RNN Rexahn Pharmaceuticals, Inc.

o	Preliminary Proxy Statement
o	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x	Definitive Proxy Statement
o	Soliciting Material Pursuant to § 240.14a-12

REXAHN PHARMACEUTICALS, INC.

(Name of Registrant as Specified in Its Charter)

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

x	No fee required.

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

(1)	Title of each class of securities to which transaction applies:
(2)	Aggregate number of securities to which transaction applies:
(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
(4)	Proposed maximum aggregate value of transaction:
(5)	Total fee paid:
o	Fee paid previously with preliminary materials
o	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:

 

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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 

To be held June 9, 2014

 

To our shareholders:

 

Notice is hereby given that the Annual Meeting of the Shareholders (the “Annual Meeting”) of Rexahn Pharmaceuticals, Inc. (the “Company”) will be held on June 9, 2014, at 8:30 a.m. (local time), at the Company’s corporate headquarters, located at 15245 Shady Grove Road, Suite 455, Rockville, Maryland 20850 .  The Annual Meeting is called for the following purposes:

 

1.

To elect as directors the eight (8) nominees named in the accompanying proxy statement to a term of one year each, or until their successors have been elected and qualified;

 

2.

To ratify the appointment of ParenteBeard LLC as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2014;

 

3.

To hold an advisory vote on executive compensation;

 

4.

To approve an amendment to the Company’s Amended and Restated Certificate of Incorporation (in the event it is deemed by the Board of Directors to be advisable) to effect a reverse stock split of the Company’s common stock at a ratio within the range of 1:2 to 1:6, as determined by the Board of Directors, together with a corresponding proportional reduction in the number of authorized shares of the Company’s capital stock; and

 

5.

To consider and take action upon such other matters as may properly come before the Annual Meeting or any postponement or adjournment thereof.

The Board of Directors has fixed April 11, 2014 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting.  Only shareholders of record at the close of business on that date will be entitled to notice of, and to vote at, the Annual Meeting.

You are cordially invited to attend the Annual Meeting. Whether or not you expect to attend, you are respectfully requested by the Board of Directors to promptly either sign , date and return the enclosed proxy card or vote via the Internet or by telephone by following the instructions provided on the notice of internet availability of proxy materials sent to shareholders who hold their shares through a broker, bank, or other nominee . A return envelope, which requires no postage if mailed in the United States, is enclosed for your convenience.

	By Order of the Board of Directors,
	Chang H. Ahn
	Chairman of the Board of Directors
April 18, 2014

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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be Held on June 9, 2014: Copies of our Proxy Materials , consisting of the Notice of Annual Meeting, the Proxy Statement and our 2013 Annual Report are available at http://www.viewproxy.com/rexahn/2014

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REXAHN PHARMACEUTICALS, INC.

 

15245 Shady Grove Road, Suite 455

Rockville, Maryland 20850

(240) 268-5300

PROXY STATEMENT

 

ANNUAL MEETING OF SHAREHOLDERS

 

To be held June 9, 2014

 

This proxy statement (the “Proxy Statement”) is furnished in connection with the solicitation of proxies by the Board of Directors of Rexahn Pharmaceuticals, Inc., a Delaware corporation (the “Company”), for the Annual Meeting of Shareholders to be held at the Company’s corporate headquarters located at 15245 Shady Grove Road, Suite 455, Rockville, Maryland 20850 ,   on June 9, 2014, at 8:30 a.m. (local time) and for any postponement or adjournments thereof (the “Annual Meeting”), for the purposes set forth in the accompanying Notice of Annual Meeting of Shareholders.

 

As permitted by rules of the Securities and Exchange Commission (the “SEC”), we are providing access to our proxy materials (the “Proxy Materials”), consisting of the Notice of Annual Meeting, this Proxy Statement, a proxy card (the “Proxy Card”), and our 2013 Annual Report to Shareholders, by notifying shareholders who hold their shares in “street name” with a broker, bank or other nominee as of the close of business on April 11, 2014 (the “Record Date”) of their availability on the Internet.  The Notice of Internet Availability of Proxy Materials (the “Notice”), which contains instructions on how to access this Proxy Statement and our 2013 Annual Report online, is first being sent or made available to shareholders on or about April 24, 2014.  If you received a Notice by mail, you will not receive a printed copy of the Proxy Materials in the mail unless you request them.  To request a printed copy of the Proxy Materials, follow the instructions included in the Notice.  We are providing our Proxy Materials to all other shareholders by sending a printed copy of the full set of Proxy Materials by mail.

 

Upon written request, we will provide, without charge, copies of our Proxy Statement, the 2013 Annual Report, and Proxy Card to any shareholder of record, or to any shareholder who owns common stock listed in the name of a bank, broker or other nominee, at the close of business on the Record Date. Any request for a copy of the Proxy Materials should be mailed to Tae Heum Jeong, 15245 Shady Grove Road, Suite 455, Rockville, Maryland 20850.

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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND ANNUAL MEETING

 

Q:	Why are these materials being made available to me?

 

A:

If the shares you own are held in “street name” with a bank, broker or other nominee as of the Record Date, the Board of Directors of the Company is making these Proxy Materials available to you solely on the Internet, or sending printed Proxy Materials to you upon your request, beginning on or about April 24, 2014, in connection with the Board of Directors’ solicitation of proxies for the Annual Meeting.  The information included in this Proxy Statement relates to the proposals to be voted on at the Annual Meeting, the voting process and certain other required information.  The Company’s 2013 Annual Report to Shareholders is also available on the Internet and a printed copy will be mailed to shareholders upon their request.  The Company is mailing printed Proxy Materials, including the 2013 Annual Report, to all other shareholders.

 

Q:	Why did I receive a Notice of Internet Availability of Proxy Materials (the “Notice”), instead of a full set of printed Proxy Materials?

 

A:

SEC rules allow us to provide access to our Proxy Materials over the Internet instead of mailing a full set of such materials to shareholders.  We have sent the Notice only to shareholders whose shares are registered in the name of a bank, broker or other nominee as of the Record Date.  These shareholders may access our Proxy Materials over the Internet using the directions set forth in the Notice and, by following the instructions in the Notice, these shareholders may request that a full set of printed Proxy Materials be sent to them.  We have chosen to send the Notice to these shareholders, instead of automatically sending a full set of printed copies to all shareholders, because Alliance Advisors, LLC has the capability to provide this service and we can reduce the impact of printing our Proxy Materials on the environment and save on the costs of printing and mailing incurred by the Company.  We are sending printed Proxy Materials to all other shareholders.

 

Q:	How do I access the Company’s Proxy Materials online?

 

A:

The Notice provides instructions for accessing the Proxy Materials for the Annual Meeting over the Internet, and includes the Internet address where those materials are available.  The Company’s Proxy Statement for the Annual Meeting and 2013 Annual Report to Shareholders can also be viewed on the Company’s website at www.rexahn.com .

 

Q:	If I received a Notice, how do I request a paper copy of the Proxy Materials?

 

A:

With respect to the shareholders who receive a Notice, a paper copy of the Company’s Proxy Materials will be made available at no cost to you, but it will only be sent to you if you request it.  To request a paper copy of the Proxy Materials, follow the instructions on the Notice which you received.  You will be able to submit your request for copies of the Proxy Materials by sending an email to the email address set forth in the Notice, by going to the Internet address set forth in the Notice or by calling the phone number provided in the Notice.

 

Q:	What shares owned by me can be voted?

 

A:

All shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”) owned by you as of the close of business on the Record Date may be voted by you.  Each share of Common Stock is entitled to one vote.  These shares include those (1) held directly in your name as the shareholder of record (“Shareholders of Record”) , and (2) held for you as the beneficial owner through a broker, bank or other nominee.

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Q:	What is the Record Date?

 

A:	The Record Date is April 11, 2014.  Only holders of Common Stock of record as of the close of business on this date will be entitled to vote at the Annual Meeting.

 

Q:	How many shares are outstanding?

 

A:	As of the Record Date, the Company had 176,641,135 shares of Common Stock outstanding.

 

Q:	What is the difference between holding shares as a Shareholder of Record and as a beneficial owner?

 

A:	As summarized below, there are some distinctions between shares held of record and those owned beneficially.

 

Shareholder of Record

 

If your shares are registered directly in your name with the Company’s transfer agent, you are considered, with respect to those shares, the Shareholder of Record.  As the Shareholder of Record, you have the right to grant your voting proxy directly to the Company or to vote in person at the Annual Meeting.

 

Beneficial Owner

 

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name” and your broker, bank or other nominee is considered, with respect to those shares, the Shareholder of Record.  As the beneficial owner, you have the right to direct your broker, bank or nominee on how to vote and are also invited to attend the Annual Meeting.  However, since you are not the Shareholder of Record, you may not vote these shares in person at the Annual Meeting unless you receive a proxy from your broker, bank or other nominee.  Your broker, bank or other nominee has provided voting instructions for you to use.  If you wish to attend the Annual Meeting and vote in person, please contact your broker, bank or other nominee so that you can receive a legal proxy to present at the Annual Meeting.

 

Q:	What am I voting on?

 

A:

You are being asked to vote on (i) the election of the eight (8) directors named in this Proxy Statement, (ii) the ratification of ParenteBeard LLC as the independent registered public accounting firm of the Company for the fiscal year ending December 31, 2014, (iii) the approval of our executive compensation, and (iv) the approval of an amendment to the Company’s Amended and Restated Certificate of Incorporation (in the event it is deemed by the Board of Directors to be advisable) to effect a reverse stock split of the Common Stock at a ratio within the range of 1:2 to 1:6, as determined by the Board of Directors, together with a corresponding proportional reduction in the number of authorized shares of the Company’s capital stock.

 

The Company is not currently aware of any matters that will be brought before the Annual Meeting (other than procedural matters) that are not referred to in the enclosed Notice of Annual Meeting. If any other business should properly come before the Annual Meeting or any postponement or adjournment thereof, the persons named in the proxy will vote on such matters according to their best judgment. Discretionary authority to vote on such matters is conferred by such proxies upon the persons voting them.

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Q:	How do I vote?

 

A:

All shareholders may vote by completing and signing the enclosed Proxy Card and returning it promptly in the enclosed postage prepaid, addressed envelope, or at the Annual Meeting in person.  Beneficial owners whose shares are registered in the name of a broker, bank or other may vote via the Internet or by telephone by following the instructions contained on the Notice. Proxy Cards properly executed and delivered by shareholders (by mail or via the Internet) and timely received by us will be voted in accordance with the instructions contained therein. If you authorize a proxy to vote your shares over the Internet or by telephone, you should not return a Proxy Card by mail, unless you are revoking your proxy. We will pass out written ballots to anyone who is eligible to vote at the Annual Meeting. If you hold your shares through a brokerage account (“street name”), you must request a legal proxy from your broker or other nominee in order to vote at the Annual Meeting.

 

Q:	How many votes do you need to hold the Annual Meeting?

 

A:	Forty percent of the Company’s issued and outstanding shares of Common Stock as of the Record Date must be present at the Annual Meeting, either in person or by proxy, in order to hold the Annual Meeting and conduct business. This is called a quorum.

 

Q:	How many votes must the nominees have to be elected?

 

A:	In order for a director to be elected, he must receive the affirmative vote of a plurality of the shares voted. There is no cumulative voting for our directors or otherwise.

 

Q:	What are the voting requirements to approve the other proposals?

 

A:

The affirmative vote of a majority of the shares cast in person or represented by proxy at the Annual Meeting and entitled to vote on the matter is required to ratify the Company’s independent auditors and approve our executive compensation. The affirmative vote of a majority of the Company’s issued and outstanding shares is required to approve the reverse stock split and authorized share reduction.

 

Q:	Who will count the votes?

 

A:	Votes at the Annual Meeting will be counted by an inspector of election, who will be appointed by the Board of Directors or the chairman of the Annual Meeting.

 

Q:	What is the effect of not voting?

 

A:

If you are a beneficial owner of shares in street name and do not provide the broker, bank or other nominee that holds your shares with specific voting instructions then, under applicable rules, the broker, bank or other nominee that holds your shares may generally vote on “routine” matters but cannot vote on “non‑routine” matters. In the case of a non-routine item, your shares will be considered “broker non-votes” on that proposal.

 

Proposal No. 2 (ratification of the appointment of ParenteBeard LLC as the independent registered public accounting firm) and Proposal No. 4 (approval of the reverse stock split and authorized share reduction) are matters the Company believes will be considered “routine.” Proposal No. 1 (election of directors) and Proposal No. 3 (advisory approval of our executive compensation) are matters the Company believes will be considered “non-routine.”

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If you are a Shareholder of Record and you do not cast your vote, no votes will be cast on your behalf on any of the items of business at the Annual Meeting.  If you are a Shareholder of Record and you properly sign and return your Proxy Card, your shares will be voted as you direct.  If no instructions are indicated on such Proxy Card and you are a Shareholder of Record, shares represented by the proxy will be voted in the manner recommended by the Board of Directors on all matters presented in this Proxy Statement, namely “FOR” all the director nominees, “FOR” the ratification of the appointment of ParenteBeard LLC as the Company’s independent registered public accounting firm for the year ending December 31, 2014, “FOR” the approval of our executive compensation, and “FOR” the approval of the reverse stock split and authorized share reduction.

 

Q:	How are broker non-votes and abstentions treated?

 

A:

Broker non-votes and abstentions with respect to a proposal are counted as present or represented by proxy for purposes of establishing a quorum.  If a quorum is present, broker non-votes and abstentions have no effect on the outcome of the vote for directors, but will count as votes against each of the other proposals.

 

Q:	Can I revoke my proxy or change my vote after I have voted?

 

A:

You may revoke your proxy and change your vote by voting again via the Internet, by completing, signing, dating and returning a new Proxy Card or voting instruction form with a later date, or by attending the Annual Meeting and voting in person. Only your latest dated Proxy Card received at or prior to the Annual Meeting will be counted. However, your attendance at the Annual Meeting will not have the effect of revoking your proxy unless you forward written notice to the Secretary of the Company at the above stated address or you vote by ballot at the Annual Meeting.  If you are a beneficial owner, you will need to request a legal proxy from the broker, bank or other nominee and bring it with you to vote at the Annual Meeting.

 

Q:	What does it mean if I receive more than one Proxy Card?

 

A:	It means that you have multiple accounts at the transfer agent and/or with stockbrokers or other nominees.  Please sign and return all Proxy Cards to ensure that all your shares are voted.

 

Q:	What are the costs of soliciting these proxies and who will pay?

 

A:

The Company will bear the costs of preparing, printing, assembling, and mailing the Proxy Materials and of soliciting proxies. We have engaged Alliance Advisors LLC to assist us with the solicitation of proxies and expect to pay Alliance Advisors approximately $5,500, plus expenses, for their services. In addition to solicitations by mail, Alliance Advisors and our directors, officers and regular employees may solicit proxies by telephone and email. We will request brokers, custodians and fiduciaries to forward proxy soliciting material to the owners of shares of our Common Stock that they hold in their names. We will reimburse banks and brokers for their reasonable out-of-pocket expenses incurred in connection with the distribution of our proxy materials.

 

As part of their service Alliance Advisors may contact you and ask you to vote over the telephone. We ask that you please take a moment to vote your shares in order to eliminate additional solicitation costs. If you need assistance with the voting of your shares, you may contact Alliance Advisors toll free at (866) 329-8434.

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Q:	May the Company postpone or adjourn the Annual Meeting?

 

A:

If sufficient votes for approval of the matters to be considered at the Annual Meeting have not been received prior to the meeting date, the Company may postpone or adjourn the Annual Meeting in order to solicit additional votes. The enclosed Proxy Card requests authority for the proxy holders, in their discretion, to vote the shareholders’ common shares with respect to a postponement or adjournment of the Annual Meeting. At any postponed or adjourned meeting, proxies received pursuant to this Proxy Statement will be voted in the same manner described in this Proxy Statement with respect to the original meeting.

 

Q:	Do I have dissenters or appraisal rights?

 

A:	Appraisal rights are not available to shareholders in connection with the proposals brought before the Annual Meeting.

 

Q:	Where can I find the voting results of the Annual Meeting?

 

A:

The Board of Directors will announce the voting results at the Annual Meeting.  The Board of Directors will also publish the results in a current report on Form 8-K within four business days after the date of the Annual Meeting.  The Board of Directors will file that report with the SEC, and you can get a copy:

 

·

by contacting the Company’s corporate offices via phone at (240) 268-5300 or by e-mail at ir@rexahn.com; or

 

·

through the SEC’s EDGAR system at www.sec.gov or by contacting the SEC’s public reference room at 1-800-SEC-0330.

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SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS

 

The table below sets forth the beneficial ownership of our Common Stock as of April 11, 2014 by the following individuals or entities:

 

·

each person, or group of affiliated persons, known to us to beneficially own 5% or more of the outstanding Common Stock;

 

·

each director and nominee;

 

·

each named executive officer identified in the Summary Compensation Table; and

 

·

all current directors and executive officers as a group.

 

As of April 11, 2014 176,641,135 shares of our Common Stock were issued and outstanding. Unless otherwise indicated, all persons named as beneficial owners of our Common Stock have sole voting power and sole investment power with respect to the shares indicated as beneficially owned. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of Common Stock that will be subject to options held by that person that are exercisable as of April 11, 2014, or will become exercisable within 60 days thereafter, are deemed outstanding, while such shares are not deemed outstanding for purposes of computing percentage ownership of any other person. In addition, unless otherwise indicated, the address for each person named below is c/o Rexahn Pharmaceuticals, Inc., 15245 Shady Grove Road, Suite 455, Rockville, MD 20850.

 

		Shares of Rexahn Pharmaceuticals Common Stock Beneficially Owned
Name of Beneficial Owner		Number of Shares				Percentage
Directors and Executive Officers:
Chang H. Ahn			8,888,924	(1)			5.0	%
Peter Suzdak			1,200,000	(2)			*
Charles Beever			150,000	(3)			*
Kwang Soo Cheong			143,000	(4)			*
David McIntosh			290,600	(5)			*
Peter Brandt			210,000	(6)			*
Si Moon Hwang			382,198	(7)			*
Mark Carthy			-				*
Tae Heum Jeong			1,330,000	(8)			*
Rakesh Soni			567,700	(9)			*
All current executive officers and directors as a group (10 persons)			13,162,422	(10)			7.5	%

 

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*	Represents less than 1% of the issued and outstanding shares of the Company’s Common Stock as of April 11, 2014

 

(1)	Includes Dr. Ahn’s options to purchase 1,575,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 11, 2014, and 500,000 shares held by Dr. Ahn’s spouse.

 

(2)	Includes Dr. Suzdak’s options to purchase 1,200,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 11, 2014.

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(3)	Includes Mr. Beever’s options to purchase 140,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 11, 2014 .

 

(4)	Includes Dr. Cheong’s options to purchase 140,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 11, 2014.

 

(5)	Includes Mr. McIntosh’s options to purchase 285,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 11, 2014, and 5,600 shares held by Mr. McIntosh’s children.

 

(6)	Includes Mr. Brandt’s options to purchase 60,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 11, 2014.

 

(7)	Includes Mr. Hwang’s options to purchase 20,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 11, 2014, and 21,000 shares held by Mr. Hwang’s children.

 

(8)	Includes Dr. Jeong’s options to purchase 825,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 11, 2014.

 

(9)	Includes Mr. Soni’s options to purchase 565,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 11, 2014.

 

(10)	Includes options to purchase 4,810,000 shares of Common Stock that are currently exercisable or exercisable within 60 days of April 11, 2014.

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PROPOSAL 1: ELECTION OF DIRECTORS

 

Eight (8) director nominees are seeking to be elected at the Annual Meeting to serve a one-year term until the next Annual Meeting in 2015:  Chang H. Ahn, Peter Suzdak, Charles Beever, Kwang Soo Cheong, David McIntosh, Peter Brandt, Si Moon Hwang and Mark Carthy .  All of the nominees currently serve as directors of the Company.  All nominees have consented to being named in this Proxy Statement and to serve if elected.

 

The Board of Directors recommends that the nominees listed above be elected as directors of the Company.  The Company has no reason to believe that any of the nominees will not be a candidate or will be unable to serve.  However, in the event that any of the nominees should become unable or unwilling to serve as a director, the persons named in the proxy have advised that they will vote (unless authority has been withdrawn) for the election of such person or persons as shall be designated by management.

 

The following table sets forth the names, ages and positions of our nominees for directors.  All of the director nominees are currently members of our Board of Directors.

 

Name	Age	Position
Dr. Chang H. Ahn	62	Chairman of the Board of Directors and Chief Scientist
Peter Suzdak	55	Chief Executive Officer and Director
Charles Beever	61	Director
Peter Brandt	57	Director
Mark Carthy	53	Director
Kwang Soo Cheong	53	Director
Si Moon Hwang	45	Director
David McIntosh	55	Director

Chang H. Ahn .   Dr. Ahn has served as Chairman of the Board of Directors since May 2005.  On January 22, 2013, Dr. Ahn stepped down as the Company’s Chief Executive Officer and was appointed the Chief Scientist.  Dr. Ahn served as Chairman and Chief Executive Officer of Rexahn, Corp from its incorporation in March 2001 to May 2005.  From 1988 to 2001, Dr. Ahn had served as an Expert Reviewer of the anticancer and antiviral drug products at the FDA’s Center for Drug Evaluation and Research.  Prior to joining the FDA in 1988, Dr. Ahn carried out cancer research at the National Cancer Institute, as well as at Emory University’s School of Medicine.  In 2003 and 2004, Dr. Ahn organized and chaired the U.S.-Korea Bio Business and Partnership Forum, for which the State of Maryland and Montgomery County are partners.  He also served as president of the Society of Biomedical Research from 2000 to 2003.  Dr. Ahn holds a Ph.D. in pharmacology from Ohio State University.  He also holds two B.S. degrees in pharmacy from Creighton University and Seoul National University.  Dr. Ahn’s expertise in the development and evaluation of new drugs and applicable regulatory frameworks provide technical experience in the bioscience industry to the Board of Directors.

 

Peter Suzdak .  Dr. Suzdak joined the Company as Chief Executive Officer in February 2013, and has served as a director since June 2013. Dr. Suzdak has over 25 years of diverse experience, including several management positions, in the pharmaceutical industry. Most recently, Dr. Suzdak was Chief Scientific Officer of Corridor Pharmaceuticals, a company developing small molecule compounds to treat pulmonary and vascular disorders, from 2010 to 2013. Prior to Corridor Pharmaceuticals, he was co-Founder, Chief Executive Officer and Chief Scientific Officer of Cardioxyl Pharmaceuticals, a company focused on therapies for the treatment of cardiovascular disease, from 2006 to 2009. Previous to Cardioxyl Pharmaceuticals, he was President and Chief Executive Officer of Artesian Therapeutics, a company engaged in the development of small molecule therapeutics for cardiovascular diseases, from 2002 to 2005. Dr. Suzdak’s experience also includes his position as Senior Vice President of Research and Development of Guilford Pharmaceuticals, a company that developed therapeutics and diagnostics for neurological diseases and cancer, from 1995 to 2002, and as Director of Neurobiology for Novo Nordisk from 1988 to 1995. Dr. Suzdak holds a Ph.D. in pharmacology and toxicology from the University of Connecticut.  Dr. Suzdak’s will contribute his extensive pharmacology, clinical development, business development, and pharmaceutical management experience to the Board of Directors.

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Charles Beever .  Mr. Beever has served as a director since May 2006. He is a Vice President of PwC Strategy& , formerly Booz & Company and Booz Allen Hamilton, where he was a Vice President from 1993 through March 2014. Prior to being elected Vice President, he served as staff member and Engagement Manager at Booz Allen from January 1984 to October 1993.  Prior to joining Booz Allen, Mr. Beever served as Plant Production Manager from October 1981 to January 1984, Industrial Engineering Manager from June 1979 to October 1981 and Production Supervisor from July 1978 to June 1979 at McGraw-Edison Company.  Mr. Beever holds a B.A. in Economics from Haverford College, where he was elected to Phi Beta Kappa, and an M.B.A. from the Harvard Graduate School of Business Administration. Mr. Beever contributes extensive managerial and business experience to the Board of Directors.

 

Peter Brandt. Mr. Brandt has served as a director since September 2010. From February 2011 to early 2013, Mr. Brandt served on the Board of Directors and, in December 2012, became Chairman of the Board of Directors of ePocrates, Inc., which was acquired by Athena Health. Also, from November 2011 until March 2012, Mr. Brandt served as interim Chief Executive Officer and President of ePocrates, Inc. Prior to that, Mr. Brandt was President and Chief Executive Officer of Noven Pharmaceuticals, a specialty pharmaceutical company. He served as President, Chief Executive Officer, and as a member of the Board of Directors from early 2008 to late 2009, at which time Noven was acquired by Hisamitsu. Prior to leading Noven, Brandt spent 28 years at Pfizer, the world’s largest pharmaceutical company. He served as Pfizer’s President – U.S. Pharmaceuticals Operations, where he helped deliver revenue and earnings growth while engineering major change within Pfizer’s U.S. pharmaceuticals organization. Prior to running the U.S. operations, he led the Latin American Pharmaceuticals Operations, as well as the following Pfizer Worldwide Pharmaceuticals functions: Finance, Information Technology, Planning and Business Development. He also oversaw the operations of Pfizer’s care management subsidiary, Pfizer Healthcare Solutions. Mr. Brandt currently serves as a director of Auxilium Pharmaceuticals, Inc. Mr. Brandt holds a B.A. from the University of Connecticut and an M.B.A. from the Columbia School of   Business. Mr. Brandt contributes extensive business and industry experience to the Board of Directors.

Mark Carthy.  Mr. Carthy has served as a director since February 2014.  Mr. Carthy is the Managing Partner of Orion Equity Partners, LLC, a healthcare venture capital management and advisory firm co-founded by Mr. Carthy in 2008. Prior to founding Orion, Mr. Carthy was a Venture Partner and General Partner at Oxford Bioscience Partners, an early stage venture capital firm that provides equity financing and management assistance to companies within the life sciences, technology, energy and healthcare sectors. From 1998 until 2000, Mr. Carthy served as the Biotechnology Portfolio Manager at Morningside Ventures where he focused on early stage private equity investments. Previously, he was Chief Business Officer of Cubist Pharmaceuticals and Senior Director of Business Development at Vertex Pharmaceuticals. Mr. Carthy served as a member of the board of the New England Venture Capital Association from 2006 until 2013 and was listed on the Forbes Midas List in 2009 as one of the leading venture capitalists. He received a Bachelor of Chemical Engineering from the University College Dublin, Ireland, a Master of Science in Chemical Engineering from the University of Missouri and a Master of Business Administration from the Harvard Graduate School of Business Administration.  Mr. Carthy contributes extensive business and industry expertise to the Board of Directors.

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Kwang Soo Cheong .  Dr. Cheong has served as a director since May 2006.  He is a faculty member at the Department of Finance of the Johns Hopkins University Carey Business School (Assistant Professor: 2001-2005; Associate Professor: 2006 to date).  Dr. Cheong was an Assistant Professor of Economics at the University of Hawaii from 1994 to 2001, and he was a lecturer at the Department of Economics of Stanford University from 1993 to 1994.  During the summer of 1995, Dr. Cheong was a Visiting Fellow in the Taxation and Welfare Division at the Korea Development Institute in Korea.  Dr. Cheong holds a B.A. in Economics and an M.A. in Economics from Seoul National University, and a Ph.D. in Economics from Stanford University.  Dr. Cheong’s distinguished academic career focused on finance and economics contributes to the Board of Directors’ perspective.

 

Si Moon Hwang .   Mr. Hwang has served as a director since June 2012.  Since October 1999, he has owned Onnuri Grand Pharmacy, a pharmacy located in South Korea.  Mr. Hwang graduated from the Southwestern University in Cebu, Philippines with a degree in Pharmacology, and has been a practicing pharmacist in oncology in South Korea since 1994.  Mr. Hwang contributes experience in oncological pharmacology to the Board of Directors.

 

David McIntosh.  Mr. McIntosh has served as a director since May 2005.  Mr. McIntosh served as a director of Rexahn, Corp. from March 2004 to May 2005.  He has been a partner at Mayer Brown LLP (law firm) since 2001.  Mr. McIntosh was a member of the United States House of Representatives, representing the 2nd District of Indiana from 1995 to 2001.  From 1993 to 1994, he was a director of the Hudson Institute Competitiveness Center.  He served on President George H.W. Bush’s Council on Competitiveness as Executive Director from 1989 to 1993.  He also served as the Special Assistant to President Reagan for Domestic Affairs from 1987 to 1989 and was the Special Assistant to the Attorney General of the United States from 1986 to 1987.  Mr. McIntosh received a B.A. from Yale College and a J.D. from the University of Chicago Law School.  Mr. McIntosh’s experience in law and politics brings a unique perspective to the Board of Directors.

 

The Board of Directors recommends a vote FOR the election of each of the director nominees.

 

Executive Officers

 

In addition to Peter Suzdak, whose information is included above, set forth below are the executive officers of the Company:

 

Tae Heum Jeong .   Dr. Jeong, 43, has served as Chief Financial Officer and Secretary since May 2005 and was a director from June 2005 to June 2012.  Dr. Jeong served as Chief Financial Officer of Rexahn, Corp from December 2002 to May 2005.  From 1997 to November 2002, Dr. Jeong served as a senior investment manager at Hyundai Venture Investment Corporation, a venture capital firm where he managed the biotech investment team.  He was also a committee member of the Industrial Development Fund of Korea’s Ministry of Commerce, Industry and Energy from 2000 to 2002.  Dr. Jeong holds a Doctor of Management from the University of Maryland, an M.S. in Finance from Johns Hopkins University, and a B.S. and an M.S., in Chemistry, from POSTECH.  Dr. Jeong has extensive experience in the financial, investment and business aspects of bioscience businesses.

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Rakesh Soni.   Mr. Soni, 58, has served as President and Chief Operating Officer of Rexahn since August 2009. Mr. Soni served as Chief Business Officer from July 2008 to August 2009.  He joined Rexahn with over 20 years of sales, marketing, product planning and business development experience in the pharmaceutical industry. Prior to joining Rexahn, Mr. Soni held several leadership roles at Otsuka America Pharmaceuticals, Inc., with responsibility for commercial development, corporate strategy and execution of licensing and acquisition of therapeutics, diagnostics and medical devices. Previously, he had held a variety of management positions at Novartis and Schering-Plough. Mr. Soni has a B.S. from University of Wisconsin, Madison and an M.B.A. from Fairleigh Dickinson University.

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Director Independence

 

Our Common Stock is listed on the NYSE MKT (“NYSE MKT”), formerly known as the American Stock Exchange.  We use Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the NYSE MKT definition of “Independent Director” in determining whether a director is independent in the capacity of director and in the capacity as a member of a board committee.

 

Directors serving on our audit committee must also comply with additional NYSE MKT requirements as follows:

 

(a)              The director must not have participated in the preparation of our financial statements or any current subsidiary at any time during the past three years; and

 

(b)              The director is able to read and understand fundamental financial statements, including our balance sheet, income statement, and cash flow statement.

 

We currently have a total of eight directors, six of whom are Independent Directors.  Our Independent Directors are Messrs. Beever, McIntosh, Brandt, Hwang, Carthy and Dr. Cheong.

 

Board Leadership Structure

 

Our Board of Directors does not have a policy on whether the role of Chairman and Chief Executive Officer should be separate or combined.  In the past, we believed that the most effective leadership structure for us was to combine these roles.  Effective February 4, 2013, Dr. Ahn stepped down as Chief Executive Officer and Dr. Suzdak was appointed the Company’s Chief Executive Officer.  Dr. Ahn remains as Chairman of the Board of Directors and was appointed the Company’s Chief Scientist.  We believe that separating the role of Chairman and Chief Executive Officer will provide for additional leadership and management perspective as the Company progresses in the development of its drug candidates.  The Company does not have a lead independent director; however, six out of eight of our current directors are independent and each of our standing committees (Audit, Nominating and Corporate Governance and Compensation) is comprised solely of independent directors.  We believe this structure provides adequate oversight of Company operations by our independent directors in conjunction with our Chairman and Chief Executive Officer.

 

Our Audit Committee is responsible for overseeing risk management and management reports to the Audit Committee on matters relating to risk management and the Audit Committee and management communicate directly with the full Board of Directors on these matters.

 

Board of Directors and Board of Directors Meetings

The Board of Directors of the Company held 6 meetings during the fiscal year ended December 31, 2013. Each current director attended 75% or more of the meetings of the Board of Directors and committees of which they were members during the period in which he or she served as a director during the fiscal year ended December 31, 2013, except for Si Moon Hwang (who attended 67% of the meetings).

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Any shareholder who wishes to send any communications to the Board of Directors or to individual directors should deliver such communications to the Company’s executive offices, 15245 Shady Grove Road, Suite 455, Rockville, MD 20850, ATTN: Corporate Secretary (secretary@rexahn.com).  Any such communication should indicate whether the communication is intended to be directed to the entire Board of Directors or to a particular director(s), and must indicate the number of shares of Common Stock beneficially owned by the shareholder.  The Secretary will forward appropriate communications to the Board of Directors and/or the appropriate director(s).  Inappropriate communications include correspondence that does not relate to the business or affairs of the Company or the functioning of the Board of Directors or its committees, advertisements or other commercial solicitations or communications, and communications that are frivolous, threatening, illegal or otherwise not appropriate for delivery to directors.

 

Members of our Board of Directors are encouraged to attend the Annual Meeting if they are available.  All members of our Board of Directors in office at the time attended the Annual Meeting held in 2013.

 

Board of Directors Committees

 

The Board of Directors has three standing committees, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee, each of which is composed of three members.

 

Audit Committee

 

The Audit Committee Charter provides that such committee, among other things:

 

·

appoints or replaces and oversees our independent auditors and approves all audit engagement fees and terms;

 

·

preapproves all audit (including audit-related) services, internal control-related services and permitted non-audit services (including fees and terms thereof) to be performed for us by our independent auditors;

 

·

reviews and discusses with our management and independent auditors significant issues regarding accounting and auditing principles and practices and financial statement presentations;

·

reviews and approves our procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission by our employees of concerns regarding accounting or auditing matters; and

 

·

reviews and oversees our compliance with legal and regulatory requirements.

 

Kwang Soo Cheong, Charles Beever and Peter Brandt serve as members of our Audit Committee.  Dr. Cheong serves as Chair of the Audit Committee and as the Audit Committee’s financial expert.  Each of the current members meets the criteria for independence required by the NYSE MKT and Rule 10A-3 under the Exchange Act.  During the year ended December 31, 2013, the Audit Committee met five times.  A copy of the Audit Committee Charter is available on our website at www.rexahn.com .

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Nominating and Corporate Governance Committee

 

The Nominating and Corporate Governance Committee Charter provides that such committee, among other things:

 

·

reviews, evaluates and seeks out candidates qualified to become Board of Directors members;

 

·

reviews committee structure and recommends directors for appointment to committees;

 

·

develops, reevaluates (not less frequently than every three years) and recommends the selection criteria for Board of Directors and committee membership;

 

·

establishes procedures to oversee evaluation of our Board of Directors, its committees, individual directors and management; and

 

·

develops and recommends guidelines on corporate governance.

 

David McIntosh, Peter Brandt, and Kwang Soo Cheong serve as members of our Nominating and Corporate Governance Committee.  Mr. McIntosh serves as Chair of the Nominating and Corporate Governance Committee.  Each of the Nominating and Corporate Governance Committee’s members meets the criteria for independence required by NYSE MKT.

 

The Nominating and Corporate Governance Committee reviews, evaluates and seeks out candidates qualified to become Board of Directors members.  Our Board of Directors currently includes individuals with a diversity of experience, including scientific, business, financial and academic backgrounds.  However, while diversity relating to background, skill, experience and perspective is one factor considered in the nomination process, the Company does not have a formal policy relating to diversity.  Nominations may be submitted by directors, officers, employees, shareholders and others for recommendation to the Board of Directors.  In fulfilling this responsibility, the Nominating and Corporate Governance Committee also consults with the Board of Directors and the Chief Executive Officer concerning director candidates.  While we do not have in place formal procedures by which shareholders may recommend director candidates to the Nominating and Corporate Governance Committee, shareholders may communicate with the members of the Board of Directors, including the Nominating and Corporate Governance Committee, by writing to the Secretary of the Board of Directors at our headquarters address.  In addition, our Amended and Restated Bylaws establish a procedure with regard to shareholder proposals for the Annual Meeting of Shareholders, including nominations of persons for election to the Board of Directors.  Because shareholders have an adequate opportunity to recommend nominees for directors, we believe that formal procedures are not necessary.  Mr. Carthy, who joined the Board of Directors in February 2014, was recommended for appointment to the Board of Directors by an investor relations firm with whom the Company works in response to a request for recommendations.  During the year ended December 31, 2013, the Nominating and Corporate Governance Committee met twice.  A copy of the Nominating and Corporate Governance Charter is available on our website at www.rexahn.com .

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Compensation Committee

 

The Compensation Committee Charter provides that such committee, among other things:

 

·

fixes salaries of executive officers and reviews salary plans for other executives in senior management positions;

 

·

reviews and makes recommendations with respect to the compensation and benefits for non-employee directors, including through equity-based plans;

 

·

evaluates the performance of our Chief Executive Officer and other senior executives and assists the Board of Directors in developing and evaluating potential candidates for executive positions; and

 

·

administers our incentive compensation, deferred compensation and equity-based plans pursuant to the terms of the respective plans.

 

Our Chief Executive Officer makes recommendations to the Compensation Committee regarding the Company’s business goals and the performance of executives in achieving those goals, and recommends other executives’ compensation levels to the Compensation Committee based on such performance. The Compensation Committee considers these recommendations and then makes an independent decision regarding officer compensation levels and awards.  Neither the Compensation Committee nor management engaged the services of a compensation consultant during the year ended December 31, 2013.

 

Charles Beever, David McIntosh and Kwang Soo Cheong serve as members of our Compensation Committee.  Mr. Beever serves as Chairman of the Compensation Committee.  Each of the members meets the criteria for independence required by NYSE MKT.  During the year ended December 31, 2013, the Compensation Committee met four times.   A copy of the Compensation Committee Charter is available on our website at www.rexahn.com .

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Summary Compensation Table

 

The following table sets forth the annual and long-term compensation, from all sources, for the Company’s named executive officers for services rendered in all capacities to Rexahn for the fiscal years ended December 31, 2013 and 2012, except as noted below.  The Company’s named executive officers include the Company’s principal executive officer, former principal executive officer and the next two most highly compensated officers listed below.  The compensation described in this table does not include medical, group life insurance or other benefits which are available generally to all of our salaried employees.

 

Name and Principal Position(s)		Year		Salary ($)				Bonus ($)				Option Awards* ($)				Total ($)
Peter D. Suzdak		2013			298,270				82,500				320,465				701,235
Chief Executive Officer**
Chang H. Ahn		2013			291,001				28,500				55,681				375,182
Chairman of the Board of Directors, former Chief Executive Officer and Chief Scientist**		2012			350,000				17,500				-				367,500
Tae Heum Jeong		2013			232,634				37,500				55,681				325,815
Chief Financial Officer		2012			207,500				10,750				-				218,250
Rakesh Soni		2013			250,000				18,750				11,136				279,886
President and Chief Operating Officer		2012			250,000				-				-				250,000

 

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*      Reflects grant date fair value computed in accordance with FASB ASC Topic 718. For information regarding assumptions used to compute grant date fair value with respect to the option awards, see Note 12 to our financial statements in our Annual Report on Form 10-K for the year ended December 31, 2013. The actual value realized by each officer with respect to option awards will depend on the difference between the market value of our Common Stock on the date the option is exercised and the exercise price.

**      Dr. Peter Suzdak was appointed by the Board of Directors to serve as CEO on February 4, 2013.  At that point, Dr. Ahn stepped down as Chief Executive Officer but remains with the Company as Chairman of the Board and Chief Scientist.

Employment Agreements

 

On September 9, 2010, the Company entered into amended and restated employment agreements with Rakesh (Rick) Soni, its President and Chief Operating Officer; Tae Heum (Ted) Jeong, its Senior Vice President, Chief Financial Officer and Secretary; and Dr. Chang Ho Ahn, its Chairman of the Board and at that time, the Chief Executive Officer, but as described in greater detail below, the Company entered into a new employment agreement on March 25, 2013 with Dr. Ahn to serve as the Chief Scientist of the Company, which employment agreement replaces and supersedes Dr. Ahn’s prior amended and restated employment agreement with the Company.

 

Each of the September 9, 2010 employment agreements is on the same terms except the base salaries and titles of the three executives, and the persons to whom they will report.  Dr. Ahn’s agreement provided for a base salary of $350,000 per annum, and that he would report to the Company’s Board of Directors; Mr. Soni’s agreement provides for a base salary of $250,000 per annum, and that he will report to the Chief Executive Officer; and Dr. Jeong’s agreement provides for a base salary of $200,000 per annum, and that he will report to the Chief Executive Officer.  On July 1, 2012 and July 1, 2013, the Compensation Committee increased Dr. Jeong’s salary to $215,000 and $250,000 per annum, respectively.  The other principal terms of each of the agreements are described below.  Each agreement provides for a term of three years with an automatic one year renewal upon the expiration of the initial three year term and upon each consecutive year term unless such employment with the Company is terminated earlier by the Company or the office r .  In addition to the base salaries described above, the agreements provide that each executive may receive an annual cash bonus and an annual option grant in such amounts, if any, as determined by the Compensation Committee of the Board of Directors.   Any such cash bonus shall be paid to the executive within 60 days after the date the Compensation Committee determines to award such bonus.  In order to receive any such cash bonus, the executive must be actively employed by the Company on the date on which such bonus is scheduled to be paid.  The agreements also provide that upon the occurrence of any of the following events, the Compensation Committee will meet and determine in its discretion whether the executive should be entitled to receive an additional bonus in consideration of his role in bringing about such events:

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·

the completion by the Company of a successful end-of-Phase 2 meeting with the Food and Drug Administration for any drug candidate;

 

·

the completion by the Company of pivotal trials of any drug candidate;

 

·

the filing by the Company of a New Drug Application with the Food and Drug Administration with respect to any drug candidate;

 

·

the approval by the Food and Drug Administration of a New Drug Application filed therewith by the Company with respect to any drug candidate;

 

·

the receipt by the Company of additional equity or debt financing; or

 

·

the execution by the Company of an agreement that may lead to no payment to the Company of up-front or milestone payments.

 

The agreements entitle each executive to receive customary benefits applicable to Rexahn’s other executive level employees, and in addition to receive term life insurance coverage in an amount equal to four times base salary, for which the executive may designate the beneficiary.

 

Upon a termination of their employment, the executives will be entitled to receive the following compensation from the Company:

 

·

If the executive’s employment is terminated as a result of his death, disability, for cause by the Company, or without good reason by the executive, then the executive will be entitled to receive the base salary to which he is otherwise entitled for the period ending on the termination date and for any accrued but unused vacation days as of the termination date.

 

·

If the executive’s employment is terminated for any other reason, but not following a change of control, then the executive will be entitled to receive the base salary to which he is otherwise entitled for the period ending on the termination date and for any accrued but unused vacation days as of the termination date and an amount equal to his then current base salary for the period beginning on the termination date ending upon the last day of the employment term.

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If the executive’s employment is terminated by the Company without cause (and not as a result of death or a disability) and such termination date falls within the one-year period immediately following a change of control (as defined in the Company’s stock option plan), then the executive will be entitled to receive the following amounts: (i) the base salary to which he is otherwise entitled for the period ending on the termination date and for any accrued but unused vacation days as of the termination date; (ii) an amount equal to the greater of (x) twice his then current base salary and (y) his then current base salary for the period beginning on the termination date and ending upon the last day of the employment term; (iii) an amount equal to a pro-rata portion of the bonus to which he otherwise might have been entitled, assuming for such purposes that the executive would have received a bonus for that fiscal year equal to one-half of his then current base salary; and (iv) a one-time cash payment, subject to applicable withholding requirements under applicable state and federal law, in an amount equal to his increased income tax costs as a result of payments made to him by the Company under this change of control provision of the amended and restated employment agreement.  With respect to Mr. Soni and Dr. Jeong, following a change in control termination, the executives must in good faith seek other employment in a position comparable to their former position with the Company.  The payment obligations of the Company will be reduced on a dollar-for-dollar basis by the amount of any payments and the value of any benefits received by the executives for services rendered to any other party during the one-year period following the date of their change in control.  Immediately prior to a change in control, all options, restricted stock and other equity-based awards granted to the executive by the Company shall become immediately and fully vested and, in the case of stock options, shall remain exercisable for their respective original terms.

 

Effective as of February 4, 2013, the Company entered into an employment agreement with Dr. Suzdak to serve as the Company’s Chief Executive Officer for a term of two years with the option to renew the employment agreement for additional one-year periods thereafter until terminated. Pursuant to the employment agreement the Company agreed to pay Dr. Suzdak an annual base salary of $330,000, with the option of a discretionary annual cash bonus of up to forty percent of his base salary, as determined by performance objectives and milestones set by the Board of Directors. The employment agreement also provides for a grant of 1,200,000 options to purchase shares of the Company’s Common Stock, which was issued on February 4, 2013, and the Board may award him up to an additional 500,000 options each year. In the event Dr. Suzdak’s employment is terminated by reason of disability or for “cause”, as defined in the employment agreement, the Company will pay Dr. Suzdak his base salary owed up to the termination date, including payment for any unused vacation days. If the Company terminates Dr. Suzdak’s employment without cause or Dr. Suzdak terminates his employment with good reason, then Dr. Suzdak’s stock options will be subject to accelerated vesting and the Company shall pay Dr. Suzdak a lump sum equal to his then current annual base salary, an amount equal to the pro-rata portion of the bonus that he otherwise might have been entitled to, and COBRA premiums for twelve months, if he is eligible for coverage. In the event the Company terminates Dr. Suzdak’s employment without cause or Dr. Suzdak terminates his employment with good reason within the one-year period following a “Change of Control,” as defined by the Company’s stock option plan, the Company shall pay Dr. Suzdak a lump sum equal to two hundred percent of his current annual base salary and a cash payment to offset any incremental additional state or federal income tax payable as a result of this salary increase in addition to the accelerated vesting of his stock options, the pro rata portion of his bonus and COBRA premiums. The employment agreement also contains a provision prohibiting Dr. Suzdak from soliciting the Company’s executives, employees, customers or clients for a period of twelve months following his termination.

 

On March 25, 2013, the Company entered into a new employment agreement with Dr. Ahn to serve as the Chief Scientist of the Company. This employment agreement replaces and supersedes Dr. Ahn’s prior amended and restated employment agreement, dated as of September 9, 2010, with the Company. The employment agreement has a one year term with an automatic renewal option for additional one-year periods thereafter until terminated.  Pursuant to the employment agreement, the Company agreed to pay Dr. Ahn an annual base salary of $285,000 with the option of a discretionary annual cash bonus as determined by the Compensation Committee based on performance objectives and milestones set by the Board of Directors.  The employment agreement also provides for a discretionary stock option award to purchase shares of the Company’s Common Stock on each anniversary of the employment agreement as determined by the Board of Directors. Any such stock option awards will be in accordance with the terms of the Company’s stock option plan.

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In the event Dr. Ahn’s employment is terminated by reason of death, disability, by the Company for “cause,” or by Dr. Ahn without “good reason,” all as defined in the employment agreement, the Company will pay Dr. Ahn his base salary owed up to the termination date, including payment for any unused vacation days.  In the event Dr. Ahn’s employment is terminated by the Company without cause or Dr. Ahn terminates his employment with good reason, then Dr. Ahn’s stock options will be subject to accelerated vesting and the Company shall pay Dr. Ahn a lump sum equal to his then current annual base salary, an amount equal to the pro-rata portion of the bonus that he otherwise might have been entitled to, and COBRA premiums for twelve months, if he is eligible for coverage. In the event the Company terminates Dr. Ahn’s employment without cause or Dr. Ahn terminates his employment with good reason within the one-year period following a “Change of Control,” as defined by the Company’s stock option plan, the Company shall pay Dr. Ahn a lump sum equal to two hundred percent of his current annual base salary and a cash payment to offset any incremental additional state or federal income tax payable as a result of this salary increase in addition to the accelerated vesting of his stock options, the pro rata portion of his bonus and COBRA premiums.  The employment agreement also contains a provision prohibiting Dr. Ahn from soliciting the Company’s executives, employees, customers or clients for a period of twelve months following his termination.