UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
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| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| x | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material under § 240.14a-12 |
CYTOSORBENTS CORPORATION
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
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CytoSorbents Corporation
7 Deer Park Drive, Suite K
Monmouth Junction, New Jersey 08852
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting
of the holders of shares of common stock, each having a par value of $0.001 per share, of CytoSorbents Corporation (“CytoSorbents”
or the “Company”), will be held at the offices of DLA Piper LLP (US) at 1251 Avenue of the Americas, New York, New
York 10020, on June 2, 2015 at 10:00 a.m. Eastern time, to consider and take action with respect to the following:
| 1. | To elect five directors, who shall each serve for a term of one year, |
| 2. | To approve the compensation of the Company’s named executive officers, on an advisory basis, |
| 3. | To determine, on an advisory basis, the frequency with which the stockholders of the Company shall have an advisory vote on
executive compensation, as disclosed pursuant to the executive compensation disclosure rules of the Securities and Exchange Commission, |
| 4. | To ratify the appointment of WithumSmith+Brown, PC as the Company’s independent auditors to audit the Company’s
financial statements for the fiscal year ending December 31, 2015, and |
| 5. | To conduct such other business as may properly come before the Annual Meeting or any adjournments thereof. |
Holders of common stock of record at the
close of business on April 15, 2015 are entitled to notice of and to vote at the Annual Meeting or any adjournments thereof.
This year, instead of mailing a printed
copy of our proxy materials, including our Annual Report, to each stockholder of record, we have decided to provide access to these
materials in a fast and efficient manner via the Internet. This reduces the amount of paper necessary to produce these materials,
as well as the costs associated with mailing these materials to all stockholders. Accordingly, on April 22, 2015, we began mailing
a Notice Regarding Internet Availability of Proxy Materials, or the Notice, to all stockholders of record as of April 15, 2015,
and posted our proxy materials on the website referenced in the Notice (www.proxyvote.com). As more fully described in the Notice,
all stockholders may choose to access our proxy materials on the website referred to in the Notice or may request to receive a
printed set of our proxy materials. In addition, the Notice 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.
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By Order of the Board of Directors, |
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/s/ Kathleen P. Bloch |
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Kathleen P. Bloch |
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Chief Financial Officer and Secretary |
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Monmouth Junction, New Jersey |
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Dated: April 22, 2015 |
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YOUR VOTE IS VERY IMPORTANT, REGARDLESS
OF THE NUMBER OF SHARES YOU OWN. WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON, PLEASE PROMPTLY VOTE YOUR PROXY BY ACCESSING THE
INTERNET SITE AND FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD OR BY REQUESTING A PRINTED COPY OF THE PROXY MATERIALS AND MARKING,
DATING, SIGNING AND RETURNING THE PROXY CARD.
CytoSorbents Corporation
7 Deer Park Drive, Suite K
Monmouth Junction, New Jersey 08852
PROXY STATEMENT
Mailed on April 22, 2015
Annual Meeting of Stockholders to be
held on June 2, 2015
This proxy statement is furnished in connection
with the solicitation of proxies by the Board of Directors of CytoSorbents Corporation, or CytoSorbents, to be used at the Annual
Meeting of the holders of shares of common stock, par value $0.001 per share, of CytoSorbents, to be held on June 2, 2015 and at
any adjournment thereof, or the Annual Meeting. The time and place of the Annual Meeting are stated in the Notice Regarding Internet
Availability of Proxy Materials and the Notice of Annual Meeting of Stockholders that accompanies this proxy statement.
The expense of soliciting proxy cards, including
the costs of preparing, assembling and mailing the Notice Regarding Internet Availability of Proxy Materials and the Notice of
Annual Meeting of Stockholders, proxy statement and proxy card, will be borne by us. This year, instead of mailing a printed copy
of our proxy materials, including our Annual Report, to each stockholder of record, we have decided to provide access to these
materials in a fast and efficient manner via the Internet. This reduces the amount of paper necessary to produce these materials,
as well as the costs associated with mailing these materials to all stockholders. Accordingly, on April 22, 2015, we began mailing
a Notice Regarding Internet Availability of Proxy Materials, or the Notice, to all stockholders of record as of April 15, 2015,
and posted our proxy materials on the website referenced in the Notice (www.proxyvote.com). As more fully described in the Notice,
all stockholders may choose to access our proxy materials on the website referred to in the Notice or may request to receive a
printed set of our proxy materials. In addition, the Notice 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.
VOTING RIGHTS
Only stockholders as of the close of business
on April 15, 2015, the record date fixed by the Board of Directors of CytoSorbents, or the Board, are entitled to notice of and
to vote at the Annual Meeting. As of April 15, 2015, there were 24,678,415 shares of common stock issued and outstanding and no
other outstanding classes of voting securities. Each holder of our common stock is entitled to one vote per share on each matter
presented at the Annual Meeting.
The presence of the holders of a majority
of the shares of common stock issued, outstanding and entitled to vote, in person or represented by duly executed proxies, at the
Annual Meeting is necessary to constitute a quorum for the transaction of business at the Annual Meeting.
A plurality of the votes cast by stockholders
entitled to vote for the election of directors is required to elect the directors. Cumulative voting for the election of directors
is not permitted. The affirmative vote of a majority of the votes cast at the meeting, in person or by duly executed proxies, is
required to approve the compensation of our named executive officers, on an advisory basis, and to ratify the appointment of our
independent auditors. The option of three years, two years or one year that receives the highest number of votes cast by stockholders
will be the frequency for the advisory vote on the compensation of our named executive officers that has been selected by stockholders,
provided a quorum is present in person or by proxy.
Shares of common stock represented by valid
proxy cards, completed, duly signed, dated, returned to the Company and not revoked, as well as shares that are properly voted
via the Internet, as explained below, will be voted at the Annual Meeting as directed on the proxy. You may also vote your shares
by telephone by calling 1-800-690-6903 and following the instructions on the proxy card.
In the election of directors, stockholders
may either vote “FOR” the nominees for election or “WITHHOLD” their votes from the nominees
for election. Shares that are represented by valid proxy cards or shares that are properly voted via the Internet and that are
marked “WITHHELD” with regard to the election of the nominees for director will be excluded entirely from the
vote and will have no effect on the outcome. If no vote is specified on the proxy and in the absence of directions to the contrary,
the shares will be voted “FOR” the election of the nominees for director named in this proxy statement.
Stockholders may vote “FOR”,
“AGAINST”, or “ABSTAIN” to approve the compensation of the Company’s named executive
officers, on an advisory basis. Abstentions and broker non-votes will not be counted and, accordingly, will have no effect on the
outcome of the vote on this proposal.
The option of three years, two years or
one year that receives the highest number of votes cast by stockholders will be the frequency for the advisory vote on the compensation
of our named executives officers that has been selected by stockholders. However, because this vote is advisory and is not binding
on our Board, the Board may decide that it is in the best interests of our stockholders and CytoSorbents to hold an advisory vote
on executive compensation more or less frequently than the option approved by our stockholders. Abstentions and broker non-votes
will not be counted and, accordingly, will have no effect on the outcome of the vote on this proposal.
Stockholders may vote “FOR”,
“AGAINST”, or “ABSTAIN” to ratify the appointment of our independent auditors. If no vote
is specified on the proxy and in the absence of directions to the contrary, the shares will be voted “FOR” the
ratification of the appointment of our independent auditors named in this proxy statement. Shares that are represented by valid
proxy cards or that are properly voted via the Internet or telephone and that are marked “ABSTAIN” with regard
to the ratification of the appointment of the independent auditors will not be counted and accordingly, will have no impact on
the outcome of the vote for the proposal.
Stockholders may vote their shares via the
Internet by following the instructions included in the Notice by accessing the Internet at www.proxyvote.com and following the
instructions contained on that website. In addition, the law of the State of Delaware, under which CytoSorbents Corporation is
incorporated, permits electronic voting, provided that each proxy submitted by a stockholder via the Internet or telephone contains
or is submitted with information from which it can be determined that such proxy was authorized by the stockholder. Submitting
a proxy via the Internet or telephone will not affect your right to vote in person should you decide to attend the Annual Meeting.
If you vote your shares via the Internet or telephone, you are responsible for any Internet access or telephone charges that you
may incur.
If you are a stockholder of record, that
is, you are listed as a stockholder in the Company’s books and records, you may vote your shares via the Internet at www.proxyvote.com
rather than by returning the proxy card that accompanies this proxy statement. Once you access that website, in order to vote your
shares, you will be required to provide the login control number contained on your proxy card. After providing this information,
you will be prompted to complete an electronic proxy card. Your votes will be indicated on your computer screen and you will be
prompted to submit or revise your electronic proxy card as desired.
If you are a beneficial owner of shares,
that is, you own your shares through a bank or broker; you should receive from your bank or broker a voting instruction form that
outlines the methods by which you can vote your shares. A number of banks and brokers have arranged for beneficial owners to vote
their shares via the Internet or telephone, and will provide voting instructions on the voting instruction form. If your bank or
broker uses Broadridge Financial Solutions, you may vote your shares via the Internet at http://www.proxyvote.com or by phone by
calling the telephone number shown on the voting instruction form received from your broker or bank. If you do not give instructions
to your bank or broker within ten days of the Annual Meeting, it may vote on matters that the New York Stock Exchange, or NYSE,
determines to be “routine”, but will not be permitted to vote your shares with respect to “non-routine”
items. Under the NYSE rules, the ratification of the appointment of our independent auditors is a routine matter, while the election
of our directors, the approval of the compensation of our named executive officers, and the recommendation for the frequency of
the advisory vote on executive compensation are not. When a bank or broker has not received instructions from the beneficial owners
or persons entitled to vote and the bank or broker cannot vote on a particular matter because it is not routine, then there is
a “broker non-vote” on that matter. Broker non-votes do not count as votes “FOR” or “AGAINST”
any proposal, but will be counted in determining whether there is a quorum for the Annual Meeting. Please note that your bank
or broker will not be able to vote your shares with respect to the election of directors if you have not provided directions to
your bank or broker. We strongly encourage you to submit your voting instructions and exercise your right to vote as a stockholder.
If you request a printed copy of the proxy
materials by mail, mark, date, sign, and return the enclosed proxy card to Broadridge Representatives of Broadridge Financial Solutions,
Inc., and our inspectors of election will tabulate and certify the votes. Alternatively, a representative of our transfer agent
may serve as inspector of election.
A postage prepaid envelope addressed to
Broadridge Financial Solutions will be provided with requested printed proxy materials.
The Board does not know of any other business
to be presented for consideration at the Annual Meeting. If any other business properly comes before the Annual Meeting or any
adjournment thereof, the proxies will be voted on such matters in the discretion of the proxy holders. The Delaware General Corporation
Law provides that, unless otherwise provided in the proxy and unless the proxy is coupled with an interest, a stockholder may revoke
a proxy previously given at any time prior to its exercise at the Annual Meeting. A stockholder who has voted shares by returning
a proxy card or by delivering a proxy via the Internet or by phone may revoke it at any time before it is exercised at the Annual
Meeting by:
| · | delivering to any of the persons named as proxies on the proxy card, or addressed to and received by the Secretary, an instrument
revoking the proxy; |
| · | appearing at the Annual Meeting and voting in person and executing a later dated proxy which is exercised at the Annual Meeting;
or |
| · | casting a later vote via the Internet or telephone. |
Attendance at the Annual Meeting will not, by itself, revoke
a proxy. We plan to announce preliminary voting results at the Annual Meeting and will report the final results in a Current Report
on Form 8-K, which we intend to file with the Securities and Exchange Commission shortly after the Annual Meeting.
PRINCIPAL STOCKHOLDERS
The stockholders named in the following
table are those known to us to be the beneficial owners of 5% or more of our common stock. Unless otherwise indicated, the information
is as of April 15, 2015. For purposes of this table, and as used elsewhere in this proxy statement, the term “beneficial
owner” means any person who, directly or indirectly, has or shares the power to vote, or to direct the voting of, shares
of our common stock, the power to dispose, or to direct the disposition of, a security or has the right to acquire shares within
sixty (60) days. Except as otherwise indicated, we believe that each owner listed below exercises sole voting and dispositive power
over its shares.
Name and Address of Beneficial Owner | |
Number of Shares Beneficially Owned | | |
Percentage Beneficially Owned | |
NJTC Investment Fund, LP 1001 Briggs Road, Suite 280 Mount Laurel, NJ 08054 | |
| 4,956,779 | (1) | |
| 16.4 | % |
Robert Shipley 9 Noble Road Nogales, Arizona 85621 | |
| 2,973,219 | (2) | |
| 9.8 | % |
| (1) | Includes 4,870,219 shares of common stock, options to purchase 31,560 shares of common stock, and 55,000 restricted stock units
that will vest only upon a “Change of Control” of the Company, as defined in the Company’s 2014 Long-Term Incentive
Plan. |
| (2) | Includes 2,972,819 shares of common stock, of which 199,760 are not held directly by Mr. Shipley but are held by Shipley family
members, and options to purchase 400 shares of common stock. |
STOCK OWNERSHIP OF DIRECTORS, NOMINEES
FOR DIRECTOR AND EXECUTIVE OFFICERS
The following table and notes thereto set
forth information with respect to the beneficial ownership of shares of our common stock as of April 15, 2015 (except as otherwise
indicated below) by each of our directors and director nominees, each named executive officer and by our directors and executive
officers as a group, based upon information furnished to us by such persons. Except as otherwise indicated, we believe that each
beneficial owner listed below exercises sole voting and dispositive power.
| |
Beneficial Ownership as of
April 15, 2015 | |
Name of Beneficial Owner (1) | |
Number of Shares(1) | | |
Percentage of Common Stock | |
Al Kraus, Chairman of the Board of Directors | |
| 451,281 | (2) | |
| 1.5 | % |
Phillip Chan, President and Chief Executive Officer, Director | |
| 590,298 | (3) | |
| 1.9 | % |
Vincent Capponi, Chief Operating Officer | |
| 551,724 | (4) | |
| 1.8 | % |
Robert Bartlett, Chief Medical Officer | |
| 104,600 | (5) | |
| -- | |
Kathleen P. Bloch, Chief Financial Officer | |
| 286,200 | (6) | |
| -- | |
James Gunton, Director | |
| 4,956,779 | (7) | |
| 16.4 | % |
Edward R. Jones, Director | |
| 88,300 | (8) | |
| -- | |
Alan D. Sobel, Director | |
| 61,000 | (9) | |
| -- | |
All current directors, director nominees and executive officers as a group (8 persons) | |
| 7,090,187 | | |
| 26.2 | % |
| (1) | Based upon 30,286,746 fully-diluted shares of Common Stock and common stock equivalents as of April 15, 2015, shares of common
stock subject to options, warrants, and restricted stock awards exercisable or expected to be exercisable with the passage of time,
are deemed outstanding for purposes of computing the percentage of the person holding such options, warrants, or restricted stock
awards. |
| (2) | Includes 55,746 shares of Common Stock, 340,535 shares of Common Stock issuable upon exercise of stock options, and 55,000
restricted stock awards which would only vest upon a “Change of Control” of the Company, as defined in the Company’s
2014 Long-Term Incentive Plan. |
| (3) | Includes 71,976 shares of Common Stock, 376,855 shares of Common Stock issuable upon exercise of stock options, 11,467 shares
of Common Stock issuable upon exercise of warrants, and 130,000 restricted stock awards which would only vest upon a “Change
of Control” of the Company, as defined in the Company’s 2014 Long-Term Incentive Plan. |
| (4) | Includes 16,724 shares of Common Stock, 410,000 shares of Common Stock issuable upon exercise of stock options, and 125,000
restricted stock awards which would only vest upon a “Change of Control” of the Company, as defined in the Company’s
2014 Long-Term Incentive Plan. |
| (5) | Includes 74,600 shares of Common Stock issuable upon
exercise of stock options, and 30,000 restricted stock awards which would only vest upon a “Change of Control” of
the Company, as defined in the Company’s 2014 Long-Term Incentive Plan. |
| (6) | Includes 7,000 shares of Common Stock held by Ms. Bloch’s
husband to which she disclaims beneficial ownership, 169,000 shares of Common Stock issuable upon exercise of stock options, and
110,000 restricted stock awards which would only vest upon a “Change of Control” of the Company, as defined in the
Company’s 2014 Long-Term Incentive Plan. |
| (7) | Includes 4,870,219 shares of common stock, options to
purchase 31,560 shares of common stock, and 55,000 restricted stock units that will vest only upon a “Change of Control”
of the Company, as defined in the Company’s 2014 Long-Term Incentive Plan. These securities are held directly by NJTC Investment
Fund, LP, of which Mr. Gunton is a partner. Mr. Gunton disclaims beneficial ownership of these securities. |
| (8) | Includes 33,300 shares of Common Stock issuable upon
exercise of stock options, and 55,000 restricted stock awards which would only vest upon a “Change of Control” of
the Company, as defined in the Company’s 2014 Long-Term Incentive Plan. |
| (9) | Includes 6,000 shares of Common Stock issuable upon exercise
of stock options, and 55,000 restricted stock awards which would only vest upon a “Change of Control” of the Company,
as defined in the Company’s 2014 Long-Term Incentive Plan. |
PROPOSAL 1
NOMINATION AND ELECTION OF DIRECTORS
Our Bylaws provide that our Board shall
consist of not less than three members. Each director serves for a one-year term, with each director being elected at each Annual
Meeting. Five directors are currently serving on the Board. Our Board is authorized to increase or decrease the total number of
directors within the limitations prescribed by our Bylaws.
The directorships expiring this year are
currently filled by Dr. Phillip Chan, Al W. Kraus, Dr. Edward Jones, James Gunton and Alan D. Sobel. If each director is elected,
the total number of directors comprising our Board of Directors will remain at five (5) directors effective immediately following
the Annual Meeting. If elected, each director’s term will expire in 2016.
The nominees for election at this Annual
Meeting have informed us that they are willing to serve for the term to which they are nominated, if elected. If any nominee should
become unavailable for election or is unable to serve as a director, the shares represented by proxies voted in favor of that nominee
will be voted for any substitute nominee that may be named by the Board.
Set forth in the table below is certain
information about the nominees for election as directors, including each nominee’s age and length of service as a director
of CytoSorbents, principal occupation and business experience for at least the past five years and the names of other publicly
held companies on whose boards the director serves or has served in the past five years. There are no family relationships among
any of our directors, nominees for director and executive officers.
Name |
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Age |
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Director
Since |
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Principal
Occupation, Other Business Experience
During Past Five Years and Other Directorships |
Nominees for Election – Terms Expiring in
2016 |
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Phillip Chan, MD, PhD |
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44 |
|
2008 |
|
Dr. Chan became a director of the Company in 2008 and since January 2009 is also Chief Executive Officer and President. Prior to CytoSorbents, Dr. Chan led healthcare and life science investments for the NJTC Venture Fund from 2003 to 2008, most recently as a Partner. In 2006, Dr. Chan co-founded Andrew Technologies, a medical device company commercializing its FDA-approved HydraSolveTM lipoplasty system for plastic surgery. He is an Internal Medicine physician with a strong background in clinical medicine and research. Dr. Chan received his MD and PhD from the Yale University School of Medicine, completed his Internal Medicine residency at the Beth Israel Deaconess Medical Center at Harvard Medical School, and received his Board certification. He also holds a BS in cell and molecular biology from Cornell University. |
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Al W. Kraus(1) (2) (3) |
|
70 |
|
2003 |
|
Mr. Kraus has been a director of the Company since 2003 and up until the end of 2008 was the Company’s President and CEO. Mr. Kraus currently serves as Chairman of the Board of Directors. Mr. Kraus has more than twenty-five years’ experience managing companies in the dialysis, medical device products, personal computer and custom software industries. Prior to joining us, from 2001 to 2003, Mr. Kraus was President and CEO of NovoVascular Inc., an early stage company developing coated stent technology. From 1996 to 1998, Mr. Kraus was President and CEO of Althin Healthcare and from 1998 to 2000, of Althin Medical Inc., a manufacturer of products for the treatment of end stage renal disease. While CEO of Althin, he provided strategic direction and management for operations throughout the Americas. From 1979 to 1985, Mr. Kraus was U.S. Subsidiary Manager and Chief Operating Officer of Gambro Inc., a leading medical technology and healthcare company. Mr. Kraus was the Chief Operating Officer of Gambro when it went public in the United States in an offering led by Morgan Stanley. |
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Edward R. Jones, MD, MBA(1)(3) |
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66 |
|
2007 |
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Dr. Jones has been a director of the Company since April 2007. Dr. Jones is an attending physician at the Albert Einstein Medical Center and Chestnut Hill Hospital as well as Clinical Professor of Medicine at Temple University Hospital. Dr. Jones has published or contributed to the publishing of 30 chapters, articles, and abstracts on the subject of treating kidney-related illnesses. He is a sixteen-year member of the Renal Physicians Association, the Philadelphia County Medical Society and a past board member of the National Kidney Foundation of the Delaware Valley. From March 2009 to March 2011, Dr. Jones was President of, and currently serves as a Counselor at, the Renal Physicians Association. Since January, 2014, Dr. Jones is Chairman of Kidney Care Partners and he is the President and Managing Director of his nephrology practice (Delaware Valley Nephrology and Hypertension, Associates). |
Name |
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Age |
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Director
Since |
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Principal
Occupation, Other Business Experience
During Past Five Years and Other Directorships |
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James T. Gunton(2) |
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49 |
|
2008 |
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Since 2001, Mr. Gunton has served
as general partner of NJTC Venture Fund, L.P. Mr. Gunton has been investing in privately held and publicly traded growth technology
and services companies for twenty years. Before co-founding NJTC Venture Fund in 2001, Mr. Gunton was a partner at Edison Venture
Fund from 1994 to 2000 and a rapidly-promoted manager at Oracle Corporation in the Silicon Valley from 1988 to 1991. Mr. Gunton
has generated several billion dollars of market value through involvement with more than 30 private and public emerging growth
companies. |
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Alan D. Sobel (1)(3) |
|
54 |
|
2014 |
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Mr. Sobel has been a director of the Company since November 2014. Since 1996, Mr. Sobel has served as the Managing Member of Sobel & Co., LLC, a full-service accounting, auditing, taxation, and business consulting firm. He has provided corporate advisory and consulting services, including mergers and acquisitions, for clients in the real estate, manufacturing, pharmaceutical, and distribution businesses, among others. Mr. Sobel is a Certified Public Accountant, and has served in various leadership roles including Chairman of the Audit Committee of the New Jersey Society of Certified Public Accountants. |
| (1) | Member of Nominating and Corporate Governance Committee. |
| (2) | Member of Compensation Committee. |
| (3) | Member of the Audit Committee. |
Director Experience, Qualifications, Attributes and Skills
We believe that the backgrounds and qualifications
of our directors and director nominees, considered as a group, provide a broad mix of experience, knowledge and abilities that
will allow the Board to fulfill its responsibilities. Our Nominating and Corporate Governance Committee does not have a specific
policy with regard to the consideration of diversity in identifying director nominees. However, our Nominating and Corporate Governance
Committee values diversity on our Board and considers the diversity of the professional experience, education and skills, as well
as diversity of origin, in identifying director nominees. Our Board is composed of a diverse group of leaders in their respective
fields. Many of the current directors have leadership experience at major domestic and international companies with operations
inside and outside the United States, as well as experience serving on other companies’ boards, which provides an understanding
of different business processes, challenges and strategies facing boards and other companies. Our directors have experience as
chief executive officers, presidents, or general partners of medical-device companies, physician or other professional organizations,
and investment companies which brings unique perspectives to the Board. Furthermore, our directors also have other experience that
makes them valuable members, such as prior experience with financing transactions or mergers and acquisitions that provides insight
into issues faced by companies.
The following highlights the specific experience,
qualification, attributes and skills of our individual Board members, or nominees for the Board, that have led our Nominating and
Corporate Governance Committee to conclude that these individuals should serve on our Board:
Phillip Chan, MD, PhD, our
current President and Chief Executive Officer, bring extensive experience in company management, business strategy, medicine, science,
investing, and fundraising. Prior to joining CytoSorbents, Dr. Chan was Partner at NJTC Venture Fund, LP, where he led healthcare
and life sciences investments. Dr. Chan co-founded Andrew Technologies, a medical device company commercializing its FDA-approved
HydraSolveTM lipoplasty system for plastic surgery. He is an MD/PhD internal medicine physician with a strong background
in clinical medicine and research.
Al W. Kraus, our Chairman
of the Board and former President and CEO, has more than twenty-five years’ experience managing publicly-traded and privately-held
companies in the dialysis, medical device products, personal computer and custom software industries.
Edward R. Jones, MD, MBA has
significant experience serving as a Medical Director of numerous dialysis facilities. In addition he currently serves as the President
and Managing Partner of Private Practice of Nephrology, Chairman of Kidney Care Partners, and Counselor to the Renal Physician
Association.
James T. Gunton has extensive
investment experience as a venture capitalist. In 2001, Mr. Gunton co-founded the NJTC Venture Fund, L.P. which manages more than
$75 million in assets. Mr. Gunton has been investing in growth technology entities for more than twenty years and encompassing
more than thirty companies.
Alan D. Sobel has been a licensed
CPA since 1987 and he has worked in public accounting in the areas of audit, consulting and tax, assisting both private and publicly-traded
entities. Mr. Sobel has served as a consultant and advisor to Chief Executive Officers and senior management in the pharmaceutical,
biotech, and other FDA manufacturing clients, including providing expertise in mergers and acquisitions undertaken by these entities.
He has worked extensively with Boards of Directors and Audit Committees as part of his role as lead auditor on SEC engagements.
Vote Required for Election
The receipt of a plurality of the votes
cast by stockholders entitled to vote in the election of directors is required for the election of the nominees listed above as
directors of CytoSorbents.
Recommendation of the Board
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR THE ELECTION OF THE NOMINEES FOR DIRECTORS.
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
MATTERS
Independence of Directors
Our Board has determined that each of the
members of the Board, with the exception of Dr. Phillip Chan, who serves as our President and Chief Executive Officer, is independent
as that term is defined under the applicable independence listing standards of the NASDAQ Global Market, or NASDAQ.
Meetings
Our Board held seven meetings during the
year ended December 31, 2014. During the year, no incumbent director attended fewer than 75% of the aggregate of all meetings of
the Board held during the period in which he or she served as a director and the total number of meetings held by the committee
on which he or she served during the period. Beginning in 2015, it is the policy of our Board that each director attends our annual
meetings of stockholders.
Board Leadership Structure and Role in Risk Oversight
Our Board evaluates its leadership structure
and role in risk oversight on an ongoing basis.
The Board believes that its current leadership
structure, with Dr. Chan serving as Chief Executive Officer and Mr. Kraus serving as our independent non-executive Chairman, is
appropriate for the Company at this time. Both Dr. Chan and Mr. Kraus are actively engaged on significant matters affecting us,
such as long-term strategy. The Chief Executive Officer has overall responsibility for all aspects of our operation, while the
Chairman has a greater focus on governance of the Company, including oversight of the Board. We believe this balance of shared
leadership between the two positions is a strength for the Company. As our independent non-executive Chairman, Mr. Kraus calls
and chairs regular and special meetings of the Board and all executive sessions of the independent directors, chairs and presides
at annual or special meetings of shareholders, provides meaningful input into the agenda of Board meetings, authorizes the retention
of outside advisors, consultants and legal counsel who report directly to the Board, consults frequently with committee chairs
and has the right to and often does attend Board committee meetings.
The Board is also responsible for oversight
of our risk management practices, while management is responsible for the day-to-day risk management processes. This division of
responsibilities is the most effective approach for addressing the risks facing the Company, and the Company’s board leadership
structure supports this approach. Through our President and Chief Executive Officer, and other members of management, the Board
receives periodic reports regarding the risks facing the Company. In addition, the Audit Committee assists the Board in its oversight
role by receiving periodic reports regarding our risk and control environment.
Committees of the Board
Our Board currently has three standing committees:
an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. These committees, their principal
functions and their respective memberships are described below.
Audit Committee
The current members of the Audit Committee
are Mr. Sobel, who serves as Chairman, Mr. Kraus and Dr. Jones. Each of the members of the Audit Committee is independent as defined
by the applicable NASDAQ listing standards and Securities and Exchange Commission, or the SEC, rules applicable to audit committee
members. The Board of Directors have determined that Mr. Sobel qualifies as an “audit committee financial expert,”
as such term is defined by Item 4.07(d)(5) of Regulation S-K as promulgated by the Securities and Exchange Commission.
The Audit Committee was established in accordance
with section 3(a)(58)(A) of the Exchange Act. The Audit Committee oversees our financial reporting process and system of internal
control over financial reporting, and selects and oversees the performance of, and approves in advance the services provided by,
our independent auditors. The Audit Committee provides an open avenue of communication among our independent auditors, financial
and senior management and the Board. The Audit Committee meets regularly with our independent auditors without management present,
and from time to time with management in separate private sessions, to discuss any matters that the Committee or these individuals
believe should be discussed privately with the Audit Committee, including any significant issues or disagreements that may arise
concerning our accounting practices or financial statements. In addition, the Audit Committee assists the Board in its oversight
role by receiving periodic reports regarding our risk and control environment.
Review and Approval of Related Person
Transactions. Our Board has adopted written policies and procedures for the review, approval or ratification of transactions
involving CytoSorbents and any executive officer, director, director nominee, 5% stockholder and certain of their immediate family
members (each of whom we refer to as a “related person”). The policies and procedures cover any transaction involving
$120,000 or more with a related person (a “related person transaction”) in which the related person has a material
interest and which does not fall under an explicitly stated exception set forth in the applicable disclosure rules of the SEC.
Any proposed related person transaction
must be reported to the Chairman of our Audit Committee. The policy calls for the transaction to be reviewed and, if deemed appropriate,
approved by the Audit Committee. The transaction should be approved in advance whenever practicable. If not practicable, the Audit
Committee will review, and may, if deemed appropriate, ratify the related person transaction. The policy also permits the Chairman
of the Audit Committee to approve related person transactions that arise between committee meetings, subject to ratification by
the Audit Committee at its next meeting. Any related person transaction that is ongoing in nature will be reviewed annually.
A related person transaction will be considered
approved or ratified if it is authorized by the Audit Committee or Chairman after full disclosure of the related person’s
interest in the transaction. The transaction may be approved or ratified only if the Audit Committee determines that the transaction
is not inconsistent with the Company’s best interests. In considering related person transactions, the Audit Committee will
consider any information considered material to investors and the following factors:
| · | the related person’s interest in the transaction; |
| · | the approximate dollar value of the transaction; |
| · | whether the transaction was undertaken in the ordinary course of our business; |
| · | whether the terms of the transaction are no less favorable to us than terms that we could have reached with an unrelated third
party; and |
| · | the purpose and potential benefit to us of the transaction. |
The policy provides that related party transactions
involving the compensation of our executive officers will be reviewed and approved by the Compensation Committee or our Board,
in accordance with the Compensation Committee’s charter.
The Audit Committee was established in December
of 2014, and therefore did not hold any meetings during the year ended December 31, 2014. The Audit Committee held its first meeting
on March 18, 2015, and three additional meetings are scheduled to be held in 2015. A copy of the Audit Committee’s charter
is posted on our website at www.cytosorbents.com.
Nominating and Corporate Governance Committee
The current members of the Nominating and
Corporate Governance Committee are Mr. Sobel, who serves as Chairman, Mr. Kraus and Dr. Jones. Each of the members of the Nominating
and Corporate Governance Committee is independent as defined by the applicable NASDAQ listing standards.
The Nominating and Corporate Governance
Committee assists the Board in fulfilling its responsibilities regarding the oversight of the composition of the Board and other
corporate governance matters. Among its other duties, the Nominating and Corporate Governance Committee evaluates nominees and
reviews the qualifications of individuals eligible to stand for election and reelection as directors and makes recommendations
to the Board on this matter; oversees compliance with our Code of Business Conduct and Ethics; reviews and approves related party
transactions; recommends and advises the Board on certain other corporate governance matters; and oversees the Board’s performance
evaluation process. The Nominating and Corporate Governance Committee does not have a specific policy with regard to the consideration
of diversity in identifying director nominees. However, our Nominating and Corporate Governance Committee values diversity on our
Board and considers the diversity of the professional experience, education and skills, as well as diversity of origin, in identifying
director nominees.
The Nominating and Corporate Governance
Committee was formed in December 2014 and therefore did not hold any meetings during the year ended December 31, 2014. A copy of
the Nominating and Corporate Governance Committee ’s charter is posted on our website at www.cytosorbents.com.
Evaluation and Identification of Director
Nominees. The Nominating and Corporate Governance Committee considers a number of factors in identifying and evaluating director
nominees. While all nominees should have the highest personal integrity, meet any regulatory qualifications and have a record of
exceptional ability and judgment, the Board relies on the judgment of members of the Nominating and Corporate Governance Committee,
with input from our President and Chief Executive Officer, to assess the qualifications of potential Board nominees with a view
to the contributions that they would make to the Board and to CytoSorbents. Because our Board believes that its members should
ideally reflect a mix of experience and other qualifications, there is no rigid formula. Our Nominating and Corporate Governance
Committee does not have a specific policy with regard to the consideration of diversity in identifying director nominees. However,
our Nominating and Corporate Governance Committee values diversity on our Board and considers the diversity of the professional
experience, education and skills, as well as diversity of origin, in identifying director nominees. In evaluating potential candidates,
the Nominating and Corporate Governance Committee will consider, among others things, the degree to which a potential candidate
fulfills a current Board need (e.g., the need for an audit committee financial expert), as well as the candidate’s ability
and commitment to understand CytoSorbents and its industry and to devote the time necessary to fulfill the role of director (including,
without limitation, regularly attending and participating in meetings of the Board and its Committees). In considering potential
candidates, the Nominating and Corporate Governance Committee will consider the overall competency of the Board in the following
areas:
In addition, the Nominating and Corporate
Governance Committee may consider other factors, as appropriate in a particular case, including, without limitation, the candidate’s:
| · | sound business and personal judgment; |
| · | diversity of origin, experience, background and thought; |
| · | senior management experience and demonstrated leadership ability; |
| · | accountability and integrity; |
| · | industry or business knowledge, including science, technology, and marketing acumen; |
| · | the extent, nature and quality of relationships and standing in the research and local communities; |
| · | in connection with nominees to be designated as “independent” directors, “independence” under regulatory |
| · | definitions, as well as in the judgment of the Nominating and Corporate Governance Committee ; |
| · | independence of thought and ideas; and |
| · | other board appointments and service. |
The Nominating and Corporate Governance
Committee considers recommendations for nominations from a variety of sources, including members of the Board, business contacts,
community leaders and members of management. As described below, the Nominating and Corporate Governance Committee will also consider
stockholder recommendations for Board nominees. The Nominating and Corporate Governance Committee’s process for identifying
and evaluating candidates is the same with respect to candidates recommended by members of the Board, management, stockholders
or others.
Stockholder Director Nominee Recommendations.
The Nominating and Corporate Governance Committee will consider director nominees recommended by stockholders. Stockholders who
wish their proposed nominee to be considered by the Nominating and Corporate Governance Committee for nomination at our next annual
stockholders’ meeting should submit information about their nominees by no later than 90 days nor earlier than 120 days prior
to the one year anniversary of the mailing of the proxy statement for our most recent annual meeting of stockholders. Stockholders
who wish to recommend a nominee should submit timely notice in writing to the Nominating and Corporate Governance Committee, c/o
CytoSorbents Corporation, 7 Deer Park Drive, Suite K, Monmouth Junction, New Jersey 08852. Stockholders also have the right to
nominate director candidates themselves, without any prior review or recommendation by the Nominating and Corporate Governance
Committee or the Board, by following the procedures set forth in our bylaws as described at “Certain Deadlines for the 2015
Annual Meeting” in this proxy statement.
Compensation Committee
The current members of the Compensation
Committee are Mr. Kraus, who serves as Chairman of the Compensation Committee, and Mr. Gunton. Each of the current members of the
Compensation Committee is independent as defined by the applicable NASDAQ listing standards.
Decisions regarding the compensation of
our executive officers are made by the Compensation Committee. The Compensation Committee’s principal responsibilities include
reviewing the Company’s overall compensation philosophy and the adequacy and market competitiveness of our compensation plans
and programs, evaluating the Company’s compensation policies and practices to determine whether these policies and practices
create incentives for a particular employee group to take actions which could put the Company at undue risk, evaluating the performance
of and reviewing and approving compensation for our executive officers, evaluating and recommending director compensation, and
reviewing and discussing with management the compensation disclosures included in this proxy statement. The Compensation Committee
also administers our equity-based and other incentive plans, including assuming responsibility for granting, or delegating as appropriate
the authority for granting, and making decisions with respect to, awards under our equity compensation and other incentive plans.
The Compensation Committee held two meetings
during the year ended December 31, 2014. A copy of the Compensation Committee’s charter is posted on our website at www.cytosorbents.com.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves as
a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any other entity
that has one or more of its executive officers serving as a member of our Board or Compensation Committee. With the exception of
Al Kraus, who served as our President and Chief Executive Officer from 2003 to 2008, none of the members of the Compensation Committee
has ever been our employee or one of our officers.
Stockholder Communications to the Board of Directors
Stockholders may send communications to
our Board in writing, addressed to the full Board of Directors or a specific committee of the Board, c/o Amy Vogel, Investor Relations,
CytoSorbents Corporation, 7 Deer Park Drive, Suite K, Monmouth Junction, New Jersey 08852, telephone (732) 329-8885, avogel@cytosorbents.com.
Code of Ethics
We have adopted a Code of Business Conduct
and Ethics that applies to our employees (including our principal executive officer, chief financial officer and other members
of our finance and administration department) and our directors. Our Code of Business Conduct and Ethics is posted on our website
at www.cytosorbents.com. In addition, we intend to post on our website all disclosures that are required by law or NASDAQ Stock
Market listing standards concerning any amendments to, or waivers from, any provision of our Code of Business Conduct and Ethics.
DIRECTOR COMPENSATION
The following table shows for the fiscal
year ended December 31, 2014 certain information with respect to the compensation of all non-employee directors of the Company.
Director Compensation
for Fiscal 2014
Name | |
Fees Earned or Paid in Cash ($) | | |
Option Awards ($) (1) | | |
Total ($) | |
Joseph Rubin (2) | |
| 7,500 | | |
| 8,658 | (2) | |
| 16,158 | |
Edward R. Jones (3) | |
| 10,000 | | |
| 8,658 | (3) | |
| 18,658 | |
James Gunton (4) | |
| — | | |
| 8,658 | (4) | |
| 8,658 | |
Al Kraus (5) | |
| 25,000 | | |
| 17,316 | (5) | |
| 42,316 | |
Alan Sobel (6) | |
| — | | |
| — | (6) | |
| — | |
Phillip Chan (7) | |
| — | | |
| — | (7) | |
| — | |
(1) |
The value of option awards granted to directors has been estimated pursuant to the recognition requirements of accounting standards for accounting for stock-based compensation for the options described in the footnotes below, except that for purposes of this table, we have assumed that none of the options will be forfeited. The directors will not realize the estimated value of these awards in cash until these awards are vested and exercised or sold. For information regarding our valuation of option awards, see “Stock-Based Compensation” in Note 2 of our financial statements for the period ended December 31, 2013. |
(2) |
In connection with his service as a director in 2014 we issued Mr. Rubin options to purchase 6,000 shares of our common stock at an exercise price of $4.875 per share, which were granted on March 28, 2014 and expire on March 28, 2024. All 6,000 shares vest and become exercisable on March 28, 2015. Mr. Rubin passed away in September 2014. |
(3) |
In connection with his service as a director in 2014 we issued Dr. Jones options to purchase 6,000 shares of our common stock at an exercise price of $4.875 per share, which were granted on March 28, 2014 and expire on March 28, 2024. All 6,000 shares vest and become exercisable on March 28, 2015. |
(4) |
In connection with Mr. Gunton’s service as a director in 2014, the NJTC Investment Fund, LP was issued options to purchase 6,000 shares of our common stock at an exercise price of $4.875 per share, which were granted on March 28, 2014 and expire on March 28, 2024. All 6,000 shares vest and become exercisable on March 28, 2015. |
(5) |
Pursuant to an agreement and in connection with Mr. Kraus’ service as a director in 2014 we issued options to purchase 12,000 shares of our common stock at an exercise price of $4.875 per share, which were granted on March 28, 2014 and expire on March 28, 2024. All 12,000 shares vest and become exercisable on March 28, 2015. |
(6) |
Effective November 11, 2014, Mr. Sobel was appointed to the Company’s Board of Directors. Mr. Sobel did not receive compensation for director services in 2014. |
(7) |
Effective July 24, 2008, Dr. Chan was appointed
to the Company’s Board of Directors. Effective January 1, 2009, Dr. Chan entered into an employment agreement becoming interim
Chief Executive Officer of the Company. Dr. Chan officially became CEO and President in 2010. During 2014, Dr. Chan was an employee
Director and was not eligible to receive compensation for Director services. |
In 2007, we approved arrangements under
which each non-employee director receives a fee of $2,000 for each quarterly Board meeting attended in
and $1,000 for conference call participation in each quarterly meeting. In addition, each non-employee director will be eligible
to be issued options to purchase up to 400 shares of our common stock. Such options will be exercisable in accordance with the
Company’s option pricing policy on the date of grant. Our directors are also reimbursed for actual out-of-pocket expenses
incurred by them in connection with their attendance at meetings of the Board of Directors.
In March 2015, the Board of Directors approved
a new fee schedule for its members whereby the Chairman will be entitled to $23,000 annually and each independent Board member
will be entitled to $10,000 annually; the Chairman of the Audit and Nominating and Corporate Governance Committee will receive
$10,000 per year and each member of the Audit and Nominating and Corporate Governance Committee will receive $4,000 per year; and
the Chairman and each member of the Compensation Committee will receive $3,000 annually.
In connection with his appointment as Chairman
of the Board in January 2009, we agreed to compensate Mr. Kraus at the rate of $20,000 per annum, and on January 8, 2009 we issued
Mr. Kraus a ten year option to purchase 8,000 shares of our common stock at a price of $2.10 per share. In December 2009, we issued
Mr. Kraus an additional option to purchase 4,000 shares of common stock at an exercise price of $4.15 per share. Additionally for
services performed as Chief Executive Office of the company through December 31, 2008, the Board approved a 10 year option to purchase
18,000 shares of our common stock at a price of $4.20 per share on January 28, 2009. In January 2011, we renewed the agreement
with Al Kraus, as Chairman of the Board of Directors for an additional two year term period. In February 2013, Mr. Kraus entered
into another agreement with the Company to remain Chairman of the Board for the fiscal 2013 year, compensated at $25,000 per annum,
with the issuance of a ten year option to purchase 12,000 shares of our common stock at a price of $2.875 per share. In January
2014, Mr. Kraus entered into another agreement with the Company to remain Chairman of the Board for the fiscal 2014 year, compensated
at $25,000 per annum, with this issuance of a 10-year option to purchase 12,000 shares of our common stock at a price of $4.875
per share. In April 2015, in connection with his services as Chairman of the Board of Directors, Mr. Kraus received a 10-year option
to purchase 12,000 shares of our common stock at a price of $8.07 per share. Additionally, in April 2015, Mr. Kraus received a
restricted stock unit award of 55,000 shares of our common stock that would vest in the event of a change of control of the Company.
OFFICERS AND KEY EMPLOYEES
Below is information about Phillip Chan,
MD, PhD, Vincent Capponi, Kathleen Bloch and Robert Bartlett, MD, our executive officers. This information includes each officer’s
age, his or her position with CytoSorbents, the length of time he or she has held each position and his or her business experience
for at least the past five years. Our Board elects our executive officers annually, and executive officers serve until they resign
or the Board terminates their position. There are no family relationships among any of our directors, nominee for director and
executive officers.
Name |
|
Age |
|
Position |
Phillip Chan, MD, PhD |
|
44 |
|
President and Chief Executive Officer |
Vincent Capponi |
|
57 |
|
Chief Operating Officer |
Kathleen Bloch |
|
60 |
|
Chief Financial Officer |
Robert Bartlett, MD |
|
75 |
|
Chief Medical Officer |
Phillip Chan, MD, PhD. Dr. Chan became a
director of the Company in 2008 and since January 2009 is also Chief Executive Officer and President. Prior to CytoSorbents, Dr.
Chan led healthcare and life science investments for the NJTC Venture Fund from 2003 to 2008, most recently as a Partner. In 2006,
Dr. Chan co-founded Andrew Technologies, a medical device company commercializing its FDA-approved HydraSolveTM lipoplasty system
for plastic surgery. He is an Internal Medicine physician with a strong background in clinical medicine and research. Dr. Chan
received his MD and PhD from the Yale University School of Medicine, completed his Internal Medicine residency at the Beth Israel
Deaconess Medical Center at Harvard Medical School, and received his Board certification. He also holds a BS in cell and molecular
biology from Cornell University.
Vincent Capponi, MS. Mr. Capponi joined
the Company as Vice President of Operations in 2002 and became its Chief Operating Officer in July 2005. He has more than 20 years
of management experience in medical device, pharmaceutical and imaging equipment at companies including Upjohn, Sims Deltec and
Sabratek. Prior to joining CytoSorbents in 2002, Mr. Capponi held several senior management positions at Sabratek and its diagnostics
division GDS, and was interim president of GDS diagnostics in 2001. From 1998 to 2000, Mr. Capponi was Senior Vice President and
Chief Operating Officer for Sabratek and Vice President Operations from 1996 to 1998. He received his MS in Chemistry and his BS
in Chemistry and Microbiology from Bowling Green State University.
Kathleen P. Bloch, MBA, CPA. Ms. Bloch has
more than 20 years of executive financial experience in both public and private companies. She replaced Interim CFO, Mr. Ronald
Berger, effective May 29, 2013. Most recently, she was Chief Financial Officer of Laureate Biopharmaceutical Services, Inc., a
leader in biopharmaceutical contract development and manufacturing. Previously, Ms. Bloch was Chief Operating Officer and CFO of
PC Group, Inc., a $70 million in revenue, NASDAQ-listed, publicly traded company with a diverse group of holdings, including several
medical device subsidiaries. Prior to that, Ms. Bloch was CFO of Silver Line Building Products Corporation, one of the world’s
largest manufacturers of vinyl windows. Previously, Ms. Bloch was CFO of ERD Waste Corporation, a NASDAQ-listed, publicly-traded
environmental services provider, operating in 16 states with more than $60 million in sales. She began her career at the accounting
firm of Peat Marwick International. Ms. Bloch holds a Master of Business Administration degree and a Bachelor of Science Accounting
degree from LaSalle University, and is a Certified Public Accountant.
Robert Bartlett, MD. Dr. Bartlett became
our Chief Medical Officer in January 2009. He is Professor Emeritus of Surgery at the University of Michigan Health System. Prior
to becoming Professor Emeritus in 2005, Dr. Bartlett was Director of the Surgical Intensive Care Unit, Chief of the Trauma/Clinical
Care Division and Director of the Extracorporeal Life Support Program at the University of Michigan Medical Center. Dr. Bartlett
was the pioneer in the development of the extracorporeal membrane oxygenation machine (ECMO), used to oxygenate blood in critically
ill patients worldwide. He received his MD from the University of Michigan Medical School, cum laude. He completed his general
surgery residency at Peter Bent Brigham Hospital in Boston, and was Chief resident in thoracic surgery. Dr. Bartlett was also a
NIH Trainee in Academic Surgery at Harvard Medical School, and was previously faculty at the University of California, Irvine.
Dr. Bartlett is the recipient of 26 separate research grants, 14 from the National Institute of Health, including an RO1 grant
for the development of a totally artificial lung. He has also received numerous national and international awards for his contributions
to critical care medicine.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows for the fiscal
years ended December 31, 2014 and 2013, compensation awarded to or paid to, or earned by, our Chief Executive Officer, our Chief
Operating Officer, our Chief Financial Officer, and our Chief Medical Officer (the “Named Executive Officers”).
Name and Principal Position |
|
Year |
|
|
Salary ($) |
|
|
Bonus ($) |
|
|
Option
Awards(1) ($) |
|
|
All Other Compensation |
|
|
Total ($) |
|
Phillip Chan
Chief Executive Officer |
|
|
2014 |
|
|
|
245,386 |
|
|
|
50,000 |
(3) |
|
|
22,875 |
(2) |
|
|
-0- |
|
|
|
318,261 |
|
|
|
|
2013 |
|
|
|
245,386 |
(3) |
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
245,386 |
|
Vincent Capponi,
Chief Operating Officer |
|
|
2014 |
|
|
|
239,445 |
|
|
|
40,000 |
|
|
|
22,500 |
(4) |
|
|
-0- |
|
|
|
301,945 |
|
|
|
|
2013 |
|
|
|
239,445 |
(5) |
|
|
200 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
239,645 |
|
Kathleen P. Bloch,
Chief Financial Officer |
|
|
2014 |
|
|
|
200,000 |
(6) |
|
|
55,000(7) |
|
|
|
15,000 |
(8) |
|
|
-0- |
|
|
|
270,000 |
|
|
|
|
2013 |
|
|
|
118,974 |
|
|
|
-0- |
|
|
|
5,375 |
(9) |
|
|
-0- |
|
|
|
124,549 |
|
Ronald Berger
Interim Chief Financial Officer (10) |
|
|
2014 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
5,550 |
(11) |
|
|
94,409 |
|
|
|
99,959 |
|
|
|
|
2013 |
|
|
|
-0- |
|
|
|
200 |
|
|
|
9,800 |
(12) |
|
|
100,526 |
|
|
|
110,526 |
|
Dr. Robert Bartlett
Chief Medical Officer |
|
|
2014 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
6,000 |
(1) |
|
|
53,000 |
|
|
|
59,000 |
|
|
|
|
2013 |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
-0- |
|
|
|
52,000 |
|
|
|
52,000 |
|
(1) |
The value of option awards granted to the Named Executive Officers has been estimated pursuant to recognition requirements of accounting standards for accounting for stock-based compensation for the options described in the footnotes below, except that for purposes of this table, we have assumed that none of the options will be forfeited. The Named Executive Officers will not realize the estimated value of these awards in cash until these awards are vested and exercised or sold. For information regarding our valuation of option awards, see “Stock-Based Compensation” in Note 2 of our financial statements for the period ended December 31, 2013. |
(2) |
On April 4, 2014, Dr. Chan received options to purchase 30,500 shares of stock at an exercise price of $2.88. Fifty (50) percent of the options vest on December 31, 2014 and the remainder vest on December 31, 2015 and expire on April 4, 2023. |
(3) |
Dr. Chan’s salary for 2013 was $245,386, of which he deferred payment on $11,575 until 2014. Effective January 1, 2015, Dr Chan’s salary will be $325,000 annually. In addition, Dr. Chan was awarded a bonus of $50,000 for 2014 which will be paid in 2015. |
(4) |
On April 4, 2014, Mr. Capponi received options to purchase 30,000 shares of stock at an exercise price of $2.88. Fifty (50) percent of the options vest on December 31, 2014 and the remainder vest on December 31, 2015 and expire on April 4, 2023. |
(5) |
Mr. Capponi’s salary for 2013 was $239,445, of which he deferred payment on $16,476 until 2014. Effective January 1, 2015, Mr. Capponi’s salary will be $270,000 annually. In addition, Mr. Capponi was awarded a bonus of $40,000 for 2014 which will be paid in 2015. |
(6) |
Beginning with her employment beginning on May 29, 2013, Ms. Bloch’s annual salary was $200,000. Effective January 1, 2015, Ms. Bloch’s salary will be $235,000 annually. |
(7) |
Ms. Bloch received a bonus of $20,000 in 2013 which was paid in 2014. In addition, Ms. Bloch was awarded a bonus of $35,000 for 2014 which will be paid in 2015. |
(8) |
On April 4, 2014 Ms. Bloch received options to purchase 20,000 shares of stock at an exercise price of $2.88. Fifty (50) percent of the options vest on December 31, 2014 and the remainder vest on December 31, 2015 and expire on April 4, 2023. |
(9) |
In connection with her employment, Ms. Bloch received options to purchase 40,000 shares on May 29, 2013 at an exercise price of $2.90. These options vest as follows: (1) 20,000 on May 9, 2014; and (2) 20,000 on May 9, 2015 and expire on May 29, 2023. |
(10) |
Mr. Berger assumed the position of Interim CFO on July 12, 2012. On May 29, 2013, Ms. Bloch became Chief Financial Officer. |
(11) |
On April 4, 2014, Mr. Berger received options to purchase 7,400 shares of stock at an exercise price of $2.88. Fifty (50) percent of the options vest on December 31, 2014 and the remainder vest on December 31, 2015 and expire on April 4, 2018. |
(12) |
On February 6, 2013, Mr. Berger received options to purchase 14,000 shares of stock at an exercise price of $2.65. These options vested on February 6, 2013, and expire five years from the date of issuance. |
(13) |
On April 4, 2014 Mr. Bartlett received options to purchase 8,000 shares of stock at an exercise price of $2.88. Fifty (50) percent of the options vest on December 31, 2014 and the remainder vest on December 31, 2015 and expire on April 4, 2023. |
Employment Agreements
Dr. Phillip Chan
Effective December 31, 2013, we renewed
the employment agreement by and between Dr. Phillip Chan and the Company as Chief Executive Officer retroactive to January 1, 2013.
Per the terms of the agreement, we agreed to pay Dr. Chan an annual base compensation of $245,386 payable in equal semimonthly
installments in accordance with our usual practice. This base compensation shall be subject to review by our Compensation Committee,
but his compensation may not be reduced from then current level. He is eligible for employee stock options, which will be adjusted
on the same basis as all other stockholders to account for any stock split, stock dividends, combination or recapitalization. The
agreement contains standard termination provisions and provides for up to six weeks of severance in connection with termination
upon certain events. Although the employment agreement expired by its terms on January 1, 2014, the parties have continued operating
under the terms of the expired agreement (including with respect to Dr. Chan’s current salary) as a new employment arrangement
is negotiated and finalized. We anticipate entering into a new employment agreement with Dr. Chan in the second fiscal quarter
of 2015.
Vincent Capponi
Effective December 31, 2013, we renewed
the employment agreement by and between Vincent Capponi and the Company as Chief Operating Officer retroactive to January 1, 2013.
Per the terms of the agreement, we agree to pay Vincent Capponi an annual base compensation of $239,445 payable in equal semimonthly
installments in accordance with our usual practice. This base compensation shall be subject to review by our Compensation Committee,
but his compensation may not be reduced from then current level. He is eligible for employee stock options, which will be adjusted
on the same basis as all other stockholders to account for any stock split, stock dividends, combination or recapitalization. The
agreement contains standard termination provisions and provides for up to two weeks of severance in connection with termination
upon certain events. Although the employment agreement expired by its terms on January 1, 2014, the parties have continued operating
under the terms of the expired agreement (including with respect to Mr. Capponi’s current salary) as a new employment arrangement
is negotiated and finalized. We anticipate entering into a new employment agreement with Mr. Capponi in the second fiscal quarter
of 2015.
Robert Bartlett
Effective December 31, 2013, we renewed
the consulting agreement with Dr. Bartlett. Pursuant to this consulting agreement, in 2013 we agreed to pay Dr. Robert Bartlett
consulting fees at an annualized rate of $52,000 payable in equal monthly installments of $4,333.33 per month. In addition, effective
January 1, 2014, we entered into a consulting agreement for fiscal year 2014 in which we agreed to pay Dr. Robert Bartlett consulting
fees at an annualized rate of $53,000 payable in equal monthly installments of $4,416.67 per month. He is eligible for stock options,
which will be adjusted on the same basis as all other stockholders to account for any stock split, stock dividends, combination
or recapitalization. Although the consulting agreement expired by its terms on January 1, 2015, Dr. Bartlett continues to provide
services to the Company at the same fee rate as a new consulting arrangement is negotiated and finalized. We anticipate entering
into a new consulting agreement with Dr. Bartlett in the second fiscal quarter of 2015.
Kathleen P. Bloch
Effective May 29, 2013, we entered into
the employment agreement with Ms. Kathleen P. Bloch. Pursuant to this employment agreement, Ms. Bloch will perform the services
and duties that are normally and customarily associated with these positions as well as other associated duties as our Board reasonably
determines. The agreement commences on May 29, 2013, with an initial term expiring on May 31, 2014. Unless otherwise terminated,
the agreement auto-renews for an additional one-year term and calls for an initial base salary of $200,000 payable in equal semi-monthly
installments in accordance with the Company’s usual practice. As a signing bonus in May 2013, Ms. Bloch was also given a
ten-year option to purchase 40,000 shares (adjusted for a twenty-five-for-one (25:1) reverse split which was effective on December
3, 2014) of the Company’s common stock. This option vests in equal installments over two years: 20,000 options at the 12
month anniversary of the initial May 2013 agreement, and 20,000 options at 24 month anniversary of the signing of the initial May
2013 employment agreement, provided that Ms. Bloch remains a full-time employee of the Company. The agreement with Ms. Bloch does
not reflect the revised share amounts pursuant to the twenty-five-for-one (25:1) reverse split of our Common Stock, which was effective
on December 3, 2014. The agreement contains standard termination provisions and provides for up to six months of severance in connection
with termination upon certain events. We anticipate entering into a new employment agreement with Ms. Bloch in the second fiscal
quarter of 2015.
Outstanding Equity Awards at December 31, 2014
The following table summarizes the equity
awards we have made to our named executive officers that have not been exercised and remained outstanding as of December 31, 2014.
Name |
|
Number of Securities Underlying Unexercised Options (#) Exercisable |
|
|
Option Awards Number of Securities Underlying Unexercised Options (#) Unexercisable |
|
|
Option Exercise Price ($) |
|
|
Option Expiration Date |
Phillip Chan |
|
|
600 |
|
|
|
|
|
|
|
2.000 |
(1) |
|
12/31/18 |
|
|
|
100,155 |
|
|
|
|
|
|
|
2.100 |
(1) |
|
1/8/19 |
|
|
|
20,000 |
|
|
|
|
|
|
|
4.325 |
(1) |
|
1/4/20 |
|
|
|
89,100 |
|
|
|
|
|
|
|
3.450 |
(1) |
|
5/5/20 |
|
|
|
15,250 |
|
|
|
15,250 |
|
|
|
2.875 |
(2) |
|
4/4/23 |
|
|
|
66,500 |
|
|
|
|
|
|
|
4.875 |
(3) |
|
3/28/24 |
|
|
|
|
|
|
|
70,000 |
|
|
|
8.070 |
(4) |
|
4/8/25 |
Vincent Capponi |
|
|
2,000 |
|
|
|
|
|
|
|
41.25 |
(1) |
|
12/31/16 |
|
|
|
44,000 |
|
|
|
|
|
|
|
6.25 |
(1) |
|
01/16/18 |
|
|
|
88,000 |
|
|
|
|
|
|
|
0.875 |
(1) |
|
06/25/18 |
|
|
|
16,000 |
|
|
|
|
|
|
|
4.200 |
(1) |
|
01/28/19 |
|
|
|
20,000 |
|
|
|
|
|
|
|
4.325 |
(1) |
|
1/4/20 |
|
|
|
81,300 |
|
|
|
|
|
|
|
3.450 |
(1) |
|
5/5/20 |
|
|
|
15,000 |
|
|
|
15,000 |
|
|
|
2.875 |
(2) |
|
4/4/23 |
|
|
|
62,700 |
|
|
|
|
|
|
|
4.875 |
(3) |
|
3/28/24 |
|
|
|
|
|
|
|
66,000 |
|
|
|
8.070 |
(4) |
|
4/8/25 |
Kathleen P. Bloch |
|
|
20,000 |
|
|
|
20,000 |
|
|
|
2.900 |
(5) |
|
5/7/23 |
|
|
|
10,000 |
|
|
|
10,000 |
|
|
|
2.875 |
(6) |
|
4/4/23 |
|
|
|
53,200 |
|
|
|
|
|
|
|
4.875 |
(3) |
|
3/28/24 |
|
|
|
|
|
|
|
56,000 |
|
|
|
8.070 |
(4) |
|
4/8/25 |
Robert Bartlett |
|
|
2,000 |
|
|
|
|
|
|
|
2.100 |
(1) |
|
01/08/14 |
|
|
|
7,000 |
|
|
|
|
|
|
|
1.825 |
(1) |
|
1/4/20 |
|
|
|
20,600 |
|
|
|
|
|
|
|
3.450 |
(1) |
|
5/5/20 |
|
|
|
4,000 |
|
|
|
4,000 |
|
|
|
2.875 |
(7) |
|
4/4/23 |
|
|
|
19,000 |
|
|
|
|
|
|
|
4.875 |
(3) |
|
3/28/24 |
|
|
|
|
|
|
|
20,000 |
|
|
|
8.070 |
(4) |
|
4/8/25 |
(1) |
Fully vested. |
(2) |
Vests and becomes exercisable as to (i) 15,250 shares on December 31, 2014; (ii) 15,250 shares on December 31, 2015. |
(3) |
Vest and becomes exercisable on March 30, 2015. |
(4) |
These options will vest on the achievement of certain milestones connected to the Company’s operations, subject to approval by the Board of Directors. |
(5) |
Vests and becomes exercisable as to (1) 20,000 shares on May 9, 2014; and (ii) 20,000 shares on May 9, 2015. |
(6) |
Vests and becomes exercisable as to (i) 10,000 shares on December 31, 2014 and (ii) 10,000 shares on December 31, 2015. |
(7) |
Vests and becomes exercisable as to (i) 8,000 shares on December 31, 2014 and (ii) 8,000 shares on December 31, 2015. |
PROPOSAL 2:
ADVISORY (NON-BINDING) VOTE ON EXECUTIVE
COMPENSATION (SAY-ON-PAY)
Background
The Dodd-Frank Wall Street Reform and Consumer
Protection Act, or the Dodd-Frank Act, requires that our stockholders have the opportunity to cast an advisory (non-binding) vote
on executive compensation at the Annual Meeting, commonly referred to as a “Say-on-Pay” vote, as well as an advisory
vote with respect to whether future Say-on-Pay votes will be held every one, two or three years, which is the subject of Proposal
No. 3 in this proxy statement.
The advisory vote on executive compensation
is a non-binding vote on the compensation of our named executive officers, the tabular disclosure regarding such compensation,
and the accompanying narrative disclosure, set forth in this proxy statement.
The advisory vote on executive compensation
is not a vote on our general compensation policies, the compensation of our Board, or our compensation policies as they relate
to risk management. The Dodd-Frank Act requires that we hold the advisory vote on executive compensation at least once every three
years.
The Compensation Committee of our Board
oversees and administers our executive compensation program, including the evaluation and approval of compensation plans, policies
and programs offered to our named executive officers. The Compensation Committee has designed the executive compensation program
for our named executive officers to meet the following objectives:
| · | Ensure executive compensation is aligned with our corporate strategies and business objectives. |
| · | Subject a substantial portion of an executive officer’s compensation to achieving both short-term and long-term performance
objectives that enhances stockholder value by linking rewards to measurable corporate and individual performance. |
| · | Reinforce the importance of meeting and exceeding identifiable and measurable goals through awards for performance. |
| · | Provide total direct compensation that is competitive in the marketplace in order to attract, retain and motivate the best
possible executive candidates. |
| · | Provide an incentive for long-term continued employment with our Company. |
We believe our approach to goal setting
and setting of targets with payouts based upon performance results assists in mitigating excessive risk-taking that could harm
our value or reward poor judgment by our executives. Several features of our programs reflect sound risk management practices.
We believe we have allocated our compensation among base salary and short and long-term compensation target opportunities in such
a way as to not encourage excessive risk-taking.
The vote solicited by this Proposal No.
2 is advisory, and therefore is not binding on the Company, our Board or our Compensation Committee. The outcome of the vote will
not require the Company, our Board or our Compensation Committee to take any action, and will not be construed as overruling any
decision by the Company or the Board.
Furthermore, because this non-binding, advisory
resolution primarily relates to the compensation of our named executive officers that has already been paid or contractually committed,
there is generally no opportunity for us to revisit these decisions. However, our Board, including our Compensation Committee,
values the opinions of our stockholders and, to the extent there is any significant vote against the executive officer compensation
as disclosed in this proxy statement, we consider our stockholders’ concerns and evaluate what actions, if any, may be appropriate
to address those concerns.
Stockholders will be asked at the Annual
Meeting to approve the following resolution pursuant to this Proposal No. 2:
RESOLVED, that the stockholders of CytoSorbents
Corporation approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, disclosed pursuant
to Item 402 of Regulation S-K in the Company’s definitive proxy statement for the 2015 Annual Meeting.
Vote Required for Approval
The affirmative vote of a majority of the
votes cast in person or by duly executed proxies is required for approval of the advisory (non-binding) vote on executive compensation.
Recommendation of the Board
THE BOARD UNANIMOUSLY RECOMMENDS
A VOTE FOR THE APPROVAL OF THE ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION.
PROPOSAL 3:
ADVISORY (NON-BINDING) VOTE ON THE
FREQUENCY OF AN ADVISORY VOTE ON
EXECUTIVE COMPENSATION
In connection with Proposal No. 2 above
seeking advisory approval of our executive compensation program, the Dodd-Frank Act also requires that we include in this proxy
statement a separate advisory (non-binding) stockholder vote to advise on whether the Say-on-Pay vote should occur every one, two
or three years. You have the option to vote for any one of the three options, or to abstain on the matter. For the reasons described
below, our Board recommends that our stockholders select a frequency of three years, or a triennial vote. We are required to solicit
stockholder approval on the frequency of future Say-on-Pay proposals at least once every six years, although we may seek stockholder
input more frequently.
Our Board believes that our current executive
compensation programs adequately links executive compensation to our performance and aligns the interests of our executive officers
with those of our stockholders. Our Board believes that, of the three choices, submitting a nonbinding, advisory Say-on-Pay resolution
to stockholders every three years is the most appropriate choice. Our compensation program does not change significantly from year
to year and is designed to induce performance over a multi-year period. Our Board believes that stockholder feedback every three
years will be more useful as it will provide stockholders with a sufficient period of time to evaluate the overall compensation
paid to our named executive officers, the components of that compensation and the effectiveness of that compensation. The amount
of compensation and mix of components of such compensation in any one year may differ from year to year, and the three year period
will provide stockholders with a more complete view of the amount and mix of that compensation. The triennial Say-on-Pay vote will
also provide stockholders with the benefit of assessing over a period of years whether the components of the compensation paid
to our named executive officers have achieved positive results for the Company. A three-year vote cycle also gives the Board and
Compensation Committee sufficient time to thoughtfully consider the results of the advisory vote, to engage with stockholders to
understand and respond to the vote results and effectively implement any appropriate changes to our executive compensation policies
and procedures.
Our Board is aware of and took into account
views that some have expressed in support of conducting an annual advisory vote on executive compensation. We are aware that some
stockholders believe that annual advisory votes will enhance or reinforce accountability. However, we have in the past been, and
will in the future continue to be, proactively engaged with our stockholders on a number of topics and in a number of forums. Thus,
we view the advisory vote on executive compensation as an additional, but not exclusive, opportunity for our stockholders to communicate
with us regarding their views on the Company’s executive compensation programs. In addition, because our executive compensation
programs have typically not changed materially from year to year and are designed to enhance long-term performance, we are concerned
that an annual advisory vote on executive compensation could lead to short-term perspective inappropriately bearing on our executive
compensation programs. Finally, although we believe that holding an advisory vote on executive compensation every three years will
reflect the right balance of considerations in the normal course, we will periodically reassess that view and can provide for an
advisory vote on executive compensation on a more frequent basis if changes in our compensation programs or other circumstances
suggest that a more frequent vote would be appropriate.
We understand that our stockholders may
have different views as to what is the best approach for CytoSorbents, and we look forward to hearing from our stockholders on
this proposal.
The Board will continue to engage with stockholders
on executive compensation between stockholder votes.
You may cast your vote on your preferred
voting frequency by choosing the option of three years, two years, one year, or abstain from voting when you vote in response to
the resolution set forth below.
RESOLVED, that the stockholders of CytoSorbents
Corporation determine, on an advisory basis, that the frequency with which the stockholders of the Company shall have an advisory
vote on executive compensation, as disclosed pursuant to the compensation disclosure rules of the SEC, is:
Choice 1—every year;
Choice 2—every two years;
Choice 3—every three years; or
Choice 4—abstain from voting.
Vote Required for Approval
The option of three years, two years or
one year that receives the highest number of votes cast by stockholders will be the frequency for the advisory vote on the compensation
of our named executive officers that has been selected by stockholders. However, because this vote is advisory and is not binding
on our Board, the Board may decide that it is in the best interests of our stockholders and the Company to hold an advisory vote
on executive compensation more or less frequently than the option approved by our stockholders.
This vote may not be construed (1) as overruling
a decision by the Company or our Board or (2) to create or imply any change or addition to the fiduciary duties of the Company
or our Board.
Recommendation of the Board
THE BOARD UNANIMOUSLY RECOMMENDS THAT
YOU VOTE FOR THE OPTION OF ONCE EVERY THREE YEARS AS THE FREQUENCY WITH WHICH STOCKHOLDERS ARE PROVIDED AN ADVISORY VOTE ON EXECUTIVE
COMPENSATION, AS DISCLOSED PURSUANT TO ITEM 402 OF REGULATION S-K.
STOCKHOLDERS ARE NOT VOTING TO APPROVE
OR DISAPPROVE THE BOARD’ RECOMMENDATION. STOCKHOLDERS MAY CHOOSE AMONG THE FOUR CHOICES INCLUDED IN THE RESOLUTION SET FORTH
ABOVE.
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT
AUDITORS
The Audit Committee has appointed the registered
independent public accounting firm of WithumSmith+Brown, PC as the independent auditors to examine the Company’s financial
statements for the fiscal year ending December 31, 2014 and has recommended to the Board that such appointment be submitted to
our stockholders for ratification. WithumSmith+Brown, PC has served as our independent auditors since 2001. Representatives from
WithumSmith+Brown, PC are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they
so desire and to respond to appropriate questions from those attending the meeting.
Although stockholder ratification of the
appointment of our independent auditors is not required by our bylaws or otherwise, we are submitting the selection of WithumSmith+Brown,
PC to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection,
then our Audit Committee will reconsider whether or not to retain that firm.
Vote Required for Approval
The affirmative vote of a majority of the
votes cast in person or by duly executed proxies is required for approval of the proposal to ratify the appointment of our independent
auditors.
Recommendation of the Board
THE BOARD RECOMMENDS A VOTE
“FOR” THE RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors
oversees CytoSorbents Corporation’s financial reporting process on behalf of the Board. Management is responsible for CytoSorbents
Corporation’s disclosure controls and procedures and financial reporting process, including its system of internal control
over financial reporting, and for preparing CytoSorbents Corporation’s financial statements in accordance with accounting
principles generally accepted in the United States. CytoSorbents Corporation’s independent auditors are responsible for auditing
those financial statements and issuing a report thereon. The Audit Committee’s responsibility is to monitor and oversee these
processes.
The Audit Committee is directly responsible
for the appointment, compensation, retention and oversight of the independent auditors. The Committee operates under a written
charter adopted by the Board of Directors, a copy of which is available on CytoSorbents Corporation’s website at www.cytosorbents.com.
The Audit Committee has met and held discussions
with management and the independent auditors, both separately and together. Management has represented to the Audit Committee that
CytoSorbents Corporation’s audited financial statements for 2014 were prepared in accordance with generally accepted accounting
principles, and the Audit Committee has reviewed and discussed the financial statements with management and the independent auditors.
The Audit Committee discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees), as amended (AICPA, Professional Standards, Vol. 1 AU section 380), as adopted by
the Public Company Accounting Oversight Board in Rule 3200T.
In addition, the Audit Committee has discussed
with the independent auditors their independence from CytoSorbents Corporation and its management, including the written disclosures
and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent
auditor’s communications with the Audit Committee concerning independence. Finally, the Audit Committee has discussed with
CytoSorbents Corporation’s independent auditors the overall scope and plans for their audits, the results of their examinations,
their evaluations and assessment of CytoSorbents Corporation’s internal control over financial reporting and the overall
quality of CytoSorbents Corporation’s financial reporting.
In its oversight function, the Audit Committee
relies on the representations of management and the independent auditors and thus does not have an independent basis to determine
that management has maintained appropriate accounting and financial reporting principles or policies or appropriate internal control
over financial reporting, that CytoSorbents Corporation’s financial statements are presented in accordance with accounting
principles generally accepted in the United States, that the audit of CytoSorbents Corporation’s financial statements has
been carried out in accordance with auditing standards generally accepted in the United States, or that the independent auditors
are in fact “independent.”
Based upon the Audit Committee’s discussions
with management and the independent auditors as described above and the Audit Committee’s review of the representations of
management and the report of the independent auditors to the Audit Committee, the Audit Committee recommended to the Board that
CytoSorbents Corporation’s audited financial statements be included in the company’s Annual Report on Form 10-K for
the year ended December 31, 2014 filed with the SEC.
Submitted by:
The Audit Committee of the
Board of Directors
Alan D. Sobel, CPA
Al W. Kraus
Edward R. Jones, MD, MBA
AUDIT AND OTHER FEES
The following table summarizes the aggregate
fees billed for professional services rendered to us by WithumSmith+Brown, PC, our registered independent public accounting firm,
in fiscal years 2014 and 2013. A description of these fees and services follows the table.
| |
2014 | | |
2013 | |
Audit Fees | |
$ | 124,371 | | |
$ | 117,888 | |
Audit Related Fees | |
| -- | | |
| -- | |
Tax Fees | |
| 8,200 | | |
| 8,430 | |
All Other Fees | |
| -- | | |
| -- | |
Total | |
$ | 132,571 | | |
$ | 126,318 | |
Audit Fees. Fees for audit services
in 2014 and 2013 consisted of fees associated with the annual audit and the reviews of CytoSorbents Corporation’s quarterly
reports on Form 10-Q along with fees associated with SEC and accounting regulations and compliance consulting.
Audit-Related Fees. There were no
fees for the category “Audit-Related Fees” in 2014 and 2013.
Tax Fees. Tax fees for 2014 and 2013
were as a result of services associated with the filing of the Company’s Federal and State tax returns.
All Other Fees. There were no fees
for the category “All Other Services” in 2014 and 2013.
The Audit Committee has considered whether
the provision of these services by WithumSmith+Brown, PC is compatible with maintaining the independence of WithumSmith+Brown,
PC. Further, because the Audit Committee of the Board did not exist before December 2014, all of the services provided by WithumSmith+Brown,
PC in 2014 and 2013 were not approved in advance. Going forward, in accordance with the Audit Committee’s pre-approval policies
and procedures described below, all fees and services will be pre-approved by the Audit Committee. The Audit Committee did not
rely on the waiver of pre-approval procedures permitted with respect to de minimus non-audit services under the applicable rules
of the SEC for its approval of any of the services provided by WithumSmith+Brown, PC in 2014 and 2013.
Pre-Approval Policies and Procedures
The Audit Committee has adopted policies
and procedures relating to the pre-approval of all audit and non-audit services to be provided by our independent auditors. Under
these policies and procedures, the Audit Committee approves in advance the provision of services and fees for such services that
are specifically identified in the independent auditor’s annual engagement letter for the audits and reviews, in management’s
annual budget relating to services to be provided by the independent auditors and any amendments to the annual budget reflecting
additional services to be provided by or higher fees of the independent auditors. All other services to be provided by the independent
auditors are pre-approved by the Audit Committee as they arise. The Chairman of the Audit Committee has been delegated authority
to pre-approve services in accordance with these policies and procedures. The Chairman is to report any such approval of services
to the Audit Committee at its next meeting. The Audit Committee considers, among other things, whether the provision of such audit
or non-audit services is consistent with applicable regulations regarding maintaining auditor independence, whether the provision
of such services would impair the independent auditors’ independence and whether the independent auditors are best positioned
to provide the most effective and efficient service.
CERTAIN RELATIONSHIPS AND RELATED-PARTY
TRANSACTIONS
All of our directors and officers complete
a directors and officers questionnaire in the first calendar quarter of each year, in which they are asked to disclose family relationships
and other related party transactions. Our Audit Committee must review and approve or ratify all related party transactions, as
defined in Item 404 of Regulation S-K promulgated under the Securities Act of 1933. In examining related party transactions, our
Audit Committee considers whether any of our directors, officers, holders of more than five percent (5%) of our voting stock, or
any immediate family members of the foregoing persons and any other persons whom the Audit Committee determines to be related parties,
have a conflict of interest where an individual may have a private interest which interferes with or appears to interfere with
our interests. In determining whether to approve or ratify a related party transaction, the Audit Committee will take into account,
among other factors it deems appropriate, whether the related party transaction is on terms no less favorable to us than terms
generally available to us from an unaffiliated third-party under the same or similar circumstances, and the extent of the related
party's interest in the transaction.
See “Executive Compensation”
and “Director Compensation” above for a discussion of director compensation, executive compensation and our named executive
officers’ employment agreements.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange
Act of 1934 (the “Exchange Act”) requires our directors and executive officers and persons who own more than 10% of
our outstanding shares of common stock to file with the SEC initial reports of ownership and reports of changes in ownership in
our common stock and other equity securities. Specific due dates for these records have been established, and we are required to
report in this proxy statement any failure in 2014 to file by these dates. Based solely on a review of the copies of such forms
furnished to us, we believe that from March 2014 to July 2014, Phillip P. Chan, Vincent Capponi, Kathleen P. Bloch, Al Kraus, Edward
Raymond Jones, James T. Gunton and Joseph Rubin were not in compliance with their respective Section 16(a) filing requirements.
Each of the aforementioned had a Form 4 reporting one transaction that was filed late. The Company has revised its administrative
procedures to enhance the ability of the Company’s Executive Officers and Directors to comply with such requirements. All
others required to file reports have done so.
CERTAIN DEADLINES FOR THE 2015 ANNUAL
MEETING
Any stockholder proposal submitted to us
pursuant to SEC Rule 14a-8 under the Exchange Act for inclusion in the proxy statement and proxy relating to our 2016 Annual Meeting
must be received by us no later than the close of business on December 25, 2015. If we do not receive notice of any non-Rule 14a-8
matter that a stockholder wishes to raise at the Annual Meeting in 2016 by March 9, 2016, the proxy holders will retain discretionary
authority to vote proxies on any such matter if it is raised at the 2016 Annual Meeting.
In order for a stockholder to nominate a
person for election to the Board or bring other business before the 2015 annual meeting of stockholders, the stockholder must comply
with the advance notice provisions of our bylaws, which require that the stockholder deliver written notice to the Secretary and
comply with the other requirements set forth in the bylaws. In the case of stockholder nominations, we must receive this notice
not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th)
day following the date on which public announcement of the date of such meeting is first made.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
The Securities and Exchange Commission has
adopted rules that permit companies and intermediaries (e.g., brokers, banks and nominees) to satisfy the delivery requirements
for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single
Notice or set of proxy materials addressed to those stockholders. This process, which is commonly referred to as “householding,”
potentially means extra convenience for stockholders and cost savings for companies and intermediaries. Under this process, stockholders
of record who have the same address and last name and have not previously requested electronic delivery of proxy materials will
receive a single envelope containing the Notice for all stockholders having that address. The Notice for each stockholder will
include that stockholder’s unique control number needed to vote his or her shares.
If you would like to receive a separate
Notice, please contact our investor relations department at our offices located at 7 Deer Park Drive, Suite K, Monmouth Junction,
New Jersey 08852; telephone (732) 329-8885.
For those stockholders who have the same
address and last name and who request to receive a printed copy of the proxy materials by mail, we will send only one copy of such
materials to each address unless one or more of those stockholders notifies us, in the same manner described above, that they wish
to receive a printed copy for each stockholder at that address.
If you are a beneficial owner, you can request
information about householding from your broker, bank or nominee.
OTHER MATTERS
The Board does not know of any matters to
be presented at the Annual Meeting other than those listed in the Notice of Annual Meeting of Stockholders that accompanies this
proxy statement. However, if other matters properly come before the Annual Meeting, it is the intention of the persons named in
the accompanying proxy to vote in accordance with their best judgment on such matters insofar as the proxies are not limited to
the contrary.
To the extent that information contained
in this proxy statement is within the knowledge of persons other than our management, we have relied on such persons for the accuracy
and completeness thereof.
This proxy statement and our annual report
on Form 10-K is available in the “Investors” section of our website at www.cytosorbents.com. Alternatively, upon the
receipt of a written request from any stockholder entitled to vote at the forthcoming Annual Meeting, we will mail, at no charge
to the stockholder, a copy of our annual report on Form 10-K, including the financial statements and schedules required to be filed
with the SEC pursuant to Rule 13a-1 under the Exchange Act, for CytoSorbents Corporation’s most recent fiscal year. Requests
from beneficial owners of our voting securities must set forth a good faith representation that, as of the record date for the
Annual Meeting, the person making the request was the beneficial owner of securities entitled to vote at such meeting. Written
requests for such report should be directed to:
Amy Vogel, Investor Relations
CytoSorbents Corporation
7 Deer Park Drive, Suite K
Monmouth Junction, New Jersey 08852
If you would like us to send you a copy
of the exhibits listed on the exhibit index of the annual report on Form 10-K, we will do so upon your payment of our reasonable
expenses in furnishing a requested exhibit.
You are asked to advise us if you intend
to attend the Annual Meeting. You are urged to complete, sign, date and return your proxy card promptly to make certain your shares
will be voted at the Annual Meeting. Also, the proxy card contains instructions for record holders who want to vote their shares
via the Internet. For your convenience, a return envelope is enclosed requiring no additional postage if mailed in the United States.
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By Order of the Board of Directors, |
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/s/ Kathleen P. Bloch |
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Kathleen P. Bloch |
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Secretary |
Dated: April 22, 2015 |
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CYTOSORBENTS CORPORATION
C/O BROADRIDGE
P.O. BOX 1342
BRENTWOOD, NY 11717 |
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YOUR VOTE IS IMPORTANT
VOTE TODAY IN ONE OF THREE WAYS
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for
electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic
voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company
in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically
via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet
and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions
up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and
then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
You may vote by Internet 24 hours a day,
7 days a week.
Your Internet vote authorizes the
named proxies to vote in the same manner as if you marked, signed and returned your proxy card.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
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M90658-P64933 KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY |
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
CYTOSORBENTS CORPORATION |
For All |
Withhold All |
For All Except |
To withhold authority to vote for any individual nominee, mark “For All Except” and write the number of the nominee on the line below. |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE FOLLOWING PROPOSALS: |
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1. To elect the following nominees to serve as directors: |
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Nominees:
01) Phillip Chan, MD, PhD
02) Al W. Kraus
03) Edward R. Jones, MD, MBA
04) James Gunton
05) Alan D. Sobel |
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For |
Against |
Abstain |
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2. To approve the compensation of the CytoSorbents Corporation’s named executive officers, on an advisory basis. |
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE 3 YEARS ON THE FOLLOWING PROPOSAL: |
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3 Years |
2 Years |
1 Year |
Abstain |
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3. To approve, on an advisory basis, that the frequency with which the stockholders of CytoSorbents Corporation shall have an advisory vote on executive compensation, as disclosed pursuant to the compensation disclosure rules of the SEC. |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE FOLLOWING PROPOSAL: |
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For |
Against |
Abstain |
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4. To ratify the appointment of WithumSmith+Brown, PC as CytoSorbents Corporation’s independent auditors to audit CytoSorbents Corporation’s financial statements for the fiscal year ending December 31, 2015. |
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MARK HERE FOR ADDRESS CHANGES/COMMENTS AND
NOTE ON REVERSE SIDE |
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MARK HERE IF YOU PLAN TO ATTEND THE MEETING |
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Yes |
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No |
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Please sign and return this Proxy Card so that the shares can be represented at the meeting. If signing for a corporation or partnership or as agent, attorney or fiduciary, indicate the capacity in which you are signing. If you vote by ballot, such vote will supersede this proxy. |
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Signature [PLEASE SIGN WITHIN
BOX] Date |
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Signature (Joint Owners) Date |
For Directions to the Annual Meeting, please refer
to the “About Us” section of our website at www.cytosorbents.com.
PLEASE RETURN THIS CARD PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE OR OTHERWISE TO CYTOSORBENTS CORPORATION, C/O BROADRIDGE, 51 MERCEDES WAY, EDGEWOOD, NY 11717, SO THAT THE SHARES CAN
BE REPRESENTED AT THE MEETING.
Important Notice Regarding the Availability
of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report of CytoSorbents Corporation are available at: www.proxyvote.com
DETACH HERE
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M90659-P64933 |
CytoSorbents Corporation
COMMON STOCK
PROXY CARD
This Proxy is Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders on June 2, 2015.
YOUR VOTE IS IMPORTANT! PLEASE SIGN AND DATE ON THE REVERSE
SIDE OF THIS CARD.
PROXY
The undersigned, revoking all prior proxies, hereby appoints
Dr. Phillip Chan and Kathleen P. Bloch, and each of them, with full power of substitution, proxies to appear on behalf of the undersigned
and to vote all shares of Common Stock of the undersigned at the Annual Meeting of Stockholders to be held at the offices of DLA
Piper LLP (US) at 1251 Avenue of the Americas, New York, New York 10020, on Tuesday, June 2, 2015 at 10:00 a.m. Eastern time, and
at any adjournments thereof, subject to any directions indicated on the reverse side of this card, upon the matters set forth in
the Notice of Annual Meeting of Stockholders and Proxy Statement dated April 22, 2015, a copy of which has been received by the
undersigned. The proxies are further authorized to vote, in their discretion, upon such other business as may properly come before
the meeting or any adjournments thereof.
If this Proxy is properly executed and returned, and not revoked,
the shares it represents will be voted at the meeting in accordance with the choices specified on this proxy card. If no choice
is specified, the shares will be voted by the proxies FOR the election of the nominees listed in Proposal 1 to serve as directors
on the Board of Directors, FOR Proposal 2 to approve the advisory (non-binding) vote on executive compensation, FOR Proposal 3
to approve the option of once every three years at the frequency with which stockholders are provided an advisory vote on executive
compensation, FOR Proposal 4 to ratify the appointment of WithumSmith+Brown, PC as CytoSorbents Corporation’s independent
auditors to audit CytoSorbents Corporation’s financial statements for the fiscal year ending December 31, 2015, and at their
discretion on any other matter that may properly come before the meeting.
Address Changes/Comments:
_________________________________________________________________________________________
_________________________________________________________________________________________
_________________________________________________________________________________________
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(If you noted any Address Changes/Comments
above, please mark the corresponding box on the reverse side.)
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
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SEE REVERSE SIDE |
SEE REVERSE SIDE |
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