PROPOSAL 2
AMENDMENT TO 2015 PLAN
General
In 2015, the Board of Directors and stockholders adopted the 2015 Plan. The 2015 Plan constitutes a key element of our total compensation program. This plan is designed to advance our interests by providing for the grant of stock
-based
and other incentive awards to our employees and key non
-employees
.
Purpose
As a result of prior grants of stock options under the 2015 Plan, 77,149
shares of Common Stock remained available for grant under the 2015 Plan as of July
15, 2019. The Board has unanimously adopted resolutions setting forth the proposed amendment to the 2015 Plan, declaring its advisability and directing that the proposed amendment be submitted to stockholders for their approval. If adopted by the stockholders, the amendment will become immediately effective, which we currently expect will occur on or about September
6, 2019. If approved, the total number of shares available for potential grant under the 2015 Plan will be increased by 1,000,000
shares, and the aggregate number of shares will increase from 1,000,000 to 2,000,000. Further, the amendment, if approved, will increase (a) the maximum number of shares of common stock for which stock options may be granted to any person in any calendar year, (b) the maximum benefit that will be paid to any person under performance awards in any calendar year, and (c) the aggregate number of shares of unrestricted stock that may be granted or sold for a purchase price that is less than their fair market value, unless granted in lieu of cash compensation equal to such fair market value, in each case from 60,000 to 120,000
shares.
As stock options and other equity awards are a critical component to making our employee’s compensation competitive with industry standards, maintaining an adequate number of stock options and other equity awards in the plan is essential to attracting and retaining a skilled employee base during late
-stage
clinical development and pre
-commercialization
activities, where multiple development milestones that have the potential to be transformational to the Company could potentially occur before the next annual meeting of stockholders. Given such possible events, the limited number of stock options currently available and the current limit to the number of shares for which stock options and other awards may be granted under the 2015 Plan have the potential to put the company at a disadvantage, if successful in achieving key milestones.
Summary of the 2015 Plan
The following summary of the material features of the 2015 Plan is qualified in its entirety by the full text of the 2015 Plan that appears as
Annex A
to this proxy statement, as proposed to be amended. All references to the “Code” are to the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto. This summary includes the proposed increase in the number of shares of Common Stock available for the grant under the 2015 Plan.
The 2015 Plan became effective on June
18, 2015 and will terminate on the date of the annual meeting of the Board of Directors immediately following the tenth (10
th
) anniversary of the Board of Director’s adoption of the plan. The 2015 Plan is administered by the Compensation Committee of the Board of Directors.
The 2015 Plan provides for the grant of stock options (both non
-statutory
options or “NSOs” and, in the case of employees, incentive stock options or “ISOs”), restricted stock, deferred stock and unrestricted stock. Unless otherwise determined by the Compensation Committee, awards may not be transferred except by will or by the laws of descent and distribution.
Number of Shares
A maximum of 2,000,000
shares of Common Stock may be delivered in satisfaction of awards made under the 2015 Plan, assuming the proposed increase in the number of shares of Common Stock available for grant under the 2015 Plan is approved. The maximum number of shares of Common Stock that may be issued pursuant to the exercise of ISOs, and the maximum number of shares of Common Stock that may be issued pursuant to the exercise of NSOs, will each be 2,000,000, as increased from time to time pursuant to the 2015 Plan. The maximum number of shares of Common Stock for which stock options may be granted to any person in any calendar year will be 120,000. The maximum
10
benefit that will be paid to any person under performance awards in any calendar year will be 120,000
shares. In the event of a stock dividend, stock split or other change in our capital structure, or a distribution to stockholders other than normal cash dividends, the Compensation Committee will make appropriate adjustments to the limits described above and will also make appropriate adjustments to the number and kind of shares of stock or securities subject to and available for awards, any exercise prices relating to awards and any other provisions of awards affected by the change. The Compensation Committee may also make similar adjustments in response to any other event, as the Compensation Committee deems appropriate, to avoid distortion in the operation of the 2015 Plan. Any such adjustment shall, to the extent applicable, comply with Section 409A of the Code.
The share limitations described above are in addition to the limitation on the number of shares available for awards under the 2015 Plan.
The maximum number of shares that may be issued under the proposed amendment to the 2015 Plan represents approximately 10.2% of the total number of shares of Common Stock outstanding on July
15, 2019. Approximately 93,934
shares in the aggregate remain issuable in connection with outstanding awards under our 2005 Equity Incentive Plan. The total number of shares issuable under the 2005 Equity Incentive Plan, combined with the 2,000,000
shares issuable under the proposed amendment to the 2015 Plan, represent approximately 10.7% of our outstanding shares on July
15, 2019.
Administration of 2015 Plan
The 2015 Plan is administered by a committee of the Board of Directors, currently the Compensation Committee. Members of the Compensation Committee are required to satisfy applicable requirements for independence. The Compensation Committee will have full authority to determine who will receive awards and to determine the types of awards to be granted as well as the amounts, terms, and conditions of any awards. The Compensation Committee will determine any questions that may arise regarding the interpretation and application of the provisions of the 2015 Plan and to make, administer and interpret such rules and regulations as it deems necessary or advisable. The Compensation Committee’s determinations are conclusive and bind all parties.
Eligibility
Participation in the 2015 Plan is limited to our employees and to key non
-employees
(other persons or entities including consultants and non
-Employee
directors who, in the opinion of the Compensation Committee, are in a position to make a significant contribution to our success).
Stock Options
Each stock option awarded under the 2015 Plan will be a NSO unless expressly designated as an ISO at the time of the grant. The exercise price of stock options granted under the 2015 Plan will be determined by the Compensation Committee, but may not be less than 100% of the fair market value of the Common Stock subject to the option, determined at the time the option is granted unless otherwise required by the Code with respect to an ISO. The term of any option granted under the 2015 Plan may not exceed ten years. Options will be exercisable at such time or times and on such conditions as the Compensation Committee specifies. Notwithstanding the foregoing, to the extent that any NSO is granted at an exercise price less than 100% of the fair market value of the Common Stock subject to the option, the requirements of Section 409A of the Code shall be satisfied as set forth in more particularity in the Individual Stock Option Agreement.
Our Board of Directors and officers hold stock options to purchase an aggregate of up to 793,601
shares of Common Stock at a weighted average exercise price of $4.82 per share. The total number of shares issuable upon exercise of these outstanding stock options represents approximately 4.1% of the total number of shares of Common Stock outstanding on July
15, 2019.
Restricted Stock Awards; Unrestricted Stock; Deferred Stock
The 2015 Plan provides for awards of nontransferable shares of Common Stock which may be subject to repurchase or forfeiture as set forth in more particularity in the Individual Restricted Stock Agreement. The Compensation Committee may, at the time any other award is granted, provide that any or all the Common Stock delivered pursuant to an award will be restricted Common Stock. The 2015 Plan also provides for awards of unrestricted stock, but restricts
11
the aggregate number of shares of unrestricted stock that may be granted or sold for a purchase price that is less than their fair market value, unless granted in lieu of cash compensation equal to such fair market value, to 120,000
shares. The 2015 Plan provides for deferred grants entitling the recipient to receive Common Stock upon the satisfaction of conditions determined by the Compensation Committee in its discretion. To the extent required, all such awards shall comply with the requirements of Section 409A of the Code.
Performance Awards
Any award under the 2015 Plan may be made subject to the satisfaction of performance criteria specified by the Compensation Committee. In the case of performance awards intended to qualify for exemption under Section 162(m) of the Code, the Compensation Committee will use objectively determinable measures of performance in accordance with Section 162(m) that are based on any or any combination of the following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof): sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating ratios; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; sales of particular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin
-offs
, split
-ups
and the like; reorganizations; or recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings. Any performance criterion based on performance over time will be determined by reference to a period of at least one year. The Compensation Committee will determine whether the performance criteria that have been chosen for a particular performance award have been met. Notwithstanding the foregoing, to the extent that any award under the 2015 Plan may be subject to Section 409A of the Code and subject to the satisfaction of performance criteria specified by the Compensation Committee, such performance parameters shall specifically comply with Section 409A of the Code in addition to such criteria necessary to qualify for exemption under Section 162(m) of the Code.
Termination of Affiliation with Company: Effect on Stock Options
Except as otherwise determined by the Compensation Committee, if a participant in the 2015 Plan dies, any ISO or NSO granted at fair market value owned by the participant will, to the extent exercisable on the date of death, remain exercisable for a one
-year
period, provided that no such option will be exercisable beyond the end of its original term. In addition, and except as otherwise determined by the Compensation Committee, if a participant’s affiliation with the Company ends because of the participant’s total and permanent disability, then any ISOs and NSOs granted at fair market value held by the participant that were exercisable at the time of disability may be exercised by the participant at any time in accordance with the original terms of the options. Finally, and except as otherwise determined by the Compensation Committee, if a participant’s employment (or other applicable affiliation with us) terminates for any reason other than death or disability, ISOs and NSOs granted at fair market value that were exercisable at the time the participant ceased to be affiliated with us will remain exercisable for three months, provided that (i) under no circumstances will any option be extended beyond its original term; and (ii) in the case of termination of the participant for cause, the Compensation Committee may elect to terminate any options immediately. In all cases, ISOs and NSOs granted at fair market value that are not exercisable on the date of termination will terminate on that date. With respect to any NSO granted at less than fair market value, the treatment of the option upon a termination of affiliation with us shall be set forth in the Individual Stock Option Agreement as determined by the Compensation Committee.
Termination of Affiliation with the Company: Effect on Restricted and Deferred Stock
Upon a termination of affiliation with us, as set forth in more particularity in the Individual Restricted and/or Deferred Stock Award Agreement and as determined by the Compensation Committee, any share of Common Stock subject to a continuing restriction may be repurchased by us. Common Stock awards, whether restricted or deferred, to which the participant did not become irrevocably entitled prior to the termination of the participant’s affiliation with us will be forfeited upon termination of affiliation.
Effect of Certain Mergers, Consolidations, Etc.
In the case of certain mergers, consolidations or similar transactions in which a majority of our stock or all or substantially all of its assets are acquired, or in the case of a dissolution or liquidation, the Compensation Committee
12
may, in its discretion, make options immediately exercisable, remove restrictions on shares of restricted Common Stock, waive conditions on any deferred awards of Common Stock and remove any performance or other conditions on any award. In addition, the Compensation Committee may, under such circumstances, provide for replacement awards for certain participants. Notwithstanding the foregoing, to the extent applicable, any such modification and/or replacement award shall comply with the requirements of Section 409A of the Code as set forth in more particularity in the Individual Option or Stock Award Agreement.
Amendment of 2015 Plan
The Compensation Committee may amend the 2015 Plan or any outstanding award for any purpose that may at the time be permitted by law, and may at any time terminate the 2015 Plan as to any future grants of awards. The Compensation Committee may not, without the approval of our stockholders, effectuate a change to the 2015 Plan (i) for which stockholder approval is required in order for the 2015 Plan to continue to qualify for the award of ISOs under Section 422 of the Code or for the award of performance
-based
compensation under Section 162(m) of the Code; or (ii) if the change would increase the aggregate number of shares of Common Stock that may be delivered under the 2015 Plan, or change the class of persons or entities that qualify as participants under the 2015 Plan. Specifically, and in addition to the foregoing, the 2015 Plan may be amended, to the extent necessary, to comply with regulatory and legislative requirements, including but not limited to Section 409A of the Code.
Federal Income Tax Consequences
The following discussion summarizes certain federal income tax consequences under the Code of the issuance and receipt of options under the 2015 Plan.
Incentive Stock Options
In general, an optionee realizes no taxable income upon the grant or exercise of an ISO, although the exercise of an ISO may result in an alternative minimum tax liability. With certain exceptions, a disposition of shares purchased under an ISO within two years from the date of grant or within one year after exercise produces ordinary income to the optionee (with a corresponding deduction available to us) generally equal to the value of the shares at the time of exercise less the exercise price. Any additional gain recognized in the disposition is generally treated as a capital gain for which we are not entitled to a deduction. If the optionee does not dispose of the shares until after the expiration of these one
-and
two
-year
holding periods, any gain or loss recognized upon a subsequent sale is generally treated as a long
-term
capital gain or loss for which we are not entitled to a deduction.
Non-statutory Options
In general, in the case of a NSO granted at fair market value, the optionee has no taxable income at the time of grant but realizes ordinary income in connection with exercise of the option in an amount equal to the excess (at time of exercise) of the fair market value of the shares acquired upon exercise over the exercise price; a corresponding deduction is available to us; and upon a subsequent sale or exchange of the shares, any recognized gain or loss after the date of exercise is treated as capital gain or loss for which we are not entitled to a deduction. The ordinary income recognized on exercise shall be subject to applicable withholding and employment taxes.
In general, an ISO that is exercised more than three months after termination of employment (other than termination by reason of death) is treated as a NSO. ISOs are also treated as non
-statutory
options to the extent they first become exercisable by an individual in any calendar year for shares having a fair market value (determined as of the date of grant) in excess of $100,000.
In general, in the case of a NSO granted at less than fair market value, the optionee will have taxable income at the time that the option is no longer subject to a substantial risk of forfeiture (and subject to applicable withholding and employment taxes), which is generally upon vesting. The optionee generally will recognize additional ordinary income on exercise equal to the amount the fair market value of the underlying stock increases, if any, from the date the substantial risk of forfeiture lapses to the date of exercise. Such ordinary income will be subject to applicable withholding and employment taxes. NSOs granted at less than fair market value are subject to the requirements of Section 409A of the Code and, as such, the Individual Stock Option Agreement will contain such terms and conditions as are required under said Section 409A including without limitation provisions applicable to the vesting and exercise of such NSOs.
13
The foregoing summary assumes that stock options are exercised for substantially vested stock. Where a stock option is exercised for Restricted Stock, as is permitted by the 2015 Plan, the tax treatment will differ from the treatment summarized above. In general, a participant who exercises a NSO for Restricted Stock will have income taxable at ordinary income rates only when the stock vests, in an amount equal to the fair market value of the stock at time of vesting less the exercise price. However, the participant may make a special election to have the income measured and taken into account, instead, at time of exercise. In either case, a corresponding deduction will be available to us. In the case of a participant who exercises an ISO for Restricted Stock, the determination of “alternative minimum taxable income” (relevant in determining whether an alternative minimum tax must be paid) will follow rules similar to the rules for determining ordinary income in the case of the exercise of a NSO. For federal income tax purposes, the exercise of an ISO for Restricted Stock will be treated the same as the exercise of an ISO for substantially vested stock, provided that the shares are held for the requisite one
-year
and two
-year
holding periods described above. It is unclear how an earlier disposition of the shares would affect the measurement of a participant’s ordinary income in the case of an ISO exercised for Restricted Stock.
Specific provisions regarding the impact of a change in control of the Company on any award granted under the 2015 Plan will, to the extent necessary, comply with the requirements of Section 409A of the Code and as set forth in more particularity in the Individual Option and/or Stock Award Agreement.
The Code also limits to $1
million the deduction we may claim for compensation paid annually to any of our top five officers, subject to a number of exceptions. The deduction limitation rules provide an exemption for compensation attributable to the exercise of non
-discounted
stock options that satisfy certain requirements. Stock options awarded under the 2015 Plan are intended to qualify for this exemption.
Stock Awards
Persons receiving Common Stock pursuant to an Award generally will recognize compensation income equal to the fair market value of the shares received, reduced by any purchase price paid. Such compensation income will be taxed at ordinary income rates and subject to applicable withholdings and employment taxes. We generally should be entitled to a corresponding deduction for federal income tax purposes when such person recognizes compensation income. When such Common Stock is sold, the seller generally will recognize capital gain or loss equal to the difference between the amount realized upon the sale and the seller’s adjusted tax basis in the Common Stock (generally, the amount that the seller paid for such stock plus the amount taxed to the seller as compensation income). Special rules apply if the Common Stock acquired pursuant to an Award is subject to vesting, or is subject to restrictions on resale under federal securities laws applicable to directors, officers or 10% shareholders. Deferred Stock issued pursuant to an Award may also be subject to special rules. In addition, any award issued pursuant to the 2015 Plan, except ISOs and NSOs granted at fair market value, may be subject to the requirements of Section 409A of the Code and accordingly, subject to special rules.
Statutory Requirements and the Subsequent Amendment
The 2015 Plan and the grant of any award thereunder is intended, to the extent applicable, to constitute good faith compliance with the requirements of the American Jobs Creation Act, specifically with respect to the definition of deferred compensation and the provisions of Section 409A of the Code. To the extent required by guidance to be issued subsequent to this filing, whether statutory or regulatory, the Company will make such amendments and/or modifications as are necessary to maintain compliance with the provisions and requirements of said Section 409A.
Recommendation of the Board of Directors
The Board of Directors recommends that you vote “
FOR
” the approval of the amendment to the 2015 Plan.
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14
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The table below provides information regarding the beneficial ownership of the Common Stock as of July
15, 2019, of (1) each person or entity who owns beneficially 5% or more of the shares of our outstanding Common Stock, (2) each of our directors, (3) each of the Named Executive Officers, and (4) our directors and officers as a group. Except as otherwise indicated, and subject to applicable community property laws, we believe the persons named in the table have sole voting and investment power with respect to all shares of Common Stock held by them.
Name of Beneficial Owner
|
|
Shares of
Common
Stock
Beneficially
Owned**
|
|
Percent of
Class
|
Altamont Pharmaceutical Holdings, LLC
(1)
|
|
2,593,311
|
|
13.23
|
%
|
ACT Capital Management, LLLP
(2)
|
|
1,506,500
|
|
7.62
|
%
|
Christopher J. Schaber
(3)
|
|
223,402
|
|
1.13
|
%
|
Keith L. Brownlie
(4)
|
|
42,647
|
|
*
|
|
Gregg A. Lapointe
(5)
|
|
44,589
|
|
*
|
|
Diane L. Parks
(6)
|
|
1,500
|
|
*
|
|
Mark E. Pearson
(1)
|
|
(1)
|
|
(1)
|
|
Robert J. Rubin
(7)
|
|
49,363
|
|
*
|
|
Jerome B. Zeldis
(8)
|
|
53,730
|
|
*
|
|
Richard Straube
(9)
|
|
79,816
|
|
*
|
|
Oreola Donini
(10)
|
|
73,816
|
|
*
|
|
Karen Krumeich
(11)
|
|
69,116
|
|
*
|
|
All directors and executive officers as a group (10 persons)
|
|
3,231,288
|
|
16.03
|
%
|
18
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19
Equity Compensation Plan Information
In December 2005, our Board of Directors approved the 2005 Equity Incentive Plan, which was approved by stockholders on December
29, 2005. In September 2013, our stockholders approved an amendment to the 2005 Equity Incentive Plan to increase the maximum number of shares of our Common Stock available for issuance under the plan by 125,000
shares, bringing the total shares reserved for issuance under the plan to 300,000
shares. In April 2015, our Board of Directors approved the 2015 Plan, which was approved by stockholders on June
18, 2015. In June 2017, our stockholders approved an amendment to the 2015 Plan to increase the maximum number of shares of our Common Stock available for issuance under the plan to 600,000
shares. In September 2018, our stockholders approved a second amendment to the 2015 Plan to increase the maximum number of shares of our Common Stock available for issuance under the plan, bringing the total shares available for issuance under the plan to 1,000,000
shares. The following table provides information, as of December
31, 2018 with respect to options outstanding under our 2005 Equity Incentive Plan and our 2015 Plan. All share numbers in this paragraph and in the following table have been adjusted for the one
-for-ten
reverse stock split effective October
7, 2016.
Plan Category
|
|
Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights
|
|
Weighted-
Average
Exercise Price of
Outstanding Options,
Warrants and
Rights
|
|
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in the first column)
|
Equity compensation plans approved by security holders
(1)
|
|
1,022,095
|
|
$
|
5.32
|
|
153,149
|
Equity compensation plans not approved by security holders
|
|
—
|
|
|
—
|
|
—
|
Total
|
|
1,022,095
|
|
$
|
5.32
|
|
153,149
|
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20
EXECUTIVE OFFICERS
The table below contains information regarding our executive officers. The ages of individuals are provided as of July
15, 2019:
Name
|
|
Age
|
|
Position
|
Christopher J. Schaber, PhD
(1)
|
|
52
|
|
Chairman of the Board, Chief Executive Officer and President
|
Oreola Donini, PhD
|
|
47
|
|
Chief Scientific Officer and Senior Vice President
|
Karen Krumeich
|
|
65
|
|
Chief Financial Officer, Senior Vice President and Corporate Secretary
|
Richard Straube, MD
|
|
67
|
|
Chief Medical Officer and Senior Vice President
|
Oreola Donini, PhD
, has been with our company since August 2013 and is currently our Chief Scientific Officer and Senior Vice President, a position she has held since December
5, 2014. Dr. Donini served as our Vice President of Preclinical Research and Development from August 2013 until December 2014. She has more than 15 years’ experience in drug discovery and preclinical development with start
-up
biotechnology companies. From 2012 to 2013, Dr. Donini worked with ESSA Pharma Inc. as Vice President Research and Development. From 2004 to 2013, Dr. Donini worked with Inimex Pharmaceuticals Inc., (“Inimex”), lastly as Senior Director of Preclinical R&D from 2007
-2013
. Prior to joining Inimex, she worked with Kinetek Pharmaceuticals Inc., developing therapies for infectious disease, cancer and cancer supportive care. Dr. Donini is a co
-inventor
and leader of our SGX94 innate defense regulator technology, developed by Inimex and subsequently acquired by us. She was responsible for overseeing the manufacturing and preclinical testing of SGX94, which demonstrated efficacy in combating bacterial infections and mitigating the effects of tissue damage due to trauma, infection, radiation and/or chemotherapy treatment. These preclinical studies resulted in a successful Phase 1 clinical study and clearance of Phase 2 protocols for oral mucositis in head and neck cancer and acute bacterial skin and skin structure infections. While with ESSA Pharma Inc. as the Vice President of Research and Development, Dr. Donini led the preclinical testing of a novel N
-terminal
domain inhibitor of the androgen receptor for the treatment of prostate cancer. While with Kinetek Pharmaceuticals Inc., her work related to the discovery of novel kinase and phosphatase inhibitors for the treatment of cancer. Dr. Donini received her PhD from Queen’s University in Kinston, Ontario, Canada and completed her post
-doctoral
work at the University of California, San Francisco. Her research has spanned drug discovery, preclinical development, manufacturing and clinical development in infectious disease, cancer and cancer supportive care.
Karen Krumeich
has been with our company since June 2015 and is currently our Senior Vice President and Chief Financial Officer. Ms. Krumeich has served as Chief Financial Officer and Vice President of Finance for public and private emerging
-growth
, start
-up
and national companies in various sectors of healthcare, including pharmaceuticals, medical devices and healthcare service companies. She has expertise in equity financings, both private and public, Sarbanes
-Oxley
compliance, acquisitions and integrations, strategic business development and operations analysis. Most recently Ms. Krumeich was the Vice President of Finance for Cerecor Inc., a clinical stage neuroscience company. At Cerecor she was involved in the company’s equity financings and was responsible for all finance and administrative functions. Prior to joining Cerecor she was a CFO Partner with Tatum, LLC, a national consulting firm, and a member of the firm’s National Healthcare Group. As a Partner with Tatum, she served as Interim Chief Financial Officer for drug development and medical device companies. Prior to joining Tatum in 2006, she was the Vice President of Finance and Chief Financial Officer of Strata Skin Sciences, Inc. (formerly Mela Sciences, Inc.), a development
-stage
medical device company. At Mela Sciences, she played a key role in the company’s initial public offering and was responsible for all functional areas of finance and accounting, administration, and investor relations. As Vice President of Finance of Gran Care Pharmacy, Inc., she was responsible for the financial leadership of the pharmacy division and directed an aggressive acquisition program. Ms. Krumeich began her career with a B.S. in Pharmacy from the University of Toledo, subsequently completed an accounting major and transitioned into finance after completing the CPA exam.
Richard Straube, MD
has been with our company since January 2014 and is currently our Senior Vice President and Chief Medical Officer. Dr. Straube is a board
-certified
pediatrician with 36 years’ experience in both academia and industry, including clinical research experience in host
-response
modulation. From 2009 until joining our company, he was Chief Medical Officer of Stealth Peptides Incorporated, a clinical stage, biopharmaceutical company. Prior to joining us, Dr. Straube served from 1988 to 1993 in various capacities, including most recently as Senior Director, Infectious Diseases and Immunology, Clinical Research, for Centocor, Inc., a biopharmaceutical company focused on developing monoclonal antibody
-based
diagnostics. While at Centocor, Inc., Dr. Straube was responsible for the initial
21
anti
-cytokine
and anti
-endotoxin
programs targeted at ameliorating inappropriate host responses to infectious and immunologic challenges. Programs that he managed at Centocor, Inc. include assessments of immunomodulation using monoclonal removal of inciting molecular triggers, removal of internal immune
-messengers
, augmentation of normal host defenses, and maintenance of normal sub
-cellular
function in the face of injury. From 1993 to 1995, Dr. Straube was Director of Medical Affairs at T
-cell
Sciences, Inc., a biotechnology company. From 1995 to 1997, he was Director of Clinical Investigations of the Pharmaceutical Products Division of Ohmeda Corp., a biopharmaceutical company. He served from 1998 to 2007 as Executive Vice President of Research and Development and Chief Scientific Officer at INO Therapeutics LLC, a biotherapeutics company, where he was responsible for the clinical trials and subsequent approval of inhaled nitric oxide for the treatment of persistent pulmonary hypertension of the newborn. From 2007 to 2009, Dr. Straube was the Chief Medical Officer at Critical Biologics Corporation, a biotechnology company. Dr. Straube received his medical degree and residency training at the University of Chicago, completed a joint adult and pediatrician infectious diseases fellowship at the University of California, San Diego (“UCSD”), and as a Milbank Scholar completed training in clinical trial design at the London School of Hygiene and Tropical Medicine. While on the faculty at the UCSD Medical Center, his research focused on interventional studies for serious viral infections.
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22
EXECUTIVE COMPENSATION
Executive Compensation Review
In 2018, in furtherance of our compensation philosophy and objectives, the Compensation Committee engaged Setren Smallberg & Associates (“SS&A”), an outside executive compensation consulting firm determined to be independent by the Compensation Committee, to conduct a review of, and recommend changes to, our compensation program for our most highly compensated executive officers. A representative of SS&A attended Compensation Committee meetings at the invitation of the Compensation Committee Chairman and was also in direct contact with the Compensation Committee and company management from time to time. SS&A provided the Compensation Committee with assistance and advice in the review of our salary structure, annual and equity incentive awards and other related executive pay issues. In addition, SS&A provided advice regarding marketplace trends and best practices relating to competitive pay levels.
SS&A did not provide any services to us other than its services as the Compensation Committee’s independent compensation consultant, and SS&A did not receive any fees or compensation from us other than the fee it received as the independent compensation consultant. Except as described above, SS&A did not provide any services to us in 2017 or 2018. The Compensation Committee confirmed that SS&A’s work for the Compensation Committee did not create any conflicts of interest.
Summary Compensation
The following table contains information concerning the compensation paid during each of the two years ended December
31, 2018 to our Chief Executive Officer and each of the three other most highly compensated executive officers during 2018.
Name
|
|
Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Option Awards
|
|
All Other Compensation
|
|
Total
|
Christopher J. Schaber
(1)
|
|
CEO &
|
|
2018
|
|
$
|
452,541
|
|
$
|
94,128
|
|
$
|
39,142
|
|
$
|
32,781
|
|
$
|
618,592
|
|
|
President
|
|
2017
|
|
$
|
443,668
|
|
$
|
106,480
|
|
$
|
78,898
|
|
$
|
44,529
|
|
$
|
673,575
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oreola Donini
(2)
|
|
CSO &
|
|
2018
|
|
$
|
230,000
|
|
$
|
41,124
|
|
$
|
26,095
|
|
$
|
4,619
|
|
$
|
301,838
|
|
|
Senior VP
|
|
2017
|
|
$
|
220,000
|
|
$
|
44,933
|
|
$
|
80,588
|
|
$
|
4,627
|
|
$
|
350,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen Krumeich
(3)
|
|
CFO &
|
|
2018
|
|
$
|
230,969
|
|
$
|
40,604
|
|
$
|
26,095
|
|
$
|
11,324
|
|
$
|
308,992
|
|
|
Senior VP
|
|
2017
|
|
$
|
226,440
|
|
$
|
44,835
|
|
$
|
80,588
|
|
$
|
15,184
|
|
$
|
367,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard C. Straube
(4)
|
|
CMO &
|
|
2018
|
|
$
|
329,521
|
|
$
|
53,975
|
|
$
|
26,095
|
|
$
|
22,116
|
|
$
|
431,707
|
|
|
Senior VP
|
|
2017
|
|
$
|
323,060
|
|
$
|
56,213
|
|
$
|
80,588
|
|
$
|
29,560
|
|
$
|
489,421
|
23
Employment and Severance Agreements
In August 2006, we entered into a three
-year
employment agreement with Christopher J. Schaber, PhD. Pursuant to this employment agreement we agreed to pay Dr. Schaber a base salary of $300,000 per year and a minimum annual bonus of $100,000. Dr. Schaber’s employment agreement automatically renews every three years, unless otherwise terminated, and was automatically renewed in December 2007, December 2010, December 2013 and December 2016 for an additional term of three years. We agreed to issue him options to purchase 12,500
shares of our Common Stock, with one third immediately vesting and the remainder vesting over three years. Upon termination without “Just Cause” as defined by this agreement, we would pay Dr. Schaber nine months of severance, as well as any accrued bonuses, accrued vacation, and we would provide health insurance and life insurance benefits for Dr. Schaber and his dependents. No unvested options shall vest beyond the termination date. Dr. Schaber’s monetary compensation (base salary of $300,000 and bonus of $100,000) remained unchanged from 2006 with the 2007 renewal. Upon a change in control of the Company due to merger or acquisition, all of Dr. Schaber’s options shall become fully vested, and be exercisable for a period of five years after such change in control (unless they would have expired sooner pursuant to their terms). In the event of his death during the term of the agreement, all of his unvested options shall immediately vest and remain exercisable for the remainder of their term and become the property of Dr. Schaber’s immediate family.
In February 2007, our Board of Directors authorized the issuance of 5,000
shares to Dr. Schaber immediately prior to the completion of a transaction, or series or a combination of related transactions negotiated by our Board of Directors whereby, directly or indirectly, a majority of our capital stock or a majority of our assets are transferred from us an
d/o
r our stockholders to a third party. The amended agreement with Dr. Schaber includes our obligation to issue such shares to him if such event occurs.
On June
22, 2011, the Compensation Committee eliminated his fixed minimum annual bonus payable and revised it to an annual targeted bonus of 40% of his annual base salary. On December
14, 2016, the Compensation Committe
e a
pproved an increase in salary for Dr. Schaber to $443,668. On December
7, 2017, the Compensation Committee approved an increase in salary for Dr. Schaber to $452,541. On December
13, 2018, the Compensation Committee approved an increase in salary for Dr. Schaber to $466,117.
In July 2013, we entered into a one
-year
employment agreement with Oreola Donini, PhD, our Vice President Preclinical Research & Development. Pursuant to the agreement, we have agreed to pay Dr. Donini $170,000 (CAD) per year and a targeted annual bonus of 20% of base salary. We also agreed to issue her options to purchase 40,000
shares of our Common Stock with one
-quarter
immediately vesting and the remainder vesting over three years. Dr. Donini’s employment agreement automatically renews each year, unless otherwise terminated, and has automatically renewed each year since execution. Upon termination without “Just Cause”, as defined in Dr. Donini’s employment agreement, we would pay Dr. Donini three months of severance, accrued bonuses and vacation, and health insurance benefits. No unvested options vest beyond the termination date. In December 2014, Dr. Donini was named Chief Scientific Officer and Senior Vice President. Upon Dr. Donini’s promotion to Chief Scientific Officer, the Compensation Committee increased her targeted bonus to 30% of her annual base salary. On December
14, 2016, the Compensation Committee approved an increase in salary for Dr. Donini to $220,000. On December
7, 2017, the Compensation Committee approved an increase in salary for Dr. Donini to $230,000. On December
13, 2018, the Compensation Committee approved an increase in salary for Dr. Donini to $241,500.
In December 2014, we entered into a one
-year
employment agreement with Richard C. Straube, MD, our Chief Medical Officer and Senior Vice President. Pursuant to the agreement, we agreed to pay Dr. Straube $300,000 per year and a targeted annual bonus of 30% of base salary. We also issued him options to purchase 10,000
shares of our Common Stock with one
-third
immediately vesting and the remainder vesting over three years. On March
26, 2019, we entered into an amendment to our employment agreement with Dr. Straube. Pursuant to the amended agreement, which amendment became effective as of April
1, 2019, Dr. Straube is required to devote at least 20 hours per week to the performance of his duties and we pay him $170,000 per year. The amended employment agreement automatically renews each year, unless otherwise terminated. Upon termination without “Just Cause”, as defined in the amended employment agreement, we would pay Dr. Straube one month of severance. No unvested options vest beyond the termination date. On December
14, 2016, the Compensation Committee approved an increase in salary for Dr. Straube to $323,060. On December
7, 2017, the Compensation Committee approved an increase in salary for Dr. Straube to $329,521. On December
13, 2018, the Compensation Committee approved an increase in salary for Dr. Straube to $339,407.
24
On June
16, 2016, we entered into a one
-year
employment agreement with Karen Krumeich, our Senior Vice President and Chief Financial Officer. Pursuant to the agreement, we have agreed to pay Ms. Krumeich $222,000 per year and a targeted annual bonus of 30% of base salary. We also agreed to issue her options to purchase 10,000
shares of our Common Stock with one
-quarter
immediately vesting and the remainder vesting over three years. Ms. Krumeich’s employment agreement automatically renews each year, unless otherwise terminated. Upon termination without “Just Cause”, as defined in Ms. Krumeich’s employment agreement, we would pay Ms. Krumeich three months of severance, accrued bonuses and vacation, and health insurance benefits. No unvested options vest beyond the termination date. On December
14, 2016, the Compensation Committee approved an increase in salary for Ms. Krumeich to $226,440. On December
7, 2017, the Compensation Committee approved an increase in salary for Ms. Krumeich to $230,969. On December
13, 2018, the Compensation Committee approved an increase in salary for Ms. Krumeich to $237,898.
[The remainder of this page is intentionally left blank.]
25
Outstanding Equity Awards at Fiscal Year-End
The following table contains information concerning unexercised options, stock that has not vested, and equity incentive plan awards for the Named Executive Officers outstanding at December
31, 2018, as adjusted for the reverse stock split of one
-for-ten
effective October
7, 2016. We have never issued Stock Appreciation Rights.
Name
|
|
Number of Securities
Underlying Unexercised
Options (#)
|
|
Equity
Incentive
Plan
Awards: Number of Securities Underlying Unexercised Unearned
Options (#)
|
|
Option
Exercise
Price
($)
|
|
Option Expiration
Date
|
|
|
Exercisable
|
|
Unexercisable
|
|
Christopher J. Schaber
|
|
11,000
|
|
—
|
|
—
|
|
$
|
46.40
|
|
6/30/2020
|
|
|
11,219
|
|
—
|
|
—
|
|
$
|
6.40
|
|
11/30/2021
|
|
|
13,000
|
|
—
|
|
—
|
|
$
|
6.80
|
|
12/04/2022
|
|
|
10,000
|
|
—
|
|
—
|
|
$
|
20.10
|
|
12/04/2023
|
|
|
10,000
|
|
—
|
|
—
|
|
$
|
15.00
|
|
12/04/2024
|
|
|
14,000
|
|
|
|
|
|
$
|
11.30
|
|
12/30/2025
|
|
|
34,286
|
|
25,714
|
|
25,714
|
|
$
|
2.01
|
|
12/06/2027
|
|
|
15,000
|
|
45,000
|
|
45,000
|
|
$
|
0.97
|
|
12/12/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
Oreola Donini
|
|
4,000
|
|
—
|
|
|
|
$
|
15.60
|
|
8/14/2023
|
|
|
2,000
|
|
—
|
|
|
|
$
|
20.10
|
|
12/4/2023
|
|
|
3,000
|
|
—
|
|
|
|
$
|
15.00
|
|
12/4/2024
|
|
|
7,000
|
|
|
|
|
|
$
|
11.30
|
|
12/30/2025
|
|
|
13,750
|
|
6,250
|
|
6,250
|
|
$
|
2.67
|
|
3/30/2027
|
|
|
17,502
|
|
17,498
|
|
17,498
|
|
$
|
2.01
|
|
12/06/2027
|
|
|
10,000
|
|
30,000
|
|
30,000
|
|
$
|
0.97
|
|
12/13/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard C. Straube
|
|
10,000
|
|
—
|
|
—
|
|
$
|
20.10
|
|
1/06/2024
|
|
|
5,000
|
|
—
|
|
—
|
|
$
|
15.00
|
|
12/04/2024
|
|
|
7,000
|
|
—
|
|
—
|
|
$
|
11.30
|
|
12/30/2025
|
|
|
13,750
|
|
6,250
|
|
6,250
|
|
$
|
2.67
|
|
3/30/2027
|
|
|
17,502
|
|
17,498
|
|
17,498
|
|
$
|
2.01
|
|
12/06/2027
|
|
|
10,000
|
|
30,000
|
|
30,000
|
|
$
|
0.97
|
|
12/13/2028
|
|
|
|
|
|
|
|
|
|
|
|
|
Karen Krumeich
|
|
8,750
|
|
1,250
|
|
1,250
|
|
$
|
7.40
|
|
6/15/2026
|
|
|
13,750
|
|
6,250
|
|
6,250
|
|
$
|
2.67
|
|
3/30/2027
|
|
|
17,502
|
|
17,498
|
|
17,498
|
|
$
|
2.01
|
|
12/06/2027
|
|
|
10,000
|
|
30,000
|
|
30,000
|
|
$
|
0.97
|
|
12/12/2028
|
[The remainder of this page is intentionally left blank.]
26
Compensation of Directors
The following table contains information concerning the compensation of the non
-employee
directors during the year ended December
31, 2018.
Name
|
|
Fees
Earned
Paid in
Cash
(1)
|
|
Option
Awards
(2)
|
|
Total
|
Keith L .Brownlie
(3)
|
|
$
|
55,000
|
|
$
|
30,000
|
|
$
|
85,000
|
Gregg A. Lapointe
|
|
$
|
47,500
|
|
$
|
30,000
|
|
$
|
77,500
|
Diane L. Parks
(4)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
Mark Pearson
|
|
$
|
20,000
|
|
$
|
31,830
|
|
$
|
51,830
|
Robert J. Rubin
|
|
$
|
52,500
|
|
$
|
30,000
|
|
$
|
82,500
|
Jerome B. Zeldis
|
|
$
|
50,000
|
|
$
|
30,000
|
|
$
|
80,000
|
Consideration and Determination of Executive and Director Compensation
The Compensation Committee of the Board of Directors is comprised of Dr. Rubin (Chair), Mr.
Pearson, and Dr. Zeldis. The Board of Directors has determined that Dr. Rubin, Mr.
Pearson, and Dr. Zeldis are “independent” directors within the meaning of applicable listing standards of Nasdaq and the Exchange Act and the rules and regulations thereunder.
The Compensation Committee provides overall guidance on compensation and benefits policy. In addition, the Compensation Committee approves and monitors:
•
executive compensation and benefits programs;
•
executive employment agreements; and
•
our equity incentive plans.
The primary objectives of the Compensation Committee are to ensure that our executive compensation and benefits programs:
•
are competitive with other growing companies of similar size and business;
•
are effective in driving performance to achieve financial goals and create stockholder value;
•
are cost
-efficient
and fair to employees, management and stockholders; and
•
are designed to attract, motivate, reward, and retain the competent and talented executives needed.
To achieve these objectives, the Compensation Committee meets at least once and usually several times during each fiscal year to review the existing compensation and benefits programs and to consider modifications that seek to provide a direct relationship between executive compensation and sustained corporate performance.
27
The Compensation Committee makes executive compensation decisions on the basis of total remuneration and seeks to create an integrated total remuneration program structured to balance short and long
-term
financial goals. A significant amount of total compensation is comprised of bonus provisions which are specified in employment contracts and which are intended to align executive interest with stockholder interest.
The Compensation Committee recommends to the Board of Directors a salary within a designated range for the respective executives, which is based on merit, performance and length of service. Bonus provisions for all executives are based on increase (if any) of net incremental profit over prior year highest net profit.
Non
-executive
employees are granted stock options from time to time under our equity incentive plans, approved by the stockholders, also in order to motivate, reward, and retain them while meeting goals and allowing them to share in the growth.
Stock Ownership Policy
In April 2012, our Board of Directors adopted a stock ownership policy applicable to our non
-employee
directors to strengthen the link between director and stockholder interests. Pursuant to the stock ownership policy, each non
-employee
director is required to hold a minimum ownership position in the Common Stock equal to the annual cash compensation paid for service on the Board of Directors, exclusive of cash compensation paid for service as a chair or member of any committees of the Board of Directors.
Stock counted toward the ownership requirement includes Common Stock held by the director, unvested and vested restricted stock, and all shares of Common Stock beneficially owned by the director held in a trust and by a spouse and/or minor children of the director. The policy provides that the ownership requirement must be attained within three years after the later of June
21, 2012 and the date a director is first elected or appointed to the Board of Directors. To monitor progress toward meeting the requirement, the Nominating Committee will review director ownership levels at the end of March of each year. Non
-employee
directors are prohibited from selling any shares of Common Stock unless such director is in compliance with the stock ownership policy. A copy of our director compensation and stock ownership policy is publicly available on our website at
www.soligenix.com
under the “Investors” section.
Compensation Committee Interlocks and Insider Participation in Compensation Decisions
No member of our Compensation Committee is or has at any time during the past year been one of our officers or employees. None of our executive officers currently serves or in the past year has served as a member of the Board of Directors or Compensation Committee of any entity that has one or more executive officers serving on our Board of Directors or Compensation Committee.
Section 16(a) Beneficial Ownership Reporting Compliance
We are required to identify each person who was an officer, director or beneficial owner of more than 10% of our registered equity securities during our most recent fiscal year and who failed to file on a timely basis reports required by Section 16(a) of the Exchange Act.
To our knowledge, based solely on review of these filings and written representations from the certain reporting persons, we believe that during the year ended December
31, 2018, our officers, directors and significant stockholders have timely filed the appropriate form under Section 16(a) of the Exchange Act.
Transactions with Related Persons
Our Audit Committee is responsible for the review, approval and ratification of related party transactions. The Audit Committee reviews these transactions under our Code of Ethics, which governs conflicts of interests, among other matters, and is applicable to our employees, officers and directors.
We are party to a registration rights agreement with certain stockholders, including Altamont Pharmaceutical Holdings, LLC, ACT Capital Management, LLLP, and Knoll Capital Management, LP, each of which beneficially owns 5% or more of the shares of our outstanding Common Stock. The agreement provides that the stockholders have the right to require that we register its shares under the Securities Act of 1933 (the “Securities Act”) for sale to the
28
public, subject to certain conditions. The stockholders also have piggyback registration rights, which means that, if not already registered, they have the right to include their shares in any registration that we effect under the Securities Act, subject to specified exceptions. We must pay all expenses incurred in connection with the exercise of these demand registration rights.
We are unable to estimate the dollar value of the registration rights to the holders of these rights. The amount of reimbursable expenses under the agreements depends on a number of variables, including whether registration rights are exercised incident to a primary offering by us, the form on which we are eligible to register such a transaction, and whether we have a shelf registration in place at the time of a future offering.
Other than as described above, the employment agreements and compensation paid to our directors, we did not engage in any transactions with related parties since January
1, 2018. For a discussion of our employment agreements and compensation paid to our directors, see “Executive Compensation — Employment and Severance Agreements” and “Executive Compensation — Compensation of Directors.”
[The remainder of this page is intentionally left blank.]
29
Stock Performance Graph
The following graph compares the changes over the last five years in the value of $100 invested at December
31, 2013 in (i) our Common Stock, (ii) the NASDAQ Composite
-Total
Returns and (iii) the NASDAQ Biotechnology Index. The year
-end
values of each investment are based on share price appreciation and the reinvestment of all dividends. Historical stock price performance shown on the performance graph is not necessarily indicative of future stock price performance.
Year
|
|
Soligenix, Inc.
|
|
NASDAQ Composite- Total Returns
|
|
NASDAQ Biotechnology Index
|
2013
|
|
100.00
|
|
100.00
|
|
100.00
|
2014
|
|
54.44
|
|
114.75
|
|
134.40
|
2015
|
|
62.78
|
|
122.74
|
|
150.22
|
2016
|
|
12.50
|
|
133.62
|
|
118.15
|
2017
|
|
12.33
|
|
173.22
|
|
143.74
|
2018
|
|
4.78
|
|
168.30
|
|
131.00
|
[The remainder of this page is intentionally left blank.]
30
OTHER MATTERS
Communications with the Board of Directors
Stockholders or other interested parties may communicate with the Board of Directors by sending a letter to Soligenix, Inc. Board of Directors, c/o The Office of the Secretary, Soligenix, Inc., 29 Emmons Drive, Suite B
-10
, Princeton, New Jersey 08540. The Office of the Secretary will receive the correspondence and forward it to the director(s) to whom the communication is addressed.
Deadline for Stockholder Proposals
Under SEC Rule 14a
-8
, stockholder proposals for the Annual Meeting of Stockholders to be held in 2020 will not be included in the proxy statement for that meeting unless the proposal is proper for inclusion in the proxy statement and for consideration at the next Annual Meeting of Stockholders, and is received by our Secretary at our executive offices, no later than March
28, 2020. Stockholders must also follow the other procedures prescribed in SEC Rule 14a
-8
under the Exchange Act, as well as our Bylaws, which contain requirements that are separate and apart from the SEC requirements of Rule 14a
-8
. Our Bylaws provide that stockholders desiring to bring business before the 2020 Annual Meeting, including nomination of a person for election to our Board of Directors, must provide written notice to our Secretary at our executive offices no earlier than 75 days, and no later than 45 days, before the one
-year
anniversary of the mailing of this Proxy Statement. The written notice must include the information required by Section 2.4 of the Bylaws: (a) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominee as a director pursuant to Regulation 14A under the Exchange Act, and such person’s written consent to serve as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on our books, and of such beneficial owner, (ii) the class and number of our shares that are owned beneficially and of record by such stockholder and such beneficial owner, and (iii) whether either such stockholder or such beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of our voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of our voting shares to elect such nominee or nominees.
Householding of Annual Meeting Materials
Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement or annual report may have been sent to multiple stockholders in your household. We will promptly deliver a separate copy of either document to you if you notify our Secretary at our executive offices. If you wish to receive separate copies of the annual report and proxy statement in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at our executive offices.
Financial Statements and Exhibits to Form 10-K
Our financial statements are contained in our Annual Report on Form 10
-K
for our fiscal year ended December
31, 2018 that was filed with the SEC, a copy of which is made available with this Proxy Statement. Such report and the financial statements contained therein are not to be considered as a part of this soliciting material.
The Form 10
-K
made available with this Proxy Statement does not include copies of the exhibits to that filing. We will furnish any such exhibit upon payment of a reasonable fee by request sent to us, c/o Office of the Secretary, Soligenix, Inc., 29 Emmons Drive, Suite B
-10
, Princeton, New Jersey 08540.
31
Other Matters
Management knows of no matters that are to be presented for action at the meeting other than those set forth above. If any other matters properly come before the meeting, the persons named in the form of proxy will vote the shares represented by proxies in accordance with their judgment on such matters.
The cost of this proxy solicitation will be borne by us. In addition to the solicitation of proxies by mail, our directors, officers and employees may also solicit proxies by telephone, facsimile, e
-mail
or other forms of communication, without special compensation for such activities. We may engage the services of a professional proxy solicitation firm to aid in the solicitation of proxies. If we do, our costs for such services will be within the range of what is customary for companies with similar operations and a similar number of shareholders and are not expected to be material. We will also request banks, brokers, fiduciaries, custodians, nominees and certain other record holders to send proxies, proxy statements and other materials to their principals at our expense. We will reimburse such banks, brokers, fiduciaries, custodians, nominees and other record holders for their reasonable out
-of-pocket
expenses of solicitation.
[The remainder of this page is intentionally left blank.]
32
ANNEX A
SOLIGENIX, INC.
2015 EQUITY INCENTIVE PLAN
ADOPTED BY THE BOARD OF DIRECTORS
ON APRIL 2, 2015
(as amended on June 18, 2017 and September 27, 2018 and as proposed to be amended on September 6, 2019)
The purpose of the Soligenix, Inc. 2015 Equity Incentive Plan (the “Plan”) is to advance the interests of Soligenix, Inc. by enhancing its ability to attract and retain employees and other persons who can make significant contributions to the success of the Company through ownership of shares of the Company’s common stock.
The Plan is intended to accomplish this goal by enabling the Company to grant Awards in the form of options, restricted stock awards, deferred stock awards, unrestricted stock, performance awards, or combinations thereof, as described in greater detail below.
ARTICLE I
DEFINITIONS
1.1
General
. Wherever the following terms are used in this Plan they shall have the meaning specified below, unless the context clearly indicates otherwise.
1.2
Award
. “Award” shall mean the grant of an option, deferred stock, restricted stock, unrestricted stock, performance award, stock appreciation right or any combination thereof pursuant to this Plan.
1.3
Award Limit
. “Award Limit” shall mean two million (2,000,000) shares of common stock, plus the amount of any increase in the number of shares that may be available for issuance pursuant to Section 2.1(a).
1.4
Board
. “Board” shall mean the Board of Directors of the Company.
1.5
Code
. “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
1.6
Committee
. “Committee” shall mean the Committee to which the Board delegates the power to act under or pursuant to the provisions of the Plan, or the Board if no Committee is selected. If the Board delegates powers to a Committee, and if the Company is or becomes subject to Section 16 of the Exchange Act, then, if necessary for compliance therewith, such Committee shall consist initially of not less than two (2) members of the Board, each member of which must be a “Non
-Employee
Board Member” within the meaning of the applicable rules promulgated pursuant to the Exchange Act. The failure of any Committee members to qualify as a “Non
-Employee
Board Member” shall not otherwise affect the validity of an Award. If the Company is or becomes subject to Section 16 of the Exchange Act, no member of the Committee shall receive any Award pursuant to the Plan or any similar plan of the Company or any affiliate while serving on the Committee unless the Board determines that the grant of such Award satisfies the then current Rule 16b
-3
requirements under the Exchange Act.
Notwithstanding anything herein to the contrary, and insofar as the Board determines that it is necessary in order for compensation recognized by Participants pursuant to the Plan to be fully deductible to the Company for federal income tax purposes, each member of the Committee also shall be an “outside director” (as defined in regulations or other guidance issued by the Internal Revenue Service under Section 162(m) of the Code).
1.7
Company
. “Company” shall mean Soligenix, Inc., a Delaware corporation, and includes any successor or assignee corporation or corporations into which the Company may be merged, changed, or consolidated; any corporation for whose securities the securities of the Company shall be exchanged; and any assignee of or successor to substantially all of the assets of the Company.
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1.8
Disability or Disabled
. “Disability or Disabled” shall mean permanent and total disability as defined in Section 22(e)(3) of the Code, except as otherwise may be required by Section 409A of the Code, in which case “disability” shall be defined as set forth in Section 409A of the Code.
1.9
Exchange Act
. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
1.10
Fair Market Value
. “Fair Market Value” of a share of common stock as of a given date shall be (i) the mean between the highest and lowest selling price of a share of common stock on such date on the principal exchange on which shares of common stock are then trading, if any, or if shares were not traded on such date, then on the closest preceding date on which a trade occurred, or (ii) if the common stock is not traded on an exchange, the mean between the closing representative bid and asked prices for the common stock on such date as reported by AMEX or, if AMEX is not then in existence, by its successor quotation system; or (iii) if the common stock is not publicly traded, the Fair Market Value of a share of common stock as established by the Committee acting in good faith.
1.11
Key Employee
. “Key Employee” shall mean an employee of the Company or of an affiliate (including, without limitation, an employee who also is serving as an officer or director of the Company or of an affiliate) designated by the Board or the Committee as being eligible to be granted one or more options under the Plan.
1.12
Key Non
-Employee
. “Key Non
-Employee
” shall mean a Non
-Employee
Board Member, consultant, or independent contractor of the Company or of an affiliate who is designated by the Board or the Committee as being eligible to be granted one or more options under the Plan.
1.13
Non
-Employee
Board Member
. “Non
-Employee
Board Member” shall mean a director of the Company who is not an employee of the Company or any of its affiliates. For purposes of this Plan, a Non
-Employee
Board Member shall be deemed to include the employer of such Non
-Employee
Board Member, if the Non
-Employee
Board Member is so required, as a condition of his employment, to provide that any option granted hereunder be made to the employer.
1.14
Participant
. “Participant” shall mean a Key Employee or a Key Non
-Employee
to whom an award is granted under the Plan.
1.15
Plan
. “Plan” shall mean this Equity Compensation Plan, as amended from time to time.
1.16
Shares
. “Shares” shall mean the following shares of the capital stock of the Company as to which Awards have been or may be granted under the Plan: treasury shares or authorized but unissued common stock $.001 par value, or any share of capital stock into which the shares are changed or for which they are exchanged within the provision of the Plan.
1.17
Rule 16b
-3
. “Rule 16b
-3
” shall mean that certain Rule 16b
-3
under the Exchange Act, as such Rule may be amended from time to time.
1.18
Termination of Directorship
. “Termination of Directorship” shall mean the time when an optionee who is an independent director ceases to be a director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole and absolute discretion, shall determine the effect of all matters and questions relating to Termination of Directorship.
1.19
Termination of Employment
. “Termination of Employment” shall mean the time when the employee
-employer
relationship between the optionee, grantee or restricted stockholder and the Company is terminated for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding (i) terminations where there is a simultaneous reemployment, continuing employment or retention as a consultant or advisor of an optionee, grantee or restricted stockholder by the Company, (ii) at the discretion of the Committee, terminations which result in a temporary severance of the employee
-employer
relationship, and (iii) at the discretion of the Committee, terminations which are followed by the simultaneous establishment of a consulting relationship by the Company with the former employee. The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether particular leaves of absence constitute Terminations of Employment; provided, however, that, with respect to “incentive stock options”, a leave of absence, change in status from an employee to an independent contractor or other
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change in the employee
-employer
relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purpose of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. Notwithstanding any other provision of this Plan, the Company has an absolute and unrestricted right to terminate an employee’s employment at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1
Shares Subject to Plan
.
(a) The shares of stock subject to options, awards of restricted stock, performance awards, awards of deferred stock or unrestricted stock shall be the Company’s common stock, $.001 par value. The aggregate number of such shares which may be issued upon exercise of such options or rights or upon any such awards under the Plan initially shall not exceed two million (2,000,000), subject to adjustment as provided herein. The shares of common stock issuable upon exercise of such options or rights or upon any such awards may be either previously authorized but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to options or stock appreciation rights granted under the Plan to any individual in any calendar year shall not exceed the limitations set forth in this subsection 2.1(b) as follows:
(i) Subject to adjustment as provided in Section 9.3, the maximum number of shares of stock as to which options may be granted to any Participant in any one calendar year shall be 120,000. These limits shall be construed and applied in a manner that is consistent with the rules under Section 162(m) of the Code.
(ii) Subject to adjustment as provided in Section 9.3, the maximum number of shares of stock subject to performance awards granted to any Participant in any one calendar year shall be 120,000. This limit shall be construed and applied in a manner that is consistent with the rules under Section 162(m) of the Code.
(iii) Subject to adjustment as provided in Section 9.3, the maximum number of shares of Stock that may be issued, in the aggregate, pursuant to the exercise of Options that do not qualify as “incentive stock options” under Section 422(b) of the Code (“non
-qualified
stock options”) shall be 2,000,000 and the maximum number of shares of Stock that may be issued, in the aggregate, pursuant to the exercise of stock options that qualify as “incentive stock options” (“ISOs”) shall also be 2,000,000, in each case plus the amount of any increase in the number of shares that may be available for issuance pursuant to Section 2.1(a); provided, that the foregoing maximum limits shall not be construed to permit more than the maximum number of shares described at (a) above (as the same may be adjusted as provided in Section 9.3) to be issued in the aggregate pursuant to all Awards.
(c) To the extent required by Section 162(m) of the Code, shares subject to options which are canceled shall continue to be counted against the Award Limit and if, after grant of an option, the price of shares subject to such option is reduced, the transaction shall be treated as a cancellation of the option and a grant of a new option and both the option deemed to be canceled and the option deemed to be granted shall be counted against the Award Limit. This subparagraph (c) shall be construed in a manner consistent with the requirements of Section 409A of the Code and any such cancellation and subsequent grant or Award shall fully comply with the requirements of said Section 409A of the Code.
2.2
Unexercised Options and Other Rights
. Consistent with the provisions of Section 162(m) of the Code, as from time to time applicable, to the extent that (i) an option expires or is otherwise terminated without being exercised, or (ii) any shares of stock subject to any restricted stock, deferred stock or performance award granted hereunder are forfeited, such shares shall again be available for issuance in connection with future awards under the Plan. If any shares of stock have been pledged as collateral for indebtedness incurred by a Participant in connection with the exercise of an option and such shares are returned to the Company in satisfaction of such indebtedness, such shares shall again be available for issuance in connection with future awards under the Plan.
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ARTICLE III
GRANTING OF OPTIONS
3.1
Eligibility
. Any officer, employee, consultant, advisor or director shall be eligible to be granted an option.
3.2
Granting of Options
.
(a) The Committee shall from time to time, in its absolute discretion:
(i) Select which Participants shall be granted options;
(ii) Subject to the Award Limit, determine the number of shares subject to such options;
(iii) Determine whether such options are to be ISOs or non
-qualified
stock options and whether such options are to qualify as performance
-based
compensation as described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such options, consistent with this Plan;
provided
,
however
, that the terms and conditions of options intended to qualify as performance
-based
compensation as described in Section 162(m)(4)(C) of the Code shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code.
(b) The Committee shall instruct the secretary of the Company to issue such options and may impose such conditions on the grant of such options as it deems appropriate, including substitution or replacement of awards, cancellation and replacement or other adjustments to the Award, including but not limited to the strike price. Without limiting the generality of the preceding sentence, the Committee may, in its discretion and on such terms as it deems appropriate, require as a condition on the grant of an option that the optionee surrender for cancellation some or all of the unexercised options, awards of restricted stock, deferred stock, performance awards or unrestricted stock or other rights which have been previously granted to him under this Plan or otherwise. Any such surrender and subsequent grant or Award shall fully comply with the requirements of Section 409A of the Code and within the statutory guidelines. Such grant or other Award may contain such terms and conditions as the Committee deems appropriate and shall be exercisable in accordance with its terms, subject to statutory and regulatory compliance.
3.3
Special Rules Applicable to ISOs
.
(a) No person may be granted an ISO under this Plan if such person, at the time the ISO is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company unless such ISO conforms to the applicable provisions of Section 422 of the Code.
(b) No ISO shall be granted unless such option, when granted, qualifies as an “incentive stock option” under Section 422 of the Code. No ISO shall be granted to any person who is not an employee.
(c) Any ISO granted under this Plan may be modified by the Committee to disqualify such option from treatment as an “incentive stock option” under Section 422 of the Code.
(d) To the extent that the aggregate Fair Market Value of stock with respect to which “incentive stock options” (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by an optionee during any calendar year (under the Plan and all other incentive stock option plans of the Company) exceeds $100,000, such options shall be treated as non
-qualified
stock options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking options into account in the order in which they were granted. For purposes of this Section 3.3(d), the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted.
3.4
Certain Additional Provisions for Non
-Qualified
Stock Options
.
(a) Non
-Qualified
Stock Options With Fair Market Value Exercise Price. Unless otherwise determined by the Board pursuant to paragraph (b) below, to avoid a deferral of compensation falling within the requirements of Section 409A of the Code, any option to purchase stock, other than an “incentive stock option”
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described in Section 422 of the Code, will have the following characteristics: (i) the exercise price will never be less than the fair market value of the underlying stock on the date the option is granted, (ii) the receipt, transfer or exercise of the option will be subject to taxation under Section 83 of the Code, and (iii) the option will not include any feature for the deferral of compensation other than the deferral of recognition of income until the later of exercise or disposition of the option.
(b) Non
-Qualified
Stock Options With an Exercise Price Less than Fair Market Value. Notwithstanding paragraph (a) above, to the extent that any non
-qualified
stock option may constitute a deferral of compensation, such option shall comply with the requirements of Section 409A of the Code as set forth in the corresponding stock option agreement.
3.5
Substitute Options
. In the event that the Company or any Subsidiary consummates a transaction described in Section 424(a) of the Code (relating to the acquisition of property or stock from an unrelated corporation), individuals who become employees or consultants of the Company or any Subsidiary on account of such transaction may be granted ISOs in substitution for options granted by their former employer, subject to the requirements of Section 409A of the Code. The Board, in its sole discretion and consistent with Sections 409A and 424(a) of the Code, shall determine the exercise price of such substitute Options.
ARTICLE IV
TERMS OF OPTIONS
4.1
Option Agreement
. Each option shall be evidenced by a written stock option agreement, which shall be executed by the optionee and an authorized officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with this Plan. Stock option agreements evidencing options intended to qualify as performance
-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. Stock option agreements evidencing ISOs shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. In this regard, any awards which are non
-qualified
stock options under Section 3.4 of this Plan will include within the written award agreement such terms and conditions as are necessary to comply with the requirements of Section 409A of the Code. Any award agreement may require that the Participant agree to be bound by any stockholders’ agreement among all or certain stockholders of the Company that may be in effect at the time of the grant of the award, or the exercise of an Option, if applicable, or certain provisions of any such agreement that may be specified by the Company.
4.2
Option Price
. The price per share of the shares subject to each option shall be set by the Committee; provided, however, that (i) such price shall be no less than the par value of a share of common stock, and (ii) in the case of options intended to qualify as ISOs or as performance
-based
compensation as described in Section 162(m)(4)(C) of the Code such price shall be no less than 100% of the Fair Market Value of a share of common stock on the date the option is granted (110% of the Fair Market Value of a share of common stock on the date such option is granted in the case of an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company).
4.3
Option Term
. The term of an option shall be set by the Committee in its discretion; provided, however, that, in the case of ISOs, the term shall not be more than ten (10) years from the date the ISO is granted, or five (5) years from such date if the ISO is granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company.
4.4
Option Vesting and Exercisability
. Stock options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at or after grant. The Committee may provide, in its discretion, that any stock option shall be exercisable only in installments, and the Committee may waive such installment exercise provisions at any time in whole or in part based on such factors as the Committee may determine, in its sole discretion, including but not limited to in connection with any “change in control” of the Company, as defined in any stock option agreement. Notwithstanding the foregoing, the Board may accelerate (i) the vesting or payment of any award (including an ISO), (ii) the lapse of restrictions on any award (including an award of Restricted Stock) and (iii) the date on which any Option first becomes exercisable as long as such acceleration will not subject the specific award or this Plan, in general, to the requirements of Section 409A of the Code.
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ARTICLE V
EXERCISE OF OPTIONS
5.1
Partial Exercise
. An exercisable option may be exercised in whole or in part. However, an option shall not be exercisable with respect to fractional shares and the Committee may require that, by the terms of the option, a partial exercise be with respect to a minimum number of shares.
5.2
Manner of Exercise
. All or a portion of an exercisable option shall be deemed exercised upon delivery of all of the following to the secretary of the Company or the secretary’s office:
(a) A written notice complying with the applicable rules established by the Committee stating that the option, or a portion thereof, is to be exercised. The notice shall be signed by the optionee or other person then entitled to exercise the option or such portion;
(b) Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act of 1933, as amended, and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop
-transfer
notices to agents and registrars;
(c) In the event that the option shall be exercised pursuant to Section 9.1 by any person or persons other than the optionee, appropriate proof of the right of such person or persons to exercise the option; and
(d) Full cash payment to the secretary of the Company for the shares with respect to which the option, or portion thereof, is exercised. However, at the discretion of the Committee, the terms of the option may (i) allow a delay in payment up to thirty (30) days from the date the option, or portion thereof, is exercised; (ii) allow payment, in whole or in part, through the delivery of shares of common stock owned by the optionee for at least six months prior to the date of delivery, duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the option or exercised portion thereof; (iii) allow payment, in whole or in part, through the surrender of shares of common stock then issuable upon exercise of the option having a Fair Market Value on the date of option exercise equal to the aggregate exercise price of the option or exercised portion thereof; (iv) allow payment, in whole or in part, through the delivery of property of any kind which constitutes good and valuable consideration; (v) allow payment, in whole or in part, through the delivery of a promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Committee, or (vi) allow payment through any combination of the foregoing. In the case of a promissory note, the Committee may also prescribe the form of such note, the security to be given for such note and the rate of interest, if any, that the note shall bear. The option may not be exercised, however, by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law, and any such note or loan shall comply with all applicable laws, regulations and rules of the Board of Governors of the Federal Reserve System and any other governmental agency having jurisdiction.
5.3
Conditions to Issuance of Stock Certificate
. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any option or portion thereof prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed;
(b) The completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Committee shall, in its absolute discretion, deem necessary or advisable;
(c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the exercise of the option as the Committee may establish from time to time for reasons of administrative convenience; and
(e) The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax.
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5.4
Rights as Stockholders
. The holders of options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares purchasable upon the exercise of an option unless and until certificates representing such shares have been issued by the Company to such holders.
5.5
Ownership and Transfer Restrictions
. The Committee, in its absolute discretion, may impose such restrictions on the ownership and transferability of the shares purchasable upon the exercise of an option as it deems appropriate. Any such restriction shall be set forth in the respective stock option agreement and may be referred to on the certificates evidencing such shares. The Committee may require the optionee to give the Company prompt notice of any disposition of shares of common stock acquired by exercise of an ISO within (i) two years from the date the option was granted or (ii) one year after the transfer of such shares to the optionee. The Committee may direct that the certificates evidencing shares acquired by exercise of an option refer to such requirement to be given prompt notice of disposition.
ARTICLE VI
AWARD OF RESTRICTED STOCK
6.1
Award of Restricted Stock.
(a) The Committee shall from time to time, in its absolute discretion, select which Participants shall be awarded restricted stock, and determine the purchase price, if any, and other terms and conditions applicable to such restricted stock, consistent with this Plan.
(b) The Committee shall establish the purchase price, if any, and form of payment for restricted stock, including any consideration required by applicable law. The Committee shall instruct the secretary of the Company to issue such restricted stock and may impose such conditions on the issuance of such restricted stock as it deems appropriate.
6.2
Restricted Stock Agreement
. Restricted stock shall be issued only pursuant to a written restricted stock agreement, which shall be executed by the selected Key Employee or consultant and an authorized officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with this Plan.
6.3
Rights as Stockholders
. Upon delivery of the shares of restricted stock to the escrow holder pursuant to Section 6.5, the restricted stockholder shall have, unless otherwise provided by the Committee, all the rights of a stockholder with respect to said shares, subject to the restrictions in the restricted stockholder’s restricted stock agreement, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided, however, that in the discretion of the Committee, any extraordinary distributions with respect to the common stock shall be subject to the restrictions set forth in Section 6.4.
6.4
Restriction
. All shares of restricted stock issued under this Plan (including any shares received by holders thereof with respect to shares of restricted stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of each individual restricted stock agreement, be subject to such restrictions as the Committee shall provide, which restrictions may include, without limitation, restrictions concerning voting rights and transferability and restrictions based on duration of employment with the Company, Company performance and individual performance; provided, however, that by a resolution adopted after the restricted stock is issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the restricted stock agreement. Restricted stock may not be sold or encumbered until all restrictions are terminated or expire.
6.5
Escrow
. The Secretary of the Company or such other escrow holder as the Committee may appoint shall retain physical custody of each certificate representing restricted stock until all of the restrictions imposed under the restricted stock agreement with respect to the shares evidenced by such certificate expire or shall have been removed.
6.6
Legend
. In order to enforce the restrictions imposed upon shares of restricted stock hereunder, the Committee shall cause a legend or legends to be placed on certificates representing all shares of restricted stock that are still subject to restrictions under restricted stock agreements, which legend or legends shall make appropriate reference to the conditions imposed thereby.
6.7
Deferred Compensation
. To the extent that any award of shares of Restricted Stock may constitute a deferral of compensation, the award shall comply with the requirements of Section 409A of the Code as set forth in the corresponding restricted stock agreement.
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ARTICLE VII
PERFORMANCE AWARDS, DEFERRED STOCK, UNRESTRICTED STOCK
7.1
Performance Awards
.
(a) Any Participant selected by the Committee may be granted one or more performance awards. The value of such performance awards may be linked to the market value, book value, net profits or other measure of the value of common stock or other specific Performance Criteria (as defined in Section 7.1(c) below) determined appropriate by the Committee, or may be based upon the appreciation in the market value, book value, net profits or other measure of the value of a specified number of shares of common stock over a fixed period or periods determined by the Committee. Performance conditioned awards are subject to the following:
(b) Any performance award intended to qualify as performance
-based
for purposes of Section 162(m) of the Code. In the case of any performance award to which this Section 7.1(b) applies, the Plan and such Award will be construed to the maximum extent permitted by law in a manner consistent with qualifying the Award for such exception. With respect to such performance awards, the Committee will establish, in writing, one or more specific Performance Criteria (as defined below) no later than ninety (90) days after the commencement of the period of service to which the performance relates (or at such earlier time as is required to qualify the Award as performance
-based
under Section 162(m) of the Code). The Performance Criteria so established shall serve as a condition to the grant, vesting or payment of the performance award, as determined by the Committee. Prior to grant, vesting or payment of the performance award, as the case may be, the Committee will certify whether the Performance Criteria have been attained and such determination will be final and conclusive. If the Performance Criteria with respect to the Award are not attained, no other Award will be provided in substitution of the performance award. No performance award to which this Section 7.1(b) applies may be granted after the first meeting of the stockholders of the Company held in 2019 until the performance measures described in Section 7.1(c) below (as the same may be amended) have been resubmitted to and re
-approved
by the stockholders of the Company in accordance with the requirements of Section 162(m) of the Code, unless such grant is made contingent upon such approval.
(c) For purposes of this Section 7.1, “Performance Criteria” are specified criteria, other than the mere performance of services or the mere passage of time the satisfaction of which is a condition for the grant, exercisability, vesting or full enjoyment of an Award. For purposes of Awards that are intended to qualify for the performance
-based
compensation exception under Section 162(m) of the Code, a Performance Criterion means an objectively determinable measure of performance relating to any or any combination of the following (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a divisional, subsidiary, line of business, project or geographical basis or in combinations thereof); sales; revenues; assets; expenses; earnings before or after deduction for all or any portion of interest, taxes, depreciation, or amortization, whether or not on a continuing operations or an aggregate or per share basis; return on equity, investment, capital or assets; one or more operating rations; borrowing levels, leverage ratios or credit rating; market share; capital expenditures; cash flow; stock price; stockholder return; sales of particular products or services; customer acquisition or retention; acquisitions and divestitures (in whole or in part); joint ventures and strategic alliances; spin
-offs
, split
-ups
and the like; reorganizations; or recapitalizations, restructurings, financings (issuance of debt or equity) or refinancings. A Performance Criterion measure and any targets with respect thereto determined by the Committee need not be based upon an increase, a positive or improved result or avoidance of loss. Any Performance Criterion based on performance over a period of time shall be determined by reference to a period of not less than one year. To the extent consistent with the requirements for satisfying the performance
-based
compensation exception under Section 162(m) of the Code, the Committee may provide in the case of any Award intended to qualify for such exception that one or more of the Performance Criteria applicable to such Award will be adjusted in an objectively determinable manner to reflect events (for example, but without limitation, acquisitions or dispositions) occurring during the performance period that affect the applicable Performance Criterion or Criteria.
7.2
Unrestricted Stock
. Subject to the terms and provisions of the Plan, the Committee may grant or sell shares of fully vested and unrestricted stock in such amounts and for such consideration, if any, as the Committee shall determine; provided, that the aggregate number of shares of unrestricted stock that may be granted or sold for a purchase price that is less than their fair market value, unless granted in lieu of cash compensation equal to such fair market value, shall not exceed 120,000
shares.
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7.3
Deferred Stock
. Any Participant selected by the Committee may be granted an award of deferred stock in the manner determined from time to time by the Committee. The number of shares of deferred stock shall be determined by the Committee and may be linked to the market value, book value, net profits or other measure of the value of common stock or other specific Performance Criteria determined appropriate by the Committee. Common stock underlying a deferred stock award will not be issued until the deferred stock award has vested, pursuant to a vesting schedule or Performance Criteria set by the Committee. Unless otherwise provided by the Committee, a grantee of deferred stock shall have no rights as a Company stockholder with respect to such deferred stock until such time as the award has vested and the common stock underlying the award has been issued.
7.4
Performance Award Agreement, Deferred Stock Agreement, Unrestricted Stock Agreement
. Each performance award, award of deferred stock and/or unrestricted Stock shall be evidenced by a written agreement, which shall be executed by the grantee and an authorized officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with this Plan.
7.5
Term
. The term of a performance award, award of deferred stock and/or unrestricted stock shall be set by the Committee in its discretion.
7.6
Payment on Exercise
. Payment of the amount determined under Section 7.1, 7.2 or 7.3 above shall be in cash, in common stock or a combination of both, as determined by the Committee. To the extent any payment under this Article VII is effected in common stock, it shall be made subject to satisfaction of all provisions of Section 5.3.
7.7
Deferred Compensation
. It is not intended that awards under this Article VII, in form and/or operation, will constitute “deferred compensation” under Section 409A of the Code. If it is subsequently determined that such awards in form and/or operation, constitute “deferred compensation” under Section 409A of the Code, the award shall be amended as provided by in Section 9.6 to comply with the requirements of Section 409A of the Code as set forth in the corresponding award agreement.
7.8
Form of Agreement
. Each award granted pursuant to this Article VII shall be evidenced by a written agreement, which shall be executed by the Grantee and an authorized officer of the Company and which shall contain such terms and conditions as the Administrator shall determine, consistent with this Plan, including the term of the award and payment on exercise.
ARTICLE VIII
ADMINISTRATION
8.1
Committee
. The Committee shall consist of two or more directors appointed by and holding office at the pleasure of the Board. To the extent applicable, the members of the Committee shall each be an “outside director” as defined under Section 162(m) of the Code. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may be filled by the Board.
8.2
Duties and Powers of Committee
. It shall be the duty of the Committee to conduct the general administration of this Plan in accordance with its provisions. The Committee shall have the power to interpret this Plan and the agreements pursuant to which options, awards of restricted stock, deferred stock, unrestricted stock or performance awards are granted or awarded, and to adopt such rules for the administration, interpretation, and application of this Plan as are consistent therewith and to interpret, amend or revoke any such rules. Any such grant or award under this Plan need not be the same with respect to each optionee, grantee or restricted stockholder. Any such interpretations and rules with respect to ISOs shall be consistent with the provisions of Section 422 of the Code. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan except with respect to matters which under Rule 16b
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or Section 162(m) of the Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee.
8.3
Majority Rule
. The Committee shall act by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Committee.
8.4
Compensation; Professional Assistance; Good Faith Actions
. Members of the Committee shall receive such compensation for their services as members as may be determined by the Board. All expenses and liabilities which members of the Committee incur in connection with the administration of this Plan shall be borne by the Company.
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The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers, or other persons. The Committee, the Company and the Company’s officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all optionees, grantees, restricted stockholders, the Company and all other interested persons. No members of the Committee or Board shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan, options, awards of restricted stock or unrestricted stock, deferred stock or performance awards, and all members of the Committee shall be fully protected and indemnified by the Company in respect of any such action, determination or interpretation.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1
Not Transferable
. Except as may otherwise be authorized in writing by the Committee in accordance with applicable law, options, restricted stock awards, unrestricted or deferred stock awards or performance awards under this Plan may not be sold, pledged, assigned, or transferred in any manner other than by will or the laws of descent and distribution, unless and until such rights or awards have been exercised, or the shares underlying such rights or awards have been issued, and all restrictions applicable to such shares have lapsed. No Award or interest or right therein shall be liable for the debts, contracts or engagements of the optionee, grantee or restricted stockholder or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided however, that this Section 9.1 shall not prevent (i) transfers by will or by the applicable laws of descent and distribution, or (ii) the designation of a beneficiary to exercise any option or other right or award (or any portion thereof) granted under the Plan after the optionee’s or grantee’s death.
9.2
Amendment Suspension or Termination of this Plan
. This Plan shall terminate on the date of the annual meeting of the Board immediately following the tenth (10
th
) anniversary of the Board’s adoption of this Plan. This Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Committee. However, without approval of the Company’s stockholders given within twelve (12) months before or after the action by the Committee, no action of the Committee may, except as provided in Section 9.3, increase the limits imposed in Section 2.1 on the maximum number of shares which may be issued under this Plan or modify the Award Limit, and no action of the Committee may be taken that would otherwise require stockholder approval as a matter of applicable law, regulation or rule. No amendment, suspension or termination of this Plan shall, without the consent of the holder of, alter or impair any rights or obligations under any Award theretofore granted, unless the award itself otherwise expressly so provides. No Award may be granted or awarded during any period of suspension or after termination of this Plan, and in no event may any ISO be granted under this Plan after the first to occur of the following events:
(a) The expiration of ten (10) years from the date the Plan is adopted by the Board; or
(b) The expiration of ten (10) years from the date the Plan is approved by the Company’s stockholders under Section 9.5.
Specifically, and in addition to the foregoing, this Plan may be amended, to the extent necessary, to comply with regulatory and legislative requirements, including Section 409A of the Code.
9.3
Adjustments
. Upon the happening of any of the following described events, a Participant’s rights with respect to awards granted hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in the award agreement.
(a)
Stock Splits and Recapitalizations
. In the event the Company issues any of its shares as a stock dividend upon or with respect to the shares, or in the event shares shall be subdivided or combined into a greater or smaller number of shares, or if, upon a merger or consolidation, reorganization, split
-up
, liquidation, combination, recapitalization or the like of the Company, shares shall be exchanged for other securities of the Company, securities of another entity, cash or other property, each Participant upon exercising an Option (for the purchase price to be paid under the Option) shall be entitled to purchase such number of shares, other securities of the Company, securities of
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such other entity, cash or other property as the Participant would have received if the Participant had been the holder of the shares with respect to which the award is exercised at all times between the Grant Date of the award and the date of its exercise, and appropriate adjustments shall be made in the purchase price per share. In determining whether any award granted hereunder has vested, appropriate adjustments will be made for distributions and transactions described in this Section 9.3(a). The Board may adjust the number of shares subject to outstanding awards and the exercise price and the terms of outstanding awards to take into consideration material changes in accounting practices or principles, extraordinary dividends, acquisitions or dispositions of stock or property, or any other event if it is determined by the Board that such adjustment is appropriate to avoid distortion in the operation of the Plan, including adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued. Notwithstanding the foregoing, any adjustment under this Section 9.3(a) shall not be permitted to the extent that the individual award or this Plan, in general, would constitute deferred compensation subject to Section 409A of the Code unless the award agreement sets forth the terms and conditions necessary to comply with the requirements of Section 409A of the Code. Where an adjustment of the type described above is made to an ISO under this Section, the adjustment will be made in a manner which will not be considered a “modification” under the provisions of subsection 424(h)(3) of the Code.
(b)
Restricted Stock
.
If any person owning Restricted Stock receives new or additional or different shares or securities (“
New Securities
”) in connection with a corporate transaction or stock dividend described in Section 9.3(a) as a result of owning such Restricted Stock, the New Securities shall be subject to all of the conditions and restrictions applicable to the Restricted Stock with respect to which such New Securities were issued. Notwithstanding the foregoing, any adjustment under this Section 9.3(b) shall not be permitted to the extent that the individual award or this Plan, in general, would constitute deferred compensation subject to Section 409A of the Code unless the award agreement sets forth the terms and conditions necessary to comply with the requirements of Section 409A of the Code.
(c)
Fractional Shares
. No fractional shares shall be issued under the Plan. Any fractional shares which, but for this Section, would have been issued shall be deemed to have been issued and immediately sold to the Company for their Fair Market Value, and the Participant shall receive from the Company cash in lieu of such fractional shares.
(d)
Further Adjustment
. Upon the happening of any of the events described in Sections 9.3(a) or 9.3(c), the class and aggregate number of shares set forth in Section 5.1 hereof that are subject to awards which previously have been or subsequently may be granted under the Plan, and the number of shares set forth in Section 5.3 hereof that may be granted to a Participant in any year shall be appropriately adjusted to reflect the events described in such Sections. The Board shall determine the specific adjustments to be made under this Section 9.3(d).
(e)
Assumption of Options Upon Certain Events
. In connection with a merger or consolidation of an entity with the Company or the acquisition by the Company of property or stock of an entity, the Board may grant awards under the Plan in substitution for stock and stock based awards issued by such entity or a Subsidiary thereof, as long as such substitute awards will not constitute a deferral of compensation under Section 409A of the Code. Notwithstanding the foregoing, to the extent that the Board determines that any such substitute award shall constitute a deferral of compensation under Section 409A of the Code, such award shall be accompanied with a written award agreement which shall set forth the terms and conditions required to comply with the requirements of Section 409A of the Code. The substitute awards shall be granted on such terms and conditions as the Board considers appropriate in the circumstances. The awards so granted shall not reduce the number of shares that would otherwise be available for awards under the Plan. Notwithstanding the foregoing, in the event of such a reorganization, merger, consolidation, recapitalization, reclassification, stock splitup, stock dividend or combination, or other adjustment or event which results in shares of Common Stock being exchanged for or converted into cash, securities or other property, the Company will have the right, subject to applicable statutory and regulatory guidance, including but not limited to Section 409A of the Code, to terminate this Plan as of the date of the exchange or conversion, in which case all options, rights and other awards under this Plan shall become the right to receive such cash, securities or other property, net of any applicable exercise price.
9.4
Approval of Plan by Stockholders
. This Plan will be submitted for the approval of the Company’s stockholders within (12) twelve months after the date of the Board’s initial adoption of this Plan. Awards may be granted prior to such stockholder approval, provided that such Awards shall not be exercisable nor shall vest prior to the time when this Plan is approved by the stockholders, and provided further that if such approval has not been obtained at the end of said twelve (12) month period, all Awards previously granted under this Plan shall thereupon be canceled and become null and void.
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9.5
Tax Withholding
. The Company shall be entitled to require payment in cash or deduction from other compensation payable to each optionee, grantee or restricted stockholder of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting or exercise of any option, restricted stock, deferred stock, performance award or unrestricted stock. The Committee may in its discretion and in satisfaction of the foregoing requirement allow such optionee, grantee or restricted stockholder to elect to have the Company withhold shares of common stock (or allow the return of shares of common stock) having a Fair Market Value equal to the sums required to be withheld.
9.6
Loan
. To the extent permitted by applicable law, the Committee may, in its discretion, extend one or more loans in connection with the exercise or receipt of an option or performance award, granted under this Plan, or the issuance of restricted stock, unrestricted stock or deferred stock awarded under this Plan. The terms and conditions of any such loan shall be set by the Committee.
9.7
Limitations Applicable to Section 16 Persons and Performance
-Based
Compensation
. Notwithstanding any other provision of this Plan, any option, performance award, stock appreciation right granted, or restricted stock, unrestricted stock or deferred stock awarded, to a Key Employee or director who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b
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of the Exchange Act) that are requirements for the application of such exemptive rule, and this Plan shall be deemed amended to the extent necessary to conform to such limitations. Furthermore, notwithstanding any other provision of this Plan, any option or stock appreciation right intended to qualify as performance
-based
compensation as described in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as performance
-based
compensation as described in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent necessary to conform to such requirements.
9.8
Other Transfer Restrictions
. Notwithstanding any other provision of the Plan, in order to qualify for the exemption provided by Rule 16b
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under the Exchange Act, and any successor provision, (i) any Restricted Stock offered under the Plan to a Participant subject to Section 16 of the Exchange Act (a “Section 16 Participant”) may not be sold for six (6) months after acquisition; (ii) any shares or other equity security acquired by a Section 16 Participant upon exercise of an Option may not be sold for six (6) months after the date of grant of the Option; and (iii) any Option or other similar right related to an equity security issued under the Plan shall not be transferable except in accordance with the rules under Section 16 of the Exchange Act, subject to any other applicable transfer restrictions under the Plan or the award agreement. The Board shall have no authority to take any action if the authority to take such action, or the taking of such action, would disqualify a transaction under the Plan from the exemption provided by Rule 16b
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under the Act, or any successor provision.
9.9
Effect of Plan Upon Other Compensation or Incentive Plans
. The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company. Nothing in this Plan shall be construed to limit the right of the Company (i) to establish any other forms of incentives or compensation for employees of the Company or (ii) to grant or assume options or other rights otherwise than under this Plan in connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, firm or association.
9.10
Compliance with Laws
. This Plan, the granting and vesting of options, restricted stock awards, unrestricted stock awards, deferred stock awards, performance awards or stock appreciation rights under this Plan and the issuance and delivery of shares of common stock and the payment of money under this Plan or under Awards granted hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements and the requirements of Section 409A of the Code) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance
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with all applicable legal requirements. To the extent permitted by applicable law, the Plan, options, restricted stock awards, unrestricted stock awards, deferred stock awards, performance awards, or stock appreciation rights granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.
9.11
Titles
. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Plan.
9.12
Governing Law
. This Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Delaware without regard to conflicts of laws thereof.
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