UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(Rule
14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934
(Amendment No. )
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Filed by a Party other than the Registrant ☐
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under Rule 14a-12
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NOVATION COMPANIES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials:
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box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of
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Amount previously paid:
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Form, Schedule or Registration Statement No.:
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NOVATION COMPANIES, INC.
9229 Ward Parkway
Kansas City, MO 64114
NOTICE OF 2019 ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD ON DECEMBER 12, 2019
To Our Shareholders:
You are cordially invited to attend the
2019 annual meeting of shareholders (the “Annual Meeting”) of Novation Companies, Inc., a Maryland corporation (the
“Company”), to be held on December 12, 2019, at 10:00 a.m., Central Standard Time, at the Company’s office for
the following purposes:
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to elect five directors to serve until the Company’s 2020 annual meeting of shareholders and until their successors are
duly elected and qualify;
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to ratify the selection of Boulay PLLP as the Company’s independent registered public accounting firm for the fiscal
year ending December 31, 2019;
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to vote on a non-binding advisory resolution to approve the compensation of the Company’s named executive officers;
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to vote on a non-binding advisory resolution regarding the frequency of shareholder advisory votes on executive compensation;
and
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to transact such other business as may properly come before the Annual Meeting and any postponement or adjournment thereof.
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The accompanying proxy statement sets
forth additional information regarding the Annual Meeting, and provides you with detailed information regarding the business to
be considered at the Annual Meeting. We encourage you to read the proxy statement carefully and in its entirety.
The Company’s Board of Directors
has fixed the close of business on October 24, 2019 as the record date for determination of shareholders entitled to notice of,
and to vote at, the Annual Meeting and any postponement or adjournment thereof.
Your vote is important. Regardless of whether you plan to
attend the Annual Meeting, we encourage you to vote your shares promptly by signing and returning the enclosed proxy card or voting
instruction card in the envelope provided, or submitting your proxy over the Internet in accordance with the instructions provided
on the enclosed proxy card or voting instruction card.
By Order of the Board of Directors
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David W. Pointer
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Chief Executive Officer and Chairman of the Board
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Kansas City, MO
October 31, 2019
Important Notice Regarding the Availability
of Proxy Materials for the Annual Meeting of Shareholders To Be Held on December 12, 2019: The proxy statement and the Company’s
annual report to shareholders are available electronically free of charge at www.investorvote.com.
GENERAL INFORMATION
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PROPOSAL 1 – ELECTION OF DIRECTORS
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PROPOSAL 2 – RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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PROPOSAL 3 – ADVISORY VOTE ON EXECUTIVE COMPENSATION
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PROPOSAL 4 – ADVISORY VOTE ON FREQUENCY OF ADVISORY VOTES ON EXECUTIVE COMPENSATION
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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CORPORATE GOVERNANCE AND RELATED MATTERS
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AUDIT COMMITTEE REPORT
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EXECUTIVE COMPENSATION
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SHAREHOLDER PROPOSALS OR NOMINATIONS
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ADDITIONAL INFORMATION
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PROXY STATEMENT
The Board of Directors (the “Board”)
of Novation Companies, Inc., a Maryland corporation (the “Company,” “we,” “us” or “our”),
is furnishing this proxy statement in connection with its solicitation of proxies for use at our 2019 annual meeting of shareholders
(the “Annual Meeting”) to be held on Thursday, December 12, 2019, at 10:00 a.m., Central Standard Time, at the Company’s
office, 9229 Ward Parkway, Kansas City, Missouri 64114. This proxy statement, along with a Notice of Annual Meeting of Shareholders
and a proxy card or voting instruction card, are being mailed to shareholders beginning on or about October 31, 2019.
GENERAL INFORMATION
Attending the Annual Meeting
You can attend the Annual Meeting only
if you were a shareholder at the close of business on October 24, 2019, the record date for the Annual Meeting (the “Record
Date”), or if you hold a valid proxy for the Annual Meeting. You should be prepared to present photo identification for admittance.
If you are a shareholder of record, your name will be verified against the list of shareholders of record on the Record Date prior
to your admission to the Annual Meeting. If you are not a shareholder of record, but hold shares in “street name” through
a broker, bank or nominee, you should provide proof of beneficial ownership on the Record Date, such as your most recent account
statement prior to the Record Date, a copy of the voting instruction card provided by your broker, bank or nominee, or other similar
evidence of ownership. If you do not provide photo identification or comply with the other procedures outlined above, you will
not be admitted to the Annual Meeting.
The Annual Meeting will begin promptly
on December 12, 2019, at 10:00 a.m., Central Standard Time. You should allow adequate time for check-in procedures.
Record Date and Voting Rights
Holders of shares of the Company’s
common stock, par value $0.01 per share (the “Common Stock”), at the close of business on the Record Date are entitled
to notice of, and to vote at the Annual Meeting. As of the Record Date, 112,403,893 shares of Common Stock were outstanding.
Each holder of Common Stock is entitled to one vote for each share of Common Stock held as of the Record Date.
Voting
You may vote using any of the following
methods:
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Proxy card or voting instruction card. Be sure to complete, sign and date the card and return it in the prepaid envelope.
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By the Internet. Specific instructions for shareholders of record who wish to vote over the Internet are set forth on
the enclosed proxy card. If you own shares held in street name, you will receive voting instructions from your broker, bank or
nominee and may vote by telephone or the Internet if they offer those alternatives. Shareholders of record will not be able to
vote by telephone. Please note that Internet voting for shareholders of record will close at 1:00 a.m. Eastern Time on December
12, 2019.
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In person at the Annual Meeting. All shareholders may vote in person at the Annual Meeting. You may also be represented
by another person at the Annual Meeting by executing a proper proxy designating that person. If you own shares held in street name,
you must obtain a legal proxy from your broker, bank or nominee and present it to the inspector of election with your ballot when
you vote at the Annual Meeting.
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If you properly submit your proxy over
the Internet, or you properly sign and return a proxy card or voting instruction card, your shares will be voted as you direct.
If you return a signed proxy card without indicating your vote, your shares will be voted in accordance with the recommendations
of the Board as follows: “FOR” the election of the director nominees; “FOR” the ratification of the selection
of Boulay PLLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019;
“FOR” the approval of a non-binding advisory resolution to approve the compensation of the Company’s named executive
officers; and for holding the advisory vote to approve the compensation of our named executive officers every “1 YEAR.”
If for any reason any director nominee
does not stand for election, any proxies we receive will be voted in favor of the remaining nominees and may be voted for a substitute
nominee in place of the nominee who does not stand. We have no reason to expect that any of the director nominees will not stand
for election. If any matters other than the four items of business described in this proxy statement are properly presented for
consideration at the Annual Meeting, persons named on the voting website and your voting card will have the discretion to vote
your shares for you on those matters. We are not aware of any other business to be acted upon at the Annual Meeting other than
as set forth herein.
You may receive more than one set of
voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example,
if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage
account in which you hold shares. If you are a shareholder of record and your shares are registered in more than one name, you
will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that
you receive.
Revoking your Proxy
If you are a shareholder of record, you
may revoke your proxy at any time before it is voted at the Annual Meeting by (1) following the instructions given for changing
your vote over the Internet or delivering a valid written proxy with a later date than the previous proxy, (2) delivering a written
statement to the Corporate Secretary that the proxy is revoked, or (3) attending the Annual Meeting and voting in person. If you
own shares held in street name, you may submit new voting instructions by contacting your broker, bank or nominee.
Solicitation of Proxies
The costs of this solicitation by the
Board will be borne by the Company. Proxy solicitations will be made by mail, telephone, facsimile and e-mail. Banks, brokerage
house nominees and other fiduciaries are requested to forward the proxy soliciting material to the beneficial owners and to obtain
authorization for the execution of proxies. The Company will, upon request, reimburse those parties for their reasonable expenses
in forwarding proxy materials to the beneficial owners.
Abstentions and Broker Non-Votes
Abstentions are not considered “votes
cast” under Maryland law and will not affect the outcome of the Proposals.
If you own shares held in “street
name” and do not provide your bank, brokerage firm or other nominee with voting instructions, your shares may constitute
“broker non-votes.” Generally, broker non-votes occur on a matter when a bank, brokerage firm or other nominee is not
permitted to vote on that matter without instructions from the beneficial owner and instructions are not given. Shares that constitute
broker non-votes will be counted for the purpose of establishing a quorum at the Annual Meeting and will not affect the outcome
of the Proposals.
Votes Required for Approval of Proposals
A quorum will be present if at least
a majority of the outstanding shares of our Common Stock entitled to vote at the Annual Meeting, totaling 56,201,947 shares, is
represented at the Annual Meeting, either in person or by proxy. Abstentions and broker non-votes will be considered present for
the purpose of establishing a quorum.
Proposal 1: Election of Directors.
Each of the five director nominees receiving a plurality of the votes cast at the Annual Meeting will be elected as a director.
You may withhold votes from any or all nominees.
Proposal 2: Ratification of Auditors.
The affirmative vote of a majority of the votes cast on this proposal at the Annual Meeting is required for ratification of the
selection of Boulay PLLP as the Company’s independent registered public accounting firm for the fiscal year ending December
31, 2019.
Proposal 3: Advisory Vote on Executive
Compensation. The affirmative vote of a majority of the votes cast on this proposal at the Annual Meeting is required for approval
of the non-binding advisory resolution to approve the compensation of the Company’s named executive officers.
Proposal 4: Advisory Vote on Frequency
of Shareholder Advisory Votes on Executive Compensation. The option (every one, two or three years) receiving the greatest
number of votes cast on this proposal at the Annual Meeting will be considered the frequency approved by shareholders.
Additional Materials
Shareholders may request a free copy
of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”) and other
financial information by contacting us at:
Novation Companies, Inc.
9229 Ward Parkway, Suite 340
Kansas City, Missouri 64114
Alternatively, current and prospective
investors can access the 2018 Form 10-K at www.investorvote.com. We also will furnish any exhibit to the 2018 Form 10-K if specifically
requested. Our SEC filings also are available free of charge at the SEC’s website, www.sec.gov, and at the Investor Relations
section of our website (under “Financials”) at www.novationcompanies.com/investors.
PROPOSAL 1 –
ELECTION OF DIRECTORS
There are five nominees for election
to the Board at the Annual Meeting: Howard M. Amster, Howard Timothy Eriksen, Barry A. Igdaloff, Lee D. Keddie and David W. Pointer,
all of which currently serve as directors of the Company.
Each director is elected annually to
serve until our next annual meeting of shareholders and until his or her successor is duly elected and qualifies. Except where
authority to vote for directors has been withheld, it is intended that the proxies received pursuant to this solicitation will
be voted “FOR” the nominees named below. If for any reason any nominee does not stand for election, such proxies will
be voted in favor of the remainder of those named and may be voted for substitute nominees in place of those who do not stand.
Management has no reason to expect that any of the nominees will not stand for election.
Set forth below is certain information
regarding each nominee for director and our executive officers, including such person’s name, age, principal occupation and
business experience for at least the past five years and the experiences and skills that led to the conclusion that the nominees
should serve as directors.
Director Nominees
Howard M. Amster, age 71, has
been a member of the Board since 2009. Mr. Amster currently is an owner and operator of multiple real estate investments. Since
March 1998, Mr. Amster has served as President of Pleasant Lake Apts. Corp., the corporate general partner of Pleasant Lake Apts.
Limited Partnership. Mr. Amster also serves as a director of Maple Leaf Financial, Inc., the holding company for Geauga Savings
Bank and newAX, Inc. (formerly Astrex, Inc.). Since June 2015, Mr. Amster also has served as a Financial Advisor at McDonald Partners,
LLC, a securities brokerage firm. From 2000 to May 2015, Mr. Amster served as a Principal with Ramat Securities Ltd., a securities
brokerage firm. From 1992 to 2000, Mr. Amster was an investment consultant with First Union Securities (formerly EVEREN Securities
and formerly Kemper Securities).
The Board believes Mr. Amster’s
qualifications to serve on the Board include his investment expertise and his experience as a director of public companies.
Howard Timothy Eriksen, age 50,
has been a member of the Board since 2018. Mr. Eriksen has been the Chief Executive Officer and Interim Chief Financial Officer
of Solitron Devices, Inc. (“Solitron”), a manufacturer of solid-state semiconductor components, since July 2016. Mr.
Eriksen also serves as the Managing Member of Eriksen Capital Management LLC (“ECM”), a Lynden, Washington based investment
advisory firm that he founded in 2005. Previously, Mr. Eriksen worked for Walker’s Manual, Inc., a publisher of books and
newsletters on micro-cap stocks, unlisted stocks and community banks, from 2004 to 2005, and prior to that for Kiewit Pacific Co,
a subsidiary of Peter Kiewit Sons, a construction and mining services company, as an administrative engineer on the Benicia Martinez
Bridge project. Mr. Eriksen has been a member of the board of directors of Solitron since August 2015. Mr. Eriksen received a Bachelor
of Arts from The Master’s University and a Master of Business Administration from Texas A&M University.
The Board believes that Mr. Eriksen’s
qualifications to serve on the Board include his financial expertise and operating experience at other small-cap companies.
Barry A. Igdaloff, age 64, has
been a member of the Board since 2009. Mr. Igdaloff has served as the sole proprietor of Rose Capital, a registered investment
advisor in Columbus, Ohio, since 1995. Mr. Igdaloff has been a director of Dynex Capital, Inc. since 2000. Previously, Mr. Igdaloff
was a director of Guest Supply, Inc. prior to its acquisition by Sysco Foods in 2001. Prior to entering the investment business,
Mr. Igdaloff was an employee of Ernst & Whinney’s international tax department. Mr. Igdaloff is a non-practicing CPA
and a non-practicing attorney.
The Board believes Mr. Igdaloff’s
qualifications to serve on the Board include his financial expertise and years of experience as an investment advisor, attorney,
CPA and director of public companies.
Lee D. Keddie, age 50, has been
a member of the Board since 2018. Mr. Keddie has been President and Chief Executive Officer of CompuMed Inc. (OTC:CMPD) (“CompuMed”),
an enterprise telemedicine solutions company, since November 2015. In addition, he has been President and Chief Executive Officer
of Value Creation Management Group LLC, a company that invests in and provides consulting to companies that need operational improvement,
since September 2014. Previously, Mr. Keddie spent 13 years with HKX, Inc., a developer of control systems for excavators, as a
Co-Owner, President & General Manager, from January 1999 to September 2013. Prior to his business leadership roles, Mr. Keddie
spent over eight years in both the commercial and military sectors of the aircraft industry. He has been a member of the board
of directors of CompuMed since November 2014 and of Stephan Co. (OTC:SPCO), a manufacturer of hair care products, since March 2015.
Mr. Keddie was a board member of Essex Rental Corp. (NASDAQ:ESSX), a company that rents and distributes construction lifting equipment,
from June 2015 to February 2017. Mr. Keddie is a professional engineer, and received an Honors Co-op Mechanical Engineering Degree
from the University of Waterloo, and spent two additional years at the University of Toronto in Aerospace Studies.
The Board believes Mr. Keddie’s
qualifications to serve on the Board include his extensive operating expertise and experience as a director of public companies.
David W. Pointer, age 49, has
been our Chief Executive Officer and Chairman of the Board since 2018. He has served as the Managing Partner of V.I. Capital Management,
LLC, a registered investment advisory firm that he founded, since January 2008. Prior to that, Mr. Pointer was a Senior Portfolio
Manager and Senior Vice President at ICM Asset Management, an employee owned investment manager, from September 2003 to September
2007, as well as Portfolio Manager at AIM/INVESCO Investments, an investment management firm, from July 1999 to August 2003. Mr.
Pointer has served on the board of directors of CompuMed, an enterprise telemedicine solutions company, since December 2013 and
as Chairman since October 2014, and previously served as Co-Chief Executive Officer from November 2015 to January 2016. He also
has served on the board of directors of Solitron Devices, Inc., a manufacturer of solid-state semiconductor components, since August
2015 and as Chairman since July 2016. Previously, Mr. Pointer served on the board of directors of ALCO Stores, Inc., a retailer,
from September 2014 to June 2015. Mr. Pointer has taught Corporate Finance as an adjunct faculty in Whitworth University’s
MBA program as well as Gonzaga University’s MBA program and is an expert in financial analysis and financial markets. Mr.
Pointer holds a Bachelor of Science in Business Administration from Central Washington University and a Master of Business Administration
from the Wharton School of Business at the University of Pennsylvania. Mr. Pointer is a member of the CFA Institute and a Chartered
Financial Analyst.
The Board believes Mr. Pointer’s
qualifications to serve on the Board include his knowledge of Novation from serving as its Chief Executive Officer, financial expertise
and experience as a director at other public companies.
V.I. Capital Management, LLC (“V.I.
Capital”) and our Chief Executive Officer and Chairman of the Board David W. Pointer are subject to a consent order (the
“Consent Order”) from the State of Washington Department of Financial Institutions, Securities Division, dated March
12, 2018 (Order Number S-16-2093-17-CO01), relating to alleged breaches of their fiduciary duty as investment advisors to their
clients, including (i) failure to disclose certain conflict of interest stemming from Mr. Pointer’s service on the Boards
of Directors of CompuMed and Solitron Devices, Inc., (ii) pledging V.I. Capital investment fund assets as collateral for a line
of credit for CompuMed and failing to disclose such pledge to V.I. Capital’s year-end auditor, and (iii) failure to timely
distribute audited financial statements and a final fund audit to investors. As conditions of the Consent Order, V.I. Capital and
Mr. Pointer agreed to (i) cease and desist from violating the Securities Act of 1933, (ii) pay a fine of $10,000 and (iii) pay
costs of $2,500. Mr. Pointer also agreed that he will not be a principal, officer or owner of an investment adviser or broker-dealer
for 10 years following the entry of the Consent Order, but he may apply for a securities salesperson or investment adviser representative
registration with an acceptable plan of supervision.
Executive Officers
Carolyn K. Campbell, age 48, has
served as our Chief Financial Officer since 2017. She previously worked as an independent contractor in internal audit and tax
roles for various businesses from July 2016 to August 2017. From 2007 to March 2016, Ms. Campbell served as the Company’s
Internal Audit Manager and was responsible for overseeing corporate audit processes and developing and implementing risk-based
audit plans and internal controls over financial recordkeeping and reporting. From 2001 to 2004, Ms. Campbell was an internal auditor
with Butler Manufacturing Company, a construction engineering company. From 1995 to 2001, Ms. Campbell was employed by Houlihan’s
Restaurant Group, a developer of restaurant concepts, most recently as a tax analyst. Ms. Campbell holds a Bachelor of Science
in Business Administration from the University of Central Missouri.
There are no family relationships among
our executive officers and directors.
Related Party Transactions
The Company has adopted a written policy
that addresses the review, approval or ratification of any transaction, arrangement, or relationship or series of similar transactions,
arrangements or relationships, including any indebtedness or guarantee of indebtedness, between the Company and any related party,
in which the aggregate amount involved exceeds the lesser of $120,000 or 1% of the average of the Company’s total assets
at year-end for the last two completed fiscal years. Under the policy, a related party of the Company includes:
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Any executive officer, or any director or nominee for election as a director;
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Any person who owns more than 5% of the Company’s voting securities;
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Any immediate family member of any of the foregoing; or
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Any entity in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which
such person has a 10% beneficial ownership interest.
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Under the policy, the Board reviews the
material facts of any related party transaction and approves it prior to its occurrence. If advance approval is not feasible, then
the Board will either ratify the transaction at its next regularly scheduled meeting or the transaction will be rescinded. In making
its determination to approve or ratify any related party transaction, the Board may consider such factors as (i) the extent of
the related party’s interest in the transaction, (ii) if applicable, the availability of other sources of comparable products
or services, (iii) whether the terms of the transaction are no less favorable than terms generally available to Company in unaffiliated
transactions under like circumstances, (iv) the benefit to the Company, and (v) the aggregate value of the transaction.
No director may engage in any Board discussion
or approval of any related party transaction in which he or she is a related party, but that director is required to provide the
Board with all material information reasonably requested concerning the transaction.
Vote Required
Each of the five director nominees receiving
a plurality of the votes cast at the Annual Meeting will be elected as a director.
THE BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE “FOR” EACH OF THE DIRECTOR NOMINEES IDENTIFIED IN THIS PROPOSAL.
PROPOSAL 2 –
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has appointed Boulay
PLLP as our independent registered public accounting firm for the fiscal year ending December 31, 2019. Although this appointment
does not require ratification, the Board has directed that the appointment of Boulay PLLP be submitted to shareholders for ratification
due to the significance of the appointment. If shareholders do not ratify the appointment of Boulay PLLP, the Audit Committee will
consider the appointment of another independent registered public accounting firm.
Boulay PLLP served as the Company’s
independent registered public accounting firm for the fiscal years ended December 31, 2018 and 2017. It is not expected that a
representative of Boulay PLLP will be present at the Annual Meeting.
Audit and Non-Audit Fees
The following table presents aggregate
fees billed for professional services rendered by Boulay PLLP for fiscal years 2018 and 2017. There were no other professional
services rendered or fees billed by Boulay PLLP for fiscal years 2018 and 2017.
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For the
Fiscal Year Ended
December 31,
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2018
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2017
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Audit fees(1)
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$ 118,449
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$ 144,977
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Audit-related fees
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Tax fees(2)
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60,248
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35,883
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All other fees(3)
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20,311
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Total
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$ 178,697
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$ 201,171
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(1)
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These fees include the annual audit and quarterly reviews of our consolidated financial statements, assistance with and review
of documents filed with the SEC.
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These fees are for preparation of the Company’s federal and state income tax returns.
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These fees are related to the audit of the Company’s 401(k) plan.
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Pre-Approval Policies and Procedures
The Audit Committee has adopted a policy
with respect to the pre-approval of all audit and non-audit services provided by our independent registered public accounting firm.
All fees paid to our independent registered public accounting firm for fiscal years 2018 and 2017 were pre-approved in accordance
with these policies. Generally, the policy requires that the Audit Committee annually approve fees exceeding $50,000 for audit
services, audit-related and tax services. Fees expected to exceed $10,000 for all other services must be approved prior to engagement
for those services.
Vote Required
The affirmative vote of a majority of
the votes cast on this proposal at the Annual Meeting is required to ratify the appointment
of Boulay PLLP as our independent registered public accounting firm for the fiscal
year ending December 31, 2019.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
“FOR” the RATIFICATION OF
THE APPOINTMENT OF BOULAY PLLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2019.
PROPOSAL 3 –
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 provides that our shareholders have the opportunity to vote to approve, on an advisory, non-binding
basis, the compensation of our Named Executive Officers (as defined herein) as disclosed in this proxy statement in accordance
with SEC rules.
We are asking shareholders to indicate
their support for the compensation of our Named Executive Officers, who are named in the “Summary Compensation Table”
included in this proxy statement. This proposal, commonly known as a “say-on-pay” proposal, gives shareholders the
opportunity to express their views on the compensation of our Named Executive Officers. Accordingly, we will ask shareholders to
vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED,
that the Company’s shareholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed
in the Company’s proxy statement for the 2019 Annual Meeting of Shareholders pursuant to the compensation disclosure rules
of the Securities and Exchange Commission, including the Summary Compensation Table and the other related tables and disclosure.”
The say-on-pay vote is advisory, and
therefore not binding on the Company, the Compensation Committee of the Board or the Board. The Board and the Compensation Committee
value the opinions of our shareholders and to the extent there is any significant vote against the Named Executive Officer compensation
as disclosed in this proxy statement, we will consider our shareholders’ concerns and the Compensation Committee will evaluate
whether any actions are necessary to address those concerns.
Vote Required
The adoption of the advisory resolution
to approve the compensation of the Named Executive Officers requires the affirmative vote of a majority of the votes cast on this
proposal at the Annual Meeting.
THE BOARD UNANIMOUSLY RECOMMENDS A
VOTE “FOR” the adoption
of the resolution approving the compensation of the Company’s named executive officers.
PROPOSAL 4 –
ADVISORY VOTE ON FREQUENCY OF SHAREHOLDER ADVISORY VOTES ON EXECUTIVE COMPENSATION
In accordance with Section 14A of the
Exchange Act, this proposal affords shareholders the opportunity to vote, on an advisory, non-binding basis at least once every
six years, on the frequency of shareholder advisory votes on the compensation of the named executive officers as disclosed in the
Company’s proxy statements in accordance with the SEC’s rules. This proposal is commonly known as a “say-on-frequency”
proposal. We are asking shareholders to indicate their support for holding non-binding, advisory votes on the compensation of our
named executive officers every year because we believe that an annual advisory vote on executive compensation will allow shareholders
to provide direct input on the Company’s compensation philosophy, policies and practices every year. Additionally, an annual
advisory vote on executive compensation is consistent with the Company’s policy of seeking input from, and engaging in discussions
with, its shareholders on executive compensation and corporate governance matters.
The say-on-frequency vote is advisory,
and therefore not binding upon the Company, the Compensation Committee of the Board or the Board. The Board and the Compensation
Committee value the opinions of our shareholders, and the option that receives the most votes will be considered by the Board and
the Compensation Committee in determining the preferred frequency of advisory votes on the compensation of the named executive
officers.
Vote Required
Shareholders can select from the following
options to vote on how frequently the non-binding, advisory votes on the compensation of the named executive officers should be
held: “1 Year,” “2 Years” or “3 Years.” The option receiving the greatest number of votes cast
on this proposal at the Annual Meeting will be considered the frequency approved by shareholders.
THE BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS SELECT “1 YEAR,” INDICATING A DESIRE TO HOLD NON-BINDING, ADVISORY VOTES ON THE COMPENSATION OF
OUR NAMED EXECUTIVE OFFICERS EVERY YEAR.
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth sets
forth certain information with respect to beneficial ownership of our Common Stock as of October 24, 2019 by: (i) each person,
or group of affiliated persons, known to us to beneficially own more than 5% of our outstanding Common Stock, (ii) each of our
directors and Named Executive Officers, and (iii) all of our current directors and executive officers as a group. The amounts
and percentages of Common Stock beneficially owned are reported on the basis of regulations of the SEC governing the determination
of beneficial ownership of securities. The information relating to 5% beneficial owners is based on information we received from
such holders. Except as otherwise set forth below, the address of the persons listed below is c/o Novation Companies, Inc., 9229
Ward Parkway, Suite 340, Kansas City, Missouri 64114.
|
Beneficial
Ownership of Common Stock
|
Name of Beneficial Owner
|
Shares
|
Percent
of Class(1)
|
Named Executive Officers and Directors
|
|
|
Howard M. Amster(2)
|
3,538,623
|
3.1%
|
Howard Timothy Eriksen(3)
|
1,333,333
|
1.2%
|
Barry A. Igdaloff(4)
|
10,170,376
|
9.0%
|
Lee D. Keddie(5)
|
1,333,333
|
1.2%
|
David W. Pointer
|
2,000,000
|
1.8%
|
Carolyn K. Campbell
|
400,000
|
*
|
Richard M. Rector
|
--
|
--
|
Jeffrey E. Eberwein
|
1,207,522
|
1.1%
|
All current directors and executive officers as a group (6 persons)(6)
|
18,775,665
|
16.7%
|
|
|
|
5% Beneficial Owners
|
|
|
Massachusetts Mutual Life Insurance Company(7)
|
19,258,775
|
17.1%
|
|
(1)
|
Based on 112,403,893 shares of common stock outstanding as of October 24, 2019. Shares of common stock issuable upon exercise
of options, warrants or other rights or the conversion of other convertible securities beneficially owned that are exercisable
or convertible within 60 days are deemed outstanding for the purpose of computing the percentage ownership of the person holding
such securities and rights and all directors and executive officers as a group.
|
|
(2)
|
Consists of 3,026,567 shares of common stock, 500,000 shares of unvested restricted stock and 12,056 shares of common stock
issuable upon exercise of options held directly.
|
|
(3)
|
Consists of 833,333 shares of common stock and 500,000 shares of unvested restricted stock.
|
|
(4)
|
Consists of 6,101,306 shares of common stock, 600,000 shares of unvested restricted stock and 12,056 shares of common stock
issuable upon exercise of options held directly; and 3,457,014 shares of common stock controlled by Mr. Igdaloff as a registered
investment advisor.
|
|
(5)
|
Consists of 833,333 shares of common stock and 500,000 shares of unvested restricted stock.
|
|
(6)
|
Consists of 16,651,553 shares of common stock, 2,100,000 shares of unvested restricted stock and 24,112 shares of common stock
issuable upon exercise of options. Excludes shares beneficially owned by Mr. Rector and Mr. Eberwein, who are no longer executive
officers or directors of the Company.
|
|
(7)
|
Based on a Form 3 filed on December 14, 2011, Massachusetts Mutual Life Insurance Company (“Mass Mutual”) may be
deemed to own beneficially and indirectly 19,258,775 shares of common stock held in one or more advisory accounts and private investment
funds. The address of Mass Mutual is 1295 State Street, Springfield, MA 01111.
|
CORPORATE GOVERNANCE
AND RELATED MATTERS
Director Independence
The Board has determined that all of
our directors are independent within the meaning of SEC and NASDAQ rules. The Board has also determined that all directors serving
on the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are independent within the meaning
of SEC and NASDAQ rules. Although the Company’s securities are not listed on NASDAQ, the Company uses the independence standards
provided in NASDAQ rules in determining whether or not our directors are independent.
Board Leadership Structure
The Board is led by Mr. Pointer, the
Company’s Chief Executive Officer and Chairman of the Board, and by Mr. Igdaloff, who serves as the Company’s Lead
Independent Director having such responsibilities set forth in the Company’s Corporate Governance Guidelines. The Board has
determined that this leadership structure is in the best interests of the Company’s shareholders at this time.
Board and Committee Meetings
During 2018, there were five meetings
of the Board, five meetings of the Audit Committee, one meeting of the Compensation Committee and one meeting of the Nominating
and Corporate Governance Committee, in addition to actions taken by unanimous written consent. Each director participated in at
least 75% of the meetings of the Board and the committees on which he served during the periods for which he has been a director
or committee member. We have no written policy regarding director attendance at our annual meetings of shareholders. Of our Board
members, only Mr. Pointer attended our 2018 Annual Meeting.
Board Committees
The Board has a standing Audit Committee,
Compensation Committee and Nominating and Corporate Governance Committee. The Board has determined that all directors serving on
the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee are independent with the meaning
of SEC and NASDAQ rules. Descriptions of the responsibilities of such committees are provided below. These descriptions are qualified
in their entirety by the full text of the written committee charters that may be found at the Investor Relations section of our
website (under “Committees”) at www.novationcompanies.com/investors.
Audit Committee. The responsibilities
of the Audit Committee are set forth in its charter and include assisting the Board in fulfilling its oversight responsibility
relating to: (i) the integrity of the Company’s consolidated financial statements and financial reporting process and its
system of internal accounting and financial controls; (ii) the performance of the internal audit function; (iii) the performance
of the independent auditors, which would include an evaluation of the independent auditor’s qualifications and independence;
(iv) the Company’s compliance with legal and regulatory requirements, including disclosure controls and procedures; and (v)
the preparation of an Audit Committee report to be included in the Company’s annual proxy statement. The Audit Committee
consists of Howard M. Amster, Howard Timothy Eriksen, and Barry A. Igdaloff, with Mr. Igdaloff serving as the chairman. The Board
has determined that Messrs. Igdaloff and Eriksen qualify as “audit committee financial experts” under SEC rules and
that each Audit Committee member has sufficient knowledge in reading and understanding the Company’s consolidated financial
statements to serve on the Audit Committee.
Nominating and Corporate Governance
Committee. The responsibilities of the Nominating and Corporate Governance Committee are set forth in its charter and include
the following: (i) identify individuals qualified to become Board members consistent with the criteria established by the Board;
(ii) recommend to the Board the director nominees for the next annual meeting of shareholders; (iii) lead the Board in the annual
review of the Board’s performance and the review of management’s performance; and (iv) shape the corporate governance
policies and practices including developing a set of corporate governance principles applicable to the Company and recommending
them to the Board. The Nominating and Corporate Governance Committee consists of Howard M. Amster, Barry A. Igdaloff
and Lee D. Keddie, with Mr. Keddie serving as the chairman.
Compensation Committee. The responsibilities
of the Compensation Committee are set forth in its charter and include the following: (i) review and approve the goals, objectives
and compensation structure for our Chief Executive Officer, Chief Financial Officer and senior management; (ii) review, approve
and recommend to the Board any new incentive-compensation and equity-based plans that are subject to Board approval; and (iii)
approve any required disclosure on executive officer compensation for inclusion in the Company’s annual proxy statement and
Annual Report on Form 10-K. The Compensation Committee consists of Howard M. Amster, Barry A. Igdaloff and Lee D. Keddie, with
Mr. Igdaloff serving as the chairman.
Compensation Committee Process and Advisors
The Compensation Committee is responsible
for discharging the responsibilities of the Board with respect to the compensation of our executive officers. The Compensation
Committee recommends overall compensation of our executive officers to the Board. The Board approves all compensation of our executive
officers. The Compensation Committee may form and delegate authority to subcommittees, comprised of one or more members of the
Compensation Committee, as necessary or appropriate, and each such subcommittee shall have the full power and authority of the
Compensation Committee.
The charter of the Compensation Committee
permits the Compensation Committee to engage outside consultants. In 2018, the Compensation Committee did not retain a compensation
consultant.
Corporate Governance Documents
The Company’s Corporate Governance
Guidelines, Code of Conduct, and the charters of the Audit Committee, Compensation Committee and Nominating and Corporate Governance
Committee are available at the Investor Relations section of our website at www.novationcompanies.com/investors. The Company will
also provide copies of these documents free of charge to any shareholder who sends a written request to: Novation Companies, Inc.,
Investor Relations, 9229 Ward Parkway, Suite 340, Kansas City, MO 64114.
Code of Ethics
The Company has adopted a Code of Conduct
that applies to our directors, principal executive officer, principal financial officer, principal accounting officer, and other
employees. The Code of Conduct is available at the Investor Relations section of our website (under “Corporate Governance”)
at www.novationcompanies.com/investors. We intend to satisfy the disclosure requirements regarding any amendment to, or waiver
from, a provision of our Code of Conduct that applies to our principal executive officer, principal financial officer, principal
accounting officer, controller or persons performing similar functions by disclosing such matters on our website within four business
days.
Our investor relations contact information
follows:
Investor Relations
9229 Ward Parkway, Suite 340
Kansas City, Missouri 64114
816.237.7000
Email: ir@novationcompanies.com
Shareholder Communications with the Board
Shareholders may communicate directly
with any member of the Board or any individual chairman of a Board committee by writing directly to those individuals at the following
address: Novation Companies, Inc., 9229 Ward Parkway, Suite 340, Kansas City, MO 64114. Communications that are intended for the
non-management, independent directors generally should be marked to the attention of the chairman of the Nominating and Corporate
Governance Committee. The Company’s general policy is to forward, and not to intentionally screen, any substantive mail received
at the Company’s corporate office that is sent directly to a director; however, (i) routine advertisements and business solicitations
and (ii) communications deemed to be a security risk or principally for harassment purposes, may not be forwarded in the discretion
of the Corporate Secretary, provided that in the latter case the Chairman of the Board is notified thereof.
Risk Oversight
The Board oversees an enterprise-wide
approach to risk management, designed to support the achievement of Company objectives, improve long-term Company performance and
create shareholder value. A fundamental part of risk management is understanding the risks the Company faces and what steps management
is taking to manage those risks, but also understanding what level of risk is appropriate for the Company. The involvement of the
full Board in setting the Company’s business strategy and objectives is integral to the Board’s assessment of the Company’s
risk and also a determination of what constitutes an appropriate level of risk for the Company. The full Board conducts an annual
risk assessment of the Company’s financial risk, legal/compliance risk and operational/strategic risk and addresses individual
risk issues throughout the year as necessary.
While the Board has the ultimate oversight
responsibility for the risk management process, the Board delegates responsibility for certain aspects of risk management to the
Audit Committee. Per its charter, the Audit Committee focuses on key financial risks and related controls and processes and discusses
with management the Company’s major financial reporting exposures and the steps management has taken to monitor and control
such exposures.
The Board believes its leadership structure
enhances overall risk oversight. While the Board requires risk assessments from management, the combination of Board member experience,
diversity of perspectives, continuing education and independence of governance processes provide an effective basis for testing,
overseeing and supplementing management assessments.
Identifying and Evaluating Nominees for Directors
The Nominating and Corporate Governance
Committee utilizes a variety of methods for identifying and evaluating nominees for director. The Nominating and Corporate Governance
Committee regularly assesses the appropriate size of the Board, and whether any vacancies on the Board are expected due to retirement
or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominating and Corporate Governance Committee
considers various potential candidates for director. Candidates may come to the attention of the Nominating and Corporate Governance
Committee through current members of the Board, professional search firms, shareholders or other persons. These candidates are
evaluated at regular or special meetings of the Nominating and Corporate Governance Committee, and may be considered at any point
during the year. Shareholder nominations should be addressed to: Novation Companies, Inc., 9229 Ward Parkway, Suite 340, Kansas
City, MO 64114, attention Corporate Secretary. The Nominating and Corporate Governance Committee will consider properly submitted
shareholder nominations for candidates for the Board, following verification of the shareholder status of persons proposing candidates.
If any materials are provided by a shareholder in connection with the nominating of a director candidate, such material will be
forwarded to the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will also review
materials provided by professional search firms or other parties.
The Nominating and Corporate Governance
Committee considers candidates for the Board based upon several criteria set forth in the Company’s Corporate Governance
Guidelines, including their broad-based business and professional skills and experience, education, accounting and financial expertise,
age, reputation, civic and community relationships, concern for the long-term interest of shareholders, personal integrity and
judgment, knowledge and experience in the Company’s industry (such as operations, finance, accounting and marketing experience
and education) and diversity. The Nominating and Corporate Governance Committee considers diversity in the broadest sense, thus
including factors such as age, gender, race, ethnicity and geographic location, as well as a variety of experience and educational
backgrounds when seeking nominees to the Board. The Nominating and Corporate Governance Committee does not have a formal diversity
policy in place.
The Nominating and Corporate Governance
Committee does not assign specific weights to the criteria and no particular criterion is necessarily applicable to all prospective
nominees. When evaluating nominees, the composition of the entire Board is also taken into account, including the need for a majority
of independent directors. In addition, the assessment of a candidate includes consideration of the number of public boards on which
he or she serves because of the time requirements for duties and responsibilities associated with serving on the Board. The Nominating
and Corporate Governance Committee believes that the backgrounds and qualifications of the directors, considered as a group, should
provide a significant composite mix of experience, knowledge and abilities that will allow the Board to fulfill its responsibilities.
The Nominating and Corporate Governance Committee assesses the effectiveness of the Corporate Governance Guidelines, including
with respect to director nominations and qualifications and achievement of having directors with a broad range of experience and
backgrounds, through completion of the annual self-evaluation process.
Director Compensation
The following table presents a summary
of the compensation earned by each director who served on the Board during the fiscal year ended December 31, 2018, other than
our Chief Executive Officer, Mr. Pointer and our former Executive Chairman, Mr. Eberwein, whose compensation is described in the
Executive Compensation section below:
Name
|
Fees Earned
or
Paid in Cash
($)
|
Stock Awards
($)(1)
|
Total
($)
|
Howard M. Amster
|
25,000
|
25,000
|
50,000
|
Barry A. Igdaloff
|
61,875
|
25,000
|
86,875
|
Howard Timothy Eriksen(2)
|
18,750
|
25,000
|
43,750
|
Lee D. Keddie(2)
|
22,500
|
25,000
|
47,500
|
Charles M. Gillman(3)
|
6,250
|
--
|
6,250
|
Robert G. Pearse(3)
|
8,125
|
--
|
8,125
|
|
(1)
|
Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.
|
|
(2)
|
Messrs. Eriksen and Keddie were appointed to the Board effective April 12, 2018.
|
|
(3)
|
Messrs. Pearse and Gillman resigned from the Board effective April 12, 2018.
|
On August 15, 2018, the Board approved
base compensation for each of the Company’s non-employee directors, Barry A. Igdaloff, Howard M. Amster, Howard Timothy Eriksen
and Lee D. Keddie, in an amount of $50,000 per annum, including (i) $25,000 in restricted stock awards, vesting on the first anniversary
of the grant date, and (ii) $25,000 in cash, payable on a quarterly basis. The Board approved additional compensation for the chairmen
of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee and the Lead Independent Director
in the amounts of $10,000, $7,500, $5,000 and $20,000, respectively, in cash, payable on a quarterly basis.
As a component of each non-employee director’s
base compensation for 2018, on August 17, 2018, the Compensation Committee granted to each of the non-employee directors 833,333
shares of restricted stock, vesting on the first anniversary of the grant date, pursuant to the terms and conditions of the 2015
Incentive Stock Plan and each director’s respective award agreement.
AUDIT COMMITTEE
REPORT
The Audit Committee engages the independent
registered public accounting firm, reviews with such firm the plans and results of any audits, reviews other professional services
provided by such firm, reviews the independence of such firm, considers the range of audit and non-audit fees and reviews with
management its evaluation of the Company’s internal control structure.
The Audit Committee has reviewed and
discussed the Company’s consolidated financial statements for fiscal year 2018 with management and Boulay PLLP, the Company’s
independent registered public accounting firm. In its discussion, management has represented to the Audit Committee that the Company’s
consolidated financial statements for fiscal year 2018 were prepared in accordance with U.S. generally accepted accounting principles.
In addition, the Audit Committee has discussed with Boulay PLLP the matters required to be discussed in accordance with the standards
of the Public Company Accounting Oversight Board (United States) (“PCAOB”) by Auditing Standard No. 16, Communications
with Audit Committees.
The Audit Committee has received from
the independent registered public accounting firm written disclosures and a letter from such firm required by applicable requirements
of the PCAOB regarding such firm’s communications with the Audit Committee concerning independence, and has discussed with
such firm its independence.
Based on these reviews and discussions,
the Audit Committee has recommended to the Board that the audited financial statements be included in the Company’s Annual
Report on Form 10-K for the year ended December 31, 2018 for filing with the SEC.
Audit Committee
Barry A. Igdaloff (Chairman)
Howard M. Amster
Howard Timothy Eriksen
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation
of our 2018 named executive officers (collectively, our “Named Executive Officers”) for the periods indicated.
Name and
Principal
|
Year
|
|
|
Stock
Awards ($)(1)
|
All
Other Compensation ($)
|
|
David W. Pointer(2)
|
2018
|
72,693
|
60,000
|
—
|
66
|
132,758
|
Chief Executive Officer and Chairman
|
|
|
|
|
|
|
Carolyn K. Campbell(3)
|
2018
|
144,904
|
42,500
|
—
|
356
|
187,760
|
Chief Financial Officer
|
2017
|
43,934
|
—
|
15,750
|
—
|
59,684
|
Richard M. Rector(4)
|
2018
|
225,000
|
52,000
|
—
|
64,095
|
341,095
|
Former President, Healthcare Staffing, Inc.
|
2017
|
101,923
|
35,000
|
97,000
|
6,720
|
240,643
|
Jeffrey E. Eberwein(5)
|
2018
|
24,658
|
—
|
—
|
—
|
24,658
|
Former Executive Chairman
|
2017
|
41,369
|
25,000
|
75,000
|
—
|
141,369
|
|
(1)
|
Represents the aggregate grant date fair value computed in accordance with FASB ASC Topic 718.
|
|
(2)
|
Mr. Pointer was appointed Chief Executive Officer on March 27, 2018.
|
|
(3)
|
Ms. Campbell was appointed Chief Financial Officer on August 14, 2017.
|
|
(4)
|
Compensation for Mr. Rector is presented beginning on July 27, 2017, the date of our acquisition of Healthcare Staffing, Inc.
(“HCS”). Other compensation includes a payment to Mr. Rector for his buyout of accrued paid time off pursuant to the
HCS paid time off policy and certain tax waivers per the HCS Purchase Agreement. Mr. Rector resigned from his position effective
April 21, 2019.
|
|
(5)
|
Mr. Eberwein resigned from his position as Executive Chairman effective March 27, 2018 and from the Board effective March 31,
2018.
|
Outstanding Equity Awards at Fiscal Year-End 2018
The following table sets forth equity
incentive plan awards for each of our Named Executive Officers outstanding as of December 31, 2018.
|
Stock Awards
|
Name
|
Number
of shares or units of stock that have not vested
|
Market
value of shares of units of stock that have not vested(1)
|
Richard M. Rector(2)
|
600,000
|
12,000
|
|
(1)
|
Based on the closing share price on December 31, 2018 of $0.02.
|
|
(2)
|
Shares of restricted stock granted under the 2015 Incentive Stock Plan. 250,000 of these shares were forfeited to the Company
as of April 21, 2019, effective upon Mr. Rector’s resignation from his position as President of HCS.
|
Employment Agreements and Arrangements with Named Executive
Officers
David W. Pointer
Mr. Pointer entered an employment agreement
with the Company on March 27, 2018 (the “Pointer Employment Agreement”). Mr. Pointer’s base salary is $100,000, and
he is eligible to earn an annual bonus, based on performance benchmarks, and to participate in any equity programs of the Company,
at the Company’s discretion. The Pointer Employment Agreement has an indefinite term and provided that Mr. Pointer is an employee
“at-will,” and his employment may be terminated at any time by either party, with or without cause, for any reason
or no reason. If Mr. Pointer’s employment is terminated by the Company other than for “cause” or by Mr. Pointer for
“good reason” (each as defined in the Pointer Employment Agreement), Mr. Pointer will receive, over a period of 12
months following termination, compensation at an annual rate equal to his then-existing annual base salary.
Carolyn K. Campbell
Ms. Campbell entered an employment agreement
with the Company on August 9, 2017 (the “Campbell Employment Agreement”). Ms. Campbell’s base salary is $150,000,
and she is eligible to participate in any equity programs of the Company, at the Company’s discretion. The Campbell Employment
Agreement has an indefinite term and provided that Ms. Campbell is an employee “at-will,” and her employment may be
terminated at any time by either party, with or without cause, for any reason or no reason. If Ms. Campbell’s employment
is terminated by the Company other than for “cause” or by Ms. Campbell for “good reason” (each as defined
in the Campbell Employment Agreement), Ms. Campbell will receive, over a period of 3 months following termination, compensation
at an annual rate equal to her then-existing annual base salary.
Richard M. Rector
Mr. Rector entered an employment agreement
with the Company and HCS on July 27, 2017 (the “Rector Employment Agreement”). Mr. Rector’s base salary was $225,000,
and he was eligible to earn a quarterly bonus, based on the Company’s EBITA achievement, and to participate in the Company’s
2015 Incentive Stock Plan. The Rector Employment Agreement also provided for a grant of 1,000,000 restricted shares of the Company’s
common stock pursuant to the terms of the Rector Employment Agreement and the Company’s 2015 Incentive Stock Plan. The Rector
Employment Agreement had an indefinite term and provided that Mr. Rector is an employee “at-will,” and his employment
may be terminated at any time by either party, with or without cause, for any reason or no reason. If Mr. Rector’s employment
were terminated by the Company other than for “cause” or by Mr. Rector for “good reason” (each as defined
in the Rector Employment Agreement), Mr. Rector would have received, over a period of 6 months following termination, compensation
at an annual rate equal to his then-existing annual base salary and immediate vesting of any Novation restricted shares that are
scheduled to vest within one year after the date of termination of employment, if any, pursuant to the Company’s 2015 Incentive
Stock Plan. Mr. Rector resigned from his position as President of HCS effective April 21, 2019.
Jeffrey E. Eberwein
Mr. Eberwein was not party to an employment
agreement with the Company. Mr. Eberwein resigned from his position as Executive Chairman effective March 27, 2018 and from the
Board effective March 31, 2018.
Equity Compensation Plan Information
The following table sets forth information
as of December 31, 2018 with respect to compensation plans under which Common Stock may be issued.
Plan Category
|
Number
of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
|
Weighted
Average Exercise Price of Outstanding Options, Warrants and Rights
|
Number
of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Shares Reflected in the First
Column)
|
Equity compensation plans approved by shareholders (1)
|
72,336
|
$1.17
|
6,152,088
|
Equity compensation plans not approved by shareholders
|
—
|
—
|
—
|
Total
|
72,336
|
$ 1.17
|
6,152,088
|
|
(1)
|
Represents shares that may be issued pursuant to outstanding options awarded under the 2015 Incentive Stock Plan.
|
SHAREHOLDER PROPOSALS
OR NOMINATIONS
Any shareholder proposal made in accordance
with the requirements of Rule 14a-8 promulgated under the Exchange Act, including the nomination of a director, and intended to
be presented at the 2020 annual meeting of shareholders (the “2020 Annual Meeting”) and included in the proxy statement
and form proxy relating to such meeting, must satisfy the requirements of the proxy rules promulgated by the SEC and must be received
at the Company’s principal executive offices on or before May 8, 2020.
Our Bylaws provide that any shareholder
wishing to bring any matter, including the nomination of a director, before an annual meeting of shareholders must deliver notice
to our Corporate Secretary at our principal executive offices not later than 5:00 p.m., Central Time, on the 90th day
prior to the first anniversary of the date of the proxy statement for the preceding year’s
annual meeting; provided, however, that in the event that the date of the annual meeting is advanced or delayed by more than 30
days from the first anniversary of the date of the preceding year’s annual meeting, in order for notice by the shareholder
to be timely, such notice must be so delivered not earlier than the 150th day prior to the date of such annual meeting
and not later than 5:00 p.m., Central Time, on the later of the 120th day prior to the date of such annual meeting,
as originally convened, or the 10th day following the day on which public announcement of the date of such meeting is
first made. The public announcement of a postponement or adjournment of an annual meeting shall not commence a new time period
for the giving of a shareholder’s notice as described above.
ADDITIONAL INFORMATION
A single set of proxy materials may
be delivered to any household at which two or more shareholders reside unless contrary instructions have been received from an
affected shareholder. This procedure, referred to as householding, reduces the volume of duplicate materials shareholders receive
and reduces mailing expenses. Once you have received notice from your broker that it will be householding communications to your
address, householding will continue until you are notified otherwise or until you revoke your consent. If you wish to receive
a separate set of proxy materials for the Annual Meeting, we will deliver them promptly upon request made by writing to Novation
Companies, Inc., Investor Relations, 9229 Ward Parkway, Suite 340, Kansas City, MO 64114. Shareholders sharing an address can
request delivery of a single copy of proxy materials for the Annual Meeting if they are receiving multiple copies of these materials
by writing to Novation Companies, Inc., Investor Relations, 9229 Ward Parkway, Suite 340, Kansas City, MO 64114.
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