Northern Technologies International Corporation Annual Report 2018

FY2018 Annual Report · Northern Technologies International Corporation

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Northern Technologies
International Corporation
Fiscal 2018 Annual Report

Northern Technologies International Corporation

• Notice of 2019 Annual Meeting
• Proxy Statement
• Annual Report on Form 10-K - August 31, 2018

Our Mission:

Our Environment:

Our business model of commercializing clean and green
technologies depends heavily on the talents, perseverance and
integrity of both our employees and our worldwide federation of
joint venture partners. We believe that our responsibilities are
first to our worldwide customers, then to our people, next to our
communities and finally to our shareholders. Therefore we must:

• Exercise honor, humanity and disciplined management

in our actions.

• See a unified world through the global perspectives

of our people.

• Ensure that the environment becomes a better place because

of what we do.

• Invest continuously in our future.

NTIC uses advanced technologies to care for the world we live in,
give back to society and strive to set an example for environmental
leadership and responsibility.

At NTIC, we believe that there is no alternative to doing
environmentally sustainable business while working to grow the
bottom line.

We encourage our employees, joint venture partners, distributors,
affiliates and suppliers
to carry out our environmental
commitments at the individual level through:

• Daily environmentally responsible business practices.
• Advanced R&D processes that promote the use of

environmentally responsible raw materials such as bio-based or
wind-powered sourced.

• Selecting components and manufacturing processes that reduce

waste and an impact on the environment.

• Education and programs to raise awareness about

our technologies and how they can help solve current
environmental challenges.

• Each NTIC employee is expected to practice an individual

commitment to sustainability and environmental responsibility
in the workplace.

Through our individual commitments to lessen our environmental
footprint and our advanced technologies which allow others to
practice sustainability, we have the power to benefit ourselves
as individuals, our federation of NTIC joint ventures and our
environment for many generations to come.

Our Technology Platforms:

ZERUST®/EXCOR® business unit manufactures and markets corrosion
inhibiting
technologies that provide customers with advanced solutions for corrosion across their
production facilities and supply chains. The technology uses proprietary chemical systems
to create invisible molecular corrosion shields on metal surfaces. The ZERUST®/EXCOR®
teams support clients globally in a broad range of industries including automotive,
electrical, electronic, medical, machine fabrications, steel production, military and
marine. ZERUST®/EXCOR® products and services allow customers to achieve substantial
cost savings as well as reduce the negative environmental impact caused by traditional
corrosion prevention methods and the waste caused by the corrosion of metal assets.

Zerust® Oil and Gas business unit provides advanced corrosion control technologies and
services to the petrochemical industry. Zerust® Oil and Gas products and services utilize
Zerust® proprietary corrosion inhibitors in combination with advanced cathodic protection
systems to dramatically enhance the corrosion protection of capital assets. These assets
include above-ground storage tanks, various pieces of process equipment, buried and
submerged pipelines, mothballed large capital equipment, pipeline flanges, valves, and
welded joints. Zerust® Oil & Gas technologies are currently implemented in refineries,
offshore oil rigs, tank farms and retail gas stations in several countries.

Natur-Tec® business unit engineers and manufactures biobased and biodegradable
plastic resins intended to replace conventional, petroleum-based plastics. Natur-Tec®
has a broad bioplastics portfolio which spans flexible film, foam, rigid injection molded
materials and engineered plastics. These applications allow for the production of 100%
certified compostable finished products, such as bags, food service products, and product
packaging. Natur-Tec® products are renewable resource based and do not contain
conventional plastic materials. Natur-Tec® products provide sustainable alternatives to
conventional plastics and enable industry and consumers to move closer to a carbon
neutral footprint.

To the Stockholders of Northern Technologies International Corporation (NTIC),

Fiscal 2018 was a tremendous year for NTIC, that not only culminated in record annual net sales and profitability,
but also saw the initiation of a quarterly cash dividend. This success is attributable to strong demand across
many of our global markets and the effective execution of our business plan. Furthermore, as we continue
to reinforce our infrastructure to support NTIC’s multiple growth opportunities, we believe we should be well
positioned to achieve our long-standing fiscal 2019 twin-goals of exceeding $60 million in net sales coupled with
$2.00 per diluted share in net income.

NTIC’s consolidated net sales for fiscal 2018 increased 30%, to a record $51,425,000 with growth across most
operating segments and geographies. Sales of ZERUST® industrial products increased 27% to an annual record of
$35,399,000, sales of ZERUST® oil and gas increased 78% and sales of Natur-Tec® products jumped approximately
48%, compared to fiscal 2017.

The momentum at NTIC China and Natur-Tec continued to accelerate, as these business units capitalized on
favorable market demand and the investments we’ve made building their respective growth platforms. Between
fiscal 2015 and fiscal 2018, annual Natur-Tec sales increased 129% from $4,278,000 to $10,051,000, while NTIC
China sales increased from $1,070,000 to $12,507,000, leading both NTIC China and Natur-Tec to profitability
during fiscal 2018. This transformation at NTIC China and Natur-Tec has also beneficially impacted NTIC’s overall
profitability and we expect these businesses to make significant contributions to our continued success going
forward.

The 78% increase in ZERUST® oil & gas sales during fiscal 2018 has also been extremely encouraging, as sales to
this large and growing market are an important component of NTIC’s strategic plan as sales to this sector also
enjoy higher margin characteristics than other business units and incremental sales here have the potential to
significantly contribute to future earnings.

Net income attributable to NTIC increased nearly 96% for fiscal 2018 to a record $6,701,000, compared to
$3,442,000 last fiscal year. On a per diluted share basis, net income attributable to NTIC increased over 91% for
fiscal 2018 to a record $1.43 per diluted share, compared to $0.75 per diluted share last fiscal year.

At the end of fiscal 2018, NTIC had $7,463,000 of cash, cash equivalents, and available for sale securities,
compared to $10,127,000 at the end of fiscal 2017. In addition, NTIC has over $12,800,000 of additional cash
at our joint ventures. Maintaining such a strong balance sheet and capital structure, enabled the company to
self-finance growth-generating initiatives. This foundation also not only allowed NTIC to pay $1,816,000 in cash
dividends to stockholders during fiscal 2018, but also enabled us to raise the company’s quarterly cash dividend
payment 20% from $0.10 to $0.12 per share.

ZERUST® Industrial Corrosion Prevention
Growth in worldwide sales of ZERUST® industrial products stepped up during fiscal 2018 compared to the prior
fiscal year, driven by strong global demand for our products and solutions, improved market share, and a significant
contribution by NTIC China. Sales by our joint ventures increased approximately 19% to over $120,000,000
during fiscal 2018, compared to nearly $101,000,000 last fiscal year, and $90,600,000 in fiscal 2016. NTIC has
strong, committed JV partners and we are optimistic that the trends across our global joint venture network
should remain strong in fiscal 2019, driven by anticipated improvements in market share, enhanced operating
performance, and global economic growth.

NTIC China sales were $12,507,000, marking a 73% increase over $7,226,000 in sales from last fiscal year. NTIC
is well positioned in China, as we have continued to aggressively obtain new customers across this large, diverse,
and growing market.

ZERUST® in the Oil & Gas Industry
With energy on the rise again, NTIC enjoyed a 78% increase in ZERUST® oil & gas sales. 2018 fiscal year sales
within this category were $3,067,000, compared to just $1,720,000 for the previous fiscal year. Growth was
driven by higher demand and broader industry acceptance of several ZERUST® solutions, including corrosion
protection for storage tank bottoms and pipelines.

The global oil & gas market remains compelling to NTIC, due to its size and profit potential. The ZERUST® oil
& gas team has developed quite a sizable funnel of sales opportunities that, in the current business climate, is
closing orders at a much more favorable pace. That said, we recognize that it will take a little more time for us
to smooth out the choppy pace at which we’ve been logging new business in the past.

Natur-Tec® Bioplastics
Sales of Natur-Tec® products grew to a record $10,051,000 during fiscal 2018, representing a 48% increase
over fiscal 2017. With this increase, Natur-Tec® represented nearly 20% of NTIC’s consolidated net sales for
fiscal 2018, compared to 17% of fiscal 2017’s net sales. Favorable regulations, corporate green initiatives, and
changing consumer preferences have all had a positive influence on global demand for Natur-Tech’s bioplastics.
We expect these trends will continue to benefit Natur-Tec® throughout fiscal 2019 and beyond.

Closing
In closing, I want to thank all the members of NTIC’s global family of employees, joint venture partners, friends
and colleagues for their hard work and dedication during this great year. Our fiscal 2018 results demonstrate the
growing strength of the compelling business model we have created. I am extremely pleased with the direction
in which we are headed and know that we believe we are well positioned to fulfill our fiscal 2019 vision of $60
million in sales and $2.00 per diluted share in earnings.

Sincerely,

G. Patrick Lynch
President & CEO, NTIC

G. Patrick Lynch

PRELIMINARY PROXY MATERIAL-SUBJECT TO COMPLETION

NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

January 18, 2019

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 11:00 a.m., Central Standard Time, on Friday, January 18, 2019,
for the following purposes:

1. To elect seven persons to serve as directors until our next annual meeting of stockholders or

until their respective successors are elected and qualified.

2. To consider a proposal to approve the Northern Technologies International Corporation 2019

Stock Incentive Plan.

3. To approve, on an advisory basis, the compensation of our named executive officers, as

disclosed in the accompanying proxy statement.

4. To ratify the selection of Baker Tilly Virchow Krause, LLP as our independent registered

public accounting firm for the fiscal year ending August 31, 2019.

5. To ratify the filing and effectiveness of the Certificate of Amendment to our Restated

Certificate of Incorporation filed with the Secretary of State of the State of Delaware on
January 16, 2018 and the increase in the number of shares of authorized common stock
effected thereby.

6. To transact such other business as may properly come before the meeting or any

adjournment of the meeting.

Only those stockholders of record at the close of business on November 21, 2018 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 8, 2019 during normal business hours for examination by any
stockholder registered on NTIC’s stock ledger as of the record date, November 21, 2018, for any purpose
germane to the Annual Meeting.

Meeting of Stockholders held last year. Although NTIC believes that the share increase amendment from
last year’s meeting was properly approved and is effective, because the description in the proxy statement
for last year’s meeting relative to the authority of brokers to vote on proposals without instruction may
create some uncertainty as to the effect of the vote obtained at last year’s meeting, and out of an
abundance of caution, NTIC is asking its stockholders at the Annual Meeting to ratify the filing and
effectiveness of the Certificate of Amendment to our Restated Certificate of Incorporation filed with the
Secretary of State of the State of Delaware on January 16, 2018 pursuant to Delaware law in order to
eliminate any uncertainty related to the effectiveness of the share increase amendment. Accordingly,
under Section 204 of the Delaware General Corporation Law, or DGCL, stockholders of record as of
November 17, 2017, other than holders whose identities or addresses cannot be determined from our
records, are entitled to and are being given notice of the Annual Meeting, but are not entitled to attend the
Annual Meeting or vote on any matter presented at the Annual Meeting unless they were also
stockholders as of November 21, 2018, the record date for the Annual Meeting.

If the ratification proposal is approved by NTIC’s stockholders, then NTIC expects to file a Certificate of
Validation promptly after the adjournment of the Annual Meeting. Any claim that the filing and
effectiveness of the share increase amendment is void or voidable due to the failure to receive the
requisite stockholder approval at last year’s Annual Meeting of Stockholders, or that the Delaware Court
of Chancery should declare in its discretion that the ratification proposal not be effective or be effective
only on certain conditions, must be brought within 120 days from the validation effective time, which, in
the case of the ratification of the share increase amendment, will be the time at which a Certificate of
Validation filed in respect of the ratification proposal becomes effective under the DGCL.

We are pleased again this year to use the “Notice and Access” method of providing proxy materials to our
stockholders via the Internet. 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.

By Order of the Board of Directors,

Matthew C. Wolsfeld
Corporate Secretary

November 30, 2018
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.

TABLE OF CONTENTS

________________

Page

INTERNET AVAILABILITY OF PROXY MATERIALS ........................................................................ iii
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING ................................. 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 May Change Your Vote or Revoke Your Proxy ...................................................................... 4
Quorum Requirement ............................................................................................................................... 4
Vote Required ........................................................................................................................................... 4
Other Business .......................................................................................................................................... 6
Procedures at the Annual Meeting ............................................................................................................ 6
Householding of Annual Meeting Materials ............................................................................................ 6
Proxy Solicitation Costs ........................................................................................................................... 6
PROPOSAL ONE—ELECTION OF DIRECTORS .................................................................................... 7
Number of Directors ................................................................................................................................. 7
Nominees for Director .............................................................................................................................. 7
Information about Current Directors and Board Nominees ...................................................................... 7
Additional Information about Current Directors and Board Nominees.................................................... 8
Board Recommendation ......................................................................................................................... 10

PROPOSAL TWO— APPROVAL OF NORTHERN TECHNOLOGIES INTERNATIONAL

CORPORATION 2019 STOCK INCENTIVE PLAN ........................................................................... 12
Background ............................................................................................................................................. 12
Reasons Why You Should Vote in Favor of the Approval of the Northern Technologies
International Corporation 2019 Stock Incentive Plan ............................................................................. 13
Summary of Sound Governance Features of the 2019 Plan ................................................................... 14
Summary of the 2019 Plan ..................................................................................................................... 17
Federal Income Tax Consequences ........................................................................................................ 26
Board of Directors Recommendation ..................................................................................................... 28
PROPOSAL THREE—ADVISORY VOTE ON EXECUTIVE COMPENSATION ................................ 29
Introduction ............................................................................................................................................ 29
Board Recommendation ......................................................................................................................... 30

PROPOSAL FOUR—RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM ............................................................................................................ 31
Selection of Independent Registered Public Accounting Firm ............................................................... 31
Audit, Audit-Related, Tax and Other Fees ............................................................................................. 31
Audit Committee Pre-Approval Policies and Procedures....................................................................... 31
Board Recommendation ......................................................................................................................... 32
PROPOSAL FIVE—RATIFICATION OF SHARE INCREASE AMENDMENT ................................... 33
Background ............................................................................................................................................. 33
Board of Directors Approved the Ratification of the Share Increase Amendment ................................ 33
Filing of a Certificate of Validation........................................................................................................ 34
Effect of Ratification Retroactive Validation of the Share Increase Amendment .................................. 34
Purpose and Effect of Share Increase Amendment ................................................................................ 34
Time Limitations on Legal Challenges to the Ratification of the Share Increase Amendment .............. 35
Consequences if the Ratification Proposal is Not Approved by the Stockholders ................................. 35
Board Recommendation ......................................................................................................................... 35

TABLE OF CONTENTS

________________

Page

STOCK OWNERSHIP ............................................................................................................................... 36
Beneficial Ownership of Significant Stockholders and Management .................................................... 36
Section 16(a) Beneficial Ownership Reporting Compliance .................................................................. 37
Securities Authorized for Issuance Under Equity Compensation Plans ................................................. 38
CORPORATE GOVERNANCE ................................................................................................................ 39
Corporate Governance Guidelines .......................................................................................................... 39
Board Leadership Structure .................................................................................................................... 39
Director Independence ............................................................................................................................ 40
Board Meetings and Attendance ............................................................................................................. 40
Board Committees .................................................................................................................................. 40
Audit Committee .................................................................................................................................... 41
Compensation Committee ...................................................................................................................... 43
Nominating and Corporate Governance Committee .............................................................................. 44
Director Nominations Process ................................................................................................................ 45
Board Oversight of Risk ......................................................................................................................... 47
Code of Ethics ........................................................................................................................................ 47
Policy Regarding Director Attendance at Annual Meetings of Stockholders ........................................ 48
Complaint Procedures ............................................................................................................................. 48
Process Regarding Stockholder Communications with Board of Directors ........................................... 48
Compensation Committee Interlocks and Insider Participation ............................................................. 48
DIRECTOR COMPENSATION ................................................................................................................ 49
Summary of Cash and Other Compensation .......................................................................................... 49
Non-Employee Director Compensation Program ................................................................................... 50
Consulting Agreement ............................................................................................................................ 51
Indemnification Agreements .................................................................................................................. 52
EXECUTIVE COMPENSATION .............................................................................................................. 53
Compensation Review ............................................................................................................................ 53
Summary of Cash and Other Compensation .......................................................................................... 62
Outstanding Equity Awards at Fiscal Year End ..................................................................................... 63
Stock Incentive Plan ............................................................................................................................... 64
Post-Termination Severance and Change in Control Arrangements ...................................................... 66
Indemnification Agreements .................................................................................................................. 68
RELATED PERSON RELATIONSHIPS AND TRANSACTIONS ......................................................... 69
Introduction ............................................................................................................................................ 69
Procedures Regarding Approval of Related Party Transactions ............................................................ 69
Description of Related Party Transactions ............................................................................................. 70

STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR 2020 ANNUAL

MEETING OF STOCKHOLDERS ........................................................................................................ 71
Stockholder Proposals for 2020 Annual Meeting ................................................................................... 71
Director Nominations for 2020 Annual Meeting .................................................................................... 71
COPIES OF FISCAL 2018 ANNUAL REPORT ....................................................................................... 72
________________

INTERNET AVAILABILITY OF PROXY MATERIALS
________________

Instead of mailing a printed copy of our proxy materials, including our Annual Report to Stockholders, to
each stockholder of record, we have provided access to these materials in a fast and efficient manner via
the Internet. 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. On or about November 30,
2018, we expect to begin mailing a Notice of Internet Availability of Proxy Materials to stockholders of
record as of November 21, 2018 (and as explained in the Notice of Meeting stockholders of record as of
November 17, 2017), and post our proxy materials on the website referenced in the Notice of Internet
Availability of Proxy Materials (www.proxyvote.com). As more fully described in the Notice of Internet
Availability of Proxy Materials, stockholders may choose to access our proxy materials at
www.proxyvote.com or may request proxy materials in printed or electronic form. In addition, the Notice
of Internet Availability of Proxy Materials and website provide information regarding how you may
request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis.
For those who previously requested printed proxy materials or electronic materials on an ongoing basis,
you will receive those materials as you requested.

Important Notice Regarding the Availability of Proxy Materials
for the Annual Meeting of Stockholders to be Held on January 18, 2019:
The Notice of Annual Meeting of Stockholders and Proxy Statement and
Annual Report to Stockholders, including our Annual Report on Form 10-K
for the fiscal year ended August 31, 2018, are available at www.proxyvote.com.

4201 Woodland Road, Circle Pines, Minnesota 55014

PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
January 18, 2019

The Board of Directors of Northern Technologies International Corporation is soliciting your proxy for
use at the 2019 Annual Meeting of Stockholders to be held on Friday, January 18, 2019. The Board of
Directors expects to make available to our stockholders beginning on or about November 30, 2018 the
Notice of Annual Meeting of Stockholders, this proxy statement and a form of proxy on the Internet or
has sent these materials to stockholders of NTIC upon their request.

GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
________________

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 Friday, January 18,
2019, at 11:00 a.m., Central Standard 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 of Stockholders.

As a result of the vote being taken at the Annual Meeting on Proposal Five, the ratification of the filing
and effectiveness of the Certificate of Amendment to our Restated Certificate of Incorporation filed with
the Secretary of State of the State of Delaware on January 16, 2018 and the increase in the number of
shares of authorized common stock effected thereby (which amendment we refer to as the “share increase
amendment” and which proposal we refer to as the “ratification proposal”), we are giving notice of the
Annual Meeting to not only stockholders of record as of the record date for the meeting, November 21,
2018, but also stockholders of record as of November 17, 2017, which was the record date for our Annual
Meeting of Stockholders held last year. Although NTIC believes that the share increase amendment from
last year’s meeting was properly approved and is effective, because the description in the proxy statement
for last year’s meeting relative to the authority of brokers to vote on proposals without instruction may
create some uncertainty as to the effect of the vote obtained at last year’s meeting, and out of an
abundance of caution, NTIC is asking its stockholders at the Annual Meeting to ratify the filing and
effectiveness of the Certificate of Amendment to our Restated Certificate of Incorporation filed with the
Secretary of State of the State of Delaware on January 16, 2018 pursuant to Delaware law in order to
eliminate any uncertainty related to the effectiveness of the share increase amendment. Accordingly,
under Section 204 of the Delaware General Corporation Law, or DGCL, stockholders of record as of
November 17, 2017, other than holders whose identities or addresses cannot be determined from our
records, are entitled to and are being given notice of the Annual Meeting, but are not entitled to attend the

Annual Meeting or vote on any matter presented at the Annual Meeting unless they were also
stockholders as of November 21, 2018, the record date for the Annual Meeting.

This notice and the attached proxy statement constitutes the notice required to be given to our
stockholders under Section 204 of the DGCL in connection with the ratification proposal, including to our
stockholders as of November 17, 2017. Under Sections 204 and 205 of the DGCL, when a matter is
submitted for ratification at a stockholder meeting, any claim that the defective corporate act ratified
under Section 204 is void or voidable due to the failure of authorization, or that the Delaware Court of
Chancery should declare in its discretion that a ratification in accordance with Section 204 of the DGCL
not be effective or be effective only on certain conditions, must be brought within 120 days from the
applicable validation effective time. If the ratification proposal is approved by NTIC’s stockholders, then
NTIC expects to file a Certificate of Validation promptly after the adjournment of the Annual Meeting.
Any claim that the filing and effectiveness of the share increase amendment is void or voidable due to the
failure to receive the requisite stockholder approval at last year’s Annual Meeting of Stockholders, or that
the Delaware Court of Chancery should declare in its discretion that the ratification proposal not be
effective or be effective only on certain conditions, must be brought within 120 days from the validation
effective time, which, in the case of the ratification of the share increase amendment, will be the time at
which a Certificate of Validation filed in respect of the ratification proposal becomes effective under the
DGCL.

Who Can Vote

Stockholders of record at the close of business on November 21, 2018 will be entitled to notice of and to
vote at the meeting or any adjournment of the meeting. As of that date, there were 4,542,177 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.

In connection with the ratification proposal, stockholders of record as of November 17, 2017, other than
holders whose identities or addresses cannot be determined from our records, are receiving notice of the
Annual Meeting under Section 204 of the DGCL. However, persons who were stockholders as of
November 17, 2017, but who are not stockholders as of November 21, 2018, the record date for the
Annual Meeting, are not entitled to attend the Annual Meeting or vote on any matter presented at the
Annual Meeting.

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 broker, bank or other nominee.

If you are a registered 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 Standard Time
(10:59 p.m., Central Standard 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 Proposal One—Election of Directors, you may:

• Vote FOR all seven nominees for director,

• WITHHOLD your vote from all seven nominees for director or

• WITHHOLD your vote from one or more of the seven nominees for director.

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 seven of the nominees for election to the
Board of Directors in Proposal One—Election of Directors and FOR each of the other proposals.

How Does the Board Recommend that You Vote

The Board of Directors unanimously recommends that you vote:

• FOR all seven of the nominees for election to the Board of Directors in Proposal One—Election

of Directors;

• FOR Proposal Two— Approval of the Northern Technologies International Corporation 2019

Stock Incentive Plan;

• FOR Proposal Three—Advisory Vote on Executive Compensation;

• FOR Proposal Four—Ratification of Selection of Independent Registered Public Accounting

Firm; and

• FOR Proposal Five—Ratification of Share Increase Amendment.

How You May 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; or

• 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 (2,271,089
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 counted in determining whether a quorum is present. A
“broker non-vote” is a proxy 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

Proposal One—Election of Directors will be decided by the affirmative vote of a plurality of shares of our
common stock present in person or represented by proxy and entitled to vote at the Annual Meeting. A
“plurality” for Proposal One means the individuals who receive the greatest number of votes cast “For”
are elected as directors.

Proposal Two— Approval of the Northern Technologies International Corporation 2019 Stock Incentive
Plan will be decided by the affirmative vote of a majority of votes cast on this proposal.

Proposal Three—Advisory Vote on Executive Compensation will be decided by the affirmative vote of a
majority of shares of our common stock present in person or represented by proxy and entitled to vote at
the Annual Meeting. Although this is a non-binding, advisory vote, the Compensation Committee and
Board of Directors expect to take into account the outcome of the vote when considering future executive
compensation decisions.

Proposal Four—Ratification of Selection of Independent Registered Public Accounting Firm will be
decided by the affirmative vote of a majority of shares of our common stock present in person or
represented by proxy and entitled to vote at the Annual Meeting.

Proposal Five—Ratification of Share Increase Amendment will be decided by the affirmative vote of a
majority of shares of our common stock outstanding as of the record date for the 2019 Annual Meeting.

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 only on certain “routine” matters. Proposal One—
Election of Directors, Proposal Two— Approval of the Northern Technologies International Corporation
2019 Stock Incentive Plan and Proposal Three—Advisory Vote on Executive Compensation are not
“routine” matters. Accordingly, if you do not direct your broker how to vote, your broker may not
exercise discretion and may not vote your shares on either of these three proposals. This is called a
“broker non-vote” and although your shares will be considered to be represented by proxy at the meeting,
they will not be considered to be shares “entitled to vote” or “votes cast” at the meeting and will not be
counted as having been voted on the applicable proposal. Proposal Four—Ratification of Selection of
Independent Registered Public Accounting Firm and Proposal Five—Ratification of Share Increase
Amendment are “routine” matters and, as such, your broker is permitted to exercise its discretion to vote
your shares for or against the proposals in the absence of your instruction.

Proposal
Proposal One: Election of
Directors

Proposal Two: Approval of the
Northern Technologies
International Corporation 2019
Stock Incentive Plan

Proposal Three: Advisory Vote
on Executive Compensation

Votes Required
Plurality of the votes cast. This
means that the seven nominees
receiving the highest number of
affirmative “FOR” votes will be
elected as directors.

Affirmative vote of a majority of
votes cast on the proposal.

Effect of Votes
Withheld /
Abstentions

Votes
withheld will
have no effect.

Effect of
Broker
Non-Votes
Broker non-
votes will have
no effect.

Abstentions
will have the
effect of a vote
against the
proposal.

Broker non-
votes will have
no effect.

Affirmative vote of the holders of
a majority in voting power of the
shares of common stock present
in person or by proxy and
entitled to vote thereon.

Abstentions
will have the
effect of a vote
against the
proposal.

Broker non-
votes will have
no effect.

Proposal Four: Ratification of
Appointment of Independent
Registered Public Accounting
Firm

Affirmative vote of the holders of
a majority in voting power of the
shares of common stock present
in person or by proxy and
entitled to vote thereon.

Abstentions
will have the
effect of a vote
against the
proposal.

We do not
expect any
broker non-
votes on this
proposal.

Proposal Five: Ratification of
Share Increase Amendment

Affirmative vote of a majority of
shares of common stock
outstanding on the record date of
the 2019 Annual Meeting.

Abstentions
will have the
effect of a vote
against the
proposal.

We do not
expect any
broker non-
votes on this
proposal.

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 on
the proxy card will have discretionary authority to vote such proxy in accordance with their best judgment
on the matters.

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.

Householding of Annual Meeting Materials

Some banks, brokers and other nominee record holders may be participating in the practice of
“householding” proxy statements, annual reports and the Notice of Internet Availability of Proxy
Materials. This means that only one copy of this proxy statement, our Annual Report to Stockholders or
the Notice of Internet Availability of Proxy Materials may have been sent to multiple stockholders in each
household. We will promptly deliver a separate copy of any of these documents to any stockholder upon
written or oral request to our 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, our Annual Report to
Stockholders or the Notice of Internet Availability of Proxy Materials in the future, or any stockholder
who is receiving multiple copies and would like to receive only one copy per household, should contact
the stockholder’s bank, broker or other nominee record holder, or the stockholder may contact us at the
above address and telephone number.

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 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.

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 seven.

Nominees for Director

The Board of Directors has nominated the following seven 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.

• Barbara D. Colwell
• Soo-Keong Koh
• Sunggyu Lee, Ph.D.
• G. Patrick Lynch

• Ramani Narayan, Ph.D.
• Richard J. Nigon
• Konstantin von Falkenhausen

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

Information about Current Directors and Board Nominees

The following table sets forth as of November 15, 2018 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
Barbara D. Colwell(1)(2)

Age Principal Occupation
73 Director of NTIC and Certain Other Companies and

Organizations

Soo-Keong Koh(2)
Sunggyu Lee, Ph.D.(3)

G. Patrick Lynch
Ramani Narayan, Ph.D.

67 Managing Director of EcoSave Pte Ltd.
66 Russ Ohio Research Scholar in Syngas Utilization
and Professor of Chemical and Biomolecular
Engineering at Ohio University
President and Chief Executive Officer of NTIC

51
69 Distinguished Professor in the Department of
Chemical Engineering & Materials Science at
Michigan State University
Senior Vice President of Cedar Point Capital, Inc.
Partner of B Capital Partners AG

70
51

Richard J. Nigon(1)(2)(3)
Konstantin von Falkenhausen(1)(3)
_________________________
(1)
(2)
(3)

Member of the Audit Committee
Member of the Nominating and Corporate Governance Committee
Member of the Compensation Committee

Director
Since
2013

2008
2004

2004
2004

2010
2012

Additional Information about Current Directors and Board Nominees

The following paragraphs provide information about each current director and nominee for director,
including all positions he or she holds, his or her principal occupation and business experience for the past
five years, and the names of other publicly-held companies of which the director or nominee currently
serves as a director or has served as a director during the past five years. We believe that all of our
directors and nominees display personal and professional integrity; satisfactory levels of education and/or
business experience; broad-based business acumen; an appropriate level of understanding of our business
and its industry and other industries relevant to our business; the ability and willingness to devote
adequate time to the work of the Board of Directors and its committees; a fit of skills and personality with
those of our other directors that helps build a board that is effective, collegial and responsive to the needs
of our company; strategic thinking and a willingness to share ideas; a diversity of experiences, expertise
and background; and the ability to represent the interests of all of our stockholders. The information
presented below regarding each director and nominee also sets forth specific experience, qualifications,
attributes and skills that led the Board of Directors to the conclusion that such individual should serve as a
director in light of our business and structure.

Barbara D. Colwell has been a director of NTIC since November 2013. Ms. Colwell is a member of the
board of directors or advisory board of several non-profit organizations and private and mutual
companies, including most notably, the Publishers Clearing House, LLC, Triumph Oil & Gas Operating
Company, LLC, IPTAR (Institute for Psychoanalytic Training and Research), the Belizean Grove and
Mutual Trust Life Insurance. We believe Ms. Colwell’s qualifications to sit on the Board of Directors
include her current and prior experience on the boards of directors of other organizations and companies
and, in particular, her experience serving on the audit committee, governance committee and
compensation committee of Publishers Clearing House, LLC, as well as her former experience serving on
the audit committee and compensation committee of Mutual Trust Financial Group.

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). We believe Mr. Koh’s
qualifications to sit on the Board of Directors include his experience on other public company boards of
directors and his significant executive experience with companies including those focused on
environmental awareness, which has become a focus of NTIC during the past several years, especially in
light of NTIC’s Natur-Tec® bioplastics business. Mr. Koh’s previous board of director experience is
helpful in guiding NTIC with respect to corporate governance matters, particularly in his role as Chair of
the Nominating and Corporate Governance Committee. Additionally, Mr. Koh has specific executive
experience with companies located in Asia, which is where several of NTIC’s joint ventures and NTIC’s
Chinese subsidiary are located.

Sunggyu Lee, Ph.D. was elected a director of NTIC in January 2004. Dr. Lee is a Russ Ohio Research
Scholar in Syngas Utilization and Professor of Chemical and Biomolecular Engineering, Ohio University,
Athens, Ohio. Previously, he held positions of Professor of Chemical and Biologic Engineering, Missouri
University of Science and Technology, Rolla, Missouri from 2005 to 2010, C.W. LaPierre Professor and
Chairman of Chemical Engineering at University of Missouri-Columbia from 1997 to 2005, and Robert
Iredell Professor and Head of Chemical Engineering Department at the University of Akron, Akron, Ohio
from 1988 to 1996. He has authored 12 books and over 550 archival publications and received 35 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, New York and also as Book Series
Editor of Green Chemistry and Chemical Engineering, CRC Press, Boca Raton, Florida. Throughout his
career, he has served as consultant and technical advisor to a number of national and international
companies in the fields of polymers, petrochemicals and energy. He received his Ph.D. from Case
Western Reserve University, Cleveland, Ohio in 1980. We believe Dr. Lee’s qualifications to sit on the
Board of Directors include his significant technical and industrial expertise with chemical and polymer
processes and products. Such expertise is particularly helpful with respect to assessing and operating
NTIC’s Natur-Tec® bioplastics business.

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, which 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 a Master of Business
Administration degree from the University of Michigan Ross School of Business. We believe
Mr. Lynch’s qualifications to sit on the Board of Directors include his depth of knowledge of our
company and its day-to-day operations in light of his position as Chief Executive Officer of NTIC, as well
as his affiliation with a significant stockholder of NTIC, which the Board of Directors believes generally
helps align management’s interests with those of our stockholders.

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 200+ refereed publications in leading journals to his credit, 19 patents, edited three books
and one expert dossier in the area of bio-based polymeric materials. His research encompasses design
and engineering of sustainable, biobased produFrederic W. Cook & Co., Inc.” cts, 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 of the Biodegradable Products Institute
(BPI), North America. He served on the Technical Advisory Board of Tate & Lyle. He served on the
Board of Directors of ASTM International, an international standards setting organization and was the
founding Chair of the committee on Environmentally Degradable Plastics and Biobased Products
(D20.96) and the Plastics Terminology Committee (D20.92). Dr. Narayan is also the technical expert for
the United States on ISO (International Standards Organization) TC 61 on Plastics—specifically for
Terminology, Biobased 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. We believe
Dr. Narayan’s qualifications to sit on the Board of Directors include his significant technical expertise in
the bioplastics area which has been helpful to NTIC’s management in assessing and operating NTIC’s
Natur-Tec® bioplastics business.

Richard J. Nigon has been a director of NTIC since February 2010 and non-executive Chairman of the
Board since November 2012. Mr. Nigon is the Senior Vice President of Cedar Point Capital, Inc., a
private company that raises capital for early stage companies. From February 2001 until May 2007,
Mr. Nigon was a Director of Equity Corporate Finance for Miller Johnson Steichen Kinnard (MJSK), a
privately held investment firm. In December 2006, MJSK was acquired by Stifel Nicolaus, and
Mr. Nigon was a Managing Director of Private Placements at Stifel Nicolaus. From February 2000 to
February 2001, Mr. Nigon served as the Chief Financial Officer of Dantis, Inc., a web hosting company.
Prior to joining Dantis, Mr. Nigon was employed by Ernst & Young, LLP from 1970 to 2000, where he
served as a partner from 1981 to 2000. While at Ernst & Young, Mr. Nigon served as the Director of
Ernst & Young’s Twin Cities Entrepreneurial Services Group and was the coordinating partner on several
publicly-traded companies in the consumer retailing and manufacturing sectors. Mr. Nigon also currently
serves as President of NorthStar Education Finance, Inc., a non-profit organization formed to foster, aid,
encourage and assist the pursuit of higher education. In addition to NTIC, Mr. Nigon also serves on the
board of directors of Tactile Systems Technology, Inc. and as chairperson of its audit committee, on the
board of directors of Celcuity Inc. and as chairperson of its audit committee and serves on the board of
directors of a number of privately-held companies. Mr. Nigon previously served on the board of directors
of Virtual Radiologic Corporation and Vascular Solutions, Inc. until its acquisition by Teleflex
Incorporated in February 2017. Through his 30 years of service at Ernst & Young, LLP, Mr. Nigon
brings to NTIC’s Board of Directors, and in particular the Audit Committee, extensive public accounting
and auditing experience. The Board of Directors believes Mr. Nigon’s strong background in financial
controls and reporting, financial management, financial analysis and Securities and Exchange
Commission reporting requirements is critical to the Board’s oversight responsibilities. In addition,
Mr. Nigon’s strategic planning expertise and other experiences gained through his management and
leadership roles at private investment firms that have invested in early stage companies, is helpful to the
Board of Directors in assessing and operating NTIC’s newer businesses.

Konstantin von Falkenhausen has been a director of NTIC since November 2012. Mr. von Falkenhausen
is currently a Partner of B Capital Partners AG, an independent investment advisory boutique focused on
infrastructure, public private partnerships and clean energy. In this capacity, since April 2018, Mr. von
Falkenhausen has been a Director of the general partner of the B Capital Energy Transition Infrastructure
Fund SICAV-SIF, an investment fund registered with the Luxembourg financial authorities CSSF. From
February 2004 to March 2008, Mr. von Falkenhausen served as a Partner of capiton AG, a private equity
firm. From March 2003 to February 2004, he served as interim Chief Financial Officer of Neon Products
GmbH, a privately held neon lighting company. From May 1999 to February 2003, Mr. von
Falkenhausen served as an investment manager of West Private Equity Ltd. and an investment director of
its German affiliate West Private Capital GmbH. Prior to May 1999, Mr. von Falkenhausen served in
several positions with BankBoston Robertson Stephens International Ltd., an investment banking firm.
Mr. von Falkenhausen is a citizen of Germany. He has a Master’s degree in economics (lic. oec) from the
University of Fribourg (Switzerland) and a Masters of Business Administration from the University of
Chicago. We believe Mr. von Falkenhausen’s qualifications to sit on the Board of Directors include his
experience with several private investment and equity firms that have invested in early stage companies,
which the Board of Directors believes is helpful in assessing and operating NTIC’s newer businesses, and
his financial expertise, which the Board of Directors believes is helpful in analyzing NTIC’s financial
performance.

Board Recommendation

The Board of Directors unanimously recommends a vote FOR the election of all of the seven 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.

PROPOSAL TWO— APPROVAL OF NORTHERN TECHNOLOGIES INTERNATIONAL
CORPORATION 2019 STOCK INCENTIVE PLAN
________________

Background

On November 16, 2018, the Board of Directors, upon recommendation of the Compensation Committee,
approved the Northern Technologies International Corporation 2019 Stock Incentive Plan (referred to in
this section as the “2019 plan” or the “plan”), subject to approval by our stockholders at the Annual
Meeting. The purpose of the 2019 plan is to advance the interests of NTIC and our stockholders by
enabling us to attract and retain qualified individuals to perform services, provide incentive compensation
for such individuals in a form that is linked to the growth and profitability of our company and increases
in stockholder value, and provide opportunities for equity participation that align the interests of
recipients with those of our stockholders.

If our stockholders approve the 2019 plan, it will replace the Northern Technologies International
Corporation Amended and Restated 2007 Stock Incentive Plan (referred to as the “2007 plan”), with the
remaining shares available for grant under the 2007 plan rolling over into the 2019 plan, and no new
awards will be granted under the 2007 plan. The terms of the 2007 plan, as applicable, will continue to
govern awards outstanding under the 2007 plan, until exercised, expired, paid or otherwise terminated or
canceled. Other than the 2007 plan, we have no other equity compensation plans under which equity
awards can be granted.

Subject to adjustment, the maximum number of shares of our common stock to be authorized for issuance
under the 2019 plan is 400,000 shares, plus (i) shares of our common stock available for issuance under
the 2007 plan as of the date of stockholder approval of the 2019 plan, but not subject to outstanding
awards and (ii) shares subject to awards outstanding under the 2007 plan as of the date of stockholder
approval of the 2019 plan that are subsequently forfeited or cancelled or expire or otherwise terminate
without the issuance of such shares (which may otherwise be returned and available for grant under the
terms of the 2007 plan and 2019 plan).

The Board of Directors is asking our stockholders to approve the 2019 plan in order to qualify stock
options for treatment as incentive stock options for purposes of Section 422 of the Internal Revenue Code
of 1986, as amended, or Code. In addition, the Listing Rules of the Nasdaq Stock Market require
stockholder approval of the 2019 plan. If our stockholders do not approve the 2019 plan, the 2007 plan
will remain in effect until it terminates in accordance with its terms.

The 2019 plan allows us to award eligible recipients the following awards:

• options to purchase shares of our common stock that qualify as “incentive stock options” within

the meaning of Section 422 of the Code (referred to as “incentive options”);

• options to purchase shares of our common stock that do not qualify as incentive options (referred

to as “non-statutory options”);

•

rights to receive a payment from us, in the form of shares of our common stock, cash or a
combination of both, equal to the difference between the fair market value of one or more shares
of our common stock and a specified exercise price of such shares (referred to as “stock
appreciation rights” or “SARs”);

•

shares of our common stock that are subject to certain forfeiture and transferability restrictions
(referred to as “restricted stock awards”);

rights to receive the fair market value of one or more shares of our common stock, payable in
cash, shares of our common stock, or a combination of both, the payment, issuance, retention
and/or vesting of which is subject to the satisfaction of specified conditions, which may include
achievement of specified objectives (referred to as “restricted stock unit awards” or “RSUs”);

rights to receive an amount of cash, a number of shares of our common stock, or a combination of
both, contingent upon achievement of specified objectives during a specified period (referred to
as “performance awards”); and

• other stock-based awards.

In the following discussion, we refer to both incentive options and non-statutory options as “options,” and
to options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards
and other stock based awards as “incentive awards.”

Reasons Why You Should Vote in Favor of the Approval of the Northern Technologies
International Corporation 2019 Stock Incentive Plan

The Board of Directors recommends a vote for the approval of the 2019 plan, because the Board of
Directors believes the 2019 plan is in the best interests of our company and our stockholders for the
following reasons:

• Aligns directors, employee and stockholder interests. We currently provide long-term incentives
primarily in the form of stock option grants to our non-employee directors, executive officers and
other key employees. We believe that our stock-based compensation programs help align the
interests of our directors, executive officers and other key employees with our stockholders. We
believe that our long-term stock-based incentives help promote long-term retention of our
employees and encourage ownership of our common stock. If the 2019 plan is approved, we will
be able to maintain our means of aligning the interests of our directors, executive officers and
other key employees with the interests of our stockholders.

• Attracts and retains talent. Talented, motivated and effective directors, executives and

employees are essential to executing our business strategies. Stock-based and annual cash
incentive compensation has been an important component of total compensation at our company
for many years because such compensation enables us to effectively recruit executives and other
employees while encouraging them to act and think like owners of our company. If the 2019 plan
is approved, we believe we will maintain our ability to offer competitive compensation packages
to both retain our best performers and attract new talent.

• Supports our pay-for-performance philosophy. We believe that stock-based compensation, by its

very nature, is performance-based compensation. We use incentive compensation to help
reinforce desired financial and other business results to our executives and to motivate them to
make decisions to produce those results.

• Avoids disruption in our compensation programs. The approval of 2019 plan by our stockholders
is critical because there may be an insufficient number of shares of our common stock available
for issuance under the currently existing Northern Technologies International Corporation
Amended and Restated 2007 Stock Incentive Plan to cover anticipated future grants during the

next year or so. If the 2019 plan is approved, we will not have to restructure our existing
compensation programs for reasons that are not directly related to the achievement of our
financial and other business objectives. To remain competitive without stock-based
compensation arrangements, it likely will be necessary to replace components of compensation
previously awarded in equity with cash or with other instruments that may not necessarily align
director, executive officer and employee interests with those of our stockholders as well as stock-
based awards do. Additionally, replacing equity with cash will increase cash compensation
expense and use cash that would be better utilized toward other strategic purposes, such as
research and development and advancing our new businesses.

• Protects stockholder interests and embraces sound stock-based compensation practices. As
described in more detail below under “Summary of Sound Governance Features of the 2019
Plan,” the 2019 plan includes a number of features that are consistent with the interests of our
stockholders and sound corporate governance practices.

Summary of Sound Governance Features of the 2019 Plan

The Board of Directors and Compensation Committee believe that the 2019 plan contains several features
that are consistent with the interests of our stockholders and sound corporate governance practices,
including the following:

• No automatic share replenishment or “evergreen” provision. The number of shares of our

common stock available for issuance under the 2019 plan is fixed and will not adjust based upon
the number of outstanding shares of our common stock. If our stockholders approve the 2019
plan, we currently expect the number of shares authorized for issuance under the 2019 plan will
last between three to four years, at which time we expect to ask our stockholders to approve an
additional share authorization.

• Will not be excessively dilutive to our stockholders. As described in more detail below under
“—Background for Shares Authorized for Issuance Under the 2019 Plan,” we believe that the
number of shares authorized for issuance under the 2019 plan is appropriate and not excessively
dilutive to our stockholders.

• Limit on number of “full value” awards. No more than 200,000 of the shares authorized for

issuance under the 2019 plan may be issued pursuant to “full value” awards, which are awards
other than stock options or SARs that are settled by the issuance of shares of our common stock.

• No liberal share counting or “recycling” of shares from exercised stock options, SARs or other
stock-based awards. Shares withheld to satisfy tax withholding obligations on awards or to pay
the exercise price of stock options, SARs or other stock-based awards and any shares not issued
or delivered as a result of a “net exercise” of a stock option will not become available for issuance
as future award grants under the 2019 plan. In addition, shares purchased by us on the open
market using proceeds from the exercise of stock options or other awards will not become
available for issuance as future award grants under the 2019 plan. The full number of shares
subject to a SAR or other stock-based award that is settled by the issuance of shares will be
counted against the shares authorized for issuance under the 2019 plan, regardless of the number
of shares actually issued upon settlement of the SAR or other stock-based award.

• No reload stock options or SARs. The 2019 plan does not authorize reload stock options or SARs
Reload stock options and SARs are awards that automatically provide for an additional grant of
awards of the same type upon the exercise of the award.

• Stock option and SAR exercise prices will not be lower than the fair market value on the grant
date. The 2019 plan prohibits granting stock options and SARs with exercise prices lower than
100% fair market value of a share of our common stock on the grant date (or 110% of the fair
market value in the case of an incentive option and if the participant owns more than 10% of the
total combined voting power of all classes of our stock), except in connection with certain
mergers, consolidations, acquisitions of property or stock, reorganizations or other similar
transactions.

• No re-pricing of “underwater” stock options or SARs without stockholder approval. The 2019

plan prohibits the re-pricing of outstanding stock options or SARs without stockholder approval,
except in connection with certain corporate transactions, such as a recapitalization or stock split,
as may be necessary in order to prevent dilution or enlargement of the rights of participants. The
2019 plan defines “re-pricing” broadly to include amendments or modifications to the terms of
outstanding stock options or SARs to lower the exercise price, canceling “underwater” stock
options or SARs in exchange for cash, replacement awards having a lower exercise price or other
awards, or repurchasing “underwater” stock options or SARs and granting a new award.

• Stock options, SARs and unvested performance awards are not entitled to dividend equivalent
rights and no dividends will be paid on unvested awards. Stock option, SAR and unvested
performance award holders have no rights as stockholders with respect to the shares underlying
their awards until such awards are exercised or vested and shares are issued. As a result, stock
options, SARs and unvested performance awards under the 2019 plan have no dividend
equivalent rights associated with them. In addition, no dividends will be paid on any unvested
awards.

• Stockholder approval is required for material revisions to the plan. The 2019 plan requires

stockholder approval of material revisions to the plan.

• No “tax gross-ups”. The 2019 plan does not provide for any tax gross-ups.

• “Clawback”. The 2019 plan contains certain “clawback” provisions that require a participant to

reimburse NTIC for any awards received after an accounting restatement and allow the
Compensation Committee under certain circumstances to terminate outstanding awards and
require a participant to return to NTIC any shares received, any profits or any other economic
value realized by the participant in connection with any awards or any shares issued upon the
exercise or vesting of any awards. In addition, under the terms of the 2019 plan, all incentive
awards are subject to our recently adopted clawback policy.

• Limits on non-employee director awards. The 2019 plan contains meaningful annual limits on
the number of shares of common stock subject to awards granted to non-employee directors.

• Members of the committee administering the plan are non-employee and independent directors.
Except with respect to the grant of awards under the plan, the 2019 plan will continue to be
administered by the Compensation Committee, which is comprised of two or more members of
the Board of Directors who are “non-employee directors” within the meaning of Rule 16b-3
under the Exchange Act and “independent directors” under the listing standards of the Nasdaq
Stock Market, the rules and regulations of the SEC and applicable law.

Background for Shares Authorized for Issuance under the 2019 Plan

If the 2019 plan is approved, the maximum number of shares of common stock available for issuance
under the 2019 plan will be equal to the sum of 400,000 shares, plus (i) shares of our common stock
available for issuance under the 2007 plan as of the date of stockholder approval of the 2019 plan, but not
subject to outstanding awards and (ii) shares subject to awards outstanding under the 2007 plan as of the
date of stockholder approval of the 2019 plan that are subsequently forfeited or cancelled or expire or
otherwise terminate without the issuance of such shares. As of November 15, 2018, 69,534 shares of our
common stock were available for issuance under the 2007 plan, but not subject to outstanding awards, and
419,586 shares of our common stock were subject to outstanding awards under the 2007 plan.

In setting the number of shares of common stock available for issuance under the 2019 plan, the Board of
Directors and Compensation Committee considered a number of factors, which are discussed further
below, including:

• Shares available and total outstanding equity-based awards under the 2007 plan and how long the

shares available are expected to last;

• Historical equity award granting practices, including our three-year average share usage rate

(commonly referred to as “burn rate”); and

• Potential dilution and overhang.

Shares Available and Outstanding Equity Awards under the 2007 Plan. While the use of long-term
incentives, in the form of equity awards, is an important part of our compensation program, we are
mindful of our responsibility to our stockholders to exercise judgment in the granting of equity awards.
In setting the number of shares available for issuance under the 2019 plan, the Board of Directors and
Compensation Committee also considered shares available and total outstanding equity awards under the
2007 plan and how long the shares available under the 2007 plan are expected to last. To facilitate the
approval of the 2019 plan, set forth below is certain information about our shares of common stock that
may be issued under our equity compensation plans as of November 15, 2018.

As of November 15, 2018, we had 4,542,177 shares of common stock issued and outstanding. The
market value of one share of common stock on November 15, 2018, as determined by reference to the
closing price as reported on the Nasdaq Stock Market, was $33.31.

As described in more detail in the table below, under the 2007 plan (and without giving effect to approval
of the 2019 plan) as of November 15, 2018:

• 69,534 shares remained available for issuance under the 2007 plan;

• 419,586 shares were subject to outstanding stock options under the 2007 plan; and

• no full value or other incentive awards were outstanding under the 2007 plan.

Historical Equity Award Granting Practices. In setting the number of shares authorized for issuance
under the 2019 plan, the Board of Directors and Compensation Committee also considered the historical
number of equity awards granted under the 2007 plan in the past three full fiscal years. The following
table sets forth information regarding awards granted and earned, and the annual burn rate for each of the
last three fiscal years. The only equity awards granted under the 2007 plan during the past three fiscal
years are stock options.

Stock options granted
Weighted average basic common shares outstanding
during fiscal year
Burn rate

Fiscal 2018 Fiscal 2017 Fiscal 2016
53,447
4,538,838 4,528,611 4,537,504

56,677

47,252

1.0%

1.25%

1.2%

The Board of Directors and Compensation Committee also considered our three-year average burn rate
(2016 to 2018) of approximately 1.2%, which is lower than the industry thresholds established by certain
major proxy advisory firms.

Based on historical granting practices and the recent trading price of our common stock, we expect the
2019 plan to cover awards for approximately three to four years.

Potential Dilution and Overhang. In setting the number of shares authorized for issuance under the 2019
plan, the Board of Directors and Compensation Committee also considered the potential dilution and
overhang that would result by approval of the 2019 plan, including the policies of certain institutional
investors and major proxy advisory firms.

Potential dilution is calculated as shown below:

Potential dilution = Total outstanding award shares divided by total number
of outstanding shares + total outstanding award shares

Total outstanding award shares include shares to be issued on exercise or settlement of outstanding equity
awards.

Potential overhang is calculated as shown below:

Potential overhang = Total potential award shares divided by total number of

outstanding shares + total outstanding award shares

Total potential award shares include shares underlying equity awards that may be made under the plan
plus total outstanding award shares.

As of November 15, 2018, potential dilution was 8.5% and potential overhang was 9.9%. If the 2019
plan is approved, potential dilution will be 8.5% and potential overhang will be 17.9%.

Summary of the 2019 Plan

The major features of the 2019 plan are summarized below. The summary is qualified in its entirety by
reference to the full text of the 2019 plan, a copy of which may be obtained from us. A copy of the 2019
plan also has been filed electronically with the Securities and Exchange Commission, or SEC, as an
appendix to this proxy statement, and is available through the SEC’s website at https://www.sec.gov.

Purpose. The purpose of the 2019 plan is to advance the interests of our company and its stockholders by
enabling us to attract and retain qualified individuals through opportunities for equity participation in our
company and to reward those individuals who contribute to the achievement of our economic objectives.

Eligibility. All employees (including officers and directors who are also employees), non-employee
directors, consultants, advisors and independent contractors of Northern Technologies International
Corporation or any subsidiary will be eligible to receive incentive awards under the 2019 plan. As of
November 15, 2018, there were approximately 75 persons who would be eligible to receive awards under
the 2019 plan. Although not necessarily indicative of future grants under the 2019 plan, 15 employees or
20% of the approximately 75 eligible recipients have been granted awards under our currently existing
2007 plan.

Shares Available for Issuance. The maximum number of shares of our common stock available for
issuance under the 2019 plan is 400,000 plus the number of shares subject to awards outstanding under
our currently existing 2007 plan as of the date of stockholder approval of the 2019 plan but only to the
extent that such outstanding awards are forfeited, expire or otherwise terminate without the issuance of
such shares. The number of shares available for issuance under the 2019 plan is subject to increase to the
extent that we issue shares or incentive awards under the 2019 plan in connection with certain merger and
acquisition transactions, or assume any plan in a merger or acquisition transaction. However, any
available shares in an assumed plan may only be utilized to the extent permitted under the Listing Rules
of the Nasdaq Stock Market.

Shares of our common stock that are issued under the 2019 plan or that are potentially issuable pursuant
to outstanding incentive awards reduce the number of shares remaining available. All shares so
subtracted from the amount available under the plan with respect to an incentive award that lapses,
expires, is forfeited or for any reason is terminated, unexercised or unvested and any shares of our
common stock that are subject to an incentive award that is settled or paid in cash or any other form other
than shares of our common stock will automatically again become available for issuance under the 2019
plan. However, any shares not issued due to the exercise of an option by a “net exercise” or the tender or
attestation as to ownership of previously acquired shares (as described below), as well as shares covered
by a stock appreciation right, to the extent exercised, and shares withheld by us to satisfy any tax
withholding obligations will not again become available for issuance under the 2019 plan. Any shares of
our common stock that we repurchase on the open market using the proceeds from the exercise of an
award under the 2019 plan will not increase the number of shares available for future grants of awards
under the 2019 plan.

Grant Limits. Under the terms of the 2019 plan:

• no more than 400,000 shares of our common stock may be issued pursuant to the exercise of

incentive stock options;

• no more than 200,000 shares of our common stock may be issued or issuable in connection with

full-value awards; and

• no more than 75,000 shares of our common stock may be granted to any non-employee director

in any one calendar year; provided that such limit will not apply to any election of a non-
employee director to receive shares of our common stock in lieu of all or a portion of any annual
Board, committee, chair or other retainer, or any meeting fees otherwise payable in cash.

All of the share limitations in the 2019 plan may be adjusted to reflect changes in our corporate structure
or shares, as described below. In addition, the limits on individual equity awards and on the number of

shares that may be issued as incentive options or other incentive awards will not apply to certain incentive
awards granted upon our assumption or substitution of like awards in any merger or acquisition.

Adjustments. In the event of any reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or
extraordinary dividend (including a spin-off) or any other similar change in our corporate structure or
shares, we must adjust:

•

the number and kind of securities available for issuance under the 2019 plan; and

in order to prevent dilution or enlargement of the rights of participants, the number, kind and,
where applicable, the exercise price of securities subject to outstanding incentive awards.

Administration. The 2019 plan will be administered by our Board of Directors or by a committee of the
Board. Any such committee will consist of at least two members of the Board, all of whom are “non-
employee directors” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended, or Exchange Act, who are “independent” as required by the listing standards of the Nasdaq
Stock Market. We expect both the Board of Directors and the Compensation Committee of the Board of
Directors to administer the 2019 plan. The Board of Directors or the committee administering the 2019
plan is referred to as the “committee.” The committee may delegate its duties, power and authority under
the 2019 plan to any of our officers to the extent consistent with applicable Delaware corporate law,
except with respect to participants subject to Section 16 of the Exchange Act.

The committee has the authority to determine all provisions of incentive awards consistent with terms of
the 2019 plan, including, the eligible recipients who will be granted one or more incentive awards under
the 2019 plan, the nature and extent of the incentive awards to be made to each participant and the form
of an incentive award agreement, the time or times when incentive awards will be granted, the duration of
each incentive award, and the restrictions and other conditions to which the payment or vesting of
incentive awards may be subject. The committee has the authority to pay the economic value of any
incentive award or settle any incentive award in the form of cash, our common stock or any combination
of both, construe and interpret the 2019 Plan and incentive awards, determine fair market value of NTIC’s
common stock, determine whether incentive awards will be adjusted for dividend equivalents and may
amend or modify the terms of outstanding incentive awards (except for any prohibited “re-pricing” of
options, discussed below) so long as the amended or modified terms are permitted under the 2019 plan
and any adversely affected participant has consented to the amendment or modification.

In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification,
stock dividend, stock split, combination of shares, rights offering, extraordinary dividend or divestiture
(including a spin off) or any other similar change in corporate structure or shares; any purchase,
acquisition, sale, disposition or write-down of a significant amount of assets or a significant business; any
change in accounting principles or practices, tax laws or other such laws or provisions affecting reported
results; any uninsured catastrophic losses or extraordinary non-recurring items as described in Accounting
Principles Board Opinion No. 30 or in management’s discussion and analysis of financial performance
appearing in our annual report to stockholders for the applicable year; or any other similar change, in each
case with respect to our company or any other entity whose performance is relevant to the grant or vesting
of an incentive award, the committee (or, if our company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) may, without the consent of any affected
participant, amend or modify the vesting criteria of any outstanding incentive award that is based in
whole or in part on the financial performance of our company (or any subsidiary or division or other
subunit thereof) or such other entity so as equitably to reflect such event, with the desired result that the
criteria for evaluating such financial performance of our company or such other entity will be

substantially the same (in the sole discretion of the committee or the board of directors of the surviving
corporation) following such event as prior to such event; provided, however, that the amended or
modified terms are permitted by the 2019 plan as then in effect.

The committee may, in its sole discretion, amend the terms of the 2019 plan or incentive awards with
respect to participants resident outside of the United States or employed by a non-U.S. subsidiary in order
to comply with local legal requirements, to otherwise protect our or subsidiary’s interests, or to meet
objectives of the 2019 plan, and may, where appropriate, establish one or more sub-plans for the purposes
of qualifying for preferred tax treatment under foreign tax laws. This authority does not, however, permit
the committee to take any action:

•

to reserve shares or grant incentive awards in excess of the limitations provided in the 2019 plan;

to effect any re-pricing of options, as discussed below;

to grant options or stock appreciation rights having an exercise price less than 100% of the “fair
market value” (as defined below) of one share of our common stock on the date of grant; or

for which stockholder approval would then be required pursuant to Section 422 of the Code or the
Listing Rules of the Nasdaq Stock Market or other applicable market or exchange.

Except in connection with certain specified changes in our corporate structure or shares, the committee
may not, without prior approval of our stockholders, seek to effect any re-pricing of any previously
granted, “underwater” option or stock appreciation right by:

•

amending or modifying the terms of the underwater option or stock appreciation right to lower
the exercise price;

canceling the underwater option or stock appreciation right in exchange for cash, replacement
options or stock appreciation rights having a lower exercise price, or other incentive awards; or

repurchasing the underwater options and stock appreciation rights and granting new incentive
awards under the 2019 plan.

For purposes of the 2019 plan, an option or stock appreciation right is deemed to be “underwater” at any
time when the fair market value of the our common stock is less than the exercise price.

Options. The exercise price to be paid by a participant at the time an option is exercised may not be less
than 100% of the fair market value of one share of our common stock on the date of grant (or 110% of the
fair market value of one share of our common stock on the date of grant of an incentive option if the
participant owns, directly or indirectly, more than 10% of the total combined voting power of all classes
of stock of NTIC or any parent or subsidiary). However, in the event options are granted as a result of
our assumption or substitution of options in a merger or acquisition, the exercise price will be the price
determined by the committee pursuant to the conversion terms applicable to the transaction. At any time
while the our common stock is listed on the Nasdaq Stock Market, “fair market value” under the 2019
plan means the mean between the reported high and low sale price of a share at the end of the regular
trading session as reported by the Nasdaq Global Market as of the date in question (or, if no shares were
traded on such date, the next preceding day on which there was such a trade). As of November 15, 2018,
the closing sale price of a share of our common stock on the Nasdaq Global Market was $33.31. The total
purchase price of the shares to be purchased upon exercise of an option will be paid entirely in cash;
provided, however, that the committee may allow exercise payments to be made, in whole or in part, by

delivery of a broker exercise notice (pursuant to which a broker or dealer is irrevocably instructed to sell
enough shares or loan the optionee enough money to pay the exercise price and to remit such sums to us),
by tender or attestation as to ownership of shares of our common stock that are acceptable to the
committee, by a “net exercise” of the option or by a combination of such methods. In the case of a “net
exercise” of an option, we will not require a payment of the exercise price of the option from the
participant but will reduce the number of shares of our common stock issued upon the exercise by the
largest number of whole shares having a fair market value that does not exceed the aggregate exercise
price for the shares exercised. Any shares of our common stock tendered or covered by an attestation will
be valued at their fair market value on the exercise date.

Options may be exercised in whole or in installments, as determined by the committee, and the committee
may impose conditions or restrictions to the exercisability of an option, including that the participant
remain continuously employed by us for a certain period or that the participant or us (or any subsidiary,
division or other subunit of our company) satisfy certain specified objectives. An option may not become
exercisable, nor remain exercisable after 10 years from its date of grant (five years from its date of grant
in the case of an incentive option if the participant owns, directly or indirectly, more than 10% of the total
combined voting power of all classes of stock of our company or any parent or subsidiary).

Options may, but need not, include a provision whereby the participant may elect at any time before the
participant’s employment or service terminates to exercise the option as to any part or all of the shares
subject to the option prior to the full vesting of the option. Any unvested shares so purchased will be
subject to a repurchase option in favor of us and to any other restriction the committee determines to be
appropriate.

Stock Appreciation Rights. A stock appreciation right is the right to receive a payment from us, in the
form of shares of our common stock, cash or a combination of both, equal to the difference between the
fair market value of one or more shares of our common stock and a specified exercise price of such
shares. Stock appreciation rights will be subject to such terms and conditions, if any, consistent with the
other provisions of the plan, as may be determined by the committee. The committee will have the sole
discretion to determine the form in which payment of the economic value of stock appreciation rights will
be made to a participant (i.e., cash, our common stock or any combination thereof) or to consent to or
disapprove the election by a participant of the form of such payment.

The exercise price of a stock appreciation right will be determined by the committee, in its discretion, at
the date of grant but may not be less than 100% of the fair market value of one share of our common
stock on the date of grant, except as provided below in connection with certain “tandem” grants (as
further defined below). However, in the event that stock appreciation rights are granted as a result of our
assumption or substitution of stock appreciation rights in a merger or acquisition, the exercise price will
be the price determined by the committee pursuant to the conversion terms applicable to the transaction.

A stock appreciation right will become exercisable at such time and in such installments as may be
determined by the committee in its sole discretion at the time of grant; provided, however, that no stock
appreciation right may be exercisable after 10 years from its date of grant.

Stock appreciation rights may be granted alone or in addition to other incentive awards, or in tandem with
an option, either at the time of grant of the option or at any time thereafter during the term of the option.
A stock appreciation right granted in tandem with an option shall cover the same number of shares of our
common stock as covered by the option (or such lesser number as the committee may determine), shall be
exercisable at such time or times and only to the extent that the related option is exercisable, have the
same term as the option and will have an exercise price equal to the exercise price for the option. Upon
the exercise of a stock appreciation right granted in tandem with an option, the option shall be canceled

automatically to the extent of the number of shares covered by such exercise; conversely, upon exercise
of an option having a related stock appreciation right, the stock appreciation right will be canceled
automatically to the extent of the number of shares covered by the option exercise.

Restricted Stock Awards and Restricted Stock Units. A restricted stock award and restricted stock units
are awards of our common stock that vest at such times and in such installments as may be determined by
the committee and, until the incentive award vest, is subject to restrictions on transferability and the
possibility of forfeiture. The committee may impose such restrictions or conditions to the vesting of
restricted stock awards or restricted stock units as it deems appropriate, including that the participant
remain continuously employed by us for a certain period or that the participant or us (or any subsidiary,
division or other subunit of our company) satisfy specified objectives. To enforce the restrictions, the
committee may place a legend on the stock certificates referring to such restrictions and may take other
steps to enforce the restrictions. Restricted stock units are similar to restricted stock awards except that
no shares of our common stock are actually awarded on the grant date of the restricted stock unit and are
denominated in shares of our common stock but paid in cash, shares of our common stock or a
combination of cash and shares of our common stock.

Unless the committee determines otherwise, any dividends (including regular quarterly cash dividends) or
distributions paid with respect to shares of our common stock subject to the unvested portion of a
restricted stock award will be subject to the same restrictions as the shares to which such dividends or
distributions relate.

In the committee’s discretion, any restricted stock units awarded under the 2019 plan may carry with it a
right to dividend equivalents. Such right would entitle the participant to be credited with an amount equal
to all cash dividends paid on one share of our common stock while the restricted stock unit is outstanding.
dividend equivalents may be converted into additional restricted stock units and may be made subject to
the same conditions and restricted as the restricted stock units to which they attach. Settlement of
dividend equivalents may be made in the form of cash, in the form of shares of our common stock, or in a
combination of both. Dividend equivalents as to restricted stock units will be subject to forfeiture and
termination to the same extent as the corresponding restricted stock units as to which the dividend
equivalents relate. In no event will participants holding restricted stock units receive any dividend
equivalents on such restricted stock units until the vesting provisions of such restricted stock units lapse.
Additionally, unless the 2019 plan provides otherwise, a participant will have all voting, liquidation and
other rights with respect to shares of our common stock issued to the participant as a restricted stock
award upon the participant becoming the holder of record of such shares as if the participant were a
holder of record of shares of our unrestricted common stock. A participant will have no voting rights to
any restricted stock units granted under the 2019 plan.

Performance Award. A participant may be granted one or more performance awards under the 2019 plan,
and such performance awards will be subject to such terms and conditions, if any, consistent with the
other provisions of the 2019 plan, as may be determined by the committee in its sole discretion, including,
but not limited to, the achievement of one or more specified objectives; provided, however, that in all
cases payment of the performance award will be made within two and one-half months following the end
of the tax year during which receipt of the performance award is no longer subject to a “substantial risk of
forfeiture” within the meaning of Section 409A of the Code, except upon certain conditions.

Performance Criteria. The committee may grant incentive awards contingent upon achievement of
performance goals, including the following, without limitation: net sales; operating income; income
before income taxes; income before interest, taxes, depreciation and amortization; income before income
taxes; income before interest, taxes, depreciation and amortization and other non-cash items; net income;
net income per share (basic or diluted); profitability as measured by return ratios (including return on

assets, return on equity, return on capital, return on investment and return on sales); cash flows; market
share; cost of sales; sales, general and administrative expense, cost reduction goals; margins (including
one or more of gross, operating and net income margins); stock price; total return to stockholders;
economic value added; working capital and strategic plan development and implementation. The
committee may select one criterion or multiple criteria for measuring performance, and the measurement
may be based on NTIC, any NTIC subsidiary or NTIC’s business unit performance, either absolute or by
relative comparison to prior periods or other companies or any other external measure of the selected
criteria.

Other Stock-Based Awards. A recipient may be granted one or more other stock-based awards under the
2019 plan, and such other-stock based awards will be subject to such terms and conditions, consistent
with the other provisions of the 2019 plan, as may be determined by the committee in its sole discretion in
such amounts and subject to such terms and conditions as the committee will determine. Such other-stock
based awards may involve the transfer of actual shares of our common stock to participants as a bonus or
in lieu of obligations to pay cash or deliver other property under the 2019 plan or under other plans or
compensatory arrangements, or payment in cash or otherwise of amounts based on the value of shares of
our common stock.

Change in Control. In the event a “change in control” of our company occurs, then, if approved by the
committee in its sole discretion either at the time of the grant of the incentive award or at any time after
such grant, all options and stock appreciation rights will become immediately exercisable in full and will
remain exercisable for the remainder of their terms; all outstanding restricted stock awards will become
immediately fully vested and non-forfeitable; and any conditions to the payment of restricted stock units,
performance awards and other stock-based awards will lapse.

In addition, the committee in its sole discretion may determine that some or all participants holding
outstanding incentive awards, whether or not exercisable or vested, will be canceled and terminated and
what the participant will receive for each share of our common stock subject to such incentive award a
cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and
securities with a fair market value) equal to the difference, if any, between the consideration received by
our stockholders in respect of a share of common stock in connection with such change in control and the
purchase price per share, if any, under the incentive award, multiplied by the number of shares of our
common stock subject to such incentive award; provided, however, that if such product is zero ($0) or
less or to the extent that the incentive award is not then exercisable, the incentive award may be canceled
and terminated without payment therefor.

For purposes of the 2019 plan a “change in control” of our company occurs upon:

•

the sale, lease, exchange or other transfer of substantially all of the assets of our company (in one
transaction or in a series of related transaction) to a person or entity that is not controlled, directly
or indirectly, by our company;

a merger or consolidation to which our company is a party if our stockholders immediately prior
to effective date of such merger or consolidation do not have “beneficial ownership” (as defined
in Rule 13d-3 under the Exchange Act) immediately following the effective date of such merger
or consolidation of more than 80% of the combined voting power of the surviving corporation’s
outstanding securities ordinarily having the right to vote at elections of directors; or

a change in control of our company of a nature that would be required to be reported pursuant to
Section 13 or 15(d) of the Exchange Act, whether or not our company is then subject to such
reporting requirements, including, without limitation, such time as (i) any person becomes, after

the effective date of the 2019 plan, the “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of 40% or more of the combined voting power of our
outstanding securities ordinarily having the right to vote at elections of directors, or
(ii) individuals who constitute the Board of Directors on the effective date of the 2019 plan cease
for any reason to constitute at least a majority of the Board of Directors, provided that any person
becoming a director subsequent to the effective date of the 2019 plan whose election, or
nomination for election by our stockholders, was approved by a vote of at least a majority of the
directors comprising the Board of Directors on the effective date of the 2019 plan will, for
purposes of this clause (ii), be considered as though such persons were a member of the Board of
Directors on the effective date of the 2019 plan.

Effect of Termination of Employment or Other Services. If a participant ceases to be employed by, or
perform other services for, us, all incentive awards held by the participant will be treated as set forth
below unless otherwise expressly provided by the committee in its sole discretion in an incentive award
agreement of the terms of an individual agreement or modified by the committee in its discretion as set
forth below. Upon termination due to death, disability or retirement, all outstanding, exercisable options
and stock appreciation rights then held by the participant will remain exercisable for a period of
12 months thereafter (but in no event after the expiration date of any such option or stock appreciation
rights), all unvested restricted stock awards, all outstanding but unpaid and unvested restricted stock units,
performance awards and other stock based awards then held by the participant will be terminated and
forfeited. Upon termination for a reason, other than death, disability or retirement, which is not also for
“cause” (as defined in the 2019 plan), all outstanding options and stock appreciation rights then held by
the participant will, to the extent exercisable as of such termination, remain exercisable in full for a period
of three months after such termination (but in no event after the expiration date of any such option or
stock appreciation right). Also, upon such termination all options and stock appreciation rights that are
not exercisable; all unvested restricted stock awards; and all outstanding but unpaid and unvested
restricted stock units, performance awards and other stock based awards then held by the participant will
be terminated and forfeited.

The committee may at any time (including on or after the date of grant or following termination), in
connection with a participant’s termination, cause options or stock appreciation rights held by the
participant to terminate, become or continue to become exercisable and/or remain exercisable, and
restricted stock awards, restricted stock units, performance awards or other stock based awards then held
by the participant to, terminate, vest and/or continue to vest or become free of restrictions and conditions
to payment, as the case may be.

Forfeiture and Recoupment. If a participant is determined by the committee to have taken any action that
would constitute “cause” or an “adverse action” during or within one year after the termination of the
participant’s employment or other service with our company or a subsidiary, all rights of the participant
under the 2019 plan and any agreements evidencing an award then held by the participant will terminate
and be forfeited and the committee may require the participant to surrender and return to us any shares
received, and/or to disgorge any profits or any other economic value made or realized by the participant in
connection with any awards or any shares issued upon the exercise or vesting of any awards during or
within one year after the termination of the participant’s employment or other service. Additionally, as
applicable, we may defer the exercise of any option or stock appreciation right for a period of up to six
months after receipt of a participant’s written notice of exercise or the issuance of share certificates upon
the vesting of any incentive award for a period of up to six months after the date of such vesting in order
for the committee to make any determination as to the existence of cause or an adverse action.

“Cause,” with respect to any participant, unless otherwise stated in a participant’s employment or other
service agreement, means (i) dishonesty, fraud, misrepresentation, embezzlement or other act of

dishonesty with respect to our company or any subsidiary, (b) any unlawful or criminal activity of a
serious nature, (c) any intentional and deliberate breach of a duty or duties that, individually or in the
aggregate, are material in relation to the participant’s overall duties, or (d) any material breach of any
employment, service, confidentiality or non-compete agreement entered into with us or any of our
subsidiaries.

An “adverse action” includes any of the following actions or conduct that the committee determines to be
injurious, detrimental, prejudicial or adverse to our interests: (i) disclosing any confidential information of
our company or any subsidiary to any person not authorized to receive it; (ii) engaging, directly or
indirectly, in any commercial activity that in the judgment of the committee competes with our business
or the business of any of our subsidiaries; or (iii) interfering with our relationships or the relationships of
our subsidiaries and our and their respective employees, independent contractors, customers, prospective
customers and vendors.

In addition, if we are required to prepare an accounting restatement due to our material noncompliance, as
a result of misconduct, with any financial reporting requirement under the securities laws, then any
participant who is one of the individuals subject to automatic forfeiture under Section 304 of the
Sarbanes-Oxley Act of 2002 will reimburse us for the amount of any award received by such individual
under the plan during the 12-month period following the first public issuance or filing with the SEC, as
the case may be, of the financial document embodying such financial reporting requirement. NTIC also
may seek to recover the amount of any incentive award received as required by the provisions of the
Dodd-Frank Wall Street Reform and Consumer Protection Act or any other clawback, forfeiture or
recoupment provision required by applicable law or under the requirements of any stock exchange or
market upon which our shares of common stock are then listed or traded. In addition, all incentive awards
under the 2019 plan will be subject to forfeiture or other penalties pursuant to any clawback or forfeiture
policy of NTIC, as in effect from time to time, and such forfeiture and/or penalty conditions or provisions
as determined by the committee. NTIC adopted a clawback policy in August 2018.

Dividend Rights. In the committee’s discretion, certain incentive awards may carry with it a right to
dividend equivalents. Such right would entitle the participant to be credited with an amount equal to all
cash dividends paid on one share of our common stock while the incentive award is outstanding.
Dividend equivalents may be converted into additional restricted stock units or other incentive awards and
may be made subject to the same conditions and restricted as the restricted stock units or other incentive
awards to which they attach. Settlement of dividend equivalents may be made in the form of cash, in the
form of shares of our common stock, or in a combination of both. Dividend equivalents as to restricted
stock units or other incentive awards will be subject to forfeiture and termination to the same extent as the
corresponding restricted stock units as to which the dividend equivalents relate. In no event will dividends
be paid out on unvested awards or provided with performance awards.

Term; Termination; Amendments. Unless terminated earlier, the 2019 plan will terminate at midnight on
the day before the 10th anniversary of its approval by our stockholders. Incentive awards outstanding at
the time the 2019 plan is terminated may continue to be exercised, earned or become free of restriction,
according to their terms. The Board may suspend or terminate the 2019 plan or any portion of the plan at
any time. In addition to the committee’s authority to amend the 2019 plan with respect to participants
resident outside of the United States or employed by a non-U.S. subsidiary, the Board may amend the
2019 plan from time to time in order that incentive awards under the 2019 plan will conform to any
change in applicable laws or regulations or in any other respect that the Board may deem to be in our best
interests; provided, however, that no amendments to the 2019 plan will be effective without stockholder
approval, if it is required under Section 422 of the Code or the Listing Rules of the Nasdaq Stock Market,
or if the amendment seeks to increase the number of shares reserved for issuance under the 2019 plan
(other than as a result of a permitted adjustment upon certain corporate events, such as stock splits) or to

modify the prohibitions on underwater option re-pricing discussed above. Termination, suspension or
amendment of the 2019 plan will not adversely affect any outstanding incentive award without the
consent of the affected participant, except for adjustments in the event of changes in our capitalization or
a “change in control” of our company.

Transferability. In general, no right or interest in any incentive award may be assigned or transferred by a
participant, except by will or the laws of descent and distribution, or subjected to any lien or otherwise
encumbered. However, a participant is entitled to designate a beneficiary to receive an incentive award
on such participant’s death, and in the event of such participant’s death, payment of any amounts due
under the 2019 plan will be made to, and exercise of any options or stock appreciation rights may be
made by, such beneficiary. Additionally, upon a participant’s request, the committee may permit a
participant to transfer all or a portion of a non-statutory option, other than for value, to certain of the
participant’s family members or related family trusts, foundations or partnerships. Permitted transferees
of non-statutory options will remain subject to all the terms and conditions of the incentive award
applicable to the participant.

Federal Income Tax Consequences

The following is a general summary, as of the date of this proxy statement, of the federal income tax
consequences to participants and NTIC of transactions under the 2019 plan. This summary is intended
for the information of stockholders considering how to vote at the annual meeting and not as tax guidance
to participants in the 2019 plan, as the consequences may vary with the types of grants made, the identity
of the participant and the method of payment or settlement. The summary does not address the effects of
other federal taxes or taxes imposed under state, local or foreign tax laws. Participants are encouraged to
seek the advice of a qualified tax advisor regarding the tax consequences of participation in the 2019 plan.

Incentive Stock Options. With respect to incentive stock options, generally, the stock option holder is not
taxed, and we are not entitled to a deduction, on either the grant or the exercise of an incentive stock
option so long as the requirements of Section 422 of the Code continue to be met. If the stock option
holder meets the employment requirements and does not dispose of the shares of our common stock
acquired upon exercise of an incentive stock option until at least one year after date of the exercise of the
stock option and at least two years after the date the stock option was granted, gain or loss realized on sale
of the shares will be treated as long-term capital gain or loss. If the shares of our common stock are
disposed of before those periods expire, which is called a disqualifying disposition, the stock option
holder will be required to recognize ordinary income in an amount equal to the lesser of (i) the excess, if
any, of the fair market value of our common stock on the date of exercise over the exercise price, or (ii) if
the disposition is a taxable sale or exchange, the amount of gain realized. Upon a disqualifying
disposition, we will generally be entitled, in the same tax year, to a deduction equal to the amount of
ordinary income recognized by the stock option holder, assuming that a deduction is allowed under
Section 162(m) of the Code.

Non-Statutory Stock Options. The grant of a stock option that does not qualify for treatment as an
incentive stock option, which is generally referred to as a non-statutory stock option, is generally not a
taxable event for the stock option holder. Upon exercise of the stock option, the stock option holder will
generally be required to recognize ordinary income in an amount equal to the excess of the fair market
value of our common stock acquired upon exercise (determined as of the date of exercise) over the
exercise price of the stock option, and we will be entitled to a deduction in an equal amount in the same
tax year, assuming that a deduction is allowed under Section 162(m) of the Code. At the time of a
subsequent sale or disposition of shares obtained upon exercise of a non-statutory stock option, any gain
or loss will be a capital gain or loss, which will be either a long-term or short-term capital gain or loss,
depending on how long the shares have been held.

SARs. The grant of an SAR will not cause the participant to recognize ordinary income or entitle us to a
deduction for federal income tax purposes. Upon the exercise of an SAR, the participant will recognize
ordinary income in the amount of the cash or the value of shares payable to the participant (before
reduction for any withholding taxes), and we will receive a corresponding deduction in an amount equal
to the ordinary income recognized by the participant, assuming that a deduction is allowed under Section
162(m) of the Code.

Restricted Stock Awards, Restricted Stock Units and Other Stock-Based Awards. The federal income tax
consequences with respect to restricted stock awards, restricted stock units, performance awards, and
other stock-based awards depend on the facts and circumstances of each award, including, in particular,
the nature of any restrictions imposed with respect to the awards. In general, if an award of stock granted
to the participant is subject to a “substantial risk of forfeiture” (e.g., the award is conditioned upon the
future performance of substantial services by the participant) and is nontransferable, a taxable event
occurs when the risk of forfeiture ceases or the awards become transferable, whichever first occurs. At
such time, the participant will recognize ordinary income to the extent of the excess of the fair market
value of the stock on such date over the participant’s cost for such stock (if any), and the same amount is
deductible by us, assuming that a deduction is allowed under Section 162(m) of the Code. Under certain
circumstances, the participant, by making an election under Section 83(b) of the Code, can accelerate
federal income tax recognition with respect to an award of stock that is subject to a substantial risk of
forfeiture and transferability restrictions, in which event the ordinary income amount and our deduction
will be measured and timed as of the grant date of the award. If the stock award granted to the participant
is not subject to a substantial risk of forfeiture or transferability restrictions, the participant will recognize
ordinary income with respect to the award to the extent of the excess of the fair market value of the stock
at the time of grant over the participant’s cost, if any, and the same amount is deductible by us, assuming
that a deduction is allowed under Section 162(m) of the Code. If a stock unit award or other stock-based
award is granted but no stock is actually issued to the participant at the time the award is granted, the
participant will recognize ordinary income at the time the participant receives the stock free of any
substantial risk of forfeiture (or receives cash in lieu of such stock) and the amount of such income will be
equal to the fair market value of the stock at such time over the participant’s cost, if any, and the same
amount is then deductible by us, assuming that a deduction is allowed under Section 162(m) of the Code.

Annual Performance Cash Awards and Other Cash-Based Awards. Annual performance cash awards and
other cash-based awards will be taxable as ordinary income to the participant in the amount of the cash
received by the participant (before reduction for any withholding taxes), and we will receive a
corresponding deduction in an amount equal to the ordinary income recognized by the participant,
assuming that a deduction is allowed under Section 162(m) of the Code.

Withholding Obligations. We are entitled to withhold and deduct from future wages of the participant, to
make other arrangements for the collection of, or to require the recipient to pay to us, an amount
necessary for us to satisfy the recipient’s federal, state or local tax withholding obligations with respect to
awards granted under the 2019 plan. Withholding for taxes may be calculated based on the maximum
applicable tax rate for the participant’s jurisdiction or such other rate that will not trigger a negative
accounting impact on NTIC. The Compensation Committee may permit a participant to satisfy a tax
obligation by withholding shares of common stock underlying an award, tendering previously acquired
shares, delivery of a broker exercise notice or a combination of these methods.

Code Section 409A. A grant may be subject to a 20% penalty tax, in addition to ordinary income tax, at
the time the grant becomes vested, plus an interest penalty tax, if the grant constitutes deferred
compensation under Section 409A of the Code and the requirements of Section 409A of the Code are not
satisfied.

Code Section 162(m). Section 162(m) of the Code prohibits public companies for deducting more than
$1 million per year in compensation paid to an individual who is a “covered employee.” The Tax Cut and
Jobs Act, signed into law on December 22, 2017, or Tax Act, amended Section 162(m), effective for tax
years beginning after December 31, 2017, (i) to expand the definition of a “covered employee” to include
any person who was the Chief Executive Officer or the Chief Financial Officer at any time during the
year and the three most highly compensated officers (other than the Chief Executive Officer or Chief
Financial Officer) who were employed at any time during the year whether or not the compensation is
reported in the Summary Compensation Table included in our proxy statement for our Annual Meeting of
Stockholders; (ii) to treat any individual who is considered a covered employee at any time during a tax
year beginning after December 31, 2016, as remaining a covered employee permanently; and (iii) to
eliminate the performance-based compensation exception to the $1 million deduction limit.

Excise Tax on Parachute Payments. Unless otherwise provided in a separate agreement between a
participant and NTIC, if, with respect to a participant, the acceleration of the vesting of an award or the
payment of cash in exchange for all or part of an award, together with any other payments that such
participant has the right to receive from NTIC, would constitute a “parachute payment” then the payments
to such participant will be reduced to the largest amount as will result in no portion of such payments
being subject to the excise tax imposed by Section 4999 of the Code. Such reduction, however, will only
be made if the aggregate amount of the payments after such reduction exceeds the difference between the
amount of such payments absent such reduction minus the aggregate amount of the excise tax imposed
under Section 4999 of the Code attributable to any such excess parachute payments. If such provisions
are applicable and if an employee will be subject to a 20% excise tax on any “excess parachute payment”
pursuant to Section 4999 of the Code, we will be denied a deduction with respect to such excess
parachute payment pursuant to Section 280G of the Code.

New Plan Benefits

It is not presently possible to determine the benefits or amounts that will be received by or allocated to
participants under the 2019 plan or would have been received by or allocated to participants for the last
completed fiscal year if the 2019 plan had then been in effect because awards under the 2019 plan will be
made at the discretion of the committee. Further, since any automatic awards to our non-employee
directors will depend on the non-employee directors’ continued service and the Board’s discretion to vary
the type and terms of those awards in the future, it is not possible to determine the exact number of shares
of our common stock that will be subject to such awards. However, under the policy currently in effect,
each non-employee director who is expected to stand for re-election at the next Annual Meeting of
Stockholders will receive a stock option valued at $50,000 on each September 1st and our Chairman of the
Board will receive an additional stock option valued at $10,000.

Board of Directors Recommendation

The Board of Directors unanimously recommends that our stockholders vote FOR approval of the
Northern Technologies International Corporation 2019 Stock Incentive Plan.

PROPOSAL THREE—ADVISORY VOTE ON EXECUTIVE COMPENSATION
________________

Introduction

The Board of Directors is providing stockholders with an advisory vote on executive compensation
pursuant to the Dodd-Frank Wall Street Consumer Protection Act and Section 14A of the Securities
Exchange Act of 1934, as amended. This advisory vote, commonly known as a “say-on-pay” vote, is a
non-binding vote on the compensation paid to our named executive officers as set forth in the “Executive
Compensation” section of this proxy statement beginning on page 53. At the 2018 Annual Meeting of
Stockholders held on January 12, 2018, 97% of the votes cast by our stockholders were in favor of our
say-on-pay vote. The Compensation Committee generally believes that such results affirmed stockholder
support of our approach to executive compensation.

Our executive compensation program is generally designed to attract, retain, motivate and reward highly
qualified and talented executive officers. The underlying core principle of our executive compensation
program is to link pay to performance and align the interests of our executives with those of our
stockholders by providing compensation opportunities that are tied directly to the achievement of
financial and other performance goals and long-term stock price performance. The “Executive
Compensation” section of this proxy statement, which begins on page 53, describes our executive
compensation program and the executive compensation decisions made by the Compensation Committee
and Board of Directors for fiscal 2018 in more detail. Important considerations include:

• A significant portion of the compensation paid or awarded to our named executive officers in
fiscal 2018 was “performance-based” or “at-risk” compensation that is tied directly to the
achievement of financial and other performance goals or long-term stock price performance.

• Equity-based compensation granted to our named executive officers was in the form of stock

options that were subject to three-year vesting and aligns the long-term interests of our executives
with the long-term interests of our stockholders.

• Our executive officers receive only modest perquisites and have modest severance and change-in-

control arrangements.

• We recently adopted a clawback policy.

• We do not provide any tax “gross-up” payments.

We believe that our executive compensation program and related decisions link pay to performance. For
example, our fiscal 2018 total net sales increased over 30.0% to $51,424,821 during fiscal 2018 compared
to fiscal 2017, and our net income attributable to NTIC increased to $6,701,366, or $1.43 per diluted
common share, for fiscal 2017 compared to $3,422,126, or $0.75 per diluted common share, for fiscal
2017. The total compensation for our named executive officers for fiscal 2018 increased approximately
47% compared to fiscal 2017.

Accordingly, the Board of Directors recommends that our stockholders vote in favor of the say-on-pay
vote as set forth in the following resolution:

RESOLVED, that our stockholders approve, on an advisory basis, the compensation paid to our

named executive officers, as disclosed in this proxy statement.

Stockholders are not ultimately voting to approve or disapprove the recommendation of the Board of
Directors. As this is an advisory vote, the outcome of the vote is not binding on us with respect to future
executive compensation decisions, including those relating to our named executive officers, or otherwise.
The Compensation Committee and Board of Directors expect to take into account the outcome of this
advisory vote when considering future executive compensation decisions.

In accordance with the result of the advisory vote on the frequency of the say-on-pay vote, which was
conducted at our 2014 Annual Meeting of Stockholders, the Board of Directors has determined that we
will conduct an executive compensation advisory vote on an annual basis. Accordingly, after this Annual
Meeting, the next say-on-pay vote will occur at our next Annual Meeting of Stockholders anticipated to
be held in January 2020. We anticipate that the next say-on-frequency vote will also occur at our 2020
Annual Meeting of Stockholders.

Board Recommendation

The Board of Directors unanimously recommends a vote FOR approval, on an advisory basis, of the
compensation paid to our named executive officers, as disclosed in this proxy statement.

PROPOSAL FOUR—RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
_________________

Selection of Independent Registered Public Accounting Firm

The Audit Committee of the Board of Directors selects our independent registered public accounting firm.
In this regard, the Audit Committee evaluates the qualifications, performance and independence of our
independent registered public accounting firm and determines whether to re-engage our current
independent registered public accounting firm. As part of its evaluation, the Audit Committee considers,
among other factors, the quality and efficiency of the services provided by the firm, including the
performance, technical expertise, and industry knowledge of the lead audit partner and the audit team
assigned to our account; the overall strength and reputation of the firm; its global capabilities relative to
our business; and its knowledge of our operations. Upon consideration of these and other factors, the
Audit Committee has selected Baker Tilly Virchow Krause, LLP to serve as our independent registered
public accounting firm for the fiscal year ending August 31, 2019.

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. Even if the selection is ratified by our stockholders, the
Audit Committee in its discretion may change the appointment at any time during the year, if it determines
that such a change would be in the best interests of NTIC and our stockholders.

Representatives of Baker Tilly Virchow Krause, LLP will be present at the Annual Meeting to respond to
appropriate questions. They also will 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 for the
fiscal years ended August 31, 2018 and August 31, 2017.

Audit Fees(1) .........................................................
Audit-Related Fees ...............................................
Tax Fees ...............................................................
All Other Fees ......................................................

Aggregate Amount Billed by
Baker Tilly Virchow Krause, LLP ($)
Fiscal 2017

Fiscal 2018

$ 493,832
—
—
—

$ 326,404

—
—
—

(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.

Audit Committee Pre-Approval Policies and Procedures

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. The Audit Committee has not
adopted any formal pre-approval policies and procedures.

Board Recommendation

The Board of Directors unanimously recommends that 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, 2019.

PROPOSAL FIVE—RATIFICATION OF SHARE INCREASE AMENDMENT
________________

Background

At the 2018 Annual Meeting of Stockholders held on January 12, 2018, we sought stockholder approval
of an amendment to our Restated Certificate of Incorporation to increase the authorized number of shares
of our common stock from 10,000,000 shares to 15,000,000 shares (which we refer to as the “share
increase amendment”). At that meeting, the inspector of election determined that the proposal to approve
the share increase amendment received the requisite stockholder approval and we subsequently filed a
Certificate of Amendment to our Restated Certificate of Incorporation reflecting the share increase
amendment with the Secretary of State of the State of Delaware on January 16, 2018. Although we
believe that the share increase amendment from last year’s meeting was properly approved and is
effective, because the description of the authority of brokers to vote on proposals without instruction in
the proxy statement for last year’s meeting may create some uncertainty as to the effect of the vote
obtained at last year’s meeting, and out of an abundance of caution, we are asking our stockholders at the
Annual Meeting to ratify the filing and effectiveness of the Certificate of Amendment to our Restated
Certificate of Incorporation filed with the Secretary of State of the State of Delaware on January 16, 2018
pursuant to Delaware law in order to eliminate any uncertainty related to the effectiveness of the share
increase amendment.

If the ratification proposal is approved by our stockholders and becomes effective, the ratification will be
retroactive to January 16, 2018, the time of the filing of the share increase amendment with the Secretary
of State of State of Delaware. If the ratification proposal is not approved by the requisite vote of
stockholders, we will not be able to file the Certificate of Validation referred to below with the Delaware
Secretary of State and the share increase amendment will not become effective in accordance with
Section 204 of the DGCL. The failure to approve the ratification proposal may leave us exposed to
potential claims that the vote on the share increase amendment did not receive requisite stockholder
approval; and, therefore, the share increase amendment was not validly adopted. This could inhibit our
ability to issue shares of our common stock in the future.

Board of Directors Approved the Ratification of the Share Increase Amendment

Section 204 of the DGCL, which became effective on April 1, 2014, and which was recently amended
effective August 1, 2018, allows a Delaware corporation, by following specified procedures, to validate a
potentially defective corporate act retroactive to the date the defective corporate act was originally taken.

NTIC does not believe that the filing or effectiveness of the share increase amendment is invalid or
ineffective. However, on November 16, 2018, the Board of Directors determined that it would be
advisable and in the best interests of the company and our stockholders to ratify the filing and
effectiveness of the share increase amendment pursuant to DGCL Section 204 in an abundance of caution
and in order to eliminate any uncertainty related to its effectiveness. The Board of Directors adopted the
resolutions (attached hereto as Appendix A and incorporated herein by reference) identifying the filing
and effectiveness of the share increase amendment as a potentially defective corporate act under Section
204 of the DGCL, identifying January 16, 2018 (the date the share increase amendment was filed with the
Secretary of State of the State of Delaware) as the date of the potentially defective corporate act,
identifying the nature of the potential failure of authorization in respect thereof (the potential failure of the
proposal to approve the share increase amendment to have received the requisite vote of the stockholders
in accordance with Section 242 of the DGCL), and approving the ratification proposal. The Board of
Directors further recommended that our stockholders approve the ratification proposal, and directed that
the ratification proposal be submitted to our stockholders for approval.

The Board of Directors further directed that notice of the Annual Meeting be provided (i) to all
stockholders of NTIC as of the record date for the Annual Meeting, and (ii) as required by Section 204 of
the DGCL, to all NTIC stockholders of record as of November 17, 2017, which was the record date for
our Annual Meeting of Stockholders held last year, other than those whose identities or addresses could
not be determined from our corporate records. The Board of Directors directed that the notice of meeting
contain the statement required by Section 204 of the DGCL that any claim that the filing and
effectiveness of the share increase amendment to be ratified pursuant to the ratification proposal is void or
voidable due to the failure to receive the requisite stockholder vote for its adoption, or that the Delaware
Court of Chancery should declare in its discretion that the ratification proposal not be effective or be
effective only on certain conditions, must be brought within 120 days from the validation effective time,
which, in the case of the ratification of the share increase amendment, will be the time at which a
Certificate of Validation filed in respect of the ratification proposal becomes effective under the DGCL.

Filing of a Certificate of Validation

Upon the receipt of the required vote of the stockholders to approve the ratification proposal, we will file
a Certificate of Validation with respect to the share increase amendment with the Secretary of State of the
State of Delaware. The time that the filing of this Certificate of Validation with the Secretary of State of
the State of Delaware becomes effective in accordance with the DGCL will be the validation effective
time of the ratification proposal within the meaning of Section 204 of the DGCL.

Effect of Ratification Retroactive Validation of the Share Increase Amendment

When the Certificate of Validation becomes effective in accordance with the DGCL, the share increase
amendment will no longer be deemed void or voidable as a result of the potential failure of authorization
described above, and the effect of the ratification will be retroactive to January 16, 2018, which was the
time of the original filing of the share increase amendment with the Secretary of State of the State of
Delaware.

Purpose and Effect of Share Increase Amendment

The share increase amendment amended our Restated Certificate of Incorporation to increase the
authorized number of shares of our common stock from 10,000,000 shares to 15,000,000 shares. Our
Board of Directors believes that the additional authorized shares of common stock provided in the share
increase amendment will provide us with the necessary flexibility to issue shares in the future for various
corporate purposes and enable us to take timely advantage of market conditions and opportunities without
the delay and expense associated with convening a special stockholders’ meeting for such purpose, except
as otherwise required by law and the rules of the Nasdaq Stock Market. These corporate purposes,
include, but are not limited to, future stock splits and stock dividends; capital-raising or financing
transactions; potential strategic transactions, including mergers, acquisitions, and other business
combinations; grants and awards under equity compensation plans; and other general corporate purpose
transactions.

In the past, we have used authorized but unissued shares in connection with equity financings and for
issuance pursuant to equity compensation plans. Although the Board of Directors has discussed from
time to time a possible stock split effected in the form of a share dividend, the Board of Directors has not
approved such a split. The increase in the number of authorized shares reflected in the share increase
amendment will allow for a sufficient authorized but unissued share amount to accommodate a future
stock split effected in the form of a share dividend if the Board of Directors determines to proceed with
such a split. Other than shares of our common stock that have been reserved for future issuance under our
equity compensation plans and these discussions regarding a possible future stock split effected in the

form of a share dividend, we currently do not have any plans, commitments, arrangements,
understandings or agreements to issue any currently authorized and unissued shares of our common stock,
or any of the additional shares of common stock authorized by the share increase amendment.

All of the additional shares resulting from the increase in our authorized common stock as reflected by the
share increase amendment are of the same class with the same dividend, voting, liquidation and similar
rights as the shares of common stock presently outstanding. The shares are unreserved and available for
issuance. No further authorization for the issuance of common stock by stockholder vote is required
under our existing Restated Certificate of Incorporation, and none would be required prior to the issuance
of the additional shares of common stock by NTIC. Stockholders have no preemptive rights to acquire
any shares issued by NTIC under its existing Restated Certificate of Incorporation, and stockholders
would not acquire any such rights with respect to any additional shares under the share increase
amendment.

Time Limitations on Legal Challenges to the Ratification of the Share Increase Amendment

If the ratification proposal becomes effective, under the DGCL, any claim that the share increase
amendment ratified pursuant to the ratification proposal is void or voidable due to the failure to receive
the requisite stockholder vote for its adoption, or that the Delaware Court of Chancery should declare in
its discretion that the ratification proposal not be effective or be effective only on certain conditions, must
be brought within 120 days from the time that the filing of the Certificate of Validation with the Secretary
of State of the State of Delaware becomes effective in accordance with the DGCL.

Consequences if the Ratification Proposal is Not Approved by the Stockholders

If the ratification proposal is not approved by the requisite vote of our stockholders, we will not be able to
file the Certificate of Validation in order to ratify the filing and effectiveness of the share increase
amendment pursuant to Section 204 of the DGCL. The failure to ratify the filing and effectiveness of the
share increase amendment under Section 204 may leave us exposed to claims that (i) the vote on the share
increase amendment was not correctly tabulated; (ii) that the share increase amendment therefore was not
validly adopted, and (iii) as a result, we do not have sufficient authorized but unissued shares of common
stock to permit certain future stock splits and stock dividends; capital-raising or financing transactions;
potential strategic transactions, including mergers, acquisitions, and other business combinations; grants
and awards under equity compensation plans; and other general corporate purpose transactions. An
inability to issue our common stock in the future could expose us to significant claims and have a material
adverse effect on our ability to operate our business.

Board Recommendation

The Board of Directors unanimously recommends a vote FOR the approval of the ratification proposal.

STOCK OWNERSHIP
________________

Beneficial Ownership of Significant Stockholders and Management

The following table sets forth information known to us with respect to the beneficial ownership of our
common stock as of November 15, 2018, the record date for the Annual Meeting, 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 included later in this
proxy statement under “Executive Compensation” and
all of our current directors and executive officers as a group.

The number of shares beneficially owned by a person includes shares subject to options held by that
person that are currently exercisable or that become exercisable within 60 days of November 15, 2018.
Percentage calculations assume, for each person and group, that all shares that may be acquired by such
person or group pursuant to options currently exercisable or that become exercisable within 60 days of
November 15, 2018 are outstanding for the purpose of computing the percentage of common stock owned
by such person or group. However, such unissued shares of common stock described above are not
deemed to be outstanding for calculating the percentage of common stock owned by any other person.

Except as otherwise indicated, the persons in the table below have sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by them, subject to community
property laws where applicable and subject to the information contained in the notes to the table.

Amount and
Nature of
Beneficial
Ownership(2)

20,500
36,666
4,000
682,775
39,500
45,300
23,600
99,735

Percent of
Class

*
*
*

14.9%

*
1.0%
*
2.2%

952,076

20.1%

601,667

13.2%

262,215

5.8%

Title of Class

Name and Address of Beneficial Owner(1)

Directors and Officers:
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock
Common Stock

Barbara D. Colwell
Soo-Keong Koh
Sunggyu Lee, Ph.D.
G. Patrick Lynch(3)
Ramani Narayan, Ph.D.
Richard J. Nigon
Konstantin von Falkenhausen
Matthew C. Wolsfeld
All current directors and executive officers as a
group (8 persons)(4)

Significant Beneficial Owners:
Common Stock

Common Stock

Inter Alia Holding Company(5)
23205 Mercantile Road
Beachwood, Ohio 44122
Perritt Capital Management, Inc. and
Perritt Funds, Inc.(6)
300 South Wacker Drive, Suite 2880
Chicago, Illinois 60606

__________________________
* Represents beneficial ownership of less than one percent.

(1)

(2)

(3)

(4)

(5)

(6)

The business address for each of the directors and officers of NTIC is c/o Northern Technologies
International Corporation, 4201 Woodland Road, Circle Pines, Minnesota 55014.

Includes for the persons listed below the following shares of common stock subject to options held by such
persons that are currently exercisable or become exercisable within 60 days of November 15, 2018:

Name
Directors
Barbara D. Colwell .........................................................................
Soo-Keong Koh .............................................................................
Sunggyu Lee, Ph.D. .......................................................................
G. Patrick Lynch ...................................................................................
Ramani Narayan, Ph.D..........................................................................
Richard J. Nigon ...................................................................................
Konstantin von Falkenhausen ...............................................................
Named Executive Officers
G. Patrick Lynch ......................................................................................
Matthew C. Wolsfeld ...............................................................................
All current directors and executive officers as a group (8 persons) ........

Shares of Common Stock
Underlying
Stock Options

19,000
20,000
4,000
44,056
20,000
30,000
23,000

44,056
32,564
192,620

Includes 601,667 shares held by Inter Alia Holding Company. See note (5) below.

The amount beneficially owned by all current directors and executive officers as a group includes 601,667
shares held of record by Inter Alia Holding Company. See notes (3) above and (5) below.

According to a Schedule 13D/A filed with the SEC on December 2, 2011, Inter Alia Holding Company is
an entity of which G. Patrick Lynch, our President and Chief Executive Officer, is a 47% stockholder. G.
Patrick Lynch shares equal voting and dispositive power over such shares with two other members of his
family. Inter Alia Holding Company’s address is 23205 Mercantile Road, Beachwood, Ohio 44122.

According to a Schedule 13G/A filed with the SEC on February 5, 2018, Perritt Capital Management, Inc.,
in its capacity as investment adviser, may be deemed the beneficial owner of 262,215 shares, which are
owned by investment advisory client(s). Perritt Capital Management, Inc. has sole voting power and sole
dispositive power over 24,215 shares and has shared voting power and shared dispositive power over
238,000 shares with Perritt Funds, Inc., an investment company.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors, executive officers and all persons who
beneficially own more than 10% of the outstanding shares of our common stock to file with the SEC
initial reports of ownership and reports of changes in ownership of our common stock. Executive
officers, directors and greater than 10% 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, 2018, none of our directors or executive officers or beneficial owners of greater than
10% of our common stock failed to file on a timely basis the forms required by Section 16 of the
Exchange Act.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table summarizes outstanding options and other awards under NTIC’s equity compensation
plans as of August 31, 2018. NTIC’s equity compensation plans as of August 31, 2018 were the Northern
Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan and the
Northern Technologies International Corporation Employee Stock Purchase Plan. Except for automatic
annual grants of $50,000 in options to purchase shares of NTIC common stock to NTIC’s directors in
consideration for their services as directors of NTIC, an automatic annual grant of $10,000 in options to
purchase shares of NTIC common stock to NTIC’s Chairman of the Board in consideration for his
services as Chairman on the first day of each fiscal year and automatic initial pro rata grants of $50,000 in
options to purchase shares of NTIC common stock to NTIC’s new directors in consideration for their
services as directors of NTIC, options and other awards granted in the future under the Northern
Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan or the new
Northern Technologies International Corporation 2019 Stock Incentive Plan, if approved by NTIC’s
stockholders, are within the discretion of the Board of Directors and the Compensation Committee of the
Board of Directors and therefore cannot be ascertained at this time.

(a)
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights

(b)
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights

(c)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(excluding securities
reflected in column (a))

348,703(1)(2)

—
348,703(1)(2)

$14.55

—
$14.55

188,044(3)

—
188,044 (3)

Plan Category
Equity compensation plans approved
by security holders

Equity compensation plans not
approved by security holders

Total
__________________________
(1)

Amount includes shares of NTIC common stock issuable upon the exercise of stock options outstanding as
of August 31, 2018 under the Northern Technologies International Corporation Amended and Restated
2007 Stock Incentive Plan.

(2)

(3)

Excludes employee stock purchase rights accruing under the Northern Technologies International
Corporation Employee Stock Purchase Plan. Under such plan, each eligible employee may purchase up to
2,000 shares of NTIC common stock at semi-annual intervals on February 28th or 29th (as the case may be)
and August 31st each year at a purchase price per share equal to 90% of the lower of (i) the closing sales
price per share of NTIC common stock on the first day of the offering period or (ii) the closing sales price
per share of NTIC common stock on the last day of the offering period.

Amount includes 140,417 shares remaining available at August 31, 2018 for future issuance under
Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan and
47,627 shares available at August 31, 2018 for future issuance under the Northern Technologies
International Corporation Employee Stock Purchase Plan.

CORPORATE GOVERNANCE
________________

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. 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 independent directors;
• Meeting attendance by directors and non-directors;
• Appropriate information and access;
• Ability to retain advisors;
• Conflicts of interest and director independence;
• Board interaction with corporate constituencies;
• Change of principal occupation and board memberships;
• Retirement and term limits;
• Retirement and resignation policy;
• 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;
• Related person transactions; and
• Communications with directors.

Board Leadership Structure

Under our Corporate Governance Guidelines, the office of Chairman of the Board and Chief Executive
Officer may or may not be held by one person. The Board of Directors believes it is best not to have a
fixed policy on this issue and that it should be free to make this determination based on what it believes is
best under the circumstances. However, the Board of Directors strongly endorses the concept of an
independent director being in a position of leadership. Under our Corporate Governance Guidelines, if at
any time the Chief Executive Officer and Chairman of the Board positions are held by the same person,
the Board of Directors will elect an independent director as a lead independent director.

G. Patrick Lynch currently serves as our President and Chief Executive Officer and Richard J. Nigon
serves as our non-executive Chairman of the Board. Because the Chief Executive Officer and Chairman
of the Board positions currently are not held by the same person, we do not have a lead independent
director. We currently believe this leadership structure is in the best interests of our company and our
stockholders and strikes the appropriate balance between the Chief Executive Officer’s responsibility for
the strategic direction, day-to-day-leadership and performance of our company and the Chairman’s

responsibility to provide oversight of our company’s corporate governance and guidance to our Chief
Executive Officer and to set the agenda for and preside over Board of Directors meetings.

At each regular Board of Directors meeting, our independent directors meet in executive session with no
company management present during a portion of the meeting. After each such executive session, our
Chairman of the Board provides our Chief Executive Officer with any actionable feedback from our
independent directors.

Director Independence

The Board of Directors has affirmatively determined that five of NTIC’s current seven directors are
“independent directors” under the Listing Rules of the Nasdaq Stock Market: Barbara D. Colwell, Soo-
Keong Koh, Sunggyu Lee, Ph.D., Richard J. Nigon and Konstantin von Falkenhausen.

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.

Board Meetings and Attendance

The Board of Directors met four times during the fiscal year ended August 31, 2018. Each of the
directors attended at least 75% 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 the director 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 from time to time may 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.

The following table summarizes the current membership of each of our three Board committees.

Director
Barbara D. Colwell
Soo-Keong Koh
Sunggyu Lee, Ph.D.
G. Patrick Lynch
Ramani Narayan, Ph.D.
Richard J. Nigon
Konstantin von Falkenhausen

Audit
√
—
—
—
—
Chair
√

Compensation
—
—
√
—
—
√
Chair

Nominating and
Corporate Governance
√
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 our 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 our 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 our employees of concerns regarding questionable accounting or auditing matters;
and

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

The Audit Committee has the authority to engage the services of outside experts and advisors as it deems
necessary or appropriate to carry out its duties and responsibilities.

Composition. The current members of the Audit Committee are Ms. Colwell, Mr. Nigon and Mr. von
Falkenhausen. Mr. Nigon is the chair of the Audit Committee.

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. Nigon 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 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. The Audit Committee met four times during fiscal 2018 and once in executive session with
Baker Tilly Virchow Krause, LLP, our independent registered public accounting firm.

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, 2018.

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, 2018 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
under Public Company Accounting Oversight Board standards. 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 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, 2018 be included in its Annual
Report on Form 10-K for the fiscal year ended August 31, 2018 for filing with the Securities and
Exchange Commission.

This report is dated as of November 7, 2018.

Audit Committee

Richard J. Nigon, Chair
Barbara D. Colwell
Konstantin von Falkenhausen

Other Information. Additional information regarding the Audit Committee and our independent
registered public accounting firm is disclosed under the “Proposal Four—Ratification of Selection of
Independent Registered Public Accounting Firm” section of this proxy statement.

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. The Compensation Committee’s primary
responsibilities include:

•

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

establishing, and from time to time, reviewing and revising, corporate goals and objectives with
respect to compensation for our executive officers and establishing and leading a process for the
full Board of Directors to evaluate the performance of our executive officers in light of those
goals and objectives;

administering our equity compensation plans and recommending 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;

reviewing our policies with respect to employee benefit plans; and

establishing, and from time to time, reviewing and revising processes and procedures for the
consideration and determination of executive compensation.

The Compensation Committee has the authority to engage the services of outside experts and advisors as
it deems necessary or appropriate to carry out its duties and responsibilities, and prior to doing so,
assesses the independence of such experts and advisors from management.

Composition. The current members of the Compensation Committee are Dr. Lee, Mr. Nigon and Mr. von
Falkenhausen. Mr. von Falkenhausen is the current Chair of the Compensation Committee. 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, a “non-employee director”
within the meaning of Rule 16b-3 under the Exchange Act, and otherwise independent under the rules and
regulations of the SEC.

Processes and Procedures for Consideration and Determination of Executive Compensation. As
described in more detail above under “—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 and our Chief Financial Officer assist 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 and our Chief Financial Officer, but also
considers other factors, such as its own views as to the form and amount 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. Neither management nor the Compensation Committee engaged a compensation
consultant.

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 are made
by the Compensation Committee, without the presence of any 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 three times during fiscal 2018.

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.

The Nominating and Corporate Governance Committee has the authority to engage the services of outside
experts and advisors as it deems necessary or appropriate to carry out its duties and responsibilities.

Composition. The current members of the Nominating and Corporate Governance Committee are
Mr. Koh, Ms. Colwell and Mr. Nigon. Mr. Koh is the 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.

Processes and Procedures for Consideration and Determination of Director Compensation. As
mentioned above under “—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 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 and other
compensation 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. The Nominating and Corporate Governance Committee met twice during fiscal 2018.

Director Nominations Process

Pursuant to a Director Nominations Process adopted by the Board of Directors, 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 continues to make important contributions to the Board, and there are no special,
countervailing considerations against re-nomination of the director.

Pursuant to a Director Nominations Process adopted by the Board of Directors, 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 of Directors and our senior management and advisors to our company.
In addition, from time to time, if appropriate, the Nominating and Corporate Governance Committee may
engage a search firm to assist it in identifying and evaluating 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 our 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 our stockholders. For more information, see the information set
forth under “Stockholder Proposals and Director Nominations for the 2020 Annual Meeting of
Stockholders ─ Director Nominations for 2020 Annual Meeting.” 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 our company and the Board of
Directors. 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 SEC; whether the candidate is “financially literate” 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 “financially sophisticated” under the Listing Rules of the Nasdaq Stock
Market and an “audit committee financial expert” under the federal securities laws and the rules and
regulations of the SEC; the needs of our company 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 our 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 our company; 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.

We do not have a formal stand-alone diversity policy in considering whether to recommend any director
nominee, including candidates recommended by stockholders. As discussed above, the Nominating and
Corporate Governance Committee will consider the factors described above, including the candidate’s
diversity of experiences, expertise and background. The Nominating and Corporate Governance
Committee seeks nominees with a broad diversity of experience, expertise and backgrounds. The
Nominating and Corporate Governance Committee does not assign specific weights to particular criteria
and no particular criterion is necessarily applicable to all prospective nominees. The Board of Directors
believes that the backgrounds and qualifications of directors, considered as a group, should provide a
significant mix of experience, knowledge and abilities that will allow the Board of Directors to fulfill its
responsibilities. While the Nominating and Corporate Governance Committee focuses on obtaining a
diversity of experiences, expertise and background on the Board of Directors rather than a diversity of
personal characteristics, it recognizes the desirability of racial, ethnic, gender, age and other personal
diversity and considers it an additional benefit when a new director can also increase the personal
diversity of the Board of Directors as a whole. The Nominating and Corporate Governance Committee
evaluates its effectiveness in achieving diversity in a broad sense on the Board of Directors through its
annual review of Board member composition prior to recommending nominees for election each year.

Board Oversight of Risk

The Board of Directors as a whole has responsibility for risk oversight, with more in-depth reviews of
certain areas of risk being conducted by the relevant Board committees that report on their deliberations
to the full Board of Directors. The oversight responsibility of the Board and its committees is enabled by
management reporting processes that are designed to provide information to the Board about the
identification, assessment and management of critical risks and management’s risk mitigation strategies.
The areas of risk that we focus on include operational, financial (accounting, credit, liquidity and tax),
legal, compensation, competitive, health, safety, environmental, economic, political and reputational
risks.

The standing committees of the Board of Directors oversee risks associated with their respective principal
areas of focus. The Audit Committee’s role includes a particular focus on the qualitative aspects of
financial reporting, on our processes for the management of business and financial risk, our financial
reporting obligations and for compliance with significant applicable legal, ethical and regulatory
requirements. The Audit Committee, along with management, is also responsible for developing and
participating in a process for review of important financial and operating topics that present potential
significant risk to our company. The Compensation Committee is responsible for overseeing risks and
exposures associated with our executive compensation programs and arrangements and management
succession planning. The Nominating and Corporate Governance Committee oversees risks relating to
our corporate governance matters, director compensation programs and director succession planning.

We recognize that a fundamental part of risk management is understanding not only the risks a company
faces and what steps management is taking to manage those risks, but also understanding what level of
risk is appropriate for the company. The involvement of the full Board of Directors each year in
establishing our key corporate business strategies and annual fiscal budget is a key part of the Board’s
assessment of management’s appetite for risk and also a determination of what constitutes an appropriate
level of risk for our company.

We believe our current Board leadership structure is appropriate and helps ensure proper risk oversight
for our company for a number of reasons, including: (1) general risk oversight by the full Board of
Directors in connection with its role in reviewing our key business strategies and monitoring on an on-
going basis the implementation of our key business strategies; (2) more detailed oversight by our standing
Board committees that are currently comprised of and chaired by our independent directors, and (3) the
focus of our Chairman of the Board on allocating appropriate Board agenda time for discussion regarding
the implementation of our key business strategies and specifically risk management.

Code of Ethics

The Board of Directors has adopted a Code of Ethics, which applies to all of our directors, executive
officers, including our Chief Executive Officer and Chief Financial Officer, and other employees, and
meets the requirements of the SEC and the Nasdaq Stock Market. A copy of our Code of Ethics 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

Although a regular Board of Directors meeting is generally held on the day of each annual meeting of
stockholders, this meeting is typically held by telephone. It is the policy of the Board of Directors that if
a regular in-person Board of Directors meeting occurs on the day of the annual meeting of stockholders,
directors standing for re-election should attend the annual meeting of stockholders, if their schedules
permit. Since a telephonic Board meeting was held on the day of last year’s Annual Meeting of
Stockholders, the only directors who attended the meeting were Mr. Nigon and Mr. Lynch.

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 our employees, on a confidential and anonymous basis, of concerns regarding questionable
accounting or auditing matters. Our 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 or any one particular director by sending correspondence,
addressed to NTIC’s Corporate Secretary, Northern Technologies International Corporation, 4201
Woodland Road, Circle Pines, MN 55014 with an instruction to forward the communication to the Board
or one or more particular directors. NTIC’s Corporate Secretary will promptly forward all such
stockholder communications to the Board or the one or more particular directors, with the exception of
any advertisements, solicitations for periodical or other subscriptions and other similar communications.

Compensation Committee Interlocks and Insider Participation

No member of the Compensation Committee has served as one of our officers or employees at any time.
Except as otherwise disclosed in this proxy statement, no member of the Compensation Committee has
had any relationship with NTIC requiring disclosure under Item 404 of Regulation S-K under the
Exchange Act. None of our executive officers has served as a director, or member of the compensation
committee (or other committee serving an equivalent function), of an organization that has an executive
officer also serving as a member of our Board of Directors or Compensation Committee.

Summary of Cash and Other Compensation

DIRECTOR COMPENSATION
________________

The table below provides summary information concerning the compensation of each individual who
served as a director of our company during the fiscal year ended August 31, 2018, other than G. Patrick
Lynch, our President and Chief Executive Officer, who was not compensated separately for serving on
the Board of Directors during fiscal 2018. His compensation during fiscal 2018 for serving as an
executive officer of our company is set forth under “Executive Compensation” included elsewhere in this
proxy statement.

DIRECTOR COMPENSATION – FISCAL 2018

Name
Barbara D. Colwell .....................
Soo-Keong Koh ..........................
Sunggyu Lee, Ph.D. ....................
Ramani Narayan, Ph.D. ..............
Richard J. Nigon .........................
Konstantin von Falkenhausen .....
__________________________
(1)

Fees Earned or
Paid in Cash ($)
$ 32,750
25,750
24,750
24,750
48,750
32,750

Option
Awards ($)(1)(2)
$ 31,000
31,000
0
31,000
46,500
31,000

All Other

Compensation ($)(3) Total ($)

$ —
—
—
144,000
—
—

$ 63,750
56,750
24,750
199,750
95,250
63,750

The amounts in this column do not reflect compensation actually received by the directors nor do they
reflect the actual value that will be recognized by the directors. Instead, the amounts reflect the grant date
fair value for option grants made by us in fiscal 2018, as calculated in accordance with Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718.

On September 1, 2017, each then current director, other than Dr. Lee and Mr. Lynch, received a stock
option to purchase 4,000 shares of our common stock at an exercise price of $18.35 per share granted under
the Northern Technologies International Corporation Amended and Restated 2007 Stock Incentive Plan, the
material terms of which are described in more detail under “Executive Compensation—Stock Incentive
Plan.” These options vested in full on September 1, 2018 and will expire on August 31, 2027 or earlier in
the case of a director whose service as a director is terminated prior to such date. In addition, on September
1, 2017, Mr. Nigon received an additional stock option to purchase 2,000 shares of our common stock in
consideration for his service as Chairman of the Board. The terms of this stock option are identical to the
other director stock options granted on that date. See “—Non-Employee Director Compensation
Program—Stock Options.” The grant date fair value associated with these awards and as calculated in
accordance with FASB ASC Topic 718 is determined based on our Black-Scholes option pricing model.
The grant date fair value per share for the options granted on September 1, 2017 was $7.75 and was
determined using the following specific assumptions: risk free interest rate: 1.87%; expected life:
10.0 years; expected volatility: 45.9%; and expected dividend yield: 0%.

(2)

The table below provides information regarding the aggregate number of options to purchase shares of our
common stock outstanding at August 31, 2018 and held by each of the directors listed in the Director
Compensation Table. Note that because of the grant date, neither the Director Compensation Table nor the
table below reflects option grants on September 1, 2018. See “—Non-Employee Director Compensation
Program—Stock Options.”

Name
Barbara D. Colwell ..................
Soo-Keong Koh .......................
Sunggyu Lee, Ph.D. .................

Aggregate Number
Of Securities
Underlying Options

19,000
20,000
4,000

Exercisable/
Unexercisable
15,000/4,000
16,000/4,000
4,000/0

Exercise
Price(s)
$13.40 – 20.10
$13.40 – 20.10
$14.70

Expiration
Date(s)
11/18/2023 – 8/31/2027
08/31/2023 – 8/31/2027
8/31/2023

Name
Ramani Narayan, Ph.D. ...........
Richard J. Nigon ......................
Konstantin von Falkenhausen ..

Aggregate Number
Of Securities
Underlying Options

20,000
30,000
23,000

Exercisable/
Unexercisable
16,000/4,000
24,000/6,000
19,000/4,000

Exercise
Price(s)
$13.40 – 20.10
$10.25 – 20.10
$10.25 – 20.10

Expiration
Date(s)
08/31/2023 – 8/31/2027
08/31/2023 – 8/31/2027
11/15/2022 – 8/31/2027

(3)

We do not provide perquisites or other personal benefits to our directors. The amounts reflected for
Dr. Narayan reflects consulting fees paid during the fiscal year ended August 31, 2018 as described in more
detail below under “—Consulting Agreement.”

Non-Employee Director Compensation Program

Overview. Our non-employee directors for purposes of our director compensation program currently
consist of Barbara D. Colwell, Soo-Keong Koh, Sunggyu Lee, Ph.D., Ramani Narayan, Ph.D., Richard J.
Nigon and Konstantin von Falkenhausen.

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 “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
during fiscal 2018:

Description
Board Member ..........................................................................................................................
Chairman of the Board ..............................................................................................................
Audit Committee Chair .............................................................................................................
Audit Committee Member (including Chair) ............................................................................

Fiscal 2018
Annual Cash
Retainer
20,000
15,000
1,000
4,000

Effective September 1, 2018, we changed our non-employee director compensation program to increase
certain annual cash retainers and implement new ones. The following table sets forth the annual cash
retainers to be paid to our non-employee directors during fiscal 2019:

Description
Non-employee Board Member ..................................................................................................
Chairman of the Board ..............................................................................................................
Audit Committee Chair .............................................................................................................
Audit Committee Member (including Chair) ............................................................................
Compensation Committee Chair ...............................................................................................
Compensation Committee (including Chair) ...........................................................................
Nominating and Corporate Governance Committee Chair .......................................................
Nominating and Corporate Governance Committee (including Chair).....................................

Fiscal 2019
Annual Cash
Retainer
25,000
15,000
5,000
4,500
4,000
3,000
2,000
3,000

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.

Stock Options. During fiscal 2018, each of our non-employee directors, other than Dr. Sunggyu Lee, was
automatically granted a ten-year non-qualified option to purchase 4,000 shares of our common stock on
the first day of our fiscal year in consideration for his or her service as a director of NTIC and the
Chairman of the Board was automatically granted an additional ten-year non-qualified option to purchase
2,000 shares of our common stock in consideration for his services as Chairman.

In addition to the cash annual retainers, we also revised the stock option component of our non-employee
director compensation program effective for fiscal 2019. Pursuant to the new program, each such non-
employee director who is expected to stand for re-election at the next annual meeting of stockholders, will
be automatically granted a ten-year non-qualified option to purchase $50,000 in shares of our common
stock on the first day of each fiscal year in consideration for his or her service as a director of NTIC and
the Chairman of the Board will be automatically granted an additional ten-year non-qualified option to
purchase $10,000 in shares of our common stock on the first day of each fiscal year in consideration for
his or her services as Chairman. In addition, each new non-employee director will be automatically
granted a ten-year non-qualified option to purchase a pro rata portion of $50,000 shares of our common
stock calculated by dividing the number of months remaining in the fiscal year at the time of election or
appointment by 12 on the date the director is first elected or appointed as a director of NTIC. The number
of shares of common stock underlying the options will be determined based on the grant date fair value of
the options. Each option will become exercisable in full on the one-year anniversary of the grant date.
The exercise price of such options will be equal to the fair market value of a share of our common stock
on the grant date.

Since 2014, Dr. Sunggyu Lee has rejected option grants to directors in connection with his services as a
director of NTIC.

Under the terms of our stock incentive plan, unless otherwise provided in a separate agreement or
modified in connection with the termination of a director’s service, if a director’s service with our
company terminates for any reason, the unvested portion of options then held by the director will
immediately terminate and the director’s right to exercise the then vested portion will:

•

immediately terminate if the director’s service relationship with our company terminated for
“cause”;
continue for a period of 12 months if the director’s service relationship with our company
terminates as a result of the director’s death, disability or retirement; or
continue for a period of three months if the director’s service relationship with our company
terminates for any reason, other than for cause or upon the director’s death, disability or
retirement.

We refer you to note (1) to the Director Compensation Table for a summary of all option grants to our
non-employee directors during the fiscal year ended August 31, 2018 and note (2) 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, 2018.

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.

Consulting Agreement

NTIC, Bioplastic Polymers LLC and Dr. Narayan are parties to a consulting agreement pursuant to which
Dr. Narayan provides certain consulting services to us relating to our Natur-Tec® business and
bioplastics program. The consulting agreement sets out terms for clear separation between Dr. Narayan’s

work at Michigan State University and any related inventions and his work with us and related inventions.
In exchange for the consulting services, we pay Dr. Narayan $12,000 per month. The term of the
consulting agreement is five years, and unless earlier terminated by the parties, will terminate on January
11, 2022. Either party may terminate the consulting agreement earlier upon 30 days prior written notice.
The consulting agreement will terminate automatically upon the death of Dr. Narayan or in the event of
his disability that prevents him from performing the consulting services under the agreement. We paid
consulting fees to Bioplastic Polymers LLC which is owned by Ramani Narayan, Ph.D. in the aggregate
amount of $144,000 during the fiscal year ended August 31, 2018.

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.

EXECUTIVE COMPENSATION
________________

Compensation Review

In this Compensation Review, we describe the key principles and approaches we use to determine
elements of compensation paid to, awarded to and earned by G. Patrick Lynch, who serves as our
President and Chief Executive Officer (referred to as our “CEO”), and Matthew C. Wolsfeld, who serves
as our Chief Financial Officer (referred to as our “CFO”). Their compensation is set forth in the
Summary Compensation Table found later in this proxy statement. The CEO and CFO are the only two
individuals who have been designated by our Board of Directors as “executive officers” of NTIC within
the meaning of the federal securities laws. This Compensation Review should be read in conjunction
with the accompanying compensation tables, corresponding notes and narrative discussion, as they
provide additional information and context to our compensation disclosures. We refer to the CEO and
CFO in this proxy statement as our “named executive officers” or “executives.”

When reading this Compensation Review, please note that we are a “smaller reporting company” under
the federal securities laws and are not required to provide a “Compensation Discussion and Analysis” of
the type required by Item 402 of Regulation S-K. This Compensation Review is intended to supplement
the SEC-required disclosure, which is included below this section, and it is not a Compensation
Discussion and Analysis.

Executive Summary

One of our key executive compensation objectives is to link pay to performance by aligning the financial
interests of our executives with those of our stockholders and by emphasizing pay for performance in our
compensation programs. We believe we accomplish this objective primarily through our annual bonus
plan, which compensates executives for achieving annual corporate financial goals and individual goals.

Our fiscal 2018 total net sales increased 30% to $51,424,821 during fiscal 2018 compared to fiscal 2017,
and our net income was $6,701,366, or $1.43 per diluted common share, for fiscal 2018 compared to
$3,422,126, or $0.75 per diluted common share, for fiscal 2017. Total compensation for our named
executive officers for fiscal 2018 increased approximately 46.7% compared to fiscal 2017, primarily as a
result of increased bonuses under our annual bonus plan.

Compensation Highlights and Best Practices

Our compensation practices include many best pay practices that support our executive compensation
objectives and principles and benefit our stockholders, such as the following:

• Pay for performance. We tie compensation directly to financial performance. Our annual bonus
plan pays out only if a certain minimum adjusted earnings threshold is met and the payouts are
completely dependent upon our actual adjusted earnings.

• At-risk pay. A significant portion of executives’ compensation is “performance-based” or “at
risk.” For fiscal 2018, 53.1% of total compensation for our named executive officers was
performance-based, assuming grant date fair values for equity awards.

• Equity-based pay. A significant portion of executives’ compensation is “equity-based” and in the
form of stock-based incentive awards. For fiscal 2018, 5.2% of total compensation for our named
executive officers was equity-based, assuming grant date fair values for equity awards.

• Three-year vesting. Value received under our long-term equity-based incentive awards granted in
fiscal 2018, which was comprised solely of stock options, is tied to three-year vesting and any
value received is contingent upon our long-term stock price performance since stock options have
value only if the market value of our common stock exceeds the exercise price of the options.

• Clawback policy. Our stock incentive plan and related award agreements include a “clawback”
mechanism to recoup incentive compensation if it is determined that executives engaged in
certain conduct adverse to our interests. In addition, in August 2018, we adopted a clawback
policy pursuant to which we may recover certain incentive compensation from current or former
executive officers in the event a financial metric used to determine the vesting or payment of
incentive compensation to an executive was calculated incorrectly or the executive engaged in
egregious conduct that is substantially detrimental to our company.

• No tax gross-ups. We do not provide tax “gross-up” payments in connection with any

compensation, benefits or perquisites provided to our executives.

• Limited perquisites. We provide only limited perquisites to our executives.

• No hedging or pledging. We prohibit our executives from engaging in hedging transactions, such
as short sales, transactions in publicly traded options, such as puts, calls and other derivatives,
and pledging our common stock in any significant respect.

Say-on-Pay Vote

At our 2018 annual meeting of stockholders, our stockholders had the opportunity to provide an advisory
vote on the compensation paid to our named executive officers, or a “say-on-pay” vote. Of the votes cast
by our stockholders, 97% were in favor of our “say-on-pay” proposal. Accordingly, the Compensation
Committee generally believes that these results affirmed stockholder support of our approach to executive
compensation and did not believe it was necessary to make; and therefore, has not made, any changes to
our executive pay program solely in response to that vote. In accordance with the result of the advisory
vote on the frequency of the say-on-pay vote, which was conducted at our 2014 annual meeting of
stockholders, our board of directors has determined that we will conduct an executive compensation
advisory vote every year. Accordingly, the next say-on-pay vote will occur at our 2020 Annual Meeting
of stockholders. Our next vote on the frequency of the say-on-pay vote also will occur at our 2020 annual
meeting of stockholders.

Executive Compensation Objectives

Our guiding compensation philosophy is to maintain an executive compensation program that allows us
to attract, retain, motivate and reward qualified and talented executives that will enable us to grow our
business, achieve our annual, long-term and strategic goals and drive long-term stockholder value.

The following core principles provide a framework for our executive compensation program:

• Align interests of our executives with stockholder interests;

•

Integrate compensation with our business plans and strategic goals;

• Link amount of compensation to both company and individual performance; and

• Provide fair and competitive compensation opportunities that attract and retain executives.

How We Make Compensation Decisions

There are several elements to our executive compensation decision-making, which we believe allow us to
most effectively implement our compensation philosophy. Each of these elements and their roles are
described briefly below.

Role of the Compensation Committee. The Compensation Committee, which is comprised solely of
independent directors, oversees our executive compensation program. Within its duties, the
Compensation Committee recommends compensation for the CEO and CFO. In doing so, the
Compensation Committee:

• Approves and recommends that the Board approve the total executive compensation package for
each executive, including his base salary, annual bonus payout and annual stock option awards;

• Approves and recommends that the Board approve the terms of our annual bonus plan;

• Approves and recommends that the Board approve annual stock option grants;

• Evaluates market competitiveness of our executive compensation program; and

• Evaluates proposed significant changes to all other elements of our executive compensation

program.

In setting or recommending executive compensation for our executives, the Compensation Committee
considers the following primary factors:

•

each executive’s position within the company and the level of responsibility;

the ability of the executive to impact key business initiatives;

the executive’s individual experience and qualifications;

company performance, as compared to specific pre-established objectives;

individual performance, generally and as compared to specific pre-established objectives;

the executive’s current and historical compensation levels;

advancement potential and succession planning considerations;

an assessment of the risk that the executive would leave NTIC and the harm to our business
initiatives if the executive left;

the retention value of executive equity holdings, including outstanding stock options;

the dilutive effect on the interests of our stockholders of long-term equity-based incentive
awards; and

anticipated share-based compensation expense as determined under applicable accounting
rules.

The Compensation Committee also considers the recommendations of the CEO with respect to executive
compensation to be paid to other executives and employees. The significance of any individual factor
described above in setting executive compensation will vary from year to year and may vary among our
executives. In making its final decision regarding the form and amount of compensation to be paid to our
named executive officers (other than the CEO), the Compensation Committee considers and gives great
weight to the recommendations of the CEO recognizing that due to his reporting and otherwise close
relationship with each executive and employee, the CEO often is in a better position than the
Compensation Committee to evaluate the performance of each executive (other than himself). In making
its final decision regarding the form and amount of compensation to be paid to the CEO, the
Compensation Committee considers the results of the CEO’s self-review and his individual annual
performance review by the Compensation Committee and the recommendations of our non-employee
directors. The CEO’s compensation is approved by the Board of Directors (with the CEO abstaining),
upon recommendation of the Compensation Committee.

Role of Management. Management’s role is to provide current compensation information to the
Compensation Committee and provide analysis and recommendations on executive compensation to the
Compensation Committee based on the executive’s level of professional experience; the executive’s
duties and responsibilities; individual performance; tenure; and historic corporate performance. None of
our executives, including the CEO, provides input or recommendations with respect to his own
compensation.

Use of Market Data. Since there are no public companies of which NTIC is aware that are substantially
similar to NTIC, in terms of its business, industry and corporate profile, the Compensation Committee has
not used market data to review and evaluate executive compensation in any material respect. However,
the Compensation Committee has recently used a group of peer companies with a market capitalization
similar to NTIC and either in a similar industry or located in Minnesota.

Elements of Our Executive Compensation Program

Our executive compensation program for the fiscal year ended August 31, 2018 consisted of the following
key elements:

• Base salary;
• Annual incentive compensation;
• Long-term equity-based incentive compensation, in the form of stock options; and
• All other compensation, including health and welfare benefits, retirement plans and perquisites.

The table below provides some of the key characteristics of and purpose for each element along with
some key actions taken during fiscal 2018.

Element
Base Salary A fixed amount, paid in cash

Key Characteristics

and reviewed annually and,
if appropriate, adjusted.

Purpose

Provide a source of fixed income
that is competitive and reflects
scope and responsibility of the
position held.

Key Fiscal 2018 Actions
Our named executive officers
received 9% increases to annual
base salaries, effective as of
September 1, 2017, the first day
of fiscal 2018.

Element
Annual
Incentive

Key Characteristics

A variable, short-term
element of compensation that
is typically payable in cash
and is based on Adjusted
EBITDOI and individual
performance goals.

Purpose
Motivate and reward our executives
for achievement of annual business
results intended to drive overall
company performance.

Key Fiscal 2018 Actions