Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On December 30, 2019 and January 2, 2019, the Board of Directors (the “Board”) of Heat Biologics, Inc. (the “Company”), in an effort to better align the Company’s Chief Executive Officer’s equity ownership interest in the Company with that of other chief executive officers of similarly situated public companies, and based upon the recommendations and guidance of the independent third party compensation consultant retained by the Compensation Committee of the Board, awarded Jeffrey Wolf, the Company’s Chief Executive Officer, restricted stock awards and other compensation as described in this Current Report on Form 8-K. On December 30, 2019, the Board awarded Mr. Wolf, 900,000 shares of restricted common stock of the Company together with a gross up cash payment of $166,864 to cover the estimated taxes with respect to such equity award, which was in addition to his annual cash bonus for 2019 that was awarded pursuant to the terms of Mr. Wolf’s employment agreement with the Company. On January 2, 2020, the Board granted to Mr. Wolf 1,980,000 shares of restricted common stock together with a gross up cash payment of $369,514 to cover the estimated taxes with respect to such equity award. The equity awards described above were granted pursuant to the Company’s 2018 Stock Incentive Plan.
In addition, on January 2, 2020, the Board approved an amendment, effective January 1, 2020, to the Company’s employment agreements with each of Mr. Wolf and Dr. Hutchins and the offer letter with Mr. Ostrander to increase their respective annual base salaries by 3%. Copies of the amendments to Mr. Wolf’s and Dr. Hutchins’ employment agreements and Mr. Ostrander’s offer letter are attached hereto as Exhibits 10.1, 10.2 and 10.3 and are incorporated herein by reference. The increases were in addition to the annual cash bonuses for 2019, which were awarded pursuant to the terms of their applicable agreements with the Company.
On January 2, 2020, based upon the recommendations and guidance of the independent third party compensation consultant retained by the Compensation Committee, the Board also awarded the following equity compensation to the non-executive members of the Board and its Committees: John K.A. Prendergast, Ph.D., the lead independent director, was awarded 400,000 shares of restricted common stock; John Monahan, Ph.D., was awarded an option to purchase 150,000 shares of common stock, and Edward B. Smith, III was awarded an option to purchase 150,000 shares of common stock. The annual cash compensation for directors is to remain the same as it was for the prior year as disclosed in the Company’s 2019 proxy statement.
The shares of restricted stock and the shares of common stock underlying the option awards vest as follows: 50% vest immediately, 30% vest on the one-year anniversary of the date of grant, 10% vest on the two-year anniversary of the date of grant and 10% vest on the three-year anniversary of the date of grant, subject to the executive officer’s or director’s continuous service to the Company on each applicable vesting date. Each option is exercisable for a period of ten years from the date of grant and has an exercise price of $0.464 per share, the closing price of the Company’s common stock on the Nasdaq Capital Market on the date of the grant.
The restricted stock was issued pursuant to the terms of a restricted stock agreement that was entered into between the Company and each of Mr. Wolf and Dr. Prendergast, the form of which is incorporated by reference hereto and attached hereto as Exhibit 10.4. The restricted stock agreements, among other things, prohibit transfers of the restricted stock prior to the two year anniversary of the grant date other than by will, laws of descent and distribution and in the event of death. In addition, sales or transfers made after the two year anniversary of the grant date are subject to the right of the Company to buy back the stock at any time that the holder desires to sell the restricted stock at a price equal to the lower of the closing price per share on the date of notice and 32 times the closing price per share on the date of grant.