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
Filed
by the Registrant ☒ |
Filed
by a party other than the Registrant ☐ |
Check
the appropriate box:
☐ |
Preliminary
Proxy Statement |
☐ |
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
☒ |
Definitive
Proxy Statement |
☐ |
Definitive
Additional Materials |
☐ |
Soliciting
Material under §240.14a-12 |
FG
Financial Group, Inc.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check all boxes that apply):
☒ |
No
fee required. |
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☐ |
Fee
paid previously with preliminary materials. |
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☐ |
Fee
computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON DECEMBER 6, 2023
November
1, 2023
To
Our Stockholders:
You
are cordially invited to attend our 2023 Annual Stockholders’ Meeting, which will be conducted virtually at www.virtualshareholdermeeting.com/FGF2023,
on December 6, 2023 at 11:00 a.m., Eastern time, and any adjournments or postponements thereof for the following purposes:
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1. |
To
elect to the Board of Directors the six director nominees identified in the accompanying Proxy Statement, each to serve for a term
as described in the Proxy Statement; |
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2. |
To
ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for the year ending December 31, 2023; |
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3. |
To
consider and act upon a non-binding advisory resolution to approve the compensation of our named executive officers; and |
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4. |
To
consider and transact such other business as may properly come before the meeting or any postponement or adjournment thereof. |
Only
stockholders of record at the close of business on October 16, 2023 are entitled to notice of, and to vote at, the Annual Meeting.
Please
read the Proxy Statement and vote your shares as soon as possible. Your vote is very important. Please complete, sign, date and return
the accompanying proxy card, or follow the instructions on the card for voting by telephone or Internet. You may also attend the Annual
Meeting and vote in person.
By
Order of the Board of Directors, |
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/s/
D. Kyle Cerminara |
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D.
Kyle Cerminara |
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Chairman
of the Board |
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IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER
MEETING TO BE HELD ON DECEMBER 6, 2023:
This
Notice and the accompanying Proxy Statement are first being distributed or made available, as the case may be, on or about November
1, 2023, and the Company’s Proxy Statement for the 2023 Annual Meeting of Stockholders and Annual Report on Form 10-K for the
year ended December 31, 2022 are available at
http://www.proxyvote.com.
TABLE
OF CONTENTS
FG
FINANCIAL GROUP, INC.
PROXY
STATEMENT FOR 2023 ANNUAL MEETING OF STOCKHOLDERS
This
Proxy Statement is furnished in connection with the solicitation of the accompanying proxies on behalf of the Board of Directors of FG
Financial Group, Inc. (the “Company”, “we”, “our” or “us”)
for use at the Company’s 2023 Annual Meeting of Stockholders (the “Annual Meeting”), which will be conducted
virtually at www.virtualshareholdermeeting.com/FGF2023, on December 6, 2023 at 11:00 a.m., eastern time, and any adjournments or postponements
of the Annual Meeting.
QUESTIONS
& ANSWERS ABOUT THE ANNUAL MEETING
Why
am I receiving these materials?
At
the Annual Meeting, holders of our common stock will act upon the matters described in the Notice of Meeting accompanying this Proxy
Statement, including the election of directors. You are receiving this Proxy Statement and the related form of proxy because you held
shares of our common stock at the close of business on the Record Date (as defined below), and the Board of Directors of the Company
(the “Board of Directors” or “Board”) is soliciting your proxy to vote at the Annual Meeting.
You
are invited to attend the Annual Meeting to vote on the proposals for which you may vote, as described in this Proxy Statement. However,
you do not need to attend the meeting to vote your shares. Instead, you may vote your shares as described in further detail under the
heading “How do I vote?” below.
When
will these materials be mailed?
The
notice, this Proxy Statement, and the proxy card for stockholders of record were distributed or made available, as the case may be, beginning
on or about November 1, 2023, and the Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31,
2022 are available at www.proxyvote.com.
Who
is entitled to vote?
Stockholders
of record at the close of business on October 16, 2023 (the “Record Date”) are entitled to vote in person or by proxy
at the Annual Meeting. As of the Record Date, 10,303,738 shares of our common stock were outstanding. Each stockholder is entitled
to one vote for each share of common stock held on the Record Date.
Stockholders
do not have cumulative voting rights in the election of directors. For ten days prior to the Annual Meeting during normal business hours,
a complete list of all stockholders of record will be available for examination by any stockholder, for any purpose germane to the Annual
Meeting, by contacting the Company’s Corporate Secretary at (847) 773-1665 for information regarding providing proof of eligibility
to view the list. The list of stockholders will also be available at the Annual Meeting.
Who
can attend the Annual Meeting?
All
stockholders as of the Record Date, or individuals holding their duly appointed proxies, may attend the Annual Meeting. Appointing a
proxy in response to our solicitation will not affect a stockholder’s right to attend the Annual Meeting and to vote in person.
Please note that if you hold your shares in “street name” (in other words, through a broker, bank, or other nominee), you
will need to bring a proxy, executed in your favor, from the holder of record (the broker, bank or other nominee) to gain admittance
to the Annual Meeting.
What
is the difference between a stockholder of record and a beneficial owner?
If
your shares are registered directly in your name with our transfer agent, VStock Transfer, LLC, then you are a “stockholder of
record.” The accompanying proxy card has been provided directly to you by the Company. You may vote by ballot at the Annual Meeting
or vote by proxy. To vote by proxy, complete, sign, date and return the enclosed proxy card or follow the instructions on the proxy card
for voting by telephone or Internet.
If
your shares are held for you by a broker, bank or other nominee (that is, held in “street name”), then you are not
a stockholder of record. Rather, the broker, bank or other nominee is the stockholder of record, and you are the “beneficial owner”
of the shares. The accompanying voting instruction card has been forwarded to you by the broker, bank or other nominee. If you complete
and properly sign the voting instruction card and return it in the appropriate envelope, or follow the instructions on the voting instruction
card for voting by telephone or Internet, the broker, bank or other nominee will cause your shares to be voted in accordance with your
instructions. If you are a beneficial owner of shares and wish to vote in person at the Annual Meeting, then you must obtain a proxy,
executed in your favor, from the holder of record (the broker, bank or other nominee).
What
constitutes a quorum?
A
majority of the 10,303,738 shares of common stock outstanding on the Record Date must be represented, in person or by proxy, to
provide a quorum at the Annual Meeting. If you vote, your shares will be part of the quorum. Shares represented by a properly executed
proxy card that is marked “ABSTAIN” or returned without voting instructions will be counted as present for the purpose of
determining whether the quorum requirement is satisfied. Also, shares held of record by a broker, bank or other nominee who has not received
voting instructions from the beneficial owner of the shares and votes on matters without discretionary authority to do so (“broker
non-votes”) will be counted as present for quorum purposes. However, although broker non-votes and abstentions are considered
as present for purposes of establishing a quorum, we believe broker non-votes and abstentions will not be considered as votes cast for
or against a proposal or director nominee. Once a share is represented at the Annual Meeting, it will be deemed present for quorum purposes
throughout the Annual Meeting (including any postponement or adjournment thereof unless a new record date is or must be set for such
postponement or adjournment).
What
is the purpose of the meeting?
The
principal purposes of the Annual Meeting are to (i) elect the six director nominees named in this Proxy Statement to the Company’s
Board of Directors, each to serve for a term as described in this Proxy Statement, (ii) ratify the appointment of BDO USA, LLP as the
Company’s independent registered public accounting firm for the year ending December 31, 2023, (iii) consider and act upon a non-binding,
advisory resolution to approve the compensation of our named executive officers, and (iv) transact such other business as may properly
come before the meeting or any postponement or adjournment thereof.
How
do I vote?
If
you are a holder of record, you can vote either in person at the Annual Meeting or by proxy without attending the Annual Meeting. We
urge you to vote by proxy even if you plan to attend the Annual Meeting so that we will know as soon as possible that enough votes will
be present for us to hold the meeting. If you attend the meeting and vote in person, your previously submitted proxy will be revoked
and will not be counted.
You
can vote by proxy using any of the following methods:
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Voting
by Telephone or Internet. If you are a holder of record, you may vote by proxy by using either the telephone or Internet methods
of voting. Proxies submitted by telephone or through the Internet must be received by 11:59 p.m., Eastern Time, on December 5, 2023.
Please see the proxy card for instructions on how to access the telephone and Internet voting systems. |
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Voting
by Proxy Card. Each stockholder of record may vote by completing, signing, dating and promptly returning the accompanying proxy
card in the self-addressed stamped envelope provided. When you return a properly executed proxy card, the shares represented by your
proxy will be voted as you specify on the proxy card. Your proxy card must be received prior to the Annual Meeting to be counted.
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The
proxies named in the enclosed form of proxy and their substitutes will vote the shares represented by the enclosed form of proxy, if
the proxy appears to be valid on its face, and, where a choice is specified by means of the ballot on the form of proxy, will vote in
accordance with each specification so made.
If
you hold your shares in “street name,” you must either direct the broker, bank, or other nominee as to how to vote your shares,
or obtain a proxy from the broker, bank, or other nominee, executed in your favor, to vote at the meeting. Please refer to the voter
instruction cards provided by your broker, bank, or other nominee for specific instructions on methods of voting, including by telephone
or using the Internet.
What
does it mean if I receive more than one proxy card?
You
will receive separate proxy cards when you own shares in different ways. For example, you may own shares individually, as a joint tenant,
in an individual retirement account, in trust or in one or more brokerage accounts. You should complete, sign, date and return each proxy
card you receive or follow the telephone or Internet voting instructions on each card. The instructions on each proxy card may differ.
Be sure to follow the instructions on each card.
Can
I change my vote or instruction?
Yes.
If you are a stockholder of record, you may revoke your proxy or change your vote, regardless whether previously submitted by mail or
via the Internet or by telephone, by (i) delivering a signed written notice stating that you revoke your proxy to the attention of the
Corporate Secretary of the Company, at 104 S. Walnut Street, Unit 1A, Itasca, IL 60143, that bears a later date than the date of the
proxy you want to revoke and is received prior to the Annual Meeting, (ii) submitting a valid, later-dated proxy via the Internet or
by telephone before 11:59 p.m., Eastern Time, on December 5, 2023, or by mail that is received prior to the Annual Meeting, or (iii)
attending the Annual Meeting (or, if the Annual Meeting is postponed or adjourned, attending the postponed or adjourned meeting) and
voting in person, which automatically will cancel any proxy previously given, or revoking your proxy in person, but your attendance alone
at the Annual Meeting will not revoke any proxy previously given.
If
you hold your shares in “street name” through a broker, bank, or other nominee, you must contact your broker, bank or other
nominee to change your vote through new voting instructions or, if you wish to change your vote in person at the Annual Meeting, obtain
a written legal proxy from the bank, broker or other nominee to vote your shares.
What
happens if I submit a proxy card and do not give specific voting instructions?
If
you are a stockholder of record and sign and return the proxy card without indicating your voting instructions, your shares will be voted
in accordance with the recommendations of the Board of Directors. With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion. As of
the filing date of this Proxy Statement, we did not know of any other matter to be raised at the Annual Meeting.
What
happens if I do not submit a proxy card and do not vote by telephone or Internet or do not submit voting instructions to my broker, bank
or other nominee?
If
you are a stockholder of record and you neither designate a proxy nor attend the Annual Meeting, your shares will not be represented
at the meeting. If you are a beneficial owner and do not provide voting instructions to your bank, broker or other nominee, then, under
applicable rules, the broker, bank or other nominee that holds your shares in “street name” may generally vote on “routine”
matters but cannot vote on “non-routine” maters. If the broker, bank, or other nominee that holds your shares does not receive
instructions from you on how to vote your shares on a “non-routine matter”, the broker, bank or other nominee will inform
the inspector of election for the Annual Meeting that it does not have the authority to vote on the matter with respect to your shares.
This is generally referred to as a “broker non-vote.”
Which
voting matters are considered “routine” or “non-routine”?
We
believe that Proposal 1 regarding the election of directors and Proposal 3 regarding the non-binding, advisory resolution to approve
the compensation of our named executive officers are considered “non-routine” matters under applicable rules. Therefore,
a broker, bank or other nominee cannot vote on such proposals without voting instructions from the beneficial owners, and there may be
broker non-votes in connection with Proposals 1 and 3.
We
believe that Proposal 2 concerning the ratification of the appointment of BDO USA, LLP as the Company’s independent registered
public accounting firm for the year ending December 31, 2023, is considered a “routine” matter under applicable rules. Therefore,
a broker, bank or other nominee may generally vote on these matters, and there will be no broker non-votes in connection with Proposal
2.
What
vote is required to approve each item? How will abstentions and broker non-votes be counted?
As
to Proposal 1, election of directors, a holder of common stock may vote “FOR” the election of each of the nominees proposed
by the Board, or “WITHHOLD” authority to vote for one or more of the proposed nominees. The election of a director requires
the affirmative vote of a plurality of the votes properly cast on the election of directors at the Annual Meeting. A “plurality”
means that the individuals who receive the largest number of votes are elected as directors up to the maximum number of directors to
be elected at the meeting. As to Proposal 1, proxies marked “WITHHOLD” and broker non-votes will have no impact on the election
of directors.
With
respect to Proposal 2, ratification of BDO USA, LLP as our independent registered public accounting firm, a holder of common stock may
vote “FOR” or “AGAINST” ratification or “ABSTAIN” from voting on the proposal. Ratification requires
an affirmative vote of holders of a majority of the votes properly cast at the Annual Meeting. Proxies marked “ABSTAIN” will
not be considered as votes cast for or against Proposal 2 and will have no effect on the outcome of the proposal.
With
respect to Proposal 3, advisory approval of the compensation of our named executive officers, a holder of common stock may vote “FOR”
or “AGAINST” approval or “ABSTAIN” from voting on the proposal. Approval requires an affirmative vote of holders
of a majority of the votes properly cast at the Annual Meeting. Proxies marked “ABSTAIN” and broker non-votes will not be
considered as votes cast for or against Proposal 3 and will have no effect on the outcome of the proposal.
What
are the Board’s voting recommendations?
The
Board recommends a vote “FOR”:
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1. |
election
of each of the six director nominees named in this Proxy Statement to the Board of Directors, each to serve for a term as described
in the Proxy Statement; |
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2. |
ratification
of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year ending
December 31, 2023; |
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3. |
approval,
on an advisory, non-binding basis, of the compensation of our named executive officers. |
As
of the date of this Proxy Statement, it is expected that Fundamental Global GP, LLC (“FG”), FG Financial Holdings, LLC
(“FGFH”), FG Group Holdings, Inc. (“FGH”) and certain of our directors will vote “FOR” approval
of Proposals 1, 2, and 3. As of the Record Date, FG and its affiliated entities, including FGH, collectively, are the beneficial
owners of 5,666,111 shares of common stock, which represents approximately 55% of the Company’s outstanding shares of common
stock. D. Kyle Cerminara, Chairman of our Board, serves as Chief Executive Officer, Founder and Partner of FG, Manager of FGFH, and
Chairman of the board of directors of FGH.
Who
is paying for the preparation and mailing of the proxy materials and how will solicitations be made?
The
Company will pay the expenses of soliciting proxies. Proxies may be solicited on our behalf by the Company’s directors, officers
or employees in person or by mail, telephone, facsimile or electronic transmission. We do not compensate them for soliciting proxies.
We have requested brokerage houses and other custodians, nominees and fiduciaries to forward soliciting material to beneficial owners
and have agreed to reimburse those institutions for their out-of-pocket expenses.
PROPOSAL
1 — ELECTION OF DIRECTORS
The
Company’s Board of Directors currently consists of six directors, each serving a one-year term.
Based
upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated D. Kyle Cerminara, Richard E. Govignon,
Jr., Rita Hayes, E. Gray Payne, Larry G. Swets, Jr., and Scott D. Wollney to stand for election at the Annual Meeting, with each director
holding office for a term of one year and until his or her successor has been duly elected and qualified or until his or her earlier
death, retirement, resignation, or removal.
Required
Vote
The
election of a director requires the affirmative vote of a plurality of the votes properly cast on the election of directors at the Annual
Meeting. A “plurality” means that the individuals who receive the largest number of votes are elected as directors, up to
the maximum number of directors to be elected at the meeting. Therefore, proxies marked “WITHHOLD” and “broker non-votes”
will have no impact on the election of directors. Properly executed proxies submitted pursuant to this solicitation will be voted “FOR”
the election of the directors marked on the proxy, unless specified otherwise.
THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF D. KYLE CERMINARA, RICHARD E. GOVIGNON,
JR., RITA HAYES, E. GRAY PAYNE, LARRY G. SWETS, JR., AND SCOTT D. WOLLNEY, AS DIRECTORS.
Directors
and Director Nominee Standing for Election:
Set
forth below is information about each of the Company’s directors and executive officers, including ages as of October 16, 2023.
Name |
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Age |
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Position |
Directors: |
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D.
Kyle Cerminara |
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46 |
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Chairman
of the Board of Directors |
Larry
G. Swets, Jr. |
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48 |
|
Chief
Executive Officer and Director |
Richard
E. Govignon, Jr. |
|
46 |
|
Director |
Rita
Hayes |
|
79 |
|
Director |
E.
Gray Payne |
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74 |
|
Director |
Scott
D. Wollney |
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55 |
|
Director |
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Executive
Officers: |
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Hassan
R. Baqar |
|
46 |
|
Executive
Vice President and Chief Financial Officer |
The
Board currently consists of six directors, each serving for a term of one year and until his or her successor has been duly elected and
qualified or until his or her earlier death, retirement, resignation, or removal.
D.
Kyle Cerminara was appointed to our Board of Directors on December 27, 2016; he became Chairman of our Board of Directors on
May 11, 2018; and he served as our Principal Executive Officer from March 2020 to June 2020. Mr. Cerminara has over 20 years’ experience
as an institutional investor, asset manager, director, chief executive, founder and operator of multiple financial services and technology
businesses. Mr. Cerminara co-founded Fundamental Global in 2012, which is the Company’s largest stockholder, and serves as its
Chief Executive Officer.
Mr.
Cerminara is a member of the board of directors of a number of companies focused in the reinsurance, investment management, technology
and communication sectors, including FG Group Holdings, Inc. (NYSE American: FGH) (formerly Ballantyne Strong, Inc.), a holding company
with diverse business activities focused on serving the entertainment and retail markets, since February 2015; BK Technologies Corporation
(NYSE American: BKTI), a provider of two-way radio communications equipment, since July 2015; Strong Global Entertainment, Inc. (NYSE
American: SGE), a leader in the entertainment industry providing mission critical products and services to cinema exhibitors and entertainment
venues, since March 2022; FG Communities, Inc., a real estate management company focused on preserving and improving affordable housing,
since July 2022; and Firefly Systems Inc., a venture-backed digital advertising company, since August 2020. Mr. Cerminara is the chairperson
of the board of directors of FG Acquisition Corp. (TSX:FGAA.U), a Canadian special purpose acquisition company that has completed its
initial public offering and is focused on searching for a target company in the financial services sector.
Mr.
Cerminara has served as the Chairman of FG Group Holdings, Inc. since May 2015 and previously served as its Chief Executive Officer from
November 2015 through April 2020. Mr. Cerminara has served as the Chairman of Strong Global Entertainment, Inc. since March 2022. Mr.
Cerminara has served as the Chairman of BK Technologies Corporation since July 2022 and previously from March 2017 until April 2020.
Mr. Cerminara has served as the Chairman and President of FG Communities, Inc. since its formation in July 2022. From February 2022 to
August 2023, Mr. Cerminara served as a Senior Advisor to FG Merger Corp. (NASDAQ: FGMC), a special purpose acquisition company, which
merged with iCoreConnect, Inc. (NASDAQ: ICCT), a market leading, cloud-based software and technology company focused on increasing workflow
productivity and customer profitability through its enterprise and healthcare workflow platform of applications and services. Since October
2023, Mr. Cerminara has served as the Chairman of FG Merger II Corp., a special purpose acquisition company in the process of completing
its initial public offering. From April 2021 to December 2021, Mr. Cerminara served as a director of Aldel Financial Inc. (NYSE: ADF),
a special purpose acquisition company co-sponsored by Fundamental Global, which merged with Hagerty, a leading specialty insurance provider
focused on the global automotive enthusiast market. From July 2020 to July 2021, Mr. Cerminara served as Director and President of FG
New America Acquisition Corp. (NYSE: FGNA), a special purpose acquisition company, which merged with OppFi Inc. (NYSE: OPFI), a leading
financial technology platform that powers banks to help everyday consumers gain access to credit. He served on the board of directors
of GreenFirst Forest Products Inc. (TSXV: GFP) (formerly Itasca Capital Ltd.), a public company focused on investments in the forest
products industry, from June 2016 to October 2021 and was appointed Chairman from June 2018 to June 2021; Limbach Holdings, Inc. (NASDAQ:
LMB), a company which provides building infrastructure services, from March 2019 to March 2020; Iteris, Inc. (NASDAQ: ITI), a publicly-traded,
applied informatics company, from August 2016 to November 2017; Magnetek, Inc., a publicly-traded manufacturer, in 2015; and blueharbor
bank, a community bank, from October 2013 to January 2020. He served as a Trustee and President of StrongVest ETF Trust, which was an
open-end management investment company, from July 2016 to March 2021. Previously, Mr. Cerminara served as the Co-Chief Investment Officer
of CWA Asset Management Group, LLC, a position he held from January 2013 to December 2020.
Prior
to these roles, Mr. Cerminara was a Portfolio Manager at Sigma Capital Management, an independent financial adviser, from 2011 to 2012,
a Director and Sector Head of the Financials Industry at Highside Capital Management from 2009 to 2011, and a Portfolio Manager and Director
at CR Intrinsic Investors from 2007 to 2009. Before joining CR Intrinsic Investors, Mr. Cerminara was a Vice President, Associate Portfolio
Manager and Analyst at T. Rowe Price (NASDAQ: TROW) from 2001 to 2007, where he was named amongst Institutional Investor’s Best
of the Buy Side Analysts in November 2006, and an Analyst at Legg Mason from 2000 to 2001.
Mr.
Cerminara received an MBA degree from the Darden Graduate School of Business at the University of Virginia and a B.S. in Finance and
Accounting from the Smith School of Business at the University of Maryland, where he was a member of Omicron Delta Kappa, an NCAA Academic
All American and Co-Captain of the men’s varsity tennis team. He also completed a China Executive Residency at the Cheung Kong
Graduate School of Business in Beijing, China. Mr. Cerminara holds the Chartered Financial Analyst (CFA) designation.
We
believe Mr. Cerminara is qualified to serve on our Board as he contributes his perspective as one of the Company’s largest stockholders.
He also offers to the Board valuable insights obtained through his management and operational experience and extensive experience in
the financial industry, including investing, capital allocation, finance and financial analysis of public companies.
Larry
G. Swets, Jr. has served as a member of our Board of Directors since November 2013 and served as our Chairman from March 2017
to May 2018. Mr. Swets has served as our Chief Executive Officer since November 2020 after serving as our interim Chief Executive Officer
from June 2020 to November 2020, through a consulting agreement with Itasca Financial LLC.
Mr.
Swets has over 25 years of experience within financial services encompassing both non-executive and executive roles. Mr. Swets founded
Itasca Financial LLC, an advisory and investment firm, in 2005 and has served as its managing member since inception. Mr. Swets also
founded and is the President of Itasca Golf Managers, Inc., a management services and advisory firm focused on the real estate and hospitality
industries, in August 2018. Mr. Swets is a member of the board of directors of GreenFirst Forest Products Inc. (TSXV: GFP), a public
company focused on investments in the forest products industry since June 2016, Harbor Custom Development, Inc. (Nasdaq: HCDI) since
February 2020, FG Group Holdings, Inc. (NYSE American: FGH) since October 2021, and Ascension Illinois Foundation since March 2018, and
was a member of the Board of Directors of Unbounded Media Corporation from June 2019 to September 2023. Mr. Swets also serves as Chief
Executive Officer and a member of the board of directors of FG Acquisition Corp (TSX:FGAA.U) since October 2021, a special acquisition
company seeking to complete an acquisition, since October 2021. Since October 2023, Mr. Swets has served as the Chief Executive Officer
of FG Merger II Corp., a special purpose acquisition company in the process of completing its initial public offering.
Previously,
Mr. Swets served as a Director and Chief Executive Officer of FG New America Acquisition Corp. (NYSE: FGNA), a special purpose acquisition
company which merged with OppFi Inc. (NYSE: OPFI), a leading financial technology platform that powers banks to help everyday consumers
gain access to credit, from July 2020 to July 2021. From April 2021 to December 2021, Mr. Swets also served as Senior Advisor to Aldel
Financial Inc., a special purpose acquisition company, which merged with Hagerty, Inc. (NYSE: HGTY), a leading specialty insurance provider
focused on the global automotive enthusiast market. Mr. Swets served as Chief Executive Officer of GreenFirst Forest Products Inc. (TSXV:
GFP) (formerly Itasca Capital Ltd.) from June 2016 to June 2021. Mr. Swets served as the Chief Executive Officer of Kingsway Financial
Services Inc. (NYSE: KFS) from July 2010 to September 2018, including as its President from July 2010 to March 2017. Mr. Swets served
as a director of Insurance Income Strategies Ltd. from October 2017 to December 2021. He also previously served as a member of the board
of directors of Limbach Holdings, Inc. (NASDAQ: LMB) from July 2016 to August 2021; Kingsway Financial Services Inc. (NYSE: KFS) from
September 2013 to December 2018; Atlas Financial Holdings, Inc. (Nasdaq: AFH) from December 2010 to January 2018; FMG Acquisition Corp.
(Nasdaq: FMGQ) from May 2007 to September 2008; United Insurance Holdings Corp. from 2008 to March 2012; and Risk Enterprise Management
Ltd. from November 2007 to May 2012.
Prior
to founding Itasca Financial LLC, Mr. Swets served as an insurance company executive and advisor, including the role of director of investments
and fixed income portfolio manager for Lumbermens Mutual Casualty Company, formerly known as Kemper Insurance Companies. Mr. Swets began
his career in insurance as an intern in the Kemper Scholar program in 1994. Mr. Swets earned a Master’s Degree in Finance from
DePaul University in 1999 and a Bachelor’s Degree from Valparaiso University in 1997. He is a member of the Young Presidents’
Organization and holds the Chartered Financial Analyst (CFA) designation.
Dr.
Richard E. Govignon, Jr.. Dr. Richard E. Govignon, Jr. was elected to our Board of Directors on December 15, 2021. Dr. Govignon
has been a Partner of Dnerus Financial, a family asset management company, since June 2021. Dr. Govignon is an experienced corporate
director/trustee in the U.S. and Canada with broad exposure to numerous industries. Dr. Govignon has been a director of Strong Global
Entertainment, Inc. (NYSE: SGE), a corporation focused on supplying screens and providing technical support services to the cinema exhibition
industry, theme parks, and other entertainment-related markets since January 2022. Dr. Govignon also serves as a member of the board
of directors of FG Acquisition Corp (TSX: FGAA.U), a special purpose acquisition corporation (“SPAC”) incorporated under
the laws of the Province of British Columbia, which in May 2023 announced a business combination agreement with ThinkMarkets an online
forex and CFD provider since April 2022. Since October 2023, Dr. Govignon has served as a director of FG Merger II Corp., a special purpose
acquisition company in the process of completing its initial public offering. Dr. Govignon is also a member of the board of directors
of B-Scada, Inc. (OTC: SCDA), a company developing software and hardware products since June 2021. Dr. Govignon served as a member of
the board of directors of GreenFirst Forest Products, Inc. (TSXV: GFP), a public company focused on forest product investments, from
January 2019 to December 2021. Dr. Govignon also served as a Trustee of the StrongVest ETF Trust (US: CWAI) that, invested in a diversified
portfolio of corporate bonds with varying maturities and equity securities from 2017 to 2019. Dr. Govignon has worked in the healthcare
and pharmaceutical industry in various management and pharmacy positions for over 20 years, most recently with ShopRite Pharmacy since
2022 and previously with CVS Health Corporation (2022-2019 and from 2013-2017), with Acme Markets Inc. (2017-2019) and Rite Aid Corporation
(2001-2013).
Dr.
Govignon received a Bachelor of Science in Pharmacy and a Doctor of Pharmacy from the University of the Sciences in Philadelphia. We
believe Dr. Govignon’s managerial experience and his experience in investing and financial analysis make him qualified to serve
on our Board of Directors.
Rita
Hayes was appointed to our Board of Directors on January 11, 2019. Ms. Hayes has been Chair of Hayes International Advisors,
LLC since 2013, where she counsels industry and institutional leaders on a range of economic, political and regulatory matters. She served
as an expert for the International Chamber of Commerce’s World Business Summit in 2008. Ms. Hayes served as Deputy U.S. Trade Representative
and Ambassador to the World Trade Organization (WTO), a post to which she was nominated by President Bill Clinton and unanimously confirmed
by the U.S. Senate, from November 1997 through August 2001, during which time she served as Acting U.S. Trade Representative from January
through March 2001. From 2001 through December 2006, she held the position of Deputy Director General of the World Intellectual Property
Organization (WIPO) to which she was approved by the 184 Member States. At the conclusion of her appointment at WIPO, she served as Senior
Advisor in Hogan & Hartson LLP’s Geneva, Switzerland office. Confirmed by the U.S. Senate in 1996, Ms. Hayes served from 1996
to 1997 as U.S. Chief Textile Negotiator in the Office of the U.S. Trade Representative (USTR) in Washington, D.C. From 1983 to 1992,
Ms. Hayes served as Chief of Staff for two members of the U.S. Congress. Ms. Hayes received a Bachelor of Arts from the University of
Georgia, an honorary degree as Doctor of Humane Letters from the College of Charleston and an honorary degree as Doctorate of Outstanding
Public Service from the University of South Carolina. We believe Ms. Hayes’ extensive record of public and private service uniquely
qualifies her to serve on our Board of Directors.
E.
Gray Payne was elected to our Board of Directors on May 31, 2018. General Payne served as Senior Vice President of The Columbia
Group (“TCG”) from September 2010 to September 2017, where he was responsible for managing the Marine Corps Programs Division
(since September 2010) and the Navy Programs Division (since October 2013). TCG is a federal consulting firm working with the Department
of Defense, the Department of Homeland Security, the National Oceanic and Atmospheric Administration, and private clients. TCG consults
in the areas of logistics, acquisitions, program management, information technology, training, marine architecture and engineering, and
command and control systems. Since December 2011, General Payne has also provided consulting services to and served on the Advisory Council
of Marstel-Day, LLC, located in Fredericksburg, Virginia, which consults in the areas of conservation, environmental compliance, and
encroachment. Prior to September 2010, General Payne was on active duty with the Marine Corps for 10 years, retiring as a Major General.
His three commands as a General Officer included the Marine Corps Mobilization Command, the Marine Corps Logistics Command, and the 4th
Marine Logistics Group. Prior to March 2001, he worked with a number of companies in various capacities, including as a management
consultant, Chief Financial Officer, Chief Operating Officer, and Chief Executive Officer. General Payne currently serves on the Board
of Directors of BK Technologies Corporation (NYSE American: BKTI), a provider of communications equipment, since January 2017. He is
a prior chairman of the Board of the Marine Corps Association and Foundation and currently serves as a Director on the Boards of VetCV
(since December 2017) and the National Wildlife Refuge Association (since June 2018). He received a B.S. in Economics from North Carolina
State University and a M.S. in Strategic Studies from U.S. Army War College. A member of the National Association of Corporate Directors,
he has also earned the Professional Director designation from the American College of Corporate Directors. We believe General Payne’s
40 years of service in the Marine Corps, as well as over 25 years of experience in the private sector in the areas of financial management,
operational improvement and strategic planning, qualify him to serve on our Board of Directors.
Scott
D. Wollney was appointed to our Board of Directors on March 30, 2015. Since December 2010, Mr. Wollney has served as the President,
Chief Executive Officer and as a Director of Atlas Financial Holdings, Inc. (“Atlas”) (OTC: AFHIF), a specialty commercial
automobile insurance business that operates primarily as a managing general agency. Since October 2023, Mr. Wollney has served as a director
of FG Merger II Corp., a special purpose acquisition company in the process of completing its initial public offering. From July 2009
until December 2010, Mr. Wollney was President and Chief Executive Officer of Kingsway America Inc. (KAI), a property and casualty holding
company and subsidiary of Kingsway Financial Services Inc. From May 2008 to March 2009, he was the President and Chief Executive Officer
of Lincoln General Insurance Company (a subsidiary of KAI), a property and casualty insurance company. Mr. Wollney co-founded Avalon
Risk Management, Inc., an insurance broker, in 1998, and served as its President, from 2002 to 2008. Mr. Wollney has more than 30 years
of experience in property and casualty insurance. During his tenure in the industry, Mr. Wollney has held executive positions at both
insurance companies, as well as brokerage operations. Mr. Wollney is a MBA graduate of Northwestern University’s Kellogg School
of Management with a concentration in finance and management strategy and holds a Bachelor of Arts degree from the University of Illinois.
We believe Mr. Wollney’s qualifications to serve on our Board of Directors include his direct operating experience with respect
to numerous disciplines which are critical to the insurance business.
CORPORATE
GOVERNANCE
Board
Diversity
Board Diversity Matrix as of October 16, 2023 |
Total Number of Directors | |
| 6 | |
| |
Female | | |
Male | | |
Non-
Binary | | |
Did not
Disclose
Gender | |
Directors | |
1 | | |
5 | | |
– | | |
– | |
Demographic Information: | |
– | | |
– | | |
– | | |
– | |
African American or Black | |
– | | |
– | | |
– | | |
– | |
Alaskan or Native American | |
– | | |
– | | |
– | | |
– | |
Asian | |
– | | |
– | | |
– | | |
– | |
Hispanic or Latinx | |
– | | |
– | | |
– | | |
– | |
Native Hawaiian or Pacific Islander | |
– | | |
– | | |
– | | |
– | |
White | |
1 | | |
5 | | |
– | | |
– | |
Two or More Races or Ethnicities | |
– | | |
– | | |
– | | |
– | |
LGBTQ+ | |
– | |
Persons with Disabilities | |
1 | |
We
recognize the value of diversity at the Board level and believe that our Board currently comprises an appropriate mix of background,
diversity and expertise. In particular, we currently have a female director, and our directors, overall, have significant experience
in a variety of industries and sectors, including, among others, the insurance industry, the financial industry, military operations
and political and diplomatic operations. Although we have no formal separate written policy, our Nominating and Corporate Governance
Committee is required under its charter to recommend nominees that ensure sufficient diversity of backgrounds on our Board. We believe
that the diversity of our directors enriches our Board by encouraging fresh perspectives and bringing new and valuable insights to the
Board.
Board
Meetings
During
the year ended December 31, 2022, the Board of Directors held eight meetings. In 2022, no director attended fewer than 75% of the total
number of (i) meetings held by the Board of Directors during the period for which he or she was a director and (ii) meetings held by
all committees of the Board of Directors on which he or she served (during the period that the director served). Independent members
of our Board of Directors also meet in executive session without management present.
“Controlled
Company” Status
As
discussed under “Security Ownership of Certain Beneficial Owners and Management,” FG and affiliated entities beneficially
own approximately 55% of our common stock as of the Record Date. As a result, we are a “controlled company,” or a company
of which more than 50% of the voting power for the election of directors is held by an individual, group or another company, under The
Nasdaq Stock Market (“Nasdaq”) rules. “Controlled companies” may elect not to comply with certain Nasdaq corporate
governance requirements, including regarding independence of their directors and board committees. Currently, we have not elected to
take advantage of these exemptions and are subject to the same governance standards as companies that are not “controlled companies.”
Director
Independence
The
Board has determined that four of its members are “independent directors” as defined under the applicable rules of Nasdaq
and the Securities and Exchange Commission (the “SEC”). The four independent directors currently serving on the Board are
Rita Hayes, E. Gray Payne, Scott D. Wollney and Richard E. Govignon, Jr. In making its determination of independence, the Board of Directors
considered questionnaires completed by directors and any relationships and transactions between the Company and all entities with which
the directors are involved. Nasdaq’s listing rules require that the Board of Directors be comprised of a majority of independent
directors.
Board
Leadership Structure
Mr.
Cerminara serves as Chairman of the Board of Directors, and Mr. Swets is the Company’s principal executive officer.
The
Chairman of the Board typically presides at all meetings of the Board. The Chairman’s role also includes providing feedback on
the direction and performance of the Company, setting the agenda of meetings of the Board of Directors and leading the Board of Directors
in anticipating and responding to changes in our business.
Our
Board of Directors has not established a policy on whether the same person should serve as both the principal executive officer of the
Company and the Chairman of the Board or, if the roles are separate, whether the Chairman should be selected from the non-employee directors
or should be an employee. Our Board believes that it should have the flexibility to periodically determine the leadership structure that
it believes is best for the Company. Given the specific characteristics and circumstances of the Company, the Board believes that its
current leadership structure will enhance and facilitate the implementation of the Company’s business strategy, including effective
monitoring and objective evaluation of the Chief Executive Officer’s performance. Mr. Cerminara has been closely involved in developing
the Company’s business strategy following the sale of our three insurance subsidiaries to FedNat Holding Company and has extensive
management experience, including having served as Chairman of the Board since May 2018. The Board believes that these qualities uniquely
qualify Mr. Cerminara to lead and facilitate informed Board discussions about the Company’s policies and operations and enable
him to communicate effectively with the Board on strategic developments and other critical matters facing the Company, while also providing
oversight of the Chief Executive Officer. As Chief Executive Officer, Mr. Swets is also responsible for developing the Company’s
business strategy and managing its day-to-day leadership and performance.
The
Board has not appointed a lead independent director at this time. Currently, the Board consists of six directors, four of whom are independent.
All independent directors serve on one or more committees of the Board, are able to closely monitor the activities of the Company and
meet in executive sessions without management present to discuss the Company’s business strategy and operations. Given the active
involvement of all of the independent directors in the Company’s matters, the Board has determined that a lead independent director
is not necessary at this time. Additionally, because the Company’s Chairman is appointed annually by the Company’s non-management
directors, such directors are able to evaluate the leadership and performance of the Chairman each year.
Risk
Oversight
Our
Board is actively involved in oversight of risks that could affect the Company. This oversight is conducted primarily through the three
standing committees of the Board, as disclosed in the descriptions of each of the committees herein, and in the charters of each of the
committees, but the full Board has retained responsibility for overall supervision of risk management efforts as they relate to the key
business risks we face. Management identifies, assesses and manages the risks most critical to our operations and routinely advises our
Board regarding those matters. Areas of material risk may include operational, financial, legal and regulatory, human capital, information
technology and security, and strategic and reputational risks. Our Board satisfies its oversight responsibility through full reports
by each committee chair regarding the applicable committee’s considerations and actions, as well as through regular reports directly
from members of management responsible for oversight of particular risks within the Company. The Audit Committee considers and discusses
financial risk exposures. The Compensation and Management Resources Committee assesses and monitors whether any of the Company’s
compensation policies and programs have the potential to encourage excessive risk-taking. The Nominating and Corporate Governance Committee
monitors the effectiveness of the Company’s corporate governance policies and the selection of prospective board members and their
qualifications. In addition, General Payne, as the chair of the Nominating and Corporate Governance Committee, takes an active role in
corporate governance matters. The Board believes that the leadership structure described above facilitates the Board’s oversight
of risks because it allows the Board, working through its committees, to participate actively in the oversight of management actions.
The Board believes that its role in risk oversight does not affect the Board’s leadership structure.
Like
all businesses, we also face threats to our cybersecurity, as we are reliant upon information systems and the internet to conduct our
business activities. In light of the pervasive and increasing threat from cyberattacks, the Audit Committee, with input from management,
assesses the Company’s cybersecurity and other information technology risks and threats and the measures implemented by the Company
to mitigate and prevent cyberattacks, and the Board receives periodic reports on the Company’s cybersecurity program.
Hedging
and Pledging Policy
Under
the Company’s Insider Trading Policy, all directors, officers and employees of the Company and its subsidiaries are prohibited
from engaging in any hedging transactions involving Company securities or equity securities of any subsidiaries of the Company, holding
Company securities in a margin account or pledging Company securities as collateral.
Policy
Concerning Director Attendance at Annual Stockholders’ Meetings
There
is no formal policy as to Director attendance at annual stockholders’ meetings. Ms. Hayes, as well as Messrs. Cerminara, Payne,
Swets, Wollney, and Govignon, attended the 2022 Annual Stockholders’ Meeting held on August 23, 2022.
Code
of Ethics
We
have adopted a code of ethics applicable to all officers, employees and directors of the Company. Our code of ethics has been posted
on our corporate website: www.fgfinancial.com under the heading “Governance Documents.”
Board
Committees and Committee Member Independence
Our
Board of Directors has established an Audit Committee, a Compensation and Management Resources Committee, and a Nominating and Corporate
Governance Committee. The composition of each committee as of the date of this Proxy Statement is outlined in the table and footnote
below. Our Board of Directors utilizes the Nasdaq rules and independence standards in determining whether its members are independent.
|
|
Audit
Committee |
|
Compensation
and
Management
Resources
Committee |
|
Nominating
and
Corporate
Governance
Committee |
Scott
D. Wollney |
|
C |
|
X |
|
X |
E.
Gray Payne |
|
X |
|
C |
|
C |
Rita
Hayes |
|
|
|
|
|
X |
Richard
E. Govignon, Jr. |
|
X |
|
|
|
|
C |
– |
Indicates
committee chair. |
The
following is a summary of the respective responsibilities of the Audit Committee, the Compensation and Management Resources Committee,
and the Nominating and Corporate Governance Committee. The Board of Directors has approved and adopted a written charter for each of
the committees listed, copies of which are posted on the Company’s website at www.fgfinancial.com, under the heading “Governance
Documents.” The Board of Directors may also establish from time to time any other committees that it deems necessary or desirable.
Members serve on these committees until their resignation or until otherwise determined by the Board of Directors.
Audit
Committee
The
Audit Committee was appointed by the Board of Directors to assist the Board in fulfilling its oversight responsibilities with respect
to the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements,
the external auditor’s qualifications, independence, and performance, and the performance of the Company’s internal audit
function. The Audit Committee’s primary duties and responsibilities are to:
|
● |
Oversee
the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company. |
|
|
|
|
● |
Identify
and monitor the management of the principal risks that could impact the financial reporting of the Company. |
|
|
|
|
● |
Monitor
the integrity of the Company’s financial reporting process and system of internal controls regarding financial reporting and
accounting appropriateness and compliance. |
|
|
|
|
● |
Provide
oversight of the qualifications, independence and performance of the Company’s external auditors and the appointed actuary. |
|
|
|
|
● |
Provide
an avenue of communication among the external auditors, the appointed actuary, management and the Board. |
|
|
|
|
● |
Review
the annual audited and quarterly financial statements with management and the external auditors. |
The
Audit Committee is also responsible for discussing policies with respect to risk assessment and risk management, including regularly
reviewing the Company’s cybersecurity and other information technology risks, controls and procedures and the Company’s plans
to mitigate cybersecurity risks and respond to data breaches.
Audit
committee members must meet the independence requirements of Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), the independence requirements of the Nasdaq listing standards and all other applicable rules and regulations. Each member
of the Audit Committee is independent and satisfies the applicable requirements for Audit Committee membership under Rule 10A-3 under
the Exchange Act and the Nasdaq rules. The Board of Directors has determined that Mr. Wollney is the “audit committee financial
expert,” as that term is defined in SEC regulations. The Audit Committee held six meetings during the year ended December 31, 2022.
Compensation
and Management Resources Committee
The
primary purpose of the Compensation and Management Resources Committee, (the “Compensation Committee”) is to assist the Board
of Directors in discharging its responsibilities with respect to compensation of the Company’s executive officers and subsidiary
presidents and to provide recommendations to the Board in connection with directors’ compensation. The Compensation Committee’s
primary duties and responsibilities are to:
|
● |
Develop
guidelines for and determine the compensation and performance of the executive officers of the Company (in the case of the Chief
Executive Officer’s compensation, without the Chief Executive Officer being present). |
|
|
|
|
● |
Recommend
to the Board incentive and equity-based plans and administer such plans, oversee compliance with the requirements under the Nasdaq
listing standards that stockholders of the Company approve equity incentive plans (with limited exceptions under such standards),
and approve grants of equity and equity-based awards. |
|
|
|
|
● |
Review
any recommendations from the Chief Executive Officer with respect to compensation for the other executive officers, including benefits
and perquisites, incentive compensation plans and equity-based plans for recommendation to the Board. |
|
|
|
|
● |
Oversee
risks relating to the Company’s compensation policies, practices and procedures. |
|
|
|
|
● |
Review
and discuss with management the proxy disclosures regarding executive compensation required to be included in the Company’s
proxy statement and periodic reports with the SEC, each in accordance with applicable rules and regulations of the SEC and other
authority. |
|
|
|
|
● |
Evaluate
the results of the stockholder advisory vote on executive compensation when held. |
|
|
|
|
● |
Review
director compensation levels and practices, and recommend, from time to time, changes in such compensation levels and practices to
Board with equity ownership in the Company encouraged. |
The
Compensation Committee receives input and recommendations from the Company’s executive officers (except with respect to such executive
officer’s own compensation) but is not bound by such recommendations. These recommendations are generally based on each executive
officer’s individual performance as well as his knowledge of each executive officer’s job responsibilities, seniority, expected
contributions and his understanding of the competitive market for such executives. Each Compensation Committee member is independent
and satisfies the applicable requirements for Compensation Committee membership under the Nasdaq rules and is a “non-employee director”
as defined in Rule 16b-3 under the Exchange Act. The Compensation Committee held four meetings during the year ended December 31, 2022.
Nominating
and Corporate Governance Committee
The
purpose of the Nominating and Corporate Governance Committee (the “Nominating Committee”) is to:
|
● |
Identify,
evaluate and recommend individuals qualified to become members of the Board of Directors, consistent with criteria approved by the
Board of Directors. |
|
|
|
|
● |
Select,
or recommend that the Board select the director nominees to stand for election at each annual or special meeting of stockholders
of the Company in which directors will be elected or to fill vacancies on the Board. |
|
|
|
|
● |
Develop
and recommend to the Board a set of corporate governance principles applicable to the Company, as the Committee deems appropriate. |
|
|
|
|
● |
Oversee
the annual performance evaluation of the Board and its committees and management. |
|
|
|
|
● |
Otherwise
take a leadership role in shaping and providing oversight of the corporate governance of the Company, including recommending directors
eligible to serve on all committees of the Board. |
Each
Nominating Committee member is independent under the Nasdaq rules. The Nominating Committee held one meeting during the year ended December
31, 2022.
Although
the Nominating Committee has not formulated any specific minimum qualifications that the committee believes must be met by a director-nominee
that the committee recommends to the Board, the factors it will take into account will include judgement, skill, diversity, experiences
with businesses and other organizations of comparable size and scope, the interplay of the candidate’s experience with the experience
of other directors, and the extent to which the candidate would be a desirable addition to the Board of Directors and any committees
of the Board. The Nominating Committee may engage consultants or third-party search firms to assist in identifying and evaluating potential
nominees and may also seek referrals from other members of the Board, management, stockholders and other sources. Evaluations of candidates
generally involve a review of background materials, internal discussions and interviews with selected candidates, as appropriate. Upon
selection of a qualified candidate, the Nominating Committee recommends the candidate for consideration by the full Board.
The
Nominating Committee will consider recommendations for directorships submitted by stockholders. Stockholders wishing to propose director
candidates for consideration by the Nominating Committee may do so by writing to the Corporate Secretary of the Company and providing
the information concerning the nominee and his or her proponent(s) as required by the Company’s By-Laws. The By-Laws set forth
further requirements for stockholders wishing to nominate director candidates for consideration at a stockholders’ meeting including,
among other things, that a stockholder must give timely written notice of such a nomination to the Corporate Secretary of the Company.
Candidates recommended by stockholders will be given the same consideration as all other candidates.
Stockholder
Communications with the Board
Stockholders
may communicate with the full Board or individual directors by submitting such communications in writing to FG Financial Group, Inc.,104
S. Walnut Street, Unit 1A, Itasca, IL 60143. The Company’s management will forward such correspondence, as appropriate.
Complaints or concerns relating to our financial reporting, accounting, internal accounting controls or auditing will be referred to
the Chairman of our Audit Committee.
DIRECTOR
COMPENSATION
Under
our director compensation program, we provide compensation to our non-employee directors. Directors who are employees of the Company
do not receive compensation for their service as directors. Our director compensation program was adopted to remain competitive in attracting
and retaining qualified board members and to better align director compensation to other public companies of comparable size to the Company.
The terms of the program were as follows:
|
● |
Each
non-employee director receives an annual cash retainer of $50,000, paid in quarterly installments; |
|
|
|
|
● |
The
Chairman of the Board receives an additional annual cash retainer of $75,000, paid in quarterly installments; |
|
|
|
|
● |
The
Chairman of the Reinsurance and Risk Committee receives an additional cash retainer of $75,000, paid in quarterly installments; |
|
|
|
|
● |
The
Chairman of the Audit Committee receives an additional cash retainer of $15,000, paid in quarterly installments; |
|
|
|
|
● |
The
Chairman of the Compensation Committee as well as the Chairman of the Nominating Committee each receives an additional cash retainer
of $5,000, paid in quarterly installments; |
|
|
|
|
● |
Each
of the members of the Audit, Compensation, and Nominating Committees (excluding the Chairman of each of those committees), receives
an additional cash retainer of $2,000, paid in quarterly installments; |
|
|
|
|
● |
Each
non-employee director receives an annual grant of restricted stock units (“RSUs”) with a value of $50,000; and |
|
|
|
|
● |
Each
non-employee director will receive reimbursement of reasonable out-of-pocket expenses for attending board and committee meetings. |
RSUs
granted to our directors vest in five equal annual installments, beginning with the first anniversary of the grant date, provided that,
if the director makes him or herself available and consents to be nominated by the Company for continued service as a director of the
Company, but is not nominated by the Board for election by stockholders, other than for good reason as determined by the Board in its
discretion, then the next 20% tranche of RSUs shall vest as of the director’s last date of service as a director of the Company.
The
Company’s 2021 Equity Incentive Plan, as amended (the “2021 Plan”) provides that the aggregate grant date fair value
of all awards granted to any single non-employee director during any single calendar year (determined as of the applicable grant date(s)
under applicable financial accounting rules), taken together with any cash fees paid to the non-employee director during the same calendar
year, may not exceed $200,000.
The
following table sets forth information with respect to compensation earned by each of our non-employee directors for the year ended December
31, 2022. Mr. Swets, who served as a director for all of 2022, did not receive any compensation for his service as a director, as he
concurrently served as Chief Executive Officer of the Company. For more information, see “Compensation of Executive Officers-Summary
Compensation Table.”
Non-Employee Director | |
Fees Earned or Paid in Cash ($)(1) | | |
Stock Awards ($)(2) | | |
Total ($) | |
D. Kyle Cerminara | |
| 125,000 | | |
| 414,000 | | |
| 539,000 | |
Rita Hayes | |
| 52,000 | | |
| 50,000 | | |
| 102,000 | |
Richard E. Govignon, Jr. | |
| 52,000 | | |
| 50,000 | | |
| 102,000 | |
E. Gray Payne | |
| 62,000 | | |
| 50,000 | | |
| 112,000 | |
Scott D. Wollney | |
| 69,000 | | |
| 50,000 | | |
| 119,000 | |
1. |
In
addition to their compensation, directors are reimbursed for travel and other reasonable out-of-pocket expenses related to their
attendance at Board or committee meetings, or for other travel on behalf of the Company. These expenses have not been included in
the table above. |
2. |
Stock
awards represent the aggregate grant date fair value of 31,645 RSUs granted to each non-employee director on August 19, 2022. The
aggregate grant date fair value for the RSUs has been presented in the table above in accordance with Financial Accounting Standards
Board Accounting Standards Codification Topic 718. The RSUs were valued using the closing price of the Company’s common shares
on Nasdaq on the grant date. The RSUs vest in five equal annual installments, beginning one year from the date of grant, provided
that, if the director makes themselves available and consents to be nominated by the Company for continued service as a director
of the Company, but is not nominated by the Board for election by stockholders, other than for good reason as determined by the Board
in its discretion, then the next 20% tranche of RSUs shall vest as of the director’s last date of service as a director of
the Company. |
|
|
|
Effective
February 17, 2023, the Company approved 130,000 restricted stock units to be granted to Mr. Cerminara based upon 2022 performance,
subject to vesting terms. On the date of the grant, the units had a fair market value of $364,000. As of the date of this filing,
the Company has issued the 130,000 RSU and delivered shares for the 1/3 vested RSUs. |
The
aggregate numbers of stock awards and option awards outstanding for each director as of December 31, 2022 were as follows:
|
● |
Mr.
Cerminara - 52,699 RSUs. |
|
● |
Ms.
Hayes - 53,714 RSUs. |
|
● |
Mr.
Govignon - 40,340 RSUs. |
|
● |
General
Payne - 52,699 RSUs. |
|
● |
Mr.
Swets - 4,231 RSUs (excludes a stock option granted to Mr. Swets for his service as the Company’s CEO; see “Compensation
of Executive Officers”). |
|
● |
Mr.
Wollney - 52,699 RSUs. |
2022
Grants of Restricted Stock Units
On
August 19, 2022, the Compensation Committee granted 31,645 RSUs with a value of $50,000 to all five of the Company’s non-employee
directors. The RSUs vest in five equal annual installments, subject to the director’s continued service on the Board, beginning
with the first anniversary of the grant date.
The
award agreements for each of the RSU grants made during 2022 discussed above also provide that if a director makes herself or himself
available and consents to be nominated by the Company for continued service as a director of the Company, but is not nominated by the
Board for election by stockholders, other than for good reason, as determined by the Board in its discretion, then the next 20% tranche
of RSUs shall vest as of the director’s last date of service as a director of the Company. The Board’s practice has been
to accelerate vesting of all of a director’s RSUs, upon the director’s termination of service.
PROPOSAL
2 — RATIFICATION OF APPOINTMENT OF BDO USA, LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR
ENDING DECEMBER 31, 2023
At
the Annual Meeting, stockholders will be asked to ratify the appointment of BDO USA, LLP (“BDO”) as our independent
registered public accounting firm for the year ending December 31, 2023. The Audit Committee of our Board of Directors has appointed
BDO as our independent registered public accounting firm for the year ending December 31, 2023. BDO also served as our independent registered
public accounting firm for the year ended December 31, 2022 and has served as our independent registered public accounting firm since
2012. If stockholders do not ratify the appointment of BDO, our Board may consider the selection of other independent registered public
accounting firms for the year ending December 31, 2023, but will not be required to do so.
Stockholder
ratification of the appointment of BDO is not required by our articles of incorporation or our By-Laws. However, our Board of Directors
is submitting the appointment of BDO to the stockholders for ratification as a matter of good corporate governance. Even if the appointment
is ratified, our Board of Directors, in its discretion, may direct the appointment of a different independent registered public accounting
firm for 2023 if the Board of Directors feels that such a change would be in the best interests of the Company and its stockholders.
We
expect that representatives of BDO will not be present at the Annual Meeting.
In
considering the reappointment of BDO as our independent registered public accounting firm, the Audit Committee considered BDO’s
qualifications, experience, independence, tenure as our independent registered public accounting firm, and its related depth of understanding
of our businesses, operations and systems. The Audit Committee and the Board of Directors believe that the continued retention of BDO
as our independent registered public accounting firm is in the best interests of the Company and our stockholders at this time.
Required
Vote
Ratification
requires an affirmative vote of holders of a majority of common stock voted at the Annual Meeting. A holder of common stock may vote
“FOR” or “AGAINST” approval or “ABSTAIN” from voting on the proposal. Proxies marked “ABSTAIN”
will not be considered as votes cast for or against Proposal 2 and will have no effect on the outcome of the proposal. A broker, bank
or other nominee who has not been furnished voting instructions from a beneficial owner will be authorized to vote on Proposal 2, as
it is a “routine” matter under applicable rules. Therefore, no broker non-votes are expected in connection with this proposal.
THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF BDO USA, LLP AS
THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2023.
Principal
Accountant Fees and Services
The
consolidated financial statements for the years ended December 31, 2022 and 2021 have been audited by BDO, our independent registered
public accounting firm. Our Audit Committee requires that management obtain the prior approval of the Audit Committee for all audit and
permissible non-audit services to be provided by BDO. Fees for all services provided by BDO were pre-approved by the Audit Committee.
The following table shows the fees that we incurred for professional services rendered by BDO for 2022 and 2021.
| |
Year ended December 31, | |
| |
2022 | | |
2021 | |
Audit fees(1) | |
$ | 313,832 | | |
$ | 257,919 | |
Audit-related fees | |
| - | | |
| - | |
Tax fees | |
| - | | |
| - | |
All other fees | |
| - | | |
| - | |
Total | |
$ | 313,832 | | |
$ | 257,919 | |
|
1. |
Includes
professional fees billed for the audits of our annual financial statements and the review of our interim condensed financial statements,
including the reimbursement of expenses incurred by BDO related to our audit. Also includes professional services normally provided
by BDO in connection with statutory and regulatory filings or engagements. |
AUDIT
COMMITTEE REPORT
The
following report of the Audit Committee shall not be deemed to be “soliciting material” or to be “filed” with
the Securities and Exchange Commission, nor shall this report be incorporated by reference into any filing made by the Company under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
The
primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its general oversight of the Company’s
financial reporting process. The Audit Committee conducted its oversight activities for the Company in accordance with the duties and
responsibilities outlined in the Audit Committee charter. The Audit Committee has the authority to obtain advice and assistance from
outside legal, accounting or other advisers as the Audit Committee deems necessary to carry out its duties and to receive appropriate
funding, as determined by the Audit Committee, from the Company for such advice and assistance.
The
Company’s management is responsible for the preparation, consistency, integrity and fair presentation of the financial statements,
accounting and financial reporting principles, systems of internal control and procedures designed to ensure compliance with accounting
standards, applicable laws and regulations. The Company’s independent registered public accounting firm, BDO, is responsible for
performing an independent audit of the Company’s financial statements.
The
Audit Committee hereby reports as follows:
|
1. |
The
Audit Committee has reviewed and discussed the audited financial statements as of and for the year ended December 31, 2022 with management. |
|
|
|
|
2. |
The
Audit Committee has discussed with BDO, the Company’s independent auditors for the year ended December 31, 2022, the matters
required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”)
and the Securities and Exchange Commission. |
|
|
|
|
3. |
The
Audit Committee has received the written disclosures and the letter from BDO required by applicable requirements of the PCAOB regarding
BDO’s communications with the Audit Committee concerning independence, and has discussed with BDO its independence. |
|
|
|
|
4. |
Based
upon the review and discussion referred to in paragraphs (1) through (3) above, the Audit Committee recommended to the Board of Directors,
and the Board approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2022, for filing with the Securities and Exchange Commission. |
THE
AUDIT COMMITTEE
Scott
D. Wollney, Chairman
E.
Gray Payne
Richard
E. Govignon, Jr.
INFORMATION
ABOUT OUR EXECUTIVE OFFICERS
Below
is biographical information for our executive officers who are not directors. Biographical information regarding Mr. Swets, our Chief
Executive Officer and a current director of the Board, can be found in Proposal 1.
Hassan
R. Baqar, age 46, has served as our Corporate Secretary since May 2022, our Chief Financial Officer since August 2021 and Executive
Vice President since December 2021, through Sequoia Financial LLC (“Sequoia”), an advisory firm for which Mr. Baqar is managing
member.
Mr.
Baqar has over 20 years of experience within financial services and other industries focused on corporate development, mergers &
acquisitions, capital raising, investments and real estate transactions. Mr. Baqar has served as the founder and managing member of Sequoia
Financial LLC, a financial services and advisory firm, since January 2019. Mr. Baqar has also served as Chief Financial Officer of Insurance
Income Strategies Ltd., a former Bermuda based reinsurance company from October 2017 to December 2021, as a director of GreenFirst Forest
Products Inc. (TSXV: GFP) (formerly Itasca Capital Ltd.), a public company focused on investments in the forest products industry from
August 2019 to December 2021 and as Chief Financial Officer of GreenFirst Forest Products Inc. from June 2016 to December 2020, as a
director of FG Reinsurance Ltd., a Cayman Islands reinsurance company since June 2020, as director, treasurer and secretary of Sponsor
Protection Coverage and Risk, Inc., a South Carolina captive insurance company since October 2022, and as a director and Chief Financial
Officer of Unbounded Media Corporation from June 2019 to September 2023. Since October 2021, Mr. Baqar has also served as the Chief Financial
Officer and a member of the board of directors of FG Acquisition Corp. (TSX: FGAA.U), a Canadian special purpose acquisition company
that has completed its initial public offering and is focused on searching for a target company in the financial services sector. Since
October 2023, Mr. Baqar has served as the Chief Executive Officer of FG Merger II Corp., a special purpose acquisition company in the
process of completing its initial public offering.
Mr.
Baqar served as a director of FG Merger Corp. (Nasdaq: FGMCU) from December 2021 to August 2023, a special purpose acquisition company
which merged with iCoreconnect Inc. (Nasdaq: ICCT), a market leading, cloud-based software and technology company focused on increasing
workflow productivity and customer profitability through its enterprise and healthcare workflow platform of applications and services,
and as Chief Financial Officer of Aldel Financial Inc. (NYSE: ADF) from January 2021 to December 2021, a special purpose acquisition
company which merged with Hagerty, Inc. (NYSE: HGTY), a leading specialty insurance provider focused on the global automotive enthusiast
market. From July 2020 to July 2021, Mr. Baqar served as Chief Financial Officer of FG New America Acquisition Corp. (NYSE: FGNA), a
special purpose acquisition company, which merged with OppFi Inc. (NYSE: OPFI), a leading financial technology platform that powers banks
to help everyday consumers gain access to credit. Previously, he served as Vice President of Kingsway Financial Services Inc. (NYSE:
KFS) (“Kingsway”) from January 2014 to January 2019 and as a Vice President of Kingsway’s subsidiary Kingsway America
Inc. from January 2010 to January 2019. Mr. Baqar also served as Chief Financial Officer and director of 1347 Capital Corp. from April
2014 to July 2016, a special purpose acquisition company which merged with Limbach Holdings, Inc. (Nasdaq: LMB). Mr. Baqar served as
a member of the board of directors of FG Financial Group, Inc. (Nasdaq: FGF) from October 2012 to May 2015. He also served as the Chief
Financial Officer of United Insurance Holdings Corp. (NYSE: UIHC), a publicly held property and casualty insurance holding company, from
August 2011 to April 2012.
His
previous experience also includes director of finance at Itasca Financial, LLC from 2008 to 2009 and positions held at Lumbermens Mutual
Casualty Company (a Kemper Insurance company), a diversified mutual property-casualty insurance provider, from June 2000 to April 2008,
where he most recently served as a senior analyst. Mr. Baqar earned a Master’s Degree in Business Administration from Northeastern
Illinois University in 2009 and a Bachelor’s Degree in Accounting and Business Administration from Monmouth College in 2000. He
also holds a Certified Public Accountant designation.
COMPENSATION
OF EXECUTIVE OFFICERS
Our
named executive officers for the fiscal year ended December 31, 2022 include Larry G. Swets, Jr., our President and Chief Executive Officer,
Hassan R. Baqar, our Executive Vice President and Chief Financial Officer, and Brian D. Bottjer, our former Senior Vice President, Chief
Accounting Officer, and Secretary.
With
respect to executive compensation, the primary goal of the Compensation Committee is to retain and motivate highly skilled executives
by aligning their pay with the Company’s performance and stockholder returns. Our compensation consists primarily of five components:
(i) base salary, (ii) a discretionary cash bonus, (iii) equity-based incentive awards, (iv) retirement benefits in the form of Company
paid matching and profit sharing contributions to the Company’s 401(k) retirement plan, and (v) premiums paid by the Company on
the behalf of our employees for health, dental, life and other ancillary insurance coverage.
Summary
Compensation Table
The
following table summarizes the compensation for our named executive officers for the years shown.
Name and Principal Position | |
Year | | |
Salary ($) | | |
Bonus ($)(2) | | |
All Other Compensation ($) | | |
Total ($) | |
Larry G. Swets, Jr.(1) | |
| 2022 | | |
| 550,000 | | |
| 384,000 | | |
| 54,768 | | |
| 988,768 | |
President & Chief Executive Officer | |
| 2021 | | |
| 550,000 | | |
| 165,000 | | |
| 106,248 | | |
| 821,248 | |
Hassan R Baqar(3) | |
| 2022 | | |
| – | | |
| 384,000 | | |
| 480,000 | | |
| 864,000 | |
Executive Vice President and Chief Financial Officer | |
| 2021 | | |
| – | | |
| – | | |
| 289,359 | | |
| 289,359 | |
Brian D. Bottjer(4) | |
| 2022 | | |
| 125,371 | | |
| – | | |
| 21,433 | | |
| 146,804 | |
Senior Vice President, Chief Accounting Officer and Secretary | |
| 2021 | | |
| 221,212 | | |
| 30,000 | | |
| 32,780 | | |
| 283,992 | |
John S. Hill(5) | |
| 2022 | | |
| – | | |
| – | | |
| – | | |
| – | |
Former Executive Vice President, & Chief Financial Officer | |
| 2021 | | |
| 172,260 | | |
| – | | |
| 342,385 | | |
| 514,645 | |
(1) |
All
other compensation for Mr. Swets represents amounts paid by the Company for 401(k) matching contributions, as well as premiums for
medical, dental, life and other ancillary insurance benefits provided to Mr. Swets. |
|
|
(2) |
Cash
bonuses for 2022 represent performance bonuses approved by the Compensation Committee on February 17, 2023 in the amount of $20,000
to both Mr. Swets and Mr. Baqar. Effective February 17, 2023, the Company approved 130,000 restricted stock units to be granted to
Mr. Swets and 130,000 restricted stock units to be granted to Mr. Baqar, based upon 2022 performance, subject to vesting terms. On
the date of the grant, the units had a fair market value of $364,000. Cash bonuses for 2021 represent performance bonuses approved
by the Compensation Committee on December 17, 2021 and paid to Messrs. Swets and Bottjer on January 15, 2022. |
|
|
(3) |
Mr.
Baqar has served as a consultant to the Company since February 2019, through Sequoia Financial LLC (“Sequoia”), an advisory
firm for which Mr. Baqar is managing member, at a rate of $10,833 per month, which also included a bonus of $75,000 related to the
successful completion of the licensing process for the Company’s insurance subsidiary. Effective August 11, 2021, the Company
entered into the Second Amended and Restated Management Services Agreement (the “MSA”) between the Company and Sequoia.
The MSA provides that Mr. Baqar will act as the Company’s Chief Financial Officer and will perform services and duties as required
by the Company’s Board of Directors and Chief Executive Officer, to whom he shall report. In consideration for the services,
the Company has agreed to pay Sequoia $40,000 per month during the term of the MSA, included in the table as other compensation. |
|
|
(4) |
Effective
May 26, 2022, Mr. Bottjer resigned from his positions as Senior Vice President, Chief Accounting Officer and Secretary of the Company.
All other compensation for Mr. Bottjer represents amounts paid by the Company for 401(k) match, as well as premiums paid for medical,
dental, life and other ancillary insurance benefits provided to Mr. Bottjer. |
|
|
(5) |
All
other compensation for 2021 represents amounts paid by the Company for 401(k) match, medical, dental, life and other ancillary insurance
benefits provided to Mr. Hill, and one private business membership to encourage entertainment of business colleagues and customers,
interactions with others within professional, business, and local communities and holding business meetings at a convenient offsite
location. For 2021, all other compensation is as follows: 401(k) match, medical, dental, life, and other ancillary insurance benefits,
$40,669; private business membership, $1,716; and severance of $300,000. Pursuant to a separation agreement and general release entered
into between the Company and Mr. Hill, the Company agreed to pay severance to Mr. Hill in the amount of $300,000, of which $99,000
was paid bi-monthly from August 6, 2021, through December 31, 2021, with the remainder, or $201,000 paid, in lump-sum on January
15, 2022. |
Executive
Officer Appointments and Employment Agreements
Effective
December 2, 2019, the Board promoted Mr. Bottjer to Senior Vice President and Controller of the Company. The employment agreement provided
for an annual base salary of $250,000 to Mr. Bottjer, effective upon his appointment to Chief Accounting Officer on July 29, 2021. Pursuant
to his employee agreement, Mr. Bottjer became eligible to receive an annual bonus, payable in cash and/or through awards based on the
equity in the Company, and subject to the achievement of the performance criteria, as determined by the Compensation Committee. Mr. Bottjer
is also eligible to participate in the Company’s benefit programs available generally to executive employees of the Company.
In
the event Mr. Bottjer is terminated by the Company without cause, the Company was obligated to pay him an amount equal to 12 months of
his base salary in effect at the time of the termination or the original base salary set forth in the Employment Agreement, whichever
is greater, over 12 months, in accordance with the Company’s normal payroll practices. If Mr. Bottjer is terminated for cause or
voluntarily resigns, he will not be entitled to any severance under the Employment Agreement. For purposes of his Employment Agreement,
“cause” exists if Mr. Bottjer (i) acts dishonestly or engages in willful misconduct, (ii) breaches his fiduciary duties,
(iii) intentionally fails to perform duties assigned to him, (iv) is convicted or enters a plea of guilty or nolo contendere with respect
to any felony crime involving dishonesty or moral turpitude or (v) breaches his obligations under the Employment Agreement. The Employment
Agreement contains customary non-competition and non-solicitation covenants.
Effective
May 26, 2022, Mr. Bottjer resigned from his positions as Senior Vice President, Chief Accounting Officer and Secretary of the Company.
Effective
August 6, 2021, Mr. Hill retired from all positions with the Company. Pursuant to a separation agreement and general release entered
into between the Company and Mr. Hill, the Company agreed to pay severance to Mr. Hill in the amount of $300,000, of which $99,000 was
paid bi-monthly from August 6, 2021 through December 31, 2021, with the remainder, or $201,000 paid, in lump-sum on January 15, 2022.
The Company also agreed to cover the cost of health insurance coverage for Mr. Hill through December 31, 2021. Also, on August 6, 2021,
the Compensation Committee of the Board approved the immediate vesting of 17,400 RSUs previously granted to Mr. Hill. Furthermore, on
August 13, 2021, the Company paid to Mr. Hill approximately $16,000, representing the balance of his unused vacation time.
On
June 18, 2020, the Company entered into a consulting agreement (the “Consulting Agreement”) with Itasca Financial LLC (“Itasca
Financial”), an advisory and investment firm founded by Mr. Swets in 2005, pursuant to which Mr. Swets would provide the services
described on behalf of Itasca Financial. The Consulting Agreement provided that Mr. Swets act as the Company’s Interim Chief Executive
Officer. In consideration for the services, the Company paid Itasca Financial $111,333 during the term of the Consulting Agreement. The
Consulting Agreement was terminated on November 10, 2020, with Mr. Swets’ appointment as CEO.
In
connection with Mr. Swets’ appointment as CEO, the Company entered into an executive employment agreement with Mr. Swets, dated
and effective as of November 10, 2020 (the “Swets Agreement”). The Swets Agreement has a three-year term and is subject to
automatic three-year renewals, unless either party provides 60 days’ prior written notice of his or its intention, as applicable,
not to renew such term. Under the Swets Agreement, Mr. Swets is entitled to an annual base salary of $550,000 until such time as the
Board determines future compensation based on Swets’ performance or other merit-based criteria.
In
the event that the Company terminates Mr. Swets without cause, subject to Mr. Swets’ execution of a general release of waiver and
claims in favor of the Company and such general release becoming fully irrevocable, Mr. Swets will be entitled to severance consisting
of two years of annual base salary continuation and benefits continuation to the extent permitted by, and in accordance with, the Company’s
applicable health and welfare plans. In the event that the parties mutually agree to terminate Mr. Swets’ employment regardless
of the reason, subject to Mr. Swets’ execution of a general release and such general release’s becoming fully irrevocable,
Mr. Swets will be entitled to severance consisting of one year of annual base salary continuation and benefits continuation to the extent
permitted by, and in accordance with, the Company’s applicable health and welfare plans. The Swets Agreement also provides that
Mr. Swets is subject to post-termination confidentiality covenants.
On
January 18, 2021, Company entered into an Equity Award Letter Agreement (the “Letter Agreement”) with Mr. Swets, pursuant
to which the Company clarified its intention to grant an additional 370,000 stock options, restricted shares or restricted stock units
pursuant to a future award (the “Future Award”), subject to the approval of an amended and/or new equity plan, among other
conditions. Specifically, under the Letter Agreement, no such Future Award may be granted until there is a determination by the Compensation
Committee of the specific vesting and other terms of the award, and an amended and/or new equity plan, in a form to be prepared and reviewed
by the Board, has been approved by the Board and stockholders of the Company that authorizes a sufficient number of shares of common
stock to make such Future Award.
Mr.
Swets will remain a director of the Company if he is continued to be elected by its stockholders and will forgo the compensation of board
fees while serving as CEO.
Mr.
Baqar had served as a consultant to the Company since February 2019 through Sequoia, an advisory firm for which Mr. Baqar is managing
member, at a rate of $10,833 per month. Effective August 6, 2021, Mr. Baqar, was appointed our Chief Financial Officer pursuant to the
MSA agreement. In consideration for these services, the Company has agreed to pay Sequoia $40,000 per month during the term of the MSA.
The initial term of the MSA is twelve months unless terminated earlier as described below. Unless either party to the MSA provides the
other with ninety days written notice, the MSA will renew for a subsequent twelve-month period. If the MSA is terminated by Mr. Baqar
for “Good Reason,” payment for the remainder of the full term will be provided in lump sum to Mr. Baqar at the time of termination.
The Company may terminate the MSA for “Cause,” at any time upon fifteen days’ prior written notice. Upon termination
by the Company for Cause, payment will stop immediately upon the effective date of termination. If the Agreement is terminated by either
party without Cause or Good Reason prior to the end of the term, payment for the remainder of the term will be provided to Mr. Baqar
subject to a maximum of three months.
In
addition, the Company shall pay all of Mr. Baqar’s reasonable expenses associated with the performance of the duties as Chief Financial
Officer.
The
MSA contains a customary confidentiality provision and a six-month post-termination of the MSA restriction against both soliciting employees
and independent contractors of the Company and inducing them to terminate their relationship with the Company.
Cash
Bonuses
On
January 15, 2022, the Company paid bonuses in the amount of $165,000 to Mr. Swets and $30,000 to Mr. Bottjer based upon performance in
2021. The bonuses were approved by the Compensation Committee on December 17, 2021. On February 17, 2023 the Compensation Committee approved
cash bonuses in the amount of $20,000 to both Mr. Swets and Mr. Baqar, based upon performance in 2022.
Share
Bonuses
Effective
February 17, 2023, the Company approved 130,000 restricted stock units to be granted to Mr. Swets and 130,000 restricted stock units
to be granted to Mr. Baqar, based upon 2022 performance, subject to vesting terms. On the date of the grant, the units had a fair market
value of $364,000.
Retirement
Benefits
The
Company matches the contributions of each of its employees to the Company’s 401(k) Plan. Matching contributions equal 100% of the
first 3% of pay and 50% of the next 2% of pay to the extent such contributions are not in excess of the Internal Revenue Code limits
on contributions to Section 401(k) plans. Under the 401(k) Plan, the Company may make additional matching contributions or other profit-sharing
contributions at its discretion. There were no discretionary contributions in 2021 or 2022.
2021
Equity Incentive Plan
On
December 15, 2021, our stockholders approved the FG Financial Group, Inc. 2021 Equity Incentive Plan (the “2021 Plan”). The
2021 Plan replaced the 2018 Equity Incentive Plan (the “2018 Plan”). No new awards will be granted under the 2018 Plan.
The
purpose of the 2021 Plan is to attract and retain directors, consultants, officers and other key employees of the Company and its subsidiaries
and to provide to such persons incentives and rewards for superior performance. The 2021 Plan is administered by the Compensation Committee
and has a term of ten years. All non-employee directors of the Company and employees and consultants of the Company and its subsidiaries
designated by the Compensation Committee are eligible to participate in the 2021 Plan and to receive awards, including stock options
(which may be incentive stock options or nonqualified stock options), stock appreciation rights (SARs), restricted shares, restricted
share units and other share-based awards.
The
maximum number of shares that may be issued or transferred with respect to awards under the amended 2021 Plan is 2,000,000 shares, subject
to adjustment in certain circumstances as described below. Shares issued under the 2021 Plan may include authorized but unissued shares,
treasury shares, shares purchased in the open market, or a combination of the foregoing.
Shares
underlying awards that are settled in cash or that terminate or are forfeited, cancelled, or surrendered without the issuance of shares
generally will again be available for issuance under the 2021 Plan. However, shares used to pay the exercise price of stock options,
shares repurchased by the Company with stock option proceeds, and shares used to pay withholding taxes upon exercise, vesting or payment
of an award, will not be added back to the share reserve under the 2021 Plan. In addition, when a SAR is exercised and settled in shares,
all of the shares underlying the SAR will be counted against the share limit of the 2021 Plan, regardless of the number of shares used
to settle the SAR.
Shares
subject to awards that are granted in assumption of, or in substitution or exchange for, outstanding awards previously granted by an
entity acquired directly or indirectly by the Company will not count against the share limit above, except as may be required by the
rules and regulations of any stock exchange or trading market. The 2021 Plan provides that the aggregate grant date fair value of all
awards granted to any single non-employee director during any single calendar year (determined as of the applicable grant date(s) under
applicable financial accounting rules), taken together with any cash fees paid to the non-employee director during the same calendar
year, may not exceed $200,000.
Equity
Compensation Plan Information
The
following table sets forth, as of December 31, 2022, the number of shares of common stock underlying awards outstanding under the 2021
Plan, the 2018 Plan, and the Company’s Amended and Restated 2014 Equity Incentive Plan (“2014 Plan”), as well as the
number of shares remaining available for issuance under the 2021 Plan. No more awards may be made under the 2018 Plan or the 2014 Plan.
Plan Category | |
Number of
securities to be
issued upon exercise
of outstanding
options, warrants
and rights(1) | | |
Weighted- average
exercise price of
outstanding options,
warrants and rights | | |
Number of
securities
remaining available
for future issuance
under equity
compensation plans
(excluding
securities reflected
in column (a))(2) | |
| |
| (a) | | |
| (b) | | |
| (c) | |
Equity compensation plans approved by security holders | |
| 477,880 | | |
$ | – | | |
| 1,233,446 | |
Equity compensation plans not approved by security holders | |
| – | | |
| – | | |
| – | |
Total | |
| 477,880 | | |
$ | – | | |
| 1,233,446 | |
|
1. |
Includes
3,999 common shares to be issued upon vesting of restricted stock units issued under our 2014 Plan; includes 77,327 common shares
to be issued upon vesting of restricted stock units and 130,000 common shares to be issued upon vesting of stock options issued under
our 2018 Plan; and includes 266,554 common shares to be issued upon vesting of restricted stock units issued under our 2021 Plan. |
|
|
|
|
2. |
Represents
shares available for future issuance under the 2021 Plan. |
Outstanding
Equity Awards at 2022 Fiscal Year-End
The
following table shows the number of outstanding equity awards that are held by our named executive officers as of December 31, 2022.
Messrs. Bottjer and Baqar did not hold any equity awards as of December 31, 2022 and 2021.
| |
| | |
Option awards | | |
|
Name | |
Number of
shares of
common stock
underlying
unexercised
options (#)
exercisable | | |
Number of
shares of
common stock
underlying
unexercised
options (#)
exercisable | | |
Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) | | |
Option exercise price ($) | | |
Option Expiration Date |
Larry G. Swets, Jr. | |
| 130,000 | (1) | |
| – | | |
| – | | |
$ | 3.38 | | |
01/11/2031 |
(1) |
The
option vests with respect to 20% of the total number of shares covered thereby on each of the first five anniversaries of the grant date,
which was January 12, 2021, if Mr. Swets remains in the Company’s continuous service through each applicable vesting date, and
the Company’s book value per share has increased by 15% from the previous year. |
|
|
|
On January 18, 2021, the Company entered into the “Letter Agreement”
with Mr. Swets, pursuant to which the Company clarified its intention to grant an additional 370,000 stock options, restricted
shares or restricted stock units pursuant to a future award subject to the approval of an amended and/or new equity plan, among other
conditions. |
Potential
Payments Upon Termination or Change in Control
Employment
Agreements
The
Employment Agreements between the Company and each of Messrs. Swets and Bottjer provide for payments by the Company in connection with
a termination of employment.
In
the event Messrs. Swets or Bottjer is terminated by the Company without cause, then the Company is obligated to pay Messrs. Swets or
Bottjer, as applicable, 24 months and 12 months, respectively, of base salary in effect at the time of the termination or the original
base salary set forth in the Employment Agreement, whichever is greater, payable by the Company over a 24-month (in the case of Mr. Swets)
or 12-month (in the case of Mr. Bottjer) period in accordance with the Company’s normal payroll practices. If Messrs. Swets or
Bottjer is terminated for cause or voluntarily resigns, he will not be entitled to any severance under the Employment Agreement. For
purposes of their respective Employment Agreements, “cause” will exist if Messrs. Swets or Bottjer (i) acts dishonestly or
engages in willful misconduct, (ii) breaches his fiduciary duties, (iii) intentionally fails to perform duties assigned to him, (iv)
is convicted or enters a plea of guilty or nolo contendere with respect to any felony crime involving dishonesty or moral turpitude,
and/or (v) breaches his obligations under the Employment Agreement. Furthermore, “cause” will exist under Mr. Swets’
employment agreement if Mr. Swets’ refuses to follow the written direction of the Board, unless such directions are, in the reasonable
written opinion of legal counsel, illegal or in violation of applicable law.
In
connection with Mr. Bottjer’s resignation effective May 26, 2022, the employment agreement which previously existed between the
Company and Mr. Bottjer was terminated.
In
connection with Mr. Hill’s retirement effective August 6, 2021, and a separation and general release entered into between the Company
and Mr. Hill, the employment agreement which previously existed between the Company and Mr. Hill was terminated.
Equity
Incentive Plans
As
of December 31, 2022, the Company had equity grants outstanding under each of its 2021, 2018 and 2014 Plans. Each of the plans contain
certain provisions concerning the vesting and termination of equity awards granted under the plans upon a termination of employment or
upon a change in control. The Company’s award agreements entered into under each plan also contain provisions concerning the vesting
and termination of the RSUs granted thereunder.
2021
and 2018 Plans
The
2021 and 2018 Plan each generally provides for “double-trigger” vesting of equity awards in connection with a change in control
of the Company, as described below.
To
the extent that outstanding awards granted under either Plan are assumed in connection with a change in control, then, except as otherwise
provided in the applicable award agreement or in another written agreement with the participant, all outstanding awards will continue
to vest and become exercisable (as applicable) based on continued service during the remaining vesting period, with performance-based
awards being converted to service-based awards at the “target” level. Vesting and exercisability (as applicable) of awards
that are assumed in connection with a change in control generally would be accelerated in full on a “double-trigger” basis,
if, within two years after the change in control, the participant’s employment is involuntarily terminated without “cause”,
or by the participant for “good reason”. Any stock options or SARs that become vested on a “double-trigger” basis
generally would remain exercisable for the full duration of the term of the applicable award.
To
the extent outstanding awards granted under either Plan are not assumed in connection with a change in control, then such awards generally
would become vested in full on a “single-trigger” basis, effective immediately prior to the change in control, with performance-based
awards becoming vested at the “target” level. Any stock options or SARs that become vested on a “single-trigger”
basis generally would remain exercisable for the full duration of the term of the applicable award.
The
Compensation Committee has discretion to determine whether any outstanding awards granted under each Plan will be assumed by the resulting
entity in connection with a change in control, and the Compensation Committee has the authority to make appropriate adjustments in connection
with the assumption of any awards. The Compensation Committee also has the right to cancel any outstanding awards in connection with
a change in control, in exchange for a payment in cash or other property (including shares of the resulting entity) in an amount equal
to the excess of the fair market value of the shares subject to the award over any exercise price related to the award, including the
right to cancel any “underwater” stock options and SARs without payment therefor.
For
purposes of the Plans, a “change in control” generally includes (a) the acquisition of 50% or more of the company’s
common stock; (b) a reorganization, merger, consolidation or similar transaction, or a sale of substantially all of the Company’s
assets; or (c) the complete liquidation or dissolution of the Company.
Whether
a participant’s employment has been terminated for “cause” will be determined by the Company. Unless otherwise provided
in the applicable award agreement or in another written agreement with the participant, “cause”, as a reason for termination
of a participant’s employment generally includes (a) an intentional act of fraud, embezzlement, theft or any other illegal or unethical
act in connection with the performance of the participant’s duties to the Company or a subsidiary that the Company determines,
acting in good faith, has materially injured or is highly likely to materially injure the Company, or any other terminable offense under
the Company’s policies and practices; (b) intentional damage to the Company’s (or a subsidiary’s) assets; (c) conviction
of (or plea of nolo contendere to) any felony or other crime involving moral turpitude; (d) improper, willful and material disclosure
or use of the Company’s (or a subsidiary’s) confidential information or other willful material breach of the participant’s
duty of loyalty to the Company or a subsidiary; (e) a willful, material violation of the Company’s policies and procedures as set
out in its employee handbook or a material violation of the Company’s code of conduct that the Company determines, acting in good
faith, has materially injured or is highly likely to materially injure the Company, monetarily or otherwise; or (f) the participant’s
willful failure or refusal to follow the lawful and good faith directions of the Company or a subsidiary.
For
purposes of the Plans, unless otherwise provided in the applicable award agreement or in an another written agreement with the participant,
“good reason” generally includes (a) the assignment to the participant of any duties that are materially inconsistent with
the Participant’s duties or responsibilities as assigned by the Company or a subsidiary, or any other action by the Company or
a subsidiary that results in a material diminution in of the participant’s duties or responsibilities, unless remedied by the Company
promptly after receipt of notice from the participant; or (b) any material failure by the Company or a subsidiary to comply with its
agreed obligations to the participant, other than an isolated, insubstantial and inadvertent failure which is remedied by the Company
promptly after receipt of notice from the Participant.
The
award agreements entered into under the 2021 Plan and 2018 Plan also contain provisions concerning the vesting and termination of the
awards subject to the agreements. Under the 2018 Plan, except as described above with respect to a change in control, un-exercisable
stock options, unless otherwise provided in the applicable award agreement, are generally forfeited automatically upon termination of
employment prior to a vesting date, unless (i) the Compensation Committee, in its discretion, provides for the full or partial acceleration
of vesting and exercisability of the option in connection with the termination, or (ii) the termination is due to the grantee’s
death or disability, in which case the unvested options will automatically become vested and exercisable upon termination. The stock
options that are exercisable at the time of termination of employment expire (a) twelve months after the termination of employment by
reason of death or disability or (b) three months after the termination of employment for other reasons. Upon the termination of a grantee’s
employment for cause (as defined under the 2018 Plan), all of the grantee’s vested and unvested options automatically terminate.
Under each Plan, with respect to unvested restricted shares and RSUs, unless otherwise provided in the applicable award agreement, unvested
restricted shares and restricted share units that have not yet vested are generally forfeited automatically in the event of the termination
of the grantee’s employment for any reason prior to a vesting date, unless (i) the Compensation Committee, in its sole discretion,
provides for the full or partial acceleration of vesting of the restricted shares or restricted share units, as applicable, in connection
with the termination, or (ii) the termination is due to the grantee’s death or disability, in which case the unvested restricted
shares or restricted share units, as applicable, will automatically become vested in full.
The
Compensation Committee has discretion to determine the form, amount and timing of each award granted under the 2021 Plan and all other
terms and conditions of the award, including, without limitation, the form of the agreement evidencing the award. As such, future awards
granted under the 2021 Plan may be subject to additional terms providing for accelerated vesting, pay outs or termination of the award
upon a termination of employment or a change in control of the Company.
Amended
and Restated 2014 Equity Incentive Plan
Under
the 2014 Plan, upon a change in control of the Company, our Board of Directors (as constituted immediately prior to such change in control)
may, in its discretion, (i) require that shares of the Company resulting from such change in control, or a parent corporation thereof,
be substituted for some or all of the common shares subject to an outstanding award granted under the 2014 Plan, with an appropriate
and equitable adjustment as shall be determined by the Board, and/or (ii) require outstanding awards granted under the 2014 Plan, in
whole or in part, to be surrendered to the Company by the holder, and to be immediately cancelled by the Company, and to provide for
the holder to receive: (1) a cash payment in an amount equal to the aggregate number of common shares then subject to the portion of
any stock option surrendered multiplied by the excess, if any, of the fair market value (as defined under the 2014 Plan) of a common
share as of the date of the change in control, over the exercise price per common share subject to such stock option; (2) shares of capital
stock of the corporation resulting from or succeeding to the business of the Company pursuant to such change in control, or a parent
corporation thereof, having a fair market value not less than the amount determined under clause (1) above; or (3) a combination of the
payment of cash pursuant to clause (1) above and the issuance of shares pursuant to clause (2) above.
A
“change in control” under the 2014 Plan generally means (i) the acquisition by any individual, entity or group of beneficial
ownership of 50% or more of the then outstanding common shares or the combined voting power of the then outstanding securities of the
Company, with certain exceptions; (ii) the consummation of a reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company, unless (A) the Company’s current beneficial owners retain more than 50%
of the Company’s outstanding shares and combined voting power following such transaction, (B) no new individual entity or group
will beneficially own 50% or more of the Company’s outstanding shares or combined voting power following such transaction, or (C)
current members of the Board will constitute at least a majority of the board following such transaction; or (iii) the consummation of
a plan of complete liquidation or dissolution of the Company.
The
Company has RSU awards outstanding that were issued under the 2014 Plan and no outstanding stock option awards. The Company’s RSU
agreements entered into with Mr. Hill and non-employee directors under the 2014 Plan generally provide that the RSUs granted thereunder
remain restricted until the applicable vesting date set forth in the agreement. In the event the grantee’s employment with the
Company or service on the Company’s board of directors, as applicable, is terminated due to the grantee’s death or disability
(as defined under the 2014 Plan) prior to one or more of the vesting dates, all unvested RSUs will vest as of the date of death or the
date the grantee is determined to be experiencing a disability. In addition, in the event the grantee’s employment with the Company
or service on the Company’s board of directors, as applicable, is terminated by the Company or by the grantee for any reason other
than death or disability (as defined under the 2014 Plan), all unvested RSUs granted under the agreement will be forfeited as of the
date of termination.
In
addition to the general provisions described above, the RSU agreements entered into by the Company in connection with the share matching
arrangements for the Company’s non-employee directors (other than Mr. Wollney) on December 15, 2017 contain special acceleration
and termination provisions. The agreements for the non-employee directors provide that the vesting of the RSUs granted thereunder is
subject to the director’s continued service on the board through the applicable vesting date, provided that if a director makes
himself available and consents to be nominated by the Company for continued service but is not nominated by the Board for election by
the stockholders, other than for good reason as determined by the Board in its discretion, then such director’s RSUs will vest
in full as of his last date of service as a director with the Company.
Retirement
of CFO
Upon
the retirement of our former Chief Financial Officer, John S. Hill, effective August 6, 2021, the Compensation Committee approved the
accelerated vesting of RSUs granted by the Company to Mr. Hill on May 29, 2015, December 15, 2017, and August 22, 2018. Accordingly,
on August 6, 2021, 17,400 unvested RSUs held by Mr. Hill vested in full, with each RSU representing one share of the Company’s
common stock.
Pay
Versus Performance
The
following pay versus performance disclosure is new this year, as required by rules recently adopted by the SEC in the fall of 2022. The
disclosure required for smaller reporting companies, like the Company, consists of a Pay Versus Performance table and reconciliation
of the information reported in the table. The SEC believes this disclosure will help stockholders better evaluate the link between executive
pay and performance, both for the Company on a stand-alone basis and as compared to other publicly traded companies.
The
pay versus performance table is highly regulated and requires pay disclosure that is significantly different than what we have customarily
provided in the Summary Compensation Table and the other executive compensation tables in prior years. The table currently provides SEC
mandated compensation data for fiscal years 2021 and 2022 for our Named Executive Officers (“NEOs”), along with certain financial
performance measures. In reviewing the table, our stockholders should note the following:
The
amounts in columns (b) and (d) of the table are taken from or derived directly from the total compensation paid to the relevant NEOs
as reported in this year’s or prior years’ Summary Compensation Tables;
The
“compensation actually paid” in columns (c) and (e) represents a new type of compensation disclosure mandated by the SEC,
the intent of which is to try and isolate the amount of compensation earned by the relevant NEO(s) in each year. To calculate “compensation
actually paid,” we are required to start with the totals for that year as reported in the Summary Compensation Table, deduct the
Summary Compensation Table values for stock and option awards, and then add back amounts for new and previously outstanding stock and
option awards in a manner mandated by the SEC. The disclosure and calculations are complex and can be confusing, and the amounts determined
in accordance with the rules often bear no relation to the money or the economic value received or monetized by a particular NEO in the
given year. We therefore caution that the term “compensation actually paid” should not be read literally and does not actually
reflect the “take home” amounts received by our NEOs in a given year;
The
SEC rules require that we include in the Pay Versus Performance table information regarding our U.S. GAAP net income results. U.S. GAAP
net income was not a performance metric in any of our compensation programs and did not affect the compensation awarded to our NEOs for
the years covered by the Pay Versus Performance Table. We are nonetheless required to include such information in the table and we urge
our investors to keep in mind that U.S. GAAP net income did not drive the amount of pay awarded to or realized by our NEOs.
Pay
Versus Performance Table
| |
(a) | | |
(b) | | |
(c) | | |
(d) | | |
(e) | | |
(f) | | |
(g) | |
| |
Year | | |
Summary Compensation Table Total for PEO(1) | | |
Compensation Actually Paid to PEO (2) | | |
Average Summary Compensation Table Total for Non -PEO NEOs | | |
Average Compensation Actually paid to Non-PEO NEOs | | |
Value of Initial Fixed $100 Investment Based on Total Shareholder Return (3) | | |
Net Income available to Maiden Common Shareholder (in thousands) | |
Larry G. Swets Jr. | |
2022 | | |
$ | 988,768 | | |
$ | 988,768 | | |
| - | | |
| - | | |
$ | 59 | | |
$ | 1,088 | |
President & Chief Executive Officer | |
2021 | | |
$ | 821,248 | | |
$ | 674,706 | | |
| - | | |
| - | | |
$ | 76 | | |
$ | (7,188 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Hassan R. Baqar | |
2022 | | |
| - | | |
$ | - | | |
$ | 864,000 | | |
| 864,000 | | |
$ | 59 | | |
$ | 1,088 | |
Executive Vice President and Chief Financial Officer | |
2021 | | |
| - | | |
$ | - | | |
$ | 289,359 | | |
| 289,359 | | |
$ | 76 | | |
$ | (7,188 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Brian D. Bottjer | |
2022 | | |
| - | | |
$ | - | | |
$ | 146,804 | | |
| 146,804 | | |
$ | 59 | | |
$ | 1,088 | |
Former Senior Vice President, Chief Accounting Officer and Secretary | |
2021 | | |
| - | | |
$ | - | | |
$ | 283,992 | | |
| 283,992 | | |
$ | 76 | | |
$ | (7,188 | ) |
| |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
John S. Hill | |
2022 | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 59 | | |
$ | 1,088 | |
Former Executive Vice President, & Chief Financial Officer | |
2021 | | |
| - | | |
$ | - | | |
$ | 514,645 | | |
| 514,645 | | |
$ | 76 | | |
$ | (7,188 | ) |
1. |
Mr.
Swets served as the Company’s Chief Executive Officer for the entirety of 2022 and 2021. Mr. Baqar served as the Company’s
Chief Financial Officer Since August 11, 2021 . Mr. Hill served as Company’s Chief Financial Officer till August 10, 2021.
Mr. Bottjer served as Company’s Chief Accounting officer for the entirety of 2021 and till May 26, 2022. |
|
|
2. |
To
calculate compensation actually paid, adjustments were made to the amounts reported in the Summary Compensation Table for the applicable
year. A reconciliation of the adjustments for Messrs. Swets, Baqar, Hill and Bottjer is set forth in the table immediately following
these footnotes. |
|
|
3. |
Pursuant
to rules of the SEC, the illustration assumes $100 was invested on December 31, 2020 in our Common Shares. Historic common share
price performance is not necessarily indicative of future common share price performance. |
To
calculate the amounts reported in the “Compensation Actually Paid” columns in the table above, the following amounts were
deducted from and added to (as applicable) our NEOs total compensation as reported in the Summary Compensation Table (“SCT”)
for our named executive officers as of December 31, 2022:
| |
| | |
| | |
Less: | | |
Plus: | | |
Plus (less): | | |
| |
Name | |
Fiscal Year | | |
SCT Total (a) | | |
SCT Share Awards (b) | | |
Fair Value of Restricted Shares Units (“RSU”) Granted in the Covered Year(c) | | |
Change in Fair Value of Unvested RSUs from Covered Years (d) | | |
Fair Value of RSU Granted and Vested in the covered year (e) | | |
Change in Fair Value of RSUs from Prior Years that Vested in the Covered Year (f) | | |
Change in Fair Value of Unvested RSUs from the Prior Years (g) | | |
Compensation
Actually
Paid | |
Larry G. Swets Jr. | |
| 2022 | | |
$ | 988,768 | | |
| - | | |
| - | |
| | - | |
| | - | |
| | - | |
| | - | |
| $ | 988,767 |
| |
| 2021 | | |
$ | 821,248 | | |
| (146,542 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 674,706 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Hassan R. Baqar | |
| 2022 | | |
$ | 864,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 864,000 | |
| |
| 2021 | | |
$ | 289,359 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 289,359 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Brian D. Bottjer | |
| 2022 | | |
$ | 146,804 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 146,804 | |
| |
| 2021 | | |
$ | 283,992 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 283,992 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
John S. Hill | |
| 2022 | | |
$ | - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| | |
| |
| 2021 | | |
$ | 514,645 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
$ | 514,645 | |
a. |
Represents
Total Compensation as reported in the Summary Compensation Table for the indicated fiscal year. |
|
|
b. |
Represents
the grant date fair value of the option award granted to Mr. Swets during the indicated fiscal year, computed in accordance with
the methodology used for financial reporting purposes. The option award becomes vested and fully exercisable in 20% increments on
each anniversary of the grant date, provided that Mr. Swets remains in the continuous service of the Company through each applicable
vesting date and that the Company’s book value per share shall have increased by 15% or more as compared to the Company’s
book value per share as of the fiscal year end prior. |
|
|
c. |
Represents
the fair value as of the indicated fiscal year-end of the outstanding and unvested RSU granted during such fiscal year, computed
in accordance with the methodology used for financial reporting purposes. |
|
|
d. |
Represents
the change in fair value during the indicated fiscal year of each RSU that was granted in a prior fiscal year and that remained outstanding
and unvested as of the last day of the indicated fiscal year, computed in accordance with the methodology used for financial reporting
purposes. No RSUs were granted to named PEO or the NEOs in 2021 or 2022 |
|
|
e. |
Represents
the fair value at vesting of the RSU that were granted and vested during the indicated fiscal year, computed in accordance with the
methodology used for financial reporting purposes. No RSUs were granted or vested in 2021 and 2022 for the named PEO or the NEOs. |
|
|
f. |
Represents
the change in fair value, measured from the prior fiscal year-end to the vesting date, of each RSU that was granted in a prior fiscal
year and which vested during the indicated fiscal year, computed in accordance with the methodology used for financial reporting
purposes. No RSUs were granted to the PEO or the NEOs in 2021 or 2022. |
|
|
g. |
Represents
the fair value as of the last day of the prior fiscal year of the share awards that were granted in a prior fiscal year and which
failed to meet the applicable vesting conditions in the indicated fiscal year, computed in accordance with the methodology used for
financial reporting purposes. |
PROPOSAL
3 — To consider and act upon a non-binding advisory resolution to approve the compensation
of our Named Executive Officers
In
accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and Section
14A of the Exchange Act, we are asking our stockholders to vote to approve, on an advisory (non-binding) basis, the compensation of our
named executive officers as disclosed in this proxy statement pursuant to the compensation disclosure rules promulgated by the SEC. This
proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on the
compensation of our named executive officers. This vote is not intended to address any specific item of compensation, but rather the
overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Accordingly,
we are asking our stockholders to vote “FOR” the following resolution at our Annual Meeting:
“RESOLVED,
that the Company’s stockholders approve, on an advisory basis, the compensation paid to the Company’s named executive officers,
as disclosed in the Company’s proxy statement pursuant to Item 402 of Regulation S-K, including the compensation tables and accompanying
narrative disclosures.”
This
advisory say-on-pay vote on executive compensation is not binding on the Board or the Compensation Committee. However, the Board values
the opinion of our stockholders and will consider the result of the vote when making future decisions regarding executive compensation.
We design our executive compensation programs to implement our core objectives of attracting key leaders, motivating our executives to
remain with the Company for long and productive careers, rewarding sustained financial and operating performance and leadership excellence
and aligning the long-term interests of our executives with those of our stockholders. The Board believes that the policies and practices
described in “Compensation of Executive Officers” are effective in achieving the Company’s goals.
THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
Required
Vote
Approval
requires an affirmative vote of the majority of the votes properly cast at the Annual Meeting. Proxies marked “ABSTAIN” and
broker non-votes will not be considered as votes cast for or against Proposal 3 and will have no effect on the outcome of the proposal.
DELINQUENT
SECTION 16(a) REPORTS
Under
Section 16(a) of the Exchange Act, our executive officers, directors, and persons who own greater than 10% of our common stock (the “Section
16 Reporting Persons”) of the Company must file a Form 4 reporting the acquisition or disposition of the Company’s equity
securities with the SEC no later than the end of the second business day after the day the transaction occurred unless certain exceptions
apply. Transactions not reported on Form 4 must be reported on Form 5 within 45 days after the end of the Company’s fiscal year.
Such persons must also file initial reports of ownership on Form 3 upon becoming an executive officer, director, or greater-than-10%
stockholder. Based solely on our review of the copies of such reports and representations that no other reports were required, we believe
that all Section 16 filing requirements applicable to our Section 16 Reporting Persons were timely complied with during 2022.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT2
The
following table sets forth certain information regarding the beneficial ownership of shares of our common stock as of the Record Date,
by:
|
● |
Each
person (or group of affiliated persons) known by us to beneficially own more than 5% of our common stock; |
|
● |
Each
of our directors and named executive officers; and |
|
● |
All
of our current directors and executive officers as a group. |
The
number and percentages of shares beneficially owned are based on 10,303,738 common shares outstanding as of the Record Date. Information
with respect to beneficial ownership has been furnished by each director, executive officer and beneficial owner of more than 5% of our
common stock. Beneficial ownership is determined in accordance with the rules of the SEC and requires that such persons have voting or
investment power with respect to the securities. In computing the number of shares beneficially owned by a person listed below and the
percentage ownership of such person, shares of common stock underlying warrants, options and RSUs held by each such person that are exercisable
or vest within 60 days of the Record Date are deemed outstanding, but are not deemed outstanding for computing the percentage ownership
of any other person. Except as otherwise noted below, and subject to applicable community property laws, the persons named have sole
voting and investment power with respect to all shares of common stock shown as beneficially owned by them. Except as otherwise indicated
below, the address for each beneficial owner is c/o FG Financial Group, Inc., 104 S. Walnut Street, Unit 1A, Itasca, IL, 60143.
| |
Beneficially Owned | |
Name and Address of Beneficial Owner | |
Number of Shares | | |
Percentage of Shares | |
5% Beneficial Owners | |
| | | |
| | |
Fundamental Global GP, LLC(1) 108 Gateway Blvd., Suite 204, Mooresville, NC 28117 | |
| 5,666,111 | | |
| 55 | % |
Named Executive Officers and Directors | |
| | | |
| | |
Larry G. Swets, Jr., President, Chief Executive Officer and Director(3) | |
| 80,597 | | |
| * | |
Hassan R. Baqar, Executive Vice President, Chief Financial Officer(3) | |
| 102,349 | | |
| * | |
D. Kyle Cerminara, Chairman of the Board(1)(2) (3) | |
| 5,761,073 | | |
| 55.8 | % |
Rita Hayes, Director(3) | |
| 36,291 | | |
| * | |
E. Gray Payne, Director(3) | |
| 41,130 | | |
| * | |
Scott D. Wollney, Director(3) | |
| 44,727 | | |
| * | |
Richard E. Govignon, Jr., Director(3) | |
| 19,862 | | |
| * | |
Current Executive Officers and Directors as a Group (8 individuals)(2) (3) | |
| 6,086,031 | | |
| 62.7 | % |
*
Less than 1.0%
1. |
Fundamental
Global GP, LLC (referred to therein as “FG”) shares voting and dispositive power with respect to 5,666,111 shares of
common stock. FG Financial Holdings LLC (“FGFH”), which is managed by Fundamental Global GP, LLC shares voting and disposition
power with respect to 5,666,111 shares of common stock. Information regarding beneficial ownership of our common stock by FG and
its affiliates is included herein in reliance on a Form 4 filed with the SEC on June 3, 2023. Mr. Cerminara is Chief Executive
Officer of FG and manager of FGFH. Due to his positions with FG and affiliated entities, Mr. Cerminara may be deemed to be beneficial
owner of the shares of the Company’s common stock disclosed as directly owned by FGFH. The business address for Mr. Cerminara
is 108 Gateway Blvd., Suite 204, Mooresville, North Carolina 28117. |
|
|
2. |
Includes
5,666,111 shares reported as beneficially owned by FG and its affiliates, of which Mr. Cerminara is deemed to have beneficial ownership
by virtue of his positions with FG, as discussed in footnote 1. |
|
|
3. |
Includes
31,378 vested but unissued RSU as of Record Date for Larry G. Swets, Jr. Includes 30,789 vested but unissued RSU as of Record
Date for Hassan R. Baqar. Includes 69,376 vested but unissued RSU as of Record Date for D. Kyle Cerminara. Includes 25,542 vested
but unissued RSU as of Record Date for E. Gray Payne. Includes 20,955 vested but unissued RSU as of Record Date for Rita Hayes.
Includes 17,679 vested but unissued RSU as of Record Date for Richard E. Govignon. |
TRANSACTIONS
WITH RELATED PERSONS
It
is the responsibility of the Audit Committee or, on a case-by-case basis, another Board committee constituted solely by independent directors,
to review and oversee proposed transactions with “related persons” as defined in Item 404(a) of the SEC’s Regulation
S-K. These include transactions and series of similar transactions to which we were a party or will be a party, in which
|
● |
the
amounts involved exceeded or will exceed lessor of $120,000 or one percent of the average of our total assets at year end for the
last two completed fiscal years; and |
|
|
|
|
● |
any
of our directors, director nominees, executive officers or beneficial owners of more than 5% of any class of our voting stock, or
any immediate family members thereof, had or will have a direct or indirect material interest. |
Below
is a summary of our related party transactions between January 1, 2021 and October 16, 2023.
Investment
in Metrolina
The
Company had previously invested $4.0 million as a limited partner in FGI Metrolina Property Income Fund, LP (“Metrolina”)
which invested in real estate through a real estate investment trust wholly owned by Metrolina. The general partner of Metrolina,
FGI Metrolina GP, LLC, was managed, in part, by Mr. Cerminara, the Chairman of the Board of Directors of the Company. Metrolina’s
investment program was managed by FGI Funds Management LLC, an affiliate of FG, which, with its affiliates, is the largest stockholder
of the Company. In the fourth quarter 2021, we received approximately $5.0 million in cash from Metrolina, representing our initial investment
of $4.0 million plus approximately $1.0 million in distributed earnings. As a result, our investment in Metrolina was fully liquidated
as of December 31, 2021.
Joint
Venture Agreement
On
March 31, 2020, the Company and FG entered into the limited liability company agreement with Fundamental Global Asset Management, LLC
(“FGAM”), a joint venture owned 50% by each party. The purpose of FGAM is to sponsor, capitalize and provide strategic advice
to investment managers in connection with the launch and/or growth of their asset management business and the investment products they
sponsor.
FGAM
is governed by a Board of Managers consisting of four managers, two of which are appointed by each Member. The Company has appointed
two of its independent directors to the FGAM Board of Managers. Certain major actions, including any decision to sponsor a new investment
manager, require the prior consent of both Members.
FG
Merchant Partners
FG
Merchant Partners (“FGMP”) was
formed to allocate capital to merchant banking, SPACs and SPAC sponsor-related business. The Company holds a limited partner
interest in FGMP. Certain of our directors and officers also hold limited partner interests in FGMP. Mr. Swets holds a limited
partner interest through Itasca Financial LLC, an advisory and investment firm for which Mr. Swets is managing member. Mr. Baqar
also holds a limited partner interest through Sequoia Financial LLC, an advisory firm for which Mr. Baqar is managing member. Mr.
Cerminara also holds a limited partner interest through Fundamental Global, LLC, a holding company for which Mr. Cerminara is the
manager and one of the members.
FGMP
has invested in the founder shares and warrants of Aldel Financial Inc. (“Aldel”), FG Merger Corp. (“FG Merger”),
FG Acquisition Corp, FG Communities Inc. (“FGC”) and Craveworthy LLC. Certain of our directors
and officers are affiliated with these SPACs and their sponsor companies as previously described.
FG
Communities, Inc.
In
October of 2022, the Company invested $2.0 million into FGC. The Company also holds an interest through its ownership in FGMP. FGC is
a self-managed real estate company focused on a growing portfolio of manufactured housing communities which are owned and operated by
FGC. Mr. Cerminara is the President and a director of FGC.
Craveworthy
LLC
On
March 16, 2023, the Company invested $200,000 in a senior unsecured loan to Craveworthy LLC. Subsequently the senior note was rolled
into a convertible secured promissory note effective October 17, 2023. Mr. Swets has an indirect interest in Craveworthy LLC, independent
from the interests held by the Company through its ownership in FGMP. Mr. Baqar and Mr. Cerminara are the Managers of Craveworthy
LLC.
Think
Financial Group Holdings Limited
On
September 29, 2023, the Company invested $250,000 in a convertible promissory note to support the business combination of Think Financial
Group Holdings Limited and FG Acquisition Corp. (“FGAC”). Mr. Swets and Mr. Baqar are the executive officers
of FGAC.
Shared
Services Agreement
On
March 31, 2020, the Company entered into a Shared Services Agreement (the “Shared Services Agreement”) with Fundamental Global
Management, LLC (“FGM”), an affiliate of FG, pursuant to which FGM provides the Company with certain services related to
the day-to-day management of the Company, including assisting with regulatory compliance, evaluating the Company’s financial and
operational performance, providing a management team to supplement the executive officers of the Company, and such other services consistent
with those customarily performed by executive officers and employees of a public company. In exchange for these services, the Company
pays FGM a fee of $456,000 per quarter (the “Shared Services Fee”), plus reimbursement of expenses incurred by FGM in connection
with the performance of the Services, subject to certain limitations approved by the Company’s Board of Directors or Compensation
Committee from time to time.
The
Shared Services Agreement has an initial term of three years, and thereafter renews automatically for successive one-year terms unless
terminated in accordance with its terms. The Shared Services Agreement may be terminated by FGM or by the Company, by a vote of the Company’s
independent directors, at the end of the initial or automatic renewal term upon 120 days’ notice, subject to payment by the Company
of certain costs incurred by FGM to wind down the provision of services and, in the case of a termination by the Company without cause,
payment of a termination fee equal to the Shared Services Fee paid for the two quarters preceding termination.
In
the third quarter of 2022, the Shared Services Agreement was amended to eliminate termination fees and to increase the termination notice
from 120 days to 365 days. The Company paid $1,825,000 to FGM under the Shared Services Agreement for each of the twelve months ended
December 31, 2022, and 2021, respectively.
Participation
in the Offering
On
June 21, 2022, we completed the closing of an underwritten public offering of 2,750,000 shares of our common stock, at a public offering
price of $1.58 per share, for gross proceeds of $4.345 million, before deducting underwriting commissions and offering expenses. Mr.
Swets, our Director and Chief Executive Officer, Mr. Baqar, our Executive Vice President and Chief Financial Officer, purchased 30,000
and 63,290 shares, respectively, in the offering. Fundamental Activist Fund I LP (“FAFI”) and FGH purchased 632,911 and 1,265,822
shares, respectively, in the offering. FG and its affiliated entities, including FAFI and FGH, collectively beneficially own an
aggregate 58.5% of our common stock. Mr. Cerminara, our Chairman, may be deemed the beneficial owner of shares owned beneficially by
FG. At the public offering price of $1.58 per share, Mr. Swets, Mr. Baqar, FAFI and FGH purchased shares of common stock at a total price
each of $47,400, $99,998, $999,999, and $1,999,999, respectively.
Other
Transactions
We
have entered into indemnification agreements with each of our directors and executive officers. These agreements provide that we will,
among other things, indemnify and advance expenses to our directors and executive officers for certain expenses, including attorneys’
fees, judgments, fines, and settlement amounts incurred by any such person in any action or proceeding, including any action by us arising
out of such person’s services as our director or executive officer, or any other company or enterprise to which the person provides
services at our request. We believe that these agreements are necessary to attract and retain qualified persons as directors and executive
officers.
As
discussed above, FG, together with its affiliates, is the largest stockholder of the Company. Mr. Cerminara, Chairman of our Board, is
Chief Executive Officer, Partner, and Manager of FG. The partnership managed by FG, including the funds that directly own shares
of our common stock and Series A Preferred Stock, have agreed to indemnify FG, the principals of FG, including Mr. Cerminara, or any
other person designated by FG for claims arising from Mr. Cerminara’s service on our Board, provided that a fund’s indemnity
obligations are secondary to any obligations we may have with respect to Mr. Cerminara’s service on our Board.
OTHER
MATTERS
The
Board of Directors does not currently know of any other matters to be presented at the Annual Meeting. If any other matters properly
come before the Annual Meeting, it is intended that the shares represented by proxies will be voted as recommended by the Board of Directors
or, if no recommendation is given, in the discretion of the proxy holders using their best judgement.
HOUSEHOLDING
The
SEC has adopted a rule concerning the delivery of annual reports and proxy statements. It permits the Company, with your permission,
to send a single copy of this Proxy Statement and our 2022 Annual Report to any household at which two or more of the Company’s
stockholders reside. This rule is called “householding,” and its purpose is to help reduce printing and mailing costs of
proxy materials. We do not “household” proxy materials to stockholders of record. However, some banks, brokers and other
nominees may be participating in the practice of “householding.”
We
will promptly deliver, upon oral or written request, a separate copy of this Proxy Statement and our 2022 Annual Report to any stockholders
residing at an address to which only one copy of this Proxy Statement and our 2022 Annual Report was mailed. Requests for additional
copies should be directed in writing to a stockholder’s broker, bank or other nominee holding shares of our common stock for such
stockholder or to the attention of our Corporate Secretary at (847) 791-6817 or in writing at 104 S. Walnut Street, Unit 1A, Itasca,
IL 60143. In the future, stockholders wishing to receive separate copies of our proxy statements and annual reports in the future, and
stockholders sharing an address that wish to receive a single copy of our proxy statement and annual report if they are receiving multiple
copies of those documents, should contact their bank, broker, or other nominee record holder, or may contact our Corporate Secretary
as described above.
STOCKHOLDER
PROPOSALS FOR PRESENTATION
AT
THE 2024 ANNUAL MEETING
Stockholder
proposals intended to be considered for inclusion in next year’s proxy statement and form of proxy for presentation at the 2024
Annual Meeting of Stockholders must comply with Exchange Act Rule 14a-8. The deadline for submitting such proposals is September 7, 2024
unless the date of the 2024 Annual Meeting is more than 30 days before or after the one-year anniversary date of the Annual Meeting,
in which case proposals must be submitted a reasonable time before we print our proxy materials for the 2024 Annual Meeting. The submission
of a stockholder proposal does not guarantee that it will be included in our proxy statement.
Stockholders
wishing to submit proposals for the 2024 Annual Meeting outside the process of Exchange Act Rule 14a-8 or to nominate individuals to
our Board of Directors must comply with the advance notice and other provisions of Article I, Section 4 of our By-Laws. To be timely,
notice of the proposal must be received by the Secretary of the Company between August 8, 2024 and September 7, 2024 provided, however,
that in the event the date of the 2024 Annual Meeting is advanced by more than 30 days before or delayed by more than 60 days after the
anniversary date of our Annual Meeting, to be timely, notice by the stockholder must be so delivered not earlier than the close of business
on the 120th day prior to the 2024 Annual Meeting and not later than the close of business on the later of (i) the 90th day prior to
the 2024 Annual Meeting or (ii) the 10th day following the day on which public announcement of the date of such meeting is first made.
Stockholder
proposals should be addressed to FG Financial Group, Inc., 104 S. Walnut Street, Unit 1A, Itasca, IL 60143. The specific requirements
for submitting stockholder proposals are set forth in Article I, Section 4 of our By-Laws.
By
Order of the Board of Directors,
/s/
D. Kyle Cerminara |
|
D.
Kyle Cerminara |
|
Chairman
of the Board |
|
A
copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, is available without charge upon written request
to: FG Financial Group, Inc., Corporate Secretary, 104 S. Walnut Street, Unit 1A, Itasca, IL 60143. You may also access this Annual Report,
along with all our filings made electronically with the SEC, including on Forms 10-Q and 8-K, on our website at www.fgfinancial.com.
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