Item
10: Directors, Executive Officers and corporate governance
Directors and Executive Officers
Our business, property and
affairs are managed by, or under the direction of, our Board, in accordance with the Washington Business Corporation Act and our bylaws.
Members of the Board are kept informed of our business through discussions with the Chief Executive Officer and other key members of management,
by reviewing materials provided to them by management, and by participating in meetings of the Board and its Committees.
The following table sets forth
the names and ages of the directors and executive officers. Our officers are appointed by, and serve at the pleasure of, the Board.
|
Name
|
|
Age
|
|
Position
|
|
Colin James Deller
|
|
53
|
|
Chief Executive Officer and Director
|
|
Brian G. Fike
|
|
52
|
|
Chief Financial Officer, Treasurer and Secretary
|
|
Robert T. Hoffman Sr.
|
|
62
|
|
Director, Chairperson of the Board
|
|
Susanne L. Meline
|
|
53
|
|
Director, Lead Independent Director
|
|
Bruce A. Pate
|
|
63
|
|
Director
|
|
Judith Schrecker
|
|
68
|
|
Director
|
Directors and officers are nominated and appointed
based upon their experience, knowledge of the Company’s markets and business segments, community involvement and commitment to serving
the interests of stockholders:
Colin James Deller
Dr.
Deller joined us as our President in February 2019, transitioned to the office of Chief Executive Officer on April 1, 2019 and was appointed
as a director on February 13, 2020. Dr. Deller began his career at Hamworthy Combustion while also completing his Ph.D. In 1996, Dr. Deller
joined Callidus, where he was employed in Project Engineering and Sales, and over the course of ten years advanced to serve as Chief Combustion
Engineer and Manager of Burner Order Execution before being promoted to oversee Callidus’ entire burner business. From 2010 until
he left Callidus, following the acquisition of Callidus by Honeywell, Dr. Deller served as General Manager with full profit and loss accountability
for the Honeywell UOP Callidus burner business worldwide. During that time, he led his team in developing new international markets, including
developing a leading market position in China. From May 2018 until he joined the Company, Dr. Deller served as the interim Global Operations
Director for the entire Honeywell International UOP Callidus business, which includes flares and thermal oxidizers in addition to burners.
Dr. Deller has a Bachelor
of Engineering in mechanical engineering from Portsmouth Polytechnic, U.K., a doctorate in flame chemistry from the University of Portsmouth,
U.K., and an MBA from The University of London.
Brian G. Fike
Mr. Fike was appointed as
our Controller in January 2016, as our interim Chief Financial Officer, Secretary and Treasurer in May 2017 and as our Chief Financial
Officer on November 12, 2019. Prior to joining the Company, from March 2001 to January 2016, Mr. Fike was employed by Darigold, Inc.,
a $2.3 billion dairy manufacturing co-op of 500 member farmers, where he successively held the positions of Plant Controller, Accounting
and Finance Manager, Strategy Manager and Regional Controller. Prior to his career at Darigold, Mr. Fike held similar positions in the
specialty foods and industrial automation industries. Mr. Fike also served eight years in the U.S. Naval Reserve.
Mr. Fike holds a BBA in Accountancy
from Boise State University and an MBA from the University of Washington.
Robert T. Hoffman Sr.
Mr.
Hoffman became a director of our Company in July 2018 in conjunction with the execution of a Voting Agreement between the Company and
clirSPV LLC and was appointed as Chairman in November 2018. Mr. Hoffman has more than 30 years of relevant capital markets experience
and expertise. In 2011, Mr. Hoffman founded and continues to manage Princeton Opportunity Management LLC. Previously, he served as founder
and managing partner of Candlewood Capital, a long/short fund which managed more than $1 billion in primarily institutional assets. Mr.
Hoffman also was a Managing Director and Portfolio Manager for the Growth & Income (G&I) mutual fund and institutional assets
of what was originally Scudder Stevens and Clark, where he was responsible for all buy and sell decisions. During his tenure, G&I
assets under management expanded from approximately $1.75 billion to more than $25 billion. Mr. Hoffman was also nominated by two separate
governors to serve three terms as a Member and Chairman of the State of New Jersey Investment Council (SIC) from 1990 to 2002. The SIC
has ultimate oversight responsibility for state and local pension funds totaling more than $80 billion. Mr. Hoffman's career also includes
service as the Assistant State Treasurer for Pensions and Investments for the State of New Jersey, Special Assistant to the Governor of
New Jersey and Mergers, and Acquisitions Analyst at ABN/LaSalle Bank. He holds an M.B.A. with Distinction from the Kellogg School of Management
at Northwestern University and an Economics degree from Dartmouth College.
Susanne L. Meline
Ms.
Meline has been a director of our Company since February 2018. In 2003, Ms. Meline co-founded Francis Capital Management (“FCM”),
a value-based investment advisor, where she continues to specialize in analyzing small cap stocks. Prior to co-founding FCM, Ms. Meline
worked as an investment banker with Houlihan Lokey, a global investment bank serving corporations, institutions, and governments worldwide.
She also practiced law in the corporate group of Jones Day, an international law firm that provides legal advisory services across multiple
disciplines and jurisdictions. Ms. Meline is a Certified Director through the UCLA Anderson School of Management, a Board Leadership Fellow
for the National Association of Corporate Directors (the “NACD”) and holds a CERT Certificate in CyberSecurity Oversight from
the NACD and Carnegie Mellon University Software Engineering Institute. Ms. Meline received a B.A. in political science from UCLA, and
a J.D. from the UC Hastings College of the Law. She has also served on the board of directors of Finomial Corporation.
Bruce A. Pate
Mr. Pate joined our Company
as a director in January 2019. Mr. Pate is the general partner of Pate Capital Partners
LP, which he founded in 2004 to invest in publicly traded companies with a special emphasis in energy and resource-related sectors. Prior
to founding Pate Capital Partners LP, Mr. Pate spent over 20 years at Morgan Stanley & Co. as a principal of the firm, where he managed
fixed income and equity portfolios for entrepreneurs, foundations, and corporations.
Judith S.
Schrecker
Ms. Schrecker joined our
Company as a director in February 2021. Ms. Schrecker brings more than 40 years of financial and operating leadership and board
participation with broad international experience. Most recently Ms. Schrecker was VP of Finance of Flat Rolled Products at ATI
Metals Inc., a Global manufacturer of technically advanced specialty materials and complex components, overseeing revenues of
over $1 Billion. Prior to that Ms. Schrecker was Chief Financial Officer of Alcoa's Global Rolled Products business and a
member of the executive council of the company. Under her leadership, the Global Rolled Products business achieved historically high
profitability. Ms. Schrecker previously served on the boards of Finacity Corporation and Dress for Success Worldwide. She attended
the University of Pittsburg Graduate School of Public and International Affairs along with a B.A. in History, Economics, and Latin
American Studies from Temple University. Additionally, Ms. Schrecker is a 2020 Exceptional Women Awardees Foundation (EWA)
recipient.
Board Meetings and Committees of our Board
The Board has three standing
committees, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee, referred to in this
Form 10-K as the “Governance Committee” (collectively, the “Board Committees”). All members of the Board
Committees are non-employee directors who are deemed independent. During the year ended December 31, 2020, the Board held nine meetings,
the Audit Committee held five meetings, the Compensation Committee held four meetings, and the Governance Committee held five meetings.
Each of our directors attended at least 75% of the meetings held by the Board and the Board Committees of which he or she is a member.
We do not have a policy with regard to Board attendance at the annual meetings. All of the members of our Board attended the 2020 Annual
Meeting.
Business
Experience and Qualifications
The
investment experience that each of Ms. Meline and Messrs. Hoffman, and Pate brings to our Board includes their experience in
analyzing the operations of businesses, and particularly smaller capitalized companies, to determine the likelihood of success. Ms.
Schrecker has significant financial, business, operational and industrial experience. In addition, Ms. Meline has significant
experience with respect to best practices in corporate governance. We believe that their experience, together with the expertise
brought to our operations by Dr. Deller, will help us achieve our goals of proving commercial viability of our products, generating
interest from end users and original equipment manufacturers and licensing our technology. For these reasons we concluded that each
of these individuals should serve as a director.
Family
Relationships. Involvement in certain legal proceedings.
None
of our executive officers is related to any of our directors or any other officer. None of our executive officers has been involved in
a legal proceeding that requires disclosure pursuant to Item 401(f) of Regulation S-K promulgated under the Exchange Act. None of our
officers was selected as such as a result of an arrangement or understanding between him and any other person. None of our director nominees
is related to any other director nominee or any officer. None of our director nominees has been involved in a legal proceeding that requires
disclosure pursuant to Item 401(f) of Regulation S-K promulgated under the Exchange Act. Mr. Hoffman was selected as a director pursuant
to the terms of a Voting Agreement we entered into with clirSPV LLC in July 2018. Mr. Pate was selected as a director pursuant to the
terms of the Cooperation Agreement we entered into with Anthony DiGiandomenico and his affiliates in January 2019.
Audit Committee
The Audit Committee is comprised
of Susanne Meline (Chairperson), Bruce Pate, and Judith Schrecker. Our Board of Directors has determined that Judith Schrecker serves
as an Audit Committee financial expert. The role of the Audit Committee includes, but is not limited to, the following:
|
|
·
|
overseeing management’s preparation of
our financial statements and management’s conduct of the accounting and financial reporting processes;
|
|
|
·
|
appointing, compensating, retaining and overseeing
the work of the independent registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing
other audit, review or attest services for the Company;
|
|
|
·
|
overseeing management’s maintenance of
internal controls and procedures for financial reporting at least annually;
|
|
|
·
|
overseeing our compliance with applicable legal
and regulatory requirements, including without limitation, those requirements relating to financial controls and reporting;
|
|
|
·
|
overseeing the independent registered public
accounting firm’s qualifications and independence;
|
|
|
·
|
preparing the report required by the rules of
the Securities and Exchange Commission to be included in our proxy statement; and
|
|
|
·
|
discharging such duties and responsibilities
as may be required of the Audit Committee by the provisions of applicable laws, rules or regulations.
|
The Audit Committee is authorized
(without seeking Board approval) to retain or terminate special legal, accounting or other advisors and may request any officer or employee
of the Company or the Company’s outside counsel or independent registered public accounting firm to meet with any members of, or
advisors to, the Audit Committee.
A copy of the charter of the
Audit Committee is available on our website at www.clearsign.com (under “Investors-Corporate Governance-Governance Documents”).
Compensation Committee
The Compensation Committee
is comprised of Bruce Pate (Chairperson), Susanne Meline, and Judith Schrecker. The role of the Compensation Committee is to:
|
|
·
|
review, approve and recommend to the Board our
compensation and benefits policies generally and the annual compensation (base salary, bonus and other
benefits) for all of our executives, including our Chief Executive Officer;
|
|
|
·
|
administer the ClearSign Technologies Corporation
2011 Equity Incentive Plan, the 2013 Consultant Stock Plan and the ClearSign Technologies Corporation 2021 Equity Incentive Plan, if approved
pursuant to Proposal 4; and
|
|
|
·
|
annually review and make recommendations to the
Board with respect to the compensation of non-executive directors, including any incentive plan compensation.
|
A copy of the charter of the
Compensation Committee is available on our website at www.clearsign.com (under “Investors-Corporate Governance-Governance Documents”).
The Compensation Committee
may engage outside advisers, including outside auditors, attorneys and consultants, as it deems necessary to discharge its responsibilities.
The Compensation Committee has sole authority to retain and terminate any compensation expert or consultant used to provide advice on
compensation levels or assist in the evaluation of director, Chief Executive Officer or senior executive compensation, including sole
authority to approve the fees of any expert or consultant and other retention terms. In addition, the Compensation Committee considers,
but is not bound by, the recommendations of our Chief Executive Officer with respect to the compensation packages of our other executive
officers.
Nominating and Corporate Governance Committee
The Governance Committee is
comprised of Bruce Pate (Chairperson) and Susanne Meline. The role of the Governance Committee is to:
|
|
·
|
evaluate from time to time the appropriate size
(number of members) of the Board and recommend any increase or decrease;
|
|
|
·
|
determine the desired skills and attributes of
members of the Board, taking into account the needs of the business and listing standards;
|
|
|
·
|
establish criteria for prospective members, conduct
candidate searches, interview prospective candidates, and oversee programs to introduce the candidate to us, our management, and operations;
|
|
|
·
|
review planning for succession to the positions
of Chairperson of the Board and Chief Executive Officer and other senior management positions;
|
|
|
·
|
annually recommend to the Board persons to be
nominated for election as directors;
|
|
|
·
|
recommend to the Board the members of all standing
committees;
|
|
|
·
|
adopt or develop for Board consideration corporate
governance principles and policies; and
|
|
|
·
|
periodically review and report to the Board on
the effectiveness of corporate governance procedures and the Board as a governing body, including conducting an annual self-assessment
of the Board and its standing committees.
|
A copy of the charter of the
Governance Committee is available on our website at www.clearsign.com (under “Investors-Corporate Governance-Governance Documents”).
The members of the Governance Committee review the qualifications of the director-nominees.
Director Qualifications and Diversity
The Board seeks independent
directors who represent a diversity of backgrounds and experiences that will enhance the quality of the Board’s deliberations and
decisions. Candidates should preferably have board experience with one or more companies or should have achieved a high level of distinction
in their chosen fields. The Board is particularly interested in maintaining a mix that includes individuals who are active or retired
executive officers and senior executives, particularly those with experience in combustion, technology, air pollution control and air
emission regulation, intellectual property, start-up companies, research and development, strategic planning, business development, compensation,
finance, accounting and banking.
In evaluating nominations
to the Board of Directors, the Governance Committee also looks for certain personal attributes, such as integrity, ability and willingness
to apply sound and independent business judgment, comprehensive understanding of a director’s role in corporate governance, availability
for meetings and consultation on Company matters, and the willingness to assume and carry out fiduciary responsibilities.
Compensation Committee Interlocks and Insider Participation
None of our prior or current
executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive
officers serving as a member of our Board or the Compensation Committee.
Risk Oversight by the Board of Directors
It is management’s responsibility
to assess and manage the various risks we face. It is the Board’s responsibility to oversee management in this effort, in order
to ensure that risks and uncertainties that may relate to our ongoing operations and to our plans for the future are considered and managed
appropriately. In exercising its oversight, the Board has allocated some areas of focus to its Committees and has retained areas of focus
for itself, as more fully described below.
Full Board –
Risks and exposures focused on by the full Board include strategic, financial and execution risks including cyber and safety risks, and
other current matters that may present material risk to our operations, plans, prospects or reputation. Throughout the year, the Chief
Executive Officer discusses these risks with the Board during strategy reviews that focus on a particular function or aspect of our business.
Audit Committee –
Risks and exposures focused on by the Audit Committee are those associated with financial matters, particularly financial reporting, tax,
accounting, disclosure, internal control over financial reporting, financial policies, investment guidelines, risk management as a whole
and credit and liquidity matters.
Governance Committee
– Risks and exposures focused on by the Governance Committee are those relating to corporate governance and management and director
succession planning.
Compensation Committee
– Risks and exposures focused on by the Compensation Committee are those associated with leadership assessment and compensation
programs and arrangements, including incentive plans, to ensure that compensation incentives are aligned with our risk management objectives.
Board Leadership Structure
The Chairperson of the Board
presides at all meetings of the Board. The Chairperson is appointed on an annual basis by at least a majority vote of the directors. At
a special meeting of the Board held on November 6, 2018, the Board determined to separate the offices of the Chief Executive Officer and
the Chairperson. The Board believes that this leadership structure increases the Board’s independence from management by allocating
authority for operational leadership to the Chief Executive Officer while allocating to the Board the responsibility for monitoring and
overseeing management. The Board again appointed Ms. Meline to the role of lead independent director at a meeting held on February 13,
2020. As the lead independent director, Ms. Meline is the liaison between Mr. Hoffman, as the Chairperson, and the other independent directors.
We believe that having a lead independent director will facilitate communication among the members of the Board.
Compliance with Section 16(a)
Based
solely upon a review of Forms 3, 4 and 5 furnished to the Company, the Company believes that, with the exception of the individuals named
below, all of its directors, officers and beneficial owners of more than 10% of our equity securities timely filed these reports during
2020.
|
|
·
|
Donald Kendrick, our Chief Technology Officer,
and Stephen Sock, our Senior Vice President of Business Development, each filed a Form 4 reporting the grant of options to purchase common
stock of the Company (each award constituting one transaction) one day after the filing due date.
|
Code of Ethics
We adopted a Code of Business
Conduct and Ethics (“Code of Ethics”) applicable to our principal executive officer and principal financial and accounting
officer and any persons performing similar functions. In addition, the Code of Ethics applies to our employees, officers, directors, agents
and representatives. The Code of Ethics requires, among other things, that our employees avoid conflicts of interest, comply with all
laws and other legal requirements, conduct business in an honest and ethical manner, and otherwise act with integrity and in our best
interest. The Code of Ethics is available on our website at www.clearsign.com (under “Investors-Corporate Governance-Governance
Documents”). We intend to satisfy the disclosure requirement regarding an amendment to, or
a waiver from, a provision of our Code of Ethics that applies to our principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions by posting the information on our internet website, www.clearsign.com.
Employee, Officer, and Director Hedging
Our policy against insider
trading prohibits all employees and directors from engaging in any short sales of our securities, hold our securities in a margin account,
or pledge our securities as collateral for a loan.
Policy with Regard to Director Nominations
There were no material changes
with regard to directors’ nomination procedures of the Company. Shareholder proposals with regard to director nominations are reviewed
by the Corporate Secretary for compliance with the requirements for such proposals, which are set forth in our Policy Regarding Shareholder
Candidates for Nomination (the “Policy”). Shareholder proposals that meet these requirements will be summarized by the Corporate
Secretary. Summaries and copies of the shareholder proposals are circulated to the Chairman of the Governance Committee.
The Governance Committee will
consider director candidates recommended by shareholders. If a director candidate is recommended by a shareholder (a “Nominating
Shareholder”), the Governance Committee expects to evaluate such candidate in the same manner it evaluates director candidates it
identifies. The Policy requires a Nominating Shareholder to have continuously held at least 5% of
the Company’s common stock for at least three years by the date the name of the candidate is submitted, and to continue to hold
the common stock through the date of the annual meeting. The Policy permits a Nominating Shareholder to submit one candidate for
consideration at any annual meeting of shareholders. Pursuant to the Policy, a Nominating Shareholder must submit a candidate for consideration
as a director in writing to the Company’s Secretary; the submission must be received by a date not later than the 120th
calendar day before the anniversary of the date that the prior year’s annual meeting proxy statement was released to shareholders
(or if the annual meeting date has changed by more than 30 days, a reasonable time before we begin to print and mail the proxy statement)
and must include the following information:
1. The
name, address and number of shares of common stock owned by the Nominating Shareholder.
2. A
representation that the Nominating Shareholder meets the requirements described above and will continue to meet them through the date
of the annual meeting. If the Nominating Shareholder is not a registered holder of the Company’s common stock, the Nominating Shareholder
must provide evidence of eligibility as provided in Exchange Act Rule 14a-8(b)(2).
3. A
description of all arrangements or understandings (whether written or oral) between or among the Nominating Shareholder and the candidate
or any other person or entity (naming such person or entity) regarding the candidate’s nomination.
4. All
information regarding the candidate that the Company would be required to disclose in a proxy statement filed pursuant to the rules and
regulations of the Securities and Exchange Commission with respect to a meeting at which the candidate would stand for election.
5. Confirmation
that the candidate is independent under the independence requirements established by the Company, Rule 10A-3(b) promulgated under the
Exchange Act and Nasdaq Listing Rule 5605(a)(2), or if the candidate is not independent under all such criteria, a description of the
reasons why the candidate is not independent.
6. The
consent of the candidate to serve as a member of the Company’s board of directors, if nominated and elected.
7. A
representation signed by the candidate that if elected he or she will:
(i) represent
all shareholders of the Company in accordance with applicable laws and the Company’s article of incorporation, bylaws and other
policies;
(ii) comply
with all rules, policies or requirements generally applicable to non-executive directors; and
(iii) upon
request, complete and sign a customary director and officer questionnaire.
Our Policy Regarding Shareholder
Candidates for Nomination is available on our website at www.clearsign.com (under “Investors-Corporate Governance-Governance Documents”).
Item
11: Executive Compensation
Compensation
Discussion
Overview
The
Compensation Committee of the Board administers our executive compensation and benefit programs. The Compensation Committee is
comprised exclusively of independent directors and oversees all compensation and benefit programs and actions that affect our
executive officers.
Compensation
Process and Role of Management
The
Compensation Committee is responsible for determining and approving all compensation for our executive officers. Pursuant to its charter,
the Compensation Committee recommends to the full Board the salary, annual incentive compensation or bonus, long-term incentive compensation
in the form of stock options or stock grants, and all other employment, severance and change-in-control agreements applicable to executive
officers. As discussed below, our Chief Executive Officer assists the Compensation Committee in its deliberations with respect to the
compensation payable to our other executive officers. At the end of or immediately following each fiscal year, our Chief Executive Officer
evaluates executive officer performance for the prior fiscal year, other than his own performance, and discusses the results of such
evaluations with the Compensation Committee. The Chief Executive Officer assesses each executive officer’s performance during the
year based upon subjective factors concerning such officer’s individual business goals and objectives, and the contributions made
by the executive officer to our overall results. The Chief Executive Officer then makes specific recommendations to the Compensation
Committee for adjustments to base salary and the grant of a target bonus and/or equity award, if appropriate, as part of the compensation
package for each executive officer, other than himself, for the next fiscal year. The Compensation Committee reviews the performance
of the Chief Executive Officer and determines all compensation for the Chief Executive Officer. The Chief Executive Officer is not present
at the time the Compensation Committee reviews his performance and discusses his compensation.
Evaluation
of Compensation Practices
In
2017, the Compensation Committee engaged Willis Towers Watson to evaluate both our executive compensation program and our director compensation
program. The objective was to determine the equity and competitiveness of our practices with those of peer companies and relevant standards
promulgated by shareholder rights organizations and other relevant stakeholders. Although the study analyzed executive compensation comprehensively,
there was particular focus on equity incentives for executives. The Compensation Committee integrated the results of the May 2017 study
into its evaluation of executive compensation and director compensation for the years 2018, 2019, and 2020. Willis Towers Watson provided
no other services to us following the evaluation. The Compensation Committee is currently reviewing compensation trends, especially at
other companies.
Director Compensation
The following table sets forth
information concerning compensation for services rendered by our non-executive directors for 2020. The amounts represented in the “Option
Awards” column reflect the grant date fair value of the options computed in accordance with FASB ASC Topic 718 and do not necessarily
equate to the income that will ultimately be realized by the director for such awards.
Director Summary Compensation Table
|
Name
|
|
Fees Earned or Paid in Cash
|
|
Stock Awards
|
|
Option Awards
|
|
Non-Equity Incentive Plan Compensation
|
|
Nonqualified Deferred Compensation Earnings
|
|
All Other Compensation
|
|
Total
|
|
Lon E. Bell
|
|
$
|
|
|
$
|
|
|
$
|
16,875
|
(1)
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
16,875
|
|
James Simmons
|
|
|
|
|
|
|
|
|
8,448
|
(2)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
8,448
|
|
Bruce Pate
|
|
|
|
|
|
|
|
|
|
97,670
|
(3)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
97,670
|
|
Susanne Meline
|
|
|
|
|
|
|
|
|
112,506
|
(4)
|
|
|
|
|
|
|
|
|
|
|
112,506
|
|
Robert T. Hoffman
|
|
|
|
|
|
|
|
|
98,906
|
(5)
|
|
|
|
|
|
|
|
|
|
|
98,906
|
|
|
|
|
$
|
-
|
|
$
|
-
|
|
$
|
334,405
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
334,405
|
|
|
(1)
|
Since his appointment as a director, Dr. Bell has received grants of 99,693 shares of common stock and options for the purchase of 119,000 shares as compensation for his services. Dr. Bell did not stand for re-election in 2020.
|
|
|
(2)
|
During his tenure as a director, Mr. Simmons received options for the purchase of 80,000 shares of common stock as compensation for his services. Mr. Simmons resigned as a director on February 13, 2020.
|
|
|
(3)
|
Since his appointment as a director, Mr. Pate has received options for the purchase of 189,000 shares of common stock as compensation for his services.
|
|
|
(4)
|
Since her appointment as a director, Ms. Meline has received grants of 27,027 shares of common stock and options for the purchase of 227,500 shares of common stock for her services.
|
|
|
(5)
|
Since his appointment as a director, Mr. Hoffman has received grants of 13,514 shares of common stock and options for the purchase of 206,500 shares of common stock for his services.
|
In 2020, each non-executive
director’s annual compensation was paid in options to purchase common stock. This component of the Company’s director compensation
program is designed to build an ownership stake in the Company while conveying an incentive to directors relative to the returns recognized
by our shareholders.
All directors are reimbursed
for ordinary and reasonable expenses incurred in exercising their responsibilities in accordance with the Company’s expense reimbursement
procedure applicable to all employees of the Company.
Independent directors are
not eligible to participate in the Company’s employee benefit plans, including the retirement plan.
Summary Compensation Table for 2020 and 2019
The table below summarizes the total compensation
paid to or earned by our Chief Executive Officer and our Chief Financial Officer in 2020 and 2019, in accordance with Item 402(m)(2) of
Regulation S-K. These officers are referred to herein as the “named executive officers” or “NEOs.” The amounts
represented in the “Option Awards” column reflects the stock compensation expense recorded by the Company pursuant to ASC
Topic 718 and does not necessarily equate to the income that will ultimately be realized by the named executive officers for such awards.
Summary Compensation Table
|
Name and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Option Awards (1)
|
|
|
All Other Compensation (2)
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colin J. Deller
|
|
|
2020
|
|
|
$
|
350,000
|
|
|
$
|
202,454
|
(3)
|
|
$
|
97,408
|
(5)
|
|
$
|
68,351
|
|
|
$
|
718,213
|
|
|
Chief Executive Officer
|
|
|
2019
|
|
|
|
306,250
|
|
|
|
90,000
|
(4)
|
|
|
206,992
|
(6)
|
|
|
59,444
|
|
|
|
662,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian G. Fike
|
|
|
2020
|
|
|
|
200,000
|
|
|
|
50,000
|
(3)
|
|
|
29,558
|
|
|
|
32,352
|
|
|
|
311,910
|
|
|
Chief Financial Officer
|
|
|
2019
|
|
|
|
174,250
|
|
|
|
19,217
|
(4)
|
|
|
50,098
|
|
|
|
29,941
|
|
|
|
273,506
|
|
|
|
(1)
|
The amounts included in this column are the aggregate dollar
amounts of compensation expense recognized by us for financial statement reporting purposes in accordance with Accounting Standards Codification
718, Compensation-Stock Compensation, and includes amounts from option awards granted in 2020, 2019, 2018, and 2017. For information
on the valuation assumptions used in calculating these dollar amounts, see Notes 2 and 8 to our consolidated financial statements in
our Annual Report on Form 10-K for the year ended December 31, 2020. These amounts reflect our accounting expense for these awards and
do not correspond to the actual value that may be recognized by the individuals upon option exercise.
|
|
|
(2)
|
Relates to healthcare benefits, relocation expenses and employer
matching in a defined contribution retirement plan available to all employees.
|
|
|
(3)
|
Bonuses for 2020 were accrued in 2020 and paid in either Stock
or Stock options during the first quarter of 2021.
|
|
|
(4)
|
Bonuses for 2019 were accrued in 2019 and paid in exercisable stock options issued during the first quarter of 2020.
|
|
|
(5)
|
Includes Option awards of $45,147 and inducement awards of $52,261.
|
|
|
(6)
|
Includes Option awards of $95,936 from our 2011 Equity Incentive
Plan and stock options of $111,056 issued to Dr. Deller as an inducement to accept our offer of employment.
|
Outstanding Equity Awards
The following table sets forth information concerning
outstanding equity awards held by our NEO’s at December 31, 2020.
|
Name
|
|
Number of Securities Underlying
Unexercised Options (#) Exercisable
|
|
Equity Incentive Plan Awards:
Number of Securities Underlying Unexercised Unearned Options (#) Unexercisable
|
|
Option Exercise Price ($)
|
|
Option Expiration Date
|
|
Equity Incentive Plan Awards:
Number of Unearned Shares, Units or Other Rights that have not Vested (#)
|
|
Equity Incentive Plan Awards:
Market of Payout Value of Unearned Shares, Units or Other Rights that have not Vested ($)
|
|
Colin J. Deller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,161
|
(1)
|
-
|
(1)
|
$0.94
|
|
12-31-29
|
|
-
|
|
-
|
|
|
|
133,333
|
(2)
|
66,667
|
(2)
|
$2.25
|
|
12/31/28
|
|
-
|
|
-
|
|
|
|
266,667
|
(3)
|
133,333
|
(3)
|
$1.16
|
|
12/31/28
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brian G Fike
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
(1)
|
|
(1)
|
$0.89
|
|
12/31/29
|
|
-
|
|
-
|
|
|
|
33,333
|
(4)
|
16,667
|
(4)
|
$2.25
|
|
12/31/28
|
|
-
|
|
-
|
|
|
|
33,333
|
(4)
|
16,667
|
(4)
|
$1.21
|
|
12/31/28
|
|
-
|
|
-
|
|
|
|
50,000
|
(1)
|
-
|
(1)
|
$1.21
|
|
12/31/28
|
|
-
|
|
-
|
|
|
|
15,625
|
(5)
|
9,375
|
(5)
|
$1.90
|
|
03/31/28
|
|
-
|
|
-
|
|
|
|
8,750
|
(6)
|
1,250
|
(6)
|
$3.80
|
|
03/31/27
|
|
-
|
|
-
|
|
|
|
5,000
|
(7)
|
-
|
(7)
|
$4.21
|
|
03/31/26
|
|
-
|
|
-
|
|
|
(1)
|
Unearned options vest 100% on the date of award. At December
31, 2020, these options have vested 100%.
|
|
|
(2)
|
Unearned options vest 33% on the date of award and on January
24th of each calendar year thereafter until fully vested on January 24th, 2021. In the event of a change in control of the Company, the
unvested options become fully vested. At December 31, 2020, these options have vested 67%. These options are non-qualified and issued
as an inducement award.
|
|
|
(3)
|
Unearned options vest 33% on the date of award and on January
24th of each calendar year thereafter until fully vested on January 24th, 2021. In the event of a change in control of the Company, the
unvested options become fully vested. At December 31, 2020, these options have vested 67%. Of the 400,000 options 141,382 are non-qualified
and issued as an inducement award.
|
|
|
(4)
|
Unearned options vest 33% on the date of award and on January 1 of each calendar year thereafter until fully vested on January 1, 2021. In the event of a change in control of the Company, the unvested options become fully vested. At December 31, 2020 these options have vested 67%.
|
|
|
(5)
|
Unearned options vest 6.25% on July 1, 2018 and on the first
day of each calendar quarter thereafter until fully vested on April 1, 2022. In the event of a change in control of the Company, the
unvested options become fully vested. At December 31, 2020, these options have vested 62.5%.
|
|
|
(6)
|
Unearned options vest 6.25% on July 1, 2017 and on the first
day of each calendar quarter thereafter until fully vested on April 1, 2021. In the event of a change in control of the Company, the
unvested options become fully vested. At December 31, 2020, these options have vested 87.5%.
|
|
|
(7)
|
Unearned options vested at the rate of 40% on April 1, 2017
and continue to vest at the rate of 5% on the first day of each calendar quarter thereafter until they are fully vested on April 1, 2020,
At December 31, 2020 100% of these options were vested.
|
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Employment Agreement with Colin James Deller
On January 28, 2019 (the “Effective
Date”), the Company and Colin James Deller entered into an employment agreement pursuant to which the Company employed Dr. Deller
as its President until April 1, 2019, at which time Dr. Deller became the Company’s Chief Executive Officer. Pursuant to the agreement,
the Company pays Dr. Deller an annual salary of $350,000. As an inducement to accept employment with the Company, Dr. Deller was also
granted an option to purchase 400,000 shares of the Company’s common stock at an exercise price of $1.16 per share and an option
to purchase 200,000 shares of the Company’s common stock at an exercise price of $2.25 per share. Each option has a term of 10 years
and will vest as follows: the right to purchase one-third of the shares of common stock subject to the option vested on the Effective
Date; the right to purchase one-third of the shares will vest on the first anniversary of the grant date; and the right to purchase one-third
of the shares will vest on the second anniversary of the grant date. The Company has agreed to pay certain expenses, not to exceed the
sum of $100,000, related to Dr. Deller’s move from Tulsa, Oklahoma to Seattle, Washington, including reasonable expenses related
to the sale of his home in Tulsa. As a temporary adjustment for the difference in the cost of living between Tulsa and Seattle (the “Relocation
Adjustment”), for a period of four years (the “Payment Period”) from the Effective Date, the Company has also agreed
to pay up to $6,000 a month to Dr. Deller for expenses related to temporary housing and travel to and from Tulsa to Seattle. If Dr. Deller
purchases a home in the Seattle area, the Relocation Adjustment will continue to be paid through the expiration of the Payment Period,
although the Relocation Adjustment may be adjusted or terminated upon mutual agreement of Dr. Deller and the Company. The agreement may
be terminated by the Company for cause, as defined in the agreement, due to Dr. Deller’s death or disability, upon 30 days’
notice to Dr. Deller or as a result of a change in control, as defined in the agreement. With the exception of a termination for cause,
if Dr. Deller’s employment is terminated by the Company, aside from accrued but unpaid salary, bonus (if any) and business expenses,
Dr. Deller will receive the balance of the unpaid Relocation Adjustment and 6 months of his annual salary.
Change of Control Arrangements
All of the option awards and
stock awards granted to the Company’s executive officers include change-in-control arrangements whereby any unvested stock options
would vest or any repurchase rights for stock grants or, if exercised prior to vesting, stock options, would terminate as a result of
a change in control.