UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant
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Filed by a Party other than
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Preliminary Proxy Statement
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Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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ISORAY, 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):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Fee paid previously with preliminary materials.
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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.
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April 29, 2016
Dear Shareholder:
You are cordially invited
to attend the Annual Meeting of Shareholders of IsoRay, Inc. (the
“Company”
) to be held at the Company’s
offices, 350 Hills Street, Suite 106, Richland, Washington 99354 at 11:00 a.m. local time on Wednesday, June 8, 2016.
The enclosed Notice
of Annual Meeting and Proxy Statement describe the formal business to be transacted at the Annual Meeting. During the Annual Meeting,
we will also report on the operations of the Company and its primary operating subsidiary, IsoRay Medical, Inc. Directors and officers
of the Company and a representative of the Company’s auditor are expected to be present to respond to appropriate questions
from shareholders.
Detailed information
concerning our activities and operating performance during the fiscal year ended June 30, 2015 is contained in our Annual Report
to Shareholders.
As we have done in
the past, this year, in accordance with U.S. Securities and Exchange Commission rules, we are using the Internet as our primary
means of furnishing proxy materials to shareholders. Consequently, most shareholders will not receive paper copies of our proxy
materials. We will instead send these shareholders a notice with instructions for accessing the proxy materials and voting via
the Internet. The notice also provides information on how shareholders may obtain paper copies of our proxy materials if they so
choose. We believe this procedure makes the proxy distribution process more efficient, less costly and helps in conserving natural
resources.
Whether or not you
expect to attend in person, we urge you to vote your shares as soon as possible. As an alternative to voting in person at the meeting,
you may vote via the Internet, by telephone or, if you receive a paper proxy card in the mail, by mailing the completed proxy card.
Voting by any of these methods will ensure your representation at the meeting and will help ensure the presence of a quorum at
the meeting.
Your vote is important.
Whether or not you are able to attend in person, it is important that your shares be represented at the Annual Meeting. Accordingly,
we ask that you
please vote over the Internet or by telephone at your earliest convenience,
or, if you receive a paper proxy
card and voting instructions by mail, that you complete, sign and date the proxy card and return it in the enclosed envelope (to
which no postage need be affixed if mailed in the United States) as soon as possible
.
If you do attend the Annual Meeting,
you may withdraw your proxy and vote personally on each matter brought before the meeting.
We look forward to
seeing you at the Annual Meeting.
If You Plan to Attend
Please note that
space limitations make it necessary to limit attendance to shareholders. Admission to the meeting will be on a first-come, first-served
basis. Shareholders holding stock in brokerage accounts (“street name” holders) will need to bring a copy of a brokerage
statement reflecting stock ownership as of the record date to enter the meeting. Cameras, recording devices and other electronic
equipment will not be permitted in the meeting.
Sincerely,
Tom LaVoy
CEO and Chairman of the Board
350 Hills Street, Suite 106
Richland, WA 99354
www.isoray.com
ISORAY, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TIME AND DATE
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11:00 a.m., local time, on Wednesday, June 8, 2016
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PLACE
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350 Hills Street, Suite 106, Richland, Washington 99354
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ITEMS OF BUSINESS
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1. To elect four directors to hold office until the Fiscal 2017 Annual Meeting of Shareholders;
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2. To approve the Company’s 2016 Equity Incentive Plan;
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3. To ratify the appointment of DeCoria, Maichel & Teague, P.S. as the independent registered public accounting firm of the Company for the fiscal year ending June 30, 2016; and
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4. To take action on any other business that may properly be considered at the Annual Meeting or any adjournment thereof.
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BOARD OF DIRECTORS RECOMMENDATION
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The Board of Directors recommends that you vote “
FOR
” the election of each nominee for the Board of Directors, and “
FOR
” Items 2 and 3.
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ADJOURNMENTS AND POSTPONEMENTS
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Any action on the items of business described above may be considered at the Annual Meeting at the time and on the date specified above or at any time and date to which the Annual Meeting may be properly adjourned or postponed.
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RECORD DATE
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You may vote at the Annual Meeting if you were a shareholder of record at the close of business on April 14, 2016. If your shares are held in an account at a brokerage firm, bank or similar organization, that organization is considered the record holder for purposes of voting at the Annual Meeting and will provide you with instructions on how you can direct that organization to vote your shares.
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INTERNET ACCESS TO PROXY MATERIALS
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Under rules adopted by the Securities and Exchange Commission, we are providing access to our 2016 Annual Meeting materials, which include the accompanying Proxy Statement and our June 30, 2015 Annual Report on Form 10-K, over the Internet in lieu of mailing printed copies. We will begin mailing, on or about April 29, 2016, a “Notice of Internet Availability of Proxy Materials” (which is different than this Notice of Annual Meeting of Stockholders) to our stockholders. The Notice of Internet Availability of Proxy Materials will contain instructions on how to access and review the 2016 Annual Meeting materials and vote online. The Notice of Internet Availability of Proxy Materials also will contain instructions on how you can request a printed copy of the 2016 Annual Meeting materials, including a proxy card if you are a record holder or a voting instruction form if you are a beneficial owner.
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VOTING
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Your vote is very important. Whether or not you plan to attend the Annual Meeting, we encourage you to read the accompanying Proxy Statement and our 2015 Annual Report on Form 10-K and vote as soon as possible. For specific instructions on how to vote your shares, please refer to the instructions in the Notice of Internet Availability of Proxy Materials and the section entitled “General Information About the Annual Meeting and Voting” beginning on page 1 of the accompanying Proxy Statement.
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ADMISSION
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Space limitations make it necessary to limit attendance at the Annual Meeting to shareholders. If your shares are held in an account at a brokerage firm, bank or similar organization and you wish to attend the Annual Meeting, you must obtain a letter from that brokerage firm, bank or similar organization confirming your beneficial ownership of the shares as of the record date and bring it to the Annual Meeting. Admission to the Annual Meeting will be on a first-come, first-served basis. Cameras and recording devices and other electronic equipment will not be permitted at the Annual Meeting.
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By Order of the Board of Directors,
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Krista Cline
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Secretary
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This Notice of Annual Meeting, Proxy Statement
and accompanying proxy card
are being distributed on or about April
29, 2016.
ISORAY, INC.
350 Hills Street, Suite 106
Richland, Washington 99354
____________________
PROXY STATEMENT
Annual Meeting of Shareholders
June 8, 2016
We are providing these
proxy materials in connection with the solicitation by the Board of Directors (the “
Board
”) of IsoRay, Inc.
of proxies to be voted at the Company’s Fiscal 2016 Annual Meeting of Shareholders to be held on June 8, 2016 (the
“Annual
Meeting”
), and at any adjournment or postponement of the Annual Meeting. These proxy materials were first sent on or
about April 29, 2016 to shareholders entitled to vote at the Annual Meeting.
GENERAL INFORMATION ABOUT THE ANNUAL
MEETING AND VOTING
Why am I receiving
these materials?
You are receiving a
proxy statement from us because you owned shares of our common or Series B preferred stock at the close of business on the April
14, 2016 record date for the Annual Meeting. This proxy statement describes matters on which we would like you, as a shareholder,
to vote. It also gives you information on these matters so that you can make an informed decision.
When you sign and return
the proxy card, you appoint Thomas LaVoy and Philip Vitale, and each of them individually, as your representatives at the meeting.
Thomas LaVoy and Philip Vitale will vote your shares at the meeting as you have instructed them. This way your shares will be voted
regardless of whether you attend the Annual Meeting. Even if you plan to attend the meeting, it is a good idea to complete, sign
and return the enclosed proxy card in advance of the meeting just in case your plans change. Returning the proxy card will not
affect your right to attend or vote at the Annual Meeting.
If a matter comes up
for vote at the Annual Meeting that is not described in this proxy statement or listed on the proxy card, Thomas LaVoy and Philip
Vitale will vote your shares, under your proxy, in their discretion. As of the date of this proxy statement, we do not expect that
any matters other than those described in this proxy statement will be voted upon at the Annual Meeting.
Will I be
receiving printed copies of the 2016 Annual Meeting materials?
You
will not receive printed copies unless you request them by following the instructions in the “Notice of Internet Availability
of Proxy Materials” (the “
Notice
”) that you will receive in the mail. The Notice is different than the
Notice of Annual Meeting of Stockholders that accompanies this Proxy Statement. We will begin mailing the Notice to stockholders
on or about April 29, 2016.
Under
rules adopted by the Securities and Exchange Commission (the “
SEC
”), we are providing access to our 2016 Annual
Meeting materials, which include this Proxy Statement and our Annual Report, over the Internet in lieu of mailing printed copies.
The Notice will contain instructions on how to access and review the 2016 Annual Meeting materials and vote online. This electronic
access process is designed to expedite shareholders’ receipt of materials, lower the cost of the Annual Meeting and help
conserve natural resources. The Company encourages you to take advantage of the availability of the proxy materials on the Internet.
The
Notice also will contain instructions on how you can request, at no cost, a printed copy of the 2016 Annual Meeting materials,
including a proxy card if you are a record holder or a voting instruction form if you are a beneficial owner. By following the
instructions in the Notice, you may request to receive, at no cost, a copy via e-mail of the 2016 Annual Meeting materials and
materials or future proxy solicitations. Your request to receive materials via e-mail will remain in effect until you terminate
it.
Can I mark my votes
on the Notice and send it back to the Company or my broker?
No. The
Notice is not a ballot. You cannot use it to vote your shares. If you mark your vote on the Notice and send it back to the Company
or your broker, your vote will not count.
How can I get electronic
access to the 2016 Annual Meeting materials?
The
Notice will provide you with instructions regarding how to view the 2016 Annual Meeting materials on the Internet.
This
Proxy Statement and our Annual Report are also available without charge on the Company’s website at
isoray.com
and
the SEC’s website at
sec.gov
. By referring to our website, we do not incorporate the website or any portion of the
website by reference into this Proxy Statement.
The
Notice will also contain instructions on how you can elect to receive future proxy materials electronically by e-mail. Choosing
to receive future proxy materials by e-mail will save the Company the cost of printing and mailing documents to you and will reduce
the impact of the Company’s annual meetings on the environment. If you choose to receive future proxy materials by e-mail,
you will receive an e-mail message next year with instructions containing a link to those materials and a link to the proxy voting
website. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.
Who may vote at
the Annual Meeting?
The Board has set April
14, 2016 as the record date for the Annual Meeting. If you were the owner of Company common or Series B preferred stock at the
close of business on April 14, 2016 (the “
record date
”), you may vote at the Annual Meeting. You are entitled
to one vote for each share of common or Series B preferred stock you held on the record date. If your shares are held in an account
at a brokerage firm, bank or similar organization, that organization is considered the record holder for purposes of voting at
the Annual Meeting and will provide you with instructions on how to direct that organization to vote your shares.
What proposals will be voted on at the
Annual Meeting?
Three proposals are
scheduled to be voted on at the Annual Meeting. The first is the election of four directors to hold office until the Fiscal 2017
Annual Meeting of Shareholders. The second is the approval of the 2016 Equity Incentive Plan. The third is the ratification of
the appointment by the Audit Committee of DeCoria, Maichel & Teague, P.S. as the Company’s independent registered public
accounting firm for the fiscal year ending June 30, 2016.
How many votes are required to approve
the proposals?
The presence, in person
or by proxy, of a majority of the outstanding shares of our common stock and Series B preferred stock voting together as one class
is necessary to constitute a quorum at the Annual Meeting. In counting the votes to determine whether a quorum exists at the Annual
Meeting, we will use the proposal receiving the greatest number of all votes “for” or “against” and abstentions
(including instructions to withhold authority to vote). As of April 14, 2016, there were 55,010,619 shares of common stock and
59,065 shares of Series B preferred stock outstanding.
In voting with regard
to the proposal to elect directors (
“Proposal 1”
), you may vote in favor of all nominees, withhold your vote
as to all nominees or vote in favor of or withhold your vote as to specific nominees. The vote required to approve Proposal 1 is
governed by Minnesota law and is a plurality of the votes cast by the holders of shares represented and entitled to vote at the
Annual Meeting, provided a quorum is present. As a result, in accordance with Minnesota law, votes that are withheld will be counted
in determining whether a quorum is present but will have no other effect on the election of directors.
In voting with regard
to the proposal to ratify the 2016 Equity Incentive Plan (“
Proposal 2
”) and with regard to the proposal to adopt
the Audit Committee’s appointment of the independent registered public accounting firm (“
Proposal 3
”),
the vote required to approve Proposals 2 and 3 is governed by Minnesota law and is the affirmative vote of the holders of a majority
of the shares represented and entitled to vote at the Annual Meeting, provided a quorum is present. As a result, abstentions will
be considered in determining whether a quorum is present and the number of votes required obtaining the necessary majority vote
and therefore will have the same legal effect as voting against Proposals 2 and 3.
Because your vote on
Proposal 3 is advisory, it will not be binding on the Board or the Company. However, the Board and the Audit Committee will consider
the outcome of the advisory vote when making future decisions regarding the selection of our independent registered public accounting
firm.
You may either vote
“FOR”, “AGAINST” or “ABSTAIN” on Proposals 2 and 3, and “FOR” or “WITHHOLD”
authority to vote for each nominee for the Board. If you withhold authority to vote for the election of directors, your shares
will not be voted with respect to the director or directors identified. If you sign and submit your proxy card without voting instructions,
your shares will be voted “FOR” Proposals 2 and 3 and “FOR” all director nominees.
Under the rules of
the New York Stock Exchange (the
“Exchange”
) that govern most domestic stock brokerage firms, member firms that
hold shares in street name for beneficial owners may, to the extent that such beneficial owners do not furnish voting instructions
with respect to any or all proposals submitted for shareholder action, vote in their discretion upon proposals which are considered
“discretionary” proposals under the rules of the Exchange. These votes by brokerage firms are considered as votes cast
in determining the outcome of any discretionary proposal. Member brokerage firms that have received no instructions from their
clients as to “non-discretionary” proposals do not have discretion to vote on these proposals. If the brokerage firm
returns a proxy card without voting on a non-discretionary proposal because it received no instructions, this is referred to as
a “broker non-vote” on the proposal. “Broker non-votes” are considered in determining whether a quorum
exists at the Annual Meeting, but are not considered as votes cast in determining the outcome of any proposal. We believe that
Proposal 3 is the only discretionary proposal.
In summary, if you
do not vote your proxy, your brokerage firm or other nominee may either:
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vote your shares on routine matters (Proposal 3) and cast a “broker non-vote” on non-routine
matters (Proposals 1 and 2); or
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leave your shares unvoted altogether.
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We encourage you to
provide instructions to your brokerage firm or other nominee by voting your proxy. This action ensures that your shares will be
voted in accordance with your wishes at the Annual Meeting.
As of April 14, 2016,
our directors and executive officers held or controlled approximately 185,523 shares of our common stock, constituting approximately
0.34% of the outstanding common stock. As of April 14, 2016, our directors and executive officers did not hold or control any shares
of our preferred stock. We believe that these holders will vote all of their shares of common stock in accordance with the Board’s
recommendations on each of the proposals.
How does the Board recommend that I
vote?
The Board recommends
that you vote your shares “FOR” Proposals 2 and 3 and all of the director nominees.
Can my shares be
voted on matters other than those described in this Proxy Statement?
Only under
limited circumstances. We have not received proper notice of, and are not aware of, any business to be transacted at the Annual
Meeting other than as indicated in this Proxy Statement. If any other item or proposal properly comes before the meeting, the proxies
received will be voted on those matters in accordance with the discretion of the proxy holders.
How do I vote my shares without attending
the Annual Meeting?
Shareholders of record
can vote as follows:
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Via the Internet:
Shareholders may vote through the Internet by following the instructions included with your Notice Regarding the Availability of Proxy Materials.
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By Telephone:
Shareholders may vote by telephone by following the instructions included with your Notice Regarding the Availability of Proxy Materials.
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By Mail:
Those shareholders who receive a paper proxy card in the mail may sign, date and return their proxy cards in the pre-addressed, postage-paid envelope that is provided with the mailed proxy materials. If you have misplaced your return envelope or need to return a proxy card from outside the United States, you may mail your proxy card to the address listed on the proxy card.
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At the Meeting:
If you attend the Annual Meeting, you may vote in person by ballot, even if you have previously returned a proxy card or otherwise voted.
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If your shares are
held in “street name” through a broker, bank or other nominee, that institution will send you separate instructions
describing the procedure for voting your shares. Please follow the directions you are given carefully so your vote is counted.
“Street name” shareholders who wish to vote in person at the Annual Meeting will need to obtain a proxy form from the
institution that holds your shares and present it to the inspector of elections with your ballot.
How do I vote my shares in person at
the Annual Meeting?
If you are a shareholder
of record and prefer to vote your shares at the Annual Meeting, you should bring the enclosed proxy card or proof of identification
to the Annual Meeting. You may vote shares held in street name at the Annual Meeting only if you obtain a signed proxy from the
record holder (broker or other nominee) giving you the right to vote the shares.
Even if you plan
to attend the Annual Meeting, we encourage you to vote in advance by Internet, telephone or proxy card so your vote will be counted
even if you later decide not to attend the Annual Meeting.
May shareholders ask questions at the
Annual Meeting?
Yes. Representatives
of the Company will answer a limited number of shareholders’ questions of general interest at the end of the Annual Meeting.
In order to give a greater number of shareholders an opportunity to ask questions, individuals or groups will be allowed to ask
only one question and no repetitive or follow-up questions will be permitted.
What does it mean if I receive more
than one proxy card?
It generally means
you hold shares registered in more than one account. To ensure that all your shares are voted, sign and return each proxy card.
May I change my vote?
Yes. If you vote by
mail, Internet or telephone, you may later change your vote and revoke your proxy card by:
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Sending a written statement to that effect to the Secretary of the Company that is received before
the commencement of the Annual Meeting on June 8, 2016;
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Voting again via the Internet or telephone;
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Submitting a properly signed proxy card with a later date;
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Voting in person at the Annual Meeting; or
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If you hold shares through a bank or brokerage firm, by contacting your financial institution and
following its procedure to revoke your prior voting instructions.
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Where can I find the voting results
of the meeting?
We will announce preliminary
voting results at the Annual Meeting. We will publish the final results in a report on Form 8-K that we will file with the SEC
shortly after the Annual Meeting.
PROPOSAL 1 – ELECTION OF DIRECTORS
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Nominees
Our Board currently
consists of four members. The Board of Directors oversees our business affairs and monitors the performance of management. In accordance
with basic principles of corporate governance, the Board does not involve itself in day-to-day operations. The directors keep themselves
informed through discussions with the Chairman, key executive officers and our principal external advisers (legal counsel, auditors,
and other professionals), by reading reports and other materials that are sent to them and by participating in Board and committee
meetings.
The Board, on the recommendation
of the Nominations and Corporate Governance Committee, has nominated the following four existing members of the Board for re-election
to the Board at the Fiscal 2016 Annual Meeting: Thomas C. LaVoy, Philip J. Vitale, M.D., Michael W. McCormick and Alan Hoffmann.
If elected as a director at the Annual Meeting, each of the nominees would serve a one-year term expiring at the Fiscal 2017 Annual
Meeting of Shareholders and until his successor has been duly elected and qualified. There are no family relationships among our
directors, nominees for director or our executive officers.
Each of the nominees
has consented to serve as a director if elected. If any of the nominees should be unavailable to serve for any reason, the Board,
upon the recommendation of the Nominations and Corporate Governance Committee, may designate a substitute nominee or nominees (in
which event the persons named on the enclosed proxy card will vote the shares represented by all valid proxy cards for the election
of such substitute nominee or nominees), allow the vacancies to remain open until a suitable candidate or candidates are located,
or by resolution provide for a lesser number of directors.
The Board unanimously
recommends that the shareholders vote “FOR” Proposal 1 to elect Thomas C. LaVoy, Philip J. Vitale, M.D., Michael
W. McCormick and Alan Hoffmann as directors for a one year term expiring at the Fiscal 2017 Annual Meeting of Shareholders and
until their successors have been duly elected and qualified.
Directors
Set forth below is
certain information as of April 14, 2016 regarding our current directors that have been nominated for re-election, including biographical
information.
Mr. LaVoy took office
in July 2005 and began service as Chairman on January 7, 2016, Dr. Vitale took office in January 2014, Mr. McCormick took office
in June 2015 and Mr. Hoffmann took office in January 2016.
Name
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Age
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Position Held
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Term
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Thomas LaVoy
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56
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Chairman, Chief
Executive Officer
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Annual
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Philip J. Vitale
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70
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Director
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Annual
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Michael W. McCormick
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53
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Director
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Annual
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Alan Hoffmann
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55
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Director
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Annual
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Thomas LaVoy –
Mr. LaVoy has been a Director of the Company since 2005 and served as Chair of the Audit Committee until his resignation from the
Audit Committee Chair position and all other Board committees effective January 13, 2016. He was appointed Chairman of the IsoRay
Board effective January 7, 2016 and took office as Chief Executive Officer of the Company on February 15, 2016. Mr. LaVoy served
as Deputy Chief Operations Officer and President of Corporate Services of Veolia Transportation on Demand (VTOD), the parent company
of SuperShuttle International Inc. and its subsidiaries, from January 2014 to February 2016. He concurrently served as Chief Financial
Officer of SuperShuttle International, Inc. and its subsidiaries from July 1997 and as Secretary from March 1998, resigning from
both positions in February 2016. VTOD through SuperShuttle is the largest shuttle transportation company in the US in addition
to operating bus and cab services throughout the US. He has also served as a director of Alanco Technologies, Inc. (OTCBB: ALAN)
since 1998 and served on its audit committee from 2012 to 2015. From September 1987 to February 1997, Mr. LaVoy served as Chief
Financial Officer of NASDAQ-listed Photocomm, Inc. Mr. LaVoy was a Certified Public Accountant with the firm of KPMG Peat Marwick
from 1980 to 1983. Mr. LaVoy has a Bachelor of Science degree in Accounting from St. Cloud University, Minnesota, and is a Certified
Public Accountant (Inactive) in the State of Minnesota. Mr. LaVoy brings over 25 years of CFO experience for progressively growing
companies in multiple industries to his service on the Company’s Board.
Philip Vitale, MD
– Dr. Vitale has been a Director of the Company since 2014 and is a board certified urologist. He practiced Urology from
1978 to 2005 at Lovelace Health Systems in Albuquerque. He also served on the Board of Governors for 9 years and held various administrative
positions including Chief Medical Officer and Senior Vice President at Lovelace. He was a staff urologist at Albuquerque VA Medical
Center from 2005 until his retirement in November 2014. He served as Chief of the Urology section from 2008 to November 2013. Dr.
Vitale was also an Assistant Professor at the University of New Mexico, Division of Urology. He is a member of the American Urological
Association and the South Central Section of the American Urological Association. Prior to his retirement, Dr. Vitale’s clinical
trials included: chemotherapy after prostatectomy (cap); a phase III randomized study for high risk prostate carcinoma; RTOG 0415
a phase III randomized study of hypofractionated 3d-crt/IMRT versus conventionally fractionated 3d-crt/IMRT in patients with favorable-risk
prostate cancer; RTOG 0815 a phase III prospective randomized trial of dose-escalated radiotherapy with or without short-term androgen
deprivation therapy for patients with intermediate-risk prostate cancer; and YP19A1 gene and pharmacogenetics of response to testosterone
therapy. Dr. Vitale holds a B.A. in Biology from LaSalle College and obtained his M.D. from the New Jersey College of Medicine
and Dentistry. He received his M.S. in Health Services Administration from the College of St. Francis. Dr. Vitale brings to the
Board medical expertise in the industries the Company is targeting.
Michael McCormick
– Mr. McCormick has been a Director of the Company since 2015 and brings over 25 years of senior executive positions in global
management, sales, and marketing to the Company. He is currently the CEO of Glukos, one of the fastest growing food energy products
in the U.S. He also serves as a founder and partner of GO Intellectual Capital, an advisory firm specializing in medical, aviation,
and financial services. GO Intellectual Capital recently provided consulting services to DJO Global, a medical device and services
company, to expand its product assortment, add new channels of distribution, and market new category opportunities. Previous to
his service with Glukos and GO, Mr. McCormick served as Executive Vice President of Global Sales and Marketing for Columbia Sportswear
from 2006-2012, where his team successfully launched several new patented technologies, including Omni-Heat® Reflective and
Omni-Freeze® Zero. During Mr. McCormick’s tenure, Columbia built an intellectual property portfolio with over 200 patents.
Mr. McCormick started his career with Nike, working in several senior management roles and ultimately becoming the Director of
National Sales, US, prior to his departure in 1999. He also served as Chief Marketing Officer of Golf Galaxy from 2003-2006 and
Executive Vice President of Global Sales and Marketing of Callaway Golf from 2000-2003. Mr. McCormick brings over 25 years of marketing
experience in a diverse group of industries to his service on the Company’s Board.
Alan Hoffmann - Mr.
Hoffmann has been a Director of the Company since January 2016. He brings over 26 years of public accounting experience to the
Company and the Board. He is the owner of Alan Hoffmann, CPA, PC, a certified public accounting firm he founded in 1996. The firm
performs audits and reviews of private companies. In addition, Mr. Hoffmann currently serves as CFO for Cognitive Research Corporation,
a privately-held, full-service contract research organization that specializes in central nervous system product development for
pharmaceutical, nutraceutical, biotechnology and medical device companies. In 2011, he served as CFO for an international manufacturing
company, Kinematics Manufacturing, Inc. His prior employment included Price Waterhouse from 1985-1989, where he held multiple positions
including Senior Tax Analyst, and Tax Manager from 1989-1996 in public accounting. After receiving his undergraduate accounting
degree with honors from the University of Wisconsin-Milwaukee in 1985, he became a Certified Public Accountant in 1989. He also
served in the United States Marine Corps and was honorably discharged in 1985.
Board Leadership Structure
Our CEO also serves
as Chairman of our Board of Directors. The Board has determined that this structure is appropriate because it believes that at
this time it is optimal to have one person speak for and lead the Company and the Board, and that the CEO should be that person.
We believe that the strength of our independent directors and our overall governance practices minimize any potential conflicts
that otherwise could result from combining the positions of Chairman and CEO.
Risk Oversight
Management is responsible
for the day-to-day management of the risks we face, while the Board, as a whole and through its committees, has responsibility
for the oversight of risk management. The Board as a whole exercises its oversight responsibilities with respect to strategic,
operational and competitive risks, as well as risks related to crisis management and executive succession issues. The Board has
delegated oversight of certain other types of risks to its committees. The Audit Committee oversees our policies and processes
relating to our financial statements and financial reporting, risks relating to our capital, credit and liquidity status, and risks
related to related person transactions. The Compensation Committee oversees risks related to our compensation programs and structure,
including our ability to motivate and retain talented executives. The Nominations and Corporate Governance Committee oversees risks
related to our governance structure and succession planning for Board membership.
In addition, our Compensation
Committee has reviewed risks related to our compensation programs and structure, and has determined that the Company’s compensation
policies and practices do not encourage excessive or unnecessary risk taking reasonably likely to result in a material adverse
effect on the Company.
We believe that our
Board leadership structure as discussed above promotes effective oversight of the Company’s risk management for the same
reasons that we believe the structure is most effective for the Company in general, namely, by providing unified leadership through
a single person, while allowing for input from our independent directors, all of whom are fully engaged in Board deliberations
and decisions.
Board Committees and Meetings
During the fiscal year
ended June 30, 2015, the Board held four regularly scheduled and special meetings and took action by written consent three times.
The Board has an Audit Committee, a Compensation Committee and a Nominations and Corporate Governance Committee.
Audit Committee.
The Audit Committee is responsible to the Board for the areas of audit and compliance and oversees the Company’s financial
reporting process, including monitoring the integrity of the financial statements and the independence and performance of the auditors
and supervises the Company’s compliance with legal and regulatory requirements. The Committee operates under a charter approved
by the Board. The Committee’s Charter as approved by the Board was attached as Appendix A to the Proxy Statement for the
Annual Meeting held in February 2015. The current members of the Audit Committee are Mr. Hoffmann (Chairman), Dr. Vitale and Mr.
McCormick. The Board has determined that Mr. Hoffmann is an “audit committee financial expert” as defined under SEC
rules. The Board has affirmatively determined that none of the members of the Audit Commitee have a material relationship with
the Company that would interfere with the exercise of independent judgment and each of the members of the Audit Committee are “independent”
as independence is defined in Section 121(A) of the listing standards of the NYSE MKT and Rule 10A-3 under the Securities
Exchange Act of 1934, as amended.
Compensation Committee.
The Compensation Committee is responsible for establishing and reviewing the compensation and employee benefit policies of
the Company. The members of the Compensation Committee are Dr. Vitale (Chairman), Mr. McCormick and Mr. Hoffmann, each of whom
are “independent” directors within the meaning of SEC rules and NYSE MKT listing standards. The Committee operates
under a charter approved by the Board. The Committee’s Charter as approved by the Board was attached as Appendix A to the
Proxy Statement for the Annual Meeting held in March 2014. The Compensation Committee reviews and recommends to the Board for approval
the compensation for the Company’s Chief Executive Officer and all of its other executive officers, including salaries, bonuses
and grants of awards under, and administration of, the Company’s equity incentive plans. The Compensation Committee, among
other things, reviews the candidates that the CEO recommends to the Board to whom awards will be made under the Company’s
equity incentive plans, determines the number of options to be awarded, and the time, manner of exercise and other terms of the
awards. Although the Committee’s charter authorizes the committee to retain an independent consultant, no third party compensation
consultant was engaged for fiscal year 2015. The Chief Executive Officer provides input to the Compensation Committee
with respect to the individual performance and compensation recommendations for all executive officers and employees.
Nominations Committee.
The Nominations and Corporate Governance Committee consists of three directors who have each been determined to be “independent”
as defined by applicable SEC rules and NYSE MKT listing standards. Mr. McCormick (Chairman), Dr. Vitale and Mr. Hoffmann currently
serve on the Nominations and Corporate Governance Committee. The Committee identifies and solicits recommendations from management
of qualified individuals as prospective Board members. The Committee also recommends the director nominees to the Board for election
at the annual meeting of shareholders. The Committee oversees the annual review and evaluation of the performance of the Board
and its committees, and develops and recommends corporate governance guidelines to the Board. In addition, the Committee examines,
evaluates, and monitors the independence of directors for general Board positions as well as for specific committee duties, and
evaluates specific qualifications for members serving as audit committee financial experts. The Committee’s charter as approved
by the Board was attached as Appendix B to the Proxy Statement for the Annual Meeting held in February 2015.
The Board and its committees
may retain outside advisors as they determine necessary to fulfill their responsibilities. All committees report their activities
to the full Board. Each committee charter is posted on the IsoRay website – www.isoray.com.
Each current Board
member attended at least 75% of the aggregate meetings of the Board and of the Committees on which he served that were held during
the period for which he was a Board or Committee member in the Company’s fiscal year ended June 30, 2015.
The following table
summarizes the membership of the Board and each of its committees as of the date of this proxy statement, as well as the number
of times each committee met or took action by written consent during the fiscal year ended June 30, 2015.
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Board
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Audit
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|
Compensation
|
|
Nominations
|
Thomas LaVoy
|
|
Chair
|
|
|
|
|
|
|
Philip Vitale, M.D.
|
|
Member
|
|
Member
|
|
Chair
|
|
Member
|
Michael McCormick
|
|
Member
|
|
Member
|
|
Member
|
|
Chair
|
Alan Hoffmann
|
|
Member
|
|
Chair
|
|
Member
|
|
Member
|
Number of Meetings Held and Consents Taken in Fiscal 2015
|
|
7
|
|
4
|
|
2
|
|
2
|
Executive Sessions
Pursuant
to the listing standards of the NYSE MKT, the independent directors are required to meet at least annually in executive sessions.
During fiscal 2015, the Board held one executive session.
Report of the Audit Committee of the
Board of Directors
The Audit Committee
consists of three outside directors, each of whom has been determined to be financially literate and meets the independence standards
for members of public company audit committees set forth in SEC rules adopted under the Sarbanes-Oxley Act of 2002 and applicable
NYSE MKT listing standards. The Committee operates under a written charter adopted by the Board. Committee members are independent
directors Alan Hoffmann (Chair) who took office in January 2016, Philip J. Vitale, M.D. and Michael W. McCormick. Mr. Hoffmann
has been determined to be qualified as an “audit committee financial expert” as defined in Item 407 of Regulation S-K.
Management is responsible
for the Company’s internal controls and the financial reporting process. The independent registered public accounting firm
is responsible for performing an independent audit of the Company’s consolidated financial statements and internal control
over financial reporting in accordance with generally accepted auditing standards and issuing a report thereon. The Committee’s
responsibility is to monitor and oversee these processes.
The Committee provides
assistance to the Board in fulfilling its oversight responsibilities relating to corporate accounting and reporting practices of
the Company toward assurance of the quality and integrity of its consolidated financial statements. The purpose of the Committee
is to serve as an independent and objective party to monitor the Company’s financial reporting process and internal control
system; oversee, review and appraise the audit activities of the Company’s independent auditors and internal auditing function;
and maintain complete, objective and open communication between the Board, the independent accountants, financial management, and
the internal audit function. The Audit Committee met four times during the 2015 fiscal year.
The Company’s
independent auditor reports directly to the Committee. The Audit Committee is solely responsible to appoint or replace the Company’s
independent auditor, and to assure the auditor’s independence and to provide oversight and supervision thereof. The Committee
determines compensation of the independent auditor and has established a policy for approval of non-audit related engagements awarded
to the independent auditor. Such engagements must not impair the independence of the auditor with respect to the Company, as prescribed
by the Sarbanes-Oxley Act of 2002; thus payment amounts are limited and non-audit related engagements must be approved in advance
by the Committee. The Committee determines the extent of funding that the Company must provide to the Committee to carry out its
duties, and has determined that such amounts were sufficient in fiscal 2015.
With respect to
the fiscal year ended June 30, 2015, in addition to its other work, the Committee:
|
·
|
Reviewed and discussed with management the audited consolidated financial statements of the Company
as of June 30, 2015 and the year then ended;
|
|
·
|
Discussed with DeCoria, Maichel & Teague, P.S. the matters required to be discussed by Auditing
Standards No. 16, “Communications and Audit Committees” as adopted by the Public Company Accounting Oversight Board
(the “
PCAOB
”); and
|
|
·
|
Received from DeCoria, Maichel & Teague, P.S. the written disclosures and the letter required
by the applicable requirements of the Public Company Accounting Oversight Board regarding its communications with the Audit Committee
concerning independence. In addition, discussed with the auditors the firm’s independence and determined that independence
had been maintained.
|
The Committee recommended,
based on the review and discussion summarized above, that the Board include the audited consolidated financial statements in the
Company’s Annual Report on Form 10-K for the year ended June 30, 2015 for filing with the SEC.
|
AUDIT COMMITTEE
|
|
Thomas LaVoy, Former Chair (Until January 2016)
|
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Philip J. Vitale, M.D.
|
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Michael W. McCormick
|
The foregoing report
of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into
any other Company filing under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except
to the extent the Company specifically incorporates this report by reference therein.
Nomination Process
The Nominations and
Corporate Governance Committee is the nominating committee of the Board. The Committee is governed by the Company’s Articles
of Incorporation and Bylaws with respect to the nominations process. The Committee is responsible for recommending nominees for
nomination by the Board for election to the Board. The Committee will consider nominations from shareholders, provided that such
nominations are received by the Company’s Secretary in accordance with the Articles of Incorporation, the Bylaws, and the
date set in the prior year’s proxy statement.
The Committee will
perform the following duties with respect to director nominations: (a) consider the criteria for identifying and recommending individuals
who may be nominated for election to the Board; (b) provide a recommendation to the Board of the slate of nominees for election
to the Board; (c) as the need arises, make recommendations to fill vacancies and actively seek individuals qualified to become
Board members; and (d) consider shareholder nominations for the Board when properly submitted in accordance with the Company’s
Articles of Incorporation and Bylaws.
The Committee will
consider candidates for the Board who are recommended by its members, other Board members, shareholders and management, as well
as those identified by any third party search firm the Company may retain to assist in identifying and evaluating possible candidates.
The Committee evaluates candidates recommended by shareholders in the same manner that it evaluates other candidates. The Committee’s
evaluations will be based upon several criteria, including the candidate’s broad-based business and professional skills and
experiences; commitment to representing the long-term interests of shareholders; an inquisitive and objective perspective; the
willingness to take appropriate risks; leadership ability; personal and professional ethics; personal integrity and judgment; and
practical wisdom and sound judgment. Candidates should have reputations, both personal and professional, consistent with the Company’s
image and reputation.
At a minimum, the majority
of directors on the Board should be “independent,” not only as that term may be legally defined, but also without the
appearance of any conflict in serving as a director. In addition, directors must have time available to devote to Board activities
and to enhance their knowledge of the medical isotope industry. Accordingly, the Committee seeks to attract and retain highly qualified
directors who have sufficient time to attend to their substantial duties and responsibilities to the Company. The Company does
not have a formal policy related to consideration of diversity in identifying director nominees.
The Committee will
utilize the following process for identifying and evaluating nominees to the Board. In the case of incumbent directors whose terms
of office are set to expire, the Committee will review such directors’ overall service to the Company during their term,
including the number of meetings attended, level of participation and quality of performance. In the case of new director candidates,
the members of the Committee will be polled for suggestions as to potential candidates that may meet the criteria above, discuss
candidates suggested by Company shareholders and may also engage, if the Committee deems appropriate, a professional search firm.
The Committee will then meet to discuss and consider these candidates’ qualifications and then choose a candidate to recommend
by majority vote. To date, the Board and the Committee have not engaged professional search firms to identify or evaluate potential
nominees but may do so in the future, if necessary.
Compensation Discussion & Analysis
Note that the discussion
below speaks as of the filing date of the Company’s Form 10-K for the fiscal year ended June 30, 2015, and does not reflect
the changes to the Company’s Board of Directors and executive officers that occurred after that date. Furthermore, many of
the policies implemented in fiscal 2015 have now changed in fiscal 2016, including but not limited to the following:
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We have entered into employment agreements with our new CEO and other employees, and believed
it was necessary to do so to attract qualified individuals to join the Company; and
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·
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Our discretionary option grants available to the CEO are no longer based on the success of oversight of investment banks
or others in the capital raising business or in cutting costs, but instead are based on increasing revenues.
|
A full discussion
of the new policies as further developed throughout the end of fiscal 2016 will be disclosed in the proxy statement and Form 10-K
circulated after the close of fiscal 2016.
Overview of Our Compensation Process
We design our named
executive officer compensation programs to attract, motivate and retain the key executives who drive our success and help us maintain
a strong position in our industry. We are committed to industry standards for the region in which we operate for base pay, and
equity payable to our named executive officers based on our ability to raise capital and cut costs. In addition, we design our
named executive compensation to encourage long-term commitment by our named executive officers to IsoRay.
Please read the “Executive
Compensation” section of this proxy statement, beginning on page 23. That section of the proxy statement, which includes
our named executive officer compensation tables and related narrative discussion, provides historical details on our compensation
programs and policies for our named executive officers. The executive officers named in the summary compensation table and deemed
to be a “named executive officer” are Dwight Babcock, Brien Ragle, and William Cavanagh.
The compensation paid
to the Company’s named executive officers is intended to align their interests with the long term interests of the Company’s
shareholders and is based on a pay-for-performance philosophy. It is straightforward, consisting principally of salary, which must
be competitive to retain the skills and experience of excellent employees, and equity compensation to encourage long term commitment
and team performance. Not all elements of our compensation package may be provided every year, depending on the performance of
the Company and the executive.
Highlights of our named
executive officer compensation programs and policies are as follows:
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·
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We generally do not enter into employment agreements with our named
executive officers,
which results in a lack of severance pay obligations, lack of change in control payments, and the ability
of the Board and the CEO to dismiss named executive officers at will, all of which the Board believes ultimately can save the Company
ongoing severance obligations and encourage performance by the named executive officers.
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·
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The discretionary option grants available to our CEO are linked to the success of the Company in
overseeing and selecting investment banking firms in raising capital and reducing costs.
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The compensation of our named executive officers is not linked to the performance of the Company,
except for discretionary bonuses and option grants, but is instead based on our ability to obtain executives with the experience
necessary and willingness to work for a company located in a small community with limited access to a major metropolitan center.
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·
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The compensation of our CFO is less than the industry norm for a CFO, as our CFO does not have
past CFO experience.
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We provide named executive officers with long-term incentives in the form of stock options. These
equity-based awards, which generally vest over a period of three years (except for grants to our CEO which vest immediately), link
compensation with the long-term price performance of our stock, and also provide a substantial retention incentive.
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·
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We do not provide perquisites to our named executive officers.
|
Company Background
Historically, our revenue
has been difficult to predict and we have not shown a profit for any quarter since the inception of our Company. When the entire
prostate cancer brachytherapy industry began to experience annual deceases in demand, our business also suffered declines. These
declines were exacerbated by the emergence of alternative radiation therapies which provided greater remuneration to the physician
than our brachytherapy solution.
Our CEO, with the assistance
of our management team, had the foresight to expand the use of the Company’s products to also include treating brain, gynecologic,
lung and other cancers with our brachytherapy products. These non-prostate treatments required significant capital for research
and development, protocols and studies. Acceptance by medical professionals unfamiliar with our products is a long term process.
As a consequence of
the combination of (i) a decline in the prostate market due to macro-economic factors; and (ii) the need to deploy significant
resources in non-prostate applications, our compensation programs have not been structured to award pay increases, bonuses, or
stock options based on revenues or profits. Instead, our compensation has rewarded capital raises and cutting costs. Capital is
critical to fund new applications. Cost cutting is important as we face a declining prostate market.
This Compensation Discussion
and Analysis describes our compensation objectives, our executive compensation process and our policies and actions with respect
to each compensation element. We describe the rationale for compensation decisions made in fiscal year 2015 with respect to our
Chief Executive Officer, our Chief Financial Officer and our Vice-President of Research and Development, whom we refer to as our
named executive officers or NEOs.
Our Executive Compensation Program
Program
Objectives.
We design our executive compensation program to achieve the following objectives:
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Motivate and reward executives whose knowledge, skills and performance are essential to our success;
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Align the performance of our executives and the interests of our shareholders;
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·
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Recruit and retain executive talent; and
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Support the corporate business strategy by rewarding cost control
measures and capital raising results.
|
Compensation
Process.
The Compensation Committee of our Board has the primary responsibility for determining compensation of our executives.
Our Board has determined that each member of our Compensation Committee is
“independent” as that term is defined
by applicable NYSE MKT rules, is an “outside director” as defined in Section 162(m) of the Internal Revenue Code,
or the Code, and a “non-employee” director as defined under Section 16 of the Exchange Act.
Our
Compensation Committee determines all compensation matters for our named executive officers, including
base salary, bonuses,
and equity compensation. Utilizing input from our Chief Executive Officer, the Compensation Committee makes an independent decision
on compensation for each executive other than the CEO. The Compensation Committee also primarily relies on the judgment of the
Chief Executive Officer in making compensation determinations of our non-executive staff. The primary goal of our Compensation
Committee is to closely align the interests of our named executive officers and staff with those of our shareholders. The Compensation
Committee assesses performance on a number of subjective and objective factors.
In making decisions
regarding executive compensation, our Compensation Committee considers, among other things:
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·
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Past compensation levels of each executive and the executives as a group;
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·
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Consistency of current compensation with previous compensation decisions and benchmarks;
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Existing levels of stock and stock option ownership among our executives, previous stock option
grants and vesting schedules to ensure executive retention and alignment with shareholder interests;
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Management recommendations;
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·
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General trends in executive compensation; and
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Meeting ongoing cost control and capital raise objectives.
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The Compensation Committee
conducts an annual review of the Chief Executive Officer’s performance and reports its evaluation to the Board. The Board
reviews the Compensation Committee’s evaluation and recommendation and also evaluates the Chief Executive Officer’s
performance according to the goals and objectives established periodically by the full Board. This review serves as the basis for
the recommendation of the Compensation Committee on Chief Executive Officer compensation.
The Compensation Committee
did not engage an independent compensation consultant to evaluate executive compensation. It did not survey healthcare industry
data or complete a peer group comparison.
Compensation Components.
Our executive
compensation primarily consists of base salary, bonuses and long-term equity-based compensation.
The factors our Compensation
Committee considered for each of our executives in fiscal 2015 included:
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Overall corporate performance during fiscal 2015 in achieving certain non-financial milestones;
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The roles and responsibilities of our executives in helping the Company meet these milestones;
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The additional roles and responsibilities of our executives;
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The individual experience and skills of our executives;
and
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The location of the Company in a small city and the fact that we are a much smaller company than
any of our competitors.
|
We have an executive
compensation philosophy and goals based on attracting, retaining and rewarding our executive officers. In addition, we believe
that executive compensation should be linked to corporate performance and accomplishments that increase shareholder value. As such,
our executive compensation policy focuses on aligning the interests of our executive officers with the long-term interests of our
shareholders and with our corporate strategies and goals.
Base salaries of executive
officers are reviewed and approved annually by our Compensation Committee and adjustments are made based on (i) salary recommendations
from our Chief Executive Officer, (ii) individual performance of executive officers for the previous fiscal year, and (iii) historical
pay. In addition, in establishing the total compensation package for our Chief Executive Officer, the Compensation Committee pursues
the same objectives and policies that apply for our other executive officers.
Base Salary
Base salary reflects
job responsibilities, value to us and individual performance, taking into consideration the need to attract and retain our executives.
We determine salaries for our named executive officers initially by reference to each executive’s previous year’s salary.
The Compensation Committee determines any increase over these salaries based upon recommendations of our Chief Executive Officer,
except in the case of the Chief Executive Officer’s own compensation. The Compensation Committee generally reviews base salaries
of our executives annually and adjusts salaries from time to time to realign salaries with perceived market increases and individual
performance.
Achievement of individual
and corporate accomplishments along with the executive officer’s level of responsibility, competitive factors and our internal
policies regarding salary increases were considered regarding fiscal 2015 salary increases.
Merit-based salary
increases for fiscal 2015 were two and one-half percent (2.5%) for Dwight Babcock, Brien Ragle and William Cavanagh. In June 2015,
we set the annual base salary for fiscal 2016 for Dwight Babcock, our President and Chief Executive Officer, at $301,000, for Brien
Ragle, our Chief Financial Officer, at $130,000, and for William Cavanagh, our Vice President of Research and Development, at
$
163,116.
Performance-Based Annual Bonus
We provide for an annual
cash incentive that reinforces our pay-for-performance approach. This incentive compensation is a short-term incentive program
that rewards achievement. Annual incentive awards are awarded at the sole determination of the Compensation Committee (on behalf
of the Board) based on the actual and measurable performance of the Company based on a set of corporate objectives for the previous
year.
This past year we did
not award any cash incentives and bonuses. Instead, the Compensation Committee requested the CEO to provide some suggested objective
quarterly performance goals so that a bonus plan could be structured. The Compensation Committee now believes that the Company
has finally reached the stage where it can base bonuses on revenue increases. Effective for the quarter ending September 30, 2015,
each named officer will earn a quarterly bonus of three percent (3%) of their annual base salary for a fifteen percent (15%) or
greater increase in revenue from the prior fiscal year’s comparable quarter. Also, effective for the year ending June 30,
2016, each named officer will earn a bonus of three percent (3%) of their annual base salary for a fifteen percent (15%) or greater
increase in revenue over the prior fiscal year. The Compensation Committee will closely monitor the results of this incentive plan
this year to determine if it provides a better incentive than the subjective bonuses paid historically from time to time.
Fiscal 2014 and 2015
accomplishments taken into account by the Compensation Committee to determine overall corporate performance included the following:
1.
|
Maintained controls over expenses.
|
2.
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Achieved annual revenue growth.
|
3.
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Received FDA clearance for our liquid Cesium-131.
|
4.
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Performed the first GliaSite case utilizing Cs-131.
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5.
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Selected for the Russell Microcap Index.
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6.
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First patient ever was implanted with Cs-131 combined with the C-4 spacer.
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7.
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First veterinary case performed on a horse.
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8.
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Several first ever peer reviewed publications were issued.
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9.
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2 new focal prostate studies initiated (Moran and UPMC).
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10.
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Established new Italian distributor.
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11.
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Received Greek license to ship products.
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12.
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Introduced Cs-131 in Russia in new cancer medical center grand opening.
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13.
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CE Mark audit completed with no warnings.
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14.
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Upgraded manufacturing and enterprise systems with redundancy.
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15.
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Participated in 6 industry shows.
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Long-Term Equity-Based Incentive Compensation
Our long-term incentive
program provides an annual award, with the potential for periodic awards, which is performance based. The objective of the program
is to align compensation for named executive officers over a multi-year period directly with the interests of our shareholders
by motivating and rewarding creation and preservation of long-term shareholder value. We believe that we can maximize our long-term
performance best if we tie the value of the long-term benefits our executives receive to our long-term performance.
The sole form of equity
compensation to our executive officers are stock options. Our Compensation Committee receives preliminary recommendations for equity-based
awards from our Chief Executive Officer. Our Compensation Committee then reviews the recommendations and recommends equity-based
awards for all of our officers, including our Chief Executive Officer and the other named executive officers, to our Board for
approval.
Stock option awards
provide our executive officers with the right to purchase shares of our common stock at a fixed exercise price typically for a
period of up to ten years, subject to continued service with us in accordance with the terms of our equity incentive plans, and
generally vest over three years (other than for the CEO whose options vest immediately). We do not grant stock options that have
exercise prices below the fair market value of our common stock on the date of grant. We do not reduce the exercise price of stock
options if the price of our common stock subsequently declines below the exercise price unless we first obtain shareholder approval.
However, we do adjust the exercise price of previously granted stock options to reflect recapitalizations, stock splits, mergers,
and similar events as permitted by the applicable stock plans.
We typically grant
stock options on an annual basis as part of annual performance reviews of our employees. We grant equity incentive compensation
to our executive officers because we believe doing so will motivate our executives by aligning their interest more closely with
the interest of our shareholders.
On June 18, 2015, we
granted stock options to purchase 50,000 shares, 20,000 shares, and 20,000 shares of our common stock to Dwight Babcock, Brien
Ragle, and William Cavanagh, respectively, at an exercise price of $1.47 per share.
Other Aspects of Our Compensation Philosophy
Other Benefits.
We provide our named
executive officers with the same employee benefits that all of our other employees receive under our broad-based benefit plans.
These plans provide for health benefits, life insurance and other welfare benefits.
Perquisites.
We do not provide our
named executive officers with any retirement or welfare plan benefits that we do not provide to all of our other employees.
Risks Related to Compensation Policies
and Practices
The Compensation Committee
has considered whether our overall compensation program for employees in 2015 creates incentives for employees to take excessive
or unreasonable risks that could materially harm our Company. We believe that several features of our compensation policies for
management employees appropriately mitigate such risks, including a mix of long- and short-term compensation incentives that we
believe is properly weighted, and the uniformity of compensation practices across our Company, which the Compensation Committee
regards as setting an appropriate level of risk taking for us. We also believe our internal legal and financial controls appropriately
mitigate the probability and potential impact of an individual employee committing us to a harmful long-term business transaction
in exchange for short-term compensation benefits.
Recoupment Policy
In order to align further
management’s interests with the interests of our shareholders and to support good corporate governance practices, the Board
has adopted a recoupment policy. Subject to rules of the SEC and NYSE MKT, in the event that we are required to prepare an accounting
restatement due to the material noncompliance with any financial reporting requirement under the federal securities laws, we will
form a committee of the non-management directors to determine whether we will recover from any of our current or former executive
officers, as determined in accordance with such rules, who received performance-based compensation (including stock options awarded
as compensation) during the period for which we are required to prepare an accounting restatement, based on the erroneous data,
in excess of what would have been paid to the executive officer under the accounting restatement. The committee may also take any
other actions authorized by our Executive Compensation Clawback Policy.
Compensation Committee Report
This report is filed
in accordance with Item 407(e)(5) of Regulation S-K, should be read in conjunction with the other information relating to executive
compensation which is contained elsewhere in this Proxy Statement and is not repeated here.
In this context, the
Compensation Committee hereby reports as follows:
|
1.
|
The Compensation Committee of the Board of Directors has reviewed and discussed the Compensation
Discussion and Analysis with management.
|
|
2.
|
Based on such review and discussions referred to in paragraph (1), the Compensation Committee recommended
to the Board that the Compensation Discussion and Analysis be included in the Company’s Form 10-K for the fiscal year ended
June 30, 2015, which is in turn included in this Proxy Statement.
|
|
Respectfully submitted by the Compensation Committee
|
|
of the Board of Directors,
|
|
|
|
Philip Vitale, MD (Chair)
|
|
Thomas LaVoy (served until January 2016)
|
|
Michael McCormick
|
Compensation Committee Interlocks and
Insider Participation
No member of the Compensation
Committee is or was during fiscal year 2015 an employee, or is or ever has been an officer of our Company. None of our executive
officers has served during fiscal year 2015 as a director or a member of the Compensation Committee of another company.
Shareholder Approval of Executive Compensation
The Company’s
last shareholder advisory vote to approve the compensation of its NEOs was held at the Annual Meeting on March 5, 2014. The
Board determined in 2014 to hold subsequent advisory votes every three years, and as a result, the next shareholder advisory vote
to approve the compensation of its NEOs will be held at the Annual Meeting to occur in 2017. The next shareholder advisory vote
on the frequency of future shareholder advisory votes on the compensations of the Company’s NEOs will be held at the Annual
Meeting to occur in 2020.
Director Compensation
Director Compensation
– Fiscal Year 2015
|
|
Fees earned
|
|
|
|
|
|
|
|
|
Non-equity
|
|
|
Non-qualified
|
|
|
|
|
|
|
|
|
|
or paid in
|
|
|
Stock
|
|
|
Option
|
|
|
incentive plan
|
|
|
deferred
|
|
|
All other
|
|
|
|
|
|
|
cash
|
|
|
awards
|
|
|
awards
|
|
|
compensation
|
|
|
compensation
|
|
|
compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Thomas LaVoy
(1)
|
|
|
52,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52,000
|
|
Michael McCormick
(2)
|
|
|
433
|
|
|
|
-
|
|
|
|
28,548
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,981
|
|
Philip Vitale MD
|
|
|
28,433
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,433
|
|
|
(1)
|
Mr. LaVoy received an additional $2,000 per month for
serving as Audit Committee Chairman.
|
|
(2)
|
Mr. McCormick received payment for his service as a non-employee director beginning when his Board
service and service on committees of the Board commenced on June 18, 2015.
|
Fiscal Year 2015
Board Compensation
·
|
Monthly Independent Director Compensation was $2,000
|
·
|
Additional Monthly Audit Committee Chairman Compensation was $2,000
|
·
|
In-Person Attendance per Board Meeting was $1,000
|
·
|
Telephonic Attendance per Board Meeting was $500
|
·
|
Committee Meeting Attendance per Meeting was $500
|
Options to Purchase
Shares of Common Stock Outstanding as of June 30, 2015
·
|
Thomas LaVoy
|
150,000
|
·
|
Philip Vitale MD
|
25,000
|
·
|
Michael McCormick
|
25,000
|
Board Compensation
Effective June 18, 2015
·
|
Monthly Independent Director Compensation was $3,000
|
·
|
Additional Monthly Audit Committee Chairman Compensation was $1,000
|
·
|
In-Person Attendance per Board Meeting was $1,000
|
·
|
Telephonic Attendance per Board Meeting was $500
|
·
|
Committee Meeting Attendance per Meeting was $500
|
Code of Ethics
We have adopted a Code
of Conduct and Ethics that applies to all of our officers, directors and employees and a separate Code of Ethics for Chief Executive
Officer and Senior Financial Officers that supplements our Code of Conduct and Ethics.
The Code of Conduct
and Ethics was previously filed as Exhibit 14.1 to our Form 10-KSB for the period ended June 30, 2005, and the Code of Ethics for
Chief Executive Officer and Senior Financial Officers was previously filed as Exhibit 14.2 to this same report. The Code of Ethics
for Chief Executive Officer and Senior Financial Officers is also available to the public on our website at http://www.isoray.com.
Each of these policies comprises written standards that are reasonably designed to deter wrongdoing and to promote the behavior
described in Item 406 of Regulation S-K promulgated by the Securities and Exchange Commission. Any amendments to or waivers of
the Codes will be promptly posted on our website at www.IsoRay.com or in a report on Form 8-K, as required by applicable laws.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following tables
set forth certain information regarding the beneficial ownership of the Company’s common stock and voting preferred stock
as of April 14, 2016 for (a) each person known by the Company to be a beneficial owner of five percent or more of the outstanding
common or Series B preferred stock of the Company, (b) each executive officer, director and nominee for director of the Company,
and (c) directors and executive officers of the Company as a group. As of April 14, 2016, the Company had 55,010,619 shares of
common stock and 59,065 shares of Series B preferred stock outstanding. Except as otherwise indicated below, the address for each
listed beneficial owner is c/o IsoRay, Inc., 350 Hills Street, Suite 106, Richland, Washington 99354.
Common Stock Share Ownership
|
|
Name of Beneficial Owner
|
|
Common
Shares
Owned
|
|
|
Common
Stock
Options(1)
|
|
|
Percent of
Class (2)
|
|
Thomas LaVoy, CEO & Chairman
|
|
|
143,523
|
|
|
|
400,000
|
|
|
|
0.99
|
%
|
Brien Ragle, CFO
|
|
|
-
|
|
|
|
70,332
|
|
|
|
0.13
|
%
|
William Cavanagh III, COO
|
|
|
-
|
|
|
|
26,659
|
|
|
|
0.05
|
%
|
Philip J. Vitale, M.D., Director
|
|
|
20,000
|
|
|
|
25,000
|
|
|
|
0.08
|
%
|
Michael W. McCormick, Director
|
|
|
22,000
|
|
|
|
25,000
|
|
|
|
0.09
|
%
|
Alan Hoffmann, Director
|
|
|
-
|
|
|
|
25,000
|
|
|
|
0.05
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Directors and Executive Officers as a group
|
|
|
185,523
|
|
|
|
571,991
|
|
|
|
1.39
|
%
|
|
1)
|
Only includes those common stock options that could be exercised for common stock within 60 days
after April 14, 2016.
|
|
2)
|
Percentage ownership is based on 55,010,619 shares of Common Stock outstanding on April 14, 2016.
Shares of Common Stock subject to stock options which are currently exercisable or will become exercisable within 60 days after
April 14, 2016 are deemed outstanding for computing the percentage ownership of the person or group holding such options, but are
not deemed outstanding for computing the percentage ownership of any other person or group.
|
Series
B Preferred Stock Share Ownership
|
|
Series B
|
|
|
|
|
|
|
Preferred
|
|
|
|
|
|
|
Shares
|
|
|
Percent of
|
|
Name of Beneficial Owner
|
|
Owned
|
|
|
Class (1)
|
|
Aissata Sidibe (2)
|
|
|
20,000
|
|
|
|
33.86
|
%
|
William and Karen Thompson Trust (3)
|
|
|
14,218
|
|
|
|
24.07
|
%
|
Jamie Granger (4)
|
|
|
10,529
|
|
|
|
17.83
|
%
|
Hostetler Living Trust (5)
|
|
|
9,479
|
|
|
|
16.05
|
%
|
Leslie Fernandez (6)
|
|
|
3,688
|
|
|
|
6.24
|
%
|
|
1)
|
Percentage ownership is based on 59,065 shares of Series B Preferred Stock outstanding on April
14, 2016.
|
|
2)
|
The address of Ms. Sidibe is 229 Lasiandra Ct, Richland, WA 99352.
|
|
3)
|
The address of the William and Karen Thompson Trust is 285 Dondero Way, San Jose, CA 95119.
|
|
4)
|
The address of Jamie Granger is 53709 South Nine Canyon Road, Kennewick, WA 99337.
|
|
5)
|
The address of the Hostetler Living Trust is 9257 NE 175th Street, Bothell, WA 98011.
|
|
6)
|
The address of Leslie Fernandez is 2615 Scottsdale Place, Richland, WA 99352.
|
No officers or directors beneficially own
shares of any class of Preferred Stock.
COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT
Section 16(a) of the
Securities Exchange Act of 1934 (the Exchange Act) requires the Company’s directors and executive officers, and persons who
beneficially own more than ten percent of a registered class of our equity securities, to file with the Securities and Exchange
Commission (the Commission) initial reports of beneficial ownership and reports of changes in beneficial ownership of our Common
Stock. The rules promulgated by the Commission under Section 16(a) of the Exchange Act require those persons to furnish us with
copies of all reports filed with the Commission pursuant to Section 16(a). The information in this section is based solely upon
a review of Forms 3, Forms 4, and Forms 5 received by us.
We believe that IsoRay’s
executive officers, directors and 10% shareholders timely complied with their filing requirements during the year ended June 30,
2015, except as follows – Fredric Swindler (one Form 4 with one transaction); William Cavanagh (two Form 4s each with one
transaction); Brien Ragle (one Form 4 with one transaction) and Thomas LaVoy (one Form 4 with one transaction). Each of these Form
4s was filed late.
Executive Officers
Set forth below
is certain information as of April 14, 2016 regarding our current executive officers, including biographical information.
Mr. LaVoy took
office as Chief Executive Officer on February 15, 2016, Mr. Ragle became our principal accounting officer and principal financial
officer on October 2, 2009 and was promoted to Chief Financial Officer on October 1, 2013, and Mr. Cavanagh was deemed to be an
executive officer by the Board effective October 12, 2010 and was promoted to Chief Operating Officer on March 3, 2016. Our Board
appoints our officers, and their terms of office are at the discretion of the Board. None of our executive officers have employment
contracts, except for Mr. LaVoy.
In connection with
Mr. LaVoy’s appointment as CEO, the Company entered into an Executive Employment Agreement (“
Employment Agreement
”)
with Mr. LaVoy for an initial term of three years subject to successive one year renewals. Under his Employment Agreement, Mr.
LaVoy receives an annual salary of $300,000. He will also participate in the bonus plan adopted by the Board in 2015 whereby he
will be eligible to receive a quarterly bonus of three percent (3%) of his annual salary for any increase in revenue for a fiscal
quarter of fifteen percent (15%) or more over the prior year’s corresponding fiscal quarter and an additional annual bonus
of three percent (3%) of his annual salary for any fifteen percent (15%) or more annual increase in revenue by the Company over
the prior fiscal year. Mr. LaVoy received options to purchase 250,000 shares of common stock on February 15, 2016. The options
were granted at the closing price of the common stock on that day and vested immediately. On a “change of control”
event, as defined in the Employment Agreement, all unvested options, if any, will become fully vested. The Employment Agreement
provides severance pay for the remaining term of the Employment Agreement or a one year period, whichever is longer. Mr. LaVoy’s
employment may be terminated upon death, disability, by the Company for cause or by Mr. LaVoy for “Good Reason.” If
Mr. LaVoy’s employment is terminated by mutual agreement, by the Company without cause, or by Mr. LaVoy for “Good Reason,”
then he will be paid his unpaid salary, bonus and expenses through the date of termination, in addition to severance pay. If employment
terminates for any other reason, then Mr. LaVoy only receives any unpaid salary, bonuses and expenses through the date of termination.
“Good Reason” means material adverse change in Mr. LaVoy’s title, authority, duties or responsibilities. Mr.
LaVoy is subject to standard confidentiality provisions and a non-compete, non-solicitation covenant for a one year period following
termination of employment.
Name
|
|
Age
|
|
Position Held
|
Thomas LaVoy
|
|
56
|
|
Chairman, Chief Executive Officer
|
Philip J. Vitale
|
|
70
|
|
Director
|
Michael W. McCormick
|
|
53
|
|
Director
|
Alan Hoffmann
|
|
55
|
|
Director
|
Thomas LaVoy –
Mr. LaVoy has been a Director of the Company since 2005 and served as Chair of the Audit Committee until his resignation from the
Audit Committee Chair position and all other Board committees effective January 13, 2016. He was appointed Chairman of the IsoRay
Board effective January 7, 2016 and took office as Chief Executive Officer of the Company on February 15, 2016. Mr. LaVoy served
as Deputy Chief Operations Officer and President of Corporate Services of Veolia Transportation on Demand (VTOD), the parent company
of SuperShuttle International Inc. and its subsidiaries, from January 2014 to February 2016. He concurrently served as Chief Financial
Officer of SuperShuttle International, Inc. and its subsidiaries from July 1997 and as Secretary from March 1998, resigning from
both positions in February 2016. VTOD through SuperShuttle is the largest shuttle transportation company in the US in addition
to operating bus and cab services throughout the US. He has also served as a director of Alanco Technologies, Inc. (OTCBB: ALAN)
since 1998 and served on its audit committee from 2012 to 2015. From September 1987 to February 1997, Mr. LaVoy served as Chief
Financial Officer of NASDAQ-listed Photocomm, Inc. Mr. LaVoy was a Certified Public Accountant with the firm of KPMG Peat Marwick
from 1980 to 1983. Mr. LaVoy has a Bachelor of Science degree in Accounting from St. Cloud University, Minnesota, and is a Certified
Public Accountant (Inactive) in the State of Minnesota.
Brien Ragle –
Mr. Ragle has over 20 years of finance and accounting experience, including SEC reporting, financial reporting, cost, project,
and management accounting in addition to performing operational analysis. Mr. Ragle has served the Company in the most senior accounting
and finance role from October 2009 to present. Mr. Ragle became IsoRay's Chief Financial Officer on October 1, 2013 after serving
the Company as Controller – Principal Financial and Accounting Officer from October 2009 to September 2013. Mr. Ragle was
IsoRay’s Cost Accounting Manager from January 2007 until October 2009. Before joining IsoRay in January 2007 as Cost Accounting
Manager, Mr. Ragle was employed by BNG America, LLC, a wholly-owned subsidiary of Energy Solutions, LLC (ES), from 2005 to 2006
as Project Accounting Manager for all projects located in the Western United States and from 2000 to 2004 as a Business Unit Controller
by SCM Consultants, Inc., a wholly-owned subsidiary of Tetra Tech, Inc. (TTEK). Mr. Ragle holds Bachelor of Arts degrees in Business
Administration, with an emphasis in accounting, and in Hospitality Management from Washington State University. Mr. Ragle is a
Certified Public Accountant in the State of Washington and designated as a Chartered Global Management Accountant by the American
Institute of Certified Public Accountants. Mr. Ragle filed for personal bankruptcy under Chapter 13 of the U.S. Bankruptcy Code
on January 26, 2011.
William Cavanagh III
– Mr. Cavanagh joined IsoRay Medical, Inc. in January 2010 and served as Vice President, Research and Development until March
3, 2016, other than serving as interim Chief Executive Officer for IsoRay from January 7 to February 14, 2016. He was appointed
Chief Operating Officer of IsoRay effective March 3, 2016. Immediately prior to joining IsoRay Medical, Mr. Cavanagh was engaged
in the research and development of dendritic cell therapies for cancer and infectious diseases. He served as Chief Scientific Officer
for Sangretech Biomedical, LLC for the six years prior to joining IsoRay Medical. At Sangretech, he oversaw the design and implementation
of a novel cancer therapy. Mr. Cavanagh began his extensive career in cancer treatment technologies in the early 1990s, when he
helped lead research and development of a therapy involving the insertion of radioactive sources directly into the prostate for
the treatment of prostate cancer (prostate brachytherapy). He has designed several cancer treatment-related studies, is listed
as an author on 34 peer-reviewed publications, and is the listed inventor on a U.S. patent application detailing a novel treatment
for cancer. Mr. Cavanagh has also served as Director of the Haakon Ragde Foundation for Advanced Cancer Studies in Seattle, Washington,
where he led the research foundation in the selection of viable research projects directed at treating advanced cancers. Mr. Cavanagh
holds a B.S. in Biology from the University of Portland (Oregon) and attended two years of medical school before beginning his
career in research management.
EXECUTIVE COMPENSATION
The following summary compensation table
sets forth information concerning compensation for services rendered in all capacities during our past three fiscal years awarded
to, earned by or paid to each of the following individuals. Salary and other compensation for these officers are set or recommended
to the Board by the Compensation Committee. No other executive officer received total compensation of over $100,000 during fiscal
year 2015.
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity
|
|
|
deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
incentive plan
|
|
|
compensation
|
|
|
All other
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
awards
|
|
|
awards
|
|
|
compensation
|
|
|
earnings
|
|
|
compensation
|
|
|
Total
|
|
Name and principal position
|
|
Year
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Dwight Babcock
|
|
2015
|
|
|
291,554
|
|
|
|
-
|
|
|
|
-
|
|
|
|
57,095
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
348,650
|
|
Former Chairman and CEO
|
|
2014
|
|
|
284,712
|
|
|
|
50,000
|
|
|
|
|
|
|
|
116,095
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
450,807
|
|
|
|
2013
|
|
|
284,394
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
284,394
|
|
Brien Ragle
|
|
2015
|
|
|
119,620
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,554
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
140,174
|
|
CFO
|
|
2014
|
|
|
117,834
|
|
|
|
-
|
|
|
|
-
|
|
|
|
39,401
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
157,235
|
|
|
|
2013
|
|
|
99,215
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
99,215
|
|
William Cavanagh
|
|
2015
|
|
|
158,020
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,554
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
178,574
|
|
COO
|
|
2014
|
|
|
154,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
37,099
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
191,599
|
|
|
|
2013
|
|
|
154,327
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
154,327
|
|
1. Amounts
represent the ASC 718, Compensation – Stock Compensation valuation for the fiscal years ended June 30, 2015, 2014 and 2013,
respectively. All such options were awarded under one of the Company’s four stock option plans. All options awarded (with
the exception of Mr. Babcock’s stock option grants that were immediately vested on the grant date) vest in three equal annual
installments beginning with the first anniversary from the date of grant and expire ten years after the date of grant. All options
were granted at the fair market value of the Company’s stock on the date of grant and the Company used a Black-Scholes methodology
as discussed in the footnotes to the financial statements to value the options.
Grants of
Plan-Based Awards
The following table sets forth certain
information with respect to stock and option awards and other plan-based awards granted to our named executive officers during
fiscal 2015.
|
|
|
|
All other
|
|
|
|
|
|
Grant
|
|
|
|
|
|
option
|
|
|
Exercise
|
|
|
date fair
|
|
|
|
|
|
awards:
|
|
|
or base
|
|
|
value of
|
|
|
|
|
|
Number of
|
|
|
price of
|
|
|
of stock
|
|
|
|
|
|
securities
|
|
|
option
|
|
|
and
|
|
|
|
Grant
|
|
underlying
|
|
|
awards
|
|
|
option
|
|
Name
|
|
Date
|
|
options (#)
|
|
|
($/Sh)
|
|
|
awards
|
|
Dwight Babcock
Former Chairman/CEO
|
|
6/17/2015
|
|
|
50,000
|
|
|
$
|
1.47
|
|
|
$
|
57,095
|
|
Brien Ragle
CFO
|
|
6/17/2015
|
|
|
20,000
|
|
|
|
1.47
|
|
|
|
20,554
|
|
William Cavanagh
COO
|
|
6/17/2015
|
|
|
20,000
|
|
|
|
1.47
|
|
|
|
20,554
|
|
Outstanding Equity Awards at Fiscal Year-End
Option awards
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
awards:
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
securities
|
|
|
securities
|
|
|
securities
|
|
|
|
|
|
|
|
|
|
underlying
|
|
|
underlying
|
|
|
underlying
|
|
|
|
|
|
|
|
|
|
unexercised
|
|
|
unexercised
|
|
|
unexercised
|
|
|
Option
|
|
|
|
|
|
|
Options
|
|
|
options
|
|
|
unearned
|
|
|
exercise
|
|
|
Option
|
|
|
|
(#)
|
|
|
(#)
|
|
|
options
|
|
|
price
|
|
|
expiration
|
|
Name
|
|
exercisable
|
|
|
unexercisable
|
|
|
(#)
|
|
|
($)
|
|
|
date
|
|
Dwight Babcock,
|
|
|
50,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
6.30
|
|
|
|
03/31/2016
|
|
Former Chairman and
|
|
|
50,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
3.80
|
|
|
|
06/23/2016
|
|
CEO
|
|
|
50,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
3.11
|
|
|
|
08/15/2016
|
|
|
|
|
100,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
0.75
|
|
|
|
05/13/2018
|
|
|
|
|
200,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
0.26
|
|
|
|
06/01/2019
|
|
|
|
|
100,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
1.43
|
|
|
|
06/30/2020
|
|
|
|
|
100,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
0.99
|
|
|
|
06/07/2021
|
|
|
|
|
50,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
0.98
|
|
|
|
06/27/2022
|
|
|
|
|
50,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
0.58
|
|
|
|
09/05/2023
|
|
|
|
|
50,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
2.17
|
|
|
|
05/20/2024
|
|
|
|
|
50,000
|
(1)
|
|
|
-
|
|
|
|
-
|
|
|
|
1.47
|
|
|
|
06/17/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brien Ragle
|
|
|
5,000
|
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
4.40
|
|
|
|
03/02/2017
|
|
CFO
|
|
|
2,000
|
(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
4.14
|
|
|
|
06/01/2017
|
|
|
|
|
20,000
|
(4)
|
|
|
-
|
|
|
|
-
|
|
|
|
1.43
|
|
|
|
06/30/2020
|
|
|
|
|
20,000
|
(5)
|
|
|
-
|
|
|
|
-
|
|
|
|
0.99
|
|
|
|
06/07/2021
|
|
|
|
|
1,666
|
(7)
|
|
|
3,334
|
|
|
|
-
|
|
|
|
0.59
|
|
|
|
09/06/2023
|
|
|
|
|
6,666
|
(8)
|
|
|
13,334
|
|
|
|
-
|
|
|
|
2.46
|
|
|
|
06/17/2024
|
|
|
|
|
-
|
(9)
|
|
|
20,000
|
|
|
|
-
|
|
|
|
1.47
|
|
|
|
06/17/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Cavanagh
|
|
|
6,660
|
(6)
|
|
|
-
|
|
|
|
-
|
|
|
|
0.98
|
|
|
|
06/27/2022
|
|
COO
|
|
|
6,666
|
(8)
|
|
|
13,334
|
|
|
|
-
|
|
|
|
2.46
|
|
|
|
06/17/2024
|
|
|
|
|
-
|
(9)
|
|
|
20,000
|
|
|
|
-
|
|
|
|
1.47
|
|
|
|
06/17/2025
|
|
1)
|
Represents options issued to Mr. Babcock which were all immediately vested and exercisable. The grant dates are 10 years prior to the expiration date in the table above.
|
2)
|
Represents the March 2, 2007 grant, all of which were exercisable as of March 2, 2010.
|
3)
|
Represents the June 1, 2007 grant, all of which were exercisable as of June 1, 2010.
|
4)
|
Represents a June 30, 2010 grant, all of which were exercisable as of June 30, 2013.
|
5)
|
Represents a June 7, 2011 grant, all of which were exercisable as of June 30, 2014.
|
6)
|
Represents a June 27, 2012 grant, all of which were exercisable as of June 27, 2015.
|
7)
|
Represents a September 6, 2013 grant, one-third of which became exercisable on September 6, 2014, one-third of which became exercisable on September 6, 2015, and the final third will become exercisable on September 6, 2016.
|
8)
|
Represents a June 17, 2014 grant, one-third of which became exercisable on June 17, 2015, one-third of which will become exercisable on June 17, 2016, and the final third will become exercisable on June 17, 2017.
|
9)
|
Represents a June 17, 2015 grant, one-third of which will become exercisable on June 17, 2016, one-third of which will become exercisable on June 17, 2017, and the final third will become exercisable on June 17, 2018.
|
Option Exercises and Stock Vested
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of shares
|
|
|
Value
|
|
|
Number of shares
|
|
|
Value
|
|
|
|
acquired on
exercise
|
|
|
realized on
exercise
|
|
|
acquired on
vesting
|
|
|
realized on
vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
Dwight Babcock
Former Chairman/CEO
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Brien Ragle
CFO
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
William Cavanagh
COO
|
|
|
13,340
|
|
|
|
7,337
|
|
|
|
-
|
|
|
|
-
|
|
The Company has a 401(k) plan that covers
all eligible full-time employees of the Company. Contributions to the 401(k) plan are made by participants to their individual
accounts through payroll withholding. Additionally, the 401(k) plan provides for the Company to make contributions to the 401(k)
plan in amounts at the discretion of management. The Company has not made any contributions to the 401(k) plan and does not maintain
any other retirement plans for its executives or employees.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Certain Relationships and Related Party
Transactions
None requiring disclosure under Reg. S-K
Item 404.
Review and Approval of Related Party
Transactions
The Company’s
Code of Ethics emphasizes the importance of avoiding situations or transactions in which personal interests may interfere with
the best interests of the Company or its shareholders. In addition, the Company’s general corporate governance practice includes
Board-level discussion and assessment of procedures for discussing and assessing relationships, including business, financial,
familial and nonprofit, among the Company and its officers and directors or their immediate family members, to the extent that
they may arise. The Board and either the Audit Committee or the Nominations and Corporate Governance Committee review any transaction
with an officer or director or their immediate family members to determine, on a case-by-case basis, whether a conflict of interest
exists. The Board ensures that all directors voting on such a matter have no interest in the matter and discusses the transaction
with counsel as the Board deems necessary. The Board will generally delegate the task of discussing, reviewing and approving transactions
between the Company and any related persons to either the Audit Committee or the Nominations and Corporate Governance Committee.
As required under SEC
rules, transactions that are determined to be directly or indirectly material to the Company or a related party would be disclosed
in our Annual Report; however, during our fiscal year ended June 30, 2015, we did not have any related party transactions requiring
disclosure under Reg. S-K Item 404.
Director Independence
Using the standards
of the NYSE MKT, the Company’s Board has determined that Mr. Hoffmann, Mr. McCormick and Dr. Vitale each qualify
under such standards as an independent director. Mr. Hoffmann, Mr. McCormick and Dr. Vitale each meet the NYSE MKT listing standards
for independence both as a director and as a member of both the Audit Committee and the Compensation Committee. No other directors
are independent under these standards. The Company did not consider any relationship or transaction between itself and these
independent directors not already disclosed in this report in making this determination.
Director
and Officer Indemnification
Our Articles of Incorporation
provide to directors and officers indemnification to the full extent provided by law, and provide that, to the extent permitted
by Minnesota law, a director will not be personally liable for monetary damages to us or our shareholders for breach of his or
her fiduciary duty as a director, except for liability for certain actions that may not be limited under Minnesota law. In addition,
the Company has entered into indemnification agreements with each of its directors and executive officers, pursuant to which the
Company has agreed to indemnify such individuals for any claims made against such individuals based on any act, omission or breach
of duty committed while acting as director or officer, except under certain circumstances such as cases involving dishonesty or
improper personal benefit. The Company also maintains an insurance policy under which its directors and officers are insured against
certain liabilities which might arise out of their relationship with the Company as directors and officers.
Vote Required for Election
The four persons receiving
the highest number of affirmative votes will be elected as directors of the Company. Votes against a nominee or withheld from voting
(whether by abstention, broker non-votes or otherwise) will have no legal effect on the vote.
PROPOSAL 2 –
APPROVE THE COMPANY’S
2016 EQUITY INCENTIVE
PLAN
|
On April 19, 2016,
the Board, at the recommendation of the Compensation Committee of the Board (the “
Compensation Committee
”),
unanimously adopted, subject to shareholder approval, the Company's 2016 Equity Incentive Plan (the “
Equity Incentive
Plan
”).
The primary purpose
of the Equity Incentive Plan is to promote the interests of the Company and its shareholders by, among other things, (i) attracting
and retaining key officers, employees and directors of, and consultants to, the Company and its affiliates, (ii) enabling such
individuals to participate in the long-term growth and financial success of the Company, (iii) encouraging ownership of stock in
the Company by such individuals, and (iv) linking their compensation to the long-term interests of the Company and its shareholders.
Our general compensation
philosophy is that long-term stock-based incentive compensation should strengthen and align the interests of our officers and employees
with our shareholders. We believe that the utilization of stock options have been effective over the years in enabling us to attract
and retain the talent critical to the Company and would like to expand the use of all types of equity to provide incentives to
a greater number of our employees.
The Equity Incentive
Plan is designed to provide officers, employees and directors of the Company and its affiliates with incentives to promote the
growth and performance of the Company. Most of the companies with which the Company competes for directors and management-level
employees are public companies that offer equity compensation as part of their overall director and officer compensation programs.
The Equity Incentive Plan will give us the flexibility we need to continue to attract and retain highly-qualified individuals by
offering a competitive compensation program linked to the performance of our common stock.
Unlike our earlier
equity incentive plans which only permitted stock options, the Equity Incentive Plan includes a variety of award types that we
may grant under the Equity Incentive Plan, including shares of restricted stock, stock appreciation rights (“
SARs
”)
and stock options.
If approved by the
Company’s shareholders, the Equity Incentive Plan will reserve an aggregate of 4,000,000 shares of Common Stock (subject
to adjustment in the event of stock splits and other similar events) for issuance under the plan. We believe this authorization
will enable us to implement our long-term stock incentive program for the life of the plan.
If the Equity Incentive
Plan is not approved, we may become unable to provide long-term, stock-based incentives to present and future employees, officers,
directors and consultants consistent with our current compensation philosophies and objectives.
The Board believes
that the future success of the Company depends, in large part, upon the ability of the Company to maintain a competitive position
in attracting, retaining and motivating key personnel. The Company does not have an existing plan allowing the grant of restricted
stock or SARs, and its existing Amended and Restated 2006 Director Stock Option Plan will expire in August 2016, leaving the Company
with no equity incentive plans available for grants to its directors, and only an option plan available for grants to its employees.
Accordingly, the Board believes adoption of the Equity Incentive Plan is in the best interests of the Company and its shareholders
and unanimously recommends a vote "FOR" the approval of the Equity Incentive Plan.
The full text of the
Equity Incentive Plan appears as Appendix A to this Proxy Statement and the following discussion, which summarizes the material
features of the Equity Incentive Plan, is qualified in its entirety by reference to the text of the Equity Incentive Plan.
Shares Available for Awards under the
Plan
Under the Equity Incentive
Plan, awards may be made in Common Stock of the Company. Subject to adjustment as provided by the terms of the Equity Incentive
Plan, the maximum number of shares of Common Stock with respect to which awards may be granted under the Equity Incentive Plan
is 4,000,000. Except as adjusted in accordance with the terms of the Equity Incentive Plan, no more than 2,000,000 shares of Common
Stock authorized under the Equity Incentive Plan may be awarded as incentive stock options.
Shares of Common Stock
subject to an award under the Equity Incentive Plan but which terminate, expire unexercised or are settled for cash, or are forfeited
or cancelled without delivery of the shares, remain available for awards under the Equity Incentive Plan. Shares of Common Stock
issued under the Equity Incentive Plan may be either newly issued shares or shares which have been reacquired by the Company.
To the extent any shares
of stock covered by an award (including restricted stock awards) under the 2016 Equity Incentive Plan are not delivered to a participant
or beneficiary for any reason, including because the participant forfeits the award or fails to exercise a stock option during
its term, then the shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of
stock available for delivery under the plan. To the extent (i) a stock option is exercised using an actual or constructive exchange
of shares to pay the exercise price, (ii) shares of stock covered by an award are withheld to satisfy withholding taxes upon exercise
or vesting of the award, or (iii) stock options are exercised by a net settlement of the stock options, then, in each case, the
number of shares of stock available will be reduced by the gross number of stock options exercised rather than the net number of
shares of stock issued upon the exercise.
Shares issued by the
Company as substitute awards granted solely in connection with the assumption of outstanding awards previously granted by a company
acquired by the Company, or with which the Company combines (“
Substitute Awards
”), do not reduce the number
of shares available for awards under the Equity Incentive Plan, unless shareholder approval is required for such Substitute Awards.
With certain limitations,
awards made under the Equity Incentive Plan may be adjusted by the committee of the Board of Directors administering the Equity
Incentive Plan (the “
Committee
”) in its discretion or to prevent dilution or enlargement of benefits or potential
benefits intended to be made available under the Equity Incentive Plan in the event of any stock dividend, reorganization, recapitalization,
stock split, combination, merger, consolidation, change in laws, regulations or accounting principles or other relevant unusual
or nonrecurring event affecting the Company.
If a corporate transaction
involving the stock of the Company (including, without limitation, any stock dividend, stock split, reverse stock split, extraordinary
cash dividend, recapitalization, reorganization, merger, consolidation, combination or exchange of shares) occurs, the share limitations
and all outstanding awards will automatically be adjusted equitably to reflect the event to the extent that the adjustment will
not affect the award’s status as “performance-based compensation” under Section 162(m) of the Code, if applicable.
Eligibility and Administration
Current and prospective
officers and employees, and directors of, and consultants to, the Company or its affiliates are eligible to be granted awards under
the Equity Incentive Plan. As of April 19, 2016, approximately 40 individuals would be eligible to participate in the Equity Incentive
Plan. However, the Company has not at the present time determined who will receive the shares of Common Stock that will be authorized
for issuance under the Equity Incentive Plan or how they will be allocated.
The Committee will
administer the Equity Incentive Plan, except with respect to awards to non-employee directors, for which the Equity Incentive Plan
will be administered by the Board. The Committee will be composed of not less than two non-employee directors, each of whom will
be a “Non-Employee Director” for purposes of Section 16 of the Exchange Act and Rule 16b-3 thereunder, and an “outside
director” within the meaning of Section 162(m) and the related regulations promulgated under the Code.
The Board has determined
that the Compensation Committee will administer the 2016 Equity Incentive Plan and act as the Committee. Subject to the terms of
the Equity Incentive Plan, the Committee has full and exclusive power within the limitations set forth in the 2016 Equity Incentive
Plan to make all decisions and determinations regarding the selection of participants and the granting of awards; establishing
the terms and conditions relating to each award; adopting rules, regulations and guidelines for carrying out the purposes of the
2016 Equity Incentive Plan; interpreting and otherwise construing the 2016 Equity Incentive Plan; and making all other determinations
that may be necessary or desirable for the administration of the Equity Incentive Plan.
The Committee may determine
the type and terms and conditions of awards under the 2016 Equity Incentive Plan, which the Committee will set forth in an award
agreement delivered to each participant. The Committee may grant awards in a combination of incentive and non-qualified stock options,
SARs or restricted stock.
Stock Options and Stock Appreciation
Rights
The Committee is authorized
to grant stock options, including both incentive stock options, which can result in potentially favorable tax treatment to the
participant, and non-qualified stock options. A stock option is the right to purchase shares of common stock at a specified price
for a specified period of time. Stock options are either “incentive” stock options or “non-qualified” stock
options. Incentive stock options have certain tax advantages that are not available to non-qualified stock options, and must comply
with the requirements of Section 422 of the Code. Only employees are eligible to receive incentive stock options. Outside directors
may only receive non-qualified stock options.
The Committee is also
authorized to grant SARs, either with or without a related option. A SAR, or stock appreciation right, is the right to receive
a cash payment or payment in the form of shares of Common Stock of the difference between the share price on the date of grant
and the share price on the date of exercise.
The Committee may specify
the terms of such grants subject to the terms of the Equity Incentive Plan. The exercise price per share subject to an option is
determined by the Committee, but may not be less than the fair market value of a share of Common Stock on the date of the grant,
except in the case of Substitute Awards. Fair market value for purposes of the 2016 Equity Incentive Plan means the closing price
of our common stock as reported on the NYSE MKT on the date in question, or if our common stock was not traded on that date, then
on the day before that date or on the next preceding day on which our common stock was traded, and without regard to after-hours
trading activity. The Committee will determine the fair market value of the common stock, in accordance with Section 409A of the
Code, if it cannot be determined in the manner described above.
The maximum term of
each option or SAR, the times at which each option or SAR will be exercisable, and the provisions requiring forfeiture of unexercised
options at or following termination of employment generally are fixed by the Committee, except that no option or SAR relating to
an option may have a term exceeding ten years. Incentive stock options that are granted to holders of more than ten percent of
the Company’s voting securities are subject to certain additional restrictions, including a five-year maximum term and a
minimum exercise price of 110% of fair market value.
A stock option or SAR
may be exercised in whole or in part at any time, with respect to whole shares only, within the period permitted thereunder for
the exercise thereof. Stock options and SARs shall be exercised by written notice of intent to exercise the stock option or SAR
and, with respect to options, payment in full to the Company of the amount of the option price for the number of shares with respect
to which the option is then being exercised. Shares of common stock purchased upon the exercise of a stock option must be paid
for at the time of exercise either (i) in cash or by certified or bank check, (ii) by tendering stock of the Company owned by the
participant in satisfaction of the exercise price, or (iii) by a “cashless exercise” through a third party.
Payment of the option
price may be made in such other method as the Committee shall approve including withholding shares of Common Stock issuable upon
exercise of an option having a fair market value equal to the option price together with any applicable withholding taxes. Subject
to applicable securities laws and Company policy, the Company may permit an option to be exercised by delivering a notice of exercise
and simultaneously selling the shares thereby acquired, pursuant to a brokerage or similar agreement approved in advance by proper
officers of the Company, using the proceeds of such sale as payment of the option price, together with any applicable withholding
taxes.
Until the participant
has been issued the shares subject to such exercise, he or she shall possess no rights as a shareholder with respect to such shares.
Restricted Shares
The Committee is authorized
to grant restricted shares of Common Stock. A restricted stock award is a grant of common stock, subject to risk of forfeiture,
to a participant for no consideration or such minimum consideration as may be required by applicable law or regulation. Restricted
stock awards may be granted only in whole shares of common stock and are subject to vesting conditions and other restrictions established
by the Committee as set forth in the 2016 Equity Incentive Plan or the award agreement. A participant granted restricted shares
of Common Stock generally has most of the rights of a shareholder of the Company with respect to the restricted shares, including
the right to receive dividends and the right to vote such shares. None of the restricted shares may be transferred, encumbered
or disposed of during the restricted period or until after fulfillment of the restrictive conditions.
Non-Employee Director Awards
Non-employee directors
are eligible to receive awards pursuant to the terms of the Equity Incentive Plan, including options, SARs and restricted shares,
upon such terms as the Committee may determine; provided, however, that with respect to awards made to non-employee directors,
the Equity Incentive Plan will be administered by the Board. A non-employee director may not be granted awards covering more than
100,000 shares of Common Stock in any fiscal year.
Vesting of Awards
The Committee may specify
vesting requirements on any award. If the vesting of an award under the 2016 Equity Incentive Plan is conditioned on the completion
of a specified period of service with the Company or its affiliates, without the achievement of performance measures or objectives,
then the required period of service for full vesting will be determined by the Committee and evidenced in an award agreement. The
Committee may determine that all stock options then held by a participant shall become fully exercisable (subject to expiration
provisions otherwise applicable to such award) and all restricted stock awards, other than awards subject to performance-based
vesting conditions, shall be fully earned and vested immediately.
Termination of Employment
The Committee will
determine the terms and conditions that apply to any award upon the termination of employment with the Company and its affiliates,
and provide such terms in the applicable award agreement or in its rules or regulations. In general, unless otherwise provided
in an award agreement or in a participant’s employment or service agreement, options may be exercised for three months following
termination of employment, or twelve months in the event of death or disability.
Change in Control
Unless otherwise stated
in an award agreement or a participant’s employment or service agreement, upon a change in control (as defined in the Equity
Incentive Plan), all restricted stock awards then held by a participant will become fully vested and all stock options and SARs
will become fully exercisable. The Committee may in its discretion and without the consent of any participant, determine that,
upon the occurrence of a change in control, each or any award or a portion thereof outstanding immediately prior to the change
in control and not previously exercised or settled will be canceled in exchange for a payment with respect to each vested share
subject to such award in cash or stock which, in any such case, will be in an amount having a fair market value equal to the fair
market value of the consideration to be paid per share in the change in control, reduced by the exercise or purchase price per
share, if any, under such award.
Forfeiture
The Committee may specify
that rights and benefits with respect to any award may be subject to reduction, cancellation, forfeiture or recoupment upon the
occurrence of certain events in addition to any otherwise applicable vesting or performance conditions. These events include, without
limitation, termination for cause; breach of non-competition, non-solicitation, confidentiality or other restrictive covenants;
or any other conduct that is detrimental to the business or reputation of the Company and/or its affiliates. Awards are also subject
to recovery under applicable clawback policies.
Amendment and Termination
The Board may, at any
time, amend or terminate the 2016 Equity Incentive Plan or any award granted under the plan, provided that, except as provided
in the plan, no amendment or termination may adversely impair the rights of an outstanding award without the participant’s
(or affected beneficiary’s) written consent. The Board may not amend the 2016 Equity Incentive Plan to materially increase
the original number of securities that may be issued under the plan (other than as provided in the plan), materially increase the
benefits accruing to a participant, or materially modify the requirements for participation in the plan, without approval of shareholders
to the extent shareholder approval is required by applicable law. Notwithstanding the foregoing, the Board may, without shareholder
approval, amend the 2016 Equity Incentive Plan at any time, retroactively or otherwise, to ensure the plan complies with current
or future law and may unilaterally amend the plan and any outstanding award, without participant consent, in order to maintain
an exemption from, or to comply with, Section 409A of the Code, and its applicable regulations and guidance.
Other Terms of Awards.
The Company may take
action, including the withholding of amounts from any award made under the Equity Incentive Plan, to satisfy withholding and other
tax obligations. Except as permitted by the applicable award agreement, awards granted under the Equity Incentive Plan generally
may not be pledged or otherwise encumbered and are not transferable except by will or by the laws of descent and distribution,
or as permitted by the Committee in its discretion.
Effective Date and Duration of Plan
If approved by our
shareholders at this annual meeting, the Equity Incentive Plan will be effective as of April 19, 2016. The 2016 Equity Incentive
Plan will terminate automatically on the 10-year anniversary of the effective date of the plan, after which no further awards may
be granted. At any earlier time, the Board may terminate the plan. However, any termination of the plan will not affect outstanding
awards.
Certain Federal Income Tax Consequences
The following is a
brief summary of the principal federal income tax consequences to the Company and an eligible person (who is a citizen or resident
of the United States for U.S. federal income tax purposes) of awards granted under the Equity Incentive Plan. The summary is not
intended to be exhaustive and, among other things, does not describe state, local or foreign tax consequences. The federal income
tax consequences of an eligible person's award under the Equity Incentive Plan are complex, are subject to change and differ from
person to person. Each person should consult with his or her own tax adviser as to his or her own particular situation.
This discussion is
based on the Code, Treasury Regulations promulgated under the Code, Internal Revenue Service rulings, judicial decisions and administrative
rulings as of the date of this Proxy Statement, all of which are subject to change or differing interpretations, including changes
and interpretations with retroactive effect. No assurance can be given that the tax treatment described herein will remain unchanged
at the time that grants of incentive stock options and/or non-qualified stock options are made under the Equity Incentive Plan.
Tax consequences to
the Company and to participants receiving awards will vary with the type of award. Generally, a participant will not recognize
income, and the Company is not entitled to take a deduction, upon the grant of an incentive stock option, a nonqualified option,
a SAR or a restricted share award. A participant will not have taxable income upon exercising an incentive stock option (except
that the alternative minimum tax may apply). Upon exercising an option other than an incentive stock option, the participant must
generally recognize ordinary income equal to the difference between the exercise price and fair market value of the freely transferable
and non-forfeitable shares of Common Stock acquired on the date of exercise.
If a participant sells
shares of Common Stock acquired upon exercise of an incentive stock option before the end of two years from the date of grant and
one year from the date of exercise, the participant must generally recognize ordinary income equal to the difference between (i)
the fair market value of the shares of Common Stock at the date of exercise of the incentive stock option (or, if less, the amount
realized upon the disposition of the incentive stock option shares of Common Stock), and (ii) the exercise price. Otherwise, a
participant’s disposition of shares of Common Stock acquired upon the exercise of an option (including an incentive stock
option for which the incentive stock option holding period is met) generally will result in short-term or long-term capital gain
or loss measured by the difference between the sale price and the participant’s tax basis in such shares of Common Stock
(the tax basis generally being the exercise price plus any amount previously recognized as ordinary income in connection with the
exercise of the option).
The Company generally
will be entitled to a tax deduction equal to the amount recognized as ordinary income by the participant in connection with an
option. The Company generally is not entitled to a tax deduction relating to amounts that represent a capital gain to a participant.
Accordingly, the Company will not be entitled to any tax deduction with respect to an incentive stock option if the participant
holds the shares of Common Stock for the incentive stock option holding periods prior to disposition of the shares.
Similarly, the exercise
of a SAR will result in ordinary income on the value of the stock appreciation right to the individual at the time of exercise.
The Company will be allowed a deduction for the amount of ordinary income recognized by a participant with respect to a SAR. Upon
a grant of restricted shares, the participant will recognize ordinary income on the fair market value of the Common Stock at the
time restricted shares vest unless a participant makes an election under Section 83(b) of the Code to be taxed at the time of grant.
The participant also is subject to capital gains treatment on the subsequent sale of any Common Stock acquired through the exercise
of a SAR or restricted share award. For this purpose, the participant’s basis in the Common Stock is its fair market value
at the time the SAR is exercised or the restricted share becomes vested (or is granted, if an election under Section 83(b) is made).
The Company may withhold
amounts from participants to satisfy tax withholding requirements. Except as otherwise provided by the Committee, participants
may have shares withheld from awards or may tender previously owned shares to the Company to satisfy the minimum tax withholding
requirements.
If a change in control
occurs, outstanding unvested awards under the Equity Incentive Plan may be considered parachute payments that would cause an “excess
parachute payment” under the Code. An excess parachute payment may subject the participant to a 20% excise tax and preclude
deduction by the Company.
The preceding discussion
is based on federal income tax laws and regulations presently in effect, which are subject to change, and the discussion does not
purport to be a complete description of the federal income tax aspects of the 2016 Equity Incentive Plan. A participant may also
be subject to state and local taxes in connection with the grant of awards under the plan. The Company recommends that participants
consult with their individual tax advisors to determine the applicability of the tax rules to the awards granted to them in their
personal circumstances.
Equity Compensation Plans
On May 27, 2005, the
Company adopted the 2005 Stock Option Plan (the Option Plan) and the 2005 Employee Stock Option Plan (the 2005 Employee Plan).
The Option Plan and the 2005 Employee Plan terminated on May 27, 2015 and no further options may be granted under either Plan.
On August 15, 2006, the Company adopted the 2006 Director Stock Option Plan (the Director Plan) pursuant to which it may grant
equity awards to eligible persons. Each of the Plans has subsequently been amended. On May 15, 2014, the Company adopted the 2014
Employee Stock Option Plan (the 2014 Employee Plan) pursuant to which it may grant equity awards to eligible persons. The 2014
Employee Plan allows the Board of Directors to grant options to purchase up to 2,000,000 shares of common stock to officers and
key employees of the Company. The Director Plan allows the Board of Directors to grant options to purchase up to 1,000,000 shares
of common stock to directors of the Company. Options granted under all of the Plans have a ten year maximum term, an exercise price
equal to at least the fair market value of the Company's common stock (based on the trading price on the NYSE MKT) on the date
of the grant, and with varying vesting periods as determined by the Board.
As of June 30, 2015,
the following options had been granted under the option plans.
|
|
Number of
|
|
|
Weighted-
|
|
|
Number of
|
|
|
|
securities to
|
|
|
average
|
|
|
securities
|
|
|
|
be issued on
|
|
|
exercise
|
|
|
remaining
|
|
|
|
exercise of
|
|
|
price of
|
|
|
available for
|
|
|
|
outstanding
|
|
|
outstanding
|
|
|
future
|
|
|
|
options,
|
|
|
options,
|
|
|
issuance
|
|
|
|
warrants,
|
|
|
warrants,
|
|
|
under equity
|
|
|
|
and rights
|
|
|
and rights
|
|
|
compensation
|
|
Plan Category
|
|
#
|
|
|
$
|
|
|
plans
|
|
Equity compensation plans approved by shareholders
|
|
|
270,000
|
|
|
|
1.47
|
|
|
|
1,730,000
|
|
Equity compensation plans not approved by shareholders
|
|
|
2,148,282
|
|
|
$
|
1.96
|
|
|
|
133,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,418,282
|
|
|
$
|
1.91
|
|
|
|
1,863,334
|
|
The
Board unanimously recommends
that the shareholders vote “FOR” Proposal 2 to
adopt
the IsoRay, Inc. 2016 Equity Incentive Plan.
PROPOSAL 3 –
RATIFICATION OF RE-APPOINTMENT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING
FIRM
|
The Audit Committee
has re-appointed the firm of DeCoria, Maichel & Teague, P.S. to serve as our independent registered public accounting firm
for the fiscal year ending June 30, 2016, and has directed that such re-appointment be submitted to our shareholders for ratification
at the Annual Meeting. Our organizational documents do not require that our shareholders ratify the selection of our independent
registered public accounting firm. If our shareholders do not ratify the selection, the Audit Committee will reconsider whether
to retain DeCoria, Maichel & Teague, P.S., but still may retain it nonetheless. Even if the selection is ratified, the Audit
Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would
be in our best interests.
A representative of
DeCoria, Maichel & Teague, P.S. is expected to be present at the Annual Meeting and will have an opportunity to make a statement
if he or she desires to do so. The representative also is expected to be available to respond to appropriate questions from shareholders.
Audit and Non-Audit Fees
The Company paid or
accrued the following fees in each of the prior three fiscal years to its principal accountant, DeCoria, Maichel & Teague,
P.S.:
|
|
For the Year Ended June 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
1. Audit fees
|
|
$
|
76,566
|
|
|
$
|
63,471
|
|
|
$
|
60,372
|
|
2. Audit-related fees
|
|
|
-
|
|
|
|
-
|
|
|
|
2,733
|
|
3. Tax fees
|
|
|
11,988
|
|
|
|
9,000
|
|
|
|
8,250
|
|
4. All other fees
|
|
|
-
|
|
|
|
-
|
|
|
|
3,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
88,554
|
|
|
$
|
72,471
|
|
|
$
|
75,105
|
|
Audit fees include
fees for the audit of our annual financial statements, reviews of our quarterly financial statements, and related consents for
documents filed with the SEC, as well as, in fiscal 2015, the fees for the audit of our internal control over financial reporting.
Audit-related fees include cost of attendance at the annual shareholder meeting. Tax fees include fees for the preparation of our
federal and state income tax returns. All other fees are related to consulting costs related to the review of documents related
to equity offerings.
As part of its responsibility
for oversight of the independent registered public accountants, the Audit Committee has established a pre-approval policy for engaging
audit and permitted non-audit services provided by our independent registered public accountants, DeCoria, Maichel & Teague,
P.S. In accordance with this policy, each type of audit, audit-related, tax and other permitted service to be provided by the independent
auditors is specifically described and each such service, together with a fee level or budgeted amount for such service, is pre-approved
by the Audit Committee. The Audit Committee has delegated authority to its Chairman to pre-approve additional non-audit services
(provided such services are not prohibited by applicable law) up to a pre-established aggregate dollar limit. All services pre-approved
by the Chairman of the Audit Committee must be presented at the next Audit Committee meeting for review and ratification. All of
the services provided by DeCoria, Maichel & Teague, P.S. described above were approved by our Audit Committee.
The Company’s
principal accountant, DeCoria, Maichel & Teague P.S., did not engage any other persons or firms other than the principal accountant’s
full-time, permanent employees.
Vote Required
The affirmative vote
of a majority of shares present in person or represented by proxy at the Annual Meeting and entitled to vote on this Proposal 3
is required to approve Proposal 3.
Any abstentions with
respect to this Proposal 3 will count as votes AGAINST this Proposal 3. Any broker non-votes with respect to this Proposal 3 will
not count as shares entitled to vote on this proposal and therefore will be disregarded for purposes of determining the outcome
of the vote on this Proposal 3.
The Board unanimously
recommends that the shareholders vote “FOR” Proposal 3 to ratify the re-appointment of DeCoria, Maichel & Teague,
P.S. as the independent registered public accounting firm of the Company.
OTHER INFORMATION
Other Business
It is not anticipated
that there will be any business presented at the Annual Meeting other than the matters set forth in the Notice of Annual Meeting
attached hereto. As of the date of this proxy statement, we were not aware of any other matters to be acted on at the Annual Meeting.
If any other business should properly come before the Annual Meeting or any adjournment thereof, the persons named on the enclosed
proxy will have discretionary authority to vote such proxy in accordance with their best judgment.
Shareholder Communications with the Board
To contact members
of the Board, individually or collectively, on any subject, please address that communication to:
Krista Cline, Corporate Secretary
IsoRay, Inc.
350 Hills St., Suite 106
Richland, WA 99354
The mailing envelope
for your communication should contain a clear notation that the enclosed letter is a “shareholder-board communication”
or “shareholder-director communication.” You must include your name and address in the written communication and indicate
whether you are a shareholder of the Company. We screen mail addressed to the Board, its Committees or any specified individual
director for security purposes and to ensure that the mail relates to discrete business matters that are relevant to our Company.
Mail that satisfies these screening criteria is required to be forwarded to the appropriate director or directors. The Corporate
Secretary will acknowledge the receipt of the communication; inform the shareholder concerning the distribution of that communication;
and when any action (if requested) would be reviewed by the Board and/or the relevant functional committee. The Corporate Secretary
will notify the shareholder of any action taken by the Board in reference to the shareholder’s request.
Board Attendance at Annual Meeting
While the Company does
not have a formal policy regarding attendance by members of the Board at the Company’s annual meetings of shareholders, it
has encouraged its directors to attend this Annual Meeting and expects to continue this informal policy. Shareholders are encouraged
to interact with the directors at that time. Mr. Babcock, Mr. LaVoy and Dr. Vitale attended the last annual meeting of the Company’s
shareholders.
Expenses of Solicitation
The Company will bear
the entire cost of this solicitation of proxies, including the preparation, assembly, printing and mailing of the Notice Regarding
the Availability of Proxy Materials, this Proxy Statement, the proxy and any additional solicitation material that the Company
may provide to shareholders. Proxies will be solicited by mail and may also be solicited by directors, officers and other employees
of the Company, without additional remuneration, in person or by telephone or facsimile transmission.
The Company has retained
Georgeson LLC, an independent proxy solicitation firm (“
Georgeson
”), to assist in soliciting proxies from stockholders.
Georgeson will receive a fee of approximately $7,500 as compensation for its services and will be reimbursed for its out-of-pocket
expenses, which are expected to not exceed $2,500. An additional fee, estimated to be $5,000-7,000 in the aggregate, will be payable
for telephone solicitations and other shareholder meeting services. The Company has agreed to indemnify Georgeson against certain
liabilities arising under the federal securities laws.
The Company will also
request brokerage firms, banks, nominees, custodians and fiduciaries to forward solicitation materials to the beneficial owners
of shares of common and Series B preferred stock as of the record date and will reimburse such persons for the cost of forwarding
the solicitation materials in accordance with customary practice. Your cooperation in promptly voting your shares and submitting
your proxy by telephone, the Internet or by completing and returning the proxy card if you receive one by mail will help to avoid
additional expense. Proxies and ballots will be received and tabulated by Broadridge and the Company’s Corporate Secretary,
Krista Cline, will serve as the inspector of elections for the Annual Meeting.
Adjournment of the Annual Meeting
In the event there
are an insufficient number of shares of our common and Series B preferred stock present in person or by proxy at the Annual Meeting
to constitute a quorum, the Board will request approval to adjourn the Annual Meeting to a later date. The place and date to which
the Annual Meeting would be adjourned would be announced at the Annual Meeting.
Shareholder Proposals and Director Nominations
In order to be eligible
for inclusion in the Company’s proxy materials for the Fiscal 2017 Annual Meeting of Shareholders, any shareholder proposal
to take action at such annual meeting must generally be received at the Company’s executive offices at 350 Hills St., Suite
106, Richland, Washington 99354 no later than December 30, 2016 in order to be considered timely under SEC rules and the advance
notice provisions of the Company’s Bylaws. Any such proposal shall be subject to the requirements of the proxy rules adopted
under the Exchange Act.
The notice with respect
to business proposals to be brought before the annual meeting must state the shareholder’s name, address and the number of
shares of common stock held, and briefly discuss the business to be brought before the annual meeting, the reasons for conducting
such business at the annual meeting and any interest of the shareholder in the proposal.
Shareholders wishing
to submit recommendations for director candidates must provide the following information in writing to the attention of the Secretary
of the Company by certified or registered mail:
|
·
|
The name, address, and biography of the candidate, including such person’s written consent
to being named in the proxy statement as a nominee and to serving as a director, if elected, and certain information regarding
the shareholder giving such notice;
|
|
·
|
The name, address, and phone number of the shareholder or group of shareholders making the recommendation;
and
|
|
·
|
With respect to common stock beneficially owned by the shareholder or group of shareholders making
the recommendation, and to the extent any shareholder is not a registered holder, proof of the number of shares held.
|
To be considered by
the Board for the Fiscal 2017 Annual Meeting of Shareholders and to be eligible for inclusion in the Company’s proxy materials
for that meeting, a director candidate nomination must be received by the Secretary by December 30, 2016 in order to be considered
timely under SEC rules and the advance notice provisions of the Company’s Bylaws.
However, if the date
of the Fiscal 2017 Annual Meeting is a date that is not within 30 days before or after the anniversary date of the Fiscal
2017 Annual Meeting, notice by the shareholder of a proposal must be received no later than ninety days before the date of the
Fiscal 2017 Annual Meeting, or, if later, by the close of business on the 10th calendar day after the first public announcement
of the date of such annual meeting. A public announcement includes disclosure in (1) a document filed by the Company with
the SEC, (2) a mailed notice of the Fiscal 2017 Annual Meeting, and (3) a press release reported by a national news service.
Unless otherwise provided in the Company’s bylaws, a shareholder who wishes to put forth a proposal at the Fiscal 2017 Annual
Meeting of Shareholders without including the proposal in the Company’s proxy statement must notify the Company of such proposal
by March 10, 2017. If a shareholder fails to give notice by this date, the proxy solicited by the Company for use in connection
with the Fiscal 2017 Annual Meeting will confer discretionary authority on the persons named as proxies to vote in their discretion
on such proposal without any discussion in the proxy statement of either the proposal or how the proxies intend to exercise their
voting discretion.
HOUSEHOLDING
Unless contrary instructions
are received, we may send a single copy of the Annual Report, Proxy Statement and Notice of Annual Meeting to any household at
which two or more shareholders reside if we believe the shareholders are members of the same family. Each shareholder in the household
will continue to receive a separate proxy card. This process is known as “householding” and helps reduce the volume
of duplicate information received at a single household, which reduces costs and expenses borne by us.
If you would like to
receive a separate set of our annual disclosure documents this year or in future years, follow the instructions described below
and we will deliver promptly a separate set. Similarly, if you share an address with another shareholder and the two of you would
like to receive only a single set of our annual disclosure documents, follow the instructions below:
1. If your shares
are registered in your own name, please contact our transfer agent by writing to them at Computershare Trust Company, 350 Indiana
Street, Golden, Colorado 80401 (Attn: IsoRay, Inc. Representative) or calling (303) 262-0600.
2. If a bank, broker
or other nominee holds your shares, please contact your bank, broker or other nominee directly.
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE
The Company has elected
to incorporate by reference certain information into this Proxy Statement. By incorporating by reference, the Company can disclose
important information to you by referring you to another document it has filed separately with the SEC and delivered to you with
this Proxy Statement. The information incorporated by reference is deemed to be a part of this Proxy Statement. However, any statement
contained in a document incorporated by reference into this Proxy Statement will be deemed to be modified or superseded for purposes
of this Proxy Statement to the extent a statement contained in this Proxy Statement modifies or supersedes the statement. Any statement
so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this Proxy Statement.
This Proxy Statement
incorporates by reference the information set forth under the following captions in the Company’s annual report on Form 10-K
for the fiscal year ended June 30, 2015 – (i) Item 6 – Selected Financial Data, (ii) Item 7 – Management’s
Discussion and Analysis of Financial Condition and Results of Operations, (iii) Item 7A – Quantitative and Qualitative Disclosures
About Market Risk, (iv) Item 8 – Financial Statements and Supplementary Data, and (v) Item 9 – Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure.
The Company’s
June 30, 2015 Annual Report on Form 10-K is enclosed with this Proxy Statement, and is also available over the Internet or by written
request as described below.
The Company will
furnish to shareholders without charge a copy of its Form 10-K for the fiscal year ended June 30, 2015, as filed with the Securities
and Exchange Commission, upon receipt of a written request addressed to IsoRay, Inc., 350 Hills St., Suite 106, Richland, WA 99354,
Attn: Corporate Secretary.
Reports, proxy statements and other information filed by the Company are also available on the internet
at the SEC’s World Wide Web site at http://www.sec.gov.
MISCELLANEOUS
The Board knows of
no other matters to be presented at the Annual Meeting. If any other business properly comes before the Annual Meeting or any adjournment
thereof, the proxies will vote on that business in accordance with their best judgment.
|
By Order of the Board of Directors,
|
|
|
|
|
|
Krista Cline
|
|
Secretary
|
APPENDIX A
ISORAY, INC. 2016 EQUITY INCENTIVE PLAN
1.
Purpose;
Eligibility
.
1.1
General
Purpose
. The name of this plan is the IsoRay, Inc. 2016 Equity Incentive Plan (the “
Plan
”). The purposes
of the Plan are to (a) enable IsoRay, Inc., a Minnesota corporation (the “
Company
”), and any Affiliate to attract
and retain the types of Employees, Consultants and Directors who will contribute to the Company’s long range success; (b)
provide incentives that align the interests of Employees, Consultants and Directors with those of the shareholders of the Company;
and (c) promote the success of the Company’s business.
1.2
Eligible
Award Recipients
. The persons eligible to receive Awards are the Employees, Consultants and Directors of the Company
and its Affiliates and such other individuals designated by the Committee who are reasonably expected to become Employees, Consultants
and Directors after the receipt of Awards.
1.3
Available
Awards
. Awards that may be granted under the Plan include: (a) Incentive Stock Options, (b) Non-qualified Stock Options,
(c) Stock Appreciation Rights, and (d) Restricted Awards.
2.
Definitions
.
“
Affiliate
”
means a corporation or other entity that, directly or through one or more intermediaries, controls, is controlled by or is under
common control with, the Company by virtue of being part of a parent-subsidiary group in which each entity owns at least fifty
percent (50%) of the equity interests in the other entity.
“
Applicable
Laws
” means the requirements related to or implicated by the administration of the Plan under applicable state corporate
law, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the shares of Common
Stock are listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are granted under the Plan.
“
Award
”
means any right granted under the Plan, including an Incentive Stock Option, a Non-qualified Stock Option, a Stock Appreciation
Right or a Restricted Award.
“
Award Agreement
”
means a written agreement, contract, certificate or other instrument or document evidencing the terms and conditions of an individual
Award granted under the Plan which may, in the discretion of the Company, be transmitted electronically to any Participant. Each
Award Agreement shall be subject to the terms and conditions of the Plan.
“
Board
”
means the Board of Directors of the Company, as constituted at any time.
“
Cause
”
means:
With respect to any Employee or Consultant:
|
(a)
|
If the Employee or Consultant is a party to an employment or service agreement with the Company
or its Affiliates and such agreement provides for a definition of Cause, the definition contained therein; or
|
|
(b)
|
If no such agreement exists, or if such agreement does not define Cause: (i) the commission of,
or plea of guilty or no contest to, a felony or a crime involving moral turpitude or the commission of any other act involving
willful malfeasance or material fiduciary breach with respect to the Company or an Affiliate; (ii) conduct that results in or is
reasonably likely to result in harm to the reputation or business of the Company or any of its Affiliates; (iii) gross negligence
or willful misconduct with respect to the Company or an Affiliate; or (iv) material violation of state or federal securities laws.
|
With respect to any
Director, a determination by a majority of the disinterested Board members that the Director has engaged in any of the following:
|
(a)
|
malfeasance in office;
|
|
(b)
|
gross misconduct or neglect;
|
|
(c)
|
false or fraudulent misrepresentation inducing the director’s
appointment;
|
|
(d)
|
willful conversion of corporate funds; or
|
|
(e)
|
repeated failure to participate in Board meetings on a regular basis despite having received proper
notice of the meetings in advance.
|
The Committee or disinterested
Board members, as applicable, in its absolute discretion, shall determine the effect of all matters and questions relating to whether
a Participant has been discharged for Cause.
“
Change in
Control
” means:
|
(a)
|
One Person (or more than one Person acting as a group) acquires ownership of stock of the Company
that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or total voting
power of the stock of the Company;
provided, that
, a Change in Control shall not occur if any Person (or more than one Person
acting as a group) owns more than 50% of the total fair market value or total voting power of the Company’s stock and acquires
additional stock;
|
|
(b)
|
One Person (or more than one Person acting as a group) acquires (or has acquired during the twelve-month
period ending on the date of the most recent acquisition) ownership of the Company’s stock possessing 30% or more of the
total voting power of the stock of such corporation;
|
|
(c)
|
A majority of the members of the Board are replaced during any twelve-month period by directors
whose appointment or election is not endorsed by majority of the Board before the date of appointment or election; or
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(d)
|
One Person (or more than one Person acting as a group), acquires (or has acquired during the twelve-month
period ending on the date of the most recent acquisition) assets from the Company that have a total gross fair market value equal
to or more than 40% of the total gross fair market value of all of the assets of the Company immediately before such acquisition(s).
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“
Code
”
means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall be
deemed to include a reference to any regulations promulgated thereunder.
“
Committee
”
means a committee of one or more members of the Board appointed by the Board to administer the Plan in accordance with
Section
3.3
and
Section 3.4
.
“
Common Stock
”
means the common stock, $0.001 par value per share, of the Company, or such other securities of the Company as may be designated
by the Committee from time to time in substitution thereof.
“
Company
”
means IsoRay, Inc., a Minnesota corporation, and any successor thereto.
“
Consultant
”
means any individual who is engaged by the Company or any Affiliate to render consulting or advisory services.
“
Continuous
Service
” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Consultant
or Director, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant renders such service,
provided that
there is
no interruption or termination of the Participant’s Continuous Service;
provided further that
if any Award is subject
to Section 409A of the Code, this sentence shall only be given effect to the extent consistent with Section 409A of the Code. For
example, a change in status from an Employee of the Company to a Director of an Affiliate will not constitute an interruption of
Continuous Service. The Committee or its delegate, in its sole discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal
or family leave of absence.
“
Covered Employee
”
has the same meaning as set forth in Section 162(m)(3) of the Code, as interpreted by IRS Notice 2007-49.
“
Deferred
Stock Units (DSUs)
” has the meaning set forth in
Section 7.2
hereof.
“
Director
”
means a member of the Board or a member of the Board of Directors of any Affiliate of the Company.
“
Disability
”
means that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical
or mental impairment;
provided, however,
for purposes of determining the term of an Incentive Stock Option pursuant to
Section
6.10
hereof, the term Disability shall have the meaning ascribed to it under Section 22(e)(3) of the Code. The determination
of whether an individual has a Disability shall be determined under procedures established by the Committee. Except in situations
where the Committee is determining Disability for purposes of the term of an Incentive Stock Option pursuant to
Section 6.10
hereof within the meaning of Section 22(e)(3) of the Code, the Committee may rely on any determination that a Participant is disabled
for purposes of benefits under any long-term disability plan maintained by the Company or any Affiliate in which a Participant
participates.
“
Disqualifying
Disposition
” has the meaning set forth in
Section 14.12
.
“
Effective
Date
” shall mean the date as of which this Plan is adopted by the Board.
“Employee
”
means any person (including those who serve as an Officer or Director but are also employed by the Company) employed by the Company
or an Affiliate;
provided, that,
for purposes of determining eligibility to receive Incentive Stock Options, an Employee
shall mean an employee of the Company or a parent or subsidiary corporation within the meaning of Section 424 of the Code. Mere
service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute
“employment” by the Company or an Affiliate.
“
Exchange
Act
” means the Securities Exchange Act of 1934, as amended.
“
Fair Market
Value
” means, as of any date, the value of the Common Stock as determined below. If the Common Stock is listed on any
established stock exchange or a national market system, the Fair Market Value shall be the closing price of a share of Common Stock
(or if no sales were reported the closing price on the date immediately preceding such date) as quoted on such exchange or system
on the day of determination, as reported in the
Wall Street Journal
or such other source as the Company deems reliable.
In the absence of an established market for the Common Stock, the Fair Market Value shall be determined by the Committee in
accordance with Section 409A of the Code, and such determination shall be conclusive and binding on all persons.
“
Free Standing
Rights
” has the meaning set forth in
Section 7.1(a)
.
“
Grant Date
”
means the date on which the Committee adopts a resolution, or takes other appropriate action, expressly granting an Award to a
Participant that specifies the key terms and conditions of the Award or, if a later date is set forth in such resolution, then
such date as is set forth in such resolution.
“
Incentive
Stock Option
” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the
Code.
“
Non-Employee
Director
” means a Director who is a “non-employee director” within the meaning of Rule 16b-3.
“
Non-qualified
Stock Option
” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock
Option.
“
Officer
”
means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
“
Option
”
means an Incentive Stock Option or a Non-qualified Stock Option granted pursuant to the Plan.
“
Optionholder
”
means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding
Option.
“
Option Exercise
Price
” means the price at which a share of Common Stock may be purchased upon the exercise of an Option.
“
Outside Director
”
means a Director who is an “outside director” within the meaning of Section 162(m) of the Code and Treasury Regulations
Section 1.162-27(e)(3) or any successor to such statute and regulation.
“
Participant
”
means an eligible person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding
Award.
“
Permitted
Transferee
” means: (a) a member of the Optionholder’s immediate family (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 Optionholder’s household (other than a tenant
or employee), a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons
(or the Optionholder) control the management of assets, and any other entity in which these persons (or the Optionholder) own more
than 50% of the voting interests; (b) third parties designated by the Committee in connection with a program established and approved
by the Committee pursuant to which Participants may receive a cash payment or other consideration in consideration for the transfer
of a Non-qualified Stock Option; and (c) such other transferees as may be permitted by the Committee in its sole discretion.
“
Plan
”
means this IsoRay, Inc. 2016 Equity Incentive Plan, as amended and/or amended and restated from time to time.
“
Related Rights
”
has the meaning set forth in
Section 7.1(a)
.
“
Restricted
Award
” means any Award granted pursuant to
Section 7.2(a)
.
“
Restricted
Period
” has the meaning set forth in
Section 7.2(a)
.
“
Rule 16b-3
”
means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.
“
Securities
Act
” means the Securities Act of 1933, as amended.
“
Stock Appreciation
Right
” means the right pursuant to an Award granted under
Section 7.1
to receive, upon exercise, an amount payable
in cash or shares equal to the number of shares subject to the Stock Appreciation Right that is being exercised multiplied by the
excess of (a) the Fair Market Value of a share of Common Stock on the date the Award is exercised, over (b) the exercise price
specified in the Stock Appreciation Right Award Agreement.
“
Stock for
Stock Exchange
” has the meaning set forth in
Section 6.4
.
“Substitute
Awards”
means Awards granted solely in assumption of, or in substitution for, outstanding awards previously granted by
a company acquired by the Company or with which the Company combines.
“
Ten Percent
Shareholder
” means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more
than 10% of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.
3.
Administration
.
3.1
Authority
of Committee
. The Plan shall be administered by the Committee or, in the Board’s sole discretion, by the Board.
Subject to the terms of the Plan, the Committee’s charter and Applicable Laws, and in addition to other express powers and
authorization conferred by the Plan, the Committee shall have the authority:
(a) to
construe and interpret the Plan and apply its provisions;
(b) to
promulgate, amend, and rescind rules and regulations relating to the administration of the Plan;
(c) to
authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;
(d) to
delegate its authority to one or more Officers of the Company with respect to Awards that do not involve Covered Employees or “insiders”
within the meaning of Section 16 of the Exchange Act;
(e) to
determine when Awards are to be granted under the Plan and the applicable Grant Date;
(f) from
time to time to select, subject to the limitations set forth in this Plan, those Participants to whom Awards shall be granted;
(g) to
determine the number of shares of Common Stock to be made subject to each Award;
(h) to
determine whether each Option is to be an Incentive Stock Option or a Non-qualified Stock Option;
(i) to
prescribe the terms and conditions of each Award, including, without limitation, the exercise price and medium of payment and vesting
provisions, and to specify the provisions of the Award Agreement relating to such grant;
(j) to
amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding
Award;
provided, however
, that if any such amendment impairs a Participant’s rights or increases a Participant’s
obligations under his or her Award or creates or increases a Participant’s federal income tax liability with respect to an
Award, such amendment shall also be subject to the Participant’s consent;
(k) to
determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination
of their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees
under the Company’s employment policies;
(l) to
make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event that
triggers anti-dilution adjustments;
(m) to
interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument
or agreement relating to, or Award granted under, the Plan; and
(n) to
exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration
of the Plan.
The Committee also
may modify the purchase price or the exercise price of any outstanding Award, but in no event shall the modification be less than
the Fair Market Value on the date of the modification,
provided that
if the modification effects a repricing, shareholder
approval shall be required before the repricing is effective.
3.2
Committee
Decisions Final
. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding
on the Company and the Participants, unless such decisions are determined by a court having jurisdiction to be arbitrary and capricious.
3.3
Delegation
.
The Committee or, if no Committee has been appointed, the Board may delegate administration of the Plan to a committee or committees
of one or more members of the Board, and the term “
Committee
” shall apply to any person or persons to whom such
authority has been delegated. The Committee shall have the power to delegate to a subcommittee any of the administrative powers
the Committee is authorized to exercise (and references in this Plan to the Board or the Committee shall thereafter be to the committee
or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from
time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan.
The members of the Committee shall be appointed by and serve at the pleasure of the Board. From time to time, the Board may increase
or decrease the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members
in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote of the
majority of its members or, in the case of a Committee comprised of only two members, the unanimous consent of its members, whether
present or not, or by the written consent of the majority of its members and minutes shall be kept of all of its meetings and copies
thereof shall be provided to the Board. Subject to the limitations prescribed by the Plan and the Board, the Committee may establish
and follow such rules and regulations for the conduct of its business as it may determine to be advisable. Notwithstanding the
foregoing, the Board, and not the Committee, shall administer the Plan with respect to all Awards to any Director who is not also
an Employee.
3.4
Committee
Composition
. Except as otherwise determined by the Board, the Committee shall consist solely of two or more Non-Employee
Directors who are also Outside Directors. The Board shall have discretion to determine whether or not it intends to comply with
the exemption requirements of Rule 16b-3 and/or Section 162(m) of the Code. However, if the Board intends to satisfy such exemption
requirements, with respect to Awards to any Covered Employee and with respect to any insider subject to Section 16 of the Exchange
Act, the Committee shall be a compensation committee of the Board that at all times consists solely of two or more Non-Employee
Directors who are also Outside Directors. Within the scope of such authority, the Board or the Committee may (a) delegate to a
committee of one or more members of the Board who are not Outside Directors the authority to grant Awards to eligible persons who
are either (i) not then Covered Employees and are not expected to be Covered Employees at the time of recognition of income resulting
from such Award or (ii) not persons with respect to whom the Company wishes to comply with Section 162(m) of the Code or (b) delegate
to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act. Nothing herein shall create an inference that an Award is not
validly granted under the Plan in the event Awards are granted under the Plan by a compensation committee of the Board that does
not at all times consist solely of two or more Non-Employee Directors who are also Outside Directors.
3.5
Indemnification
.
In addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent
allowed by Applicable Laws, the Committee shall be indemnified by the Company against the reasonable expenses, including attorney’s
fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which the
Committee may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted
under the Plan, and against all amounts paid by the Committee in settlement thereof (
provided, however
, that the settlement
has been approved by the Company, which approval shall not be unreasonably withheld) or paid by the Committee in satisfaction of
a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such Committee did not act in good faith and in a manner which such person reasonably believed to be in
the best interests of the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained
of was unlawful;
provided, however
, that within 60 days after institution of any such action, suit or proceeding, such Committee
shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding.
4.
Shares
Subject to the Plan
.
4.1 Subject
to adjustment in accordance with
Section 11
, a total of 4,000,000 shares of Common Stock shall be available for the grant
of Awards under the Plan;
provided that
, no more than 2,000,000 shares of Common Stock may be granted as Incentive Stock
Options. Additionally, a Director who is not also an Employee may not be granted Awards covering more than 100,000 shares of Common
Stock in any fiscal year.
During the terms of the Awards, the Company shall keep available at all times the number of shares
of Common Stock required to satisfy such Awards.
4.2 Shares
of Common Stock available for distribution under the Plan may consist, in whole or in part, of authorized and unissued shares,
treasury shares or shares reacquired by the Company in any manner.
4.3 Subject
to adjustment in accordance with
Section 11
,
no Participant shall be granted, during
any one (1) year period, Options to purchase Common Stock and Stock Appreciation Rights with respect to more than 500,000 shares
of Common Stock in the aggregate or any other Awards with respect to more than 500,000 shares of Common Stock in the aggregate.
If an Award is to be settled in cash, the number of shares of Common Stock on which the Award is based shall not count toward the
individual share limit set forth in this
Section 4
.
4.4 Any
shares of Common Stock subject to an Award that is canceled, forfeited or expires prior to exercise or realization, either in full
or in part, shall again become available for issuance under the Plan. Notwithstanding anything to the contrary contained herein:
shares subject to an Award under the Plan shall not again be made available for issuance or delivery under the Plan if such shares
are (a) shares tendered in payment of an Option, (b) shares delivered or withheld by the Company to satisfy any tax withholding
obligation, or (c) shares covered by a stock-settled Stock Appreciation Right or other Awards that were not issued upon the settlement
of the Award.
4.5 Any
shares of Common Stock issued by the Company as Substitute Awards in connection with the assumption or substitution of outstanding
grants from any acquired company shall not reduce the shares of Common Stock available for Awards under the Plan to the extent
that the rules and regulations of any stock exchange or other trading market on which the shares of Common Stock are listed or
traded provide an exemption from shareholder approval for assumption, substitution, conversion, adjustment, or replacement of outstanding
awards in connection with mergers, acquisitions, or other corporate combinations.
5.
Eligibility
.
5.1
Eligibility
for Specific Awards
. Incentive Stock Options may be granted only to Employees. Awards other than Incentive Stock Options
may be granted to Employees, Consultants and Directors and those individuals whom the Committee determines are reasonably expected
to become Employees, Consultants and Directors following the Grant Date.
5.2
Ten
Percent Shareholders
. A Ten Percent Shareholder shall not be granted an Incentive Stock Option unless the Option Exercise
Price is at least 110% of the Fair Market Value of the Common Stock at the Grant Date and the Option is not exercisable after the
expiration of five years from the Grant Date.
6.
Option
Provisions
. Each Option granted under the Plan shall be evidenced by an Award Agreement. Each Option so granted shall
be subject to the conditions set forth in this
Section 6
, and to such other conditions not inconsistent with the Plan as
may be reflected in the applicable Award Agreement. All Options shall be separately designated Incentive Stock Options or Non-qualified
Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for
shares of Common Stock purchased on exercise of each type of Option. Notwithstanding the foregoing, the Company shall have no liability
to any Participant or any other person if an Option designated as an Incentive Stock Option fails to qualify as such at any time
or if an Option is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A
of the Code and the terms of such Option do not satisfy the requirements of Section 409A of the Code. The provisions of separate
Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option
or otherwise) the substance of each of the following provisions:
6.1
Term
.
Subject to the provisions of
Section 5.2
regarding Ten Percent Shareholders, no Incentive Stock Option shall be exercisable
after the expiration of 10 years from the Grant Date. The term of a Non-qualified Stock Option granted under the Plan shall be
determined by the Committee;
provided, however
, no Non-qualified Stock Option shall be exercisable after the expiration
of 10 years from the Grant Date.
6.2
Exercise
Price of an Incentive Stock Option
. Subject to the provisions of
Section 5.2
regarding Ten Percent Shareholders,
the Option Exercise Price of each Incentive Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock
subject to the Option on the Grant Date. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an Option
Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution
for another option in a manner satisfying the provisions of Section 424(a) of the Code.
6.3
Exercise
Price of a Non-qualified Stock Option
. The Option Exercise Price of each Non-qualified Stock Option shall be not less
than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing,
a Non-qualified Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if
such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section
409A of the Code.
6.4
Consideration
.
The Option Exercise Price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes
and regulations, either (a) in cash or by certified or bank check at the time the Option is exercised or (b) in the discretion
of the Committee, upon such terms as the Committee shall approve, the Option Exercise Price may be paid: (i) by delivery to the
Company of other Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal
to the Option Exercise Price (or portion thereof) due for the number of shares being acquired, or by means of attestation whereby
the Participant identifies for delivery specific shares of Common Stock that have an aggregate Fair Market Value on the date of
attestation equal to the Option Exercise Price (or portion thereof) and receives a number of shares of Common Stock equal to the
difference between the number of shares thereby purchased and the number of identified attestation shares of Common Stock (a “
Stock
for Stock Exchange
”); (ii) a “cashless” exercise program established with a broker; (iii) by reduction in
the number of shares of Common Stock otherwise deliverable upon exercise of such Option with a Fair Market Value equal to the aggregate
Option Exercise Price at the time of exercise; (iv) any combination of the foregoing methods; or (v) in any other form of legal
consideration that may be acceptable to the Committee. Unless otherwise specifically provided in the Option, the exercise price
of Common Stock acquired pursuant to an Option that is paid by delivery (or attestation) to the Company of other Common Stock acquired,
directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for
more than six months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting
purposes). Notwithstanding the foregoing, during any period for which the Common Stock is publicly traded (i.e., the Common Stock
is listed on any established stock exchange or a national market system) an exercise by a Director or Officer that involves or
may involve a direct or indirect extension of credit or arrangement of an extension of credit by the Company, directly or indirectly,
in violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any Award under this Plan.
6.5
Transferability
of an Incentive Stock Option
. An Incentive Stock Option shall not be transferable except by will or by the laws of descent
and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the
foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.
6.6
Transferability
of a Non-qualified Stock Option
. A Non-qualified Stock Option may, in the sole discretion of the Committee, be transferable
to a Permitted Transferee, upon written approval by the Committee to the extent provided in the Award Agreement. If the Non-qualified
Stock Option does not provide for transferability, then the Non-qualified Stock Option shall not be transferable except by will
or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the
Option.
6.7
Vesting
of Options
. Each Option may, but need not, vest and therefore become exercisable in periodic installments that may,
but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised
(which may be based on performance or other criteria) as the Committee may deem appropriate. The vesting provisions of individual
Options may vary. No Option may be exercised for a fraction of a share of Common Stock.
6.8
Termination
of Continuous Service
. Unless otherwise provided in an Award Agreement or in an employment agreement the terms of which
have been approved by the Committee, in the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s
death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise
such Option as of the date of termination) but only within such period of time ending on the earlier of (a) the date three months
following the termination of the Optionholder’s Continuous Service or (b) the expiration of the term of the Option as set
forth in the Award Agreement;
provided that
, if the termination of Continuous Service is by the Company for Cause, all outstanding
Options (whether or not vested) shall immediately terminate and cease to be exercisable. If, after termination, the Optionholder
does not exercise his or her Option within the time specified in the Award Agreement, the Option shall terminate.
6.9
Extension
of Termination Date
. An Optionholder’s Award Agreement may also provide that if the exercise of the Option following
the termination of the Optionholder’s Continuous Service for any reason would be prohibited at any time because the issuance
of shares of Common Stock would violate the registration requirements under the Securities Act or any other state or federal securities
law or the rules of any securities exchange or interdealer quotation system, then the Option shall terminate on the earlier of
(a) the expiration of the term of the Option in accordance with
Section 6.1
or (b) the expiration of a period after termination
of the Participant’s Continuous Service that is three months after the end of the period during which the exercise of the
Option would be in violation of such registration or other securities law requirements.
6.10
Disability
of Optionholder
. Unless otherwise provided in an Award Agreement, in the event that an Optionholder’s Continuous
Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of
time ending on the earlier of (a) the date 12 months following such termination or (b) the expiration of the term of the Option
as set forth in the Award Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time
specified herein or in the Award Agreement, the Option shall terminate.
6.11
Death
of Optionholder
. Unless otherwise provided in an Award Agreement, in the event an Optionholder’s Continuous Service
terminates as a result of the Optionholder’s death, then the Option may be exercised (to the extent the Optionholder was
entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right
to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s
death, but only within the period ending on the earlier of (a) the date 12 months following the date of death or (b) the expiration
of the term of such Option as set forth in the Award Agreement. If, after the Optionholder’s death, the Option is not exercised
within the time specified herein or in the Award Agreement, the Option shall terminate.
6.12
Incentive
Stock Option $100,000 Limitation
. To the extent that the aggregate Fair Market Value (determined at the time of grant)
of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any
calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, the Options or portions thereof which exceed
such limit (according to the order in which they were granted) shall be treated as Non-qualified Stock Options.
7.
Provisions
of Awards Other Than Options
.
7.1
Stock
Appreciation Rights
.
(a) General
Each Stock
Appreciation Right granted under the Plan shall be evidenced by an Award Agreement. Each Stock Appreciation Right so granted shall
be subject to the conditions set forth in this
Section 7.1
, and to such other conditions not inconsistent with the Plan
as may be reflected in the applicable Award Agreement. Stock Appreciation Rights may be granted alone (“
Free Standing
Rights
”) or in tandem with an Option granted under the Plan (“
Related Rights
”).
(b) Grant
Requirements
Any Related
Right that relates to a Non-qualified Stock Option may be granted at the same time the Option is granted or at any time thereafter
but before the exercise or expiration of the Option. Any Related Right that relates to an Incentive Stock Option must be granted
at the same time the Incentive Stock Option is granted.
(c) Term
of Stock Appreciation Rights
The term
of a Stock Appreciation Right granted under the Plan shall be determined by the Committee;
provided, however
, no Stock Appreciation
Right shall be exercisable later than the tenth anniversary of the Grant Date.
(d) Vesting
of Stock Appreciation Rights
Each Stock
Appreciation Right may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be
equal. The Stock Appreciation Right may be subject to such other terms and conditions on the time or times when it may be exercised
as the Committee may deem appropriate. The vesting provisions of individual Stock Appreciation Rights may vary. No Stock Appreciation
Right may be exercised for a fraction of a share of Common Stock. The Committee may, but shall not be required to, provide for
an acceleration of vesting and exercisability in the terms of any Stock Appreciation Right upon the occurrence of a specified event.
(e) Exercise
and Payment
Upon exercise
of a Stock Appreciation Right, the holder shall be entitled to receive from the Company an amount equal to the number of shares
of Common Stock subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (i) the Fair Market
Value of a share of Common Stock on the date the Award is exercised, over (ii) the exercise price specified in the Stock Appreciation
Right or related Option. Payment with respect to the exercise of a Stock Appreciation Right shall be made on the date of exercise.
Payment shall be made in the form of shares of Common Stock (with or without restrictions as to substantial risk of forfeiture
and transferability, as determined by the Committee in its sole discretion), cash or a combination thereof, as determined by the
Committee.
(f) Exercise
Price
The exercise
price of a Free Standing Stock Appreciation Right shall be determined by the Committee, but shall not be less than 100% of the
Fair Market Value of one share of Common Stock on the Grant Date of such Stock Appreciation Right. A Related Right granted simultaneously
with or subsequent to the grant of an Option and in conjunction therewith or in the alternative thereto shall have the same exercise
price as the related Option, shall be transferable only upon the same terms and conditions as the related Option, and shall be
exercisable only to the same extent as the related Option;
provided, however
, that a Stock Appreciation Right, by its terms,
shall be exercisable only when the Fair Market Value per share of Common Stock subject to the Stock Appreciation Right and related
Option exceeds the exercise price per share thereof and no Stock Appreciation Rights may be granted in tandem with an Option unless
the Committee determines that the requirements of
Section 7.1(b)
are satisfied.
(g) Reduction
in the Underlying Option Shares
Upon any exercise
of a Related Right, the number of shares of Common Stock for which any related Option shall be exercisable shall be reduced by
the number of shares for which the Stock Appreciation Right has been exercised. The number of shares of Common Stock for which
a Related Right shall be exercisable shall be reduced upon any exercise of any related Option by the number of shares of Common
Stock for which such Option has been exercised.
7.2
Restricted
Awards
.
(a) General
A Restricted
Award is an Award of actual shares of Common Stock (“
Restricted Stock
”), which may, but need not, provide that
such Restricted Award may not be sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as collateral for
a loan or as security for the performance of any obligation or for any other purpose for such period (the “
Restricted
Period
”) as the Committee shall determine. Each Restricted Award granted under the Plan shall be evidenced by an Award
Agreement. Each Restricted Award so granted shall be subject to the conditions set forth in this
Section 7.2
, and to such
other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.
(b) Restricted
Stock
Each Participant
granted Restricted Stock shall execute and deliver to the Company an Award Agreement with respect to the Restricted Stock setting
forth the restrictions and other terms and conditions applicable to such Restricted Stock. If the Committee determines that the
Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the
applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (A) an escrow
agreement satisfactory to the Committee, if applicable and (B) the appropriate blank stock power with respect to the Restricted
Stock covered by such agreement. If a Participant fails to execute an agreement evidencing an Award of Restricted Stock and, if
applicable, an escrow agreement and stock power, the Award shall be null and void. Subject to the restrictions set forth in the
Award, the Participant generally shall have the rights and privileges of a shareholder as to such Restricted Stock, including the
right to vote such Restricted Stock and the right to receive dividends;
provided that
, any cash dividends and stock dividends
with respect to the Restricted Stock shall be withheld by the Company for the Participant’s account, and interest may be
credited on the amount of the cash dividends withheld at a rate and subject to such terms as determined by the Committee. The cash
dividends or stock dividends so withheld by the Committee and attributable to any particular share of Restricted Stock (and earnings
thereon, if applicable) shall be distributed to the Participant in cash or, at the discretion of the Committee, in shares of Common
Stock having a Fair Market Value equal to the amount of such dividends, if applicable, upon the release of restrictions on such
share and, if such share is forfeited, the Participant shall have no right to such dividends.
(c) Restrictions
Restricted
Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and
to such other terms and conditions as may be set forth in the applicable Award Agreement: (A) if an escrow arrangement is used,
the Participant shall not be entitled to delivery of the stock certificate; (B) the shares shall be subject to the restrictions
on transferability set forth in the Award Agreement; (C) the shares shall be subject to forfeiture to the extent provided in the
applicable Award Agreement; and (D) to the extent such shares are forfeited, the stock certificates shall be returned to the Company,
and all rights of the Participant to such shares and as a shareholder with respect to such shares shall terminate without further
obligation on the part of the Company.
(d) Restricted
Period
With respect
to Restricted Awards, the Restricted Period shall commence on the Grant Date and end at the time or times set forth on a schedule
established by the Committee in the applicable Award Agreement. No Restricted Award may be granted or settled for a fraction of
a share of Common Stock. The Committee may, but shall not be required to, provide for an acceleration of vesting in the terms of
any Award Agreement upon the occurrence of a specified event.
(e) Delivery
of Restricted Stock
Upon the expiration
of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in
Section 7.2(c)
and
the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable
Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his or
her beneficiary, without charge, the stock certificate evidencing the shares of Restricted Stock which have not then been forfeited
and with respect to which the Restricted Period has expired (to the nearest full share) and any cash dividends or stock dividends
credited to the Participant’s account with respect to such Restricted Stock and the interest thereon, if any.
(f) Stock
Restrictions
Each certificate
representing Restricted Stock awarded under the Plan shall bear a legend in such form as the Company deems appropriate.
8.
Securities
Law Compliance
. Each Award Agreement shall provide that no shares of Common Stock shall be purchased or sold thereunder
unless and until (a) any then applicable requirements of state or federal laws and regulatory agencies have been fully complied
with to the satisfaction of the Company and its counsel and (b) if required to do so by the Company, the Participant has executed
and delivered to the Company a letter of investment intent in such form and containing such provisions as the Committee may require.
The Company shall use reasonable efforts to seek to obtain from each regulatory commission or agency having jurisdiction over the
Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise of the Awards;
provided, however
, that this undertaking shall not require the Company to register under the Securities Act the Plan, any
Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful
issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell
Common Stock upon exercise of such Awards unless and until such authority is obtained.
9.
Use
of Proceeds from Stock
. Proceeds from the sale of Common Stock pursuant to Awards, or upon exercise thereof, shall constitute
general funds of the Company.
10.
Miscellaneous
.
10.1
[Intentionally
Omitted.]
10.2
Shareholder
Rights
. Except as provided in the Plan or an Award Agreement, no Participant shall be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares of Common Stock subject to such Award unless and until such Participant
has satisfied all requirements for exercise of the Award pursuant to its terms and no adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property) or distributions of other rights for which the record date is
prior to the date such Common Stock certificate is issued, except as provided in
Section 11
hereof.
10.3
No
Employment or Other Service Rights
. Nothing in the Plan or any instrument executed or Award granted pursuant thereto
shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time
the Award was granted or shall affect the right of the Company or an Affiliate to terminate (a) the employment of an Employee with
or without notice and with or without Cause or (b) the service of a Director pursuant to the By-laws of the Company or an Affiliate,
and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case
may be.
10.4
Transfer;
Approved Leave of Absence
. For purposes of the Plan, no termination of employment by an Employee shall be deemed to
result from either (a) a transfer of employment to the Company from an Affiliate or from the Company to an Affiliate, or from one
Affiliate 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 reemployment 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 Committee otherwise so provides in writing, in either case, except
to the extent inconsistent with Section 409A of the Code if the applicable Award is subject thereto.
10.5
Withholding
Obligations
. To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee,
the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common
Stock under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation
paid to the Participant by the Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company
to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Award,
provided, however
, that no shares of Common Stock are withheld with a value
exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned and unencumbered
shares of Common Stock of the Company.
11.
Adjustments
Upon Changes in Stock
. In the event of changes in the outstanding Common Stock or in the capital structure of the Company
by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an extraordinary corporate transaction
such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization
occurring after the Grant Date of any Award, Awards granted under the Plan and any Award Agreements, the exercise price of Options
and Stock Appreciation Rights, the maximum number of shares of Common Stock subject to all Awards stated in
Section 4
and
the maximum number of shares of Common Stock with respect to which any one person may be granted Awards during any period stated
in
Section 4
will be equitably adjusted or substituted, as to the number, price or kind of a share of Common Stock or other
consideration subject to such Awards to the extent necessary to preserve the economic intent of such Award. In the case of adjustments
made pursuant to this
Section 11
, unless the Committee specifically determines that such adjustment is in the best interests
of the Company or its Affiliates, the Committee shall, in the case of Incentive Stock Options, ensure that any adjustments under
this
Section 11
will not constitute a modification, extension or renewal of the Incentive Stock Options within the meaning
of Section 424(h)(3) of the Code and in the case of Non-qualified Stock Options, ensure that any adjustments under this
Section
11
will not constitute a modification of such Non-qualified Stock Options within the meaning of Section 409A of the Code. Any
adjustments made under this
Section 11
shall be made in a manner which does not adversely affect the exemption provided
pursuant to Rule 16b-3 under the Exchange Act. Further, with respect to Awards intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, any adjustments or substitutions will not cause the Company to be denied
a tax deduction on account of Section 162(m) of the Code. The Company shall give each Participant notice of an adjustment hereunder
and, upon notice, such adjustment shall be conclusive and binding for all purposes.
12.
Effect
of Change in Control
.
12.1 Unless
otherwise provided in an Award Agreement or in a Participant’s employment or service agreement, notwithstanding any provision
of the Plan to the contrary, in the event of a Change in Control, all Options and Stock Appreciation Rights shall become immediately
exercisable with respect to 100% of the shares subject to such Options or Stock Appreciation Rights, and/or the Restricted Period
shall expire immediately with respect to 100% of the shares of Restricted Stock or Restricted Stock Units. To the extent practicable,
any actions taken by the Committee under the immediately preceding sentence shall occur in a manner and at a time which allows
affected Participants the ability to participate in the Change in Control with respect to the shares of Common Stock subject to
their Awards.
12.2 In
addition, in the event of a Change in Control, the Committee may in its discretion and upon at least 10 days’ advance notice
to the affected persons, cancel any outstanding Awards and pay to the holders thereof, in cash or stock, or any combination thereof,
the value of such Awards based upon the price per share of Common Stock received or to be received by other shareholders of the
Company in the event. In the case of any Option or Stock Appreciation Right with an exercise price (or SAR Exercise Price in the
case of a Stock Appreciation Right) that equals or exceeds the price paid for a share of Common Stock in connection with the Change
in Control, the Committee may cancel the Option or Stock Appreciation Right without the payment of consideration therefor.
12.3 The
obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger,
consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially
all of the assets and business of the Company and its Affiliates, taken as a whole.
13.
Amendment
of the Plan and Awards
.
13.1
Amendment
of Plan
. The Board at any time, and from time to time, may amend or terminate the Plan. However, except as provided
in
Section 11
relating to adjustments upon changes in Common Stock and
Section 13.3
, no amendment shall be effective
unless approved by the shareholders of the Company to the extent shareholder approval is necessary to satisfy any Applicable Laws.
At the time of such amendment, the Board shall determine, upon advice from counsel, whether such amendment will be contingent on
shareholder approval.
13.2
Shareholder
Approval
. The Board may, in its sole discretion, submit any other amendment to the Plan for shareholder approval, including,
but not limited to, amendments to the Plan intended to satisfy the requirements of Section 162(m) of the Code and the regulations
thereunder regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation
paid to certain executive officers.
13.3
Contemplated
Amendments
. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary
or advisable to provide eligible Employees, Consultants and Directors with the maximum benefits provided or to be provided under
the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options or to the nonqualified
deferred compensation provisions of Section 409A of the Code and/or to bring the Plan and/or Awards granted under it into compliance
therewith.
13.4
No
Impairment of Rights
. Rights under any Award granted before amendment of the Plan shall not be impaired by any amendment
of the Plan unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
13.5
Amendment
of Awards
. The Committee at any time, and from time to time, may amend the terms of any one or more Awards;
provided,
however
, that the Committee may not affect any amendment which would otherwise constitute an impairment of the rights under
any Award unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.
14.
General
Provisions
.
14.1
Forfeiture
Events
. The Committee may specify in an Award Agreement that the Participant’s rights, payments and benefits with
respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain events,
in addition to applicable vesting conditions of an Award. Such events may include, without limitation, breach of non-competition,
non-solicitation, confidentiality, or other restrictive covenants that are contained in the Award Agreement or otherwise applicable
to the Participant, a termination of the Participant’s Continuous Service for Cause, or other conduct by the Participant
that is detrimental to the business or reputation of the Company and/or its Affiliates.
14.2
Clawback
.
Notwithstanding any other provisions in this Plan, any Award which is subject to recovery under any law, government regulation
or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to
such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such
law, government regulation or stock exchange listing requirement).
14.3
Other
Compensation Arrangements
. Nothing contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
14.4
Sub-plans
.
The Committee may from time to time establish sub-plans under the Plan for purposes of satisfying blue sky, securities, tax or
other laws of various jurisdictions in which the Company intends to grant Awards. Any sub-plans shall contain such limitations
and other terms and conditions as the Committee determines are necessary or desirable. All sub-plans shall be deemed a part of
the Plan, but each sub-plan shall apply only to the Participants in the jurisdiction for which the sub-plan was designed.
14.5
[Intentionally
Omitted.]
14.6
Unfunded
Plan
. The Plan shall be unfunded. Neither the Company, the Board nor the Committee shall be required to establish any
special or separate fund or to segregate any assets to assure the performance of its obligations under the Plan.
14.7
Recapitalizations
.
Each Award Agreement shall contain provisions required to reflect the provisions of
Section 11
.
14.8
Delivery
.
Upon exercise of a right granted under this Plan, the Company shall issue Common Stock or pay any amounts due within a reasonable
period of time thereafter. Subject to any statutory or regulatory obligations the Company may otherwise have, for purposes of this
Plan, 30 days shall be considered a reasonable period of time.
14.9
No
Fractional Shares
. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan. The Committee
shall determine whether cash, additional Awards or other securities or property shall be issued or paid in lieu of fractional shares
of Common Stock or whether any fractional shares should be rounded, forfeited or otherwise eliminated.
14.10
Other
Provisions
. The Award Agreements authorized under the Plan may contain such other provisions not inconsistent with this
Plan, including, without limitation, restrictions upon the exercise of the Awards, as the Committee may deem advisable.
14.11
Section
409A
. The Plan is intended to comply with Section 409A of the Code to the extent subject thereto, and, accordingly,
to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described
in the Plan that are due within the “short-term deferral period” as defined in Section 409A of the Code shall not be
treated as deferred compensation unless Applicable Laws require otherwise. Notwithstanding anything to the contrary in the Plan,
to the extent required to avoid accelerated taxation and tax penalties under Section 409A of the Code, amounts that would otherwise
be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following
the Participant’s termination of Continuous Service shall instead be paid on the first payroll date after the six-month anniversary
of the Participant’s separation from service (or the Participant’s death, if earlier). Notwithstanding the foregoing,
neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any excise tax
or penalty on any Participant under Section 409A of the Code and neither the Company nor the Committee will have any liability
to any Participant for such tax or penalty.
14.12
Disqualifying
Dispositions
. Any Participant who shall make a “disposition” (as defined in Section 424 of the Code) of
all or any portion of shares of Common Stock acquired upon exercise of an Incentive Stock Option within two years from the Grant
Date of such Incentive Stock Option or within one year after the issuance of the shares of Common Stock acquired upon exercise
of such Incentive Stock Option (a “
Disqualifying Disposition
”) shall be required to immediately advise the Company
in writing as to the occurrence of the sale and the price realized upon the sale of such shares of Common Stock.
14.13
Section
16
. It is the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies, the applicable
requirements of Rule 16b-3 as promulgated under Section 16 of the Exchange Act so that Participants will be entitled to the benefit
of Rule 16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject to short-swing liability
under Section 16 of the Exchange Act. Accordingly, if the operation of any provision of the Plan would conflict with the intent
expressed in this
Section 14.13
, such provision to the extent possible shall be interpreted and/or deemed amended so as
to avoid such conflict.
14.14
Section
162(m)
. To the extent the Committee issues any Award that is intended to be exempt from the deduction limitation of
Section 162(m) of the Code, the Committee may, without shareholder or grantee approval, amend the Plan or the relevant Award Agreement
retroactively or prospectively to the extent it determines necessary in order to comply with any subsequent clarification of Section
162(m) of the Code required to preserve the Company’s federal income tax deduction for compensation paid pursuant to any
such Award.
14.15
Beneficiary
Designation
. Each Participant under the Plan may from time to time name any beneficiary or beneficiaries by whom any
right under the Plan is to be exercised in case of such Participant’s death. Each designation will revoke all prior designations
by the same Participant, shall be in a form reasonably prescribed by the Committee and shall be effective only when filed by the
Participant in writing with the Company during the Participant’s lifetime.
14.16
Expenses
.
The costs of administering the Plan shall be paid by the Company.
14.17
Severability
.
If any of the provisions of the Plan or any Award Agreement is held to be invalid, illegal or unenforceable, whether in whole or
in part, such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability
and the remaining provisions shall not be affected thereby.
14.18
Plan
Headings
. The headings in the Plan are for purposes of convenience only and are not intended to define or limit the
construction of the provisions hereof.
14.19
Non-Uniform
Treatment
. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively
among persons who are eligible to receive, or actually receive, Awards. Without limiting the generality of the foregoing, the Committee
shall be entitled to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform and
selective Award Agreements.
15.
Effective
Date of Plan
. The Plan shall become effective as of the Effective Date, but no Award shall be exercised (or, in the
case of a stock Award, shall be granted) unless and until the Plan has been approved by the shareholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.
16.
Termination
or Suspension of the Plan
. The Plan shall terminate automatically on the ten-year anniversary of the Effective Date.
No Award shall be granted pursuant to the Plan after such date, but Awards theretofore granted may extend beyond that date. The
Board may suspend or terminate the Plan at any earlier date pursuant to
Section 13.1
hereof. No Awards may be granted under
the Plan while the Plan is suspended or after it is terminated.
17.
Choice
of Law
. The law of the State of Minnesota shall govern all questions concerning the construction, validity and interpretation
of this Plan, without regard to such state’s conflict of law rules.
As adopted by the Board
of Directors of IsoRay, Inc. on April 19, 2016.
As approved by the
shareholders of IsoRay, Inc. on [____________].
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