UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment
No.___)
Filed by the Registrant
x
Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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MANHATTAN PHARMACEUTICALS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if
other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies: N/A
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Aggregate number of securities to which transaction applies: N/A
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): N/A
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Proposed maximum aggregate value of transaction: N/A
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Total fee paid: N/A
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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Amount Previously Paid: N/A
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Form, Schedule or Registration Statement No.: N/A
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Date Filed: N/A
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MANHATTAN PHARMACEUTICALS, INC.
787 Seventh Avenue, 48
th
Floor
New York, New York 10019
Dear Stockholder:
You are cordially invited
to the Annual Meeting of Stockholders (the “Annual Meeting”) of Manhattan Pharmaceuticals, Inc. (“Manhattan”
or the “Company”), to be held at 10:00 a.m. local time, on Monday, April 16, 2012, at the offices of our legal counsel,
Alston & Bird LLP, located at 90 Park Avenue, New York, New York 10016. At the meeting, the stockholders will be asked to (i)
elect five directors for a term of one year , (ii) authorize our Board of Directors (the “Board”), at its discretion,
to amend our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), to effect up to
two reverse stock splits of our issued and outstanding shares of common stock, par value $0.001 per share (“Common Stock”),
(iii) authorize the Board, at its discretion, to amend our Certificate of Incorporation, to change Manhattan’s name to “TG
Therapeutics, Inc.,” (iv) authorize the adoption of the 2012 Incentive Plan, and (v) ratify the appointment of J.H. Cohn LLP
as our independent registered public accounting firm for the year ending December 31, 2012. You will also have the opportunity
to ask questions and make comments at the meeting.
It is important that your
stock be represented at the meeting regardless of the number of shares you hold. You are encouraged to specify your voting preferences
by marking our proxy card and returning it as directed. If you do attend the meeting and wish to vote in person, you may revoke
your proxy at the meeting.
If you have any questions
about the proxy statement or the accompanying 2011 Annual Report, please contact Sean A. Power, our Chief Financial Officer at
(212) 554-4305.
We look forward to seeing
you at the Annual Meeting.
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Sincerely,
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/s/ Michael S. Weiss
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Michael S. Weiss
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Executive Chairman, Interim Chief Executive Officer and President
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March 15, 2012
New York, New York
MANHATTAN PHARMACEUTICALS, INC.
787 Seventh Avenue, 48
th
Floor
New York, New York 10019
NOTICE
OF Annual Meeting OF STOCKHOLDERS
The Annual Meeting of
Stockholders of Manhattan Pharmaceuticals, Inc. will be held at the offices of our legal counsel, Alston & Bird LLP, located
at 90 Park Avenue, New York, New York 10016, on Monday, April 16, 2012, at 10:00 a.m., local time. At the meeting, stockholders
will consider and act on the following items:
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1.
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Elect five directors for a term of one year;
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2.
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To authorize our Board, at its discretion, to amend our Certificate of Incorporation to effect
up to two reverse stock splits of our issued and outstanding shares of Common Stock;
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3.
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To authorize the Board, at its discretion, to amend our Certificate of Incorporation, to change
Manhattan’s name to “TG Therapeutics, Inc.”;
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4.
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To authorize the adoption of the 2012 Incentive Plan;
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5.
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Ratify the appointment of J.H. Cohn LLP as our independent registered public accounting firm for
the year ending December 31, 2012
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6.
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The transaction of any other business that may properly come before the Annual Meeting or any adjournment
of the Annual Meeting.
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Only those stockholders
of record as of the close of business on March 9, 2012, are entitled to vote at the Annual Meeting or any postponements or adjournments
thereof. A complete list of stockholders entitled to vote at the Annual Meeting will be available for your inspection beginning
March 10, 2012, at our offices located at 787 Seventh Avenue, New York, New York 10019, between the hours of 10:00 a.m. and 5:00
p.m., local time, each business day.
YOUR VOTE IS IMPORTANT!
You may vote your shares
by completing and returning the enclosed proxy card, or by logging onto
www.proxyvote.com
and with your proxy card in hand,
following the instructions.
Submitting your proxy
does not affect your right to vote in person if you decide to attend the Annual Meeting. You are urged to submit your proxy as
soon as possible, regardless of whether or not you expect to attend the Annual Meeting. You may revoke your proxy at any time before
it is exercised at the Annual Meeting by (i) delivering written notice to our Corporate Secretary, Sean Power, at our address above,
(ii) submitting a later dated proxy card, or (iii) attending the Annual Meeting and voting in person. No revocation under (i) or
(ii) will be effective unless written notice or the proxy card is received by our Corporate Secretary at or before the Annual Meeting.
When you submit your proxy,
you authorize Michael Weiss and Sean Power to vote your shares at the Annual Meeting and on any adjournments of the Annual Meeting
in accordance with your instructions.
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By Order of the Board of Directors,
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/s/ Sean A. Power
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Sean A. Power
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Corporate Secretary
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March 15, 2012
New York, New York
MANHATTAN PHARMACEUTICALS, INC
.
787 Seventh Avenue, 48
th
Floor
New York, New York 10019
Phone: (212) 554-4305
Fax: (212) 554-4531
PROXY STATEMENT
This proxy statement
and the accompanying proxy card are being mailed beginning on or about March 15, 2012, to the owners of shares of common and Series
A Preferred Stock of Manhattan as of March 9, 2012, in connection with the solicitation of proxies by our Board for the Annual
Meeting.
The Annual Meeting will
take place at the offices of our legal counsel, Alston & Bird LLP, located at 90 Park Avenue, New York, New York 10016 on Monday,
April 16, 2012, at 10:00 a.m., local time. Our Board encourages you to read this document thoroughly and take this opportunity
to vote, via proxy, on the matters to be decided at the Annual Meeting. As discussed below, you may revoke your proxy at any time
before your shares are voted at the Annual Meeting.
Table of Contents
Proxy Statement
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Questions and Answers
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3
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What is the purpose of the Annual Meeting?
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3
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Who is entitled to vote at our Annual Meeting?
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3
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How do I vote?
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3
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What is a proxy?
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3
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How will my shares be voted if I vote by proxy?
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3
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How do I revoke my proxy?
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4
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Is my vote confidential?
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4
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How are votes counted?
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4
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What constitutes a quorum at the Annual Meeting?
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4
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What vote is required to elect our directors for a one-year term?
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4
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What vote is required to authorize our Board, at its discretion, to amend our Certificate of Incorporation, to effect up to two reverse stock splits of our issued and outstanding shares of Common Stock?
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4
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What vote is required to authorize the Board, at its discretion, to amend our Certificate of Incorporation, to change Manhattan’s name to “TG Therapeutics, Inc.”?
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5
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What vote is required to adopt the 2012 Incentive Plan?
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5
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What vote is required to ratify J.H. Cohn LLP as our independent registered public accounting firm for the year ending December 31, 2012?
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5
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What percentage of our
outstanding Common Stock and Series A Preferred Stock do our directors and executive officers own?
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5
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Who was our independent public accountant for the year ending December 31, 2011? Will they be represented at the Annual Meeting?
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5
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How can I obtain a copy of our annual report on Form 10-K?
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5
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Corporate Governance
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6
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Our Board of Directors
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6
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Communicating with the Board of Directors
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8
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Audit Committee
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8
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Compensation Committee
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8
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Nominating Process
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9
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Independent Registered Public Accounting Firm Fees and Other Matters
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10
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Audit Fees
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10
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Audit-Related Fees
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10
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Tax Fees
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10
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All Other Fees
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10
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Pre-Approval of Services
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10
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Report of the Audit Committee
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12
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Change of Control
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13
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Our Executive Officers
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14
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Executive Officers
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14
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Executive Compensation
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15
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Summary Compensation Table
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15
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Outstanding Equity Awards at 2011 Fiscal Year End
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16
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Employment Agreements
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17
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Director Compensation
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19
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Director Compensation Program
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19
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2011 Director Compensation
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19
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Section 16(a) Beneficial Ownership Reporting Compliance
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21
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Related-Person Transactions
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22
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Stock Ownership of Our Directors, Executive Officers, and 5% Beneficial Owners
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23
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Proposal One: Election of Directors; Nominees
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25
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Proposal Two:
To authorize our Board, at its discretion, to amend our Amended and Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to effect up to two reverse stock splits of our issued and outstanding shares of Common Stock
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26
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Proposal Three:
To authorize the Board, at its discretion, to amend our Certificate of Incorporation, to change Manhattan’s name to “TG Therapeutics, Inc.”
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31
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Proposal Four:
To Authorize the Adoption of the 2012 Incentive Plan
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32
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Proposal
Five: Ratification of Appointment Of J.H. Cohn LLP
as our Independent Registered Public Accounting Firm
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39
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Additional Information
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40
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Householding of Annual Meeting Materials
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40
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Stockholder Proposals for Our
2013 Annual Meeting
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40
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Other Matters
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40
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Solicitation of Proxies
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40
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Incorporation of Information by Reference
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40
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Appendix A: Form of Certificate of Amendment to Effect Stock Split
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41
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Appendix B: Form of Certificate of Amendment to Effect Name Change
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42
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Appendix C: 2012 Incentive Plan
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43
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QUESTIONS
AND ANSWERS
Q.
What is the purpose of the Annual
Meeting?
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A.
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At the Annual Meeting, our stockholders will act upon the matters outlined in the Notice of Annual
Meeting of Stockholders accompanying this proxy statement, including (i) electing five directors for a term of one year, (ii) to
authorize our Board, at its discretion, to amend our Certificate of Incorporation to effect up to two reverse stock splits of our
issued and outstanding shares of Common Stock, (iii) to authorize the Board, at its discretion, to amend our Certificate of Incorporation
to change Manhattan’s name to “TG Therapeutics, Inc.”, (iv) to authorize the adoption of the 2012 Incentive Plan
and (v) to ratify the appointment of J.H. Cohn LLP as our independent registered public accounting firm for the year ending December
31, 2012.
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Q.
Who is entitled to vote at our Annual
Meeting?
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A.
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The record holders of our Common Stock and our Series A Preferred Stock, par value $0.001 per
share at the close of business on the record date, March 9, 2012, may vote at the Annual Meeting. Each share of Common Stock
is entitled to one vote. Each share of our Series A Preferred Stock is convertible into 500 shares of Common Stock, and votes
on an as-converted basis with the Common Stock. There were 284,683,977 shares of Common Stock outstanding and 1,108,816
shares of Series A Preferred Stock (convertible into 554,408,000 shares of Common Stock) outstanding on the record date and
entitled to vote at the Annual Meeting. A list of stockholders entitled to vote at the Annual Meeting, including the
address of and number of shares held by each stockholder of record, will be available for your inspection beginning March 10,
2012, at our offices located at 787 Seventh Avenue, New York, New York 10019, between the hours of 10:00 a.m. and 5:00 p.m.,
local time, each business day.
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Q.
How do I vote?
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A.
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You may vote in person at the Annual
Meeting, by use of a proxy card, via Internet at
www.proxyvote.com
,
or by telephone as indicated in the proxy card.
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Q.
What is a proxy?
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A.
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A proxy is a person you appoint to vote your shares on your behalf. If you are unable to attend
the Annual Meeting, our Board is seeking your appointment of a proxy so that your shares may be voted. If you vote by proxy, you
will be designating Michael Weiss, our Executive Chairman, Interim Chief Executive Officer and President, and Sean Power, our Chief
Financial Officer, Treasurer and Corporate Secretary, as your proxies. Mr. Weiss and/or Mr. Power may act on your behalf and have
the authority to appoint a substitute to act as your proxy.
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Q.
How will my shares be voted if I vote
by proxy?
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A.
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Your proxy will be voted according to the instructions you provide.
If you complete and submit
your proxy but do not otherwise provide instructions on how to vote your shares, your shares will be voted (i) “FOR”
the individuals nominated to serve as members of our Board of Directors, (ii) “FOR” authorizing our Board, at its discretion,
to amend our Certificate of Incorporation, to effect up to two reverse stock splits of our issued and outstanding shares of Common
Stock, (iii) “FOR” authorizing the Board, at its discretion, to amend our Certificate of Incorporation, to change Manhattan’s
name to “TG Therapeutics, Inc.”, (iv) “FOR” the adoption of the 2012 Incentive Plan, and (v) “FOR”
the ratification of J.H. Cohn LLP as our independent registered public accounting firm for the year ending December 31, 2012.
Presently,
our Board does not know of any other matter that may come before the Annual Meeting. However, your proxies are authorized to vote
on your behalf, using their discretion, on any other business that properly comes before the Annual Meeting.
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Q.
How do I revoke my proxy?
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A.
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You may revoke your proxy at any time before your shares are voted at the Annual Meeting by:
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·
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delivering written notice to our Corporate Secretary, Sean Power, at our address above;
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·
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submitting a later dated proxy card or voting again via the Internet; or
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·
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attending the Annual Meeting and voting in person.
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Q.
Is my vote confidential?
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A.
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Yes. All votes remain confidential, unless you provide otherwise.
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Q.
How are votes counted?
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A.
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Before the Annual Meeting, our Board of Directors will appoint one or more inspectors of election
for the meeting. The inspector(s) will determine the number of shares represented at the meeting, the existence of a quorum and
the validity and effect of proxies. The inspector(s) will also receive, count, and tabulate ballots and votes and determine the
results of the voting on each matter that comes before the Annual Meeting.
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Abstentions and votes withheld,
and shares represented by proxies reflecting abstentions or votes withheld, will be treated as present for purposes of determining
the existence of a quorum at the Annual Meeting. They will not be considered as votes “for” or “against”
any matter for which the stockholder has indicated their intention to abstain or withhold their vote. Broker or nominee non-votes,
which occur when shares held in “street name” by brokers or nominees who indicate that they do not have discretionary
authority to vote on a particular matter, will not be considered as votes “for” or “against” that particular
matter. Broker and nominee non-votes will be treated as present for purposes of determining the existence of a quorum, and may
be entitled to vote on certain matters at the Annual Meeting.
Q.
What constitutes a quorum at the Annual
Meeting?
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A.
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In accordance with Delaware law (the law under which we are incorporated) and our Amended and Restated
Bylaws, the presence at the Annual Meeting, by proxy or in person, of the holders of a majority of the outstanding shares of the
capital stock entitled to vote at the Annual Meeting constitutes a quorum, thereby permitting the stockholders to conduct business
at the Annual Meeting. Abstentions, votes withheld, and broker or nominee non-votes will be included in the calculation of the
number of shares considered present at the Annual Meeting for purposes of determining the existence of a quorum.
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If a quorum
is not present at the Annual Meeting, a majority of the stockholders present in person and by proxy may adjourn the meeting to
another date. If an adjournment is for more than 30 days or a new record date is fixed for the adjourned meeting by our Board,
we will provide notice of the adjourned meeting to each stockholder of record entitled to vote at the adjourned meeting. At any
adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the originally
called meeting.
Q.
What vote is required to elect our
directors for a one-year term?
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A.
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The affirmative vote of a plurality of the votes of the shares present, in person or by proxy,
at the Annual Meeting is required for the election of each of the nominees for director. “Plurality” means that the
nominees receiving the largest number of votes up to the number of directors to be elected at the Annual Meeting will be duly elected
as directors. Abstentions, votes withheld, and broker or nominee non-votes will not affect the outcome of director elections.
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Q.
What
vote is required to authorize our Board, at its discretion, to amend our Certificate of Incorporation, to effect up to two reverse
stock splits of our issued and outstanding shares of Common Stock?
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A.
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The affirmative vote of the majority of shares present in person
or represented by proxy at the Annual Meeting and entitled to vote on the subject matter.
Abstentions and votes
withheld will have the same effect as a negative vote. However, broker or nominee non-votes, and shares represented by
proxies reflecting broker or nominee non-votes, will not have the effect of a vote against this proposal as they are not
considered to be present and entitled to vote on this matter.
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Q.
What
vote is required to authorize the Board, at its discretion, to amend our Certificate of Incorporation, to change Manhattan’s
name to “TG Therapeutics, Inc.”?
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A.
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The affirmative vote of the majority of shares present in person or
represented by proxy at the Annual Meeting and entitled to vote on the subject matter.
Abstentions and votes withheld will have
the same effect as a negative vote. However, broker or nominee non-votes, and shares represented by proxies reflecting broker or
nominee non-votes, will not have the effect of a vote against this proposal as they are not considered to be present and entitled
to vote on this matter.
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Q.
What
vote is required to adopt the 2012 Incentive Plan?
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A.
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The affirmative vote of the majority of shares present in person or
represented by proxy at the Annual Meeting and entitled to vote on the subject matter.
Abstentions and votes withheld will have
the same effect as a negative vote. However, broker or nominee non-votes, and shares represented by proxies reflecting broker or
nominee non-votes, will not have the effect of a vote against this proposal as they are not considered to be present and entitled
to vote on this matter.
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Q.
What
vote is required to ratify J.H. Cohn LLP as our independent registered public accounting firm for the year ending December 31, 2012?
A. The affirmative
vote of a majority of the shares present, in person or by proxy, and entitled to vote at the Annual Meeting is required to approve
the ratification of J.H. Cohn LLP as our independent registered public accounting firm for the year ending December 31, 2012. Abstentions
and votes withheld will have the same effect as a negative vote. However, broker or nominee non-votes, and shares represented by
proxies reflecting broker or nominee non-votes, will not have the effect of a vote against this proposal as they are not considered
to be present and entitled to vote on this matter.
Q.
What
percentage of our outstanding Common Stock and Series A Preferred Stock do our directors and executive officers own?
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A.
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As of March 9, 2012, our directors and executive officers owned, or have the right to acquire,
approximately 25.8% of our outstanding Common Stock (calculated on an as-converted basis with regard to the Series A Preferred
Stock). See the discussion under the heading “Stock Ownership of Our Directors, Executive Officers, and 5% Beneficial Owners”
on page 23 for more details.
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Q.
Who
was our independent public accountant for the year ending December 31, 2011? Will they be represented at the Annual Meeting?
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A.
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J.H. Cohn LLP is the independent registered public accounting firm that audited our financial statements
for the year ending December 31, 2011. We expect a representative of J.H. Cohn LLP to be present at the Annual Meeting. The representative
will have an opportunity to make a statement and will be available to answer your questions.
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Q.
How can I obtain a copy of our annual
report on Form 10-K?
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A.
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We have filed our annual report on Form 10-K for the year ended December 31, 2011, with the Securities
and Exchange Commission (“SEC”). The annual report on Form
10-
K is also
included in the 2011 Annual Report to Stockholders. You may obtain, free of charge, a copy of our annual report on Form 10-K, including
financial statements and exhibits, by writing to our corporate secretary, Sean Power, or by email at info@tgtxinc.com. Upon request,
we will also furnish any exhibits to the annual report on Form 10-K as filed with the SEC.
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CORPORATE
GOVERNANCE
Our Board of Directors
Our amended and restated
bylaws provide that the Board shall consist of one or more members, as determined from time to time by resolution of the Board.
Currently, our Board consists of two members, with three members listed as Director-Nominees. The following individuals are being
nominated to serve on our Board (See “Proposal 1 – Election of Directors; Nominees”):
Name
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Age
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Position
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Director
Since
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Michael S. Weiss
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46
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Executive Chairman, Interim Chief Executive Officer and President
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2011
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Neil Herskowitz
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55
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Director
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2004
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Laurence N. Charney
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64
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Director-Nominee
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2012
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William J. Kennedy
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67
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Director-Nominee
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2012
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Mark Schoenebaum, M.D.
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39
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Director-Nominee
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2012
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The Board does not have
a formal policy regarding the separation of the roles of Chief Executive Officer and Executive Chairman, as the Board believes
that it is in the best interests of the Company to make that determination based on the direction of the Company and the current
membership of the Board. The Board has determined that having a director who is an executive officer serve as the Chairman is in
the best interest of the Company’s stockholders at this time.
Manhattan has a risk management
program overseen by Michael Weiss, our Executive Chairman, Interim Chief Executive Officer and President. Mr. Weiss identifies
material risks and prioritizes them for our Board. Our Board regularly reviews information regarding our credit, liquidity, and
operations, as well as the risks associated with each.
Though not a listed company,
Manhattan adheres to the corporate governance standards adopted by the Nasdaq Stock Market (“Nasdaq”). Nasdaq rules
require our Board to make an affirmative determination as to the independence of each director. Consistent with these rules, our
Board undertook its annual review of director independence on March 2, 2012. During the review, our Board considered relationships
and transactions during 2011 and during the past three fiscal years between each director or any member of his immediate family,
on the one hand, and the Company and our subsidiaries and affiliates, on the other hand. The purpose of this review was to determine
whether any such relationships or transactions were inconsistent with a determination that the director is independent. Based on
this review, our Board determined that of the two current members of our Board, one, Neil Herskowitz, is independent under the
criteria established by Nasdaq and by our Board.
The following biographies
set forth the names of our director nominees, their ages, the year in which they first became directors, their positions with us,
their principal occupations and employers for at least the past five years, any other directorships held by them during the past
five years in companies that are subject to the reporting requirements of the Securities Exchange Act of 1934 (the “Exchange
Act”), or any company registered as an investment company under the Investment Company Act of 1940, as well as additional
information, all of which we believe sets forth each director nominee’s qualifications to serve on the Board. There is no
family relationship between and among any of our executive officers or directors. There are no arrangements or understandings between
any of our executive officers or directors and any other person pursuant to which any of them are elected as an officer or director.
Michael
S. Weiss, 46,
has served as Manhattan’s Executive Chairman, Interim Chief Executive Officer and President
since December 2011. Mr. Weiss is co-founder, managing partner and principal of Opus Point Partners since 2008. He has also served
as a director and the non-executive chairman of the board of directors of National Holdings Corporation since January 19, 2011
and is one of the principal stockholders of National Holdings Corporation. Mr. Weiss earned his J.D. from Columbia Law School and
his B.S. in Finance from the University at Albany. He began his professional career as a lawyer with Cravath, Swaine & Moore.
In 1999, Mr. Weiss founded Access Oncology which was later acquired by Keryx Biopharmaceuticals (NASDAQ: KERX) in 2004. Following
the merger, Mr. Weiss remained as CEO of Keryx and grew the company to close to a $1BB market capitalization company at its peak.
While at Keryx, he raised over $150MM in equity capital through public and private offerings, executed a $100MM+ strategic alliance,
negotiated multiple Special Protocol Assessments agreements with the FDA and managed multiple large clinical trials.
Neil
Herskowitz, 55,
has served on our Board since July 2004. He has served as the Managing Member of ReGen Partners
LLC, an investment fund located in New York, and as the President of its affiliate, Riverside Claims LLC since June 2004. Mr.
Herskowitz has previously served as a director and Audit Committee Chairman of Chelsea Therapeutics (CHTP) a publicly traded pharmaceutical
development company. He also serves on the board of directors of Starting Point Services for Children, a not-for-profit corporation.
Mr. Herskowitz received a B.B.A. in Finance from Bernard M. Baruch College in 1978.
Laurence N. Charney,
64,
was nominated to our Board in March 2012. Since 2007, Mr. Charney has served as a business strategist and financial
advisor to Boards, CEOs and investors. Previously, from 1970 through June 2007, Mr. Charney was a senior audit partner at
Ernst & Young, LLP, a registered public accounting firm, retiring as a practice leader in the Americas Quality and Risk Management
Group. Mr. Charney currently serves as a director and audit committee member of Iconix Brand Group, Inc., and as a director and
audit committee chairman of Pacific Drilling S.A. In addition, Mr. Charney previously served as a director and audit committee
member of Marvel Entertainment, Inc., Mrs. Fields Original Cookies, and Pure Biofuels, Inc. In addition to his extensive experience
on the boards of various corporate entities, Mr. Charney is also very active on the boards of several non-profit organizations.
Mr. Charney graduated with a B.B.A. degree from Hofstra University and completed the Executive MBA in Business program at Columbia
University.
William J. Kennedy, PhD., 67,
was nominated to our Board in March 2012. Dr. Kennedy is a regulatory
affairs professional with over 27 years of domestic and international experience. Prior to his retirement, Dr. Kennedy was Vice
President for Regulatory Affairs for Zeneca Corporation. Dr. Kennedy has successfully managed the development, preparation, submission
and approval of dozens of NDAs and major SNDAs. Dr. Kennedy has helped shape regulatory policy in the United States continuously
since 1988, as a member and Chairman of PhRMA's Regulatory Affairs Coordinating Committee, as PhRMA's Chief Negotiator with Congress
and FDA for FDAMA, and as the Co-Chairman of PhRMA's PDUFA III Steering Committee.
Before joining the
pharmaceutical industry, Dr. Kennedy was an Associate Research Professor at Yale Medical School.
Dr. Kennedy is the author
of several articles and is an often sought after speaker for his insight into the regulatory process.
He
co-founded the website PDUFADate.com which provides regulatory opinions to the financial community.
Dr. Kennedy was the
recipient of RAP's prestigious Special Recognition Award in 1998.
Dr. Kennedy has been an independent
consultant to the pharmaceutical industry since 1999.
Mark Schoenebaum,
M.D., 39,
was nominated to our Board in March 2012. Mr. Schoenebaum is a Senior Managing Director and heads ISI’s
Health Care Research Team. He is also ISI’s Biotechnology & Pharmaceuticals major analyst. He has been ranked Institutional
Investor’s #1 biotechnology analyst for the past seven years. In addition, Mr. Schoenebaum has been highly ranked in the Greenwich
Associates survey for several years. Prior to joining ISI in 2010, Mr. Schoenebaum spent two years at Deutsche Bank as a Managing
Director and Senior Biotechnology Analyst. Prior to that, he held a similar position at Bear Stearns. Mr. Schoenebaum graduated
from Indiana University with highest distinction in 1996 with a B.A. and received an M.D. from the Johns Hopkins University School
of Medicine in 2000.
During 2011, our Board
held three meetings. During 2011, the only nominee serving at the time of those meetings attended at least 75% of the meetings
of the Board and the meetings of those committees on which he served. It is our expectation that all of the directors standing
for election will attend this year’s Annual Meeting.
On
December 28, 2011 the Board held a meeting and resolved to enter into an Exchange Transaction Agreement (the
"
Exchange
Transaction Agreement"
)
with
Opus Point Partners, LLC, a Delaware limited liability company ("Opus")
and TG Therapeutics, Inc., a Delaware corporation ("TG"). Under the Exchange Transaction Agreement, Opus exchanged its
shares of common stock in TG for shares of Series A Preferred Stock. The exchange ratio was $2.25, divided by $.04 divided by 500.
As a result, Opus received 281,250 shares of Series A Preferred Stock. Furthermore, the Exchange Transaction Agreement provided
that each holder of restricted TG common stock outstanding on December 29, 2011 receive restricted shares of Series A Preferred
Stock using the same exchange ratio, and such shares would carry the same restrictions that existed prior to the execution of the
Exchange Transaction Agreement.
Each
share of Series A Preferred Stock is convertible into 500 shares of Common Stock provided that such conversion rights are subject
to sufficient available authorized shares of Common Stock.
The
Exchange Transaction Agreement permitted Opus the unilateral right to set the number of members of the Board of the Company at
six members at any time and then appoint an additional three members of the Board of the Company to the vacant seats, until the
later of (x) two years from December 29, 2011, or (y) the date on which Opus owns less than 10% of the equity securities of the
Company on an aggregate basis.
Communicating with the Board of Directors
Our Board has established
a process by which stockholders can send communications to the Board. You may communicate with the Board as a group, or to specific
directors, by writing to Sean Power, our Corporate Secretary, at our offices located at 787 Seventh Avenue, 48
th
Floor,
New York, New York 10019. The Corporate Secretary will review all such correspondence and regularly forward to the Board a summary
of all correspondence and copies of all correspondence that, in the opinion of the Corporate Secretary, deals with the functions
of the Board or committees thereof or that he otherwise determines requires their attention. Directors may at any time review a
log of all correspondence we receive that is addressed to members of our Board and request copies of any such correspondence. Concerns
relating to accounting, internal controls, or auditing matters may be communicated in this manner, or may be submitted on an anonymous
basis via e-mail at info@tgtxinc.com. These concerns will be immediately brought to the attention of our Board and handled in accordance
with procedures established by our Board.
Audit Committee
The Board
of Directors did not have a formally constituted Audit Committee in 2011, so the entire Board currently acts as the Audit
Committee.
The Audit Committee held
four meetings during the fiscal year ended December 31, 2011. At this time, the Company’s Audit Committee has no formal charter,
but following the election of the current slate of directors at the Annual Meeting, we intend to adopt a charter setting forth
the duties and responsibilities of the Audit Committee. Currently, such duties and responsibilities include reviewing and monitoring
our financial statements and internal accounting procedures, selecting our independent registered public accounting firm and consulting
with and reviewing the services provided by our independent registered public accounting firm. Our Audit Committee has sole discretion
over the retention, compensation, evaluation and oversight of our independent registered public accounting firm.
The SEC requires that
at least one member of the Audit Committee have a “heightened” level of financial and accounting sophistication. Such
a person is known as the “audit committee financial expert” under the SEC’s rules. Our Board has determined that
Neil Herskowitz is an “audit committee financial expert,” as the SEC defines that term, and is an independent member
of our Board of Directors and our Audit Committee. Please see Mr. Herskowitz’s biography on page 7 for a description of his
relevant experience.
The report of the Audit
Committee can be found on page 12 of this proxy statement.
Compensation Committee
The Company does not currently
have a standing Compensation Committee, but upon election of the current slate of directors we intend to establish a Compensation
Committee and adopt a charter therefor. Currently, the duties of a formal Compensation Committee are fulfilled by the entire Board,
with such duties including evaluation of the performance of the Chief Executive Officer and our other executive officers, determining
the overall compensation of the Chief Executive Officer and our other executive officers and administering all executive compensation
programs, including, but not limited to, our incentive and equity-based plans. The Board also evaluates the performance of the
Chief Executive Officer and our other executive officers on an annual basis and reviews and approves on an annual basis all compensation
programs and awards relating to such officers. The Board applies discretion in the determination of individual executive compensation
packages to ensure compliance with the Company’s compensation philosophy. The Chief Executive Officer makes recommendations
to the Board with respect to the compensation packages for officers other than himself. The Board may engage a compensation consultant
to conduct a review of its executive compensation programs in 2012. The Committee did not engage a compensation consultant in 2011.
Nominating Process
We do not currently have
a nominating committee or any other committee serving a similar function. Director nominations are approved by a vote of a majority
of our independent directors as required under the Nasdaq rules and regulations. Although we do not have a written charter in place
to select director nominees, our Board intends to adopt resolutions regarding the director nomination process following the Annual
Meeting. It is our intention that the process to be adopted will function to select director nominees who will be valuable members
of our Board.
Our independent directors
currently identify potential nominees to serve as directors through a variety of business contacts, including current executive
officers, directors, community leaders and stockholders. The independent directors may, to the extent they deem appropriate, retain
a professional search firm and other advisors to identify potential nominees.
Our independent directors
will also consider candidates recommended by stockholders for nomination to our Board. A stockholder who wishes to recommend a
candidate for nomination to our Board must submit such recommendation to our Corporate Secretary, Sean Power, at our offices located
at 787 Seventh Avenue, 48
th
Floor, New York, New York 10019. Any recommendation must be received not less than 60 calendar
days nor more than 90 calendar days before the anniversary date of the previous year’s annual meeting. All stockholder recommendations
of candidates for nomination for election to our Board must be in writing and must set forth the following: (i) the candidate’s
name, age, business address, and other contact information, (ii) the number of shares of Common Stock and Series A Preferred Stock
beneficially owned by the candidate, (iii) a complete description of the candidate’s qualifications, experience, background
and affiliations, as would be required to be disclosed in the proxy statement pursuant to Schedule 14A under the Exchange Act,
(iv) a sworn or certified statement by the candidate in which he or she consents to being named in the proxy statement as a nominee
and to serve as director if elected, and (v) the name and address of the stockholder(s) of record making such a recommendation.
We believe that our Board
as a whole should encompass a range of talent, skill, and expertise enabling it to provide sound guidance with respect to our operations
and interests. Our independent directors evaluate all candidates to our Board by reviewing their biographical information and qualifications.
If the independent directors determine that a candidate is qualified to serve on our Board, such candidate is interviewed by at
least one of the independent directors and our Chief Executive Officer. Members of the Board also have an opportunity to interview
qualified candidates. The independent directors then determine, based on the background information and the information obtained
in the interviews, whether to recommend to the Board that the candidate be nominated for approval by the stockholders to fill a
directorship. With respect to an incumbent director whom the independent directors are considering as a potential nominee for re-election,
the independent directors review and consider the incumbent director’s service during his or her term, including the number
of meetings attended, level of participation, and overall contribution to the Board. The manner in which the independent directors
evaluate a potential nominee will not differ based on whether the candidate is recommended by our directors or stockholders.
We consider the following
qualifications, among others, when making a determination as to whether a person should be nominated to our Board: the independence
of the director nominee; the nominee’s character and integrity; financial literacy; level of education and business experience,
including experience relating to biopharmaceutical companies; whether the nominee has sufficient time to devote to our Board; and
the nominee’s commitment to represent the long-term interests of our stockholders. We review candidates in the context of
the current composition of the Board and the evolving needs of our business. We believe that each of the current members of our
Board (who are also our director nominees) has the requisite business, biopharmaceutical, financial or managerial experience to
serve as a member of the Board, as described above in their biographies under the heading “Our Board of Directors.”
We also believe that each of the current members of our Board has other key attributes that are important to an effective board,
including integrity, high ethical standards, sound judgment, analytical skills, and the commitment to devote significant time and
energy to service on the Board and its committees.
We do not have a formal
policy in place with regard to the consideration of diversity in considering candidates for our Board, but the Board strives to
nominate candidates with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent,
skills and expertise to oversee our business.
INDEPENDENT
registered
public accounting fir
M FEES AND OTHER MATTERS
J.H. Cohn LLP, the independent
registered public accounting firm that audited our financial statements for the years ended December 31, 2011, and December 31,
2010 has served as our independent registered public accounting firm since 2002. We expect a representative of J.H. Cohn LLP to be
present at the Annual Meeting. The representative will have an opportunity to make a statement and will be available to answer
your questions.
Our Board has asked the
stockholders to ratify the selection of J.H. Cohn LLP as our independent registered public accounting firm. See Proposal Five: Ratification
of Appointment of J.H. Cohn LLP as Our Independent Registered Public Accounting Firm on page 39 of this proxy statement. The Board
has reviewed the fees described below and concluded that the payment of such fees is compatible with maintaining J.H. Cohn LLP’s
independence. All proposed engagements of J.H. Cohn LLP, whether for audit services, audit-related services, tax services, or permissible
non-audit services, were pre-approved by our Board.
Audit Fees
For the fiscal years ended
December 31, 2011 and December 31, 2010, J.H. Cohn LLP billed us an aggregate of approximately $105,322 and $97,542, respectively,
in fees for the professional services rendered in connection with the audits of our annual financial statements included in our
Annual Reports on Form 10-K for those two fiscal years and the review of our financial statements included in our Quarterly Reports
on Form 10-Q during those two fiscal years.
Audit-Related Fees
During the fiscal years
ended December 31, 2011 and December 31, 2010, J.H. Cohn LLP billed us an aggregate of approximately $0 and $13,785, respectively,
in fees for audit-related services reasonably related to the performance of the audits and reviews for those two fiscal years,
in addition to the fees described above under the heading “Audit Fees.” These fees include review of registration statements.
Tax Fees
During the fiscal years
ended December 31, 2011 and December 31, 2010, J.H. Cohn LLP billed us an aggregate of approximately $0 and $7,500, respectively,
for professional services rendered for tax compliance, tax advice, and tax planning services. These professional services consisted
of general consultation from time to time regarding compliance with and planning for federal, state, local, and international tax
matters.
All Other Fees
During the fiscal years
ended December 31, 2011 and December 31, 2010, we were not billed by J.H. Cohn LLP for any fees for services, other than those described
above, rendered to us and our affiliates for those two fiscal years.
Pre-Approval of Services
Our Board has established
a policy setting forth the procedures under which services provided by our independent registered public accounting firm will be
pre-approved by our Board. The potential services that might be provided by our independent registered public accounting firm fall
into two categories:
|
·
|
Services that are permitted, including the audit of our annual financial statements, the review
of our quarterly financial statements, related attestations, benefit plan audits and similar audit reports, financial and other
due diligence on acquisitions, and federal, state, and non-US tax services; and
|
|
·
|
Services that may be permitted, subject to individual pre-approval, including compliance and internal-control
reviews, indirect tax services such as transfer pricing and customs and duties, and forensic auditing.
|
Services that our independent
registered public accounting firm may not legally provide include such services as bookkeeping, certain human resources services,
internal audit outsourcing, and investment or investment banking advice.
All proposed engagements
of our independent registered public accounting firm, whether for audit services or permissible non-audit services, are pre-approved
by the Board. We jointly prepare a schedule with our independent registered public accounting firm that outlines services that
we reasonably expect we will need from our independent registered public accounting firm, and categorize them according to the
classifications described above. Each service identified is reviewed and approved or rejected by the Board.
Report
of THE Audit Committee
In monitoring the preparation
of our financial statements, the Audit Committee met with both management and J.H. Cohn LLP, our independent registered public accounting
firm for the year ended December 31, 2011, to review and discuss all financial statements prior to their issuance and to discuss
any and all significant accounting issues. Management and our independent registered public accounting firm advised the Audit Committee
that each of the financial statements were prepared in accordance with generally accepted accounting principles. The Audit Committee’s
review included a discussion of the matters required to be discussed pursuant to the Statement on Auditing Standards No. 61, “Communication
with Audit Committees,” as amended, (Codification of Statements on Auditing Standards, AU Section 380) as adopted by the
Public Company Accounting Oversight Board (PCAOB) in Rule 3200T, or SAS 61. SAS 61 requires our independent registered public accounting
firm to discuss with the Audit Committee, among other things, the following:
|
•
|
Methods used to account for significant or unusual transactions;
|
|
•
|
The effect of any accounting policies in controversial or emerging areas for which there is a lack
of authoritative guidance or consensus;
|
|
•
|
The process used by management to formulate sensitive accounting estimates and the basis for the independent
registered public accounting firm’s conclusion regarding the reasonableness of any such estimates; and
|
|
•
|
Any disagreements with management over the application of accounting principles, the basis for management’s
accounting estimates and the disclosures necessary in the financial statements.
|
The Audit Committee has discussed
the independence of J.H. Cohn LLP, our independent registered public accounting firm for the year ended December 31, 2011, including
the written disclosures made by J.H. Cohn LLP to the Audit Committee, as required PCAOB Rule 3526, “Communication with Audit
Committees Concerning Independence.” PCAOB Rule 3526 requires the independent registered public accounting firm to (i) disclose
in writing all relationships that, in the independent registered public accounting firm’s professional opinion, may reasonably
be thought to bear on independence, (ii) confirm their perceived independence, and (iii) engage in a discussion of independence
with the Audit Committee.
Finally, the Audit Committee
continues to monitor the scope and adequacy of our internal controls and other procedures, including any and all proposals for
adequate staffing and for strengthening internal procedures and controls where appropriate and necessary.
On the basis of these reviews
and discussions, the Audit Committee recommended to the Board that it approve the inclusion of our audited financial statements
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, for filing with the SEC.
By the Audit Committee of the Board of Directors
Michael Weiss
Neil Herskowitz
Dated March 2, 2012
CHANGE OF CONTROL
On December 29, 2011 the
Company completed a reverse acquisition of privately held TG. The acquisition was effected pursuant to the Exchange Transaction
Agreement. In accordance with the terms of the Exchange Transaction Agreement, 95% of the holders of common shares of TG (one (1)
minority stockholder of TG holding in aggregate 132,000 common shares of TG did not participate) surrendered their TG common shares.
In exchange for their TG common shares, the Exchange Transaction Agreement provided for the Company to issue to TG’s stockholders
281,250 shares of Series A Preferred Stock.
Each share of Series A Preferred
Stock is convertible into 500 shares of Common Stock provided that such conversion rights are subject to sufficient available authorized
shares of Common Stock.
The Series A Preferred Stock has the same voting rights (on an as-converted basis),
and other attributes as Common Stock. The Series A Preferred Stock will automatically be exchanged for Common Stock when sufficient
authorized shares are available to allow for such conversion.
The shares of Series A
Preferred Stock (and the underlying Common Stock once converted) are not registered for resale and, therefore, shall remain subject
to the rights and restrictions of Rule 144.
The Series A
Preferred Stock issued in connection with the Exchange Transaction Agreement provided the former TG stockholders with direct
and/or indirect ownership of approximately 95% of the Company’s outstanding equity as of December 29, 2011. Based on
the fair value of the Common Stock of $0.04 per share, the purchase price approximated was $295,933, plus the fair value of
restricted stock assumed of $82,305. In connection with the Exchange Transaction, the Company incurred $231,580 of
acquisition related costs.
OUR EXECUTIVE OFFICERS
Executive Officers
Our current executive officers
are as follows:
Name
|
|
Age
|
|
Position
|
Michael S. Weiss
|
|
46
|
|
Executive Chairman, Interim Chief Executive Officer and President
|
Sean A. Power
|
|
30
|
|
Chief Financial Officer, Treasurer and Corporate Secretary
|
No executive officer is
related by blood, marriage or adoption to any other director or executive officer. The biography of Mr. Weiss is presented in connection
with “Corporate Governance” beginning on page 6 of this proxy statement.
Sean A. Power, 30,
has served
as our Chief Financial Officer since December 2011 and currently serves as the CFO of Opus Point Partners. Mr. Power joined the
Company from Keryx Biopharmaceuticals, Inc. (KERX), where he served as Corporate Controller from 2006 to 2011. During his tenure
there, Mr. Power was involved in all capital raising and licensing transactions. He was also responsible for leading Keryx’s
compliance with SEC rules and regulations. Prior to joining Keryx, he was with KPMG, LLP, independent certified public accountants,
where he served as a senior associate. Mr. Power received a B.B.A in accounting from Siena College and is a member of the American
Institute of Certified Public Accountants.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets
forth the cash and other compensation that we paid to our current named executive officers (“NEOs”) or that was otherwise
earned by our NEOs for their services in all capacities during 2010 and 2011.
Name and
Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Stock
Awards
($) (1)
|
|
|
Option
Awards
($) (1)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael S. Weiss
|
|
|
2011
|
|
|
|
—
|
|
|
|
2,250,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,250,000
|
|
Executive Chairman, Interim Chief Executive Officer and President
(2)
|
|
|
2010
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean A. Power
|
|
|
2011
|
|
|
|
—
|
|
|
|
337,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
337,500
|
|
Chief Financial Officer, Treasurerand Corporate Secretary
(3)
|
|
|
2010
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael McGuinness
|
|
|
2011
|
|
|
|
285,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
154,475
|
(5)
|
|
|
439,475
|
|
Chief Operating and Financial Officer, Secretary
(4)
|
|
|
2010
|
|
|
|
280,000
|
|
|
|
—
|
|
|
|
98,498
|
|
|
|
—
|
|
|
|
9,800
|
(6)
|
|
|
388,298
|
|
________________________
|
(1)
|
Reflects the aggregate grant date fair value of stock and option awards granted by the Company
as computed under FASB ASC Topic 718. The grant date fair value of the stock awards is based on the fair market value of the
underlying shares on the date of grant and does not take into account any estimated forfeitures. The assumptions made in the
valuation of the option awards are contained in Note 11 to our consolidated financial statements for 2010, which are
included in our Annual Report on Form 10-K for the fiscal year 2010.
|
|
(2)
|
Mr. Weiss was appointed our Executive Chairman, Interim Chief Executive Officer and President on December
29, 2011.
|
|
(3)
|
Mr. Power was appointed our Chief Financial Officer, Treasurer and Corporate Secretary on December
29, 2011.
|
|
(4)
|
Mr. McGuinness resigned as Chief Operating and Financial Officer and Secretary effective December
29, 2011.
|
|
(5)
|
$9,975 represents matching contributions by the Company to our 401(k) retirement plan. The remainder,
$142,500, represents severance earned by Mr. McGuinness in connection with his termination of employment effective December 29,
2011. This severance amount will be paid to Mr. McGuinness in equal semi-monthly installments through March 31, 2012.
|
|
(6)
|
Represents matching contributions by the Company to our 401(k) retirement plan.
|
Outstanding Equity Awards at 2011 Fiscal
Year End
The following table provides
information concerning equity awards that are outstanding as of December 31, 2011 for each of our NEOs.
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock That
Have
Not
Vested
(#)
|
|
|
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)
|
|
Mr. Weiss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
112,500
|
(1)
|
|
|
1,136,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. Power
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
16,875
|
(2)
|
|
|
170,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr. McGuinness
|
|
|
4,400
|
(3)
|
|
|
—
|
|
|
|
35.00
|
|
|
|
07/10/16
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
1,200
|
(4)
|
|
|
—
|
|
|
|
67.50
|
|
|
|
07/10/16
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
6,400
|
(5)
|
|
|
—
|
|
|
|
47.50
|
|
|
|
04/25/17
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
22,000
|
(6)
|
|
|
—
|
|
|
|
8.50
|
|
|
|
03/25/18
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
26,667
|
(7)
|
|
|
13,333
|
|
|
|
3.50
|
|
|
|
03/02/20
|
|
|
|
—
|
|
|
|
—
|
|
____________________
|
(1)
|
Restricted Series A Preferred Stock granted to Mr. Weiss in connection with the Exchange Transaction
Agreement
. The shares vest as follows: 14,063 on each of November 15, 2012, November 15,
2013, November 15, 2014, and November 15, 2015; 28,124 upon the occurrence of the registrant achieving a particular market capitalization
target; and 28,124 upon the occurrence of the registrant achieving a second particular market capitalization target.
|
|
(2)
|
Restricted Series A Preferred Stock granted to Mr. Power in connection with the Exchange Transaction
Agreement
. The shares vest as follows: 2,812 on each of November 15, 2012, November 15, 2013,
and November 15, 2014; 4,219 upon the occurrence of the registrant achieving a particular market capitalization target; and 4,220
upon the occurrence of the registrant achieving a second particular market capitalization target.
|
|
(3)
|
Stock options awarded to the executive on July 10, 2006. The stock options
vested in equal installments on an annual basis through July 10, 2009.
|
|
(4)
|
Stock options awarded to the executive on July 10, 2006. The stock options
vested in equal installments on an annual basis through July 10, 2009.
|
|
(5)
|
Stock options awarded to the executive on April 25, 2007. The stock
options vested in equal installments on an annual basis through April 25, 2010.
|
|
(6)
|
Stock options awarded to the executive on March 25, 2008. The stock
options vested as to 7,334 of the options on March 25, 2008, and the remaining options vested in equal installments on an annual
basis through March 25, 2010.
|
|
(7)
|
Stock options awarded to the executive on March 2, 2010. The
stock options vested as to 20,000 immediately upon grant, and the
remaining options vest in equal installments on an annual basis
through March 2, 2013.
In connection with the termination of Mr. McGuinness on December 29, 2011, all unvested options
were forfeited as of that date.
|
Employment Agreements
Michael
S. Weiss.
Mr. Weiss was appointed Executive Chairman, Interim Chief Executive Officer and President of the
Company, effective December 29, 2011. In connection with the appointment, the Company assumed Mr. Weiss’ employment agreement
with TG, effective November 1, 2011, under which Mr. Weiss is to serve as the Company’s Executive Chairman, Interim Chief
Executive Officer and President until such employment is terminated pursuant to the terms of the agreement. Under the terms of
his employment agreement, Michael S. Weiss will receive an annual base salary of $225,000 (which will automatically be reduced
by 50% when Mr. Weiss resigns from his interim roles). Mr. Weiss will also be eligible to earn an annual cash performance bonus,
based upon achievement of annual performance goals and objectives set by agreement between Mr. Weiss and the Board each year, with
a target bonus of 100% of his base salary.
The Company will also
grant Mr. Weiss a number of shares of restricted Common Stock equal to 1.25% of the shares of Common Stock outstanding on the date
of grant on a fully-diluted basis. Each of these annual grants of restricted stock will vest and become non-forfeitable as to 25%
of the shares on the first anniversary of the respective date of grant, as to 25% of the shares on the second anniversary of the
respective date of grant and as to 50% of the shares on the date that the “market capitalization” (as defined in the
employment agreement) is $100 million greater than the market capitalization on the respective date of grant, provided that Mr.
Weiss remains an employee, director and/or consultant of the Company through each vesting date.
Pursuant to his employment
agreement, if Mr. Weiss’ employment is terminated by the Company without Cause (as defined therein) or if Mr. Weiss resigns
for Good Reason (as defined therein), then, in addition to his accrued obligations, if within 45 days after the date of termination,
he executes and does not revoke a general release of claims and covenant not to sue, he will receive the following severance benefits:
(i) a lump sum severance payment equal to 1.5 times the sum of his base salary and target bonus (or 2 times the sum of his base
salary and target bonus if his employment is terminated upon or following a change in control); (ii) continuation of group health
benefits for 18 months (or 24 months if his employment is terminated in upon or following a change in control); (iii) a prorated
target bonus; (iv) any shares of restricted stock outstanding on the date of his termination will become fully-vested and non-forfeitable
as of his date of termination; and (v) any stock options outstanding on the date of his termination will become fully-vested and
will remain exercisable for a period of 24 months following the date of his termination (or, if earlier, the normal expiration
date of such stock options).
If Mr. Weiss’ employment
is terminated by reason of his death or disability, he will be entitled to his accrued obligations and a prorated target bonus.
In addition, (i) any shares of restricted stock outstanding on the date of his termination will become fully vested and non-forfeitable
as of his date of termination; and (ii) the vested portion of any stock options outstanding on the date of his termination will
remain exercisable for a period of 24 months following the date of his termination (or, if earlier, the normal expiration date
of such stock options), and any unvested portion of outstanding stock options will lapse as of the date of termination.
If Mr. Weiss’ employment
is terminated by the Company for Cause or by Mr. Weiss without Good Reason, Mr. Weiss will receive his accrued obligations but
no additional benefits. Any shares of restricted stock outstanding on the date of his termination will be forfeited. The vested
portion of any stock options outstanding on the date of his termination will remain exercisable for a period of thirty (30) days
following the date of his termination (or, if earlier, the normal expiration date of such stock options), and any unvested portion
of outstanding stock options will lapse as of the date of termination.
During his employment
and for 12 months following the termination of his employment for any reason, Mr. Weiss is prohibited from engaging in any business
that develops anti-CD20 monoclonal antibodies within the geographic area in which the Company does business, which is deemed to
be worldwide, and he is subject to a non-disparagement clause. He is also subject to certain covenants related to confidential
information, trade secrets, return of property, and invention assignment.
Sean A. Power.
Mr. Power was appointed Chief Financial Officer, Treasurer and Secretary of the Company, effective December 29, 2011. In connection
with the appointment, the Company assumed Mr. Power’s employment agreement with TG, effective November 1, 2011, under which
Mr. Power is to serve as the Company’s Chief Financial Officer, Treasurer and Secretary until such employment is terminated
pursuant to the terms of the agreement. Under the terms of his employment agreement, Sean A. Power will receive an annual base
salary of $135,000. Mr. Power will also be eligible to earn an annual cash performance bonus, based upon achievement of annual
performance goals and objectives set by agreement between Mr. Power and the board each year, with a target bonus of 33% of his
base salary.
The Company will grant
Mr. Power a number of shares of restricted Common Stock of the Company as determined by the CEO and board. Each of these annual
grants of restricted stock will be subject to vesting terms, which will be determined at the time of grant by the CEO and Board.
Pursuant to his employment
agreement, if Mr. Power’s employment is terminated by the Company without Cause (as defined therein) or if Mr. Power resigns
for Good Reason (as defined therein), then, in addition to his accrued obligations, if within 45 days after the date of termination,
he executes and does not revoke a general release of claims and covenant not to sue, he will receive the following severance benefits:
(i) a lump sum severance payment equal to 0.5 times the sum of his base salary and target bonus (or 1 times the sum of his base
salary and target bonus if his employment is terminated upon or following a change in control); (ii) continuation of group health
benefits for 12 months; (iii) a prorated target bonus; (iv) any shares of restricted stock outstanding on the date of his termination
will become fully-vested and non-forfeitable as of his date of termination; and (v) any stock options outstanding on the date of
his termination will become fully-vested and will remain exercisable for a period of 12 months following the date of his termination
(or, if earlier, the normal expiration date of such stock options).
If Mr. Power’s employment
is terminated by reason of his death or disability, he will be entitled to his accrued obligations and a prorated target bonus.
In addition, (i) any shares of restricted stock outstanding on the date of his termination will become fully vested and non-forfeitable
as of his date of termination; and (ii) the vested portion of any stock options outstanding on the date of his termination will
remain exercisable for a period of 12 months following the date of his termination (or, if earlier, the normal expiration date
of such stock options), and any unvested portion of outstanding stock options will lapse as of the date of termination.
If Mr. Power’s employment
is terminated by the Company for Cause or by Mr. Power without Good Reason, Mr. Power will receive his accrued obligations but
no additional benefits. Any shares of restricted stock outstanding on the date of his termination will be forfeited. The vested
portion of any stock options outstanding on the date of his termination will remain exercisable for a period of thirty 30 days
following the date of his termination (or, if earlier, the normal expiration date of such stock options), and any unvested portion
of outstanding stock options will lapse as of the date of termination.
During his employment
and for 12 months following the termination of his employment for any reason, Mr. Power is prohibited from engaging in any business
that develops anti-CD20 monoclonal antibodies within the geographic area in which the Company does business, which is deemed to
be worldwide, and he is subject to a non-disparagement clause. He is also subject to certain covenants related to confidential
Information, trade secrets, return of property, and invention assignment.
Michael G. McGuinness.
Mr. McGuinness’ employment with us was governed by an employment agreement dated July 7, 2006. The agreement provided
for an initial three-year term of employment ending July 2009, subject to additional one-year renewal periods upon the mutual agreement
of the parties. Pursuant to the agreement, Mr. McGuinness was entitled to an annual base salary of $205,000 and an annual bonus,
payable in the discretion of our Board, of up to 30 percent of his annual base salary. Mr. McGuinness was also entitled to certain
other fringe benefits that were made available to our senior executives from time to time, including medical and dental insurance
and participation in our 401(k) plan. On November 19, 2008, at the first closing of our private placement of secured notes, we
entered an amendment to the employment agreement, which provided for a reduction of up to one-third of the salary payable to Mr.
McGuinness until we received at least $2,500,000 of gross proceeds from the sale of the units or other sales of securities or from
other revenue received by us in the operation of our business or any combination of the foregoing.
In addition, in accordance
with the terms of the employment agreement, we issued to Mr. McGuinness two 10-year stock options pursuant to our 2003 Stock Option
Plan. The first option related to 220,000 shares of Common Stock and was exercisable at a price of $0.70, the closing price of
our Common Stock on the date of his employment agreement. The second option related to 60,000 shares and was exercisable at a price
of $1.35 per share. Both options vested in three annual installments commencing July 10, 2007. Since Mr. McGuinness’ employment
with us has been terminated prior to the end of such 10-year term, the options became exercisable for a period of 90 days.
As stated in Mr. McGuiness’
employment agreement, if his employment is terminated during the term of the agreement upon a “change of control” and,
if at the time of such termination, the aggregate value of our outstanding Common Stock is less than $80 million, then (i) Mr.
McGuinness would continue receiving his base salary and fringe benefits for a period of six months following such termination and
(ii) the portions of the stock options issued in accordance with the employment agreement that have vested as of the date of such
termination or that are scheduled to vest in the calendar year of such termination would be deemed vested and would remain exercisable
for a period of 90 days following such termination.
Mr. McGuiness’ employment
with us was terminated as of the signing of the Exchange Transaction Agreement on December 29, 2011. In accordance with his employment
agreement he will receive severance in the amount of $142,500 paid in equal semi-monthly installments beginning January 15, 2012
ending March 31, 2012.
DIRECTOR COMPENSATION
Director Compensation Program
Non-employee directors
are eligible to participate in our Non-employee Director Compensation Arrangement, which was adopted on January 2007, amended in
March 2008 and amended again in March 2010. Under the 2007 arrangement, non-employee directors are granted an option to purchase
50,000 shares of Common Stock upon their initial election or appointment to the board. Thereafter on an annual basis, non-employee
directors are entitled to an option to purchase 50,000 shares of Common Stock. Each non-employee director is entitled to a retainer
of $20,000 per year, payable on a quarterly basis. In addition, each such director shall be entitled to a fee of $1,000 for each
meeting of the Board attended in person, or $500 for attending a meeting by telephone or other electronic means. Each non-employee
director serving on a committee of the Board is entitled to a fee of $1,000 for each meeting of such committee attended by such
director in person, or $500 for attending a committee meeting by telephone or other electronic means. Under the 2008 amendment,
due to our need to retain funds for our operations, payment of fees to our directors were suspended for all periods subsequent
to March 31, 2008. Under the 2010 amendment each non-employee director was paid a flat fee of $10,000 for their service as a director
from March 2008 through March of 2010 and a fee of $1,000 per month commencing in March 2010. Each non-employee director is also
entitled to reimbursement for reasonable out-of-pocket expenses incurred in connection with the performance of his service as a
director, including without limitation, travel related expenses incurred in connection with attendance at Board or Board committee
meetings.
2011 Director Compensation
The following table sets
forth the cash and other compensation paid by the Company to the non-employee members of the Board for all services in all capacities
during 2011.
Name
|
|
Fees Earned or
Paid in Cash
($) (1)
|
|
|
Stock Awards
($) (2)
|
|
|
Option
Awards ($) (2)
|
|
|
Total ($)
|
|
Neil Herskowitz
|
|
|
|
|
784
|
|
|
|
|
|
784
|
|
Douglas Abel
|
|
|
|
|
|
|
784
|
|
|
|
|
|
|
|
784
|
|
Timothy McInerney
|
|
|
|
|
|
|
784
|
|
|
|
|
|
|
|
784
|
|
Richard Steinhart
|
|
|
|
|
|
|
784
|
|
|
|
|
|
|
|
784
|
|
David Shimko
|
|
|
|
|
|
|
919
|
|
|
|
|
|
|
|
919
|
|
_______________
|
(1)
|
Represents cash retainer for serving on our Board and
committees of the Board.
|
|
(2)
|
Reflects the aggregate grant date fair value of stock
and option awards granted by the Company as computed under FASB ASC Topic 718. The grant date fair value of the stock awards is
based on the fair market value of the underlying shares on the date of grant.
|
During 2011 there were
not any stock and option awards granted to each director.
As of December 31, 2011,
the following aggregate number of unvested stock and option awards were held by each of our non-employee directors:
Name
|
|
Stock
awards (#)
|
|
Option
awards (#)
|
|
Neil Herskowitz
|
|
|
|
666
|
|
Douglas Abel
|
|
|
|
666
|
|
Timothy McInerney
|
|
|
|
666
|
|
Richard Steinhart
|
|
|
|
666
|
|
David Shimko
|
|
|
|
666
|
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange
Act requires our directors, executive officers and persons who own more than 10% of the shares of our Common Stock to file an initial
report of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the SEC. Such officers, directors and 10% stockholders
are also required by SEC rules to furnish us with copies of any Forms 3, 4 or 5 that they file. The SEC rules require us to disclose
late filings of initial reports of stock ownership and changes in stock ownership by our directors, executive officers and 10%
stockholders. Based solely on a review of copies of the Forms 3, 4 and 5 furnished to us by reporting persons and any written representations
furnished by certain reporting persons, we believe that during the fiscal year ended December 31, 2011, all Section 16(a) filing
requirements applicable to our directors, executive officers and 10% stockholders were completed in a timely manner.
RELATED-PERSON TRANSACTIONS
On
December 30, 2011, OPN Capital Markets (“OPNCM”) and its affiliated broker-dealer, National Securities Corporation
(“NSC” and collectively with OPNCM, “National”), both affiliates of National Holdings Corporation (“National
Holdings”), entered into a Placement Agency Agreement (the “PAA”) with the Company in connection with the initial
closing of the offering of up to $25 million of stock and warrants of the Company (the “Offering”). Pursuant
to the PAA, National acted as the Company’s placement agent for Offering.
Michael
S. Weiss is a director and Non-Executive Chairman of the Board of National Holdings. He is also a stockholder of National
Holdings and, when combined with his ownership indirectly through Opus and its affiliates, beneficially owns 23.6% of National
Holdings, the parent company of NSC. Mr. Weiss disclaims such beneficiary ownership other than to the extent
of his pecuniary interest. In addition, Opus and NSC are parties to a 50/50 joint venture that shares profits from OPNCM, the investment
banking division of NSC that was responsible for managing the Offering.
The
Company completed the initial closing of the Offering on December 30, 2011, issuing 277,285,633 shares of Common Stock at a price
per share of $0.04 for total gross proceeds, before placement commissions and expenses, of $11,091,425. Investors also
received warrants to purchase 69,321,424 shares of Common Stock. The warrants have an exercise price of $0.04 per share and are
exercisable for five years. The Company completed the second closing of the Offering on January 31, 2012, issuing 489,199 shares
of Series A Preferred Stock at a price per share of $20.00 for gross proceeds, before placement commissions and expenses of $9,783,980.
Investors also received warrants to purchase 61,149,875 shares of Common Stock. The warrants have an exercise price of $0.04 per
share and are exercisable for five years. The Company completed the third and final closing of the Offering on February 24,
2012, issuing 206,229 shares of Series A Preferred Stock at a price per share of $20.00 for gross proceeds, before placement commissions
and expenses of 4,124,580. Investors also received warrants to purchase 25,778,625 shares of Common Stock. The warrants have an
exercise price of $0.04 per share and are exercisable for five years.
As
placement agent, National received cash commissions equal to 10% of the gross proceeds of the Offering, five-year warrants to purchase
shares of the Series A Preferred Stock equal to 10% of shares sold in the Offering, and a non-accountable expense allowance equal
to two percent of the gross proceeds of the Offering for National’s expenses (not including up to $80,000 of National’s
legal expenses and any blue sky fees, both of which the Company also reimbursed). In addition to acting as placement agent
in the Offering, National provided advisory services in connection with the exchange transaction. National is entitled
to receive an advisory fee of $150,000 for such services.
STOCK OWNERSHIP OF OUR DIRECTORS, EXECUTIVE
OFFICERS,
AND 5% BENEFICIAL OWNERS
The following table shows
information, as of March 9, 2012, concerning the beneficial ownership of our common stock by:
|
·
|
each person we know to be the beneficial owner of more than 5% of our Common Stock;
|
|
·
|
each of our current directors;
|
|
·
|
each of our NEOs shown in our Summary Compensation Table; and
|
|
·
|
all current directors and NEOs as a group.
|
As of March 9, 2012, there
were 284,683,977 shares of our Common Stock outstanding and 1,108,816 shares of our Series A Preferred Stock, convertible into
554,408,000 shares of Common Stock. In order to calculate a stockholder’s percentage of beneficial ownership, we include
in the calculation those shares underlying shares of Series A Preferred Stock, options or warrants beneficially owned by that stockholder
that are vested or that will vest within 60 days of March 9, 2012. Shares of restricted stock are deemed to be outstanding. Options
or warrants held by other stockholders that are not attributed to the named beneficial owner are disregarded in this calculation.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect
to the shares of our common stock. Unless we have indicated otherwise, each person named in the table below has sole voting power
and investment power for the shares listed opposite such person’s name, except to the extent authority is shared by spouses
under community property laws.
Name and Address of Beneficial Owner
(1)
|
|
Amount and Nature
of Beneficial
Ownership
|
|
|
Percentage of Shares
Outstanding
|
|
Michael S. Weiss (2)
|
|
|
207,631,500
|
|
|
|
24.7
|
%
|
Sean A. Power (3)
|
|
|
8,437,500
|
|
|
|
1.0
|
%
|
Michael McGuinness (4)
|
|
|
61,147
|
|
|
|
*
|
|
Neil Herskowitz (5)
|
|
|
14,857
|
|
|
|
*
|
|
Laurence Charney
|
|
|
—
|
|
|
|
—
|
|
William Kennedy
|
|
|
—
|
|
|
|
—
|
|
Mark Schoenebaum
|
|
|
—
|
|
|
|
—
|
|
All current directors and named executive officers as a group (7 persons) (6)
|
|
|
216,151,671
|
|
|
|
25.8
|
%
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
Opus Point Partners, LLC (7)
|
|
|
142,006,500
|
|
|
|
16.9
|
%
|
|
*
|
Less than 1% of outstanding common stock.
|
(1) The
address of each of the directors and officers listed is c/o Manhattan Pharmaceuticals, Inc., 787 Seventh Avenue, 48
th
Floor, New York, New York 10019.
(2) Includes
112,500 shares of our Series A Preferred Stock (convertible into 56,250,000 shares of Common Stock)
,
which vest as follows: 14,063 on each of November 15, 2012, November 15, 2013, November 15, 2014, and November 15, 2015; 28,124
upon the occurrence of the registrant achieving a particular market capitalization target; and 28,124 upon the occurrence of the
registrant achieving a second particular market capitalization target.
In addition, Mr. Weiss purchased shares in the Offering
conducted by the Company which closed on December 30, 2011. As a result of that purchase he owns 7,500,000 shares of our Common
Stock, and 1,875,000 warrants to purchase our Common Stock at $0.04, exercisable for five years. Finally,
also
included in Mr. Weiss’ beneficial ownership are 284,013
shares of our Series A Preferred Stock (convertible into 142,006,500
shares of Common Stock) issued to Opus Point Partners, LLC, of which Mr. Weiss is a co-founder, managing partner, and principal
and beneficially owns a 50% interest.
(3) Includes
16,875 shares of our Series A Preferred Stock (convertible into 8,437,500 shares of Common Stock)
,
which vest as follows: 2,812 on each of November 15, 2012, November 15, 2013, and November 15, 2014; 4,219 upon the occurrence
of the registrant achieving a particular market capitalization target; and 4,220 upon the occurrence of the registrant achieving
a second particular market capitalization target.
(4) Includes
61,147 shares of our Common Stock issuable upon the exercise of options and warrants.
(5) Includes
14,857 shares of our Common Stock issuable upon the exercise of options and warrants.
(6) Includes
1,951,004 shares of our Common Stock issuable upon the exercise of options and warrants.
(7) The
address of Opus Point Partners, LLC is 787 Seventh Avenue, 48
th
Floor, New York, New York 10019. Includes
284,013
shares of our Series A Preferred Stock (convertible into 142,006,500 shares of Common Stock) issued to Opus Point Partners,
LLC, in connection with the Exchange Transaction Agreement. As discussed above, Mr. Weiss is a co-founder, managing partner, and
principal and beneficially owns a 50% interest in Opus Point Partners, LLC.
PROPOSAL ONE
ELECTION OF DIRECTORS; NOMINEES
Our Amended and
Restated Bylaws provide that the Board shall consist of one or more members, as determined from time to time by resolution of
the Board. Our Board currently consists of two members. Our two current directors have been nominated for re-election at the
Annual Meeting along with three new nominees. The nominated directors are: Michael S. Weiss, Neil Herkowitz, Laurence N.
Charney, William J. Kennedy and Mark Schoenbaum MD. For information about each of the nominees and our Board generally,
please see “Corporate Governance-Our Board of Directors” beginning on page 6. If elected, the nominees will hold
office until the next annual meeting and until a respective successor is elected and has been qualified, or until such
director resigns or is removed from office. Management expects that each of the nominees will be available for election, but
if any of them is unable to serve at the time the election occurs, your proxy will be voted for the election of another
nominee to be designated by a majority of the independent directors serving on our Board.
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF ALL OF THE NOMINEES FOR DIRECTORS. IF A CHOICE IS
SPECIFIED ON THE PROXY BY THE STOCKHOLDER, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES WILL
BE VOTED “FOR” ALL OF THE NOMINEES. THE AFFIRMATIVE VOTE OF THE HOLDERS OF A PLURALITY OF THE SHARES OF COMPANY COMMON
STOCK AND COMPANY PREFERRED STOCK REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL MEETING AT WHICH A QUORUM IS PRESENT IS REQUIRED
FOR THE ELECTION OF THE NOMINEES.
PROPOSAL TWO
TO AUTHORIZE AN AMENDMENT TO OUR CERTIFICATE
OF INCORPORATION TO EFFECT UP TO TWO REVERSE STOCK SPLITS OF OUR COMMON STOCK AS DETERMINED BY OUR BOARD OF DIRECTORS
Our Board is proposing
that our stockholders approve a proposal to authorize our Board to effect up to two reverse stock splits of all outstanding shares
of our Common Stock, at any ratio at its discretion, from 4-for-1 up to 100-for-1. If this proposal is approved, our Board will
have the authority to effect up to two reverse stock splits at any time. Our Board believes that approval of a proposal providing
the Board with this generalized grant of authority with respect to setting the split ratio, rather than mere approval of a pre-defined
reverse stock split, will give the Board flexibility to set the ratio in accordance with current market conditions and therefore
allow the Board to act in the best interests of the Company and our stockholders.
If our stockholders grant
the Board the authority to effect up to two reverse stock splits, we would have the ability to file up to two Certificates of Amendment
to the Certificate of Incorporation with the Delaware Secretary of State to effect each of the proposed reverse stock splits. The
form of Certificate of Amendment is attached to this proxy statement as
Appendix A
, the text of which may be altered
for any changes required by the Delaware Secretary of State and changes deemed necessary or advisable by the Board. Our Board has
approved and declared advisable the proposed Certificates of Amendment. If the proposed reverse stock splits are implemented, then
the number of issued and outstanding shares of our Common Stock would be reduced.
Purpose of Proposed Reverse Stock Splits
If
the Board was to determine to implement the reverse stock splits, its primary reasons for doing
so are to:
|
·
|
reduce the number of issued and outstanding shares without affecting the number of authorized shares.
This is important because the Series A Preferred Stock automatically converts into Common Stock when the Company has sufficient
authorized but unissued shares to permit such conversion. The reverse splits contemplated will enable the conversion of the Series
A Preferred Stock to Common Stock, so that the Company will only have one class of shares issued and outstanding; and
|
|
·
|
increase the per share price of the our Common Stock, which we view as beneficial because it will
(i) allow
for application to Nasdaq for listing on their exchange,
(ii) improve the perception
of our Common Stock as an investment security, (iii) appeal to a broader range of investors
to generate
greater investor interest in us
, and (iv)
reduce stockholder transaction costs because investors
would pay lower commission to trade a fixed dollar amount of our stock if our stock price were higher than they would if our stock
price were lower.
|
You should consider that,
although our Board believes that a reverse stock split will in fact increase the price of our Common Stock, in many cases, because
of variables outside of a company’s control (such as market volatility, investor response to the news of a proposed reverse
stock split and the general economic environment), the market price of a company’s shares of common stock may in fact decline
in value after a reverse stock split. You should also keep in mind that the implementation of a reverse stock split does not have
an effect on the actual or intrinsic value of our business or a stockholder’s proportional ownership in our Company. However,
should the overall value of our Common Stock decline after any proposed reverse stock split, then the actual or intrinsic value
of the shares of our Common Stock held by you will also proportionately decrease as a result of the overall decline in value.
Potential Effects of the Proposed Reverse
Stock Splits
The immediate effect of
a reverse stock split would be to reduce the number of shares of our Common Stock outstanding and to increase the trading price
of our Common Stock. Notwithstanding the decrease in the number of outstanding shares following any proposed reverse stock split,
our Board does not intend for this transaction to be the first step in a “going private transaction” within the meaning
of Rule 13e-3 of the Securities Exchange Act.
However, we cannot predict
the effect of any reverse stock split upon the market price of our Common Stock over an extended period, and in many cases, the
market value of a company’s common stock following a reverse stock split declines. We cannot assure you that the trading
price of our Common Stock after any reverse stock split will rise in inverse proportion to the reduction in the number of shares
of our Common Stock outstanding as a result of such reverse stock splits. Also, we cannot assure you that a reverse stock split
would lead to a sustained increase in the trading price of our Common Stock. The trading price of our Common Stock may change due
to a variety of other factors, including our operating results and other factors related to our business and general market conditions.
Examples of Potential
Reverse Stock Splits at Various Ratios.
The table below provides examples of reverse stock splits at various ratios up to 100-for-1:
Shares Outstanding
|
|
|
|
Shares Outstanding
|
|
Reduction in
|
At March 9, 2012
|
|
Reverse Stock Split Ratio
|
|
After Reverse Stock Split
|
|
Shares Outstanding
|
284,683,977
|
|
20-for-1
|
|
14,434,200
|
|
270,449,777
|
|
|
|
|
|
|
|
284,683,977
|
|
25-for-1
|
|
11,387,360
|
|
273,296,617
|
|
|
|
|
|
|
|
284,683,977
|
|
50-for-1
|
|
5,693,680
|
|
278,990,297
|
|
|
|
|
|
|
|
284,683,977
|
|
75-for-1
|
|
3,795,787
|
|
280,888,190
|
|
|
|
|
|
|
|
284,683,977
|
|
100-for-1
|
|
2,846,841
|
|
281,837,136
|
The resulting decrease
in the number of shares of our Common Stock outstanding could potentially adversely affect the liquidity of our Common Stock, especially
in the case of larger block trades.
Effects on Ownership
by Individual Stockholders
. If we implement a reverse stock split, the number of shares of our Common Stock held by each stockholder
would be reduced by multiplying the number of shares held immediately before the reverse stock split by the appropriate ratio and
then rounding down to the nearest whole share. We would either pay cash to each stockholder in lieu of any fractional interest
in a share to which each stockholder would otherwise be entitled as a result of the reverse stock split, as described in further
detail below, or round up to the nearest whole share. The reverse stock split would not affect any stockholder’s percentage
ownership interest in our Company or proportionate voting power, except to the extent that interests in fractional shares would
be paid in cash.
Effect on Options, Warrants
and Series A Preferred Stock
. In addition to adjusting the number of shares of our Common Stock, we would adjust all outstanding
shares of any options, warrants and Series A Preferred Stock entitling the holders to purchase shares of our Common Stock as a
result of the reverse stock split, as required by the terms of these securities. In particular, we would reduce the conversion
ratio for each instrument, and would increase the exercise price in accordance with the terms of each instrument and based on the
4-for-1 up to 100-for-1 exchange ratio of the reverse stock split (i.e., the number of shares issuable under such securities would
decrease by 75%, up to 100%, respectively, and the exercise price per share would be multiplied by 4, up to 100, respectively).
Also, we would reduce the number of shares reserved for issuance under our existing stock option plans proportionately based on
the exchange ratio of the reverse stock split. A reverse stock split would not otherwise affect any of the rights currently accruing
to holders of our Common Stock, options or warrants exercisable for, or Series A Preferred Stock convertible into, our Common Stock.
Other Effects on Outstanding
Shares
. If we implement a reverse stock split, the rights pertaining to the outstanding shares of our Common Stock would be
unchanged after the reverse stock split. Each share of our Common Stock issued following a reverse stock split would be fully paid
and non-assessable.
Any reverse stock split
would result in some stockholders owning “odd-lots” of less than 100 shares of our Common Stock. Brokerage commissions
and other costs of transactions in odd-lots are generally higher than the costs of transactions in “round-lots” of
even multiples of 100 shares.
Our Common Stock is currently
registered under the Exchange Act. As a result, we are subject to the periodic reporting and other requirements of the Exchange
Act. The proposed reverse stock splits would not affect the registration of our Common Stock under the Exchange Act.
Authorized Shares of Stock
The reverse stock split,
if implemented, would not change the number of authorized shares of our Common Stock, which is currently 500,000,000, under our
Certificate of Incorporation. Therefore, because the number of issued and outstanding shares of our Common Stock would decrease,
the number of shares remaining available for issuance would increase. These additional shares of Common Stock would be available
for issuance from time to time for corporate purposes such as acquisitions of companies or assets, sales of stock or securities
convertible into Common Stock and raising additional capital. We believe that the availability of the additional shares will provide
us with the flexibility to meet business needs as they arise, to take advantage of favorable opportunities and to respond to a
changing corporate environment.
We have no plans, proposals or arrangements, written or otherwise, at
this time, to issue any of the additional available authorized shares of Common Stock that would result from a reverse stock split.
If this proposal is approved, the additional authorized but unissued shares of Common Stock may generally be issued from time to
time for such proper corporate purposes as may be determined by our Board, without further action or authorization by our stockholders,
except for some limited circumstances where stockholder approval is required by law or the listing standards of any stock exchange
on which our Common Stock may be listed at such time.
Procedure for Effecting the Proposed Reverse
Stock Splits and Exchange of Stock Certificates
If the stockholders approve
the proposal, and our Board determines to effect a reverse stock split we will file with the Delaware Secretary of State a Certificate
of Amendment to our Certificate of Incorporation. We could file up to two Certificates of Amendment to our Certificate of Incorporation,
one for each reverse stock split. Any reverse stock split will become effective at the time and on the date of filing of, or at
such later time as is specified in, the corresponding Certificate of Amendment, which we refer to as the “effective time”
and “effective date,” respectively. Beginning at the effective time, each certificate representing shares of Common
Stock will be deemed for all corporate purposes to evidence ownership of the number of whole shares into which the shares previously
represented by the certificate were combined pursuant to a reverse stock split.
Upon a reverse stock split,
we intend to treat stockholders holding our Common Stock in “street name,” through a bank, broker or other nominee,
in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers or other nominees will
be instructed to effect the reverse stock split for their beneficial holders holding our Common Stock in “street name.”
However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing the reverse
stock split. If you hold your shares with a bank, broker or other nominee and if you have any questions in this regard, we encourage
you to contact your nominee.
Following any reverse stock
split, stockholders holding physical certificates must exchange those certificates for new certificates.
Our transfer agent will
advise registered stockholders of the procedures to be followed to exchange certificates in a letter of transmittal to be sent
to stockholders. No new certificates will be issued to a stockholder until the stockholder has surrendered the stockholder’s
outstanding certificate(s), together with the properly completed and executed letter of transmittal, to the transfer agent. Any
old shares submitted for transfer, whether pursuant to a sale, other disposition or otherwise, will automatically be exchanged
for new shares. Stockholders should not destroy any stock certificate(s) and should not submit any certificate(s) until requested
to do so.
Fractional Shares
We will not issue fractional
shares in connection with any reverse stock split. Instead, any fractional share resulting from a reverse stock split because the
stockholder owns a number of shares not evenly divisible by the exchange ratio would instead either (i) be rounded up to the
nearest whole share, or (ii) be cancelled, with the holder to receive cash in lieu of the fractional share. The cash amount
to be paid to each stockholder will be equal to the resulting fractional interest in one share of our Common Stock to which the
stockholder would otherwise be entitled, multiplied by the closing trading price of our Common Stock on the trading day immediately
preceding the effective date of the reverse stock split. We do not anticipate that the aggregate cash amount paid by the Company
for fractional interests will be material to the Company.
No Appraisal Rights
No appraisal rights are
available under the Delaware General Corporation Law or under our Certificate of Incorporation or our Bylaws with respect to the
reverse stock splits. There may exist other rights or actions under state law for stockholders who are aggrieved by reverse stock
splits generally.
Accounting Consequences
The par value of our Common
Stock in effect at the time of any reverse stock split would remain unchanged after such reverse stock split. Also, our capital
account would remain unchanged, and we do not anticipate that any other accounting consequences would arise as a result of any
reverse stock split.
Certain Material U.S. Federal Income Tax
Considerations
The following is a summary
of the material U.S. federal income tax considerations with respect to a reverse stock split to holders of our shares of capital
stock. This summary is based on the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), the Treasury
regulations promulgated thereunder, and administrative rulings and court decisions in effect as of the date of this document, all
of which may be subject to change, possibly with retroactive effect. This summary only addresses holders who hold their shares
as capital assets within the meaning of the Internal Revenue Code and does not address all aspects of U.S. federal income taxation
that may be relevant to holders subject to special tax treatment, such as financial institutions, dealers in securities, insurance
companies, foreign persons and tax-exempt entities. In addition, this summary does not consider the effects of any applicable state,
local, foreign or other tax laws.
We have not sought and
will not seek any ruling from the Internal Revenue Service, or the IRS, or an opinion from counsel with respect to the U.S. federal
income tax considerations discussed below. There can be no assurance that the tax considerations discussed below would be accepted
by the IRS or a court. The tax treatment of the reverse stock splits to holders may vary depending upon a holder’s particular
facts and circumstances.
We urge holders to consult
with their own tax advisors as to any U.S. federal, state, local or foreign tax considerations applicable to them that could result
from the reverse stock splits.
Except as described below
with respect to cash received in lieu of fractional shares, the receipt of Common Stock in the reverse stock splits should not
result in any taxable gain or loss to a holder for U.S. federal income tax purposes. The aggregate tax basis of the Common Stock
received by a holder as a result of the reverse stock splits (including the basis of any fractional share to which a holder is
entitled) will be equal to the aggregate basis of the existing Common Stock exchanged for such stock. A holder’s holding
period for the Common Stock received in the reverse stock splits will include the holding period of the Common Stock exchanged
therefor.
A holder who receives cash
in lieu of a fractional share of Common Stock will be treated as first receiving such fractional share and then receiving cash
in redemption of such fractional share. A holder will generally recognize capital gain or loss on such deemed redemption in an
amount equal to the difference between the amount of cash received and the adjusted basis of such fractional share.
Vote Required
The
affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the
subject matter.
Abstentions and votes withheld will have the same effect as a negative vote. However, broker or nominee
non-votes, and shares represented by proxies reflecting broker or nominee non-votes, will not have the effect of a vote against
this proposal as they are not considered to be present and entitled to vote on this matter.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE “FOR” THIS PROPOSAL.
PROPOSAL THREE
To
authorize the Board, at its discretion, to amend OUR Certificate of Incorporation to change Manhattan’s name to
“TG Therapeutics, Inc.”
On
March 2, 2012, our Board approved, subject to the approval our stockholders, the adoption of an amendment to our Certificate
of Incorporation to change the corporate name of the Company from "Manhattan Pharmaceuticals, Inc." to
"TG Therapeutics, Inc." The resolution also provided that the amendment be proposed to the stockholders entitled to
vote thereon for consideration at the Annual Meeting all in accordance with Section 242 of the Delaware General Corporation
Law. The Board is seeking stockholder approval of the name change.
The
Board recommends this action in order to create a more unified company identity and believes
the change of the Company name
is desirable to reflect the exchange transaction with TG. The name change will more accurately reflect our business activities
and will promote public recognition of our new business focus.
The
form of the Amendment is attached as
Appendix B
.
Reasons for Stockholder
Approval
Section
242 of the Delaware General Corporation Law requires that Delaware corporations, such as the Company, obtain stockholder approval
of an amendment to the certificate of incorporation. In order to change the corporate name of the Company, it is necessary to amend
the Company's Certificate of Incorporation.
Vote Required to
Approve the Amendment to the Certificate of Incorporation
The
affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the
subject matter.
Abstentions and votes withheld will have the same effect as a negative vote. However, broker or nominee
non-votes, and shares represented by proxies reflecting broker or nominee non-votes, will not have the effect of a vote against
this proposal as they are not considered to be present and entitled to vote on this matter.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE “FOR” THIS PROPOSAL.
PROPOSAL FOUR
To
authorize the adoption of the 2012 Incentive Plan
On March 2, 2012,
the Board of Directors adopted, subject to stockholder approval at the Annual Meeting, the 2012 Incentive Plan. The 2012 Incentive
Plan will become effective as of the date it was approved by the Board. If approved by our stockholders, 75,000,000 shares of Common
Stock will be available for issuance upon the grant or exercise of awards under the 2012 Incentive Plan.
The Company currently maintains
the 1995 Stock Option Plan and the 2003 Stock Option Plan (collectively, the “Existing Plans”). As of March 1, 2012,
there were approximately 188,000 shares of Common Stock subject to outstanding awards issued under the Existing Plans. If
our stockholders approve the 2012 Incentive Plan, all future equity grants to the Company's employees, officers, directors and
consultants will be made from the 2012 Incentive Plan, and the Company will not grant any additional awards under the Existing
Plans. If the Stockholders do not approve the 2012 Incentive Plan, the Company will continue granting awards under the Existing
Plans.
A summary of the 2012 Incentive
Plan is set forth below. This summary is qualified in its entirety by the full text of the 2012 Incentive Plan, which is attached
to this Proxy Statement as
Appendix C
.
Summary of the 2012 Incentive Plan
Purpose
The purpose of the 2012
Incentive Plan is to promote the Company’s success by linking the personal interests of the Company’s employees, officers,
directors and consultants of the Company and its affiliates, and by providing participants with an incentive for outstanding performance.
The 2012 Incentive Plan is also intended to enhance the Company’s ability to motivate, attract, and retain the services of
employees, officers, directors and consultants upon whose judgment, interest, and special effort the successful conduct of the
Company’s operation is largely dependent.
Administration
The 2012 Incentive Plan
will be administered by a committee (the “Committee”) appointed by the Board, or at the discretion of the Board from
time to time, the 2012 Incentive Plan may be administered by the Board. The Committee will have the authority to designate participants;
determine the type or types of awards to be granted to each participant and the number, terms and conditions thereof; establish,
adopt or revise any rules and regulations as it may deem advisable to administer the 2012 Incentive Plan; and make all other decisions
and determinations that may be required under the 2012 Incentive Plan.
Eligibility
The 2012 Incentive Plan permits the grant of
incentive awards to employees, officers, directors and consultants of the Company and its affiliates as selected by the Committee.
As of March 1, 2012, the number of eligible participants is approximately 10. The number of eligible participants may increase
over time based upon future growth of the Company and its affiliates.
Permissible Awards
The 2012 Incentive Plan authorizes the granting
of awards in any of the following forms:
|
·
|
options to purchase shares of the Common Stock, which may be designated under the Code as nonstatutory
stock options or incentive stock options;
|
|
·
|
stock appreciation rights (SARs), which give the holder the right to receive the difference between
the fair market value per share of the Common Stock on the date of exercise over the base price of the award (which cannot be less
than the fair market value of the underlying stock as of the grant date);
|
|
·
|
restricted stock, which is subject to restrictions on transferability and subject to forfeiture
on terms set by the Committee;
|
|
·
|
restricted or deferred stock units, which represent the right to receive shares of Common Stock
in the future, based upon the attainment of stated vesting or performance criteria in the case of restricted stock units;
|
|
·
|
performance awards, which are awards payable in cash or stock upon the attainment of specified
performance goals (any award that may be granted under the 2012 Incentive Plan may be granted in the form of a performance award);
|
|
·
|
dividend equivalents, which entitle the holder of a “full-value” award (such as restricted
stock, stock units, or performance awards payable in common stock) to cash payments equal to any dividends paid on the shares of
stock underlying the award;
|
|
·
|
other stock-based awards in the discretion of the Committee; and
|
Shares Available for Awards
Subject to adjustment as
provided in the 2012 Incentive Plan, the aggregate number of shares of Common Stock reserved and available for issuance pursuant
to awards granted under the 2012 Incentive Plan is 75,000,000.
Share Counting
The
share counting
provisions of the 2012 Incentive Plan provide that the following shares will be added back to the 2012 Incentive Plan share reserve
and will again be available for issuance pursuant to awards granted under the 2012 Incentive Plan: (i) unissued or forfeited
shares originally subject to an award that is canceled, terminates, expires, is forfeited or lapses for any reason; (ii) shares
subject to awards settled in cash; (iii) shares withheld or repurchased from an award or delivered by a participant to satisfy
minimum tax withholding requirements; (iv) shares delivered to the Company in satisfaction of the exercise price of an option;
(v) shares originally subject to an option or SAR that are not issued upon exercise of the option or SAR for any reason, including
by reason of net-settlement of the award; and (vi) shares subject to an award other than an option or SAR that are not issued for
any reason, including by reason of failure to achieve maximum performance goals. In addition, substitute awards granted in connection
with a merger will not count against the share reserve under the 2012 Incentive Plan.
Limitations on Individual Awards
The maximum aggregate number
of shares of Common Stock subject to stock-based awards that may be granted under the 2012 Incentive Plan in any 12-month period
to any one participant is as follows:
Type of Award
|
|
Shares
|
|
|
|
|
|
Options
|
|
|
25,000,000
|
|
Stock Appreciation Rights
|
|
|
25,000,000
|
|
Performance Awards
|
|
|
25,000,000
|
|
The maximum aggregate amount
awarded or credited with respect to cash-based awards under the 2012 Incentive Plan to any one participant in any 12-month period
is $15,000,000.
Grants to Non-Employee Directors
Grants of awards to non-employee
directors under the 2012 Incentive Plan will be made only in accordance with the terms, conditions and parameters of a plan, program
or policy for the compensation of non-employee directors as in effect from time to time. Accordingly, the Committee may not
make discretionary grants to non-employee directors under the 2012 Incentive Plan.
Section 162(m) and Performance Goals
All options and SARs granted
under the 2012 Incentive Plan are designed to be exempt from the $1,000,000 deduction limit imposed by Code Section 162(m).
The Committee may designate any other award granted under the 2012 Incentive Plan as a qualified performance-based award in order
to make the award fully deductible without regard to the $1,000,000 deduction limit imposed by Code Section 162(m). If an
award is so designated, the Committee must establish objectively determinable performance goals for the award based on one or
more of the following business criteria, which may be expressed in terms of Company-wide objectives or in terms of objectives
that relate to the performance of an affiliate or a division, region, department or function within the Company or an affiliate:
revenue, sales, profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit
measures), earnings (EBIT, EBITDA, earnings per share, or other corporate earnings measures), net income (before or after taxes,
operating income or other income measures), cash (cash flow, cash generation, working capital or other cash measures), stock price
or performance, total stockholder return (stock price appreciation plus reinvested dividends), return on equity, return on assets,
return on investment, market share, improvements in capital structure, expenses (expense management, expense ratio, expense efficiency
ratios or other expense measures), business expansion or consolidation (acquisitions, divestitures, in-licensing, or product acquisitions),
market capitalization, clinical and regulatory milestones, corporate financing activities, supply, production and manufacturing
milestones, and corporate partnerships or strategic alliances.
The Committee must establish
such goals within 90 days after the beginning of the period for which such performance goal relates (or such later date as may
be permitted under applicable tax regulations), and the Committee may for any reason reduce (but not increase) any award, notwithstanding
the achievement of a specified goal. The Committee may provide, at the time the performance goals are established, that any
evaluation of performance will exclude or otherwise objectively adjust for any specified circumstance or event that occurs during
a performance period, including by way of example but without limitation the following: asset write-downs or impairment charges,
litigation or claim judgments or settlements, the effect of changes in tax laws, accounting principles or other laws or provisions
affecting reported results, accruals for reorganization and restructuring programs, extraordinary nonrecurring items as described
in then-current accounting principles, extraordinary nonrecurring items as described in management’s discussion and analysis
of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable
year, acquisitions or divestitures and foreign exchange gains and losses.
Limitations on Transfer; Beneficiaries
A participant generally
may not assign or transfer an award other than by will or the laws of descent and distribution; provided, however, that nonstatutory
stock options may be transferred without consideration to members of a participant’s immediate family, to trusts in which
such immediate family members have more than 50% of the beneficial interest, to foundations in which such immediate family members
(or the participant) control the management of assets, and to any other entity (including limited partnerships and limited liability
companies) in which the immediate family members (or the participant) own more than50% of the voting interest. In addition, the
Committee may permit other transfers (other than transfers for value) where it concludes that such transferability does not result
in accelerated taxation, does not cause any option intended to be an incentive stock option to fail to qualify as such, and is
otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation, state or federal
tax or securities laws applicable to transferable awards.
A
participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the participant and
to receive any distribution with respect to any award upon the participant’s death.
Treatment of Awards upon a Change in
Control
Except as otherwise provided
in the award certificate or any special 2012 Incentive Plan document governing an award, upon the occurrence of a change in control,
(i) all outstanding options, SARs, and other awards in the nature of rights that may be exercised will become fully exercisable,
(ii) all time-based vesting restrictions on outstanding awards will lapse, and (iii) the target payout opportunities attainable
under all outstanding performance-based awards will be deemed to have been fully earned as of the effective date of the change
in control based upon an assumed achievement of all relevant performance goals at the "target" level of performance as
of the date of the change in control and the awards will payout on a prorata basis based upon the length of time within the performance
period that has elapsed prior to the change in control.
Discretionary Acceleration
Regardless of whether a
change in control has occurred, the Committee may in its sole discretion at any time determine that all or a portion of a participant’s
awards will become fully vested. The Committee may discriminate among participants or among awards in exercising such discretion.
Adjustments
In the event of a transaction
between the Company and its stockholders that causes the per-share value of the Common Stock to change (including, without limitation,
any stock dividend, stock split, spin-off, rights offering, or large nonrecurring cash dividend), the share authorization limits
under the 2012 Incentive Plan will be adjusted proportionately, and the Committee must make such adjustments to the 2012 Incentive
Plan and awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement of rights immediately resulting
from such transaction. In the event of a stock split, a stock dividend, or a combination or consolidation of the outstanding Common
Stock into a lesser number of shares, the authorization limits under the 2012 Incentive Plan will automatically be adjusted proportionately,
and the shares then subject to each award will automatically be adjusted proportionately without any change in the aggregate purchase
price.
Termination and Amendment
The Board or the Committee
may, at any time and from time to time, amend, modify or terminate the 2012 Incentive Plan without stockholder approval; provided,
however, that if an amendment to the 2012 Incentive Plan would, in the reasonable opinion of the Board or the Committee, constitute
a material change requiring stockholder approval under applicable laws, policies or regulations
or
the applicable listing or other requirements of an exchange, then such amendment shall be subject to stockholder approval; and
provided, further, that the Board or Committee may condition any other amendment or modification on the approval of stockholders
of the Company for any reason, including by reason of such approval being necessary or deemed advisable (i) to comply with the
listing or other requirements of an exchange, or (ii) to satisfy any other tax, securities or other applicable laws, policies or
regulations. No termination or amendment of the 2012 Incentive Plan may, without the written consent of the participant, reduce
or diminish the value of an outstanding award.
The Committee may amend
or terminate outstanding awards. However, such amendments may require the consent of the participant and, unless approved
by the stockholders, the exercise price of an outstanding option may not be reduced, directly or indirectly, and the original term
of an option may not be extended.
Prohibition on Repricing
Except as described above
under “Adjustments”, the exercise price of an option may not be reduced, directly or indirectly by cancellation and
regrant or otherwise, without the prior approval of the stockholders of the Company. In addition, the Company may not, without
the prior approval of stockholders of the Company, repurchase an option for value from a participant if the current fair market
value of the shares underlying the option is lower than the exercise price per share of the option
.
Certain U.S. Federal Income Tax Effects
The U.S. federal income
tax discussion set forth below is intended for general information only and does not purport to be a complete analysis of all of
the potential tax effects of the 2012 Incentive Plan. It is based upon laws, regulations, rulings and decisions now in effect,
all of which are subject to change. State and local income tax consequences are not discussed, and may vary from locality to locality.
Tax Withholding.
The Company has the right
to deduct or withhold, or require a participant to remit to the Company, an amount sufficient to satisfy federal, state, and local
taxes (including employment taxes) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable
event arising as a result of the 2012 Incentive Plan.
Nonstatutory Stock Options.
There will be no federal income tax consequences to the optionee or to the Company upon the grant of a nonstatutory stock option
under the 2012 Incentive Plan. When the optionee exercises a nonstatutory option, however, he or she will recognize ordinary income
in an amount equal to the excess of the fair market value of the Common Stock received upon exercise of the option at the time
of exercise over the exercise price, and the Company will be allowed a corresponding federal income tax deduction. Any gain that
the optionee realizes when he or she later sells or disposes of the option shares will be short-term or long-term capital gain,
depending on how long the shares were held.
Incentive Stock Options.
There typically will be no federal income tax consequences to the optionee or to the Company upon the grant or exercise of
an incentive stock option. If the optionee holds the acquired option shares for the required holding period of at least two years
after the date the option was granted and one year after exercise, the difference between the exercise price and the amount realized
upon sale or disposition of the option shares will be long-term capital gain or loss, and the Company will not be entitled to a
federal income tax deduction. If the optionee disposes of the option shares in a sale, exchange, or other disqualifying disposition
before the required holding period ends, he or she will recognize taxable ordinary income in an amount equal to the excess of the
fair market value of the option shares at the time of exercise over the exercise price, and the Company will be allowed a federal
income tax deduction equal to such amount. While the exercise of an incentive stock option does not result in current taxable income,
the excess of the fair market value of the option shares at the time of exercise over the exercise price will be an item of adjustment
for purposes of determining the optionee's alternative minimum taxable income.
Stock Appreciation Rights.
A participant receiving a stock appreciation right under the 2012 Incentive Plan will not recognize income, and the Company will
not be allowed a tax deduction, at the time the award is granted. When the participant exercises the stock appreciation right,
the amount of cash and the fair market value of any shares of Common Stock received will be ordinary income to the participant
and the Company will be allowed a corresponding federal income tax deduction at that time.
Restricted Stock.
Unless a participant makes an election to accelerate recognition of the income to the date of grant as described below,
a participant will not recognize income, and the Company will not be allowed a tax deduction, at the time a restricted stock award
is granted, provided that the award is nontransferable and is subject to a substantial risk of forfeiture. When the restrictions
lapse, the participant will recognize ordinary income equal to the fair market value of the Common Stock as of that date (less
any amount he or she paid for the stock), and the Company will be allowed a corresponding federal income tax deduction at that
time, subject to any applicable limitations under Code Section 162(m). If the participant files an election under Code Section 83(b)
within 30 days after the date of grant of the restricted stock, he or she will recognize ordinary income as of the date of
grant equal to the fair market value of the stock as of that date (less any amount paid for the stock), and the Company will be
allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section 162(m).
Any future appreciation in the stock will be taxable to the participant at capital gains rates. However, if the stock is later
forfeited, the participant will not be able to recover the tax previously paid pursuant to the Code Section 83(b) election.
Restricted or Deferred
Stock Units.
A participant will not recognize income, and the Company will not be allowed a tax deduction, at the time
a stock unit award is granted. When the participant receives or has the right to receive shares of Common Stock (or the equivalent
value in cash or other property) in settlement of a stock unit award, a participant will recognize ordinary income equal to the
fair market value of the Common Stock or other property as of that date (less any amount he or she paid for the stock or property),
and the Company will be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations
under Code Section 162(m).
Performance Awards Payable
in Cash.
A participant will not recognize income, and the Company will not be allowed a tax deduction, at the
time a performance award payable in cash is granted (for example, when the performance goals are established). Upon receipt
of cash in settlement of the award, a participant will recognize ordinary income equal to the cash received, and the Company will
be allowed a corresponding federal income tax deduction at that time, subject to any applicable limitations under Code Section
162(m).
Dividend Equivalents.
A participant will recognize ordinary income, and the Company will be allowed a tax deduction, at the time the dividend equivalents
are paid or payable.
Code Section 409A.
The 2012 Incentive Plan permits the grant of various types of incentive awards, which may or may not be exempt from Code Section 409A.
If an award is subject to Section 409A, and if the requirements of Section 409A are not met, the taxable events as described
above could apply earlier than described, and could result in the imposition of additional taxes and penalties. Restricted stock
awards, and stock options and SARs that comply with the terms of the 2012 Incentive Plan are generally exempt from the application
of Code Section 409A. Stock units, other stock-based awards and cash-based awards that are granted in one year and payable
in a later year generally are subject to Section 409A unless they are designed to satisfy the short-term deferral exemption
from such law. If not exempt, such awards must be specially designed to meet the requirements of Section 409A in order to
avoid early taxation and penalties.
Tax Withholding.
The Company or any affiliate has the right to deduct or withhold, or require a participant to remit to the Company, an amount sufficient
to satisfy federal, state, and local taxes (including employment taxes) required by law to be withheld with respect to any exercise,
lapse of restriction or other taxable event arising as a result of the 2012 Incentive Plan.
Benefits to Named Executive Officers
and Others
As of March 9, 2012, no
awards had been granted under the 2012 Incentive Plan. Awards under the 2012 Incentive Plan are at the discretion of the
Committee. Accordingly, future awards under the 2012 Incentive Plan are not determinable.
Securities Authorized for Issuance Under
Equity Compensation Plans
The following table provides
information as of December 31, 2011, regarding the securities authorized for issuance under our equity compensation plans.
Equity Compensation Plan Information
Plan Category
|
|
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options
(a)(2)
|
|
|
Weighted-Average
Exercise Price of
Outstanding Options
(b)
|
|
|
Number of
Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding
Securities Reflected
in Column (a))
(c)(3)
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders (1)
|
|
|
188,683
|
|
|
$
|
23.33
|
|
|
|
133,107
|
|
Equity compensation plans not approved by security holders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
188,683
|
|
|
$
|
23.33
|
|
|
|
133,107
|
|
(1) Includes
the Existing Plans.
(2) Includes
shares issuable pursuant to the exercise of stock options.
(3) All
such shares are available for issuance pursuant to grants of full-value stock awards.
For additional information about all of our
equity compensation plans, see Note 4 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the
fiscal year ended December 31, 2011, filed with the SEC.
Vote Required to Approve the 2012 Incentive
Plan
The
affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the
subject matter.
Abstentions and votes withheld will have the same effect as a negative vote. However, broker or nominee
non-votes, and shares represented by proxies reflecting broker or nominee non-votes, will not have the effect of a vote against
this proposal as they are not considered to be present and entitled to vote on this matter.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT YOU VOTE “FOR” THIS PROPOSAL.
PROPOSAL FIVE
RATIFICATION OF APPOINTMENT OF J.H. COHN LLP
AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board is submitting
the selection of J.H. Cohn LLP as our independent registered public accounting firm to the stockholders for ratification at our Annual
Meeting. Stockholder ratification of our independent registered public accounting firm is not required by our Amended and Restated
Bylaws or otherwise. If J.H. Cohn LLP is not ratified as our independent registered public accounting firm by a majority of the shares
present or represented by proxy, the Board will review its future selection of independent registered public accounting firm. J.H.
Cohn LLP will still serve as our independent registered public accounting firm for the year ending December 31, 2012, if it is
not ratified by our stockholders.
Vote Required to Approve the Ratification
of the Appointment of J.H. Cohn LLP
The
affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the
subject matter.
Abstentions and votes withheld will have the same effect as a negative vote. However, broker or nominee
non-votes, and shares represented by proxies reflecting broker or nominee non-votes, will not have the effect of a vote against
this proposal as they are not considered to be present and entitled to vote on this matter.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF J.H. COHN LLP
AS THE
COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2012.
ADDITIONAL INFORMATION
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 and 2011 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 contact us at: Manhattan Pharmaceuticals,
Inc., 787 Seventh Avenue, New York, New York 10019, Attn: Sean Power. You may also contact us at (212) 554-4305.
If you want to receive
separate copies of the proxy statement and Annual Report 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 the above address or phone number.
Stockholder Proposals
for Our 2013 Annual Meeting
Only proper proposals
under Rule 14a-8 of the Exchange Act which are timely received will be included in the proxy materials for our next annual meeting.
In order to be considered timely, such proposal must be received by our Corporate Secretary, Sean Power, at 787 Seventh Avenue,
New York, New York 10019, no later than November 16, 2012. Stockholders may also nominate candidates to the Board pursuant to
Rule 14a-11 of the Exchange Act, and such nominations will be included in the proxy materials for our next annual meeting if timely
received. In order to be considered timely, such nominations must be received by Mr. Power on or after October 17, 2012, and
on or before November 16, 2012. We suggest that stockholders submit any stockholder proposal by certified mail, return receipt
requested.
Our Amended and
Restated Bylaws require stockholders to provide advance notice to the Company of any stockholder director nomination(s) and
any other matter a stockholder wishes to present for action at an annual meeting of stockholders (other than matters to be
included in our proxy statement, which are discussed in the previous paragraph). In order to properly bring business before
an annual meeting, our Amended and Restated Bylaws require, among other things, that the stockholder submit written notice
thereof complying with our Amended and Restated Bylaws to Sean Power, our Corporate Secretary, at the above address, not less
than 60 days nor more than 90 days prior to the anniversary of the preceding year’s annual meeting. Therefore, the
Company must receive notice of a stockholder proposal submitted other than pursuant to Rule 14a-8 (as discussed above) no
sooner than February 16, 2013, and no later than January 17, 2013. If a stockholder fails to provide timely notice of a
proposal to be presented at our 2013 Annual Meeting of Stockholders, the proxy designated by our Board will have
discretionary authority to vote on any such proposal that may come before the meeting.
Other Matters
Our Board does not know
of any other matters that may come before the meeting. However, if any other matters are properly presented to the meeting, it
is the intention of the person named in the accompanying proxy card to vote, or otherwise act, in accordance with their judgment
on such matters.
Solicitation of Proxies
We will bear the cost
of solicitation of proxies. In addition to the solicitation of proxies by mail, our officers and employees may solicit proxies
in person or by telephone. We may reimburse brokers or persons holding stock in their names, or in the names of their nominees,
for their expenses in sending proxies and proxy material to beneficial owners.
Incorporation of Information
by Reference
The Audit Committee Report
contained in this proxy statement is not deemed filed with the SEC and shall not be deemed incorporated by reference into any prior
or future filings made by us under the Securities Act of 1933, as amended or the Exchange Act, except to the extent that we specifically
incorporate such information by reference. Our Annual Report on Form 10-K for the year ended December 31, 2011, delivered
to you together with this proxy statement, is hereby incorporated by reference.
APPENDIX A
CERTIFICATE OF AMENDMENT
TO
THE RESTATED CERTIFICATE OF INCORPORATION
OF
MANHATTAN PHARMACEUTICALS, INC.
Manhattan Pharmaceuticals,
Inc., a corporation organized and existing under the laws of the State of Delaware (the “
Company
”), hereby
certifies as follows:
FIRST: That the Board of
Directors of the Company has duly adopted resolutions (i) authorizing the Company to execute and file with the Secretary of
State of the State of Delaware this Certificate of Amendment of Certificate of Incorporation (this “
Certificate of
Amendment
”) to (a) effect up to two reverse stock splits at a ratio ranging from 4-for-1 to 100-for-1; and (b) declaring
this Certificate of Amendment to be advisable and recommended for approval by the stockholders of the Company.
SECOND: That this Certificate
of Amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State
of Delaware by the Board of Directors and stockholders of the Company.
THIRD: That upon the effectiveness
of this Certificate of Amendment, Article Fourth, Sections A., B., C., and D. of the Restated Certificate of Incorporation of the
Company are hereby deleted in their entirety and replaced with the following, and Article Fourth, Section E. shall be renumbered
to Section C:
A. Immediately
upon the filing of this Certificate of Amendment, each
1
shares of Common Stock (as defined below) issued and outstanding at such time shall be combined into one (1) share of such
Common Stock (the “Reverse Stock Split”). Upon surrender by a holder of a certificate or certificates for Common Stock
(including, for this purpose, a holder of shares of Common Stock issuable upon conversion of Series A Preferred Stock), duly endorsed,
at the office of the Company (or, if lost, an acceptable affidavit of loss is delivered to the Company), the Company shall, as
soon as practicable thereafter, issue and deliver to such holder, or to the nominee or assignee of such holder, a new certificate
or certificates for the number of shares of Common Stock that such holder shall be entitled to following the Reverse Stock Split.
No fractional shares shall be issued, and, in lieu thereof, the Corporation shall pay cash equal to such fraction multiplied by
the fair market value of a share of Common Stock (pre-reverse stock split). The Common Stock issued in this exchange (post-reverse
stock split) shall have the same rights, preferences and privileges as the Common Stock (pre-reverse stock split).
B. The
Corporation is authorized to issue two classes of stock designated “Common Stock” and “Series A Preferred Stock.”
The total number of shares of all classes of stock that this Corporation is authorized to issue is Five Hundred and Ten Million
(510,000,000), consisting of Five Hundred Million (500,000,000) shares of Common Stock, par value $0.001 per share, and Ten Million
(10,000,000) shares of Preferred Stock, par value $0.001 per share.”
|
1
|
Insert reverse stock split ratio, ranging from 4-for-1
to 100-for-1.
|
APPENDIX B
CERTIFICATE OF AMENDMENT
TO
THE RESTATED CERTIFICATE OF INCORPORATION
OF
MANHATTAN PHARMACEUTICALS, INC.
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware
It is hereby certified that:
1. Manhattan Pharmaceuticals, Inc. is a corporation formed under the laws of the State of Delaware, and its certificate of incorporation
was originally filed in the office of the Secretary of State on May 18, 1993 under the name Atlantic Pharmaceuticals, Inc.
2. The certificate of
incorporation is hereby amended by deleting the existing Article FIRST and replacing it in its entirety with the following amendment:
“
FIRST
:
The name of the corporation is TG Therapeutics, Inc.”
3. This amendment to the
certificate of incorporation has been duly adopted in accordance with Section 242 of the General Corporation Law of the State of
Delaware.
The undersigned is signing
this certificate on _____, 2012.
|
|
|
Michael S. Weiss
|
|
Interim Chief Executive Officer and President
|
APPENDIX C
2012 Incentive Plan
MANHATTAN PHARMACEUTICALS, INC.
2012 INCENTIVE PLAN
MANHATTAN PHARMACEUTICALS, INC.
2012 INCENTIVE PLAN
ARTICLE 1
PURPOSE
|
1
|
1.1
|
General
|
1
|
ARTICLE 2
DEFINITIONS
|
1
|
2.1
|
Definitions
|
1
|
ARTICLE 3
EFFECTIVE TERM OF PLAN
|
6
|
3.1
|
Effective Date
|
6
|
3.2
|
Term of Plan
|
6
|
ARTICLE 4
ADMINISTRATION
|
6
|
4.1
|
Committee
|
6
|
4.2
|
Actions and Interpretations by the Committee
|
7
|
4.3
|
Authority of Committee
|
7
|
4.4
|
Delegation
|
7
|
4.5
|
Indemnification
|
8
|
ARTICLE 5
SHARES SUBJECT TO THE PLAN
|
8
|
5.1
|
Number of Shares
|
8
|
5.2
|
Share Counting
|
8
|
5.3
|
Stock Distributed
|
9
|
5.4
|
Limitation on Awards
|
9
|
ARTICLE 6
ELIGIBILITY
|
9
|
6.1
|
General
|
9
|
ARTICLE 7
STOCK OPTIONS
|
9
|
7.1
|
General
|
9
|
7.2
|
Incentive Stock Options
|
10
|
ARTICLE 8
STOCK APPRECIATION RIGHTS
|
10
|
8.1
|
Grant of Stock Appreciation Rights
|
10
|
ARTICLE 9
RESTRICTED STOCK AND STOCK UNITS
|
11
|
9.1
|
Grant of Restricted Stock and Stock Units
|
11
|
9.2
|
Issuance and Restrictions
|
11
|
9.3
|
Dividends on Restricted Stock
|
11
|
9.4
|
Forfeiture
|
12
|
9.5
|
Delivery of Restricted Stock
|
12
|
ARTICLE 10
PERFORMANCE AWARDS
|
12
|
10.1
|
Grant of Performance Awards
|
12
|
10.2
|
Performance Goals
|
12
|
ARTICLE 11
QUALIFIED STOCK-BASED AWARDS
|
12
|
11.1
|
Options and Stock Appreciation Rights
|
12
|
11.2
|
Other Awards
|
12
|
11.3
|
Performance Goals
|
13
|
11.4
|
Inclusions and Exclusions from Performance Criteria
|
13
|
11.5
|
Certification of Performance Goals
|
14
|
11.6
|
Award Limits
|
14
|
ARTICLE 12
DIVIDEND EQUIVALENTS
|
14
|
12.1
|
Grant of Dividend Equivalents
|
14
|
ARTICLE 13
STOCK OR OTHER STOCK-BASED AWARDS
|
14
|
13.1
|
Grant of Stock or Other Stock-Based Awards
|
14
|
ARTICLE 14
PROVISIONS APPLICABLE TO AWARDS
|
14
|
14.1
|
Award Certificates
|
14
|
14.2
|
Form of Payment of Awards
|
15
|
14.3
|
Limits on Transfer
|
15
|
14.4
|
Beneficiaries
|
15
|
14.5
|
Stock Trading Restrictions
|
15
|
14.6
|
Effect of a Change in Control
|
15
|
14.7
|
Acceleration for Other Reasons
|
15
|
14.8
|
Forfeiture Events
|
16
|
14.9
|
Substitute Awards
|
16
|
ARTICLE 15
CHANGES IN CAPITAL STRUCTURE
|
16
|
15.1
|
Mandatory Adjustments
|
16
|
15.2
|
Discretionary Adjustments
|
16
|
15.3
|
General
|
17
|
ARTICLE 16
AMENDMENT, MODIFICATION AND TERMINATION
|
17
|
16.1
|
Amendment, Modification and Termination
|
17
|
16.2
|
Awards Previously Granted
|
17
|
16.3
|
Compliance Amendments
|
17
|
ARTICLE 17
GENERAL PROVISIONS
|
18
|
17.1
|
Rights of Participants
|
18
|
17.2
|
Withholding
|
18
|
17.3
|
Special Provisions Related to Section 409A of the Code
|
18
|
17.4
|
Unfunded Status of Awards
|
20
|
17.5
|
Relationship to Other Benefits
|
20
|
17.6
|
Expenses
|
20
|
17.7
|
Titles and Headings
|
20
|
17.8
|
Gender and Number
|
20
|
17.9
|
Fractional Shares
|
20
|
17.10
|
Government and Other Regulations
|
20
|
17.11
|
Governing Law
|
21
|
17.12
|
Severability
|
21
|
17.13
|
No Limitations on Rights of Company
|
21
|
MANHATTAN PHARMACEUTICALS, INC.
2012 INCENTIVE PLAN
ARTICLE 1
PURPOSE
1.1.
GENERAL
.
The purpose of the Manhattan Pharmaceuticals, Inc. 2012 Incentive Plan (the “Plan”) is to promote the success, and
enhance the value, of Manhattan Pharmaceuticals, Inc. (the “Company”), by linking the personal interests of employees,
officers, directors and consultants of the Company or any Affiliate (as defined below) to those of Company stockholders and by
providing such persons with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the
Company in its ability to motivate, attract, and retain the services of employees, officers, directors and consultants upon whose
judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent. Accordingly,
the Plan permits the grant of incentive awards from time to time to selected employees, officers, directors and consultants of
the Company and its Affiliates.
ARTICLE 2
DEFINITIONS
2.1.
DEFINITIONS
.
When a word or phrase appears in this Plan with the initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this Section or in Section 1.1 unless a clearly different
meaning is required by the context. The following words and phrases shall have the following meanings:
(a)
“Affiliate”
means (i) any Subsidiary or Parent, or (ii) an entity that directly or through one or more intermediaries controls, is controlled
by or is under common control with, the Company, as determined by the Committee.
(b)
“Award”
means an award of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Deferred Stock Units, Performance
Awards, Dividend Equivalents, Other Stock-Based Awards, or any other right or interest relating to Stock or cash, granted to a
Participant under the Plan.
(c)
“Award
Certificate” means a written document, in such form as the Committee prescribes from time to time, setting forth the terms
and conditions of an Award. Award Certificates may be in the form of individual award agreements or certificates or a program document
describing the terms and provisions of an Award or series of Awards under the Plan. The Committee may provide for the use of electronic,
internet or other non-paper Award Certificates, and the use of electronic, internet or other non-paper means for the acceptance
thereof and actions thereunder by a Participant.
(d)
“Beneficial
Owner” shall have the meaning given such term in Rule 13d-3 of the General Rules and Regulations under the 1934 Act.
(e)
“Board”
means the Board of Directors of the Company.
(f)
“Cause”
as a reason for a Participant’s termination of employment shall have the meaning assigned such term in the employment, severance
or similar agreement, if any, between such Participant and the Company or an Affiliate, provided, however that if there is no such
employment, severance or similar agreement in which such term is defined, and unless otherwise defined in the applicable Award
Certificate, “Cause” shall mean any of the following acts by the Participant, as determined by the Committee: gross
neglect of duty, prolonged absence from duty without the consent of the Company, material breach by the Participant of any published
Company code of conduct or code of ethics; or willful misconduct, misfeasance or malfeasance of duty which is reasonably determined
to be detrimental to the Company. With respect to a Participant’s termination of directorship, “Cause” means
an act or failure to act that constitutes cause for removal of a director under applicable Delaware law. The determination of the
Committee as to the existence of “Cause” shall be conclusive on the Participant and the Company.
(g)
“Change
in Control” means and includes the occurrence of any one of the following events but shall specifically exclude a Public
Offering:
(i) during
any consecutive 12-month period, individuals who, at the beginning of such period, constitute the Board of Directors of the Company
(the “Incumbent Directors”) cease for any reason to constitute at least a majority of such Board, provided that any
person becoming a director after the beginning of such 12-month period and whose election or nomination for election was approved
by a vote of at least a majority of the Incumbent Directors then on the Board shall be an Incumbent Director; provided, however,
that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election
contest with respect to the election or removal of directors (“Election Contest”) or other actual or threatened solicitation
of proxies or consents by or on behalf of any Person other than the Board (“Proxy Contest”), including by reason of
any agreement intended to avoid or settle any Election Contest or Proxy Contest, shall be deemed an Incumbent Director; or
(ii) any
Person becomes a Beneficial Owner, directly or indirectly, of either (A) 50% or more of the then-outstanding shares of common stock
of the Company (“Company Common Stock”) or (B) securities of the Company representing 50% or more of the combined voting
power of the Company’s then outstanding securities eligible to vote for the election of directors (the “Company Voting
Securities”); provided, however, that for purposes of this subsection (ii), the following acquisitions of Company Common
Stock or Company Voting Securities shall not constitute a Change in Control: (v) an acquisition directly from the Company, (w)
an acquisition by the Company or a Subsidiary, (x) an acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary, (y) the acquisition by GTC Biotherapeutics, Inc., LFB Biotechnologies S.A.S., LFB/GTC
LLC (collectively “the Licensors”) of shares pursuant to the Option agreement between the Licensors and the Company,
dated as of April 29, 2011, or (z) an acquisition pursuant to a Non-Qualifying Transaction (as defined in subsection (iii) below);
or
(iii) the
consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving
the Company or a Subsidiary (a “Reorganization”), or the sale or other disposition of all or substantially all of the
Company’s assets (a “Sale”) or the acquisition of assets or stock of another corporation or other entity (an
“Acquisition”), unless immediately following such Reorganization, Sale or Acquisition: (A) all or substantially all
of the individuals and entities who were the Beneficial Owners, respectively, of the outstanding Company Common Stock and outstanding
Company Voting Securities immediately prior to such Reorganization, Sale or Acquisition beneficially own, directly or indirectly,
more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such
Reorganization, Sale or Acquisition (including, without limitation, an entity which as a result of such transaction owns the Company
or all or substantially all of the Company’s assets or stock either directly or through one or more subsidiaries, the “Surviving
Entity”) in substantially the same proportions as their ownership, immediately prior to such Reorganization, Sale or Acquisition,
of the outstanding Company Common Stock and the outstanding Company Voting Securities, as the case may be, and (B) no Person (other
than (x) the Company or any Subsidiary, (y) the Surviving Entity or its ultimate parent entity, or (z) any employee benefit plan
(or related trust) sponsored or maintained by any of the foregoing) is the Beneficial Owner, directly or indirectly, of 50% or
more of the total common stock or 50% or more of the total voting power of the outstanding voting securities eligible to elect
directors of the Surviving Entity, and (C) at least a majority of the members of the board of directors of the Surviving Entity
were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such
Reorganization, Sale or Acquisition (any Reorganization, Sale or Acquisition which satisfies all of the criteria specified in (A),
(B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”).
(h)
“Code”
means the Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the
Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.
(i)
“Committee”
means the committee of the Board described in Article 4.
(j)
“Company”
means Manhattan Pharmaceuticals, Inc., a Delaware corporation, or any successor corporation.
(k)
“Continuous
Service” means the absence of any interruption or termination of service as an employee, officer, director or consultant
of the Company or any Affiliate, as applicable; provided, however, that for purposes of an Incentive Stock Option “Continuous
Service” means the absence of any interruption or termination of service as an employee of the Company or any Parent or Subsidiary,
as applicable, pursuant to applicable tax regulations. Continuous Service shall not be considered interrupted in the following
cases: (i) a Participant transfers employment between the Company and an Affiliate or between Affiliates, or (ii) in the discretion
of the Committee as specified at or prior to such occurrence, in the case of a spin-off, sale or disposition of the Participant’s
employer from the Company or any Affiliate, (iii) a Participant transfers from being an employee of the Company or an Affiliate
to being a director of the Company or of an Affiliate, or vice versa, (iv) in the discretion of the Committee as specified at or
prior to such occurrence, a Participant transfers from being an employee of the Company or an Affiliate to being a consultant to
the Company or of an Affiliate, or vice versa, or (v) any leave of absence authorized in writing by the Company prior to its commencement;
provided, however, that for purposes of Incentive Stock Options, no such leave may exceed 90 days, unless reemployment upon expiration
of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company
is not so guaranteed, on the 91st day of such leave any Incentive Stock Option held by the Participant shall cease to be treated
as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Whether military, government
or other service or other leave of absence shall constitute a termination of Continuous Service shall be determined in each case
by the Committee at its discretion, and any determination by the Committee shall be final and conclusive; provided, however, that
for purposes of any Award that is subject to Code Section 409A, the determination of a leave of absence must comply with the requirements
of a “bona fide leave of absence” as provided in Treas. Reg. Section 1.409A-1(h).
(l)
“Covered
Employee” means a covered employee as defined in Code Section 162(m)(3).
(m)
“Deferred
Stock Unit” means a right granted to a Participant under Article 9 to receive Shares (or the equivalent value in cash or
other property if the Committee so provides) at a future time as determined by the Committee, or as determined by the Participant
within guidelines established by the Committee in the case of voluntary deferral elections.
(n)
“Disability”
of a Participant means that the Participant (i) is unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months, or (ii) is, by reason of any medically determinable physical or mental impairment which can
be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three months under an accident or health plan covering employees of the Participant’s
employer. If the determination of Disability relates to an Incentive Stock Option, Disability means Permanent and Total Disability
as defined in Section 22(e)(3) of the Code. In the event of a dispute, the determination of whether a Participant has incurred
a Disability will be made by the Committee and may be supported by the advice of a physician competent in the area to which such
Disability relates.
(o)
“Dividend
Equivalent” means a right granted to a Participant under Article 12.
(p)
“Effective
Date” has the meaning assigned such term in Section 3.1.
(q)
“Eligible
Participant” means an employee (including a leased employee), officer, director or consultant of the Company or any Affiliate.
(r)
“Exchange”
means any national securities exchange on which the Stock may from time to time be listed or traded.
(s)
“Fair
Market Value,” on any date, means (i) if the Stock is listed on a securities exchange, the closing sales price on such exchange
on such date or, in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which
sales were reported, or (ii) if the Stock is not listed on a securities exchange, the mean between the bid and offered prices as
quoted by the applicable interdealer quotation system for such date, provided that if the Stock is not quoted on an interdealer
quotation system or it is determined that the fair market value is not properly reflected by such quotations, Fair Market Value
will be determined by such other method as the Committee determines in good faith to be reasonable and in compliance with Code
Section 409A.
(t)
“Full-Value
Award” means an Award other than in the form of an Option or SAR, and which is settled by the issuance of Stock (or at the
discretion of the Committee, settled in cash valued by reference to Stock value).
(u)
“Good
Reason” has the meaning, if any, assigned such term in the employment, consulting, severance or similar agreement, if any,
between a Participant and the Company or an Affiliate; provided, however, that if there is no such employment, consulting, severance
or similar agreement in which such term is defined, “Good Reason” shall have the meaning, if any, given such term in
the applicable Award Certificate. If not defined in either such document, the term “Good Reason” as used herein shall
not apply to a particular Award.
(v)
“Grant
Date” of an Award means the first date on which all necessary corporate action has been taken to approve the grant of the
Award as provided in the Plan, or such later date as is determined and specified as part of that authorization process. Notice
of the grant shall be provided to the grantee within a reasonable time after the Grant Date.
(w)
“Incentive
Stock Option” means an Option that is intended to be an incentive stock option and meets the requirements of Section 422
of the Code or any successor provision thereto.
(x)
“Independent
Directors” means those members of the Board of Directors who qualify at any given time as (a) an “independent”
director under the applicable rules of each Exchange on which the Shares are listed, (b) a “non-employee” director
under Rule 16b-3 of the 1934 Act, and (c) an “outside” director under Section 162(m) of the Code.
(y)
“Non-Employee
Director” means a director of the Company who is not a common law employee of the Company or an Affiliate.
(z)
“Nonstatutory
Stock Option” means an Option that is not an Incentive Stock Option.
(aa)
“Option”
means a right granted to a Participant under Article 7 of the Plan to purchase Stock at a specified price during specified time
periods. An Option may be either an Incentive Stock Option or a Nonstatutory Stock Option.
(bb)
“Other
Stock-Based Award” means a right, granted to a Participant under Article 13, that relates to or is valued by reference to
Stock or other Awards relating to Stock.
(cc)
“Parent”
means a corporation, limited liability company, partnership or other entity which owns or beneficially owns a majority of the outstanding
voting stock or voting power of the Company. Notwithstanding the above, with respect to an Incentive Stock Option, Parent shall
have the meaning set forth in Section 424(e) of the Code.
(dd)
“Participant”
means an Eligible Participant who has been granted an Award under the Plan; provided that in the case of the death of a Participant,
the term “Participant” refers to a beneficiary designated pursuant to Section 14.4 or the legal guardian or other legal
representative acting in a fiduciary capacity on behalf of the Participant under applicable state law and court supervision.
(ee)
“Performance
Award” means any award granted under the Plan pursuant to Article 10.
(ff)
“Person”
means any individual, entity or group, within the meaning of Section 3(a)(9) of the 1934 Act and as used in Section 13(d)(3) or
14(d)(2) of the 1934 Act.
(gg)
“Plan”
means the Manhattan Pharmaceuticals, Inc. 2012 Incentive Plan, as amended from time to time.
(hh)
“Public
Offering” means a public offering of any class or series of the Company’s equity securities pursuant to a registration
statement filed by the Company under the 1933 Act.
(ii)
“Qualified
Performance-Based Award” means an Award that is either (i) intended to qualify for the Section 162(m) Exemption and is made
subject to performance goals based on Qualified Business Criteria as set forth in Section 11.2, or (ii) an Option or SAR having
an exercise price equal to or greater than the Fair Market Value of the underlying Stock as of the Grant Date.
(jj)
“Qualified
Business Criteria” means one or more of the Business Criteria listed in Section 11.2 upon which performance goals for certain
Qualified Performance-Based Awards may be established by the Committee.
(kk)
“Restricted
Stock” means Stock granted to a Participant under Article 9 that is subject to certain restrictions and to risk of forfeiture.
(ll)
“Restricted
Stock Unit” means the right granted to a Participant under Article 9 to receive shares of Stock (or the equivalent value
in cash or other property if the Committee so provides) in the future, which right is subject to certain restrictions and to risk
of forfeiture.
(mm)
“Section
162(m) Exemption” means the exemption from the limitation on deductibility imposed by Section 162(m) of the Code that is
set forth in Section 162(m)(4)(C) of the Code or any successor provision thereto.
(nn)
“Shares”
means shares of the Company’s Stock. If there has been an adjustment or substitution pursuant to Article 15, the term “Shares”
shall also include any shares of stock or other securities that are substituted for Shares or into which Shares are adjusted pursuant
to Article 15.
(oo)
“Stock”
means the $0.001 par value common stock of the Company and such other securities of the Company as may be substituted for Stock
pursuant to Article 15.
(pp)
“Stock
Appreciation Right” or “SAR” means a right granted to a Participant under Article 8 to receive a payment equal
to the difference between the Fair Market Value of a Share as of the date of exercise of the SAR over the base price of the SAR,
all as determined pursuant to Article 8.
(qq)
“Subsidiary”
means any corporation, limited liability company, partnership or other entity, domestic or foreign, of which a majority of the
outstanding voting stock or voting power is beneficially owned directly or indirectly by the Company. Notwithstanding the above,
with respect to an Incentive Stock Option, Subsidiary shall have the meaning set forth in Section 424(f) of the Code.
(rr)
“1933
Act” means the Securities Act of 1933, as amended from time to time.
(ss)
“1934
Act” means the Securities Exchange Act of 1934, as amended from time to time.
ARTICLE 3
EFFECTIVE TERM OF PLAN
3.1.
EFFECTIVE
DATE
. Subject to the approval of the Plan by the Company’s stockholders within 12 months after the Plan’s adoption
by the Board, the Plan will become effective on the date that it is adopted by the Board (the “Effective Date”).
3.2.
TERMINATION
OF PLAN
. Unless earlier terminated as provided herein, the Plan shall continue in effect until the date of the 2022 stockholders’
meeting or, if the stockholders approve an amendment to the Plan that increases the number of Shares subject to the Plan, the tenth
anniversary of the date of such approval. The termination of the Plan on such date shall not affect the validity of any Award outstanding
on the date of termination, which shall continue to be governed by the applicable terms and conditions of the Plan. Notwithstanding
the foregoing, no Incentive Stock Options may be granted more than ten (10) years after the Effective Date.
ARTICLE 4
ADMINISTRATION
4.1.
COMMITTEE
.
The Plan shall be administered by a Committee appointed by the Board (which Committee shall consist of at least two directors)
or, at the discretion of the Board from time to time, the Plan may be administered by the Board. It is intended that at least two
of the directors appointed to serve on the Committee shall be Independent Directors and that any such members of the Committee
who do not so qualify shall abstain from participating in any decision to make or administer Awards that are made to Eligible Participants
who at the time of consideration for such Award (i) are persons subject to the short-swing profit rules of Section 16 of the 1934
Act, or (ii) are reasonably anticipated to become Covered Employees during the term of the Award. However, the mere fact that a
Committee member shall fail to qualify as an Independent Director or shall fail to abstain from such action shall not invalidate
any Award made by the Committee which Award is otherwise validly made under the Plan. The members of the Committee shall be appointed
by, and may be changed at any time and from time to time in the discretion of, the Board. Unless and until changed by the Board,
the Compensation Committee of the Board is designated as the Committee to administer the Plan. The Board may reserve to itself
any or all of the authority and responsibility of the Committee under the Plan or may act as administrator of the Plan for any
and all purposes. To the extent the Board has reserved any authority and responsibility or during any time that the Board is acting
as administrator of the Plan, it shall have all the powers and protections of the Committee hereunder, and any reference herein
to the Committee (other than in this Section 4.1) shall include the Board. To the extent any action of the Board under the Plan
conflicts with actions taken by the Committee, the actions of the Board shall control. Notwithstanding any of the foregoing, grants
of Awards to Non-Employee Directors under the Plan shall be made only in accordance with the terms, conditions and parameters of
a plan, program or policy for the compensation of Non-Employee Directors that is approved and administered by a committee of the
Board consisting solely of Independent Directors.
4.2.
ACTION
AND INTERPRETATIONS BY THE COMMITTEE
. For purposes of administering the Plan, the Committee may from time to time adopt rules,
regulations, guidelines and procedures for carrying out the provisions and purposes of the Plan and make such other determinations,
not inconsistent with the Plan, as the Committee may deem appropriate. The Committee may correct any defect, supply any omission
or reconcile any inconsistency in the Plan or in any Award in the manner and to the extent it deems necessary to carry out the
intent of the Plan. The Committee’s interpretation of the Plan, any Awards granted under the Plan, any Award Certificate
and all decisions and determinations by the Committee with respect to the Plan are final, binding, and conclusive on all parties.
Each member of the Committee is entitled to, in good faith, rely or act upon any report or other information furnished to that
member by any officer or other employee of the Company or any Affiliate, the Company’s or an Affiliate’s independent
certified public accountants, Company counsel or any executive compensation consultant or other professional retained by the Company
or the Committee to assist in the administration of the Plan. No member of the Committee will be liable for any good faith determination,
act or omission in connection with the Plan or any Award.
4.3.
AUTHORITY
OF COMMITTEE
. Except as provided in Section 4.1 hereof, the Committee has the exclusive power, authority and discretion to:
(a) grant
Awards;
(b) designate
Participants;
(c) determine
the type or types of Awards to be granted to each Participant;
(d) determine
the number of Awards to be granted and the number of Shares or dollar amount to which an Award will relate;
(e) determine
the terms and conditions of any Award granted under the Plan;
(f) prescribe
the form of each Award Certificate, which need not be identical for each Participant;
(g) decide
all other matters that must be determined in connection with an Award;
(h) establish,
adopt or revise any rules, regulations, guidelines or procedures as it may deem necessary or advisable to administer the Plan;
(i) make
all other decisions and determinations that may be required under the Plan or as the Committee deems necessary or advisable to
administer the Plan;
(j) amend
the Plan or any Award Certificate as provided herein; and
(k) adopt
such modifications, procedures, and subplans as may be necessary or desirable to comply with provisions of the laws of the United
States or any non-U.S. jurisdictions in which the Company or any Affiliate may operate, in order to assure the viability of the
benefits of Awards granted to participants located in the United States or such other jurisdictions and to further the objectives
of the Plan.
4.4.
DELEGATION
.
(a)
Administrative
Duties
. The Committee may delegate to one or more of its members or to one or more officers of the Company or an Affiliate
or to one or more agents or advisors such administrative duties or powers as it may deem advisable, and the Committee or any individuals
to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any
responsibility the Committee or such individuals may have under this Plan.
(b)
Special
Committee
. The Board may, by resolution, expressly delegate to a special committee, consisting of one or more directors who
may but need not be officers of the Company, the authority, within specified parameters as to the number and terms of Awards,
to (i) designate officers and/or employees of the Company or any of its Affiliates to be recipients of Awards under the Plan,
and (ii) to determine the number of such Awards to be received by any such Participants. The acts of such delegates shall be treated
hereunder as acts of the Board and such delegates shall report regularly to the Board and the Compensation Committee regarding
the delegated duties and responsibilities and any Awards so granted.
4.5.
INDEMNIFICATION
.
Each person who is or shall have been a member of the Committee, or of the Board, or an officer of the Company to whom authority
was delegated in accordance with this Article 4 shall be indemnified and held harmless by the Company against and from any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from
any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any
action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof,
with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding
against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her own behalf, unless such loss, cost, liability, or expense is
a result of his or her own willful misconduct or except as expressly provided by statute. The foregoing right of indemnification
shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s charter
or bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1.
NUMBER
OF SHARES
. Subject to adjustment as provided in Sections 5.2 and Section 15.1, the aggregate number of Shares reserved and
available for issuance pursuant to Awards granted under the Plan shall be 75,000,000. The maximum number of Shares that may be
issued upon exercise of Incentive Stock Options granted under the Plan shall be 75,000,000.
5.2.
SHARE
COUNTING
. Shares covered by an Award shall be subtracted from the Plan share reserve as of the Grant Date as provided in subsection
(a) below, but shall be added back to the Plan share reserve or otherwise treated in accordance with subsections (b) through (i)
of this Section 5.2.
(a) To
the extent that an Award is canceled, terminates, expires, is forfeited or lapses for any reason, any unissued or forfeited Shares
subject to the Award will be added back to the Plan share reserve and again be available for issuance pursuant to Awards granted
under the Plan.
(b) Shares
subject to Awards settled in cash will be added back to the Plan share reserve and again be available for issuance pursuant to
Awards granted under the Plan.
(c) Shares
withheld or repurchased from an Award or delivered by a Participant to satisfy minimum tax withholding requirements will be added
back to the Plan share reserve and again be available for issuance pursuant to Awards granted under the Plan.
(d) If
the exercise price of an Option is satisfied in whole or in part by delivering Shares to the Company (by either actual delivery
or attestation), the number of Shares so tendered (by delivery or attestation) shall be added to the Plan share reserve and will
be available for issuance pursuant to Awards granted under the Plan.
(e) To
the extent that the full number of Shares subject to an Option or SAR is not issued upon exercise of the Option or SAR for any
reason, including by reason of net-settlement of the Award, the unissued Shares originally subject to the Award will be added back
to the Plan share reserve and again be available for issuance pursuant to other Awards granted under the Plan.
(f) To
the extent that the full number of Shares subject to a Full Value Award is not issued for any reason, including by reason of failure
to achieve maximum performance goals, the unissued Shares originally subject to the Award will be added back to the Plan share
reserve and again be available for issuance pursuant to Awards granted under the Plan.
(g) Substitute
Awards granted pursuant to Section 14.9 of the Plan shall not count against the Shares otherwise available for issuance under the
Plan under Section 5.1.
(h) Shares
available under a stockholder-approved plan of a company acquired by the Company (as appropriately adjusted to Shares to reflect
the transaction) may be issued under the Plan pursuant to Awards granted to individuals who were not employees of the Company or
its Affiliates immediately before such transaction and will not count against the maximum share limitation specified in Section
5.1.
5.3.
STOCK
DISTRIBUTED
. Any Stock distributed pursuant to an Award may consist, in whole or in part, of authorized and unissued Stock,
treasury Stock or Stock purchased on the open market.
5.4.
LIMITATION
ON AWARDS
. Notwithstanding any provision in the Plan to the contrary (but subject to adjustment as provided in Article 15):
(a)
Options
.
The maximum number of Shares subject to time-vesting Options granted under the Plan in any 12-month period to any one Participant
shall be 25,000,000.
(b)
SARs
.
The maximum number of Shares subject to time-vesting Stock Appreciation Rights granted under the Plan in any 12-month period to
any one Participant shall be 25,00,000.
(c)
Performance
Awards
. With respect to any one 12-month period (i) the maximum amount that may be paid to any one Participant for Performance
Awards
payable in cash or property other than Shares shall be $15,000,000, and (ii) the maximum
number of Shares that may be paid to any one Participant for Performance Awards payable in Stock shall be 25,000,000 Shares. For
purposes of applying these limits in the case of multi-year performance periods, the amount of cash or property or number of Shares
deemed paid with respect to any one 12-month period is the total amount payable or Shares earned for the performance period divided
by the number of 12-month periods in the performance period.
ARTICLE 6
ELIGIBILITY
6.1.
GENERAL
.
Awards may be granted only to Eligible Participants. Incentive Stock Options may be granted only to Eligible Participants who are
employees of the Company or a Parent or Subsidiary as defined in Section 424(e) and (f) of the Code. Eligible Participants who
are service providers to an Affiliate may be granted Options or SARs under this Plan only if the Affiliate qualifies as an “eligible
issuer of service recipient stock” within the meaning of §1.409A-1(b)(5)(iii)(E) of the final regulations under Code
Section 409A.
ARTICLE 7
STOCK OPTIONS
7.1.
GENERAL
.
The Committee is authorized to grant Options to Participants on the following terms and conditions:
(a)
Exercise
Price
. The exercise price per Share under an Option shall be determined by the Committee, provided that the exercise price
for any Option (other than an Option issued as a substitute Award pursuant to Section 14.9) shall not be less than the Fair Market
Value as of the Grant Date.
(b)
Prohibition
on Repricing
. Except as otherwise provided in Section 15.1, the exercise price of an Option may not be reduced, directly or
indirectly by cancellation and regrant or otherwise, without the prior approval of the stockholders of the Company. In addition,
the Company may not, without the prior approval of stockholders of the Company, repurchase an Option for value from a Participant
if the current Fair Market Value of the Shares underlying the Option is lower than the exercise price per share of the Option.
(c)
Time
and Conditions of Exercise
. The Committee shall determine the time or times at which an Option may be exercised in whole or
in part, subject to Section 7.1(e
), and may include in the Award Certificate
a provision that
an Option that is otherwise exercisable and has an exercise price that is less than the Fair Market Value of the Stock on the last
day of its term will be automatically exercised on such final date of the term by means of a “net exercise,” thus entitling
the optionee to Shares equal to the intrinsic value of the Option on such exercise date, less the number of Shares required for
tax withholding. The Committee shall also determine the performance or other conditions, if any, that must be satisfied before
all or part of an Option may be exercised or vested.
(d)
Payment
.
The Committee shall determine the methods by which the exercise price of an Option may be paid, the form of payment, and the methods
by which Shares shall be delivered or deemed to be delivered to Participants. As determined by the Committee at or after the Grant
Date, payment of the exercise price of an Option may be made, in whole or in part, in the form of (i) cash or cash equivalents,
(ii) delivery (by either actual delivery or attestation) of previously-acquired Shares based on the Fair Market Value of the Shares
on the date the Option is exercised, (iii) withholding of Shares from the Option based on the Fair Market Value of the Shares on
the date the Option is exercised, (iv) broker-assisted market sales, or (iv) any other “cashless exercise” arrangement.
(e)
Exercise
Term
. Except for Nonstatutory Options granted to Participants outside the United States, no Option granted under the Plan shall
be exercisable for more than ten years from the Grant Date.
(f)
No
Deferral Feature
. No Option shall provide for any feature for the deferral of compensation other than the deferral of recognition
of income until the exercise or disposition of the Option.
(g)
No
Dividend Equivalents
. No Option shall provide for Dividend Equivalents.
7.2.
INCENTIVE
STOCK OPTIONS
. The terms of any Incentive Stock Options granted under the Plan must comply with the requirements of Section
422 of the Code. Without limiting the foregoing, any Incentive Stock Option granted to a Participant who at the Grant Date owns
more than 10% of the voting power of all classes of shares of the Company must have an exercise price per Share of not less than
110% of the Fair Market Value per Share on the Grant Date and an Option term of not more than five years. If all of the requirements
of Section 422 of the Code (including the above) are not met, the Option shall automatically become a Nonstatutory Stock Option.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1.
GRANT
OF STOCK APPRECIATION RIGHTS
. The Committee is authorized to grant Stock Appreciation Rights to Participants on the following
terms and conditions:
(a)
Right
to Payment
. Upon the exercise of a SAR, the Participant has the right to receive, for each Share with respect to which the
SAR is being exercised, the excess, if any, of:
(1) The
Fair Market Value of one Share on the date of exercise; over
(2) The
base price of the SAR as determined by the Committee and set forth in the Award Certificate, which shall not be less than the Fair
Market Value of one Share on the Grant Date.
(b)
Prohibition
on Repricing
. Except as otherwise provided in Section 15.1, the base price of a SAR may not be reduced, directly or indirectly
by cancellation and regrant or otherwise, without the prior approval of the stockholders of the Company. In addition, the Company
may not, without the prior approval of stockholders of the Company, repurchase a SAR for value from a Participant if the current
Fair Market Value of the Shares underlying the SAR is lower than the base price per share of the SAR.
(c)
Time
and Conditions of Exercise
. The Committee shall determine the time or times at which a SAR may be exercised in whole or in
part,
and may include in the Award Certificate
a provision that a SAR that is otherwise exercisable
and has a base price that is less than the Fair Market Value of the Stock on the last day of its term will be automatically exercised
on such final date of the term, thus entitling the holder to cash or Shares equal to the intrinsic value of the SAR on such exercise
date, less the cash or number of Shares required for tax withholding. Except for SARs granted to Participants outside the United
States, no SAR shall be exercisable for more than ten years from the Grant Date.
(d)
No
Deferral Feature
. No SAR shall provide for any feature for the deferral of compensation other than the deferral of recognition
of income until the exercise or disposition of the SAR.
(e)
No
Dividend Equivalents
. No SAR shall provide for Dividend Equivalents.
(f)
Other
Terms
. All SARs shall be evidenced by an Award Certificate. Subject to the limitations of this Article 8, the terms, methods
of exercise, methods of settlement, form of consideration payable in settlement (e.g., cash, Shares or other property), and any
other terms and conditions of the SAR shall be determined by the Committee at the time of the grant and shall be reflected in the
Award Certificate.
ARTICLE 9
RESTRICTED STOCK AND STOCK UNITS
9.1.
GRANT
OF RESTRICTED STOCK AND STOCK UNITS
. The Committee is authorized to make Awards of Restricted Stock, Restricted Stock Units
or Deferred Stock Units to Participants in such amounts and subject to such terms and conditions as may be selected by the Committee.
An Award of Restricted Stock, Restricted Stock Units or Deferred Stock Units shall be evidenced by an Award Certificate setting
forth the terms, conditions, and restrictions applicable to the Award.
9.2.
ISSUANCE
AND RESTRICTIONS
. Restricted Stock, Restricted Stock Units or Deferred Stock Units shall be subject to such restrictions on
transferability and other restrictions as the Committee may impose (including, for example, limitations on the right to vote Restricted
Stock or the right to receive dividends on the Restricted Stock). These restrictions may lapse separately or in combination at
such times, under such circumstances, in such installments, upon the satisfaction of performance goals or otherwise, as the Committee
determines at the time of the grant of the Award or thereafter. Except as otherwise provided in an Award Certificate or any special
Plan document governing an Award, a Participant shall have none of the rights of a stockholder with respect to Restricted Stock
Units or Deferred Stock Units until such time as Shares of Stock are paid in settlement of such Awards.
9.3
DIVIDENDS
ON RESTRICTED STOCK
. In the case of Restricted Stock, the Committee may provide that ordinary cash dividends declared on the
Shares before they are vested (i) will be forfeited, (ii) will be deemed to have been reinvested in additional Shares or otherwise
reinvested (subject to Share availability under Section 5.1 hereof), or (iii) in the case of Restricted Stock that is not subject
to performance-based vesting, will be paid or distributed to the Participant as accrued (in which case, such dividends must be
paid or distributed no later than the 15th day of the 3rd month following the later of (A) the calendar year in which the corresponding
dividends were paid to stockholders, or (B) the first calendar year in which the Participant’s right to such dividends is
no longer subject to a substantial risk of forfeiture). Unless otherwise provided by the Committee, dividends accrued on Shares
of Restricted Stock before they are vested shall, as provided in the Award Certificate, either (i) be reinvested in the form of
additional Shares, which shall be subject to the same vesting provisions as provided for the host Award, or (ii) be credited by
the Company to an account for the Participant and accumulated without interest until the date upon which the host Award becomes
vested, and any dividends accrued with respect to forfeited Restricted Stock will be reconveyed to the Company without further
consideration or any act or action by the Participant.
9.4.
FORFEITURE
.
Subject to the terms of the Award Certificate and except as otherwise determined by the Committee at the time of the grant of the
Award or thereafter, upon termination of Continuous Service during the applicable restriction period or upon failure to satisfy
a performance goal during the applicable restriction period, Restricted Stock or Restricted Stock Units that are at that time subject
to restrictions shall be forfeited.
9.5.
DELIVERY
OF RESTRICTED STOCK
. Shares of Restricted Stock shall be delivered to the Participant at the Grant Date either by book-entry
registration or by delivering to the Participant, or a custodian or escrow agent (including, without limitation, the Company or
one or more of its employees) designated by the Committee, a stock certificate or certificates registered in the name of the Participant.
If physical certificates representing shares of Restricted Stock are registered in the name of the Participant, such certificates
must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock.
ARTICLE 10
PERFORMANCE AWARDS
10.1.
GRANT
OF PERFORMANCE AWARDS
. The Committee is authorized to grant any Award under this Plan, including cash-based Awards, with performance-based
vesting criteria, on such terms and conditions as may be selected by the Committee. Any such Awards with performance-based vesting
criteria are referred to herein as Performance Awards. The Committee shall have the complete discretion to determine the number
of Performance Awards granted to each Participant, subject to Section 5.4, and to designate the provisions of such Performance
Awards as provided in Section 4.3. All Performance Awards shall be evidenced by an Award Certificate or a written program established
by the Committee, pursuant to which Performance Awards are awarded under the Plan under uniform terms, conditions and restrictions
set forth in such written program.
10.2.
PERFORMANCE
GOALS
. The Committee may establish performance goals for Performance Awards which may be based on any criteria selected by
the Committee. Such performance goals may be described in terms of Company-wide objectives or in terms of objectives that relate
to the performance of the Participant, an Affiliate or a division, region, department or function within the Company or an Affiliate.
If the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company
or the manner in which the Company or an Affiliate conducts its business, or other events or circumstances render performance goals
to be unsuitable, the Committee may modify such performance goals in whole or in part, as the Committee deems appropriate. If a
Participant is promoted, demoted or transferred to a different business unit or function during a performance period, the Committee
may determine that the performance goals or performance period are no longer appropriate and may (i) adjust, change or eliminate
the performance goals or the applicable performance period as it deems appropriate to make such goals and period comparable to
the initial goals and period, or (ii) make a cash payment to the participant in an amount determined by the Committee. The foregoing
two sentences shall not apply with respect to a Performance Award that is intended to be a Qualified Performance-Based Award if
the recipient of such award (a) was a Covered Employee on the date of the modification, adjustment, change or elimination of the
performance goals or performance period, or (b) in the reasonable judgment of the Committee, may be a Covered Employee on the date
the Performance Award is expected to be paid.
ARTICLE 11
QUALIFIED PERFORMANCE-BASED AWARDS
11.1.
OPTIONS
AND STOCK APPRECIATION RIGHTS
. The provisions of the Plan are intended to ensure that all Options and Stock Appreciation Rights
granted hereunder to any Covered Employee shall qualify for the Section 162(m) Exemption.
11.2.
OTHER
AWARDS
. When granting any other Award, the Committee may designate such Award as a Qualified Performance-Based Award, based
upon a determination that the recipient is or may be a Covered Employee with respect to such Award, and the Committee wishes such
Award to qualify for the Section 162(m) Exemption. If an Award is so designated, the Committee shall establish performance goals
for such Award within the time period prescribed by Section 162(m) of the Code based on one or more of the following Qualified
Business Criteria, which may be expressed in terms of Company-wide objectives or in terms of objectives that relate to the performance
of an Affiliate or a division, region, department or function within the Company or an Affiliate:
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Revenue
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Sales
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Profit (net profit, gross profit, operating profit, economic profit,
profit margins or other corporate profit measures)
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Earnings (EBIT, EBITDA, earnings per share, or other corporate
earnings measures)
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Net income (before or after taxes, operating income or other income
measures)
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Cash (cash flow, cash generation, working capital, or other cash
measures)
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Stock price or performance
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Total stockholder return (stock price appreciation plus reinvested
dividends)
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Return on equity
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Return on assets
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Return on investment
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Market share
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Improvements in capital structure
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Expenses (expense management, expense ratio, expense efficiency
ratios or other expense measures)
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Business expansion or consolidation (acquisitions, divestitures,
in-licensing, or product acquisitions)
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Market capitalization
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Clinical and regulatory milestones
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Corporate financing activities
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Supply, production, and manufacturing milestones
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Corporate partnerships or strategic alliances
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Performance goals with respect to the foregoing
Qualified Business Criteria may be specified in absolute terms, in percentages, or in terms of growth from period to period or
growth rates over time, as well as measured relative to the performance of a group of comparator companies, or a published or special
index, or a stock market index, that the Committee deems appropriate. Any member of a comparator group or an index that ceases
to exist during a measurement period shall be disregarded for the entire measurement period. Performance Goals need not be based
upon an increase or positive result under a business criterion and could include, for example, the maintenance of the status quo
or the limitation of economic losses (measured, in each case, by reference to a specific business criterion).
11.3.
PERFORMANCE
GOALS
. Each Qualified Performance-Based Award (other than a market-priced Option or SAR) shall be earned, vested and payable
(as applicable) only upon the achievement of performance goals established by the Committee based upon one or more of the Qualified
Business Criteria, together with the satisfaction of any other conditions, such as continued employment, as the Committee may determine
to be appropriate; provided, however, that the Committee may provide, either in connection with the grant thereof or by amendment
thereafter, that achievement of such performance goals will be waived, in whole or in part, upon (i) the termination of employment
of a Participant by reason of death or Disability, or (ii) the occurrence of a Change in Control. Performance periods established
by the Committee for any such Qualified Performance-Based Award may be as short as three months and may be any longer period. In
addition, the Committee has the right, in connection with the grant of a Qualified Performance-Based Award, to exercise negative
discretion to determine that the portion of such Award actually earned, vested and/or payable (as applicable) shall be less than
the portion that would be earned, vested and/or payable based solely upon application of the applicable performance goals.
11.4.
INCLUSIONS
AND EXCLUSIONS FROM PERFORMANCE CRITERIA
. The Committee may provide in any Qualified Performance-Based Award, at the time the
performance goals are established, that any evaluation of performance shall exclude or otherwise objectively adjust for any specified
circumstance or event that occurs during a performance period, including by way of example but without limitation the following:
(a) asset write-downs or impairment charges; (b) litigation or claim judgments or settlements; (c) the effect of changes in tax
laws, accounting principles or other laws or provisions affecting reported results; (d) accruals for reorganization and restructuring
programs; (e) extraordinary nonrecurring items as described in then-current accounting principles; (f) extraordinary nonrecurring
items as described in management’s discussion and analysis of financial condition and results of operations appearing in
the Company’s annual report to stockholders for the applicable year; (g) acquisitions or divestitures; and (h) foreign exchange
gains and losses. To the extent such inclusions or exclusions affect Awards to Covered Employees, they shall be prescribed in a
form that meets the requirements of Code Section 162(m) for deductibility.
11.5.
CERTIFICATION
OF PERFORMANCE GOALS
. Any payment of a Qualified Performance-Based Award granted with performance goals pursuant to Section
11.3 above shall be conditioned on the written certification of the Committee in each case that the performance goals and any other
material conditions were satisfied. Except as specifically provided in Section 11.3, no Qualified Performance-Based Award held
by a Covered Employee or by an employee who in the reasonable judgment of the Committee may be a Covered Employee on the date of
payment, may be amended, nor may the Committee exercise any discretionary authority it may otherwise have under the Plan with respect
to a Qualified Performance-Based Award under the Plan, in any manner to waive the achievement of the applicable performance goal
based on Qualified Business Criteria or to increase the amount payable pursuant thereto or the value thereof, or otherwise in a
manner that would cause the Qualified Performance-Based Award to cease to qualify for the Section 162(m) Exemption.
11.6.
AWARD
LIMITS
. Section 5.4 sets forth, with respect to any one 12-month period, (i) the maximum number of time-vesting Options or
SARs that may be granted to any one Participant, (i) the maximum amount that may be paid to any one Participant for Performance
Awards payable in cash or property other than Shares, and (iii) the maximum number of Shares that may be paid to any one Participant
for Performance Awards payable in Stock.
ARTICLE 12
DIVIDEND EQUIVALENTS
12.1.
GRANT
OF DIVIDEND EQUIVALENTS
. The Committee is authorized to grant Dividend Equivalents with respect to Full-Value Awards granted
hereunder, subject to such terms and conditions as may be selected by the Committee. Dividend Equivalents shall entitle the Participant
to receive payments equal to ordinary cash dividends or distributions with respect to all or a portion of the number of Shares
subject to a Full-Value Award, as determined by the Committee. The Committee may provide that Dividend Equivalents (i) will be
deemed to have been reinvested in additional Shares or otherwise reinvested, or (ii) except in the case of Performance Awards,
will be paid or distributed to the Participant as accrued (in which case, such Dividend Equivalents must be paid or distributed
no later than the 15th day of the 3rd month following the later of (A) the calendar year in which the corresponding dividends were
paid to stockholders, or (B) the first calendar year in which the Participant’s right to such Dividends Equivalents is no
longer subject to a substantial risk of forfeiture). Unless otherwise provided by the Committee, Dividend Equivalents accruing
on unvested Full-Value Awards shall, as provided in the Award Certificate, either (i) be reinvested in the form of additional Shares,
which shall be subject to the same vesting provisions as provided for the host Award, or (ii) be credited by the Company to an
account for the Participant and accumulated without interest until the date upon which the host Award becomes vested, and any Dividend
Equivalents accrued with respect to forfeited Awards will be reconveyed to the Company without further consideration or any act
or action by the Participant.
ARTICLE 13
STOCK OR OTHER STOCK-BASED AWARDS
13.1.
GRANT
OF STOCK OR OTHER STOCK-BASED AWARDS
. The Committee is authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related
to Shares, as deemed by the Committee to be consistent with the purposes of the Plan, including without limitation Shares awarded
purely as a “bonus” and not subject to any restrictions or conditions, convertible or exchangeable debt securities,
other rights convertible or exchangeable into Shares, and Awards valued by reference to book value of Shares or the value of securities
of or the performance of specified Parents or Subsidiaries. The Committee shall determine the terms and conditions of such Awards.
ARTICLE 14
PROVISIONS APPLICABLE TO AWARDS
14.1.
AWARD
CERTIFICATES
. Each Award shall be evidenced by an Award Certificate. Each Award Certificate shall include such provisions,
not inconsistent with the Plan, as may be specified by the Committee.
14.2.
FORM
OF PAYMENT FOR AWARDS
. At the discretion of the Committee, payment of Awards may be made in cash, Stock, a combination of cash
and Stock, or any other form of property as the Committee shall determine. In addition, payment of Awards may include such terms,
conditions, restrictions and/or limitations, if any, as the Committee deems appropriate, including, in the case of Awards paid
in the form of Stock, restrictions on transfer and forfeiture provisions. Further, payment of Awards may be made in the form of
a lump sum, or in installments, as determined by the Committee.
14.3.
LIMITS
ON TRANSFER
. No right or interest of a Participant in any unexercised or restricted Award may be pledged, encumbered, or hypothecated
to or in favor of any party other than the Company or an Affiliate, or shall be subject to any lien, obligation, or liability of
such Participant to any other party other than the Company or an Affiliate. No unexercised or restricted Award shall be assignable
or transferable by a Participant other than by will or the laws of descent and distribution; provided, however, that that Nonstatutory
Stock Options may be transferred without consideration to members of a Participant’s immediate family (“Immediate Family
Members”), to trusts in which such Immediate Family Members have more than fifty percent (50%) of the beneficial interest,
to foundations in which such Immediate Family Members (or the Participant) control the management of assets, and to any other entity
(including limited partnerships and limited liability companies) in which the Immediate Family Members (or the Participant) own
more than fifty percent (50%) of the voting interest; and, provided, further, that the Committee may (but need not) permit other
transfers (other than transfers for value) where the Committee concludes that such transferability (i) does not result in accelerated
taxation, (ii) does not cause any Option intended to be an Incentive Stock Option to fail to be described in Code Section 422(b),
and (iii) is otherwise appropriate and desirable, taking into account any factors deemed relevant, including without limitation,
state or federal tax or securities laws applicable to transferable Awards.
14.4.
BENEFICIARIES
.
Notwithstanding Section 14.3, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise
the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death. A beneficiary,
legal guardian, legal representative, or other person claiming any rights under the Plan is subject to all terms and conditions
of the Plan and any Award Certificate applicable to the Participant, except to the extent the Plan and Award Certificate otherwise
provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If no beneficiary has been designated
or survives the Participant, any payment due to the Participant shall be made to the Participant’s estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant, in the manner provided by the Company, at any
time provided the change or revocation is filed with the Committee.
14.5.
STOCK
TRADING RESTRICTIONS
. All Stock issuable under the Plan is subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state securities laws, rules and regulations and the rules of
any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may
place legends on any Stock certificate or issue instructions to the transfer agent to reference restrictions applicable to the
Stock.
14.6.
EFFECT
OF A CHANGE IN CONTROL
. Except as otherwise provided in the Award Certificate or any special Plan document governing an Award,
upon the occurrence of a Change in Control, (i) all outstanding Options, SARs, and other Awards in the nature of rights that may
be exercised shall become fully exercisable, and (ii) all time-based vesting restrictions on outstanding Awards shall lapse. Except
as otherwise provided in the Award Certificate or any special Plan document governing an Award, upon the occurrence of a Change
in Control, the target payout opportunities attainable under all outstanding performance-based Awards shall be deemed to have been
fully earned as of the effective date of the Change in Control based upon an assumed achievement of all relevant performance goals
at the "target" level of performance as of the date of the Change in Control and there shall be pro-rata payout to Participants
within thirty (30) days following the effective date of the Change in Control based upon the length of time within the performance
period that has elapsed prior to the Change in Control.
14.7.
ACCELERATION
FOR OTHER REASONS
. Regardless of whether an event has occurred as described in Section 14.6 above, the Committee may in its
sole discretion at any time determine that, upon the termination of service of a Participant for any reason, or the occurrence
of a Change in Control, all or a portion of such Participant’s Options or SARs shall become fully or partially exercisable,
that all or a part of the restrictions on all or a portion of the Participant’s outstanding Awards shall lapse, and/or that
any performance-based criteria with respect to any Awards held by that Participant shall be deemed to be wholly or partially satisfied,
in each case, as of such date as the Committee may, in its sole discretion, declare. The Committee may discriminate among Participants
and among Awards granted to a Participant in exercising its discretion pursuant to this Section 14.7.
14.8.
FORFEITURE
EVENTS
. Awards under the Plan shall be subject to any compensation recoupment policy that the Company may adopt from time to
time that is applicable by its terms to the Participant. In addition, the Committee may specify in an Award Certificate that the
Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture
or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions
of an Award. Such events may include, but shall not be limited to, (i) termination of employment for cause, (ii) violation of material
Company or Affiliate policies, (iii) breach of noncompetition, confidentiality or other restrictive covenants that may apply to
the Participant, (iv) other conduct by the Participant that is detrimental to the business or reputation of the Company or any
Affiliate, or (v) a later determination that the vesting of, or amount realized from, a Performance Award was based on materially
inaccurate financial statements or any other materially inaccurate performance metric criteria, whether or not the Participant
caused or contributed to such material inaccuracy.
14.9.
SUBSTITUTE
AWARDS
. The Committee may grant Awards under the Plan in substitution for stock and stock-based awards held by employees of
another entity who become employees of the Company or an Affiliate as a result of a merger or consolidation of the former employing
entity with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the former employing
corporation. The Committee may direct that the substitute awards be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.
ARTICLE 15
CHANGES IN CAPITAL STRUCTURE
15.1.
MANDATORY
ADJUSTMENTS
. In the event of a nonreciprocal transaction between the Company and its stockholders that causes the per-share
value of the Stock to change (including, without limitation, any stock dividend, stock split, spin-off, rights offering, or large
nonrecurring cash dividend), the authorization limits under Section 5.1 and 5.4 shall be adjusted proportionately, and the Committee
shall make such adjustments to the Plan and Awards as it deems necessary, in its sole discretion, to prevent dilution or enlargement
of rights immediately resulting from such transaction. Action by the Committee may include: (i) adjustment of the number and kind
of shares that may be delivered under the Plan; (ii) adjustment of the number and kind of shares subject to outstanding Awards;
(iii) adjustment of the exercise price of outstanding Awards or the measure to be used to determine the amount of the benefit payable
on an Award; and (iv) any other adjustments that the Committee determines to be equitable. Notwithstanding the foregoing, the Committee
shall not make any adjustments to outstanding Options or SARs that would constitute a modification or substitution of the stock
right under Treas. Reg. Sections 1.409A-1(b)(5)(v) that would be treated as the grant of a new stock right or change in the form
of payment for purposes of Code Section 409A. Without limiting the foregoing, in the event of a subdivision of the outstanding
Stock (stock-split), a declaration of a dividend payable in Shares, or a combination or consolidation of the outstanding Stock
into a lesser number of Shares, the authorization limits under Section 5.1 and 5.4 shall automatically be adjusted proportionately,
and the Shares then subject to each Award shall automatically, without the necessity for any additional action by the Committee,
be adjusted proportionately without any change in the aggregate purchase price therefor.
15.2
DISCRETIONARY
ADJUSTMENTS
. Upon the occurrence or in anticipation of any corporate event or transaction involving the Company (including,
without limitation, any merger, reorganization, recapitalization, combination or exchange of shares, or any transaction described
in Section 15.1), the Committee may, in its sole discretion, provide (i) that Awards will be settled in cash rather than Stock,
(ii) that Awards will become immediately vested and non-forfeitable and exercisable (in whole or in part) and will expire after
a designated period of time to the extent not then exercised, (iii) that Awards will be assumed by another party to a transaction
or otherwise be equitably converted or substituted in connection with such transaction, (iv) that outstanding Awards may be settled
by payment in cash or cash equivalents equal to the excess of the Fair Market Value of the underlying Stock, as of a specified
date associated with the transaction, over the exercise or base price of the Award, (v) that performance targets and performance
periods for Performance Awards will be modified, consistent with Code Section 162(m) where applicable, or (vi) any combination
of the foregoing. The Committee’s determination need not be uniform and may be different for different Participants whether
or not such Participants are similarly situated.
15.3
GENERAL
.
Any discretionary adjustments made pursuant to this Article 15 shall be subject to the provisions of Section 16.2. To the extent
that any adjustments made pursuant to this Article 15 cause Incentive Stock Options to cease to qualify as Incentive Stock Options,
such Options shall be deemed to be Nonstatutory Stock Options.
ARTICLE 16
AMENDMENT, MODIFICATION AND TERMINATION
16.1.
AMENDMENT,
MODIFICATION AND TERMINATION
. The Board or the Committee may, at any time and from time to time, amend, modify or terminate
the Plan without stockholder approval; provided, however, that if an amendment to the Plan would, in the reasonable opinion of
the Board or the Committee, constitute a material change requiring stockholder approval under applicable laws, policies or regulations
or the applicable listing or other requirements of an Exchange, then such amendment shall be subject to stockholder approval; and
provided, further, that the Board or Committee may condition any other amendment or modification on the approval of stockholders
of the Company for any reason, including by reason of such approval being necessary or deemed advisable (i) to comply with the
listing or other requirements of an Exchange, or (ii) to satisfy any other tax, securities or other applicable laws, policies or
regulations.
16.2.
AWARDS
PREVIOUSLY GRANTED
. At any time and from time to time, the Committee may amend, modify or terminate any outstanding Award without
approval of the Participant; provided, however:
(a) Subject
to the terms of the applicable Award Certificate, such amendment, modification or termination shall not, without the Participant’s
consent, reduce or diminish the value of such Award determined as if the Award had been exercised, vested, cashed in or otherwise
settled on the date of such amendment or termination (with the per-share value of an Option or SAR for this purpose being calculated
as the excess, if any, of the Fair Market Value as of the date of such amendment or termination over the exercise or base price
of such Award);
(b) The
original term of an Option or SAR may not be extended without the prior approval of the stockholders of the Company;
(c) Except
as otherwise provided in Section 15.1, the exercise price of an Option or base price of a SAR may not be reduced, directly or indirectly,
without the prior approval of the stockholders of the Company; and
(d) No
termination, amendment, or modification of the Plan shall adversely affect any Award previously granted under the Plan, without
the written consent of the Participant affected thereby. An outstanding Award shall not be deemed to be “adversely affected”
by a Plan amendment if such amendment would not reduce or diminish the value of such Award determined as if the Award had been
exercised, vested, cashed in or otherwise settled on the date of such amendment (with the per-share value of an Option or SAR for
this purpose being calculated as the excess, if any, of the Fair Market Value as of the date of such amendment over the exercise
or base price of such Award).
16.3.
COMPLIANCE
AMENDMENTS
. Notwithstanding anything in the Plan or in any Award Certificate to the contrary, the Board may amend the Plan
or an Award Certificate, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming
the Plan or Award Certificate to any present or future law relating to plans of this or similar nature (including, but not limited
to, Section 409A of the Code), and to the administrative regulations and rulings promulgated thereunder. By accepting an Award
under this Plan, a Participant agrees to any amendment made pursuant to this Section 16.3 to any Award granted under the Plan without
further consideration or action.
ARTICLE 17
GENERAL PROVISIONS
17.1.
RIGHTS
OF PARTICIPANTS
.
(a) No
Participant or any Eligible Participant shall have any claim to be granted any Award under the Plan. Neither the Company, its Affiliates
nor the Committee is obligated to treat Participants or Eligible Participants uniformly, and determinations made under the Plan
may be made by the Committee selectively among Eligible Participants who receive, or are eligible to receive, Awards (whether or
not such Eligible Participants are similarly situated).
(b) Nothing
in the Plan, any Award Certificate or any other document or statement made with respect to the Plan, shall interfere with or limit
in any way the right of the Company or any Affiliate to terminate any Participant’s employment or status as an officer, or
any Participant’s service as a director or consultant, at any time, nor confer upon any Participant any right to continue
as an employee, officer, director or consultant of the Company or any Affiliate, whether for the duration of a Participant’s
Award or otherwise.
(c) Neither
an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company or any Affiliate and,
accordingly, subject to Article 16, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive
discretion of the Committee without giving rise to any liability on the part of the Company or an of its Affiliates.
(d) No
Award gives a Participant any of the rights of a stockholder of the Company unless and until Shares are in fact issued to such
person in connection with such Award.
17.2.
WITHHOLDING
.
The Company or any Affiliate shall have the authority and the right to deduct or withhold, or require a Participant to remit to
the Company or such Affiliate, an amount sufficient to satisfy federal, state, and local taxes (including the Participant’s
FICA obligation) required by law to be withheld with respect to any exercise, lapse of restriction or other taxable event arising
as a result of the Plan. The obligations of the Company under the Plan will be conditioned on such payment or arrangements and
the Company or such Affiliate will, to the extent permitted by law, have the right to deduct any such taxes from any payment of
any kind otherwise due to the Participant. Unless otherwise determined by the Committee at the time the Award is granted or thereafter,
any such withholding requirement may be satisfied, in whole or in part, by withholding from the Award Shares having a Fair Market
Value on the date of withholding equal to the minimum amount (and not any greater amount) required to be withheld for tax purposes,
all in accordance with such procedures as the Committee establishes. All such elections shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.
17.3.
SPECIAL
PROVISIONS RELATED TO SECTION 409A OF THE CODE
.
(a)
General
.
It is intended that the payments and benefits provided under the Plan and any Award shall either be exempt from the application
of, or comply with, the requirements of Section 409A of the Code. The Plan and all Award Certificates shall be construed in a manner
that effects such intent. Nevertheless, the tax treatment of the benefits provided under the Plan or any Award is not warranted
or guaranteed. Neither the Company, its Affiliates nor their respective directors, officers, employees or advisers (other than
in his or her capacity as a Participant) shall be held liable for any taxes, interest, penalties or other monetary amounts owed
by any Participant or other taxpayer as a result of the Plan or any Award.
(b)
Definitional
Restrictions
. Notwithstanding anything in the Plan or in any Award Certificate to the contrary, to the extent that any amount
or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code (“Non-Exempt
Deferred Compensation”) would otherwise be payable or distributable, or a different form of payment (e.g., lump sum or installment)
of such Non-Exempt Deferred Compensation would be effected, under the Plan or any Award Certificate by reason of the occurrence
of a Change in Control, or the Participant’s Disability or separation from service, such Non-Exempt Deferred Compensation
will not be payable or distributable to the Participant, and/or such different form of payment will not be effected, by reason
of such circumstance unless the circumstances giving rise to such Change in Control, Disability or separation from service meet
any description or definition of “change in control event”, “disability” or “separation from service”,
as the case may be, in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that
may be available under such definition). This provision does not prohibit the vesting of any Award upon a Change in Control, Disability
or separation from service, however defined. If this provision prevents the payment or distribution of any amount or benefit, or
the application of a different form of payment of any amount or benefit, such payment or distribution shall be made at the time
and in the form that would have applied absent the Change in Control, Disability or separation from service as applicable.
(c)
Allocation
among Possible Exemptions
. If any one or more Awards granted under the Plan to a Participant could qualify for any separation
pay exemption described in Treas. Reg. Section 1.409A-1(b)(9), but such Awards in the aggregate exceed the dollar limit permitted
for the separation pay exemptions, the Company (acting through the Committee or the Chief Financial Officer) shall determine which
Awards or portions thereof will be subject to such exemptions.
(d)
Six-Month
Delay in Certain Circumstances
. Notwithstanding anything in the Plan or in any Award Certificate to the contrary, if any amount
or benefit that would constitute Non-Exempt Deferred Compensation would otherwise be payable or distributable under this Plan or
any Award Certificate by reason of a Participant’s separation from service during a period in which the Participant is a
Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Committee under Treas. Reg.
Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment
taxes):
(i) the
amount of such Non-Exempt Deferred Compensation that would otherwise be payable during the six-month period immediately following
the Participant’s separation from service will be accumulated through and paid or provided on the first day of the seventh
month following the Participant’s separation from service (or, if the Participant dies during such period, within 30 days
after the Participant's death) (in either case, the “Required Delay Period”); and
(ii) the
normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay
Period.
For purposes of this Plan, the term
“Specified Employee” has the meaning given such term in Code Section 409A and the final regulations thereunder; provided,
however, that, as permitted in such final regulations, the Company’s Specified Employees and its application of the six-month
delay rule of Code Section 409A(a)(2)(B)(i) shall be determined in accordance with rules adopted by the Board or any committee
of the Board, which shall be applied consistently with respect to all nonqualified deferred compensation arrangements of the Company,
including this Plan.
(e)
Installment
Payments
. If, pursuant to an Award, a Participant is entitled to a series of installment payments, such Participant’s
right to the series of installment payments shall be treated as a right to a series of separate payments and not to a single payment.
For purposes of the preceding sentence, the term “series of installment payments” has the meaning provided in Treas.
Reg. Section 1.409A-2(b)(2)(iii) (or any successor thereto).
(f)
Timing
of Release of Claims
. Whenever an Award conditions a payment or benefit on the Participant’s execution and non-revocation
of a release of claims, such release must be executed and all revocation periods shall have expired within 60 days after the date
of termination of the Participant’s employment; failing which such payment or benefit shall be forfeited. If such payment
or benefit is exempt from Section 409A of the Code, the Company may elect to make or commence payment at any time during such 60-day
period. If such payment or benefit constitutes Non-Exempt Deferred Compensation, then, subject to subsection (c) above, (i) if
such 60-day period begins and ends in a single calendar year, the Company may make or commence payment at any time during such
period at its discretion, and (ii) if such 60-day period begins in one calendar year and ends in the next calendar year, the payment
shall be made or commence during the second such calendar year (or any later date specified for such payment under the applicable
Award), even if such signing and non-revocation of the release occur during the first such calendar year included within such 60-day
period. In other words, a Participant is not permitted to influence the calendar year of payment based on the timing of signing
the release.
(g)
Permitted
Acceleration
. The Company shall have the sole authority to make any accelerated distribution permissible under Treas. Reg.
section 1.409A-3(j)(4) to Participants of deferred amounts, provided that such distribution(s) meets the requirements of Treas.
Reg. section 1.409A-3(j)(4).
17.4.
UNFUNDED
STATUS OF AWARDS
. The Plan is intended to be an “unfunded” plan for incentive and deferred compensation. With respect
to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Certificate shall
give the Participant any rights that are greater than those of a general creditor of the Company or any Affiliate. In its sole
discretion, the Committee may authorize the creation of grantor trusts or other arrangements to meet the obligations created under
the Plan to deliver Shares or payments in lieu of Shares or with respect to Awards. This Plan is not intended to be subject to
ERISA.
17.5.
RELATIONSHIP
TO OTHER BENEFITS
. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the Company or any Affiliate unless provided otherwise in
such other plan. Nothing contained in the Plan will prevent the Company from adopting other or additional compensation arrangements,
subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable
only in specific cases.
17.6.
EXPENSES
.
The expenses of administering the Plan shall be borne by the Company and its Affiliates.
17.7.
TITLES
AND HEADINGS
. The titles and headings of the Sections in the Plan are for convenience of reference only, and in the event of
any conflict, the text of the Plan, rather than such titles or headings, shall control.
17.8.
GENDER
AND NUMBER
. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine;
the plural shall include the singular and the singular shall include the plural.
17.9.
FRACTIONAL
SHARES
. No fractional Shares shall be issued and the Committee shall determine, in its discretion, whether cash shall be given
in lieu of fractional Shares or whether such fractional Shares shall be eliminated by rounding up or down.
17.10.
GOVERNMENT
AND OTHER REGULATIONS
.
(a) Notwithstanding
any other provision of the Plan, no Participant who acquires Shares pursuant to the Plan may, during any period of time that such
Participant is an affiliate of the Company (within the meaning of the rules and regulations of the Securities and Exchange Commission
under the 1933 Act), sell such Shares, unless such offer and sale is made (i) pursuant to an effective registration statement under
the 1933 Act, which is current and includes the Shares to be sold, or (ii) pursuant to an appropriate exemption from the registration
requirement of the 1933 Act, such as that set forth in Rule 144 promulgated under the 1933 Act.
(b) Notwithstanding
any other provision of the Plan, if at any time the Committee shall determine that the registration, listing or qualification of
the Shares covered by an Award upon any Exchange or under any foreign, federal, state or local law or practice, or the consent
or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting
of such Award or the purchase or receipt of Shares thereunder, no Shares may be purchased, delivered or received pursuant to such
Award unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free
of any condition not acceptable to the Committee. Any Participant receiving or purchasing Shares pursuant to an Award shall make
such representations and agreements and furnish such information as the Committee may request to assure compliance with the foregoing
or any other applicable legal requirements. The Company shall not be required to issue or deliver any certificate or certificates
for Shares under the Plan prior to the Committee’s determination that all related requirements have been fulfilled. The Company
shall in no event be obligated to register any securities pursuant to the 1933 Act or applicable state or foreign law or to take
any other action in order to cause the issuance and delivery of such certificates to comply with any such law, regulation or requirement.
17.11.
GOVERNING
LAW
. To the extent not governed by federal law, the Plan and all Award Certificates shall be construed in accordance with and
governed by the laws of the State of Delaware.
17.12.
SEVERABILITY
.
In the event that any provision of this Plan is found to be invalid or otherwise unenforceable under any applicable law, such invalidity
or unenforceability will not be construed as rendering any other provisions contained herein as invalid or unenforceable, and all
such other provisions will be given full force and effect to the same extent as though the invalid or unenforceable provision was
not contained herein.
17.13.
NO
LIMITATIONS ON RIGHTS OF COMPANY
. The grant of any Award shall not in any way affect the right or power of the Company to make
adjustments, reclassification or changes in its capital or business structure or to merge, consolidate, dissolve, liquidate, sell
or transfer all or any part of its business or assets. The Plan shall not restrict the authority of the Company, for proper corporate
purposes, to draft or assume awards, other than under the Plan, to or with respect to any person. If the Committee so directs,
the Company may issue or transfer Shares to an Affiliate, for such lawful consideration as the Committee may specify, upon the
condition or understanding that the Affiliate will transfer such Shares to a Participant in accordance with the terms of an Award
granted to such Participant and specified by the Committee pursuant to the provisions of the Plan.
The foregoing is hereby
acknowledged as being the Manhattan Pharmaceuticals, Inc. 2012 Incentive Plan as adopted by the Board on __________, 2012 and by
the stockholders on _____________, 2012.
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MANHATTAN PHARMACEUTICALS, INC.
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By:
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Its:
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