DEF 14A of HireQuest, Inc., Apr 29, 2024

DEF 14A of HireQuest, Inc.

Filed Apr 29, 2024 · FY20230001437749-24-013700

Open on EDGAR

  1. ELECTION OF DIRECTORS

    ELECTION OF DIRECTORS

  2. (Proposal #1)

    (Proposal #1) In evaluating the suitability of director nominations, the Nominating and Corporate Governance Committee takes into account factors such as a general understanding of various business disciplines, understanding of the Company’s business environment, backgrounds, perspectives, skills, character, judgment, diversity of experience, and ability to act on behalf of all stockholders. We do not have a formal diversity policy, however, the Nominating and Governance Committee endeavors to have a Board representing diverse viewpoints as well as diverse expertise at policy-making levels in many areas, including business, accounting and finance, marketing and sales, business development, human capital management, public company governance, growth through mergers and acquisitions, risk management and in other areas that are relevant to our activities.

  3. Nominees For Election

    Nominees For Election Richard F. Hermanns, R. Rimmy Malhotra, Lawrence F. Hagenbuch, Kathleen Shanahan, Edward Jackson, and Jack Olmstead have been nominated to serve on the Board until our next annual meeting of stockholders and until their respective successors are duly elected and qualify. Each of the nominees has consented to being named in this proxy statement and has agreed to serve as a director if elected. As of the date of this proxy statement, our Board of Directors is not aware of any nominee who is unable or will decline to serve as a director. The Board of Directors recommends that the stockholders elect the nominees named below. The Nominees: The biographical descriptions below set forth certain information with respect to each nominee for election as a Director at the Annual Meeting. The Board has identified specific attributes of each nominee that the Board has determined qualify that person for service on the Board. Richard F. Hermanns - Richard F. Hermanns, age 60, was elected as a director in July of 2019 and currently serves as president and chief executive officer of HireQuest, Inc. Mr. Hermanns beneficially owns more than 5% of the Company's voting stock. Mr. Hermanns has nearly thirty years of experience in the temporary staffing industry. He previously served as chief executive officer and secretary of Hire Quest, LLC since the Company’s founding in 2002. He also previously served in the same capacities for predecessor entities since July 1991. He is also Chairman of the Board of Directors and President of Hirequest Insurance Company and has been since its founding in 2010. He has been Chief Executive Officer of Hire Quest Financial, LLC since its founding in 2006. Together with Edward Jackson, Mr. Hermanns owns a majority stake in Bass Underwriters, Inc., a large managing general insurance agent. Prior to founding Hire Quest and its related entities, Mr. Hermanns served as Chief Financial Officer of Outsource International, and as an Assistant Vice President for NCNB National Bank (now Bank of America). Mr. Hermanns obtained his Bachelor of Science degree in Economics and Finance from Barry University, and his Masters of Business Administration in Finance from the University of Southern California. Mr. Hermanns is also active in the charitable realm. Among his charitable pursuits, he founded the Higher Quest Foundation, a non-profit organization dedicated to fighting global hunger in a more sustainable way. The particular experience, qualifications, attributes or skills that led our Board to conclude that Mr. Hermanns should continue to serve as a director include his continued tenure leading the Company, his business acumen, and his experience in the temporary staffing industry. In addition, his significant ownership stake in HireQuest provides our board with a unique perspective regarding the long-term strategy of the company. R. Rimmy Malhotra - R. Rimmy Malhotra, age 48, was appointed to our Board of Directors on April 6, 2016. From 2013 to the present, Mr. Malhotra has served as the Managing Member and Portfolio Manager for Nicoya Fund LP, a private investment partnership. Previously, from 2008 to 2013 he served as portfolio manager of the Gratio Values Fund, a mutual fund registered under the Investment Act of 1940. Prior to this, he was an Investment Analyst at a New York based hedge fund. Since November 2019, Mr. Malhotra has been a member of the Board of Directors of Optex Systems Holdings, Inc. (NASDAQ:OPXS), is the Chair of its Nominating and Corporate Governance Committee, and sits on its Audit and Compensation Committees. Since January 2021, he has served on the Board of Directors and is Chair of the Audit Committee for Scott’s Liquid Gold-Inc. (OTCBB:SLGD). He earned an MBA in Finance from The Wharton School and a Master’s degree in International Relations from the University of Pennsylvania where he was a Lauder Fellow. Mr. Malhotra holds undergraduate degrees in Computer Science and Economics from Johns Hopkins University. The particular experience, qualifications, attributes or skills that led our Board to conclude that Mr. Malhotra should continue to serve as a director of our Company include his experience with public equity, including his service on the boards of directors of multiple public companies, and his qualifications as a financial matters expert. Lawrence F. Hagenbuch - Lawrence F. Hagenbuch, age 57, was appointed to Command Center’s Board of Directors in April 2018 and was retained after the Merger. Mr. Hagenbuch chairs our Audit Committee. He brings extensive operations and board experience to the Company, along with expertise in the creation of innovative marketing and planning strategies. Mr. Hagenbuch is currently an operating partner with Crossplane Capital. Mr. Hagenbuch served on the Board of Directors of Optex Systems Holdings, Inc. (NASDAQ:OPXS) from November 2019 until February 2023, where he also was chair of the Audit Committee and served on the Compensation and Nominating and Corporate Governance Committees. Mr. Hagenbuch served on the Board of Directors and the Audit and Compensation Committees of Remy International, Inc. (NASDAQ:REMY) from 2008 until the sale of the company in 2015. He also served on the Board of Directors of Arotech Corporation (NASDAQ:ARTX). Mr. Hagenbuch has served in senior management positions at J. Hilburn, Alix Partners, GE / GE capital, and American National Can. Mr. Hagenbuch began his professional career in the United States Navy. He earned an undergraduate degree in engineering from Vanderbilt University on a full Navy ROTC scholarship. He later earned an MBA from the Wharton School of the University of Pennsylvania. The particular experience, qualifications, attributes or skills that led our Board to conclude that Mr. Hagenbuch should continue to serve as a director of our Company include his years of operating experience at both large and growth-oriented companies, in addition to his experience as a director of other public companies.

  4. Nominees For Election

    Kathleen Shanahan - Kathleen Shanahan, age 65, was elected to the board of directors in July of 2019. Ms. Shanahan presently serves as Senior Advisor to Turtle & Hughes, Inc. where she served as Chief Executive Officer until January 1, 2024. Her current role is pursuant to a fourteen month CEO transition agreement. Established in 1923, Turtle & Hughes ranks among the nation’s top twenty electrical distribution companies serving the industrial, construction, commercial, electrical contracting, export, and utility industries. Turtle & Hughes operates in the United States, Canada, Mexico, and Puerto Rico and is a certified women-owned business. Ms. Shanahan was previously Chair and Chief Executive Officer, of Ground Works Solutions, formerly URETEK Holdings, Inc., a corporation focused on soil stabilization and densification. She served as a member of the Board of Directors and Audit Committee of TRC Companies, Inc. (NYSE:TRR) from 2015 through 2017, and as a member of the Board of Directors and Chair of the Executive Compensation Committee of WCI Communities, Inc. (NYSE:WCI) from 2004 through 2007. Ms. Shanahan has also been the CEO and Chairperson of WRSCompass, an environmental engineering and contracting company with a national footprint. She served as Chief of Staff for Florida Governor Jeb Bush, Chief of Staff for Vice President-elect Dick Cheney, Deputy Secretary of the California Trade and Commerce Agency for Governor Wilson, Special Assistant to then Vice President George H. W. Bush, and Staff Assistant to President Ronald Reagan’s National Security Council. She currently serves on the board of Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD), and FRP, a private company. She received her undergraduate degree in Nutrition and Biochemistry from the University of California, San Diego, Revelle College, and her Masters in Business Administration from New York University. The particular experience, qualifications, attributes or skills that led our Board to conclude that Ms. Shanahan should continue to serve as a director of our Company include her proven leadership skills, her various business and political relationships, and her service as both executive and director of multiple organizations. Edward Jackson - Edward Jackson, age 58, was elected to the board of directors in July of 2019. Mr. Jackson beneficially owns more than 5% of the Company's voting stock. Mr. Jackson has more than 35 years of experience in the insurance industry. He is currently the president of Bass Underwriters, Inc., a large managing general insurance agent (“Bass”), in which he and Mr. Hermanns own a majority stake. In his capacity as president of Bass he oversees all management operations, marketing strategies, underwriting reviews, and claims procedures. He also has diverse business holdings in industries other than insurance. He was previously a member of and consultant to Hire Quest Holdings, LLC and its related family of companies. He owns and is president of one of the largest Haagen Dazs franchise stores in North America, and he founded a company that provides inspection services for insurance carriers nationwide. He holds a Bachelor of Science degree in Risk Management and Insurance from Florida State University. He holds insurance licenses in General Lines (Property & Casualty), and Surplus Lines, Health, and Life. The particular experience, qualifications, attributes or skills that led our Board to conclude that Mr. Jackson should continue to serve as a Director include his business acumen, his experience leading a large managing general agent, his franchising experience, and his experience in the insurance industry. Jack Olmstead – Jack Olmstead, age 70, was appointed to our Board of Directors in June 2020. He is the President of Tri-City Electrical Contractors, Inc., one of Florida’s leading electrical contractors, and has over 37 years of operations and management experience in electrical construction. Mr. Olmstead has served previously as President of the Gulf Coast Chapter of the Associated Builders and Contractors, Inc. He currently serves on the boards of the CEO Council of Tampa and Build Tampa Bay. He has served on the Board of Directors for the Central Florida Chapter of the Children’s Home Society of Florida and is a dedicated supporter for Lifepath Hospice and PACE Center for Girls in Hillsborough County. The particular experience, qualifications, attributes and skills that led our Board to conclude that Mr. Olmstead should serve as a director of our Company include his many years of operational experience in an industry we serve, his participation in strategic planning and growth of a company in a related industry, and his many business connections.

  5. DIRECTOR COMPENSATION

    DIRECTOR COMPENSATION The following individuals served as Directors of HireQuest, Inc. during all of 2023: Richard F. Hermanns, R. Rimmy Malhotra, Edward Jackson, Lawrence Hagenbuch, Kathleen Shanahan, and Jack Olmstead. The following table summarizes the compensation we paid to non-employee directors during 2023. Compensation paid to Mr. Hermanns is disclosed under “Compensation of Named Executive Officers – Summary Compensation Table” below.

  6. DIRECTOR COMPENSATION

    | Name | Fees earned or paid in cash | Stock awards (1) | Option awards | Total | | Edward Jackson | $9,000 | $32,393 | $- | $41,392 | | Jack Olmstead | - | 54,007 | - | 54,007 | | Kathleen Shanahan | - | 56,397 | - | 56,397 | | Lawrence F. Hagenbuch | - | 53,397 | - | 53,397 | | R. Rimmy Malhotra(2) | 28,750 | 34,504 | - | 63,254 | | Total | $37,750 | $230,698 | $- | $268,448 |

  7. DIRECTOR COMPENSATION

    | 1. | This column represents the grant date fair value of shares awarded to each non-employee director (and earned in 2023) in accordance with U.S. GAAP. The amounts were calculated using the closing price of our stock on the grant date. These amounts include all vested and unvested shares. All amounts in this column represent the value of stock elected in-lieu of cash retainers. | | 2. | At the end of the fiscal year, Mr. Malhotra had options to purchase 8,750 shares of common stock with an average strike price of $5.50 per share. 100% of these options have vested. |

  8. The Director Compensation Plan

    The Director Compensation Plan On September 23, 2019, the Board of Directors adopted and approved the 2019 HireQuest, Inc. Non-Employee Director Compensation Plan (the “Director Compensation Plan”). On September 25, 2019, the Board adopted and approved certain revisions to the plan. All subsequent references in this proxy statement to “Director Compensation Plan” include such revisions. The Director Compensation Plan remained in effect in 2023.

  9. Summary Compensation Table

    Summary Compensation Table The following table summarizes the compensation earned by our NEOs during 2023 and 2022:

  10. Summary Compensation Table

    | Name and Principal Position | Year | Salary | Bonus | Stock awards(1) | Option awards | Non-Equity Incentive Plan Compensation | All other compensation | Total | | Richard F. Hermanns | 2023 | $400,000 | $- | $- | $- | $948,385(2) | $- | $1,348,385 | | President, Chief Executive Officer, and Chairman | 2022 | 382,404 | - | 720,000 | - | 1,174,341(3) | - | 2,276,745 | | John McAnnar | 2023 | 220,055 | - | 188,700 | - | 72,000(4) | - | 480,755 | | Secretary, Chief Legal Officer, Vice President | 2022 | 210,000 | - | - | - | 88,200(5) | - | 298,200 | | Steve G. Crane* | 2023 | 31,648 | 9,692(6) | 128,100 | - | - | | 169,440 | | Chief Financial Officer | 2022 | - | - | - | - | - | - | - | | David Burnett* | 2023 | 215,110 | - | - | - | 66,000(7) | - | 281,110 | | Chief Financial Officer | 2022 | 225,000 | - | - | - | 94,500(8) | - | 319,500 |

  11. Summary Compensation Table

    *Mr. Burnett served as Chief Financial Officer until November 13, 2023 when Mr. Crane was appointed as Chief Financial Officer.

  12. Summary Compensation Table

    | 1. | This column represents the grant date fair value of shares awarded in accordance with U.S. GAAP. The amounts were calculated using the closing price of our stock on the grant date. | | 2. | Includes 2023 Pre-Tax Income Bonus and Sales Increase Bonus as defined in Mr. Hermanns' employment agreement. | | 3. | Includes 2022 Pre-Tax Income Bonus and Sales Increase Bonus as defined in Mr. Hermanns' employment agreement. $224,997 of this bonus was settled in Company stock. | | 4. | Includes 2023 Performance Bonus as defined in Mr. McAnnar's employment agreement. | | 5. | Includes 2022 Performance Bonus as defined in Mr. McAnnar's employment agreement. $17,990 of this bonus was settled in Company stock. | | 6. | Discretionary bonus. | | 7. | Includes 2023 Performance Bonus as defined in Mr. Burnett's employment agreement pro-rated to account for his final date of employment of November 13, 2023. | | 8. | Includes 2022 Performance Bonus as defined in Mr. Burnett's employment agreement. |

  13. Outstanding Equity Awards at Fiscal Year End

    Outstanding Equity Awards at Fiscal Year End The following table shows our outstanding equity awards held by Named Executive Officers as of December 31, 2023:

  14. Outstanding Equity Awards at Fiscal Year End

    | | Option Awards | | | | Stock Awards | | | Name | Number of shares underlying vested options | Number of shares underlying non-vested options | Option exercise price | Option expiration date | Number of shares of stock that have not vested (1) | Market value of shares of stock that have not vested (2) | | Richard F. Hermanns | - | - | - | - | 52,627 | $807,824 | | John McAnnar | - | - | - | - | 13,926 | 213,764 | | Steve G. Crane | - | - | - | - | 10,000 | 153,500 | | David Burnett | - | - | - | - | 5,101 | 78,300 |

  15. Outstanding Equity Awards at Fiscal Year End

    | 1. | These shares vest between June 28, 2024 and September 30, 2027. |

  16. Outstanding Equity Awards at Fiscal Year End

    | 2. | The market value is based on our closing stock price of $15.35 on December 29, 2023. |

  17. Pay Versus Performance

    Pay Versus Performance The Company is providing the following disclosure in response to Item 402(v) of Regulation S-K. The information set forth below was not used by the Compensation Committee in setting compensation for our named executive officers as set forth in the Summary Compensation Table. The disclosure in this section is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

  18. Pay Versus Performance Table

    Pay Versus Performance Table

  19. Pay Versus Performance Table

    | (a) | (b) | (c) | (d) | (e) | (f) | (g) | | Year | Summary Compensation Table Total for PEO (1) | Compensation Actually Paid to PEO (2) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers (1) | Average Compensation Actually Paid to Non-PEO Named Executive Officers (2) | Value of Initial Fixed $100 Investment Based on Total Shareholder Return (3) | Net Income | | 2023 | $1,348,385 | $1,527,565 | $310,435(4) | $318,101(5) | $156.33 | $6,135,000 | | 2022 | 2,276,745 | 2,447,309 | 308,850 | 551,609 | 159.04 | 12,458,106 | | 2021 | 2,581,706 | 3,217,158 | 419,571 | 560,484 | 199.69 | 11,849,934 |

  20. Pay Versus Performance Table

    | 1. | Reflects, in column (b), total compensation reported in the Summary Compensation Table (SCT) for our chief executive officer, Richard F. Hermanns, and, in column (d), average total compensation reported in the SCT for our non-PEO named executive officers, in each case for the years 2023, 2022, and 2021. The non-PEO named executive officers for all or a portion of those years are Steve G. Crane, David S. Burnett, and John D. McAnnar. | | 2. | Reflects, in column (c), compensation actually paid to our PEO and, in column (e), average compensation actually paid to our non-PEO named executive officers, in each case for the years 2023, 2022, and 2021, consisting of the respective amounts set forth in columns (b) and (d) of the table, adjusted as set forth in the applicable table below, as determined in accordance with SEC rules. | | 3. | Represents the cumulative total shareholder return (TSR) of the Company for the measurement periods ending on December 31 of each of 2023, 2022, and 2021, respectively. The TSR reflected in this column for each applicable fiscal year is calculated based on a fixed investment of $100 at the applicable measurement point on the same cumulative basis as is used in Item 201(e) of Regulation S-K and assumes reinvestment of all dividends. | | 4. | Because David Burnett served as CFO until November 13, 2023 when Steve G. Crane replaced him, and because the two did not overlap, the value in this item may appear to be lower than it would have been in a year without a change in principal financial officer. If the two had been aggregated and treated as one for purposes of this calculation, the average would have been $465,653. | | 5, | See note above. |

  21. Pay Versus Performance Table

    The following table sets forth the adjustments made during each year represented in the Pay Versus Performance Table to arrive at compensation "actually paid" to our PEO during each of the years in question:

  22. Pay Versus Performance Table

    | Adjustments to Determine Compensation "Actually Paid" for PEO | 2023 | 2022 | 2021 | | Deduction for amounts reported under the "Stock awards" column and stock portion of "Non-Equity Plan Incentive Compensation" column in the SCT | $- | $944,997 | $524,982 | | Deduction for amounts reported under the "Option awards" columns in the SCT | - | - | - | | Increase for Fair Value* as of year-end of awards granted during year that remain outstanding and unvested as of year end | - | 955,414 | 621,835 | | Increase for Fair Value* as of the vesting date of awards granted during year that vested during year | - | - | - | | Increase/deduction for Change in Fair Value* from prior year-end to current year-end of awards granted prior to year that were outstanding and unvested as of year-end | (5,885) | 92,485 | 171,871 | | Increase/deduction for Change in Fair Value* from prior year-end to vesting date of awards granted prior to year that vested during year | 170,822 | 57,062 | 356,573 | | Deduction of Fair Value* as of prior year-end of awards granted prior to year that were forfeited during year | - | - | - | | Increase based upon Incremental Fair Value*, if any, of awards modified during year | - | - | - | | Increase based upon dividends or other earnings paid during year prior to vesting date of award that are not otherwise included in total compensation | 14,242 | 10,600 | 10,155 | | Total Adjustments | 179,180 | 170,564 | 635,452 |

  23. Pay Versus Performance Table

    *Awards include those in the "Stock awards" column and the stock portion of the the "Non-Equity Incentive Plan Compensation" column. The Fair Value or Change in Fair Value, as applicable, of the equity award adjustments was computed in accordance with FASB ASC Topic 718. The valuation assumptions used to calculate such Fair Values, such as assumed volatility and risk-free rate differ from those used at the time of grant due to the fluctuation in the stock price and the corresponding Monte Carlo Value simulations valued as of the corresponding dates in accordance with Item 402(v) of Regulation S-K. The following table sets forth the adjustments made during each year represented in the Pay Versus Performance Table to arrive at average compensation "actually paid" to our Non-PEO named executive officers during each of the years in question:

  24. Pay Versus Performance Table

    | Adjustments to Determine Average Compensation "Actually Paid" for Non-PEO Named Executive Officers | 2023 | 2022 | 2021 | | Deduction for amounts reported under the "Stock awards" column and stock portion of "Non-Equity Plan Incentive Compensation" column in the SCT | $105,600 | $- | $209,919 | | Deduction for amounts reported under the "Option awards" column in the SCT | - | - | - | | Increase for Fair Value* as of year-end of awards granted during year that remain outstanding and unvested as of year-end | 102,333 | - | 218,383 | | Increase for Fair Value* as of the vesting date of awards granted during year that vested during year | - | - | - | | Increase/deduction for Change in Fair Value* from prior year-end to current year-end of awards granted prior to year that were outstanding and unvested as of year-end | (1,288) | 214,982 | 39,375 | | Increase/deduction for Change in Fair Value* from prior year-end to vesting date of awards granted prior to year that vested during year | 10,124 | 24,320 | 89,803 | | Deduction of Fair Value* as of prior year-end of awards granted prior to year that were forfeited during year | - | - | - | | Increase based upon Incremental Fair Value*, if any, of awards modified during year | - | - | - | | Increase based upon dividends or other earnings paid during year prior to vesting date of award that are not otherwise included in total compensation | 2,097 | 6,912 | 6,541 | | Total Adjustments | 7,666 | 242,759 | 140,913 |

  25. Pay Versus Performance Table

    *Awards include those in the "Stock awards" column and the stock portion of the "Non-Equity Incentive Plan Compensation" column. The Fair Value or Change in Fair Value, as applicable, of the equity award adjustments was computed in accordance with FASB ASC Topic 718. The valuation assumptions used to calculate such Fair Values, such as assumed volatility and risk-free rate differ from those used at the time of grant due to the fluctuation in the stock price and the corresponding Monte Carlo Value simulations valued as of the corresponding dates in accordance with Item 402(v) of Regulation S-K.

  26. Pay Versus Performance Comparative Disclosure

    Pay Versus Performance Comparative Disclosure Compensation Actually Paid and Total Shareholder Return The Company believes that the amount of "compensation actually paid" to our PEO and "average compensation actually paid" to our other NEOs is appropriately aligned with the Company's total shareholder return set forth in the above table. This alignment is due, in large part, to the fact that a significant portion of the compensation paid to our NEOs is comprised of equity awards, including contractual bonuses which our executives may elect to receive fully or partially in Company stock. For example, in 2023, approximately 34.0% of the value of total compensation awarded to our non-PEO NEOs was comprised of equity awards of restricted shares of company common stock. Given the renewal cycle of our PEO's contract his 2023 total compensation did not include equity. In 2022, approximately 36.6% of the value of total compensation awarded to our NEOs, including our PEO, was comprised of equity awards of restricted shares of Company common stock inclusive of stock elections in lieu of cash bonus payments. In 2021, the percentage was approximately 24.5% inclusive of stock elections in lieu of cash bonus payments. Because our NEOs are awarded restricted shares of common stock upon renewal of their employment agreements which occurs every two years for Non-PEO NEOs and every three years for our PEO, the amounts listed in the "Stock Awards" column of the SCT appear to vary significantly. While TSR was slightly negative in 2023 compared to 2022, we believe our industry is currently facing temporary headwinds and that TSR has been impacted as a result. Still, as TSR decreased in 2023, so did the compensation actually paid to our PEO (-37.5%) and average compensation paid to our non-PEO NEOs (-42.3% or -15.5% if David Burnett and Steve G. Crane had been aggregated and treated as one). Compensation Actually Paid and Net Income The Company believes that the amount of "compensation actually paid" to our PEO and "average compensation actually paid" to our other NEOs is appropriately aligned with the Company's net income as set forth in the above table. This alignment is due, in large part, to the bonus structure the Compensation Committee has in place for our NEOs. Historically, the bonus has been a significant portion of total compensation, particularly, with respect to our PEO. The bonus, with respect to our PEO, is largely tied to increase in system-wide-sales, which, in turn, contribute directly to our revenue. For our Non-PEO NEOs, bonuses are determined based on a formula with inputs regarding six key profitability drivers: same store system-wide-sales increase, new store system-wide-sale increase, sales from acquisitions, maintenance of permanent payroll within historical norms, improvement on accounts receivable turns, and improvements in our workers' compensation loss ratio. As our net income decreased in 2023 compared to 2022 these bonuses as well as total compensation actually paid to our NEOs decreased significantly as set forth above.