UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment No. )
Filed
by the Registrant ☒
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy
Statement
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Definitive Additional
Materials
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Soliciting Material
Pursuant to §240.14a-12
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HOUSTON
WIRE & CABLE COMPANY
(Name
of Registrant as Specified in its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
☒
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No
fee required.
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title
of each class of securities to which transaction applies:
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Aggregate number
of securities to which transaction applies:
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(3)
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Per unit price
or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum
aggregate value of transaction:
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(5)
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Total fee paid:
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form, Schedule
or Registration Statement No.:
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Filing Party:
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Date Filed:
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 7, 2019
To Our Stockholders:
The 2019 annual meeting
of stockholders of Houston Wire & Cable Company will be held at our corporate headquarters, 10201 North Loop East, Houston,
Texas 77029 on Tuesday May 7, 2019, at 8:30 a.m., Central Time. The annual meeting of stockholders is being
held for the following purposes:
1. To
elect seven directors to serve on the Board of Directors until the 2020 annual meeting of stockholders and until their successors
have been elected and qualified (Proposal No. 1);
2. To
ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year
ending December 31, 2019 (Proposal No. 2);
3. To
approve the Company’s executive compensation on an advisory basis (Proposal No. 3); and
4. To
transact such other business as may properly come before the annual meeting and any adjournment or postponement thereof.
Only stockholders
of record at the close of business on March 15, 2019 are entitled to vote at the meeting or at any postponement or adjournment
thereof.
Please act promptly
to vote your shares with respect to the proposals described above. You may vote your shares by marking, signing, dating and mailing
the enclosed proxy card. You may also vote by telephone or through the internet by following the instructions set forth on the
proxy card. If you attend the annual meeting, you may vote in person, even if you have previously submitted a proxy.
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By Order of the Board of Directors,
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Christopher M. Micklas
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Vice President, Chief Financial Officer, Treasurer and Secretary
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March 27, 2019
TABLE OF CONTENTS
HOUSTON WIRE & CABLE COMPANY
10201 North Loop East
Houston, Texas 77029
PROXY STATEMENT
The accompanying proxy
is solicited on behalf of the Board of Directors of Houston Wire & Cable Company (the “Company,” “we”
or “us”) for the 2019 annual meeting of stockholders that will be held at our corporate headquarters, 10201 North Loop
East, Houston, Texas 77029, on Tuesday, May 7, 2019, at 8:30 a.m., Central Time, and at any postponement or adjournment
thereof. We are first mailing notice of availability of this proxy statement and the accompanying proxy card and 2018 annual report
to stockholders (which includes our annual report on Form 10-K for the year ended December 31, 2018) on or about March 27,
2019.
ABOUT THE MEETING
What is the purpose of this proxy statement?
This proxy statement
provides information regarding matters to be voted on at the 2019 annual meeting of our stockholders. Additionally, it contains
certain information that the Securities and Exchange Commission (the “SEC”) requires us to provide annually to stockholders.
The proxy statement is also the document used by our board to solicit proxies to be used at the 2019 annual meeting. Proxies are
solicited to give all stockholders of record an opportunity to vote on the matters to be presented at the annual meeting, even
if they cannot attend the meeting. The board has designated James L. Pokluda III and G. Gary Yetman as proxies, who will vote the
shares represented by proxies solicited by the board at the annual meeting in accordance with the stockholders’ instructions.
What proposals will be voted on at the annual meeting?
Stockholders will
vote on the following proposals at the annual meeting:
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the election of seven directors, each to serve until the next annual meeting and until a successor is duly elected and qualified (Proposal No. 1);
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the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2019 (Proposal No. 2);
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the approval of our executive compensation on an advisory basis (Proposal No. 3); and
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any other business properly coming before the annual meeting and any adjournment or postponement thereof.
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Who is entitled to vote?
Only stockholders
of record at the close of business on the record date, March 15, 2019, are entitled to receive notice of the annual meeting and
to vote the shares of common stock that they held on that date at the meeting and any postponement or adjournment of the meeting.
If your shares are held in “street name,” please refer to the information forwarded to you by your bank, broker or
other holder of record to see what you must do to vote your shares.
A complete list of
stockholders entitled to vote at the annual meeting will be available for examination by any stockholder at our corporate headquarters,
10201 North Loop East, Houston, Texas 77029, during normal business hours for a period of ten days before the annual meeting
and at the annual meeting.
What is the difference between a stockholder of record and
a beneficial holder of shares?
If your shares are
registered directly in your name with our transfer agent, American Stock Transfer and Trust Company
,
LLC, you are considered
a stockholder of record with respect to those shares. If this is the case, we have sent or provided the stockholder proxy materials
directly to you.
If your shares are
held in a stock brokerage account or by a bank or other nominee (also known as held “in street name”), you are considered
the “beneficial holder” of the shares, and your brokerage firm, bank or other nominee is the stockholder of record.
If this is the case, the proxy materials have been forwarded to you by your brokerage firm, bank or other nominee. As the beneficial
holder, you have the right to direct your broker, bank or other nominee how to vote your shares. Please contact your broker, bank
or other nominee for instructions on how to vote any shares you beneficially own.
Who can attend the meeting?
All stockholders of
record as of March 15, 2019, or their duly appointed proxies, may attend the meeting. If you hold your shares in street name, you
will need to bring a copy of a brokerage or other account statement reflecting your stock ownership as of the record date and check
in at the registration desk at the meeting.
What constitutes a quorum?
A quorum of stockholders
is necessary to hold the annual meeting. The presence at the meeting, in person or by proxy, of the holders of a majority of the
shares of common stock outstanding on the record date will constitute a quorum. As of the record date, 16,613,012 shares of our
common stock were outstanding. Shares covered by proxies received will be considered present at the meeting for purposes of establishing
a quorum.
How do I vote?
You may vote in person at the meeting or
by proxy by any of the following methods:
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Telephoning the toll-free number listed on the proxy card;
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Using the internet site listed on the proxy card; or
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Marking, dating, signing and returning the enclosed proxy card.
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We recommend that
you vote by proxy even if you plan to attend the meeting so that we will know as soon as possible that enough votes will be present
for us to hold the meeting. If you vote by proxy, your shares will be voted as you direct on the proxy card, by telephone or via
the internet. If you are a stockholder of record and attend the meeting, you may vote at the meeting or deliver your completed
proxy card in person, even if you previously sent in a proxy card or voted by telephone or via the internet.
If your shares are
held in street name, please refer to the information forwarded to you by your broker, bank or other holder of record to see what
you must do in order to vote your shares. If you are a street name stockholder and you wish to vote in person at the meeting, you
will need to obtain a proxy from the institution that holds your shares and present it to the inspector of elections with your
ballot when you vote at the annual meeting.
Can I change my vote after I give my proxy?
You can revoke your proxy, whether it was
given by telephone, internet or mail, before it is voted by:
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Delivering to our Secretary at the address on the first page of this proxy statement a written notice of revocation of your proxy before or at the annual meeting and prior to voting;
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Delivering a new proxy bearing a later date by telephone, via the internet or by submitting a duly executed proxy card; or
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Voting in person at the annual meeting.
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The last vote you submit chronologically
(by any means) will supersede all prior votes.
The powers of the
proxy holders with regard to your shares will be suspended if you attend the meeting in person and request to revoke a previously
granted proxy, although attendance at the meeting will not, by itself, revoke a previously granted proxy.
How many votes are required for the proposals to pass?
Each outstanding share
entitles its holder to cast one vote on each matter to be voted upon at the annual meeting. Directors are elected by a plurality
vote, meaning that the seven director nominees receiving the greatest numbers of votes will be elected. The approval of a majority
of the votes present, in person or by proxy, at the annual meeting and entitled to vote is required to ratify the selection of
our independent public accounting firm, and to approve, on an advisory basis, our executive compensation.
How are abstentions and broker non-votes treated?
If a stockholder withholds
authority to vote on the election of directors, it will have no effect on the vote. If a stockholder abstains from voting on any
other proposal, it will have the same effect as a vote against that proposal.
Broker non-votes with
respect to any proposal will have no effect on the outcome of the vote on that proposal. A “broker non-vote” occurs
on a proposal when shares held of record by a broker are present or represented at the meeting but the broker is not permitted
to vote on that proposal without instruction from the beneficial owner of the shares and no instruction has been given.
What if I do not specify a choice for a matter when returning
a proxy?
Stockholders should
specify their choice for each matter on the enclosed proxy. If no specific instructions are given, validly submitted proxies will
be voted “FOR” the election of all seven nominees for director, “FOR” the ratification of the appointment
of Ernst & Young LLP as our independent registered public accounting firm, and “FOR” the approval of our executive
compensation.
Will anyone contact me concerning this vote?
No arrangements or
contracts have been made or entered into with any solicitors as of the date of this proxy statement, although we reserve the right
to engage solicitors if we deem them necessary. If done, such solicitations may be made by mail, telephone, facsimile, e-mail or
personal interviews.
What are the board’s recommendations?
The board’s
recommendations, together with the description of each proposal, are set forth in this proxy statement. In summary, the board unanimously
recommends that you vote:
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“FOR” the election of each nominee for director (see page 8);
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“FOR” the ratification of Ernst & Young LLP as our independent registered public accounting firm (see page 27); and
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“FOR” the approval of the compensation of our named executive officers (see page 27); and
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What happens if additional matters are
presented at the annual meeting?
Other than the three
proposals described in this proxy statement, we are not aware of any other business to be acted upon at the annual meeting. If
you grant a proxy, the persons named as proxy holders on the enclosed proxy card will vote your shares on any additional matters
properly presented for a vote at the meeting as recommended by the board or, if no recommendation is given, in their own discretion.
Who will tabulate and certify the vote?
Representatives of
Broadridge Financial Solutions, Inc. will tabulate the votes. A representative of Schiff Hardin LLP, the Company’s legal
counsel, will be the inspector of elections.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table
sets forth the beneficial ownership of shares of our common stock for each stockholder who is known by us to own beneficially more
than 5% of the outstanding shares of our common stock.
Name and Address of Beneficial Owner
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Amount
and
Nature of
Beneficial
Ownership
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Percent of Class
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Nierenberg Investment Management Company, Inc.
(1)
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19605 NE 8
th
St.
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Camas, WA 98607
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1,651,135
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9.94
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%
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FMR LLC (2)
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245 Summer Street
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Boston, MA 02210
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1,442,610
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8.68
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%
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Royce & Associates, LP
(3)
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745 Fifth Avenue
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New York, NY 10151
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1,208,781
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7.28
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%
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Dimensional Fund Advisors LP
(4)
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Building One
6300 Bee Cave Road
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Austin, TX 78746
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1,104,048
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6.65
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%
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(1)
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As reported in an amendment to Statement on Schedule 13D filed with the SEC on behalf of Nierenberg
Investment Management Company, Inc., on March 13, 2019. Nierenberg Investment Management Company, Inc. is deemed to be the beneficial
owner of these shares on behalf of various investment companies registered under the Investment Company Act of 1940. Nierenberg
Investment Management Company, Inc. had shared voting and shared dispositive power with respect to all 1,651,135 shares reported
as beneficially owned.
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As reported in an amendment to Statement on Schedule 13G filed with the SEC on behalf of FMR LLC
and Abigail P. Johnson, its chairman, on February 13, 2019. Fidelity Management & Research Company, a wholly-owned subsidiary
of FMR LLC, is deemed to be the beneficial owner of these shares as a result of acting as investment adviser to various investment
companies registered under the Investment Company Act of 1940. One of those investment companies, Fidelity Series Intrinsic Opportunities
Fund, beneficially owned 1,348,500 shares, or 8.16%, of our common stock. Fidelity Management & Research Company had sole voting
power with respect to 10,922 shares, shared voting power with respect to no shares and sole dispositive power with respect to all
1,442,610 shares reported as beneficially owned.
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As reported in an amendment to Statement on Schedule 13G filed with the SEC on behalf of Royce
& Associates, LP on January 15, 2019. Royce & Associates, LP is deemed to be the beneficial owner of these shares as a
result of its acting as investment adviser to various accounts. Royce & Associates, LP had sole voting and sole dispositive
power for all 1,208,781 shares reported as beneficially owned.
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As reported in an amendment to Statement on Schedule 13G filed with the SEC on behalf of Dimensional
Fund Advisors LP on February 8, 2019. Dimensional Fund Advisors LP is deemed to be the beneficial owner of these shares as a result
of its acting as investment adviser to various investment companies registered under the Investment Company Act of 1940. Dimensional
Fund Advisors LP has sole voting power with respect to 1,052,007 shares, shared voting power with respect to no shares and sole
dispositive power with respect to all 1,104,048 shares reported as beneficially owned.
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The following table
sets forth the beneficial ownership of shares of our common stock for (i) each of our directors and nominees, (ii) each of
our executive officers named in the Summary Compensation Table on page 18 and (iii) all of our directors and executive officers
as a group. Except as noted below, the nature of beneficial ownership for shares shown in this table is sole voting and sole dispositive
power. The information below is as of March 15, 2019, unless otherwise indicated.
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Amount and Nature of Beneficial Ownership
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Name of Beneficial Owner
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Shares Owned
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Shares Under
Options/Restricted
Stock Units
Exercisable/Vesting
Within 60 Days
(1)
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Total Number
of Shares
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Percent of
Class
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Michael T. Campbell
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17,044
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(2)
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54,737
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71,781
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*
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Nicol G. Graham
(3)
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187,636
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-
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187,636
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1.1
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%
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Roy W. Haley
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200,000
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28,176
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228,176
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1.4
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%
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Margaret S. Laird
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-
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-
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Christopher M. Micklas
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65,797
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(4)
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-
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65,797
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*
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James L. Pokluda III
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270,912
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(5)
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77,910
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348,822
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2.1
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%
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Robert L. Reymond
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-
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6,667
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6,667
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*
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Sandford W. Rothe
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10,200
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(6)
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4,950
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15,150
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*
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William H. Sheffield
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20,000
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(7)
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59,331
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79,331
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*
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G. Gary Yetman
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7,851
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31,608
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39,459
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*
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All directors and executive officers as a group (9 persons)
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779,440
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263,379
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1,042,819
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6.2
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%
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(1)
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Includes share units under the Nonemployee Directors’ Deferred Compensation Plan as follows:
Mr. Haley – 12,680 shares; and Mr. Sheffield – 4,594 shares.
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(2)
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Owned by Mr. Campbell’s individual retirement account.
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(3)
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Mr. Graham served as Chief Financial Officer of the Company until his retirement in April 2018.
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(4)
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Includes 38,241 unvested restricted shares.
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(5)
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Includes 106,617 unvested restricted shares.
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(6)
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Owned by Mr. Rothe’s individual retirement account.
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(7)
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Mr. Sheffield has shared voting power and shared dispositive power with respect to 7,000 of these shares.
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PROPOSAL NO. 1 — ELECTION
OF DIRECTORS
Our amended and restated
bylaws provide for each director to stand for election each year at our annual meeting and to serve until the next annual meeting
and until a successor is duly elected and qualified.
At the recommendation
of the Nominating and Corporate Governance Committee, the board has nominated the persons listed below to serve as directors, each
for a one-year term, beginning at the annual meeting on May 7, 2019 and continuing until the 2020 annual meeting. The nominees
include six independent directors, as defined in the Nasdaq Listing Rules, and the President and Chief Executive Officer of the
Company. All of the nominees, other than Margaret S. Laird, currently serve as members of the Board of Directors. Ms. Laird has
been nominated to replace Michael T. Campbell, who will retire from the board as of the 2019 annual meeting.
It is the intention
of the persons named in the accompanying proxy card, unless otherwise instructed, to vote to elect the nominees named below as
the directors. Each nominee has consented to serve as a director if elected at this year’s annual meeting. In the event any
nominee is unable to serve as a director, discretionary authority is reserved to the board to vote for a substitute. The board
has no reason to believe that any nominee named below will be unable to serve if elected.
The nominees for election
to the office of director, and certain information with respect to their backgrounds, are set forth below.
Nominees Standing for Election to the Board
Roy W. Haley, age 72. Director since
2017
Independent Director
Mr. Haley served as
the Chairman of the Board of WESCO International, Inc. (“WESCO”) from 1998 until his retirement in 2011 and as Chief
Executive Officer of WESCO from 1994 to 2009. WESCO is a leading North American-based distributor of products and provider of advanced
supply chain management and logistics services used primarily in industrial, construction, utility, and commercial, institutional
and government markets. From 1988 to 1993, Mr. Haley served as Chief Operating Officer, President and a director of American General
Corporation, a diversified financial services company. In 2018, Mr. Haley retired as a director of Essendant Inc. (formerly United
Stationers, Inc.), after 18 years of service. He was previously a director of BlueLinx Holdings Inc., from 2013 to 2016 and Non-Executive
Chairman of the Board from 2014 to 2016. As a former CEO of a major distributor of industrial products, Mr. Haley brings extensive
knowledge of the industrial and electrical distribution industries, the customer perspective and experience with distribution operations.
Margaret S. Laird, age 42. New Nominee
Ms. Laird has served
as Chief Pricing Officer of Hitachi Vantara, a subsidiary of Hitachi, Ltd. that provides data-managing solutions to business enterprises,
since January 2019. From 2005 until 2018, Ms. Laird was with Deloitte Consulting LLP in its Monitor Deloitte Strategy Practice,
most recently as a Managing Director. The board identified Ms. Laird as a director nominee based on her deep experience with digital
strategies and technologies, her expertise in sales and pricing, and the age and gender diversity she will bring to the board.
James L. Pokluda III, age 54. Director since 2012
President and Chief Executive Officer of the Company
Mr. Pokluda was appointed
President in May 2011 and Chief Executive Officer in January 2012. From 2007 until 2011, he served as Vice President – Sales
and Marketing. During his 31 years with the Company, Mr. Pokluda has a demonstrated history of substantial contributions to the
Company including the construction and leadership of our long-term growth plan, implementation of the National Service Center,
the commercialization of our private branded products, co-leadership of the initial public offering in 2006, follow-on offering
in 2007 and acquisitions. Mr. Pokluda served on the Board of Directors of Houston Electrical League (HEL) for several years, is
an affiliate member of the National Association of Electrical Distributors (NAED), and a graduate of the College of Engineering
at Texas A&M University. In 2012, Mr. Pokluda completed the University of Chicago’s Booth School of Business Executive
Education Advanced Management Program. As the only management representative on our board, and someone with experience in all aspects
of our business, Mr. Pokluda provides an insider’s perspective in board discussions about our industry and the business and
strategic direction of the Company.
Robert L. Reymond, age 53. Director
since August 2018
Independent Director
Mr. Reymond is currently
the President of the Oil, Gas and Chemical Division and a member of the board of directors of Burns & McDonnell, a privately
held full-service engineering, architecture, construction, environmental and consulting solutions firm, a role he has held since
2015. Prior to his current role, Mr. Reymond was the Senior Vice President and Manager of Projects, Oil, Gas and Chemical Division
of Burns & McDonnell from 2012 to 2014. Prior to 2012, Mr. Reymond held various management level roles since joining Burns
& McDonnell in 2002. Mr. Reymond’s extensive experience in engineering and construction provide knowledge and insights
into two of the Company’s most significant markets.
Sandford W. Rothe, age 63. Director
since November 2018
Independent Director
Mr. Rothe is a retired
Partner of Deloitte LLP (“Deloitte”). Mr. Rothe joined Deloitte in 1977, became a partner in 1990 and was the Managing
Partner of Deloitte’s Denver office from 2002 until his retirement in June 2018. At Deloitte he held various leadership positions
and served clients across many industries, advising clients in the areas of strategy, new market development, mergers & acquisitions,
operational efficiency, capital allocation and structure and enterprise IT Projects. He served as a National Facilitator for Deloitte’s
executive transition labs, focused on the successful onboarding and integration of incoming C-Suite executives. He is a Certified
Public Accountant in Colorado and Oklahoma. Mr. Rothe’s significant experience with financial and SEC reporting, internal
controls and risk management strengthen the board’s capabilities in those areas.
William H. Sheffield, age 70. Director
since 2006
Independent Director
Mr. Sheffield is a
corporate director and serves on the boards of directors of Hydro One, Velan Inc., Burnbrae Farms Limited, Longview Aviation Capital
and 4iiii Innovations. He previously served on the boards of Canada Post Corporation until 2018 and Ontario Power Generation Inc.
until 2014. Mr. Sheffield served as Chief Executive Officer of Sappi Fine Paper from 2001 until 2003. He holds an MBA and a BSc,
and is recognized as both a Governance Fellow and a Certified Professional Director by the National Association of Corporate Directors
in the United States and the Institute of Corporate Directors in Canada. With his knowledge of complex issues surrounding global
companies and his understanding of what makes businesses work effectively and efficiently, Mr. Sheffield provides valuable insight
to our board and offers particular expertise in labor relations, critical end user markets and board governance issues.
G. Gary Yetman, age 64. Director since 2014
Independent Director
Mr. Yetman served
as the Chief Executive Officer and President of Coleman Cable, Inc. from 1999 until his retirement following the sale of Coleman
Cable in 2014. Prior to that, Mr. Yetman held various senior management positions with Coleman Cable’s predecessor and within
the electrical industry. Mr. Yetman’s extensive experience and proven track record within the electrical wire and cable industry
make him an excellent addition to our Board of Directors.
Board Recommendation and Stockholder Vote Required
The Board of Directors
recommends a vote “FOR” the election of the nominees named above (Proposal No. 1 on the accompanying proxy
card).
The seven nominees who receive the greatest
number of votes will be elected directors.
CORPORATE GOVERNANCE AND BOARD COMMITTEES
The Company is committed
to good corporate governance. We regularly review our policies and procedures, giving due consideration to current developments
and “best practices.” We believe that we comply with all applicable SEC and Nasdaq rules and regulations, and we have
adopted additional corporate governance practices that we believe are in the best interests of the Company and its stockholders.
Our commitment to
good corporate governance can be seen through practices such as:
|
·
|
Annual election of directors
|
|
·
|
All independent directors, other than the CEO
|
|
·
|
Independent chairman of the board
|
|
·
|
Independent Audit, Compensation and Nomination and Corporate Governance Committees
|
|
·
|
Regular executive sessions of independent directors
|
|
·
|
Risk oversight by full board and committees
|
|
·
|
Regular board and committee self-evaluations
|
|
·
|
Annual advisory vote on executive compensation
|
|
·
|
Pay for performance philosophy
|
|
·
|
Commitment to diversity and inclusion in the boardroom and throughout the Company
|
|
·
|
Stock ownership guidelines for directors and executive officers
|
|
·
|
Prohibitions on hedging, short sales and other speculative transactions
|
|
·
|
Related Person Transaction Policy
|
|
·
|
Clawback policy for incentive compensation awards
|
These practices and
policies are described in further detail below.
Board Composition
Our Board of Directors
currently consists of seven directors. Each director is elected for a term of one year and serves until a successor is duly elected
and qualified or until his or her death, resignation or removal. There are no family relationships between any of our directors
or executive officers. Our executive officers are elected by and serve at the discretion of the Board of Directors.
Board Leadership Structure and Risk Oversight
Since our IPO, the
offices of Chairman and Chief Executive Officer of the Company have been held by different individuals. Our board is led by an
independent Chairman, who since January 1, 2012, has been Mr. Sheffield. Our Chief Executive Officer, Mr. Pokluda, is the only
member of the board who is not an independent director. We believe that this leadership structure enhances the accountability of
the Chief Executive Officer to the board and strengthens the board’s independence from management. In addition, separating
these roles allows Mr. Pokluda to focus his efforts on running our business and managing the Company in the best interests
of our stockholders, while we are able to benefit from Mr. Sheffield’s experience as a member of other public company
boards.
The board takes an
active role in monitoring and assessing the Company’s risks, which include risks associated with operations, credit, financing
and capital investments. Management is responsible for the Company’s day-to-day risk management activities, and our board’s
role is to engage in informed risk oversight. The Nominating and Corporate Governance Committee with the assistance of management
compiled, prioritized and periodically updates a list of risks to which the Company could be subjected. It also identifies the
significant risks, which are then reviewed by the board and assigned to one of the standing committees of the board for oversight.
In fulfilling this oversight role, our Board of Directors focuses on understanding the nature of our enterprise risks, including
our operations and strategic direction, as well as the adequacy of our risk management process and overall risk management system.
There are a number of ways our board performs this function, including the following:
|
•
|
at its regularly scheduled meetings, the board receives management updates on our business operations, financial results and strategy and discusses risks related to the business;
|
|
•
|
the Audit Committee assists the board in its oversight of risk management by discussing with management, particularly the Chief Executive Officer and Chief Financial Officer, our guidelines and policies regarding financial and enterprise risk management and risk appetite, including major risk exposures, and the steps management has taken to monitor and control such exposures; and
|
|
•
|
through management updates and committee reports, the board monitors our risk management activities, including the enterprise risk management process, risks relating to our compensation programs, and financial and operational risks being managed by the Company.
|
Director Independence
The Board of Directors
has determined that each person who served as a director in 2018, and each director nominee for 2019, except Mr. Pokluda, is “independent”
under Nasdaq Listing Rule 5605(a)(2). Under Rule 5605(a)(2), a director is considered independent as long as he or she
does not have a relationship with the Company or management which would interfere with the exercise of independent judgment in
carrying out the director’s responsibilities. The Nasdaq Listing Rules also enumerate certain relationships which preclude
a finding of independence and generally provide that an individual cannot be considered independent if, among other things, he
or she is a current officer or other employee of the issuer or directly or indirectly receives certain significant payments from
the issuer other than in his or her capacity as a director or board committee member.
Related Person Transaction Policy
The purpose of the
Related Person Transaction Policy, as adopted by the Board of Directors, is to provide for the identification, review and consideration
of transactions between the Company and any related person. “Related person” means anyone who is, or within the past
year was, a director, nominee for director or executive officer of the Company or greater than five percent beneficial owner of
the Company's voting securities or any member of their immediate families.
Under the policy,
any related person transaction must be reviewed, considered, and approved or ratified by the Audit Committee of the Board of Directors
directly or through the Chairman of the Audit Committee. The Policy applies to all related person transactions, even if the amount
involved does not exceed the $120,000 threshold required for disclosure under the SEC rules. Review of a proposed related person
transaction takes into consideration the purpose of, and the potential benefits to the Company from, the related person transaction,
and the impact of the related person transaction on a director's independence in the event that the related person is a director
or an immediate family member of a director. No member of the Audit Committee may participate in any review, consideration, or
approval of any related person transaction with respect to which such member or any of his or her immediate family members is the
related person.
The policy provides
that the Company may undertake certain pre-approved related person transactions (e.g., transactions in which the related person's
interest derives solely from his or her service as a director of another corporation or entity that is a party to the transaction)
without further specific review, consideration and approval. The Company engaged in no related person transactions in 2018.
Board Meetings
The board met five
times during 2018. Each person who was a director during 2018 attended at least 75% of the meetings of the board and of the committees
on which he served during the period he was a director. Absent special circumstances, each director is expected to attend the annual
meeting of stockholders. All of the current directors attended the 2018 annual meeting of stockholders, other than Messrs. Reymond
and Rothe, who joined the Board in August 2018 and November 2018, respectively.
Executive Sessions
The Company’s
Corporate Governance Guidelines require the independent directors to meet in executive session separate from management at least
two times a year. The independent directors met in executive session three times during 2018.
Committees Established by the Board of Directors
The board has three
standing committees – the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee
– and a fourth, non-standing committee, the Strategy & Operations Committee. Mr. Sheffield is currently a member and
Chairman of the Nominating and Corporate Governance Committee and, as Chairman of the Board, attends all other committee meetings
on an ex officio basis.
Audit Committee.
The Audit Committee consists of Messrs. Campbell, Haley, Reymond and Rothe, each of whom is independent for purposes of Rules 5605(a)(2)
and (c)(2) of the Nasdaq Listing Rules and Rule 10A-3(b)(1) under the Securities Exchange Act of 1934. Mr. Campbell serves
as the Chairman. Each of the Audit Committee members is financially literate as determined by our board in its business judgment.
The board has also determined that Mr. Campbell is an “audit committee financial expert,” as such term is defined under
the applicable SEC rules. Mr. Rothe is expected to assume the role of Chairman upon Mr. Campbell’s retirement.
The Audit Committee
met four times in 2018. The Audit Committee operates under a charter approved by the Board of Directors, which can be found by
accessing the “Investors” page of our website at
http://ir.houwire.com
and clicking on the “Corporate
Governance” link
.
Copies of the charter will be sent to stockholders upon request
.
The principal duties
and responsibilities of the Audit Committee are to assist the board in its oversight of:
|
•
|
the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company;
|
|
•
|
the independent auditors’ qualifications and independence; and
|
|
•
|
the performance of the independent auditors.
|
Our Audit Committee is also responsible
for:
|
•
|
maintaining free and open communication among the committee, the independent auditors and management of the Company;
|
|
•
|
reviewing and approving related person transactions; and
|
|
•
|
preparing the report required to be prepared
pursuant to the rules of the SEC for inclusion in the Company’s annual
proxy statement.
|
The Audit Committee
has the resources and authority appropriate to discharge its duties and responsibilities, including the authority to select, retain,
terminate and approve the fees and other retention terms of counsel, accountants or other experts and advisors, as it deems necessary
or appropriate. See “Report of the Audit Committee” on page 25.
Nominating and
Corporate Governance Committee.
The Nominating and Corporate Governance Committee consists of Messrs. Campbell, Rothe,
Sheffield and Yetman. Mr. Sheffield serves as the temporary Chairman and has waived the committee chair fee. The board has determined
that all committee members are independent for purposes of Rule 5605(a)(2) of the Nasdaq Listing Rules.
The Nominating and
Corporate Governance Committee met six times in 2018. The Nominating and Corporate Governance Committee operates under
a charter approved by the Board of Directors, which can be found by accessing the “Investors” page of our website at
http://ir.houwire.com
and clicking on the “Corporate Governance” link. Copies will be provided to stockholders
upon request.
The principal duties
and responsibilities of the Nominating and Corporate Governance Committee are to:
|
•
|
identify persons that the Committee believes are qualified to be directors of the Company and consider and evaluate other candidates for director brought to the attention of the Committee, including persons nominated by stockholders in accordance with the nomination procedures specified in the Company’s By-laws or otherwise recommended by stockholders;
|
|
•
|
recommend to the board (1) the nominees for election as directors at each annual meeting of stockholders or at any special meeting of stockholders at which directors are to be elected and (2) the persons to be appointed by the board to fill any vacancy on the board (including any vacancy resulting from an increase in the size of the board);
|
|
•
|
review the committee structure of the board and the membership of the board committees, and recommend to the board nominees for appointment to each of the committees;
|
|
•
|
review and reassess, at least annually, the adequacy of the Company’s Corporate Governance Guidelines and recommend to the board for approval any changes that the Committee deems necessary or appropriate;
|
|
•
|
review any proposals properly submitted by stockholders for inclusion in the Company’s proxy statement and recommend to the board any action to be taken in response to such proposals; and
|
|
•
|
oversee the annual evaluation of the board.
|
In screening and recommending
candidates as directors of the Company, the Nominating and Corporate Governance Committee considers the nature of the expertise
and experience required for the performance of the duties of a director of a corporation engaged in the Company’s business
and such matters as the relevant business and industry experience, professional background, age, current employment, community
service and other board service of candidates for directors, as well as the racial, ethnic and gender diversity of the board. The
committee seeks to identify, as candidates for director, persons with a reputation for, and record of, integrity and good business
judgment who (1) have experience in positions with a high degree of responsibility and are leaders in the organizations with which
they are affiliated, (2) are free from conflicts of interest that could interfere with a director’s duties to the Company
and its stockholders, and (3) are willing and able to make the necessary commitment of time and attention required for effective
board service. The Nominating and Corporate Governance Committee also takes into account the candidate’s level of financial
literacy. The Nominating and Corporate Governance Committee monitors the mix of skills and experience of the directors in order
to assess whether the board has the necessary tools to perform its oversight function effectively. The Nominating and Corporate
Governance Committee will consider nominees for our Board of Directors recommended by stockholders, using the same criteria as
for other candidates.
The Nominating and
Corporate Governance Committee has the authority to retain advisors, including a search firm to be used to identify director candidates.
The Nominating and Corporate Governance Committee has the authority to approve the firm’s fees and other retention terms
and to terminate any advisor. The Company will provide for appropriate funding, as determined by the Nominating and Corporate Governance
Committee, for payment of compensation to any search firm or other advisors.
Stockholder Recommendations
for Director Nominations.
As noted above, the Nominating and Corporate Governance Committee considers and establishes procedures
regarding recommendations for nomination to the board, including nominations submitted by stockholders. For information on how
to nominate a person for election as a director at the 2020 annual meeting, please see the discussion under the heading “Stockholder
Proposals and Nominations for 2020 Annual Meeting.” The Nominating and Corporate Governance Committee will evaluate all potential
candidates in the same manner, regardless of the source of the recommendation. Based on the information provided to the Nominating
and Corporate Governance Committee, it will make an initial determination whether to conduct a full evaluation of a candidate.
As part of the full evaluation process, the Nominating and Corporate Governance Committee may conduct interviews, obtain additional
background information and conduct reference checks of the candidate, among other things. The Nominating and Corporate Governance
Committee may also ask the candidate to meet with management and other members of the board.
Compensation
Committee.
The Compensation Committee consists of Messrs. Campbell, Haley and Yetman. Mr. Yetman serves as the Chairman.
The board has determined that all committee members are (1) independent for purposes of Rules 5605(a)(2) and (d)(2) of
the Nasdaq Listing Rules, (2) “non-employee directors” as defined in Rule 16b-3 under the Securities Exchange
Act of 1934, and (3) “outside directors” as defined by Section 162(m) of the Internal Revenue Code.
The Compensation Committee met five times
in 2018. The Compensation Committee operates under a charter approved by the Board of Directors and can be found by accessing the
“Investors” page of our website at
http://ir.houwire.com
and clicking on the “Investors” link and
then clicking on “Corporate Governance.” Copies of the charter will be sent to stockholders upon request.
The principal duties and responsibilities
of the Compensation Committee are as follows:
|
•
|
make recommendations to the board with respect to the CEO’s compensation;
|
|
•
|
consider the Company’s performance and relative stockholder return, the value of similar incentive awards to the CEOs at comparable companies, and the awards given to the Company’s CEO in past years when determining the long-term component of the CEO’s compensation;
|
|
•
|
review the CEO’s recommendations on compensation of the executive officers of the Company and make recommendations to the board with respect thereto and with respect to the Company’s major compensation policies and practices;
|
|
•
|
administer and review the Company’s stock plans, including approving the number and distribution of awards under the 2017 Stock Plan; and
|
|
•
|
review and make recommendations to the board concerning management development and succession planning activities, including an appropriate successor in the event of the unexpected death, incapacity or resignation of the CEO.
|
The Compensation Committee
has the authority to delegate any of its responsibilities to subcommittees as it deems appropriate, provided the subcommittees
are composed entirely of independent directors. The Compensation Committee also may retain a compensation consultant or other advisors
to assist in the evaluation of CEO or executive officer compensation. The Compensation Committee has authority to approve the retention
terms and terminate any such consulting firm. The Company will provide for appropriate funding, as determined by the Compensation
Committee, for payment of compensation to any consulting firm or other advisors employed by the Compensation Committee.
The CEO may not be present during any deliberations
on his compensation.
Strategy &
Operations Committee
. The Strategy & Operations Committee (previously named Budget, Planning and Strategy Committee)
consists of Messrs. Haley, Pokluda, Reymond and Rothe. Mr. Haley serves as chairman. The duties and responsibility of the Strategy
& Operations Committee are to develop an enhanced level of understanding of the Company’s planning process, assess the
annual budgets, update the multi-year strategic plan and related multi-year financial targets and assist the board in overseeing
risk management and business continuity.
The Strategy &
Operations Committee met four times in 2018.
Stock Ownership Guidelines
The Board of Directors
has adopted stock ownership guidelines encouraging each director and executive officer to invest in the Company’s common
stock. The recommended level for an independent director is an amount equal to three times an independent director’s annual
cash retainer, for the CEO is an amount equal to two times his base salary, and for the CFO is an amount equal to one time his
base salary. The amount invested includes the grant date value of shares of restricted stock and restricted stock units. The recommended
ownership level should be achieved within five years after becoming a director or executive officer. All of the current directors
and executive officers either meet the ownership guidelines or are in the five-year grace period.
Transactions in the
Company’s common stock by directors, officers and employees are subject to the Company’s Insider Trading Policy. In
addition to fostering compliance with the prohibition on insider trading, that policy prohibits the Company’s directors,
officers and employees from participating in aggressive or speculative transactions with respect to the Company’s stock,
including short sales and hedging strategies.
Clawback Policy
The Board of Directors
has adopted an Incentive Compensation Recoupment Policy entitling the Company to recover certain cash or equity based incentive
compensation paid to officers (including the CEO and the CFO) in the event of a restatement of the Company’s financial statements
due to material noncompliance with financial reporting requirements, regardless of fault, or in the event of certain acts of misconduct
by the officer. Recoupment covers any incentive compensation that is awarded or paid or that vests within 36 months preceding the
date of the restatement or 36 months following the occurrence of the misconduct.
Communications with Directors
Stockholders may communicate
any concerns they have regarding the Company, including recommendations of candidates for director, to the Board of Directors or
to any member of the board via web form by accessing the “Investors” page of our website at
http://ir.houwire.com
and clicking on the “Corporate Governance” and “Contact the Board” links, through our Corporate Governance
Hotline at 866-254-2275 or by writing to them at the following address:
Houston Wire & Cable Company
Attention: [Board of Directors]/[Board Member]
c/o Chief Financial Officer
10201 North Loop East
Houston, TX 77029
Communications directed
to the independent directors should be sent to the attention of the Chairman of the Nominating and Corporate Governance Committee,
c/o Chief Financial Officer, at the address indicated above.
Any stockholder or
other interested person who has a particular concern regarding accounting, internal accounting controls or other audit matters
that he or she wishes to bring to the attention of the Audit Committee may communicate those concerns to the Audit Committee or
its Chairman, using the address indicated above.
The independent directors
of the Company have unanimously approved procedures with respect to the receipt, review and processing of, and any response to,
written communications sent by stockholders and other interested persons to the Board of Directors. Any written communication regarding
accounting, internal accounting controls, or other matters are processed in accordance with procedures adopted by the Audit Committee.
Code of Business Conduct
The board has adopted
a Code of Conduct, most recently updated in November 2018 and reviewed annually, a copy of which may be found by accessing the
“Investors” page on our website at
http://ir.houwire.com
and clicking on the “Corporate Governance”
link. Under the Code of Conduct, we insist on honest and ethical conduct by all of our directors, officers, employees and other
representatives, including but not limited to the following:
|
•
|
Our directors, officers and employees are
required to avoid situations in which their personal, family or financial
interests conflict with those of the Company;
|
|
•
|
Our directors, officers and employees must refrain from engaging in any activities that compete with the Company, or which may compromise its interests;
|
|
•
|
Our directors, officers and employees must refrain from taking any business or investment opportunity discovered in the course of employment with or service to the Company that the director, officer or employee knows, or should have known or has reason to know, would benefit the Company; and
|
|
•
|
Our directors, officers and employees must comply with all applicable governmental laws, rules and regulations.
|
We are also committed
to ensuring that all disclosures in reports and documents that the Company files with the SEC, as well as other public communications
made by the Company, are full, fair, accurate, timely and understandable. Further, we will comply with all laws, rules and regulations
that are applicable to our activities and expect all of our directors, officers and employees to obey the law. Any violation of
applicable law or any deviation from the standards embodied in the Code of Conduct will result in appropriate corrective and disciplinary
action, up to and including termination of employment.
DIRECTOR COMPENSATION
Each non-employee
member of the Board of Directors receives an annual cash retainer of $60,000, paid quarterly. The Chairman of the Board receives
an additional fee of $50,000 per year, and the Chairmen of the Audit, Compensation, Nominating and Corporate Governance, and Strategy
& Operations Committees receive additional annual fees of $12,000, $9,000, $6,000 and $9,000, respectively, also paid quarterly.
There are no additional fees for meeting attendance. Mr. Pokluda does not receive any additional compensation for his service
as a director. Mr. Sheffield, who currently serves as temporary Chairman of the Nominating and Corporate Governance Committee,
has waived the chairman’s fee for that committee.
The Company has adopted
the Nonemployee Directors’ Deferred Compensation Plan. This plan permits a nonemployee director of the Company to make an
advance election to defer receipt of all or a portion of the board fees (including annual retainers for board service and additional
retainers for service as Chairman or as a chair of a board committee) that are otherwise payable to the director for services performed
during a calendar year. The deferred board fees are converted into stock units, based on the price of the Company’s common
stock on the date the fees would otherwise be paid to the director, and credited to a stock unit account, which is credited with
dividend equivalents to the extent applicable. The stock unit account is distributed in shares of common stock on the date previously
elected by the director (or, if no date is elected, on the January 31 following the date the director’s board service ends),
or upon a change in control of the Company, if earlier.
In addition, following
election or reelection to the board, each non-employee director receives a grant of restricted stock units having a fair market
value of $60,000, based on the price of the Company’s common stock on the date of grant. The restricted stock units vest
on the date of the Company’s annual meeting of stockholders the following year and are settled in shares of common stock
when the director’s service on the board terminates for any reason. Any dividends declared on the common stock during the
term of the restricted stock units will be accrued and paid to the director when the restricted stock units are settled.
We reimburse members
of our Board of Directors for any out-of-pocket expenses they incur in connection with services provided as directors. The Nominating
and Corporate Governance Committee has adopted a policy encouraging each director to devote at least one day each year to director
education, and we pay for the cost of attending continuing education programs, up to $5,000 per director per year. Perquisites
paid or provided to individual directors in 2018 were significantly less than the SEC’s minimum threshold for disclosure
($10,000).
The following table sets forth all compensation
paid to each of our non-employee directors in 2018:
Name
|
|
Fees Earned
or Paid in Cash
($)
(1)
|
|
|
Stock
Awards
($)
(2)
|
|
|
Total
($)
|
|
Michael T. Campbell
|
|
|
72,000
|
|
|
|
60,000
|
|
|
|
132,000
|
|
Roy W. Haley
|
|
|
69,000
|
|
|
|
60,000
|
|
|
|
129,000
|
|
Robert L. Reymond
(3)
|
|
|
35,000
|
|
|
|
55,000
|
|
|
|
90,000
|
|
Sandford W. Rothe
(4)
|
|
|
15,000
|
|
|
|
30,000
|
|
|
|
45,000
|
|
Mark A. Ruelle
(5)
|
|
|
16,500
|
|
|
|
-
|
|
|
|
16,500
|
|
William H. Sheffield
|
|
|
110,000
|
|
|
|
60,000
|
|
|
|
170,000
|
|
G. Gary Yetman
|
|
|
69,000
|
|
|
|
60,000
|
|
|
|
129,000
|
|
|
(1)
|
Includes amounts deferred under the Nonemployee Directors’ Deferred Compensation Plan.
|
|
|
|
|
(2)
|
This column shows the aggregate grant date fair value of the restricted stock unit awards granted on May 8, 2018 (or August 3, 2018 and November 6, 2018, for Messrs. Reymond and Rothe, respectively) based on the closing price of the Company’s common stock on the date of grant, in accordance with FASB Accounting Standards Codification (“ASC”) Topic 718.
|
|
|
|
|
(3)
|
Mr. Reymond was appointed as a director on August 3, 2018.
|
|
|
|
|
(4)
|
Mr. Rothe was appointed as a director on November 6, 2018.
|
|
|
|
|
(5)
|
Mr. Ruelle retired from the Board on May 8, 2018.
|
The following table
sets forth the aggregate number of stock options and restricted stock units granted under the Company’s stock plans for each
of our non-employee directors outstanding as of December 31, 2018. For information regarding Mr. Pokluda’s outstanding equity
awards, see the 2018 Outstanding Equity Awards at Fiscal Year End table on page 21.
Name
|
|
Stock Options
|
|
|
Restricted Stock Units
|
|
Michael T. Campbell
|
|
|
10,000
|
|
|
|
44,737
|
|
Roy W. Haley
|
|
|
-
|
|
|
|
15,496
|
|
Robert L. Reymond
|
|
|
-
|
|
|
|
6,667
|
|
Sandford W. Rothe
|
|
|
-
|
|
|
|
4,950
|
|
William H. Sheffield
|
|
|
10,000
|
|
|
|
44,737
|
|
G. Gary Yetman
|
|
|
-
|
|
|
|
31,608
|
|
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table
and related notes set forth information concerning the compensation paid to our President and Chief Executive Officer and our Chief
Financial Officer for fiscal years 2018 and 2017. Because our President and Chief Executive Officer and our Chief Financial Officer
are our only executive officers, the following compensation disclosures have been limited to those individuals. We collectively
refer to these executive officers throughout this section as our “named executive officers.”
Name and Principal
Position
|
|
Year
|
|
|
Salary
($)
(1)
|
|
|
Bonus
($)
(2)
|
|
|
Stock Awards
($)
(3)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
(4)
|
|
|
All Other
Compensation
($)
(5)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James L. Pokluda III,
|
|
|
2018
|
|
|
|
514,712
|
|
|
|
-
|
|
|
|
300,000
|
|
|
|
556,563
|
|
|
|
20,661
|
|
|
|
1,391,936
|
|
President & Chief Executive Officer
|
|
|
2017
|
|
|
|
498,847
|
|
|
|
-
|
|
|
|
1,350,000
|
(6)
|
|
|
537,548
|
|
|
|
14,075
|
|
|
|
2,400,470
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher M. Micklas,
|
|
|
2018
|
|
|
|
207,692
|
|
|
|
62,308
|
|
|
|
275,000
|
|
|
|
33,407
|
|
|
|
7,696
|
|
|
|
586,103
|
|
Chief Financial Officer
(beginning April 16, 2018)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nicol G. Graham,
|
|
|
2018
|
|
|
|
85,720
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
251,558
|
|
|
|
337,278
|
|
Chief Financial Officer
(through April 16, 2018)
|
|
|
2017
|
|
|
|
254,024
|
|
|
|
-
|
|
|
|
-
|
|
|
|
107,241
|
|
|
|
13,727
|
|
|
|
374,992
|
|
|
(1)
|
The
annual salary rates for 2018 were $515,000 for Mr. Pokluda, $300,000 for Mr. Micklas and $254,166 for Mr. Graham.
|
|
(2)
|
This
column reflects the portion of Mr. Micklas’s 2018 bonus that was guaranteed under his offer letter.
|
|
(3)
|
This
column shows the aggregate grant date fair value of the shares of restricted stock under the 2017 Plan computed in accordance
with FASB ASC Topic 718. Annual awards were granted on December 4, 2018, and Mr. Pokluda received 48,387 shares and Mr. Micklas
received 12,097 shares. Pursuant to his offer letter, Mr. Micklas received 26,144 shares on May 8, 2018. All awards were subject
to time-based vesting. See note 8 of Notes to Consolidated Financial Statements contained in our Annual Report on Form 10-K
for the year ended December 31, 2018 for a discussion of the assumptions made in the valuation of these awards.
|
|
(4)
|
For
Mr. Pokluda, reflects the performance based annual bonus earned pursuant to his employment agreement, and for Mr. Micklas reflects
the excess of the performance based bonus earned pursuant to the Company’s Senior Management Bonus Program over the portion
of his bonus guaranteed in his offer letter. Mr. Graham was not eligible for a bonus due to his retirement. See “2018 Annual
Incentive Programs” below for a discussion of Mr. Pokluda’s 2018 annual bonus arrangement and the 2018 Senior Management
Bonus Program.
|
|
(5)
|
All
Other Compensation reported for Mr. Pokluda for 2018 represents a matching contribution by the Company to our 401(k) Plan
of $2,650; group term life and long-term disability insurance premiums of $1,726; and personal use of an automobile of $16,285.
All Other Compensation reported for Mr. Micklas for 2018 represents a matching contribution by the Company to our 401(k) Plan
of $577; group term life and long-term disability insurance premiums of $889; and automobile allowance of $6,230. All Other Compensation
reported for Mr. Graham for 2018 represents a matching contribution by the Company to our 401(k) Plan of $1,659; group
term life and long-term disability insurance premiums of $1,228; personal use of an automobile of $1,474; consulting fees of $169,444,
the value of accelerated vesting of restricted stock awards of $67,992, and partial reimbursement of COBRA premiums of $9,761.
|
|
(6)
|
Includes
a performance stock unit award valued at $600,000 granted in December 2017 with respect to Mr. Pokluda’s long-term incentive
compensation for 2018. The performance stock unit award that is part of Mr. Pokluda’s long-term incentive compensation for
2019 was granted in the first quarter of 2019.
|
Employment Agreements
James L. Pokluda III
On March 24, 2017,
the Company and Mr. Pokluda entered into a second amended and restated employment agreement that (i) extended the term through
December 31, 2018 (with automatic one-year extensions thereafter), (ii) increased his base salary to $500,000 and annual incentive
opportunity to a target of 80% of salary and (iii) provided for immediate vesting of any unvested restricted stock awards and performance
stock unit awards granted as of January 31, 2017 in the event of a termination by the Company without cause, termination by Mr.
Pokluda for good reason, or termination due to death or disability. The other material terms of the employment agreement remained
unchanged.
Mr. Pokluda will be
entitled to receive as severance the payments described under “Potential Payments upon Termination of Employment or Change
in Control of the Company” below. The agreement limits Mr. Pokluda’s ability to compete with the Company for a period
of one year following the termination of his employment for any reason or two years if he is receiving severance benefits due to
a qualifying termination prior to a change in control.
Christopher
M. Micklas
Mr. Micklas joined
the Company as Chief Financial Officer on April 16, 2018. Pursuant to his offer letter from the Company, for 2018, Mr. Micklas
received an annual base salary of $300,000, a maximum annual cash bonus opportunity under the Company’s Senior Management
Bonus Program of 50% of base salary, subject to the attainment of certain performance goals (with a guaranteed minimum bonus for
2018 of 30% of base salary from his date of hire) and a one-time award of restricted stock units with a grant date value equal
to the value of Company common stock Mr. Micklas commits to purchase with his own funds, up to a maximum of $200,000. Mr. Micklas
is entitled to participate in the Company’s Stock Plan and vacation and benefit plans on the same terms as other members
of senior management.
Mr. Micklas will be
entitled to receive as severance the payments described under “Potential Payments upon Termination of Employment or Change
in Control of the Company” below.
Nicol G. Graham
In connection with
Mr. Graham’s retirement on April 16, 2018, he entered into a retirement and consulting agreement with the Company, pursuant
to which he serves as a consultant, providing transitional support and financial, accounting and other services, to the Company
for a period of one year ending April 15, 2019. The agreement provides for a consulting fee of $21,180.53 per month (which is equal
to his base salary in effect prior to retirement), immediate vesting of all unvested shares of restricted stock, reimbursement
of the differential between the COBRA cost for continuation benefits and the amount currently paid by Mr. Graham for medical and
dental insurance benefits and continued use of a Company car and fuel card during the consulting period. Mr. Graham continues to
be bound by the Company’s Insider Trading Policy and by the noncompetition, confidentiality and intellectual property provisions
of his prior employment agreement, and is obligated to refrain from engaging in business activity in competition with the Company’s
businesses for a period of one year following the end of the consulting period.
2018 Annual Incentive Programs
Under Mr. Pokluda’s
employment agreement, Mr. Pokluda has a target bonus of 80% of his base salary and can earn an annual bonus of up to 120% of his
base salary based on achievement of one or more performance targets for the fiscal year that are agreed to by the Board of Directors
(or Compensation Committee) and Mr. Pokluda and consistent with the Company’s annual business plan. For 2018, the Compensation
Committee selected three performance measures: (1) EBITDA (net income, plus interest expense, income tax provision, depreciation
and amortization), (2) gross margin from sales of targeted products (“Strategic Sales Margin”) and (3) Working Capital
Efficiency, weighted 60%, 20% and 20%, respectively. There were three benchmarks (threshold, target and maximum) for each of the
three performance measures. Performance between any of the benchmarks is adjusted on a straight-line basis.
For 2018, Mr. Micklas
and all other members of senior management (other than Mr. Pokluda) participated in our Senior Management Bonus Program, provided
that Mr. Micklas was guaranteed a minimum bonus for 2018 equal to 30% of his base salary. Under that Program, each participant
could earn an annual bonus of up to 50% of his or her base salary based on achievement of benchmarks with respect to the same three
performance measures of EBITDA, Strategic Sales Margin and Working Capital Efficiency established for purposes of Mr. Pokluda’s
annual incentive compensation.
Under the Program,
all bonuses are paid the year following the year for which performance is being measured, after receipt of (and subject to) the
audit of the financial statements for the relevant year. No award is payable under the Program to any participant whose employment
terminates prior to the time the bonus is paid; as a result, Mr. Graham received no bonus for 2018. In all cases, the payment is
at the discretion of the Compensation Committee, and the Compensation Committee retains the right to terminate a participant’s
participation in the bonus program at any time, in which case no bonus will be paid.
The annual cash bonus opportunities for
2018 at the threshold, target and maximum levels for Mr. Pokluda and Mr. Micklas are as follows:
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
Named Executive Officer
|
|
$ Amount
|
|
|
% of Base
Salary
|
|
|
$ Amount
(1)
|
|
|
% of Base
Salary
|
|
|
$ Amount
(1)
|
|
|
% of Base
Salary
|
|
James L. Pokluda III
|
|
|
206,000
|
|
|
|
40
|
|
|
|
412,000
|
|
|
|
80
|
|
|
|
618,000
|
|
|
|
120
|
|
Christopher M. Micklas
|
|
|
-
|
(2)
|
|
|
|
(2)
|
|
|
-
|
(2)
|
|
|
|
(2)
|
|
|
112,500
|
|
|
|
50
|
|
|
(1)
|
For Mr. Micklas, salary is prorated from April 16, 2018.
|
|
(2)
|
Per his offer letter, Mr. Micklas was guaranteed a minimum bonus equal to 30% of salary for 2018. This exceeds the amounts
payable at the Threshold and Target levels under the 2018 Senior Management Bonus Program.
|
Our actual performance in 2018 compared
to the target and maximum levels was:
Performance Goal ($ in millions)
|
|
Target
|
|
|
Maximum
|
|
|
Actual
|
|
EBITDA
|
|
$
|
14.25
|
|
|
$
|
18.0
|
|
|
$
|
16.1
|
|
Strategic Sales Margin
|
|
$
|
9.7
|
|
|
$
|
10.4
|
|
|
$
|
11.7
|
|
Working Capital Efficiency
|
|
|
0.94
|
|
|
|
0.93
|
|
|
|
0.91
|
|
Based on the above performance the target
amounts and actual bonus amounts earned for Mr. Pokluda and Mr. Micklas are shown in the table below:
Named Executive Officer
|
|
Target Bonus
|
|
|
Actual Bonus
|
|
James L. Pokluda III
|
|
$
|
412,000
|
|
|
$
|
556,561
|
|
Christopher M. Micklas
|
|
|
-
|
(1)
|
|
$
|
95,715
|
|
|
(1)
|
Mr. Micklas was guaranteed a minimum bonus of $62,308 for 2018.
|
401(k) Plan
The Company sponsors
the Houston Wire & Cable Company Employee Savings Plan, which is a tax-qualified retirement plan that covers most employees,
including the named executive officers. A participant can elect to defer a percentage of his or her compensation, up to a maximum
in 2018 of $18,500, or $24,500 if age 50 or over, and the Company will make a matching contribution equal to 100% of the first
1% of the participant’s deferral contributions. Participants vest in the matching contribution accounts at a rate equal to
20% for each year of service, subject to full vesting upon age 65, death or disability.
2018 Outstanding Equity Awards at Fiscal
Year-End
The following table
sets forth information for Mr. Pokluda and Mr. Micklas with respect to unexercised options to purchase common stock that remained
outstanding and shares of restricted stock, restricted stock units and performance stock units that remained unvested at December
31, 2018. Mr. Graham had no outstanding equity awards as of that date. The Company’s executive officers currently do not
have any other outstanding stock awards.
|
|
Option awards
|
|
|
Stock awards
|
|
Name
|
|
Number of
securities
underlying
unexercised
options
exercisable
(#)
|
|
|
Number of
securities
underlying
unexercised
options
unexercisable
(#)
|
|
|
Option
exercise
price
($)
|
|
|
Option
expiration
date
|
|
Number of
shares or
units of
stock that
have not
vested
(#)
|
|
|
Market
value
of shares or
units of
stock
that have
not
vested
($)
(3)
|
|
|
Equity
incentive
plan awards:
number of
unearned
shares,
units or
other rights
that have not
vested
(#)
(4)
|
|
|
Equity
incentive
plan
awards:
market or
payout
value of
unearned
shares,
units
or other
rights that
have not
vested
($)
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James L. Pokluda III
|
|
|
64,330
|
|
|
|
0
|
|
|
|
14.11
|
|
|
12/20/2021
|
|
|
106,617
|
(1)
|
|
|
539,482
|
|
|
|
86,154
|
|
|
|
435,939
|
|
|
|
|
8,580
|
|
|
|
0
|
|
|
|
14.11
|
|
|
12/20/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
0
|
|
|
|
12.03
|
|
|
12/14/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher Micklas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,241
|
(2)
|
|
|
193,499
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These
shares vest in installments of 7,462 shares on December 19, 2019, 19,999 shares on December 19, 2019, 16,129 shares on each December
4, 2019, 2020, and 2021, 15,385 shares on December 11, 2019 and 15,384 on December 11, 2020.
|
|
(2)
|
These
shares vest in installments of 4,033 on December 4, 2019 and 4,032 shares on each of December 4, 2020 and 2021, 8,715 shares on
each of May 8, 2019 and 2020 and 8,714 shares on May 8, 2021.
|
|
(3)
|
The
market value of the stock awards was determined using the closing price of the Company’s common stock on December 31, 2018
($5.06 per share).
|
|
(4)
|
Of
these shares, 40,000 vest on December 31, 2019 and 46,154 vest on December 31, 2020, in each case as adjusted based on the level
of attainment of the performance goals.
|
Potential Payments upon Termination of Employment or Change
in Control of the Company
The Company provides
certain benefits upon his termination of employment from the Company. These benefits are in addition to the benefits to which the
executive officers would be entitled upon a termination of employment generally (
i.e.
, vested retirement benefits accrued
as of the date of termination, stock-based awards that are vested as of the date of termination and the right to elect continued
health coverage pursuant to COBRA). The incremental benefits are described below.
Employment Agreement
with Mr. Pokluda
The Company’s
employment agreement with Mr. Pokluda provides the following severance benefits:
Termination Prior
to a Change in Control
. If prior to a Change in Control (as defined in Mr. Pokluda’s employment agreement) Mr. Pokluda’s
employment is terminated by the Company without Cause, Mr. Pokluda terminates his employment for Good Reason, or his employment
terminates due to Disability, he is entitled to (i) continued payment of then current base salary for 24 months, (ii) two payments,
each equal to the amount of his incentive bonus for the most recently completed fiscal year, paid when incentive bonuses are paid
to other executives for the year in which the termination occurs and the following year, (iii) continued participation in the Company’s
health plan for 36 months (provided that COBRA is elected) with the premiums for the first 18 months at active employee rates,
and (iv) immediate vesting of any unvested equity awards granted as of January 31, 2017, which as of December 31, 2018 would include
(a) the balance of the shares of restricted stock granted on December 19, 2016, which are scheduled to vest on December 19, 2019,
(b) the balance of the shares of restricted stock granted on January 30, 2017, which are scheduled to vest on December 19, 2019,
and (c) the performance stock unit award granted on January 31, 2017, which is scheduled to vest at the end of the performance
period on December 31, 2019 (the “Subject Awards”), provided that the number of performance stock units payable pursuant
to the Subject Award described in (c) shall be determined at the end of the performance period as if Mr. Pokluda’s employment
had continued through such date. Other outstanding equity awards will vest pursuant to the terms of the 2017 Stock Plan.
Termination Following
a Change in Control
. If within two years following a Change in Control (as defined in the 2017 Stock Plan) Mr. Pokluda’s
employment is terminated by the Company without Cause (other than for Disability) or Mr. Pokluda terminates his employment for
Good Reason, he is entitled to the same benefits as in the case of termination prior to a Change in Control, except that the 24
months of base salary and two years of incentive bonuses are payable in a lump sum within ten days after termination. If any excise
tax under Section 280G of the Code would be triggered by the benefits paid to Mr. Pokluda, and the net after-tax value of the benefits
is less than the net after-tax value of the benefits reduced so that no excise tax is payable, then the benefits will be reduced
accordingly.
Termination Due
to Death
. If Mr. Pokluda’s employment is terminated due to his death, his estate will be entitled to a pro rata portion
of the bonus payable for the year of termination had he remained employed through the end of the year, and his surviving spouse
and dependents can elect continued participation in the Company’s health plan for 36 months (provided that COBRA is elected)
with the premiums for the first 18 months at active employee rates. The Subject Awards will vest as described above, and other
outstanding equity awards will vest pursuant to the terms of the 2017 Stock Plan.
In each case, benefits are conditioned
on the execution of a release of claims, and Mr. Pokluda is subject to a two-year non-compete restriction.
The terms “Cause,”
“Disability” and “for Good Reason” are defined as follows:
“Cause”
means (i) a material neglect by Mr. Pokluda of his assigned duties, which includes any failure to follow the written direction
of the board or to comply with the Company’s code of ethics or written policies, or repeated refusal by Mr. Pokluda to perform
his assigned duties, in each case other than by reason of disability, which continues for 30 days following receipt of written
notice from the board; (ii) the commission by Mr. Pokluda of any act of fraud or embezzlement against Company or any of its affiliates
or the commission of any felony or act involving dishonesty; (iii) the commission by Mr. Pokluda of any act of moral turpitude
which actually causes financial harm to the Company or any of its affiliates; (iv) a material breach by Mr. Pokluda of the confidentiality
provisions of the employment agreement or any other confidentiality or non-disclosure agreement of Mr. Pokluda with the Company;
or (v) Mr. Pokluda’s commencement of employment with another company while he is an employee of the Company without the prior
consent of the board.
“Disability”
means, in the sole judgment of the board, Mr. Pokluda’s inability to engage in any substantial gainful activity by reason
of any medically-determinable physical or mental impairment which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than 12 months.
“Good Reason”
means voluntary termination of the employment agreement by Mr. Pokluda if, without the prior consent of Mr. Pokluda: (a) the Company
shall relocate its principal executive offices to a location outside the Houston, Texas metropolitan area; (b) there is a material
reduction by the Company in Mr. Pokluda’s responsibilities, duties, authority, title or reporting relationship; or (c) the
Company materially reduces Mr. Pokluda’s base salary or takes action that adversely affects Mr. Pokluda’s participation
in, or materially reduces Mr. Pokluda’s benefit under, any benefit plan of the Company in which Mr. Pokluda is participating;
provided, however, that termination for Good Reason by Mr. Pokluda shall not be permitted unless (x) Mr. Pokluda has given the
Company at least 30 days’ prior written notice that he has a basis for a termination for Good Reason, which notice shall
specify the facts and circumstances constituting Good Reason, and (y) the Company has not remedied such facts and circumstances
constituting Good Reason within such 30-day period.
Offer Letter
with Mr. Micklas
The Company’s
offer letter to Mr. Micklas provides the following severance benefits:
Termination Following
a Change in Control
. If within two years following a Change in Control (as defined in the 2017 Stock Plan), Mr. Micklas’
employment is terminated by the Company without Cause or Mr. Micklas terminates is employment for Good Reason, he is entitled to
a lump sum payment equal to the sum of one year of base salary then in effect and one times the amount of the annual bonus paid
to him for the most recently completed fiscal year. The terms “Cause” and “Good Reason” are defined
as follows:
“Cause”
means (i) a material neglect by Mr. Micklas of his assigned duties (for other than disability) that continues for 30 days following
receipt of written notice from the Board, (ii) the commission by Mr. Micklas of fraud or embezzlement against the Company
or its affiliates or the commission of any felony or act involving dishonesty, (iii) a breach by Mr. Micklas of the Company’s
code of ethics, written policy, the Non-Compete Agreement or any non-disclosure or confidentiality agreement between him and the
Company, or (iv) Mr. Micklas’ commencement of employment with another company while still an employee of the Company without
the prior consent of the Board.
“Good Reason”
means (i) the relocation of the Company’s principal executive offices to outside the Houston, Texas metropolitan area, (ii)
a material reduction in Mr. Micklas’ responsibilities, duties, authority, position, title or reporting relationship (other
than a reduction or loss resulting from the Company no longer being publicly owned), or (iii) a material reduction in Mr. Micklas’
then current base salary or cash bonus opportunity, provided that in each case Mr. Micklas’ first gives the Company written
notice of his basis for a Good Reason termination and the Company does not remedy the circumstances within 30 days following receipt
of such notice.
Stock Plans
The 2006 Stock Plan,
as amended, provides that with respect to grants made after February 2014, the Compensation Committee has the discretion to determine
how awards are to be treated upon a Change in Control, provided that if the awards are assumed by the acquiring entity, the vesting
provisions continue and the Compensation Committee has the discretion to accelerate vesting only if there is a subsequent termination
of employment. Mr. Pokluda’s January 30, 2017 performance stock units and restricted stock award agreements provide that
if the awards are not assumed by the acquiring entity they will fully vest on a Change in Control. The 2017 Stock Plan contains
the same Change in Control language as the amended 2006 Stock Plan. The award agreements under the 2017 Stock Plan provide that
if the awards are not assumed by the acquiring entity they will fully vest on a Change in Control. These award agreements also
provide that upon termination of employment due to death or disability, a pro rata portion of restricted stock units, and the target
number of performance stock units, will vest.
The tables set forth
below quantify the additional benefits described above that would be paid to each named executive officer pursuant to the arrangements
described above, assuming a qualifying termination of employment and/or Change in Control occurred on December 31, 2018.
Name
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Accelerated
Vesting of
Options
(1)
($)
|
|
|
Accelerated
Vesting of
Restricted
Stock/Units
(2)
($)
|
|
|
Continued
Health
Coverage
($)
|
|
James L. Pokluda III
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to change in control
|
|
|
1,030,000
|
|
|
|
1,113,126
|
|
|
|
-
|
|
|
|
341,353
|
(3)
|
|
|
35,355
|
|
On or after change in control
|
|
|
1,030,000
|
|
|
|
1,113,126
|
|
|
|
-
|
|
|
|
341,353
|
(3)(4)
|
|
|
35,355
|
|
Christopher M. Micklas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior to a change in control
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
193,408
|
(5)
|
|
|
-
|
|
On or after a change in control
|
|
|
300,000
|
|
|
|
95,715
|
|
|
|
-
|
|
|
|
193,408
|
(6)
|
|
|
-
|
|
|
(1)
|
As
of December 31, 2018, Mr. Pokluda and Mr. Micklas had no unvested stock options.
|
|
(2)
|
Based
on the closing price of the Company’s stock at December 31, 2018.
|
|
(3)
|
Reflects
accelerated vesting of (i) the Subject Awards if termination of employment is by the Company for other than Cause, by Mr. Pokluda
for Good Reason, or due to death or Disability and (ii) a prorata portion of the December 2017 performance stock unit award, if
termination is due to death or Disability.
|
|
(4)
|
Reflects
accelerated vesting of (i) the Subject Awards if termination of employment is by the Company for other than Cause (other than
Disability), by Mr. Pokluda for Good Reason, or due to death and (ii) all remaining awards, which consist of the December 1, 2017
performance stock unit and restricted stock unit awards. The December 1, 2017 performance stock unit and restricted stock unit
awards are included based on the assumption that the awards would not be assumed by the acquiring entity.
|
|
(5)
|
Reflects
accelerated vesting of a prorata portion of the restricted stock awards upon termination of employment due to death or disability.
|
|
(6)
|
Reflects
accelerated vesting of restricted stock awards based on the assumption that the awards would not be assumed by the acquiring entity.
|
EQUITY
COMPENSATION PLAN INFORMATION
The following table
provides information as of December 31, 2018 with respect to our compensation plans (including individual compensation arrangements)
under which our equity securities are authorized for issuance:
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Plan Category
|
|
Number of
Securities to be
Issued upon
Exercise of
Outstanding
Options, Warrants
and Rights
|
|
|
Weighted-Average
Exercise Price of
Outstanding
Options,
Warrants
and Rights
(2)
|
|
|
Number of Securities
Remaining Available
for Issuance under
Equity Compensation
Plans (Excluding
Securities Reflected in
Column (a))
|
|
Equity
compensation plans approved by security holders
(1)
|
|
|
636,555
|
|
|
$
|
7.84
|
|
|
|
627,283
|
|
Equity compensation plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
636,555
|
|
|
$
|
7.84
|
|
|
|
627,283
|
|
|
(1)
|
Amounts
shown in this row relate solely to stock options, restricted stock units and performance stock units granted under the 2006 Stock
Plan, which expired in May 2017. This row excludes shares of restricted stock granted under the 2006 Stock Plan and the 2017
Stock Plan, which were granted at no cost to the recipients.
|
|
(2)
|
Weighted-average
exercise price of outstanding stock options. The performance stock units and restricted stock units have no exercise price.
|
REPORT OF THE AUDIT COMMITTEE
The Audit Committee
of the board is responsible for providing oversight of our accounting and financial reporting functions. The board appoints the
Audit Committee annually, with the committee consisting of at least three directors. The Audit Committee operates under a formal
charter, which is available by accessing the “Investors” page on the Company’s website at
http://ir.houwire.com
and clicking on the “Corporate Governance” link. The Audit Committee charter sets forth in detail, the duties and responsibilities
of the Audit Committee.
The Audit Committee
relies on the expertise and knowledge of management and Ernst & Young LLP, the Company’s independent registered public
accounting firm, in carrying out its oversight responsibilities. Management is responsible for the Company’s financial reporting
process, including its system of internal controls, and for the preparation of the consolidated financial statements in accordance
with generally accepted accounting principles. Ernst & Young LLP is responsible for auditing those financial statements and
issuing a report thereon.
The Audit Committee
reviewed and discussed with management and Ernst & Young LLP the quarterly financial statements for each quarter during the
year ended December 31, 2018 and the audited financial statements of the Company for the year ended December 31, 2018. The Audit
Committee also reviewed and discussed with Ernst & Young LLP the matters required to be discussed by Auditing Standard No.
1301, “Communications with Audit Committees,” issued by the Public Company Accounting Oversight Board (“PCAOB”).
In addition, the Audit
Committee received the written independence disclosures and the letter from Ernst & Young LLP that are required by the applicable
requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence.
The disclosures described the relationships and fee arrangements between Ernst & Young LLP and the Company. Consistent with
the applicable requirements of the PCAOB and the rules and regulations of the SEC, the Audit Committee considered whether the provision
of non-audit services by the independent registered public accounting firm to the Company for the fiscal year ended December 31,
2018 is compatible with maintaining Ernst & Young LLP’s independence and has discussed with Ernst & Young LLP the
firm’s independence from the Company.
Based on the above-mentioned
reviews and discussions with management and Ernst & Young LLP, the Audit Committee, exercising its business judgment, recommended
to the board that the Company’s audited financial statements be included in its Annual Report on Form 10-K for the year ended
December 31, 2018, for filing with the SEC.
This report is submitted
on behalf of the members of the Audit Committee:
|
Michael T. Campbell, Chairman
|
|
Roy W. Haley
|
|
Robert L. Reymond
|
|
Sandford W. Rothe
|
Dated: March 12, 2019
PRINCIPAL INDEPENDENT ACCOUNTANT FEES
AND SERVICES
The Audit Committee
is responsible for the appointment, compensation, retention and oversight of the work of Ernst & Young LLP, our independent
registered public accounting firm. The independent registered public accounting firm reports directly to the Audit Committee. As
part of its responsibility, the committee established a policy requiring the pre-approval of all audit and permissible non-audit
services performed by the registered public accounting firm. In pre-approving services, the Audit Committee considers whether such
services are consistent with the SEC’s rules on auditor independence.
Prior to the engagement
of the registered public accounting firm for an upcoming audit/non-audit service period, defined as a twelve-month timeframe, Ernst &
Young LLP submits a detailed list of services expected to be rendered during that period as well as an estimate of the associated
fees for each of the following four categories of services to the Audit Committee for approval:
|
•
|
Audit
Services
consist of services rendered by an external auditor for the audit of our annual consolidated financial statements
(including tax services performed to fulfill the auditor’s responsibility under generally accepted auditing standards) and
internal controls and reviews of financial statements included in Forms 10-Q, and includes services that generally only an
external auditor can reasonably provide, such as comfort letters, statutory audits, attest services, consents and assistance with
and review of documents filed with the SEC.
|
|
•
|
Audit-Related Services
consist of assurance and related services by an external auditor that are reasonably related to audit or review of financial statements, including employee benefit plan audits, due diligence related to mergers and acquisitions, and accounting consultations.
|
|
•
|
Tax Services
consist of services not included in Audit Services above, rendered by an external auditor for tax compliance.
|
|
•
|
Other Non-Audit Services
are any other permissible work that is not an Audit, Audit-Related or Tax Service.
|
Circumstances may
arise during the twelve-month period when it may become necessary to engage the independent registered public accounting firm for
additional services not contemplated in the original pre-approval. In those instances, the Audit Committee requires specific pre-approval
before engaging the independent auditor.
The table below summarizes
the fees billed by our independent registered public accounting firm, Ernst & Young LLP, for the audit of our annual financial
statements for the fiscal years ended December 31, 2018 and 2017 and fees billed for other services rendered by Ernst & Young
LLP during those periods.
Year
|
|
Audit Fees
(1)
|
|
|
Audit-Related Fees
|
|
|
Tax Fees
(2)
|
|
|
All Other Fees
|
|
|
Total
|
|
2018
|
|
$
|
435,000
|
|
|
$
|
63,500
|
|
|
$
|
75,350
|
|
|
$
|
—
|
|
|
$
|
573,850
|
|
2017
|
|
$
|
448,000
|
|
|
$
|
124,000
|
|
|
$
|
67,025
|
|
|
$
|
—
|
|
|
$
|
639,025
|
|
|
(1)
|
Audit
fees include fees for professional services rendered for the audit of our annual consolidated financial statements (including
services related to the audit of internal control over financial reporting under the Sarbanes-Oxley Act of 2002) and the reviews
of the interim financial statements included in our Forms 10-Q.
|
|
(2)
|
Tax
fees represent professional services related to tax compliance.
|
For the fiscal year
ended December 31, 2018, none of the Audit-Related Fees, Tax Fees or Other Fees were approved in accordance with the exceptions
to the pre-approval requirements set forth in 16 CFR 210.2-01(c)(7)(i)(C).
PROPOSAL NO. 2 — RATIFICATION OF
SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
General
Stockholder ratification
of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the
year ending December 31, 2019 is not required. However, the Board of Directors is submitting the selection of Ernst
& Young LLP as the Company’s independent registered public accounting firm to the stockholders for ratification to learn
the opinion of stockholders on this selection. If the stockholders fail to ratify Ernst & Young LLP as the independent
registered public accounting firm, the Audit Committee will reassess its appointment. Even if the selection is ratified,
the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at
any time during the year if it determines that such change would be in the best interests of the Company and its stockholders.
Representatives of Ernst & Young LLP are expected to be at the annual meeting of stockholders and will have the opportunity
to make a statement, if they desire to do so, and to respond to appropriate questions from those attending the meeting.
Board Recommendation and Stockholder Vote Required
The Board of Directors
recommends a vote “FOR” the ratification of the selection of Ernst & Young LLP as the Company’s independent
registered public accounting firm for the year ending December 31, 2019 (Proposal No. 2 on the proxy card).
The affirmative vote
of the holders of a majority of the votes represented at the annual meeting in person or by proxy will be required for approval.
PROPOSAL NO. 3 — ADVISORY VOTE
TO APPROVE
EXECUTIVE COMPENSATION
The Compensation Committee's
goal in setting executive compensation is to provide a compensation package that attracts, motivates and retains executive talent
and rewards executive officers for superior Company and individual performance while encouraging behavior that is in the long-term
best interests of the Company and its stockholders. Consistent with this philosophy, a significant portion of the total compensation
opportunity for each of our executives is performance-based and dependent upon the Company's achievement of specified financial
goals and the performance of the Company's shares on a long-term basis.
Stockholders are urged
to read the Summary Compensation Table and other related compensation tables and narrative disclosure which describe the compensation
of our named executive officers in fiscal 2018.
In accordance with
Rule 14a-21 under the Securities Exchange Act of 1934 and as a matter of good corporate governance, stockholders will be asked
at the 2019 annual meeting of stockholders to approve the following advisory resolution:
RESOLVED, that the
stockholders of Houston Wire & Cable Company approve, on an advisory basis, the compensation of the Company's named executive
officers described in the Executive Compensation section of the Proxy Statement and disclosed in the 2018 Summary Compensation
Table and related compensation tables and narrative disclosure included in the Proxy Statement.
This advisory vote,
commonly referred to as a "say-on-pay" advisory vote, is not binding on the board. Although non-binding, the board and
the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding
our executive compensation programs.
Board Recommendation and Stockholder Vote Required
The Board of Directors
recommends a vote “FOR” the advisory approval of the Company’s executive compensation (Proposal No. 3 on the
proxy card).
The affirmative vote
of the holders of a majority of the votes represented at the annual meeting in person or by proxy will be required for approval.
ANNUAL REPORT TO STOCKHOLDERS
We have enclosed our
2018 annual report to stockholders with this proxy statement. The annual report includes our annual report on Form 10-K for
the fiscal year ended December 31, 2018, as filed with the SEC. The annual report on Form 10-K contains our audited financial statements,
along with other financial information about us. We urge you to read these documents carefully.
You can also obtain, free of charge, a
copy of our annual report on Form 10-K by:
|
•
|
accessing the “Financials & Filings” page of our website at
http://ir.houwire.com
and clicking on the “SEC Filings” link;
|
|
|
|
|
•
|
writing to: Houston Wire & Cable Company —
Chief Financial Officer
10201 North Loop East
Houston, Texas 77029; or
|
|
|
|
|
•
|
telephoning us at: (713) 609-2200.
|
You can also obtain
a copy of our annual report on Form 10-K and other periodic filings that we make with the SEC from the SEC’s website
at
http://www.sec.gov
.
STOCKHOLDER PROPOSALS AND NOMINATIONS
FOR 2020 ANNUAL MEETING
The proxy rules of
the SEC permit our stockholders, after notice to the Company, to present proposals for stockholder action in our proxy statement
where such proposals are consistent with applicable law, pertain to matters appropriate for stockholder action and are not properly
omitted by us in accordance with the proxy rules. In order for any stockholder proposal to be considered for inclusion
in our proxy statement to be issued in connection with our 2020 annual meeting of stockholders, that proposal must be received
at our corporate headquarters, 10201 North Loop East, Houston, Texas 77029 (Attention: Chief Financial Officer), no later than
November 28, 2019.
Our certificate of
incorporation and by-laws provide that stockholder action can be taken only at an annual or special meeting of stockholders and
cannot be taken by written consent in lieu of a meeting. Our certificate of incorporation and by-laws provide that,
except as otherwise required by law, special meetings of our stockholders can only be called pursuant to a resolution adopted by
a majority of our Board of Directors or by our chief executive officer or the chairman of our Board of Directors. Stockholders
are not permitted to call a special meeting or to require our board to call a special meeting.
Our by-laws establish
an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed
nominations of persons for election to our board. Stockholders at our annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the direction of our board or by a stockholder who was
a stockholder of record on the record date for the meeting and upon giving of notice and provided that the stockholder has given
to our Secretary timely written notice, in proper form, of the stockholder’s intention to bring that business before the
meeting. Specifically, our bylaws provide the following procedure in order that business may properly come before the
stockholders at the annual meeting. Among other things, stockholders intending to bring business before the annual meeting
must provide written notice of such intent to the Secretary of the Company. Such notice must be given no earlier than
January 8, 2020 and no later than February 7, 2020. In addition, the following information must be provided in
the written notice: (1) a brief description of the business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (2) the name and address, as they appear on the Company’s books, of the stockholder
proposing such business, (3) the class and number of shares of common stock that are beneficially owned by the stockholder, (4)
any material interest of the stockholder in such business and (5) a representation that the stockholder intends to appear in person
or by proxy at the annual meeting to bring such business before the meeting.
If the stockholder
proposes to nominate a person as a director, the written notice must be given no earlier than January 8, 2020 and no later than
February 7, 2020 and must set forth the following information as to each proposed nominee: (1) the name, age, business address
and, if known, residence address of such nominee, (2) the principal occupation or employment of such nominee, (3) the number of
shares of common stock which are beneficially owned by such nominee, and (4) any other information concerning the nominee that
must be disclosed as to nominees in proxy solicitations pursuant to Regulation 14A under the Securities Exchange Act of 1934, including
such person’s written consent to be named as a nominee and to serve as a director if elected. As to the stockholder
giving the notice, the following information is required: (1) the name and address, as they appear on the Company’s books,
of such stockholder and (2) the number of shares of common stock beneficially owned by such stockholder. The Company may require
any proposed nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility
of such proposed nominee to serve as a director of the Company.
GENERAL
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of
the Securities Exchange Act of 1934 requires our officers, directors and persons who own more than ten percent of a registered
class of our equity securities to file reports of ownership and changes in ownership on Forms 3, 4 and 5, as applicable, with the
SEC. Officers, directors and stockholders owning more than ten percent of our common stock are required by the SEC regulations
to furnish us with copies of all Forms 3, 4 and 5 they file.
Based solely upon
a review of Forms 3 and 4 and any amendments furnished to us, we believe that our directors, officers and greater than 10% beneficial
owners complied with all applicable Section 16 filing requirements for the fiscal year ended December 31, 2018, and that such filings
were timely, except for the following late filings: (1) the Form 3 reporting the appointment of Christopher M. Micklas as Chief
Financial Officer on April 16, 2018 was filed on May 1, 2018; (2) the Form 4 reporting the award of 817 stock units to William
H. Sheffield on May 8, 2018 was filed on May 16, 2018, and the Form 4 reporting the award of 791 stock units to Mr. Sheffield on
August 3, 2018 was filed on August 20, 2018; (3) the Form 4 reporting the award of 2,255 stock units to Roy W. Haley on May 8,
2018 was filed on May 16, 2018, and the Form 4 reporting the award of 2,183 stock units to Mr. Haley on August 3, 2018 was filed
on August 20, 2018; (4) the Form 4 reporting the purchase of 1,851 shares by G. Gary Yetman on May 24, 2018 was filed on March
25, 2019; and (5) the Form 3 reporting the appointment of Robert L. Reymond as a director on June 1, 2018 and the Form 4 reporting
the award of 6,667 restricted stock units to Mr. Reymond on June 1, 2018 were both filed on June 20, 2018.
Other Information
The expenses of preparing
and mailing this proxy statement and the accompanying proxy card and the cost of solicitation of proxies, if any, will be the responsibility
of the Company. In addition to the use of mailings, proxies may be solicited by personal interview, telephone and by
our directors, officers and regular employees without special compensation therefor. We expect to reimburse banks, brokers
and other persons for their reasonable out-of-pocket expenses in handling proxy materials for beneficial owners of our common stock.
Our board does not
know of any other matters that are to be presented for action at the 2019 annual meeting of stockholders. Should any
other matter come before the annual meeting, however, the persons named in the enclosed proxy will have discretionary authority
to vote all proxies with respect to such matter in accordance with their judgment.
|
BY ORDER OF THE BOARD OF DIRECTORS
|
|
|
|
|
|
|
|
Christopher M. Micklas
|
|
Vice President, Chief Financial Officer, Treasurer and Secretary
|
Dated: March 27, 2019
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