Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
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by the Registrant [X]
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Soliciting Material
Pursuant to Rule Sec.240.14a-12
Rekor
Systems, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant
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7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046
(410)
762-0800
August
3, 2021
Dear
Stockholder,
You are
cordially invited to attend the 2021 Annual Meeting of Stockholders
(the “Annual Meeting”) of Rekor Systems, Inc. to be
held at 10:00 a.m. (local time) on September 14, 2021, at Lavan541,
541 West 25th Street, New York,
NY 10001 and virtually via a live video webcast at https://agm.issuerdirect.com/rekr
The attached notice of Annual Meeting and proxy statement describe
the matters to be presented at the Annual Meeting and provide
information about us that you should consider when you vote your
shares.
The
principal business of the meeting will be (i) to elect as directors
the nominees named in this proxy statement to serve until the 2022
Annual Meeting of Stockholders and until their successors are duly
elected and qualified, (ii) to ratify the appointment of Friedman
LLP as our independent public accountant for the fiscal year ending
December 31, 2021, (iii) to advise us as to whether you approve the
compensation of our named executive officers (Say-on-Pay), (iv) to
advise us as to whether you prefer a vote to advise us on the
compensation of our named executive officers every year, every two
years or every three years (Say-on-Pay Frequency), (v) to approve
and adopt an amendment to the Company’s 2017 Equity Award
Plan to increase the number of authorized shares of common stock
reserved for issuance to 5,000,000, and (vi) to transact such other
business as may be properly brought before the Annual Meeting and
any adjournments thereof.
We hope
you will be able to attend the Annual Meeting. Whether you plan to
attend the Annual Meeting or not, it is important that your shares
are represented. Therefore, when you have finished reading the
proxy statement, you are urged to complete, sign, date and return
the enclosed proxy card promptly in accordance with the
instructions set forth on the card. This will ensure your proper
representation at the Annual Meeting, whether or not you can
attend.
Sincerely,
/s/ Robert A.
Berman
Robert
A. Berman
Chairman of the
Board
YOUR
VOTE IS IMPORTANT. PLEASE RETURN YOUR PROXY PROMPTLY.
7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046
(410)
762-0800
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
be Held September 14, 2021
To the
Stockholders of Rekor Systems, Inc.:
NOTICE IS HEREBY GIVEN that the 2021
Annual Meeting of Stockholders (the “Annual Meeting”)
of Rekor Systems, Inc., a Delaware corporation (the
“Company”), will be held at 10:00 a.m. (local time) on
September 14, 2021, or such later date or dates as such Annual
Meeting date may be adjourned, at Lavan541, 541 West 25th Street, New York, NY 10001 and
virtually via a live video webcast at https://agm.issuerdirect.com/rekr,
for the purpose of considering and taking action on the following
proposals:
1.
Elect as directors
the nominees named in the proxy statement;
2.
To ratify the
appointment of Friedman LLP as our independent public accountant
for the fiscal year ending December 31, 2021;
3.
To advise us as to
whether you approve the compensation of our named executive
officers (Say-on-Pay);
4.
To advise us as to
whether you prefer to vote to advise us on the compensation of our
named executive officers every year, every two years or every three
years (Say-on-Pay Frequency);
5.
To approve and
adopt an amendment to the Company’s 2017 Equity Award Plan to
increase the number of authorized shares of common stock reserved
for issuance to 5,000,000 shares; and
6.
To transact such
other business as may be properly brought before the Annual Meeting
and any adjournments thereof.
The
foregoing business items are more fully described in the following
pages, which are made part of this notice. The Board recommends
that you vote as follows:
●
“FOR” for the election of the Board
nominees as directors;
●
“FOR” ratification of the selection
of Friedman LLP as our independent public accountant for our fiscal
year ending December 31, 2021;
●
“FOR” the compensation of our named
executive officers as set forth in this proxy
statement;
●
“FOR” a frequency of voting every
three years on the compensation of our named executive officers;
and
●
“FOR” the amendment to the
Company’s 2017 Equity Award Plan to increase the number of
authorized shares of common stock reserved for issuance to
5,000,000 shares.
You may
vote if you were the record owner of the Company’s common
stock at the close of business on July 16, 2021. The Board of
Directors of the Company has fixed the close of business on July
16, 2021, as the record date (the “Record Date”) for
the determination of stockholders entitled to notice of and to vote
at the Annual Meeting and at any adjournments thereof.
As of
the Record Date there were 41,038,127 shares of common stock
outstanding and entitled to vote at the Annual Meeting. Holders of
the shares of common stock are entitled to one vote for each share
of common stock held. A list of stockholders of record will be
available at the meeting and, during the 10 days prior to the
meeting, at the office of the Secretary of the Company at 7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046.
All
stockholders are cordially invited to attend the Annual Meeting.
Whether you plan to attend the Annual Meeting in person or via live
videocast or not, you are requested to complete, sign, date and
return the enclosed proxy card as soon as possible in accordance
with the instructions on the proxy card. A pre-addressed, postage
prepaid return envelope is enclosed for your
convenience.
By
Order of the Board of Directors of Rekor Systems,
Inc.,
Sincerely,
By:
/s/ Robert A.
Berman
Chairman of the
Board
YOUR
VOTE AT THE ANNUAL MEETING IS IMPORTANT
Your
vote is important. Please vote as promptly as possible even if you
plan to attend the Annual Meeting in person or via live
videocast.
For
information on how to vote your shares, please see the instruction
from your broker or other fiduciary, as applicable, as well as
“General Information About the Annual Meeting” in the
proxy statement accompanying this notice.
We
encourage you to vote by completing, signing, and dating the proxy
card, and returning it in the enclosed envelope, or by following
the electronic voting instructions below.
If you
have questions about voting your shares, please contact our
Corporate Secretary at Rekor Systems, Inc., at 7172 Columbia
Gateway Drive, Suite 400, Columbia, MD 21046, telephone number
(410) 762-0800.
If you
decide to change your vote, you may revoke your proxy in the manner
described in the attached proxy statement at any time before it is
voted.
We urge
you to review the accompanying materials carefully and to vote as
promptly as possible. Note that we have enclosed with this notice a
proxy statement/prospectus.
THE PROXY STATEMENT IS
AVAILABLE AT: https://www.iproxydirect.com/REKR
VOTING IS AVAILABLE AT: https://www.iproxydirect.com/REKR
By
Order of the Board of Directors,
Sincerely,
/s/ Robert A.
Berman
Robert
A. Berman
Chairman of the
Board
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON SEPTEMBER 14, 2021 AT 10:00 A.M.
EDT.
The Notice of Annual Meeting of Stockholders and our Proxy
Statement are available at:
https://www.iproxydirect.com/REKR
REFERENCES
TO ADDITIONAL INFORMATION
This
proxy statement incorporates important business and financial
information about Rekor Systems, Inc. that is not included in or
delivered with this document. You may obtain this information
without charge through the Securities and Exchange Commission
(“SEC”) website (www.sec.gov) or upon your written or
oral request by contacting the Corporate Secretary of Rekor Systems, Inc.,
7172 Columbia Gateway Drive, Suite 400, Columbia, MD 21046,
telephone number (410) 762-0800.
To
ensure timely delivery of these documents, any request should be
made no later than August 27, 2021 to receive them before the
annual meeting.
For
additional details about where you can find information about Rekor
Systems, Inc., please see the section entitled “Where You Can
Find More Information” in this proxy statement.
Table
of Contents
GENERAL
INFORMATION ABOUT THE ANNUAL MEETING
1
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
6
PROPOSAL
NO. 1 - ELECTION OF DIRECTORS
7
EXECUTIVE
OFFICERS
15
EXECUTIVE
COMPENSATION
16
COMPENSATION
OF REKOR DIRECTORS
19
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
21
PROPOSAL
NO. 2 - RATIFICATION OF THE APPOINTMENT OF FRIEDMAN LLP AS
INDEPENDENT PUBLIC
ACCOUNTANT
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2021
22
PROPOSAL
NO. 3 - ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS
23
PROPOSAL
NO. 4 - ADVISORY VOTE TO APPROVE THE FREQUENCY OF HOLDING FUTURE
ADVISORY VOTES
ON
THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
24
PROPOSAL
NO. 5 - AMENDMENT TO OUR 2017 EQUITY AWARD PLAN TO INCREASE THE
NUMBER OF AUTHORIZED
SHARES
OF COMMON STOCK RESERVED FOR ISSUANCE UNDER THE PLAN
25
OTHER
MATTERS
33
ANNEX
A
A-1
7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046
(410)
762-0800
FOR
REKOR SYSTEMS, INC.
2021
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 14, 2021
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
This
proxy statement, along with the accompanying notice of the 2021
Annual Meeting of Stockholders, contains information about the 2021
Annual Meeting of Stockholders of Rekor Systems, Inc., including
any adjournments or postponements thereof (referred to herein as
the “Annual Meeting”). We are holding the Annual
Meeting at 10:00 a.m. EDT on September 14, 2021, in person at
Lavan541, 541 West 25th Street, New York,
NY 10001 and virtually via a live video webcast at https://agm.issuerdirect.com/rekr
or such later date or dates as such Annual Meeting date may be
adjourned. For directions to the meeting, please call (410)
762-0800.
In this
proxy statement, we refer to Rekor Systems, Inc. as
“Rekor,” the “Company,” “we,”
“us” or “our.”
Why
Did You Send Me This Proxy Statement?
The
Board of Directors of the Company (referred to herein as the
“Board of Directors” or the “Board”) is
soliciting proxies, in the accompanying form, to be used at the
Annual Meeting on September 14, 2021 at 10:00 a.m. EDT and any
adjournments thereof. This proxy statement along with the
accompanying Notice of Annual Meeting of Stockholders summarizes
the purposes of the Annual Meeting and the information you need to
know to vote at the Annual Meeting.
Important
Notice Regarding the Availability of Proxy Materials for the
Stockholder Meeting to be Held on September 14, 2021: The proxy
statement and annual report to security holders are available
at https://www.iproxydirect.com/REKR
The
following documents are being mailed on or about August 4, 2021, to
all stockholders entitled to notice of and to vote at the Annual
Meeting:
1)
This
proxy statement,
2)
The
accompanying proxy card,
3)
Our
2020 Annual Report.
The
2020 Annual Report includes our financial statements for the fiscal
year ended December 31, 2020 but is not a part of this proxy
statement. You can also find a copy of our 2020 Annual Report on
Form 10-K on the Internet through the Securities and Exchange
Commission’s electronic data system called EDGAR at
www.sec.gov or
through the “Investor Relations” section of our website
at www.rekor.ai/investors
Who
Can Vote?
Stockholders who
owned common stock at the close of business on July 16, 2021 (the
“Record Date”), are entitled to vote at the Annual
Meeting. On the Record Date, there were 41,038,127 shares of common
stock outstanding and entitled to vote.
You do
not need to attend the Annual Meeting to vote your shares. Shares
represented by valid proxies, received in time for the Annual
Meeting and not revoked prior to the Annual Meeting, will be voted
at the Annual Meeting. A stockholder may revoke a proxy before the
proxy is voted by electronically delivering to our Secretary a
signed statement of revocation or a duly executed proxy card
bearing a later date. Any stockholder who has executed a proxy card
but attends the Annual Meeting virtually may revoke the proxy and
vote at the Annual Meeting by contacting our transfer agent, Issuer
Direct, using the instructions provided during the virtual Annual
Meeting.
How
Many Votes Do I Have?
Each
share of common stock that you own entitles you to one
vote.
How
Do I Vote?
Whether
you plan to attend the Annual Meeting or not, we urge you to vote
by proxy. All shares represented by valid proxies that we receive
through this solicitation, and that are not revoked, will be voted
in accordance with your instructions on the proxy card or as
instructed via Internet or telephone. You may specify whether your
shares should be voted for or against each nominee for director,
and how your shares should be voted with respect to each of the
other proposals. Except as set forth below, if you properly submit
a proxy without giving specific voting instructions, your shares
will be voted in accordance with the Board’s recommendations
as noted below. Voting by proxy will not affect your right to
attend the Annual Meeting. If your shares are registered directly
in your name through our stock transfer agent, Issuer Direct
Corporation, or you have stock certificates, you may
vote:
●
By mail. Complete and mail the enclosed
proxy card in the enclosed postage prepaid envelope. Your proxy
will be voted in accordance with your instructions. If you sign the
proxy card but do not specify how you want your shares voted, they
will be voted as recommended by the Board.
●
In person at the meeting. If you attend
the meeting, you may electronically deliver your completed proxy
card to the Secretary during the meeting, or you may vote by
completing a ballot electronically by following the instructions
provided during the virtual Annual Meeting or by contacting Issuer
Direct using the instructions provided during the virtual Annual
Meeting
●
Via the Internet at: https://www.iproxydirect.com/REKR
If your
shares are held in “street name” (held in the name of a
bank, broker or other nominee), you must provide the bank, broker
or other nominee with instructions on how to vote your shares and
can do so as follows:
●
By Internet or by telephone. Follow the
instructions you receive from your broker to vote by Internet or
telephone.
●
By mail. You will receive instructions
from your broker or other nominee explaining how to vote your
shares.
How
Does The Board Recommend That I Vote On The Proposals?
The
Board recommends that you vote as follows:
●
“FOR” for the election of the Board
nominees as directors;
●
“FOR” ratification of the selection
of Friedman LLP as our independent public accountant for our fiscal
year ending December 31, 2021;
●
“FOR” the compensation of our named
executive officers as set forth in this proxy
statement;
●
“FOR” a frequency of voting every
three years on the compensation of our named executive officers;
and
●
“FOR” the amendment to our 2017 Equity
Award Plan to increase the number of authorized shares of common
stock reserved for issuance to 5,000,000 shares.
If any
other matter is presented, the proxy card provides that your shares
will be voted by the proxy holder listed on the proxy card in
accordance with his or her best judgment. At the time this proxy
statement was printed, we knew of no matters that needed to be
acted on at the Annual Meeting, other than those discussed in this
proxy statement.
2
May
I Change or Revoke My Proxy?
If you
give us your proxy, you may change or revoke it at any time before
the Annual Meeting. You may change or revoke your proxy in any one
of the following ways:
●
signing a new proxy
card and submitting it as instructed above;
●
if your shares are
held in street name, re-voting by Internet or by telephone as
instructed above – only your latest Internet or telephone
vote will be counted;
●
if your shares are
registered in your name, notifying the Company’s Secretary in
writing before the Annual Meeting that you have revoked your proxy;
or
●
attending the
Annual Meeting virtually and voting during the meeting. Attending
the Annual Meeting virtually will not in and of itself revoke a
previously submitted proxy unless you specifically request
it.
What
If I Receive More Than One Proxy Card?
You may
receive more than one proxy card or voting instruction form if you
hold shares of our common stock in more than one account, which may
be in registered form or held in street name. Please vote in the
manner described under “How Do I Vote?” on the proxy
card for each account to ensure that all of your shares are
voted.
Will
My Shares Be Voted If I Do Not Return My Proxy Card?
If your
shares are registered in your name or if you have stock
certificates, they will not be voted if you do not return your
proxy card by mail or vote at the Annual Meeting as described above
under “How Do I Vote?” If your broker cannot vote your
shares on a particular matter because it has not received
instructions from you and does not have discretionary voting
authority on that matter, or because your broker chooses not to
vote on a matter for which it does have discretionary voting
authority, this is referred to as a “broker non-vote.”
The New York Stock Exchange (“NYSE”) has rules that
govern brokers who have record ownership of listed company stock
(including stock such as ours that is listed on The Nasdaq Capital
Market) held in brokerage accounts for their clients who
beneficially own the shares. Under these rules, brokers who do not
receive voting instructions from their clients have the discretion
to vote uninstructed shares on certain matters (“routine
matters”), but do not have the discretion to vote
uninstructed shares as to certain other matters (“non-routine
matters”). Under NYSE interpretations, Proposal 1 (election
of directors), Proposal 3 (advisory vote to approve executive
compensation), Proposal 4 (advisory vote on frequency to advise us
on the compensation of our named executive officers every year,
every two years or every three years), and Proposal 5 (amendment of
the Rekor Systems, Inc. 2017 Equity Award Plan) are considered
non-routine matters, and Proposal 2 (ratification of our
independent public accountant) is considered a routine matter. If
your shares are held in street name and you do not provide voting
instructions to the bank, broker or other nominee that holds your
shares as described above under “How Do I Vote?,” the
bank, broker or other nominee has the authority, even if it does
not receive instructions from you, to vote your unvoted shares for
Proposal 2 (ratification of our independent public accountant), but
does not have authority to vote your unvoted shares for Proposals
1, 3, 4 and 5. We encourage you to provide voting instructions.
This ensures your shares will be voted at the Annual Meeting in the
manner you desire.
3
What
Vote is Required to Approve Each Proposal and How are Votes
Counted?
Proposal
1:
Election
of Directors
The
nominees for director who receive the affirmative vote of
a majority of the votes present and entitled to vote in
the election will be elected as director. You may vote either FOR
all of the nominees, WITHHOLD your vote from all of the nominees or
WITHHOLD your vote from any one or more of the nominees. Votes that
are withheld will not be included as affirmative votes in the vote
tally for the election of directors. Brokerage firms are not
entitled to vote customers’ unvoted shares held by the firms
in street name for the election of directors. As a result, any
shares not voted by such a beneficial owner will be treated as a
broker non-vote and such broker non-votes will not be included in
the number of votes present and entitled to vote.
Proposal
2:
Ratification
of the
Appointment
of Friedman
LLP
as our Independent Public Accountant for the Fiscal Year Ending
December 31, 2021
The affirmative
vote of a majority of the votes cast for this proposal is required
to ratify the appointment of the Company’s independent public
accountant. Abstentions will be counted towards the tabulation of
votes cast on this proposal and will have the same effect as a
negative vote. Brokerage firms have authority to vote
customers’ unvoted shares held by the firms in street name on
this proposal. If a broker does not exercise this authority, such
broker non-votes will not be included in the number of votes
present and entitled to vote. We are not required to obtain the
approval of our stockholders to appoint the Company’s
independent accountant. However, if our stockholders do not ratify
the appointment of Friedman LLP as the Company’s independent
public accountant for the fiscal year ending December 31, 2021, the
Audit Committee of the Board may reconsider its
appointment.
Proposal
3:
Advisory
Vote to Approve the Compensation of our Named Executive Officers
(Say-on-Pay)
The advisory vote
to approve the compensation of our executive officers will be
approved if the votes cast in favor of
the proposal exceed the votes cast against
the proposal (Say-on-Pay). Abstentions will be counted
towards the tabulation of votes cast on this proposal and will have
the same effect as a negative vote. Broker non-votes will not be
counted as either votes cast for or against
this proposal. While the results of this advisory vote are
non-binding, the Compensation Committee of the Board and the Board
values the opinions of our stockholders and will consider the
outcome of the vote, along with other relevant factors, in deciding
whether any actions are necessary to address the concerns raised by
the vote and when making future compensation
decisions for executive officers.
Proposal
4:
Advisory
Vote on Frequency of Voting on Compensation of our Named Executive
Officers
The frequency (one
year, two years or three years) that receives the greatest number
of votes cast by the stockholders will be deemed the frequency for
the advisory Say-on-Pay vote preferred by the stockholders. The
proxy card provides stockholders with the opportunity to choose
among four options (holding the vote every one, two or three years,
or abstaining) and, therefore, stockholders will not be voting to
approve or disapprove the recommendation of the Board. While the
results of this advisory vote are non-binding, the Board values the
opinions of our stockholders and will review and consider the
outcome of the vote, along with other relevant factors, in
evaluating the frequency of future advisory votes on executive
compensation. Brokerage firms do not have authority to vote
customers’ unvoted shares held by the firms in street name
for this proposal. As a result, any shares not voted by a
beneficial owner will be treated as a broker non-vote. Such broker
non-votes will have no effect on the results of this
vote.
Proposal
5:
Approval
of Amendment to Our 2017 Equity Award Plan
The affirmative
vote of the holders of a majority of the shares of stock present or
represented by proxy and entitled to vote during the Annual Meeting
will be required to approve this proposal. Abstentions will be
counted towards the tabulation of votes cast on this proposal and
will have the same effect as a negative vote. Broker non-votes will
not be counted as either votes cast for or against this
proposal.
4
What
Constitutes a Quorum for the Annual Meeting?
The
presence, in person or by proxy, of the holders of a majority of
the shares entitled to vote at the Annual Meeting is necessary to
constitute a quorum at the Annual Meeting. Votes of stockholders of
record who are present at the Annual Meeting in person or by proxy,
abstentions, and broker non-votes are counted for purposes of
determining whether a quorum exists.
Householding
of Annual Disclosure Documents
The
Securities and Exchange Commission (the “SEC”)
previously adopted a rule concerning the delivery of annual
disclosure documents. The rule allows us or brokers holding our
shares on your behalf to send a single set of our annual report and
proxy statement to any household at which two or more of our
stockholders reside, if either we or the brokers believe that the
stockholders are members of the same family. This practice,
referred to as “householding,” benefits both
stockholders and us. It reduces the volume of duplicate information
received by you and helps to reduce our expenses. The rule applies
to our annual reports, proxy statements and information statements.
Once stockholders receive notice from their brokers or from us that
communications to their addresses will be
“householded,” the practice will continue until
stockholders are otherwise notified or until they revoke their
consent to the practice. Each stockholder will continue to receive
a separate proxy card or voting instruction card.
Those
stockholders who either (i) do not wish to participate in
“householding” and would like to receive their own sets
of our annual disclosure documents in future years or (ii) who
share an address with another one of our stockholders and who would
like to receive only a single set of our annual disclosure
documents should follow the instructions described
below:
●
stockholders whose
shares are registered in their own name should contact our transfer
agent, Issuer Direct Corporation, and inform them of their request
by calling them at 919.744.2722 or writing them at 1 Glenwood
Avenue, Suite 1001, Raleigh, NC 27603.
●
Stockholders whose
shares are held by a broker or other nominee should contact such
broker or other nominee directly and inform them of their request,
stockholders should be sure to include their name, the name of
their brokerage firm and their account number.
Who
is paying for this proxy solicitation?
In
addition to mailed proxy materials, our directors, officers and
employees may also solicit proxies in person, by telephone, or by
other means of communication. We will not pay our directors,
officers and employees any additional compensation for soliciting
proxies. We may reimburse brokerage firms, banks and other agents
for the cost of forwarding proxy materials to beneficial
owners.
When
are stockholder proposals due for next year’s annual
meeting?
At our
annual meeting each year, our Board of Directors submits to
stockholders its nominees for election as directors. In addition,
the Board of Directors may submit other matters to the stockholders
for action at the annual meeting.
Pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, stockholders may
present proper proposals for inclusion in the Company’s proxy
statement for consideration at the 2021 annual meeting of
stockholders by submitting their proposals to the Company in a
timely manner. These proposals must meet the stockholders
eligibility and other requirements of the SEC. To be considered for
inclusion in next year’s proxy materials, you must submit
your proposal in writing by April 6, 2022 to our Corporate
Secretary, 7172 Columbia Gateway Drive, Suite 400, Columbia, MD
21046
5
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information, as of the Record
Date, with respect to the beneficial ownership of the outstanding
common stock by (i) any holder of more than five (5%) percent; (ii)
each of the Company’s executive officers and directors; and
(iii) the Company’s directors and executive officers as a
group. Except as otherwise indicated, each of the stockholders
listed below has sole voting and investment power over the shares
beneficially owned.
Shares Beneficially Owned
Name and address of beneficial owner (1)
Number of Shares
beneficially owned (2)
Percent of class
Directors and Named Executive Officers
Robert
A. Berman
5,781,218(3)
14.1%
Richard
Nathan
1,625,104(4)
4.0%
Matthew
Hill
1,586,669(5)
3.9%
Paul
de Bary
137,834(6)
*
Glenn
Goord
166,334(7)
*
David
Hanlon
80,334(8)
*
Steven
Croxton
57,834(9)
*
Eyal
Hen
46,035(10)
*
Riaz
Latifullah
187,929(11)
*
All
directors and named executive officers as a group (9
persons)
9,669,291
23.6%
5% or Greater Shareholders
Avon
Road Partners, L.P.
2,940,104(3)
7.2%
Rekor
Holdings, LLC
2,725,836(3)
6.6%
Goldman
Sachs Group Inc
3,936,958(12)
9.6%
Arctis
Global, LLC
2,322,782(13)
5.7%
Superius
Securities Group Inc Profit Sharing Plan
1,799,015(14)
4.4%
Cedarview
Capital Management, LP
545,330(15)
1.3%
* Less
than 1%
(1)
Unless otherwise
indicated, the address of those listed is c/o Rekor Systems, Inc.,
7172 Columbia Gateway Drive, Suite 400, Columbia, MD 21046. Unless
otherwise indicated, all shares are owned directly by the
beneficial owner.
(2)
Based on 41,039,527
shares of our common stock issued and outstanding as of the August
2, 2021.
(3)
As the general
partner and Manager of Avon Road Partners, L.P. and Rekor Holdings
LLC, respectively, Mr. Berman may be deemed to be the beneficial
owner of 5,781,218 shares of Rekor Systems, Inc. common stock, or
14.1% of the class of securities. He may be deemed to share with
Avon Road (and not with any third-party) the power to vote or
direct the vote of and to dispose or direct the disposition of the
2,940,104 shares of Rekor Systems, Inc. common stock beneficially
owned by Avon Road, or 7.2% of the class of securities. He may also
be deemed to share with Rekor Holdings LLC (and not with any
third-party) the power to vote or direct the vote of and to dispose
or direct the disposition of the 2,725,836 shares of Rekor Systems,
Inc. common stock beneficially owned by Rekor Holdings LLC, or 6.6%
of the class of securities. It also consists of options to purchase
66,668 shares of our common stock exercisable within 60 days of
August 2, 2021. Based on the Schedule 13D/A Amendment No. 5 filed
with the SEC by Avon Road, Rekor Holdings LLC and Mr. Berman on
December 18, 2020.
(4)
Consists of
1,620,255 shares of our common stock and an Unit Warrant to
purchase 4,849 shares of our common stock exercisable within 60
days of August 2, 2021.
(5)
Consists of
1,586,669 shares of Rekor Systems, Inc. common stock.
(6)
Consists of options
to purchase 108,499 shares of our common stock exercisable within
60 days of August 2, 2021, and 29,335 shares of our common
stock.
(7)
Consists of options
to purchase 70,999 shares of our common stock exercisable within 60
days of August 2, 2021, and 95,335 shares of our common
stock.
(8)
Consists of options
to purchase 70,999 shares of our common stock exercisable within 60
days of August 2, 2021 and 9,335 shares of our common
stock.
(9)
Consists of options
to purchase 48,499 shares of our common stock exercisable within 60
days of August 2, 2021 and 9,335 shares of our common
stock.
(10)
Consists of options
to purchase 33,334 shares of our common stock exercisable within 60
days of August 2, 2021, and 12,701 shares of our common
stock.
(11)
Consists of options
to purchase 187,929 shares of our common stock exercisable within
60 days of August 2, 2021.
(12)
Based on the Form 4
filed with the Securities and Exchange Commission on May 20, 2021,
reporting indirect ownership of 3,936,957.64 shares of Rekor
Systems, Inc. common stock. The address of the reporting person is
200 West Street, New York, New York 10282.
(13)
Based on the
Schedule 13G filed with the Securities and Exchange Commission on
May 11, 2021, reporting beneficial ownership of 5.7% based on
40,994,510 shares issued and outstanding. The address of the
reporting person is 70 East 77th Street, 8A, New York, New York
10075.
(14)
Based on the
Schedule 13G/A Amendment No. 2 as filed with the Securities and
Exchange Commission on February 4, 2021, reporting beneficial
ownership of 5.45% based on 32,974,257 shares issued and
outstanding. The address of the reporting person is 94 Grand Ave,
Englewood, NJ 07631..
(15)
Based on the
Schedule 13G/A Amendment No. 1 as filed with the Securities and
Exchange Commission on February 16, 2021, reporting beneficial
ownership of 1.36% based on 39,844,106 shares issued and
outstanding. The address of the reporting person is One Penn Plaza,
45th Floor, New York, New York 10119
6
PROPOSAL
NO. 1 ELECTION OF DIRECTORS
Our
Board currently consists of six members. The Corporate Governance
Committee and Board have unanimously approved the recommended slate
of six directors.
The
following table shows the Company’s nominees for election to
the Board. Each nominee, if elected, will serve until the next
Annual Meeting of Stockholders and until a successor is named and
qualified, or until his earlier resignation or removal. All
nominees are members of the present Board of Directors. We have no
reason to believe that any of the nominees is unable or will
decline to serve as a director if elected. Unless otherwise
indicated by the stockholder, the accompanying proxy will be voted
for the election of the six persons named under the heading
“Nominees for Directors.” Although the Company knows of
no reason why any nominee could not serve as a director, if any
nominee shall be unable to serve, the accompanying proxy will be
voted for a substitute nominee.
Nominees
for Director
Name of Nominee
Age
Position
Director Since
Robert
A. Berman
61
President
and Chief Executive Officer, and Executive Chairman of the
Board
2016
Paul
A. de Bary
74
Lead
Director
2017
Glenn
Goord
69
Director
2016
David
Hanlon
76
Director
2018
Richard
Nathan, Ph. D.
76
Director
2016
Steven
D. Croxton
58
Director
2019
The
Nominations Committee and the Board seek, and the Board is
comprised of, individuals whose characteristics, skills, expertise,
and experience complement those of other Board members. We have set
out below biographical and professional information about each of
the nominees, along with a brief discussion of the experience,
qualifications, and skills that the Board considered important in
concluding that the individual should serve as a current director
and as a nominee for re-election as a member of our
Board.
Nominees
Biographies
Robert A. Berman, Chief Executive Officer and Director
Robert
Berman has served as our Chief Executive Officer and a member of
our Board of Directors since March 2016 and was appointed Executive
Chairman of the Board of Directors in connection with the
retirement of Mr. James McCarthy from the Board on July 23, 2020.
Since January 2000, Mr. Berman has served as the General Partner of
Avon Road Partners, L.P., a limited partnership investing in real
estate and the broadcast media industry. From 2006 through March
2015, Mr. Berman held the office of Chairman and Chief Executive
Officer at Cinium Financial Services Corporation, a privately-held
specialty finance company, and its predecessor, Upper Hudson
Holdings, LLC. Prior to Cinium, Mr. Berman was Chief Executive
Officer of Empire Resorts, Inc., a NASDAQ-listed gaming company,
from 2002-2005.
Director Qualifications
Mr.
Berman has extensive experience in the private equity and public
company markets. We believe his strong understanding of the
financial markets and the M&A process, and his previous senior
executive roles with public companies make him a qualified member
of our Board of Directors and to serve as our Chief Executive
Officer and Executive Chairman.
7
Richard Nathan, PhD, Director
Richard
Nathan, Ph.D., has served on our Board of Directors since March
2016. From April 2016 until his retirement in February 2018, Dr.
Nathan served as our Chief Operating Officer. Prior to that, Dr.
Nathan was the Chief Executive Officer of AOC Key Solutions, where
he worked for over 17 years. Dr. Nathan has over 45 years of
corporate management, program management and business and proposal
development experience and experience managing service and
technical contracts for federal departments and agencies and state
governments. Dr. Nathan holds a BS in Chemistry from the
Massachusetts Institute of Technology and a PhD in Chemistry from
the Polytechnic Institute of Brooklyn.
Director Qualifications
Dr.
Nathan has a strong technical background and extensive experience
in the government contracting area. We believe this expertise, when
combined with his entrepreneurial background having built strong
operating companies, makes him a qualified member of our Board of
Directors and the committees on which he participates.
Glenn Goord, Director
Glenn
Goord has served on our Board of Directors since March 2016. From
1996 until his retirement in 2006, Mr. Goord served as Commissioner
of the New York State Department of Correctional Services
(“NYSDCS”), where he oversaw the state prison system.
Mr. Goord received the Carl Robison Award, the highest honor
bestowed by the Middle Atlantic States Correctional Association, in
1997. In 1998 he received the Charles Evans Hughes Award for public
service from the Albany based Capital Area Chapter for the American
Society for Public Administration (ASPA). In 2002, ASPA awarded Mr.
Goord its highest honor, the Governor Alfred E. Smith Award, for
his direction of the NYSDCA’s efforts to aid New York City
following the September 11, 2001 terrorist attack. Mr. Goord holds
a BA in Psychology from Fairleigh Dickinson
University.
Director Qualifications
Mr.
Goord has a strong background in government operations and
procurement. His insights into how government operates is a key
skill for board decision making on Rekor strategy in certain
industry segments. We believe his management and operational
experience makes him a qualified member of our Board of Directors
and the committees on which he participates.
Paul A. de Bary, Lead Director
Paul A.
de Bary has served on our Board of Directors since January 2017 and
as Lead Director since November 2017. As an attorney, financial
advisor and investment banker, Mr. de Bary has had extensive
experience with financial markets, governmental operations and
private businesses. From 1996 to 2015, he was a managing director
at Marquette de Bary Co., Inc., a New York based broker-dealer,
where he served as a financial advisor for state and local
government agencies, public and private corporations and non-profit
organizations, as well as general counsel. He previously served as
a director of Empire Resorts, Inc. (Nasdaq: NYNY) from 1996 to
2010, where he served as chairman of its audit committee as well
as, at various times throughout his tenure as a director, a member
of the governance and compensation committees and various special
committees. Mr. de Bary has also served as Chairman of the Board of
Ethics of the Town of Greenwich, Connecticut since 2008. Mr. de
Bary is a member of the American Bar Association, the New York
State Bar Association and the Association of the Bar of the City of
New York. Mr. de Bary holds a JD, an MBA and an A.B. from Columbia
University.
Director Qualifications
Mr. de
Bary has a diverse background that includes experience as a lawyer,
investment banker, corporate officer and member of several boards
of directors, including those of public companies. We believe these
experiences, combined with his skills and knowledge related to
public market decision-making and audit committee roles and
responsibilities, makes him qualified member of our Board of
Directors and the committees on which he participates.
8
David P. Hanlon,
David
Hanlon has served on our Board of Directors since November 2018.
Mr. Hanlon is a founding principal of Executive Hospitality
Partners, a strategic and asset management firm. Since 2008, he has
served as Chief Executive Officer of Hanlon Investments which
provides project development consulting services to casinos, hotels
and resorts. Mr. Hanlon has served as a member of Cornell
University’s Industry Advisory Board, as well as on the Board
of Directors of the Cornell Football Association and was elected to
be a lifetime member of the Cornell University Administrative
Advisory Board. He was also an advisor to the Wharton
Entrepreneurial Program. Mr. Hanlon holds a B.S. in Hotel
Administration from Cornell, an MBA in Finance and an M.S. in
Accounting from the Wharton School at the University of
Pennsylvania and graduated from the Advanced Management Program at
the Harvard Business School.
Director Qualifications
Mr.
Hanlon has extensive leadership and executive management experience
and experience serving on public company boards of directors. We
believe his skills and experience make him a qualified member of
our Board of Directors and the committees on which he
participates.
Steven D. Croxton, Director
Mr.
Croxton is Managing Director of Rice, Voelker, LLC and has more
than 30 years’ experience in investment and commercial
banking. During his career, Mr. Croxton has been involved in
financing and advisory transactions totaling more than $35 billion
for a variety of public and private corporations. He has previously
served on the Board of Directors of Peninsula Gaming, LLC, and has
held leadership roles with responsibilities related to investment,
corporate, and international banking. Mr. Croxton earned a B.S. in Finance from
Louisiana State University, and a Master of International
Management from the American Graduate School of International
Management (now Thunderbird School of Global Management), and holds
FINRA Series 7, 24, 63, and 79 licenses.
Director Qualifications
Mr.
Croxton has in-depth knowledge of the capital markets, as well as
extensive background in financing and advisory of public
corporations. We believe his skills and experiences make him a
qualified member of our Board of Directors and the committees on
which he participates.
Unless
authority to vote for the nominees named above is withheld, the
shares represented by the enclosed proxy will be voted FOR the
election of such nominees as directors. In the event that any of
the nominees shall become unable or unwilling to serve, the shares
represented by the enclosed proxy will be voted for the election of
such other person as the Board may recommend in such
nominee’s place. The Board has no reason to believe that any
of the nominees will be unable or unwilling to serve.
Family
Relationships
There
are no family relationships among our executive officers and
directors.
9
Involvement
in Certain Legal Proceedings
During
the past ten years, none of our directors, executive officers,
promoters, control persons, or nominees has been:
●
the subject of any
bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that
time;
●
convicted in a
criminal proceeding or is subject to a pending criminal proceeding
(excluding traffic violations and other minor
offenses);
●
subject to any
order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction or any Federal or
State authority, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities;
●
found by a court of
competent jurisdiction (in a civil action), the Commission or the
Commodity Futures Trading Commission to have violated a federal or
state securities or commodities law;
●
the subject of, or
a party to, any Federal or State judicial or administrative order,
judgment, decree, or finding, not subsequently reversed, suspended
or vacated, relating to an alleged violation of (a) any Federal or
State securities or commodities law or regulation; (b) any law or
regulation respecting financial institutions or insurance companies
including, but not limited to, a temporary or permanent injunction,
order of disgorgement or restitution, civil money penalty or
temporary or permanent cease-and- desist order, or removal or
prohibition order; or (c) any law or regulation prohibiting mail or
wire fraud or fraud in connection with any business entity;
or
●
the subject of, or
a party to, any sanction or order, not subsequently reversed,
suspended or vacated, of any self-regulatory organization (as
defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.
78c(a)(26))), any registered entity (as defined in Section 1(a)(29)
of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any
equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with
a member.
Vote
Required
The
nominees for director who receive the affirmative votes of a
majority of the votes present and entitled to be elected as
director. You may vote either FOR all of the nominees, WITHHOLD
your vote from all of the nominee directors or WITHHOLD your vote
from any one or more of the nominees directors. Votes that are
withheld will not be included as affirmative votes in the vote
tally for the election of directors. Brokerage firms are not
entitled to vote customers’ unvoted shares held by the firms
in street name for the election of directors. As a result, any
shares not voted by such a beneficial owner will be treated as a
broker non-vote and such broker non- votes not be included in the
number of votes present and entitled to vote.
THE
BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES NAMED
ABOVE AS DIRECTORS, AND PROXIES SOLICITED BY THE BOARD WILL BE
VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE
ON THE PROXY.
10
Information
about the Board of Directors and Committees
Corporate
Governance
Independence
of Directors
Our
Board is currently comprised of six members, five of whom are
independent directors. Mr. Berman is not an independent
director.
The
Board, upon recommendation of the Governance Committee, unanimously
determined that each of our five non-employee directors is
“independent,” as such term is defined in the Nasdaq
Stock Market Rules (“Stock Market Rules”).
The
definition of “independent director” included in the
Stock Market Rules includes a series of objective tests, such as
that the director is not an employee of the Company, has not
engaged in various types of specified business dealings with the
Company, and does not have an affiliation with an organization that
has had specified business dealings with the Company. Consistent
with the Company’s Corporate Governance Principles, the
Board’s determination of independence is made in accordance
with the Stock Market Rules, as the Board has not adopted
supplemental independence standards. As required by the Stock
Market Rules, the Board also has made a subjective determination
with respect to each director that such director has no material
relationship with the Company (either directly or as a partner,
stockholder or officer of an organization that has a relationship
with the Company), even if the director otherwise satisfies the
objective independence tests included in the definition of an
“independent director” included in the Stock Market
Rules.
In
determining that each individual who served as a member of the
Board is independent, the Board considered that, in the ordinary
course of business, transactions may occur between the Company and
entities with which some of our directors are affiliated. The Board
unanimously determined that the relationships discussed below in
the section entitled “CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE” were not material to
an independence determination. No unusual discounts or terms were
extended.
Board
Leadership Structure
Our
Board of Directors is currently led by its Executive Chairman,
Robert Berman. Our Board of Directors recognizes that it is
important to determine an optimal Board leadership structure to
ensure the independent oversight of management as the Company
continues to grow. We historically have separated the roles of
Chief Executive Officer and Chairman of the Board, but in
connection with the previously announced new strategic direction of
the Company and its focus on its technology business, we believe at
the present time that Mr. Berman is in the best position to serve
as both Executive Chairman of the Board of Directors and Chief
Executive Officer, and that combining these two roles at this time
is in the best interests of the Company and its stockholders. The
Company may revisit this decision in the future as circumstances
warrant.
Our
organizational guidelines provide for a Lead Director to be elected
whenever the Chair of the Board of Directors is not an independent
director. The responsibilities of the Lead Director are to: 1)
preside at meetings of our stockholders and Board of Directors if
the Chair is absent; 2) call meetings and executive sessions of the
independent directors of the Board; 3) establish the agenda and
preside at all executive sessions and other meetings of the
independent directors of the Board and communicate the results of
meetings of the independent directors to the Chair and other
members of management, as appropriate; 4) communicate with the
independent directors of the Board between meetings as necessary or
appropriate, serve as a liaison between the Chair and the
independent directors and communicate independent director
consensus on important issues to the Chair;
5) approve Board
meeting agendas and schedules for regular meetings of the Board of
Directors to assure there is sufficient time for discussion of all
agenda items and approve meeting materials and other information to
be sent to the Board in advance of regular meetings; 6) evaluate
the quality and timeliness of information sent to the Board by the
Chief Executive Officer and other members of management; 7) oversee
the evaluation of the Chief Executive Officer and assist the Board
Chair on matters of Board succession planning and crisis
management; 8) assist the Chair of the Governance Committee with
individual director evaluations; and 9) be available for
consultation and direct communication at the request of major
stockholders. Mr. de Bary currently serves as Lead
Director.
Director
Attendance at Board, Committee, and Other Meetings
Directors are
expected to attend Board meetings and meetings of the committees on
which they serve, with the understanding that on occasion a
director may be unable to attend a meeting. The Board does not have
a policy on director attendance at the Company’s annual
meeting.
The
non-management directors (who also constitute all of the
independent directors) meet in executive sessions in connection
with regularly scheduled Board meetings and at such other times as
the non-management directors deem appropriate. These sessions are
led by the Lead Director.
In
2020, the Board held sixteen regular and special meetings, the
non-management directors held one meeting and no special executive
sessions, the Audit Committee held nine regular and special
meetings, the Compensation Committee held four regular and special
meetings, and the Governance Committee held eight regular and
special meetings. Each director attended 100% of the regular and
special meetings of the Board and of the committees on which he or
she served that were held during his or her term of office. Each of
the non-management (and independent) directors attended 100% of the
regular and special executive sessions that were held during his or
her term of office.
11
Board
Role in Risk Oversight
Our
Board of Directors has responsibility for the oversight of our risk
management processes and, either as a whole or through its
committees, regularly discusses with management our major risk
exposures, their potential impact on our business and the steps we
take to manage them. The risk oversight process includes receiving
regular reports from Board committees and members of senior
management to enable our Board to understand the Company’s
risk identification, risk management and risk mitigation strategies
with respect to areas of potential material risk, including
operations, finance, legal, regulatory, strategic and reputational
risk.
The
Audit Committee reviews information regarding liquidity and
operations and oversees our management of financial risks.
Periodically, the Audit Committee reviews our policies with respect
to risk assessment, risk management, loss prevention and regulatory
compliance. Oversight by the Audit Committee includes direct
communication with our external auditors, and discussions with
management regarding significant risk exposures and the actions
management has taken to limit, monitor or control such exposures.
The Compensation Committee is responsible for assessing whether any
of our compensation policies or programs has the potential to
encourage excessive risk-taking. The Governance Committee manages
risks associated with the independence of the board, corporate
disclosure practices, and potential conflicts of interest. While
each committee is responsible for evaluating certain risks and
overseeing the management of such risks, the entire Board is
regularly informed through committee reports about such risks.
Matters of significant strategic risk are considered by our Board
as a whole.
Committees
of the Board
Our
Board has four standing committees: Audit, Compensation, Governance
and Nominations. Each of the committees is solely comprised of and
chaired by independent directors, each of whom the Board has
affirmatively determined is independent pursuant to the Stock
Market Rules. Each of the committees operates pursuant to its
charter. The committee Charters are reviewed annually by the
Governance Committee. If appropriate, and in consultation with the
chairs of the other committees, the Corporate Governance Committee
proposes revisions to the charters. The responsibilities of each
committee are described in more detail below. The charters for the
four committees are available on the Company’s website at
www.rekor.ai by
following the link to “Investors” and then to
“Corporate Governance.”
Audit
Committee
We have
an Audit Committee comprised of directors who are
“independent” within the meaning of Nasdaq Rule
5605(b)(1). The Audit Committee assists our Board in overseeing the
financial reporting process and maintaining the integrity of our
financial statements, and of our financial reporting processes and
systems of internal audit controls, and our compliance with legal
and regulatory requirements. The Audit Committee is responsible for
reviewing the qualifications, independence and performance of our
independent registered public accounting firm and review our
internal controls, financial management practices and investment
functions and compliance with financial legal and regulatory
requirements. The Audit Committee is also responsible for
performing risk and risk management assessments as well as
preparing any report of the Audit Committee that may be required by
the proxy rules of the SEC to be included in the
Corporation’s annual proxy statement. Our Board has
identified and appointed Paul de Bary as its “audit committee
financial expert,” as defined by the SEC in Item 407 of
Regulation S-K. Mr. de Bary serves as the Chair of the Audit
Committee, and is joined on the committee by Mr. Croxton, and Mr.
Hanlon.
Compensation
Committee
We have
a Compensation Committee comprised of members who are
“Non-Employee Directors” within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) and “outside directors”
within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended (the “Code”). They are also
“independent” directors within the meaning of NASDAQ
Rule 5605(b)(1). The Compensation Committee is responsible for
overseeing the establishment and maintenance of our overall
compensation and incentive programs to discharge the Board’s
responsibilities relating to compensation of our executive officers
and directors, including establishing criteria for evaluating
performance and setting appropriate levels of compensation, and to
produce an annual report on executive compensation for inclusion in
the Corporation’s proxy statement in accordance with the
rules and regulations of the SEC. The Compensation Committee
advises and makes recommendations to our Board on all matters
concerning director compensation. Mr. Goord serves as Chair of the
Compensation Committee and is joined by Mr. Nathan.
Compensation
Committee Interlocks and Insider Participation
None of
the members of the Compensation Committee has been, during 2020, an
officer or employee of Rekor or any of its subsidiaries or
predecessor companies, or was formerly an officer of Rekor or any
of its subsidiaries or predecessor companies or had any
relationship requiring disclosure by us under Item 404 of
Regulation S-K. No interlocking relationship as described in Item
407(e)(4) of Regulation S-K exists between any of our executive
officers or Compensation Committee members, on the one hand, and
the executive officers or Compensation Committee members of any
other entity, on the other hand, nor has any such interlocking
relationship existed in the past.
12
Governance Committee
Our
Board has a Governance Committee that (1) reviews and recommends
improvements to our governance guidelines and corporate policies;
(2) monitors compliance with our Code of Conduct; (3) evaluates and
makes recommendations concerning changes in the charters of the
various Committees of the Board of Directors, and (4) such other
matters as may be required to ensure compliance with applicable
federal and state laws or the requirements of any exchange on which
the Company maintains a listing for its securities. The committee
is required to be comprised of entirely “independent”
directors within the meaning of NASDAQ Rule
5605(b)(1).
Mr.
Nathan currently serves as the Chair of the Governance Committee
and is joined on the committee by Mr. Goord and Mr. de
Bary.
Nominations
Committee
Our
Nominations Committee that ensures proper performance of people and
practices of the Company by (1) recommending new members of the
Board; (2) training new members of the Board; (3) reviewing the
performance of the Board and its various committees and making
recommendations intended to improve that performance, (4)
evaluating and making recommendations to the Governance Committee
as to changes in the charters of the various committees of the
Board, (5) evaluating the performance of the Chief Executive
Officer, (6) overseeing the development and implementation of
succession planning for senior management positions; and (7)
identifying and recommending candidates for membership of the Board
committees. Mr. Hanlon currently serves as the Chair of the
Nominations Committee and is joined on the committee by Mr. Goord
and Mr. Nathan.
Name
Audit Committee
Compensation Committee
Corporate Governance Committee
Nominations Committee
Paul
A. de Bary - (Independent)
Chair
-
Member
-
Glenn
Goord- (Independent)
-
Chair
Member
Member
David
Hanlon - (Independent)
Member
-
-
Chair
Steven
D. Croxton - (Independent)
Member
-
-
-
Richard
Nathan - (Independent)
-
Member
Chair
Member
We seek
directors with the highest standards of ethics and integrity, sound
business judgment, and the willingness to make a strong commitment
to the Company and its success. The Nominations Committee works
with the Board on an annual basis to determine the appropriate and
desirable mix of characteristics, skills, expertise, and experience
for the full Board and each committee, taking into account both
existing directors and all nominees for election as directors, as
well as any diversity considerations and the membership criteria
applied by the Nominations Committee. The Nominations Committee and
the Board, which do not have a formal diversity policy, consider
diversity in a broad sense when evaluating board composition and
nominations; and they seek to include directors with a diversity of
experience, professions, viewpoints, skills, and backgrounds that
will enable them to make significant contributions to the Board and
the Company, both as individuals and as part of a group of
directors. The Board evaluates each individual in the context of
the full Board, with the objective of recommending a group that can
best contribute to the success of the business and represent
stockholder interests through the exercise of sound judgment. In
determining whether to recommend a director for re-election, the
Nominations Committee also considers the director’s
attendance at meetings and participation in and contributions to
the activities of the Board and its committees.
The
Nominations Committee will consider director candidates recommended
by stockholders, and its process for considering such
recommendations is no different than its process for screening and
evaluating candidates suggested by directors, management of the
Company, or third parties.
Corporate
Governance Matters
We are
committed to maintaining strong corporate governance practices that
benefit the long-term interests of our stockholders by providing
for effective oversight and management of the Company. Our
governance policies, including our Code of Conduct and Committee
Charters can be found on our website at www.rekor.ai by
following the link to “Investors” and then to
“Corporate Governance.”
The
Governance Committee regularly reviews our Code of Conduct and
Committee Charters to ensure that they take into account
developments at the Company, changes in regulations and listing
requirements, and the continuing evolution of best practices in the
area of corporate governance.
The
Board conducts an annual self-evaluation in order to assess whether
the directors, the committees, and the Board are functioning
effectively.
13
Code
of Conduct
We have
adopted a Code of Conduct, which serves as our Code of Ethics,
which applies to all of our employees, including our Chief
Executive Officer and our Chief Financial Officer. Our Code of
Conduct is available on our website at www.rekor.ai.
If we amend or grant a waiver of one or more of the provisions of
our Code of Conduct, we intend to satisfy the requirements under
Item 5.05 of Item 8-K regarding the disclosure of amendments to or
waivers from provisions of our Code of Conduct that apply to our
Principal Executive and Principal Financial Officer by posting the
required information on our website at the above address. Our
website is not part of this Proxy Statement.
Communications
with the Board of Directors
Stockholders and
other parties may communicate directly with the Board of Directors
or the relevant board member by addressing communications
to:
Rekor
Systems, Inc.
c/o
Corporate Secretary
7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046
All
stockholder correspondence will be compiled by our corporate
secretary. Communications will be distributed to the Board of
Directors, or to any individual director or directors as
appropriate, depending on the facts and circumstances outlined in
the communications. Items that are unrelated to the duties and
responsibilities of the Board of Directors may be excluded, such
as:
●
junk mail and mass
mailings;
●
resumes and other
forms of job inquiries;
●
surveys;
and
●
solicitations and
advertisements.
In
addition, any material that is unduly hostile, threatening, or
illegal in nature may be excluded, provided that any communication
that is filtered out will be made available to any outside director
upon request.
Section
16(a) of the Securities Exchange Act of 1934 requires the
Company’s directors, executive officers, and stockholders who
own more than 10% of the Company’s stock to file forms with
the SEC to report their ownership of the Company’s stock and
any changes in ownership. The Company assists its directors and
executives by identifying reportable transactions of which it is
aware and preparing and filing the forms on their behalf. All
persons required to file forms with the SEC must also send copies
of the forms to the Company. We have reviewed all forms provided to
us. Based on that review and on written information given to us by
our executive officers and directors, we believe that all Section
16(a) filings during the past fiscal year were filed on a timely
basis and that all directors, executive officers and 10% beneficial
owners have fully complied with such requirements during the past
fiscal year.
14
EXECUTIVE OFFICERS
The
following persons are our executive officers and hold the offices
set forth opposite their names.
Name
Age
Principal Occupation
Officer Since
Robert
A. Berman
61
President
and Chief Executive Officer and Executive Chairman of the
Board
2017
Eyal
Hen
48
Chief
Financial Officer
2019
Riaz
Latifullah
64
Executive
Vice President, Corporate Development
2017
Robert A. Berman, Chief Executive Officer, President and Executive
Chairman of the Board
The
biography for Robert A. Berman is set forth above in the section
entitled “Nominees Biographies - Robert A. Berman, Chief
Executive Officer and Director.”
Eyal Hen, Chief Financial Officer
Mr. Hen
has served as our Chief Financial Officer since May of 2019. He has
more than 18 years’ experience as a global finance and
business management executive in corporate environments, most
recently with VAYA Pharma Inc. and Ormat Technologies, Inc.
(NYSE:ORA). His expertise working as a finance executive in the
public markets, where he oversaw financial reporting, compliance
initiatives, investor communications, and financing, is
instrumental as the Company continues its growth. Mr. Hen holds a
BA in Economics and Accounting from Ben Gurion University (Israel)
and an MBA from the University of Phoenix.
Riaz Latifullah, Executive Vice President, Corporate
Development
Mr.
Latifullah currently serves as Executive Vice President, Corporate
Development. On May 1, 2018, Mr. Latifullah was appointed as our
Principal Financial and Accounting Officer, a role he assumed on an
interim basis upon the resignation of our former Chief Financial
Officer until the hiring of Mr. Eyal Hen as set forth above. Prior
to joining Rekor, Mr. Latifullah served as the Chief Financial
Officer of the American Grandparents Association /
Grandparents.com. Mr. Latifullah spent 13 years with AARP, a
non-profit organization that advocates on behalf of people over age
50. With AARP he served as Vice President, Financial Management,
Senior Director Strategic Markets and Director Brand Operations. As
an in-house entrepreneur with AARP he created and launched five
start-up operations bringing significant changes to the
organization. In other positions before AARP Mr. Latifullah served
as General Manager for TV on the WEB, an internet video production
company, a Government Relations Representative for the U.S.
Merchant Marine Academy Alumni Foundation and an Investment Banking
Associate for Ryan, Lee and Company. Mr. Latifullah holds an MBA
from Stanford University, an MSE in Naval Architecture and Marine
Engineering from the University of Michigan and a BS in Marine
Engineering from the U.S. Merchant Marine Academy.
15
EXECUTIVE
COMPENSATION
The
following table sets forth information about the annual paid
compensation of our: Principal Executive Officer, Mr. Berman; two
most highly compensated executive officers other than the Principal
Executive Officer, Messrs. Hen and Latifullah, who were serving as
executive officers as of December 31, 2020; The information in this
table for the Company’s most recently completed fiscal year
is based on the information available to the Company as of the date
of the Company’s Annual Report on Form 10-K for the year
ended 2020.
Name/Capacities in which compensation was
received
Year
Base Salary
Bonus
Equity incentive awards
All other compensation (3)
Total
Robert
Berman
2020
$495,000
$-
$-
$24,826
$519,826
Chief
Executive Officer
2019
453,205(1)
-
46,605(2)
18,194
518,004
Eyal
Hen
2020
371,667(4)
15,000
237,000(5)
19,862
643,528
Chief Financial
Officer
2019
202,074
-
26,415(6)
2,488
230,977
Riaz
Latifullah
2020
305,000
25,000
-
25,260
355,260
EVP
Corporate Development
2019
289,680(7)
-
10,566(8)
17,700
317,946
(1)
In 2019, we
increased Mr. Berman’s base salary from $395,000 to $495,000
per year effective May 15, 2019.
(2)
Amount represents
the fair value of the issuance of 100,000 stock options to Mr.
Berman on May 8, 2019.
(3)
Amount represents
401(k) matching and health insurance contributions.
(4)
In 2020, we
increased Mr. Hen’s base salary from $335,000 to $375,000 per
year effective February 3, 2020.
(5)
Amount represents
the fair value of the issuance of 50,000 restricted stock units to
Mr. Hen on February 21, 2020.
(6)
Amount represents
the fair value of the issuance of 50,000 stock options to Mr. Hen
on May 15, 2019.
(7)
In 2019, we
increased Mr. Latifullah’s base salary from $285,000 to
$305,000 per year effective May 15, 2019.
(8)
Amount represents
the fair value of the issuance of 20,000 stock options to Mr.
Latifullah on May 8, 2021.
16
Outstanding
Equity Awards at Fiscal Year-End
The
following table sets forth information with respect to unexercised
stock options, stock that has not vested, and equity incentive plan
awards held by our named executive officers at December 31,
2020.
Option Awards (3)
Restricted Stock Awards(3)
Name
Grant Date
Number of Securities Underlying Unexercised Option -
Exercisable
Number of Securities Underlying Unexercised Options -
Unexercisable
Option Exercise Price
Option Expiration Date
Number of Shares that Have Not Vested
Market Value of Shares of Stock that Have not
Vested (2)($)
Robert
Berman
5/8/2019
16,667
33,333(1)
1.00
5/8/2029
-
-
5/8/2019
16,667
33,333(1)
1.50
5/8/2029
-
-
Eyal
Hen
2/21/2020
50,000(1)
403,500
5/15/2019
16,667
33,333(1)
0.78
5/15/2019
-
-
Riaz
Latifullah
5/8/2019
6,667
13,333(1)
0.80
5/8/2029
-
-
12/31/2016
174,595
-
1.42
12/31/2026
-
-
(1)
The options and
awards vest in equal annual installments over three
years.
(2)
Represents the
market value of the restricted stock award or restricted stock unit
based on the closing price of our common stock of $8.07 per share
on December 31, 2020.
(3)
All of the options
and restricted stock unit awards listed in the table were granted
under our 2017 Equity Award Plan.
Compensation
Committee Interlocks and Insider Participation
No
member of our Compensation Committee is a current or former officer
or employee of Rekor or its subsidiaries. No executive officer of
Rekor served as a director or member of the Compensation Committee
of any entity that has one or more executive officers serving as a
member of our Board of Directors or Compensation
Committee.
Employment
Agreements
We have
entered into employment agreements with our executives in
connection with his or her commencement of employment with
us.
Berman Employment Agreement
The
Employment Agreement entered into May 15, 2019 with Robert Berman
(“Berman Employment Agreement”) provides that Mr.
Berman will serve as our Chief Executive Officer and President. The
agreement has a term of five years with automatically renewing
one-year terms thereafter. This agreement supersedes Mr.
Berman’s previous employment agreement which otherwise would
have expired by its terms on March 31, 2022. Mr. Berman’s
base salary is $495,000 per annum, and he is eligible for a bonus
as determined by our Compensation Committee. Mr. Berman is also
eligible to receive all such other benefits as are provided to
other management employees.
Mr.
Berman was granted options to purchase 100,000 shares of common
stock of the Company with an exercise price per share as follows:
50,000 shares at $1.00 and 50,000 shares at $1.50.
In the
event of a “Change of Control”, as defined in the
Berman Employment Agreement, whether during the initial term or
thereafter, we shall have the right to terminate the Berman
Employment Agreement. Mr. Berman is eligible to receive two times
his base salary then in effect if his employment with the Company
is terminated within 120 days of a change in control (as such is
defined in the Berman Employment Agreement).
Mr.
Berman also agreed as consideration for entering into the Berman
Employment Agreement, that for the period during his employment and
for twelve months thereafter, (i) he will not compete with the
Company in the “Geographic Area”, as defined in the
Berman Employment Agreement, and (ii) he will not solicit any of
our existing employees, suppliers or customers.
17
Hen Employment Agreement
The
Employment Agreement with Eyal Hen (the “Hen Employment
Agreement”) provides that Mr. Hen will serve as our Chief
Financial Officer for an initial three-year term that began on May
15, 2019, subject to automatic extension. His base salary of
$335,000 per annum and will be eligible for a bonus as determined
by the Board of Directors of the Company (the “Board”)
in its sole discretion. Mr. Hen is also eligible to receive all
such other benefits as are provided to other management
employees.
Mr. Hen
was granted options to purchase 50,000 shares of common stock of
the Company, $0.0001 par value per share (“ Common
Stock”), pursuant to the Company’s 2017 Equity Award
Plan (the “2017 Plan”), which will vest in three equal
annual installments on the first (May 15, 2020), second (May 15,
2021), and third (May 15, 2022) anniversaries of the grant date, at
a strike price of $0.78 per share, the closing price of the
Company’s common stock on May 15, 2019.
Mr. Hen
is eligible to receive two times his base salary then in effect if
his employment with the Company is terminated within 120 days of a
change of control (as such term is defined in the Hen Employment
Agreement).
Mr. Hen
also agreed as consideration for entering into the Hen Employment
Agreement, that for the period during his employment and for twelve
months thereafter, (i) he will not compete with the Company in the
“Geographic Area”, as defined in the Hen Employment
Agreement, and (ii) he will not solicit any of our existing
employees, suppliers or customers.
Latifullah Employment Agreement
The
employment agreement with Riaz Latifullah (the “Latifullah
Employment Agreement”) provides that Mr. Latifullah shall be
Executive Vice President of Corporate Development, effective May
15, 2019, for an initial term to end on April 7, 2022, subject to
automatic extension. Mr.
Latifullah’s
annual base salary is $305,000, and he will be eligible for a bonus
as determined by the Board in its sole discretion. Mr. Latifullah
is also eligible to receive all such other benefits as are provided
to other management employees.
On May
8, 2019, pursuant to the Latifullah Employment Agreement, Mr.
Latifullah was granted options to purchase 20,000 shares of common
stock, pursuant to the 2017 Plan, which will vest in three equal
annual installments on the first (May 8, 2020), second (May 8,
2021), and third (May 8, 2022) anniversaries of the grant date, at
a strike price of $0.80 per share, the closing price of the
Company’s common stock on May 8, 2019.
Mr.
Latifullah is eligible to receive two times his base salary then in
effect if Mr. Latifullah’s employment with the Company is
terminated within 120 days of a change of control (as such term is
defined in the Latifullah Employment Agreement).
Mr.
Latifullah also agreed as consideration for entering into the
Latifullah Employment Agreement, that for the period during his
employment and for twelve months thereafter, (i) he will not
compete with the Company in the “Geographic Area”, as
defined in the Latifullah Employment Agreement, and (ii) he will
not solicit any of our existing employees, suppliers or
customers.
Bonus
Eligibility
Bonuses
for our executive officers may be conditioned on the achievement of
objective goals, which may not be waived after being set, based on
one or more of the following performance measures: earnings;
operating profits (including measures of earnings before interest,
taxes, depreciation and amortization); free cash flow or adjusted
free cash flow; cash from operating activities; revenues; net
income (before or after tax); financial return ratios; market
performance; stockholder return and/or value; net profits; earnings
per share; profit returns and margins; stock price; working
capital; capital investments; returns on assets; returns on equity;
returns on capital investments; selling, general and administrative
expenses; discounted cash flows; productivity; expense targets;
market share; cost control measures; strategic initiatives; changes
between years or periods that are determined with respect to any of
the above-listed performance criteria; net present value; sales
volume; cash conversion costs; leverage ratios; maintenance of
liquidity; integration of acquired businesses; operational
efficiencies; regulatory compliance, including the Sarbanes-Oxley
Act of 2002; and economic profit.
18
COMPENSATION OF REKOR
DIRECTORS
The
following table provides the total compensation for each person who
served as a non-employee member of our Board of Directors during
fiscal year 2020, including all compensation awarded to, earned by
or paid to each person who served as a non-employee director for
some portion or all of fiscal year 2020:
Name
Fees earned or paid in cash ($)
Total ($)
Paul
de Bary
76,000
76,000
Glenn
Goord
48,500
48,500
David
Hanlon
45,250
45,250
Christine
Harada (1)
57,250
57,250
Richard
Nathan
33,500
33,500
Steven
Croxton
38,500
38,500
(1) Ms. Harada
resigned from the board on July 2, 2021.
For the
year ended December 31, 2020, our non-employee directors are
compensated for their services as follows:
Board Meeting Fee
Committee Meeting Fee
Position
Annual Fee($)(1)
In Person($)
Telephonic($)
In Person($)
Telephonic($)
Board
Member
25,000
1,000
500
500
250
Audit
Committee Chair
20,000
1,500
500
500
250
Compensation
Committee Chair
10,000
1,500
500
500
250
Governance
Committee Chair
10,000
1,500
500
500
250
Special
Committee
-
500
250
500
250
Lead
Director
10,000
-
-
-
-
(1)
Payments are made on a quarterly basis.
19
On
November 5, 2020, our Board of Directors approved the following
changes to the board compensation fee structure beginning on
January 1, 2021:
Board Meeting Fee
Committee Meeting Fee
Position
Annual Fee ($) (1)
In Person ($)
Telephonic ($)
In Person ($)
Telephonic ($)
Board
Member
50,000
1,000
500
500
250
Audit
Committee Chair
30,000
1,500
500
500
250
Compensation
Committee Chair
10,000
1,500
500
500
250
Governance
Committee Chair
10,000
1,500
500
500
250
Nominations
Committee Chair
10,000
1,500
500
500
500
Special
Committee
-
500
250
500
250
Lead
Director
10,000
-
-
-
-
(1)
Payments are made on a quarterly basis.
Directors who are
officers or employees of Rekor or its subsidiaries do not receive
any compensation for service on our Board, but employee directors
will be reimbursed for expenses incurred in attending meetings of
our Board or any committees thereof.
Director
Stock Ownership Policy
To
align the interests of directors with stockholders, on July 9,
2021, the Board of Directors adopted a requirement that each of our
directors will be required to own our stock in an amount equal to
three (3) times his or her annual cash retainer (excluding any cash
retainer for service on any committee). This stock ownership policy
will take effect on January 1, 2022. For purposes of our policy, a
director’s holdings shall include shares held directly or
indirectly and individually or jointly. Our directors are expected
to meet this ownership requirement within five years of the later
of (a) January 1, 2022 or (b) the date he or she first becomes a
director.
20
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
The
Governance Committee has
responsibility for reviewing and, if appropriate, for approving any
related party transactions that would be required to be disclosed
pursuant to applicable SEC rules.
Described below are
any transactions since January 1, 2020 through August 3, 2021 and
any currently proposed or subsequent transactions to which the
Company was a party in which:
●
The amounts
involved exceeded or will exceed the lower of either $120,000 or 1%
of the average of the Company’s total assets at year-end for
the last two completed fiscal years; and
●
A director,
executive officer, holder of more than 5% of the outstanding
capital stock of the Company, or any member of such person’s
immediate family had or will have a direct or indirect material
interest.
Review
and Approval, or Ratification of Transactions with Related
Parties
Prior
to adoption of the Company’s Code of Conduct in August 2017,
we had no formal, written policy or procedure for the review and
approval of related-party transactions. The Code of Conduct
requires all Company personnel to seek review of and obtain
approval or ratification of any Company transaction which involves
them or certain family members or businesses they have economic
interests in. The Charter of our Governance Committee also requires
that any transaction with a related person that must be reported
under applicable rules of the SEC must be reviewed and either
approved, disapproved or ratified by our Governance
Committee.
In
February 2020, to further implement these requirements, the Board
of Directors adopted a Conflict of Interest and Related Parties
Transaction Policy upon the recommendation of the Governance
Committee. In the case of all directors and senior officers, this
policy requires review and approval of such transactions to be
obtained from the Governance Committee.
Each of
the transactions described below was approved by the Board of
Directors after review and recommendation by the Governance
Committee, which consists entirely of officers and directors
without any personal, business or family interest in the
transactions described:
AOC
Key Solutions Transaction
On
March 16, 2020 the Corporation announced that it had received an
offer to purchase its AOC Key Solutions subsidiary, for an
aggregate price of $4 million, from PurpleReign, LLC
(“PurpleReign”), an entity formed by Mr. Greg McCarthy,
the then Chief Executive Officer of AOC Key Solutions. As founders
of AOC Key Solutions and persons related to a principal in
PurpleReign and a key executive of AOC Key Solutions, Mr. James
McCarthy, the then-Chair of our Board of Directors, and Dr. Richard
Nathan, as a member of our Board of Directors, recused themselves
from participation in any discussions with management or the Board
concerning the potential sale. In connection with its review of the
transaction, the Governance Committee retained the investment
banking services of B. Riley FBR, Inc. (“BRFBR”) to
review the terms of the proposed transaction and advise the Company
whether the consideration to be received was fair to the
Company’s public stockholders. On April 2, 2020, the Company
divested its AOC Key Solutions subsidiary.
Investment
in 2019 Promissory Notes and Exchange for Equity
On
March 12, 2019, we financed the acquisition of certain assets
through an agreement pursuant to which investors loaned us
$20,000,000 in exchange for promissory notes (the “2019
Notes”) and we issued warrants to purchase 2,500,000 shares
of our common stock to the investors. The investors included Avon
Road, an affiliate of Robert Berman, Rekor’s Chief Executive
Officer and a member of our Board of Directors and Matt Hill, a
principal in the company selling the assets, who is now the
Company’s Chief Science Officer. On July 15, 2020, the
“Company completed an exchange provided for in connection
with the 2019 Notes. Approximately $15.1 million aggregate
principal amount of the 2019 Notes were exchanged for 4,349,497
shares of the Company’s common stock pursuant to the
previously disclosed Exchange Agreements dated June 30, 2020. As
part of the exchange, Matt Hill, Chief Science Officer exchanged
$1,726,676 into 431,669 common shares. After this transaction Matt
Hill owns 961,669 common shares.
McCarthy
– Berman Stock Purchase Agreement
On
August 5, 2020, our former Chairman, Mr. James McCarthy entered
into a privately negotiated Stock Purchase Agreement with Mr.
Robert A. Berman, our current CEO, President, and Executive
Chairman, to sell Mr. Berman 2,725,836 shares of the
Company’s common stock, at a price per share of approximately
$2.57. The transfer of the shares is conditioned upon Mr. Berman's
full payment of the purchase price of $7,000,000 within forty-five
days, after which Mr. McCarthy will cease to be a beneficial owner
of the Company’s common stock.
Director
Independence
Paul de
Bary, Glen Goord , Steven D. Croxton, Richard Nathan and David P.
Hanlon are each “independent” within the meaning of
Nasdaq Rule 5605(b)(1).
21
PROPOSAL
NO. 2
RATIFICATION
OF THE APPOINTMENT OF FRIEDMAN LLP AS INDEPENDENT PUBLIC ACCOUNTANT
FOR THE FISCAL YEAR ENDING DECEMBER 31, 2021
Effective April 27,
2021 the Audit Committee has appointed Friedman LLP, independent
public accountant, to audit our financial statements for the fiscal
year ending December 31, 2021. A representative of Friedman LLP is
expected to be virtually present at the 2021 Annual Meeting and
will have an opportunity to make a statement if he or she desires
to do so. It is also expected that such representative will be
available to respond to appropriate questions.
The
Audit Committee retained Friedman LLP as the Company’s
independent registered public accounting firm to perform the audit
of the Company’s consolidated financial statements for the
fiscal year ending December 31, 2021, and the audit of the
Company’s internal control over financial reporting as of
December 31, 2021.
Our
independent registered public accounting firm for 2018 and 2017 was
BD & Company, Inc., (“BD & Company”). BD &
Company served as our principal auditor from May 2017 until June
2019.
The
Audit Committee has considered whether the provision of services,
other than services rendered in connection with the audit of our
annual financial statements, was compatible with maintaining BD
& Company’s independence.
Aggregate fees
billed or incurred related to the following years for professional
services rendered by Friedman for 2020 and 2019 are set forth
below.
For the Year
Ended December 31,
2020
2019
(Dollars in
thousands)
Audit
fees
$204
$179
All other
fees
16
13
Total
$220
$192
Aggregate fees
billed or incurred related to the following years for professional
services rendered by BD & Company for 2020 and 2019 are set
forth below.
For the Year
Ended December 31,
2020
2019
(Dollars in
thousands)
Audit
fees
$-
$130
Tax
fees
67
42
All other
fees
8
102
Total
$75
$274
Audit
Fees for 2020 and 2019 include fees associated with the audits of
the annual financial statements and the quarterly reviews of the
unaudited interim financial statements included in the
Company’s Quarterly Reports on Form 10-Q. Audit-related fees
for 2020 primarily include costs associated with SEC filings and
the supplemental audit and disclosure documents. Tax fees for 2020
and 2019 include fees associated with the preparation and reviews
of tax returns, advising on the impact of local tax laws, and tax
planning. All other fees for 2019 include fees associated with the
Sales Agreement with B. Riley and transition costs from BD &
Company to Friedman. In June 2019, BD & Company became our tax
provision and tax return preparer, and the fees associated with
these services are presented as tax fees in the table
above.
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors
Consistent with SEC
policies and guidelines regarding audit independence, the Audit
Committee is responsible for the pre-approval of all audit and
permissible non-audit services provided by our principal
accountants on a case-by-case basis. Our Audit Committee has
established a policy regarding approval of all audit and
permissible non-audit services provided by our principal
accountants. Our Audit Committee pre-approves these services by
category and service. Our Audit Committee has pre-approved all of
the services provided by our principal accountants.
No
Appraisal Rights
Under
Delaware law, our stockholders are not entitled to appraisal rights
with respect to our proposed ratification of the appointment of
Friedman LLP as our independent public accountant and we will not
independently provide our stockholders with any such
rights.
Vote
Required
The
affirmative vote of a majority of the votes cast for this proposal
is required to ratify the appointment of the Company’s
independent public accountant. Abstentions will be counted towards
the tabulation of votes cast on this proposal and will have the
same effect as a negative vote. Brokerage firms have authority to
vote customers’ unvoted shares held by the firms in street
name on this proposal. If a broker does not exercise this
authority, such broker non-votes will have no effect on the results
of this vote. We are not required to obtain the approval of our
stockholders to appoint the Company’s independent accountant.
However, if our stockholders do not ratify the appointment of
Friedman LLP as the Company’s independent public accountant
for the fiscal year ending December 31, 2021, the Audit Committee
may reconsider its appointment.
THE
BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
FRIEDMAN LLP AS INDEPENDENT PUBLIC ACCOUNTANT, AND PROXIES
SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A
STOCKHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
22
PROPOSAL NO. 3
ADVISORY
VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE
OFFICERS
The
Dodd-Frank Wall Street Reform and Consumer Protection Act (the
“Dodd-Frank Act”) requires the Company’s
stockholders to have the opportunity to cast a non-binding advisory
vote regarding the approval of the compensation disclosed in this
Proxy Statement of the Company’s executive officers who are
named in the Executive Compensation Table (the “Named
Executive Officers”). The Company has disclosed the
compensation of the Named Executive Officers pursuant to rules
adopted by the SEC.
We
believe that our compensation policies for the Named Executive
Officers are designed to attract, motivate and retain talented
executive officers and are aligned with the long-term interests of
the Company’s stockholders. This advisory vote, commonly
referred to as a “say-on-pay” vote, gives you as a
stockholder the opportunity to approve or not approve the
compensation of the Named Executive Officers that is disclosed in
this Proxy Statement by voting for or against the following
resolution (or by abstaining with respect to the
resolution):
RESOLVED, that the
stockholders of the Company approve all of the compensation of the
Company’s executive officers who are named in the Executive
Compensation Table of the Company’s 2021 Proxy Statement, as
such compensation is disclosed in the Company’s 2021 Proxy
Statement pursuant to Item 402 of Regulation S-K, which disclosure
includes the Proxy Statement’s Summary Compensation Table and
other executive compensation tables and related narrative
disclosures.
Because
your vote is advisory, it will not be binding on either the Board
of Directors or the Company. However, the Company’s
Compensation Committee will take into account the outcome of the
stockholder vote on this proposal at the Annual Meeting when
considering future executive compensation arrangements. In
addition, your non-binding advisory votes described in this
Proposal 3 will not be construed: (1) as overruling any decision by
the Board of Directors, any board committee or the Company relating
to the compensation of the Named Executive Officers, or (2) as
creating or changing any fiduciary duties or other duties on the
part of the Board of Directors, any board committee or the
Company.
Vote Required
The
advisory vote to approve the compensation of our executive officers
will be approved if the votes cast in favor of the proposal exceed
the votes cast against the proposal. Abstentions will be counted
towards the tabulation of votes cast on this proposal and will have
the same effect as a negative vote. Broker non-votes will not be
counted as either votes cast for or against this proposal. While
the results of this advisory vote are non-binding, the Compensation
Committee of the Board and the Board values the opinions of our
stockholders and will consider the outcome of the vote, along with
other relevant factors, in deciding whether any actions are
necessary to address the concerns raised by the vote and when
making future compensation decisions for executive
officers.
THE
BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE
COMPENSATION OF THE COMPANY’S NAMED EXECUTED OFFICERS, AS
STATED IN THE ABOVE NON-BINDING RESOLUTION, AND PROXIES SOLICITED
BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A STOCKHOLDER
HAS INDICATED OTHERWISE ON THE PROXY.
23
PROPOSAL NO. 4
ADVISORY VOTE ON THE FREQUENCY OF HOLDING FUTURE ADVISORY VOTES ON
THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
In
addition to holding a “say-on-pay” advisory vote, we
are seeking an advisory, non-binding vote regarding the frequency
of future advisory “say-on-pay” votes in accordance
with the SEC’s proxy rules, known as a “say-on-pay
frequency” advisory vote.
Stockholders will
be able to vote that we hold this “say-on-pay” advisory
vote every year, two years, or three years, or stockholders may
abstain from voting on this proposal.
After
due consideration, the Board has decided to recommend that this
“say-on-pay” advisory vote on executive compensation
occur triennially. While there are valid arguments for annual and
biennial votes, we believe that a triennial vote will allow our
stockholders to provide us with regular direct input on our
compensation philosophy, policies and practices as disclosed in our
proxy statements and will be most useful to the Board. The
Board’s decision was based further on the premise that this
recommendation could be modified in future years if it becomes
apparent that a triennial vote is not meaningful, is burdensome or
is less frequent than that recommended by best corporate governance
practices.
The
frequency (one year, two years or three years) that receives the
greatest number of votes cast by the stockholders will be deemed
the frequency for the advisory “say-on-pay” vote
preferred by the stockholders. Because your vote is advisory, the
results will not be binding upon the Company. Although not binding,
the Board values the opinions of our stockholders and will review
and consider the outcome of the vote, along with other relevant
factors, in evaluating the frequency of future advisory votes on
executive compensation.
Vote
Required
The
frequency (one year, two years or three years) that receives the
greatest number of votes cast by the stockholders will be deemed
the frequency for the advisory “say-on-pay” vote
preferred by the stockholders. Abstentions and broker non-votes
will not be counted as either votes cast for or against this
proposal. While the results of this advisory vote are non-binding,
the Compensation Committee of the Board and the Board values the
opinions of our stockholders and will consider the outcome of the
vote, along with other relevant factors, in deciding whether any
actions are necessary to address the concerns raised by the vote
and when making future compensation decisions for executive
officers.
THE
BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE OPTION OF THREE
YEARS AS YOUR PREFERENCE FOR THE FREQUENCY OF HOLDING FUTURE
ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS,
AND PROXIES SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF
UNLESS A STOCKHOLDER HAS INDICATED OTHERWISE ON THE
PROXY.
24
PROPOSAL
5
APPROVAL AND ADOPTION OF AN AMENDMENT TO THE REKOR SYSTEMS, INC.
2017 EQUITY AWARD PLAN TO INCREASE THE NUMBER OF AUTHORIZED SHARES
OF COMMON STOCK RESERVED FOR ISSUANCE UNDER THE PLAN
We are
asking our stockholders to approve and adopt an amendment to the
Rekor Systems, Inc. 2017 Equity Award Plan (the “Plan”)
to increase the number of authorized shares of common stock
reserved for issuance under the Plan by 4,368,733 shares, resulting
in a total of 5,000,000 shares available for issuance upon
effectiveness of the proposed amendment. Our Board believes that
the Plan is a vital component of our employee compensation program
because it allows us the ability to compensate our employees,
consultants, and non-employee directors whose contributions are
important to our success by offering them the opportunity to
participate in our future performance while at the same time
providing an incentive to build long-term stockholder value. We
operate in a competitive market and new hire grants are essential
in helping us attract talented individuals. Likewise, annual grants
are essential in helping us retain and motivate our most valuable
employees. Both new hire grants and annual grants help keep
employees’ interests aligned with the interests of our
stockholders. On May 7, 2021, the Board approved the amendment to
the Plan for the reasons discussed below, subject to approval by
our stockholders. Our Board and management recommend that our
stockholders approve the amendment to our Plan. If our stockholders
do not approve and adopt the amendment to the Plan, the Plan will
remain in effect with its current terms and conditions and the
number of shares reserved for issuance will not
increase.
Other
than the increase in the number of shares reserved for issuance
under our Plan, our Plan has not been amended in any material way
since the Plan was originally approved and adopted in August
2017.
Share
Reserve
As of
July 26, 2021, an aggregate of 631,267 shares of our common stock
remained available for future grants under our Plan. If the
increase in the number of shares reserved for issuance under the
Plan is not approved, we may not have enough shares available to
reliably sustain our equity grant programs in the future. We
anticipate that if the amendment is approved and adopted by the
stockholders, we will have sufficient shares to grant equity awards
until approximately the 2024 Annual Meeting. The shares
requested may, however, last for a shorter or longer period of time
depending on various factors, such as the number of grant
recipients, future grant practices, our stock price, and forfeiture
rates.
As a
high-growth business, we utilize a value-based equity strategy
across all levels of our organization as we anticipate continued
revenue and headcount growth in the future. We strive to maintain
an effective incentive compensation program for the Company in
light of this anticipated growth to remain competitive for talent
in our market and support inorganic growth via strategic
acquisitions, when appropriate. We will continue to manage
dilution, as discussed below, and expense as we consider both our
current equity strategy and whether it is reasonable and
appropriate to make changes.
We are
committed to effectively managing our equity compensation program
in light of potential stockholder dilution. For this reason, in
administering our Plan, we consider both our “burn
rate” and our “overhang” in evaluating the impact
of the program on our stockholders. We define “burn
rate” as the number of equity awards granted during the year,
divided by the weighted average number of shares of our common
stock outstanding during the period. The burn rate measures the
potential dilutive effect of our equity grants. We define
“overhang” as the number of full value awards granted
(but not yet vested or issued) and stock options granted (but not
yet exercised) divided by the number of shares of common stock
outstanding at the end of the period. We endeavor to ensure that
our burn rate and overhang approximate the average rates of our
peer group, and that they are within the limits recommended by
certain independent stockholder advisory groups.
Accordingly, the
Board believes that the request for an additional 4,368,733 shares
for the Plan, resulting in a total of 5,000,000 shares available
for issuance under the Plan, is reasonable and prudent to allow us
to replenish our share usage from previous fiscal years, to
continue our current granting practices in the future, and to be
able to respond to growth (both organic and inorganic), market
competition, and potential stock price fluctuations.
Vote
Required
Stockholders are
requested to approve and adopt the amendment to the Rekor Systems,
Inc. 2017 Equity Award Plan to increase the number of authorized
shares of common stock reserved for issuance by 4,368,733 shares,
resulting in a total of 5,000,000 shares available for issuance
under the Plan. A summary of the Plan is included below in the
section captioned "Summary of the Plan”, and the Plan, as
amended to give effect to the amendment described in this proposal,
is attached to this proxy statement as Annex
A.
The
affirmative vote of a majority of the votes cast for this proposal
is required to approve the amendment to the Plan to increase the
number of authorized shares of common stock reserved for issuance
by 4,368,733shares, resulting in a total of 5,000,000 shares
available for issuance. Abstentions will be counted towards the
tabulation of votes cast on this proposal and will have the same
effect as a negative vote. Broker non-votes will not be counted as
either votes cast for or against this proposal. Our executive
officers and members of the Board have a financial interest in this
proposal because they are eligible to receive awards under the
Plan.
THE
BOARD RECOMMENDS A VOTE FOR THE AMENDMENT TO THE REKOR SYSTEMS,
INC. 2017 EQUITY AWARD PLAN TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK RESERVED FOR ISSUANCE TO 5,000,000
SHARES.
25
Summary
of the Rekor Systems, Inc. 2017 Equity Award Plan
The
following paragraphs provide a summary of the principal features of
the Plan, as amended to give
effect to this proposal 5. This summary does not purport to
be complete and is qualified in its entirety by reference to the
full text of the Plan a copy of which will be filed with the SEC
with this proxy statement as Annex
A.
Overview
The
purpose of the 2017 Equity Award Plan is to promote the interests
of the Company (including its subsidiaries and affiliates, if any)
and its stockholders by using equity interests in the Company to
attract, retain and motivate its management, nonemployee directors
and other eligible persons and to encourage and reward their
contributions to our performance and profitability.
As of
July 26, 2021, the total shares of our common stock remaining
available for issuance under the Plan is 631,267.
The
Plan permits us to take a flexible approach to our equity awards by
permitting the grant of restricted stock, restricted stock units,
restricted stock purchase rights, stock options, stock appreciation
rights, performance awards and other stock awards. We have also
designed the Plan to include a number of provisions that our
management believes promote best practices by reinforcing the
alignment of equity compensation arrangements for nonemployee
directors, officers, employees, consultants and stockholders’
interests. These provisions include, but are not limited to, the
following:
●
No Discounted
Awards. Awards that have an
exercise price cannot be granted with an exercise price less than
the fair market value on the grant date.
●
No Repricing Without
Stockholder Approval. We
cannot, without stockholder approval, reduce the exercise price of
an award (except for adjustments in connection with a
recapitalization), and, at any time when the exercise price of an
award is above the market value of our common stock, we cannot,
without stockholder approval, cancel and re-grant or exchange such
award for cash, other awards or a new award at a lower (or no)
exercise price.
●
No Evergreen
Provision. There is no
evergreen feature under which the shares of common stock authorized
for issuance under the Equity Award Plan can be automatically
replenished.
●
No Automatic
Grants. The Plan does not
provide for “reload” or other automatic grants to
recipients.
●
No
Transferability. Awards generally may not be transferred,
except by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order, unless approved by the
Administrator.
●
No Tax
Gross-Ups. The Plan
does not provide for any tax gross-ups.
●
No liberal change-in-control
definition. The
change-in-control definition contained in the Plan is not a
“liberal” definition that would be activated on mere
stockholder approval of a transaction.
●
“Double-trigger”
change in control vesting. If awards granted under the Plan are assumed
by a successor in connection with a change in control of the
Company, such awards will not automatically vest and pay out solely
as a result of the change in control, unless otherwise expressly
set forth in an award agreement.
●
No dividends on unearned
performance awards. The Plan
prohibits the current payment of dividends or dividend equivalent
rights on unearned performance-based awards.
●
Limitation on
amendments. No
amendments to the Plan may be made without stockholder approval if
any such amendment would materially increase the number of shares
reserved or the per-participant award limitations under the Plan,
diminish the prohibitions on repricing stock options or stock
appreciation rights, or otherwise constitute a material change
requiring stockholder approval under applicable laws, policies or
regulations or the applicable listing or other requirements of the
principal exchange on which our shares are
traded.
●
Administered by the
Administrator. The Plan is
administered by our Board of Directors (in such capacity, the
“Administrator”).
●
Clawbacks. Awards
based on the satisfaction of financial metrics that are
subsequently reversed, due to a financial statement restatement or
reclassification, are subject to forfeiture.
26
Equity Award Plan Principal Features
The
principal features of the Plan are summarized below. This summary
is not complete, however, and is qualified by the terms of the
Plan.
Shares Available Under the Plan
The
maximum aggregate number of shares of our common stock available
for issuance under the Plan is 5,000,000. Shares subject to an
award may be authorized but unissued, or reacquired shares of our
common stock or treasury shares. If an award under the Plan expires
or becomes unexercisable without having been exercised in full, or
an award is settled for cash, the unissued shares that were subject
to the award will become available for future grant under the Plan,
as will any shares that are withheld by us when an option is
exercised or tax withholdings are satisfied by the tendering of
shares. However, shares that have been issued under the Plan will
not be returned to the Plan and will not be available for future
distribution under the Plan.
Plan Administration
The
Plan is administered by the Administrator. The Administrator has
the exclusive authority, subject to the terms and conditions set
forth in the Plan, to determine all matters relating to awards
under the Plan, including the selection of individuals to be
granted an award, the type of award, the number of shares of our
common stock subject to an award, and all terms, conditions,
restrictions and limitations, if any, including, without
limitation, vesting, acceleration of vesting, exercisability,
termination, substitution, cancellation, forfeiture, or repurchase
of an award and the terms of any instrument that evidences the
award.
Term
The
Plan provides that it will continue in effect for a term of ten
(10) years, unless sooner terminated pursuant to its
provisions.
Eligibility
Awards
under the Plan may be granted to employees (including officers),
consultants and directors of the Company, its subsidiaries and
affiliates. In addition, an award under the Plan may be granted to
a person who is offered employment by us or a subsidiary or
affiliate, provided that such award shall be immediately forfeited
if such person does not accept such offer of employment within an
established time period. If otherwise eligible, an employee,
consultant or director who has been granted an award under the Plan
may be granted other awards. Although all employees of the Company,
its subsidiaries and affiliates are eligible to receive awards
under the Plan, it is not possible to estimate the number of
additional individuals who may become eligible to receive awards
under the Plan from time to time.
Awards
The
Plan is broad-based and flexible, providing for awards to be made
in the form of (a) restricted stock and restricted stock
units, (b) restricted stock purchase rights,
(c) incentive stock options, which are intended to qualify
under Section 422 of the Code, (d) non-qualified stock
options, which are not intended to qualify under Section 422
of the Code, (e) stock appreciation rights,
(f) performance awards, (g) performance shares,
(h) performance units or (i) other stock-based awards
that relate to or serve a similar function to the awards described
above. Awards may be made on a standalone, combination or tandem
basis. Additional information about some of the awards is set forth
below.
Awards of Restricted Common Stock, Restricted Stock Purchase Rights
and Restricted Stock Units
Awards
of restricted common stock and grants of restricted stock purchase
rights of shares of our common stock awarded or granted to the
recipient, all or a portion of which are subject to a restriction
period set by the Administrator during which restriction period the
recipient or purchaser shall not be permitted to sell, transfer or
pledge the restricted common stock. Restricted stock units are
notional accounts that are valued solely by reference to shares of
our common stock, subject to a restriction period set by the
Administrator and payable in our common stock, cash or a
combination thereof. The restriction period for both restricted
stock and restricted stock units may be based on period of service,
which shall not be less than one (1) year, performance of the
recipient or the Company, its subsidiaries, divisions or
departments for which the recipient is employed or such other
factors as the Administrator may determine.
27
Rights as a Stockholder
Subject
to any restrictions set forth in the award agreement, a recipient
or purchaser of our restricted common stock will possess all of the
rights of a holder of our common stock, including the right to vote
and receive dividends. Cash dividends on the shares of our common
stock that are the subject of an award agreement shall be paid in
cash to the recipient or purchaser and may be subject to forfeiture
as set forth in the award agreement. The recipient of restricted
stock units shall not have any of the rights of a stockholder of
the Company; the Administrator shall be entitled to specify with
respect to any restricted stock unit award that upon the payment of
a dividend by the Company, the Company will hold in escrow an
amount in cash equal to the dividend that would have been paid on
the restricted stock units had they been converted into the same
number of shares of our common stock and held by the recipient on
that date. Upon adjustment and vesting of the restricted stock
unit, any cash payment due with respect to such dividends shall be
made to the recipient.
Termination of Employment, Consultancy or Director
Relationship
Generally, upon
termination of employment, consultancy or a director relationship
for any reason during the restricted period, the recipient or
purchaser will forfeit the right to the shares of restricted our
common stock to the extent that the applicable restrictions have
not lapsed at the time of such termination.
Common Stock Options
Types
Stock options to purchase shares of our commons
stock may be granted under the Plan to directors and
consultants in the form of nonqualified stock options and to
employees in the form of incentive stock options or nonqualified
stock options.
Exercise Price
The per
share exercise price for shares underlying common stock options
will be determined by the Administrator, provided that the exercise
price must be at least equal to 100% of the fair market value per
share of common stock on the date of grant. In the case of an
incentive stock option granted to an employee who, at the time of
grant, owns more than 10% of the total combined voting power of all
classes of our stock, the per share exercise price must be at least
equal to 110% of the fair market value per share of common stock on
the date of grant.
Term of Option; Vesting
The
term during which a common stock option may be exercised will be
determined by the Administrator, provided that no common stock
option will be exercisable more than ten (10) years from the
date of grant. In the case of an incentive stock option granted to
an employee who, at the time of grant, owns more than 10% of the
total combined voting power of all classes of stock of the Company
or its subsidiaries or affiliates, the term of such common stock
option may not be more than five (5) years. The Administrator
has full authority, subject to the terms of the Plan, to determine
the vesting period or limitation or waiting period with respect to
any common stock option granted to a participant or the shares
purchased upon exercise of such option; provided, however, that such
vesting restriction or limitation or waiting period shall not be
less than one (1) year. In addition, the Administrator
may, for any reason, accelerate the exercisability of any common
stock option.
Other Awards
Stock Appreciation Rights
The
Administrator may grant to an employee, consultant or a director a
right to receive the excess of the fair market value of shares of
our common stock on the date the stock appreciation right is
exercised over the fair market value of such shares on the date the
stock appreciation right was granted. Such spread may, in the sole
discretion of the Administrator, be paid in cash or common stock or
a combination of both.
28
Performance Awards
The
Administrator may grant performance awards to employees based on
the performance of a recipient over a specified period. Such
performance awards may be awarded contingent upon future
performance of the Company or its affiliates or subsidiaries during
that period. A performance award may be in the form of common stock
(or cash in an amount equal to the fair market value thereof) or
the right to receive an amount equal to the appreciation, if any,
in the fair market value of common stock over a specified period.
Performance awards may be paid, in the Administrator’s
discretion, in cash or stock or some combination thereof. Each
performance award will have a maximum value established by the
Administrator at the time the award is made. Unless otherwise
provided in an award agreement or by the Administrator, performance
awards terminate if the recipient does not remain an employee of
the Company, or its affiliates or subsidiaries, at all times during
the applicable performance period.
Other Stock-Based Awards
The
Administrator may, in its discretion, grant other stock-based
awards that are related to or serve a similar function to the
awards described above.
Material Terms of Performance Goals for Qualified Performance-Based
Compensation
Under
section 162(m) of the Code, in order for us to deduct compensation
in excess of $1,000,000 that is paid in any year to any
“covered employee,” such compensation must be treated
as “qualified performance-based,” within the meaning of
section 162(m) of the Code. A “covered employee” is
defined under section 162(m) of the Code as a company’s
principal executive officer or any of such company’s three
other most highly compensated executive officers named in the proxy
statement (other than the principal executive officer or principal
financial officer). Section 7 of the Plan sets forth the
procedures the Administrator should follow to avoid the
deductibility limitations of section 162(m) of the Code when making
long-term incentive performance awards under the Plan to current
covered employees and employees whom the Administrator anticipates
may become covered employees between the time of grant and payment
of the award. However, there can be no guarantee that amounts
payable under the Plan will be treated as “qualified
performance-based” compensation and we reserve the
flexibility to pay nondeductible compensation when necessary to
achieve our compensation objectives.
Among
other things, in order for an award under Section 7 of the
Plan to be treated as “qualified performance-based”
compensation that is not subject to the $1,000,000 cap, stockholder
approval of the material terms of the performance goals is required
at least every five (5) years. The material terms include the
employees eligible to receive the compensation, a description of
the performance criteria and the maximum amount of compensation
that may be paid to any one employee. A description of the material
terms for qualified performance-based compensation in the Plan
follows:
Employees Eligible to Receive
Compensation. A
performance-based award under the Plan may be granted to employees
(including officers) of the Company, its subsidiaries and
affiliates. In addition, a performance-based award may be granted
to a person who is offered employment by the Company or a
subsidiary or affiliate, provided that such award shall be
immediately forfeited if such person does not accept such offer of
employment within an established time period.
Performance
Criteria. When making an award
under the Plan, the Administrator may designate the award as
“qualified performance-based compensation,” which means
that performance criteria must be satisfied in order for an
employee to be paid the award. Qualified performance-based
compensation may be made in the form of restricted common stock,
restricted stock units, common stock options, performance shares,
performance units or other stock equivalents. Section 7 of the
Plan includes the performance criteria the Administrator has
adopted, subject to stockholder approval, for a “qualified
performance-based compensation” award, which shall consist of
objective tests based on one or more of the
following:
●
earnings;
●
operating profits
(including measures of earnings before interest, taxes,
depreciation and amortization;
●
free cash flow or
adjusted free cash flow;
●
cash from operating
activities;
●
revenues;
●
net income (before
or after tax);
●
financial return
ratios;
●
market
performance;
●
stockholder return
and/or value;
●
net
profits;
29
●
earnings per
share;
●
profit returns and
margins;
●
stock
price;
●
working
capital;
●
capital
investments;
●
returns on
assets;
●
returns on
equity;
●
returns on capital
investments;
●
selling, general
and administrative expenses;
●
discounted cash
flows;
●
productivity;
●
expense
targets;
●
market
share;
●
cost control
measures;
●
strategic
initiatives;
●
changes between
years or periods that are determined with respect to any of the
above-listed performance criteria;
●
net present
value;
●
sales
volume;
●
cash conversion
costs;
●
leverage
ratios;
●
maintenance of
liquidity;
●
integration of
acquired businesses;
●
operational
efficiencies, including Lean Six Sigma initiatives;
●
regulatory
compliance, including the Sarbanes-Oxley Act of 2002;
and
●
economic
profit.
Performance
criteria may be measured solely on the Company, a subsidiary or
business unit basis, on specific capital projects or groups of
projects or a combination thereof. Further, performance criteria
may reflect absolute entity performance or a relative comparison of
entity performance to the performance of one or more peer groups of
entities or other external measure of the selected performance
criteria. The measure for any such award may include or exclude
items to retain the intents and purposes of specific objectives,
such as losses from discontinued operations, extraordinary gains or
losses, the cumulative effect of accounting changes, acquisitions
or divestitures, foreign exchange impacts, acceleration of
payments, costs of capital invested, discount factors, and any
unusual or nonrecurring gain or loss. In order to qualify as
performance-based under section 162(m) of the Code, the performance
criteria will be established before 25% of the performance period
has elapsed and will not be subject to change (although future
awards may be based on different performance criteria). The
performance periods may extend over one to five calendar years, and
may overlap one another.
Other Provisions
Termination, Amendment and Employee Retirement Income Security Act
of 1974 (“ERISA”) Status
The
Plan provides that the Administrator may generally amend, alter,
suspend or terminate the Plan and the Administrator may
prospectively or retroactively amend any or all of the terms of
awards granted under the Plan, so long as any such amendment does
not impair the rights of any recipient without the
recipient’s consent. Stockholder approval is required for any
material Plan amendment or any amendment necessary to comply with
the tax code or any other applicable laws or stock exchange
requirements. The Plan is not subject to the provisions of
ERISA.
30
Anti-dilution Provisions
Subject
to any required action by our stockholders, the number of shares of
common stock covered by each outstanding award (and the purchase or
exercise price thereof), and the number of shares of common stock
that have been authorized for issuance under the Plan, but as to
which no awards have yet been granted (or which have been returned
to the Plan upon cancellation or expiration of an award or the
withholding of shares by the Company) will be proportionately
adjusted to prevent dilution or enlargement of rights in the event
of any stock split, stock dividend, combination or reclassification
of the common stock or other relevant capitalization
change.
Prohibition on Loans to Participants
We may
not lend money to any participant under the Plan for the purpose of
paying the exercise or base price associated with any award or for
the purpose of paying any taxes associated with the exercise or
vesting of an award.
Withholding Obligations
We may
take such steps as are considered necessary or appropriate for the
withholding of any federal, state, local or foreign taxes of any
kind that we are required by any law or regulation of any
governmental authority to withhold in connection with any award
under the Plan, including, without limiting the generality of the
foregoing, the withholding of all or any portion of any payment or
the withholding of the issue of common stock to be issued under the
Plan, until such time as the recipient has paid us for any amount
we are required to withhold with respect to taxes. Unless otherwise
determined by the Administrator, withholding obligations may be
settled with vested common stock, including vested common stock
that is part of the award that gives rise to the withholding
requirement. The Administrator may establish such procedures as it
deems appropriate, including the making of irrevocable elections,
for the settlement of withholding obligations with vested common
stock.
Potential Dilutive Impact of the Plan
We are
committed to effectively managing its employee equity compensation
programs while minimizing stockholder dilution. For this reason, in
administering our equity compensation program, we consider both our
“burn rate” and “overhang” in evaluating
the impact of the program on our stockholders. We define
“burn rate” as the number of equity awards granted
during the year, divided by the weighted average number of shares
of our common stock outstanding during the period. The burn rate
measures the potential dilutive effect of our equity grants. We
define “overhang” as the number of full value awards
granted (but not yet vested or issued) and stock options granted
(but not yet exercised) divided by the number of shares of common
stock outstanding at the end of the period.
Certain Federal Income Tax Consequences
The
following is a brief summary of the principal federal income tax
consequences of the receipt of restricted common stock and
restricted stock units, the grant and exercise of common stock
options awarded under the Plan and the subsequent disposition of
shares acquired upon such exercise and the receipt of certain other
awards under the Plan. This summary is based upon the provisions of
the Code as in effect on the date of this offering circular,
current regulations adopted and proposed thereunder and existing
judicial decisions, as well as administrative rulings and
pronouncements of the Internal Revenue Service (all of which are
subject to change, possibly with retroactive effect). This summary
is not intended to be exhaustive and does not describe all federal,
state or local tax laws. Furthermore, the general rules discussed
below may vary, depending upon the personal circumstances of the
individual holder. Accordingly, participants should consult a tax
advisor to determine the income tax consequences of any particular
transaction.
Taxation of Restricted Common Stock
In
general, except in the case of an election under section 83(b) of
the Code, a participant will not incur any tax upon the grant of
shares of stock which are subject to a substantial risk of
forfeiture. However, when the restrictions lapse or the shares
become freely transferable, the participant will recognize ordinary
income equal to the fair market value of the applicable shares at
such time, less the amount, if any, paid for such shares, unless
the participant has made a section 83(b) election with respect to
such shares or has elected to defer receipt of such shares, as
discussed below.
If a
participant makes a section 83(b) election within 30 days of a
grant of restricted common stock, the participant will recognize
ordinary income at the time of grant in an amount equal to the
difference between the fair market value of the restricted shares
on the grant date and the amount, if any, paid for such restricted
shares. If the participant makes such an election, he or she will
not recognize any further income with respect to such shares solely
as a result of a later lapse of the restrictions.
31
If a
participant holds the restricted common stock as a capital asset
after the earlier of either (1) the vesting of such restricted
common stock or (2) the making of a timely section 83(b)
election with respect to such restricted common stock, any
subsequent gain or loss will be taxable as long-term or short-term
capital gain or loss, depending upon the holding period. For this
purpose, the basis in the restricted common stock generally will be
equal to the sum of the amount (if any) paid for the restricted
common stock and the amount included in ordinary income as a result
of the vesting event or section 83(b) election, as applicable;
provided, however, that, if a participant forfeits restricted
common stock with respect to which a section 83(b) election was
made prior to vesting, the participant’s capital loss is
limited to the amount (if any) paid for such restricted common
stock.
In
general, at the time a participant recognizes ordinary income with
respect to the restricted common stock, will be entitled to a
deduction in an amount equal to the ordinary income recognized by
the participant, which deduction may be limited by section 162(m)
of the Code.
Taxation of Restricted Stock Units; Stock Appreciation Rights;
Performance Shares and Performance Units
In
general, a participant will not incur any tax upon the grant of
restricted stock units, stock appreciation rights, performance
shares or performance units. However, when the restrictions lapse,
the participant will recognize ordinary income in an amount equal
to the sum of the cash and the fair market value of any property
received.
Taxation of Non-Qualified Stock Options
In
general, a participant will not recognize any income upon the grant
of a non-qualified stock option. Upon the exercise of a
non-qualified stock option, however, a participant generally will
recognize ordinary income in an amount equal to the excess of the
fair market value of the non-qualified option stock on the date of
exercise over the exercise price (i.e., the “spread”)
and the Company will be entitled to a deduction in an equal amount,
which may be limited by section 162(m) of the Code.
Upon
subsequent sales of shares obtained through the exercise of
non-qualified stock options, the participant may realize short-term
or long-term capital gain or loss, depending upon the holding
period of the shares, if such shares constitute capital assets in
the participant’s hands. The gain or loss will be measured by
the difference between the sales price and the tax basis of the
shares sold. The tax basis for this purpose generally will be fair
market value of the shares on the date of exercise.
Taxation of Incentive Stock Options
A
participant who is granted an incentive stock option does not
recognize taxable income at the time the option is granted or upon
its exercise, although the exercise is an adjustment item for
alternative minimum tax purposes and may subject the participant to
alternative minimum tax. If the shares acquired upon exercise are
sold after the expiration of two years from the grant of the option
and one year after exercise of the option, any gain or loss is
treated as long-term capital gain or loss. If these holding periods
are not satisfied, the participant recognizes ordinary income at
the time of disposition equal to the difference between the
exercise price and the lower of (1) the fair market value of
the shares at the date of the option exercise or (2) the sale
price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated
as ordinary income is treated as long-term or short-term capital
gain or loss, depending on the holding period. Unless limited by
section 162(m) of the Tax Code, we are generally entitled to a
deduction in the same amount as the ordinary income recognized by
the participant.
Taxation of Other Stock Based Awards
Other
awards may be granted under Plan. Since the amount, character and
timing of income recognized in connection with such awards will
vary depending upon the specific terms and conditions of such
awards, no information regarding the tax consequences of the
receipt of such awards may be provided at this time.
Tax Withholding
Our
obligations under the Plan are conditioned upon proper arrangements
being in place with participants in the Plan for the payment of
withholding tax obligations. Unless otherwise determined by the
Administrator, withholding tax obligations may be settled with
shares of our common stock, including shares that are part of the
award that gives rise to the withholding obligation.
In
light of the factors described above, the Administrator believes
that the ability to grant equity compensation is vital to our
ability to continue to attract, motivate, reward, and retain
individuals.
32
OTHER
MATTERS
As of
the date of this Proxy Statement, the Board knows of no other
business that will be presented at the Annual Meeting. If any other
business is properly brought before the Annual Meeting, it is
intended that proxies in the enclosed form will be voted in respect
thereof in accordance with the best judgment and in the discretion
of the persons voting the proxies.
33
Annex
A
REKOR SYSTEMS, INC.
2017 EQUITY AWARD PLAN
(as amended and restated as of _____________________)
Section 1
Purpose; Definitions
The
2017 Equity Award Plan of Rekor Systems, Inc., a Delaware
corporation (the “Company”), is intended to
promote the best interests of the Company and its stockholders by
(i) assisting the Company and its Affiliates in the recruitment
and/or retention of persons with ability and initiative, (ii)
providing an incentive to such persons to contribute to the growth
and success of the Company’s businesses by affording such
persons equity participation in the Company, and (iii) associating
the interests of such persons with those of the Company and its
Affiliates and stockholders. The following capitalized terms shall
have the following respective meanings when used in the
Plan:
(a)
“Administrator”
means the Board, or its Committee appointed in accordance with
Section 3 of
the Plan, as shall be administering the Plan.
(b)
“Affiliate”
means (i) any Subsidiary of the Company, (ii) any Parent of the
Company, (iii) any corporation, or trade or business (including,
without limitation, a partnership, limited liability company or
other entity) which is directly or indirectly controlled fifty
percent (50%) or more (whether by ownership of stock, assets or an
equivalent ownership interest or voting interest) by the Company or
one of its Affiliates, (iv) any other entity in which the Company
or any of its Affiliates has a material equity interest and which
is designated as an “Affiliate” by resolution of the
Committee; and (v) any executive officer, director or ten percent
(10%) shareholder of the Company.
(c)
“Applicable
Laws” means the legal requirements relating to the
administration of plans providing one or more of the types of
Awards described in the Plan and the issuance of Shares thereunder
pursuant to U.S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange rules or regulations
and the applicable laws, rules and regulations of any foreign
country or jurisdiction where Awards are, or will be, granted under
the Plan.
(d)
“Award” means a
grant of an Option, Restricted Stock, including a Restricted Stock
Purchase Right, Restricted Stock Unit, Stock Appreciation Right,
Performance Award, Performance Share, Performance Unit or other
stock-based Award under the Plan, all on a standalone, combination
or tandem basis, as described in or granted under the
Plan.
(e)
“Award
Agreement” means a written agreement between the
Company and a Recipient evidencing the terms and conditions of an
individual Award. The Award Agreement is subject to the terms and
conditions of the Plan.
(f)
“Board” means
the Board of Directors of the Company.
(g)
“Cause” shall
mean, unless otherwise set forth in an Award Agreement or
determined in writing by the Administrator, termination of a
Recipient’s Continuous Service Status by the Company for any
of the following reasons: (i) the conviction of the Recipient
for committing, or entering a plea of nolo contendere by the
Recipient with respect to, a felony under federal or state law or a
crime involving moral turpitude; (ii) the commission of an act
of personal dishonesty, embezzlement, or fraud involving personal
profit that has caused or is reasonably expected to result in
material injury to the Company; (iii) the willful misconduct,
gross negligence or deliberate failure on the part of the Recipient
to perform his or her employment duties with the Company in any
material respect; (iv) the unauthorized use or disclosure by
Recipient of any proprietary information or trade secrets of the
Company or any other party to whom the Recipient owes an obligation
of nondisclosure as a result of his or her relationship with the
Company; or (v) the failure to comply with Company policies or
agreements with the Company, in any material respect.
(h)
“Change in
Control” shall mean the occurrence of any of the
following events, each of which shall be determined independently
of the others: (i) any “Person” (as hereinafter
defined) becomes a “beneficial owner” (as such term is
used in Rule 13d-3 promulgated under the Exchange Act) of a
majority of the stock of the Company entitled to vote in the
election of directors of the Company; (ii) individuals who are
Continuing Directors of the Company (as hereinafter defined) cease
to constitute a majority of the members of the Board;
(iii) stockholders of the Company adopt and consummate
(x) a plan of liquidation for all or substantially all of the
assets of the Company or (y) an agreement providing for the
distribution of all or substantially all of the assets of the
Company; (iv) consummation of a merger, consolidation, other
form of business combination or a sale of all or substantially all
of its assets, with an unaffiliated third party, unless the
business of the Company following consummation of such merger,
consolidation or other business combination is continued following
any such transaction by a resulting entity (which may be, but need
not be, the Company) and the stockholders of the Company
immediately prior to such transaction hold, directly or indirectly,
at least a majority of the voting power of the resulting entity;
provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) shall not constitute a Change in Control;
(v) there is a Change in Control of the Company of a nature
that is reported in response to Item 5.01 of Current Report on
Form 8-K or any similar item, schedule or form under the Exchange
Act, as in effect at the time of the change, whether or not the
Company is then subject to such reporting requirements; or
(vi) the Company consummates a transaction which constitutes a
“Rule 13e-3 transaction” (as such term is defined in
Rule 13e-3 of the Exchange Act).
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(i)
“Code” means
the Internal Revenue Code of 1986, as amended or replaced from time
to time.
(j)
“Committee”
means one or more committee or subcommittees of the Board appointed
by the Board to administer the Plan, in accordance with
Section 3
below.
(k)
“Common Stock”
means the common stock, par value $0.0001, of the
Company.
(l)
“Company”
has the meaning set forth above in this Section 1 of the
Plan.
(m)
“Consultant”
means any person, including an advisor (but excluding an Employee),
who is engaged by the Company or any Affiliate to render services
and is compensated for such services, and any director of the
Company whether compensated for such services or not.
(n)
“Continuing
Directors” shall mean the members of the Board on the
Effective Date, provided that any person becoming a member of the
Board subsequent to such date whose election or nomination for
election was supported by at least a majority of the directors who
then comprised the Continuing Directors shall be considered to be a
Continuing Director; provided,
however, that no individual initially elected or nominated
as a Director as a result of an actual or threatened election
contest with respect to Directors or as a result of any other
actual or threatened solicitation of proxies by or on behalf of any
person other than the Board shall be deemed to be a Continuing
Director.
(o)
“Continuous Service
Status” means the absence of any interruption or
termination of service as an Employee or Consultant. Continuous
Service Status as an Employee or Consultant shall not be considered
interrupted in the case of: (i) sick leave; (ii) military
leave; (iii) any other leave of absence approved by the
Administrator, provided
that, for purposes of Incentive Stock Options, such leave is
for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by
contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) in the case
of transfers between locations of the Company or between the
Company, any of its Affiliates or any of their respective
successors. A change in status from an Employee to a Consultant or
from a Consultant to an Employee will not constitute an
interruption of Continuous Service Status so long as under the new
title the person is still required to perform “substantial
future services” (within the meaning of Treas. Reg. §
1.409A-1(d)) to the Company, its Affiliates or their respective
successors.
(p)
“Director”
means a director serving on the Board who is not also an Employee;
and who has been duly elected to the Board by the stockholders of
the Company or by the Board under applicable corporate law. Neither
service as a Director nor payment of a director’s fee by the
Company shall, without more, constitute “employment” by
the Company.
(q)
“Disability”
means permanent and total disability as determined under procedures
established by the Administrator for the purposes of the Plan;
provided, however, that
(i) with respect to an Incentive Stock Option, such Disability
must also fall within the meaning of “permanent and total
disability” as defined in Section 22(e)(3) of the Code,
and (ii) with respect to all Awards, to the extent required by
Section 409A of the Code, such Disability must also fall
within the meaning of “disabled” as defined in
Section 409A(a)(2)(C) of the Code.
(r)
“Effective
Date” means the date described in Section 15(a) of the
Plan.
(s)
“Employee”
means any common-law employee of the Company or any Affiliate,
including Officers employed by the Company or any Affiliate;
provided, however, that a
person serving solely as an interim officer of the Company or any
Affiliate shall not be deemed an Employee for the purposes of the
Plan. Neither service as a Director nor payment of a
director’s fee by the Company shall, without more, constitute
“employment” by the Company.
(t)
“Exchange
Act”means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto, or the rules
and regulations promulgated thereunder.
(u)
“Fair Market
Value” means, as of any date, the value of Common
Stock determined as follows:
(i) If
the Common Stock is listed on a U.S. national securities exchange,
its Fair Market Value shall be either the mean of the highest and
lowest reported sale prices of the stock (or, if no sales were
reported, the average of the closing bid and asked price) or the
last reported sale price of the stock, as determined by the
Administrator in its discretion, on a U.S. national securities
exchange for any given day or, if not listed on such exchange, on
any other national securities exchange on which the Common Stock is
listed as reported in The Wall Street Journal or such other source
as the Administrator deems reliable;
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(ii) If
the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, the Fair Market Value
of a Share of Common Stock shall be either the mean between the
high bid and low asked prices or the last asked price, as
determined by the Administrator for the Common Stock on any given
day, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(iii)
In the absence of an established regular public market for the
Common Stock, the Fair Market Value shall be determined in good
faith by the Administrator pursuant to the reasonable application
of a reasonable valuation method in accordance with the provisions
of Section 409A of the Code and the regulations thereunder
and, with respect to an Incentive Stock Option, in accordance with
such regulations as may be issued under the Code; provided that with respect to an
individual described in Section 5(c)(i)(A)(1)
hereof, this Section 1(s)(iii) shall
not be available if the resulting price fails to represent the Fair
Market Value of the stock on the date of grant as determined in
accordance with Sections 1(s)(i) or
(ii) above.
(v)
“Incentive Stock
Option” means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of
the Code and the regulations promulgated thereunder.
(w)
“Listed
Security” means
any security of the Company that is listed or approved for listing
on a national securities exchange or designated or approved for
designation as a national market system security on an interdealer
quotation system by the Financial Industry Regulatory Authority
(FINRA).
(x)
“Non-Qualified Stock
Option” means any Option that is not an Incentive
Stock Option.
(y)
“Officer”
unless otherwise noted herein, means a person who is an officer of
the Company or Affiliate.
(z)
“Option” means
a stock option granted pursuant to the Plan.
(aa)
“Parent” means
a “parent corporation,” whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any
successor provision.
(bb)
“Performance
Award” means an Award granted pursuant to Section 6(b) of the
Plan.
(cc)
“Performance
Share” means an Award granted pursuant to Section 6(c) of the Plan
of a unit valued by reference to a designated number of Shares,
which value may be paid to the Recipient upon achievement of such
performance goals as the Administrator may establish.
(dd)
“Performance
Unit” means an Award granted pursuant to Section 6(d) of the Plan
of a unit valued by reference to a designated number of Shares,
which value may be paid to the Recipient upon achievement of such
performance goals as the Administrator may establish.
(ee)
“Plan” has the
meaning set forth above in this Section 1 of the
Plan.
(ab)
“Recipient”
means an Employee, former Employee, Consultant, former Consultant,
Director or former Director who holds an outstanding
Award.
(ac)
“Reprice” means
the reduction of the exercise price of Options or Stock
Appreciation Rights previously awarded, and, at any time when the
exercise price of Options or Stock Appreciation Rights is above the
Fair Market Value of a share of Common Stock, the cancellation and
re-grant or the exchange of such outstanding Options or Stock
Appreciation Rights for either cash or a new Award with a lower (or
no) exercise price.
(ad)
“Restricted
Stock” means Shares of Common Stock acquired pursuant
to a grant of an Award or Restricted Stock Purchase Right under
Section 4 of
the Plan.
A-3
(ae)
“Restricted Stock Purchase
Right” means the right to purchase Common Stock
pursuant to Section 4 of the
Plan.
(af)
“Restricted Stock
Unit” means a notional account established pursuant to
an Award granted pursuant to Section 4 of the Plan that
is (i) valued solely by reference to shares of Common Stock,
(ii) subject to restrictions specified in the Award Agreement,
and (iii) payable in Common Stock, cash or a combination
thereof. The Restricted Stock Unit awarded to the Recipient will
vest according to time-based or performance-based criteria
specified in the Award Agreement.
(ag)
“Retirement”
means an Employee’s retirement from active employment with
the Company or any Affiliate as determined under a pension plan of
the Company or any Affiliate applicable to the Employee; or the
Employee’s termination of employment at or after age 55
under circumstances that the Administrator, in its sole discretion,
deems equivalent to retirement.
(ah)
“Rule 16b-3”
means Rule 16b-3 promulgated under Section 16 of the Exchange
Act, as such rule may be amended from time to time, and any
successor rule, regulation, or statue fulfilling the same or a
similar function.
(ai)
“Section 162(m)
Exception” means the exception on “applicable
employee remuneration” under Section 162(m) of the Code
for “qualified performance-based
compensation.”
(aj)
“Service
Provider” means an Employee, Director or
Consultant.
(ak)
“Stock Appreciation
Right” means an Award granted pursuant to Section 6(a) of the
Plan.
(al)
“Share” means a
share of the Common Stock, as adjusted in accordance with
Section 9 of
the Plan.
(am)
“Subsidiary”
means a “subsidiary corporation,” whether now or
hereafter existing, as defined in Section 424(f) of the
Code.
(an)
“Substitute
Awards” means Awards granted or Shares issued by the
Company in assumption of, or in substitution or exchange for,
awards previously granted, or the right or obligation to make
future awards, in each case by a company acquired by the Company or
any Affiliate or with which the Company or any Affiliate
combines.
Section 2
Shares Subject to the Plan
(a)
Shares Available for
Issuance. Subject to the provisions of Section 9 of the Plan, the
aggregate maximum number of Shares available for grants of Awards
under the Plan is 5,000,000 Shares. Awards may be issued entirely
in the form of Incentive Stock Options or through any combination
of any one or more of the forms of Awards authorized under the
terms of the Plan. The Shares subject to an Award under the Plan
may be authorized but unissued, or reacquired Common Stock or
treasury shares.
(b)
Shares Eligible for
Reissuance. If any Shares subject to an Award are forfeited,
an Award expires or otherwise terminates without issuance of
Shares, or an Award is settled for cash (in whole or in part) or
otherwise does not result in the issuance of all or a portion of
the Shares subject to such Award (including on payment in Shares on
exercise of a Stock Appreciation Right), such Shares shall, to the
extent of such forfeiture, expiration, termination, cash settlement
or non-issuance, be added to the Shares available for grant under
the Plan on a one-for-one basis. In the event that (i) any
Option or other Award granted hereunder is exercised through the
tendering of Shares (either actually or by attestation) or by the
withholding of Shares by the Company, or (ii) withholding tax
liabilities arising from such Option or other Award are satisfied
by the tendering of Shares (either actually or by attestation) or
by the withholding of Shares by the Company, then in each such case
the Shares so tendered or withheld shall be added to the Shares
available for grant under the Plan on a one-for-one
basis.
(c)
Dividends on Awards with
Performance Goals. If an Award under the Plan is subject to
vesting based on achievement of certain performance goals, any
dividend and dividend equivalents with respect to such Award shall
be paid only upon and to the extent that the underlying Award
vests.
(d)
Substitute Awards.
Substitute Awards shall not reduce the Shares authorized for grant
under the Plan, nor shall Shares subject to a Substitute Award be
added to the Shares available for Awards under the Plan as provided
in paragraph (a) above. Additionally, in the event that a
company acquired by the Company or any Affiliate, or with which the
Company or any Affiliate combines, has shares available under a
pre-existing plan approved by stockholders and not adopted in
contemplation of such acquisition or combination, the shares
available for grant pursuant to the terms of such pre-existing plan
(as adjusted, to the extent appropriate, using the exchange ratio
or other valuation ratio or formula used in such acquisition or
combination to determine the consideration payable to the holders
of common stock of the entities party to such acquisition or
combination) may be used for Awards under the Plan and shall not
reduce the Shares authorized for grant under the Plan (and Shares
subject to such Awards shall not be added to the Shares available
for Awards under the Plan as provided in paragraphs (a) and
(b) above); provided,
that Awards using such available shares shall not be made
after the date awards or grants could have been made under the
terms of the pre-existing plan, absent the acquisition or
combination, and shall only be made to individuals who were not
Employees or Directors prior to such acquisition or
combination.
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Section 3
Administration of the Plan
(a)
Administration; Committee
Composition. The Plan shall be administered by the Board or
a Committee, or a combination thereof, as determined by the Board;
provided, that, if
applicable, with (i) respect to any Award that is intended to
satisfy the requirements of Rule 16b-3, such Committee shall
consist of at least the number of Directors as is required by Rule
16b-3 and each such Director shall satisfy the required
qualifications of such rule and (ii) with respect to any Award
that is intended to satisfy the requirements of the
Section 162(m) Exception, such Committee shall consist of at
least the number of Directors satisfying the requirements of the
Section 162(m) Exception. Committee members shall serve for
such term(s) as the Board may determine, subject to removal by the
Board at any time. The Committee shall act by a majority of its
members, or if there are only two members of such Committee, by
unanimous consent of both members. If at any time there is no
Committee in office, the functions of the Committee specified in
the Plan shall be carried out by the Board.
(b)
Powers of the
Administrator. Except for the terms and conditions
explicitly set forth in the Plan, and in the case of a Committee,
the specific duties delegated by the Board to such Committee, the
Administrator shall have exclusive authority, in its discretion, to
determine the Fair Market Value of the Common Stock in accordance
with Section 1(s) of the Plan
and to determine all matters relating to Awards under the Plan,
including the selection of individuals to be granted an Award, the
type of Award, the number of shares of Common Stock subject to an
Award, all terms, conditions, restrictions and limitations, if any,
including, without limitation, vesting, acceleration of vesting,
exercisability, termination, substitution, cancellation,
forfeiture, or repurchase of an Award and the terms of any
instrument that evidences the Award. The Administrator shall also
have exclusive authority to interpret the Plan and its rules and
regulations, and to make all other determinations deemed necessary
or advisable under or for administering the Plan, subject to
Section 13 of
the Plan. All actions taken and determinations made by the
Administrator pursuant to the Plan shall be conclusive and binding
on all parties involved or affected. The Administrator may, by a
majority of its members then in office, authorize any one or more
of its members or any Officer of the Company to execute and deliver
documents on behalf of the Administrator, or delegate to an Officer
of the Company the authority to make decisions pursuant to
Section 5(d)
of the Plan, provided that
the Administrator may not delegate its authority with regard to the
selection for participation of or the granting of Awards to persons
subject to Section 13 of the Exchange Act.
(c)
Compliance with Section 409A
of the Code. Awards granted under the Plan shall be designed
and administered in such a manner that they are either exempt from
the application of, or comply with, the requirements of
Section 409A of the Code and the regulations thereunder. To
the extent that the Administrator determines that any Award granted
under the Plan is subject to Section 409A of the Code, the
Award Agreement shall incorporate the terms and conditions
necessary to avoid the imposition of an additional tax under
Section 409A of the Code upon a Recipient. Notwithstanding any
other provision of the Plan or any Award Agreement (unless the
Award Agreement provides otherwise with respect to this
Section 3):
(i) an Award shall not be granted, deferred, accelerated,
extended, paid out, settled, substituted or modified under the Plan
in a manner that would result in the imposition of an additional
tax under Section 409A of the Code upon a Recipient; and
(ii) if an Award constitutes “deferred
compensation” within the meaning of Section 409A of the
Code, and if the Recipient holding the Award is a “specified
employee” (as defined in Section 409A of the Code, with
such classification to be determined in accordance with the
methodology established by the Company), no distribution or payment
of any amount on account of a “separation from service”
(as defined in Section 409A of the Code) shall be made before
a date that is six (6) months following the date of such
separation from service, or, if earlier, the date of the
Recipient’s death. Although the Company intends to administer
the Plan so that Awards will be exempt from, or will comply with,
the
requirements
of Section 409A of the Code, the Company does not warrant that
any Award under the Plan will qualify for favorable tax treatment
under Section 409A of the Code or any other provision of
federal, state, local or non-United States law. Neither the
Company, nor its Affiliates, nor their respective Directors,
Officers, Employees or advisers shall be liable to any Recipient
(or any other individual claiming a benefit through the Recipient)
for any tax, interest, or penalties the Recipient might owe as a
result of the grant, holding, vesting, exercise, or payment of any
Award under the Plan.
(d)
“Double Trigger”
Change in Control Vesting. Unless otherwise expressly set
forth in an award agreement, if awards granted under the Plan are
assumed by a successor in connection with a change in control of
the Company, such awards will not automatically vest and pay out
solely as a result of the Change in Control.
Section 4
Restricted Stock Award, Restricted Stock Purchase Right and
Restricted Stock Units
(a)
Awards of Restricted Stock and
Restricted Stock Units and Restricted Stock Purchase Rights.
Shares of Restricted Stock or Restricted Stock Units may be issued
either alone, in addition to, or in tandem with other Awards
granted under the Plan and/or cash awards made outside of the Plan.
The Administrator shall determine the individuals to whom it will
award Restricted Stock or Restricted Stock Units under the Plan,
and it shall advise the Recipient in writing, by means of an Award
Agreement, of the terms, conditions and restrictions related to the
Award, including the number of Shares of Restricted Stock or
Restricted Stock Units to be awarded to the Recipient, the price to
be paid, if any, the time or times within which such Awards may be
subject to forfeiture and any other terms and conditions of the
Awards, in addition to those contained in this Section 4. The purchase
price of the Shares subject to the Restricted Stock Purchase Rights
shall be as determined by the Administrator. The Administrator may
condition the grant or vesting of Restricted Stock or Restricted
Stock Units upon the attainment of specified performance goals of
the Recipient or of the Company, its Affiliates for or within which
the Recipient is primarily employed, or upon such other factors as
the Administrator shall determine. The provisions of an Award need
not be the same with respect to each Recipient. The terms of the
Award of Restricted Stock or Restricted Stock Units shall comply in
all respects with Applicable Law and the terms of the
Plan.
(b)
Awards and Certificates.
Each Award shall be confirmed by, and subject to the terms of, an
Award Agreement. Shares of Restricted Stock shall be evidenced in
such manner as the Administrator may deem appropriate, including
book-entry registration or issuance of one or more stock
certificates. The Administrator may require that the certificates
evidencing such Shares be held in custody by the Company until the
restrictions thereon shall have lapsed and that, as a condition of
any Award of Restricted Stock, the Recipient shall have delivered
to the Company a stock power, endorsed in blank, relating to the
Shares covered by such Award. Any certificate issued with respect
to Shares of Restricted Stock shall be registered in the name of
such Recipient and shall bear an appropriate legend referring to
the terms, conditions and restrictions applicable to such Award,
substantially in the following form:
“THE SHARES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AND OTHER TERMS AND CONDITIONS (INCLUDING FORFEITURE) SET
FORTH IN THE REKOR SYSTEMS, INC. 2017 EQUITY AWARD PLAN AND THE
AWARD AGREEMENT, BETWEEN THE COMPANY AND THE REGISTERED HOLDER.
COPIES OF SUCH PLAN AND AWARD AGREEMENT ARE ON FILE AT THE OFFICE
OF THE SECRETARY OF REKOR SYSTEMS, INC. ANY TRANSFER OR PURPORTED
TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE IN VIOLATION
OF SUCH AWARD AGREEMENT SHALL BE NULL AND VOID.”
A-5
(c) If
and when the Restriction Period (hereinafter defined) expires
without a prior forfeiture of the Restricted Stock subject to such
Restriction Period, the Recipient may request that unlegended
certificates for such Shares be delivered to the Recipient. Such
certificates may bear a legend pursuant to Section 13, despite the
removal of any legend under this Section 4.
(d)
Terms and Conditions.
Shares of Restricted Stock and Restricted Stock Units shall be
subject to the following terms and conditions:
(i)
Restriction Period. Subject
to the provisions of the Plan and the terms of the Award Agreement,
during a period set by the Administrator, commencing with the date
of grant of such Award (the “Restriction Period”),
which shall not be less than one (1) year, the Recipient shall
not be permitted to sell, assign, transfer, pledge or otherwise
encumber Shares of Restricted Stock or Restricted Stock Units (the
“Restrictions”). The
Administrator may provide for the lapse of such Restrictions in
installments or otherwise and may accelerate or waive such
Restrictions, in whole or in part, in each case based on period of
service, performance of the Recipient or of the Company, its
Affiliates, division or department for which the Recipient is
employed or such other factors or criteria as the Administrator may
determine.
(ii)
Repurchase Option. Unless
the Administrator determines otherwise, the Award Agreement
granting a Restricted Stock Purchase Right of Restricted Stock
shall grant the Company a repurchase option exercisable during the
Restriction Period upon the voluntary or involuntary termination of
the Recipient’s employment with the Company for any reason
(including death or disability). Subject to any requirements of the
Applicable Laws, the terms of the Company’s repurchase option
(including without limitation the price at which, and the
consideration for which, it may be exercised, and the events upon
which it shall lapse) shall be as determined by the Administrator
in its sole discretion and reflected in the Award Agreement for
such Restricted Stock Purchase Rights.
(iii)
Rights of Restricted Stock
Recipients. Except as provided in this Section 4(d) of the Plan,
the applicable Award Agreement and Applicable Law, the Recipient
shall have, with respect to the Shares of Restricted Stock, all of
the rights of a stockholder of the Company holding the class or
series of Common Stock that is the subject of the Award Agreement,
including, if so provided in the Award Agreement, the right to vote
the Shares and the right to receive any cash dividends. Unless
otherwise determined by the Administrator in the applicable Award
Agreement for the Restriction Period, (A) cash dividends on
the Shares that are the subject of the Award Agreement shall be
paid in cash to the Recipient and may be subject to forfeiture as
provided in the Award Agreement and (B) dividends payable in
Common Stock shall be paid in the form of Restricted Stock. If
there is a pro rata distribution of warrants or other rights to
acquire shares of Common Stock, then the Recipient shall have the
right to participate in or receive such warrants or other rights,
provided, however, that any
shares of Common Stock acquired pursuant to the exercise of such
warrants or other rights shall be subject to the same vesting
requirements and restrictions as the underlying Common
Stock.
(iv)
Rights of Restricted Stock Unit
Recipients. The Recipient of Restricted Stock Units shall
not have any of the rights of a stockholder of the Company and has
no right to vote any shares of Common Stock or to receive any cash
dividend. The Administrator shall be entitled to specify in a
Restricted Stock Unit Award Agreement that in the event that the
Company declares a dividend on its Common Stock, the Company will
hold in escrow an amount in cash equal to the dividend that would
have been paid on the Restricted Stock Units had they been
converted into the same number of shares of Common Stock and held
by Recipient on the record date of such dividend. Upon adjustment
and vesting of the Restricted Stock Unit, any cash payment due with
respect to such dividends shall be made to the
Recipient.
(v)
Termination of Service Provider
Relationship. Except to the extent otherwise provided in the
applicable Award Agreement or the Plan or otherwise expressly
authorized by the Administrator in its sole discretion, if a
Recipient ceases to be a Service Provider for any reason during the
Restriction Period, all Shares or Restricted Stock Units still
subject to restriction shall be forfeited by the
Recipient.
(e)
Other Provisions. The Award
Agreement shall contain such other terms, provisions and conditions
not inconsistent with the Plan as may be determined by the
Administrator in its sole discretion, including, without
limitation, provisions relating to tax matters including wage
withholding requirements and prohibitions on elections by the
Recipient under Section 83(b) of the Code. In addition, the
terms of the Award Agreements for Restricted Stock or Restricted
Stock Units need not be the same with respect to each
Recipient.
Section 5
Options
(a) Limitations on Options. For a
Director, each Option shall be designated in the written Award
Agreement as a Non-Qualified Stock Option. For an Employee, each
Option shall be designated in the written Award Agreement as either
an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation for an Employee, to the extent
that Incentive Stock Options are amended, the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options
are exercisable for the first time by the Recipient during any
calendar year (under all plans of the Company and any Affiliate)
exceeds $100,000 or other circumstances exist that would cause the
Options to lose their status as Incentive Stock Options, such
Options shall be treated as Non-Qualified Stock Options. For
purposes of this Section 5, Incentive Stock
Options shall be taken into account in the order in which they were
granted. The Fair Market Value of the Shares shall be determined as
of the time the Option with respect to such Shares is granted. If
an Option is granted hereunder that is part Incentive Stock
Option and part Non-Qualified Stock Option due to becoming
first exercisable in any calendar year in excess of $100,000, the
Incentive Stock Option portion of such Option shall become
exercisable first in such calendar year, and the Non-Qualified
Stock Option portion shall commence becoming exercisable once the
$100,000 limit has been reached.
A-6
(b)
Term of Option. The term of
each Option shall be stated in the Award Agreement but shall be no
longer than ten (10) years from the date of grant or such
shorter term as may be provided in the Award Agreement. Moreover,
in the case of an Incentive Stock Option granted to a Recipient
who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Subsidiary (taking
into account the attribution rules under Section 424(d) of the
Code), the term of the Incentive Stock Option shall be five
(5) years from the date of grant or such shorter term as may
be provided in the Award Agreement.
(c)
Option Exercise Price and
Consideration.
(i)
Exercise Price. The per
share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be determined by the Administrator,
subject to the following:
(A) In
the case of an Incentive Stock Option,
(1)
granted to an Employee who, at the time the Incentive Stock Option
is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the
Company or any Subsidiary (taking into account the attribution
rules under Section 424(d) of the Code), the per Share
exercise price shall be not less than 110% of the Fair Market Value
per Share on the date of grant, or
(2)
granted to any Employee other than an Employee described in
paragraph (A)(1) immediately above, the per Share exercise
price shall be not less than 100% of the Fair Market Value per
Share on the date of grant.
(B) In
the case of a Non-Qualified Stock Option, the per Share exercise
price shall be not less than 100% of the Fair Market Value per
Share on the date of grant; provided, that in the case of
Substitute Awards, the exercise price may be less than 100% of Fair
Market Value per Share on the date of grant.
(ii)
Waiting Period and Exercise
Dates. The Administrator shall have the authority, subject
to the terms of the Plan, to determine any vesting restriction or
limitation or waiting period with respect to any Option granted to
a Recipient or the Shares acquired pursuant to the exercise of such
Option; provided, however,
that such vesting restriction or limitation or waiting period shall
not be less than one (1) year.
(iii)
Form of Consideration. The
Administrator shall determine the acceptable form of consideration
for exercising an Option, including the method of payment. In the
case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of
grant. Unless limited by the Administrator, such consideration may
consist entirely of:
(A)
cash (in the form of a certified or bank check or such other
instrument as the Company may accept);
(B)
other Shares owned on the date of exercise of the Option by the
Recipient based on the Fair Market Value of the Common Stock on the
date the Option is exercised; provided, however, that in the case of an
Incentive Stock Option, the right to make a payment in the form of
already owned Shares may be authorized only at the time the Option
is granted;
(C) any
combination of (A) and (B) above;
(D) by
delivery of a properly executed exercise notice together with such
other documentation as the Administrator and a qualified broker, if
applicable, shall require to effect an exercise of the Option, and
delivery to the Company of the proceeds required to pay the
exercise price;
(E) by
requesting that the Company withhold such number of Shares then
issuable upon exercise of the Option as will have a Fair Market
Value equal to the exercise price of the Shares being acquired upon
the exercise of the Option; or
(F)
such other consideration and method of payment for the issuance of
Shares to the extent permitted by the Administrator and Applicable
Laws.
A-7
(d)
Exercise of
Option.
(i)
Procedure for Exercise; Rights as
a Stockholder. Except as otherwise authorized by the
Administrator, any Option granted hereunder shall be exercisable
according to the terms of the Plan and at such times and under such
conditions as determined by the Administrator and set forth in the
Award Agreement. If the Administrator provides that any Option is
exercisable only in installments, the Administrator may at any time
waive such installment exercise provisions, in whole or in part,
based on such factors as the Administrator may determine. The
Administrator may at any time, in whole or in part, accelerate the
exercisability of any Option.
An
Option shall be deemed exercised when the Company receives:
(i) written notice of exercise (in accordance with the Award
Agreement) from the person entitled to exercise the Option, and
(ii) full payment for the Shares with respect to which the
Option is exercised. Full payment may consist of any consideration
and method of payment authorized by the Administrator in accordance
with Section 5(c)(iii) of the
Plan and permitted by the Award Agreement. Shares issued upon
exercise of an Option shall be issued in the name of the Recipient.
Until the stock certificate evidencing such Shares is issued (as
evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a stockholder
shall exist with respect to such Shares, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be
issued) such stock certificate promptly after the Option is
exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 9 of the
Plan.
(ii)
Termination of Relationship as
Employee. If a Recipient ceases to be an Employee, other
than for Cause or upon the Recipient’s death, Disability or
Retirement, the Recipient, subject to the restrictions of this
Section 5(d)(ii), may
exercise his or her Option within the time specified in this
Section 5(d)(ii) to the
extent that the Option is vested on the date of termination,
including any acceleration of vesting granted by the Administrator,
and has not yet expired as set forth in the Award Agreement. Unless
otherwise set forth in the Award Agreement, such Option may be
exercised as follows: (i) if the Option is a Non-Qualified
Stock Option, it shall remain exercisable for the lesser of the
remaining term of the Option or three (3) months from the date
of such termination of the relationship as a Service Provider;
provided, however, that if
the Recipient dies within such three-month period, any unexercised
Option held by such Recipient shall, notwithstanding the expiration
of such three-month period, continue to be exercisable (to the
extent to which it was exercisable at the time of death) for the
lesser of a period of twelve (12) months from the date of such
death, the expiration of the stated term of such Option; or
(ii) if the Option is an Incentive Stock Option, it shall
remain exercisable for the lesser of the term of the Option or
three (3) months following the Recipient’s termination
of his or her relationship as a Service Provider; provided, however, that if the Recipient dies
within such three-month period, any unexercised Option held by such
Recipient shall, notwithstanding the expiration of such three-month
period continue to be exercisable (to the extent to which it was
exercisable at the time of death) for the lesser of a period of
twelve (12) months from the date of such death, the expiration
of the stated term of such Option, or the exercise period that
applies for purposes of Section 422 of the Code. If, on the
date of termination, the Recipient is not vested as to his or her
entire Option and the Administrator has not granted any
acceleration of vesting, the Shares covered by the unvested portion
of the Option shall revert to the Plan. If a Recipient ceases to be
a Service Provider for Cause, the Option shall immediately
terminate, and the Shares covered by such Option shall revert to
the Plan. If, after termination, the Recipient does not exercise
his or her Option within the time specified herein, the Option
shall terminate, and the Shares covered by such Option shall revert
to the Plan.
Notwithstanding the
above, in the event of a Recipient’s change in status from
Employee to non-Employee Officer or Director, the Recipient shall
not automatically be treated as if the Recipient terminated his or
her relationship as a Service Provider, nor shall the Recipient be
treated as ceasing to provide services to the Company solely as a
result of such change in status. In the event a Recipient’s
status changes from Employee to non-Employee Officer or Director,
an Incentive Stock Option held by the Recipient shall cease to be
treated as an Incentive Stock Option and shall be treated for tax
purposes as a Non-Qualified Stock Option three (3) months and
one (1) day following such change of status.
(iii)
Disability of Employee. If,
as a result of the Recipient’s Disability, a Recipient ceases
to be an Employee, the Recipient may exercise his or her Option
subject to the restrictions of this Section 5(d)(iii) and
within the period of time specified herein to the extent the Option
is vested on the date of termination, including any acceleration of
vesting granted by the Administrator, and has not yet expired as
set forth in the Award Agreement. Unless otherwise set forth in the
Award Agreement, such Option shall be exercisable for the lesser of
the remaining period of time specified in the Award Agreement or
twelve (12) months from the date of such termination. If, on
the date of termination, the Recipient is not vested as to his or
her entire Option and the Administrator has not granted any
acceleration of vesting, the Shares covered by the unvested portion
of the Option shall revert to the Plan. If, after termination, the
Recipient does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan. In the event of
termination of employment by reason of Disability, if an Incentive
Stock Option is exercised after the expiration of the exercise
periods applicable under Section 422 of the Code, such Option
will thereafter be treated as a Non-Qualified Stock
Option.
(iv)
Death of Employee. If a
Recipient dies while an Employee, the Option may be exercised
subject to the restrictions of this Section 5(d)(iv) and
within such period of time as is specified in the Award Agreement
(but in no event later than the earlier of twelve (12) months
from the date of such death or the expiration of the term of such
Option as set forth in the Award Agreement), but only to the extent
that the Option is vested on the date of death, including any
acceleration of vesting granted by the Administrator, and has not
yet expired as set forth in the Award Agreement. If, at the time of
death, the Recipient is not vested as to his or her entire Option
and the Administrator has not granted any acceleration of vesting,
the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Recipient’s estate or, if
none, by the person(s) entitled to exercise the Option under the
Recipient’s will or the applicable laws of descent or
distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan. In the event of
termination of employment by reason of death, if an Incentive Stock
Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such
Option will thereafter be treated as a Non-Qualified Stock
Option.
A-8
(v)
Retirement of
Employee.
(A)
Non-Qualified Stock
Options. If, as a result of the Recipient’s
Retirement, a Recipient ceases to be an Employee, the Recipient
may, subject to the restrictions of this Section 5(d)(v), exercise
his or her Non-Qualified Stock Option within the time specified
herein to the extent the Option is vested on the date of
termination, including any acceleration of vesting granted by the
Administrator, and has not yet expired as set forth in the Award
Agreement. Unless otherwise set forth in the Award Agreement, such
Option may be exercised for the lesser of the remaining period of
time specified in the Award Agreement or three (3) years
following the Recipient’s Retirement. Notwithstanding the
foregoing, if the Recipient dies within such three-year (or
shorter) period, any unexercised Non-Qualified Stock Option held by
such Recipient shall, notwithstanding the expiration of such
period, continue to be exercisable to the extent to which it was
exercisable at the time of death for a period of twelve
(12) months from the date of death or the expiration of the
stated term of such Option, whichever period is
shorter.
(B)
Incentive Stock Options. If
the Recipient holds an Incentive Stock Option and ceases to be an
Employee by reason of his or her Retirement, such Incentive Stock
Option may continue to be exercisable by the Recipient to the
extent to which it was exercisable at the time of Retirement for a
period of three (3) months from the date of Retirement or the
expiration of the stated term of such Option, whichever period is
the shorter of the two. Notwithstanding the foregoing, if the
Recipient dies within such three-month period, any unexercised
Incentive Stock Option held by such Recipient shall,
notwithstanding the expiration of such period, continue to be
exercisable to the extent to which it was exercisable at the time
of death for a period of twelve (12) months from the date of
such death, the expiration of the stated term of such Option, or
the exercise period that applies for purposes of Section 422
of the Code, whichever period is shorter.
If, on
the date of termination due to Retirement, the Recipient is not
vested as to his or her entire Option and the Administrator has not
granted any acceleration of vesting, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after
termination due to Retirement, the Option is not exercised within
the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the
Plan.
(vi)
Termination of Relationship as
Director. Except as otherwise set forth in the Award
Agreement, if a Recipient ceases to be a Director, other than for
Cause, the Recipient, subject to the restrictions of this
Section 5(d)(vi) and to
the extent that the Option is vested on the date of termination of
service as a Director, including any acceleration of vesting
granted by the Administrator, may exercise his or her Option for
the lesser of the remaining term of the Option or three
(3) years from the date of such termination of the service as
a Director. If, on the date of termination, the Recipient is not
vested as to his or her entire Option and the Administrator has not
granted any acceleration of vesting, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If a
Recipient ceases to be a Director for Cause, the Option shall
immediately terminate, and the Shares covered by such Option shall
revert to the Plan. If, after termination, the Recipient does not
exercise his or her Option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(vii)
Death of Director. If a
Recipient dies while a Director, the Option may be exercised
subject to the restrictions of this Section 5(d)(vii) and
within such period of time as is specified in the Award Agreement
(but in no event later than the earlier of three (3) years or
the expiration of the term of such Option as set forth in the Award
Agreement), but only to the extent that the Option is vested on the
date of death, including any acceleration of vesting granted by the
Administrator, and has not yet expired as set forth in the Award
Agreement. If, at the time of death, the Recipient is not vested as
to his or her entire Option and the Administrator has not granted
any acceleration of vesting, the Shares covered by the unvested
portion of the Option shall immediately revert to the Plan. The
Option may be exercised by the executor or administrator of the
Recipient’s estate or, if none, by the person(s) entitled to
exercise the Option under the Recipient’s will or the
applicable laws of descent or distribution. If the Option is not so
exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to
the Plan.
(viii)
Cash Out Provisions. On
receipt of written notice of exercise, to the extent permitted by
Section 409A of the Code and the regulations thereunder, the
Administrator may elect, but shall not be required, to cash out all
or any part of the shares of Common Stock for which an Option is
being exercised by paying the Recipient an amount, in cash, equal
to the excess of the Fair Market Value of the Common Stock over the
option price times the number of shares of Common Stock for which
an Option is being exercised on the effective date of such cash
out. Cash outs pursuant to this Section 5(d)(viii)
relating to Options held by Recipients who are actually or
potentially subject to Section 16(b) of the Exchange Act shall
comply with the provisions of Section 16 of the Exchange Act
and the rules promulgated thereunder, to the extent
applicable.
(ix)
No Option Repricing. Except
as provided in Section 9 of the Plan, the
Administrator shall not be permitted to Reprice an Option after the
date of grant without the approval of the Company’s
stockholders.
Section 6
Other Awards
The
Administrator, in its sole discretion, but subject to the terms of
the Plan, may grant the following types of Awards (in addition to
or in combination with the Awards of Options and Restricted Stock
described above) under the Plan on a standalone, combination or
tandem basis:
(a)
Stock Appreciation Right.
The Administrator may grant a right to receive the excess of the
Fair Market Value of a Share on the date the Stock Appreciation
Right is exercised over the Fair Market Value of a Share on the
date the Stock Appreciation Right was granted (the
“Spread”). Upon exercise
of a Stock Appreciation Right, the Spread with respect to a Stock
Appreciation Right will be payable in cash, Shares with a total
Fair Market Value equal to the Spread or a combination of these
two. The terms of the Award Agreements granting Stock Appreciation
Rights need not be the same with respect to each Recipient. The
term of each Stock Appreciation Right shall be stated in the Award
Agreement but shall be no longer than ten (10) years from the
date of grant or such shorter term as may be provided in the Award
Agreement. A Stock Appreciation Right shall be subject to
adjustment as provided in Section 9 of the Plan.
Except as provided in Section 9 of the Plan, the
Administrator shall not be permitted to Reprice a Stock
Appreciation Right after the date of grant without the approval of
the Company’s stockholders. The Administrator may provide for
the automatic exercise on the last day of the term for any Stock
Appreciation Right where the Fair Market Value of the Stock
Appreciation Right is greater than zero.
A-9
(b)
Performance Award. The
Administrator may grant a Performance Award based on the
performance of the Recipient over a specified performance period. A
Performance Award may be awarded to an Employee contingent upon
future performance of the Company or any Affiliate, division or
department thereof in which such Employee is employed, if
applicable, during the performance period. The Administrator shall
establish the performance measures applicable to such performance
prior to the beginning of the performance period, but subject to
such later revisions as the Administrator may deem appropriate to
reflect significant, unforeseen events or changes. The Performance
Award may consist of a right to receive Shares (or cash in an
amount equal to the Fair Market Value thereof) or the right to
receive an amount equal to the appreciation, if any, in the Fair
Market Value of Shares over a specified period. Payment of a
Performance Award may be made following the end of the performance
period in cash, Shares (based on the Fair Market Value on the
payment date) or a combination thereof, as determined by the
Administrator, and in a lump sum or installments as determined by
the Administrator. Except as otherwise provided in an Award
Agreement or as determined by the Administrator, a Performance
Award shall terminate if the Recipient does not remain continuously
in the employ of the Company at all times during the applicable
performance period. The terms of the Award Agreements granting
Performance Awards need not be the same with respect to each
Recipient.
(c)
Performance Shares. The
Administrator may grant Performance Shares to a Recipient.
Performance Shares may be awarded to an Employee contingent upon
future performance of the Company or any Affiliate, division or
department thereof in which such Employee is employed, if
applicable, during the performance period. The Administrator will
set the performance periods and performance objectives that,
depending on the extent to which they are met, will determine the
number of Performance Shares payable in cash, Shares, or a
combination of cash and Shares, as applicable. Unless otherwise
provided in an Award Agreement or determined by the Administrator,
Performance Share Awards shall terminate if the Recipient does not
remain an Employee of the Company or its Affiliates at all times
during the applicable performance period. The terms of the Award
Agreements granting Performance Shares need not be the same with
respect to each Recipient.
(d)
Performance Units. The
Administrator may grant Performance Units that will result in a
payment to an Employee only if performance goals established by the
Administrator are achieved. The Administrator will set the
performance periods and performance objectives that, depending on
the extent to which they are met, will determine the amount of
Performance Units payable in cash, Shares, or a combination of cash
and Shares, as applicable. Unless otherwise provided in an Award
Agreement or determined by the Administrator, Performance Unit
awards shall terminate if the Recipient does not remain an Employee
of the Company, or its Affiliates at all times during the
applicable performance period. The terms of the Award Agreements
granting Performance Units need not be the same with respect to
each Recipient.
(e)
Other Share-Based Awards.
The Administrator may, in its discretion, grant other Share-based
Awards which are related to or serve a similar function to those
Awards set forth in this Section 6.
Section 7
Qualified Performance-Based Compensation
The
Administrator may designate any Award as “qualified
performance-based compensation” for purposes of the
Section 162(m) Exception. Accordingly, in the case of such
Awards, the Plan shall be administered and the provisions of the
Plan or any related Award Agreement shall be interpreted in a
manner consistent with the Section 162(m) Exception. Any
Awards designated as “qualified performance-based
compensation” shall be conditioned on the achievement of
objective goals based on one or more of the following performance
measures as determined by the Administrator:
(i)
earnings;
(ii)
operating profits (including measures of earnings before interest,
taxes, depreciation and amortization (“EBITDA”), or adjusted
EBITDA);
(iii)
free cash flow or adjusted free cash flow;
(iv)
cash from operating activities;
(v)
revenues;
(vi)
net income (before or after tax);
(vii)
financial return ratios;
(viii)
market performance;
A-10
(ix)
stockholder return and/or value;
(x) net
profits;
(xi)
earnings per share;
(xii)
profit returns and margins;
(xiii)
stock price;
(xv)
working capital;
(xvi)
capital investments;
(xvii)
returns on assets;
(xviii)
returns on equity;
(xix)
returns on capital investments;
(xx)
selling, general and administrative expenses;
(xxi)
discounted cash flows;
(xxii)
productivity;
(xxiii)
expense targets;
(xxiv)
market share;
(xxv)
cost control measures;
(xxvi)
strategic initiatives;
A-11
(xxvii)
changes between years or periods that are determined with respect
to any of the above-listed performance criteria;
(xxviii) net
present value;
(xxix)
sales volume;
(xxx)
cash conversion costs;
(xxxi)
leverage ratios;
(xxxii)
maintenance of liquidity;
(xxxiii)
integration of acquired businesses;
(xxxiv)
operational efficiencies, including Lean Six Sigma
initiatives;
(xxxv)
regulatory compliance, including the Sarbanes-Oxley Act of 2002;
and
(xxxvi)
economic profit.
Performance
criteria may be measured solely on a Company, Affiliate or business
unit basis, on specific capital projects or groups of projects or a
combination thereof. Further, performance criteria may reflect
absolute entity performance or a relative comparison of entity
performance to the performance of a peer group of entities or other
external measure of the selected performance criteria. The measure
for any such award may include or exclude items to retain the
intents and purposes of specific objectives, such as losses from
discontinued operations, extraordinary gains or losses, the
cumulative effect of accounting changes, acquisitions or
divestitures, foreign exchange impacts, acceleration of payments,
costs of capital invested, discount factors, and any unusual or
nonrecurring gain or loss. The performance criteria (and any
exclusions) will be established by the Administrator before the
earlier of (i) 90 days after the commencement of the
applicable performance period and (ii) 25% of the performance
period has elapsed and will not be subject to change (although
future awards may be based on different performance criteria). The
performance periods may extend over one (1) to five
(5) calendar years, and may overlap one another.
Notwithstanding any
provision of the Plan (other than Article 11), with respect to any
Award that is subject to this Section 7, the
Administrator may adjust downwards, but not upwards, the amount
payable pursuant to such Award, and the Administrator may not waive
the achievement of the applicable performance goals except in the
case of the death or disability of the Recipient or as otherwise
determined by the Administrator in special circumstances. The
Administrator must certify, in writing the amount of the Award for
each Recipient for such performance period before payment of the
Award is made
Section 8
Non-Transferability of Awards
Unless
otherwise specified by the Administrator in the Award Agreement, an
Award may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than (i) by
will or by the laws of descent or distribution, (ii) pursuant
to a qualified domestic relations order (as defined in the Code or
Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder), (iii) to family
members of a Recipient or trusts for the benefit of family members
of a Recipient in transactions not involving payment of
consideration or (iv) as permitted by Rule 701 of the
Securities Act of 1933, as amended (the “Securities Act”). Options
and other Awards may be exercised, during the lifetime of the
Recipient, only by the Recipient or by the guardian or legal
representative of the Recipient or by an alternate payee pursuant
to a qualified domestic relations order. Any attempt to assign,
pledge or otherwise transfer any Award or any right or privileges
conferred thereby, contrary to the Plan, or the sale or levy or
similar process upon the rights and privileges conferred hereby,
shall be void.
A-12
Section 9
Adjustments upon Changes in Capitalization
Subject
to any required action by the stockholders of the Company, the
number of Shares covered by each outstanding Award and the number
of Shares which have been authorized for issuance under the Plan
but as to which no Awards have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Award,
as well as the price per Share covered by each such outstanding
Award, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, special
cash dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the
Company; provided, however,
that (a) conversion of any convertible securities of the
Company shall not be deemed to have been “effected without
receipt of consideration;” and (b) no adjustment shall
be made below par value and no fractional shares of Common Stock
shall be issued. Such adjustment shall be made by the Board in its
sole discretion, whose determination in that respect shall be
final, binding and conclusive. In the event of an extraordinary
cash dividend, the Administrator may, in its sole discretion,
equitably adjust the aggregate number of Shares available under the
Plan, as well as the exercise price, number of Shares and other
appropriate terms of any outstanding Award in order to preserve the
intended benefits of the Plan. Except as expressly provided herein,
no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an
Award.
Section 10
Eligibility for Awards
Awards
may be granted to Employees and Directors. In addition, an Award
may be granted to a person who is offered employment by the Company
or an Affiliate, provided
that such Award shall be immediately forfeited if such
person does not accept such offer of employment within such time
period as the Company or Affiliate may establish. If otherwise
eligible, an Employee or Director who has been granted an Award may
be granted additional Awards.
Section 11
Date of Grant
The
date of grant of an Award shall be, for all purposes, the date on
which the Administrator makes the determination granting such
Award, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to
each Recipient within a reasonable time after the date of such
grant.
Section 12
Amendment and Termination of the Plan
(a)
Amendment and Termination.
Subject to this Section 12, the Board may
at any time amend, alter, suspend or terminate the Plan. Subject to
Section 7 and
the other terms of the Plan, the Administrator may amend the terms
of any Award theretofore granted, prospectively or retroactively,
but no such amendment shall impair the rights of any Recipient
without the Recipient’s consent.
(b)
Stockholder Approval. The
Company shall obtain stockholder approval of any material Plan
amendment and any amendment to the extent necessary and desirable
to comply with the Code (or other applicable law, rule or
regulation, including the requirements of any exchange or quotation
system on which the Common Stock is listed or quoted). Such
stockholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the Applicable Law,
rule or regulation.
(c)
Effect of Amendment or
Termination. No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any Recipient
(except such an amendment made to comply with Applicable Law,
including without limitation, Section 409A of the Code, stock
exchange rules or accounting rules), unless mutually agreed
otherwise between the Recipient and the Administrator, which
agreement must be in writing and signed by the Recipient and the
Company.
A-13
Section 13
Conditions upon Issuance of Shares
(a)
Legal Compliance.
Notwithstanding any other provision of the Plan or any agreement
entered into by the Company pursuant to the Plan, the Company shall
not be obligated, and shall have no liability for failure, to issue
or deliver any Shares under the Plan unless such issuance or
delivery would comply with the Applicable Laws, with such
compliance determined by the Company in consultation with its legal
counsel. As a condition to receiving an Award, the Company may
require the Recipient to represent and warrant at the time of any
such exercise, purchase or vesting that the Shares are being
purchased or held only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by law.
Shares issued upon exercise, purchase or vesting of Awards granted
prior to the date on which the Common Stock becomes a Listed
Security shall be subject to certain restrictions on transfer and
certain conditions regarding the voting rights of such Shares, as
reflected in the applicable Award Agreement. In addition, Awards
issued prior to the date on which the Common Stock becomes a Listed
Security shall require the Recipient to agree to a lock-up
agreement in connection with public offerings of the
Company’s stock that applies to all capital stock and rights
to purchase capital stock of the Company held by the Recipient on
such terms and subject to such conditions as are reflected in the
applicable Award Agreement. The Administrator may cause a legend or
legends to be placed on any certificates for Shares or other
securities delivered under the Plan as it may deem appropriate to
make reference to such legal rules and restrictions, or to impose
any restrictions on transfer.
(b)
Withholding Obligations.
The Administrator may take such steps as are considered necessary
or appropriate for the withholding of any federal, state, local or
foreign taxes of any kind which the Company is required by any law
or regulation of any governmental authority to withhold in
connection with any Award under the Plan, including, without
limiting the generality of the foregoing, the withholding of all or
any portion of any payment or the withholding of the issue of
Common Stock to be issued under the Plan, until such time as the
Recipient has paid the Company for any amount which the Company is
required to withhold with respect to taxes. Unless otherwise
determined by the Administrator, withholding obligations may be
settled with vested Common Stock, including vested Common Stock
that is part of the Award that gives rise to the withholding
requirement. The Administrator may establish such procedures as it
deems appropriate, including the making of irrevocable elections,
for the settlement of withholding obligations with vested Common
Stock.
(c)
Inability to Obtain
Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have
been obtained.
(d)
Grants Exceeding Allotted
Shares. If the number of Shares covered by an Award exceeds,
as of the date of grant, the number of Shares which may be issued
under the Plan without additional stockholder approval, such Award
shall be void with respect to such excess Shares, unless
stockholder approval of an amendment sufficiently increasing the
number of Shares subject to the Plan is timely obtained in
accordance with Applicable Law and Section 12(b) of the
Plan.
Section 14
Information and Documents to Recipients
Prior
to the date, if any, upon which the Common Stock becomes a Listed
Security and if required by the Applicable Laws, the Company shall
provide financial statements at least annually to each Recipient
during the period such Recipient has one or more Awards
outstanding, and in the case of an individual who acquired Shares
pursuant to the Plan, during the period such individual owns such
Shares. The Company shall not be required to provide such
information if the issuance of Awards under the Plan is limited to
key employees whose duties in connection with the Company assure
their access to equivalent information. Furthermore, prior to the
date, if any, upon which the Common Stock becomes a Listed
Security, to the extent that the Company is relying on the
exemption from registration under Section 12(g) of the
Exchange Act provided in Rule 12h-1(f)(1) under the Exchange Act,
the Company shall provide each Recipient the information described
in Rules 701(e)(3), (4), and (5) under the Securities Act
not less frequently than every six months with the financial
statements being not more than 180 days old and with such
information provided either by physical or electronic delivery to
the Recipient or by written notice to the Recipients of the
availability of the information on an Internet site that may be
password-protected and of any password needed to access the
information.
Section 15
General Provisions
(a)
Term of Plan. The Plan
shall become effective upon its approval by the stockholders of the
Company (“Effective
Date”), provided that such approval occurs on or
before the first anniversary of the date of its adoption by the
Board. Such stockholder approval shall be obtained in the manner
and to the degree required under Applicable Laws and the rules of
any stock exchange upon which the Common Stock is listed. It shall
continue in effect for a term of ten (10) years unless
terminated earlier under Section 12 of the
Plan.
(b)
No Contract of Employment.
Neither the Plan nor any Award hereunder shall confer upon an
individual any right with respect to continuing such
individual’s employment relationship with the Company, nor
shall they interfere in any way with such individual’s right
or the Company’s right to terminate such employment
relationship at any time, with or without cause.
(c)
Severability. In the event
that any provision of the Plan shall be held illegal or invalid for
any reason, the illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been
included.
A-14
(d)
Governing Law. The Plan and
all Awards made and actions taken thereunder shall be governed by
and construed in accordance with the laws of the State of
Delaware.
(e)
Prohibition on Loans to
Recipients. The Company shall not lend funds to any
Recipient for the purpose of paying the exercise or base price
associated with any Award or for the purpose of paying any taxes
associated with the exercise or vesting of an Award.
(f)
Unfunded Status of Plan. It
is intended that the Plan constitute an “unfunded” plan
for incentive and deferred compensation. The Administrator may
authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock or make
payment; provided, however,
that, unless the Administrator otherwise determines, the existence
of such trusts or other arrangements is consistent with the
“unfunded” status of the Plan.
(g)
Liability of Administrator.
Except as provided under Applicable Law, no member of the Board or
the Committee will be liable for any action or determination made
in good faith by the Board or the Committee with respect to the
Plan or any Award under it. Neither the Company, the Board nor the
Committee, nor any Affiliate, nor any directors, officers or
employees thereof, shall be liable to any Recipient or other person
if it is determined for any reason by the Internal Revenue Service
or any court that an Incentive Stock Option granted hereunder does
not qualify for tax treatment as an “incentive stock
option” under Section 422 of the Code.
(h)
Return and/or Forfeiture of
Performance-Based Payments or Awards. Notwithstanding any
other provision in this Plan or in any Award Agreement, in the
event that pursuant to the terms or requirements of the
Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and
Consumer Protection Act, or of any applicable laws, rules or
regulations promulgated by the Securities and Exchange Commission
from time to time, and in the event any Award is based upon the
satisfaction of financial performance metrics which are
subsequently reversed due to a restatement or reclassification of
financial results of the Company, then any payments made or awards
granted shall be returned and forfeited to the extent required and
as provided by applicable laws, rules, regulations or listing
requirements.
(i)
Participants in Foreign
Countries. The Administrator shall have the authority to
adopt such modifications, procedures and sub-plans as may be
necessary or desirable to comply with provisions of the laws of
foreign countries in which the Company or its Affiliates may
operate to assure the viability of the benefits from Awards granted
to Recipients performing services in such countries and to meet the
objectives of the Plan.
* *
*
A-15
REKOR SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL MEETING OF SHAREHOLDERS – SEPTEMBER 14, 2021 AT 10:00
AM EDT TIME
CONTROL ID:
REQUEST ID:
The undersigned hereby appoints Robert A Berman, President, CEO and
Chairman, and Eyal Hen, Chief Financial Officer, as proxy of the
undersigned, with power of substitution, to vote all shares held by
the undersigned which are entitled to be voted at the Meeting of
the Shareholders of Rekor Systems, Inc. (the “Company”)
to be held September 14, 2021, or such later date or dates as such
Annual Meeting date may be adjourned, in person at: Lavan541, 541
West 25th
Street, New York, NY 10001, and
virtually via a live video webcast on the Internet at:
https://agm.issuerdirect.com/rekr,
and for the purpose of considering and taking action on the
following proposals:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
Important Notice Regarding the Availability of Proxy
Materials
for the Shareholder Meeting To Be Held on September 14,
2021
The Notice of the Meeting, Proxy Statement, Proxy Card, Annual
Report on Form 10-K
are available at www.iproxydirect.com/rekr
VOTING INSTRUCTIONS
If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
MAIL:
Please mark, sign, date, and return this Proxy Card promptly using
the enclosed envelope.
FAX:
Complete the reverse portion of this Proxy Card and Fax to
202-521-3464.
INTERNET:
https://www.iproxydirect.com/REKR
PHONE:
1-866-752-VOTE(8683)
ANNUAL MEETING OF THE SHAREHOLDERS OF
REKOR SYSTEMS, INC.
PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE:
☒
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Proposal 1
FOR ALL
WITHHOLD
ALL
FOR ALL
EXCEPT
Election of Directors.
☐
☐
Robert
Berman
☐
CONTROL ID:
Paul
A. de Bary
☐
REQUEST ID:
Richard
Nathan, Ph.D.
☐
Glenn
Goord
☐
David
Hanlon
☐
Steven
D. Croxton
☐
Proposal 2
FOR
AGAINST
ABSTAIN
Ratify the appointment of Friedman LLP as our independent public
accountant for the fiscal year ending December 31,
2021.
☐
☐
☐
Proposal 3
FOR
AGAINST
ABSTAIN
To advise us as to whether you approve the compensation of our
named executive officers (Say-on-Pay).
☐
☐
☐
Proposal 4
EVERY YEAR
EVERY TWO YEARS
EVERY THREE YEARS
ABSTAIN
To advise us as to whether you prefer to vote to advise us on the
compensation of our named executive officers every year, every two
years or every three years (Say-on-Pay Frequency).
☐
☐
☐
☐
Proposal 5
FOR
AGAINST
ABSTAIN
To approve and adopt an amendment to the Company’s 2017
Equity Award Plan to increase the number of authorized shares of
common stock reserved for issuance to 5,000,000
shares.
☐
☐
☐
To transact such other business as may be properly brought before
the Annual Meeting and any adjournments thereof.
MARK “X” HERE IF YOU PLAN
TO ATTEND THE MEETING: ☐
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR ALL
PERSONS LISTED IN PROPOSAL 1 AND A VOTE FOR PROPOSALS 2, 3, 4, AND
5.
The undersigned hereby revokes any proxy or proxies heretofore
given to vote or act with respect to the capital stock of the
Company and hereby ratifies and confirms all that the Proxy, or his
substitutes, or any of them, may lawfully do by virtue
hereof.
MARK HERE FOR ADDRESS CHANGE ☐ New
Address (if applicable):
IMPORTANT: Please sign exactly
as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as
such. If signer is a partnership, please sign in partnership name
by authorized person.
