DEF 14A 1 a09-34677_1def14a.htm DEF 14A

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.     )

 

Filed by the Registrant  x

 

Filed by a Party other than the Registrant  o

 

Check the appropriate box:

o

Preliminary Proxy Statement

o

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

x

Definitive Proxy Statement

o

Definitive Additional Materials

o

Soliciting Material Pursuant to §240.14a-12

 

Northern Technologies International Corporation

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

x

No fee required.

o

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

 

 

(5)

Total fee paid:

 

 

 

o

Fee paid previously with preliminary materials.

o

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

 

 

(3)

Filing Party:

 

 

 

 

(4)

Date Filed:

 

 

 

 



Table of Contents

 

 

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

January 28, 2010

 

The Annual Meeting of Stockholders of Northern Technologies International Corporation, a Delaware corporation, will be held at NTIC’s corporate executive offices located at 4201 Woodland Road, Circle Pines, Minnesota 55014, beginning at 4:00 p.m., local time, on Thursday, January 28, 2010, for the following purposes:

 

1.                    To elect eight persons to serve as our directors until the next annual meeting of stockholders or until their respective successors shall be elected and qualified.

 

2.                    To ratify the selection of Baker Tilly Virchow Krause, LLP as our independent registered public accounting firm for the fiscal year ending August 31, 2010.

 

3.                    To transact such other business as may properly come before the meeting or any adjournment of the meeting.

 

Only stockholders of record at the close of business on December 1, 2009 will be entitled to notice of, and to vote at, the meeting and any adjournments thereof.  A stockholder list will be available at our corporate offices beginning January 18, 2010 during normal business hours for examination by any stockholder registered on NTIC’s stock ledger as of the record date, December 1, 2009, for any purpose germane to the annual meeting.

 

We are pleased to continue to take advantage of the Securities and Exchange Commission rules that allow issuers to furnish proxy materials to their stockholders on the Internet.  We believe these rules allow us to provide our stockholders with the information they need, while lowering the costs of delivery and reducing the environmental impact of our annual meeting.

 

 

By Order of the Board of Directors,

 

 

Matthew Wolsfeld

 

Corporate Secretary

 

December 11, 2009

Circle Pines, Minnesota

 

Important:  Whether or not you expect to attend the meeting in person, please vote by the Internet or telephone, or request a paper proxy card to sign, date and return by mail so that your shares may be voted.  A prompt response is helpful and your cooperation is appreciated.

 

Important Notice Regarding the Availability of Proxy Materials for the

Stockholder Meeting to be Held on January 28, 2010.  Our Proxy Statement and

Annual Report to Stockholders are available at www.proxyvote.com/ntic.

 



Table of Contents

 

TABLE OF CONTENTS

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

1

GENERAL INFORMATION ABOUT THE ANNUAL MEETING

1

Date, Time, Place and Purposes of Meeting

1

Who Can Vote

2

How You Can Vote

2

How Does the Board Recommend that You Vote

3

How You Can Change Your Vote or Revoke Your Proxy

3

Quorum Requirement

3

Vote Required

3

Proxy Solicitation Costs

4

Procedures at the Annual Meeting

4

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

5

PROPOSAL ONE — ELECTION OF DIRECTORS

6

Number of Directors

6

Nominees for Director

6

Board Recommendation

6

Information About Current Directors and Board Nominees

6

Additional Information About Current Directors and Board Nominees

7

CORPORATE GOVERNANCE

10

Director Independence

10

Board Meetings and Attendance

10

Board Committees

10

Audit Committee

11

Audit Committee Report

12

Compensation Committee

13

Nominating and Corporate Governance Committee

14

Corporate Governance Guidelines

16

Code of Ethics

17

Policy Regarding Director Attendance at Annual Meetings of Stockholders

17

Complaint Procedures

17

Process Regarding Stockholder Communications with Board of Directors

17

DIRECTOR COMPENSATION

18

Summary of Cash and Other Compensation

18

Non-Employee Director Compensation Program

20

Consulting Arrangements

21

Compensation Arrangements with Inside Directors

21

Indemnification Agreements

22

EXECUTIVE COMPENSATION

23

Executive Compensation Program

23

Summary of Cash and Other Compensation

26

Outstanding Equity Awards at Fiscal Year End

28

Stock Incentive Plans

28

Post-Termination Severance and Change in Control Arrangements

30

Indemnification Agreements

30

RELATED PERSON RELATIONSHIPS AND TRANSACTIONS

31

Agreement with Entity Affiliated with Former Chairman of the Board and Chief Executive Officer

31

Director and Executive Officer Compensation

31

 




Table of Contents

 

 

4201 Woodland Road, Circle Pines, Minnesota 55014

 


 

PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS

 

January 28, 2010

 


 

The Board of Directors of Northern Technologies International Corporation is soliciting your proxy for use at the 2010 Annual Meeting of Stockholders to be held on Thursday, January 28, 2010.  The Board of Directors expects to make available to our stockholders beginning on or about December 11, 2009 the Notice of Annual Meeting, this proxy statement and a form of proxy on the Internet or has sent these materials to stockholders of NTIC upon their request.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS

 


 

Our proxy statement and annual report to stockholders, which includes our annual report on Form 10-K, are available at www.proxyvote.com.  Pursuant to rules adopted by the Securities and Exchange Commission, or SEC, we have elected to provide access to our proxy materials over the Internet.  Accordingly, we are sending a Notice Regarding the Availability of Proxy Materials to certain of our stockholders of record and beneficial owners (excluding those stockholders of record and beneficial owners who previously have requested that they receive electronic or paper copies of our proxy materials). All stockholders have the ability to access our proxy materials on the website referred to in the Notice Regarding the Availability of Proxy Materials or request to receive a printed set of our proxy materials. Instructions on how to access our proxy materials over the Internet or to request a printed copy may be found in the Notice Regarding the Availability of Proxy Materials. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by e-mail on an ongoing basis. We believe that this process expedites your receipt of our proxy materials, lowers the costs of our Annual Meeting and reduces the environmental impact of our meeting.

 

GENERAL INFORMATION ABOUT THE ANNUAL MEETING

 


 

Date, Time, Place and Purposes of Meeting

 

The Annual Meeting of Stockholders of Northern Technologies International Corporation (sometimes referred to as “NTIC,” “we,” “our” or “us” in this proxy statement) will be held on Thursday, January 28, 2010, at 4:00 p.m., local time, at the principal executive offices of Northern Technologies International Corporation located at 4201 Woodland Road, Circle Pines, Minnesota 55014, for the purposes set forth in the Notice of Annual Meeting.

 

1



Table of Contents

 

Who Can Vote

 

Stockholders of record at the close of business on December 1, 2009 will be entitled to notice of and to vote at the meeting or any adjournment of the meeting.  As of that date, there were 4,240,679 shares of our common stock outstanding.  Each share of our common stock is entitled to one vote on each matter to be voted on at the Annual Meeting.  Stockholders are not entitled to cumulate voting rights.

 

How You Can Vote

 

Your vote is important.  Whether you hold shares directly as a stockholder of record or beneficially in “street name” (through a broker, bank or other nominee), you may vote your shares without attending the Annual Meeting. You may vote by granting a proxy or, for shares held in street name, by submitting voting instructions to your stockbroker or nominee.

 

If you are a stockholder whose shares are registered in your name, you may vote your shares in person at the meeting or by one of the three following methods:

 

·                  Vote by Internet, by going to the website address http://www.proxyvote.com and following the instructions for Internet voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.

 

·                  Vote by Telephone, by dialing 1-800-690-6903 and following the instructions for telephone voting shown on the Notice of Internet Availability of Proxy Materials or on your proxy card.

 

·                  Vote by Proxy Card, by completing, signing, dating and mailing the enclosed proxy card in the envelope provided if you received a paper copy of these proxy materials.

 

If you vote by Internet or telephone, please do not mail your proxy card.

 

If your shares are held in “street name” (through a broker, bank or other nominee), you may receive a separate voting instruction form with this proxy statement or you may need to contact your broker, bank or other nominee to determine whether you will be able to vote electronically using the Internet or telephone.

 

The deadline for voting by telephone or by using the Internet is 11:59 p.m., Eastern Daylight Savings Time, on the day before the date of the Annual Meeting or any adjournments thereof. Please see the Notice of Internet Availability of Proxy Materials, your proxy card or the information your bank, broker, or other holder of record provided to you for more information on your options for voting.

 

If you return your signed proxy card or use Internet or telephone voting before the Annual Meeting, the named proxies will vote your shares as you direct.  You have three choices on each matter to be voted on.

 

For the election of directors, you may:

 

·                  Vote FOR the eight nominees for director,

 

·                  WITHHOLD your vote from the eight nominees for director or

 

·                  WITHHOLD your vote from one or more of the eight nominees for director.

 

2



Table of Contents

 

For each of the other proposals, you may:

 

·                  Vote FOR the proposal,

 

·                  Vote AGAINST the proposal or

 

·                  ABSTAIN from voting on the proposal.

 

If you send in your proxy card or use Internet or telephone voting, but do not specify how you want to vote your shares, the proxies will vote your shares FOR all eight of the nominees for director and FOR all of the other proposals set forth in the Notice of Annual Meeting.

 

How Does the Board Recommend that You Vote

 

The Board of Directors unanimously recommends that you vote FOR all eight of the nominees for director and FOR the approval of all of the other proposals set forth in the Notice of Annual Meeting.

 

How You Can Change Your Vote or Revoke Your Proxy

 

If you are a stockholder whose shares are registered in your name, you may revoke your proxy at any time before it is voted by one of the following methods:

 

·                  Submitting another proper proxy with a more recent date than that of the proxy first given by following the Internet or telephone voting instructions or completing, signing, dating and returning a proxy card to us.

 

·                  Sending written notice of your revocation to our Corporate Secretary.

 

·                  Attending the Annual Meeting and voting by ballot.

 

Quorum Requirement

 

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority (2,120,340 shares) of the outstanding shares of our common stock as of the record date will constitute a quorum for the transaction of business at the Annual Meeting.  In general, shares of our common stock represented by proxies marked “For,” “Against,” “Abstain” or “Withheld” are counted in determining whether a quorum is present.  In addition, a “broker non-vote” is considered in determining whether a quorum is present.  A “broker non-vote” is a card returned by a broker on behalf of its beneficial owner customer that is not voted on a particular matter because voting instructions have not been received by the broker from the customer, and the broker has no discretionary authority to vote on behalf of such customer on such matter.

 

Vote Required

 

Assuming a quorum is represented at the Annual Meeting, either in person or by proxy, the election of the eight nominees for director requires the affirmative vote of a plurality of the shares of common stock present in person or by proxy and entitled to vote.  This means that a director nominee with the most votes for a particular slot is elected for that slot.  Only votes “For” and “Withheld” affect the outcome.  The other proposals will be decided by the affirmative vote of the holders of a majority of the shares of common stock present in person or by proxy and entitled to vote at the Annual Meeting.

 

3



Table of Contents

 

If your shares are held in “street name” and you do not indicate how you wish to vote, your broker is permitted to exercise its discretion to vote your shares on certain “routine” matters that include the ratification of the selection of our independent registered public accounting firm (Proposal Two).  The election of directors is not considered a “routine” matter; and, therefore, if you do not direct your broker how to vote on the election of directors (Proposal One), your broker may not exercise discretion and may not vote your shares.  This is called a “broker non-vote.”  Broker non-votes are not considered to be “entitled to vote” on Proposal One and therefore, will not be counted as a vote “FOR” or “WITHELD” any of the director nominees.  Abstentions and withheld votes will be counted, and will have the effect of an “Against” vote.

 

Proxy Solicitation Costs

 

The cost of soliciting proxies, including the preparation, assembly, electronic availability and mailing of proxies and soliciting material, as well as the cost of making available or forwarding this material to the beneficial owners of our common stock will be borne by NTIC.  Our directors, officers and regular employees may, without compensation other than their regular compensation, solicit proxies by telephone, e-mail, facsimile, telegraph or personal conversation.  We may reimburse brokerage firms and others for expenses in making available or forwarding solicitation materials to the beneficial owners of our common stock.

 

Procedures at the Annual Meeting

 

The presiding officer at the Annual Meeting will determine how business at the meeting will be conducted.  Only matters brought before the Annual Meeting in accordance with our Bylaws will be considered.

 

Only a natural person present at the Annual Meeting who is either one of our stockholders, or is acting on behalf of one of our stockholders, may make a motion or second a motion.  A person acting on behalf of a stockholder must present a written statement executed by the stockholder or the duly authorized representative of the stockholder on whose behalf the person purports to act.

 

4



Table of Contents

 

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT

 


 

The following table sets forth information known to us with respect to the beneficial ownership of our common stock as of December 1, 2009 for:

 

·                  each person known by us to beneficially own more than five percent of the outstanding shares of our common stock,

 

·                  each of our directors,

 

·                  each of the executive officers named in the Summary Compensation Table on page 27 under the heading “Executive Compensation” and

 

·                  all of our current directors and executive officers as a group.

 

Shares are deemed to be “beneficially owned” by a person if such person, directly or indirectly, has sole or shared power to vote or to direct the voting of such shares or sole or shared power to dispose or direct the disposition of such shares.  Except as otherwise indicated, we believe that each of the beneficial owners of our common stock listed below, based on information provided by these owners, has sole dispositive and voting power with respect to its shares, subject to community property laws where applicable.  Shares not outstanding but deemed beneficially owned by virtue of the right of a person or member of a group to acquire them within 60 days are treated as outstanding only when determining the amount and percent owned by such person or group.

 

Name

 

Shares Subject to Options
Immediately Exercisable or
Exercisable Within 60 Days

 

Total Number of Shares
of Common Stock
Beneficially Owned

 

Percent of
Total Voting
Power

 

Stockholders Owning 5% or More:

 

 

 

 

 

 

 

Inter Alia Holding Company(1)

 

0

 

852,068

 

20.1

%

Directors and Named Executive Officers:

 

 

 

 

 

 

 

Pierre Chenu

 

7,333

 

11,333

 

*

 

Tilman B. Frank, M.D.

 

1,555

 

1,555

 

*

 

Soo-Keong Koh

 

1,555

 

1,555

 

*

 

Donald A. Kubik, Ph.D.

 

8,000

 

140,286

 

3.3

%

Sunggyu Lee, Ph.D.

 

6,666

 

6,666

 

*

 

G. Patrick Lynch(2)

 

10,360

 

877,896

 

20.7

%

Ramani Narayan, Ph.D.

 

6,666

 

8,166

 

*

 

Mark J. Stone(3)

 

6,666

 

16,666

 

*

 

Matthew C. Wolsfeld

 

16,633

 

47,652

 

1.1

%

Directors and executive officers as a group (nine persons)(4)

 

65,434

 

1,111,775

 

26.0

%

 


* Represents beneficial ownership of less than one percent of our common stock.

 

(1)               Inter Alia Holding Company is an entity of which G. Patrick Lynch, our President and Chief Executive Officer, is a stockholder.  G. Patrick Lynch shares voting and dispositive power over such shares.  Of the NTIC shares indicated as held by Inter Alia Holding Company, 378,167 of such shares were pledged as of such date by Inter Alia Holding Company to various banks as collateral for loans.  Inter Alia Holding Company’s address is 23205 Mercantile Road, Beachwood, Ohio.

 

(2)               Includes 852,068 shares held by Inter Alia Holding Company.  See note (1) above.  Mr. Lynch’s address is 4201 Woodland Road, Circle Pines, Minnesota 55014.

 

(3)               Includes 10,000 shares held jointly with Mr. Stone’s spouse.

 

(4)               The amount beneficially owned by all current directors and executive officers as a group includes 852,068 shares held of record by Inter Alia Holding Company and shares held jointly with spouses.  See notes (1) and (3) above.

 

5



Table of Contents

 

PROPOSAL ONE — ELECTION OF DIRECTORS

 


 

Number of Directors

 

Our Bylaws provide that the Board of Directors will consist of at least one member or such other number as may be determined by the Board of Directors from time to time or by the stockholders at an annual meeting.  The Board of Directors has fixed the number of directors at eight commencing on the date of our 2010 Annual Meeting of Stockholders.

 

Nominees for Director

 

The Board of Directors has nominated the following eight individuals to serve as our directors until the next annual meeting of stockholders or until their successors are elected and qualified.  All of the nominees named below are current members of the Board of Directors.

 

·                  Pierre Chenu

·                  Tilman B. Frank, M.D.

·                  Soo-Keong Koh

·                  Donald A. Kubik, Ph.D.

·                  Sunggyu Lee, Ph.D.

·                  G. Patrick Lynch

·                  Ramani Narayan, Ph.D.

·                  Mark J. Stone

 

Proxies can only be voted for the number of persons named as nominees in this proxy statement, which is eight.

 

On November 30, 2009, Mark M. Mayers passed away.  Mr. Mayers had served as a director of NTIC since November 2004.  The Board thanks Mr. Mayers for his dedication and service to NTIC.

 

Board Recommendation

 

The Board of Directors recommends a vote FOR the election of all of the nominees named above.

 

If prior to the Annual Meeting, the Board of Directors should learn that any nominee will be unable to serve for any reason, the proxies that otherwise would have been voted for this nominee will be voted for a substitute nominee as selected by the Board.  Alternatively, the proxies, at the Board’s discretion, may be voted for that fewer number of nominees as results from the inability of any nominee to serve.  The Board of Directors has no reason to believe that any of the nominees will be unable to serve.

 

Information About Current Directors and Board Nominees

 

The following table sets forth as of December 1, 2009 the name, age and principal occupation of each current director and each individual who has been nominated by the Board of Directors to serve as a director of our company, as well as how long each individual has served as a director of NTIC.

 

Name

 

Age

 

Principal Occupation

 

Director
Since

Pierre Chenu(1)(2)

 

71

 

Chairman of the Board of NTIC

 

2003

Tilman B. Frank, M.D.(2)(3)

 

43

 

Partner and Chief Executive Officer of Capitalent GmbH

 

2008

Soo-Keong Koh(1)

 

58

 

Managing Director of EcoSave Pte Ltd.

 

2008

Donald A. Kubik, Ph.D.

 

69

 

President of DAK Engineering, LLC

 

1995

Sunggyu Lee, Ph.D.

 

57

 

Professor of Chemical and Biological Engineering, Missouri University of Science and Technology

 

2004

G. Patrick Lynch

 

42

 

President and Chief Executive Officer of NTIC

 

2004

 

6



Table of Contents

 

Name

 

Age

 

Principal Occupation

 

Director
Since

Ramani Narayan, Ph.D.

 

60

 

Distinguished Professor in the Department of Chemical Engineering & Materials Science at Michigan State University

 

2004

Mark J. Stone(1)(3)

 

50

 

President of Petrus International, Inc.

 

2001

 


(1)           Member of the Audit Committee

(2)           Member of the Compensation Committee

(3)           Member of the Nominating and Corporate Governance Committee

 

There are no family relationships among any of our directors.

 

Additional Information About Current Directors and Board Nominees

 

Pierre Chenu has been a director of NTIC since 2003 and Chairman of the Board since July 2005.  Mr. Chenu is currently retired.  Prior to his retirement, Mr. Chenu served as Vice President, Worldwide Operations, Flat Glass Activities within the Asahi-Glaverbel Glass Group, a position he had served for five years.  Prior to that, Mr. Chenu was a member of the Executive Committee of Glaverbel S.A., with various operating responsibilities in France, Spain, Italy, Russia, Germany, China and the United States.  Before joining Glaverbel, Mr. Chenu worked for U.S. Steel in steel production in Pittsburgh, Pennsylvania and for Corning Inc. where he held various staff, line and executive positions in the United States, France and the United Kingdom.  Mr. Chenu holds a Master’s Degree in Engineering, with a specialty in metallurgy, from the University of Liege (Belgium) and a M.B.A. from Harvard University.  Mr. Chenu is a citizen of Belgium.

 

Tilman B. Frank, M.D.  has been a director of NTIC since May 2008. Dr. Frank is Partner and Chief Executive Officer of Capitalent GmbH, a personnel consulting firm, a position he has held since January 2009.  Dr. Frank served as Chief Executive Officer of Societät für Unternehmensplanung (S·U·P) GmbH, a personnel consulting company, where he served in such position from July 2007 to December 2008.  From June 2001 to July 2007, Dr. Frank served as Managing Director of S·U·P. Prior to joining S·U·P, Dr. Frank served as Senior Vice President of Marketing and Sales of vamedis* AG, a German-based e-procurement solutions provider, from October 2001 to May 2001. Dr. Frank holds a Medical Doctor degree from the University of Frankfurt.

 

Soo-Keong Koh has been a director of NTIC since May 2008. Mr. Koh is the Managing Director of Ecosave Pte Ltd., a company whose business is focused on environmental biotech and energy conservation technologies, a position he has held since April 2007. From January 1986 to April 2007, Mr. Koh served as Chief Executive Officer and President of Toll Asia Pte Ltd formerly SembCorp Logistics Ltd (SembLog), a Singapore public listed company, which was acquired by Toll in May 2006. Mr. Koh has over 20 years of experience in the logistics industry. Mr. Koh holds a Bachelor of Engineering, a Master of Business Administration and a Postgraduate Diploma in Business Law from the University of Singapore (now known as the National University of Singapore).

 

Donald A. Kubik, Ph.D. has been a director and the Vice Chairman of the Board of NTIC since September 1999.  Dr. Kubik currently serves as President of DAK Engineering, LLC, a consulting firm.  In May 2009, Dr. Kubik retired as Chief Technology Officer of NTIC.  Dr. Kubik served as Vice President of NTIC from 1979 to September 1999, as Co-Chief Executive Officer of NTIC from September 1999 to May 2000 and as Chief Technology Officer from May 2000 until his retirement in June 2009.  Dr. Kubik is responsible for developing the patent that led to NTIC’s introduction of protective plastic film and paper products incorporating volatile corrosion inhibitors.  Prior to joining

 

7



Table of Contents

 

NTIC, Dr. Kubik held a research and development position with Minnesota Mining & Manufacturing Company (3M).

 

Sunggyu Lee, Ph.D. was elected a director of NTIC in January 2004.  Dr. Lee is Professor of Chemical and Biological Engineering, Missouri University of Science and Technology, Rolla, Missouri.  Previously, he held positions of Robert Iredell Professor and Head of Chemical Engineering Department at the University of Akron, Akron, Ohio for 1988-1996 and C.W. LaPierre Professor and Chairman of Chemical Engineering at University of Missouri-Columbia for 1997-2005. He has authored six books and over 400 archival publications and received 27 U.S. patents in a variety of chemical and polymer processes and products. He is currently serving as Editor of Encyclopedia of Chemical Processing, Taylor & Francis, New York, NY and also as Book Series Editor of Green Chemistry and Chemical Engineering, CRC Press, Boca Raton, FL.  Throughout his career, he has served as consultant and technical advisor to a number of national and international companies.  He received his Ph.D. from Case Western Reserve University, Cleveland, Ohio in 1980.

 

G. Patrick Lynch, an employee of NTIC since 1995, has been President since July 2005 and Chief Executive Officer since January 2006 and was appointed a director of NTIC in February 2004.  Mr. Lynch served as President of North American Operations of NTIC from May 2004 to July 2005.  Prior to May 2004, Mr. Lynch held various positions with NTIC, including Vice President of Strategic Planning, Corporate Secretary and Project Manager.  Mr. Lynch is also an officer and director of Inter Alia Holding Company, a financial and management consulting firm that is a significant stockholder of NTIC.  Prior to joining NTIC, Mr. Lynch held positions in sales management for Fuji Electric Co., Ltd. in Tokyo, Japan, and programming project management for BMW AG in Munich, Germany.  Mr. Lynch received an M.B.A. degree from the University of Michigan Business School in Ann Arbor, Michigan.

 

Ramani Narayan, Ph.D. has been a director of NTIC since November 2004. He is a Distinguished Professor at Michigan State University in the Department of Chemical Engineering & Materials Science, where he has 105 refereed publications in leading journals to his credit, 18 patents, edited three books and one expert dossier in the area of bio-based polymeric materials.  His research encompasses design & engineering of sustainable, biobased products, biodegradable plastics and polymers, biofiber reinforced composites, reactive extrusion polymerization and processing, studies in plastic end-of-life options like biodegradation and composting.  He conducts carbon footprint calculations for plastics and products.  He also performs LCA (Life Cycle Assessment) for reporting a product’s environmental footprint.  He serves as Scientific Chair and board member of the Biodegradable Products Institute (BPI), North America. He serves on the Technical Advisory Board of Tate & Lyle.  He served on the Board of Directors of ASTM International, an international standards setting organization and currently chairs the committee on Environmentally Degradable Plastics and Biobased Products (D20.96) and the Plastics Terminology Committee D20.92.  He is also the technical expert for the USA on ISO (International Standards Organization) TC 61 on Plastics — specifically for Terminology, and Biodegradable Plastics.  He has won numerous awards, including the Named MSU University Distinguished Professor in 2007; the Governors University Award for commercialization excellence; Michigan State University Distinguished Faculty Award, 2006, 2005 Withrow Distinguished Scholar award,  Fulbright Distinguished Lectureship Chair in Science & Technology Management & Commercialization (University of Lisbon; Portugal); First recipient of the William N. Findley Award, The James Hammer Memorial Lifetime Achievement Award, and Research and Commercialization Award sponsored by ICI Americas, Inc. & the National Corn Growers Association.

 

Mark J. Stone has been a director of NTIC since 2001.  Mr. Stone has been President of Petrus International, Inc., an international consulting firm, since 1992.  Mr. Stone has advised a variety of Japanese and other multi-national corporations in areas including project finance and international investment strategy.  Mr. Stone is also President of MM Management, LLC, an entity that manages Chief

 

8



Table of Contents

 

Masaharu Morimoto’s business interests.  Mr. Stone was a director of Aqua Design, Inc., an international water desalination company, from 1988 to 1996.  Mr. Stone was Director, Marketing & Business Development of Toray Marketing & Sales (America) Inc. from 1986 to 1992.  From 1980 to 1986, Mr. Stone was employed by Mitsui & Co. (U.S.A.), Inc. where he founded and was Treasurer of Hydro Management Resources, a Mitsui subsidiary, which finances, owns and operates water treatment projects.  Mr. Stone holds an A.B. from Harvard University.

 

9



Table of Contents

 

CORPORATE GOVERNANCE

 


 

Director Independence

 

The Board of Directors has affirmatively determined that four of NTIC’s current eight directors are “independent directors” under the Listing Rules of the NASDAQ Stock Market:  Pierre Chenu, Mark J. Stone, Dr. Tilman B. Frank and Soo-Keong Koh.

 

In making these affirmative determinations that such individuals are “independent directors,” the Board of Directors reviewed and discussed information provided by the directors and by NTIC with regard to each director’s business and personal activities as they may relate to NTIC and NTIC’s management.

 

As a result of the passing away of Mr. Mayers on November 30, 2009, NTIC no longer complies with NASDAQ Listing Rule 5605(b)(1), which requires NASDAQ-listed companies, such as NTIC, to have a majority of independent directors on the Board of Directors.  NTIC has a “cure period” of until the earlier of its next annual meeting of stockholders or November 30, 2010 to regain compliance with rule; provided, however, that if the annual stockholders meeting occurs no later than 180 days following the event that caused the failure to comply with the requirement, NTIC instead has 180 days from such event, or until June 1, 2010, to regain compliance. Since NTIC’s next Annual Meeting of Stockholders is scheduled to be held on January 28, 2010, NTIC has until June 1, 2010 to regain compliance with NASDAQ Listing Rule 5605(b)(1).  NTIC is in the process of searching for an individual who would be considered an “independent director” under the Listing Rules of the NASDAQ Stock Market and could be added to the Board of Directors as soon as reasonably practicable after the Annual Meeting of Stockholders.

 

Board Meetings and Attendance

 

The Board of Directors met four times during the fiscal year ended August 31, 2009.  Each of the directors attended at least 75 percent of the aggregate of the total number of meetings of the Board and the total number of meetings held by all Board committees on which he served.

 

Board Committees

 

The Board of Directors has a standing Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, each of which has the composition and responsibilities described below.  The Board of Directors may from time to time establish other committees to facilitate the management of our company and may change the composition and responsibilities of our existing committees.  Each of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee operates under a written charter adopted by the Board of Directors, which can be found on the “Investor Relations-Corporate Governance” section of our corporate website www.ntic.com.  A printed copy of each charter is also available to any stockholder upon request to our Corporate Secretary at Northern Technologies International Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014 or by telephone at (763) 225-6637.

 

The following table summarizes the current membership of each of our three Board committees.  Each of the members of the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee is an “independent director” under the Listing Rules of the NASDAQ Stock Market.

 

10



Table of Contents

 

Director

 

Audit

 

Compensation

 

Nominating and
Corporate Governance

Pierre Chenu

 

 

 

Tilman B. Frank, Ph.D.

 

 

Chair

 

Soo-Keong Koh

 

 

 

Chair

Donald A. Kubik, Ph.D.

 

 

 

Sunggyu Lee, Ph.D.

 

 

 

G. Patrick Lynch

 

 

 

Ramani Narayan, Ph.D.

 

 

 

Mark J. Stone

 

Chair

 

 

 

Audit Committee

 

Responsibilities.  The Audit Committee provides assistance to the Board of Directors in fulfilling its responsibilities for oversight, for quality and integrity of the accounting, auditing, reporting practices, systems of internal accounting and financial controls, the annual independent audit of our financial statements, and the legal compliance and ethics programs of NTIC as established by management.  The Audit Committee’s primary responsibilities include:

 

·                  Overseeing NTIC’s financial reporting process, internal control over financial reporting and disclosure controls and procedures on behalf of the Board of Directors;

 

·                  Having sole authority to appoint, retain and oversee the work of NTIC’s independent registered public accounting firm and establish the compensation to be paid to the firm;

 

·                  Reviewing and pre-approving all audit services and permissible non-audit services to be provided to NTIC by our independent registered public accounting firm;

 

·                  Establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by NTIC’s employees of concerns regarding questionable accounting or auditing matters; and

 

·                  Overseeing the establishment and administration (including the grant of any waiver from) a written code of ethics applicable to NTIC’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

 

Composition.  The current members of the Audit Committee are Mr. Chenu, Mr. Koh and Mr. Stone.  Mr. Stone is the current chair of the Audit Committee.  Mr. Mayers served as a member of the Audit Committee during fiscal 2009.

 

Each current member of the Audit Committee qualifies as “independent” for purposes of membership on audit committees pursuant to the Listing Rules of the NASDAQ Stock Market and the rules and regulations of the SEC and is “financially literate” as required by the Listing Rules of the NASDAQ Stock Market.  In addition, the Board of Directors has determined that Mr. Stone qualifies as an “audit committee financial expert” as defined by the rules and regulations of the SEC and meets the qualifications of “financial sophistication” under the Listing Rules of the NASDAQ Stock Market as a result of his extensive financial background and various financial positions he has held throughout his career.  Stockholders should understand that these designations related to our Audit Committee members’ experience and understanding with respect to certain accounting and auditing matters do not impose upon

 

11



Table of Contents

 

any of them any duties, obligations or liabilities that are greater than those generally imposed on a member of the Audit Committee or of the Board of Directors.

 

Meetings and Other Information.  The Audit Committee met four times during fiscal 2009, one time outside the presence of management and one time face to face with Baker Tilly Virchow Krause, LLP, NTIC’s independent registered public accounting firm.  Additional information regarding NTIC’s Audit Committee and its independent registered public accounting firm is disclosed under the “—Audit Committee Report” and “Proposal Two—Ratification of Selection of Independent Registered Public Accounting Firm” sections of this proxy statement.

 

Audit Committee Report

 

This report is furnished by the Audit Committee of the Board of Directors with respect to NTIC’s financial statements for the fiscal year ended August 31, 2009.

 

One of the purposes of the Audit Committee is to oversee NTIC’s accounting and financial reporting processes and the audit of NTIC’s annual financial statements. NTIC’s management is responsible for the preparation and presentation of complete and accurate financial statements.  NTIC’s independent registered public accounting firm, Baker Tilly Virchow Krause, LLP, is responsible for performing an independent audit of NTIC’s financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and for issuing a report on their audit.

 

In performing its oversight role, the Audit Committee has reviewed and discussed NTIC’s audited financial statements for the fiscal year ended August 31, 2009 with NTIC’s management.  Management represented to the Audit Committee that NTIC’s financial statements were prepared in accordance with generally accepted accounting principles.  The Audit Committee has discussed with Baker Tilly Virchow Krause, LLP, NTIC’s independent registered public accounting firm, the matters required to be discussed by Statement on Auditing Standards No. 114, as amended and as adopted by the Public Company Accounting Oversight Board.  The Audit Committee has received the written disclosures and the letter from Baker Tilly Virchow Krause, LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the Baker Tilly Virchow Krause, LLP’s communications with the Audit Committee concerning independence.  The Audit Committee has discussed with Baker Tilly Virchow Krause, LLP its independence and concluded that the independent registered public accounting firm is independent from NTIC and NTIC’s management.

 

Based on the review and discussions of the Audit Committee described above, in reliance on the unqualified opinion of Baker Tilly Virchow Krause, LLP regarding NTIC’s audited financial statements, and subject to the limitations on the role and responsibilities of the Audit Committee discussed above and in the Audit Committee’s charter, the Audit Committee recommended to the Board of Directors that NTIC’s audited financial statements for the fiscal year ended August 31, 2009 be included in its Annual Report on Form 10-K for the fiscal year ended August 31, 2009 for filing with the Securities and Exchange Commission.

 

This report is dated as of November 20, 2009.

 

Audit Committee

 

Mark J. Stone, Chair

Pierre Chenu

Mark M. Mayers

 

12



Table of Contents

 

Compensation Committee

 

Responsibilities.  The Compensation Committee provides assistance to the Board of Directors in fulfilling its oversight responsibility relating to compensation of our chief executive officer and other executive officers and administers our equity compensation plans.  In so doing, the Compensation Committee, among other things:

 

·                  recommends to the Board of Directors for its determination, the annual salaries, incentive compensation, long-term compensation and any and all other compensation applicable to the our executive officers;

 

·                  establishes, and from time to time reviews and revises, corporate goals and objectives with respect to compensation for our executive officers and establishes and leads a process for the full Board of Directors to evaluate the performance of our executive officers in light of those goals and objectives;

 

·                  administers our equity compensation plans and recommends to the Board of Directors for its determination grants of options or other equity-based awards for executive officers, employees and independent consultants under our equity compensation plans;

 

·                  reviews our policies with respect to employee benefit plans; and

 

·                  establishes and from time to time reviews and revises processes and procedures for the consideration and determination of executive compensation.

 

Composition.  The current members of the Compensation Committee are Mr. Chenu and Dr. Frank.  Dr. Frank is the current chair of the Compensation Committee.  Mr. Mayers served as a member of the Compensation Committee during fiscal 2009.  The Board of Directors has determined that each of the members of the Compensation Committee is considered an “independent director” under the Listing Rules of the NASDAQ Stock Market and a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended.

 

Processes and Procedures for Consideration and Determination of Executive Compensation.  As described in more detail above under the heading “—Responsibilities,” the Board of Directors has delegated to the Compensation Committee the responsibility, among other things, to recommend to the Board of Directors any and all compensation payable to our executive officers, including annual salaries, incentive compensation and long-term incentive compensation, and to administer our equity and incentive compensation plans applicable to our executive officers.  Decisions regarding executive compensation made by the Compensation Committee are not considered final and are subject to final review and approval by the entire Board of Directors.  Under the terms of its formal written charter, the Compensation Committee has the power and authority, to the extent permitted by our Bylaws and applicable law, to delegate all or a portion of its duties and responsibilities to a subcommittee of the Compensation Committee.  The Compensation Committee has not generally delegated any of its duties and responsibilities to subcommittees, but rather has taken such actions as a committee, as a whole.

 

Our President and Chief Executive Officer assists the Compensation Committee in gathering compensation related data regarding our executive officers and making recommendations to the Compensation Committee regarding the form and amount of compensation to be paid to each executive officer.  In making final recommendations to the Board of Directors regarding compensation to be paid to our executive officers, the Compensation Committee considers the recommendations of our President and Chief Executive Officer, but also considers other factors, such as its own views as to the form and amount

 

13



Table of Contents

 

of compensation to be paid, the achievement by the company of pre-established performance objectives the general performance of the company and the individual officers, the performance of the company’s stock price and other factors that may be relevant.

 

Final deliberations and decisions by the Compensation Committee regarding its recommendations to the Board of Directors of the form and amount of compensation to be paid to our executive officers, including our President and Chief Executive Officer, are made by the Compensation Committee, without the presence of the President and Chief Executive Officer or any other executive officer of our company.  In making final decisions regarding compensation to be paid to our executive officers, the Board of Directors considers the same factors and gives considerable weight to the recommendations of the Compensation Committee.

 

Meetings.  The Compensation Committee met two times during fiscal 2009.

 

Nominating and Corporate Governance Committee

 

Responsibilities.  The primary responsibilities of the Nominating and Corporate Governance Committee include:

 

·                  identifying individuals qualified to become members of the Board of Directors;

 

·                  recommending director nominees for each annual meeting of our stockholders and director nominees to fill any vacancies that may occur between meetings of stockholders;

 

·                  being aware of best practices in corporate governance matters;

 

·                  developing and overseeing an annual Board of Directors and Board committee evaluation process; and

 

·                  establishing and leading a process for determination of the compensation applicable to the non-employee directors on the Board.

 

Composition.  The current members of the Nominating and Corporate Governance Committee are Dr. Koh, Dr. Frank and Mr. Stone.  Mr. Koh is the current chair of the Nominating and Corporate Governance Committee.  The Board of Directors has determined that each of the members of the Nominating and Corporate Governance Committee is considered an “independent director” under the Listing Rules of the NASDAQ Stock Market.

 

Director Nominations Process.  In selecting nominees for the Board of Directors, the Nominating and Corporate Governance Committee first determines whether the incumbent directors are qualified to serve, and wish to continue to serve, on the Board.  The Nominating and Corporate Governance Committee believes that NTIC and its stockholders benefit from the continued service of qualified incumbent directors because those directors have familiarity with and insight into NTIC’s affairs that they have accumulated during their tenure with the company.  Appropriate continuity of Board membership also contributes to the Board’s ability to work as a collective body.  Accordingly, it is the practice of the Nominating and Corporate Governance Committee, in general, to re-nominate an incumbent director if the director wishes to continue his or her service with the Board, the director continues to satisfy the criteria for membership on the Board that the Nominating and Corporate Governance Committee generally views as relevant and considers in deciding whether to re-nominate an incumbent director or nominate a new director, the Nominating and Corporate Governance Committee believes the director

 

14



Table of Contents

 

continues to make important contributions to the Board, and there are no special, countervailing considerations against re-nomination of the director.

 

In identifying and evaluating new candidates for election to the Board, the Nominating and Corporate Governance Committee solicits recommendations for nominees from persons whom the Nominating and Corporate Governance Committee believes are likely to be familiar with qualified candidates having the qualifications, skills and characteristics required for Board nominees from time to time.  Such persons may include members of the Board and senior management of NTIC.  In addition, the Nominating and Corporate Governance Committee may engage a search firm to assist it in identifying qualified candidates.  The Nominating and Corporate Governance Committee reviews and evaluates each candidate whom it believes merits serious consideration, taking into account available information concerning the candidate, any qualifications or criteria for Board membership established by the Nominating and Corporate Governance Committee, the existing composition of the Board, and other factors that it deems relevant.  In conducting its review and evaluation, the Nominating and Corporate Governance Committee solicits the views of NTIC’s management, other Board members, and other individuals it believes may have insight into a candidate.  The Nominating and Corporate Governance Committee may designate one or more of its members and/or other Board members to interview any proposed candidate.

 

The Nominating and Corporate Governance Committee will consider recommendations for the nomination of directors submitted by NTIC stockholders.  For more information, see the information set forth under the heading “Other Matters — Director Nominations.”  The Nominating and Corporate Governance Committee will evaluate candidates recommended by stockholders in the same manner as those recommended as stated above.

 

There are no formal requirements or minimum qualifications that a candidate must meet in order for the Nominating and Corporate Governance Committee to recommend the candidate to the Board.  The Nominating and Corporate Governance Committee believes that each nominee should be evaluated based on his or her merits as an individual, taking into account the needs of NTIC and the Board.  However, in evaluating candidates, there are a number of criteria that the Nominating and Corporate Governance Committee generally views as relevant and is likely to consider.  Some of these factors include whether the candidate is an “independent director” under the Listing Rules of the NASDAQ Stock Market and meets any other applicable independence tests under the federal securities laws and rules and regulations of the Securities and Exchange Commission; whether the candidate is “financially literate” or “financially sophisticated” and otherwise meets the requirements for serving as a member of an audit committee under the Listing Rules of the NASDAQ Stock Market; whether the candidate is an “audit committee financial expert” under the federal securities laws and the rules and regulations of the Securities and Exchange Commission; the needs of NTIC with respect to the particular talents and experience of its directors; the personal and professional integrity and reputation of the candidate; the candidate’s level of education and business experience; the candidate’s broad-based business acumen; the candidate’s level of understanding of NTIC’s business and its industry; the candidate’s ability and willingness to devote adequate time to work of the Board and its committees; the fit of the candidate’s skills and personality with those of other directors and potential directors in building a board that is effective, collegial and responsive to the needs of NTIC; whether the candidate possesses strategic thinking and a willingness to share ideas; the candidate’s diversity of experiences, expertise and background; and the candidate’s ability to represent the interests of all stockholders and not a particular interest group.

 

Processes and Procedures for Consideration and Determination of Director Compensation.  As described in more detail above under the heading “—Responsibilities,” the Board of Directors has delegated to the Nominating and Corporate Governance Committee the responsibility, among other things, to review and make recommendations to the Board of Directors concerning compensation for non-employee members of the Board of Directors, including but not limited to retainers, meeting fees, committee chair and

 

15



Table of Contents

 

member retainers and equity compensation.  Decisions regarding director compensation made by the Nominating and Corporate Governance Committee are not considered final and are subject to final review and approval by the entire Board of Directors.  Under the terms of its formal written charter, the Nominating and Corporate Governance Committee has the power and authority, to the extent permitted by our Bylaws and applicable law, to delegate all or a portion of its duties and responsibilities to a subcommittee of the Nominating and Corporate Governance Committee.  The Nominating and Corporate Governance Committee has not generally delegated any of its duties and responsibilities to subcommittees, but rather has taken such actions as a committee, as a whole.

 

In making recommendations to the Board of Directors regarding compensation to be paid to our non-employee directors, the Nominating and Corporate Governance Committee considers fees paid to directors of comparable public companies, the number of board and committee meetings that our directors are expected to attend, and other factors that may be relevant.  In making final decisions regarding non-employee director compensation, the Board of Directors considers the same factors and the recommendation of the Nominating and Corporate Governance Committee.

 

Meetings and Other Matters.  The Nominating and Corporate Governance Committee met four times during fiscal 2009.  Additional information regarding the Nominating and Corporate Governance Committee is disclosed under the “Director Compensation—Non-Employee Director Compensation Program” section of this proxy statement.

 

Corporate Governance Guidelines

 

The Board of Directors has adopted Corporate Governance Guidelines.  A copy of these Corporate Governance Guidelines can be found on the “Investor Relations-Corporate Governance” section of our corporate website www.ntic.com.  A printed copy of such Corporate Governance Guidelines is also available to any stockholder upon request to our Corporate Secretary at Northern Technologies International Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014 or by telephone at (763) 225-6637.  Among the topics addressed in our Corporate Governance Guidelines are:

 

·                  Board size, composition and qualifications;

·                  Selection of directors;

·                  Board leadership;

·                  Board committees;

·                  Board and committee meetings;

·                  Executive sessions of outside directors;

·                  Meeting attendance by directors and non-directors;

·                  Appropriate information and access;

·                  Ability to retain advisors;

·                  Conflicts of interest;

·                  Board interaction with corporate constituencies;

·                  Change of principal occupation and board memberships;

·                  Retirement and term limits;

·                  Board compensation;

·                  Stock ownership by directors and executive officers;

·                  Loans to directors and executive officers;

·                  CEO evaluation;

·                  Board and committee evaluation;

·                  Director continuing education;

·                  Succession planning; and

·                  Communications with directors.

 

16



Table of Contents

 

Code of Ethics

 

The Board of Directors has adopted a Code of Ethics, which applies to all of NTIC’s directors, executive officers, including NTIC’s Chief Executive Officer and Chief Financial Officer, and other employees, and meets the requirements of the Securities and Exchange Commission and the NASDAQ Stock Market.  A copy of NTIC’s Code of Ethics was filed as an exhibit to our Annual Report on Form 10-K for the year ended August 31, 2009 and is available on the “Investor Relations-Corporate Governance” section of our corporate website www.ntic.com.

 

Policy Regarding Director Attendance at Annual Meetings of Stockholders

 

It is the policy of the Board of Directors that directors standing for re-election should attend our annual meeting of stockholders, if their schedules permit.  A Board of Directors meeting is generally held on the day following each annual meeting of stockholders.  To save costs, a telephonic Board meeting was held on the day following the 2009 annual meeting of stockholders; and, therefore, G. Patrick Lynch and Donald A. Kubik, Ph.D. were the only directors in attendance at the 2009 annual meeting of stockholders.

 

Complaint Procedures

 

The Audit Committee has established procedures for the receipt, retention and treatment of complaints received by NTIC regarding accounting, internal accounting controls or auditing matters, and the submission by employees of NTIC, on a confidential and anonymous basis, of concerns regarding questionable accounting or auditing matters.  NTIC personnel with such concerns are encouraged to discuss their concerns with our outside legal counsel, who in turn will be responsible for informing the Audit Committee.

 

Process Regarding Stockholder Communications with Board of Directors

 

Stockholders may communicate with the Board of Directors of NTIC by sending correspondence, addressed to our Corporate Secretary, Northern Technologies International Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014, or mwolsfeld@ntic.com with an instruction to forward the communication to a particular director.  Our Corporate Secretary will receive the correspondence and forward it to any individual director or directors to whom the communication is directed.

 

17



Table of Contents

 

DIRECTOR COMPENSATION

 


 

Summary of Cash and Other Compensation

 

The following table provides summary information concerning the compensation of each individual who served as a director of our company during the fiscal year ended August 31, 2009, other than G. Patrick Lynch, our President and Chief Executive Officer, and Donald A. Kubik, Ph.D., our Vice Chairman and former Chief Technology Officer, neither of whom was compensated separately for serving on the Board of Directors or any Board committees during fiscal 2009.  Their compensation during fiscal 2009 for serving as executive officers of our company, and in the case of Dr. Kubik, a consultant of our company commencing in June 2009, is set forth under the heading “Executive Compensation” included elsewhere in this proxy statement.

 

DIRECTOR COMPENSATION—FISCAL 2009

 

Name

 

Fees Earned or
Paid in Cash ($)

 

Option
Awards ($)(1)(2)(3)

 

All Other
Compensation ($)(4)

 

Total ($)

 

Pierre Chenu

 

$

32,425

 

$

13,969

 

$

0

 

$

46,394

 

Tilman B. Frank, M.D.

 

16,650

 

6,956

 

0

 

23,606

 

Soo-Keong Koh

 

15,750

 

6,956

 

0

 

22,706

 

Sunggyu Lee, Ph.D.

 

15,750

 

10,781

 

10,000

 

36,531

 

Mark M. Mayers

 

22,250

 

10,781

 

0

 

33,031

 

Ramani Narayan, Ph.D.

 

15,750

 

10,781

 

102,510

 

129,041

 

Mark J. Stone

 

24,975

 

10,781

 

0

 

35,756

 

 


(1)          Reflects the dollar amount recognized as stock-based compensation expense for option awards for each director for financial statement reporting purposes with respect to the fiscal year ended August 31, 2009, not including an estimate of forfeitures related to service-based vesting conditions.  The following table provides additional information regarding the dollar amount recognized as stock-based compensation expense during the fiscal year ended August 31, 2009, without taking into account forfeiture rates, and the specific assumptions used in the valuation, for each option award held by each director reflected in the table.  All options have a five-year life and an anticipated dividend yield of 2.00%.

 

Name

 

Grant
Date

 

Number of
Securities
Underlying Options
Granted (#)

 

Amount Recognized
in Financial
Statements in
Fiscal 2009 ($)

 

Risk Free
Interest
Rate

 

Expected
Volatility

 

Pierre Chenu

 

09/01/08

 

6,000

 

$

9,560

 

2.88

%

46.7

%

 

 

09/01/07

 

2,000

 

2,431

 

4.20

%

42.2

%

 

 

09/01/06

 

2,000

 

1,978

 

4.70

%

42.9

%

Tilman B. Frank, M.D.

 

09/01/08

 

4,000

 

6,372

 

2.88

%

46.7

%

 

 

05/02/08

 

666

 

584

 

2.84

%

42.1

%

Soo-Keong Koh

 

09/01/08

 

4,000

 

6,372

 

2.88

%

46.7

%

 

 

05/02/08

 

666

 

584

 

2.84

%

42.1

%

Sunggyu Lee, Ph.D.

 

09/01/08

 

4,000

 

6,372

 

2.88

%

46.7

%

 

 

09/01/07

 

2,000

 

2,431

 

4.20

%

42.2

%

 

 

09/01/06

 

2,000

 

1,978

 

4.70

%

42.9

%

Mark M. Mayers

 

09/01/08

 

4,000

 

6,372

 

2.88

%

46.7

%

 

 

09/01/07

 

2,000

 

2,431

 

4.20

%

42.2

%

 

 

09/01/06

 

2,000

 

1,978

 

4.70

%

42.9

%

Ramani Narayan, Ph.D.

 

09/01/08

 

4,000

 

6,372

 

2.88

%

46.7

%

 

 

09/01/07

 

2,000

 

2,431

 

4.20

%

42.2

%

 

 

09/01/06

 

2,000

 

1,978

 

4.70

%

42.9

%

Mark J. Stone

 

09/01/08

 

4,000

 

6,372

 

2.88

%

46.7

%

 

 

09/01/07

 

2,000

 

2,431

 

4.20

%

42.2

%

 

 

09/01/06

 

2,000

 

1,978

 

4.70

%

42.9

%

 

18



Table of Contents

 

(2)          The following table provides information regarding each stock option grant to each director during the fiscal year ended August 31, 2009:

 

Name

 

Grant
Date

 

Number of
Securities
Underlying Options
Granted (#)(a)

 

Exercise
Price
($/Share)

 

Expiration
Date

 

Grant Date
Fair Value of
Option Awards ($)(b)

 

Pierre Chenu

 

09/01/08

 

6,000

(c)

$

12.84

 

08/31/2013

 

$

28,680

 

Tilman B. Frank, M.D.

 

09/01/08

 

4,000

(c)

12.84

 

08/31/2013

 

19,115

 

Soo-Keong Koh

 

09/01/08

 

4,000

(c)

12.84

 

08/31/2013

 

19,115

 

Sunggyu Lee, Ph.D.

 

09/01/08

 

4,000

(c)

12.84

 

08/31/2013

 

19,115

 

Mark M. Mayers

 

09/01/08

 

4,000

(c)

12.84

 

08/31/2013

 

19,115

 

Ramani Narayan, Ph.D.

 

09/01/08

 

4,000

(c)

12.84

 

08/31/2013

 

19,115

 

Mark J. Stone

 

09/01/08

 

4,000

(c)

12.84

 

08/31/2013

 

19,115

 

 


(a)           Represents options granted under the Northern Technologies International Corporation 2007 Stock Incentive Plan, the material terms of which are described in more detail below under the heading “Executive Compensation—Cash and Other Compensation—Stock Incentive Plans.”

 

(b)          We refer you to note (1) above for a discussion of the assumptions made in calculating the grant date fair value of the option awards.

 

(c)           This option vests with respect to one-third of the underlying shares of our common stock on each of the following dates, so long as the individual remains a director of our company as of such dates:  September 1, 2009, September 1, 2010 and September 1, 2011.

 

(3)      The following table provides information regarding the aggregate number of options to purchase shares of our common stock outstanding at August 31, 2009 and held by each of the directors listed in the above table:

 

 

Name

 

Aggregate Number
Of Securities

Underlying Options

 

Exercisable/
Unexercisable

 

Exercise
Price(s)

 

Expiration
Date(s)

 

Pierre Chenu

 

12,000

 

7,333 / 4,667

 

$

5.75 – 12.84

 

8/31/2010 – 8/31/2013

 

Tilman B. Frank, M.D.

 

4,666

 

1,555 /3,111

 

7.75 – 12.84

 

5/01/2013 – 8/31/2013

 

Soo-Keong Koh

 

4,666

 

1,555 /3,111

 

7.75 – 12.84

 

5/01/2013 – 8/31/2013

 

Sunggyu Lee, Ph.D.

 

10,000

 

6,666 / 3,334

 

5.75 – 12.84

 

8/31/2010 – 8/31/2013

 

Mark M. Mayers

 

11,500

 

7,001 / 5,999

 

5.75 – 12.84

 

11/12/2009– 8/31/2013

 

Ramani Narayan, Ph.D.

 

11,500

 

7,001 / 5,999

 

5.75 – 12.84

 

11/12/2009– 8/31/2013

 

Mark J. Stone

 

10,000

 

6,666 / 3,334

 

5.75 – 12.84

 

8/31/2010 – 8/31/2013

 

 

(4)         We do not provide perquisites or other personal benefits to our directors.  The amounts reflected for each of Dr. Narayan and Dr. Lee reflect consulting fees paid during the fiscal year ended August 31, 2009 as described in more detail below under the heading “—Consulting Arrangements.”

 

19



Table of Contents

 

Non-Employee Director Compensation Program

 

Overview.  Our non-employee directors currently consist of Pierre Chenu, Tilman B. Frank, M.D., Donald A. Kubik, Ph.D., Soo-Keong Koh, Sunggyu Lee, Ph.D., Ramani Narayan, Ph.D. and Mark J. Stone.  For compensation purposes, Dr. Kubik became a non-employee director commencing in June 2009.

 

We use a combination of cash and long-term equity-based incentive compensation in the form of annual stock option grants to attract and retain qualified candidates to serve on the Board of Directors.  In setting non-employee director compensation, we follow the process and procedures described under the heading “Corporate Governance—Nominating and Corporate Governance Committee—Processes and Procedures for the Determination of Director Compensation.”

 

Cash Retainers and Meeting Fees.  Each of our non-employee directors receives annual cash retainers and meeting fees.  The following table sets forth the annual cash retainers paid to our non-employee directors:

 

Description

 

Annual Cash
Retainer

 

Board Member

 

$

10,000

 

Chairman of the Board

 

15,000

 

Audit Committee Chair

 

5,000

 

Audit Committee Member (not including Chair)

 

4,000

 

 

The annual cash retainers are paid in the beginning of each calendar quarter.  For example, the retainers paid in the beginning of the first calendar quarter are for the period from January 1 through March 31.

 

Each of our non-employee directors also receives $1,000 for each Board, Board committee and strategy review meeting attended.  No director, however, earns more than $1,000 per day in Board, Board committee and strategy review meeting fees.

 

As part of our cost reduction efforts, commencing in March 2009, our annual cash retainers and meeting fees were reduced temporarily by 10%.  This reduction remains in effect as of the date of printing of this proxy statement.

 

Stock Options.  Each of our non-employee directors is automatically granted a five-year non-qualified option to purchase 4,000 shares of our common stock on the first day of each fiscal year in consideration for their services as directors of NTIC and the Chairman of the Board is automatically granted an additional five-year non-qualified option to purchase 2,000 shares of our common stock on the first day of each fiscal year in consideration for his services as Chairman.  Each automatically granted option becomes exercisable, on a cumulative basis, with respect to one-third of the shares covered by such option on each one-year anniversary of the date of its grant.  The exercise price of such option is equal to the fair market value of a share of our common stock on the date of grant.

 

We refer you to note (2) to the Director Compensation Table above for a summary of all option grants to our non-employee directors during the fiscal year ended August 31, 2009 and note (3) to the Director Compensation Table for a summary of all options to purchase shares of our common stock held by our non-employee directors as of August 31, 2009.

 

Reimbursement of Expenses.  All of our directors are reimbursed for travel expenses for attending meetings and other miscellaneous out-of-pocket expenses incurred in performing their Board functions.

 

20



Table of Contents

 

Consulting Arrangements

 

We paid consulting fees to Bioplastic Polymers LLC which is owned by Ramani Narayan, Ph.D. in the aggregate amount of $100,000 and royalty fees in an aggregate amount of $2,510 during the fiscal year ended August 31, 2009.  The consulting services rendered by Bioplastic Polymers LLC related to research and development associated with various new technologies.  The royalty fees were paid pursuant to an oral agreement pursuant to which we have agreed to pay Bioplastic Polymers LLC and Dr. Narayan in consideration of the transfer and assignment by Biopolymer Plastics LLC and Dr. Narayan of certain biodegradable polymer technology to us, an aggregate of three percent of the gross margin on any net sales of products incorporating the biodegradable polymer technology transferred to us by Bioplastic Polymers LLC and Dr. Narayan for a period of 10 years, provided that if a patent for or with respect to biodegradable polymer technology is issued before the expiration of such 10 year period, then until the expiration of such patent we will pay to Bioplastic Polymers LLC and Dr. Narayan an aggregate of three percent of the biodegradable polymer technology gross margin attributable to such patent.

 

In May 2009, we entered into an agreement with DAK Engineering, LLC, an entity owned by our former Chief Technical Officer and a current director, Donald A. Kubik, Ph.D., pursuant to which we have engaged DAK Engineering, LLC to perform certain services to us, specifically services in the area of chemistry, technology development, supplier technical issues, production issues, product performance characterization, and other forms of commercializing intellectual property rights.  In consideration for such services, we have agreed to pay DAK Engineering, LLC a monthly fee of $7,250.  During fiscal 2009, we paid DAK Engineering, LLC an aggregate of $21,750 in consulting fees.  The agreement may be terminated by either party for any reason with 30 days prior notice before the quarter end by providing written notice to the other party and may be terminated upon the occurrence of other certain events, as set forth in the agreement.  The agreement also contains other standard terms, including provisions regarding confidentiality, non-competition and non-solicitation.

 

In May 2009, we entered into a technology transfer and consulting agreement with Sunggyu Lee, Ph.D. pursuant to which we agreed to pay Dr. Lee $30,000 payable in six $5,000 monthly installments in exchange for an 18-month option to purchase certain technology developed by Dr. Lee.  If we decide to exercise the option, Dr. Lee has agreed to transfer to us the technology and to provide us consulting services related to the further development and commercialization of the technology in exchange for an additional $120,000 payable in eight $15,000 monthly installments.  If we commercialize any products or services that incorporate the transferred technology or any other new related inventions developed by Dr. Lee during the term of the agreement and transferred to us under the agreement, we have agreed to pay Dr. Lee a royalty of three percent of any earnings before interest and taxes to us generated from the commercial exploitation by us of any products or services that incorporate the technology and/or inventions.  Such royalties will be required to be paid until the earlier of the last to expire of any applicable patents covering such technology or inventions, the invalidity of such patents, or if there are no issued patents covering such technology and inventions, 10 years from the first date of commercial sale or license.   The agreement may be terminated by NTIC if, at any stage, NTIC determines in its sole discretion not to proceed with the project.

 

Compensation Arrangements with Inside Directors

 

Our inside directors during fiscal 2009—G. Patrick Lynch and Donald A. Kubik, Ph.D. —were compensated during fiscal 2009 for their services as executive officers of our company.  Commencing in June 2009, Dr. Kubik received compensation as a non-employee director during fiscal 2009, as described above under the heading “—Non-Employee Director Compensation Program.”   For information relating to compensation awarded to, earned by or paid to Mr. Lynch and Dr. Kubik, see “Executive Compensation” included elsewhere in this proxy statement. We do not separately compensate our inside

 

21



Table of Contents

 

directors for their service as directors of our company, although we do reimburse them for any out-of-pocket expenses they incur in connection with attending Board and Board committee meetings.

 

Indemnification Agreements

 

We have entered into agreements with all of our directors under which we are required to indemnify them against expenses, judgments, penalties, fines, settlements and other amounts actually and reasonably incurred, including expenses of a derivative action, in connection with an actual or threatened proceeding if any of them may be made a party because he or she is or was one of our directors.  We will be obligated to pay these amounts only if the director acted in good faith and in a manner that he or she reasonably believed to be in or not opposed to our best interests.  With respect to any criminal proceeding, we will be obligated to pay these amounts only if the director had no reasonable cause to believe his or her conduct was unlawful.  The indemnification agreements also set forth procedures that will apply in the event of a claim for indemnification.

 

22



Table of Contents

 

EXECUTIVE COMPENSATION

 


 

Executive Compensation Program

 

Our executive compensation program for the fiscal year ended August 31, 2009 consisted of:

 

·                  Base salary;

·                  Annual incentive compensation;

·                  Long-term equity-based incentive compensation, in the form of stock options; and

·                  All other compensation.

 

Base Salary.  We provide a base salary for our named executive officers, which, unlike some of the other elements of our executive compensation program, is not subject to company or individual performance risk.  We recognize the need for most executives to receive at least a portion of their total compensation in the form of a guaranteed base salary that is paid in cash regularly throughout the year to support their standard of living.

 

We initially fix base salaries for our executives at a level that we believe enable us to hire and retain them in a competitive environment and to reward satisfactory individual performance and a satisfactory level of contribution to our overall business objectives.  The Compensation Committee reviews base salaries for our named executive officers each year beginning in July and generally recommends to the Board of Directors any increases for the following fiscal year in July or August or as soon as practicable thereafter.  Regardless of when the final decision regarding base salaries for a fiscal year is made by the Board of Directors, any increases in base salaries are effective as of September 1 of that year, which could result in a retroactive payment to the executive shortly after the final decision is made.

 

The Compensation Committee’s recommendations to the Board of Directors regarding the base salaries of our named executive officers are based on a number of factors, including:  the executive’s level of responsibility, prior experience and base salary for the prior year, the skills and experiences required by the position, length of service with our company, past individual performance and other considerations the Compensation Committee deems relevant.  The Compensation Committee also recognizes that in addition to the typical responsibilities and duties held by our executives by virtue of their positions, our executives due to the small number of our employees, often possess additional responsibilities and perform additional duties that would be typically delegated to others in most organizations with additional personnel and resources.

 

Annualized base salary rates for fiscal 2007, 2008 and 2009 for our named executive officers were as follows:

 

Name

 

Fiscal
2007

 

Fiscal
2008

 

% Change
From Fiscal
2007

 

Fiscal
2009*

 

% Change
From Fiscal
2008*

 

G. Patrick Lynch

 

$

190,000

 

$

210,000

 

10.5

%

$221,000/$189,000

 

5.2%/(10.5)%

 

Donald A. Kubik, Ph.D.

 

170,000

 

175,000

 

3.0

%

175,000/148,750

 

0.0%/(15.0)%

 

Matthew C. Wolsfeld

 

145,000

 

155,000

 

6.9

%

163,000/139,500

 

5.2%/(10.6)%

 

 


*              Reflects fiscal 2009 base salary prior to 15% cost reduction and after such reduction.

 

23



Table of Contents

 

As part of our cost savings initiatives implemented in January 2009, we reduced the base salaries of our executives and other officers by approximately 15% on average, by 10% for all other employees and suspended our matching of 401(k) contributions.

 

We historically have granted our executive officers a mid-single digit percentage increase in their base salary each fiscal year, although the percentage may be higher or lower if the responsibilities of the executive increased or decreased during the year.  The percentage increase in Mr. Lynch’s base salary from fiscal 2007 to fiscal 2008 was performance and responsibility based.

 

Annual Incentive Compensation.  In addition to base compensation, we provide our named executive officers the opportunity to earn annual incentive compensation based on the achievement of certain company and individual related performance goals.  Our annual bonus program directly aligns the interests of our executive officers and stockholders by providing an incentive for the achievement of key corporate and individual performance measures that are critical to the success of our company and linking a significant portion of each executive officer’s annual compensation to the achievement of such measures.  The following is a brief summary of the material terms of our annual bonus plan program for fiscal 2009:

 

·                  The total amount available under the bonus plan was up to 25 percent of NTIC’s earnings before interest, taxes and other income (EBITOI);

·                  The total amount available under the bonus plan was $0 if EBITOI, as adjusted to take into account amounts to be paid under the bonus plan, fell below 70 percent of target EBITOI; and

·                  The payment of bonuses under the plan to executive officer participants was made in both cash and shares of NTIC common stock, the exact amount and percentages of which was determined by the Board of Directors, upon recommendation of the Compensation Committee.

 

No bonuses were paid to our executives in fiscal 2009 under the annual bonus plan or otherwise.

 

The Board of Directors recently approved the terms of the annual bonus plan for fiscal 2010, which are identical to the terms of the fiscal 2009 bonus plan.  Any shares of NTIC common stock issued in full or partial payment of a bonus award is issued as a stock bonus under the Northern Technologies International Corporation 2007 Stock Incentive Plan, which was approved by our stockholders in January 2007.

 

Long-Term Equity-Based Incentive Compensation.  Although we do not have any stock retention or ownership guidelines, the Board of Directors encourages our named executive officers to have a financial stake in our company in order to align the interests of our stockholders and management.  We therefore provide long-term equity-based incentive compensation to our named executive officers, as well as to all of our other U.S.-based employees, in the form of stock options.  We believe that stock options are an important part of our overall compensation program.  In particular, we believe that stock options align the interests of our executives and other employees with stockholder interests and long-term value creation and enable these individuals to achieve meaningful equity ownership in our company.  Through the grant of stock options, we seek to align the long-term interests of our executives and other employees with the long-term interests of our stockholders by creating a strong and direct linkage between compensation and long-term stockholder return.  When our executives deliver returns to our stockholders, in the form of increases in our stock price or otherwise, stock options permit an increase in their compensation.  We believe stock options also may enable us to attract, retain and motivate executives and other employees by maintaining competitive levels of total compensation.  However, unless our stock price increases after stock option grants are made, the stock options deliver no value to the option holders.  A stock option becomes valuable only if our common stock price increases above the option exercise price and the holder

 

24



Table of Contents

 

of the option remains employed during the period required for the option to “vest.”  This provides an incentive for an option holder to remain employed by us.

 

All of our stock options have been granted under the Northern Technologies International Corporation 2007 Stock Incentive Plan or the Northern Technologies International Corporation 2000 Stock Incentive Plan.  Both of these plans have been approved by our stockholders.  Under the 2007 plan, we have the ability to grant stock options, stock appreciation rights, restricted stock awards, stock unit awards, performance awards and stock bonuses.  To date, only incentive and non-statutory stock options and stock bonuses have been granted.  The 2007 plan contains both an overall limit on the number of shares of our common stock that may be issued, as well as individual and other grant limits.  For more information regarding the terms of our 2007 plan, we refer you to “Executive Compensation—Stock Incentive Plans.”

 

We have adopted a Policy and Procedures Regarding the Grant of Stock Options and Other Equity-Based Incentive Awards.  Under this policy, the Board of Directors has retained all authority to grant options and other equity-based incentive awards to eligible recipients, upon recommendation of the Compensation Committee, and, none of its authority may be delegated to our management in the form of “mass” or “block” grants to be allocated among employees by our management.  Current executive officers and other employees are eligible for option grants on a periodic basis.  We did not grant any options to our executives during fiscal 2009.  In November 2009, we granted each of Mr. Lynch and Mr. Wolsfeld a five-year option to purchase 12,000 and 9,000 shares of our common stock, respectively, at an exercise price equal to $7.65 per share.  We do not have, nor have we ever had, a program, plan or practice to time stock option grants to executives in coordination with the release of material nonpublic information.

 

The policy also sets forth the general terms and conditions of our stock option grants.  For example, we generally grant “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, in order to provide our executives and other employees the additional tax benefit associated with incentive stock options, which we believe at this time outweighs our interest in obtaining the tax deduction which would be available if we granted non-statutory stock options which were later exercised by the optionees.  The stock options granted to our executives and other employees typically vest or become exercisable over a period of three years from the date of grant, with one-third of the underlying shares vesting in each year on the anniversary of the date of grant.  Stock options typically remain exercisable for a period of five years from the date of grant, so long as the optionee continues to be employed by us.

 

It is our policy to set the per share exercise price of all stock options granted under the 2007 plan at an amount equal to the fair market value of a share of our common stock on the date of grant.  For purposes of the 2007 plan, the fair market value of our common stock is the mean between the reported high and low sale price of our common stock, as reported by the NASDAQ Global Market.  The Board of Directors may not, under the terms of the 2007 plan, without prior approval of our stockholders, seek to effect any re-pricing of any previously granted, “underwater” option by amending or modifying the terms of the underwater option to lower the exercise price, cancelling the underwater option and granting replacement options having a lower exercise price, or other incentive award in exchange, or repurchasing the underwater options and granting new incentive awards under the plan.  For purposes of the 2007 plan, an option is deemed to be “underwater” at any time when the fair market value of our common stock is less than the exercise price.

 

We review the long-term equity-based incentives for our named executive officers, on an individual basis and on an aggregate basis, at least each year at the time we determine base salaries and the terms of our annual incentive compensation arrangements for the upcoming year.  The determinations by the Board of Directors, upon recommendation of the Compensation Committee, regarding the number of stock options,

 

25



Table of Contents

 

if any, to grant our named executive officers are based on a number of factors, including: the executive’s position within the company and the level of responsibility, skills and experiences required by the executive’s position; the attainment of or failure to attain company objectives and the difficulty in achieving desired company objectives; individual performance of the executive; the executive’s length of service to our company; the executive’s percentage ownership of our common equity outstanding, including stock options, and competitive compensation data, including outstanding options held by an executive as a percentage of our common equity outstanding.

 

All Other Compensation.  It is generally our policy not to extend significant perquisites to our executives that are not available to our employees generally.  The only significant perquisite that we provide to our named executive officers is the personal use of a company owned vehicle.  Our executives also receive benefits, which are also received by our other employees, including participation in the Northern Technologies International Corporation 401(k) Plan and health, dental and life insurance benefits.  Under the 401(k) plan, all eligible participants, including our named executive officers, may voluntarily request that we reduce his or her pre-tax compensation by up to 10 percent (subject to certain special limitations) and contribute such amounts to a trust.  We typically contribute an amount equal to 50 percent of the first seven percent of the amount that each participant contributed under this plan.  As part of our cost savings initiatives implemented in December 2008 and January 2009, however, we suspended our matching of 401(k) contributions. We do not provide pension arrangements or post-retirement health coverage for our executives or employees.  We also do not provide any nonqualified defined contribution or other deferred compensation plans.

 

Employment Agreements.   All of our employees, including our named executive officers, are employed at will and do not have employment agreements that guarantee them any particular base salary, annual incentive cash compensation or any other compensation or benefits.  Nor do we have any severance arrangements with our named executive officers.

 

Summary of Cash and Other Compensation

 

The following table provides summary information concerning all compensation awarded to, earned by or paid to our principal executive officer, our principal financial officer and a former executive officer.   We refer to these individuals in this proxy statement as our “named executive officers.”

 

SUMMARY COMPENSATION TABLE—FISCAL 2009

 

 

 

 

 

 

 

 

 

Stock

 

Option

 

All Other

 

 

 

Name and Principal Position

 

Year

 

Salary

 

Bonus(1)

 

Awards(2)

 

Awards(3)

 

Compensation(4)

 

Total

 

G. Patrick Lynch

 

2009

 

$

200,077

 

$

0

 

$

0

 

$

4,118

 

$

6,638

 

$

210,833

 

President and Chief Executive Officer

 

2008

 

210,000

 

107,919

 

10,500

 

9,393

 

11,336

 

349,148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Donald A. Kubik, Ph.D. (5)

 

2009

 

129,231

 

0

 

0

 

0

 

28,298

 

157,529

 

Former Vice Chairman and Chief Technology Officer

 

2008

 

175,000

 

42,310

 

42,310

 

5,275

 

7,739

 

272,634

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Matthew Wolsfeld

 

2009

 

147,635

 

0

 

0

 

15,065

 

5,267

 

167,967

 

Chief Financial Officer and Corporate Secretary

 

2008

 

155,000

 

43,721

 

43,721

 

20,340

 

7,770

 

270,552

 

 


(1)         Represents discretionary cash bonuses earned in fiscal year as indicated, but actually paid to named executive officer in the following fiscal year.  Annually, prior to the November meeting of the Board of Directors, the Compensation Committee recommends annual incentive compensation to be paid to our executive officers in cash and/or NTIC common stock.  The Board of Directors then considers and, if it deems appropriate, approves the amount and manner of payment of the annual incentive compensation.  No bonuses were paid for fiscal 2009

 

26



Table of Contents

 

performance.  The bonuses earned for fiscal 2008 were paid in cash and in shares of NTIC common stock as determined by the Board of Directors, upon recommendation of the Compensation Committee.  The amount reflected in the column entitled “Bonus” reflects the cash amount of bonus received by each of the officers.  The following officers also received the following number of shares of NTIC common stock as part of their fiscal 2008 bonus:  Mr. Lynch (1,000 shares); Dr. Kubik (4,010 shares); and Mr. Wolsfeld (4,144 shares).  The number of shares was determined by dividing one-half of the amounts of the total stock bonus to be awarded to the individual by the closing sale price of a share of NTIC common stock, as reported on the NASDAQ Global Market, on the date the Board of Directors determined the amount of the bonus.  We refer you to the information under the heading “—Executive Compensation Program—Annual Incentive Compensation” for a discussion of the factors taken into consideration by the Board of Directors in determining the amount of bonus paid to each named executive officer.

 

(2)         As described above in note (1), the following named executive officers received the following number of shares of NTIC common stock in connection with their annual bonuses for fiscal 2008:  Mr. Lynch (1,000 shares); Dr. Kubik (4,010 shares); and Mr. Wolsfeld (4,144 shares).   The amount reflected in the column entitled “Stock Awards” for each officer reflects the dollar amount recognized for each officer for financial statement reporting purposes with respect to the fiscal year ended August 31, 2008 for that portion of annual bonus paid in shares of NTIC common stock.

 

(3)         Reflects the dollar amount recognized as stock-based compensation expense for option awards for each named executive officer for financial statement reporting purposes with respect to the fiscal years ended August 31, 2009 and 2008, respectively, not including an estimate of forfeitures related to service-based vesting conditions. The following table provides additional information regarding the dollar amount recognized as stock-based compensation expense for option awards during the fiscal year ended August 31, 2009, without taking into account forfeiture rates, and the specific assumptions used in the valuation for each option award held by each named executive officer reflected in the table:

 

Name

 

Grant
Dates

 

Number of
Securities
Underlying
Options
Granted (#)

 

Amount
Recognized
in Financial
Statements
in Fiscal

2009 ($)

 

Risk Free
Interest Rate

 

Expected
Life

 

Expected
Volatility

 

Expected
Dividend
Yield

 

G. Patrick Lynch

 

11/16/07

 

3,540

 

$

4,118

 

3.67

%

5 years

 

42.0

%

2

%

Donald A. Kubik, Ph.D.

 

 

 

 

 

 

 

 

Matthew C. Wolsfeld

 

11/16/07

 

12,950

 

15,065

 

3.67

%

5 years

 

42.0

%

2

%

 

(4)         The amounts shown in the column entitled “All Other Compensation” for fiscal 2009 include the following with respect to each named executive officer:

 

Name

 

401(k) Match

 

Personal Use
of Auto

 

Consulting Fees

 

G. Patrick Lynch

 

$

3,227

 

$

3,411

 

$

0

 

Donald A. Kubik, Ph.D.

 

3,980

 

2,568

 

21,750

 

Matthew C. Wolsfeld

 

4,411

 

856

 

0

 

 

(5)         Dr. Kubik retired as Chief Technology Officer effective May 31, 2009.  In May 2009, we entered into an agreement with DAK Engineering, LLC, to perform certain services to us, specifically services in the area of chemistry, technology development, supplier technical issues, production issues, product performance characterization, and other forms of commercializing intellectual property rights.  In consideration for such services, we have agreed to pay DAK Engineering, LLC a monthly fee of $7,250.  During fiscal 2009, we paid DAK Engineering, LLC an aggregate of $21,750 in consulting fees.

 

27



Table of Contents

 

Outstanding Equity Awards at Fiscal Year End

 

The following table provides information regarding unexercised stock options for each of our named executive officers that remained outstanding at August 31, 2009.  We did not have any unvested stock awards outstanding at August 31, 2009.

 

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END—FISCAL 2009

 

 

 

Option Awards

 

Name

 

Number of Securities
Underlying Unexercised
Options (#)

Exercisable

 

Number of Securities
Underlying Unexercised
Options (#)

Unexercisable

 

Option
Exercise
Price ($)

 

Option
Expiration Date

 

G. Patrick Lynch

 

1,180

 

2,360

(1)

$

9.95

 

11/16/2012

 

 

 

8,000

 

0

 

5.38

 

11/04/2010

 

Donald A. Kubik, Ph.D.

 

8,000

 

0

 

5.38

 

11/04/2010

 

Matthew C. Wolsfeld

 

4,317

 

8,633

(1)

9.95

 

11/16/2012

 

 

 

8,000

 

0

 

5.38

 

11/04/2010

 

 


(1)         These options were granted under the Northern Technologies International Corporation 2007 Stock Incentive Plan.  These options vest over a three-year period, with one-third of the underlying shares vesting on each of November 16, 2008, 2009 and 2010 so long as the individual remains an employee of NTIC as of such date. These options expire on November 16, 2012 or earlier if the individual leaves the employ of NTIC.  Upon the occurrence of a change in control, the unvested and unexercisable options described in this table will be accelerated and become fully vested and immediately exercisable as of the date of the change in control.  For more information, we refer you to the discussion below under the heading “—Stock Incentive Plans.”

 

Stock Incentive Plans

 

We have two stock incentive plans under which stock options are currently outstanding — the Northern Technologies International Corporation 2007 Stock Incentive Plan and the Northern Technologies International Corporation 2000 Stock Incentive Plan.  Upon the approval of the 2007 plan by our stockholders in January 2007, we terminated the 2000 plan with respect to any future grants and thus any future grants of stock options or other stock incentive awards will be made under the 2007 plan.

 

Under the terms of the 2007 plan, our named executive officers, in addition to other employees and individuals, are eligible to receive equity compensation awards, such as stock options, stock appreciation rights, restricted stock awards, stock bonuses and performance awards.  To date, only incentive and non-statutory stock options and stock bonuses have been granted under the plan.  The plan contains both an overall limit on the number of shares of our common stock that may be issued, as well as individual and other grant limits.

 

Incentive stock options must be granted with a per share exercise price equal to at least the fair market value of a share of our common stock on the date of grant.  For purposes of the plan, the fair market value of our common stock is the mean between the reported high and low sale price of our common stock, as reported by the NASDAQ Global Market.  We generally set the per share exercise price of all stock options granted under the plan at an amount equal to the fair market value of a share of our common stock on the date of grant.

 

Except in connection with certain specified changes in our corporate structure or shares, the Board of Directors or Compensation Committee may not, without prior approval of our stockholders, seek to effect any re-pricing of any previously granted, “underwater” option by amending or modifying the terms of the underwater option to lower the exercise price, cancelling the underwater option and granting replacement

 

28



Table of Contents

 

options having a lower exercise price, or other incentive award in exchange, or repurchasing the underwater options and granting new incentive awards under the plan.  For purposes of the plan, an option is deemed to be “underwater” at any time when the fair market value of our common stock is less than the exercise price.

 

Options will become exercisable at such times and in such installments as may be determined by the Board of Directors, provided that options may not be exercisable after 10 years from their date of grant.  We generally provide for the vesting of stock options in equal annual installments over a three-year period commencing on the one-year anniversary of the date of grant and for option terms of five years.

 

Optionees may pay the exercise price of stock options in cash, except that the Compensation Committee may allow payment to be made (in whole or in part) by (1) using a broker-assisted cashless exercise procedure pursuant to which the optionee, upon exercise of an option, irrevocably instructs a broker or dealer to sell a sufficient number of shares of our common stock or loan a sufficient amount of money to pay all or a portion of the exercise price of the option and/or any related withholding tax obligations and remit such sums to us and directs us to deliver stock certificates to be issued upon such exercise directly to such broker or dealer; or (2) using a cashless exercise procedure pursuant to which the optionee surrenders to us shares of our common stock either underlying the option or that are otherwise held by the optionee.

 

Under the terms of the plan, unless otherwise provided in a separate agreement, if a named executive officer’s employment or service with our company terminates for any reason, the unvested portion of the option will immediately terminate and the executive’s right to exercise the then vested portion of the option will:

 

·                  immediately terminate if the executive’s employment or service relationship with our company terminated for “cause”;

 

·                  continue for a period of 12 months if the executive’s employment or service relationship with our company terminates as a result of the executive’s death, disability or retirement; or

 

·                  continue for a period of three months if the executive’s employment or service relationship with our company terminates for any reason, other than for cause or upon death, disability or retirement.

 

As set forth in the plan, the term “cause” is as defined in any employment or other agreement or policy applicable to the named executive officer or, if no such agreement or policy exists, means (i) dishonesty, fraud, misrepresentation, embezzlement or other act of dishonesty with respect to us or any subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) any intentional and deliberate breach of a duty or duties that, individually or in the aggregate, are material in relation to the overall duties, or (iv) any material breach of any employment, service, confidentiality or non-compete agreement entered into with us or any subsidiary.

 

As described in more detail under the heading “—Post-Termination Severance and Change in Control Arrangements” if there is a change in control of our company, then, under the terms of agreements evidencing options granted to our named executive officers and other employees under the plan, all outstanding options will become immediately exercisable in full and will remain exercisable for the remainder of their terms, regardless of whether the executive to whom such options have been granted remains in the employ or service of us or any of our subsidiaries.

 

The terms of our 2000 plan are substantially similar to the terms of our 2007 plan.

 

29



Table of Contents

 

Post-Termination Severance and Change in Control Arrangements

 

All of our named executive officers are employed “at will” and are not entitled to any severance or other payments under an agreement upon their termination of employment with us, whether such termination is by us without cause or otherwise.  In addition, except with respect to their outstanding stock options which are subject to the terms and conditions of the plans under which they were granted, none of our named executive officers have any change in control agreements with us that entitle them to any payments or benefits upon a change in control of our company.

 

Under the terms of our stock incentive plans, options granted under these plans will become fully exercisable upon a “change in control” of our company.  For purposes of these plans, a “change in control” means:

 

·                  the sale, lease, exchange or other transfer of all or substantially all of our assets to a corporation that is not controlled by us;

 

·                  the approval by our stockholders of any plan or proposal for our liquidation or dissolution;

 

·                  certain merger or business combination transactions;

 

·                  more than 40 percent of our outstanding voting shares are acquired by any person or group of persons who did not own any shares of common stock on the effective date of the plan; and

 

·                  certain changes in the composition of our Board of Directors.

 

If a change in control of NTIC had occurred on August 31, 2009, the number of options indicated in the table below held by each of our named executive officers would have been automatically accelerated and exercisable.  The estimated value of the automatic acceleration of the vesting of unvested stock options held by a named executive officer as of August 31, 2009 is also indicated in the table below and is based on the difference between: (i) the market price of the shares of our common stock underlying the unvested stock options held by such officer as of August 31, 2009 (based on the closing sale price of our common stock on August 28, 2009 — $8.55), and (ii) the exercise price of the options.  The estimated value of the automatic acceleration of the vesting of unvested stock options is zero since the unvested options were out-of-the-money as of August 31, 2009.

 

Executive Officer

 

Number of Unvested Options
Subject to Automatic Acceleration

 

Estimated Value of Automatic
Acceleration of Vesting

 

G. Patrick Lynch

 

2,360

 

$

0.00

 

Donald A. Kubik, Ph.D.

 

0

 

 

Matthew C. Wolsfeld

 

8,633

 

0.00

 

 

Indemnification Agreements

 

We have entered into agreements with all of our executive officers under which we are required to indemnify them against expenses, judgments, penalties, fines, settlements and other amounts actually and reasonably incurred, including expenses of a derivative action, in connection with an actual or threatened proceeding if any of them may be made a party because he is or was one of our executive officers.  We will be obligated to pay these amounts only if the executive officer acted in good faith and in a manner that he or she reasonably believed to be in or not opposed to our best interests.  With respect to any criminal proceeding, we will be obligated to pay these amounts only if the executive officer had no reasonable cause to believe his conduct was unlawful.  The indemnification agreements also set forth procedures that will apply in the event of a claim for indemnification.

 

30



Table of Contents

 

RELATED PERSON RELATIONSHIPS AND TRANSACTIONS

 


 

Agreement with Entity Affiliated with Former Chairman of the Board and Chief Executive Officer

 

We were a party to a consulting agreement with Emeritushnic Facilities Company, Inc. (referred to as “EFC”), an entity owned by our former Chairman of the Board and Chief Executive Officer, Philip M. Lynch, and certain of his family members, excluding G. Patrick Lynch, our current President and Chief Executive Officer, pursuant to which EFC performed certain consulting services to us, including maintaining communications and relations between us and our joint venture partners.  This agreement terminated by its terms within 90 days of Mr. Philip M. Lynch’s death.  In consideration for such services, we paid EFC a monthly fee of $25,000 and reimbursed EFC up to a maximum of $180,000 per year for documented, out-of-pocket expenses reasonably incurred by EFC in the course of conducting business on our behalf.  During fiscal 2009, we paid EFC consulting fees totaling $100,000 and reimbursed EFC for out-of-pocket expenses of an aggregate of $74,086.  The consulting agreement also contained other standard terms, including provisions regarding confidentiality, non-competition and non-solicitation.

 

Director and Executive Officer Compensation

 

Please see “Director Compensation” and “Executive Compensation” for information regarding a consulting arrangements we have with three of our directors and the other compensation arrangements with our directors and executive officers during fiscal 2009.

 

31



Table of Contents

 

PROPOSAL TWO — RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 


 

Selection of Independent Registered Public Accounting Firm

 

The Audit Committee of the Board of Directors has selected Baker Tilly Virchow Krause, LLP (formerly Virchow Krause & Company LLP) to serve as our independent registered public accounting firm for the fiscal year ending August 31, 2010.  Although it is not required to do so, the Board of Directors is asking our stockholders to ratify the Audit Committee’s selection of Baker Tilly Virchow Krause, LLP.  If our stockholders do not ratify the selection of Baker Tilly Virchow Krause, LLP, another independent registered public accounting firm will be considered by the Audit Committee of the Board of Directors.  Even if the selection is ratified by our stockholders, the Audit Committee may in its discretion change the appointment at any time during the year, if it determines that such a change would be in the best interests of our company and its stockholders.

 

Representatives of Baker Tilly Virchow Krause, LLP will be present at the Annual Meeting to respond to appropriate questions.  They will also have the opportunity to make a statement if they wish to do so.

 

Audit, Audit-Related, Tax and Other Fees

 

The following table presents the aggregate fees billed to us by Baker Tilly Virchow Krause, LLP, our independent registered public accounting firm, for the fiscal years ended August 31, 2009 and August 31, 2008.

 

 

 

Aggregate Amount Billed by
Baker Tilly Virchow Krause, LLP ($)

 

 

 

Fiscal 2009

 

Fiscal 2008

 

Audit Fees(1)

 

$

129,000

 

$

147,200

 

Audit-Related Fees(2)

 

48,230

 

82,179

 

Tax Fees

 

0

 

0

 

All Other Fees

 

0

 

0

 

 


(1)                                  These fees consisted of the audit of our annual financial statements by year, review of financial statements included in our quarterly reports on Form 10-Q and other services normally provided in connection with statutory and regulatory filings or engagements.

 

(2)                                  These fees consisted of reviews of quarterly financials, reviews of registration statements and the issuance of consents.  The Audit Committee has considered whether the provision of these services is compatible with maintaining the independence of Baker Tilly Virchow Krause, LLP and has determined that it is.

 

Audit Committee Pre-Approval Policies and Procedures

 

Rules adopted by the Securities and Exchange Commission in order to implement requirements of the Sarbanes-Oxley Act of 2002 require public company audit committees to pre-approve audit and non-audit services provided by a company’s independent registered public accounting firm.  All services rendered by Baker Tilly Virchow Krause, LLP to NTIC were permissible under applicable laws and regulations and all services provided to NTIC, other than de minimis non-audit services allowed under applicable law, were approved in advance by the Audit Committee in accordance with these rules.  The Audit Committee has not adopted any formal pre-approval policies and procedures.

 

32



Table of Contents

 

Board of Directors Recommendation

 

The Board of Directors unanimously recommends that our stockholders vote FOR ratification of the selection of Baker Tilly Virchow Krause, LLP, as our independent registered public accounting firm for the fiscal year ending August 31, 2010.  If you send in your proxy card or use Internet or telephone voting, but do not specify how you want to vote your shares, the proxies will vote your shares FOR ratification of the selection of Baker Tilly Virchow Krause, LLP as our independent registered public accounting firm for the fiscal year ending August 31, 2010.

 

33



Table of Contents

 

OTHER MATTERS

 


 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and all persons who beneficially own more than 10 percent of the outstanding shares of our common stock to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock.  Executive officers, directors and greater than 10 percent beneficial owners are also required to furnish NTIC with copies of all Section 16(a) forms they file.  To our knowledge, based upon a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended August 31, 2009, none of our directors or executive officers or beneficial owners of greater than 10 percent of our common stock failed to file on a timely basis the forms required by Section 16 of the Exchange Act, except that Soo-Keong Koh and Tilman B. Frank, M.D., current directors of NTIC, each filed a late Form 4 reporting an option grant and Inter Alia Holding Company and Julianne Lynch filed a late Form 3 reporting their 10 percent ownership of NTIC common stock and a late Form 4 reporting certain open market sales.

 

Stockholder Proposals for 2011 Annual Meeting

 

Stockholders who, in accordance with Rule 14a-8 under the Exchange Act, wish to present proposals for inclusion in the proxy materials relating to the 2011 Annual Meeting of Stockholders must submit their proposals so that they are received by us at our principal executive offices no later than the close of business on August 13, 2010, unless the date of the meeting is delayed by more than 30 calendar days.  The proposals must satisfy the requirements of the proxy rules promulgated by the Securities and Exchange Commission and as the rules of the SEC make clear, simply submitting a proposal does not guarantee that it will be included.

 

Any other stockholder proposals to be presented at the 2011 Annual Meeting of Stockholders (other than a matter brought pursuant to SEC Rule 14a-8) must be given in writing to our Corporate Secretary and must be delivered to or mailed and received at our principal executive offices, not less than 90 days nor more than 120 days prior to the anniversary date of the 2010 Annual Meeting of Stockholders; provided, however, that in the event that the 2011 Annual Meeting of Stockholders is not held within 30 days before or after such anniversary date, notice by the stockholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made, whichever first occurs.  The proposal must contain specific information required by our Bylaws, a copy of which may be obtained by writing to our Corporate Secretary.  If a proposal is not timely and properly made in accordance with the procedures set forth in our Bylaws, it will be defective and may not be brought before the meeting.  If the proposal is nonetheless brought before the meeting and the Chairman of the meeting does not exercise the power and duty to declare the proposal defective, the persons named in the proxy may use their discretionary voting with respect to the proposal.

 

Director Nominations for 2011 Annual Meeting

 

In accordance with procedures set forth in our Bylaws, NTIC stockholders may propose nominees for election to the Board of Directors only after providing timely written notice to our Corporate Secretary.  To be timely, a stockholder’s notice to the Corporate Secretary must be delivered to or mailed and received at NTIC’s principal executive offices not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting; provided, however, that in the event that the annual meeting with respect to which such notice is to be tendered is not held within 30 days before or

 

34



Table of Contents

 

after such anniversary date, notice by the stockholder to be timely must be received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or public disclosure was made, whichever first occurs.  The notice must set forth, among other things:

 

·                  the nominee’s name, age, business address, residence address and record address;

 

·                  the nominee’s principal occupation or employment;

 

·                  the class and number of shares of NTIC capital stock which are beneficially owned by the nominee;

 

·                  signed consent to serve as a director of NTIC; and

 

·                  any other information concerning the nominee required under the rules of the Securities and Exchange Commission in a proxy statement soliciting proxies for the election of directors.

 

Submissions must be made by mail, courier or personal delivery.  E-mailed submissions will not be considered.  The Nominating and Corporate Governance Committee will consider only those stockholder recommendations whose submissions comply with the procedural requirements set forth in NTIC’s Bylaws.  The Nominating and Corporate Governance Committee will evaluate candidates recommended by stockholders in the same manner as those recommended by others.

 

Other Business

 

Our management does not intend to present other items of business and knows of no items of business that are likely to be brought before the Annual Meeting, except those described in this proxy statement.  However, if any other matters should properly come before the Annual Meeting, the persons named in the enclosed proxy will have discretionary authority to vote such proxy in accordance with their best judgment on the matters.

 

Copies of Fiscal 2009 Annual Report

 

We have sent or made electronically available to each of our stockholders a copy of our annual report on Form 10-K (without exhibits) for the fiscal year ended August 31, 2009.  The exhibits to our Form 10-K are available by accessing the SEC’s EDGAR filing database at www.sec.gov.  We will furnish a copy of any exhibit to our Form 10-K upon receipt from any such person of a written request for such exhibits upon the payment of our reasonable expenses in furnishing the exhibits. This request should be sent to:  Northern Technologies International Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014, Attention: Stockholder Information.

 

Householding of Annual Meeting Materials

 

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports.  This means that only one copy of this proxy statement or NTIC’s Annual Report to Stockholders may have been sent to multiple stockholders in each household.  NTIC will promptly deliver a separate copy of either document to any stockholder upon written or oral request to NTIC’s Stockholder Information Department, Northern Technologies International Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014, telephone: (763) 225-6637.  Any stockholder who wants to receive separate copies of this proxy statement or NTIC’s Annual Report to Stockholders in the future, or any stockholder who is receiving multiple copies and would like

 

35



Table of Contents

 

to receive only one copy per household, should contact the stockholder’s bank, broker, or other nominee record holder, or the stockholder may contact NTIC at the above address and phone number.

 


 

Your vote is important.  Whether or not you plan to attend the Annual Meeting in person, vote your shares of NTIC common stock by the Internet or telephone, or request a paper proxy card to sign, date and return by mail so that your shares may be voted.

 

 

By Order of the Board of Directors

 

 

Pierre Chenu

 

Chairman of the Board

 

 

 

 

December 11, 2009

 

Circle Pines, Minnesota

 

 

36



 

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION M18293-P87246 NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION 4201 WOODLAND ROAD P.O. BOX 69 CIRCLE PINES, MN 55014 To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. For Against Abstain 2. Ratify the selection of Baker Tilly Virchow Krause, LLP as independent registered public accounting firm for the fiscal year ending August 31, 2010. For address changes and/or comments, please check this box and write them on the back where indicated. For All Withhold All For All Except Vote on Directors 01) Pierre Chenu 02) Tilman B. Frank, M.D. 03) Soo-Keong Koh 04) Donald A. Kubik, Ph.D. 05) Sunggyu Lee, Ph.D. 06) G. Patrick Lynch 07) Ramani Narayan, Ph.D. 08) Mark J. Stone 1. Election of Directors Nominees: Vote on Proposal VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. The Board of Directors recommends that you vote FOR the following: The Board of Directors recommends you vote FOR the following proposal: 3. Transact such other business as may properly come before the meeting. PLEASE SIGN exactly as the name appears on this card. When shares are held by joint tenants, both should sign. When signing as an attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.

 


 

Address Changes/Comments: (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: Combined Document is available at www.proxyvote.com. M18294-P87246 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION ANNUAL MEETING OF STOCKHOLDERS January 28, 2010 The undersigned, having duly received the Notice of Annual Meeting of Stockholders and Proxy Statement, hereby appoints Pierre Chenu and Donald A. Kubik, Ph.D., or either of them, as proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of Northern Technologies International Corporation that the undersigned is entitled to vote at the Annual Meeting of Stockholders of Northern Technologies International Corporation, a Delaware corporation, to be held at Northern Technologies International Corporation Headquarters, 4201 Woodland Road, Circle Pines, Minnesota 55014, beginning at 4:00 p.m., local time, on Thursday, January 28, 2010, for the purposes stated on the reverse side, and any adjournment or postponement thereof. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR AND FOR THE APPROVAL OF PROPOSAL 2 AND, IN THE DISCRETION OF THE PROXY HOLDER, ON OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED REPLY ENVELOPE CONTINUED AND TO BE SIGNED ON REVERSE SIDE