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Wireless Ronin Technologies, Inc.
Baker Technology Plaza
5929 Baker Road, Suite 475
Minnetonka, Minnesota 55345

 

 

April 29, 2009

 

Dear Shareholder:

 

I am pleased to invite you to attend the annual meeting of shareholders of Wireless Ronin Technologies, Inc., to be held at Briggs and Morgan, P.A., 80 South Eighth Street, Suite 2200, Minneapolis, Minnesota, on June 11, 2009, at 3:30 p.m. central time. Details regarding the business to be conducted are more fully described in the accompanying notice of annual meeting and proxy statement. Also enclosed in this package is a proxy card for you to record your vote and a return envelope for your proxy card.

 

Your vote is important. Whether or not you plan to attend the meeting, I hope that you will vote as soon as possible. Voting will ensure your representation at the meeting, if you do not attend in person. If you do attend in person, you may withdraw your proxy and vote personally on any matters brought properly before the meeting.

 

Sincerely,

 

WIRELESS RONIN TECHNOLOGIES, INC.

 

 

James C. Granger
President, Chief Executive Officer and Director

Wireless Ronin Technologies, Inc.
Baker Technology Plaza
5929 Baker Road, Suite 475
Minnetonka, Minnesota 55345

 

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD JUNE 11, 2009

 

 

 

NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Wireless Ronin Technologies, Inc., a Minnesota corporation, will be held at Briggs and Morgan, P.A., 80 South Eighth Street, Suite 2200, Minneapolis, Minnesota, on June 11, 2009, at 3:30 p.m. central time, for the following purposes, as more fully described in the accompanying proxy statement:

 

 

Only shareholders of record at the close of business on April 20, 2009, are entitled to notice of, and to vote at, the meeting. Whether or not you expect to attend the meeting in person, please mark, date and sign the enclosed proxy exactly as your name appears thereon and promptly return it in the envelope provided, which requires no postage if mailed in the United States. Proxies may be revoked at any time before they are exercised and, if you attend the meeting in person, you may withdraw your proxy and vote personally on any matter brought properly before the meeting.

 

Sincerely,

 

WIRELESS RONIN TECHNOLOGIES, INC.

 

 

Scott N. Ross
Vice President, General Counsel and Secretary

 

Minnetonka, Minnesota

April 29, 2009

TABLE OF CONTENTS

 

Wireless Ronin Technologies, Inc.
Baker Technology Plaza
5929 Baker Road, Suite 475
Minnetonka, Minnesota 55345

 

 

 

 

PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 11, 2009

 

 

 

 

 

This proxy statement is furnished by the board of directors of Wireless Ronin Technologies, Inc. and contains information relating to the annual meeting of our shareholders to be held on June 11, 2009, beginning at 3:30 p.m. central time, at Briggs and Morgan, P.A., 80 South Eighth Street, Suite 2200, Minneapolis, Minnesota. This proxy statement and accompanying proxy card are being distributed on or about April 29, 2009.

 

Important Notice Regarding the Internet Availability of Proxy Materials for the Shareholder Meeting to be Held on June 11, 2009

 

In accordance with rules and regulations adopted by the U.S. Securities and Exchange Commission (the “SEC”), we are now furnishing our proxy materials on the Internet. “Proxy materials” means this proxy statement, our 2008 Annual Report and any amendments or updates to these documents. Our proxy materials are available on the Internet at www.wirelessronin.com/proxy2009.html.

 

What is the purpose of the annual meeting?

 

At our annual meeting, shareholders will vote on the following items of business:

 

 

You will also vote on such other matters as may properly come before the meeting or any adjournment or postponement thereof.

 

What are the board’s recommendations?

 

Our board of directors recommends that you vote:

 

 

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.

 

What shares are entitled to vote?

 

As of April 20, 2009, the record date for the meeting, we had 14,849,860 shares of common stock outstanding and approximately 96 shareholders of record. Each share of our common stock outstanding on the record date is entitled to one vote on each item being voted on at the meeting. You can vote all the shares that you owned on the record date. These shares include (1) shares held directly in your name as the shareholder of record, and (2) shares held for you as the beneficial owner through a broker, bank or other nominee. Shareholders do not have the right to cumulate votes in the election of directors.

 

What is the difference between holding shares as a shareholder of record and as a beneficial owner?

 

Most shareholders hold their shares through a broker or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.

 

Shareholder of Record.  If your shares are registered directly in your name with our transfer agent, Registrar and Transfer Company, you are considered, with respect to those shares, the shareholder of record, and we are sending these proxy materials directly to you. As the shareholder of record, you have the right to grant your voting proxy directly to the named proxy holders or to vote in person at the meeting. We have enclosed a proxy card for you to use.

 

Beneficial Owner.  If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you together with a voting instruction card. As the beneficial owner, you have the right to direct your broker, trustee or nominee how to vote and are also invited to attend the annual meeting.

 

Since a beneficial owner is not the shareholder of record, you may not vote these shares in person at the meeting unless you obtain a “legal proxy” from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting. Your broker, trustee or nominee has enclosed or provided voting instructions for you to use in directing the broker, trustee or nominee how to vote your shares.

 

Who can attend the annual meeting?

 

All shareholders as of the record date, or their duly appointed proxies, may attend the meeting. If you are not a shareholder of record but hold shares through a broker or nominee (i.e., in street name), you should provide proof of beneficial ownership on the record date, such as your most recent account statement prior to April 20, 2009, a copy of the voting instruction card provided by your broker, trustee or nominee, or other similar evidence of ownership. Registration and seating will begin at 3:15 p.m. Cameras, recording devices and other similar electronic devices will not be permitted at the meeting.

 

How can I vote my shares in person at the annual meeting?

 

Shares held in your name as the shareholder of record may be voted in person at the meeting. Shares held beneficially in street name may be voted in person only if you obtain a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares. Even if you plan to attend the meeting, we recommend that you also submit your proxy or voting instructions as described below so that your vote will be counted if you later decide not to attend the meeting.

 

How can I vote my shares without attending the annual meeting?

 

Whether you hold shares directly as the shareholder of record or beneficially in street name, you may direct how your shares are voted without attending the meeting. If you are a shareholder of record, you may vote by submitting a proxy. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker, trustee or nominee. For directions on how to vote, please refer to the instructions

included on your proxy card or, for shares held beneficially in street name, the voting instruction card provided by your broker, trustee or nominee.

 

Can I change my vote or revoke my proxy after I return my proxy card?

 

Yes. Even after you have submitted your proxy, you may change your vote or revoke your proxy at any time before the votes are cast at the meeting by (1) delivering a written notice of your revocation to our Corporate Secretary at our principal executive office, (2) executing and delivering a later dated proxy, or (3) appearing in person at the meeting, filing a written notice of revocation with our Corporate Secretary and voting in person the shares to which the proxy relates. Any written notice or later dated proxy should be delivered to Wireless Ronin Technologies, Inc., Baker Technology Plaza, 5929 Baker Road, Suite 475, Minnetonka, Minnesota 55345, Attention: Scott N. Ross, Vice President, General Counsel and Secretary, or hand-delivered to Mr. Ross before the vote at the meeting.

 

What constitutes a quorum?

 

The presence at the meeting, in person or by proxy, of the holders of at least a majority of the shares of our common stock outstanding as of the record date will constitute a quorum. There must be a quorum for any action to be taken at the meeting (other than an adjournment or postponement of the meeting). If you submit a properly executed proxy card, even if you abstain from voting, then your shares will be counted for purposes of determining the presence of a quorum. If a broker indicates on a proxy that it lacks discretionary authority as to certain shares to vote on a particular matter, commonly referred to as “broker non-votes,” those shares will still be counted for purposes of determining the presence of a quorum at the meeting.

 

What vote is required to approve each item?

 

Election of Directors.  Assuming the presence of a quorum, the seven persons receiving the highest number of FOR votes will be elected as directors.

 

Other Items.  For each other item to be considered at the annual meeting, assuming the presence of a quorum, the affirmative vote of the majority of votes cast in person or by proxy on the matter (excluding broker non-votes) will be required for approval. Abstentions will be considered for purposes of calculating the vote, but will not be considered to have been voted in favor of such matter.

 

If you hold your shares beneficially in street name and do not provide your broker or nominee with voting instructions, your shares may constitute “broker non-votes.” Generally, broker non-votes occur on a matter when a broker is not permitted to vote on that matter without instructions from the beneficial owners and instructions are not given. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes will not have any effect on the outcome of the vote.

 

What does it mean if I receive more than one proxy card?

 

If you receive more than one proxy card, it means that you hold shares registered in more than one name or brokerage account. You should sign and return each proxy card that you receive in order to ensure that all of your shares are voted.

 

How can I vote on each of the proposals?

 

In the election of directors, you may vote FOR each of the nominees, or your vote may be WITHHELD with respect to any or all of the nominees. For each other matter, you may vote FOR or AGAINST the proposal, or you may indicate that you wish to ABSTAIN from voting on the proposal.

 

Each of your shares will be voted according to your directions on the proxy card. If you sign your proxy card or broker voting instruction card with no further instructions, your shares will be voted in accordance with the recommendations of our board of directors (FOR each of the nominees for director named in the proxy statement, FOR the amendment to our Amended and Restated 2006 Equity Incentive Plan to increase the total number of shares for which awards may be granted from 1,750,000 to 2,125,000 and to increase the

maximum number of shares for which awards may be granted to any individual participant in any calendar year from 300,000 to 500,000, and FOR ratification of the appointment of independent auditors for the year ending December 31, 2009).

 

Who will count the proxy votes?

 

Votes will be counted by Erin Flor, our Executive Assistant, who has been appointed to act as the inspector of election for the annual meeting.

 

How will voting on any other business be conducted?

 

We do not expect any matters to be presented for a vote at the meeting other than the matters described in this proxy statement. If you grant a proxy, either of the proxy holders, James C. Granger or Scott N. Ross, or his nominee(s) or substitute(s), will have the discretion to vote your shares on any additional matters that are properly presented for a vote at the meeting. If a nominee is not available as a candidate for director, the persons named as proxy holders may vote your proxy for another candidate nominated by our board of directors.

 

Who is paying for this proxy solicitation?

 

We will pay the expenses incurred in connection with the solicitation of proxies. We are soliciting proxies principally by mail. In addition, our directors, officers and other employees may solicit proxies personally, by telephone, by facsimile or by e-mail, for which they will receive no consideration other than their regular compensation. We will also request brokerage houses, nominees, custodians and fiduciaries to forward soliciting material to the beneficial owners of shares held as of the record date and will reimburse such persons for their reasonable expenses so incurred.

 

Seven persons have been nominated for election as directors at the annual meeting, all of whom currently serve as directors. Our directors are elected annually, by a plurality of the votes cast, to serve until the next annual meeting of shareholders and until their respective successors are elected and duly qualified. There are no familial relationships between any director or officer.

 

The seven nominees receiving the highest number of affirmative votes of the shares entitled to vote at the annual meeting shall be elected to the board of directors. Set forth below is certain information concerning the nominees for the board of directors. The board of directors recommends that shareholders vote FOR the nominees listed below.

 

 

James C. Granger has served as our President, Chief Executive Officer and as one of our directors since December 2008. Prior to joining our company, Mr. Granger served as President of Toptech Systems, Inc., a provider of software, hardware and data services. Prior to Toptech, Mr. Granger was President and Chief Executive Officer and a Director of Norstan Inc., a communications solutions and services company, from November 2000 to February 2004. Mr. Granger served as Chairman, President and Chief Executive Officer of Digital Biometrics, Inc., now part of L-1 Identity Solutions Inc., a provider of identification information systems that employ biometric technology, from January 1997 to November 2000. He was President of Access Platform Systems Division at ADC Telecommunications, Inc., a provider of broadband communications network infrastructure products and related services from 1995 to 1997. Mr. Granger served as Vice President of Consumer Markets Operations, and before that, as Vice President of Marketing, at Sprint/United Telephone from 1989 to 1995.

 

Gregory T. Barnum joined our board of directors in February 2006, became our Lead Director in December 2007, and became Chairman in September 2008. Since February 2006, Mr. Barnum has been Vice President of Finance and Chief Financial Officer for Datalink Corporation, which designs, installs and supports

data storage systems. From July 1997 to June 2005, Mr. Barnum was Chief Financial Officer and Secretary of CNT Corporation, an information technology services company. Prior to employment with CNT Corporation, he served as Senior Vice President of Finance and Administration, Chief Financial Officer and Secretary of Tricord Systems, Inc. and held similar senior financial positions with Cray Computer Corporation and Cray Research, Inc. Mr. Barnum is a member of the board of directors of Lime Energy Co. and serves as a member of its audit and compensation committees.

 

Stephen F. Birke joined our board of directors in July 2008. Mr. Birke was our Interim Chief Executive Officer from September 2008 to December 2008. Mr. Birke served for 38 years at Target Corporation in various roles, most recently as Vice President and General Merchandise Manager until his retirement from Target in May 2008. Mr. Birke is currently founder and President of Birch Tree International, LLC, a retail/wholesale consulting company, which was organized in August 2008.

 

Thomas J. Moudry joined our board of directors in March 2006. Since December 2005, Mr. Moudry has been Chief Executive Officer and Chief Creative Officer of Martin Williams Advertising, Inc., a subsidiary of Omnicom Group, Inc., an advertising and marketing company. Prior to his current position at Martin Williams, Mr. Moudry served as such company’s President and Executive Creative Director from June 2005 to December 2005 and such company’s Executive Vice President and Creative Director from July 2003 to June 2005. From April 2000 to May 2003, Mr. Moudry was Executive Vice President and Executive Creative Officer of Omnicom Group, Inc.

 

William F. Schnell joined our board of directors in July 2005. Dr. Schnell also serves on the board of directors of National Bank of Commerce and Lakewalk Surgery Center. Since 1990, Dr. Schnell has been an orthopedic surgeon with Orthopedic Associates of Duluth, and formerly served as its President.

 

Brett A. Shockley joined our board of directors in March 2006. Since October 2008, Mr. Shockley has been served as the Managing Director of Avaya Inc.’s global professional services team for Contact Center and Unified Communications. Avaya Inc. is a privately held telecommunications company which specializes in enterprise telephony and call center technology. From January 2002 to October 2008, Mr. Shockley was Chairman, Chief Executive Officer and President of Spanlink Communications, Inc., a provider of unified communications and contact center solutions. From August 2000 to December 2001, Mr. Shockley was Vice President-General Manager of the Customer Contact Business Unit of Cisco Systems. See “Certain Relationships and Related Transactions.”

 

Geoffrey J. Obeney joined our board of directors in March 2008. Mr. Obeney has served as Vice President of Information Technology for Terra Industries, Inc., a supplier of nitrogen products to agricultural, industrial and environmental industries, since February 2008. From November 2005 to January 2008, he was the Interim Chief Executive Officer of Spirit Computing, Ltd., a supplier of information technology solutions. From October 2004 to October 2005, he served as the Chief Information Officer of SEI LLC, a start-up company. From July 2003 to October 2004, he was Vice President, Technology Infrastructure Services for W.W. Grainger, Inc. Mr. Obeney held various information technology positions with Gateway, Inc. from 1990 to 2003, including serving as Vice President Technology Infrastructure for Gateway, Inc. from March 1999 to July 2003.

 

Our board of directors represents the interests of our shareholders as a whole and is responsible for directing the management of our business and affairs, as provided by Minnesota law. The board of directors held 13 meetings during the year ended December 31, 2008. In addition to meetings of the full board, directors also attended committee meetings. Each director attended at least 75 percent of all of the meetings of the board and of those committees on which he served, except that Dr. Schnell attended 65 percent of the meetings of the board and of the committees on which he serves.

The board is comprised of a majority of independent directors as defined in Rule 5605(a)(2) (formerly Rule 4200(a)(15)) of the Marketplace Rules of the NASDAQ Stock Market. In this regard, the board has affirmatively determined that Messrs. Barnum, Birke, Moudry, Shockley and Obeney and Dr. Schnell are independent directors under that rule. Our board determined that our acquisition of communications systems for our office locations from Spanlink Communications, Inc. and Mr. Birke’s service as Interim Chief Executive Officer from September 2008 to December 2008 did not prevent it from reaching a determination that Messrs. Shockley and Birke are independent. Mr. Granger, our President, Chief Executive Officer and one of our directors, is not an independent director.

 

The independent members of the board have regularly scheduled meetings at which only independent directors are present, known as executive sessions.

 

We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions) and directors. Our Code of Business Conduct and Ethics satisfies the requirements of Item 406(b) of Regulation S-K and applicable NASDAQ Marketplace Rules. Our Code of Business Conduct and Ethics is posted on our Internet website at www.wirelessronin.com and is available, free of charge, upon written request to our Corporate Secretary at Baker Technology Plaza, 5929 Baker Road, Suite 475, Minnetonka, Minnesota 55345. We intend to disclose any amendment to or waiver from a provision of our Code of Business Conduct and Ethics that requires disclosure on our website at www.wirelessronin.com.

 

The board of directors has an audit committee, a compensation committee, a corporate governance and nominating committee and an executive committee. With the exception of our executive committee, each committee consists solely of members who are independent as defined in Rule 5605(a)(2) of the Marketplace Rules of the NASDAQ Stock Market. Further information regarding the independence of our directors for service on our board’s committees appears in the committee discussions below. The following table shows the current membership of the committees and identifies our independent directors:

 

 

 

 

Each of the audit committee, the compensation committee, and the corporate governance and nominating committee has adopted and operates under a written charter. Each such committee regularly reviews and makes recommendations to the board about changes to its charter. Current copies of the committee charters may be found on our website at www.wirelessronin.com and are available in print upon written request to our Corporate Secretary at Wireless Ronin Technologies, Inc., Baker Technology Plaza, 5929 Baker Road, Suite 475, Minnetonka, Minnesota 55345.

 

The audit committee meets throughout the year, with regularly scheduled meetings. Additional meetings, either by phone or in person, are called when deemed necessary or desirable. The compensation committee, the corporate governance and nominating committee and the executive committee meet as needed. The chairperson of each committee, with the advice and consultation of management and the committee’s outside

advisors, if any, sets the agenda for each meeting. The committees receive materials related to the topics on the agenda prior to each meeting, and keep minutes of each meeting.

 

Our audit committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act. Each member of our audit committee is independent as defined in Rule 5605(a)(2) of the Marketplace Rules of the NASDAQ Stock Market and Exchange Act Rule 10A-3. Further, no member of our audit committee participated in the preparation of the financial statements of our company or any current subsidiary of our company at any time during the past three years.

 

Pursuant to our listing agreement with the NASDAQ Stock Market, each member of the audit committee is able to read and understand fundamental financial statements, including an issuer’s balance sheet, income statement, and cash flow statement, and at least one member of the committee has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background which results in the individual’s financial sophistication. In addition, our board of directors has determined that Gregory T. Barnum is an audit committee financial expert as such term is defined by Item 407(d)(5) of Regulation S-K.

 

The functions of the audit committee include oversight of the integrity of our financial statements, our compliance with legal and regulatory requirements, and the performance, qualifications and independence of our independent auditors. Our audit committee is directly responsible for the appointment, retention, compensation, evaluation, termination and oversight of the work of any independent auditor engaged for the purpose of preparing or issuing an audit report or related work. The audit committee met seven times and took action by written consent once during the year ended December 31, 2008.

 

Our audit committee has:

 

 

Based on the above-referenced review and discussions, the audit committee recommended to the board of directors that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2008, for filing with the SEC.

 

The name of each person who serves as a member of our audit committee is set forth below.

 

 

Our compensation committee is responsible for discharging the board’s responsibilities relating to compensation of the company’s executives. Our compensation committee is also responsible for producing an annual report on executive compensation for inclusion in our proxy statement, and overseeing and advising the

board on the adoption of policies that govern our compensation programs, including stock and benefit plans. Our compensation committee met once and took action by written consent ten times during the year ended December 31, 2008.

 

Each member of our compensation committee meets the independence requirements established by our board and applicable laws, regulations and the Marketplace Rules of the NASDAQ Stock Market. In addition, each member is a non-employee director as defined in Exchange Act Rule 16b-3 and an outside director as defined under Section 162(m) of the Internal Revenue Code (the “Code”). Our board appoints the members of the compensation committee and its chairperson. Our board may remove any member from the compensation committee at any time with or without cause.

 

Our compensation committee has the resources and authority necessary to discharge its duties and responsibilities. Our compensation committee has sole authority to retain and terminate, and approve fees and other retention terms for, its outside counsel, compensation consultants, and other experts or consultants as it deems appropriate. Details regarding the role of executive officers in determining or recommending executive compensation, as well as detail regarding the role of compensation consultants, is set forth under the caption “Compensation Discussion and Analysis.”

 

In April 2009, our compensation committee engaged Financial Concepts, Inc. as its outside compensation consultant. Financial Concepts was selected based on its ability to meet the committee’s needs at the most effective cost. The committee anticipates receiving input from Financial Concepts on its compensation strategy, compensation levels and general market practices. Specific assignments will be determined by the committee, with the advice of management. The committee anticipates that Financial Concepts will advise the committee during 2009 on the development and use of a competitive market review involving base salary, non-equity incentive awards and equity incentive awards for the company’s executives.

 

During the year ended December 31, 2008, the members of our compensation committee were Gregory T. Barnum, Thomas J. Moudry and William F. Schnell. None of such persons was an officer or employee of our company during the year ended December 31, 2008, or in any prior year, and none of the members had any relationship requiring disclosure under Item 404(a) of Regulation S-K. There were no compensation committee interlocks as described in Item 407(e)(4) of Regulation S-K.

 

Our compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis that appears herein. Based on such review and discussion, the compensation committee recommended to our board of directors that the Compensation Discussion and Analysis be included in this proxy statement and in our Annual Report on Form 10-K for the year ended December 31, 2008.

 

The name of each person who currently serves as a member of the committee is set forth below.

 

Thomas J. Moudry, Chairman
Stephen F. Birke
Geoffrey J. Obeney
William F. Schnell

 

Each member of our corporate governance and nominating committee is independent as defined in Rule 5605(a)(2) of the Marketplace Rules of the NASDAQ Stock Market.

 

The functions of the corporate governance and nominating committee include identifying individuals qualified to become members of our board and overseeing our corporate governance principles. The corporate governance and nominating committee met twice and took action by written consent once during the year ended December 31, 2008.

Corporate Governance and Nominating Committee Procedures

 

The corporate governance and nominating committee identifies, reviews and evaluates candidates for election as director who meet the standards set forth in our company’s corporate governance guidelines. The committee does not evaluate proposed nominees differently depending upon who has made the recommendation; however, the committee may consider, as one of the factors in its evaluation of shareholder recommended nominees, the size and duration of the interest of the recommending shareholder or shareholder group in the equity of our company.

 

Upon the recommendation of the corporate governance and nominating committee, the board of directors appointed Mr. Birke as a director in July 2008 and Mr. Granger as a director in December 2008. Mr. Birke was brought to the attention of the committee by a non-management director. Mr. Granger was appointed to the board in conjunction with his election as President and Chief Executive Officer, after a national search led by a third-party search firm. The committee has not to date paid any third party a fee to assist in identifying or evaluating potential nominees to the board.

 

The corporate governance and nominating committee may consider nominees suggested by directors, management and shareholders. It is the committee’s view that the continuing service of qualified incumbents promotes stability and continuity in the boardroom. However, prior to nominating an existing director for re-election to the board, the committee will consider and review an existing director’s qualifications and performance. Where there is no qualified and available incumbent, or where there is a vacancy or a desire to increase the size of the board, the committee will identify and evaluate new candidates. The committee will solicit recommendations for nominees from persons that it believes are likely to be familiar with qualified candidates. These persons may include members of the board and management. The committee may also determine to engage a third-party search firm. Based upon all available information, the committee recommends to the board candidates who, in the view of the committee, are most suited for board membership.

 

In making its selections, the corporate governance and nominating committee will also evaluate candidates proposed by shareholders. The committee may choose not to consider an unsolicited recommendation if no vacancy exists on the board and the committee does not perceive a need to increase the size of the board. The committee will consider only those director candidates recommended in accordance with the procedures set forth below.

 

Shareholder Nomination Procedures

 

To submit a recommendation of a director candidate to the corporate governance and nominating committee, a shareholder must submit the following information in writing, addressed to the Chairman of the corporate governance and nominating committee, care of the Corporate Secretary, at the principal executive office of Wireless Ronin Technologies, Inc.:

 

(1) The name and address of the person recommended as a director candidate;

 

 

In order for a director candidate to be considered for nomination at the annual meeting of shareholders, the recommendation must be received by the corporate governance and nominating committee as provided under “Shareholder Proposals for 2010 Annual Meeting.”

 

Minimum Qualifications

 

The corporate governance and nominating committee believes that members of the board must possess certain basic personal and professional qualities in order to properly discharge their fiduciary duties to shareholders, provide effective oversight of management, and monitor adherence to principles of sound corporate governance. It is therefore the policy of the committee that all persons nominated to serve as a director of our company should possess the following minimum qualifications: personal integrity and ethical character; absence of conflicts of interest; fair and equal representation of our company’s constituencies; demonstrated achievement in one or more fields; ability to function effectively in an oversight role; business understanding; and availability.

 

In approving candidates, the corporate governance and nominating committee will also assure that: at least a majority of the directors are independent; as many as possible of the directors satisfy the financial literacy requirements for service on the audit committee; at least one of the directors qualifies as an audit committee financial expert; at least some of the independent directors have experience as senior executives of a public or substantial private company; and at least some of the independent directors have general familiarity with our company’s industry.

 

Further, the corporate governance and nominating committee will seek to promote through the nomination process an appropriate diversity on the board of professional background, experience, expertise, perspective, gender, ethnicity and country of citizenship.

 

Our executive committee consists of four independent directors as defined in Rule 5605(a)(2) of the Marketplace Rules of the NASDAQ Stock Market and our President and Chief Executive Officer. Pursuant to our Bylaws, the executive committee may exercise all of the powers of the board of directors in the management of our business and affairs when the board is not in session. The executive committee met once and took action by written consent four times during the year ended December 31, 2008.

 

Our board of directors has provided the following process for shareholders and interested parties to send communications to our board and/or individual directors. All communications should be addressed to Wireless Ronin Technologies, Inc., Baker Technology Plaza, 5929 Baker Road, Suite 475, Minnetonka, Minnesota 55345, Attention: Corporate Secretary. Communications to individual directors may also be made to such director at our company’s address. All communications sent to a member of the audit committee or to any individual director will be received directly by such individuals and will not be screened or reviewed by any company personnel. Any communications sent to the board in the care of the Corporate Secretary will be reviewed by the Corporate Secretary to ensure that such communications relate to the business of the company before being reviewed by the board.

 

We encourage all of our directors to attend the annual meeting of shareholders. We generally hold a board meeting coincident with the annual shareholders’ meeting to minimize director travel obligations and facilitate their attendance at the shareholders’ meeting. All of our directors attended the 2008 annual meeting.

 

Our compensation committee periodically reviews and makes recommendations to our board regarding the components and amount of non-employee director compensation. Directors who are employees of our company receive no fees for their services as director.

 

Non-employee members of our board of directors receive the following cash compensation:

 

 

However, in November 2008, as part of our company’s effort to reduce expenses, the board suspended the above-described cash compensation for non-employee directors. Furthermore, the board made no provision for the cumulation of cash compensation during the suspension and has not accrued any amounts for such payments in the future. The board may, in its discretion, lift the suspension of cash compensation for non-employee directors, re-instituting such payments at some time in the future.

 

Non-employee members of our board also receive equity-based compensation. Upon election to the board, non-employee directors automatically receive a five-year option for the purchase of 40,000 shares of common stock under our 2006 Non-Employee Director Stock Option Plan. Such options become exercisable to the extent of 25 percent of the shares purchasable thereunder on the date of grant with additional increments of 25 percent becoming exercisable upon such director’s reelection to the board. In addition, in October 2008, our board of directors awarded each non-employee director a five-year option for the purchase of 20,000 shares of common stock under our Amended and Restated 2006 Equity Incentive Plan. Such options become exercisable to the extent of 25 percent of the shares purchasable thereunder on the date of grant with additional increments of 25 percent becoming exercisable annually thereafter. In accordance with the terms of the Amended and Restated 2006 Equity Incentive Plan, the exercise price of each option is $1.61 per share, representing the closing price of our common stock on the NASDAQ Global Market on October 17, 2008.

 

Compensation of our directors during 2008 appears in the following table. Because Messrs. Granger, Birke and Mack each served as Chief Executive Officer for a portion of 2008, their compensation is presented in the Summary Compensation Table below.

 

 

 

 

 

 

The following table sets forth certain information known to us regarding beneficial ownership of our common stock as of April 20, 2009, by (1) each person who is known to us to own beneficially more than five percent of our common stock, (2) each director, (3) each executive officer named in the Summary Compensation Table below, and (4) all current executive officers and directors as a group. The percentage of beneficial ownership is based on 14,849,860 shares outstanding as of April 20, 2009. As indicated in the footnotes, shares issuable pursuant to warrants and options are deemed outstanding for computing the percentage of the person holding such warrants or options but are not deemed outstanding for computing the percentage of any other person. Except as otherwise noted below or pursuant to applicable community property laws, each person identified below has sole voting and investment power with respect to the listed shares and none of the listed shares has been pledged as security. Except as otherwise noted below, we know of no agreements among our shareholders that relate to voting or investment power with respect to our common stock. Unless otherwise indicated, the address for each listed shareholder is c/o Wireless Ronin Technologies, Inc., Baker Technology Plaza, 5929 Baker Road, Suite 475, Minnetonka, Minnesota 55345.

 

 

 

 

 

SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires our officers, directors and persons who own more than 10 percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Such officers, directors and shareholders are required by the SEC to furnish us with copies of all such reports. To our knowledge, based solely on a review of copies of reports filed with the SEC during 2008, all applicable Section 16(a) filing requirements were met.

 

Executive Summary

 

We are committed to a compensation philosophy that:

 

 

To fulfill this philosophy, our compensation committee seeks to:

 

 

Our company’s performance in 2008 reflected the challenges faced by many in this global economic climate. Based on the company’s performance in 2008, no non-equity incentive awards were paid to our named executive officers under our Senior Management Bonus Plan.

 

Our company took important steps during 2008 to position itself for long-term success. To better align our internal resources with sales levels and project commitments we have taken steps to reduce our expenses. One step in this process was to reduce our headcount. This action has decreased our expense rate and, in the long-term, makes our company a more efficient organization. Additionally, base salaries have been maintained at their 2008 levels, with no increases implemented for 2009 as part of this annual review.

 

Our executive management team experienced key transitions during 2008, significant to the strategy for our company’s long-term success. Mr. Mack, our former Chairman, President and Chief Executive Officer, resigned in September 2008. Upon Mr. Mack’s resignation, the role of Chairman was separated from the role of Chief Executive Officer, with Mr. Barnum, one of our non-employee directors, assuming the role of non-employee Chairman. Mr. Birke, another member of our board, served as Interim Chief Executive Officer from Mr. Mack’s resignation until Mr. Granger’s appointment in December 2008 as President and Chief Executive Officer. Separately, Mr. Witham, our former Executive Vice President and Chief Financial Officer, resigned in June 2008. Mr. Anderson, who served as our company’s Vice President and Controller from December 2006 until his resignation in April 2009, served as Interim Chief Financial Officer from Mr. Witham’s resignation until March 2009, when Mr. McAreavey was appointed Vice President and Chief Financial Officer. We believe our company is fortunate to have strong executive leadership in place, along with talented and dedicated team members and an involved board to support the company as it moves forward.

 

The remainder of our Compensation Discussion and Analysis is organized into the following sections:

 

 

Unless the context indicates otherwise, this Compensation Discussion and Analysis describes our executive compensation program as in effect during 2008. We frequently review our executive compensation program and may change or discontinue any aspect of the program at any time. This flexibility ensures that we continue to be responsive to the dynamics of the marketplace for executive talent while maintaining our focus on driving shareholder value.

 

This Compensation Discussion and Analysis contains statements regarding our company’s performance targets and goals. These targets and goals are discussed in the limited context of our executive compensation program and should not be considered statements of management’s expectations or estimates of results or other guidance. Our company specifically cautions investors not to apply these statements to other contexts.

 

Overview of Our Executive Compensation Program

 

Employment Agreements:  Among our named executive officers, we have employment agreements with our President and Chief Executive Officer, our Vice President and Chief Financial Officer and our Executive Vice President and Chief Operating Officer. During 2008 we also had employment agreements with the following named executive officers: our former President and Chief Executive Officer, our former Executive Vice President and Chief Financial Officer, our former Executive Vice President, Content Engineering and President of Wireless Ronin Technologies (Canada), Inc., our former Vice President and Controller and our former Executive Vice President and Chief Technology Officer. Our compensation committee believes that employment agreements are customary and appropriate at this level of leadership. Each of the currently operative employment agreements is described in detail in the narrative following “Potential Payments upon Termination or Change in Control.”

 

Compensation Arrangements for Interim Chief Executive Officer:  In September 2008, upon the resignation of Mr. Mack, our board of directors appointed Mr. Birke to serve as our Interim Chief Executive Officer. Our board, which at the time consisted of all independent directors, negotiated the terms of Mr. Birke’s employment. Although Mr. Birke did not have an employment agreement, he was compensated at an annual base salary of $300,000. This amount was set in excess of the $260,000 annual base salary of his predecessor given the challenges faced by our company at the time of such transition. Consistent with our expense reduction initiatives, the annual base salary of our President and Chief Executive Officer was reduced to $250,000 when our company hired Mr. Granger to serve in such positions in December 2008. After a short period of overlap with Mr. Granger to facilitate a smooth transition, Mr. Birke’s employment with our company ceased in January 2009. In addition to the above-referenced cash compensation, our board of directors awarded Mr. Birke five-year options for the purchase of an aggregate of 70,000 shares of common stock under our Amended and Restated 2006 Equity Incentive Plan. Such options become exercisable to the extent of 25 percent of the shares purchasable thereunder on the date of grant with additional increments of 25 percent becoming exercisable annually thereafter. In accordance with the terms of the Amended and Restated 2006 Equity Incentive Plan, the exercise price of each option is $1.61 per share, representing the closing price of our common stock on the NASDAQ Global Market on October 17, 2008. Each of our company’s non-employee directors received a stock option award for the purchase of 20,000 shares of common stock on the same terms on the same date. The board granted a larger award to Mr. Birke in consideration of his service to our company as Interim Chief Executive Officer.

 

Compensation Arrangements for Interim Chief Financial Officer:  In June 2008, upon the resignation of Mr. Witham, our board of directors appointed Mr. Anderson to serve as our Interim Chief Financial Officer. Mr. Anderson, who also held the positions of Vice President and Controller, continued to serve our company under the terms of his pre-existing employment agreement. Although Mr. Anderson’s annual base salary was not increased during his service as Interim Chief Financial Officer, he was awarded a discretionary bonus of $2,500 per month during such service in consideration of the additional responsibilities associated with the new position. Mr. Anderson, who served as our Vice President and Controller from December 2006 until his resignation in April 2009, ceased serving as our Interim Chief Financial Officer in March 2009 when our company hired Mr. McAreavey to serve as our Vice President and Chief Financial Officer. In addition to the above-referenced cash compensation, our board of directors awarded Mr. Anderson a five-year option for the purchase of 15,000 shares of common stock under our Amended and Restated 2006 Equity Incentive Plan. Such option becomes exercisable to the extent

of 25 percent of the shares purchasable thereunder on the date of grant with additional increments of 25 percent becoming exercisable annually thereafter. In accordance with the terms of the Amended and Restated 2006 Equity Incentive Plan, the exercise price of such option is $1.61 per share, representing the closing price of our common stock on the NASDAQ Global Market on October 17, 2008. The board granted this award to Mr. Anderson for retention purposes.

 

Change-in-Control Agreements:  The above-referenced employment agreements contain provisions related to, and define, a change-in-control of our company. Each of the currently operative employment agreements is described in detail in the narrative following “Potential Payments upon Termination or Change in Control.” We do not maintain any other change-in-control policies or plans.

 

Severance Policy:  The above-referenced employment agreements contain provisions related to severance payments upon termination of employment. Each of the currently operative employment agreements is described in detail in the narrative following “Potential Payments upon Termination or Change in Control.” We do not maintain any other severance policies or plans. The amounts and types of severance paid or payable to named executive officers no longer employed with our company are described in detail in the narrative following “Potential Payments upon Termination or Change in Control.”

 

Role of Executive Officers:  Our compensation committee looks to certain executive officers, including named executive officers, for assistance with the design and assessment of our executive compensation program and other personnel issues. For example, our named executive officers assist in the development of corporate succession plans for our Chief Executive Officer and other senior corporate officers, and provide periodic reports on matters relating to the company’s personnel appointments and practices. The committee reviews the performance of the Chief Executive Officer, whereas our Chief Executive Officer assists the committee with its annual review of the performance of the other executive officers. Named executive officers also assist the committee by providing insight on our company’s business goals and results, defining objectives for individual executives, and assessing the effect on our culture and personnel of suggested changes to our compensation programs. No executive officer is involved in assessing or setting his or her own compensation.

 

Impact of Tax and Accounting Treatment on Compensation Decisions:  Our compensation committee reviews the tax and accounting treatment of compensation paid to our named executive officers. The potential tax and accounting treatment are factors, but not the only factors, the committee takes into consideration when approving compensation components and amounts.

 

Section 162(m) of the Code generally limits the deductibility of compensation in excess of $1 million for the Chief Executive Officer and the four most highly compensated employees other than the Chief Executive Officer. Certain performance-based compensation is not subject to this limitation. Our committee may determine that our compensation objectives are not furthered when compensation must be paid in a specific manner to be tax deductible.

 

Perquisites and Other Benefits:  Our company does not currently provide to our named executive officers any perquisites or other benefits, other than standard health insurance benefits and the ability to purchase shares of our common stock at a discount under our 2007 Associate Stock Purchase Plan. Because our standard health insurance benefits do not discriminate in scope, terms or operation, in favor of executive officers and are available generally to all non-temporary, full-time employees, such benefits are not deemed to be compensatory for purposes of the Summary Compensation Table below. Furthermore, because the discount provided under our 2007 Associate Stock Purchase Plan is available generally to all salaried employees of our company, such benefit is not deemed to be compensatory for purposes of the Summary Compensation Table below. We formerly paid the premiums associated with an enhanced long-term disability insurance benefit for our officers. Such program was discontinued in 2008 as part of our cost savings measures. Our compensation committee believes that in its current growth mode, and with its commitment to control expenses, the company is not in a position to offer perquisites or other non-standard benefits to any of its employees, including the named executive officers.

Total Direct Compensation

 

Base Salary:  Our named executive officers receive a base salary to compensate them for services rendered throughout the year. Base salary is intended to recognize each officer’s responsibilities, role in the organization, experience level, and contributions to the success of our company. The compensation committee considers at the close of each fiscal year base salary levels for the following year.

 

In December 2007 our compensation committee reviewed the base salary levels for our named executive officers. The committee’s review focused on the individual performance of the named executive officers and the accomplishments of the company throughout 2007. The committee also considered an executive compensation survey and other executive compensation data provided by CBIZ Human Capital Services, an executive compensation consultant engaged during 2007. The committee used this outside data to analyze the competitiveness of the company’s base salaries. Using these performance reviews and data, the committee adjusted base salaries for the named executive officers an average of 12.1 percent.

 

In December 2008 our compensation committee reviewed the base salary levels for our named executive officers. The committee considered the company’s overall effort to better align expenses with its current level of sales and projects. In light of this effort, as well as the current global economic situation, the committee determined to maintain base salaries for the named executive officers at their 2008 levels, with no increases implemented for 2009 as part of this annual review.

 

Throughout 2008, Mr. Koller also was eligible to receive commissions based upon company-wide sales. Effective January 1, 2009, Mr. Koller ceased to be eligible for commissions. As with all of our other named executive officers, Mr. Koller’s non-equity incentive compensation, if any, will instead source from the below-described Senior Management Bonus Plan.

 

Senior Management Bonus Plan:  Our named executive officers are eligible for non-equity incentive awards under our company’s Senior Management Bonus Plan, which was established in December 2007. Awards under this plan may be paid in cash or in shares of restricted stock, ranging from a threshold of 20 percent to a maximum of 200 percent of a target award dollar amount pre-established for each named executive officer. Actual award amounts are determined early each year based on the company’s achievement of pre-established performance targets for the prior year.

 

The compensation committee utilizes the Senior Management Bonus Plan to reward the named executive officers for their contributions to the company’s performance. The committee believes that the Senior Management Bonus Plan is an effective and appropriate method of providing short-term incentives to the named executive officers, who do not earn commissions and are not eligible to participate in the company’s profit sharing bonus program available to other non-commissioned employees. Awards under the Senior Management Bonus Plan reward named executive officers for performance for the prior year and create incentives to drive behavior in subsequent years.

 

In December 2007 our compensation committee approved the Senior Management Bonus Plan for 2008. It first approved a target award dollar amount for each named executive officer. The committee then approved the company’s targeted performance on which actual awards amounts would be determined. Actual award amounts for the company’s performance in 2008 would be based 75 percent on the company’s achievement of its 2008 revenue goal, and 25 percent on the company’s achievement of its target gross margin percentage. The committee could have adjusted the plan’s revenue goal up or down for any equitable reason, including a board-approved material deviation in the company’s budget and business plan, if the company completed an acquisition during the year, or if the company changed its capital structure. The company did not achieve its revenue goal or its gross margin goal for 2008, and the committee chose not to adjust the goals for purposes of the plan. Accordingly, no awards were made under the Senior Management Bonus Plan for the company’s performance in 2008.

 

In December 2008 our compensation committee approved the Senior Management Bonus Plan for 2009. It first approved a target award dollar amount for each named executive officer (Mr. Granger — $200,000; Mr. Koller — $75,000; and Mr. Anderson — $35,000). The committee then approved the company’s targeted performance on which actual award amounts will be determined. In recognition of the company’s evolving

culture and focus on controlling expenses, actual award amounts for 2009 performance will be based 50 percent on the company’s achievement of its 2009 revenue goal, and 50 percent on the company’s achievement of its target EBITDA123R/(loss). The committee believes it is appropriate to consider performance relative to this non-GAAP measure because it factors out the non-cash expense of stock option awards. The committee believes that it would be competitively harmful to disclose the company’s actual 2009 revenue goal and targeted EBITDA123R/(loss), as that would enable competitors to identify the company’s financial targets and business strategies. In March 2009, upon the commencement of Mr. McAreavey’s service as our Vice President and Chief Financial Officer, Mr. McAreavey’s target award dollar amount for 2009 performance was set at $40,000.

 

Discretionary Bonus:  The nature of the discretionary bonus earned during 2008 by one of our named executive officers is described above in detail under the caption “Compensation Arrangements for Interim Chief Financial Officer.”

 

Stock Option Awards:  Our named executive officers are eligible for stock option awards under our company’s Amended and Restated 2006 Equity Incentive Plan. Stock options are awarded as incentives for future performance and to encourage named executive officers to remain with the company. Stock options are also intended to align the interests of our named executive officers with our shareholders.

 

With one exception, stock options awarded to our named executive officers during 2008 have a term of five years and become exercisable to the extent of 25 percent of the shares purchasable thereunder on the date of grant with additional increments of 25 percent becoming exercisable annually thereafter. Although subject to the same vesting schedule, the stock option awarded in December 2008 to Mr. Granger, in conjunction with his appointment as our President and Chief Executive Officer, has a term of ten years. The exercise price for each of the stock options awarded during 2008 is the closing price of our company’s stock on the NASDAQ Global Market on the date of each grant.

 

The following table sets forth information concerning the compensation of our named executive officers for 2008, 2007 and 2006.

 

 

 

 

 

The following table sets forth information concerning non-equity incentive plan awards that could have been paid for 2008 performance and equity incentive plan awards granted in 2008 to our named executive officers. The exercise price of each stock option awarded during 2008 represented the closing price of our common stock on the NASDAQ Global Market on the date of grant.

 

 

 

 

The following table sets forth certain information concerning outstanding stock option awards held by our named executive officers as of December 31, 2008:

 

 

 

 

 

 

The following table sets forth information concerning each exercise of stock options and each vesting of restricted stock for our named executive officers during the year ended December 31, 2008:

 

 

 

 

Upon the termination of a named executive officer or change in control of the company, a named executive officer may be entitled to payments or the provision of other benefits, depending on the triggering event.

 

Named Executive Officers Currently Employed by Our Company

 

The potential payments for each named executive officer who is currently employed with our company were determined as part of the negotiation of each of their employment agreements, and the compensation committee believes that the potential payments for the triggering events are in line with current compensation trends. The events that would trigger a current named executive officer’s entitlement to payments or other benefits upon termination or a change in control, and the value of the estimated payments and benefits are described in the following table, assuming a termination date (based on annual base salaries in effect as of April 1, 2009) and, where applicable, a change in control date of December 31, 2008, and a stock price of $0.82 per share, which was the closing price of one share of our common stock on December 31, 2008:

 

 

 

 

Named Executive Officers Formerly Employed by Our Company

 

The amounts actually paid or payable to each named executive officer who resigned from their positions with our company are set forth in the following table and the portion of such amounts earned during 2008 are included in the “All Other Compensation” column of the Summary Compensation Table.

 

 

 

 

Employment Agreements

 

We have employment agreements with Messrs. Granger, McAreavey, and Koller. The agreements with Messrs. Granger and McAreavey have terms ending December 31, 2009. The agreement with Mr. Koller has a term ending April 1, 2010. Each of these agreements will be automatically extended for successive one year periods unless either we or the officer elects not to extend employment. In general, the annual base salary payable under these agreements may be increased, but not decreased, in the sole discretion of our board. These agreements prohibit each officer from competing with us during his or her employment and for a period of time thereafter (two years for Mr. Granger and one year for each of the other officers). The agreements also contain non-disclosure, non-interference and non-solicitation provisions. If we terminate the officer’s employment without cause, the officer is entitled to receive a severance payment equal to a portion of his annual base salary (six months for Mr. McAreavey and one year for each of the other officers). In addition, in a termination without cause, Mr. Koller is entitled to a payment equal to his earned commission, and each other officer is entitled to a payment equal to the non-equity incentive plan award paid in the prior year, if any. If there has been a change of control in our company and the officer’s employment is involuntarily terminated or the officer leaves for good reason within 12 months following the change of control, we would pay the officer the severance payments described above, except that Mr. Koller would be entitled to his base salary only. Severance payments would generally be made to these officers in equal monthly installments over the non-competition period specified in the agreement.

Separation Agreements

 

In connection with the resignations of each of Messrs. Mack, Witham, Whent and Ebbert, in consideration of each officer’s execution of a reasonable and customary release, we awarded certain severance benefits. Mr. Mack received separation payments aggregating one year’s base salary, the right to medical (COBRA) benefits for one year, accelerated vesting of options for the purchase of 120,000 shares at $2.80 per share, and a 90-day extension of the post-termination exercisability of (a) such options and (b) warrants for the purchase of 35,354 shares at $2.25 per share. The salary component of Mr. Mack’s separation payment represented one-half of the amount that would have been payable under Mr. Mack’s employment agreement upon an involuntary termination without cause. Mr. Witham received severance payments equal to one and a half times his base salary, one and a half times his prior year non-equity incentive plan award, the right to medical (COBRA) benefits for one year, and payment for accrued, unused paid time off, as set forth in his employment agreement for an involuntary termination without cause. We also agreed to extend the period of exercisability of the stock options held by Mr. Witham that were vested as of the date of his resignation. In particular, the expiration date of such options was extended to the date which is 180 days after the end of the then current blackout period imposed upon the company’s employees. Because such blackout period ended on November 10, 2008, Mr. Witham’s affected options will expire on May 9, 2009. Mr. Whent received severance payments equal to one year’s base salary, the right to medical (COBRA) benefits for one year, and payment for accrued, unused paid time off, as set forth in his employment agreement for an involuntary termination without cause. Pursuant to Mr. Whent’s separation agreement, Mr. Whent also assumed the obligations of Wireless Ronin Technologies (Canada), Inc. under certain agreements with customers using the online teaching education portal program and our company assigned its rights under several related agreements to Mr. Whent. Mr. Ebbert received severance payments equal to one year’s base salary, one times his prior year non-equity incentive plan award, the right to medical (COBRA) benefits for one year, and payment for accrued, unused paid time off, as set forth in his employment agreement for an involuntary termination without cause.

 

Under the separation agreements with each of the foregoing officers, severance payments are paid in equal installments over the one-year non-competition period specified in such officers’ former employment agreements, except that payments to Mr. Mack are paid over a one-year period and his two-year non-competition period remains in force.

 

Recent Departure

 

In April 2009, Mr. Anderson terminated his employment with the company. We are engaged in discussions with Mr. Anderson regarding the final details of his departure, which may include severance payments set forth in his employment agreement for a termination without cause, in consideration of a reasonable and customary release and Mr. Anderson’s cooperation in providing for transition of his responsibilities.

 

In February 2009, our board of directors adopted a written policy for the review and approval of related person transactions requiring disclosure under Rule 404(a) of Regulation S-K. This policy states that the audit committee is responsible for reviewing and approving or disapproving all interested transactions, which are defined as any transaction, arrangement or relationship in which (a) the amount involved may be expected to exceed $120,000 in any fiscal year, (b) our company will be a participant, and (c) a related person has a direct or indirect material interest. A related person is defined as an executive officer, director or nominee for director, or a greater than five percent beneficial owner of our company’s common stock, or an immediate family member of the foregoing. The policy deems certain interested transactions to be pre-approved, including the employment and compensation of executive officers.

 

The terms of the employment agreements between our company and our current executive officers are set forth in the Executive Compensation section of this proxy statement under the caption “Potential Payments upon Termination or Change in Control.”

 

In June 2007, we executed a statement of work with Spanlink Communications, Inc. relating to the acquisition of a communications system for a new office location. The statement of work specified a Cisco Unified Communications system, including hardware, software and services in connection with the installation and maintenance of the system, and arose out of a proposal from Spanlink and a master services agreement signed by the parties in April 2007. In November 2007, we executed another statement of work with Spanlink relating to our Canadian facility. Brett A. Shockley, one of our directors, was the President, Chairman, a Director and principal shareholder of Spanlink at the time we entered into these transactions. We paid Spanlink approximately $72,748 in 2007 and approximately $221,590 in 2008 for hardware, software and professional services under the contract. We believe the communication systems from Spanlink and the cost thereof to be competitive with systems that could be provided by unrelated parties.

 

The board of directors and our shareholders previously approved the Amended and Restated 2006 Equity Incentive Plan. The board initially reserved 1,000,000 shares of common stock for issuance under the plan. On November 15, 2007, our shareholders approved an increase in the total number of shares available for issuance under the plan to 1,750,000 shares. As of April 20, 2009, we had outstanding option awards for 1,406,259 shares with a weighted average exercise price of $2.37 per share. As a result, 336,741 shares remained available for future award under the plan. The number of shares currently available for awards under the plan has been determined by the board to be insufficient to meet the future anticipated needs of our company. Options and other possible forms of awards under the plan are expected to be an important incentive to attract, retain and motivate eligible participants in order to achieve our growth and profitability objectives. A general description of the plan is set forth below.

 

Purpose.  The purpose of the plan is to permit the board to develop and implement a variety of stock-based programs based on the changing needs of the company. The board and senior management of the company believe it is in the best interests of the company’s shareholders for officers, employees and certain other persons to own stock in the company and that such ownership enhances the company’s ability to attract highly qualified personnel, strengthen its retention capabilities, and enhance the long-term performance of the company to vest in participants a proprietary interest in the success of the company and to provide certain “performance-based compensation” within the meaning of Section 162(m)(4)(C) of the Code.

 

Shares Subject to the Plan.  The maximum number of shares issuable pursuant to awards of restricted stock, restricted stock units or stock bonuses is currently 1,750,000 shares. If any award lapses, expires or otherwise terminates for any reason without having been exercised or settled in full, or if shares subject to forfeiture or repurchase are forfeited or repurchased by us, any such shares will again become available for issuance under the plan. Shares will not be treated as having been issued under the plan, and therefore will not reduce the number of shares available for grant, to the extent an award is settled in cash or shares are withheld in satisfaction of tax withholding obligations. Appropriate adjustments will be made to the shares reserved under the plan, to the other numerical limits on awards under the plan and to outstanding awards in the event of any change in our common stock through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares or similar change in our capital structure, or if we make a distribution in a form other than common stock (excluding normal cash dividends) that has a material effect on the fair market value of our common stock.

 

Administration.  The plan is administered by the compensation committee of our board of directors. Awards to participants are granted by the committee which consists of at least two directors, each of whom is both a non-employee director within the meaning of Exchange Act Rule 16b-3 and an outside director for purposes of Section 162(m) of the Code. Subject to the provisions of the plan, the committee determines in its discretion the persons to whom and the times at which awards are granted, the types and sizes of such awards, and all of their terms and conditions. The committee may, subject to certain limitations required by Section 162(m) of the Code and the express language in the plan that prohibits amending, modifying, extending, canceling or renewing any award, waive any restrictions or conditions applicable to any award, and accelerate, continue, extend or defer the vesting of any award. The committee may establish rules and policies for administration of the plan and adopt one or more forms of agreement to evidence awards made under the plan. The committee interprets the plan and any agreement used under the plan, and all determinations of the committee are final and binding on all persons having an interest in the plan or any award issued under the plan.

Eligibility.  Under the plan, the committee may grant awards to any employee, officer, non-employee director or any individual consultant or independent contractor providing services to our company or other affiliated entity. While the committee may grant incentive stock options (“ISOs”) only to employees, the committee may grant non-qualified stock options (“Non-ISOs”), warrants, restricted stock, restricted stock units (“RSUs”), stock appreciation rights (“SARs”), stock awards and performance awards to any eligible participant. As of April 20, 2009, we had 72 employees (including three executive officers) and six non-employee directors who were eligible to participate in the plan. Under the plan, the committee has not granted awards to individual consultants or independent contractors and does not currently anticipate any change in that practice.

 

Individual Limit.  Under the existing plan, no more than 300,000 shares may be issued to any participant in any calendar year.

 

Stock Options.  The committee may grant Non-ISOs and ISOs within the meaning of Section 422 of the Code, or any combination of these. Each option granted under the plan must be evidenced by a written agreement between us and the optionee specifying the number of shares subject to the option and the other terms and conditions of the option, consistent with the requirements of the plan. The exercise price of each option may not be less than the fair market value of a share of our common stock on the date of grant. However, any ISO granted to a person who at the time of grant owns stock possessing more than 10 percent of the total combined voting power of all classes of our stock or of any parent or subsidiary corporation must have an exercise price equal to at least 110 percent of the fair market value of a share of our common stock on the date of grant and any such options must not be exercised after the expiration of five years from the date of grant. On April 20, 2009, the closing price of our common stock on the NASDAQ Global Market was $1.69 per share.

 

The plan provides that the option exercise price may be paid in cash, by check, or in cash equivalent; by tender of shares of common stock owned by the optionee having a fair market value not less than the exercise price; by such other lawful consideration as approved by the committee; or by any combination of these. Nevertheless, the committee may restrict the forms of payment permitted in connection with any option grant. No option may be exercised unless the optionee has made adequate provision for federal, state, local and foreign taxes, if any, relating to the exercise of the option, including, if permitted or required by us, through the optionee’s surrender of a portion of the option shares to our company.

 

Options become vested and exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the committee. The maximum term of any option granted under the plan is ten years, provided, as noted above, that an ISO granted to a ten percent shareholder must have a term not exceeding five years. Subject to the term of an award, an option generally will remain exercisable for three months following the optionee’s termination of service, except that if service terminates as a result of the optionee’s death or disability, the option generally will remain exercisable for twelve months. However, if service is terminated for cause, the option will terminate immediately.

 

ISOs are nontransferable by the optionee other than by will or by the laws of descent and distribution, and are exercisable during the optionee’s lifetime only by the optionee. Non-ISOs granted under the plan may be assigned or transferred to the extent permitted by the committee.

 

Warrants.  The committee may grant warrants pursuant to the plan. Each warrant granted under the plan must be evidenced by a written agreement in such form and including such terms as the committee shall from time to time approve. The exercise price per share of any warrant may not be less than the fair market value of a share of our common stock on the date of grant, except as permitted in connection with the issuance of warrants in a transaction to which Section 424(a) of the Code applies, and any such warrant must not be exercised after the expiration of ten years from the date of grant.

 

Stock Appreciation Rights.  The committee may grant SARs. The exercise price of each SAR may not be less than the fair market value of a share of our common stock on the date of grant. Upon the exercise of any SAR, the participant is entitled to receive an amount equal to the excess of the fair market value of the underlying shares of common stock as to which the right is exercised over the aggregate exercise price for

such shares. At the committee’s discretion, it may make payment of a SAR in cash or in shares of common stock whose fair market value on the exercise date equals the payment amount. The committee may make payment in a lump sum or it may defer payment in accordance with the terms of the participant’s award agreement. The maximum term of any SAR granted under the plan is ten years.

 

Restricted Stock and Restricted Stock Units.  Shares of restricted stock and RSUs are subject to restrictions as the committee may impose, which may lapse separately or in combination at such time or times, in installments or otherwise as the committee may deem appropriate. The grant or vesting of restricted stock and RSUs may be performance-based, time-based or both. Restricted stock and RSUs may be “qualified performance-based awards” as recognized under Code Section 162(m), in which event the grant or vesting or both, as applicable, of such restricted stock or RSUs will be conditioned upon the attainment of performance goals. Except as otherwise determined by the committee, upon a participant’s termination of employment (as determined under criteria established by the committee) during the restriction period, all shares of restricted stock and RSUs subject to restriction will be forfeited and reacquired by us, except that the committee may waive in whole or in part any or all remaining restrictions with respect to shares of restricted stock or RSUs. The minimum restriction period for restricted stock and RSUs is three years, or one year in the case of performance-based awards.

 

An award may, but need not be, a “qualified performance-based award,” which is intended to qualify as performance-based compensation under Section 162(m) of the Code. The performance measures which may apply to an award include, but are not limited to:

 

 

These performance measures may be established on a company-wide basis or with respect to one or more business units, divisions or subsidiaries, can be on an absolute or relative basis and can be measured either annually or cumulatively over a time period specified in the award agreement. A “qualified performance-based award” includes a grant of restricted stock or RSUs designated as such by the committee at the time of grant based upon a determination that: (1) the recipient is or may be a “covered employee” within the meaning of Section 162(m)(3) of the Code in the year in which we would expect to be able to claim a tax deduction with respect to such restricted stock or RSU award and (2) the committee wishes such grant to qualify for the exemption from the limitation on deductibility of compensation with respect to any covered employee imposed by Section 162(m) of the Code. The committee specifies the performance goals to which any “qualified performance-based award” is subject.

 

The provisions of restricted stock and RSUs, including any applicable performance goals, need not be the same with respect to each participant. During the restriction period, the committee may require that any stock certificates evidencing restricted shares be noncertificated or be held by us. Other than these restrictions on transfer and any other restrictions the committee may impose, the participant will have all the rights of a holder of stock holding the class or series of stock that is the subject of the restricted stock or RSU award.

Except as may be provided by the committee, in the event of a participant’s termination of employment or relationship with the company prior to all of his restricted stock becoming vested, or in the event any conditions to the vesting of restricted stock have not been satisfied prior to the deadline for the satisfaction of such conditions as set forth in the award, the shares of restricted stock which have not vested shall be forfeited, and the committee may provide that any purchase price paid by the participant be returned to the participant, or a cash payment equal to the restricted stock’s fair market value on the date of forfeiture, if lower, be paid to the participant.

 

Performance Awards.  The committee may grant performance awards to eligible individuals subject to the terms of the plan. A performance award (1) may take the form of any of the award types available under the plan, (2) may be denominated or payable in cash, shares, other securities, other awards or other property, and (3) will provide the holder with the right to receive payments, in whole or in part, upon the achievement of performance goals established by the committee. Prior to or at the time of grant, the committee may designate such awards as “qualified performance-based awards,” as described above under “Restricted Stock and Restricted Stock Units,” intended to qualify under Section 162(m) of the Code. The vesting or settlement of such awards will be conditioned upon the attainment of one or more of the performance measures described above.

 

Stock Bonuses, Dividend Equivalents and Other Stock-Based Awards.  Stock bonuses and other awards that are valued by reference to, or otherwise based upon, our common stock, including without limitation dividend equivalents may also be granted under the plan, either alone or in conjunction with other awards.

 

Cash Bonuses.  Cash bonuses may be awarded in connection with an award of restricted stock, RSUs or a stock bonus as performance-based compensation, and, if awarded, are distributed at the time the recipient recognizes taxable income in connection with the awards.

 

Transferability of Awards.  Awards are non-transferable other than by will or the laws of descent and distribution. However, in the discretion of the committee, Non-ISOs, warrants and SARs may be transferred to members of the holder’s immediate family. The transfer may be made directly or indirectly or by means of a trust, partnership or otherwise. ISOs may be exercised only by the initial holder, a guardian if state law permits, and upon death of the optionee by his legal representative or beneficiary.

 

Change in Control.  In the event of a change in control of our company, and provided that an award agreement does not include contrary provisions, awards will become exercisable and nonforfeitable, as follows: any stock options and SARs outstanding as of the date of such change in control which are not then exercisable and vested, will become fully exercisable and vested; the restrictions and deferral limitations applicable to any restricted stock and RSUs will lapse, and such restricted stock and RSUs will become free of all restrictions and become fully vested; all performance awards will be considered to be earned and payable in full; and any deferral or other restriction will lapse and such performance awards will be settled in cash or shares, as determined by the committee. All restrictions on other awards will similarly lapse and such awards will become free of all restrictions and fully vested. Upon a change in control, the committee may determine that some or all recipients holding outstanding awards will receive, with respect to some or all of such awards, as of the effective date of the change in control, cash in an amount equal to the excess of the fair market value of such awards immediately prior to the effective date of the change in control over the exercise price per share of such awards.

 

Forfeiture for Financial Reporting Misconduct.  If the company is required to prepare an accounting restatement due to the material noncompliance of the company, as a result of misconduct, with any financial reporting requirement under the securities laws, if the participant knowingly or grossly negligently engaged in the misconduct, or the participant is subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, the participant shall reimburse the company the amount of any payment in settlement of an award, and the income realized by a participant in connection with any other stock based award, earned or accrued during the twelve-month period following the first public issuance or filing with the SEC (whichever just occurred) of the financial document embodying such financial reporting requirement.

Compliance with Section 409A of the Code.  Notwithstanding any other provisions to the contrary, any award that is deferred compensation within the meaning of Code Section 409A shall be automatically modified and limited to the extent that the committee determines necessary to avoid the imposition of the additional tax under Code Section 409A(9)(1)(B) on a participant holding such award.

 

Amendments and Termination.  Our board of directors may amend, alter, suspend, discontinue or terminate the plan at any time and from time to time, but without the approval of our shareholders, no amendment, alteration, suspension, discontinuation or termination may be made that would (i) increase the number of shares that may be issued under the plan; (ii) permit granting of options at less than the market price of our stock; (iii) permit the repricing of outstanding options; (iv) amend the maximum shares set forth that may be granted as options, SARs, restricted stock, RSUs, stock bonus or other awards; (v) extend the term of the plan; (vi) change the class of persons eligible to participate in the plan; or (vii) otherwise implement any amendment required to be approved by shareholders under the rules of any applicable stock exchange or NASDAQ Marketplace Rules.

 

Term of the Plan.  The plan will terminate on February 2, 2017, or on any earlier date of discontinuation or termination as determined by our board of directors.

 

The board has approved, subject to shareholder approval, an amendment to the plan which would increase the number of shares of common stock which may be awarded under the plan by 375,000 from 1,750,000 to 2,125,000 and increase the maximum number of shares for which awards may be granted to any individual participant in any calendar year from 300,000 to 500,000. In connection with this amendment, the maximum number of shares of common stock that may be issued in the form of restricted stock, stock bonuses or RSUs would also increase by 375,000 from 1,750,000 to 2,125,000.

 

The board believes that this amendment will advance the interests of our company and our shareholders by continuing to provide incentive to eligible participants and facilitating an increase in the proprietary interests of such persons in our company. The proposed increase in the annual cap on awards to any individual participant is designed to provide the compensation committee with the flexibility to make awards of such size in the future and to ratify the December 2008 issuance of a stock option under the plan for the purchase of 400,000 shares to our new President and Chief Executive Officer. Such issuance, which was made by our board of directors upon the recommendation of our compensation committee, was made to a person not previously an employee or director of our company as an inducement material to the individual’s entry into employment with our company. No further awards of such magnitude are presently contemplated.

 

The text of the plan, including the proposed amended language, which is bold and underlined, is attached as Appendix A to this proxy statement.

 

Incentive Stock Options.  Under present law, an optionee who is granted an ISO does not recognize taxable income at the time the option is granted or upon its exercise, although the exercise is an adjustment item for alternative minimum tax purposes and may subject the optionee to the alternative minimum tax. Upon a disposition of the shares more than two years after grant of the option and one year after exercise of the option, any gain or loss is treated as long-term capital gain or loss. Net capital gains on shares held more than 12 months are generally taxed at a maximum federal rate of 15 percent. Capital losses are generally allowed in full against capital gains and up to $3,000 against other income. If the above holding periods are not satisfied, the optionee recognizes ordinary income at the time of disposition equal to the difference between the fair market value of the stock when the option was exercised and the exercise price. Any gain or loss recognized on such a premature disposition of the shares in excess of the amount treated as ordinary income is treated as long-term or short-term capital gain or loss, depending on the holding period. Any recognized ordinary income or gain will not be subject to tax withholding by our company. Unless limited by Section 162(m) of the Code, our company is entitled to a deduction in the same amount as and at the time the optionee recognizes ordinary income.

Non-qualified Stock Options.  An optionee does not recognize any taxable income at the time he or she is granted a Non-ISO. Upon exercise, the optionee recognizes taxable income generally measured by the excess of the then fair market value of the shares over the exercise price. Any taxable income recognized in connection with an option exercise by an employee of our company is subject to tax withholding by our company. The applicable withholding rate for income realized upon exercise of non-qualified stock options is 25 percent for income realized below $1,000,000 and 35 percent for the excess income over $1,000,000. Unless limited by Section 162(m) of the Code, our company is entitled to a deduction in the same amount as and at the time the optionee recognizes ordinary income. Upon a disposition of such shares by the optionee, any difference between the sale price and the optionee’s exercise price, to the extent not recognized as taxable income as provided above, is treated as a long-term or short-term capital gain or loss, depending on the holding period. Net capital gains on shares held more than 12 months may be taxed at a maximum federal rate of 15 percent (lower rates may apply depending upon when the shares are acquired and the applicable income tax bracket of the taxpayer). Capital losses are generally allowed in full against capital gains and up to $3,000 against other income.

 

Restricted Stock and RSUs.  Restricted stock awards and RSUs are generally taxed on the later of grant or the expiration of a substantial risk of forfeiture. Such awards are subject to a “substantial risk of forfeiture” within the meaning of Section 83 of the Code to the extent the award will be forfeited in the event that the recipient ceases to provide services to our company. Because restricted stock and RSU grants are subject to a substantial risk of forfeiture, the recipient will not recognize ordinary income at the time the award is granted. Instead the recipient will recognize ordinary income on the earlier of (a) the date the award is no longer subject to a substantial risk of forfeiture or (b) when the restricted stock or RSU becomes transferable. The amount of ordinary income to be recognized is equal to the difference between the amount paid for the award and the fair market value of the award on the date the award is no longer subject to a substantial risk of forfeiture. The ordinary income recognized by the recipient who is an employee will be subject to tax withholding by our company. Unless limited by Section 162(m) of the Code, our company is entitled to a tax deduction in the same amount and at the same time as the recipient recognizes ordinary income.

 

Dividend Equivalents and Other Awards.  Other types of awards granted under the plan, whether distributed in stock or cash, will be treated as ordinary income at the time and to the extent the awards vest and restrictions on them lapse. At such time, the recipient will be subject to income tax on such awards at ordinary income rates, as described above, unless the recipient has made an election under Section 83(b) of the Code at the time of the grant. In the year the award is taxable to the participant, our company will take a deduction for the amount reported as ordinary income.

 

Deductibility Limit on Compensation in Excess of $1 Million.  Section 162(m) of the Code generally limits the deductible amount of annual compensation paid (including, unless an exception applies, compensation otherwise deductible in connection with awards granted under the plan) by a public company to a “covered employee” (i.e., the Chief Executive Officer and the other executive officers who are most highly compensated) to no more than $1 million.

 

The foregoing is only a summary of the general effect of U.S. federal income taxation upon the optionee or award recipient and our company with respect to the grant and exercise of options and other awards under the plan. This summary does not purport to be complete and does not discuss the tax consequences arising in the context of the optionee’s or recipient’s death or the income tax laws of any municipality, state or foreign country in which the optionee’s or recipient’s income or gain may be taxable.

 

Future awards to be received by or allocated to particular participants under the plan are not presently determinable.

 

The affirmative vote of holders of a majority of the voting securities present in person or represented by proxy at the annual meeting is required to approve the amendment. Abstentions will be considered shares

entitled to vote in the tabulation of votes cast on the proposal and will have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this proposal has been approved. The board of directors considers approval of the amendment to be in the best interests of our company and our shareholders and recommends that you vote FOR approval of the amendment.

 

The following table provides information as of December 31, 2008 with respect to compensation plans under which our equity securities are authorized for issuance.

 

 

 

PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM