AMRI Albany Molecular Research, Inc.

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934
(Amendment No. 1)

 

Filed by the Registrant      x

Filed by a Party other than the Registrant ¨

 

Check the appropriate box:

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

 

Albany Molecular Research, Inc.

 

(Name of Registrant as Specified in Its Charter)

 

N/A

 

 (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

Payment of filing Fee (Check the appropriate box):

x	No fee required.
¨	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
	(1)	Title of each class of securities to which transaction applies: ______________________
	(2)	Aggregate number of securities to which transaction applies: ______________________
	(3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ________________________________________________________
	(4)	Proposed maximum aggregate value of transaction: _____________________________
	(5)	Total fee paid: __________________________________________________________
¨	Fee paid previously with preliminary materials.
¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11 (a) (2) and identify the filing for which the offsetting fee was paid previously.  Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
	(1)	Amount previously paid: __________________________________________________
	(2)	Form, Schedule or Registration Statement No.: _________________________________
	(3)	Filing Party: ____________________________________________________________
	(4)	Dated Filed: ____________________________________________________________

 

 

ALBANY MOLECULAR RESEARCH, INC.

26 Corporate Circle

Albany, New York 12203

 

May [ ], 2015

Dear Stockholder:

 

You are cordially invited to attend the 2015 Annual Meeting of Stockholders of Albany Molecular Research, Inc. to be held on Wednesday, June 3, 2015 at 10:00 a.m., local time, at the Company’s corporate offices located at 26 Corporate Circle, Albany, New York 12203.

 

The attached proxy statement, with formal notice of the meeting on the first page, describes the matters expected to be acted upon at the meeting. We urge you to review these materials carefully. Following the formal portion of the meeting, we will review our operations, report on 2014 financial results and discuss our plans for the future.

 

Your vote is important to us. We hope that you will be able to attend the meeting. Whether or not you plan to attend the meeting, we ask that you please complete, date, and sign the enclosed proxy card and return it as promptly as possible in the envelope provided. If you attend the meeting, you may vote in person if you wish, even if you have previously returned your proxy card.

 

Sincerely,

 

William S. Marth

President and Chief Executive Officer

 

 

ALBANY MOLECULAR RESEARCH, INC.

26 Corporate Circle

Albany, New York 12203

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

To Be Held on June 3, 2015

 

To the Stockholders of Albany Molecular Research, Inc.,

 

NOTICE IS HEREBY GIVEN that the 2015 Annual Meeting of Stockholders of Albany Molecular Research, Inc., a Delaware corporation (the ‘‘Company’’ or ‘‘AMRI’’), will be held on Wednesday, June 3, 2015 at 10:00 a.m., local time, at the Company’s corporate offices located at 26 Corporate Circle, Albany, New York 12203 (including any adjournments or postponements thereof, the ‘‘Annual Meeting’’) for the following purposes:

 

	1.	To elect two Class II  Directors of the Company, to serve until the 2018 Annual Meeting of Stockholders and until his/her successor is duly elected and qualified or until his/her earlier resignation or removal;
	2.	To ratify the Company’s selection of KPMG LLP as the independent registered public accounting firm for the 2015 fiscal year;
	3.	To approve the Company’s Third Amended 2008 Stock Option and Incentive Plan;
	4.	To approve the Company’s Third Amended 1998 Employee Stock Purchase Plan;
	5.	To approve an amendment to the Company’s Restated Certificate of Incorporation to increase the authorized shares of common stock;
	6.	To hold an advisory vote to approve the compensation of the Company’s named executive officers; and
	7.	To consider and act upon any other matters that may properly come before the Annual Meeting and any adjournments or postponements thereof.

 

Only holders of record of the Company’s Common Stock, par value $.01 per share, at the close of business on April 13, 2015 are entitled to notice of and to vote at the Annual Meeting and any adjournments or postponements thereof.

 

All Stockholders are cordially invited to attend the Annual Meeting in person. However, to assure your representation at the Annual Meeting, we urge you, whether or not you plan to attend the Annual Meeting, to complete, sign, date and mail promptly the enclosed proxy which is being solicited on behalf of the Board of Directors so that your shares will be represented at the Annual Meeting.

 

In the event there are not sufficient shares to be voted in favor of any of the foregoing Proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned in order to permit further solicitation of proxies.

 

	By Order of the Board of Directors,
	Lori M. Henderson
	Senior Vice President, General Counsel and
	Secretary

 

Albany, New York

May [ ], 2015

 

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD.

 

 

ALBANY MOLECULAR RESEARCH, INC.

26 Corporate Circle

Albany, New York 12203

 

PROXY STATEMENT

 

ANNUAL MEETING OF STOCKHOLDERS

 

To Be Held on June 3, 2015

May [ ], 2015

 

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Albany Molecular Research, Inc., a Delaware corporation (the ‘‘Company’’), for use at the Annual Meeting of Stockholders of the Company to be held on Wednesday, June 3, 2015 at 10:00 a.m., local time, at the Company’s corporate offices located at 26 Corporate Circle, Albany, New York 12203 or at any adjournments or postponements thereof (the ‘‘Annual Meeting’’). The Annual Report of the Company, including financial statements for the fiscal year ended December 31, 2014, is being mailed together with this proxy statement to all Stockholders of the Company entitled to vote at the Annual Meeting. The Notice of Annual Meeting, Proxy Statement and proxy card are first being mailed to Stockholders of the Company on or about May [ ], 2015 in connection with the solicitation of proxies for the Annual Meeting. Copies of the Annual Meeting Materials will also be available on the Company’s website at www.amriglobal.com.

 

At the Annual Meeting, Stockholders will be asked to consider and vote upon the following matters:

 

	1.	To elect two Class II Directors of the Company, to serve until the 2018 Annual Meeting of Stockholders and until his/her successor is duly elected and qualified or until his/her earlier resignation or removal;
	2.	To ratify the Company’s selection of KPMG LLP as the independent registered public accounting firm for the 2015 fiscal year;
	3.	To approve the Company’s Third Amended 2008 Stock Option and Incentive Plan;
	4.	To approve the Company’s Third Amended 1998 Employee Stock Purchase Plan;
	5.	To approve an amendment to the Company’s Restated Certificate of Incorporation to increase the authorized shares of common stock;
	6.	To hold an advisory vote to approve the compensation of the Company’s named executive officers; and
	7.	To consider and act upon any other matters that may properly come before the Annual Meeting and any adjournments or postponements thereof.

 

Only holders of record of the Company’s common stock, par value $.01 per share (the ‘‘Common Stock’’) at the close of business on April 13, 2015 (the ‘‘Record Date’’) will be entitled to notice of and to vote at the Annual Meeting. As of the Record Date, 33,124,596 shares of Common Stock were issued, outstanding and entitled to vote at the Annual Meeting.

 

The holders of Common Stock outstanding as of the Record Date are entitled to one vote per share on any Proposal presented at the Annual Meeting. Stockholders may vote by proxy by completing, signing, dating and returning the accompanying proxy card in the postage-prepaid envelope enclosed for that purpose. Execution of the proxy will not in any way affect a Stockholder’s right to attend the Annual Meeting and vote in person. Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before the taking of the vote at the Annual Meeting. Proxies may be revoked by (1) filing with the Secretary of the Company before the taking of the vote at the Annual Meeting, a written notice of revocation bearing a later date than the proxy, (2) duly executing a later-dated proxy relating to the same shares and delivering it to the Secretary of the Company before the taking of the vote at the Annual Meeting, or (3) attending the Annual Meeting and voting in person (although attendance at the Annual Meeting will not in and of itself constitute a revocation of a proxy). Any written notice of revocation or subsequent proxy should be sent so as to be delivered to Albany Molecular Research, Inc., 26 Corporate Circle, Albany, New York 12203, Attention: Lori Henderson, Secretary, before the taking of the vote at the Annual Meeting.

 

 

The presence, in person or by proxy, of a majority of the total number of outstanding shares of Common Stock entitled to vote is necessary to constitute a quorum for the transaction of business at the Annual Meeting. Shares that reflect abstentions or ‘‘broker non-votes’’ (i.e., shares represented at the Annual Meeting held by brokers or nominees as to which instructions have not been received from the beneficial owners or persons entitled to vote such shares and with respect to which the broker or nominee does not have discretionary voting power to vote such shares) will be counted for purposes of determining whether a quorum is present for the transaction of business at the Annual Meeting.

 

Stockholders of the Company are requested to complete, date, sign and return the accompanying proxy card in the enclosed envelope. The persons named as attorneys-in-fact in the proxies, William S. Marth and Lori M. Henderson were selected by the Board of Directors and are officers of the Company. Shares of Common Stock represented by properly executed proxies received by the Company and not revoked will be voted at the Annual Meeting in accordance with the instructions contained therein. If instructions are not given, properly executed proxies will be voted ‘‘FOR’’ each of Proposals 1 through 6. It is not anticipated that any matters other than those described herein will be presented at the Annual Meeting. If other matters are presented, proxies will be voted in accordance with the discretion of the proxy holders.

 

A representative from Computershare will serve as the Inspector of Elections and will count all votes and ballots.

 

 

PROPOSAL 1

 

ELECTION OF DIRECTORS

 

The Board of Directors of the Company consists of seven members and is divided into three classes, with three Class I Directors (Una S. Ryan, Ph.D., O.B.E., Arthur J. Roth, CPA, and Gabriel Leung), two Class II Directors (Kevin O’Connor and William S. Marth) and two Class III Directors (Thomas E. D’Ambra, Ph.D. and Veronica G. H. Jordan, Ph.D.). Directors serve for three year terms with one class of directors being elected by the Company’s Stockholders at each Annual Meeting.

 

At the Annual Meeting, two Class II Directors will be elected to serve until the 2018 Annual Meeting of Stockholders and until his/her successor is duly elected and qualified or until his/her earlier resignation or removal. The Board of Directors, upon the recommendation of the Nominating Committee, has nominated Kevin O’Connor and William Marth for election as Class II Directors. Unless otherwise specified in the proxy, it is the intention of the persons named in the proxy to vote the shares represented by each properly executed proxy for the election of Mr. O’Connor and Mr. Marth as Class II Directors. Kevin O’Connor and William Marth have agreed to stand for election and to serve, if elected, as directors. However, if a person nominated by the Board of Directors fails to stand for election or is unable to accept election, the proxies will be voted for the election of such other person or persons as the Board of Directors may recommend.

 

Vote Required For Approval

 

Directors are elected by a plurality of the votes cast, in person or by proxy, at the Annual Meeting. The nominee who receives the highest number of affirmative votes of the shares present or represented and voting on the election of directors at the Annual Meeting will be elected to the Board of Directors. Shares present or represented and not so marked as to withhold authority to vote for a particular nominee will be voted in favor of a particular nominee and will be counted toward such nominee’s achievement of plurality. Votes withheld will be excluded entirely from the vote and will have no effect. Broker non-votes will also have no effect on the outcome of the election of directors.

 

Recommendation

 

The Board of Directors of the Company unanimously recommends a vote FOR the election of its nominees as directors of the Company.

 

 

The following table sets forth the nominees to be elected at the Annual Meeting and continuing directors, the year each such nominee or director was first elected a director, the positions with the Company currently held by the nominee and director, the year each nominee’s or continuing director’s current term will expire and the nominee’s and continuing director’s age and current class.

 

						Year First Became
Name		Position with the Company		Age		Director
Class II – Nominees for Election
Kevin O’Connor(1)(3)		Director		60		2000
William S. Marth		Director, President and		60		2012
		Chief Executive Officer
Class I − Term expires in 2017
Una S. Ryan, Ph.D., O.B.E(1)(3)		Director		73		2006
Arthur J. Roth, CPA(1)(2)		Director		75		2003
Gabriel Leung(2)		Director		53		2010
Class III – Term Expires in 2016
Thomas E. D’Ambra, Ph.D.		Chairman of the Board of		59		1991
		Directors
Veronica G. H. Jordan, Ph.D.(2)(3)		Director		64		2006

 

(1) Member of Nominating and Corporate Governance Committee.

(2) Member of Audit Committee.

(3) Member of Compensation Committee.

 

DIRECTORS AND EXECUTIVE OFFICERS

 

The Company’s executive officers are appointed on an annual basis by, and serve at the discretion of the Board. Each executive officer is a full-time employee of the Company. The directors, nominees and executive officers of the Company are as follows:

 

Name		Age		Position with the Company
William S. Marth*		60		President and Chief Executive Officer, Director
Felicia Ladin		43		Senior Vice President, Chief Financial Officer and Treasurer
Lori M. Henderson		53		Senior Vice President, General Counsel and Secretary
Steven R. Hagen, Ph.D.		54		Senior Vice President of Manufacturing and Pharmaceuticals
George Svokos		57		Chief Commercial Officer and Senior Vice President, API
Thomas E. D’Ambra, Ph.D.		59		Chairman of the Board of Directors
Veronica G. H. Jordan, Ph.D.		64		Director
Gabriel Leung		53		Director
Kevin O’Connor *		60		Director
Arthur J. Roth, CPA		75		Director
Una S. Ryan, Ph.D., O.B.E.		73		Director

 

* Nominee for election.

 

 

BIOGRAPHICAL INFORMATION

 

Nominees for Election as Class II Directors for Terms to Expire in 2018

 

Kevin O’Connor has served as one of our directors since March 2000. Until his retirement in 2013, Mr. O’Connor served as Chief Executive Officer of Tech Valley Communications, a telecommunications company, since July 2000. Mr. O’Connor previously served as the President of the Center for Economic Growth, Inc., a business-sponsored economic development organization, from 1992 through 2000. Mr. O’Connor also served as a Deputy Commissioner for the New York State Department of Economic Development from 1987 to 1992, as a Program Associate for the New York State Governor’s Office from 1984 to 1987 and held various positions in the New York State Division of the Budget and the New York State Department of Health from 1980 to 1984. In addition, Mr. O’Connor also serves as a director of several private companies and non-profit organizations. Mr. O’Connor holds a B.A. in history and an M.A. in public administration from the State University of New York College in Brockport. Mr. O’Connor’s experience as a CEO provides him with skills related to management, finance, compensation, information technology and corporate governance. His government experience provides him with unique insights into economic development, which enables him to make valuable contributions in our Board’s deliberation process, especially in the areas of business strategy, competition, and the marketplace.

 

William S. Marth has served as one of our directors since May of 2012 and became our President and Chief Executive Officer in January 2014, after briefly serving as the Company's non-executive Chairman. In 2014, Mr. Marth served as a senior advisor to Teva Pharmaceuticals following his retirement in 2012 as President and Chief Executive Officer of Teva – Americas. He had previously served as President and Chief Executive Officer of Teva North America from January 2008 to June 2010, as President and Chief Executive Officer of Teva USA from January 2005 to January 2008 and Executive Vice President and Vice President of Sales and Marketing for Teva USA. In addition Mr. Marth worked with several large equity firms providing guidance on their healthcare investments. Mr. Marth is recognized as an industry leader with an unparalleled record of commercial success. He was a key strategist in establishing Teva as a leading Specialty Pharmaceutical Company and being ultimately recognized as the premier worldwide producer of generic drugs. He was a member of Teva’s global executive management team and Teva Americas’ Board of Directors from 2007 to 2012. He has global experience in all core functional areas including Strategic Planning, IR, R&D, Supply Chain Management and Regulatory. He also served as the architect of the $6.8 billion Cephalon and $7.4 billion Barr Laboratories transactions and integrations. Prior to joining Teva USA, he held various positions with the Apothecon division of Bristol-Myers Squibb. Mr. Marth earned his B.Sc. in Pharmacy from the University of Illinois in 1977 and his M.B.A. in 1989 from the Keller Graduate School of Management, DeVry University. He is a licensed pharmacist and has served on various boards and committees, including, The University of the Sciences in Philadelphia, the Board of Ambassadors for John Hopkins’ Project RESTORE. In January of 2014, Mr. Marth became the Chairman of the Board of Directors of Sorrento Therapeutics and in March 2014 became a director at Galmed Pharmaceuticals. Mr. Marth served as the Chairman of the Board of Directors of the Generic Pharmaceutical Association (GPhA) in 2008 and 2009 and the American Society for Health-System Pharmacists (ASHP) in 2010. We believe Mr. Marth’s industry and commercial leadership expertise benefit the Company significantly.

 

Incumbent Class I Directors — Terms Expiring 2017

 

Una S. Ryan, Ph.D., O.B.E. has served as one of our directors since October 2006. Dr. Ryan is Chair of The Bay Area BioEconomy Initiative (BA-BI), a non-profit organization committed to fostering an atmosphere of innovation and collaboration to enhance a vibrant bioeconomy in the San Francisco Bay Area and is Managing Director of Golden Seeds (Silicon Valley), an angel investment firm that seeks above market returns through the empowerment of women entrepreneurs. She is also a partner in Astia Angel, investing in women-led ventures. Previously, Dr. Ryan was President and CEO of Diagnostics for All, Inc. (DFA), developing inexpensive diagnostics for global health and agriculture and President and CEO of Waltham Technologies, Inc., a cleantech/energy start-up. She was also formerly President and CEO of AVANT Immunotherapeutics, Inc., (now Celldex) a company developing vaccines and immunotherapeutics. Dr. Ryan’s board positions also include RenovoRx, Bioarry Therapeutics and Bell Biosystems. She is on the Board of Directors of BayBio and was Chair of MassBio, as well as the Biotechnology Industry Organization (BIO), New England Healthcare Institute, Board of Associates of the Whitehead Institute, Strategy & Policy Council of the MIT Center for Biomedical Innovation, the Massachusetts Life Sciences Collaborative Leadership Council and Management Science for Health (MSH). Dr. Ryan holds a Ph.D. in Cellular and Molecular Biology from Cambridge University and a B.S. in Zoology, Microbiology and Chemistry from Bristol University. She received an Honorary Doctor of Science degree from Bristol University in 2009. In 2007, Dr. Ryan received the Albert Einstein Award for outstanding achievement in the life sciences. In 2002, Her Majesty Queen Elizabeth II awarded Dr. Ryan the Order of the British Empire (OBE) for services to biotechnology. Dr. Ryan has in depth knowledge of the entire drug development process. We believe her industry and governance expertise and knowledge of the drug development process directly benefits our business.

 

 

Arthur J. Roth, CPA, has served as one of our directors since October 2003 and served as Lead Director beginning in 2012 through June 2013. Mr. Roth serves as a tax consultant to the international law firm of Mayer Brown LLP, a position he has held since December 2011. Previously, from 2003 to 2011 he was a tax consultant to the law firm of Hodgson Russ LLP. Mr. Roth served on the Board of Directors and as the Chair of the Audit Committee of First Albany Capital Inc. from October 2003 until August 2006 and served as Commissioner of the New York State Department of Taxation and Finance from 1999 to 2003. Prior to his appointment as Commissioner, Mr. Roth was Deputy Commissioner for Operations, New York State Department of Taxation and Finance from 1996 until 1999. Mr. Roth was a senior consulting director with Coopers and Lybrand from 1992 to 1996 and a founder and managing director of Roth Nobis & Company, an accounting firm serving the manufacturing and service industries, from 1968 to 1992. Mr. Roth serves as a director for MVP Healthcare and also serves as director for several non-profit companies including the New York State Society of Certified Public Accounts. Mr. Roth is a certified public accountant and holds a B.A. from Syracuse University. Mr. Roth has expertise in taxation, public accounting, disclosure and financial systems management due to his roles in government and private accounting practice. In addition, Mr. Roth’s executive leadership experience provides him with insights into corporate governance matters. We believe Mr. Roth’s tax and financial expertise and leadership experience benefit the Company significantly.

 

Gabriel Leung, has served as one of our directors since November 2010. Mr. Leung is the Vice Chairman of the Board of Directors of Novocure, Ltd., a privately-held medical device company pioneering the fourth cancer treatment modality. Beginning in 2011 until his resignation in December 2014, Mr. Leung served as a director of Delcath Systems Inc., a development stage specialty pharmaceutical and medical device company focused on oncology. From 2003 through 2010 Mr. Leung held executive positions at OSI Pharmaceuticals, most recently as Executive Vice President and president of the Pharmaceutical Business at OSI. While at OSI he was responsible for the entire oncology business unit, including Research and Development, Commercial, Medical Affairs and Business Development. Mr. Leung was instrumental in the record-setting launch of oncology drug Tarceva by OSI in 2004 and the successful acquisition of OSI by Astellas in 2010. Prior to OSI, Mr. Leung held positions at Pharmacia, most recently as Group VP, Global Prescription Business & Head, Global Oncology Franchise; and Bristol-Myers Squibb, most recently as Senior Director, US Oncology Marketing and Sterling Drug Inc. Mr. Leung has served as an advisor to the National Cancer Institute and has served for over ten years under former President George H.W. Bush as an active member of C-Change, a national initiative aiming to eliminate cancer as a major public health concern. In 2010, the Chinese Biopharmaceutical Association — USA presented Mr. Leung with the Brilliant Achievement Award in recognition of his outstanding contributions to building international research collaborations. He holds a B.S. in Pharmacy from the University of Texas at Austin and a M.S. in Pharmacy from University of Wisconsin-Madison. Mr. Leung has a variety of business experience that relates directly to our industry, including his leadership positions in global pharmaceutical companies and his participation and leadership in many industry organizations. Mr. Leung has global scientific and research and development experience, including extensive interactions with the U.S. Food and Drug Administration. We believe that his knowledge of the global pharmaceutical industry and the drug development and marketing industries benefit our business directly.

 

 

Incumbent Class III Directors — Terms Expiring 2016

 

Thomas E. D’Ambra, Ph.D., co-founded the Company in 1991 and served as President and Chief Executive Officer until his retirement in 2013. As of January 2014, Dr. D’Ambra resumed the role of Chairman of the Board of Directors and currently serves in that capacity. During his tenure as an employee of the Company, Dr. D'Ambra had been involved and taken an active role in all aspects of the Company’s business at various times, from bench research scientist to business development, to operational and strategic management and led the Company in its global growth through 2013. He has authored numerous publications and is inventor on over 30 U.S. patents. In August 2014, Dr. D'Ambra was appointed to the Albany College of Pharmacy and Health Sciences' (ACPHS) Board of Trustees and in October 2014 was appointed to the Albany Palace Theater and Performance Arts Center Board of Trustees. He has and continues to serve as an advisor and mentor for new and young companies. Prior to co-founding the Company, Dr. D’Ambra served as the Vice President, Chemistry and co-founder of Coromed, Inc., a traditional development contract research organization, from 1989 to 1991 and Group Leader and Senior Research Chemist with Sterling Winthrop, Inc., a pharmaceutical company, from 1982 to 1989. Dr. D’Ambra holds a B.A. in chemistry from the College of the Holy Cross and a Ph.D. in organic chemistry from the Massachusetts Institute of Technology. His entrepreneurial skills, strategic vision, leadership ability and in-depth knowledge of our business strategy, industry, product, research and development, operations and employees were critical to the growth experienced by the Company since its inception.

 

Veronica G. H. Jordan, Ph.D., has served as one of our directors since October 2006. Dr. Jordan is an independent consultant providing senior management expertise to companies developing novel healthcare products and services. In 2014, Dr. Jordan was elected to the Board of Directors of Vermillion Inc., a diagnostic and bio-analytical company focused on gynecologic diseases. Previously Dr. Jordan served as President, Chief Executive Officer and board member of Medelle Corporation, a medical device company in the women’s health area. Prior to joining Medelle, Dr. Jordan served 14 years, from 1987 to 2001, as Senior Vice President and before that Vice President at Parexel International Corporation, a global contract pharmaceutical outsourcing organization that provides clinical research, medical marketing and consulting services. Dr. Jordan worked at Biogen Incorporated, from 1981 to 1987, as Product Manager and was ultimately promoted to Director of Marketing and Business Development. Dr. Jordan began her industry career in the R&D labs at Baxter International after earning a B.Sc. in Biochemistry from Cambridge University and a Ph.D. in Biochemistry/Cell Biology from Oxford University, and completing a postdoctoral research fellowship at the Dana Farber Cancer Institute. Dr. Jordan brings a mix of scientific knowledge and executive leadership skills to the Board and has broad knowledge of the global pharmaceutical outsourcing sector. Dr. Jordan’s executive experience provides her with significant financial acumen and knowledge of our industry, including business and compensation practices in our industry, which makes her qualified to serve on our Board and able to make valuable contributions to our compensation committee.

 

Executive Officers who are not Directors

 

Felicia Ladin joined the Company as Senior Vice President, Chief Financial Officer and Treasurer in February 2015. Ms. Ladin brings more than 20 years of finance, accounting and tax management experience to AMRI. A CPA by training, Ms. Ladin has spent the majority of her career in the pharmaceutical industry, most recently as Senior Vice President, CFO, Global Specialty Medicines at Teva Pharmaceuticals Industries, Ltd. Between 2008 and 2014, Ms. Ladin held positions of increasing responsibility directing Teva’s financial planning and analysis operations, and from 2002 to 2008 was tax director for the U.S. During her 12 year tenure at Teva, Ms. Ladin was instrumental in developing and implementing financial systems and infrastructure through a number of acquisitions, and driving consistency and efficiencies across locations, supporting the Specialty Medicine division’s growth into an $8 billion global business. Ms. Ladin holds a B.S. in Accounting from the University of Delaware and an M.S. in Taxation from Seton Hall University.

 

Lori M. Henderson has served as the Company’s Senior Vice President, General Counsel and Corporate Secretary since 2011. Ms. Henderson is responsible for leading all of AMRI’s legal and business development activities for the Company’s locations worldwide, including the United States, Europe and Asia. From 2008 to 2010, she served as General Counsel, Corporate Secretary and Chief Administrative Officer for Rand Worldwide, Inc. where she oversaw the legal, human resource and IT departments of this technology company. From 1999 through 2008 she held increasing positions of responsibility and served as General Counsel, Corporate Secretary and Chief Administrative Officer for Moldflow Corporation, a company operating in the CAD/CAE business with global operations. At Moldflow, Ms. Henderson was responsible for the legal, human resources and IT functions at the Company, and was part of the management team that completed the successful sale of Moldflow to Autodesk in June 2008. Ms. Henderson also served as Corporate Counsel and Secretary at C.P. Clare Corporation and prior to that was an associate at Goodwin Procter LLP, specializing in corporate transactions. Ms. Henderson holds a B.A. from Gordon College and a J.D. from George Washington University.

 

 

Steven R. Hagen, Ph.D., has served as our Senior Vice President, Manufacturing and Pharmaceuticals since 2012 and is responsible for AMRI’s API and Drug Product manufacturing operations globally, including chemical and pharmaceutical development activities. Previously, Dr. Hagen was the Company’s Vice President, Pharmaceutical Development and Manufacturing and was responsible for the Company’s analytical, quality and regulatory affairs. Dr. Hagen joined AMRI in 2005 as Senior Director of analytical quality services. Prior to AMRI, Dr. Hagen began his tenure at Pfizer, Inc. as a Research Scientist and before Pfizer, Inc., Dr. Hagen was an Analytical Biochemist with Ribi ImmunoChem Research, Inc. Dr. Hagen received a B.A. in Biology from Lawrence University, as well as a Master’s degree in Botany and a Ph.D. in Biochemistry, both from the University of Idaho.

 

George Svokos serves as the Company’s Chief Commercial Officer and Senior Vice President, API, a position he has held since February 2015. Previously Mr. Svokos had served as our Senior Vice President Sales and General Manager API since January 2014. Prior to joining the Company, Mr. Svokos had been with Teva Pharmaceuticals Industries Ltd. for over 30 years and most recently, he was Senior Vice President of Product and Portfolio Selection, and Business Development, responsible for strategic planning, portfolio selection, new product introductions and business development. From 2011 to 2012, Mr. Svokos was Senior Vice President, US Technical Operations, responsible for strategic planning, manufacturing, supply chain, regulatory and legal compliance, and safety, for eleven U.S. dosage form manufacturing facilities, as well as supply of branded and generic products to the U.S. market from overseas plants in Europe, the Middle East, China and India. Before this role, he served as Executive Vice President of Commercial Operations, Teva API, leading the global sales and marketing of Teva’s API division, including a global sales force, with multibillion-dollar sales. Mr. Svokos is the President of the Drug, Chemical & Associated Technologies Association (DCAT). Mr. Svokos earned an M.B.A. from the University of Missouri and a B.S. in Chemical Engineering from Columbia University.

 

 

PROPOSAL 2

 

RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS

 

The Audit Committee of our Board of Directors has selected KPMG LLP as our independent public accounting firm for the 2015 fiscal year. The Board of Directors has further directed that management submit the selection of independent auditors for ratification by the Stockholders at the Annual Meeting. KPMG LLP has audited our financial statements since 2005. Representatives of KPMG LLP are expected to be present at the Annual Meeting and will have an opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions.

 

Stockholder ratification of the selection of KPMG LLP as our independent auditors is not required by our bylaws or otherwise. However, the Board of Directors is submitting the selection of KPMG LLP to the Stockholders for ratification as a matter of good corporate practice. If the Stockholders fail to ratify the selection, the Audit Committee will reconsider whether to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and our Stockholders.

 

Vote Required For Approval:

 

A quorum being present, the affirmative vote of a majority of the votes cast is necessary to ratify the selection of KPMG LLP as the Company’s independent auditor for the fiscal year 2015.

 

Recommendation:

 

The Board of Directors of the Company unanimously recommends a vote FOR the ratification of the selection of KPMG LLP as the Company’s independent public accounting firm for the fiscal year 2015.

 

 

Proposal 3

 

APPROVAL OF THIRD AMENDED

2008 STOCK OPTION AND INCENTIVE PLAN

 

The Board of Directors believes that stock options and other stock-based incentive awards can play an important role in the success of the Company by encouraging and enabling the employees, officers, non-employee directors and other key persons of the Company and its subsidiaries upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. The Board of Directors anticipates that providing such persons with a direct stake in the Company will assure a closer identification of the interests of such individuals with those of the Company and its Stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company.

 

On February 27, 2015, the Board of Directors, subject to Stockholder approval, approved the Third Amended 2008 Stock Option and Incentive Plan (as amended, the “2008 Plan”), to, among other things, increase the aggregate number of shares authorized for issuance under the 2008 Plan by 2,000,000 shares to 7,700,000 shares of Common Stock. This amendment was designed to enhance the flexibility of the Compensation Committee to grant equity awards to our officers, employees, non-employee directors and other key persons and to ensure that the Company can continue to grant equity awards to such persons at levels determined to be appropriate by the Compensation Committee. The Company is growing rapidly and has an expanded management team and employee base who are critical to the success of the business. In additional, the Board of Directors, in recommending these changes, considered that fact that new executives and staff added as part of acquired businesses need to receive appropriate incentives to ensure the success of the transactions. A copy of the 2008 Plan is attached as Appendix A to this proxy statement and is incorporated herein by reference.

 

As of March 31, 2015, there were stock options to acquire 1,737,438 shares of Common Stock outstanding under our equity compensation plans, with a weighted average exercise price of $8.18 and a weighted average remaining term of 7.15 years. In addition, as of March 31, 2015, there were 1,062,074 unvested full value awards, 799,025 with time-based vesting and 263,049 with performance vesting, outstanding under our equity compensation plans. Other than the foregoing, no awards under our equity compensation plans were outstanding as of March 31, 2015. The shares remaining available for issuance as of March 31, 2015 is 1,422,077 and the common shares outstanding as of March 31, 2015 are 33,104,229.

 

Summary of Material Features

 

Certain material features of the 2008 Plan as proposed to be amended are:

 

•

The maximum number of shares of Common Stock available for awards under the 2008 Plan is increased by 2,000,000 shares from 5,700,000 shares to 7,700,000 shares.

 

•

Shares of Common Stock that are forfeited, cancelled, reacquired by the Company prior to vesting, satisfied without the issuance of Common Stock or otherwise terminated (other than by exercise) are added back to the shares of Common Stock available for issuance under the 2008 Plan.

 

•

Shares tendered or held back for taxes will not be added back to the reserved pool under the 2008 Plan. Upon the exercise of a stock appreciation right, the full number of shares underlying the award will be charged to the reserved pool.

 

•

Shares of Common Stock reacquired by the Company on the open market will not be added to the reserved pool under the 2008 Plan.

 

•

The award of stock options (both incentive and non-qualified options), stock appreciation rights, restricted stock awards, deferred stock awards, unrestricted stock awards, cash-based awards, performance share awards and dividend equivalent rights is permitted.

 

 

•

Minimum vesting periods are required for restricted stock, deferred stock awards and performance share awards granted to employees.

 

•

No dividends or dividend equivalents may be paid on full value shares subject to performance vesting until such shares are actually earned upon satisfaction of the performance criteria.

 

•

Without Stockholder approval, the exercise price of stock options and stock appreciation rights will not be reduced and stock options and stock appreciation rights will not be otherwise repriced through cancellation in exchange for cash, other awards or stock options or stock appreciation rights with a lower exercise price.

 

•

Any material amendment to the 2008 Plan is subject to approval by our Stockholders.

 

•

The term of the 2008 Plan will now expire on June 3, 2025.

 

Based solely on the closing price of our Common Stock as reported by the NASDAQ Global Market on April 13, 2015, the maximum aggregate market value of the 2,000,000 shares of Common Stock constituting the proposed increase described herein that could potentially be issued under the 2008 Plan is $37,360,000. The shares we issue under the 2008 Plan will be authorized but unissued shares or shares that we reacquire.

 

Qualified Performance-Based Compensation under Code Section 162(m)

 

To ensure that certain awards granted under the 2008 Plan to a “Covered Employee” (as defined in the Internal Revenue Code of 1986 (the “Code”)) qualify as “performance-based compensation” under Section 162(m) of the Code, the 2008 Plan provides that the Compensation Committee may require that the vesting of such awards be conditioned on the satisfaction of performance criteria that may include any or all of the following: (1) earnings before interest, taxes, depreciation and amortization, (2) net income (loss) (either before or after interest, taxes, depreciation and/or amortization), (3) changes in the market price of Common Stock, (4) economic value-added, (5) funds from operations or similar measure, (6) sales or revenue, (7) acquisitions or strategic transactions, (8) operating income (loss), (9) cash flow (including, but not limited to, operating cash flow and free cash flow), (10) return on capital, assets, equity, or investment, (11) stockholder returns, (12) return on sales, (13) gross or net profit levels, (14) productivity, (15) expense, (16) margins, (17) operating efficiency, (18) customer satisfaction, (19) working capital, (20) earnings (loss) per share of Common Stock, (21) sales or market shares and (22) number of customers, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group, and any of the above may be applicable to the organizational level specified by the Compensation Committee, including the Company or a unit, division or group or subsidiary of the Company. The Compensation Committee will select the particular performance criteria within 90 days following the commencement of a performance cycle. Subject to adjustments for stock splits and similar events, the maximum award granted to any one individual that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code will not exceed 500,000 shares of Common Stock for any performance cycle and options or stock appreciation rights with respect to no more than 500,000 shares of Common Stock may be granted to any one individual during any calendar year period. If a performance-based award is payable in cash, it cannot exceed $1,000,000 for any performance cycle.

 

Rationale for Share Increase

 

The 2008 Plan is critical to our ongoing effort to build Stockholder value. Equity incentive awards are an important component of our executive and non-executive employees’ compensation. Our Compensation Committee and the Board of Directors believe that we must continue to offer a competitive equity compensation program in order to attract, retain and motivate the talented and qualified employees necessary for our continued growth and success.

 

We manage our long-term Stockholder dilution by limiting the number of equity incentive awards granted annually. The Compensation Committee carefully monitors our annual net burn rate, total dilution and equity expense in order to maximize Stockholder value by granting only the number of equity incentive awards that it believes are necessary and appropriate to attract, reward and retain our employees. Our compensation philosophy reflects broad-based eligibility for equity incentive awards for high performing employees. By doing so, we link the interests of those employees with those of our Stockholders and motivate our employees to act as owners of the business.

 

 

Burn Rate

 

The following table sets forth information regarding historical awards granted for the 2012 through 2014 period, and the corresponding burn rate, which is defined as the number of shares subject to equity-based awards granted in a year divided by the weighted average number of shares of Common Stock outstanding for that year:

 

Share Element		2014				2013				2012
Stock Options Granted			327,000				354,000				430,000
Full-Value Awards Granted			691,000				266,000				140,000
Total Awards Granted (1)			1,018,000				620,000				570,000
Weighted average common shares outstanding during the fiscal year			31,526,000				30,912,000				30,318,000
Annual Burn Rate			3.23	%			2.01	%			1.88	%
Three-Year Average Burn Rate (2)			2.37	%			—				—

 

(1)

Total Awards granted represents the sum of Stock Options Granted and Full-Value Awards granted.

 

(2)

As illustrated in the table above, our three-year average burn rate for the 2012-2014 period was 2.37%.

 

If our request to increase the share reserve under the 2013 Plan by an additional 2,000,000 shares is approved by Stockholders, we will have approximately 3,422,077 shares available for grant after the Annual Meeting, which is based on 1,422,077 shares available for grant under the Second Amended 2008 Stock Option and Incentive Plan on March 31, 2015 and the 2,000,000 shares subject to this proposal. Our compensation committee determined the size of the requested share increase based on projected equity awards to anticipated new hires and projected annual equity awards to existing employees. We anticipate that if our request to increase the share reserve is approved by our Stockholders, assuming modest growth, it will be sufficient to provide equity incentives to attract, retain, and motivate employees through our 2019 annual meeting of Stockholders.

 

Vote Required for Approval:

 

The affirmative vote of a majority of shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this Proposal is required for the approval of the amendment to the 2008 Plan. If you own shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your shares so that your vote can be counted on this Proposal.

 

Recommendation

 

Our Board of Directors unanimously recommends a vote FOR the approval of the Third Amended 2008 Stock Option and Incentive Plan.

 

 

Summary of the 2008 Plan

 

The following description of certain features of the 2008 Plan is intended to be a summary only. The summary is qualified in its entirety by the full text of the 2008 Plan, a copy of which is attached hereto as Annex A.

 

Plan Administration. The 2008 Plan is administered by the Compensation Committee. The Compensation Committee has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, subject to the provisions of the 2008 Plan. The Compensation Committee may delegate to our Chief Executive Officer the authority to grant stock options to employees who are not subject to the reporting and other provisions of Section 16 of the Exchange Act and not subject to Section 162(m) of the Code, subject to certain limitations and guidelines.

 

Eligibility. Persons eligible to participate in the 2008 Plan will be those full or part-time officers, employees, non-employee directors and other key persons of the Company and its subsidiaries as selected from time to time by the Compensation Committee in its discretion. Approximately 1,258 individuals are currently eligible to participate in the 2008 Plan, which includes 5 officers, 1,247 employees who are not officers, and 6 non-employee directors.

 

Plan Limits. Taking into account the proposed increase described herein, 7,700,000 shares are available for issuance under the 2008 Plan. The maximum award of stock options or stock appreciation rights granted to any one individual will not exceed 500,000 shares of Common Stock (subject to adjustment for stock splits and similar events) for any calendar year period. If any award of restricted stock, deferred stock award or performance shares granted to an individual is intended to qualify as “performance-based compensation” under Section 162(m) of the Code, then the maximum award shall not exceed 500,000 shares of Common Stock (subject to adjustment for stock splits and similar events) to any one such individual in any performance cycle. If any cash-based award is intended to qualify as “performance-based compensation” under Section 162(m) of the Code, then the maximum award to be paid in cash in any performance cycle may not exceed $1,000,000. In addition, no more than the number of shares reserved and available for issuance under the 2008 Plan may be issued in the form of incentive stock options.

 

Stock Options. The 2008 Plan permits the granting of (1) options to purchase Common Stock intended to qualify as incentive stock options under Section 422 of the Code and (2) options that do not so qualify. Options granted under the 2008 Plan will be non-qualified options if they fail to qualify as incentive options or exceed the annual limit on incentive stock options. Incentive stock options may only be granted to employees of the Company and its subsidiaries. Non-qualified options may be granted to any persons eligible to receive incentive options and to non-employee directors and key persons. The option exercise price of each option will be determined by the Compensation Committee but may not be less than 100% of the fair market value of the Common Stock on the date of grant. Fair market value for this purpose will be the last reported sale price of the shares of Common Stock on the NASDAQ on the date of grant. The exercise price of an option may not be reduced after the date of the option grant other than to appropriately reflect changes in the Company’s capital structure.

 

The term of each option will be fixed by the Compensation Committee and may not exceed ten years from the date of grant. The Compensation Committee will determine at what time or times each option may be exercised. Options may be made exercisable in installments and the exercisability of options may be accelerated by the Compensation Committee. In general, unless otherwise permitted by the Compensation Committee, no option granted under the 2008 Plan is transferable by the optionee other than by will or by the laws of descent and distribution, and options may be exercised during the optionee’s lifetime only by the optionee, or by the optionee’s legal representative or guardian in the case of the optionee’s incapacity.

 

Upon exercise of options, the option exercise price must be paid in full either in cash, by certified or bank check or other instrument acceptable to the Compensation Committee or by delivery (or attestation to the ownership) of shares of Common Stock that are beneficially owned by the optionee and that are not subject to restrictions under any Company Plan. Subject to applicable law, the exercise price may also be delivered to the Company by a broker pursuant to irrevocable instructions to the broker from the optionee. In addition, the Compensation Committee may permit non-qualified options to be exercised using a net exercise feature, which reduces the number of shares issued to the optionee by the largest whole number of shares with a fair market value that does not exceed the exercise price.

 

 

To qualify as incentive options, options must meet additional federal tax requirements, including a $100,000 limit on the value of shares subject to incentive options that first become exercisable by a participant in any one calendar year.

 

Equity Grants to Non-Employee Directors. The 2008 Plan allows the Compensation Committee to issue equity grants to each non-employee director at its discretion from time to time. Stock options granted to non-employee directors will have an exercise price per share equal to the fair market value of the Common Stock on the date of grant and, unless otherwise determined by the Compensation Committee, expire ten years after the date of grant. The administrator, in its discretion, may also grant additional equity awards to non-employee directors.

 

Stock Appreciation Rights. The Compensation Committee may award stock appreciation rights subject to such conditions and restrictions as the Compensation Committee may determine. Stock appreciation rights entitle the recipient to shares of Common Stock equal to the value of the appreciation in the stock price over the exercise price. The exercise price may not be less than 100% of the fair market value of the Common Stock on the date of grant. The term of a stock appreciation right may not exceed ten years.

 

Restricted Stock. The Compensation Committee may award shares of Common Stock to participants subject to such conditions and restrictions as the Compensation Committee may determine. These conditions and restrictions may include the achievement of certain performance goals (as summarized above) and/or continued employment with us through a specified restricted period. The 2008 Plan provides minimum vesting periods for grants of restricted stock to employees.

 

Deferred Stock Awards. The Compensation Committee may grant deferred stock awards to any participants. Deferred stock awards are awards of phantom stock units that are ultimately payable in the form of shares of Common Stock and may be subject to such conditions and restrictions as the Compensation Committee may determine. These conditions and restrictions may include the achievement of certain performance goals (as summarized above) and/or continued employment with the Company through a specified vesting period. In the Compensation Committee’s sole discretion, it may permit a participant to make an advance election to receive a portion of his or her future cash compensation otherwise due in the form of a deferred stock award, subject to the participant’s compliance with the procedures established by the Compensation Committee and requirements of Section 409A of the Code. During the deferral period, the deferred stock awards may be credited with dividend equivalent rights. The 2008 Plan provides minimum vesting periods for grants of deferred stock awards to employees.

 

Unrestricted Stock Awards. The Compensation Committee may also grant shares of Common Stock which are free from any restrictions under the 2008 Plan. Unrestricted stock may be granted to any participant in recognition of past services or other valid consideration and may be issued in lieu of cash compensation due to such participant.

 

Cash-Based Awards. The Compensation Committee may grant cash-based awards under the 2008 Plan to participants. The cash-based awards may be subject to the achievement of certain performance goals (as summarized above).

 

Dividend Equivalent Rights. The Compensation Committee may grant dividend equivalent rights to participants which entitle the recipient to receive credits for dividends that would be paid if the recipient had held specified shares of Common Stock. Dividend equivalent rights may be granted as a component of another award (other than a stock option or stock appreciation right) or as a freestanding award. Dividend equivalent rights may be settled in cash, shares of Common Stock or a combination thereof, in a single installment or installments, as specified in the award.

 

 

Change of Control Provisions. The 2008 Plan provides that upon the effectiveness of a “Sale Event,” as defined in the 2008 Plan, except as otherwise provided by the Compensation Committee in the award agreement, and at the discretion of the Administrator of the 2008 Plan, stock options and stock appreciation rights that are not exercisable immediately prior to the effective time of the Sale Event shall become fully exercisable as of the effective time of the Sale Event, all other awards with time-based vesting, conditions or restrictions shall become fully vested and nonforfeitable as of the effective time of the Sale Event and all awards with conditions and restrictions relating to the attainment of performance goals may become vested and nonforfeitable in connection with a Sale Event, unless the parties to the Sale Event agree that such awards will be assumed or continued by the successor entity. Upon the effectiveness of a sale event, the 2008 Plan and all awards thereunder will terminate, unless the parties to the sale agree that such awards will be assumed or continued by the successor entity. In the event of such termination, (i) the Company may make or provide for a cash payment to participants holding options and stock appreciation rights, in exchange for the cancellation thereof, equal to the difference between the per share cash consideration in the sale event and the exercise price of the options or stock appreciation rights or (ii) each participant shall be permitted, within a specified period of time prior to the consummation of the sale event, as determined by the Compensation Committee, to exercise all outstanding options and stock appreciation rights held by such participant.

 

Adjustments for Stock Dividends, Stock Splits, Etc. The 2008 Plan requires the Compensation Committee to make appropriate adjustments to the number of shares of Common Stock that are subject to the 2008 Plan, to certain limits in the 2008 Plan, and to any outstanding awards to reflect stock dividends, stock splits, extraordinary cash dividends and similar events.

 

Tax Withholding. Participants in the 2008 Plan are responsible for the payment of any federal, state or local taxes that the Company is required by law to withhold upon the exercise of options or stock appreciation rights or vesting of other awards. Subject to approval by the Compensation Committee, participants may elect to have the minimum tax withholding obligations satisfied by authorizing the Company to withhold shares of Common Stock.

 

Amendments and Termination. The Board may at any time amend or discontinue the 2008 Plan and the Compensation Committee may at any time amend or cancel any outstanding award for the purpose of satisfying changes in the law or for any other lawful purpose. However, no such action may adversely affect any holder’s rights under any outstanding award without such holder’s consent. To the extent required under the rules of the NASDAQ, any amendments that materially change the terms of the 2008 Plan will be subject to approval by our Stockholders. Amendments shall also be subject to approval by our Stockholders if and to the extent determined by the Compensation Committee to be required by the Code to preserve the qualified status of incentive options or to ensure that compensation earned under the 2008 Plan qualifies as performance-based compensation under Section 162(m) of the Code.

 

Effective Date of 2008 Plan. The Board initially adopted the 2008 Stock Option and Incentive Plan on February 7, 2008, it was subsequently approved by our Stockholders and became effective on June 4, 2008. The Board approved the Amended 2008 Stock Option and Incentive Plan on March 22, 2011, which became effective upon Stockholder approval on June 1, 2011. The Board approved the Second Amended 2008 Stock Option and Incentive Plan on January 31, 2013, which became effective upon Stockholder approval on June 5, 2013. The Board approved the Third Amended 2008 Stock Option and Incentive Plan on February 27, 2015 to add an additional 2,000,000 shares and make certain other changes to the 2008 Plan, and such amendment will be effective upon approval by our Stockholders. Awards of incentive options may be granted under the 2008 Plan until the date that is 10 years from the date of Board approval of the Third Amended 2008 Stock Option and Incentive Plan. No other awards may be granted under the 2008 Plan after the date that is 10 years from the date of Stockholder approval of the Third Amended 2008 Stock Option and Incentive Plan.

 

 

New Plan Benefits

 

Because the grant of awards under the 2008 Plan is within the discretion of the Compensation Committee, the Company cannot determine the dollar value or number of shares of Common Stock that will in the future be received by or allocated to any participant, including our non-employee directors. Accordingly, in lieu of providing information regarding benefits that will be received under the 2008 Plan, the following table provides information concerning the benefits that were received by the following persons and groups during 2014: each named executive officer; all current executive officers, as a group; all current directors who are not executive officers, as a group; and all employees who are not executive officers, as a group.

 

		Options								Restricted Stock
Name and Position		Average Exercise Price				Number (#)				Average Dollar Value ($)				Number (#)
William Marth, President and CEO			-				-			$	10.29				194,445
Steven R. Hagen, Senior Vice President, Pharmaceutical Development and Manufacturing		$	10.43				25,000			$	10.43				12,500
Lori M. Henderson, Senior Vice President, General Counsel and Secretary		$	10.43				29,167			$	10.43				14,583
Michael M. Nolan, former Chief Financial Officer		$	10.43				33,333			$	10.43				16,667
George Svokos, Chief Commercial Officer and Senior Vice President, API		$	10.29				129,167			$	10.26				44,583
All executive officers, as a group		$	10.35				216,667			$	10.30				282,778
All current directors who are not executive officers, as a group		$	10.43				43,206			$	10.14				119,343
All current employees who are not executive officers, as a group		$	10.43				66,666			$	16.86				288,833

 

Summary of Federal Income Tax Consequences

 

The following is a summary of the principal federal income tax consequences of certain transactions under the 2008 Plan. It does not describe all federal tax consequences under the 2008 Plan, nor does it describe foreign, state or local tax consequences.

 

Incentive Options. No taxable income is generally realized by the optionee upon the grant or exercise of an incentive option. If shares of Common Stock issued to an optionee pursuant to the exercise of an incentive option are sold or transferred after two years from the date of grant and after one year from the date of exercise, then (i) upon sale of such shares, any amount realized in excess of the option price (the amount paid for the shares) will be taxed to the optionee as a long-term capital gain, and any loss sustained will be a long-term capital loss, and (ii) the Company will not be entitled to any deduction for federal income tax purposes. The exercise of an incentive option will give rise to an item of tax preference that may result in alternative minimum tax liability for the optionee.

 

 

If shares of Common Stock acquired upon the exercise of an incentive option are disposed of prior to the expiration of the two-year and one-year holding periods described above (a “disqualifying disposition”), generally (i) the optionee will realize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of the shares of Common Stock at exercise (or, if less, the amount realized on a sale of such shares of Common Stock) over the option price thereof, and (ii) the Company will be entitled to deduct such amount. Special rules will apply where all or a portion of the exercise price of the incentive option is paid by tendering shares of Common Stock.

 

If an incentive option is exercised at a time when it no longer qualifies for the tax treatment described above, the option is treated as a non-qualified option. Generally, an incentive option will not be eligible for the tax treatment described above if it is exercised more than three months following termination of employment (or one year in the case of termination of employment by reason of disability). In the case of termination of employment by reason of death, the three-month rule does not apply.

 

Non-Qualified Options. No income is realized by the optionee at the time the option is granted. Generally (i) at exercise, ordinary income is realized by the optionee in an amount equal to the difference between the option price and the fair market value of the shares of Common Stock on the date of exercise, and we receive a tax deduction for the same amount, and (ii) at disposition, appreciation or depreciation after the date of exercise is treated as either short-term or long-term capital gain or loss depending on how long the shares of Common Stock have been held. Special rules will apply where all or a portion of the exercise price of the non-qualified option is paid by tendering shares of Common Stock. Upon exercise, the optionee will also be subject to Social Security taxes on the excess of the fair market value over the exercise price of the option.

 

Other Awards. The Company generally will be entitled to a tax deduction in connection with an award under the 2008 Plan in an amount equal to the ordinary income realized by the participant at the time the participant recognizes such income. Participants typically are subject to income tax and recognize such tax at the time that an award is exercised, vests or becomes non-forfeitable, unless the award provides for a further deferral.

 

Parachute Payments. The vesting of any portion of an option or other award that is accelerated due to the occurrence of a change in control (such as a sale event) may cause a portion of the payments with respect to such accelerated awards to be treated as “parachute payments” as defined in the Code. Any such parachute payments may be non-deductible to the Company, in whole or in part, and may subject the recipient to a non-deductible 20% federal excise tax on all or a portion of such payment (in addition to other taxes ordinarily payable).

 

Limitation on Deductions. Under Section 162(m) of the Code, the Company’s deduction for certain awards under the 2008 Plan may be limited to the extent that the Chief Executive Officer or other executive officer whose compensation is required to be reported in the summary compensation table (other than the Principal Financial Officer) receives compensation in excess of $1 million a year (other than performance-based compensation that otherwise meets the requirements of Section 162(m) of the Code). The 2008 Plan is structured to allow certain awards to qualify as performance-based compensation.

 

 

Equity Compensation Plan Information

 

The following table provides information about the securities authorized for issuance under our equity compensation plans as of December 31, 2014:

 

Equity Compensation Plan Information

Plan category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted Average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plan (excluding securities referenced in column (a)

(a)

(b)

(c)

Equity compensation plans approved by security holders(1):

1,804,348

$

6.18

2,223,398

(2)

Equity compensation plans not approved by security holders:

N/A

N/A

N/A

Total

1,804,348

$

6.18

2,223,398

 

(1)

Consists of options outstanding under the Company’s 1998 Stock Option and Incentive Plan and the Company’s Second Amended 2008 Stock Option and Incentive Plan. Does not include restricted stock or purchase rights accruing under the Company’s Employee Stock Purchase Plan (“ESPP”) because the purchase price (and therefore the number of shares to be purchased) will not be determined until the end of the purchase period.

 

(2)

Includes 1,824,060 shares available under the Second Amended 2008 Stock Option and Incentive Plan and 399,338 shares available under the ESPP as of December 31, 2014.

 

 

PROPOSAL 4

 

APPROVAL OF THIRD AMENDED

1998 EMPLOYEE STOCK PURCHASE PLAN

 

The Company’s 1998 Employee Stock Purchase Plan (as amended to date, the “ESPP”) was adopted by our Stockholders at a special meeting of Stockholders held on July 1, 1998. As of April 13, 2015, a total of 1,400,000 shares of our Common Stock were authorized for issuance under the ESPP, of which approximately 371,285 remained available and reserved for issuance. In 2011 the Board of Directors, approved the Amended 1998 Employee Stock Purchase Plan to increase in the number of shares available under the ESPP by 400,000 shares, increasing the total from 600,000 shares to 1,000,000 shares. In 2013, the Board approved the Second Amended 1998 Employee Stock Purchase Plan to increase in the number of shares available by an additional 400,000 shares, increasing the total from 1,000,000 shares to 1,400,000 shares.

 

We believe that the availability of an adequate reserve of shares for issuance under the ESPP will benefit us by providing employees with an opportunity to acquire shares of our Common Stock and will enable us to attract, retain and motivate valued employees. On February 27, 2015, our Board of Directors unanimously approved an the Third Amended 1998 Employee Stock Purchase Plan to increase the number of shares of our Common Stock reserved for issuance under the ESPP by 200,000 shares to a total of 1,600,000 shares. Such increase is subject to Stockholder approval at the Annual Meeting.

 

Based solely on the closing price of our Common Stock reported on the NASDAQ Global Market on April 13, 2015, the maximum aggregate market value of the 200,000 shares subject to the proposed increase described herein that could potentially be issued under the ESPP is $3,730,000.

 

Vote Required for Approval:

 

The affirmative vote of a majority of shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this Proposal is required for the approval of the Third Amended 1998 Employee Stock Purchase Plan. If you own shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your shares so that your vote can be counted on this Proposal.

 

Recommendation:

 

Our Board of Directors unanimously recommends a vote FOR the approval of the Third Amended 1998 Employee Stock Purchase Plan.

 

Summary of the Material Provisions of the ESPP

 

The following description of certain provisions of the ESPP is intended to be a summary only. The summary is qualified in its entirety by the full text of the ESPP, a copy of which is attached hereto as Annex B. It is our intention that the ESPP qualify as an “employee stock purchase plan” under Section 423 of the Code.

 

Any employee of the Company or of any present or future subsidiary of the Company is eligible to participate in the ESPP so long as the employee is customarily employed for at least 20 hours per week. No person who owns or holds, or as a result of participation in the ESPP would own or hold, Common Stock or options to purchase Common Stock, together equal to 5% or more of the Company’s total outstanding Common Stock is entitled to participate in the ESPP. No employee may exercise an option granted under the ESPP that permits the employee to purchase our Common Stock having a value of more than $25,000 (determined using the fair market value of the stock at the time such option is granted) in any calendar year.

 

Participation in the ESPP is limited to eligible employees who authorize payroll deductions (within ranges specified by the Compensation Committee, with a minimum of 1% and a maximum of 10% of the employee’s eligible compensation for the applicable pay period) pursuant to the ESPP. There are currently approximately 1,252 employees eligible to participate in the ESPP, of whom approximately 292 are participating. Once an employee becomes a participant in the ESPP, that employee will automatically participate in successive offering periods, as described below, until such time as that employee withdraws from the ESPP, becomes ineligible to participate in the ESPP, or his or her employment ceases.

 

 

Each offering of our common stock under the ESPP is for a period of six months, which we refer to as an “offering period.” New offering periods begin on January 1 and July 1 of each year. Shares are purchased on the last business day of each exercise period, in June and December, with that day being referred to as an “exercise date”. The Compensation Committee may establish different offering periods or exercise dates under the ESPP.

 

On the first day of an offering period, we grant to employees participating in that offering period an option to purchase shares of our Common Stock. On the exercise date of each offering period, the employee is deemed to have exercised the option, at the exercise price, to the extent of accumulated payroll deductions. The option exercise price is an amount equal to 85% of the fair market value per share of our Common Stock on either the first day of the offering period or the exercise date, whichever is lower. The maximum number of shares of Common Stock that may be issued to any employee under the ESPP in any offering period is 2,000, subject to adjustments by our Board of Directors or the Compensation Committee from time to time.

 

Subject to certain limitations, the number of shares of our Common Stock a participant purchases in each exercise period is determined by dividing the total amount of payroll deductions withheld from the participant’s compensation during the exercise period by the option exercise price. In general, if an employee is no longer a participant on an exercise date, the employee’s option, which would have been automatically exercised on that date, will be automatically terminated, and the amount of the employee’s accumulated payroll deductions will be refunded.

 

A participant may elect to decrease (but may not increase) the amount of his or her payroll deductions at any time during an offering period, subject to the minimum of 1% and a maximum of 10% of eligible compensation. A reduction in the amount of a participant’s payroll deductions will be effective 15 business days after we receive written notice from the participant and will apply to the first full pay period commencing after that date. A participant may withdraw from an offering period at any time without affecting his or her eligibility to participate in future offering periods. If a participant withdraws from an offering period, that participant may not again participate in the same offering period, but may enroll in subsequent offering periods. An employee’s withdrawal will be effective as of the business day following the employee’s delivery of written notice of withdrawal under the ESPP.

 

The ESPP is administered by the Compensation Committee. The ESPP will continue until terminated by our Board of Directors.

 

We are unable to determine the dollar value and number of options or amounts that will be received by or allocated to any of our executive officers, those officers as a group, or employees who are not executive officers as a group, as a result of the increase in the number of shares subject to purchase under the ESPP. If the proposed amendment had been in effect during fiscal year 2014, it would not have affected the number of options received by or allocated to participants in fiscal year 2014.

 

Our Board of Directors may, in its discretion, at any time, terminate or amend the ESPP. Upon termination of the ESPP, all amounts in the accounts of participating employees will be refunded.

 

Summary of Federal Income Tax Consequences

 

The following is only a summary of the effect of the United States income tax laws and regulations upon an employee and the Company with respect to such employee’s participation in the ESPP. This summary does not purport to be a complete description of all federal tax implications of participation in the ESPP, nor does it discuss the income tax laws of any municipality, state or foreign country in which a participant may reside or otherwise be subject to tax.

 

A participant in the ESPP recognizes no taxable income either as a result of participation in the ESPP or upon exercise of an option to purchase shares of our Common Stock under the terms of the ESPP.

 

 

If a participant disposes of shares purchased upon exercise of an option granted under the ESPP within two years from the first day of the applicable offering period or within one year from the exercise date, which we refer to as a “disqualifying disposition”, the participant will realize ordinary income in the year of that disposition equal to the amount by which the fair market value of the shares on the date the shares were purchased exceeds the purchase price. The amount of ordinary income will be added to the participant’s basis in the shares, and any additional gain or resulting loss recognized on the disposition of the shares will be a capital gain or loss. A capital gain or loss will be long-term if the participant’s holding period is more than 12 months, or short-term if the participant’s holding period is 12 months or less.

 

If the participant disposes of shares purchased upon exercise of an option granted under the ESPP at least two years after the first day of the applicable offering period and at least one year after the exercise date, the participant will realize ordinary income in the year of disposition equal to the lesser of (1) the excess of the fair market value of the shares on the date of disposition over the exercise price or (2) the excess of the fair market value of the shares on the first day of the applicable offering period over the exercise price. The amount of any ordinary income will be added to the participant’s basis in the shares, and any additional gain recognized upon the disposition after that basis adjustment will be a long-term capital gain. If the fair market value of the shares on the date of disposition is less than the exercise price, there will be no ordinary income and any loss recognized will be a long-term capital loss.

 

If the participant still owns the shares at the time of death, the lesser of (1) the excess of the fair market value of the shares on the date of death over the exercise price or (2) the excess of the fair market value of the shares on the first day of the offering period in which the shares were purchased over the exercise price will constitute ordinary income in the year of death.

 

The Company is generally entitled to a tax deduction in the year of a disqualifying disposition equal to the amount of ordinary income recognized by the participant as a result of that disposition. In all other cases, the Company is not allowed a deduction.

 

 

Proposal 5

 

PROPOSED AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION

TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK

 

The Company’s Restated Certificate of Incorporation currently authorizes the issuance of 50,000,000 shares of Common Stock, par value $0.01 per share. On February 27, 2015, the Board of Directors approved a proposal to (i) increase the number of authorized shares of the Company’s Common Stock from 50,000,000 shares to 100,000,000 shares; and (ii) amend the Restated Certificate of Incorporation to increase the number of shares of Common Stock that were authorized to issue to 100,000,000 shares, subject to Stockholder approval.

 

The Board of Directors believes the proposed amendment to be advisable and in the best interests of the Company and its Stockholders and is accordingly submitting the proposed amendment to be voted on by the Stockholders in order to give the Company more flexibility in considering the planning for future corporate needs, including, but not limited to, stock dividends, grants under equity compensation plans, stock splits, financing, potential strategic transactions, including mergers, acquisitions and other general corporate transactions.

 

As of March 31, 2015, of the 50,000,000 currently authorized shares of Common Stock, 38,593,884 were either issued or reserved for issuance. Shares reserved for issuance include 371,285 shares for issuance under the Second Amended 1998 Employee Stock Purchase Plan, and 1,422,077 under the Second Amended Stock Option and Incentive Plan. If approved at the Annual Meeting an additional 2,200,000 shares will be reserved under these plans collectively. Shares reserved in accordance with a bank agreement related to the issuance of convertible debt in November 2013 include 5,278,713 shares which must be increased by an additional 5,278,713 shares following the Annual Meeting.

 

Based on these issued and reserved shares of Common Stock, the Company currently has approximately 8,000,000 shares of Common Stock remaining available for issuance in the future for other corporate purposes.

 

Since the beginning of 2012 through the record date, the Company has issued approximately 2,578,198 shares of Common Stock. The Company currently has no plans, arrangements, commitments or understandings with respect to the issuance of the 50,000,000 additional shares of Common Stock that are the subject of this Proposal.

 

The Restated Certificate of Incorporation currently also authorizes the issuance of 2,000,000 shares of preferred stock, par value $.01 per share, none of which are issued or outstanding. The proposed amendment to the Restated Certificate of Incorporation would not change the authorized number of shares of preferred stock. There are currently no plans, arrangements, commitments or understandings with respect to the issuance of any shares of preferred stock.

 

Text of the Amendment

 

The Board of Directors proposes to amend the first paragraph of Article IV of the Restated Certificate of Incorporation so that it would read in its entirety as follows:

 

“The total number of shares of capital stock which the Corporation shall have authority to issue is One-Hundred Two Million (102,000,000) shares, of which (a) One-Hundred Million (100,000,000) shares shall be common stock, par value $.01 per share (the “Common Stock”); and (b) Two Million (2,000,000) shares shall be undesignated preferred stock, par value $.01 per share (the “Undesignated Preferred Stock”).

 

Purpose of the Amendment

 

The Board of Directors is recommending this increase in the authorized Common Stock primarily to give the Company flexibility to issue shares of Common Stock for future corporate needs. Generally, as outlined in the Restated Certificate of Incorporation, the Company is authorized to issue, from time to time, all or any portion of the Common Stock of the Company which may have been authorized but not issued, to such person or persons and for such lawful consideration as it may deem appropriate, and generally in its absolute discretion. The Board’s discretion, however, would be subject to applicable rules and regulations that may apply to any particular issuance or reservation for issuance that might require Stockholder approval.

 

 

The newly authorized shares of Common stock would be issuable for any proper corporate purpose including flexibility in considering the planning for future corporate needs, including, but not limited to, stock dividends, grants under equity compensation plans, stock splits, financing, potential strategic transactions, including mergers, acquisitions and other general corporate transactions. In December 2013, the Company issued $150,000,000 of 2.25% Cash Convertible Senior Notes (the “Notes”). In connection with the offering of these Notes, the Company entered into warrant transactions in which the Company sold warrants of its Common Stock to the counterparties. The Company is required to reserve 10,557,424 shares related to these warrants. In 2014, Wilmington Trust, National Association waived half of the reserve requirement for a period of time, and the Company has a commitment to re-reserve 5,278,713 shares following Stockholder approval of this Proposal.

 

Rights of Additional Authorized Shares

 

Any authorized shares of Common Stock, if and when issued, would be part of the Company’s existing class of Common Stock and would have the same rights and privileges as the shares of Common Stock currently outstanding. Current Stockholders do not have pre-emptive rights with respect to Common Stock, nor do they have cumulative voting rights. Should the Board of Directors issue additional shares of Common Stock, existing Stockholders would not have any preferential rights to purchase any of such shares, and their percentage ownership of the Company’s then outstanding Common Stock could be reduced.

 

Potential Adverse Effects of Amendment

 

Future issuances of Common Stock could have a dilutive effect on the Company’s earnings per share, book value per share and the voting power and interest of current Stockholders. In addition, the availability of additional shares of Common Stock for issuance could, under certain circumstances, discourage or make more difficult any efforts to obtain control of the Company. The Board of Directors is not aware of any attempt, or contemplated attempt, to acquire control of the Company, nor is this Proposal being presented with the intent that it be used to prevent or discourage any acquisition attempt. However, nothing would prevent the Board from taking any such actions that it deems to be consistent with its fiduciary duties.

 

Effectiveness of Amendment

 

If the proposed amendment is adopted, it will become effective upon the filing of a certificate of amendment to the Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which the Company expects to file promptly after the Annual Meeting. If the proposed amendment is not approved by the Company’s Stockholders, the number of authorized shares of Common Stock will remain unchanged.

 

Vote Required for Approval:

 

The affirmative vote of a majority of shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on this Proposal is required for the approval of the amendment of Company’s Restated Certificate of Incorporation. If you own shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your shares so that your vote can be counted on this Proposal.

 

Recommendation:

 

The Board of Directors unanimously recommends a vote FOR the approval of the proposed amendment to the Company’s Restated Certificate of Incorporation to increase the authorized shares of Common Stock.

 

 

PROPOSAL 6

 

ADVISORY VOTE REGARDING COMPENSATION OF

THE COMPANY’S NAMED EXECUTIVE OFFICERS

 

In accordance with Section 14A of the Exchange Act, the Company is providing Stockholders with the opportunity to vote on the compensation of the Company’s named executive officers as disclosed in this proxy statement. This is commonly known as a ‘‘say-on-pay’’ vote. At the 2011 Annual Meeting of Stockholders, the Company’s Stockholders voted, on a non-binding advisory basis, for the Company to hold future, non-binding advisory votes on the compensation of the Company’s named executive officers on an annual basis. In light of this result and after a discussion of the Board of Directors, the Board of Directors determined that the Company will hold future non-binding, advisory votes on executive compensation on an annual basis until the next required non-binding advisory vote on the frequency of such future non-binding, advisory votes on executive compensation. At the Annual Meeting, the Company is presenting to Stockholders the following non-binding, advisory resolution regarding the approval of the compensation of the Company’s named executive officers:

 

RESOLVED, that the compensation paid to the Company’s named executive offıcers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED.

 

Although the vote is non-binding, the Compensation Committee and the Board of Directors value your opinions and will consider the outcome of the vote in establishing compensation philosophy and making future compensation decisions.

 

As described more fully in the ‘‘Compensation Discussion & Analysis’’ and in the Summary Compensation Table and subsequent tables found herein the Company’s named executive officers are compensated in a manner consistent with our business strategy, competitive practice, sound compensation governance principles, and Stockholder interests and concerns.

 

Vote Required For Approval:

 

The affirmative vote of a majority of the shares of the Company’s Common Stock present or represented by proxy and voting at the Annual Meeting is required for approval of this Proposal. If you own shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your shares so that your vote can be counted on this Proposal. Unless otherwise instructed, proxies solicited by the Board of Directors will be voted ‘‘FOR’’ this Proposal.

 

Recommendation:

 

The Board of Directors of the Company unanimously recommends a vote FOR the approval of this Proposal.

 

 

CORPORATE GOVERNANCE AND BOARD MATTERS

 

The Board of Directors and its Committees

 

The Board of Directors currently consists of seven (7) members. The Board of Directors is divided into three classes and each year one of those classes must stand for election. The Board of Directors of the Company held nine (9) formal meetings and three (3) voluntary meeting/conference calls during 2014. During 2014, each of the incumbent directors then serving attended 100% of the total number of formal meetings of the Board of Directors. The Board of Directors has established an Audit Committee (the ‘‘Audit Committee’’), a Compensation Committee (the ‘‘Compensation Committee’’), and a Nominating and Corporate Governance Committee (the ‘‘Nominating Committee’’). Each of the incumbent directors then serving attended 100% of the total number of committee meetings of which they were members. The Board is invited to attend annual meetings of stockholders and Thomas E. D’Ambra, Ph.D., William Marth, Kevin O’Connor and Arthur Roth, were in attendance at the 2014 Annual Meeting of Stockholders.

 

Independence of Members of the Board of Directors

 

The Board of Directors has determined that the Company’s non-employee Directors, Veronica G. H. Jordan, Ph.D., Gabriel Leung, Kevin O’Connor, Arthur J. Roth, and Una S. Ryan, Ph.D., O.B.E., are independent within the meaning of the director independence standards of the NASDAQ Stock Market, Inc. (‘‘NASDAQ’’) and the director independence standards of the Securities and Exchange Commission (‘‘SEC’’). Furthermore, the Board of Directors has determined that each member of the Audit and Compensation Committees is independent within the meaning of the director independence standards of NASDAQ and the SEC, and that each member of the Audit Committee meets the heightened director independence standards of the SEC for audit committee members. Thomas E. D’Ambra, Ph.D. became a non-employee director on January 1, 2014. Given Dr. D’Ambra ’s current shareholdings and former employee status, the Board of Directors does not consider Dr. D’Ambra independent within the meaning of the NASDAQ and SEC director independence standards. Although the Board of Directors determined William S. Marth was independent within the meaning of the NASDAQ and SEC director independence standards in 2013 and met the higher director independence standards relating to Audit Committee members, when Mr. Marth became the Company’s President and Chief Executive Officer on January 1, 2014, the Board of Directors determined Mr. Marth was no longer independent within the meaning of the NASDAQ and SEC director independence standards and no longer eligible to be a member of the Audit Committee.

 

Board Leadership Structure

 

Dr. D’Ambra currently serves as the Chairman of the Board of Directors. The Company believes the appointment of Mr. Marth as President and CEO of the Company and Dr. D’Ambra as the Chairman of the Board of Directors is appropriate and effective for the Company given Dr. D’Ambra’ s long and successful history as a founder of the Company and his continued commitment and strong leadership.

 

The Audit Committee

 

The Audit Committee appoints the independent registered public accounting firm to audit the Company’s financial statements and to perform services related to such audit, reviews the scope and results of the audit with the independent registered public accounting firm, reviews the Company’s year-end operating results with management and the independent registered public accounting firm, considers the adequacy of the internal accounting procedures and considers the effect of such procedures on the accountants’ independence. The Audit Committee has the right to retain outside independent consultants. The Audit Committee currently consists of Mr. Roth (Chair), Dr. Jordan and Mr. Leung, each of whom is independent as defined by the applicable rules of NASDAQ and the SEC, and as affirmed by the Board of Directors. The Board of Directors has determined that Mr. Roth qualifies as an ‘‘audit committee financial expert’’ as such term is defined by the rules adopted by the SEC. The Audit Committee held five (5) meetings during 2014. A copy of the Audit Committee Charter is available on the Company’s website at www.amriglobal.com under the Investor Relations section.

 

 

The Compensation Committee

 

The Compensation Committee reviews and recommends the compensation arrangements for executive officers, including the Chief Executive Officer, and reviews general compensation levels for other employees as a group, determines equity-based awards to be granted to eligible persons under the Company’s Second Amended 2008 Stock Option and Incentive Plan (the ‘‘2008 Stock Plan’’) and Technology Development Incentive Plan and takes such other action as may be required in connection with the Company’s compensation and incentive plans. The Compensation Committee also reviews and recommends compensation for the Board of Directors. The Compensation Committee consists of Dr. Jordan (Chairwoman), Mr. O’Connor and Dr. Ryan, each of whom is independent as defined by the applicable rules of NASDAQ and the SEC, and as affirmed by the Board of Directors. The Compensation Committee held eight (8) meetings during 2014. A copy of the Compensation Committee Charter is available on the Company’s website at www.amriglobal.com under the Investor Relations section.

 

The Compensation Committee has the right to retain and dismiss outside independent consultants. In 2013, the Company engaged an independent compensation advisor, F.W. Cook (“Cook”), to advise the Compensation Committee during the evaluation of 2014 compensation. During 2014, the Company re-engaged Cook to advise the Compensation Committee during the evaluation of 2015 compensation. In consultation with Cook, the Compensation Committee made certain determinations discussed below regarding 2014 full year compensation levels for executive officers and board members. Cook provided no other services to the Company in 2014 and the Compensation Committee determined that Cook does not have any conflicts of interest in connection with the performance of their services for the Compensation Committee.

 

The Nominating Committee

 

The Nominating Committee consists of Messrs. O’Connor (Chair) and Roth, and Dr. Ryan, all of whom are independent for purposes of the listing standards of NASDAQ. The Nominating Committee is responsible for the implementation of the Company’s Corporate Governance Guidelines. The Nominating Committee evaluates the performance of the Chief Executive Officer and the Board of Directors. In addition, the Nominating Committee makes recommendations to the Board of Directors of candidates for election to the Board of Directors. In evaluating and determining whether to recommend a person as a candidate for election as a director, the Nominating Committee considers the minimum qualifications set forth in the Nominating Committee Charter including:

 

•

the highest personal and professional integrity,

 

•

demonstrated exceptional ability and judgment,

 

•

effectiveness, in conjunction with the other members of the Board, in collectively serving the long-term interests of the Company’s Stockholders,

 

•

the nominee shall be highly accomplished in his or her respective field, with superior credentials and recognition,

 

•

the nominee shall have sufficient time and availability to devote to the affairs of the Company, particularly in light of the number of boards on which the nominee may serve and;

 

•

to the extent such nominee serves or has previously served on other boards, the nominee shall have a demonstrated history of actively contributing at board meetings.

 

The Nominating Committee may employ a variety of methods for identifying and evaluating nominees for director including retaining outside independent consultants. While the Company does not have a formal diversity policy for Board membership, the Board of Directors seeks directors who represent a mix of backgrounds and experiences that will enhance the quality of the Board’s deliberations and decisions. The Nominating Committee considers, among other factors, diversity with respect to viewpoint, skills, experience and community involvement in its evaluation of candidates for Board membership. Such diversity considerations are discussed by the Nominating Committee in connection with the general qualifications of each potential nominee.

 

 

The Nominating Committee may assess the size of the Board of Directors, the need for particular expertise on the Board, the upcoming election cycle of the Board of Directors and whether any vacancies are expected, due to retirement or otherwise. In the event that vacancies are anticipated or otherwise arise, the Nominating Committee will consider various potential candidates for director which may come to the Nominating Committee’s attention through current directors, professional search firms, Stockholders or other persons. The Nominating Committee will consider candidates recommended by Stockholders, when the nominations are properly submitted, under the criteria summarized above. Following verification of the Stockholder status of persons proposing candidates, the Nominating Committee makes an initial analysis of the qualifications of any recommended candidate pursuant to the criteria summarized above to determine whether the candidate is qualified for service on the Board of Directors before deciding to undertake a complete evaluation of the candidate. The same identifying and evaluating procedures apply to all candidates for director nomination, including candidates submitted by Stockholders. The Nominating Committee held three (3) meetings during 2014. A copy of the Nominating Committee Charter is available on the Company’s website at www.amriglobal.com under the Investor Relations section.

 

Board Performance Self-Assessment

 

Each year the Board of Directors evaluates its performance and effectiveness. Each director completes an evaluation form developed by the Nominating and Governance Committee to solicit feedback on specific aspects of the Board’s role, organization, and meetings. The collective ratings and comments are compiled by the Corporate Secretary and presented to the full Board of Directors. Each Board Committee conducts an annual performance self-assessment through a similar process.

 

Enterprise Risk Management

 

The Company has established a Risk Management Committee that employs a number of risk identification and mitigation strategies. The Risk Management Committee has surveyed the business to identify risks, analyze the probability of occurrence and impact to our business of those risks, and oversee mitigation efforts. The Risk Management Committee conducts periodic reviews of ongoing business performance, financial results and future opportunities and risks. The Risk Management Committee regularly reports to the full Board of Directors.

 

Stockholder Communication

 

The Board of Directors welcomes the submission of any comments or concerns from Stockholders and any interested parties. Communications should be addressed to Lori M. Henderson, Secretary, Albany Molecular Research, Inc., 26 Corporate Circle, P.O. Box 15098, Albany, New York 12212-5098 and marked to the attention of the Board of Directors or any of its committees or individual directors.

 

Code of Ethics and Business Conduct Guidelines

 

The Company has adopted a Code of Ethics and Business Conduct Guidelines, which is applicable to all directors, officers and employees of the Company. The Code of Ethics and Business Conduct Guidelines is available on the Company’s website, www.amriglobal.com, under the Investor Relations section. Any amendments to, or waivers of, the Code of Ethics and Business Conduct Guidelines which applies to any of our executive officers or directors will be disclosed on our website promptly following the date of such amendment or waiver.

 

 

COMPENSATION DISCUSSION AND ANALYSIS

 

We provide a competitive total compensation package to our executive management team through a combination of base salary, annual cash incentives, long-term equity incentive grants, a broad-based benefits program, competitive employment agreements and, in some instances, non-recurring perquisites. In 2014, our Stockholders voted on an advisory basis with respect to our compensation program for named executive officers. Of the votes cast (excluding abstentions and broker non-votes), 97% were cast in support of the program. In light of this, in reviewing the executive compensation program for 2015, the Compensation Committee decided to retain the general overall program design, which ties a significant portion of the executives’ pay closely with our performance. In the future, the Compensation Committee will continue to consider the executive compensation program in light of changing circumstances and Stockholder feedback. This Compensation Discussion and Analysis explains our compensation philosophy and policies and practices with respect to our Chief Executive Officer, Chief Financial Officer and the other three most highly-compensated executive officers for the year ended December 31, 2014, who are collectively referred to as the named executive officers.

 

Executive Summary — 2014 Results

 

In early 2014, the Company established aggressive goals related to the growth in contract revenue and operating margin, excluding royalties received based on certain licensed products. The Board of Directors agreed on performance targets that required at least 8% overall growth in contract revenue, and a positive contract operating margin of at least 5%. Given the Company’s focus on growth by acquisition, along with further development of profitable revenue achievement across business segments, the Compensation Committee placed equal weighting on the operating income and overall contract revenue targets, with each goal being weighted 50% for calculation of the cash bonus pool. Following the acquisitions of Cedarburg Pharmaceuticals and OsoBio Pharmaceuticals, the Compensation Committee adjusted the contract revenue and contract operating profit targets to include the stated expectations for the added businesses, while keeping the weighting levels the same. 2014 was a transformative year for the Company in many ways, with the execution of two acquisition transactions that added to the Company’s strategic growth plans, the establishment of a three business unit structure, the integration of new members of the executive team under the leadership of William Marth, our Chief Executive Officer, and finally, building the foundation for two further acquisitions that closed in early 2015. The Company continued its strong performance in 2014 with growth in overall revenue and contract revenue to record levels and a significant increase in the overall profitability of the contract manufacturing businesses. In spite of a successful year of growth, the Company did not achieve its “Threshold” contract revenue objective or contract operating income objective, resulting in no cash incentive payments being made to our named executive officers or to any other employees with respect to 2014.

 

In early 2014, the Compensation Committee awarded each executive an increase in base salary, which increases were effective April 1, 2014. As in prior years, the Compensation Committee determined to continue the grants of equity awards to the executive staff, in keeping with the evaluation done by the outside advisors to the Compensation Committee of the relative levels of compensation of our executives compared to executives in our chosen peer group and in broader based compensation surveys. The Compensation Committee did not approve any additional perquisites for the executive staff, which remain modest and are only those perquisites that are also available to other employees of the Company, or otherwise agreed to for executives that joined AMRI from companies that we acquired this year.

 

The Objectives of our Executive Compensation Program

 

The Compensation Committee is composed of independent directors. The primary purpose of the Compensation Committee is to review, oversee, and evaluate our executive compensation policies, strategies and programs.

 

Our executive compensation programs are designed to achieve the following objectives:

 

·

Attract and retain key executive talent by providing compensation and benefit opportunities that are comparable to those offered by life science, biotech, research and other technology industry companies of similar size.

 

 

·

Provide a competitive total compensation package based on an executive meeting or exceeding annually defined short- and long-term business goals that align with the creation of Stockholder value.

 

·

Recognize, and reward overall business results to align our executives’ goals with those of our Stockholders.

 

·

Foster a shared commitment among executives to meeting departmental and company goals while promoting the Company’s shared core values.

 

Compensation Philosophy and Principles

 

It is the philosophy of the Compensation Committee that the executive compensation program be both performance-and market-based, and that a significant portion of compensation be allocated to short- and long-term variable performance-based compensation instruments. Our compensation philosophy for our executive officers is to provide base salaries that are slightly below market median for similarly situated executives in comparable firms, and to provide incentives that approximate the median of the market for achieving target level performance. Actual base salaries may vary from this generally targeted position based on the performance, tenure, experience and contributions of the individual. Actual annual cash incentives will vary with the annual performance of the Company. Actual total cash compensation can be less than or greater than the median of the market, based on these factors. To balance both short- and long-term objectives and to align the executives with Stockholders, long-term incentives are awarded and may vary based on performance, market levels, and expected contributions.

 

We strive to attract and retain executives with the ability and the experience necessary to lead and deliver strong performance to our Stockholders by providing a total compensation package that is competitive. We benchmark our salary, target incentive levels and practices, as well as performance results, in relation to other comparable industry companies of similar size in terms of revenue, number of employees and market capitalization. We changed our peer group significantly during 2014 to recognize our new size and focus on growth. We believe this group of companies (which is set forth below) represents an appropriate peer group as it includes similar organizations with whom we would compete for executive talent. In late 2013 the Company engaged independent compensation advisor, Cook, to advise the Compensation Committee during the evaluation of 2014 compensation. The Compensation Committee has assessed any potential of conflicts raised by the work of Cook and has determined that no such conflict of interest exists.

 

Because we maintain a balanced compensation approach featuring a variety of elements designed to achieve the Company’s short- and long-term objectives, we do not believe that the program is structured to promote inappropriate risk-taking by our executives, nor do we believe that a focus on near-term challenges in 2015 will ultimately detract from our ability to progress toward our long-term objectives. We believe that our compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. Our program has always been designed to ensure that long-term incentives are an important element of core compensation. In addition, we believe specific elements of the program operate to moderate risk-taking behavior. For instance, our annual cash incentive award program has maximum limits of payout that can be attained.

 

Comparative Consideration

 

In 2014, the Compensation Committee engaged Cook to conduct a review of comparable compensation practices for the executive officer group. This review included an update of the established peer group of publicly traded companies to include a mix of higher growth life sciences tools, health care equipment/supplies, and pharma companies with a manufacturing emphasis in the generic space. Pure pharmaceutical companies were not included in the Peer Group as the Compensation Committee and Cook both feel those companies are not appropriate comparables as they tend to have different business models and compensation practices in place. Each position in the senior executive team including the CEO, CFO, and the other named executive officers was benchmarked against a comparable group of publicly traded peer companies. The ‘‘Peer Group,’’ which was reviewed and approved by the Compensation Committee currently consists of a group of 18 companies.

 

 

Abiomed, Inc.

Akorn, Inc.

AngioDynamics, Inc.

Cambrex Corp.

Charles River Laboratories International

Endologix, Inc.

Genomic Health, Inc.

HeartWare International Inc.

Lannett Co. Inc.

Luminex Corp.

Meridian Bioscience, Inc.

Merit Medical Systems, Inc.

NuVasive, Inc.

NxStage Medical, Inc.

Quidel Corp.

Sagent Pharmaceuticals, Inc.

Sequenom, Inc.

Volcano Corp.

 

At the time the Peer Group was reviewed most peer firms had revenues ranging from approximately half of the 2014 revenue for AMRI to as high as approximately four times the Company’s 2014 revenue. The market capitalization of the majority of the comparator firms was significantly higher than that of the Company.

 

In addition to the proxy data collected from the Peer Group, established published surveys of life sciences, biotechnology, research and other technology industries are used to assess our estimates of competitive market pay levels and practices. The benefit of published survey data is the large sample size of incumbents within companies of similar size and industry. The larger sample size, relative to publicly disclosed compensation data of our peers, increases the reliability of the data.

 

We review median compensation levels for executives for the Peer Group and companies represented in the surveys, but we do not set specific target ranges related to industry peers for individual executive compensation decisions. The median is used as one point of reference in making compensation decisions.

 

 

Key Compensation Elements and Determinants

 

Factors Used in Determining Pay

 

The table below provides an overview of the elements, purpose and determination factors of the three core compensation elements used in our current compensation program.

 

Compensation Element		Purpose		Determinations and Adjustments		Deliverable
Base Salary and Benefits		Attract and retain executive officers through competitive pay and benefit programs		Individual performance, experience, tenure, competitive market data and trends, internal equity among positions within the Company with similar responsibilities, executive potential and the Company’s business outlook		Base salary − fixed bi-weekly cash payments   Benefits − annual health and welfare insurance, retirement savings programs and stock purchase programs
Annual Non-Equity Incentive Award		Create an incentive for the achievement of pre-defined annual business objectives		For target non-equity percentages − competitive market data and trends and internal equity among positions within the Company with similar responsibilities   For actual non-equity payouts − performance against pre-established criteria in the annual cash incentive plan		Annual variable cash payout, payable, if earned, late in the first quarter of the following year
Long-Term Incentive Plan		Align the interests of executive officers over a multi-year period directly with the creation and preservation of long-term Stockholder value while creating appropriate recruiting and retention incentives through the use of multi-year vesting schedules and performance-based vesting schedules		Annual award − individual performance, company performance, internal equity among positions within the Company with similar responsibilities and executive potential   New hire, promotion and special awards − internal equity among positions within the Company with similar responsibilities and market data and trends		Annual award − delivered using a combination of time- and performance-based restricted stock and stock options, generally awarded in the first quarter   New hire, promotion and special awards – time-based restricted stock awards and stock option awards

 

 

Each element of compensation outlined above is considered both individually and collectively when considering compensation matters. Compensation adjustments also consider the interrelation between each compensation element to ensure that the entire program is appropriately aligned. In addition, the Compensation Committee may also apply discretion in determining specific compensation levels of individual executives. The compensation program is evaluated annually taking into consideration evolving changes to the existing business strategy and plans of the Company.

 

The Compensation Committee considers recommendations regarding the level of compensation paid to executive officers when compared to competitive market data, and seeks input from the Chief Executive Officer and Cook, the Compensation Committee’s independent compensation consultant. In addition, the Chief Executive Officer assesses each executive officer’s contributions to the business and his or her ability to execute on our long-term strategy when making recommendations to the Compensation Committee regarding compensation, but cannot unilaterally implement compensation changes for any executives reporting directly to him. The Chief Executive Officer does not participate in the determination of his own compensation. The Compensation Committee regularly evaluates the CEO’s performance and reviews its discussions regarding our Chief Executive Officer’s performance and compensation with the full Board prior to communicating compensation decisions to our Chief Executive Officer.

 

Base Salary

 

It is our objective to have base salaries reflect position responsibilities and the incumbent or potential incumbent’s value to the Company in performing job responsibilities. Executives are considered for periodic merit and competitive pay increases, generally on an annual basis, in the first quarter of the fiscal year. Each of our named executive officers has entered into an employment agreement with the Company. Prior to his departure from the Company, we had an employment agreement with Mr. Nolan and, in connection with Mr. Nolan’s departure, the Company entered into a Separation Agreement with Mr. Nolan. Minimum salaries are set in the agreement for the executives. These minimums have been determined by the Company and reviewed and confirmed with the Compensation Committee based on a variety of factors, such as market data for such position, the experience of the executive entering into the agreement and the cost of living in the executive’s home state.

 

The following table provides information regarding base salaries provided to our named executive officers in 2014 and the base salaries for 2015, based on actions taken by the Compensation Committee early in 2015:

 

Name		Amount of 2014 Base Salary Adjustment				2014 Base Salary (Effective April 1, 2014)				Amount of 2015 Base Salary Adjustment				2015 Base Salary (effective April 1, 2015)
William S. Marth			N/A			$	650,000				N/A			$	650,000
Michael M. Nolan			5	%		$	400,000					(1)				(1)
Steven R. Hagen Ph.D.			3.7	%		$	335,000				3	%		$	345,050
Lori M. Henderson			7.9	%		$	350,000				7.7	%		$	375,000
George Svokos				(2)		$	400,000				3	%		$	412,000

(1)

Mr. Nolan‘s employment with the Company terminated on March 31, 2015 and he was thus was not awarded a base salary adjustment for 2015.

(2)

Mr. Svokos joined the Company on January 6, 2014 and his base salary for 2014 was established as part of his employment arrangements.

 

Annual Non-Equity Incentive Plan Awards

 

Our compensation program provides for an annual non-equity incentive award for our executive team that is linked to Company performance. The purpose of this program is to provide additional compensation for individuals based on attaining or exceeding pre-established corporate goals. Goals and objectives for the executive officers for the fiscal year are recommended by the CEO and approved by the Compensation Committee. Specific goals and objectives for the CEO are set by the Compensation Committee in consultation with the full Board of Directors.

 

 

The non-equity incentive program is designed to motivate and reward achievement of critical financial and strategic goals and milestones. Non-equity incentive awards are earned for achieving target performance levels with potential to earn greater or lesser amounts depending upon actual performance and are designed to motivate the executive team to achieve or exceed financial performance goals to receive an award. No non-equity incentive is awarded if threshold performance goals are not met.

 

At the beginning of 2014, our Compensation Committee approved the corporate goals under the non-equity incentive program and using competitive market practices as a guide in consultation with Cook, established the potential non-equity incentive payouts for each named executive officer at threshold, target and superior performance levels. The following table outlines the threshold, target and superior payouts that an executive may receive (expressed as a percentage of base salary).

 

Potential Non-Equity Incentive Payouts (% of Base Salary)

 

		Threshold				Target				Superior
William S. Marth			30	%			50	%			100	%
Michael M. Nolan			30	%			50	%			100	%
Steven R. Hagen Ph.D.			30	%			50	%			100	%
Lori M. Henderson			30	%			50	%			100	%
George Svokos			30	%			50	%			100	%

 

In 2014, the Compensation Committee and Mr. Marth agreed that the only metrics that would be used to determine the non-equity awards for the executive staff would be the corporate performance measures. The Compensation Committee agreed that for the executive team, focus on the overall corporate objectives should override any personal goals or objectives set for the executive or his or her team and as such, no portion of any non-equity award for 2014 was determined based on individual performance goals.

 

Corporate performance goals for 2014 were set based on contract revenue and operating margin, all excluding revenue and income from royalties. The Compensation Committee placed equal weighting on the operating income and overall contract revenue targets, with each goal being weighted 50% for calculation of the cash bonus pool. Following the acquisitions of Cedarburg Pharmaceuticals and OsoBio Pharmaceuticals, the Compensation Committee adjusted the contract revenue and contract operating profit targets to include the stated expectations for the added businesses, while keeping the weighting levels the same. Because the threshold goals for 2014 were not reached, no non-equity awards were paid to any executive officer.

 

Long Term Incentive Compensation

 

We maintain a long-term incentive program that provides for periodic awards of restricted Common Stock and option awards. Grants are typically made on an annual basis as recommended by the CEO and approved by the Compensation Committee. The objective of the program is to align compensation for the named executive officers over a multi-year period directly with the interests of our Stockholders. In addition, this program is an important tool in the recruiting and retention of key employees. The program rewards the creation and preservation of long-term Stockholder value.

 

We review the mix of long-term incentives, base salary and non-equity incentive payments with competitive market compensation data provided by our independent compensation consultant, particularly with respect to the newly constructed peer group. There is no specific fixed percentage of compensation set to be targeted as long-term compensation. It has been the Company’s practice for an annual award to be made by the Compensation Committee to executives and key employees.

 

The Compensation Committee delegated authority to the Chief Executive Officer to allocate equity awards to employees who are not executive officers with limits on the number of shares that can be granted to any one individual without Committee approval. The timing of awards is made without regard to anticipated earnings or other major announcements of the Company.

 

 

In general, certain newly hired employees, including executive officers, are granted stock options and/or other equity awards on an established day as determined in accordance with the Company’s Equity Award Grant Policy, with the options having an exercise price equal to the fair market value of our Common Stock on the date of grant. The employees’ start dates are scheduled without regard to anticipated earnings or other major announcements by the Company.

 

Executives may also be awarded stock options or other equity award grants as a means of long-term incentive compensation outside of the scheduled annual distribution. Grants of this nature above a stated level, as with the annual grant, must be recommended by the CEO and reviewed and approved by the Compensation Committee, and are generally awarded for specific exceptional performance, recognition, promotion, retention of a key employee, new employment packages or other extraordinary circumstances.

 

The equity awards provided to each executive in 2014 are detailed in the Grants of Plan-Based Awards Table and the annual awards are described more fully below.

 

Mix of Restricted Stock and Stock Options

 

The provisions of our stock incentive plan provide for the distribution of a number of potential equity incentive awards; however we have primarily utilized only non-qualified stock options and restricted stock grants to date. In 2014 the Compensation Committee approved a long-term incentive grant for executives that represented a mix of restricted stock and non-qualified stock options. The mix was established with 50% of the value of the grant for the named executives designated as non-qualified stock options, while 50% of the value was designated as either time-based or performance-based restricted stock, such that 25% of the total award was performance-based restricted stock. Because restricted stock shares are ‘‘full value’’ awards, we consider one share of restricted stock to have the equivalent value of a stock option to purchase three shares of Common Stock. For our CEO, however, we have utilized only performance-based restricted stock, after his new hire grant which was time-based. This focus on long term performance more closely aligns our CEO’s focus with that of our Stockholders.

 

In determining the use of long-term incentive instruments for 2014, the Compensation Committee considered the following factors:

 

·

The ‘at risk’ nature of the grant — Non-qualified stock options drive an executive to contribute to the creation of Stockholder value through an increase in stock price in order to recognize any income at the time of exercise. This puts the option holdings at risk of generating no value if Stockholders do not also recognize an increase in stock price.

 

·

The dilutive impact of the grant, as restricted stock awards require fewer shares to be granted to provide the same competitive value as options, and therefore the dilutive effect on earnings per share is generally lower with restricted stock.

 

·

The accounting impact of equity award expensing.

 

·

The tax implications to the Company and executive.

 

·

The value of each form of equity grant to the executive as a motivation and/or retention tool.

 

·

The number of shares granted to an executive relative to industry and peer group comparables.

 

Following the review of these factors, the Compensation Committee concluded that the benefits to the

Company and to the executives of non-qualified stock options and restricted stock outweighed the benefits for incentive stock options.

 

 

Performance Vesting for Restricted Stock

 

In keeping with the Compensation Committee’s decision in 2011 to utilize performance criteria for a portion of the equity awards made to the named executive officers, the Compensation Committee adopted performance criteria for certain of the shares of restricted stock granted to the executive team. The 2014 performance-based shares (including the annual grant of shares to our CEO) will vest either in full or in part of the third anniversary of the grant, contingent upon the Company’s achievement of certain goals in respect to the Company’s share price compared against the Russell 2000 Stock Index over such three-year period. 

 

Employment Agreements

 

We have entered into employment agreements with each of our named executive officers, Mr. Marth, Mr. Nolan, Ms. Henderson, Dr. Hagen, and Mr. Svokos. Mr. Nolan’s employment with the Company terminated on March 31, 2015 and, in connection with his termination, we entered into a Separation Agreement with Mr. Nolan, which superseded his employment agreement. These agreements provide for a certain level of severance in the event of a termination of employment by us without cause or by the executive for good reason. In return, each executive agrees, during the term of employment and for a period of time thereafter, not to compete with us or solicit or hire our employees and independent contractors. We have also entered into Employee Non-Disclosure, Proprietary Information, Inventions and Non-Solicitation Agreements with each of our named executive officers. We believe that these agreements together are fair to our executives and to our Stockholders because these agreements provide severance in exchange for the restrictive covenants which protect us. Further, because the severance level is negotiated up front, it makes it easier for our Board to terminate executives for any reason without the need for protracted negotiations.

 

The employment agreements with our named executive officers also provide additional protection to the officers in the event of a change in control, including severance payments, and the equity award agreements with our named executive officers provide for accelerated vesting of equity awards in the event of a change in control of the Company (for additional details, please see ‘‘Potential Payments upon Termination or Change-in- Control’’ table). Consistent with industry practice, our Compensation Committee believes it is fair to provide severance protection and accelerated vesting of equity grants upon a change in control. By agreeing up front to provide such protection, our Compensation Committee believes we can reinforce and encourage the continued attention and dedication of senior management to their assigned duties without distraction in the face of an actual or threatened change in control and ensure that management is motivated to negotiate the best merger consideration for our Stockholders. The employment agreements are described in more detail in this Proxy Statement.

 

Insider Trading Policy

 

Under our insider trading policy, our employees, including our executive officers, and directors are not permitted to engage in the following transactions with respect to our stock: sell short; buy or sell puts, calls or options in respect of the Company’s securities; purchase securities of the Company on margin; pledge our securities as collateral for a loan, or gift our securities during a period when the employee, officer or director is not permitted to trade. In addition, under insider trading laws, no director, officer or employee of the Company may: trade in our securities, including Common Stock, options, and any other type of securities that the Company may issue, while in possession of material, non-public information about the Company; disclose material, non-public information concerning the Company to others who may trade on the basis of that information; provide trading advice about the Company while possessing material, non-public information; or trade in the securities of any other public company while possessing material, non-public information obtained in the course of service as a director, officer or employee of the Company.

 

Tax Considerations

 

Section 162(m) of the Code places a limit of $1,000,000 on the amount of compensation that public companies may deduct in any one year with respect to certain of its named executive officers. Certain performance-based compensation approved by Stockholders is not subject to this deduction limit. Our Compensation Committee’s strategy in this regard is to be cost and tax efficient. Therefore, whenever possible, the Compensation Committee intends to structure compensation programs to qualify compensation as performance-based under Section 162(m) of the Code, while maintaining the flexibility in the future to approve arrangements that it deems to be in our best interests and the best interests of our Stockholders, even if such arrangements are subject to the deduction limitations imposed by Section 162(m) of the Code and do not always qualify for full tax deductibility.

 

 

COMPENSATION COMMITTEE REPORT

 

The Compensation Committee of the Board of Directors and the Directors who served as members of the Compensation Committee during 2014 have reviewed and discussed with management the foregoing Compensation Discussion and Analysis and, based on such review and discussions, have recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

 

Compensation Committee

 

Veronica G.H. Jordan, Ph.D., Chairwoman

Kevin O’Connor

Una S. Ryan, Ph.D., O.B.E.

 

 

COMPENSATION OF EXECUTIVE OFFICERS

Summary Compensation Table

The following table summarizes, for the fiscal years indicated in the table, the compensation awarded or paid to, or earned by, any person serving as our ‘‘principal executive officer’ ’or ‘‘principal financial officer’’ in the year ended December 31, 2014 and our three other highest paid executive officers whose total compensation in fiscal year 2014 exceeded $100,000 and who were serving as executive officers on December 31, 2014 (our ‘‘Named Executive Officers’’):

 

Name and Principal Position		Year				Salary				Bonus				Stock Awards (3)				Option Awards (4)				Non-Equity Incentive Plan Compensation (5)				All Other Compensation (6)				Total
William Marth, President & CEO			2014			$	632,500	(1)		$	350,000	(1)		$	1,767,625			$	—			$	—			$	14,814			$	2,764,939
Michael M. Nolan, Senior Vice President, CFO and Treasurer			2014			$	394,913			$	—			$	154,077			$	161,998			$	—			$	8,708			$	719,696
			2013			$	378,118			$	38,676	(2)		$	79,865			$	114800			$	169,736			$	8,777			$	789,972
			2012			$	99,617				484,642	(2)		$	171,500			$	165,000			$	45,500			$	1,864			$	967,623
Lori M. Henderson, Senior Vice President, General Counsel and Secretary			2014			$	343,121			$		_		$	134,829			$	141,752			$	—			$	12,742			$	632,444
			2013			$	321,906			$	—			$	69,879			$	100,450			$	126,860			$	12,742			$	631,837
			2012			$	310,961			$	—			$	34,181			$	50,400			$	154,665			$	11,338			$	561,545
Steven R. Hagen, Ph.D.,  Senior Vice President			2014			$	331,755			$	—			$	115,563			$	121,500			$	—			$	12,742			$	581,560
			2013			$	322,946			$	—			$	59,900			$	86,100			$	113,354			$	11,738			$	594,038
			2012			$	322,946			$	120,000	(7)		$	29,300			$	43,200			$	52,108	(7)		$	10,930			$	578,484
George Svokos, Chief Commercial Officer and Senior Vice President, API			2014			$	384,616	(8)		$	240,000	(8)		$	439,929			$	624,752			$	—			$	67,387			$	1,756,684

 

(1)

Mr. Marth became the President and CEO on January 1, 2014 and his base salary was established at that time based on a review of comparable compensation arrangements for the peer group and negotiations with Mr. Marth prior to his joining the Company. Pursuant to the terms of his employment agreement with the Company, Mr. Marth was paid a relocation bonus in the amount of $350,000. In the event that Mr. Marth’s employment terminates at any time within 24 months of his relocation date in certain circumstances, he is required to reimburse the Company for the relocation bonus.

 

 

 

(2)

Mr. Nolan joined the Company in September 2012 and his base salary was established at that time based on a review of comparable compensation arrangements for the peer group, the salary of the previous Chief Financial Officer and negotiations with Mr. Nolan prior to his joining the Company. Mr. Nolan was paid a sign-on bonus in the amount of $34,083. On December 27, 2012, the Compensation Committee approved a relocation bonus payable to Mr. Nolan in consideration of Mr. Nolan’s relocation from the Boston Massachusetts area to the Albany New York region (“Relocation Bonus”). The Relocation Bonus, in the amount of $302,065, was paid to Mr. Nolan prior to the end of 2012. In addition, in accordance with the terms of the employment agreement with Mr. Nolan, the Compensation Committee approved the payment of $129,829, which Mr. Nolan used to pay certain closing costs in connection with the sale of one home and the acquisition of the new home. Mr. Nolan was also paid an additional $18,665 which was used for temporary housing expenses. In 2013, Mr. Nolan received a payment in the amount of $38,676 that was related to reimbursement for moving expenses as approved by the Compensation Committee.

 

(3)

This column represents the aggregate grant date fair value of time-based and performance-based restricted stock awards with respect to the 2014, 2013 or 2012 fiscal year granted to each executive officer in accordance with FASB ASC Topic 718. For time-based restricted stock, the grant date fair value is calculated using the average of the high and low price of our stock on the date of the grant. For performance-based stock, the grant date fair value is calculated in accordance with FASB ASC Topic 718 based on probable outcome. The grant date fair value of the performance-based stock awards granted in 2014 is $767,618, $67,164, $58,774, $50,375, and $58,774, for Messrs. Marth and Nolan, Ms. Henderson, and Messrs. Hagen and Svokos, respectively, assuming the highest level of performance is achieved.

 

(4)

This column represents the aggregate grant date fair value of option awards with respect to the 2014, 2013, or 2012 fiscal year granted to each of the named executives in accordance with FASB ASC Topic 718. For stock options, fair value is calculated using the Black-Scholes calculated value on the date of the grant. See Note 9 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2014 regarding assumptions underlying the valuation of these equity awards.

 

(5)

This column represents earnings derived from payments from our annual incentive program. Each named executive was eligible to receive a payment based on the achievement of personal, departmental and corporate goals set for 2014, 2013, or 2012. The 2014 goals were not achieved and no payments were made with respect to the year ended December 31, 2014.

 

(6)

See the All Other Compensation Table below for additional detailed information.

 

(7)

Dr. Hagen was awarded a discretionary bonus of $100,000 in October, 2012 in recognition of his promotion to Senior Vice President which was treated as an offset to any potential bonus that would have been earned for his performance during 2012. Based on the Company’s actual results for 2012 and Dr. Hagen’s performance, he was eligible for a bonus in the amount of $152,108 for the 2012 year. Dr. Hagen’s 2012 bonus amount was enhanced by an additional $20,000 discretionary payment in recognition of his accomplishments during 2012 and the outstanding performance of the business units under his leadership, particularly the Company’s large scale manufacturing facility in Rensselaer, New York and he therefore received $72,108 as a bonus payment at the completion of 2012 at the time such payments were made to the other named executive officers.

 

(8)

Mr. Svokos joined the Company on January 6, 2014 and his base salary was established at the time based on a review of comparable compensation arrangements for the peer group and negotiations with Mr. Svokos prior to his joining the Company. Mr. Svokos was paid a sign-on bonus in the amount of $240,000.

 

 

All Other Compensation

 

		Year		Payments Related to 401(k) Match (1)				Value of Life Insurance Premiums (2)				Health Insurance Opt-Out Payment (3)				Other Reimburse- ments (4)				Total
William Marth		2014		$	11,011			$	3,153			$	650			$	—			$	14,814
Michael M. Nolan		2014		$	7,898			$	810			$	—			$	—			$	8,708
		2013		$	7,967			$	810			$	—			$	—			$	8,777
		2012		$	1,708			$	156			$	—			$	—			$	1,864
Lori M. Henderson		2014		$	11,500			$	1,242			$	—			$	—			$	12,742
		2013		$	11,500			$	1,242			$	—			$	—			$	12,742
		2012		$	10,096			$	1,242			$	—			$	—			$	11,338
Steven R. Hagen, Ph.D.		2014		$	11,500			$	1,242			$	—			$	—			$	12,742
		2013		$	10,496			$	1,242			$	—			$	—			$	11,738
		2012		$	9,688			$	1,242			$	—			$	—			$	10,930
George Svokos		2014		$	11,308			$	1,965			$	—			$	54,114			$	67,387

 

(1)

This column reports Company matching contributions to the named executives’ 401(k) savings account. Subject to caps imposed by the IRS, the Company provides a matching contribution equal to 100% of the participant’s contributions to the 401(k) savings account for each payroll period up to 4%. The Company then matches 50% of the participant’s next 2% contribution, to a maximum company match of 5%.

 

(2)

This column represents taxable value of premiums made on the part of the Company to cover term life insurance for each of the named executive officers in the amount of two (2) times their base salary for the prior calendar year.

 

(3)

AMRI maintains a $650 annual incentive for employees who opt of health and dental insurance if proof of other coverage is provided to the Company.

 

(4)

In accordance with the terms of the employment agreement with Mr. Svokos, the Compensation Committee approved the payment of a temporary housing allowance in the amount of $46,701 and reimbursement of moving expenses in the amount of $7,413.

 

 

  

 

Grants of Plan-Based Awards

 

The following table provides information pertaining to equity awards granted to the named executives in

2014 as well as the non-equity incentive award potential for the named executive officers for the attainment of

an incentive payout at the listed level, as explained in ‘‘Annual Non-Equity Incentive Awards’’ section of the

Compensation Discussion and Analysis.

 

																												Option and Stock Awards
				Estimated Future Payouts Under Non Equity Incentive Plan Awards (1):												Estimated Future Payouts Under Equity Incentive Plan Awards (2)												All other Stock Awards: Number of Shares of Stock or Units				All other Option Awards: Number of Securities Underlying Options				Exercise or Base Price of Option Awards ($/Share)				Grant Date Fair Value of Stock and Option Awards (4)
Name		Grant Date		Threshold ($)				Target ($)				Maximum ($)				Threshold (#)				Target (#)				Maximum (#)				(#)(3)				(#)(3)
(a)		(b)		(c)				(d)				(e)				(f)				(g)				(h)				(i)				(j)				(k)				(l)
William Marth		1/1//2014																											99,207											$	1,000,007
		2/4/2014															23,810				47,619				95,238															$	767,618
				$	195,000			$	325,000			$	650,000
Michael M. Nolan		2/4/2014																															33,333			$	10.43			$	161,998
		2/4/2014																											8,333											$	86,913
		2/4/2014															2,083				4,167				8,333															$	67,164
				$	120,000			$	200,000			$	400,000
Lori M. Henderson		2/4/2014																															29,167			$	10.43			$	141,752
		2/4/2014																											7,292											$	76,056
		2/4/2014															1,823				3,646				7,292															$	58,774
				$	105,000			$	175,000			$	350,000
Steven R. Hagen, Ph.D.		2/4/2014																															25,000			$	10.43			$	121,500
		2/4/2014																											6,250											$	65,188
		2/4/2014															1,563				3,125				6,250															$	50,375
				$	100,500			$	167,500			$	335,000
George Svokos		1/6/2014																															100,000			$	10.25			$	483,000
		1/6/2014																											30,000											$	305,099
		2/4/2014																															29,167			$	10.43			$	141,752
		2/4/2014																											7,292											$	76,056
		2/4/2014															1,823				3,646				7,292															$	58,774
				$	120,000			$	200,000			$	400,000

 

 

(1)

Columns (c), (d), and (e) reflect the Named Executive Officer’s (NEO) potential payments for attaining the level “Threshold”, “Target” or “Maximum” for attainment of their 2014 goals and objectives. Payments actually made are reflected in the Summary Compensation Table and reflect the Company’s actual performance against the 2014 goals and objectives. For a description on the attainment of 2014 goals and objectives, see the “Compensation Discussion and Analysis – Fiscal Year 2014 Non Equity Award Decisions” section of this Proxy Statement.

 

(2)

Columns (f), (g) and (h) reflect the NEO potential payments for attaining the level “Threshold”, “Target” or “Maximum” (25%, 50% and 100% respectively) number of restricted stock that may vest. The 2014 performance-based restricted stock will vest either in full or in part on the third anniversary date of the grant and require that the Company achieve certain goals in respect to the Company’s share price compared against the Russell 2000 Stock Index over a three-year period in order to vest (“2014 Performance Targets”).

 

(3)

Restricted stock and non-qualified stock option awards vest 25% per year over four years.

 

(4)

The grant date fair value of the options is calculated using the Black Scholes valuation on the day of grant and multiplying it by the number of shares. For time-based restricted Stock, fair value is calculated by multiplying the number of shares granted by the average of the high and low price of our stock on the date of the grant. For performance-based stock, fair value is calculated in accordance with FASB ASC Topic 718 based on probable outcome.

 

  

Option Exercises and Stock Vested

 

The following table sets forth certain information regarding restricted stock awards vested during 2014 for the named executive officers and options exercised during 2014 by the named executive officers.

 

		Option Awards								Stock Awards
Name		Number of Shares Acquired on Exercise				Value Realized on Exercise				Number of Shares Acquired on Vesting				Value Realized on Vesting
		(#)				($)(1)				(#)				($)(2)
William Marth			—				—				5,843			$	62,520
Michael M. Nolan			25,000			$	333,400				15,834			$	320,174
Lori M. Henderson			30,000			$	425,400				9,794			$	118,505
Steven R. Hagen, Ph.D.			43,500			$	482,625				7,650			$	103,151
George Svokos			—				—				—				—

 

(1)

Value realized by determining the difference between the market price of Company’s common stock as reported by the NASDAQ on the date of the exercise and the exercise or base price of the options.

 

(2)

Value realized is calculated on the basis of the closing price of our Common Stock as reported on NASDAQ on the date of the vesting, multiplied by the number of shares of Common Stock that vested.

 

  

Outstanding Equity Awards at 2014 Fiscal Year End

 

The following table provides information on the holdings of stock options and stock awards by the

named executives on December 31, 2014. This table includes unexercised and unvested options and restricted

stock. Each equity grant is shown separately for each named executive officer. The vesting schedule for

each grant is based on the option or stock award grant date, as described in more detail in the footnotes to

the table.

 

The market value of the stock awards is based on the closing market price of AMRI stock as of

December 31, 2014 of $16.28.

 

				Option Awards																			Stock Awards
				Number of Securities Underlying Unexercised Options Exercisable				Number of Securities Underlying Unexercised Options Unexercisable(1)				Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (1)				Option Exercise Price				Option Expiration			Stock		Number of Shares or Units of Stock That Have Not Vested (1)				Market Value of Shares or Units of Stock That Have Not Vested				Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (1)				Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
Name		Grant Date		(#)				(#)				(#)				($)				Date(2)			Grant Date		(#)				($)				(#)				($)
William Marth		06/13/2012			10,000												5.99			06/13/2022
		1/31/2013			12,367												2.59			1/31/2023
																							01/01/2014			99,207				1,615,090
																							02/04/2014											95,238				1,550,475
Michael M. Nolan		09/17/2012			25,000				50,000								3.43			09/17/2022			09/17/2012			25,000				407,000
		01/31/2013			10,000				15,000				15,000				5.99			01/31/2023			01/31/2013			5,000				81,400				4,999				81,384
		02/04/2014							33,333								10.43			02/04/2024			02/04/2014			8,333				135,661				8,333				135,661
Lori M. Henderson		02/04/2011			30,000				20,000								4.87			02/04/2021			02/04/2011			2,500				40,700
		06/02/2011			13,125				4,375				4,375				5.25			06/02/2021			06/02/2011			1,457				23,720				1,457				23,720
		02/17/2012			17,500				8,750				8,750				2.93			02/17/2022			02/17/2012			2,916				47,472				2,916				47,472
		01/31/2013			8,750				13,125				13,125				5.99			01/31/2023			01/31/2013			4,374				71,209				4,374				71,209
		02/04/2014							29,167								10.43			02/04/2024			02/04/2014			7,292				118,714				7,292				118,714
Steven R. Hagen, Ph.D.		03/17/2008			7,500												11.21			03/17/2018
		11/03/2008			15,000												13.20			11/03/2018
		03/08/2010			8,400				2,100								8.90			03/08/2020			03/08/2010			700				11,396
		06/02/2011							3,750				3,750				5.25			06/02/2021			06/02/2011			1,250				20,350				1,250				20,350
		02/17/2012			1,250				7,500				7,500				2.93			02/17/2022			02/17/2012			2,500				40,700				2,500				40,700
		01/31/2013							11,250				11,250				5.99			01/31/2023			01/31/2013			3,750				61,050				3,750				61,050
		02/04/2014							25,000								10.43			02/04/2024			02/04/2014			6,250				101,750				6,250				101,750
George Svokos(3)		01/06/2014							100,000								10.25			01/06/2024			01/06/2014			30,000				488,400
		02/04/2014							29,167								10.43			02/04/2024			02/04/2014			7,292				118,714				7,292				118,714

 

  

(1)

The 2014 stock awards to Mr. Marth are both time and performance-based and the 2014 equity awards to other members of the executive staff were time-based stock options and both performance- and time-based restricted stock. The 2014 performance-based shares will vest either in full or in part of the third anniversary date of the grant and require that the Company achieve certain goals in respect to the Company’s share price compared against the Russell 2000 Stock Index over a three-year period in order to vest. The time-based equity awards granted in 2014 vest 25% per year over four years. Fifty percent (50%) of the 2013 equity awards to members of the executive staff were performance-based and require that the Company achieve certain goals in respect to contract operating margin in each year in order to vest. The earned portion of these equity awards, along with the time-based equity awards, vest 25% per year over four years. Fifty percent (50%) of the 2012 equity awards to members of the executive staff were performance-based and require that the Company achieve certain goals in respect to contract operating margin in each year in order to vest. The earned portion of these equity awards, along with the time-based equity awards, vest 25% per year over four years. Based on the Company’s results for 2014, the Company did not achieve the second and third year’s goals relating to operating margin and thus 25% of the performance-based awards granted in 2012 and 2013 did not vest in early 2015. Based on the Company’s audited results for 2012 and 2013, the Company did achieve the first and second year’s goal related to operating margin and thus 25% of the performance-based awards granted in 2012 did vest in early 2013 and an additional 25% of the performance-based awards granted in 2012 did vest in early 2014. The performance-based awards granted to the named executive officers in 2011 had performance goals that required 20% contract revenue growth on a year over year basis. During 2014, the Company did not achieve 20% year over year revenue growth when compared to 2013 and thus 25% of the 2011 performance-based awards will be forfeited again this year by the executive staff. The named executive officers continue to be eligible to earn the remaining 25% of such 2011 award as the 20% revenue growth targets are established each year based on the actual revenue achieved at the end of each prior calendar year. The forfeited 2011, 2012 and 2013 performance-based awards are not included as shares that have not yet vested above.

 

(2)

For all unvested options and restricted stock granted prior to 2011, the vesting terms were 60% vesting on the third anniversary of the date of grant, 20% vesting on the fourth anniversary of the date of grant and 20% on the fifth anniversary of the date of grant. Except as otherwise noted, the stock options and restricted stock granted in 2011, 2012, 2013 and 2014 that are not performance-based, contain a vesting schedule that provides for 25% vesting on each anniversary date of the grant.

 

(3)

The January 6, 2014 grants to Mr. Svokos are time-based and vest 33.3% on each anniversary date of the grant as negotiated in his employment agreement.

 

Agreements with Named Executive Officers

 

The Company is party to employment agreements with Mr. Marth, Ms. Henderson, Dr. Hagen and Mr. Svokos and had an employment agreement with Mr. Nolan prior to his separation from the Company on March 31, 2015. In connection with his separation from the Company, we entered into a separation agreement with Mr. Nolan in February 2015. The terms of the employment agreements are substantially similar, except with respect to stated minimum annual base salary, and with respect to benefits payable upon termination of employment upon a change of control. The following description sets forth the terms of agreements with named executive officers.

 

 

Effective January 1, 2014, the Company entered into an employment with Mr. Marth relating to his transition into his current position as President and Chief Executive Officer. Mr. Marth’s employment agreement provides for a minimum base salary of $650,000. Under the employment agreement with Mr. Marth, if his employment is terminated by the Company for any reason other than for cause (as defined in the employment agreement) or due to his death or disability or by him in the event of a material change in his title, reporting or a material diminution in the nature or scope of his powers, duties or responsibilities or a material breach of the employment agreement by the Company, Mr. Marth is entitled to the following payments and benefits: (i) continued payment of base salary for two years following termination, (ii) an amount equal to Mr. Marth’s non-equity incentive award paid for the year prior to the year of termination, payable in monthly installments over the two-year period following termination (iii) a pro-rated bonus (to the extent earned) for the year of termination (iv) up to 12 months of outplacement support services at the Company’s expense and (v) health and dental insurance continuation for 24 months following termination. Receipt of these severance payments and benefits is conditioned upon Mr. Marth executing a general release of claims, confidentiality, non-disparagement and return of property agreement (a “Release”) and such Release becoming irrevocable and Mr. Marth’s continued compliance with the non-competition, non-solicitation and confidentiality provisions of his employment agreement. If there was a change of control (as defined in the employment agreement) and within two (2) years following such change in control Mr. Marth’s employment is terminated by the Company without cause or Mr. Marth resigns for good reason (as defined in the employment agreement), then Mr. Marth would be entitled to receive the following payments and benefits: (i) full vesting of all Company contributions made to the 401(k) plan on his behalf, (ii) a pro-rated target bonus for the year of termination, (iii) an amount equal to the sum of two times his annual base salary, plus his non-equity incentive award received in respect of the immediately preceding year, payable in a lump sum, (iv) up to 12 months of outplacement support services at the Company’s expense, and (v) health and dental insurance continuation for 24 months following termination. Receipt of such payments and benefits is conditioned upon Mr. Marth executing a Release and such Release becoming irrevocable.

 

Under the employment agreements with each of Ms. Henderson, Dr. Hagen and Mr. Svokos, if the executive’s employment is terminated by the Company for any reason other than for cause (as defined in the employment agreements) or due to the executive’s death or disability or by the executive in the event of a material diminution in the nature or scope of the powers, duties or responsibilities of the executive or a material breach of the employment agreement by the Company, each executive is entitled to the following payments and benefits: (i) continued payment of base salary for 12 months following termination, (ii) an amount equal to the executive’s non-equity incentive award paid for the year prior to the year of termination, payable in monthly installments over the one-year period following termination (iii) up to 12 months of outplacement support services at the Company’s expense and (iv) health and dental insurance continuation for 12 months following termination. Receipt of these severance payments and benefits is conditioned upon the executive’s execution of a Release. If there was a change of control (as defined in the employment agreements) and within two (2) years following such change in control the executive’s employment is terminated by the Company without cause or the executive resigns for good reason (as defined in the employment agreements), then the executive would be entitled to receive the following payments and benefits: (i) an amount equal to the sum of 1.5 times (x) the executive’s annual base salary, plus (y) the executive’s non-equity incentive award received in respect of the immediately preceding year, payable in a lump sum, (ii) up to 12 months of outplacement support services at the Company’s expense and (iii) health and dental insurance continuation for 12 months following termination. Receipt of such payments and benefits is conditioned upon the executive executing a Release and such Release becoming irrevocable. In addition under Ms. Henderson and Mr. Svokos’s employment agreements, in the event that the executive’s employment is terminated by the Company for any reason other than for cause or due to the executive’s death or disability or by the executive in the event of a material diminution in the nature or scope of her powers, duties or responsibilities or a material breach of the employment agreement by the Company, the executive is entitled to full vesting of the executive’s new hire equity awards. In addition, each of the employment agreements with the named executive officers provide for full vesting of all equity awards upon a change of control. The employment agreements require that payments and benefits to each named executive officer will be reduced only if the executive would receive a greater after-tax amount with the reduction.

 

Mr. Nolan’s employment agreement provided for the severance payments and benefits described in the paragraph above. In addition, in the event of a change of control, Mr. Nolan’s employment agreement provided that all equity awards held by Mr. Nolan and all Company contributions made to the 401(k) plan on Mr. Nolan’s behalf would become fully vested upon the change of control and, within 30 days of such change in control, the Company would pay Mr. Nolan a lump sum equal to his pro-rata target bonus for the year in which the change of control occurs.

 

 

The Company has also entered into Employee Non-Disclosure, Proprietary Information, Inventions and Non-Solicitation Agreements with its named executive officers which outline responsibilities relating to confidentiality and non-solicitation of Company’s employees for a certain period.

 

On February 11, 2015, the Company entered into a separation agreement with Mr. Nolan in connection with the termination of his employment. The separation agreement provides for (i) continued base salary payments to Mr. Nolan through March 31, 2016, (ii) accelerated vesting of the restricted stock award and stock option granted to Mr. Nolan on September 17, 2012, (iii) up to 12 months of outplacement support services at the Company’s expense and (iv) health and dental insurance continuation through March 31, 2016. This separation agreement includes a general release of claims in favor of the Company.

 

 

Potential Payments Upon Termination or Change-in-Control

 

The table below details the potential payments to the executives under the circumstances of termination

that is listed. The amounts listed in the table represent the total payment to be made for that compensation/ benefit element, not an annual amount. In accordance with the rules of the Securities Exchange Commission, the table below is prepared as if the relevant event occurred on December 31, 2014; based on the compensation arrangements in place for each named executive officer as of that date.

 

				Voluntary								Involuntary
Payments and Benefits		Name		Employee Termination Without Good Reason				Employee Termination upon Company Breach				Termination Without Cause				Termination for Cause				Termination upon Death or Disability (5)				Change of Control Without Termination (6)				Termination after Change-in-Control (7)
Cash Severance (1)		Marth			—				1,300,000				1,300,000				—				—				—				1,300,000
		Nolan			—				400,000				400,000				—				—				—				600,000
		Henderson			—				350,000				350,000				—				—				—				525,000
		Hagen			—				335,000				335,000				—				—				—				502,500
		Svokos			—				400,000				400,000				—				—				—				600,000
Bonus Component (1)		Marth			—				—				—				—				—				—				325,000
		Nolan			—				—				—				—				—				200,000				200,000
		Henderson			—				—				—				—				—				175,000				175,000
		Hagen			—				—				—				—				—				167,500				167,500
		Svokos			—				—				—				—				—				200,000				200,000
Stock Options (2)		Marth			—				—				—				—				—				—				—
		Nolan			—				—				—				—				—				1,144,250				1,144,250
		Henderson			—				228,200				228,200				—				—				999,077				999,077
		Hagen			—				—				—				—				—				676,248				676,248
		Svokos			—				603,000				603,000				—				—				773,627				773,627
Restricted Stock (2)		Marth			—				—				—				—				—				—				3,165,565
		Nolan			—				—				—				—				—				841,106				841,106
		Henderson			—				40,700				40,700				—				—				539,194				539,194
		Hagen			—				—				—				—				—				247,968				247,968
		Svokos			—				488,400				488,400				—				—				725,828				725,828
Health Care Benefits (3)		Marth			—				—				—				—				—				—				—
		Nolan			—				11,062				11,062				—				11,062				—				11,062
		Henderson			—				11,062				11,062				—				11,062				—				11,062
		Hagen			—				11,062				11,062				—				11,062				—				11,062
		Svokos			—				11,062				11,062				—				11,062								11,062
Outplacement (4)		Marth			—				12,000				12,000				—				—				—				12,000
		Nolan			—				12,000				12,000				—				—				—				12,000
		Henderson			—				12,000				12,000				—				—				—				12,000
		Hagen			—				12,000				12,000				—				—				—				12,000
		Svokos			—				12,000				12,000				—				—				—				12,000
Total		Marth			—				1,312,000				1,312,000				—				—				—				4,802,565
		Nolan			—				423,062				423,062				—				11,062				2,185,356				2,808,418
		Henderson			—				641,962				641,962								11,062				1,713,271				2,261,333
		Hagen			—				358,062				358,062								11,062				1,091,716				1,617,278
		Svokos			—				1,514,462				1,514,462								11,062				1,699,455				2,322,517

 

 

(1)

For details relating to the employment agreements with our named executive officers, see the “Agreements with Named Executive Officers” section above.

 

(2)

This amount represents the intrinsic value (that is, the value based upon the Company’s stock price on December 31, 2014 of $16.28 per share), and in the case of options minus the exercise price of equity awards that would become exercisable as of December 31, 2014. Ms. Henderson, Mr. Nolan and Mr. Svokos have a provision in their employment agreements which requires accelerated vesting of certain options and restricted stock granted when they joined the Company in the event their employment is terminated under certain circumstances. For additional details relating to the employment agreements with our named executive officers, see the “Agreements with Named Executive Officers” section above.

 

(3)

The amounts indicated are equal to the cost to the Company minus employee paid premiums for the executive’s health and dental insurance premiums. In 2014, such cost to the Company for health and dental insurance is calculated at $922/month for family coverage.

 

(4)

The amount shown in this row represents the value of services provided by a third party to assist the executives in obtaining a new position. AMRI utilizes a global employment transition service firm to provide outplacement job search assistance to terminated executives. The fee listed reflects the negotiated outplacement fee to assist a senior executive in his or her job search for a period of one year.

 

(5)

Each executive’s employment agreement provides that “upon death or disability,” the executive would receive a pro rata non-equity incentive award based on the number of days the executive worked in the year prior to death or disability.

 

(6)

Upon a change of control without termination, each executive’s employment agreement contains a provision wherein all outstanding stock options, restricted stock, or other equity awards immediately vest, except Mr. Marth’s agreement contains this provision following the first year of employment. In addition, each executive, except Mr. Marth, is entitled to receive upon the change of control a lump sum equal to the Executive’s pro rata target cash bonus for the year in which the change of control occurred (as such may be set forth in the Company’s bonus plan for such year and calculated assuming target achievement of corporate and personal goals); such pro rata amount to be determined based on the actual date of the closing of such Change of Control transaction.

 

(7)

Each executive’s employment agreement contains a “double-trigger” event wherein a change-in-control event coupled with a termination within twenty-four (24) months results in the amounts reflected in this column.

 

  

COMPENSATION OF DIRECTORS

 

Our directors who are also employees receive no additional compensation for their services as directors. Our non-employee directors are compensated in accordance with a compensation policy that has been approved by the Compensation Committee of the Board. During 2014, the Company’s current independent compensation consultants, Cook, presented information to the Compensation Committee regarding each component of compensation and information regarding total compensation versus the competitive market using the Peer Group. This analysis was updated during 2014, particularly with reference to the newly approved Peer Group of companies that was developed for both the executive compensation and director compensation reviews. Taking into consideration Cook’s findings and recommendations, the director cash compensation was modified and a summary of 2014 director compensation is as follows:

 

Director Annual Compensation

 

	§	Annual Stock/Option Grant divided equally between restricted stock and options	$  70,000
		·      Grant of non-qualified stock options of Common Stock with an exercise price equal to the fair market value on the date of grant ·     Grant of restricted stock with a vesting period of one year from the date of grant ·     This amount will be increased to $90,000 in 2015
	§	Board Member Annual Fee	$  45,000
		·     Annual fee includes up to 8 meetings per year
		·     For more than 8 Board meetings per year, an additional:
		•     $2,000 will be paid for meetings, and an additional •     $1,000 will be paid for Teleconference calls
	§	Non-Executive Chairman Annual Fee	$  55,000

 

Committee Chair Compensation

	§	Audit Committee Chairman Annual Fee	$  20,000
	§	Compensation Committee Chairman Annual Fee	$  15,000
	§	Nominating/Governance Committee Chairman Annual Fee	$  15,000
		·     Annual fee for each Committee includes up to 7 meetings per year
		·     For more than 7 Committee Meetings (per Committee), an additional $ 1,000 will be paid for meetings, and an additional $ 500 will be paid for Teleconference calls.

 

Committee Member Compensation (Non-Chair)

	§	Audit Committee Annual Fee	$  10,000
	§	Compensation Committee Annual Fee	$  7,500
	§	Nominating/Governance Committee Annual Fee	$  7,500
		•     For more than 7 Committee Meetings (per Committee), an additional $ 1,000 will be paid for meetings, and an additional $ 500 will be paid for Teleconference calls.

 

  

Non-employee directors also are reimbursed for reasonable expenses incurred in attending Board of Directors and Committee meetings. Directors receive no additional compensation for informal Board or Committee meetings.

 

The Board of Directors requires non-employee directors to own AMRI shares. The Board adopted a policy requiring that the annual fee paid to each non-employee director will be paid half in cash and half in a grant of Common Stock of the Company until such time as such director holds Common stock of the Company having a fair market value of at least $100,000. At that time, the non-employee director may receive a greater portion of his annual retainer fee in the form of cash. At any time, non-employee directors may choose to receive a greater portion of their annual retainer fee in the form of Common Stock. Each Board member is currently over the required $100,000 threshold and therefore is free to choose the composition of their annual fee compensation.

 

AMRI does not provide termination or change of control agreements for non-employee directors, nor are any perquisites or life insurance premium payments offered to the directors.

 

Director Compensation Table

 

Name		Fees Earned or Paid in Cash(1) ($)				Stock Awards(1)(2) ($)				Option Awards(3) ($)				All Other Compensation ($)				Total ($)(4)
Thomas E. D’Ambra, Ph.D.			111,000				35,000				35,000				2,029,234				2,210,234
Veronica G.H. Jordan, Ph.D.			63,000				55,000				35,000				—				153,000
Gabriel Leung			63,500				35,000				35,000				—				133,500
Kevin O’Connor			80,000				35,000				35,000				—				150,000
Arthur J. Roth			82,000				35,000				35,000				—				152,000
Una S. Ryan, Ph.D., O.B.E.			71,500				35,000				35,000				—				141,000

 

(1)

Directors’ annual retainer is paid 50% in cash and 50% in AMRI stock until such time as the Director holds AMRI stock with a minimum value of at least $100,000. At any time, non-employee Directors may choose to receive a greater portion of their annual retainer fee in the form of Common Stock. Award values in the column labeled Stock Awards reflect such payments.

 

(2)

This column represents the aggregate grant date fair value of awards in accordance with FASB ASC Topic 718. Fair value is calculated using the average of the high and low price on the date of the stock award grant.

 

(3)

This column represents the aggregate grant date fair value of stock options granted to the directors in 2014. The fair value was estimated using the Black-Scholes option-pricing model in accordance with the FASB ASC Topic 718. The following non-employee directors have outstanding option awards as of the 2014 fiscal year-end: Dr. Jordan (79,568), Mr. Leung (49,568), Mr. O’Connor (84,568), Mr. Roth (84,568), and Dr. Ryan (79,568).

 

(4)

The Company maintains a Technology Development Incentive Plan. Dr. D’Ambra is entitled to payments under the Company’s Technology Development Incentive Plan for amounts paid to the Company under the license agreement with Sanofi-Aventis. During 2014, Dr. D’Ambra received payments in the aggregate amount of $1,787,916 under this plan. Please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed on March 16, 2015 for information on the Company’s licensing agreement with Sanofi-Aventis. Dr. D’Ambra received a bonus in the amount of $227,250 based on the Company’s performance and his performance, earned in 2013 while in his former position as President and Chief Executive Officer and paid in 2014. In 2014, Dr. D’Ambra also received a payment in the amount of $13,462 representing a portion of his salary earned in 2013 and $606 in payments related to his 2013 401(k) match.

 

  

Compensation Committee Interlocks and Insider Participation

 

During 2014, Dr. Jordan, Dr. Ryan and Mr. O’Connor served as members of the Compensation Committee. During the last year, no executive officer of the Company served as: (i) a member of the Compensation Committee (or other committee of the Board of Directors performing equivalent functions or, in the absence of any such committee, the entire Board of Directors) of another entity, one of whose executive officers served on the Compensation Committee of the Company; (ii) a director of another entity, one of whose executive officers served on the Compensation Committee of the Company; or (iii) a member of the compensation committee (or other committee of the Board of Directors performing equivalent functions or, in the absence of any such committee, the entire Board of Directors) of another entity, one of whose executive officers served as a director of the Company.

 

Related Party Transactions

 

Dr. D’Ambra is entitled to payments under the Company’s Technology Development Incentive Plan for amounts paid to the Company under the license agreement with Sanofi-Aventis, including 10% of all royalties paid to the Company. During 2014, Dr. D’Ambra received payments in the aggregate amount of $1,787,916 under this plan. Please refer to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, filed on March 16, 2015 for information on the Company’s licensing agreement with Sanofi-Aventis.

 

During 2014, Mr. O’Connor served on the Board of Directors of First Light Fiber, formally Tech Valley Communications, a telecommunications company which services the Albany, New York region. During 2014, First Light Fiber was one of the providers of telephone and internet services to the Company. First Light Fiber was paid approximately $160,646 for services rendered to the Company in 2014.

 

Mr. Marth was previously President and Chief Executive Officer of a global pharmaceutical company to which the Company provided a variety of services in 2014. The Company received approximately $3,395,000 in contract revenue from this customer in 2014.

 

Audit Committee Report

 

The Audit Committee reviews AMRI’s financial reporting process on behalf of the Board. Management has the primary responsibility for establishing and maintaining adequate internal financial controllership, for preparing the financial statements and for the public reporting process. KPMG LLP, our Company’s independent auditor for 2014, is responsible for expressing opinions on the conformity of the Company’s audited financial statements with generally accepted accounting principles. In addition, KPMG will express its own opinion on the effectiveness of the Company’s internal control over financial reporting.

 

The Audit Committee is also responsible for the review and approval of related-party transactions that are required to be disclosed under Item 404 of Regulation S-K. Pursuant to the Company’s Corporate Governance Guidelines, the Board evaluates all relationships between the Company and each director in light of relevant facts and circumstances for determining if any relationship exists that might interfere with a Director’s ability to satisfy his or her responsibilities as an independent Director. The Audit Committee has reviewed and approved such related-party transaction disclosed herein.

 

 

The Audit Committee has reviewed and discussed with management and KPMG the audited financial statements for the year ended December 31, 2014, management’s assessment of the effectiveness of the Company’s internal control over financial reporting and KPMG’s evaluation of the Company’s internal control over financial reporting. The Audit Committee has discussed with KPMG the matters that are required to be discussed by professional standards. The Audit Committee has received the written disclosures and the letter from KPMG required by applicable requirements of the Public Company Accounting Oversight Board for independent auditor communications with audit committees concerning independence. The Audit Committee has concluded that KPMG’s provision of audit and non-audit services to AMRI and its affiliates are compatible with KPMG’s independence. Based on the considerations and discussions referred to above, the Audit Committee recommended to our Board of Directors that the audited financial statements for the year ended December 31, 2014 be included in our Annual Report on Form 10-K for 2014. This report is provided by the following independent directors, who comprise the Audit Committee:

 

              Audit Committee

              Arthur J. Roth, Chairman

              Veronica G.H. Jordan, Ph.D.

              Gabriel Leung

 

 

 

 

PRINCIPAL AND MANAGEMENT STOCKHOLDERS

 

The following table sets forth certain information regarding beneficial ownership of the Company’s Common Stock as of April 13, 2015 of (i) each person known by the Company to beneficially own five percent or more of the outstanding shares of the Company’s Common Stock, (ii) the directors and executive officers of the Company and (iii) all directors and executive officers of the Company as a group. Unless otherwise indicated below, to the knowledge of the Company, all persons listed below have sole voting and investment power with respect to their shares of Common Stock, except to the extent authority is shared by spouses under applicable law.

 

		Shares Beneficially Owned
Name of Beneficial Owner (1)		Number				Percent (2)
Executive Officers
William S. Marth (3)			437,214				1.3	%
Felicia Ladin (4)			33,824					*
Michael M. Nolan (5)			74,905					*
Lori M. Henderson (6)			155,926					*
Steven R. Hagen, Ph.D. (7)			70,700					*
George Svokos (8)			111,299					*
Directors
Thomas E. D'Ambra, Ph.D. (9)			2,674,885				8.1	%
Veronica G.H. Jordan, Ph.D. (10)			117,309					*
Gabriel Leung (11)			80,884					*
Kevin O'Connor (12)			122,417					*
Arthur J. Roth (13)			119,063					*
Una S. Ryan, Ph.D., O.B.E. (14)			113,081					*
All executive officers and directors as a group			4,111,507				12.4	%
Five Percent Stockholders
Constance M. D'Ambra (15)			2,455,818				7.4	%
Bessemer Trust Company of Delaware N.A. (16)			4,053,289				12.2	%
Visium Balanced Master Fund, Ltd. (17)			3,200,000				9.8	%
Dimensional Fund Advisors LP (18)			2,700,817				8.3	%
BlackRock, Inc. (19)			2,611,008				8.9	%
Permian Investment Partners, LP (20)			2,248,686				6.9	%
Wellington Management Group, LLP (21)			1,631,317				5.0	%

 

 

*

Less than 1%

 

(1)

The address of all listed Executive Officers and Directors is c/o Albany Molecular Research, Inc., 26 Corporate Circle, P.O. Box 15098, Albany, New York 12203.

 

(2)

All percentages have been determined as of April 13, 2015 in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and includes voting and/or investment power with respect to the Company’s shares of Common Stock. Unless otherwise indicated, to the knowledge of the Company, the named person possesses sole voting and investment power with respect to their shares. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of Common Stock which such person has the right to acquire within 60 days after April 13, 2015. For purposes of computing the percentage of outstanding shares of the Company’s Common Stock held by each person or group of persons named above, any shares of Common Stock which such person or persons has or have the right to acquire within 60 days after April 13, 2015 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. As of April 13, 2015, a total of 33,124,596 shares of Common Stock were issued and outstanding.

 

(3)

Mr. Marth’s beneficial ownership includes no shares subject to options which are or become exercisable within 60 days of the record date, no shares of restricted stock that vest within 60 days of the record date, and 228,294 shares of restricted stock that vest more than 60 days following the record date.

 

(4)

Ms. Ladin’s beneficial ownership includes no shares subject to options which are or become exercisable within 60 days of the record date, no shares of restricted stock that vest within 60 days of the record date, and 33,824 shares of restricted stock that vest more than 60 days following the record date.

 

(5)

Mr. Nolan’s beneficial ownership includes 40,334 shares subject to options which are or become exercisable within 60 days of the record date, no shares of restricted stock that vest within 60 days of the record date, and 12,500 shares of restricted stock that vest more than 60 days following the record date. Mr. Nolan separated from the Company on March 31, 2015.

 

(6)

Ms. Henderson’s beneficial ownership includes 109,792 shares subject to options which are or become exercisable within 60 days of the record date, 1,456 shares of restricted stock that vest within 60 days of the record date, and 33,553 shares of restricted stock that vest more than 60 days following the record date.

 

(7)

Dr. Hagen’s beneficial ownership includes 39,500 shares subject to options which are or become exercisable within 60 days of the record date, 1,250 shares of restricted stock that vest within 60 days of the record date, and 27,217 shares of restricted stock that vest more than 60 days following the record date.

  

(8)

Mr. Svokos’s beneficial ownership includes 40,626 shares subject to options which are or become exercisable within 60 days of the record date, no shares of restricted stock that vest within 60 days of the record date, and 41,585 shares of restricted stock that vest more than 60 days following the record date.

 

(9)

Includes shares owned jointly by Dr. and Mrs. D'Ambra, as to which shares Dr. and Mrs. D'Ambra share voting and investment power. Excludes shares held by the Bessemer Trust Company of Delaware N.A. (“Bessemer”), as to which shares Dr. D'Ambra does not have or share the power to vote or dispose. Dr. and Mrs. D'Ambra may be deemed to beneficially own additional shares, which are held by the Thomas D’Ambra SLAT Trust (the “Trust Shares”). The trustee of the Thomas D’Ambra SLAT trust is Dr. and Mrs. D’Ambra’s son, Geoffrey D’Ambra. Dr. D'Ambra disclaims beneficial ownership of the Trust Shares, and this report shall not be deemed an admission that he is the beneficial owner of the Trust Shares, except to the extent of his pecuniary interest, if any, in the Trust Shares. Dr. D’Ambra’s beneficial ownership includes 67,201 shares subject to options which are or become exercisable within 60 days of the record date, no shares of restricted stock that vest within 60 days of the record date, and 121,843 shares of restricted stock that vest more than 60 days following the record date.

 

(10)

Dr. Jordan’s beneficial ownership includes 79,568 shares subject to options which are or become exercisable within 60 days of the record date, no shares of restricted stock that vest within 60 days of the record date and 2,639 shares of restricted stock that vest more than 60 days following the record date.

 

 

(11)

Mr. Leung’s beneficial ownership includes 49,568 shares subject to options which are or become exercisable within 60 days of the record date, no shares of restricted stock that vest within 60 days of the record date, and 2,639 shares of restricted stock that vest more than 60 days following the record date.

 

(12)

Mr. O’Connor’s beneficial ownership includes 79,568 shares subject to options which are or become exercisable within 60 days of the record date, no shares of restricted stock that vest within 60 days of the record date, and 2,639 shares of restricted stock that vest more than 60 days following the record date.

 

(13)

Mr. Roth’s beneficial ownership includes 79,568 shares subject to options which are or become exercisable within 60 days of the record date, no shares of restricted stock that vest within 60 days of the record date, and 2,639 shares of restricted stock that vest more than 60 days following the record date.

 

(14)

Dr. Ryan’s beneficial ownership includes 79,568 shares subject to options which are or become exercisable within 60 days of the record date, no shares of restricted stock that vest within 60 days of the record date, and 2,639 shares of restricted stock that vest more than 60 days following the record date.

 

(15)

Includes shares jointly owned with her spouse, Dr. Thomas E. D’Ambra, as to which shares Dr. and Mrs. D’Ambra share voting and investment power. Excludes shares held by the Bessemer Trust Company of Delaware N.A. (“Bessemer”), as to which shares Mrs. D'Ambra does not have or share the power to vote or dispose. Dr. and Mrs. D'Ambra may be deemed to beneficially own additional shares, which are held by the Thomas D’Ambra SLAT Trust (the "Trust Shares"). The trustee of the Thomas D’Ambra SLAT trust is Dr. and Mrs. D’Ambra’s son, Geoffrey D’Ambra. Mrs. D'Ambra disclaims beneficial ownership of the Trust Shares, and this report shall not be deemed an admission that she is the beneficial owner of the Trust Shares, except to the extent of her pecuniary interest, if any, in the Trust Shares. The address for Mrs. D'Ambra is c/o Albany Molecular Research, Inc. 26 Corporate Circle, P.O. Box 15098, Albany, New York 12203.

 

(16)

Based on information set forth in Schedule 13G/A filed under the Exchange Act on April 14, 2015. Includes (i) 1,351,095.67 shares held by the BTDEL TTEE of Thomas D’Ambra Family Trust I UAD 2/26/97 FBO Abigail D’Ambra, (ii)1,351,096.67 shares held by the BTDEL TTEE of Thomas D’Ambra Family Trust I UAD 2/26/97 FBO Geoffrey D’Ambra, and (iii) 1,351,096.66 shares held by the BTDEL TTEE of Thomas D’Ambra Family Trust I UAD 2/26/97 FBO Agatha D’Ambra, based on information provided by the trustee of the above three trusts, Bessemer Trust Company of Delaware N.A. (“Bessemer”). Bessemer has voting and dispositive power (based on directions provided by Stuart Cable as the “Special Holding Direction Adviser” under the trusts) and, accordingly, Bessemer and Mr. Cable are the beneficial owners of all shares held by the above three trusts. The address is 1007 Orange Street, Suite 1450, Wilmington, DE 19801. Bessemer and Mr. Cable disclaim any pecuniary interest in the shares held by the above three trusts.

 

(17)

Based on information set forth in Schedule 13G/A filed under the Exchange Act on February 12, 2015 by Visium Balanced Master Fund, Ltd. (“VBMF”), VBMF beneficially owns 3,200,000 with shared power to vote and dispose of the same. Each of Visium Asset Management, LP (“VAM”), as investment manager to VAM, JG Asset, LLC (“JG Asset”), as general partner to VAM, and Jacob Gottlieb, as managing member of JG Asset, may be deemed to beneficially own the 3,200,000 shares held by VBMF. The address for VBMF, VAM, JG Asset and Gottlieb is c/o Visium Asset Management, LP, 888 Seventh Avenue, New York, NY 10019.

 

(18)

Based on information set forth in Schedule 13G/A filed under the Exchange Act on February 5, 2015 by Dimensional Fund Advisors LP ("Dimensional"), an investment advisor registered under Section 203 of the Investment Advisors Act of 1940 Dimensional furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager to certain other commingled group trusts and separate accounts. These investment companies, trusts and accounts are the "Funds". In its role as investment advisor or manager, Dimensional possesses investment and/or voting power over the securities of the Issuer described in this schedule that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Issuer held by the Funds. However, all securities reported in this schedule are owned by the Funds. The address of Dimensional is Palisades West, Building One, 6300 Bee Cave Road, Austin, TX 78746.

 

 

(19)

Based on information set forth in Schedule 13G/A filed under the Exchange Act on January 23, 2015 by BlackRock, Inc.. The address of BlackRock, Inc. is 40 East, New York, New York 10022.

 

(20)

Based on information set forth in Schedule 13G/A filed under the Exchange Act on February 17, 2015 by Permian Investment Partners, LP. The 2,248,686 shares are held by Permian Master Fund, LP and accounts (collectively, the “Fund and Accounts”) which are managed by Permian Investment Partners, LP (“Permian”). Permian, in its capacity as the investment manager of each of the Fund and Accounts, has the sole power to vote and the sole power to direct the disposition of all Shares held by the Fund and Accounts. Accordingly, for the purposes of Reg. Section 240.13d-3, Permian may be deemed to beneficially own an aggregate of 2,248,686 Shares, or 6.9% of the Shares deemed issued and outstanding as of December 31, 2014. The address for Permian is 295 Madison Avenue, New York, NY 10017.

 

(21)

Based on information set forth in Schedule 13G/A filed under the Exchange Act on February 12, 2015 by Wellington Management Group, LLP (“Wellington Management”), Wellington Management, in its capacity as investment adviser, may be deemed to beneficially own 1,631,317 shares of the Company which are held of record by clients of Wellington Management. The address for Wellington Management is 280 Congress Street, Boston, Massachusetts 02210.

 

EXPENSES OF SOLICITATION

 

The Company will pay the entire expense of soliciting proxies for the Annual Meeting. In addition to solicitations by mail, certain directors, officers and regular employees of the Company (who will receive no compensation for their services other than their regular compensation) may solicit proxies by telephone, telegram or personal interview. Banks, brokerage houses, custodians, nominees and other fiduciaries have been requested to forward proxy materials to the beneficial owners of shares held of record by them and such custodians will be reimbursed for their expenses. Solicitation by officers and employees of the Company may also be made of some Stockholders in person or by mail, telephone or telegraph following the original solicitation. The Company may, if required, engage a proxy solicitation firm to assist in soliciting proxies by telephone, telegram or mail. In such event, the Company would pay the entire cost of such solicitation which would be expected to be less than $10,000.

 

HOUSEHOLDING OF PROXY MATERIALS

 

Our 2014 Annual Report, including audited financial statements for the fiscal year ended December 31, 2014, is being mailed to you along with this proxy statement. In order to reduce printing and postage costs, we have undertaken an effort to deliver only one Annual Report and one proxy statement to multiple Stockholders sharing an address. This delivery method, called ‘‘householding,’’ is not being used, however, if our Company has received contrary instructions from one or more of the Stockholders sharing an address. If your household has received only one Annual Report and one proxy statement, the Company will deliver promptly a separate copy of the Annual Report and the proxy statement to any Stockholder who sends a written request to Albany Molecular Research, Inc., 26 Corporate Circle, Albany, New York 12203, Attention: Lori M. Henderson, Secretary. If your household is receiving multiple copies of the Company’s Annual Report or proxy statement and you wish to request delivery of a single copy, you may send a written request to Albany Molecular Research, Inc., 26 Corporate Circle, Albany, New York 12203, Attention: Secretary. Phone (518) 512-2000.

 

SUBMISSION OF STOCKHOLDER PROPOSALS FOR 2016 ANNUAL MEETING

 

Stockholder proposals submitted pursuant to Exchange Act Rule 14a-8 for inclusion in the Company’s proxy statement and form of proxy for the 2016 annual meeting of stockholders must be received in writing by the Company by January 2, 2016. Such proposals must also comply with the requirements as to form and substance established by the Securities and Exchange Commission if such proposals are to be included in the proxy statement and form of proxy. Any such proposals should be mailed to: Albany Molecular Research, Inc., 26 Corporate Circle, P.O. Box 15098, Albany, New York 12212-5098, Attention: Secretary.

 

 

Stockholder proposals intended to be presented at the 2016 annual meeting of stockholders, other than Stockholder proposals submitted pursuant to Exchange Act Rule 14a-8, must be delivered to, or mailed and received at, Albany Molecular Research, Inc., 26 Corporate Circle, P.O. Box 15098, Albany, New York 12212-5098, together with all supporting documentation required by the Company’s Amended and Restated By-laws, not earlier than January 2, 2016 nor later than February 16, 2016; provided, however, that in the event that the annual meeting is scheduled to be held before May 4, 2016 or after August 2, 2016, notice must be so delivered not later than the close of business on the later of (i) the 75th day prior to the scheduled date of such annual meeting or (ii) the 15th day following the day on which public announcement of the date of such meeting is first made by the Company. The proposal must also comply with the other requirements contained in the Company’s Amended and Restated By-laws, including supporting documentation and other information. Proxies solicited by the Board of Directors will confer discretionary voting authority with respect to these proposals, subject to the Securities and Exchange Commission’s rules governing the exercise of this authority.

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

On behalf of AMRI and its affiliates, the Audit Committee of the Board retained KPMG LLP to audit our consolidated financial statements and our internal control over financial reporting for 2014. We understand the need for KPMG to maintain objectivity and independence in its audit of our financial statements and our internal control over financial reporting. To minimize relationships that could appear to impair the objectivity of KPMG, our Audit Committee has restricted the non-audit services that KPMG may provide to us.

 

The Audit Committee has also adopted policies and procedures for pre-approving all non-audit work performed by KPMG. The chair of the Audit Committee is authorized to pre-approve any audit and non-audit service on behalf of the Audit Committee, provided such decisions are presented to the full Committee at its next regularly scheduled meeting. The aggregate fees billed by KPMG in 2014 and 2013 for these various services were:

 

Type of Fees		2014				2013
		($’s in 000’s)
Audit Fees		$	1,382			$	979
Audit-Related Fees		$	103			$	76
Tax Fees		$	2			$	7
All Other Fees			—				—
Total Fees		$	1,487			$	1,062

 

In the above table, in accordance with the SEC’s definitions and rules, ‘‘audit fees’’ are fees that AMRI paid to KPMG for the audit of AMRI’s annual financial statements included in the Form 10-K and review of financial statements included in the Form 10-Qs; for the audit of AMRI’s internal control over financial reporting with the objective of obtaining reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects; and for services that are normally provided by the auditor in connection with statutory and regulatory filings or engagements including local reporting requirements in Hungary, India, the United Kingdom, and Singapore. ‘‘Audit-related fees’’ are fees for assurance and related services that are reasonably related to the performance of the audit or review of AMRI’s financial statements and internal control over financial reporting. ‘‘Tax fees’’ are fees for tax compliance, tax advice and tax planning, and ‘‘all other fees’’ are fees for any services not included in the first three categories.

 

Representatives from KPMG will be present at the Annual Meeting with the opportunity to make a statement if so desired and will be available to respond to appropriate questions.

 

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires the Company’s executive officers and directors, and persons who own more than 10% of the Company’s outstanding shares of Common Stock, to file reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. Such officers, directors and 10% beneficial owners are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file. To the Company’s knowledge, the Company believes that all Section 16 filing requirements were satisfied for 2014.

 

 

OTHER MATTERS

 

The Board of Directors does not know of any matters other than those described in this Proxy Statement that will be presented for action at the Annual Meeting. If other matters are duly presented, proxies will be voted in accordance with the best judgment of the proxy holders.

 

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.

 

  

 

Annex A

 

ALBANY MOLECULAR RESEARCH, INC.

 

THIRD AMENDED 2008 STOCK OPTION AND INCENTIVE PLAN

 

SECTION 1.

GENERAL PURPOSE OF THE PLAN; DEFINITIONS

  

The name of the plan is the Albany Molecular Research, Inc. Third Amended 2008 Stock Option and Incentive Plan (the “Plan”). The purpose of the Plan is to encourage and enable the officers, employees, Non-Employee Directors and other key persons (including consultants and prospective employees) of Albany Molecular Research, Inc. (the “Company”) and its Subsidiaries upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company.

 

The following terms shall be defined as set forth below:

 

“Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

 

“Administrator” means either the Board or the compensation committee of the Board or a similar committee performing the functions of the compensation committee and which is comprised of not less than two Non-Employee Directors who are independent.

 

“Award” or “Awards,” except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Deferred Stock Awards, Restricted Stock Awards, Unrestricted Stock Awards, Cash-based Awards, Performance Share Awards and Dividend Equivalent Rights.

 

“Award Agreement” means a written or electronic agreement setting forth the terms and provisions applicable to an Award granted under the Plan. Each Award Agreement is subject to the terms and conditions of the Plan.

 

“Board” means the Board of Directors of the Company.

 

“Cash-based Award” means an Award entitling the recipient to receive a cash-denominated payment.

 

“Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.

 

“Covered Employee” means an employee who is a “Covered Employee” within the meaning of Section 162(m) of the Code.

 

“Deferred Stock Award” means an Award of phantom stock units to a grantee.

 

“Dividend Equivalent Right” means an Award entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of Stock specified in the Dividend Equivalent Right (or other award to which it relates) if such shares had been issued to and held by the grantee.

 

“Effective Date” means the date on which the Third Amended Plan is approved by stockholders as set forth in Section 20.

 

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

“Fair Market Value” of the Stock on any given date means the fair market value of the Stock determined in good faith by the Administrator; provided, however, that if the Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), NASDAQ Global Market or another national securities exchange, the determination shall be made by reference to market quotations. If there are no market quotations for such date, the determination shall be made by reference to the last date preceding such date for which there are market quotations.

 

“Incentive Stock Option” means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code.

 

“Non-Employee Director” means a member of the Board who is not also an employee of the Company or any Subsidiary.

 

“Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.

 

“Option” or “Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5.

 

“Performance-based Award” means any Restricted Stock Award, Deferred Stock Award, Performance Share Award or Cash-based Award granted to a Covered Employee that is intended to qualify as “performance-based compensation” under Section 162(m) of the Code and the regulations promulgated thereunder.

 

“Performance Criteria” means the criteria that the Administrator selects for purposes of establishing the Performance Goal or Performance Goals for an individual for a Performance Cycle. The Performance Criteria (which shall be applicable to the organizational level specified by the Administrator, including, but not limited to, the Company or a unit, division, group, or Subsidiary of the Company) that will be used to establish Performance Goals are limited to the following: earnings before interest, taxes, depreciation and amortization, net income (loss) (either before or after interest, taxes, depreciation and/or amortization), changes in the market price of the Stock, economic value-added, funds from operations or similar measure, sales or revenue, acquisitions or strategic transactions, operating income (loss), cash flow (including, but not limited to, operating cash flow and free cash flow), return on capital, assets, equity, or investment, stockholder returns, return on sales, gross or net profit levels, productivity, expense, margins, operating efficiency, customer satisfaction, working capital, earnings (loss) per share of Stock, sales or market shares and number of customers, any of which may be measured either in absolute terms or as compared to any incremental increase or as compared to results of a peer group.

 

“Performance Cycle” means one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more Performance Criteria will be measured for the purpose of determining a grantee’s right to and the payment of a Restricted Stock Award, Deferred Stock Award, Performance Share Award or Cash-based Award.

 

“Performance Goals” means, for a Performance Cycle, the specific goals established in writing by the Administrator for a Performance Cycle based upon the Performance Criteria.

 

“Performance Share Award” means an Award entitling the recipient to acquire shares of Stock upon the attainment of specified Performance Goals.

 

“Restricted Stock Award” means an Award entitling the recipient to acquire, at such purchase price (which may be zero) as determined by the Administrator, shares of Stock subject to such restrictions and conditions as the Administrator may determine at the time of grant.

 

“Sale Event” shall mean (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (ii) a merger, reorganization or consolidation in which the outstanding shares of Stock are converted into or exchanged for securities of the successor entity and the holders of the Company’s outstanding voting power immediately prior to such transaction do not own a majority of the outstanding voting power of the successor entity immediately upon completion of such transaction, or (iii) the sale of all of the Stock of the Company to an unrelated person or entity.

 

 

“Sale Price” means the value as determined by the Administrator of the consideration payable, or otherwise to be received by stockholders, per share of Stock pursuant to a Sale Event.

 

“Section 409A” means Section 409A of the Code and the regulations and other guidance promulgated thereunder.

 

“Stock” means the Common Stock, par value $0.01 per share, of the Company, subject to adjustments pursuant to Section 3.

 

“Stock Appreciation Right” means an Award entitling the recipient to receive shares of Stock having a value equal to the excess of the Fair Market Value of the Stock on the date of exercise over the exercise price of the Stock Appreciation Right multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised.

 

“Subsidiary” means any corporation or other entity (other than the Company) in which the Company has at least a 50 percent interest, either directly or indirectly.

 

“Ten Percent Owner” means an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation.

 

“Unrestricted Stock Award” means an Award of shares of Stock free of any restrictions.

 

SECTION 2.

ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS

  

(a)

Administration of Plan. The Plan shall be administered by the Administrator.

 

(b)

Powers of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan, including the power and authority:

 

(i)

to select the individuals to whom Awards may from time to time be granted;

 

(ii)

to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Deferred Stock Awards, Unrestricted Stock Awards, Cash-based Awards, Performance Share Awards and Dividend Equivalent Rights, or any combination of the foregoing, granted to any one or more grantees;

 

(iii) to determine the number of shares of Stock to be covered by any Award;

 

(iv)

to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and grantees, and to approve the form of written instruments evidencing the Awards;

 

(v)

subject to the limitations provided in the Plan, too accelerate at any time the exercisability or vesting of all or any portion of any Award;

 

(vi)

subject to the provisions of Section 5(a)(ii), to extend at any time the period in which Stock Options may be exercised; and

 

  

(vii)

at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.

 

All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan grantees.

 

(c)

Delegation of Authority to Grant Options. Subject to applicable law, the Administrator, in its discretion, may delegate to the Chief Executive Officer of the Company all or part of the Administrator’s authority and duties with respect to the granting of Options, to individuals who are (i) not subject to the reporting and other provisions of Section 16 of the Exchange Act and (ii) not Covered Employees. Any such delegation by the Administrator shall include a limitation as to the amount of Options that may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price and the vesting criteria. The Administrator may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Administrator’s delegate or delegates that were consistent with the terms of the Plan.

 

(d)

Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include, without limitation, the term of an Award, the provisions applicable in the event employment or service terminates, and the Company’s authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.

 

(e)

Indemnification. Neither the Board nor the Administrator, nor any member of either or any delegate thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Administrator (and any delegate thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under the Company’s articles or bylaws or any directors’ and officers’ liability insurance coverage which may be in effect from time to time and/or any indemnification agreement between such individual and the Company.

 

(f)

Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company and its Subsidiaries operate or have employees or other individuals eligible for Awards, the Administrator, in its sole discretion, shall have the power and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine which individuals outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to individuals outside the United States to comply with applicable foreign laws; (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent the Administrator determines such actions to be necessary or advisable (and such subplans and/or modifications shall be attached to this Plan as appendices); provided, however, that no such subplans and/or modifications shall increase the share limitations contained in Section 3(a) hereof; and (v) take any action, before or after an Award is made, that the Administrator determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.

 

  

SECTION 3.

STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

  

(a)

Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 7,700,000 shares, subject to adjustment as provided in Section 3(b); provided that not more than 7,700,000 shares shall be issued in the form of Incentive Stock Options. For purposes of this limitation, the shares of Stock underlying any Awards that are forfeited, canceled or otherwise terminated (other than by exercise) shall be added back to the shares of Stock available for issuance under the Plan. Shares tendered or held back upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding shall not be available for future issuance under the Plan. In addition, upon exercise of Stock Appreciation Rights, the gross number of shares exercised shall be deducted from the total number of shares remaining available for issuance under the Plan. In the event the Company repurchases shares of Stock on the open market, such shares shall not be added to the shares of Stock available for issuance under the Plan. Subject to such overall limitations, shares of Stock may be issued up to such maximum number pursuant to any type or types of Award; provided, however, that Stock Options or Stock Appreciation Rights with respect to no more than 500,000 shares of Stock may be granted to any one individual grantee during any one calendar year period. The shares available for issuance under the Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the Company.

 

(b)

Changes in Stock. Subject to Section 3(c) hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger or consolidation, sale of all or substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged for securities of the Company or any successor entity (or a parent or subsidiary thereof), the Administrator shall make an appropriate or proportionate adjustment in (i) the maximum number of shares reserved for issuance under the Plan, including the maximum number of shares that may be issued in the form of Unrestricted Stock Awards, Restricted Stock Awards, Deferred Stock Awards or Performance Share Awards, (ii) the number of Stock Options or Stock Appreciation Rights that can be granted to any one individual grantee and the maximum number of shares that may be granted under a Performance-based Award, (iii) the number and kind of shares or other securities subject to any then outstanding Awards under the Plan, (iv) the repurchase price, if any, per share subject to each outstanding Restricted Stock Award, (v) the number of Stock Options granted to Non-Employee Directors, and (vi) the price for each share subject to any then outstanding Stock Options and Stock Appreciation Rights under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of Stock Options and Stock Appreciation Rights) as to which such Stock Options and Stock Appreciation Rights remain exercisable. The Administrator shall also make equitable or proportionate adjustments in the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration cash dividends paid other than in the ordinary course or any other extraordinary corporate event. Notwithstanding the foregoing, no adjustment shall be made under this Section 3(b) if the Administrator determines that such action could cause any Award to fail to satisfy the conditions of any applicable exception from the requirements of Section 409A or otherwise could subject the grantee to the additional tax imposed under Section 409A in respect of an outstanding Award or constitute a modification, extension or renewal of an Incentive Stock Option within the meaning of Section 424(h) of the Code. The adjustment by the Administrator shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a cash payment in lieu of fractional shares.

 

 

(c)

Mergers and Other Transactions. Except as the Administrator may otherwise specify with respect to particular Awards in the relevant Award documentation, and in the discretion of the Administrator in the case of and subject to the consummation of a Sale Event, all Options and Stock Appreciation Rights that are not exercisable immediately prior to the effective time of the Sale Event shall become fully exercisable as of the effective time of the Sale Event, all other Awards with time-based vesting, conditions or restrictions shall become fully vested and nonforfeitable as of the effective time of the Sale Event and all Awards with conditions and restrictions relating to the attainment of performance goals may become vested and nonforfeitable in connection with a Sale, unless, in any case, the parties to the Sale Event agree that Awards will be assumed or continued by the successor entity. Upon the effective time of the Sale Event, the Plan and all outstanding Awards granted hereunder shall terminate, unless provision is made in connection with the Sale Event in the sole discretion of the parties thereto for the assumption or continuation of Awards theretofore granted by the successor entity, or the substitution of such Awards with new Awards of the successor entity or parent thereof, with appropriate adjustment as to the number and kind of shares and, if appropriate, the per share exercise prices, as such parties shall agree (after taking into account any acceleration hereunder). In the event of such termination, (i) the Company shall have the option (in its sole discretion) to make or provide for a cash payment to the grantees holding Options and Stock Appreciation Rights, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the Sale Price multiplied by the number of shares of Stock subject to outstanding Options and Stock Appreciation Rights (to the extent then exercisable (after taking into account any acceleration hereunder) at prices not in excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding Options and Stock Appreciation Rights; or (ii) each grantee shall be permitted, within a specified period of time prior to the consummation of the Sale Event as determined by the Administrator, to exercise all outstanding Options and Stock Appreciation Rights held by such grantee.

 

(d)

Substitute Awards. The Administrator may grant Awards under the Plan in substitution for stock and stock based awards held by employees, directors or other key persons of another corporation in connection with the merger or consolidation of the employing corporation with the Company or a Subsidiary or the acquisition by the Company or a Subsidiary of property or stock of the employing corporation. The Administrator may direct that the substitute awards be granted on such terms and conditions as the Administrator considers appropriate in the circumstances. Any substitute Awards granted under the Plan shall not count against the share limitation set forth in Section 3(a).

 

SECTION 4.

ELIGIBILITY

 

Grantees under the Plan will be such full or part-time officers and other employees, Non-Employee Directors and key persons (including consultants and prospective employees) of the Company and its Subsidiaries as are selected from time to time by the Administrator in its sole discretion.

 

SECTION 5.

STOCK OPTIONS

  

Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve.

 

Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be granted only to employees of the Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Code. To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.

 

(a)

Stock Options Granted to Employees and Key Persons. The Administrator in its discretion may grant Stock Options to eligible employees and key persons of the Company or any Subsidiary. Stock Options granted pursuant to this Section 5(a) shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable. If the Administrator so determines, Stock Options may be granted in lieu of cash compensation at the optionee’s election, subject to such terms and conditions as the Administrator may establish.

 

i.

Exercise Price. The exercise price per share for the Stock covered by a Stock Option granted pursuant to Section 5(a) shall be determined by the Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the option price of such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value on the grant date.

 

 

ii.

Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than ten years after the date the Stock Option is granted. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the term of such Stock Option shall be no more than five years from the date of grant.

 

iii.

Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time or times, whether or not in installments, as shall be determined by the Administrator at or after the grant date. The Administrator may at any time accelerate the exercisability of all or any portion of any Stock Option. An optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.

 

iv.

Method of Exercise. Stock Options may be exercised in whole or in part, by giving written notice of exercise to the Company, specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods to the extent provided in the Option Award Agreement:

 

A.

In cash, by certified or bank check or other instrument acceptable to the Administrator; or

 

B.

Through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the optionee on the open market or that are beneficially owned by the optionee and are not then subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise date; or

 

C.

By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; or

 

D.

With respect to Non-Qualified Stock Options, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price.

 

Payment instruments will be received subject to collection. The transfer to the optionee on the records of the Company or of the transfer agent of the shares of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Option Award Agreement or applicable provisions of laws (including the satisfaction of any withholding taxes that the Company is obligated to withhold with respect to the optionee). In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of attested shares. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the exercise of Stock Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Stock Options may be permitted through the use of such an automated system.

 

v.

Annual Limit on Incentive Stock Options. To the extent required for “incentive stock option” treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by an optionee during any calendar year shall not exceed $100,000. To the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option.

 

 

(b)

Stock Options Granted To Non-Employee Directors

 

i.

Grant of Options. Each Non-Employee Director who is serving as Director is eligible to receive grants of Non-Qualified Stock Options to acquire shares of Stock valued at an amount determined by the Compensation Committee from time to time. The Stock Options to such Directors shall be granted at the same time as the annual grant of equity to the management team or in no event more than five (5) business days following the annual stockholders meeting.

 

The exercise price per share for the Stock covered by a Stock Option granted under this Section 5(b) shall be equal to the Fair Market Value of the Stock on the date the Stock Option is granted.

 

The Administrator, in its discretion, may grant additional Non-Qualified Stock Options to Non-Employee Directors. Any such grant may vary among individual Non-Employee Directors.

 

ii.

Exercise; Termination. Unless otherwise determined by the Administrator, an Option granted under Section 5(b) shall not be exercisable after the expiration of ten years from the date of grant.

 

Options granted under this Section 5(b) may be exercised only by written notice to the Company specifying the number of shares to be purchased. Payment of the full purchase price of the shares to be purchased may be made by one or more of the methods specified in Section 5(a)(iv). An optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.

 

SECTION 6.

STOCK APPRECIATION RIGHTS

  

(a)

Exercise Price of Stock Appreciation Rights. The exercise price of a Stock Appreciation Right shall not be less than 100 percent of the Fair Market Value of the Stock on the date of grant.

 

(b)

Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be granted by the Administrator independently of any Stock Option granted pursuant to Section 5 of the Plan.

 

(c)

Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined from time to time by the Administrator. The term of a Stock Appreciation Right may not exceed ten years.

 

SECTION 7.

RESTRICTED STOCK AWARDS

 

(a)

Nature of Restricted Stock Awards. The Administrator shall determine the restrictions and conditions applicable to each Restricted Stock Award at the time of grant. Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance goals and objectives. The grant of a Restricted Stock Award is contingent on the grantee executing the Restricted Stock Award Agreement. The terms and conditions of each such Award Agreement shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees.

 

(b)

Rights as a Stockholder. Upon execution of the Restricted Stock Award Agreement and payment of any applicable purchase price, a grantee shall have the rights of a stockholder with respect to the voting of the Restricted Stock and receipt of dividends,’ provided that if the lapse of restrictions with respect to the Restricted Stock Award is tied to the attainment of performance goals, any dividends paid by the Company during the performance period shall accrue and shall not be paid to the grantee until and to the extent the performance goals are met with respect to the Restricted Stock Award. . Unless the Administrator shall otherwise determine, (i) uncertificated Restricted Stock shall be accompanied by a notation on the records of the Company or the transfer agent to the effect that they are subject to forfeiture until such Restricted Stock are vested as provided in Section 7(d) below, and (ii) certificated Restricted Stock shall remain in the possession of the Company until such Restricted Stock is vested as provided in Section 7(d) below, and the grantee shall be required, as a condition of the grant, to deliver to the Company such instruments of transfer as the Administrator may prescribe.

 

  

(c)

Restrictions. Restricted Stock may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein or in the Restricted Stock Award Agreement. Except as may otherwise be provided by the Administrator either in the Award Agreement or, subject to Section 18 below, in writing after the Award Agreement is issued if a grantee’s employment (or other service relationship) with the Company and its Subsidiaries terminates for any reason, any Restricted Stock that has not vested at the time of termination shall automatically and without any requirement of notice to such grantee from or other action by or on behalf of, the Company be deemed to have been reacquired by the Company at its original purchase price (if any) from such grantee or such grantee’s legal representative simultaneously with such termination of employment (or other service relationship), and thereafter shall cease to represent any ownership of the Company by the grantee or rights of the grantee as a stockholder. Following such deemed reacquisition of unvested Restricted Stock that are represented by physical certificates, a grantee shall surrender such certificates to the Company upon request without consideration.

 

(d)

Vesting of Restricted Stock. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which the non-transferability of the Restricted Stock and the Company’s right of repurchase or forfeiture shall lapse. Notwithstanding the foregoing, in the event that any such Restricted Stock granted to employees shall have a performance-based goal, the restriction period with respect to such shares shall not be less than one year, and in the event any such Restricted Stock granted to employees shall have a time-based restriction, the total restriction period with respect to such shares shall not be less than three years; provided, however, that Restricted Stock with a time-based restriction may become vested incrementally over such three-year period. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on which all restrictions have lapsed shall no longer be Restricted Stock and shall be deemed “vested.” Except as may otherwise be provided by the Administrator either in the Award Agreement or, subject to Section 18 below, in writing after the Award Agreement is issued, a grantee’s rights in any shares of Restricted Stock that have not vested shall automatically terminate upon the grantee’s termination of employment (or other service relationship) with the Company and its Subsidiaries and such shares shall be subject to the provisions of Section 7(c) above.

 

(e)

Restricted Stock Granted to Non-Employee Directors

 

i.

Grant of Restricted Stock.

 

(A)

Each Non-Employee Director who is serving as Director of the Company is eligible to receive grants of restricted stock valued at an amount determined by the Compensation Committee from time to time. The restricted stock to such Directors shall be granted at the same time as the annual grant of equity to the management team or in no event more than five (5) business days following the annual stockholders meeting.

 

SECTION 8.

DEFERRED STOCK AWARDS

  

(a)

Nature of Deferred Stock Awards. The Administrator shall determine the restrictions and conditions applicable to each Deferred Stock Award at the time of grant. Conditions may be based on continuing employment (or other service relationship) and/or achievement of pre-established performance goals and objectives. The grant of a Deferred Stock Award is contingent on the grantee executing the Deferred Stock Award Agreement. The terms and conditions of each such Award Agreement shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees. Notwithstanding the foregoing, in the event that any such Deferred Stock Award granted to employees shall have a performance-based goal, the restriction period with respect to such Award shall not be less than one year, and in the event any such Deferred Stock Award granted to employees shall have a time-based restriction, the total restriction period with respect to such Award shall not be less than three years; provided, however, that any Deferred Stock Award with a time-based restriction may become vested incrementally over such three-year period. At the end of the deferral period, the Deferred Stock Award, to the extent vested, shall be settled in the form of shares of Stock.

 

  

(b)

Election to Receive Deferred Stock Awards in Lieu of Compensation. The Administrator may, in its sole discretion, permit a grantee to elect to receive a portion of future cash compensation otherwise due to such grantee in the form of a Deferred Stock Award. Any such election shall be made in writing and shall be delivered to the Company no later than the date specified by the Administrator and in accordance with Section 409A and such other rules and procedures established by the Administrator. Any such future cash compensation that the grantee elects to defer shall be converted to a fixed number of phantom stock units based on the Fair Market Value of Stock on the date the compensation would otherwise have been paid to the grantee if such payment had not been deferred as provided herein. The Administrator shall have the sole right to determine whether and under what circumstances to permit such elections and to impose such limitations and other terms and conditions thereon as the Administrator deems appropriate.

 

(c)

Rights as a Stockholder. A grantee shall have the rights as a stockholder only as to shares of Stock acquired by the grantee upon settlement of a Deferred Stock Award; provided, however, that the grantee may be credited with Dividend Equivalent Rights with respect to the phantom stock units underlying his Deferred Stock Award, subject to such terms and conditions as the Administrator may determine.

 

(d)

Termination. Except as may otherwise be provided by the Administrator either in the Award Agreement or, subject to Section 18 below, in writing after the Award Agreement is issued, a grantee’s right in all Deferred Stock Awards that have not vested shall automatically terminate upon the grantee’s termination of employment (or cessation of service relationship) with the Company and its Subsidiaries for any reason.

 

SECTION 9.

UNRESTRICTED STOCK AWARDS

 

(a)

Grant or Sale of Unrestricted Stock. The Administrator may, in its sole discretion, grant (or sell at par value or such higher purchase price determined by the Administrator) an Unrestricted Stock Award under the Plan. Unrestricted Stock Awards may be granted in respect of past services or other valid consideration, or in lieu of cash compensation due to such grantee.

 

SECTION 10.

CASH-BASED AWARDS

 

(a)

Grant of Cash-based Awards. The Administrator may, in its sole discretion, grant Cash-based Awards to any grantee in such number or amount and upon such terms, and subject to such conditions, as the Administrator shall determine at the time of grant. The Administrator shall determine the maximum duration of the Cash-based Award, the amount of cash to which the Cash-based Award pertains, the conditions upon which the Cash-based Award shall become vested or payable, and such other provisions as the Administrator shall determine. Each Cash-based Award shall specify a cash-denominated payment amount, formula or payment ranges as determined by the Administrator. Payment, if any, with respect to a Cash-based Award shall be made in accordance with the terms of the Award and may be made in cash or in shares of Stock, as the Administrator determines.

 

SECTION 11.

PERFORMANCE SHARE AWARDS

 

(a)

Nature of Performance Share Awards. The Administrator may, in its sole discretion, grant Performance Share Awards independent of, or in connection with, the granting of any other Award under the Plan. The Administrator shall determine whether and to whom Performance Share Awards shall be granted, the Performance Goals, the periods during which performance is to be measured, which may not be less than one year, and such other limitations and conditions as the Administrator shall determine.

 

 

 

(b)

Rights as a Stockholder. A grantee receiving a Performance Share Award shall have the rights of a stockholder only as to shares actually received by the grantee under the Plan and not with respect to shares subject to the Award but not actually received by the grantee. A grantee shall be entitled to receive shares of Stock under a Performance Share Award only upon satisfaction of all conditions specified in the Performance Share Award agreement (or in a performance plan adopted by the Administrator).

 

(c)

Termination. Except as may otherwise be provided by the Administrator either in the Award agreement or, subject to Section 18 below, in writing after the Award agreement is issued, a grantee’s rights in all Performance Share Awards shall automatically terminate upon the grantee’s termination of employment (or cessation of service relationship) with the Company and its Subsidiaries for any reason.

 

SECTION 12.

PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES

 

(a)

Performance-based Awards. Any employee or other key person providing services to the Company and who is selected by the Administrator may be granted one or more Performance-based Awards in the form of a Restricted Stock Award, Deferred Stock Award, Performance Share Awards or Cash-based Award payable upon the attainment of Performance Goals that are established by the Administrator and relate to one or more of the Performance Criteria, in each case on a specified date or dates or over any period or periods determined by the Administrator. The Administrator shall define in an objective fashion the manner of calculating the Performance Criteria it selects to use for any Performance Period. Depending on the Performance Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall Company performance or the performance of a division, business unit, or an individual. The Administrator, in its discretion, may adjust or modify the calculation of Performance Goals for such Performance Period in order to prevent the dilution or enlargement of the rights of an individual (i) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction, event or development, (ii) in recognition of, or in anticipation of, any other unusual or nonrecurring events affecting the Company, or the financial statements of the Company, or (iii) in response to, or in anticipation of, changes in applicable laws, regulations, accounting principles, or business conditions provided however, that the Administrator may not exercise such discretion in a manner that would increase the Performance-based Award granted to a Covered Employee. Each Performance-based Award shall comply with the provisions set forth below.

 

(b)

Grant of Performance-based Awards. With respect to each Performance-based Award granted to a Covered Employee, the Administrator shall select, within the first 90 days of a Performance Cycle (or, if shorter, within the maximum period allowed under Section 162(m) of the Code) the Performance Criteria for such grant, and the Performance Goals with respect to each Performance Criterion (including a threshold level of performance below which no amount will become payable with respect to such Award). Each Performance-based Award will specify the amount payable, or the formula for determining the amount payable, upon achievement of the various applicable performance targets. The Performance Criteria established by the Administrator may be (but need not be) different for each Performance Cycle and different Performance Goals may be applicable to Performance-based Awards to different Covered Employees.

 

(c)

Payment of Performance-based Awards. Following the completion of a Performance Cycle, the Administrator shall meet to review and certify in writing whether, and to what extent, the Performance Goals for the Performance Cycle have been achieved and, if so, to also calculate and certify in writing the amount of the Performance-based Awards earned for the Performance Cycle. The Administrator shall then determine the actual size of each Covered Employee’s Performance-based Award, and, in doing so, may reduce or eliminate the amount of the Performance-based Award for a Covered Employee if, in its sole judgment, such reduction or elimination is appropriate.

 

 

(d)

Maximum Award Payable. The maximum Performance-based Award payable to any one Covered Employee under the Plan for a Performance Cycle is 500,000 Shares (subject to adjustment as provided in Section 3(b) hereof) or $1,000,000 in the case of a Performance-based Award that is a Cash-based Award.

 

SECTION 13.

DIVIDEND EQUIVALENT RIGHTS

 

(a)

Dividend Equivalent Rights. A Dividend Equivalent Right may be granted hereunder to any grantee as a component of another Award or as a freestanding award. The terms and conditions of Dividend Equivalent Rights shall be specified in the Award Agreement. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional shares of Stock, which may thereafter accrue additional equivalents. Any such reinvestment shall be at Fair Market Value on the date of reinvestment or such other price as may then apply under a dividend reinvestment plan sponsored by the Company, if any. Dividend Equivalent Rights may be settled in cash or shares of Stock or a combination thereof, in a single installment or installments. A Dividend Equivalent Right granted as a component of a Restricted Stock Award or Performance Share Award shall provide that such Dividend Equivalent Right shall be settled only upon , settlement, or payment of, or lapse of restrictions on, such other Award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other Award

 

(b)

Interest Equivalents. Any Award under this Plan that is settled in whole or in part in cash on a deferred basis may provide in the grant for interest equivalents to be credited with respect to such cash payment. Interest equivalents may be compounded and shall be paid upon such terms and conditions as may be specified by the grant.

 

(c)

Termination. Except as may otherwise be provided by the Administrator either in the Award Agreement or, subject to Section 18 below, in writing after the Award Agreement is issued, a grantee’s rights in all Dividend Equivalent Rights or interest equivalents granted as a component of another Award that has not vested shall automatically terminate upon the grantee’s termination of employment (or cessation of service relationship) with the Company and its Subsidiaries for any reason.

 

SECTION 14.

Transferability of Awards

   

(a)

Transferability. Except as provided in Section 14(b) below, during a grantee’s lifetime, his or her Awards shall be exercisable only by the grantee, or by the grantee’s legal representative or guardian in the event of the grantee’s incapacity. No Awards shall be sold, assigned, transferred or otherwise encumbered or disposed of by a grantee other than by will or by the laws of descent and distribution. No Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and void.

 

(b)

Administrator Action. Notwithstanding Section 14(a), the Administrator, in its discretion, may provide either in the Award Agreement regarding a given Award or by subsequent written approval that the grantee (who is an employee or director) may transfer his or her Awards (other than any Incentive Stock Options) to his or her immediate family members, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners, provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Award.

 

(c)

Family Member. For purposes of Section 14(b), “family member” shall mean a grantee’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the grantee’s household (other than a tenant of the grantee), a trust in which these persons (or the grantee) have more than 50 percent of the beneficial interest, a foundation in which these persons (or the grantee) control the management of assets, and any other entity in which these

 

 

persons (or the grantee) own more than 50 percent of the voting interests.

 

(d)

Designation of Beneficiary. Each grantee to whom an Award has been made under the Plan may designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee’s death. Any such designation shall be on a form provided for that purpose by the Administrator and shall not be effective until received by the Administrator. If no beneficiary has been designated by a deceased grantee, or if the designated beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate.

 

SECTION 15.

TAX WITHHOLDING

 

(a)

Payment by Grantee. Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the grantee for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee. The Company’s obligation to deliver evidence of book entry (or stock certificates) to any grantee is subject to and conditioned on tax withholding obligations being satisfied by the grantee.

 

(b)

Payment in Stock. Subject to approval by the Administrator, a grantee may elect to have the Company’s minimum required tax withholding obligation satisfied, in whole or in part, by authorizing the Company to withhold from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due.

 

SECTION 16.

Additional Conditions Applicable to Nonqualified Deferred Compensation Under Section 409A.

 

In the event any Stock Option or Stock Appreciation Right under the Plan is materially modified and deemed a new grant at a time when the Fair Market Value exceeds the exercise price, or any other Award is otherwise determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A (a “409A Award”), the following additional conditions shall apply and shall supersede any contrary provisions of this Plan or the terms of any agreement relating to such 409A Award.

 

(a)

Exercise and Distribution. Except as provided in Section 16(b) hereof, no 409A Award shall be exercisable or distributable earlier than upon one of the following:

 

i.

Specified Time. A specified time or a fixed schedule set forth in the written instrument evidencing the 409A Award.

 

ii.

Separation from Service. Separation from service (within the meaning of Section 409A) by the 409A Award grantee; provided, however, that if the 409A Award grantee is a “key employee” (as defined in Section 416(i) of the Code without regard to paragraph (5) thereof) and any of the Company’s Stock is publicly traded on an established securities market or otherwise, exercise or distribution under this Section 16(a)(ii) may not be made before the date that is six months after the date of separation from service.

 

iii.

Death. The date of death of the 409A Award grantee.

 

iv.

Disability. The date the 409A Award grantee becomes disabled (within the meaning of Section 16(c)(ii) hereof).

 

  

v.

Unforeseeable Emergency. The occurrence of an unforeseeable emergency (within the meaning of Section 16(c)(iii) hereof), but only if the net value (after payment of the exercise price) of the number of shares of Stock that become issuable does not exceed the amounts necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the exercise, after taking into account the extent to which the emergency is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the grantee’s other assets (to the extent such liquidation would not itself cause severe financial hardship).

 

vi.

Change in Control Event. The occurrence of a Change in Control Event (within the meaning of Section 16(c)(i) hereof), including the Company’s discretionary exercise of the right to accelerate vesting of such grant upon a Change in Control Event or to terminate the Plan or any 409A Award granted hereunder within 12 months of the Change in Control Event.

 

(b)

No Acceleration. A 409A Award may not be accelerated or exercised prior to the time specified in Section 16(a) hereof, except in the case of one of the following events:

 

i.

Domestic Relations Order. The 409A Award may permit the acceleration of the exercise or distribution time or schedule to an individual other than the grantee as may be necessary to comply with the terms of a domestic relations order (as defined in Section 414(p)(1)(B) of the Code).

 

ii.

Conflicts of Interest. The 409A Award may permit the acceleration of the exercise or distribution time or schedule as may be necessary to comply with the terms of a certificate of divestiture (as defined in Section 1043(b)(2) of the Code).

 

iii.

Change in Control Event. The Administrator may exercise the discretionary right to accelerate the vesting of such 409A Award upon a Change in Control Event or to terminate the Plan or any 409A Award granted thereunder within 12 months of the Change in Control Event and cancel the 409A Award for compensation.

 

(c)

Definitions. Solely for purposes of this Section 16 and not for other purposes of the Plan, the following terms shall be defined as set forth below:

 

i.

“Change in Control Event” means the occurrence of a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership of a substantial portion of the assets of the Company (as defined in Section 1.409A-3(g) of the proposed regulations promulgated under Section 409A by the Department of the Treasury on September 29, 2005 or any subsequent guidance).

 

ii.

“Disabled” means a grantee who (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or its Subsidiaries.

 

iii.

“Unforeseeable Emergency” means a severe financial hardship to the grantee resulting from an illness or accident of the grantee, the grantee’s spouse, or a dependent (as defined in Section 152(a) of the Code) of the grantee, loss of the grantee’s property due to casualty, or similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the grantee.

 

 

SECTION 17.

TRANSFER, LEAVE OF ABSENCE, ETC.

  

For purposes of the Plan, the following events shall not be deemed a termination of employment:

 

(a)

a transfer to the employment of the Company from a Subsidiary or from the Company to a Subsidiary, or from one Subsidiary to another; or

 

(b)

an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee’s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise so provides in writing.

 

SECTION 18.

AMENDMENTS AND TERMINATION

 

The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall adversely affect rights under any outstanding Award without the holder’s consent. Except as provided in Section 3(b) or 3(c), in no event may the Administrator exercise its discretion to reduce the exercise price of outstanding Stock Options or Stock Appreciation Rights or effect re-pricing through cancellation and re-grants or cancellation of Stock Options or Stock Appreciation Rights in exchange for cash or other Awards. To the extent required under the rules of any securities exchange or market system on which the Stock is listed, to the extent determined by the Administrator to be required by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code, or to ensure that compensation earned under Awards qualifies as performance-based compensation under Section 162(m) of the Code, Plan amendments shall be subject to approval by the Company stockholders entitled to vote at a meeting of stockholders. Nothing in this Section 18 shall limit the Administrator’s authority to take any action permitted pursuant to Section 3(c).

 

SECTION 19.

STATUS OF PLAN

 

With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a grantee shall have no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence.

 

SECTION 20.

GENERAL PROVISIONS

 

(a)

No Distribution. The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof.

 

(b)

Delivery of Stock Certificates. Stock certificates to grantees under this Plan shall be deemed delivered for all purposes when the Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the grantee, at the grantee’s last known address on file with the Company. Uncertificated Stock shall be deemed delivered for all purposes when the Company or a Stock transfer agent of the Company shall have given to the grantee by electronic mail (with proof of receipt) or by United States mail, addressed to the grantee, at the grantee’s last known address on file with the Company, notice of issuance and recorded the issuance in its records (which may include electronic “book entry” records). Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award, unless and until the Administrator has determined, with advice of counsel (to the extent the Administrator deems such advice necessary or advisable), that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed, quoted or traded. All Stock certificates delivered pursuant to the Plan shall be subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state or foreign jurisdiction, securities or other laws, rules and quotation system on which the Stock is listed, quoted or traded. The Administrator may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Administrator may require that an individual make such reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems necessary or advisable in order to comply with any such laws, regulations, or requirements. The Administrator shall have the right to require any individual to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Administrator.

 

 

(c)

Stockholder Rights. Until Stock is deemed delivered in accordance with Section 20(b), no right to vote or receive dividends or any other rights of a stockholder will exist with respect to shares of Stock to be issued in connection with an Award, notwithstanding the exercise of a Stock Option or any other action by the grantee with respect to an Award.

 

(d)

Other Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this Plan and the grant of Awards do not confer upon any employee any right to continued employment with the Company or any Subsidiary.

 

(e)

Trading Policy Restrictions. Option exercises and other Awards under the Plan shall be subject to such Company’s insider trading policy and procedures, as in effect from time to time.

 

(f)

Forfeiture of Awards under Sarbanes-Oxley Act. If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, then any grantee who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002 shall reimburse the Company for the amount of any Award received by such individual under the Plan during the 12-month period following the first public issuance or filing with the United States Securities and Exchange Commission, as the case may be, of the financial document embodying such financial reporting requirement.

 

(g)

Clawback Policy. Awards under the Plan shall be subject to the Company’s clawback policy, as in effect from time to time.

 

SECTION 21.

EFFECTIVE DATE OF PLAN

 

This Plan shall become effective upon approval by the holders of a majority of the votes cast at a meeting of stockholders at which a quorum is present. No grants of Stock Options and other Awards may be made hereunder after the tenth anniversary of the date the Third Amended Plan is approved by stockholders and no grants of Incentive Stock Options may be made hereunder after the tenth anniversary of the date the Third Amended Plan is approved by the Board.

 

SECTION 22.

GOVERNING LAW

 

This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the State of Delaware, applied without regard to conflict of law principles.

  

 

ORIGINAL 2008 STOCK INCENTIVE PLAN
DATE APPROVED BY BOARD OF DIRECTORS:		February 7, 2008
DATE APPROVED BY STOCKHOLDERS:		June 4, 2008
AMENDED 2008 STOCK INCENTIVE PLAN
DATE APPROVED BY BOARD OF DIRECTORS:		March 22, 2011
DATE APPROVED BY STOCKHOLDERS:		June 1, 2011
SECOND AMENDED 2008 STOCK INCENTIVE PLAN
DATE APPROVED BY BOARD OF DIRECTORS:		January 31, 2013
DATE APPROVED BY STOCKHOLDERS:		June 5, 2013
THIRD AMENDED 2008 STOCK INCENTIVE PLAN
DATE APPROVED BY THE BOARD OF DIRECTORS:		February 27, 2015
DATE APPROVED BY STOCKHOLDERS		:

 

 

ANNEX B

 

ALBANY MOLECULAR RESEARCH, INC.

 

THIRD AMENDED 1998 EMPLOYEE STOCK PURCHASE PLAN

 

The purpose of the Albany Molecular Research, Inc. 1998 Employee Stock Purchase Plan ("the Plan") is to provide eligible employees of Albany Molecular Research, Inc. (the "Company") and its subsidiaries with opportunities to purchase shares of the Company's common stock, par value $.01 per share (the "Common Stock"). One Million Six Hundred Thousand (1,600,000) shares of Common Stock in the aggregate have been approved and reserved for this purpose. The Plan is intended to constitute an "employee stock purchase plan" within the meaning of Section 423(b) of the Internal Revenue Code of 1986, as amended (the "Code"), and shall be interpreted in accordance with that intent.

 

1.

Administration. The Plan will be administered by the Company's Board of Directors (the "Board") or by a committee appointed by the Board for such purpose (the "Committee"). The Board or the Committee has authority to make rules and regulations for the administration of the Plan, and its interpretations and decisions with regard thereto shall be final and conclusive. No member of the Board or the Committee shall be liable for any action or determination with respect to the Plan or any option granted hereunder.

 

2.

Offerings. The Company will make one or more offerings to eligible employees to purchase the Common Stock under the Plan ("Offerings"). The initial Offering will begin on January 1, 1999 and will end on June 30, 1999. Thereafter, an Offering will begin on the first business day occurring on or after each January 1 and July 1 and will end on the last business day occurring on or before the following June 30 and December 31, respectively. The Committee may, in its discretion, choose an Offering period of six months or less for each of the Offerings and choose a different Offering period for each Offering.

 

3.

Eligibility. All employees of the Company (including employees who are also directors of the Company) and all employees of each Designated Subsidiary (as defined in Section 11) are eligible to participate in any one or more of the Offerings under the Plan, provided that as of the first day of the applicable Offering (the "Offering Date") they are customarily employed by the Company or a Designated Subsidiary for more than twenty (20) hours a week.

 

4.

Participation. An employee eligible on any Offering Date may participate in such Offering by submitting an enrollment form to his or her appropriate payroll location at least fifteen (15) business days before the Offering Date (or by such other deadline as shall be established for the Offering). The form will (a) state a whole percentage to be deducted from such employee's Compensation (as defined in Section 11) per pay period , (b) authorize the purchase of Common Stock for such employee in each Offering in accordance with the terms of the Plan and (c) specify the exact name or names in which shares of Common Stock purchased for such employee are to be issued pursuant to Section 10. An employee who does not enroll in accordance with these procedures will be deemed to have waived the right to participate. Unless an employee files a new enrollment form or withdraws from the Plan, such employee's deductions and purchases will continue at the same percentage of Compensation for future Offerings, provided such employee remains eligible. Notwithstanding the foregoing, participation in the Plan will neither be permitted nor be denied contrary to the requirements of the Code.

 

5.

Employee Contributions. Each eligible employee may authorize payroll deductions at a minimum of one percent (1%) up to a maximum of ten percent (10%) of his or her Compensation for each pay period. The Company will maintain book accounts showing the amount of payroll deductions made by each participating employee for each Offering. No interest will accrue or be paid on payroll deductions.

 

6.

Deduction Changes. An employee may not increase his or her payroll deduction during any Offering, but may decrease his or her payroll deduction for the remainder of the Offering. An employee may also terminate his or her payroll deduction for the remainder of the Offering, either with or without withdrawing from the Offering under Section 7. To reduce or terminate his or her payroll deduction (without withdrawing from the Offering), an employee must submit a new enrollment form at least fifteen (15) business days (or such shorter period as shall be established) before the payroll date on which the change becomes effective. Subject to the requirements of Sections 4 and 5, an employee may either increase or decrease his or her payroll deduction with respect to the next Offering by filing a new enrollment form at least fifteen (15) business days before the next Offering Date (or by such other deadline as shall be established for the Offering).

 

 

7.

Withdrawal. An employee may withdraw from participation in the Plan by delivering a written notice of withdrawal to his or her appropriate payroll location. The employee's withdrawal will be effective as of the next business day. Following an employee's withdrawal, the Company will promptly refund such employee's entire account balance under the Plan (after payment for any Common Stock purchased before the effective date of withdrawal). Partial withdrawals are not permitted. The employee may not begin participation again during the remainder of the Offering, but may enroll in a subsequent Offering in accordance with Section 4.

 

8.

Grant of Options. On each Offering Date, the Company will grant to each eligible employee who is then a participant in the Plan an option ("Option") to purchase on the last day of such Offering (the "Exercise Date"), at the Option Price hereinafter provided for, a maximum of two thousand (2,000) shares of Common Stock reserved for the purposes of the Plan, or such other maximum number of shares as shall have been established by the Board or the Committee in advance of the offering. The purchase price for each share purchased under such Option (the "Option Price") will be 85% of the Fair Market Value of the Common Stock on the Offering Date or the Exercise Date, whichever is less. Notwithstanding the foregoing, no employee may be granted an option hereunder if such employee, immediately after the option was granted, would be treated as owning stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or any Parent or Subsidiary (as defined in Section 11).

 

For purposes of the preceding sentence, the attribution rules of Section 424(d) of the Code shall apply in determining the stock ownership of an employee, and all stock which the employee has a contractual right to purchase shall be treated as stock owned by the employee. In addition, no employee may be granted an Option which permits his or her rights to purchase stock under the Plan, and any other employee stock purchase plan of the Company and its Parents and Subsidiaries, to accrue at a rate which exceeds $25,000 of the fair market value of such stock (determined on the option grant date or dates) for each calendar year in which the Option is outstanding at any time. The purpose of the limitation in the preceding sentence is to comply with Section 423(b)(8) of the Code.

 

9.

Exercise of Option and Purchase of Shares. Each employee who continues to be a participant in the Plan on the Exercise Date shall be deemed to have exercised his or her Option on such date and shall acquire from the Company such number of whole shares of Common Stock reserved for the purpose of the Plan as his or her accumulated payroll deductions on such date will purchase at the Option Price, subject to any other limitations contained in the Plan. Any amount remaining in an employee's account at the end of an Offering solely by reason of the inability to purchase a fractional share will be carried forward to the next Offering; any other balance remaining in an employee's account at the end of an Offering will be refunded to the employee promptly.

 

10.

Issuance of Certificates. Certificates representing shares of Common Stock purchased under the Plan may be issued only in the name of the employee, in the name of the employee and another person of legal age as joint tenants with rights of survivorship, or in the name of a broker authorized by the employee to be his or her nominee for such purpose.

 

11.

Definitions. The term "Compensation" means the amount of total cash compensation, prior to salary reduction pursuant to either Section 125 or 401(k) of the Code, including base pay, overtime, commissions and bonuses, but excluding allowances and reimbursements for expenses such as relocation allowances or travel expenses, income or gains on the exercise of Company stock options, and similar items.

 

 

The term "Designated Subsidiary" means any present or future Subsidiary (as defined below) that has been designated by the Board or the Committee to participate in the Plan. The Board or the Committee may so designate any Subsidiary, or revoke any such designation, at any time and from time to time, either before or after the Plan is approved by the stockholders.

 

The term "Fair Market Value of the Common Stock" means (i) if the Common Stock is admitted to trading on a national securities exchange or the National Association of Securities Dealers National Market System, the closing price reported for the Common Stock on such exchange or system for such date or, if no sales were reported for such date, for the last date preceding such date for which a sale was reported, or (ii) if clause (i) does not apply but the Common Stock is admitted to quotation on the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), the average of the highest bid and lowest asked prices of the Common Stock reported on NASDAQ for such date or, if no bid and asked prices were reported for such date, for the last day preceding such date for which such prices were reported.

 

The term "Parent" means a "parent corporation" with respect to the Company, as defined in Section 424(e) of the Code. The term "Subsidiary" means a "subsidiary corporation" with respect to the Company, as defined in Section 424(f) of the Code.

 

12.

Rights on Termination of Employment. If a participating employee's employment terminates for any reason before the Exercise Date for any Offering, no payroll deduction will be taken from any pay due and owing to such employee and the balance in such employee's account will be paid to such employee or, in the case of death, to such employee's designated beneficiary as if such employee had withdrawn from the Plan under Section 7. An employee will be deemed to have terminated employment, for this purpose, if the corporation that employs such employee, having been a Designated Subsidiary, ceases to be a Subsidiary, or if such employee is transferred to any corporation other than the Company or a Designated Subsidiary.

 

13.

Special Rules. Notwithstanding anything herein to the contrary, the Board or the Committee may adopt special rules applicable to the employees of a particular Designated Subsidiary, whenever the Board or the Committee determines that such rules are necessary or appropriate for the implementation of the Plan in a jurisdiction where such Designated Subsidiary has employees; provided that such rules are consistent with the requirements of Section 423(b) of the Code. Such special rules may include (by way of example, but not by way of limitation) the establishment of a method for employees of a given Designated Subsidiary to fund the purchase of shares other than by payroll deduction, if the payroll deduction method is prohibited by local law or is otherwise impracticable. Any special rules established pursuant to this Section 13 shall, to the extent possible, result in the employees subject to such rules having substantially the same rights as other participants in the Plan.

 

14.

Optionees Not Stockholders. Neither the granting of an Option to an employee nor the deductions from his or her pay shall constitute such employee a holder of the shares of Common Stock covered by an Option under the Plan until such shares have been purchased by and issued to such employee.

 

15.

Rights Not Transferable. Rights under the Plan are not transferable by a participating employee other than by will or the laws of descent and distribution, and are exercisable during the employee's lifetime only by the employee.

 

16.

Application of Funds. All funds received or held by the Company under the Plan may be combined with other corporate funds and may be used for any corporate purpose.

 

17.

Adjustment in Case of Changes Affecting Common Stock. In the event of a subdivision of outstanding shares of Common Stock, or the payment of a dividend in Common Stock, the number of shares approved for the Plan, and the share limitation set forth in Section 8, shall be increased proportionately, and such other adjustment shall be made as may be deemed equitable by the Board or the Committee. In the event of any other change affecting the Common Stock, such adjustment shall be made as may be deemed equitable by the Board or the Committee to give proper effect to such event.

 

 

18.

Amendment of the Plan. The Board or the Committee may at any time, and from time to time, amend the Plan in any respect, except that without the approval, within twelve (12) months of such Board or Committee action, by the holders of a majority of the shares of stock of the Company present or represented and entitled to vote at a meeting of stockholders, no amendment shall be made increasing the number of shares approved for the Plan or making any other change that would require stockholder approval in order for the Plan, as amended, to qualify as an "employee stock purchase plan" under Section 423(b) of the Code.

 

19.

Insufficient Shares. If the total number of shares of Common Stock that would otherwise be purchased on any Exercise Date plus the number of shares purchased under previous Offerings under the Plan exceeds the maximum number of shares issuable under the Plan, the shares then available shall be apportioned among participants in proportion to the amount of payroll deductions accumulated on behalf of each participant that would otherwise be used to purchase Common Stock on such Exercise Date.

 

20.

Termination of the Plan. The Plan may be terminated at any time by the Board or the Committee. Upon termination of the Plan, all amounts in the accounts of participating employees shall be promptly refunded.

 

21.

Governmental Regulations. The Company's obligation to sell and deliver Common Stock under the Plan is subject to obtaining all governmental approvals required in connection with the authorization, issuance, or sale of such stock.

 

The Plan shall be governed by Delaware law except to the extent that such law is preempted by federal law.

 

22.

Issuance of Shares. Shares may be issued upon exercise of an Option from authorized but unissued Common Stock, from shares held in the treasury of the Company, or from any other proper source.

 

23.

Tax Withholding. Participation in the Plan is subject to any required tax withholding on income of the participant in connection with the Plan. Each employee agrees, by entering the Plan, that the Company and its Subsidiaries shall have the right to deduct any such taxes from any payment of any kind otherwise due to the employee, including shares issuable under the Plan.

 

24 .

Notification Upon Sale of Shares. Each employee agrees, by entering the Plan, to give the Company prompt notice of any disposition of shares purchased under the Plan where such disposition occurs within two years after the date of grant of the Option pursuant to which such shares were purchased.

 

25 .

Effective Date and Approval of Stockholders The Plan shall take effect on the first day of the Company's initial public offering, subject to approval by the holders of a majority of the shares of stock of the Company present or represented and entitled to vote at a meeting of stockholders, which approval must occur within twelve (12) months of the adoption of the Plan by the Board.

 

 

ANNEX C

 

CERTIFICATE OF AMENDMENT OF

 

RESTATED CERTIFICATE OF INCORPORATION

OF

ALBANY MOLECULAR RESEARCH, INC.

 

___________________________________________________

 

Pursuant to Sections 228 and 242

of the General Corporation Law of the State of Delaware

___________________________________________________

 

Albany Molecular Research, Inc. (hereinafter called the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:

 

FIRST:        The name of the Corporation is Albany Molecular Research, Inc. The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on August 6, 1998. On February 3, 1999, an Amended and Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware. On February 10, 1999, a Restated Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware.

 

SECOND:         That the board of directors of the Corporation adopted resolutions in accordance with Sections 141(f) and 242 of the General Corporation Law of the State of Delaware (i) proposing certain amendments to the Corporation’s Restated Certificate of Incorporation, (ii) declaring such amendments to be advisable and in the best interests of the Corporation and (iii) directing that such amendments be submitted to the stockholders of the Corporation for approval thereby. The resolutions setting forth the amendments and directing that such amendments be submitted to the stockholders of the Corporation are as follows:

 

RESOLVED:         That, subject to stockholder approval, the Corporation amend its Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware, as follows:

 

The first paragraph of Article IV shall be replaced in its entirety by the following:

 

“The total number of shares of capital stock which the Corporation shall have authority to issue is One Hundred and Two Million (102,000,000) shares, of which (a) One Hundred Million (100,000,000) shares shall be common stock, par value $0.01 per share (the “Common Stock”), and (b) Two Million (2,000,000) shares shall be undesignated preferred stock, par value $0.01 per share (“Undesignated Preferred Stock”).”

 

Part A, Section 1 of Article IV shall be replaced in its entirety by the following:

 

“1. Designation; Ranking. A total of 100,000,000 shares of the Corporation’s common stock shall be designated as Common Stock, $0.01 par value per share.”

 

RESOLVED:         That the foregoing amendments are hereby recommended to the stockholders of the Corporation as being advisable and in the best interests of the Corporation and its stockholders.

 

RESOLVED:         That the amendment to the Restated Certificate of Incorporation, as described in the foregoing resolutions, be submitted to the stockholders of the Corporation entitled to vote thereon for its approval in compliance with Sections 228 and 242 of the General Corporation Law of the State of Delaware.

 

 

THIRD: That the aforesaid amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware and has been consented to in writing by the stockholders of the Corporation in accordance with Sections 228 and 242 of the General Corporation Law of the State of Delaware.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF, this Certificate of Amendment has been executed by William S. Marth, the Corporation’s President and Chief Executive Officer, this _____ day of ____________, 2015.

 

	ALBANY MOLECULAR RESEARCH, INC.
	By:
		William S. Marth
		President and Chief Executive Officer