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 ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☒ |
Preliminary Proxy Statement |
☐ |
Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)) |
☐ |
Definitive Proxy Statement |
☐ |
Definitive Additional Materials |
☐ |
Soliciting Material Pursuant to
§240.14a-12 |
ADAMIS
PHARMACEUTICALS CORPORATION
(Name of Registrant as Specified in its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement, if Other Than
Registrant)
Payment
of Filing Fee (Check all boxes that apply): |
☒ |
No fee required. |
☐ |
Fee paid previously with preliminary
materials. |
☐ |
Fee computed on table in
exhibit required by Item 25(b) per Exchange Act
Rules 14a-6(i)(1) and 0-11. |
PRELIMINARY COPY – SUBJECT TO COMPLETION
|
ADAMIS PHARMACEUTICALS
CORPORATION
11682 El Camino Real,
Suite 300
San Diego, CA 92130 |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on July 29, 2022
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
“Meeting”) of Adamis Pharmaceuticals Corporation, a Delaware
corporation, referred to herein as we, us, our, or the Company,
will be held virtually on Friday, July 29, 2022, at [__:__]
[a.m./p.m.], Pacific Time, to:
|
1.
|
Elect five directors to our Board
of Directors (the “Board”), each to serve until the next Annual
Meeting of Stockholders or until his or her successor has been duly
elected or appointed and qualified. |
|
2.
|
Adopt and approve a proposed
amendment to our Restated Certificate of Incorporation authorizing
the Board, in its sole discretion, to effect a reverse stock split
of our outstanding shares of common stock at any time on or before
December 31, 2022, at a reverse stock split ratio ranging from
1-for-2 to 1-for-15, as determined by our Board at a later
date. |
|
3.
|
Approve an amendment to our 2020
Equity Incentive Plan to eliminate certain limitations on our
ability to grant Awards under the plan, and the plan as amended, as
described in more detail in the accompanying Proxy
Statement. |
|
4.
|
Approve, on a nonbinding advisory
basis, the compensation of our named executive
officers. |
|
5.
|
Ratify the selection of BDO USA,
LLP as our independent registered public accounting firm for the
year ending December 31, 2022. |
|
6.
|
To approve the adjournment of the
Meeting, if necessary, to solicit additional proxies if there are
not sufficient votes at the time of the Meeting to adopt Proposal
2. |
|
7.
|
Transact such other business as
may properly come before the Meeting or any adjournments or
postponements thereof. |
The above items of business are more fully described in the Proxy
Statement accompanying this notice. This year’s Meeting will be a
completely virtual meeting, which will be conducted via live
webcast. You will be able to listen to the Meeting, submit
questions during the Meeting, and vote during the live webcast of
the Meeting by visiting
www.virtualshareholdermeeting.com/ADMP2022. To participate
in the virtual Meeting, you will need the control number found on
your proxy card or in the instructions that accompanied your proxy
materials. The meeting webcast will begin promptly at [__:__]
[a.m./p.m.] Pacific Time. We encourage you to access the Meeting
prior to the start time. Online check-in will begin at [__:__]
[a.m./p.m.] Pacific Time, and you should allow ample time for the
check-in procedures. You will not be able to attend the Meeting
in person.
Only holders of record of our common stock, par value $0.0001 (the
“Common Stock”), and our Series C Preferred Stock, par value
$0.0001 per share (the “Series C Preferred”), at the close of
business on June [_], 2022 (the “Record Date”), will be entitled to
notice of the virtual Meeting or any adjournments or postponements
thereof. The names of stockholders of record entitled to vote at
the Meeting will be available for inspection for any legally valid
purpose relating to the Meeting at
www.virtualshareholdermeeting.com/ADMP2022. In
addition, for the ten days prior to the Meeting, the list of such
stockholders of record will be available for examination by any
stockholder for a legally valid purpose relating to the Meeting at
our corporate headquarters during regular business hours.
Your vote is important. Whether or not you plan to attend the
Meeting in person, we would like for your shares to be represented
at the virtual meeting. Please take the time to read the entirety
of the Proxy Statement to better familiarize yourself with the
proposals and why we believe they are critical to the continuing
operation of the Company. Please submit your proxy to vote as soon
as possible via the Internet, telephone, or mail.
|
|
By Order of the Board of Directors, |
|
|
|
|
|
David J.
Marguglio |
San Diego, California
June [__], 2022
|
|
Chief
Executive Officer, Director |
Whether you plan to attend the Meeting or not, it is important
that you read the Proxy Statement and follow the instructions on
your proxy card to submit your proxy by mail, telephone or
Internet. This will ensure that your shares are
represented.
Important Notice Regarding the Availability of Proxy Materials
for the Annual Stockholder Meeting To Be Held on July 29, 2022, via
live webcast at
www.virtualshareholdermeeting.com/admp2022: In
accordance with rules approved by the Securities and Exchange
Commission, we are providing this notice to our stockholders to
advise them of the availability on the Internet of our proxy
materials related to the Meeting. The rules allow companies to
provide access to proxy materials in one of two ways. Because we
have elected to utilize the “full set delivery” option, we are
delivering our proxy materials to our stockholders under the
“traditional” method, by providing paper copies, as well as
providing access to our proxy materials on a publicly accessible
website.
Our Proxy Statement and proxy card are enclosed along with our
Annual Report on Form 10-K for the year ended December 31,
2021, which is being provided as our Annual Report to Stockholders.
These materials are also available on the website:
http://www.adamispharmaceuticals.com. The information on
this website, other than the Proxy Statement, is not part of the
Proxy Statement.
PROXY STATEMENT SUMMARY
This summary highlights information contained elsewhere in this
Proxy Statement. This summary does not contain all of the
information that you should consider. You should read the entire
Proxy Statement carefully before voting.
Meeting Information and
Availability of Proxy Materials |
|
Date and Time:
Friday, July 29, 2022, at [__:__] [a.m./p.m.], Pacific Time
Place:
Via live audio webcast at
www.virtualshareholdermeeting.com/ADMP2022
Record Date:
Close of business on June [__], 2022
|
How to Submit Your
Proxy
We encourage you to submit your proxy in advance of the meeting.
You may submit your proxy using one of the following voting
methods. Make sure to have your proxy card or voting instruction
form in hand and follow the instructions.
You may in the following ways:
|
Voting Matters: |
Our Board’s
Recommendations
|
|
|
|
|
 |
Submit a proxy via the internet |
Proposal 1: Election of five
(5) Director Nominees (page 7) |
FOR each Director
Nominee |
|
Go to
http://www.proxyvote.com |
|
|
|
|
Proposal 2: Adopt and approve a proposed amendment to our
Restated Certificate of Incorporation authorizing the Board to
effect a reverse stock split (page 14)
|
FOR |
 |
Submit a proxy by telephone
Stockholders of record may submit a proxy by calling the toll-free
telephone number on your proxy card.
|
Proposal 3: Approve an amendment
to our 2020 Equity Incentive Plan to eliminate certain limitations
on our ability to grant Awards under the plan (page 25) |
FOR |
 |
Submit a proxy by mail
Stockholders of record may sign and date the proxy card you receive
and return it in the enclosed stamped, self-addressed envelope.
|
Proposal 4: Approve, on a nonbinding advisory basis, the
compensation of our named executive officers (page 36) |
FOR |
Beneficial Holders
Follow the voting
instructions set forth on the voting instruction form provided by
your broker or other nominee with these proxy
materials.
|
Proposal 5: Ratify the selection of BDO USA, LLP as our
independent registered public accounting firm for the year ending
December 31, 2022 (page 37)
|
FOR |
|
|
Proposal 6: To approve the adjournment of the
Meeting, if necessary, to solicit additional proxies for Proposal 2
(page 39)
|
FOR |
|
|
|
|
|
|
PRELIMINARY COPY – SUBJECT TO COMPLETION
ADAMIS PHARMACEUTICALS CORPORATION
11682 El Camino Real, Suite 300
San Diego, CA 92130
(858) 997-2400
2022 PROXY STATEMENT
General
This Proxy Statement is furnished in connection with the
solicitation by the Board of Directors (the “Board”) of Adamis
Pharmaceuticals Corporation, referred to herein as we, us, our, or
the Company, of proxies to be voted at the Annual Meeting of
Stockholders, or the “Meeting,” and at any adjournments or
postponements thereof. The Meeting will be held virtually on
Friday, July 29, 2022, at [__:__] [a.m./p.m.], Pacific Time. The
virtual Meeting can be accessed via the internet at
www.virtualshareholdermeeting.com/ADMP2022, where you will
be able to listen to the meeting live, submit questions, and vote
online.
Our principal executive office is located at 11682 El Camino Real,
Suite 300, San Diego, California 92130, and our telephone
number is (858) 997-2400. The approximate date on which we expect
this Proxy Statement, the proxy card and accompanying materials to
first be sent or given to stockholders is June [ ],
2022.
Record Date and Shares Outstanding
Stockholders of record at the close of business on June [_], 2022
(the “Record Date”) are entitled to notice of the Meeting. At the
Record Date, [______________] shares of Common Stock and [_____]
shares of Series C Preferred were outstanding and entitled to vote
at the Meeting.
Voting Rights
Only holders of Common Stock or Series C Preferred at the close of
business on the Record Date are entitled to notice of and vote at
the Meeting. Each share of Common Stock is entitled to one vote on
all matters to be voted on at the Meeting and stockholders cannot
cumulate votes. Each share of Series C Preferred is entitled to
[______] votes with respect to Proposal 2; however, the Series C
Preferred shall not be entitled to vote on any other proposal or
matter brought before the Meeting. The presence, in person or by
proxy, of the holders of a majority in voting power of the
outstanding shares of Common Stock and Series C Preferred, in the
aggregate, and the holders of at least one-third of all issued and
outstanding shares of Common Stock entitled to vote, as of the
Record Date will be required to constitute a quorum for the
transaction of business at the Meeting and at any postponement or
adjournment thereof.
Broker Non-Votes
If you do not give instructions to your bank or broker, it may vote
on matters that are considered to be “routine” under applicable
stock exchange rules but will not be permitted to vote your shares
with respect to “non-routine” items. Rulings on proposals are made
pursuant to rules and interpretations governing the conduct of
brokerage firms rather than rules that apply directly to the
Company. However, we believe that under the applicable rules, the
reverse stock split proposal (Proposal 2), the ratification
of the appointment of our independent auditors (Proposal 5), and
the proposal to approve the adjournment of the Meeting, if
necessary, to solicit additional proxies if there are insufficient
votes at the time of the meeting to adopt Proposal 2 (Proposal 6)
are considered routine matters, while the election of our directors
(Proposal 1), the approval of certain amendments to our 2020 Equity
Incentive Plan (Proposal 3), and the advisory vote on executive
compensation (Proposal 4) are non-routine matters. A “broker
non-vote” occurs when a broker, bank or other holder of record
holding shares for a beneficial owner properly executes and returns
a proxy without voting on a particular proposal because such holder
of record does not have discretionary voting power for that
particular item and has not received instructions from the
beneficial owner. Broker non-votes will not be counted as votes
“FOR” or “AGAINST” any proposal, but will be counted in determining
whether there is a quorum for the Meeting. We strongly encourage
you to submit your voting instructions and exercise your right to
vote as a stockholder.
THE INFORMATION PROVIDED IN THE “QUESTION AND ANSWERS”
FORMAT
BELOW IS FOR YOUR CONVENIENCE ONLY AND IS MERELY A SUMMARY OF
THE INFORMATION CONTAINED IN THIS PROXY STATEMENT. YOU SHOULD
READ THIS ENTIRE PROXY STATEMENT CAREFULLY.
Questions and Answers
|
Q. |
Why am I receiving these
materials? |
We have provided you these proxy materials because our Board is
soliciting your proxy to vote at the Meeting, which is to be held
on Friday, July 29, 2022, at [__:__] [a.m./p.m.] (Pacific Time),
via live webcast, or at any adjournments or postponements thereof,
for the purposes set forth in this Proxy Statement. You are invited
to attend the virtual Meeting to vote on the proposals described in
this Proxy Statement. However, you do not need to attend the
Meeting to vote your shares.
If you have received a printed copy of these materials by mail, you
may complete, sign and return the enclosed proxy card or follow the
instructions below to submit your proxy over the telephone or on
the Internet. If you did not receive a printed copy of these
materials by mail and are accessing them on the Internet, you may
submit your proxy on the Internet or over the telephone, as
described below.
You are voting on the following matters to:
|
1. |
Elect five directors (Howard C.
Birndorf, Meera J. Desai, David J. Marguglio, Vickie S. Reed, and
Richard C. Williams) for a term ending at the next annual meeting
of stockholders and until his or her successor is duly elected and
qualified or until such person's earlier death, removal or
resignation. |
|
|
|
|
2. |
Adopt and approve a proposed amendment to our Restated Certificate
of Incorporation authorizing the Board, in its sole discretion, to
effect a reverse stock split of our outstanding shares of common
stock at any time on or before December 31, 2022, at a reverse
stock split ratio ranging from 1-for-2 to 1-for-15, as determined
by our Board at a later date.
|
|
|
|
|
3. |
Approve an amendment to our 2020
Equity Incentive Plan to eliminate certain limitations on our
ability to grant Awards under the plan, and the plan as amended, as
described in more detail in this Proxy Statement. |
|
|
|
|
4. |
Approve, on a nonbinding advisory
basis, the compensation of our named executive
officers. |
|
|
|
|
5. |
Ratify the selection of BDO USA,
LLP as our independent registered public accounting firm for the
year ending December 31, 2022. |
|
|
|
|
6. |
Approve the adjournment of the
Meeting, if necessary, to solicit additional proxies if there are
insufficient votes at the time of the Meeting to adopt Proposal
2. |
|
|
|
|
7. |
Transact such other business as
may properly come before the Meeting or any adjournments or
postponements thereof. |
|
Q. |
How can stockholders attend
the Meeting; can I attend the meeting in person? |
This year’s Meeting will be completely virtual, and will be
conducted via live webcast. You will be able to participate in the
Meeting if you were a stockholder as of the close of business on
the Record Date or hold a valid proxy for the Meeting. You will be
able to listen to the Meeting, submit your questions during the
Meeting, and vote during the live webcast of the Meeting by
visiting www.virtualshareholdermeeting.com/ADMP2022 and
entering the control number included on your proxy card, or in the
instructions that accompanied your proxy materials.
|
Q. |
What is the format of the
Meeting? |
We will be hosting the Meeting live via Internet webcast. You will
not be able to attend the Meeting in person. A summary of the
information you need to attend the Meeting online is provided
below:
|
● |
Any
stockholder as of the Record Date may listen to the meeting and
participate live via webcast at
www.virtualshareholdermeeting.com/ADMP2022. The
webcast will begin at [__:__] [a.m./p.m.] Pacific Time on July 29,
2022. |
|
● |
Stockholders may vote and submit questions during
the Meeting via live webcast. |
|
● |
To
enter the Meeting, please have your control number which is
available on your proxy card. If you do not have your
control number, you will not be able to vote or submit questions
during the Meeting. |
|
● |
Instructions on how to connect to and participate
in the Meeting via Internet, including how to demonstrate proof of
stock ownership, are posted at
www.virtualshareholdermeeting.com/ADMP2022. |
|
Q. |
Who is entitled to vote at
the virtual Meeting? |
Only stockholders of record holding Common Stock and Series C
Preferred at the close of business on the Record Date are entitled
to vote shares held by such stockholders on that date at the
Meeting.
|
Q. |
How many votes do I have? |
Each share of our Common Stock that you own entitles you to one
vote on each proposal properly brought before the Meeting. Each
share of Series C Preferred is entitled to [______] votes with
respect to Proposal 2; however, the Series C Preferred is not
entitled to vote on any other proposal or matter brought before the
Meeting.
|
Q. |
How do I vote or submit a
proxy? |
Submit a Proxy by Mail: Stockholders of record (that is, if
you hold your stock in your own name) may sign and date the proxy
card you receive and return it in the enclosed stamped,
self-addressed envelope.
Submit a Proxy by Telephone or Internet: If you are a holder
of record of shares, you can choose to submit a proxy by telephone
or by Internet. You can submit a proxy by telephone by calling the
toll-free telephone number on your proxy card. The website for
submitting your proxy by Internet is
http://www.proxyvote.com and it is also listed on the proxy
card. Please have your proxy card handy when you call or go online.
Telephone and Internet voting facilities for stockholders of record
will close at 11:59 p.m., Eastern Standard Time, on July 28, 2022.
If you hold your shares beneficially in street name, the
availability of telephonic or Internet voting will depend on the
voting process of your broker, trustee or other nominee. Please
check with your broker, trustee or other nominee and follow the
voting procedures your broker, trustee or other nominee provides to
vote your shares.
Voting Via the Virtual Annual Meeting Website. To vote
during the virtual Meeting, follow the instructions posted at
www.virtualshareholdermeeting.com/ADMP2022.
If your shares are held in the name of a bank, broker, trustee or
other nominee holder of record (i.e., in “street name”), you
will receive instructions from the holder of record that you must
follow in order for your shares to be voted. Submitting a proxy by
telephone and Internet generally will be offered to stockholders
owning shares through most banks and brokers by following the
instruction form provided to you by your broker, bank, trustee, or
other nominee.
If you submit a proxy to vote by telephone or on the Internet, you
do not have to mail in your proxy card. Submitting a proxy by
Internet and telephone is available 24 hours a day. Proxies
submitted through the Internet or by telephone must be received by
11:59 p.m. (Eastern Standard Time) on July 28, 2022.
The Company has retained Saratoga Proxy Consulting, LLC, a proxy
solicitation firm, to assist in the solicitation of proxies and
provide related advice and informational support. If you have
any questions or need assistance voting your shares of Common
Stock, please contact Saratoga Proxy Consulting, LLC, our proxy
solicitor, by calling (212) 257-1311 or toll free at (888)
368-0379.
|
Q. |
Important Notice Regarding the Availability of Proxy
Materials for the Annual Meeting of Stockholders to be Held on July
29, 2022. Can I access the proxy materials and annual report
electronically? |
Under the rules of the SEC, we have chosen to deliver proxy
materials to stockholders under the “full set delivery option,” by
providing paper copies of the Company’s full Proxy Statement and
form of proxy. This Proxy Statement, the proxy card, and our Annual
Report on Form 10-K for the year ended December 31, 2021, are
available on the website:
http://www.adamispharmaceuticals.com. The information on
this website, other than this Proxy Statement, is not part of this
Proxy Statement.
|
Q. |
Can I change my vote or
revoke my proxy? |
Yes. You may change your vote or revoke your proxy at any time
prior to the taking of the vote at the virtual Meeting. If you
submitted your proxy by mail, you must (a) file with the Corporate
Secretary of the Company a properly executed written notice of
revocation or (b) timely deliver a valid later-dated proxy, or
attend and vote at the Meeting. If you submitted your proxy by
telephone or Internet, you may change your vote or revoke your
proxy with a later submitted telephone or Internet proxy.
Attendance at the virtual Meeting will not have the effect of
revoking a proxy unless you give written notice of revocation to
the Corporate Secretary of the Company or vote at the virtual
Meeting. The method by which you vote by proxy will in no way limit
your right to vote at the Meeting if you decide to attend the
virtual Meeting. If your shares are held in the name of a bank or
brokerage firm, you must obtain a proxy, executed in your favor,
from the bank or broker, to be able to vote at the Meeting.
|
Q. |
How are proxies
voted? |
All valid proxies received prior to the Meeting will be voted. All
shares represented by a proxy will be voted and, where a
stockholder specifies by means of the proxy a choice with respect
to any matter to be acted upon, the shares will be voted in
accordance with the stockholder’s instructions. If you return a
signed and dated proxy card or otherwise vote without marking
voting selections, your shares will be voted, as applicable, “FOR”
the election of all nominees for director as described in Proposal
1, and “FOR” Proposals 2, 3, 4, 5 and 6. If any other matter is
properly presented at the Meeting, your proxy holder (one of the
individuals named on your proxy) will vote your shares using his or
her best judgment,
|
Q. |
How are proxies being
solicited? |
In addition to mailing proxy solicitation materials, our directors,
employees or our advisor may also solicit proxies at the Meeting
via live webcast, via the Internet, by telephone or by other
electronic means of communication we deem appropriate.
Additionally, we have retained Saratoga Proxy Consulting, LLC, a
proxy solicitation firm, to assist us in the proxy solicitation
process.
|
Q. |
Do I have appraisal or
dissenters’ rights? |
None of applicable Delaware law, the Company’s Restated Certificate
of Incorporation, or the Bylaws, provide for appraisal or other
similar rights for dissenting stockholders in connection with any
of the proposals set forth in this Proxy Statement. Accordingly,
you will have no right to demand appraisal and obtain payment for
your shares in connection with such proposals.
|
Q. |
What constitutes a
quorum? |
The presence at the Meeting, in person or by proxy, of the holders
of a majority in voting power of the outstanding shares of Common
Stock and Series C Preferred, in the aggregate, and the holders of
at least one-third of all issued and outstanding shares of Common
Stock entitled to vote, on the Record Date will constitute a
quorum. On the Record Date, there were [_____________] outstanding
shares of Common Stock and [_____________] shares of Series C
Preferred outstanding having a total of an aggregate of
[_____________] votes. Thus, the presence of (i) the holders of
Common Stock and Series C Preferred holding at least [___________]
votes and (ii) holders of at least [___________] shares of Common
Stock will be required to establish a quorum. Abstentions and
broker non-votes will be counted for purposes of determining
whether a quorum is present at the Meeting. If a quorum is not
present, the Meeting may be adjourned, including by the Chairman of
the Meeting without action of the stockholders at the Meeting, to
another place, if any, date or time.
|
Q. |
What happens if the Meeting
is postponed or adjourned? |
If the Meeting is postponed or adjourned, your proxy will remain
valid and may be voted when the Meeting is convened or reconvened.
You may change or revoke your proxy until it is voted.
|
Q. |
What vote is required to
approve each item? |
The affirmative vote of a plurality of the votes cast at the
Meeting by stockholders entitled to vote thereon is required for
the election of directors; only votes “FOR” or “WITHHELD” will
affect the outcome. A plurality vote means that the directors who
receive the most votes in an election, though not necessarily a
majority, will be elected. For Proposal 2 to adopt and approve
the reverse stock split proposal, the affirmative vote of holders
of a majority of the combined voting power of the outstanding
shares of Common Stock and Series C Preferred entitled to vote on
the proposal, voting together and counted as a single class, on the
Record Date will be required. Abstentions and broker non-votes are
not counted in determining the number of shares of Common Stock
voted for or against Proposal 2. The votes of the Series C
Preferred on Proposal 2 will mirror votes cast by holders of Common
Stock, without regard to abstentions or broker non-votes by holders
of Common Stock. Because the
voting standard for Proposal 2 is a majority of the combined voting
power of the outstanding shares of Common Stock and Series C
Preferred entitled to vote on the proposal, voting together and
counted as a single class, abstentions and
broker non-votes will, in one sense, have the effect of a
vote “AGAINST” the
proposal. However, as further discussed under “Will choosing not
to vote my shares have the same effect as casting a vote against
the Reverse Stock Split Proposal 2,” because the Series C
Preferred Stock has [_________] votes per share on the reverse
stock split (Proposal 2) and such votes must be counted by the
Company in the same proportion as the aggregate shares of Common
Stock voted on Proposal 2 at the Meeting, the failure of a share of
Common Stock to be voted on Proposal 2 will effectively have no
impact on the outcome of the vote. For Proposal 3 to approve
the amendments to the 2020 Equity Incentive Plan and the plan as
amended, the advisory Proposal 4 concerning executive compensation,
Proposal 5 to ratify the selection of BDO USA, LLP, and Proposal 6
to adjourn the Meeting, if necessary, to solicit additional proxies
if there are insufficient votes at the time of the Meeting to adopt
Proposal 2, or other matters that may properly come before the
Meeting, the affirmative vote of holders of a majority of the votes
cast either in person or represented by proxy at the Meeting will
be required. For these proposals, broker non-votes, if any, and a
properly marked “ABSTAIN” with respect to any such matter will not
be voted, and will not be counted as a vote cast for purposes of
determining the number of votes cast with respect to such
proposals. Accordingly, broker non-votes and abstentions will not
be considered as voting with respect to such matters.
|
Q. |
Will choosing not to vote my
shares have the same effect as casting a vote against the Reverse
Stock Split Proposal 2? |
No. If you prefer that the reverse stock split Proposal 2 not be
approved, you should cast your vote against the proposal. Approval
of the reverse stock split Proposal 2 requires the affirmative vote
of holders of a majority of the combined voting power of the
outstanding shares of Common Stock and Series C Preferred entitled
to vote on the proposal, voting together and counted as a single
class, assuming a quorum is present. Since the Series C Preferred
has [__________] votes per share on the reverse stock split
Proposal 2 and such votes must be counted by the Company in the
same proportion as the aggregate shares of Common Stock that are
voted on the reverse stock split Proposal 2, the failure of a share
of Common Stock to be voted will effectively have no impact on the
outcome of the vote. However, shares of Common Stock voted against
Proposal 2 will have the effect of causing the proportion of Series
C Preferred voted against the proposal to increase accordingly and
vice versa.
|
Q. |
How do I vote if I hold my
shares in “street name”? |
If your shares are registered directly in your name with our
transfer agent, American Stock Transfer & Trust Company, LLC,
then you are considered the stockholder of record with respect to
those shares, and the Notice or these proxy materials were sent
directly to you by the Company.
If your shares are held in an account at a brokerage firm, bank,
broker-dealer, or other similar organization, then you are the
“beneficial owner” of shares held in “street name,” and the Notice
or these proxy materials were forwarded to you by that
organization. The organization holding your account is considered
the stockholder of record for purposes of voting at the Meeting. As
a beneficial owner, you have the right to instruct that
organization on how to vote the shares held in your account. Your
bank or broker may permit you to vote your shares electronically by
telephone or on the Internet. A large number of banks and brokerage
firms participate in programs that offer telephone and Internet
voting options. If your shares are held in an account at a bank or
brokerage firm that participates in such a program, you may vote
those shares electronically by telephone or on the Internet by
following the instructions set forth on the voting form provided to
you by your bank or brokerage firm.
These Internet and telephone voting procedures are designed to
authenticate stockholders’ identities, allow stockholders to submit
proxies to vote their shares and confirm that stockholders’ votes
have been recorded properly. Stockholders submitting a proxy via
telephone or the internet should understand that there may be costs
associated with electronic access, such as usage charges from
Internet access providers and telephone companies that must be
borne by the stockholder using such services. Also, please be aware
that the Company cannot take responsibility for any access,
Internet or telephone service interruptions that may occur or any
inaccuracies, erroneous or incomplete information that may
appear.
|
Q. |
What happens if I do not
instruct my broker how to vote on the proxy? |
If you do not instruct your broker how to vote, your broker may
vote your shares for you at his or her discretion on “routine”
matters.
|
Q. |
May I attend the Meeting if I
hold my shares in “street name”? |
As the beneficial owner of shares, you are invited to attend the
virtual Meeting. If you are not a record holder, however, you may
not vote your shares at the Meeting unless you obtain a proxy,
executed in your favor, from the record holder of your shares.
|
Q. |
What are the recommendations
of the Board? |
The Board unanimously recommends that the stockholders vote:
|
● |
FOR Proposal 1 to elect the five
nominated directors; |
|
● |
FOR Proposal 2 to authorize the Board, in
its sole discretion, to effect a reverse stock split of our
outstanding shares of Common Stock; |
|
● |
FOR Proposal 3 approving the amendment to
our 2020 Equity Incentive Plan and the plan as amended; |
|
● |
FOR Proposal 4 approving the compensation
of our named executive officers; |
|
● |
FOR Proposal 5 ratifying the selection of
BDO USA, LLP as our independent registered public accounting firm
for the year ending December 31, 2022; and |
|
● |
FOR Proposal 6 allowing
the proxy holders to vote in favor of adjournment of the Meeting,
if necessary, to solicit additional proxies if there are not
sufficient votes at the time of the Meeting to adopt Proposal
2. |
With respect to any other matter that properly comes before the
Meeting, the proxies will vote as recommended by the Board or, if
no recommendation is given, in their own discretion based on their
best judgment in accordance with Rule 14a-4(c).
Solicitation of Proxies
This solicitation is made by the Company. We will bear the expenses
of soliciting proxies and the cost of preparing, printing,
assembling and mailing all proxy materials that may be sent to our
stockholders in connection with this solicitation. Arrangements
will also be made with brokerage houses, other custodians, nominees
and fiduciaries, to forward soliciting material to the beneficial
owners of Common Stock held by such persons. We will reimburse such
persons for reasonable out-of-pocket expenses incurred by them. In
addition to the solicitation of proxies by use of the mails, In
addition, officers and regular employees of ours may solicit
proxies without additional compensation, by telephone or facsimile
transmission.
In addition, Saratoga Proxy Consulting, LLC, a proxy solicitation
firm, has been engaged to assist in the solicitation of proxies and
provide related advice and informational support, for a service
fee, estimated to be approximately [$________] plus reimbursement
of certain expenses and certain other charges. We will also
reimburse brokerage firms and other custodians, nominees and
fiduciaries for their expenses in forwarding proxy and solicitation
materials to stockholders. If you have any questions or need
assistance voting your shares of Common Stock, please contact
Saratoga Proxy Consulting, LLC, our proxy solicitor, by calling
(212) 257-1311 or toll free at (888) 368-0379.
PROPOSAL
1 - ELECTION OF DIRECTORS
Information
Regarding Board of Directors
The
Board has nominated five candidates for election as director for a
term expiring at the next annual meeting of stockholders and until
his or her successor is duly elected and qualified or until such
person’s earlier death, removal or resignation. All of the nominees
are currently members of our Board. Each of the nominees named
below has consented to (i) serve as a nominee, (ii) serve as a
director if elected, and (iii) being named as a nominee in this
Proxy Statement. We are not aware of any reason that a nominee
would be unable or unwilling to serve as a director (subject to a
director’s right to resign at any time).
Pursuant
to our Bylaws, generally the number of directors is fixed and may
be increased or decreased from time to time by resolution of our
Board. The Board has fixed the number of directors at five members.
Proxies cannot be voted for a greater number of persons than the
number of nominees named. In the event one or more of the named
nominees is unable to serve, proxies will be voted in favor of the
remainder of those nominees and for such substitute nominee as may
be selected by our Board.
Certain
information with respect to the directors and nominees is set forth
below as of the Record Date.
HOWARD C. BIRNDORF |
INDEPENDENT |

Age:
72
Director
Since: 2019
Committees:
Audit
Compensation
(chair)
Nominating
and Governance
|
Experience:
Mr.
Birndorf became a director in August 2019. Since at least 2016 he
has been an investor, and since 2018 he has served as a business
development consultant with Vision Clinical Research, a contract
research organization service provider in the in vitro diagnostic,
medical device and pharmaceutical industries. Mr. Birndorf
co-founded the monoclonal antibody company Hybritech in 1978, which
was subsequently acquired by Eli Lilly & Co. in 1986. He has
founded or co-founded a number of other companies including Gen
Probe Incorporated, IDEC Pharmaceuticals (which merged with Biogen
to form Biogen-Idec), and Ligand Pharmaceuticals Incorporated. Mr.
Birndorf was also involved in the formation of Gensia (Sicor), and
was a director of Neurocrine Biosciences from 1992 to 1997. He was
the founder and co-chair of the Coalition for 21st Century Medicine
and was a co-founder, Chairman and Chief Executive Officer of
Nanogen, Inc. Mr. Birndorf received his B.A. in Biology from
Oakland University, an M.S. in Biochemistry from Wayne State
University, and received honorary Doctor of Science degrees from
Oakland University and Wayne State University. We believe that Mr.
Birndorf is qualified to serve on our board of directors because of
his extensive experience in the biopharmaceutical industry,
leadership, business and scientific knowledge of the life science
and pharmaceutical industries, including his service as a director
and an executive officer of private and public biotechnology
companies.
|
MEERA J. DESAI, Ph.D., NACD.DC. |
INDEPENDENT |

Age:
44
Director
Since: 2021
Committees:
Audit
Compensation
Nominating
and Governance (chair)
|
Experience:
Dr.
Desai became a director in October 2021. Dr. Desai is the founder
and managing partner since August 2018 of Silicon Valley based
Karana Biotech, a boutique advisory firm focused on guiding
pharmaceutical and biotech clients through complex international
licensing, commercialization, and other strategic transactions. She
currently also serves on the Board of Directors for Nielson
BioSciences, Inc., a privately-held San Diego-based
biopharmaceutical company. She has over 15 years of pharmaceutical
industry in drug development and commercialization of products in
multiple therapeutic areas, as well as corporate development
experience regarding a variety of transactions and relationships.
From May 2014 to August 2018, she held positions of increasing
responsibility at AcelRx Pharmaceuticals, a public specialty
pharmaceutical company, including Senior Director, Corporate
Development. Prior to that time, she held positions of increasing
responsibility at Novartis Pharmaceuticals Corporation, an
affiliate of Novartis AG, including Associate Director,
Pharmaceutical Development, and has also held responsible program
manager positions at Nektar Therapeutics, and ALZA Corporation, a
Johnson & Johnson company. Dr. Desai holds a Bachelor of Arts
degree in chemistry from Drew University, a Doctorate in Analytical
Chemistry from Iowa State University, and has completed her
Directorship Certification through the National Association of
Corporate Directors (NACD.DC). We believe that Dr. Desai is
qualified to serve on our board of directors because of her
extensive experience as an employee and consultant in the
pharmaceutical, medical device and healthcare industries including
extensive business and corporate development experience negotiating
and executing licensing transactions, managing complex alliances
and supporting the fundraising, financing, and investor relations
efforts for biotechnology companies.
|
DAVID J. MARGUGLIO |
MANAGEMENT |

Age:
51
Director
Since: 2009
Committees:
None
|
Experience:
Mr.
Marguglio is the Company’s Co-Founder, Chief Executive Officer and
director. He joined the Company as Vice President, Business
Development and Investor Relations, and a director in April 2009 in
connection with the closing of the merger transaction between the
Company and the corporation that now is a wholly-owned subsidiary
of the Company, Adamis Corporation (“Old Adamis”), and was
appointed as President and Chief Executive Officer of the Company
in May 2022. He has held positions with the Company of Senior Vice
President of Corporate Development and, since March 2017, Senior
Vice President and Chief Business Officer. Mr. Marguglio was a
co-founder of Old Adamis and served as its Vice President of
Business Development and Investor Relations, and a director, since
its inception in June 2006 until April 2009. Prior to Adamis, Mr.
Marguglio held various positions with Citigroup Global Markets,
Salomon Smith Barney and Merrill Lynch. Before entering the
financial industry, he worked as a financial analyst and founded
and ran two different startup companies, the latter of which was
eventually acquired by a Fortune 100 company. He received a degree
in finance and business management from the Hankamer School of
Business at Baylor University. We believe that Mr. Marguglio is
qualified to serve on our board of directors because of his deep
knowledge of Adamis gained as both a co-founder and long-serving
officer and director of Adamis, as well as his prior experience in
business and corporate development, finance and equity capital
markets.
|
VICKIE S. REED |
INDEPENDENT |

Age:
60
Director
Since: 2022
Committees:
Audit
Compensation
Nominating
and Governance
|
Experience:
Ms.
Reed was appointed to serve as a member of our board of directors
in May 2022. Ms. Reed is a healthcare executive with over 25
years of experience in operating and governance roles. Ms. Reed has
served as Senior Vice President, Finance and Chief Accounting
Officer at Mirati Therapeutics since November 2021, and as Chief
Accounting Officer since January 2020, Vice President of Finance
from December 2016 to January 2020, and Senior Director and
Corporate Controller from October 2013 to December 2016, of Mirati
Therapeutics. She is also a member of the board of directors of
Evoke Pharma, a public pharmaceuticals company. Previously, she
served as Senior Director, Finance and Controller at Zogenix, Inc.,
a public biotechnology company in San Diego and Emeryville,
California, and held corporate accounting positions at Amylin
Pharmaceuticals, Inc., a public biotechnology company acquired by
Bristol Myers Squibb in 2012. Prior to joining Amylin, Ms. Reed
held financial leadership roles at several biotechnology and
telecommunications companies. Ms. Reed began her career with Price
Waterhouse, now PricewaterhouseCoopers, in Denver, Colorado. She is
a Certified Public Accountant (inactive) in the State of Colorado
and received a B.S. in Accounting from University of Colorado,
Denver. We believe that Ms. Reed is qualified to serve on our
board of directors because of her experience as the chief
accounting officer of a publicly-traded biotech company, which
brings to our board of directors and the committees of our board of
directors valuable financial skills and expertise, and significant
executive management experience and leadership skills, as well as a
strong understanding of corporate governance principles.
|
RICHARD C. WILLIAMS |
INDEPENDENT |
Age:
78
Director
Since: 2014
Committees:
Audit
(chair)
Compensation
Nominating
and Governance
|
Experience:
Mr.
Williams became a director and Chairman of the Board in August
2014. Since 1989, Mr. Williams has served as the founder and
President of Conner-Thoele Limited, a consulting and financial
advisory firm specializing in the healthcare industry and
pharmaceutical segment. Prior to founding Conner-Thoele Limited in
1989, Mr. Williams served in a number of progressively responsible
operational and financial management positions with multinational
firms. These firms included American Hospital Supply Corporation,
UNC Resources, Abbott Laboratories, Field Enterprises and Erbamont
NV. Mr. Williams has served as a director and Vice Chairman of
Strategic Planning for King Pharmaceuticals. Prior to King, he
served as Chairman and a director of Medco Research before Medco
was acquired by King Pharmaceuticals. Mr. Williams has also
served as a director of several other public and private companies,
several as Chairman, including Ista Pharmaceuticals, Vysis
Pharmaceuticals, Immunomedics Inc., EP Medical and the Company. Mr.
Williams served as a director and Chairman of the Board from
November 2003 to April 2009, when the Company merged with Old
Adamis (which was then named Adamis Pharmaceuticals Corporation)
and changed its corporate name to Adamis Pharmaceuticals
Corporation. Following the merger, Mr. Williams served as Chairman
of the Board until June 2009. He served as a director of Ista
Pharmaceuticals from December 2002 to June 2012 and as Chairman of
the Board from July 2004 to June 2012, when Ista was acquired. He
was a member of the Listed Company Advisory Committee of New York
Stock Exchange. Mr. Williams received a Bachelor of Arts
degree in Economics from DePauw University and a Masters of
Business Administration from the Wharton School of Finance. We
believe that Mr. Williams is qualified to serve on our board of
directors because of his extensive leadership, business, financial
and scientific knowledge of the life science industry, including
his service as an officer and director of private and public
biotechnology companies and the knowledge gained from consulting to
companies and investors in the biotechnology, pharmaceuticals and
life science areas, as well as his previous experience working in
senior capacities at large pharmaceutical companies.
|
Experience
of Directors
We
believe that the backgrounds and qualifications of our directors
and director nominees, considered as a group, provide a broad mix
of experience, knowledge and abilities that will allow the Board to
fulfill its responsibilities. We believe that our Board is composed
of a group of leaders in their respective fields. Many of the
current directors have executive experience at public companies, as
well as experience serving on other companies’ boards, which
provides an understanding of different business processes,
challenges and strategies facing boards and other companies.
Further, our directors also have other experience that makes them
valuable members and provides insight into issues relevant to the
Company, such as prior experience with regulatory, corporate
governance, public accounting, audit, corporate finance, licensing
transactions, merger and acquisitions.
Independence
of Directors
The
Board has undertaken a review of its composition, the composition
of its committees and the independence of our directors and
considered whether any director has a material relationship with us
that could compromise his or her ability to exercise independent
judgment in carrying out his or her responsibilities. Based on
information requested from and provided by each director concerning
his or her background, employment and affiliations, including
family relationships, our Board has determined that none of our
current directors, other than Mr. Marguglio who is an
executive officer of the Company, has a relationship that would
interfere with the exercise of independent judgment in carrying out
the responsibilities of a director, and that each of such directors
and the director nominee is “independent” as that term is defined
under the rules of Nasdaq. Our board of directors has also
determined that Dr. Desai, Mr. Birndorf, Mr. Williams and
Ms. Reed, satisfy the independence standards for committee
members established by the applicable SEC rules and the listing
standards of Nasdaq. In making these determinations, the Board
considered the current and prior relationships that each
non-employee director has with our company and all other facts and
circumstances that our Board deemed relevant in determining their
independence, including the beneficial ownership of our capital
stock by each non-employee director, and the transactions involving
them described in the section titled “Certain Relationships and
Related Party Transactions.”
Meetings
of Our Board
Our Board met 19 times during 2021. Each person who was a director
during 2021 other than Ms. Blunt, who resigned as a director
effective October 1, 2021, attended more than 75% of the total of
the Board meetings and the meetings of the committees upon which he
or she served that were held during the time that such person
served as a director during 2021. Our Board and its committees set
schedules to meet throughout the year and also can hold special
meetings and act by written consent from time to time, as
appropriate.
Attendance
at Annual Meeting
Although
we have no formal policy regarding director attendance at annual
meetings, we encourage all directors to attend. All of the persons
who were directors at the time of last year’s annual meeting of
stockholders attended last year’s meeting.
Board
Leadership Structure and Role in Risk Oversight
Our
Board evaluates its leadership structure and role in risk oversight
on an ongoing basis. The Board does not currently have a policy,
one way or the other, with respect to whether the same person
should serve as both the chief executive officer and chair of the
Board or, if the roles are separate, whether the chair of the Board
should be selected from the non-employee directors or should be an
employee. The Board believes that it should have the flexibility to
make these determinations at any given point in time in the way
that it believes best to provide appropriate leadership for the
Company at that time. Currently, Mr. Williams, an independent
director, serves as Chairman of the Board. The Chair of the Board
is responsible for coordinating the Board’s activities, including
the scheduling of meetings of the full Board, scheduling executive
sessions of the non-employee directors and setting relevant items
on the agenda (in consultation with the Chief Executive Officer as
necessary or appropriate). The Chief Executive Officer is
responsible for setting the strategic direction for the Company and
the day to day leadership and performance of the
Company.
The
Board is also responsible for oversight of our risk management
practices, while management is responsible for the day-to-day risk
management processes. The Board believes this division of
responsibilities is the most effective approach for addressing the
risks facing the Company. We are exposed to a number of risks,
including financial risks, strategic and operational risks, risks
relating to our development and commercialization activities, risks
relating to the COVID-19 pandemic, and risks relating to regulatory
and legal compliance. The Board will regularly discuss with
management our major risk exposures and the steps management has
taken to monitor and control such exposures. The Board is currently
comprised of five directors, four of whom are independent. The
Board has three standing committees with separate chairs - the
Audit, Compensation, and Nominating and Governance Committees. All
of the members of each committee are independent directors. Through
our Chief Executive Officer, and other members of management, the
Board receives periodic reports regarding the risks facing the
Company. Each of our Board committees also considers the risk
within its area of responsibilities. For example, our Compensation
Committee periodically reviews enterprise risks with the goal of
ensuring that our compensation programs do not encourage excessive
risk-taking, our Nominating and Governance Committee assesses risks
related to governance issues, and our Audit Committee monitors and
assesses financial risk and internal controls and assists the Board
in overseeing legal requirements.
Our
Audit Committee is responsible for overseeing risk management and
on at least an annual basis reviews and discusses with management
policies and systems pursuant to which management addresses risk,
including risks associated with our audit, financial reporting,
internal control, disclosure control, and legal and regulatory
compliance. Our Audit Committee also serves as the contact point
for employees to report corporate compliance issues. Our Audit
Committee regularly reviews with our Board, as appropriate, issues
that arise in connection with such topics. Our full Board regularly
engages in discussions of risk management to assess major risks
facing the Company and reviews options for their
mitigation.
Committees
of the Board
The Board has the following three committees: (1) Audit
Committee; (2) Compensation Committee; and (3) Nominating
and Governance Committee. Mr. Williams is Chair of the Audit
Committee; Mr. Birndorf is Chair of the Compensation
Committee; and Dr. Desai is Chair of the Nominating and
Governance Committee. Copies of the charter of each committee are
available on our website at www.adamispharma.com.
Audit Committee
The
Audit Committee of the Board was established by the Board in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”). The Audit Committee is
responsible to oversee our accounting and financial reporting
processes and the audits of our financial statements. The Audit
Committee assists the full Board in its general oversight of our
compliance with legal and regulatory requirements, and is directly
responsible for the appointment, compensation and oversight of the
work of our independent registered public accounting firm. Subject
to the charter, the responsibilities of the Audit Committee also
include reviewing and monitoring the integrity of our accounting
practices, internal control systems, financial reporting processes
and our financial statements and related disclosures in our filings
with the SEC, monitoring the independence and performance of our
independent auditor, providing an avenue of communication among the
independent auditor, our management and our Board, and reviewing
policies with respect to risk assessment and risk management. The
Audit Committee meets with management periodically to consider the
adequacy of our internal controls and our financial reporting. The
Audit Committee discusses these matters with our independent
registered public accounting firm and with appropriate financial
personnel from the Company. Meetings are held with participation
from the independent registered public accounting firm. The
independent registered public accounting firm is given unrestricted
access to the Audit Committee. The Audit Committee also has the
ability to retain, at our expense and without further approval of
the Board, special legal, accounting or other consultants or
experts that it deems necessary in the performance of its duties.
The Audit Committee also reviews and approves related party
transactions. The current members of the Audit Committee are
Richard C. Williams, Howard C. Birndorf, Meera J. Desai and
Vickie S. Reed. The Board has determined that each current member
of the Audit Committee is “independent” as defined by the
applicable NASDAQ rules and by the Sarbanes-Oxley Act of 2002 and
regulations of the SEC, and that Mr. Williams and Ms. Reed
qualify as an “audit committee financial expert” as defined in such
regulations. The Audit Committee met 17 times during
2021.
Compensation Committee
Principal
functions of the Compensation Committee include: (i) reviewing and
approving or recommending approval of compensation arrangements and
levels of our chief executive officer and our other executive
officers; (ii) to the extent the Board delegates such authority to
the committee, administering our equity incentive plans and
agreements; (iii) reviewing and making recommendations to the
Board with respect to incentive compensation and equity plans;
(iv) reviewing and approving or making recommendations to the
Board regarding the corporate goals and objectives relevant to
executive compensation and evaluating our executive officers’
performance in light of such goals and objectives; and
(v) performing other duties regarding compensation for
employees and consultants as the Board may from time to time
delegate to the committee. Subject to provisions of any applicable
employment agreements, the Compensation Committee typically reviews
base salary levels and total compensation for executive officers at
least annually. The committee, or the independent directors serving
on the Board, makes the final decisions regarding the chief
executive officer’s and the other named executive officers’ total
direct compensation; to the extent that the chief executive officer
or other officer is also a director, such person does not
participate in Board determinations concerning his or her
compensation. With respect to equity compensation, the Compensation
Committee or the Board grants stock options or other equity awards.
Management plays a role in the compensation-setting process. The
most significant aspects of management’s role are to evaluate
employee performance and recommend salary levels and compensation
awards. Our Chief Executive Officer may make recommendations to the
Compensation Committee and the Board concerning compensation for
other executive officers. Our Chief Executive Officer is a member
of the Board but does not participate in Board or committee
decisions regarding any aspect of his own compensation. Pursuant to
its charter, the Compensation Committee may engage the services of
outside advisors, experts, and others to assist the committee. The
committee may engage compensation consultants to provide
information to the committee to assist in making decisions
regarding compensation of our officers and directors. The current
members of the Compensation Committee are Richard C. Williams,
Howard C. Birndorf, Meera J. Desai and Vickie S. Reed. The
Compensation Committee met five times during 2021.
Nominating and Governance Committee
Subject to its charter, the general functions of the Nominating and
Governance Committee are (i) to recruit, evaluate and nominate
candidates to be presented for appointment or election to serve as
members of the Board; (ii) to recommend nominees for Board
committees; (iii) to recommend corporate governance guidelines
applicable to the Company; and (iv) to oversee the evaluation and
effectiveness of the Board and its committees. The current members
of the Nominating and Governance Committee are Richard C.
Williams, Howard C. Birndorf, Meera J. Desai and Vickie S. Reed.
The Nominating and Governance Committee met two times during
2021.
Compensation
Committee Interlocks and Insider Participation
No
executive officer has served as a director or member of the Board
or the Compensation Committee (or other committee serving an
equivalent function) of any other entity while an executive officer
of that other entity served as a director of or member of our Board
or our Compensation Committee. Our chief executive officer may
participate in discussions with the Compensation Committee
regarding salaries and incentive compensation for other named
executive officers, except for discussions regarding his own salary
and incentive compensation.
Director
Nomination Procedures
The
Nominating and Governance Committee is responsible for recommending
to the Board the nominees for election as directors at any meeting
of stockholders and the persons to be elected by the Board to fill
any vacancies on the Board. In making such recommendations, the
committee will consider candidates timely and properly proposed by
stockholders. Stockholders may submit a candidate's name and
qualifications to the Board by mailing a letter to the attention of
the Corporate Secretary, Adamis Pharmaceuticals Corporation, 11682
El Camino Real, Suite 300, San Diego, California 92130, and
providing the information required by the Bylaws along with any
additional supporting materials the security holder considers
appropriate. The committee will review and evaluate information
available to it regarding candidates timely and properly proposed
by stockholders and will apply the same criteria, and will follow
substantially the same process in considering them, as it does in
considering candidates identified by members of the Board or senior
management, except that the committee may consider, as one of the
factors in its evaluation of stockholder recommended candidates,
the size and duration of the interest of the recommending
stockholder or stockholder group in the equity of the Company. The
committee has not adopted a formal policy with respect to a fixed
set of specific minimum qualifications for its candidates for
membership on the board of directors. In considering potential new
directors, the committee considers a variety of factors, including:
(i) reputation for integrity, honesty and high ethical standards;
(ii) demonstrated business acumen, experience and ability to
exercise sound judgments in matters that relate to our current and
long-term objectives and willingness and ability to contribute
positively to our decision-making process; (iii) commitment to
understanding our business and our industry; (iv) adequate time to
attend and participate in meetings of the Board and its committees;
(v) ability to understand the sometimes conflicting interests of
the various constituencies of the Company, which include
stockholders, employees, customers, governmental units, creditors
and the general public and to act in the interests of all
stockholders; and (vi) such other attributes, including
independence, that satisfy requirements imposed by the Securities
and Exchange Commission ("SEC") and the NASDAQ listing standards.
The committee believes that the qualifications and strengths of an
individual in totality, rather than any specific factor, should be
primary, with a view to nominating persons for the election to the
Board whose backgrounds, integrity, and personal characteristics
indicate that they will make a contribution to the Board. The
committee is generally of the view that the continuing service of
qualified incumbents promotes stability and continuity in the
boardroom, giving the Company the benefit of the familiarity and
insight into the Company's affairs that its directors have
accumulated during their tenure, while contributing to the Board's
ability to work as a collective body. Accordingly, it is the
general policy of the committee, absent special circumstances, to
nominate qualified incumbent directors who continue to satisfy the
committee's criteria for membership on the Board, who the committee
believes will continue to make important contributions to the Board
and who consent to stand for reelection. The committee does not
have a specific policy with regard to the consideration of
diversity in identifying director candidates. However, the
committee values diversity on our Board and considers the diversity
of the professional experience, education and skills, as well as
diversity of origin, in identifying director candidates.
Stockholder
Communications with the Board
Stockholders
may send communications to the Board or individual members of the
Board by writing to them, care of Adamis Pharmaceuticals
Corporation, Attention: Corporate Secretary, at 11682 El Camino
Real, Suite 300, San Diego, California 92130. Communications will
be forwarded to the intended director or directors. If the
stockholder wishes the communication to be confidential, then the
communication should be provided in a form that will maintain
confidentiality.
Required
Vote
Each
director is elected by a plurality of the votes cast on the
election of directors at a meeting at which a quorum is present. As
a result, assuming that a quorum is present at the Meeting, the
nominees who receive the highest number of votes, up to the number
of directors to be elected at the Meeting, will be elected.
Abstentions and broker non-votes will not be counted in determining
which nominees receive the largest number of votes cast and
therefore will have no effect on the outcome of the vote on this
proposal. The persons named in the enclosed proxy will vote the
proxies they receive “FOR” the election of the nominees named
above, unless a particular proxy card withholds authorization to do
so or provides contrary instructions.
Recommendation
of the Board of Directors
FOR PROPOSAL 1,
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF THE
CANDIDATES NOMINATED BY THE BOARD. |
PROPOSAL
2 - AMENDMENT TO THE COMPANY’S
RESTATED
CERTIFICATE OF INCORPORATION TO EFFECT A
REVERSE
STOCK SPLIT OF COMMON STOCK
Introduction
The Board has unanimously approved an amendment to our Restated
Certificate of Incorporation (the “Restated Certificate”), which
would effect a reverse stock split (“Reverse Stock Split”) of all
issued and outstanding shares of our Common Stock, at a ratio
ranging from 1-for-2 to 1-for-15, inclusive. Effecting a Reverse
Stock Split would reduce the number of outstanding shares of our
Common Stock. The decision whether or not to effect a Reverse Stock
Split and the ratio of any Reverse Stock Split will be determined
by the Board following the Meeting and prior to December 31, 2022.
The Board has recommended that the proposed amendment be presented
to our stockholders for adoption and approval (the “reverse stock
split proposal”).
Our stockholders are being asked to adopt and approve the reverse
stock split proposal pursuant to this Proposal 2 and to grant
authorization to the Board to determine, at its option, whether to
implement a Reverse Stock Split, including its specific timing and
ratio. Should we receive the required stockholder approvals for
Proposal 2, the Board will have the sole authority to elect, at any
time on or prior to December 31, 2022, and without the need
for any further action on the part of our stockholders, whether to
effect a Reverse Stock Split and the number of whole shares of our
Common Stock, between and including two (2) and fifteen (15), that
will be combined into one share of our Common Stock.
By approving Proposal 2, our stockholders will: (a) approve an
amendment to our Restated Certificate pursuant to which any whole
number of outstanding shares of common stock between and including
two (2) and fifteen (15) could be combined into one share
of Common Stock; and (b) authorize the Board to file such
amendment with the Secretary of State of the State of Delaware, as
determined by the Board at its sole option. The Board may also
elect not to undertake any Reverse Stock Split and therefore
abandon the amendment. No further action on the part of
stockholders will be required to either implement or abandon the
Reverse Stock Split. If a Reverse Split Certificate of Amendment
effecting the Reverse Stock Split has not been filed with the
Secretary of State of the State of Delaware by the close of
business on December 31, 2022, our Board will abandon the
Reverse Stock Split, and stockholder approval would again be
required prior to implementing any Reverse Stock Split.
The form of the proposed amendment to the Restated Certificate to
effect the Reverse Stock Split is as set forth on Annex
A (subject to the Board’s selection of the applicable
reverse stock split ratio). The Reverse Stock Split, if effected,
would affect all of our holders of Common Stock uniformly. The
following description of the proposed amendment is a summary and is
subject to the full text of the proposed Certificate of Amendment
to our Restated Certificate, which is attached to this Proxy
Statement as Annex A (the “Reverse Split Certificate of
Amendment”).
Background
of the Reverse Split
Our
Common Stock is publicly traded and listed on The Nasdaq Capital
Market under the symbol “ADMP.” On December 31, 2021, the
Nasdaq Listing Qualifications Department of The Nasdaq Capital
Market (“Nasdaq”) notified us that the closing bid price of our
Common Stock had been below $1.00 per share for 30 consecutive
business days, and as a result we did not comply with the minimum
bid price requirement for continued listing on The Nasdaq Capital
Market. Listing Rule 5550(a)(2) (“Bid Price Rule”). Pursuant to
Nasdaq Marketplace Rule 5810(c)(3)(A), we were provided an initial
compliance period of 180 calendar days, or until June 29, 2022, to
regain compliance. The notice stated that if at any time before
June 29, 2022, the bid price of our Common Stock closes at or above
$1.00 per share for a minimum of 10 consecutive business days,
Nasdaq will provide written notification that we have achieved
compliance with the minimum bid price requirement, and the matter
would be resolved. The notice letter also disclosed that if we do
not regain compliance within the initial compliance period, we may
be eligible for an additional 180-day compliance period. To
qualify for additional time, we would be required to meet the
continued listing requirement for market value of publicly held
shares and all other initial listing standards for The Nasdaq
Capital Market, with the exception of the bid price requirement,
and would need to provide written notice of a plan to cure the
deficiency during the second compliance period, including by
effecting a reverse stock split if necessary. If we meet these
requirements, Nasdaq would inform us that we have been granted an
additional 180 calendar days to regain compliance. However, if it
appears to the staff of Nasdaq that we will not be able to cure the
deficiency, or if we are otherwise not eligible, the staff would
notify us that we will not be granted additional 180 days for
compliance and will be subject to delisting at that time. In the
event of such notification, we may appeal the staff’s determination
to delist our securities, but there can be no assurance that any
such appeal would be successful.
We
intend to monitor the closing bid price for our Common Stock and
will consider available strategies in an effort to satisfy the Bid
Price Rule. However, there are no assurances that we will be able
to regain compliance with the minimum bid price requirements or
will otherwise be in compliance with other Nasdaq listing
rules.
Reasons
for the Reverse Stock Split
For
the reasons described below, among others, we believe that
effecting the Reverse Stock Split is in the Company’s and our
stockholders’ best interests.
Meet Continued Nasdaq Listing Requirements. Our Board approved
the reverse stock split proposal with a primary intent of
increasing the per share trading price of our Common Stock in order
to meet The Nasdaq Capital Market’s price criteria for continued
listing on that exchange. If the Company does not meet the minimum
bid requirement by the end of initial compliance period or during
any additional grace period, its shares will be subject to
delisting. If an issuer’s equity security is delisted from
Nasdaq, it may be forced to seek to have its equity security traded
or quoted on the OTC Bulletin Board or in the “pink sheets.” Such
alternatives are generally considered to be less efficient markets
and not as broad as Nasdaq, and therefore less desirable.
Accordingly, the delisting, or even the potential delisting, of an
equity security could have a negative impact on the liquidity and
market price of the equity security.
As
such, our Board believes that it is in the best interest of the
Company and its stockholders that the Board has the ability to
effect, in its discretion, the Reverse Stock Split to improve the
price level of our Common Stock so that we are able to maintain
continued compliance with the Bid Price Rule and minimize the risk
of delisting from Nasdaq.
Any
delisting from The Nasdaq Capital Market would likely result in
further reductions in the market prices of our Common Stock,
substantially limit the liquidity of our Common Stock, and
materially adversely affect our ability to raise capital or pursue
strategic restructuring, refinancing or other transactions on
acceptable terms, or at all. Delisting from Nasdaq could also have
other negative results, including the potential loss of
institutional investor interest, fewer business development
opportunities, and the inability to raise additional required
capital. In addition, the SEC has adopted rules governing “penny
stocks” that impose additional burdens on broker-dealers trading in
stock priced at below $5.00 per share, unless listed on certain
securities exchanges. In the event of a delisting, we would attempt
to take actions to restore our compliance with Nasdaq’s listing
requirements, but we can provide no assurance that any such action
taken by us would allow our Common Stock to become listed again,
stabilize the market price or improve the liquidity of our Common
Stock, prevent our Common Stock from dropping below the Nasdaq
minimum bid price requirement or prevent future non-compliance with
Nasdaq’s listing requirements.
Appeal to a Broader Range of Investors to Generate Greater Investor
Interest in the Company. In addition to regaining compliance
with the Nasdaq minimum bid listing requirements, we also believe
that the Reverse Stock Split and an increase in our stock price may
make our Common Stock more attractive to a broader range of
institutional and other investors (including funds that are
prohibited from buying stocks whose price is below a certain
threshold) and facilitate higher levels of institutional stock
ownership, where investment policies generally prohibit investments
in lower-priced securities, as well as better enable us to raise
funds to help finance operations. We understand that many
brokerage firms and institutional investors have internal policies
and practices that either prohibit them from investing in
low-priced stocks or tend to discourage individual brokers from
recommending low-priced stocks to their customers, which reduces
the number of potential purchasers of our Common Stock. In
addition, some of those policies and practices may function to make
the processing of trades in low-priced stocks economically less
attractive to brokers. Investors may also be dissuaded from
purchasing lower-priced stocks because the brokerage commissions, as a percentage of
the total transaction, tend to be higher for such stocks.
Moreover, we believe the analysts at many brokerage firms do not
monitor the trading activity or otherwise provide coverage of
lower-priced stocks. Further, lower-priced stocks have a perception
in the investment community as being more risky and speculative,
which may negatively impact not only the price of our Common Stock,
but also our market liquidity.
Criteria
to be Used for Determining Reverse Stock Split Ratio
In
determining which reverse stock split ratio to implement, if any,
following receipt of stockholder approval of the amendment to our
Restated Certificate to effect the Reverse Stock Split, the Board
may consider, among other things, various factors, such
as:
|
● |
the
historical and expected trading prices and trading volumes of our
Common Stock; |
|
|
|
|
● |
The
Nasdaq Capital Market Continued Listing Standards
requirements; |
|
|
|
|
● |
the
number of shares of our Common Stock outstanding; |
|
|
|
|
● |
the
then-prevailing trading prices and trading volumes of our Common
Stock and the expected impact of the Reverse Stock Split on the
trading market for our Common Stock in the short- and
long-term; |
|
|
|
|
● |
overall
trends in the stock market; |
|
|
|
|
● |
the
anticipated impact of a particular ratio on our ability to reduce
administrative and transactional costs; |
|
|
|
|
● |
business
developments and our actual and projected financial performance;
and |
|
|
|
|
● |
prevailing
general market and economic conditions. |
We reserve the right to abandon a Reverse Stock Split without
further action by our stockholders at any time before the
effectiveness of the filing with the Secretary of the State of
Delaware of the Reverse Split Certificate of Amendment, even if the
authority to effect a Reverse Stock Split has been approved by our
stockholders at the Meeting. If the reverse stock split proposal is
adopted and approved, we could effect the Reverse Stock Split at
any time after the Meeting until December 31, 2022. By voting
in favor of a Reverse Stock Split, you are expressly also
authorizing the Board to delay, not to proceed with, and abandon, a
Reverse Stock Split if it should so decide, in its sole discretion,
that such action is in the best interests of the stockholders.
Certain
Risks Associated with a Reverse Stock Split
There
are certain risks associated with a reverse stock split, and we
cannot accurately predict or assure that the Reverse Stock Split
will produce or maintain the desired results. However, our Board
believes that the benefits to the Company and our stockholders
outweigh the risks and recommends that you vote in favor of the
reverse stock split proposal.
We cannot assure you that the proposed Reverse Stock Split, if
effected, will increase our stock price. There can be no
assurance that the total market capitalization of our Common Stock
(the aggregate value of all of our outstanding Common Stock at the
then market price after the Reverse Stock Split) will be equal to
or greater than the total market capitalization before the Reverse
Stock Split, or that the per share market price of our Common Stock
following the Reverse Stock Split will either equal or exceed the
current per share market price. At June [___], 2022, the
closing sale price of our Common Stock on The Nasdaq Capital Market
was $[__] per share. Reducing the number of outstanding shares of
our Common Stock through the Reverse Stock Split, if we decide to
proceed with the Reverse Stock Split, is intended to increase the
per share trading price of our Common Stock to exceed the minimum
bid price requirement for continued listing on The Nasdaq Capital
Market for at least the required period of time. However, we cannot
assure you that the market price per share of our Common Stock
after the Reverse Stock Split will rise or remain constant in
proportion to the reduction in the number of shares of Common Stock
outstanding before the Reverse Stock Split. Even if we implement
the Reverse Stock Split, the per share trading price of our Common
Stock may decrease due to factors unrelated to the Reverse Stock
Split. The effect of the Reverse Stock Split on the per share
trading price of our Common Stock cannot be predicted with any
certainty, and the history of reverse stock splits for other
companies is varied, particularly since some investors may view a
reverse stock split negatively. In many cases, the market price of
a company's shares declines after a reverse stock split, or the
market price of a company's shares immediately after a reverse
stock split does not reflect a proportionate or mathematical
adjustment to the market price based on the ratio of the reverse
stock split. Other factors, such as our financial results, market
conditions and the market perception of our business, may adversely
affect the per share trading price of our Common Stock.
Accordingly, the total market capitalization of our Common Stock
and the Company after the Reverse Stock Split may be lower than the
total market capitalization before the Reverse Stock Split, and it
is possible that the Reverse Stock Split may not result in a per
share trading price that would attract investors who do not trade
in lower priced stocks. As a result, there can be no assurance that
the Reverse Stock Split, if completed, will result in the benefits
that we anticipate or that the per share trading price of our
Common Stock will not decrease in the future.
The proposed Reverse Stock Split may decrease the liquidity of our
Common Stock and result in higher transaction costs. The
liquidity of our Common Stock may be negatively impacted by the
Reverse Stock Split, given the reduced number of shares that would
be outstanding after the Reverse Stock Split, particularly if the
per share trading price does not increase proportionately as a
result of the Reverse Stock Split. In addition, if the Reverse
Stock Split is implemented, it will increase the number of our
stockholders who own “odd lots” of fewer than 100 shares of Common
Stock. Brokerage commission and other costs of transactions in odd
lots are generally higher than the costs of transactions of more
than 100 shares of Common Stock. In addition, although we believe
the Reverse Stock Split may enhance the marketability of our Common
Stock to certain potential investors, we cannot assure you that, if
implemented, our Common Stock will be more attractive to investors.
While our Board believes that a higher stock price may help
generate the interest of new investors, the Reverse Stock Split may
not result in a per-share price that will attract certain types of
investors, such as institutional investors or investment funds, and
such share price may not satisfy the investing guidelines of
institutional investors or investment funds. As a result, the
trading liquidity of our Common Stock may not improve as a result
of the Reverse Stock Split and could be adversely affect by a
higher per share price. Accordingly, the Reverse Stock Split may
not achieve the desired results of increasing marketability of our
Common Stock as described above.
The proposed Reverse Stock Split may result in future
dilution to our stockholders. The Reverse Stock Split will
reduce the number of outstanding shares of our Common Stock without
a proportionate reduction in the number of shares of authorized but
unissued Common Stock in our Restated Certificate, which will give
the Company a larger number of authorized shares available to be
issued in the future without further stockholder action, except as
may be required by applicable laws or the rules of any stock
exchange on which our Common Stock is listed. The issuance of
additional shares of our Common Stock may have a dilutive effect on
the ownership of existing stockholders and could also reduce
stockholders’ equity on a per share basis. The issuance in the
future of such additional authorized shares may have the effect of
diluting the earnings per share and book value per share, as well
as the stock ownership and voting rights, of the currently
outstanding shares of Common Stock. In addition, the issuance or
potential issuance of additional shares of common stock may have a
depressive effect on the market price of our Common Stock. If this
Proposal 2 is adopted and approved and a Reverse Stock Split is
effected, then depending on a number of factors, including without
limitation the ratio of the Reverse Stock Split that is effected,
the Board could, in its discretion, in the future consider
submitting a proposal for consideration at a future meeting of
stockholders to reduce the number of authorized shares of Common
Stock in the Company’s Restated Certificate.
Even if the Reverse Stock Split is effected, we may not be able to
satisfy all of the other requirements for continued listing of our
Common Stock on The Nasdaq Capital Market or other stock
exchange. As discussed above, the Board is submitting the
Reverse Stock Split proposed to our stockholders for approval with
the primary intent of increasing the market price and minimum bid
prices of our Common Stock to regain and maintain compliance with
the listing requirements of The Nasdaq Capital Market and to make
our Common Stock more attractive to a broader range of
institutional and other investors. However, continued listing on
such exchange requires compliance with a variety of other
qualitative and quantitative listing standards. Even if we effect
the Reverse Stock Split, we may not be able to satisfy or maintain
listing requirements on The Nasdaq Capital Market or any other
stock exchange. We cannot provide any assurances that we will be
able to maintain a listing of the Common Stock on The Nasdaq
Capital Market or any other stock exchange.
Potential
Anti-Takeover Effect
A
Reverse Stock Split would result in an increased proportion of
unissued authorized shares to issued shares, which could have
possible anti-takeover effects and could be used by us to oppose a
hostile takeover attempt or to delay or prevent changes in our
control or management (for example, by permitting issuances that
would dilute the stock ownership of a person seeking to effect a
change in the composition of the Board or contemplating a tender
offer or other transaction for the combination of us with another
company). These authorized but unissued shares could (within the
limits imposed by applicable law) be issued in one or more
transactions that could make a change of control of the Company
more difficult, and therefore more unlikely, or used to resist or
frustrate a third-party transaction that is favored by a majority
of the independent stockholders (for example, by permitting
issuances that would dilute the stock ownership of a person seeking
to effect a change in the composition of the Board or management of
the Company or contemplating a tender offer or other transaction
for the combination of the Company with another company). For
example, without further stockholder approval, the Board could
(within the limits imposed by applicable law) strategically sell
shares of Common Stock in a private transaction to purchasers who
would oppose a takeover or favor our then current Board, or the
shares could be available for potential issuance pursuant to a
shareholder rights plan. The additional authorized shares could be
used to discourage persons from attempting to gain control of the
Company by diluting the voting power of shares then outstanding or
increasing the voting power of persons that would support the Board
in a potential takeover situation, including by preventing or
delaying a proposed business combination that is opposed by the
Board although perceived to be desirable by some stockholders. The
issuance of additional shares to certain persons allied with our
management could have the effect of making it more difficult to
remove our current management by diluting the stock ownership or
voting rights of persons seeking to cause such removal. Despite
these possible anti-takeover effects, this reverse stock split
proposal has been prompted by business and financial considerations
and not by the threat of any hostile takeover attempt or any effort
of which we are aware to accumulate our stock or to obtain control
of our company by means of a merger, tender offer, solicitation in
opposition to management or otherwise (nor is the Board currently
aware of any such attempts directed at us). Nevertheless,
stockholders should be aware that approval of this proposal could
facilitate future efforts by us to deter or prevent changes in our
control, including transactions in which the stockholders might
otherwise receive a premium for their shares over then current
market prices.
Procedure
for Implementing the Reverse Stock Split
The effective time of the Reverse Stock Split (the “Effective
Time”), if approved by stockholders and implemented by the Company,
will be the date and time the Reverse Split Certificate of
Amendment is filed with the Delaware Secretary of State (unless a
different date and time is set forth in the Reverse Split
Certificate of Amendment, in which case the Effective Time of the
Reverse Split Certificate of Amendment will be the date and time
set forth in such certificate). If the reverse stock split proposal
is adopted and approved and the Board determines to proceed with
the Reverse Stock Split, the exact timing of the filing of the
Reverse Split Certificate of Amendment will be determined by our
Board.
If, at any time prior to the filing of the Reverse Split
Certificate of Amendment with the Delaware Secretary of State,
notwithstanding stockholder approval and without further action by
the stockholders, the Board, in its sole discretion, determines
that it is in the Company’s best interests and the best interests
of the Company’s stockholders to delay the filing of the Reverse
Split Certificate of Amendment or abandon the Reverse Stock Split,
the Reverse Stock Split may be delayed or abandoned. The Company
reserves the right to abandon a reverse stock split without further
action by our stockholders at any time before the effectiveness of
the filing with the Secretary of the State of Delaware of the
Reverse Split Certificate of Amendment, even if the Reverse Stock
Split has been approved by our stockholders at the Meeting.
If a
Reverse Stock Split is effected, then after the Effective Time, our
Common Stock will have new Committee on Uniform Securities
Identification Procedures (CUSIP) numbers, which is a number used
to identify our equity securities, and stock certificates with the
older CUSIP numbers will need to be exchanged for stock
certificates with the new CUSIP numbers by following the procedures
described below. Our Common Stock will continue to be listed on The
Nasdaq Capital Market under the symbol "ADMP" subject to any future
change of listing of our securities.
Principal
Effects of the Reverse Stock Split
General
The
Reverse Stock Split, if implemented by the Board, will reduce the
total number of outstanding shares of Common Stock based on the
exchange ratio determined by the Board in its discretion, and it
will apply automatically to all shares of our Common Stock,
including shares issuable upon the exercise or conversion of
outstanding stock options, RSUs, warrants and convertible
securities. The Reverse Stock Split would be effected
simultaneously for all shares of our Common Stock, and the exchange
ratio would be the same for all shares of Common Stock. The Reverse
Stock Split would affect all of our stockholders uniformly and
would not affect any stockholder's percentage ownership interests
in the Company, except with respect to the treatment of fractional
shares. The principal effect of the Reverse Stock Split will be to
proportionately decrease the number of outstanding shares of our
Common Stock based on the reverse stock split ratio selected by our
Board.
Voting
rights and other rights of the holders of our Common Stock will not
be affected by the Reverse Stock Split, other than as a result of
the treatment of fractional shares. The number of stockholders of
record will not be affected by the Reverse Stock Split (except to
the extent any are cashed out as a result of holding fractional
shares). If approved and implemented, the Reverse Stock Split may
result in some stockholders owning “odd lots” of less than 100
shares of our Common Stock. Odd lot shares may be more difficult to
sell, and brokerage commissions and other costs of transactions in
odd lots are generally somewhat higher than the costs of
transactions in “round lots” of even multiples of 100 shares. Our
Board believes, however, that these potential effects are
outweighed by the benefits of the Reverse Stock Split.
Our
Common Stock is currently registered under Section 12(b) of
the Exchange Act, and we are subject to the periodic reporting and
other requirements of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). After the Reverse Stock Split, we
will continue to be subject to the periodic reporting and other
requirements of the Exchange Act. The Reverse Stock Split would not
affect our securities law reporting and disclosure obligations, and
we would continue to be subject to the periodic reporting
requirements of the Exchange Act.
Authorized Shares; Number of Shares of Common Stock Available for
Future Issuance
The proposed Reverse Split Certificate of Amendment, which would
amend our Restated Certificate and effect a Reverse Stock Split,
does not reduce the number of authorized shares of Common Stock set
forth in our Restated Certificate, which is currently 200,000,000.
The Reverse Stock Split will result in a reduction of the total
outstanding shares of Common Stock and shares reserved for issuance
under outstanding options, restricted stock units, warrants and
convertible securities, without a proportionate reduction in the
number of shares of Common Stock that the Company is authorized to
issue under the Restated Certificate. Accordingly, if this Proposal
2 is approved and a Reverse Stock Split is effected, after the
Reverse Stock Split we will have a larger number of authorized
unissued shares relative to the number of outstanding shares of
Common Stock, and we will have the ability under our Restated
Certificate to issue new shares of Common Stock up to the number of
authorized shares set forth therein, without further vote of the
stockholders of the Company, except as required under Delaware
corporate law or under the rules of Nasdaq or other securities
exchange on which shares of Common Stock of the Company are then
listed. If this Proposal 2 is approved, then the additional
authorized shares may be issued in the future for a variety of
corporate purposes as the Board considers advisable, including, but
not limited to, the following: capital raising transactions
involving equity or convertible debt securities; providing equity
incentives to employees, directors, consultants or advisors under
equity incentive plans or otherwise; establishing strategic
relationships with other companies; expanding our business through
the acquisition of other businesses, technologies or products;
stockholder right plans; stock splits or stock dividends; or other
corporate purposes. Such shares could be issued directly, or could
be reserved for issuance and then issued pursuant to the exercise
of warrants, options, restricted stock units (“RSUs”), or on
conversion of convertible securities that we may issue in the
future. In the event that our Board determines to issue additional
shares of Common Stock, it intends, in accordance with its
fiduciary duties, to issue any such shares on terms that it
considers to be in the best interests of the Company and our
stockholders. The Board believes that these additional authorized
shares will provide the Company with the needed ability to issue
shares in the future to take advantage of market conditions or
favorable opportunities. With the exception of shares that are
issuable upon the exercise of outstanding options, warrants and
RSUs, as of the date of this Proxy Statement we do not have any
commitments, arrangements, agreements or understandings to issue
any of the authorized but unissued shares that would become
available as a result of approval of this Proposal and carrying out
a Reverse Stock Split. However, we may issue additional shares of
Common Stock in the future, which would include the additional
shares authorized by this Proposal, in connection with raising
additional capital for the Company. As we have previously disclosed
in our filings with the SEC, the development of our business will
require significant additional funding, and continued operations
depend on our ability to raise additional funding, which could
occur through fundraising transactions that involve issuance of
shares of Common Stock or securities convertible into or
exercisable for Common Stock, and approval of this Proposal would
provide the shares that could be used in such transactions. If this
Proposal 2 is approved, we may issue additional shares of Common
Stock or securities convertible into or exercisable for shares of
Common Stock from time to time in the future, including pursuant to
our registration statements previously filed with the SEC or new
registration statements that we may file in the future, and to the
extent that we do so, the shareholdings of our existing
stockholders will be diluted by such issuances. We currently cannot
estimate the number of shares of Common Stock that may be issued in
the future in any such fundraising transaction, as the number of
shares would depend on a number of factors including the trading
price of the Common Stock at the time of any such financing, the
amount of capital the Company is able to raise, the Company’s need
for capital, the terms of any such transaction, and general market
conditions. Except for a stock split or stock dividend, future
issuances of common shares will dilute the voting power and
ownership of our existing stockholders and, depending on the amount
of consideration received in connection with the issuance, could
also reduce stockholders’ equity on a per share basis. If the Board
authorizes the issuance of additional shares after the Reverse
Stock Split, the dilution to the ownership interest of our existing
stockholders may be greater than would occur had the Reverse Stock
Split not been effected.
For
illustrative purposes only, the following table contains
approximate information, based on 149,983,265 shares of Common
Stock outstanding as of March 31, 2022, that would result from the
listed hypothetical reverse stock split ratios, without giving
effect to the treatment of fractional shares.
Reverse
Split Ratio(1) |
|
Total
Authorized(2) |
|
Issued and
Outstanding(3) |
|
Reserved for
Future
Issuance(4)
|
|
Authorized
Shares
Available
Post-Reverse
Split
|
As
of March 31, 2022 |
|
|
200,000,000 |
|
|
149,733,265 |
|
|
34,190,782 |
|
|
16,075,953 |
1-for-2 |
|
|
200,000,000 |
|
|
74,866,632 |
|
|
17,095,391 |
|
|
108,037,977 |
1-for-3 |
|
|
200,000,000 |
|
|
49,911,088 |
|
|
11,396,927 |
|
|
138,691,985 |
1-for-4 |
|
|
200,000,000 |
|
|
37,433,316 |
|
|
8,547,695 |
|
|
154,018,989 |
1-for-5 |
|
|
200,000,000 |
|
|
29,946,653 |
|
|
6,838,156 |
|
|
163,215,191 |
1-for-6 |
|
|
200,000,000 |
|
|
24,955,544 |
|
|
5,698,463 |
|
|
169,345,993 |
1-for-7 |
|
|
200,000,000 |
|
|
21,390,466 |
|
|
4,884,397 |
|
|
173,725,137 |
1-for-8 |
|
|
200,000,000 |
|
|
18,716,658 |
|
|
4,273,847 |
|
|
177,009,495 |
1-for-9 |
|
|
200,000,000 |
|
|
16,637,029 |
|
|
3,798,975 |
|
|
179,563,996 |
1-for-10 |
|
|
200,000,000 |
|
|
14,973,326 |
|
|
3,419,078 |
|
|
181,607,596 |
1-for-11 |
|
|
200,000,000 |
|
|
13,612,115 |
|
|
3,108,252 |
|
|
183,279,633 |
1-for-12 |
|
|
200,000,000 |
|
|
12,477,772 |
|
|
2,849,231 |
|
|
184,672,997 |
1-for-13 |
|
|
200,000,000 |
|
|
11,517,943 |
|
|
2,630,060 |
|
|
185,851,997 |
1-for-14 |
|
|
200,000,000 |
|
|
10,695,233 |
|
|
2,442,198 |
|
|
186,862,569 |
1-for-15 |
|
|
200,000,000 |
|
|
9,982,217 |
|
|
2,279,385 |
|
|
187,738,398 |
(1) |
Proposed
ratios ranging from 1-for-2 to 1-for-15, inclusive. |
|
|
(2) |
Total
authorized shares of Common Stock as of March 31, 2022. |
|
|
(3) |
Does
not include shares reserved for future issuance pursuant to
outstanding options, warrants, restricted stock units and future
awards under the Company’s 2020 Equity Incentive Plan (the “2020
Plan”). Please note that between the date of this Proxy
Statement and the date of the Meeting, we could engage in
transactions involving the issuance of securities that would
increase the number of issued or issuable shares from the numbers
reflected in the above tables. Does not reflect the
impact of fractional shares. |
|
|
(4) |
Includes
and based on, as of March 31, 2022: (i) 4,786,142 shares of Common
Stock issuable upon exercise of outstanding stock options granted
under the Prior Plan at a weighted average exercise price of $4.19
per share; (ii) 14,202,824 shares issuable upon the exercise of
outstanding warrants at a weighted average exercise price of $1.17
per share; (iii) 900,000 shares issuable upon the exercise of
outstanding restricted stock units; (iv) 130,000 shares issuable
upon the exercise of outstanding options not granted under the 2009
Equity Incentive Plan or the 2020 Equity Incentive Plan (the "2020
Plan"); and (v) 14,171,816 shares authorized to be issued under the
2020 Equity Incentive Plan upon awards that may be made in the
future under that plan. Does not include future annual increases in
the number of shares available to be issued pursuant to the 2020
Plan. |
The
actual number of shares outstanding after giving effect to the
Reverse Stock Split, if implemented, will depend on the reverse
stock split ratio that is ultimately determined by the Board. No
shares of our preferred stock are outstanding and the total number
of authorized shares of preferred stock will not be affected by the
Reverse Stock Split.
Effect on Par Value
The
proposed amendments to our Restated Certificate will not affect the
par value of our Common Stock or Preferred Stock, which will remain
at $0.0001 per share.
Effect of the Reverse Stock Split on Employee Plans, Options,
Restricted Stock Awards and Units, Warrants, and Convertible or
Exchangeable Securities
Based
upon the reverse stock split ratio determined by the Board,
proportionate adjustments are generally required to be made to the
per share exercise price and the number of shares issuable upon the
exercise or conversion of all outstanding options, warrants,
restricted stock units, and convertible or exchangeable securities
entitling the holders to acquire, purchase, exchange for, or
convert into, shares of Common Stock, including, without
limitation, any awards previously granted under our 2009 Equity
Incentive Plan or 2020 Equity Incentive Plan. Additionally, the
exercise prices of outstanding options and warrants, and the
conversion prices of our outstanding convertible securities, would
increase, likewise in proportion to the reverse stock split ratio.
This would result in approximately the same aggregate price being
required to be paid under such options, warrants, convertible or
exchangeable securities upon such exercise, conversion or exchange,
immediately following the Reverse Stock Split as was the case
immediately preceding the Reverse Stock Split. The number of shares
deliverable upon settlement or vesting of restricted stock or
restricted stock unit awards will be similarly adjusted, subject in
all cases to our treatment of fractional shares. In addition, the
number of shares available for issuance upon options and other
awards granted under our equity incentive plans would be
proportionately decreased.
Effect on Preferred Stock
As of the date of this Proxy Statement, except for [_______] shares
of Series C Preferred, there were no issued or outstanding shares
of our Preferred Stock and no outstanding options or warrants to
purchase shares of our Preferred Stock. The Reverse Stock Split
would not impact the number of authorized or outstanding shares of
our Preferred Stock.
Record and Beneficial Holders
If this Proposal 2 is adopted and approved by our stockholders and
our Board elects to implement a Reverse Stock Split, stockholders
of record holding all of their shares of Common Stock
electronically in book-entry form under the direct registration
system for securities will be exchanged by the exchange agent and
will receive a transaction statement at their address of record
indicating the number of new post-split shares of Common Stock they
hold after the Reverse Stock Split along with payment of fair value
for, and in lieu of, any fractional shares. Non-registered
stockholders holding Common Stock through a bank, broker or other
nominee should note that such banks, brokers or other nominees may
have different procedures for processing the Reverse Stock Split
and making payment for fractional shares than those that would be
put in place by us for registered stockholders. If you hold your
shares with such a bank, broker or other nominee and if you have
questions in this regard, you are encouraged to contact your
nominee.
If this Proposal 2 is approved by our stockholders and our Board
elects to implement a Reverse Stock Split, stockholders of record
holding some or all of their shares in certificate form will
receive a letter of transmittal from the Company or its exchange
agent, as soon as reasonably practicable after the effective date
of the Reverse Stock Split. Our transfer agent is expected to act
as “exchange agent” for the purpose of implementing the exchange of
stock certificates. Holders of pre-Reverse Stock Split shares will
be asked to surrender to the exchange agent certificates
representing pre-Reverse Stock Split shares in exchange for
post-Reverse Stock Split shares and payment in lieu of fractional
shares (if any) in accordance with the procedures to be set forth
in the letter of transmittal. No new post-Reverse Stock Split share
certificates will be issued to a stockholder until such stockholder
has surrendered such stockholder’s outstanding certificate(s)
together with the properly completed and executed letter of
transmittal to the exchange agent.
STOCKHOLDERS
SHOULD NOT DESTROY ANY PRE-SPLIT STOCK CERTIFICATE AND SHOULD NOT
SUBMIT ANY CERTIFICATES UNTIL THEY ARE REQUESTED TO DO
SO.
Fractional
Shares
No
fractional shares will be issued in connection with the Reverse
Stock Split. Stockholders of record who otherwise would be entitled
to receive fractional shares, after aggregating all fractional
shares held by the stockholder, will be entitled to an amount in
cash (without interest or deduction) equal to the closing sale
price per share of the Company’s Common Stock as reported on The
Nasdaq Capital Market on the last trading day preceding the
effective date of the Reverse Stock Split multiplied by the number
of shares of Pre-Reverse Stock Split shares of Common Stock held by
the stockholder that would otherwise have been exchanged for such
fractional share. No transaction costs would be assessed to
stockholders for the cash payment. Stockholders would not be
entitled to receive interest for their fractional shares. Except
for the right to receive the cash payment in lieu of fractional
shares, stockholders will not have any voting, dividend or other
rights with respect to the fractional shares they would otherwise
be entitled to receive.
Stockholders
of record who are entitled to receive fractional share payments
will not be entitled to receive interest for the period of time
between the Effective Time and the date payment is made for their
fractional share interest. You should also be aware that, under the
escheat laws of certain jurisdictions, sums due for fractional
interests that are not timely claimed after the funds are made
available may be required to be paid to the designated agent for
each such jurisdiction. Thereafter, stockholders otherwise entitled
to receive such funds may have to obtain the funds directly from
the state to which they were paid.
YOU
SHOULD NOT SEND YOUR OLD CERTIFICATES NOW. YOU SHOULD SEND THEM
ONLY AFTER YOU RECEIVE THE LETTER OF TRANSMITTAL FROM OUR TRANSFER
AGENT.
Accounting
Matters
The
proposed amendment to the Company’s Restated Certificate will not
affect the par value of our Common Stock per share, which will
remain $0.0001 par value per share. As a result of the Reverse
Stock Split, upon the Effective Time, the stated capital on our
balance sheet attributable to our Common Stock, which consists of
the par value per share of our Common Stock multiplied by the
aggregate number of shares of our Common Stock issued and
outstanding, will be reduced in proportion to the size of the
Reverse Stock Split and the reduction in the shares of Common Stock
outstanding, subject to a minor adjustment in respect of the
treatment of fractional shares, and the additional paid-in capital
account will be credited with the amount by which the stated
capital is reduced. Our stockholders’ equity, in the aggregate,
will remain unchanged.
Additionally,
net income or loss per share for all periods would increase
proportionately as a result of a reverse stock split since there
would be a lower number of shares outstanding. We do not anticipate
that any other material accounting consequences would arise as a
result of a reverse stock split. If we effect the Reverse Stock
Split, in future financial statements we will restate net income or
loss per share and other per share amounts for periods ending
before the Reverse Stock Split to give retroactive effect to the
Reverse Stock Split.
Certain
U.S. Federal Income Tax Consequences of the Reverse Stock
Split
The
following discussion is a summary of certain U.S. federal income
tax consequences of the Reverse Stock Split to the Company and to
stockholders that are “U.S. Holders” as defined below and hold
shares of Common Stock as capital assets for U.S. federal income
tax purposes. This discussion is based upon provisions of the U.S.
Internal Revenue Code of 1986, as amended (the “Code”), the
Treasury regulations promulgated under the Code, and U.S.
administrative rulings and court decisions, all as in effect on the
date hereof and all of which are subject to change, possibly with
retroactive effect, and differing interpretations. Changes in these
authorities may cause the U.S. federal income tax consequences of
the Reverse Stock Split to vary substantially from the consequences
summarized below. The effects of U.S. federal tax laws other than
U.S. federal income tax laws, such as estate and gift tax laws, and
any applicable state, local or non-U.S. tax laws, are not
discussed.
This
discussion is limited to U.S. Holders that hold Common Stock as a
“capital asset” within the meaning of Section 1221 of the Code
(generally, property held for investment). This discussion does not
address all U.S. federal income tax consequences that may be
relevant to a U.S. Holder’s particular circumstances, including the
impact of the alternative minimum tax, the rules related to
“qualified small business stock” within the meaning of
Section 1202 of the Code or the Medicare contribution tax on
net investment income. In addition, it does not address
consequences relevant to U.S. Holders subject to special rules,
including, without limitation: persons that are not U.S. Holders
(as defined below); persons subject to the alternative minimum tax;
U.S. Holders (as defined below) whose functional currency is not
the U.S. dollar; persons holding our common stock as part of a
hedge, straddle or other risk reduction strategy or as part of a
conversion transaction or other integrated investment; banks,
insurance companies, and other financial institutions; small
business investment companies, real estate investment trusts or
regulated investment companies; brokers, dealers or traders in
securities; corporations that accumulate earnings to avoid U.S.
federal income tax; S corporations, partnerships or other entities
or arrangements treated as partnerships for U.S. federal income tax
purposes (and investors therein); tax-exempt organizations or
governmental organizations; retirement plans; persons who hold
their shares of Common Stock pursuant to the exercise of
compensatory stock options, the vesting of previously restricted
shares of stock or otherwise as compensation; persons deemed to
sell our common stock under the constructive sale provisions of the
Code; persons who hold or receive our common stock pursuant to the
exercise of any employee stock option or otherwise as compensation;
and tax-qualified retirement plans.
If a
partnership or other entity classified as a partnership for U.S.
federal income tax purposes holds shares of Common Stock, the tax
treatment of a partner thereof will generally depend upon the
status of the partner, the activities of the partnership and
certain determinations made at the partner level. Accordingly,
partnerships holding Common Stock and the partners in such
partnerships should consult their tax advisors regarding the U.S.
federal income tax consequences to them.
The
Company has not sought and will not seek an opinion of counsel or a
ruling from the Internal Revenue Service (“IRS”) regarding the
federal income tax consequences of the Reverse Stock Split. There
can be no assurance the IRS or a court will not take a position
contrary to that discussed below regarding the tax consequences of
the Reverse Stock Split. The state and local tax consequences of
the Reverse Stock Split may vary as to each stockholder, depending
on the jurisdiction in which such stockholder resides. This
discussion should not be considered as tax or investment advice,
and the tax consequences of the Reverse Stock Split may not be the
same for all stockholders.
EACH
HOLDER OF COMMON STOCK SHOULD CONSULT SUCH HOLDER’S TAX ADVISOR
WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE REVERSE
STOCK SPLIT TO SUCH HOLDER.
For
purposes of the discussion below, a “U.S. Holder” is a beneficial
owner of shares of our Common Stock that for U.S. federal income
tax purposes is or is treated as: (1) an individual citizen or
resident of the United States; (2) a corporation created or
organized under the laws of the United States, any state thereof,
or the District of Columbia; (3) an estate the income of which is
subject to U.S. federal income taxation regardless of its source;
or (4) a trust that (a) is subject to the primary
supervision of a U.S. court and the control of one of more “United
States persons” (within the meaning of Section 7701(a)(30) of
the Code), or (b) has a valid election in effect to be treated
as a United States person for U.S. federal income tax
purposes.
The
Reverse Stock Split should constitute a “recapitalization” for U.S.
federal income tax purposes. As a result, a U.S. Holder generally
should not recognize gain or loss upon the Reverse Stock Split,
except with respect to cash received in lieu of a fractional share
of our Common Stock, as discussed below. A U.S. Holder’s aggregate
tax basis in the shares of our Common Stock received pursuant to
the Reverse Stock Split should equal the aggregate tax basis of the
shares of our Common Stock surrendered (excluding any portion of
such basis that is allocated to any fractional share of our Common
Stock), and such U.S. Holder’s holding period in the shares of our
Common Stock received should include the holding period in the
shares of our Common Stock surrendered. Treasury regulations
promulgated under the Code provide detailed rules for allocating
the tax basis and holding period of the shares of our Common Stock
surrendered to the shares of our Common Stock received pursuant to
the Reverse Stock Split. Holders of shares of our Common Stock
acquired on different dates and at different prices should consult
their tax advisors regarding the allocation of the tax basis and
holding period of such shares.
A
U.S. Holder that receives cash in lieu of a fractional share of our
Common Stock pursuant to the Reverse Stock Split should recognize
capital gain or loss in an amount equal to the difference between
the amount of cash received and the U.S. Holder’s tax basis in the
shares of our Common Stock surrendered that is allocated to such
fractional share of our Common Stock. Such capital gain or loss
should be long-term capital gain or loss if the U.S. Holder’s
holding period for our Common Stock surrendered exceeded one year
at the Effective Time of the Reverse Stock Split. Long-term capital
gains of non-corporate U.S. Holders are generally subject
to preferential tax rates. There are limitations on the
deductibility of capital losses under the Code.
A
U.S. Holder (other than corporations and certain other exempt
recipients) may be subject to information reporting and backup
withholding when such holder receives cash in lieu of a fractional
share of our Common Stock pursuant to the Reverse Stock Split. A
U.S. Holder will be subject to backup withholding if such holder is
not otherwise exempt and such holder does not provide its taxpayer
identification number in the manner required or otherwise fails to
comply with applicable backup withholding tax rules. Backup
withholding is not an additional tax. Any amounts withheld under
the backup withholding rules may be refunded or allowed as a credit
against the U.S. Holder’s federal income tax liability, if any,
provided the required information is timely furnished to the IRS.
U.S. Holders should consult their tax advisors regarding their
qualification for an exemption from backup withholding and the
procedures for obtaining such an exemption.
The
foregoing discussion is for informational purposes only and is not
intended to be, nor should it be construed to be, legal or tax
advice to any particular stockholder. Nor does this discussion bind
the Internal Revenue Service or any court. Moreover, this summary
is not a complete analysis of all potential U.S. federal income tax
consequences and does not address any non-income, foreign, state or
local tax consequences. Accordingly, you are urged to consult your
own tax advisors about the application of the U.S. federal tax laws
(including estate and gift tax laws) to your particular situation
and applicable non-income, state, local and foreign tax
consequences.
No
Appraisal Rights
Under
the Delaware General Corporation Law, our stockholders are not
entitled to dissenter’s rights or appraisal rights with respect to
the Reverse Stock Split described in this proposal, if it is
implemented, and we will not independently provide our stockholders
with any such rights.
No
Going Private Transaction
Notwithstanding
the change in the number of authorized shares and outstanding
shares following the Reverse Stock Split, the Board does not intend
for this transaction to be the first step in a series of plans or
proposals of a “going private transaction” within the meaning of
Rule 13e-3 of the Exchange Act.
Interest
of Certain Persons in Matters to be Acted Upon
Certain
of our officers and director have an interest in Proposal 2
as a result of their ownership of shares of Common Stock as set
forth in the section entitled “Security Ownership of Certain
Beneficial Owners and Management” below. However, we do not believe
that our officers or directors have interests in Proposal 2 that
are different from or greater than those of our other
stockholders.
Vote
Required
The affirmative vote of the holders of a majority of the combined
voting power of the outstanding shares of Common Stock and Series C
Preferred, voting together and counted as a single class, on the
Record Date is required to adopt and approve the amendment to our
Restated Certificate to effect the Reverse Stock Split. The holders
of Common Stock have the right to cast one vote per share of Common
Stock on this proposal. The holders of Series C Preferred Stock
have the right to cast [_____] votes per share of Series C
Preferred Stock, or an aggregate of [_____] votes, on this
proposal, provided, that such votes must be counted by the Company
in the same proportion as the aggregate shares of Common Stock that
are voted on this proposal, without regard to abstentions by
holders of Common Stock or broker non-votes. As an example, if
50.5% of the votes cast by holders of Common Stock present, in
person or by proxy, and entitled to vote are voted at the Meeting
in favor of this proposal, the Company can count 50.5% of the votes
cast by the holders of the Series C Preferred as votes in favor of
this proposal. Because the
voting standard for Proposal 2 is a majority of the combined voting
power of the outstanding shares of Common Stock and Series C
Preferred entitled to vote on the proposal, voting together and
counted as a single class, abstentions and
broker non-votes will, in one sense, have the effect of a
vote “AGAINST” the
proposal. However, if you prefer that the reverse stock
split Proposal 2 not be approved, you should cast your vote against
the proposal. Since the Series C Preferred has [__________] votes
per share on the reverse stock split Proposal 2 and such votes must
be counted by the Company in the same proportion as the aggregate
shares of Common Stock that are voted on the reverse stock split
Proposal 2 at the Meeting, the failure of a share of Common Stock
to be voted will effectively have no impact on the outcome of the
vote. However, shares of Common Stock voted against Proposal 2 will
have the effect of causing the proportion of Series C Preferred
voted against the proposal to increase accordingly and vice
versa.
Recommendation
of the Board of Directors
FOR PROPOSAL 2,
THE BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO GRANT THE BOARD THE
DISCRETIONARY AUTHORITY TO EFFECT A REVERSE STOCK
SPLIT. |
PROPOSAL
3 - APPROVAL OF AMENDMENTS TO THE 2020 EQUITY INCENTIVE
PLAN
Our stockholders are being asked to approve an amendment to our
2020 Equity Incentive Plan to eliminate the requirement in the plan
that no Award may be granted, issued or made under the plan until
such time as the fair market value of the Common Stock, which is
generally the closing sales price of the Common Stock on the
principal stock market on which the Common Stock is traded, has
been equal to or greater than $3.00 per share (subject to
proportionate adjustment for stock splits, reverse stock splits,
and similar events) for at least ten consecutive trading days (such
provision sometimes referred to as the “FMV Limitation”), and to
approve the plan as amended. We sometimes refer to the current 2020
Equity Incentive Plan, prior to the amendment described in this
Proposal 3, as the “Current Plan,” and we refer to the Current Plan
as proposed to be amended as the “Plan” or the “2020 Plan.” The
Board and the stockholders of the Company approved the Current Plan
in 2020. The Board approved the amendment on May 31, 2022, subject
to stockholder approval.
A
copy of the Plan, as amended, is attached hereto as Annex C.
In this Proposal, we are requesting stockholder approval of the
amendment to the Plan and the Plan as amended. The amendment to the
Plan will become effective upon stockholder approval. The Plan, as
amended, contains the following material changes from the Current
Plan:
|
● |
Eliminates
the requirement in Section 11 of the Current Plan that no Award may
be granted, issued or made under the Plan until such time as the
fair market value of the Common Stock, which is generally the
closing sales price of the Common Stock on the principal stock
market on which the Common Stock is traded, has been equal to or
greater than $3.00 per share (subject to proportionate adjustment
for stock splits, reverse stock splits, and similar events) for at
least ten consecutive trading days. |
Reasons
to Approve the Amendment to the Current Plan
Ability to Attract and Retain Qualified Personnel.
The Company believes that approval of this Proposal 3 is critical
to its ability to attract and retain highly qualified personnel,
remain competitive and implement business strategies designed to
increase stockholder value. The Current Plan is a successor to the
Company's 2009 Equity Incentive Plan (the "Prior Plan" or the "2009
Plan"), which terminated in February 2019. Notwithstanding approval
of the Current Plan in 2020, because of the FMV Limitation the
Company has not been able to grant any options or other equity
awards under the Current Plan to employees, consultants or
directors since February 2019. The Company believes that its
inability to grant options or other equity awards under the Current
Plan because of the FMV Limitation has impaired and will in the
future continue to materially impair its ability to attract highly
qualified new employees and directors and its ability to retain
employees.
Equity
incentives and the ability to grant stock options and make other
equity awards to new employees, existing employees, and directors
is an important component of overall compensation programs for
companies in the life science industry. We believe that approving
the proposed amendment and the Plan is necessary to allow us to
attract and retain the services of talented individuals that we
believe are essential to our long-term growth and financial
success. Because of the FMV Limitation, we have been unable to make
equity awards (with the limited exception of certain equity awards
to new employees in compliance with a limited exception under
Nasdaq’s marketplace listing rules) to employees, directors or
consultants. The life sciences industry is highly competitive, and
our future success is dependent upon our ability to attract and
retain employees with the expertise to enable us to achieve our
goals. Currently, the Company is at a competitive disadvantage in
terms of retaining or attracting employees because it currently
does not have an equity incentive plan available to provide equity
incentives to employees, directors and eligible consultants through
the grant of new equity awards. We rely significantly on equity
incentives to attract and retain key employees, and to attract and
retain qualified directors, and we believe that such equity
incentives are necessary for us to remain competitive in the
marketplace for employees. The life sciences and pharmaceuticals
industries are highly competitive, and our future success is
dependent upon our ability to attract and retain employees with the
expertise to enable us to achieve our goals. The Company does not
offer retirement plans or deferred compensation plans generally to
employees that would require additional cash capital resources to
fund. The inability to grant equity awards under the Current Plan
to current and new employees because of the FMV Limitation has
adversely affected the Company’s ability to retain employees and to
attract new highly qualified employees. The Company believes that
eliminating the FMV Limitation will help attract and retain the
personnel that the Company believes will be needed to strive to
increase stockholder value. The approval of the amendment to the
Current Plan will allow us to grant stock options and other awards
at levels determined appropriate by the Board. We seek to use
equity awards to increase incentives on the part of eligible
employees, non-employee directors and consultants who provide
significant services to the company. We believe that providing an
equity stake in the future success of our business encourages our
employees to be highly motivated to achieve our long-term business
goals and to increase stockholder value. Without approval of the
amendments to the Current Plan, we will continue, for an indefinite
period of time, to be materially or completely limited in our
ability to use equity as a component of compensation to attract or
retain key personnel. Because the FMV Limitation for proportional
adjustments to the $3.00 per share price target in connection with
certain events such as reverse stock splits, if Proposal 2 is
approved and the Reverse Stock Split is effected, the per share
dollar price of the FMV Limitation will be proportionately
increased and will continue to be a barrier to the Company’s
ability to make equity awards to employees, directors and
consultants.
Stockholder
approval of the amendment and the Plan is necessary in order for us
to meet the stockholder approval requirements of The Nasdaq Stock
Market that (with certain exceptions) require stockholder approval
of equity plans or other equity compensation arrangements, to grant
incentive stock options under the Plan, and to be able to grant
options and other awards to directors, employees and qualified
consultants.
If our stockholders fail to approve this Proposal 3, the Current
Plan will continue to be in effect in accordance with its existing
terms, including the FMV Limitation, which will continue to prevent
the Company from making equity awards under the Current Plan until
such time, if any, as the FMV Limitation requirement is
satisfied.
New
Plan Benefits
The amount, if any, of equity compensation that may be awarded to
officers, directors, employees and consultants under the Plan
following stockholder approval of this Proposal is determined from
time to time by the administrator of the Plan. As of the date of
this Proxy Statement, except as described in this paragraph, there
has been no determination by the plan administrator with respect to
future awards under the Plan. Accordingly, except as described in
this paragraph, we cannot currently determine the total amount of
benefits or number of shares subject to equity awards that may be
granted in the future to executive officers, directors and
employees under the Plan. As described elsewhere in this Proxy
Statement under our director compensation policy described under
“Summary of the Plan -- Automatic Option Grant Program for
Non-Employee Directors” and “Executive Compensation – Compensation
of Directors,” under the Plan our non-employee directors are
eligible to receive annual automatic equity awards, currently a
stock option to purchase 50,000 shares of Common Stock when a
person first joins the Board, and a stock option each year to
purchase 30,000 shares of Common Stock. Accordingly, if the
amendment to the Plan described in this Proposal 3 is approved,
then on the first business day following the Meeting, we intend to
make an option grant to our non-employee directors pursuant to the
provisions of the Plan to purchase a total of 30,000 shares of
Common Stock.
As of
March 31, 2022, 4,786,142 shares were subject to outstanding stock
option awards under the Prior Plan with a weighted average exercise
price of $4.19 per share and a weighted average remaining life of
3.97 years, and 4,781,209 shares were issuable upon the vesting in
the future of outstanding restricted stock units granted under the
Prior Plan.
As a result of the FMV Limitation, no Awards have been made under
the Current Plan, including no Awards during the years ended
December 31, 2020 and 2021 or during 2022 before the date of
this Proxy Statement, to our named executive officers, all current
executive officers as a group, all persons who served as
non-employee directors at any time during fiscal 2021 as a group (a
total of four (4) people) and all current non-executive officer
employees and consultants as a group. On June [____], 2022, the
last reported sales price of our Common Stock on Nasdaq was
[$_____].
The
following table sets forth information about awards granted under
the Plan during the years ended December 31, 2020 and 2021, to
our named executive officers, all current executive officers as a
group (five people), all persons who served as non-employee
directors at any time during fiscal 2020 or 2021, as a group, and
all current non-executive officer employees as a group.
NAME |
|
Weighted
Average Exercise Price of
Stock Option
Awards ($) |
|
|
Number
of Shares Subject to Stock Option Awards |
|
|
Restricted
Stock Units |
|
Dennis
J. Carlo, Ph.D. |
|
|
|
|
|
|
|
|
|
|
|
|
Former
President and Chief Executive Officer(1) |
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2021 |
|
$ |
__ |
|
|
|
0 |
|
|
|
0 |
|
Fiscal
2020 |
|
|
— |
|
|
|
0 |
|
|
|
0 |
|
Robert
O. Hopkins |
|
|
|
|
|
|
|
|
|
|
|
|
Former
Senior Vice President, Chief Financial Officer |
|
|
|
|
|
|
|
|
|
Fiscal
2021 |
|
$ |
__ |
|
|
|
0 |
|
|
|
0 |
|
Fiscal
2020 |
|
|
— |
|
|
|
0 |
|
|
|
0 |
|
Ronald
B. Moss |
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Medical Officer |
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2021 |
|
$ |
__ |
|
|
|
0 |
|
|
|
0 |
|
Fiscal
2020 |
|
|
— |
|
|
|
0 |
|
|
|
0 |
|
David
J. Marguglio |
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Business Officer |
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2021 |
|
$ |
__ |
|
|
|
0 |
|
|
|
0 |
|
Fiscal
2020 |
|
|
— |
|
|
|
0 |
|
|
|
0 |
|
Ronald
B. Moss, M.D. |
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Medical Officer |
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2018 |
|
$ |
__ |
|
|
|
0 |
|
|
|
0 |
|
Fiscal
2019 |
|
|
— |
|
|
|
0 |
|
|
|
0 |
|
Executive
Officers (five people) |
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2021 |
|
$ |
__ |
|
|
|
0 |
|
|
|
0 |
|
Fiscal
2020 |
|
|
— |
|
|
|
0 |
|
|
|
0 |
|
Non-Employee
Directors (five people) |
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2021 |
|
$ |
__ |
|
|
|
0 |
|
|
|
0 |
|
Fiscal
2020 |
|
$ |
__ |
|
|
|
0 |
|
|
|
0 |
|
Non-Executive
Officer Employees as a Group (approximately
81 people) |
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
2021 |
|
$ |
__ |
|
|
|
0 |
|
|
|
0 |
|
Fiscal
2020 |
|
|
— |
|
|
|
0 |
|
|
|
0 |
|
In
the three months ended March 31, 2022, the Company made two
non-plan new employee inducement option grants to two non-officer
employees covering a total of 130,000 shares. The following table
includes information regarding awards outstanding under the Prior
Plan and non-plan new employee inducement option grants and the
percentage that the number of such awards represent as a percentage
of the fully-diluted outstanding shares, in each case as of March
31, 2022.
|
|
Number |
|
|
As a % of
Fully-Diluted
Shares Outstanding
at March 31, 2022 (1) |
|
2009 Equity Incentive Plan (the
“Prior Plan”) |
|
|
|
|
|
|
|
|
Options outstanding |
|
|
4,786,142 |
|
|
|
3.1 |
% |
Weighted average exercise price of outstanding
options |
|
$ |
4.19 |
|
|
|
|
|
Weighted average remaining term of outstanding
options |
|
|
3.97 years |
|
|
|
|
|
Restricted stock units outstanding |
|
|
900,000 |
|
|
|
* |
% |
Non-Plan Inducement
Options |
|
|
|
|
|
|
|
|
Options outstanding |
|
|
130,000 |
|
|
|
* |
% |
* |
Less than one percent. |
(1) |
Based on 149,733,265 shares of our Common Stock
outstanding as of March 31, 2022. Determined on a fully diluted
basis, meaning the total shares outstanding includes shares
issuable pursuant to outstanding awards under the Prior Plan and
non-plan option grants, but does not include shares issuable upon
outstanding warrants not granted pursuant to the Prior
Plan. |
Summary
of the Plan
The material features of the Plan are summarized below. Please note
that the description of the Plan is qualified in its entirety by
reference to the copy of the Plan attached hereto as Annex
B. Share amounts below do not reflect the impact of the
proposed Reverse Stock Split, and will be proportionately adjusted
to give effect to any Reverse Stock Split.
Stock
Awards. The Plan provides for the grant of incentive stock
options (“ISOs”), nonstatutory stock options (“NSOs”), restricted
stock awards, restricted stock unit awards, stock appreciation
rights, performance stock awards, and other forms of equity
compensation, or collectively, stock awards or “Awards.” In
addition, the Plan provides for the grant of cash awards. Incentive
stock options may be granted only to employees. All other awards
may be granted to employees, including officers, non-employee
directors, and eligible consultants. As of May 31, 2022, we had 15
employees and five directors eligible to receive Awards under the
Plan.
Share
Reserve. The aggregate number of shares of Common Stock that
may be issued pursuant to stock awards under the Plan (the “Share
Reserve”) was initially established at 2,000,000 shares. At March
31, 2022, the Share Reserve was 14,171,816 shares. If Proposal 2 to
approve the reverse stock split proposal is approved and a Reverse
Stock Split is implemented, then the number of shares included in
the Share Reserve would be proportionately decreased. The number of
shares of Common Stock reserved for issuance automatically
increases on January 1 of each calendar year during the term
of the Plan, commencing January 1, 2021, by five percent
(5.0%) of the total number of shares of Common Stock outstanding on
December 31 of the preceding calendar year. Notwithstanding
the foregoing, the Board may act prior to the start of a calendar
year for which an increase applies to provide that there will be no
increase in the Share Reserve for such year or that the increase in
the Share Reserve for such year will be a lesser number of shares
of Common Stock than would otherwise occur pursuant to the
preceding sentence. Under the Plan, the maximum number of shares
that may be issued pursuant to the exercise of incentive stock
options under the Plan is equal to 80,000,000 shares plus, to the
extent allowable under Section 422 of the Internal Revenue Code of
1986, as amended (the “Code”), any shares that become available for
issuance under the Plan pursuant to the annual increase in the
Share Reserve as described above.
If a
stock award granted under the Plan expires or otherwise terminates
without being exercised in full, or is settled in cash, the shares
of Common Stock not acquired pursuant to the stock award again will
become available for subsequent issuance under the Plan. In
addition, the following types of shares under the Plan may become
available for the grant of new stock awards under the Plan: (a)
shares that are forfeited to or repurchased by us prior to becoming
fully vested; (b) shares subject to stock awards that are settled
in cash; (c) shares withheld to satisfy income or employment
withholding taxes; (d) shares used to pay the exercise price
of an option in a net exercise arrangement; (e) shares tendered to
us to pay the exercise price of an option; and (f) shares that are
cancelled pursuant to an exchange or repricing program. Shares
issued under the Plan may be previously unissued shares or
reacquired shares, including shares bought on the open
market.
Administration.
The board of directors, or a duly authorized committee thereof, has
the authority to administer the Plan. The board of directors may
also delegate to one or more of our officers the authority to
(1) designate employees (other than other officers) to be
recipients of certain stock awards, and (2) determine the number of
shares of Common Stock to be subject to such stock awards, subject
to overall limitations established by the Board. Subject to the
terms of the Plan, the board of directors or the authorized
committee, referred to as the plan administrator, determines
recipients, dates of grant, the numbers and types of stock awards
to be granted, and the terms and conditions of the stock awards,
including the period of their exercisability and vesting schedule
applicable to a stock award. Our compensation committee currently
acts as the plan administrator. Subject to the limitations set
forth below, the plan administrator will also determine the
exercise price, strike price or purchase price of awards granted
and the types of consideration to be paid for the award.
The
plan administrator has the authority to modify outstanding awards
under the Plan. Subject to the terms of the Plan, the plan
administrator has the authority to reduce the exercise, purchase or
strike price of any outstanding stock award, cancel any outstanding
stock award in exchange for new stock awards, cash or other
consideration, adjust or accelerate the vesting of outstanding
awards, or take any other action that is treated as a repricing
under U.S. generally accepted accounting principles, with the
consent of any adversely affected participant.
Stock
Options. ISOs and NSOs are granted pursuant to stock option
agreements approved by the plan administrator. The plan
administrator determines the exercise price for a stock option,
within the terms and conditions of the Plan, provided that the
exercise price of a stock option generally cannot be less than 100%
of the fair market value of our Common Stock on the date of grant.
Options granted under the Plan vest at the rate specified by the
plan administrator. The plan administrator determines the term of
stock options granted under the Plan, up to a maximum of ten years.
Under the Plan, the plan administrator determines the vesting of
options or other awards upon a holder’s termination of continuous
service to the Company (other than for “Cause,” as defined in the
Plan), including without Cause or by reason of death or disability.
Except as otherwise provided in the applicable option agreement or
any other written agreement between an award holder and the
Company, under the Plan, if an option holder’s continuous service
to the Company or any of its affiliates terminates other than for
“Cause,” as defined in the Plan, or as a result of the option
holder’s Disability (as defined in the Plan) or death, then an
option may generally be exercised, to the extent that the holder
was entitled to exercise such option as of the date of termination
of continuous service (or as set forth in the award agreement or
other written agreement between the holder and the Company relating
to the option), for three months following the termination of
continuous service or such longer or shorter period as is specified
in the applicable award agreement. The option term may be extended
in the event that exercise of the option following such a
termination of service would violate the registration requirements
of the Securities Act of 1933, as amended. If an option holder’s
service relationship with us or any of our affiliates ceases due to
disability or death, or an option holder dies within a certain
period following cessation of service, the option holder or a
beneficiary may generally exercise options for a period of 12
months in the event of disability and 18 months in the event of
death. In the event of a termination for cause, options generally
terminate immediately upon the termination of the individual for
cause. In no event may an option be exercised beyond the expiration
of its term. With respect to restricted stock awards and restricted
stock unit awards, the plan administrator may impose such
restrictions or conditions to the vesting of a restricted stock
unit award as it, in its sole discretion, deems appropriate, and
unless otherwise provided in the applicable award agreement, upon a
participant’s termination of continuous service, the portion of the
restricted stock unit award that has not vested will be forfeited.
The Plan generally defines continuous service as meaning that a
participant’s service with the Company or an affiliate of the
Company, whether as an employee, director or consultant, is not
interrupted or terminated.
Acceptable
consideration for the purchase of Common Stock issued upon the
exercise of a stock option will be determined by the plan
administrator and may include (a) cash, check, bank draft or money
order, (b) a broker-assisted cashless exercise, (c) the tender of
shares of Common Stock previously owned by the optionee, (d) a net
exercise of the option, and (e) other legal consideration approved
by the plan administrator.
Unless
the plan administrator provides otherwise, options generally are
not transferable except by will, the laws of descent and
distribution, or pursuant to a domestic relations order. An
optionee may designate a beneficiary, however, who may exercise the
option following the optionee’s death.
Tax
Limitations on Incentive Stock Options. The aggregate fair
market value, determined at the time of grant, of Common Stock with
respect to ISOs that are exercisable for the first time by an
optionee during any calendar year under all of our stock plans may
not exceed $100,000. Options or portions thereof that exceed such
limit will generally be treated as NSOs. No ISO may be granted to
any person who, at the time of the grant, owns or is deemed to own
stock possessing more than 10% of our total combined voting power
or that of any of our affiliates unless (a) the option exercise
price is at least 110% of the fair market value of the stock
subject to the option on the date of grant and (b) the term of the
ISO does not exceed five years from the date of grant.
Automatic
Option Grant Program for Non-Employee Directors. Under the
provisions of the Plan relating to non-employee directors, each
person who becomes a non-employee director will automatically
receive an initial grant of a nonstatutory option to purchase
50,000 shares of Common Stock upon such person’s election or
appointment. These initial grants will vest in equal monthly
installments over a period of three years from the grant date. In
addition, any person who is a non-employee director immediately
after the annual meeting of our stockholders automatically will be
granted, on the first business day after the annual meeting date, a
nonstatutory option to purchase 30,000 shares of Common Stock, or
the annual grant. These annual grants will vest in equal monthly
installments over one year from the grant date as long as the
non-employee director remains a director, consultant or employee of
the Company. In the event of certain corporate transactions,
including change in control transactions, the vesting of options
held by non-employee directors whose service has not terminated
generally will be accelerated in full. If the director ceases to
serve as a director as a result of the transaction, or ceases to
service as a director for other reasons, the director will have
12 months from the date of cessation of service within which
to exercise the option. Under the Plan, the Board has, and will
retain, the discretion to make additional equity awards to
non-employee directors, independent of the automatic grant
provisions of the Plan.
Restricted
Stock Awards. Restricted stock awards are granted pursuant to
restricted stock award agreements adopted by the plan
administrator. Restricted stock awards may be granted in
consideration for: (a) cash, check, bank draft or money order,
(b) past or future services rendered to us or our affiliates, or
(c) any other form of legal consideration approved by the plan
administrator. Shares of Common Stock acquired under a restricted
stock award may, but need not, be subject to a share repurchase
option in our favor in accordance with a vesting schedule to be
determined by the plan administrator. Rights to acquire shares
under a restricted stock award may be transferred only upon such
terms and conditions as set by the plan administrator. Except as
otherwise provided in the applicable award agreement, restricted
stock awards that have not vested will be forfeited upon the
participant’s cessation of continuous service for any
reason.
Restricted
Stock Unit Awards. Restricted stock unit awards are granted
pursuant to restricted stock unit award agreements adopted by the
plan administrator. Restricted stock unit awards may be granted in
consideration for any form of legal consideration acceptable to our
board of directors. A restricted stock unit award may be settled by
cash, delivery of stock, a combination of cash and stock as deemed
appropriate by the plan administrator, or in any other form of
consideration set forth in the restricted stock unit award
agreement. Additionally, dividend equivalents may be credited in
respect to shares covered by a restricted stock unit award. Except
as otherwise provided in the applicable award agreement, restricted
stock units that have not vested will be forfeited upon the
participant’s cessation of continuous service for any
reason.
Stock
Appreciation Rights. Stock appreciation rights are granted
pursuant to stock appreciation right grant agreements adopted by
the plan administrator. The plan administrator determines the
strike price for a stock appreciation right which cannot be less
than 100% of the fair market value of the Common Stock on the date
of grant. Upon the exercise of a stock appreciation right, we will
pay the participant an amount equal to the product of (a) the
excess of the per share fair market value of the Common Stock on
the date of exercise over the strike price, multiplied by (b) the
number of shares of Common Stock with respect to which the stock
appreciation right is exercised. The appreciation distribution
payable upon exercise of a stock appreciation right may be paid in
shares of Common Stock, in cash, or in any combination of the two
or in any other form of consideration, as determined by the plan
administrator and contained in the stock appreciation right
agreement. A stock appreciation right granted under the Plan vests
at the rate specified in the stock appreciation right agreement, as
determined by the plan administrator.
The
plan administrator determines the term of stock appreciation rights
granted under the Plan up to a maximum of ten years. Unless the
terms of a participant’s stock appreciation right agreement
provides otherwise, if a participant’s service relationship with us
or any of our affiliates ceases for any reason other than cause,
the participant may generally exercise any vested stock
appreciation right for a period of three months (or such longer or
shorter period specified in the stock appreciation right agreement)
following the cessation of service. In the event of a termination
for cause, stock appreciation rights generally terminate
immediately upon the occurrence of the event giving rise to the
termination of the individual for cause. In no event may a stock
appreciation right be exercised beyond the expiration of its
term.
Performance
Awards. The Plan permits the grant of performance-based stock
awards. Awards granted under the Plan are not eligible to qualify
as performance-based compensation that is exempt from the
$1,000,000 limitation on the deductibility of compensation paid to
a covered employee imposed by Section 162(m) of the Code,
which exemption was repealed as part of the Tax Cuts and Jobs Act
of 2017 (the “TCJA”). Accordingly, all awards granted under the
Plan will be subject to the $1,000,000 limitation on the income tax
deductibility of compensation paid to a covered employee imposed by
Section 162(m) of the Code. Performance awards give
participants the right to receive payments in stock or property
based solely upon the achievement of certain performance goals
during a specified performance period.
A
performance stock award is a stock award that is payable (including
that may be granted, may vest, or may be exercised) contingent upon
the achievement of pre-determined performance goals during a
performance period. A performance stock award may require the
completion of a specific period of continuous service. The length
of any performance period, the performance goals to be achieved
during the performance period, and the measure of whether and to
what degree such performance goals have been attained will be
determined by the compensation committee. In addition, to the
extent permitted by applicable law and the applicable award
agreement, the plan administrator may determine that cash may be
used in payment of performance stock awards.
In
granting a performance award, the compensation committee will set a
period of time, or a performance period, over which the attainment
of one or more goals, or performance goals or criteria, will be
measured, and the Board or the compensation committee will
establish the performance goals, based upon one or more criteria,
or performance criteria, enumerated in the Plan. Under the Plan,
performance goals may be based on one or more of the following
criteria: earnings (including earnings per share and net earnings);
earnings before interest, taxes, and depreciation; earnings before
interest, taxes, depreciation, and amortization; total stockholder
return; return on equity or average stockholder’s equity; return on
assets, investment, or capital employed; stock price; margin
(including gross margin); income (before or after taxes); operating
income; operating income after taxes; pre-tax profit; operating
cash flow; sales or revenue targets; increases in revenue or
product revenue; expenses and cost reduction goals; improvement in
or attainment of working capital levels; economic value added (or
an equivalent metric); market share; cash flow; cash flow per
share; share price performance; debt reduction; customer
satisfaction; stockholders’ equity; capital expenditures; debt
levels; operating profit or net operating profit; workforce
diversity; growth of net income or operating income; billings;
implementation or completion of projects or processes; financing;
regulatory milestones; stockholder liquidity; corporate governance
and compliance; product commercialization; intellectual property;
personnel matters; progress of internal research or clinical
programs; progress of partnered programs; partner satisfaction;
budget management; clinical achievements; completing phases of a
clinical study (including the treatment phase); announcing or
presenting preliminary or final data from clinical studies; in each
case, whether on particular timelines or generally; timely
completion of clinical trials; submission of Device Master File(s)
and other regulatory achievements; partner or collaborator
achievements; internal controls, including those related to the
Sarbanes-Oxley Act of 2002; research progress, including the
development of programs; investor relations, analysts and
communication; manufacturing achievements (including obtaining
particular yields from manufacturing runs and other measurable
objectives related to process development activities); strategic
partnerships or transactions (including in-licensing and
out-licensing of intellectual property); establishing relationships
with commercial entities with respect to the marketing,
distribution and sale of our products and services (including with
group purchasing organizations, distributors and other vendors);
supply chain achievements (including establishing relationships
with manufacturers, suppliers and other services providers of the
our products and services); co-development, co-marketing, profit
sharing, joint venture, or other similar arrangements; individual
performance goals; corporate development and planning goals; and
other measures of performance selected by our board of directors or
any committee thereof. The performance goals may be based on
company-wide performance or performance of one or more business
units, divisions, affiliates, or business segments, and may be
either absolute or relative to the performance of one or more
comparable companies or the performance of one or more relevant
indices. Unless specified otherwise in the award agreement at the
time the award is granted or in such other document setting forth
the performance goals at the time the goals are established, we
will appropriately make adjustments in the method of calculating
the attainment of performance goals as follows: to exclude
restructuring or other nonrecurring charges; to exclude exchange
rate effects; to exclude the effects of changes to generally
accepted accounting principles; to exclude the effects of any
statutory adjustments to corporate tax rates; to exclude the
effects of any items that are unusual in nature or occur
infrequently as determined under generally accepted accounting
principles; to exclude the dilutive effects of acquisitions or
joint ventures; to assume that any business divested by us achieved
performance objectives at targeted levels during the balance of a
performance period following such divestiture; to exclude the
effect of any change in the outstanding shares of our Common Stock
by reason of any stock dividend or split, stock repurchase,
reorganization, recapitalization, merger, consolidation, spin-off,
combination or exchange of shares or other similar corporate
change, or any distributions to common stockholders other than
regular cash dividends; to exclude the effects of stock-based
compensation and the award of bonuses under our bonus plans; to
exclude costs incurred in connection with potential acquisitions or
divestitures that are required to be expensed under generally
accepted accounting principles; to exclude the goodwill and
intangible asset impairment charges that are required to be
recorded under generally accepted accounting principles; and to
exclude the effect of any other unusual, nonrecurring gain or loss
or other extraordinary item. In addition, we retain the discretion
to adjust or eliminate the compensation or economic benefit due
upon attainment of the goals. The performance goals may differ from
participant to participant and from award to award.
Other
Stock Awards. The plan administrator may grant other awards
based in whole or in part by reference to, or otherwise based on,
Common Stock. The plan administrator will set the number of shares
under the award and all other terms and conditions of such
awards.
Cash
Awards. A cash award is an award that is denominated in, or
payable to an eligible participant solely in, cash. Cash awards may
be granted with value and payment contingent upon the achievement
of performance goals or criteria.
Capitalization
Adjustments; Changes to Capital Structure. In the event that
there is a specified type of change in our capital structure, such
as a stock split or reverse stock split, appropriate capitalization
adjustments will be made to (a) the number of shares subject to the
Plan, (b) the maximum number of shares that may be issued pursuant
to the exercise of ISOs, (c) the maximum number of securities that
may be awarded to any person during a calendar year, and
(d) the number of shares and price per share of stock subject
to outstanding stock awards.
Corporate
Transactions. In the event of certain specified significant
corporate transactions as defined in the Plan, including a change
in ownership or effective control of the Company or a change in the
ownership of a substantial part of the assets of the Company as
defined within the meaning of Section 409A of the Code, the plan
administrator has the discretion to take any of the following
actions with respect to stock awards: arrange for the assumption,
continuation, or substitution of a stock award by a surviving or
acquiring entity or parent company; arrange for the assignment of
any reacquisition or repurchase rights held by us to the surviving
or acquiring entity or parent company; accelerate the vesting of
the stock award and provide for its termination prior to the
effective time of the corporate transaction; arrange for the lapse
of any reacquisition or repurchase right held by us; cancel or
arrange for the cancellation of the stock award in exchange for
such cash consideration, if any, as our board of directors may deem
appropriate; or make a payment equal to the excess of (1) the
value of the property the participant would have received upon
exercise of the stock award over (2) the exercise price or
strike price otherwise payable in connection with the stock award.
The plan administrator is not obligated to treat all stock awards,
even those that are of the same type, in the same manner. The plan
administrator may provide, in an individual award agreement or in
any other written agreement between a participant and us, that the
stock award will be subject to additional acceleration of vesting
and exercisability or settlement in the event of a corporate
transaction. Except as may otherwise be stated in a particular
award agreement, in the event of a corporate transaction, the
vesting and exercisability provisions of stock awards will be
accelerated in full, and if the surviving or acquiring entity (or
its parent company) elects not to assume, continue or substitute
for such stock awards, then such awards will be terminated if not
exercised prior to the effective date of the corporate
transaction.
Under
the Plan, a corporate transaction is defined generally as
(1) the acquisition by any person or company of more than 50%
of the combined voting power of our then outstanding stock,
(2) a merger, consolidation or similar transaction in which
our stockholders immediately before the transaction do not own,
directly or indirectly, more than 50% of the combined voting power
of the surviving entity (or the parent of the surviving entity) in
substantially the same proportions as their ownership immediately
prior to such transaction, (3) a sale or other disposition of
all or substantially all of our assets other than to an entity more
than 50% of the combined voting power of which is owned by our
stockholders in substantially the same proportions as their
ownership of our outstanding voting securities immediately prior to
such transaction, or (4) when a majority of our board of
directors becomes comprised of individuals who were not serving on
our board of directors on the date the Plan is adopted (the
“incumbent board”), or whose nomination, appointment, or election
was not approved by a majority of the incumbent board still in
office.
Potential
Recoupment of Awards. Awards granted under the Plan will be
subject to recoupment in accordance with any clawback policy that
we adopt or are required to adopt pursuant to the listing standards
of any national securities exchange or association on which our
securities are listed or as is otherwise required by the Dodd-Frank
Wall Street Reform and Consumer Protection Act or other applicable
law. In addition, the administrator of the Plan may impose other
clawback, recovery or recoupment provisions in an award agreement
as the administrator determines necessary or appropriate, including
a reacquisition right in respect of previously acquired shares of
our Common Stock or other cash or property upon the occurrence of
events described in such policy.
Term.
The Plan became effective on the date that it was approved by the
stockholders. Unless sooner terminated by the Board, the Plan will
terminate on the day before the 10th anniversary of the date that
the Plan is approved by the Board and by the stockholders,
whichever is earlier.
Amendment
and Termination. The Board may at any time amend the Plan in
any respect that it deems necessary or advisable, subject to the
limitations, if any, of applicable law. However, except as provided
with respect to capitalization adjustments, stockholder approval
shall be required for any amendment of the Plan that either (a)
materially increases the number of shares of Common Stock available
for issuance under the Plan, (b) materially expands the class of
individuals eligible to receive awards under the Plan, (c)
materially increases the benefits accruing to participants under
the Plan or materially reduces the price at which shares of Common
Stock may be issued or purchased under the Plan, (d) materially
extends the term of the Plan, or (e) expands the types of awards
available for issuance under the Plan, but in each of the foregoing
instances only to the extent required by applicable law or listing
requirements. Except as provided above, rights under any award
granted before amendment of the Plan will not be impaired by any
amendment of the Plan unless (a) the Company requests the consent
of the affected participant, and (b) such participant consents in
writing.
U.S.
Federal Income Tax Consequences
The
following is a summary of the principal United States federal
income tax consequences to participants and us with respect to
participation in the Plan. This summary is not intended to be
exhaustive, does not discuss the income tax laws of any local,
state or foreign jurisdiction in which a participant may reside
and, among other considerations, does not describe the deferred
compensation provisions of Section 409A of the Code to the extent
an award is subject to and does not satisfy those rules. The
information set forth below is a summary only and does not purport
to be complete. The information is based upon current federal
income tax rules and therefore is subject to change when those
rules change. Because the tax consequences to any recipient may
depend on his or her particular situation, each recipient should
consult the recipient’s tax adviser regarding the federal, state,
local, and other tax consequences of the grant or exercise of an
award or the disposition of stock acquired as a result of an award.
The Plan is not qualified under the provisions of Section 401(a) of
the Code and is not subject to any of the provisions of the
Employee Retirement Income Security Act of 1974. Our ability to
realize the benefit of any tax deductions described below depends
on our generation of taxable income, as well as the requirement of
reasonableness, the provisions of Section 162(m) of the Code,
and the satisfaction of our tax reporting obligations.
Nonstatutory
Stock Options. Generally, there is no taxation upon the grant
of a nonstatutory stock option if the option is granted with an
exercise price equal to the fair market value of the underlying
stock on the grant date. On exercise, an optionee will recognize
ordinary income equal to the excess, if any, of the fair market
value on the date of exercise of the stock over the exercise price.
If the optionee is employed by us or one of our affiliates, that
income will be subject to withholding tax. The optionee’s tax basis
in those shares will be equal to their fair market value on the
date of exercise of the option, and the optionee’s capital gain
holding period for those shares will begin on that date. Subject to
the requirement of reasonableness, the provisions of Section 162(m)
of the Code and the satisfaction of a tax reporting obligation, we
will generally be entitled to a tax deduction equal to the taxable
ordinary income realized by the optionee.
Incentive
Stock Options. The Plan provides for the grant of stock options
that are intended to qualify as “incentive stock options,” as
defined in Section 422 of the Code. An
optionee is not taxed at the time an ISO is granted. The tax
consequences upon exercise and later disposition of the underlying
shares generally depend upon whether the optionee was an employee
of ours or our subsidiary at all times from the date of grant until
three months preceding exercise (or longer periods in the case of
the optionee’s disability or death) and on whether the optionee
holds the shares for more than one year after exercise and two
years after the date of grant of the ISO. If the
optionee satisfies both the employment rule and the holding rule
for income tax purposes, the optionee will not recognize income
upon exercise of the ISO and we will not be allowed an income tax
deduction at any time. The difference between the ISO exercise
price and the amount realized upon disposition of the shares by the
optionee will constitute either a long-term capital gain or a
long-term capital loss. If the optionee meets the employment rule,
but fails to observe the holding rule (a “disqualifying
disposition”), the optionee generally recognizes the excess of the
fair market value of the shares at the date of exercise over the
ISO exercise price as ordinary income in the year of the
disqualifying disposition. Upon disposition of the shares, any
excess of the sales price over the fair market value at the date of
exercise will be recognized by the optionee as capital gain (long
term or short-term depending on the length of time the shares were
held after the stock option was exercised). If the sales price on
disposition of the shares is less than the fair market value on the
date of exercise, then the ordinary income recognized by the
optionee is generally limited to the excess of the sales price over
the ISO exercise price. If there is a disqualifying
disposition of a share, we are allowed a deduction in an amount
equal to the ordinary income includible in income by the optionee,
subject to the requirement of reasonableness and the provisions of
Section 162(m) of the Code, and provided that either the employee
includes that amount in income or we timely satisfy our reporting
requirements with respect to that amount. Under current IRS guidelines, we are not required
to withhold any federal income tax in the event of a disqualifying
disposition. Different consequences may apply for an optionee
subject to the alternative minimum tax. For purposes of the
alternative minimum tax, the amount by which the fair market value
of a share of stock acquired on exercise of an ISO exceeds the
exercise price of the stock option generally will be an adjustment
included in the optionee’s alternative minimum taxable income for
the year in which the option is exercised. If, however, there is a
disqualifying disposition of the share in the year in which the
stock option is exercised, there will be no adjustment for
alternative minimum tax purposes with respect to that share. In
computing alternative minimum taxable income, the tax basis of a
share acquired on exercise of an ISO is increased by the amount of
the adjustment taken into account with respect to that share for
alternative minimum tax purposes in the year the option is
exercised.
Restricted
Stock Awards. Generally, the recipient of a restricted stock
award will recognize ordinary income at the time the stock is
received equal to the excess, if any, of the fair market value of
the stock received over any amount paid by the recipient in
exchange for the stock. If, however, the stock is not vested when
it is received (for example, if the employee is required to work
for a period of time in order to have the right to sell the stock),
the recipient generally will not recognize income until the stock
becomes vested, at which time the recipient will recognize ordinary
income equal to the excess, if any, of the fair market value of the
stock on the date it becomes vested over any amount paid by the
recipient in exchange for the stock. A recipient may, however, file
an election with the Internal Revenue Service, within 30 days after
his or her receipt of the stock award, to recognize ordinary
income, as of the date the recipient receives the award, equal to
the excess, if any, of the fair market value of the stock on the
date the award is granted over any amount paid by the recipient in
exchange for the stock. The recipient’s basis for the determination
of gain or loss upon the subsequent disposition of shares acquired
from stock awards will be the amount paid for such shares plus any
ordinary income recognized either when the stock is received or
when the stock becomes vested. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and
the satisfaction of a tax reporting obligation, we will generally
be entitled to a tax deduction equal to the taxable ordinary income
realized by the recipient of the stock award.
Stock
Appreciation Rights. Generally, if a stock appreciation right
is granted with an exercise price equal to the fair market value of
the underlying stock on the date of grant, the recipient will
recognize ordinary income equal to the fair market value of stock
or cash received upon such exercise. If the recipient is employed
by us or one of our affiliates, that income will be subject to
withholding taxes. Subject to the requirement of reasonableness,
the provisions of Section 162(m) of the Code and the satisfaction
of a tax reporting obligation, we will generally be entitled to an
income tax deduction equal to the amount of ordinary income
realized by the recipient of the stock appreciation
right.
Restricted
Stock Units. Generally, the recipient of a restricted stock
unit award structured to conform to the requirements of Section
409A of the Code or an exception to Section 409A of the Code will
recognize ordinary income at the time the shares are delivered to
the participant in an amount equal to the excess, if any, of the
fair market value of the shares received over any amount paid by
the recipient in exchange for the shares. If a restricted stock
unit award is subject to Section 409A of the Code, the shares
subject to a restricted stock unit award may generally only be
delivered upon one of the following events: a fixed calendar date
(or dates), separation from service, death, disability or a change
in control. If delivery occurs on another date, unless the
restricted stock unit awards otherwise comply with or qualify for
an exception to the requirements of Section 409A of the Code, in
addition to the tax treatment described above, the recipient will
owe an additional 20% federal tax and interest on any taxes owed.
The recipient’s basis for the determination of gain or loss upon
the subsequent disposition of shares acquired from a restricted
stock unit award will be the amount paid, if any, for shares plus
any ordinary income recognized when the stock is delivered. Subject
to the requirement of reasonableness, the provisions of Section
162(m) of the Code, and the satisfaction of a tax reporting
obligation, we will generally be entitled to an income tax
deduction equal to the amount of ordinary income realized by the
participant.
Section
162 Limitations. In general, under Section 162(m) of the Code,
income tax deductions of publicly-held corporations may be limited
to the extent total compensation for certain executive officers
exceeds $1 million (less the amount of any “excess parachute
payments” as defined in Section 280G of the Code) for such person
in any one year. Prior to the TCJA, covered employees generally
consisted of our Chief Executive Officer and each of the next three
highest compensated officers serving at the end of the taxable year
other than our Chief Financial Officer, and compensation that
qualified as “performance-based” under Section 162(m) was exempt
from this $1 million deduction limitation. As part of the TCJA, the
ability to rely on this exemption was, with certain limited
exceptions, eliminated effective for taxable years beginning after
December 31, 2017; in addition, the definition of covered employees
was expanded to generally include all named executive officers. As
a result, awards granted to our covered employees under the Plan
may not be fully deductible.
Section
409A. Section 409A covers most programs that defer the receipt
of compensation to a succeeding year. It provides rules for
elections to defer, if any, and for timing of payouts. There are
significant penalties placed on the participant for failure to
comply with Section 409A. Section 409A does not apply to incentive
stock options, non-statutory stock options that have an exercise
price that is at least equal to the grant date fair market value
and that meet certain other requirements, restricted stock and
restricted stock unit type awards provided there is no deferral of
income beyond the vesting date. Section 409A also does not cover
the grant of stock appreciation rights if the exercise price is not
less than the fair market value of the underlying stock on the date
of grant, the rights are settled in such stock and no features
defer the recognition of income beyond the exercise
date.
Interest
of Certain Persons in Matters to Be Acted Upon
Each
of our current directors, executive officers and employees is
eligible to receive awards under the Plan. If the Plan is approved,
such persons would potentially benefit from being able to receive
awards under the Plan. The administrator has the discretion to
determine which eligible persons will receive awards under the
Plan. As a result, future participation in the Plan by executive
officers, directors and other employees is not
determinable.
Required
Vote
Assuming
that a quorum is present at the Meeting, approval of this proposal
requires the affirmative vote of a majority of the votes cast with
respect to the proposal at the Meeting. Abstentions will not be
treated as votes cast in favor of or against the proposal. Broker
non-votes will have no effect on the outcome of this
proposal.
Recommendation
of the Board of Directors
FOR PROPOSAL 3,
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL
OF THE AMENDMENT TO THE 2020 EQUITY INCENTIVE PLAN AND THE PLAN AS
AMENDED. |
PROPOSAL
4 - ADVISORY VOTE ON EXECUTIVE COMPENSATION
Under
the Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010, our stockholders are entitled to vote to approve, on an
advisory, non-binding basis, the compensation of our named
executive officers as disclosed in this Proxy Statement in
accordance with the SEC’s rules. We conducted our first say-on-pay
vote at our 2013 Annual Meeting of Stockholders. At our 2019 Annual
Meeting of Stockholders, the stockholders voted, on a non-binding
advisory basis, in favor of having an advisory vote on executive
compensation every year. Accordingly, we are conducting an advisory
vote on the compensation of our named executive officers at the
Meeting and will continue to conduct an advisory vote on the
compensation of our named executive officers annually until our
next say-on-pay frequency vote.
Please
read the “Executive Compensation” section of this Proxy Statement
for additional details about our executive compensation program. We
believe that our compensation policies and procedures are intended
to be aligned with the long-term interests of our stockholders. We
believe our compensation programs are designed to reward, motivate,
attract and retain highly qualified executives by incentivizing
them to achieve Company and, as applicable, individual performance
goals intended to align with stockholder interests.
We
are asking our stockholders to indicate their support for our named
executive officer compensation as described in this Proxy
Statement. This proposal, commonly known as a “say-on-pay”
proposal, gives our stockholders the opportunity to express their
views on our named executive officers’ compensation. This vote is
not intended to address any specific item of compensation, but
rather the overall compensation of our named executive officers and
the policies and practices described in this Proxy Statement.
Accordingly, we will ask our stockholders to vote “FOR” the
following resolution at the Meeting:
“RESOLVED,
that the Company’s stockholders approve, on an advisory basis, the
compensation of the named executive officers, as disclosed in the
Company’s proxy statement for the 2022 Annual Meeting of
Stockholders pursuant to the compensation disclosure rules of the
Securities and Exchange Commission.”
The
say-on-pay vote is advisory, and therefore not binding on the
Company, the Compensation Committee or the Board. However, the
Board and Compensation Committee value the opinions of our
stockholders, we will consider our stockholders’ concerns, and the
Compensation Committee will consider the results of this vote in
making determinations in the future regarding executive
compensation arrangements.
Because
this advisory vote relates to, and may impact, the Company’s
executive compensation policies and practices, the Company’s
executive officers, including its named executive officers, have an
interest in the outcome of this vote.
Required
Vote
Assuming
that a quorum is present at the Meeting, approval of this proposal
requires the affirmative vote of holders of a majority of the votes
cast with respect to the proposal either in person or represented
by proxy at the Meeting. Abstentions will not be treated as votes
cast in favor of or against the proposal. Broker non-votes will
have no effect on the outcome of this proposal.
Recommendation
of the Board of Directors
FOR PROPOSAL 4,
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE
APPROVAL, ON A NONBINDING ADVISORY BASIS, OF THE COMPENSATION OF
OUR NAMED EXECUTIVE OFFICERS. |
PROPOSAL
5 - RATIFICATION OF SELECTION OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee has selected the independent registered public
accounting firm of BDO USA, LLP (“BDO”) for the purpose of auditing
and reporting upon the financial statements of the Company for the
year ending December 31, 2022. Neither the firm nor any of its
members has any direct or indirect financial interest in the
Company.
While
the Audit Committee is responsible for the appointment,
compensation, retention and oversight of the independent registered
public accounting firm, the Audit Committee and our Board are
requesting, as a matter of policy, that the stockholders ratify the
appointment of BDO as our independent registered public accounting
firm. The Audit Committee is not required to take any action as a
result of the outcome of the vote on this proposal. However, if the
stockholders do not ratify the selection, the Audit Committee may
investigate the reasons for stockholder rejection and may consider
whether to retain BDO or to appoint another independent registered
public accounting firm. Furthermore, even if the appointment is
ratified, the Audit Committee in its discretion may direct the
appointment of a different independent registered public accounting
firm at any time during the year if the committee determines that
such a change would be in the best interests of the Company and our
stockholders. A formal statement by representatives of BDO is not
planned for the Meeting. However, representatives of BDO are
expected to be present at the virtual Meeting and will be available
to respond to appropriate questions by stockholders.
On June 18, 2020, the Company dismissed Mayer Hoffman McCann P.C.
(“MHM”) as the Company’s independent registered public accounting
firm. The Audit Committee of the Board approved the decision to
dismiss MHM. On the same day, the Audit Committee appointed
BDO as the Company’s new independent registered public accounting
firm for the purpose of auditing and reporting upon the financial
statements of the Company for the year ending December 31,
2020.
During the two fiscal years ended December 31, 2019, and the
subsequent interim periods through June 18, 2020, there were no:
(1) disagreements with MHM on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or
procedures, which disagreements if not resolved to their
satisfaction would have caused them to make reference in connection
with their opinion to the subject matter of the disagreement, or
(2) reportable events (as described in Item 304(a)(1)(v) of
Regulation S-K).
The audit reports of MHM on the Company’s financial statements as
of and for the years ended December 31, 2019 and 2018 did not contain
an adverse opinion or a disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting
principles, except that the reports included an explanatory
paragraph noting that the Company has incurred recurring losses
from operations and is dependent on additional financing to fund
operations, and that such conditions raise substantial doubt about
the Company’s ability to continue as a going concern.
We provided MHM with a copy of the disclosures that we made in a
Current Report on Form 8-K (the “Report”) prior to the time the
Report was filed with the SEC. We requested that MHM furnish
a letter addressed to the SEC stating whether or not it agrees with
the statements made therein. A copy of MHM’s letter dated June 19,
2020, was attached as Exhibit 16.1 to the Report.
During the fiscal years ended December 31, 2019 and 2018, and during all
subsequent interim periods through June 18, 2020, neither the
Company nor anyone on its behalf consulted with BDO regarding (i)
the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit
opinion that might be rendered on the Company’s financial
statements, and in each case where a written report or oral advice
was provided to the Company that BDO concluded was an important
factor considered by the Company in reaching a decision as to the
accounting, auditing or financial reporting issue, or (ii) any
matter that was the subject of a “disagreement” with its former
auditors within the meaning of Item 304(a)(1)(iv) of Regulation S-K
and the related instructions or a “reportable event” within the
meaning of Item 304(a)(1)(v) Regulation S-K.
Audit
Fees
The
following table sets forth fees billed to us by our independent
registered public accounting firm during the years ended
December 31, 2021 and 2020 for: (i) services rendered for the
audit of our annual financial statements, review of our quarterly
financial statements, and other services normally provided in
connection with statutory and regulatory filing requirements; (ii)
services by our independent registered public accounting firm that
are reasonably related to the performance of the audit or review of
our financial statements and that are not reported as Audit Fees;
(iii) services rendered in connection with tax compliance, tax
advice and tax planning; and (iv) all other fees for services
rendered.
BDO
fees summarized below:
|
|
Fiscal 2021 |
|
|
Fiscal
2020 |
|
Audit
Fees (1) |
|
$ |
991,959 |
|
|
$ |
468,505 |
|
Audit
Related Fees |
|
|
— |
|
|
|
— |
|
Tax
Fees (2) |
|
|
56,223 |
|
|
|
29,406 |
|
All
Other Fees |
|
|
— |
|
|
|
— |
|
Total
Fees: |
|
$ |
1,048,182 |
|
|
$ |
497,911 |
|
(1) |
Includes
fees associated with the audit of our financial statements, the
review of our interim financial statements, and for services
normally provided in connection with statutory and regulatory
filing requirements, including fees associated with review of
registration statements and providing consents and comfort
letters. |
(2) |
Includes
fees associated with the preparation of the Company’s income tax
returns and other tax related consulting. |
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Registered Public Accounting
Firm
The
Audit Committee approves in advance all audit and permitted
non-audit services that may be performed by our principal
independent registered public accounting firm. Unless a type of
service to be provided by our independent registered public
accounting firm has received general pre-approval, it will require
specific pre-approval by the Audit Committee. The Audit Committee
delegates certain pre-approval authority to its chairperson, whose
activities are reported to the Audit Committee at each regularly
scheduled meeting. All fees to our principal independent registered
public accounting firm reported in the table above under the
headings Audit Fees and Audit-Related Fees, and Tax Fees and All
Other Fees, for the years ended December 31, 2021 and 2020 were
approved by the Audit Committee before the respective services were
rendered, which concluded that the provision of such services was
compatible with the maintenance of the independence of the firm
providing those services in the conduct of its auditing
functions.
Required
Vote
Assuming
that a quorum is present at the Meeting, approval of this proposal
requires the affirmative vote of holders of a majority of the votes
cast with respect to the proposal either in person or represented
by proxy at the Meeting. Abstentions will not be treated as votes
cast in favor of or against the proposal. Broker non-votes will
have no effect on the outcome of this proposal.
Recommendation
of the Board of Directors
FOR PROPOSAL 5,
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE
RATIFICATION OF THE SELECTION OF BDO AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM. |
PROPOSAL
6 - APPROVAL OF THE ADJOURNMENT OF THE MEETING,
IF NECESSARY, TO SOLICIT ADDITIONAL PROXIES
General
If the Meeting is convened and a quorum is present, but there are
not sufficient votes to approve Proposal 2 or if there are
insufficient votes to constitute a quorum, our proxy holders may
move to adjourn the Meeting at that time in order to enable the
Board to solicit additional proxies sufficient to constitute a
quorum and to approve Proposal 2.
In this proposal, we are asking our stockholders to authorize the
holder of any proxy solicited by the Board to vote in favor of
adjourning the Meeting to another time and place, if necessary, to
solicit additional proxies in the event there are not sufficient
votes to approve Proposal 2. If our stockholders approve this
proposal, we could adjourn the Meeting and any adjourned or
postponed session of the Meeting and use the additional time to
solicit additional proxies, including the solicitation of proxies
from our stockholders that have previously voted. Among other
things, approval of this proposal could mean that, even if we had
received proxies representing a sufficient number of votes to
defeat Proposal 2, we could adjourn the Meeting without a vote on
such proposal to solicit additional proxies and votes in favor of
such proposal.
If it is necessary to adjourn the Meeting, except as may be
required by applicable law or SEC regulations, no notice of the
adjourned meeting is required to be given to our stockholders,
other than an announcement at the Meeting of the date, time and
place to which the Meeting is adjourned, and the means of remote
communication, if any, by which stockholders may participate in the
meeting, so long as the meeting is adjourned for 30 days or
less and no new record date is fixed for the adjourned meeting. At
the adjourned meeting, we may transact any business which might
have been transacted at the original meeting.
Required
Vote
Assuming
that a quorum is present at the Meeting, approval of this proposal
requires the affirmative vote of holders of a majority of the votes
cast with respect to the proposal either in person or represented
by proxy at the Meeting. Abstentions will not be treated as votes
cast in favor of or against the proposal. Broker non-votes will
have no effect on the outcome of this proposal.
Recommendation
of the Board of Directors
FOR PROPOSAL 6,
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE
AUTHORIZATION TO ADJOURN THE MEETING AS SET FORTH IN THE
PROPOSAL. |
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has reviewed and discussed with our management
the Company’s audited financial statements for the fiscal year
ended December 31, 2021, including the internal controls over
financial reporting. The Audit Committee also reviewed and
discussed with our independent registered public accounting firm
with respect to such financial statements those matters required to
be discussed by Auditing Standard 1301, Communications with
Audit Committees (formerly Auditing Standard 16), issued by the
Public Company Accounting Oversight Board (“PCAOB”) and the matters
required to be discussed by the applicable requirements of the
PCAOB and the SEC. Our independent registered public accounting
firm provided the Audit Committee with the written disclosures
required by applicable requirements of the PCAOB regarding the
independent accountant’s communications with the Audit Committee
concerning independence. In addition, the Audit Committee has
discussed with the independent registered public accounting firm
its independence with respect to the Company and has considered
whether the independent registered public accounting firm’s
provision of certain other non-audit related services to the
Company is compatible with maintaining such independent registered
public accounting firm’s independence.
Based upon the review and discussions referred to above, the Audit
Committee recommended to our Board that the Company’s audited
financial statements referred to above be included in our Annual
Report on Form 10-K for the year ended December 31, 2021.
|
Audit Committee |
|
Richard C. Williams, Chair |
|
Howard C. Birndorf |
|
Meera J. Desai, Ph.D., NACD.DC.
Vickie S. Reed
|
Ms. Reed is a current member of the Audit Committee, but the
relevant review and discussions of the Audit Committee described
above took place before her appointment. In accordance with the
rules of the SEC, the information contained in the Report of the
Audit Committee set forth above shall not be deemed to be
“soliciting material,” or to be “filed” with the SEC or subject to
the SEC’s Regulation 14A, or to the liabilities of Section 18 of
the Exchange Act, except to the extent that we specifically request
that the information be treated as soliciting material or that we
specifically incorporate it by reference into a document filed
under the Securities Act of 1933, as amended, or the Exchange
Act.
EXECUTIVE OFFICERS
The
names, ages, principal occupations during the past five years, and
certain other information with respect to our executive officers
are shown below as of the Record Date. To the extent that any named
executive officer is also serving as a member of the Board, then
such named executive officer’s biography is set forth under
“Information Regarding Board of Directors” above. Our executive
officers are appointed by the Board, serve at the discretion of our
Board and hold office until their successor is duly elected and
qualified or until their earlier resignation or removal. There are
no family relationships among any of our directors, nominees or
executive officers.
Name |
|
Age |
|
Principal
Occupation |
David
J. Marguglio |
|
51 |
|
President
and Chief Executive Officer, and Director |
David
C. Benedicto |
|
61 |
|
Chief
Financial Officer |
Ronald
B. Moss, M.D. |
|
62 |
|
Chief
Medical Officer |
David C. Benedicto. Mr. Benedicto became the Chief
Financial Officer of the Company in August 2021. He has more than
two decades of experience operating in finance roles at public and
private companies. Since joining Adamis in late 2014, he has served
as Controller and then as Chief Accounting Officer. He previously
held a senior accounting manager role at Trius Therapeutics, Inc.
prior to the business being acquired. He has also held controller
positions and led finance functions at HERC Products, Inc. and BAE
Systems Inc. Mr. Benedicto is a CPA and a CMA (Certified
Management Accountant) and holds a bachelor’s degree in Accounting
from the University of Saint La Salle and a Master of Business
Administration from the University of Redlands.
Ronald B. Moss, M.D. Dr. Moss joined the Company as
Chief Medical Officer in February 2017. Prior to joining the
Company, Dr. Moss served as President and Chief Executive
Officer of Ansun Biopharma from October 2012 to February 2017 and
as interim CEO from October 2011 to October 2012. Dr. Moss
served as Executive Vice President of Clinical Development &
Medical Affairs at NexBio from January 2009 to October 2011. From
June 2006 to January 2009, Dr. Moss served as the Vice
President of Clinical Development at Vical Inc. From January 2004
to March 2006, he served as the Vice President of Medical Affairs
at Telos Pharmaceuticals. Dr. Moss served as the Senior
Director of Worldwide Regulatory Affairs for Vaccines/Biologics at
Merck and Company from January 2003 to January 2004. Dr. Moss
joined The Immune Response Corporation in January 1994 as Medical
Director and advanced through positions of increasing
responsibility and served as the interim President and Chief
Executive Officer from August 2002 to January 2003. From July 1993
to January 1994, Dr. Moss served as Assistant Medical Director
at Immunization Products Ltd., a joint venture between
Rhone-Poulenc Rorer and Immune Response. Dr. Moss trained in
Pediatrics at SUNY Stony Brook and completed his Fellowship in
Allergy and Clinical Immunology at the National Institutes of
Health, and is board certified in allergy and immunology. He is a
Fellow of the American Academy of Allergy, Asthma and Immunology
(FAAAAI) and a Fellow of the American College of Allergy, Asthma,
and Immunology (FACAAI). Dr. Moss is a voluntary associate
clinical professor at University of California, San Diego, School
of Medicine Department of Medicine. Dr. Moss earned his M.D.
degree at the Chicago Medical School, Rosalind Franklin University
of Medicine and Science and his bachelor’s degree from the State
University of New York at Stony Brook.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth information, as of June [_], 2022
(the “Table Date”), regarding beneficial ownership of all classes
of our voting securities, to the extent known to us, by
(i) each person who is a director or a nominee for director;
(ii) each named executive officer in the Summary Compensation
Table; (iii) all directors and executive officers as a group;
and (iv) each person who is known by us to be the beneficial owner
of 5% or more of any class of our voting securities. Except as
otherwise noted, each person has sole voting and investment power
as to his or her shares. As of the Table Date, the applicable share
numbers and percentages are based on 149,983,265 shares of Common
Stock issued and outstanding.
|
|
Shares Beneficially Owned (1) |
|
|
|
Title
or Class of Securities: |
|
|
|
Common
Stock |
|
|
|
Shares |
|
|
Percent |
|
Directors: |
|
|
|
|
|
|
|
|
Dennis J. Carlo,
Ph.D. |
|
|
2,146,363 |
(2) |
|
|
1.4 |
|
David J. Marguglio |
|
|
835,540 |
(3) |
|
|
* |
|
Richard C. Williams |
|
|
299,918 |
(4) |
|
|
* |
|
Howard C. Birndorf |
|
|
58,824 |
(5) |
|
|
* |
|
Meera J. Desai, Ph.D., NACD.DC |
|
|
— |
|
|
|
* |
|
Vickie S. Reed |
|
|
— |
|
|
|
* |
|
Other
Named Officers: |
|
|
|
|
|
|
|
|
Robert O. Hopkins |
|
|
614,753 |
(6) |
|
|
* |
|
Ronald B. Moss |
|
|
495,378 |
(7) |
|
|
* |
|
Other Beneficial
Ownership: |
|
|
|
|
|
|
|
|
All Adamis directors and executive
officers as a group (seven persons) |
|
|
2,548,432 |
(8) |
|
|
1.7 |
|
* |
Less
than 1%. |
(1) |
Based
upon information supplied by officers, directors and principal
stockholders. Beneficial ownership is determined in
accordance with rules of the SEC that deem shares to be
beneficially owned by any person who has or shares voting or
investment power with respect to such shares. Unless
otherwise indicated, the persons named in this table have sole
voting and sole investing power with respect to all shares shown as
beneficially owned, subject to community property laws where
applicable. Shares of Common Stock subject to an option or
similar right that is currently exercisable or exercisable within
60 days of the date of the table are deemed to be outstanding and
to be beneficially owned by the person holding such option or right
for the purpose of computing the percentage ownership of such
person but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person.
Except as otherwise indicated, the address of each of the
persons in this table is as follows: c/o Adamis
Pharmaceuticals Corporation, 11682 El Camino Real, Suite 300, San
Diego, California 92130. |
(2) |
Includes
686,576 shares of Common Stock beneficially owned, 5,883 shares of
Common Stock held of record by a family member and beneficially
owned by Dr. Carlo; and 1,453,904 shares of Common Stock
underlying options which were exercisable or vested as of the Table
Date or 60 days after such date. |
(3) |
Includes
233,906 shares of Common Stock owned of record, 5,884 shares of
Common Stock held of record by a family member and beneficially
owned by Mr. Marguglio; 595,750 shares of Common Stock
underlying options which were exercisable or vested as of the Table
Date or 60 days after such date. Excludes 200,000 restricted
stock units which vest after such period. |
(4) |
Includes
89,918 shares of Common Stock owned of record and 210,000 shares of
Common Stock underlying options which were exercisable as of the
Table Date or 60 days after such date. Excludes 150,000
restricted stock units which vest after such period. |
(5) |
Includes
58,824 shares that are issuable upon the exercise of a warrant that
is exercisable as of and within 60 days after the Table
Date. |
(6) |
Includes
189,973 shares of Common Stock owned of record and 424,780 shares
of Common Stock underlying options which were exercisable or vested
as of the Table Date or 60 days after such date. |
(7) |
Includes
201,911 shares of Common Stock owned of record and 293,467 shares
of Common Stock underlying options which were exercisable or vested
as of the Table Date or 60 days after such date. |
(8) |
Includes
755,583 shares of Common Stock beneficially owned, and 1,728,141
shares of Common Stock underlying options and 58,824 warrant shares
which were exercisable or vested within 60 days after the Table
Date. |
Board
Diversity Matrix
The
following matrix discloses, as of May 31, 2022, the gender and demographic backgrounds of
our Board as self-identified by its members in accordance with
Nasdaq Listing Rule 5606.
Board
Size: |
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
Directors |
|
5 |
|
|
|
|
|
|
|
|
|
|
Gender: |
|
Male |
|
|
Female |
|
|
Non-binary |
|
|
Gender
Undisclosed |
|
Total Number of Directors |
|
3 |
|
|
2 |
|
|
0 |
|
|
0 |
|
Number of directors who identify in any of the categories
below: |
|
|
|
|
|
|
|
|
|
|
|
|
African American or Black |
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
Alaskan Native or American Indian |
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
Asian |
|
0 |
|
|
1 |
|
|
0 |
|
|
0 |
|
Hispanic or Latinx |
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
Native Hawaiian or Pacific
Islander |
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
White |
|
4 |
|
|
4 |
|
|
0 |
|
|
0 |
|
Two or More Races or Ethnicities |
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
LGBTQ+ |
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
Undisclosed |
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
EXECUTIVE COMPENSATION
Summary
Compensation Table
The
following table sets forth all compensation awarded, earned or paid
for services rendered in all capacities to the Company during the
years ended December 31, 2021 and 2020 to (i) each person who
served as the Company’s chief executive officer during fiscal 2021,
(ii) the two most highly compensated officers other than the
chief executive officer who were serving as executive officers at
the end of fiscal 2021 and whose total compensation for such year
exceeded $100,000, and (iii) up to two additional individuals for
whom disclosures would have been provided in this table but for the
fact that such persons were not serving as executive officers as of
the end of 2021 (sometimes referred to collectively as the “named
executive officers”).
Name
and Principal Position |
|
Year |
|
Salary
($) |
|
|
Bonus
($) |
|
|
Stock
Awards
($) |
|
|
Option
Awards
($) |
|
|
Non-Equity
Incentive Plan
Compensation
($) |
|
|
All
Other
Compensation
($) |
|
|
Total
($) |
|
Dennis
J. Carlo, Ph.D. |
|
2021 |
|
$ |
687,023 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
95,834 |
(3) |
|
$ |
782,857 |
|
Former
President and Chief Executive Officer (1) |
|
2020 |
|
$ |
667,013 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
248,129 |
(2) |
|
|
67,665 |
(3)(4) |
|
$ |
982,807 |
|
Robert
O. Hopkins |
|
2021 |
|
$ |
287,932 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
403,538 |
(3)(4)(5) |
|
$ |
691,470 |
|
Former
Senior Vice President, Chief Financial Officer |
|
2020 |
|
$ |
424,600 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
118,463 |
(2) |
|
|
36,897 |
(3) |
|
$ |
579,960 |
|
Ronald
B. Moss |
|
2021 |
|
$ |
473,550 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
159,823 |
(2) |
|
|
59,826 |
(3) |
|
$ |
693,199 |
|
Chief
Medical Officer |
|
2020 |
|
$ |
451,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
125,829 |
(2) |
|
|
36,817 |
(3) |
|
$ |
613,646 |
|
David
J. Marguglio |
|
2021 |
|
$ |
417,459 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
73,220 |
(3)(4) |
|
$ |
490,679 |
|
Chief
Business Officer (6) |
|
2020 |
|
$ |
405,300 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
113,079 |
(2) |
|
|
31,982 |
(3) |
|
$ |
550,361 |
|
|
(1) |
Dr.
Carlo’s employment with the Company terminated effective May 18,
2022. |
|
(2) |
Reflects
performance-based cash bonuses paid pursuant to the Company’s
incentive bonus programs with respect to the respective
year. |
|
(3) |
For
2021 and 2020, includes premiums paid by the Company on behalf of
each of Dr. Carlo, Dr. Moss, Mr. Marguglio and
Mr. Hopkins for life, health, dental, and vision insurance.
For 2021, includes, for Dr. Carlo, Dr. Moss,
Mr. Marguglio and Mr. Hopkins, $24,484, $19,898, $22,542
and $7,327, respectively, paid relating to certain payroll and tax
withholding obligations arising from vesting of certain restricted
stock units and issuance of shares of common stock following
vesting. |
|
(4) |
Due
to COVID-19 limitations and restrictions on affecting vacations and
vacation travel, for 2020 and 2021 the Company paid employees whose
accumulated vacation/PTO hours ceased accruing during 2020 and 2021
because the maximum allowable accrual was reached amounts in
consideration of the inability to accrue additional vacation hours
during 2020 and 2021. |
|
(5) |
Mr. Hopkins’
employment with the Company terminated effective August 23, 2021.
His compensation with respect to the 2021 year reflected in the
table includes payment of accumulated vacation/PTO and severance
compensation paid in 2021 and severance compensation accrued but
not paid or payable until after the end of the 2021
year. |
|
(6) |
Mr.
Marguglio became President and Chief Executive Officer of the
Company in May 2022. |
Narrative
Disclosure to Compensation Table
Employment Agreements with Named Executive
Officers
The
Company has entered into employment agreements with its named
executive officers and certain other executive officers.
Dennis J. Carlo, Ph.D. The company entered into an
employment agreement with Dennis J. Carlo, Ph.D., effective
December 31, 2015. The agreement provided for his employment as
President and Chief Executive Officer. Dr. Carlo’s employment with
the Company terminated effective May 18, 2022, and the Company and
Dr. Carlo entered into a Separation Agreement and Release, which
superseded the provisions in his employment agreement concerning
severance payments and other benefits in connection with a
termination of employment. The agreement provided for an initial
base salary at a rate of $550,000 per annum. Effective January 1,
2021, Dr. Carlo’s annual base salary was increased to $687,023.
There was no increase in the annual base salary for Dr. Carlo for
2020. Under the agreement, Dr. Carlo was eligible to
participate in benefit programs that are routinely made available
to officers. The agreement provides that if Dr. Carlo’s employment
is terminated without cause (as defined in the agreement), then
conditioned on his timely execution of a general release and
waiver, he would be entitled to receive severance payments at his
then-annual base salary rate for 18 months after the date of
termination and would also (assuming eligibility and timely
elections) be entitled to continuation of his medical, dental and
vision insurance coverage pursuant to the Consolidated Omnibus
Budget Reconciliation Act (“COBRA”) during the applicable severance
period with the Company being responsible to pay an amount equal to
the Company’s portion of the required premiums, and the vesting of
a number of unvested stock options would accelerate as if Dr. Carlo
had remained employed during the severance period and all options
would remain exercisable for a period of one year after the date of
termination (subject to the provisions of the 2009 Plan). In the
event of a change in control transaction (as defined in the
agreement), the vesting of any unvested options would be
accelerated in full. In the event of a termination without Cause or
a termination of employment for Good Reason (as defined in the
agreement) within 13 months after a change in control, Dr. Carlo
would be entitled to receive a severance payment in an amount equal
to 18 months of his base salary rate as well as continued insurance
coverage pursuant to COBRA as described above.
Robert
O. Hopkins. The company entered into an employment agreement
with Robert O. Hopkins, effective December 31, 2015. The agreement
provided for his employment as Chief Financial Officer. Mr.
Hopkins’ employment with the Company terminated other than for
cause effective on August 20, 2021, and he became entitled to
receive severance compensation as described below. The agreement
provided for an initial base salary at a rate of $260,000 per
annum. Effective January 1, 2021, Mr. Hopkins’ annual base salary
was increased to $445,830. There was no increase in the annual base
salary for Mr. Hopkins for 2020. Under the agreement, Mr. Hopkins
was eligible to participate in benefit programs that are routinely
made available to officers. The agreement was terminable at any
time by either party. The agreement provides that if
Mr. Hopkins’ employment was terminated without cause (as
defined in the agreement), then conditioned on his timely execution
of a general release and waiver, he would be entitled to receive
severance payments at his then-annual base salary rate for nine
months after the date of termination, and would also (assuming
eligibility and timely elections) be entitled to continuation of
his medical, dental and vision insurance coverage pursuant to COBRA
during the applicable severance period (or until he becomes
employed full-time by another employer) with the Company being
responsible to pay an amount equal to the Company’s portion of the
premiums required to continue coverage pursuant to COBRA. In the
event of a termination without cause, a number of unvested stock
options would accelerate, vest and be exercisable in full as if Mr.
Hopkins had remained employed during the severance period described
above, and all options would remain exercisable for a period of one
year after the date of termination (subject to the provisions of
the 2009 Plan). The agreement provides that upon termination of
employment by reason of death or disability (as defined in the
agreement), any options that are vested and exercisable on the
termination date will remain exercisable for 12 months after the
date of cessation of service. In the event of a change in control
transaction (as defined in the agreement), the vesting of any
unvested options would be accelerated in full, and in the event of
a termination without Cause or a termination of employment for Good
Reason (as defined in the agreement) within 13 months after a
change in control, then Mr. Hopkins would be entitled to receive a
severance payment in an amount equal to nine months of his base
salary rate as well as continued insurance coverage pursuant to
COBRA as described above.
Ronald
B. Moss, M.D. The company entered into an employment agreement
with Ronald B. Moss, M.D., effective February 28, 2017. The
agreement provides for his employment as Chief Medical Officer. The
agreement provided for an initial base salary at a rate of $385,000
per annum. Effective January 1, 2021, Dr. Moss’s annual base salary
was increased to $473,550. There was no increase in the annual base
salary for Dr. Moss for 2020. Under the agreement, Dr. Moss is
eligible to participate in benefit programs that are routinely made
available to officers, including any executive stock ownership
plans, profit sharing plans, incentive compensation or bonus plans,
retirement plans, Company-provided life insurance, or similar
executive benefit plans maintained or sponsored by the Company. The
agreement is terminable at any time by either party. Under the
terms of the agreement, upon a termination of employment, Dr. Moss
would be entitled to receive any unpaid base salary compensation
and benefits and expense reimbursements owed for services sundered
prior to the effective date of termination. The agreement provides
that if Dr. Moss’s employment is terminated without cause (as
defined in the agreement), then conditioned on his timely execution
of a general release and waiver, he is entitled to receive
severance payments at his then-annual base salary rate for nine
months after the date of termination, and provided it does not
result in a penalty to the Company would also (assuming eligibility
and timely elections) be entitled to continuation of his medical,
dental and vision insurance coverage pursuant to COBRA during the
applicable severance period (or until he becomes employed full-time
by another employer) with the Company being responsible to pay an
amount equal to the Company’s portion of the premiums required to
continue coverage pursuant to COBRA. In addition, under the terms
of the agreement, in the event of a termination without cause, a
number of unvested stock options would accelerate, vest and be
exercisable in full as if Dr. Moss had remained employed during the
severance period described above, and all options would remain
exercisable for a period of one year after the date of termination
(subject to the provisions of the 2009 Plan). The agreement
provides that upon termination of employment by reason of death or
disability (as defined in the agreement), any options that are
vested and exercisable on the termination date will remain
exercisable for 12 months after the date of cessation of service.
In the event of a change in control transaction (as defined in the
agreement), any unvested options (as well as certain RSUs
previously granted to Dr. Moss) would be accelerated in full. In
addition, in the event of a termination without Cause or a
termination of employment for Good Reason (as defined in the
agreement) within 13 months after a change in control, then Dr.
Moss would be entitled to receive a severance payment in an amount
equal to nine months of his base salary rate as well as continued
insurance coverage pursuant to COBRA as described above.
David
J. Marguglio. The previously entered into an employment
agreement with David J. Marguglio, effective December 31, 2015,
providing for the employment of Mr. Marguglio as Senior Vice
President, Corporate Development, at an initial base salary rate of
$300,000 per annum. Effective January 1, 2021, Mr. Marguglio’s
annual base salary was increased to $417,459. There was no increase
in the annual base salary for Mr. Marguglio for 2020. The Company
has entered into a new employment agreement with David J. Marguglio
dated as of May 18, 2022, which agreement supersedes the prior
employment agreement, providing for the employment of Mr. Marguglio
as President and Chief Executive Officer of the Company. The
agreement provided for an initial base salary at a rate of $500,000
per annum. The Board may review Mr. Marguglio’s base salary
and may increase base salary from time to time. Under the
agreement, Mr. Marguglio is eligible to participate in benefit
programs that are routinely made available to officers, including
any executive stock ownership plans, profit sharing plans,
incentive compensation or bonus plans, retirement plans,
Company-provided life insurance and directors and officers
insurance, or similar executive benefit plans maintained or
sponsored by the Company, including without limitation eligibility
to receive an annual cash bonus under the Company’s bonus plan at
the target percentage of annual base salary applicable to the chief
executive officer (and appropriately and proportionately pro rated
for the first year of Mr. Marguglio’s employment as chief executive
officer). The agreement is terminable at any time by either party.
Under the terms of the agreement, upon a termination of employment,
Mr. Marguglio would be entitled to receive any unpaid base salary
compensation and benefits and expense reimbursements owed for
services rendered prior to the effective date of termination. The
agreement provides that if Mr. Marguglio’s employment is terminated
without cause or Mr. Marguglio terminates his employment for good
reason (as such terms are defined in the agreement), then
conditioned on his timely execution of a general release and
waiver, he is entitled to receive severance payments at his
then-annual base salary rate for 18 months after the date of
termination, and provided it does not result in a penalty to the
Company would also (assuming eligibility and timely elections) be
entitled to continuation of his medical, dental and vision
insurance coverage pursuant to COBRA during the applicable
severance period (or until he becomes eligible for group medical
care coverage through other employment or, if earlier, until he is
no longer eligible under COBRA for continuation coverage for
medical care) with the Company being responsible to pay the
Company’s portion of the premiums required to continue coverage
pursuant to COBRA. In addition, under the terms of the agreement,
in the event of a termination without cause, a number of unvested
stock options would accelerate, vest and be exercisable in full
(and if any options have been early exercised, any reacquisition or
repurchase rights held by the Company with respect to such option
shares subject to such acceleration shall lapse to the same extent)
as if Mr. Marguglio had remained employed during the severance
period described above, and all options would remain exercisable
for a period of one year after the date of termination (but not
beyond the original term of the applicable options). The agreement
provides that upon termination of employment by reason of death or
disability (as defined in the agreement), any options that are
vested and exercisable on the termination date will remain
exercisable for 12 months after the date of cessation of service.
In the event of a change in control transaction (as defined in the
agreement), any unvested options (as well as certain RSUs
previously granted to Mr. Marguglio) would be accelerated in
full.
Bonus and Non-Equity Incentive Plan Compensation
Each
named executive officer and other executive officer is eligible to
receive such discretionary bonuses as the Compensation Committee
may approve. The Board may in its discretion make discretionary
cash or equity payments, awards, changes in base salary, bonuses or
other payments to its officers and employees. In addition, our
compensation structure includes eligibility for annual cash bonuses
for officers and most non-officer employees pursuant to the
Company’s incentive bonus plan (the “Bonus Plan”). The terms of the
Bonus Plan establish for each level of Company employee (with
certain exceptions), including the Company’s executive officers, a
target cash bonus amount expressed as a percentage of base salary.
Eligibility and bonus payments will be based on evaluation by the
Committee of the Company’s achievement of corporate performance
goals for the relevant year, where applicable individual goals, and
certain other factors. The corporate performance goals for each
plan year will be determined by the Committee and may include the
achievement of performance targets and business goals relating to
matters such as the Company’s financial results, revenues, net
income, EBITDA, return on equity, stock price, capital raising
activities, pre-clinical or clinical trial activities (including,
without limitation, initiation or completion of trials), regulatory
filings relating to product candidates, other regulatory activities
or approvals, product development, product commercialization
activities, strategic activities and strategic commercial
agreements or arrangements, or other corporate goals. The Committee
may develop and specify different goals, weighting factors and
target bonus percentages for different employees or officers.
Determinations regarding payments of bonuses under the Bonus Plan
are made by the Compensation Committee. The Bonus Plan provides
that the Committee retains the discretion to, among other matters,
increase or reduce payouts or determine that payouts will not be
made notwithstanding that performance goals are achieved. The
target bonus amounts as a percentage of base salary for 2020 and
2021 for our named executive officers were as follows:
Dr. Carlo, 60%; and Dr. Moss, Mr. Marguglio and
Mr. Hopkins, 45%. The corporate performance goals for 2021
included the achievement of performance targets and business goals
related to transactions relating to the Company’s U.S. Compounding
Inc. subsidiary, clinical development and regulatory filings and
approvals, and product development and clinical trial activities.
Following the end of the 2021 year, the Compensation Committee
approved cash bonus payments to the named executive officers in the
amount of $159,823 to Dr. Moss. The corporate performance
goals for 2020 included the achievement of performance targets and
business goals related to the Company’s financial results,
commercialization activities and agreements, clinical development
and regulatory filings and approvals, and product development
activities. Following the end of the 2020 year, the Compensation
Committee approved cash bonus payments to the named executive
officers in the following amounts: Dr. Carlo, $248,129;
Mr. Marguglio, $113,709; Dr. Moss, $125,829; and
Mr. Hopkins, $118,463.
Equity Incentives
Our
2020 Equity Incentive Plan (the “2020 Plan”) provides for the grant
to eligible employees, directors and consultants of stock options,
shares of Common Stock, restricted stock awards, restricted stock
unit (“RSU”) awards, stock appreciation rights, performance stock
awards, and other forms of equity compensation (“Stock Awards”), as
well as certain kinds of performance cash awards (collectively with
Stock Awards, “Awards”), on such terms as are determined by the
Board or other Plan administrator. The Board adopted the 2020 Plan
in June 2020, and the stockholders approved the 2020 Plan in August
2020.
No
stock options, RSUs or other Awards were granted or awarded in 2020
or 2021 under the 2020 Plan. Under the provisions of the 2020 Plan,
no Award may be granted, issued or made until such time as the fair
market value of the Common Stock, which is generally the closing
sales price of the Common Stock on the principal stock market on
which the Common Stock is traded, has been equal to or greater than
$3.00 per share (subject to proportionate adjustment for stock
splits, reverse stock splits, and similar events) for at least 10
consecutive trading days, after which time Awards may be made under
the Plan without regard to any subsequent increase or decrease in
the fair market value of the Common Stock. The aggregate number of
shares of Common Stock that may be issued pursuant to stock Awards
under the 2020 Plan (the “Share Reserve”) is initially 2,000,000.
Under the terms of the 2020 Plan, the number of shares of Common
Stock reserved for issuance automatically increases on
January 1 of each calendar year during the term of the 2020
Plan, commencing January 1, 2021, by five percent of the total
number of shares of Common Stock outstanding on December 31 of
the preceding calendar year; however, the Board may act prior to
the start of a calendar year for which an increase applies to
provide that there will be no increase in the Share Reserve for
such year or that the increase in the Share Reserve for such year
will be a lesser number of shares of Common Stock than would
otherwise occur pursuant to the preceding sentence. The Board, or
an authorized committee such as the Compensation Committee,
administers the 2020 Plan. The 2020 Plan administrator determines
recipients, dates of grant, the numbers and types of Awards to be
granted, and the terms and conditions of the Awards, including the
period of their exercisability and vesting schedule applicable to
an Award. Options granted under the 2020 Plan have terms of up to
10 years. To the extent that Awards may be granted under the 2020
Plan, we generally made an initial equity award of stock options to
most new employees and annual stock-based grants as part of our
overall compensation program, and sometimes upon promotion. All
equity-based awards granted to executives are approved by our
Compensation Committee or the Board. Stock option grants have an
exercise price equal to the fair market value of our Common Stock
on the grant date and generally have a vesting schedule that
provides for monthly or other periodic vesting of the option over a
period of time, sometimes with an initial cliff-vesting period
where a portion vests after an initial period of time from the
grant date, provided that the award recipient continues to provide
continuous service to the Company.
Our
2009 Equity Incentive Plan (the “2009 Plan”) provides for the grant
to eligible employees, directors and consultants of Awards, as well
as certain kinds of performance cash awards, on such terms as are
determined by the Board or other 2009 Plan administrator. The Board
adopted the 2009 Plan in February 2009 and the stockholders
approved the 2009 Plan in March 2009. The 2009 Plan terminated in
February 2019 and no further awards may be made under the 2009
Plan; however, the 2009 Plan continues to apply to outstanding
Awards previously made under the 2009 Plan. The Board, or an
authorized committee such as the Compensation Committee,
administers the 2009 Plan. The 2009 Plan administrator determines
recipients, dates of grant, the numbers and types of Awards to be
granted, and the terms and conditions of the Awards, including the
period of their exercisability and vesting schedule applicable to
an Award. Options granted under the 2009 Plan have terms of up to
10 years. Stock option grants have an exercise price equal to the
fair market value of our Common Stock on the grant date and
generally have a vesting schedule that provides for monthly or
other periodic vesting of the option over a period of time,
sometimes with an initial cliff-vesting period where a portion
vests after an initial period of time from the grant date, provided
that the award recipient continues to provide continuous service to
the Company.
Employee Benefit Programs
Executive
officers are eligible to participate in our employee benefit plans,
including medical, dental and vision, in each case on the same
basis as other employees, subject to applicable law. We also
provide vacation and other paid holidays to all employees,
including executive officers.
Pension Benefits
None
of our named executive officers are covered by a pension plan or
other similar benefit plan that provides for payments or other
benefits at, following, or in connection with
retirement.
Nonqualified Deferred Compensation
None
of our named executive officers are covered by a defined
contribution or other plan that provides for the deferral of
compensation on a basis that is not tax-qualified.
Hedging Policy
Under
our insider trading policy, no officer, employee, or director (or
any other related person subject to the policy) may make a short
sale or similar related transaction of the Company’s securities.
Our policy permits, but discourages, such persons from engaging in
hedging transactions or similar arrangements and requires that any
such proposed transactions first be approved by our compliance
officer.
Potential Payments Upon Termination or Change in
Control
The
employment agreements of the named executive officers of the
Company, as well as certain other executive officers of the
Company, contain provisions providing for certain potential
payments upon the occurrence of certain terminations of employment
or upon a change in control of the Company, as described above
under the heading “Employment Agreements with Named Executive
Officers.”
The
employment of Robert O. Hopkins, who served as chief financial
officer of the Company, terminated other than for cause effective
on August 20, 2021. Pursuant to the terms of his employment
agreement with the Company, Mr. Hopkins was entitled to
receive, and did receive, severance payments in an amount equal to
his 2021 annual base salary rate at the date of termination, less
standard deductions and withholdings, for a period of nine months
after the date of separation, and was entitled to be reimbursed for
payment of the Company’s portion of the premiums required to
continue medical, dental and vision insurance coverage pursuant to
COBRA during the severance payment period (or, if earlier, until he
becomes employed full-time by another employer).
On
May 18, 2022, the Company and Dennis J. Carlo, Ph.D., entered into
a Separation Agreement and Release (the “Separation Agreement”).
Pursuant to the terms of the Separation Agreement, Dr. Carlo
resigned from his positions as Chief Executive Officer and as an
officer, director and employee of the Company and all subsidiaries
effective May 18, 2022 (the “Separation Date”). Pursuant to the
Separation Agreement, the Company agreed to pay Dr. Carlo a cash
severance payment equal to $1,433,000, less applicable
withholdings, taxes and other lawful deductions, payable in a lump
sum within 14 days after the Separation Date and after the
expiration of the applicable revocation period. The Separation
Agreement provides that in the event that Dr. Carlo timely elects
continuation coverage of health benefits under the Company’s health
plan pursuant to COBRA, the Company will, subject to certain
limitations and conditions, pay the same portion of premiums for
such coverage that it pays for similarly-situated employees for the
same level of group medical coverage, as in effect as of the
Separation Date, for the period from the Separation Date through
the earliest of 18 months from the Separation Date, or the date
that Dr. Carlo becomes eligible for group medical care coverage
through other employment or is no longer eligible under COBRA for
continuation coverage for medical care. In addition, pursuant to
the Separation Agreement the vesting of restricted stock units held
by Dr. Carlo covering 250,000 shares of common stock was
accelerated so that they became fully vested, with shares of common
stock issued shortly after vesting. Outstanding stock options held
by Dr. Carlo, all of which are vested, will remain exercisable
for a period of one year after the Separation Date. Subject to
certain exceptions and limitations, the Separation Agreement
includes a mutual general release of claims by Dr. Carlo and the
Company in favor of the other party and certain related persons and
parties, and customary confidentiality, nondisparagement and
cooperation provisions. The Separation Agreement also includes
certain other customary representations, warranties and covenants
of Dr. Carlo, and provides for reimbursement of certain expenses
incurred by Dr. Carlo. The Separation Agreement supersedes all
other agreements or arrangements between Dr. Carlo and the Company
regarding the subject matter of the agreement including concerning
severance payments and benefits, including without limitation the
employment agreement previously entered into between Dr. Carlo and
the Company.
Equity
Incentive Plans
Our
2009 Plan and our 2020 Plan (sometimes referred to as the “Plans”)
include provisions affecting the vesting of Awards granted under
the Plans in the event of a change in control (as defined in the
Plans) of the Company. Under the provisions of the 2009 Plan,
unless otherwise provided in a particular Award agreement under the
2009 Plan, the following provisions apply to Stock Awards in the
event of a Corporate Transaction (as defined in the 2009 Plan)
unless otherwise provided in the instrument evidencing the Stock
Award or any other written agreement between the Company or any
Affiliate and the holder of the Stock Award, and may result in
acceleration of options or other awards granted under the 2009 Plan
in connection with a change in control transaction: (i) the
surviving or acquiring corporation (or is parent) may assume or
continue any or all outstanding Stock Awards or substitute similar
Stock Awards, pursuant to terms determined by the Board; and (ii)
if the surviving or acquiring corporation (or its parent) does not
assume or continue such outstanding Stock Awards or substitute
similar stock awards for such outstanding Stock Awards, then the
vesting of Stock Awards held by persons whose continuous service
(as defined in the 2009 Plan) has not terminated before the
effective time of the transaction will be accelerated in full (and
any reacquisition or repurchase rights will lapse), and will
terminate if not exercised before the effective time of the
transaction. In addition, if a Stock Award will terminate if not
exercised prior to the effective time of a corporate transaction,
the Board may provide that the holder of such Stock Award may not
exercise such Stock Award but will receive a payment equal in value
to the excess, if any, of (A) the value of the property the
holder of the Stock Award would have received upon the exercise of
the Stock Award (including, at the discretion of the Board, any
unvested portion of such Stock Award), over (B) any exercise
price payable by such holder in connection with such exercise.
Under the 2009 Plan, a Stock Award may be subject to additional
acceleration of vesting and exercisability upon or after a change
in control as may be provided in the Stock Award Agreement for such
Stock Award or as may be provided in any other written agreement
between the Company or any Affiliate and the recipient of the Stock
Award. The terms of the options held by the named executive
officers as well as options granted to other executive officers of
the Company provide for full acceleration of any unvested portion
of the option upon a change in control event.
Similarly,
under the 2020 Plan, in the event of a change in control (as
defined in the 2020 Plan), the plan administrator has the
discretion to take a variety of actions with respect to stock
awards granted under the 2020 Plan, including without limitation
accelerating the vesting of the stock award, cancel or arrange for
the cancellation of the stock award in exchange for such cash
consideration as the Board may deem appropriate, or make a payment
equal to the excess of (1) the value of the property the
participant would have received upon exercise of the stock award
over (2) the exercise price or strike price otherwise payable
in connection with the stock award. In addition except as may
otherwise be stated in a particular award agreement, in the event
of a corporate transaction, the vesting and exercisability
provisions of stock awards will be accelerated in full, and if the
surviving or acquiring entity (or its parent company) elects not to
assume, continue or substitute for such stock awards, then such
awards will be terminated if not exercised prior to the effective
date of the corporate transaction.
Outstanding
Equity Awards at Year-End
The
following table provides a summary of equity awards outstanding at
December 31, 2021, for each of our named executive
officers:
|
|
Option
Awards |
|
Stock
Awards |
|
|
|
Number
of Securities Underlying Unexercised Options (#)
Exercisable |
|
|
Number
of Securities Underlying Unexercised Options (#) |
|
|
Equity
Incentive Plan Awards:
Number
of Securities Underlying Unexercised Unearned |
|
|
Option
Exercise Price |
|
|
Option
Expiration |
|
Number
of Shares or Units of Stock That Have Not |
|
|
|
Market
Value of Shares or Units of Stock That Have |
|
|
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or
Other Rights That Have Not |
|
|
Equity
Incentive Plan Awards:
Market
or Payout Value of Unearned Shares, Units or Other Rights That Have
Not |
|
Name |
|
(1) |
|
|
Unexercisable |
|
|
Options (#) |
|
|
($) |
|
|
Date |
|
Vested (#) |
|
|
|
Not Vested ($) |
|
|
Vested (#) |
|
|
Vested ($) |
|
Dennis
J. Carlo, Ph.D. |
|
|
166,934 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
2.83 |
|
|
2/21/2028 |
|
|
— |
|
|
|
$ |
— |
|
|
|
250,000 |
(6) |
|
$ |
151,250 |
|
|
|
|
477,000 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
3.15 |
|
|
2/7/2027 |
|
|
|
|
|
|
|
|
|
|
|
28,989 |
(7) |
|
|
17,538 |
|
|
|
|
442,367 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
4.10 |
|
|
1/25/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,003 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
5.99 |
|
|
1/23/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130,100 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
5.99 |
|
|
1/23/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,200 |
(5) |
|
|
— |
|
|
|
— |
|
|
$ |
6.32 |
|
|
4/1/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,300 |
(4) |
|
|
— |
|
|
|
— |
|
|
$ |
6.32 |
|
|
4/1/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
O. Hopkins |
|
|
133,547 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
2.83 |
|
|
2/21/2028 |
|
|
— |
|
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
|
110,000 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
3.15 |
|
|
2/7/2027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67,183 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
4.10 |
|
|
1/25/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65,050 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
5.99 |
|
|
1/23/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,200 |
(5) |
|
|
— |
|
|
|
— |
|
|
$ |
6.32 |
|
|
4/1/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,800 |
(4) |
|
|
— |
|
|
|
— |
|
|
$ |
6.32 |
|
|
4/1/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald
B. Moss |
|
|
83,467 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
2.83 |
|
|
2/21/2028 |
|
|
— |
|
|
|
$ |
— |
|
|
|
23,191 |
(7) |
|
$ |
14,031 |
|
|
|
|
210,000 |
(3) |
|
|
— |
|
|
|
— |
|
|
$ |
3.45 |
|
|
2/28/2027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
J. Marguglio |
|
|
133,547 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
2.83 |
|
|
2/21/2028 |
|
|
— |
|
|
|
$ |
— |
|
|
|
200,000 |
(6) |
|
$ |
121,000 |
|
|
|
|
176,000 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
3.15 |
|
|
2/7/2027 |
|
|
|
|
|
|
|
|
|
|
|
23,191 |
(7) |
|
|
14,031 |
|
|
|
|
107,493 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
4.10 |
|
|
1/25/2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,830 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
5.99 |
|
|
1/23/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,080 |
(2) |
|
|
— |
|
|
|
— |
|
|
$ |
5.99 |
|
|
1/23/2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,600 |
(5) |
|
|
— |
|
|
|
— |
|
|
$ |
6.32 |
|
|
4/1/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,200 |
(4) |
|
|
— |
|
|
|
— |
|
|
$ |
6.32 |
|
|
4/1/2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Does
not include restricted stock units granted. |
(2) |
The
options vest with respect to 1/36 of the shares subject to the
option on each monthly anniversary of the grant date, and have a
term of ten years (subject to earlier termination upon the events
described in the Plan such as certain terminations of
employment). |
(3) |
The
options vest with respect to one-third of the shares immediately
and monthly thereafter with respect to 1/24 of the shares subject
to the option, and have a term of ten years (subject to earlier
termination upon the events described in the Plan such as certain
terminations of employment). |
(4) |
The
options vest with respect to one-sixth of the shares subject to the
option on the six-month anniversary of the grant date and monthly
thereafter with respect to 1/36 of the shares subject to the
option, and have a term of ten years (subject to earlier
termination upon the events described in the Plan such as
termination of employment). |
(5) |
The
options are fully vested and have a term of ten years (subject to
earlier termination upon the events described in the Plan such as
certain terminations of employment). |
(6) |
The
restricted stock unit awards vest on the seventh anniversary of the
date of grant if the recipient has provided continuous service to
the Company until such date, and upon change of control or upon
death or disability. |
(7) |
The
restricted stock unit awards vest ratably approximately quarterly
over a period of three years if the recipient has provided
continuous service or upon change of control or upon death or
disability. |
Compensation
of Directors
The
following table shows amounts earned by each director for 2021,
other than Dr. Carlo and Mr. Marguglio, who are executive
officers and received no additional compensation for their services
as a director.
|
|
Fees |
|
|
|
|
|
|
|
|
|
|
Non-Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned |
|
|
|
|
|
|
|
|
|
|
Incentive |
|
|
Nonqualified |
|
|
|
|
|
|
|
|
|
|
|
or
Paid |
|
|
Stock |
|
|
Option |
|
|
Plan |
|
|
Deferred |
|
|
All
Other |
|
|
|
|
|
|
|
in
Cash |
|
|
Awards |
|
|
Awards |
|
|
Compensation |
|
|
Compensation |
|
|
Compensation |
|
|
Total |
|
Director |
|
($)(1) |
|
|
($) |
|
|
($) |
|
|
($)(2) |
|
|
Earnings |
|
|
($) |
|
|
($) |
|
Howard
C. Birndorf |
|
$ |
64,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
64,000 |
|
Roshawn
A. Blunt (3) |
|
$ |
48,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
48,000 |
|
Meera
J. Desai (4) |
|
$ |
16,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
30,250 |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
46,250 |
|
Richard
C. Williams |
|
$ |
128,000 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
128,000 |
|
(1) |
Reflects
the amount of fees earned during 2021. |
(2) |
Amount
reflects the grant date fair value of cash stock appreciation
rights (“SARs”) granted to the director. In light of the
inability to grant a stock option to Dr. Desai under the 2020
Plan to purchase 50,000 shares of common stock, in connection with
her appointment as a director of the Company, Dr. Desai was
granted a cash SAR. The SAR provides for a reference
price equal to $1.01 per share, the fair market value of the common
stock of the Company of the date of grant of the SAR, and a
reference number of shares equal to 50,000 shares. The
SAR vests with respect to 1/6 of the reference number of shares on
the six-month anniversary of the grant date and vests monthly
thereafter in equal installments over a period of three years from
the grant date, subject to the recipient providing continuous
service to the Company. The SAR has a term of seven
years. The vested portion of the SAR may be settled only
in cash and may be exercised for a period of 12 months after the
date of termination of the recipient’s service to the
Company. Upon settlement, the Company will pay to the
recipient an amount of cash equal to the difference between the
fair market value of the common stock on the date of termination of
service or, if lower, on the date of exercise, and the initial
reference price, multiplied by the number of shares as to which the
SAR is being exercised. In the event of a change of
control of the Company before the SAR is fully vested, vesting and
exercisability is accelerated. |
(3) |
Ms.
Blunt resigned as a director of the Company effective October 1,
2021. |
(4) |
Dr. Desai
became a director of the Company effective October 1,
2021. |
In
general, under the Company’s policies concerning fees for
non-employee directors, non-employee directors of the Company were
entitled during 2021 to receive the following amounts of cash
compensation for service as a director: each non-employee director
was entitled to receive an annual fee of $64,000 per year, paid
quarterly in arrears; and the Chairman of the Board was entitled to
receive an annual fee of $128,000 per year, or twice the
non-employee director annual fee, paid quarterly in arrears. Each
director is also entitled to reimbursement of reasonable expenses
incurred in connection with board-related activities. In addition,
to the extent that awards may be granted pursuant to the terms of
the 2020 Plan, upon joining the Board a non-employee director is
entitled to receive an initial director option under the 2020 Plan
to purchase 50,000 shares of Common Stock, vesting monthly over a
period of 36 months from the grant date, and each non-employee
director is also entitled to receive under the 2020 Plan a
succeeding annual grant, on the first business day after the date
of the annual meeting of stockholders, to purchase 30,000 shares of
Common Stock, with the annual grant vesting and becoming
exercisable as to 1/12 of the shares subject to the option on each
monthly anniversary of the grant date. The initial director options
and any annual options have a term of 10 years and will have an
exercise price equal to the fair market value of the Common Stock
on the grant date. Because the 2020 Plan provides that no Awards
may be made under the plan until the fair market value of the
Common Stock has reached certain minimum per share price
thresholds, no options or other awards were made pursuant to the
2020 Plan during 2020 or 2021.
DELINQUENT
SECTION 16(A) REPORTS
Directors,
certain officers and beneficial owners of more than 10% of our
common stock (“common stock”) are required by Section 16(a) of
the Securities Exchange Act of 1934 and related regulations to file
ownership reports on Forms 3, 4 and 5 with the SEC and to
furnish us with copies of the reports. Other than as set forth
below, based solely on a review of the copies of such forms
furnished to us, we believe that from January 1, 2021 to December
31, 2021, all such persons satisfied such applicable SEC filing
requirements. On October 6, 2021, Dr. Desai filed a Form 4
reporting the award on October 1, 2021, of a stock appreciation
right, which may be settled only in cash, covering a reference
number of shares equal to 50,000 shares in connection with her
becoming a director of the Company.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
To
our knowledge, other than (i) compensation for services as
executive officers and directors; (ii) employment relationships or
transactions involving an executive officer and related
compensation solely resulting from that employment relationship or
transaction, including the employment agreements, stock option or
other equity awards, and other transactions described above under
the heading “Executive Compensation” or not required to be
reported; or (iii) as set forth below, there were no material
transactions, or series of similar transactions, since
January 1, 2020, or any currently proposed transactions, or
series of similar transactions, to which we were, or will be, a
party, in which the amount involved exceeds the lesser of
(a) $120,000 or (b) one percent of the average of our total
assets at the end of our last two completed fiscal years, and in
which any director or executive officer, or any security holder who
is known by us to own of record or beneficially more than 5% of any
class of the Common Stock, or any member of the immediate family of
any of the foregoing persons, has an interest (a “related party
transaction”).
We
have entered into indemnification agreements with our directors and
executive officers. Each agreement provides, among other things,
that we will indemnify the officer to the fullest extent
permissible under Delaware law against liabilities and certain
expenses (including attorneys’ fees, judgments, fines and
settlement amounts reasonably incurred by the officer in any action
or proceeding), that may arise by reason of their service to us or
at our direction, and to advance expenses incurred as a result of
any proceeding against them as to which they could be indemnified.
As described above under the heading “Executive Compensation,” we
have entered into various employment-related agreements and
compensatory arrangements with our executive officers and directors
that, among other things, provide for compensatory and certain
severance and change of control benefits.
We
have entered into employment agreements with certain of our
executive officers that, among other things, provide for certain
severance and change of control benefits. For a description of
employment agreements with our named executive officers, see
“Executive Compensation—Employment Agreements with Named Executive
Officers.” We have granted stock options to our named executive
officers, other executive officers and certain of our directors.
See “Executive Compensation—Outstanding Equity Awards at
Year-End.”
In
February 2020, the Company entered into a Securities Purchase
Agreement (the “Purchase Agreement”) with certain accredited
institutional investors including CVI Investments, Inc. (“CVI
Investments”) (the “Purchasers”) pursuant to which the Company sold
to the Purchasers, in a registered direct offering and concurrent
private placement, shares (the “Shares”) of Common Stock and
warrants to purchase shares of Common Stock (the “Warrants”) with
an exercise price of $0.70 per share. The negotiated combined
purchase price for one Share and 0.75 Warrant was $0.58. CVI
Investments purchased 5,800,000 Shares and 4,350,000 Warrants. The
Warrants are exercisable commencing six months from the date of
issuance or earlier in certain circumstances, and will expire five
years after they become exercisable.
Review,
Approval and Ratification of Transactions with Related
Persons
The
Audit Committee is responsible under its charter for reviewing and,
approving or ratifying all related party transactions, defined as
those transactions required to be disclosed under Item 404 of
Regulation S-K. In evaluating related person transactions, the
members of the Audit Committee apply the same standards of good
faith and fiduciary duty they apply to their general
responsibilities as members of a committee of the Board and as
individual directors, and will review and consider, among other
factors, whether the terms of the transaction are no less favorable
to us than those that we could obtain from unaffiliated third
parties. The Audit Committee will approve a related person
transaction when, in its good faith judgment, it determines that
the transaction is in, or is not inconsistent with, the best
interests of the Company.
GENERAL
Other
Matters at the Meeting
Except
as described in this Proxy Statement, we know of no other matters
to be submitted at the Meeting. If any other matter properly comes
before the Meeting, it is the intention of the persons named in the
enclosed proxy to vote the shares they represent as the Board may
recommend or, if no recommendation is given, in their own
discretion according to their best judgment in accordance with Rule
14a-4(c). By submitting your proxy, you grant discretionary
authority with respect to such other matters.
Stockholder
Proposals for the next Annual Meeting of
Stockholders
To be
considered for inclusion in next year’s proxy materials pursuant to
Rule 14a-8 of the SEC, your proposal must be submitted in writing
by [__________ ___], 2023, to our Corporate Secretary at 11682
El Camino Real, Suite 300, San Diego, California 92130. In
addition, if we are not notified by such date of a proposal to be
brought before the 2023 Annual Meeting of Stockholders by a
stockholder, then proxies held by management may provide the
discretion to vote against such proposal even through it is not
discussed in the proxy statement for such meeting. In addition,
pursuant to advance notice provisions in our Bylaws, if you wish to
submit a proposal or nominate a director to be presented at next
year’s annual meeting (that will not be included in next year’s
proxy materials), your proposal or nomination generally must be
submitted in writing to the same address and received by our
Corporate Secretary no later than [__________ ___,] 2023, but
no earlier than [__________ ___], 2023. However, if the date
of next year’s annual meeting is changed by more than 30 days
before or after the first anniversary date of the Meeting, then
notice by the stockholder to be timely must be so received not
earlier than the close of business on the 120th day
prior to the date of next year’s annual meeting and not later than
the later of the close of business on the later of the
90th day prior to the date of next year’s annual meeting
or the 10th day following the day on which public
announcement of the date of such meeting is first made. You are
also advised to review the Bylaws, which contain additional
requirements about advance notice of stockholder proposals and
director nominations.
In
addition to satisfying the foregoing requirements under our Bylaws,
to comply with the universal proxy rules, stockholders who intend
to solicit proxies in support of director nominees other than the
Company’s nominees must provide notice that sets forth the
information required by Rule 14a-19 under the Exchange Act no later
than [__________ __], 2023.
All
such notices should be directed to our Corporate Secretary at our
corporate headquarters located at Adamis Pharmaceuticals
Corporation, 11682 El Camino Real, Suite 300, San Diego, CA
92130.
In
connection with our solicitation of proxies for our 2023 Annual
Meeting of Stockholders, we intend to file a proxy statement and
WHITE proxy card with the SEC. Stockholders may obtain our proxy
statement (and any amendments and supplements thereto) and other
documents as and when filed with the SEC without charge from the
SEC’s website at: www.sec.gov.
Annual
Report on Form 10-K
A
copy of our Annual Report on Form 10-K for the year ended December
31, 2021, is enclosed with these materials. Upon written request,
we will provide each stockholder being solicited by this Proxy
Statement with a copy, free of charge, of any of the documents
referred to in this Proxy Statement. All such requests should be
directed to Adamis Pharmaceuticals Corporation, 11682 El Camino
Real, Suite 300, San Diego, California 92130; Attention: Corporate
Secretary. You also may access this Proxy Statement and our Annual
Report on Form 10-K for the year ended December 31, 2021 at:
http://www.adamispharmaceuticals.com.
Householding
The
SEC has adopted rules that permit companies and intermediaries (for
example, brokers, banks and nominees) to satisfy the delivery
requirements for proxy statements and annual reports with respect
to two or more stockholders sharing the same address by delivering
a single proxy statement addressed to those stockholders. This
process, which is commonly referred to as “householding,”
potentially means extra convenience for stockholders and cost
savings for companies and intermediaries. This year, some banks,
brokers or other nominee record holders may be “householding” our
proxy materials. This means that only one copy of our Proxy
Statement and annual report to stockholders may have been sent to
multiple stockholders in your household unless contrary
instructions have been received by the broker, bank or nominee from
you. If you would like to receive a separate Proxy Statement and
annual report, we will promptly send you additional copies if you
call or write our Corporate Secretary at our offices located at
11682 El Camino Real, Suite 300, San Diego, California 92130;
telephone (858) 997-2400. If you are a beneficial owner, you
can request additional copies of this Proxy Statement and annual
report, or you can request a change in your householding status, by
notifying your broker, bank or nominee.
|
|
Sincerely, |
|
|
|
|
|
|
|
|
/s/
David J. Marguglio |
|
|
David
J. Marguglio |
June [___],
2022 |
|
Chief
Executive Officer |
ADAMIS PHARMACEUTICALS CORPORATION
11682 El Camino Real, Suite 300
San Diego, CA 92130 |
|
SUBMIT YOUR PROXY TO VOTE BY INTERNET:
Before the Meeting - Go to
www.proxyvote.com
Use
the Internet to submit your proxy to vote and for electronic
delivery of information up until 11:59 PM, Eastern Time the day
before the cut-off date or meeting date. Have your proxy card in
hand when you access the web site and follow the instructions to
obtain your records and to create an electronic voting instruction
form.
|
|
|
During the Meeting - Go to
www.virtualshareholdermeeting.com/ADMP2022. |
|
|
You may attend the meeting via the internet and
vote during the meeting. Have the information that is printed
in the box marked by the arrow available and following the
instructions. |
|
|
SUBMIT YOUR PROXY TO VOTE BY PHONE - 1-800-690-6903
Use
any touch-tone telephone to submit your proxy to vote up until
11:59 PM, Eastern Time the day before the cut-off date or meeting
date. Have your proxy card in hand when you call and then follow
the instructions.
|
|
|
VOTE BY MAIL:
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided, or return it to Vote
Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717.
|
|
|
|
TO
VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS
FOLLOWS:
KEEP
THIS PORTION FOR YOUR RECORDS
|
|
DETACH
AND RETURN THIS PORTION ONLY |
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
ADAMIS
PHARMACEUTICALS
CORPORATION |
FOR
ALL |
WITH-
HOLD
ALL |
FOR
ALL
EXCEPT
|
To
withhold authority to vote for any individual nominee(s), mark “For
All Except” and write the number(s) of the nominee(s) on the line
below. |
|
The
Board of Directors recommends you vote FOR the
following: |
|
|
|
|
1. |
Election
of Directors |
☐ |
☐ |
☐ |
|
|
|
|
|
Nominees: |
|
|
|
|
|
|
|
|
01) Howard
C.
Birndorf 02)
Meera J. Desai, Ph.D.,
NACD.DC 03)
David J. Marguglio
04) Vickie S. Reed
05)
Richard C. Williams |
Vote
on Proposals: |
|
|
|
|
For |
Against |
Abstain |
The
Board of Directors recommends you vote FOR Proposals 2, 3, 4, 5, 6
and 7. |
|
|
|
2. |
To
adopt and approve an amendment to the Company’s restated
certificate of incorporation to authorize the Board of Directors
(the “Board”) of the Company to effect a reverse stock split of the
Company’s common stock by a ratio of not less than 1-for-2 and not
more than 1-for-15, with the Board having the discretion as to
whether or not the reverse split is to be effected, and with the
exact ratio of any reverse split to be set at a whole number within
the above range as determined by the Company’s Board in its
discretion. |
☐ |
☐ |
☐ |
3. |
To
approve an amendment to our 2020 Equity Incentive Plan to eliminate
the requirement in the plan that no Award may be made until such
time as the fair market value of the Common Stock has been at least
$3.00 per share for at least ten consecutive trading days, and the
plan as amended. |
☐ |
☐ |
☐ |
4. |
To
approve the compensation of our named executive
officers. |
☐ |
☐ |
☐ |
5. |
To
ratify the selection of BDO USA, LLP as our independent registered
public accounting firm for the year ending December 31,
2022. |
☐ |
☐ |
☐ |
6. |
To
approve the adjournment of the Meeting, if necessary, to solicit
additional proxies if there are insufficient votes at the time of
the Meeting to adopt Proposal 2. |
☐ |
☐ |
☐ |
|
NOTE:
Such other business as may properly come before the meeting
or any adjournment thereof. |
Note:
In their discretion, the proxies may vote upon any and all
other matters as may properly come before the Meeting or any
adjournment or postponement thereof, to the extent authorized under
Rule 14a-4(c) of the Securities Exchange Act of 1934. In
the event one or more of the named nominees for election as a
director is unable to serve, the persons designated as proxies may
cast votes for other persons as substitute nominees. |
|
|
|
|
Please
sign exactly as your name(s) appear(s) hereon. When signing
as attorney, executor, administrator, or other fiduciary, please
give full title as such. Joint owners should each sign
personally. All holders must sign. If a
corporation or partnership, please sign in full corporate or
partnership name, by authorized officer. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature
[PLEASE SIGN WITHIN BOX] |
Date |
|
Signature
[JOINT OWNERS] |
Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Important
Notice Regarding the Availability of Proxy Materials for the Annual
Meeting: The Notice & Proxy Statement, Form 10-K is/are
available at www.proxyvote.com.
ADAMIS
PHARMACEUTICALS CORPORATION
Annual
Meeting of Stockholders
July
29, 2022; [__:__] [a.m./p.m.]
This
proxy is solicited by the Board of Directors
The
stockholder(s) hereby appoint(s) David J. Marguglio and David C.
Benedicto, or either of them, as proxies, each of them acting
individually or in the absence of others, with the full power of
substitution and re-substitution and hereby authorize(s) them to
represent and to vote, as designated on the reverse side of this
ballot, all of the shares of common stock, par value $0.0001 of
ADAMIS PHARMACEUTICALS CORPORATION that the stockholder(s) is/are
entitled to vote at the Annual Meeting of Stockholders to be held
at [__:__] [a.m./p.m.], PDT on July 29, 2022, virtually at
www.virtualshareholdermeeting.com/ADMP2022, and any
adjournment or postponement thereof.
In
their discretion, the proxy is authorized to vote upon any other
matter that may properly come before the meeting or any
adjournments or postponements thereof to the extent authorized
under Rule 14a-4(c) under the Securities Exchange Act of
1934.
This
proxy, when properly executed, will be voted in the manner directed
herein. If no such direction is made, this proxy will be voted in
accordance with the Board of Directors’
recommendations.
Continued
and to be signed on reverse side
|
|
Annex A
Certificate of Amendment to the
Restated Certificate of Incorporation
of Adamis Pharmaceuticals Corporation
Adamis Pharmaceuticals Corporation, a corporation organized under
and existing under the laws of the State of Delaware (the
“Company”), certifies that:
FIRST: The name of the Company is Adamis Pharmaceuticals
Corporation.
SECOND: The Board of Directors of the Company, acting in
accordance with the provisions of Sections 141 and 242 of the
Delaware General Corporation Law (the “DGCL”), duly approved and
adopted resolutions to amend Article IV of the Restated Certificate
of Incorporation of the Company, which is hereby amended by
inserting the following paragraph at the end of such Article:
“D. Upon the filing of this Certificate of Amendment with the
Secretary of State of the State of Delaware and the effectiveness
of this Certificate of Amendment (the “Effective Time”), each [two
(2), three (3), four (4), five (5), six (6), seven (7),
eight (8), nine (9), ten (10), eleven (11), twelve (12),
thirteen (13), fourteen (14), or fifteen (15)]1 shares
of the Company’s Common Stock (the “Old Common Stock”) issued and
outstanding or held by the Company in treasury immediately prior to
the Effective Time shall automatically, and without any action by
the holder thereof, be reclassified and combined into one validly
issued, fully paid and nonassessable share of Common Stock (“New
Common Stock”), subject to the treatment of fractional share
interests as described below (such reclassification and combination
of shares, the “Reverse Stock Split”). The par value of the Common
Stock following the Reverse Stock Split shall remain at $0.0001 per
share. The Company shall not issue any fractional shares in the
Reverse Stock Split. In lieu of such fractional shares, any
stockholder who would otherwise be entitled to a fractional share
of New Common Stock as a result of the Reverse Stock Split,
following the Effective Time (after taking into account all
fractional shares of New Common Stock otherwise issuable to such
stockholder), shall be entitled to receive a cash payment (without
interest) equal to the product of (1) the closing sale price per
share of the Common Stock as reported by The Nasdaq Capital Market
on the last trading day preceding the date of the Effective Time by
(2) the number of shares of Old Common Stock held by such holder
that would otherwise have been exchanged for such fractional share
interests. Notwithstanding the foregoing, the Company shall not be
obliged to issue certificates evidencing the shares of New Common
Stock or cash in lieu of fractional shares, if any, unless and
until, where shares are held in certificated form, the certificates
evidencing the shares of Old Common Stock held by a holder prior to
the Reverse Stock Split are either delivered to the Company or its
transfer agent, or the holder notifies the Company or its transfer
agent that such certificates have been lost, stolen or destroyed
and executes an agreement satisfactory to the Company to indemnify
the Company from any loss incurred by it in connection with such
certificates. Each stock certificate that, immediately prior
to the Effective Time, represented shares of Old Common Stock that
were issued and outstanding immediately prior to the Effective Time
shall, from and after the Effective Time, automatically and without
the necessity of any action on the part of the Company or the
respective holders thereof, represent that number of whole shares
of New Common Stock after the Effective Time into which the shares
formerly represented by such certificate have been reclassified and
combined (as well as the right to receive cash in lieu of
fractional shares of New Common Stock after the Effective Time as
set forth above; provided, however, that each holder of record
holding a certificate that represented shares of Old Common Stock
that were issued and outstanding immediately prior to the Effective
Time shall receive, upon surrender of such certificate, a new
certificate evidencing and representing the number of whole shares
of New Common Stock after the Effective Time into which the shares
of Old Common Stock formerly represented by such certificate shall
have been reclassified and combined pursuant to the Reverse Stock
Split (including the right to receive a cash payment in lieu of a
fractional share of New Common Stock to which such holder may be
entitled as set forth above). The Reverse Stock Split shall be
effected on a record holder-by-record holder basis, such that any
fractional shares of post-Reverse Stock Split Common Stock
resulting from the Reverse Split and held by a single record holder
shall be aggregated. The Reverse Stock Split shall also apply to
any outstanding securities or rights convertible into, or
exchangeable or exercisable for, Old Common Stock of the Company
and all references to the Old Common Stock in agreements,
arrangements, documents and plans relating thereto or any option or
right to purchase or acquire shares of Old Common Stock shall be
deemed to be references to the New Common Stock or options or
rights to purchase or acquire shares of New Common Stock, as the
case may be.
1Shall
be a number equal to or greater than 2 and equal to or lesser than
15, as determined by the Board of Directors of the Company.
THIRD: Thereafter, pursuant to a resolution of the Board,
this Certificate of Amendment was submitted to the stockholders of
the Company for their approval, and was duly adopted by the
required vote of stockholders in accordance with the provisions of
Section 242 of the DGCL.
IN WITNESS WHEREOF, this Certificate of Amendment to the Restated
Certificate of Incorporation has been duly executed by its
authorized officer on this _____ day of __________, 2022.
|
ADAMIS
PHARMACEUTICALS CORPORATION |
|
|
|
|
By: |
|
|
|
David J. Marguglio |
|
|
Chief Executive
Officer |
Annex B
ADAMIS PHARMACEUTICALS CORPORATION
2020 Equity Incentive Plan
As amended
(a) Eligible
Award Recipients. Employees, Directors and Consultants are
eligible to receive Awards.
(b) Available
Awards. The Plan provides for the grant of the following types
of Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) Stock Appreciation Rights, (iv) Restricted Stock
Awards, (v) Restricted Stock Unit Awards, (vi) Performance Stock
Awards, (vii) Other Stock Awards, and (viii) Cash Awards.
(c) Purpose.
The Plan, through the grant of Awards, is intended to help the
Company secure and retain the services of eligible award
recipients, to provide incentives for such persons to exert maximum
efforts for the success of the Company and any Affiliate, and
provide a means by which the eligible recipients may benefit from
increases in value of the Common Stock.
(a) Administration
by the Board. The Board will administer the Plan. The Board may
delegate administration of the Plan to a Committee or Committees,
as provided in Section 2(c).
(b) Powers
of the Board. The Board will have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To
determine: (A) who will be granted Awards; (B) when and how each
Award will be granted; (C) what type of Award will be granted; (D)
the provisions of each Award (which need not be identical),
including when a person will be permitted to exercise or otherwise
receive cash or Common Stock under the Award; (E) the number of
shares of Common Stock subject to, or the cash value of, an Award;
and (F) the Fair Market Value applicable to an Award.
(ii) To
construe and interpret the Plan and Awards granted under it, and to
establish, amend and revoke rules and regulations for
administration of the Plan and Awards. The Board, in the exercise
of these powers, may correct any defect, omission or inconsistency
in the Plan or in any Award Agreement, in a manner and to the
extent it will deem necessary or expedient to make the Plan or
Award fully effective.
(iii) To
settle all controversies regarding the Plan and Awards granted
under it.
(iv) To
accelerate, in whole or in part, the time at which an Award may be
exercised or vest (or the time at which cash or shares of Common
Stock may be issued in settlement thereof). For purposes of
clarification, the Board retains the discretion to adjust or
accelerate the vesting schedule of outstanding Awards, with the
consent of the Participant.
(v) To
suspend or terminate the Plan at any time. Except as otherwise
provided in the Plan or an Award Agreement, suspension or
termination of the Plan will not impair a Participant’s rights
under the Participant’s then-outstanding Award without the
Participant’s written consent, except as provided in subsection
(viii) below.
(vi) To
amend the Plan in any respect the Board deems necessary or
advisable, including, without limitation, by adopting amendments
relating to Incentive Stock Options and certain nonqualified
deferred compensation under Section 409A of the Code and/or to make
the Plan or Awards granted under the Plan compliant with the
requirements for Incentive Stock Options or exempt from, or
compliant with, the requirements for nonqualified deferred
compensation under Section 409A of the Code, subject to the
limitations, if any, of applicable law. If required by applicable
law or listing requirements, and except as provided in Section 9(a)
relating to Capitalization Adjustments, the Company will seek
stockholder approval of any amendment of the Plan that (A)
materially increases the number of shares of Common Stock available
for issuance under the Plan, (B) materially expands the class of
individuals eligible to receive Awards under the Plan, (C)
materially increases the benefits accruing to Participants under
the Plan, (D) materially reduces the price at which shares of
Common Stock may be issued or purchased under the Plan, (E)
materially extends the term of the Plan, or (F) materially expands
the types of Awards available for issuance under the Plan or is
otherwise required by applicable law or listing requirements to be
approved by the stockholders of the Company. Except as otherwise
provided in the Plan (including subsection (viii) below) or an
Award Agreement, no amendment of the Plan will impair a
Participant’s rights under an outstanding Award without the
Participant’s written consent.
(vii) To
submit any amendment to the Plan for stockholder approval,
including, but not limited to, amendments to the Plan intended to
satisfy the requirements of Section 422 of the Code regarding
“incentive stock options.”
(viii) To
approve forms of Award Agreements for use under the Plan and to
amend the terms of any one or more Awards, including, but not
limited to, amendments to provide terms more favorable to the
Participant than previously provided in the Award Agreement,
subject to any specified limits in the Plan that are not subject to
Board discretion; provided, however, that a Participant’s
rights under any Award will not be impaired by any such amendment
unless (A) the Company requests the consent of the affected
Participant, and (B) such Participant consents in writing.
Notwithstanding the foregoing, (1) a Participant’s rights will not
be deemed to have been impaired by any such amendment if the Board,
in its sole discretion, determines that the amendment, taken as a
whole, does not materially impair the Participant’s rights, and (2)
subject to the limitations of applicable law, if any, the Board may
amend the terms of any one or more Awards without the affected
Participant’s consent (A) to maintain the qualified status of the
Award as an Incentive Stock Option under Section 422 of the Code;
(B) to change the terms of an Incentive Stock Option, if such
change results in impairment of the Stock Award solely because it
impairs the qualified status of the Stock Award as an Incentive
Stock Option under Section 422 of the Code; (C) to clarify the
manner of exemption from, or to bring the Award into compliance
with, Section 409A of the Code; or (D) to comply with other
applicable laws or listing requirements.
(ix) Generally,
to exercise such powers and to perform such acts as the Board deems
necessary or expedient to promote the best interests of the Company
and that are not in conflict with the provisions of the Plan or
Awards.
(x) To
adopt such rules, procedures and sub-plans related to the operation
and administration of the Plan as are necessary or appropriate to
permit participation in the Plan by Employees, Directors or
Consultants who are foreign nationals or employed outside the
United States (provided that Board approval will not be necessary
for immaterial modifications to the Plan or any Award Agreement
that are required for compliance with the laws of the relevant
foreign jurisdiction).
(xi) To
effect, with the consent of any adversely affected Participant, (A)
the reduction of the exercise, purchase or strike price of any
outstanding Award; (B) the cancellation of any outstanding Award
and the grant in substitution therefor of a new (1) Option or SAR,
(2) Restricted Award, (3) Restricted Stock Unit Award, (4)
Other Award, (5) cash, and/or (6) other valuable consideration
determined by the Board, in its sole discretion, with any such
substituted award (x) covering the same or a different number of
shares of Common Stock as the cancelled Award, and (y) granted
under the Plan or another equity or compensatory plan of the
Company; or (C) any other action that is treated as a repricing
under generally accepted accounting principles (collectively (A)
through (C), an “Exchange Program”).
(c) Delegation
to Committee.
(i) General.
The Board may delegate some or all of the administration of the
Plan to a Committee or Committees. If administration of the Plan is
delegated to a Committee, the Committee will have, in connection
with the administration of the Plan, the powers theretofore
possessed by the Board that have been delegated to the Committee,
including the power to delegate to a subcommittee of the Committee
any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board will thereafter
be to the Committee or subcommittee, as applicable). Any delegation
of administrative powers will be reflected in resolutions, not
inconsistent with the provisions of the Plan, adopted from time to
time by the Board or Committee (as applicable). The Board may
retain the authority to concurrently administer the Plan with the
Committee and may, at any time, revest in the Board some or all of
the powers previously delegated. Whether or not the Board has
delegated administration of the Plan to a Committee, the Board will
have the final power to determine all questions of policy and
expediency that may arise in the administration of the Plan.
(ii) Rule
16b-3 Compliance. The Committee may consist solely of two or
more Non-Employee Directors, in accordance with Rule 16b-3. In
addition, the Board or the Committee, in its sole discretion, may
delegate to a Committee which need not consist of Non-Employee
Directors the authority to grant Awards to eligible persons who are
not then subject to Section 16 of the Exchange Act.
(d) Delegation
to an Officer. The Board may delegate to one (1) or more
Officers the authority to do one or both of the following (i)
designate Employees who are not Officers to be recipients of
Options and SARs (and, to the extent permitted by applicable law,
other Awards) and, to the extent permitted by applicable law, the
terms of such Awards, and (ii) determine the number of shares of
Common Stock to be subject to such Awards granted to such
Employees; provided, however, that the Board resolutions
regarding such delegation will specify the total number of shares
of Common Stock that may be subject to the Awards granted by such
Officer and that such Officer may not grant an Award to himself or
herself. Any such Awards will be granted on the form of Award
Agreement most recently approved for use by the Committee or the
Board, unless otherwise provided in the resolutions approving the
delegation authority. The Board may not delegate authority to an
Officer who is acting solely in the capacity of an Officer (and not
also as a Director) to determine the Fair Market Value pursuant to
Section 15 below.
(e) Effect
of Board’s Decision. All determinations, interpretations and
constructions made by the Board in good faith will not be subject
to review by any person and will be final, binding and conclusive
on all persons.
|
3. |
SHARES SUBJECT TO THE
PLAN. |
(a) Share
Reserve.
(i) Subject
to the provisions of Section 9(a) relating to Capitalization
Adjustments, and the following sentence regarding the annual
increase, the aggregate number of shares of Common Stock that may
be issued pursuant to Awards will be two million (2,000,000) shares
from the Effective Date up to the first Evergreen Date that occurs
as described in the next sentence (as may be increased on Evergreen
Dates, the “Share Reserve”). In addition, the Share
Reserve will automatically increase on January 1st of each
year commencing January 1, 2021, and ending on (and including)
January 1, 2030 (or, if the Plan terminates earlier, then
January 1 of the year in which the Plan terminates) (each, an
“Evergreen Date”), in an amount equal to five percent
(5.0%) of the total number of shares of Capital Stock outstanding
on the last day of the immediately preceding calendar year.
Notwithstanding the foregoing, the Board may act prior to the start
of a calendar year for which an increase applies to provide that
there will be no increase in the Share Reserve for such year or
that the increase in the Share Reserve for such year will be a
lesser number of shares of Common Stock than would otherwise occur
pursuant to the preceding sentence.
(ii) For
clarity, the Share Reserve in this Section 3(a) is a limitation on
the number of shares of Common Stock that may be issued pursuant to
the Plan. As a single share may be subject to grant more than once
(e.g., if a share subject to an Award is forfeited, it may
be made subject to grant again as provided in Section 3(b) below),
the Share Reserve is not a limit on the number of Awards that can
be granted.
(iii) Shares
may be issued in connection with a merger or acquisition as
permitted by Nasdaq Listing Rule 5635(c) or, if applicable, NYSE
Listed Company Manual Section 303A.08, NYSE American Company
Guide Section 711 or other applicable rule, and such issuance will
not reduce the number of shares available for issuance under the
Plan.
(b) Reversion
of Shares to the Share Reserve. If an Award or any portion
thereof (i) expires or otherwise terminates without all of the
shares covered by such Award having been issued, or (ii) is settled
in cash (i.e., the Participant receives cash rather than
stock), such expiration, termination or settlement will not reduce
(or otherwise offset) the number of shares of Common Stock that may
be available for issuance under the Plan. If any shares of Common
Stock issued pursuant to an Award are forfeited back to or
repurchased by the Company because of the failure to meet a
contingency or condition required to vest such shares in the
Participant or shares of Common Stock that are surrendered to the
Company pursuant to an Exchange Program, then the shares that are
forfeited, repurchased or so surrendered will again become
available for issuance under the Plan. Any shares reacquired by the
Company in satisfaction of tax withholding obligations on an Award
or as consideration for the exercise or purchase price of an Award
will again become available for issuance under the Plan.
(c) Incentive
Stock Option Limit. Subject to the provisions of Section 9(a)
relating to Capitalization Adjustments, the aggregate maximum
number of shares of Common Stock that may be issued pursuant to the
exercise of Incentive Stock Options will be will be 80,000,000
shares of Common Stock plus, to the extent allowable under Section
422 of the Code and the Treasury Regulations promulgated
thereunder, any shares that become available for issuance under the
Plan pursuant to the second sentence of Section 3(a)(i) above or
Section 3(b) above.
(d) Source
of Shares. The stock issuable under the Plan will be shares of
authorized but unissued or reacquired Common Stock, including
shares repurchased by the Company on the open market or
otherwise.
(a) Eligibility
for Specific Awards. Incentive Stock Options may be granted
only to employees of the Company or a parent corporation or
subsidiary corporation thereof (as such terms are defined in
Sections 424(e) and 424(f) of the Code). Awards other than
Incentive Stock Options may be granted to Employees, Directors and
Consultants; provided, however, that Awards may not be
granted to Employees, Directors and Consultants who are providing
Continuous Service only to any “parent” of the Company, as such
term is defined in Rule 405 of the Securities Act, unless (i) the
stock underlying such Awards is treated as “service recipient
stock” under Section 409A of the Code (for example, because the
Awards are granted pursuant to a corporate transaction such as a
spin off transaction), (ii) the Company, in consultation with its
legal counsel, has determined that such Awards are otherwise exempt
from Section 409A of the Code, or (iii) the Company, in
consultation with its legal counsel, has determined that such
Awards comply with the distribution requirements of Section 409A of
the Code.
(b) Ten
Percent Stockholders. A Ten Percent Stockholder will not be
granted an Incentive Stock Option unless the exercise price of such
Option is at least 110% of the Fair Market Value on the date of
grant and the Option is not exercisable after the expiration of
five years from the date of grant.
(c) Consultants.
A Consultant will not be eligible for the grant of a Stock Award
if, at the time of grant, either the offer or sale of the Company’s
securities to such Consultant is not exempt under Rule 701 because
of the nature of the services that the Consultant is providing to
the Company, because the Consultant is not a natural person, or
because of any other provision of Rule 701, unless the Company
determines that such grant need not comply with the requirements of
Rule 701 and will satisfy another exemption under the Securities
Act as well as comply with the securities laws of all other
relevant jurisdictions.
|
5. |
PROVISIONS RELATING TO OPTIONS
AND STOCK APPRECIATION RIGHTS. |
Each Option or SAR will be in such form and will contain such terms
and conditions as the Board deems appropriate. All Options will be
separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and, if certificates are issued, a
separate certificate or certificates will be issued for shares of
Common Stock purchased on exercise of each type of Option. If an
Option is not specifically designated as an Incentive Stock Option,
or if an Option is designated as an Incentive Stock Option but some
portion or all of the Option fails to qualify as an Incentive Stock
Option under the applicable rules, then the Option (or portion
thereof) will be a Nonstatutory Stock Option. The provisions of
separate Options or SARs need not be identical; provided,
however, that each Award Agreement will conform to (through
incorporation of provisions hereof by reference in the applicable
Award Agreement or otherwise) the substance of each of the
following provisions:
(a) Term.
Subject to the provisions of Section 4(b) regarding Ten
Percent Stockholders, no Option or SAR will be exercisable after
the expiration of ten years from the date of its grant or such
shorter period specified in the Award Agreement.
(b) Exercise
Price. Subject to the provisions of Section 4(b) regarding Ten
Percent Stockholders, the exercise or strike price of each Option
or SAR will be not less than 100% of the Fair Market Value of the
Common Stock subject to the Option or SAR on the date the Award is
granted. Notwithstanding the foregoing, an Option or SAR may be
granted with an exercise or strike price lower than 100% of the
Fair Market Value of the Common Stock subject to the Award if such
Award is granted pursuant to an assumption of or substitution for
another option or stock appreciation right pursuant to a Corporate
Transaction and in a manner consistent with the provisions of
Section 409A of the Code and, if applicable, Section 424(a) of the
Code. Each SAR will be denominated in shares of Common Stock
equivalents.
(c) Purchase
Price for Options. The purchase price of Common Stock acquired
pursuant to the exercise of an Option may be paid, to the extent
permitted by applicable law and as determined by the Board in its
sole discretion, by any combination of the methods of payment set
forth below. The Board will have the authority to grant Options
that do not permit all of the following methods of payment (or
otherwise restrict the ability to use certain methods) and to grant
Options that require the consent of the Company to use a particular
method of payment. The permitted methods of payment are as
follows:
(i) by
cash, check, bank draft or money order payable to the Company;
(ii) pursuant
to a program developed under Regulation T as promulgated by
the Federal Reserve Board that, prior to the issuance of the stock
subject to the Option, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to
pay the aggregate exercise price to the Company from the sales
proceeds;
(iii) by
delivery to the Company (either by actual delivery or attestation)
of shares of Common Stock;
(iv) if
an Option is a Nonstatutory Stock Option, by a “net exercise”
arrangement pursuant to which the Company will reduce the number of
shares of Common Stock issuable upon exercise by the largest whole
number of shares with a Fair Market Value that does not exceed the
aggregate exercise price; provided, however, that the
Company will accept a cash or other payment from the Participant to
the extent of any remaining balance of the aggregate exercise price
not satisfied by such reduction in the number of whole shares to be
issued. Shares of Common Stock will no longer be subject to an
Option and will not be exercisable thereafter to the extent that
(A) shares issuable upon exercise are used to pay the exercise
price pursuant to the “net exercise,” (B) shares are delivered to
the Participant as a result of such exercise, and/or (C) shares are
withheld to satisfy tax withholding obligations; or
(v) in
any other form of legal consideration that may be acceptable to the
Board and specified in the applicable Award Agreement.
(d) Exercise
and Payment of a SAR. To exercise any outstanding SAR, the
Participant must provide written notice of exercise to the Company
in compliance with the provisions of the Stock Appreciation Right
Agreement evidencing such SAR. The appreciation distribution
payable on the exercise of a SAR will be not greater than an amount
equal to the excess of (A) the aggregate Fair Market Value (on the
date of the exercise of the SAR) of a number of shares of Common
Stock equal to the number of Common Stock equivalents in which the
Participant is vested under such SAR, and with respect to which the
Participant is exercising the SAR on such date, over (B) the
aggregate strike price of the number of Common Stock equivalents
with respect to which the Participant is exercising the SAR on such
date. The appreciation distribution may be paid in Common Stock, in
cash, in any combination of the two or in any other form of
consideration, as determined by the Board and contained in the
Award Agreement evidencing such SAR.
(e) Transferability
of Options and SARs. The Board may, in its sole discretion,
impose such limitations on the transferability of Options and SARs
as the Board will determine. In the absence of such a determination
by the Board to the contrary, the following restrictions on the
transferability of Options and SARs will apply:
(i) Restrictions
on Transfer. An Option or SAR will not be transferable except
by will or by the laws of descent and distribution (or pursuant to
subsections (ii) and (iii) below), and will be exercisable during
the lifetime of the Participant only by the Participant. The Board
may permit transfer of the Option or SAR in a manner that is not
prohibited by applicable tax or securities laws. Except as
explicitly provided in the Plan, neither an Option nor an SAR may
be transferred for consideration.
(ii) Domestic
Relations Orders. Subject to the approval of the Board or a
duly authorized Officer, an Option or SAR may be transferred
pursuant to the terms of a domestic relations order, official
marital settlement agreement or other divorce or separation
instrument as permitted by Treasury Regulations Section
1.421-1(b)(2) or comparable non-U.S. law. If an Option is an
Incentive Stock Option, such Option may be deemed to be a
Nonstatutory Stock Option as a result of such transfer.
(iii) Beneficiary
Designation. Subject to the approval of the Board or a duly
authorized Officer, a Participant may, by delivering written notice
to the Company or to any third party designated by the Company, in
a form approved by the Company (or the designated broker),
designate a third party who, upon the death of the Participant,
will thereafter be entitled to exercise the Option or SAR and
receive the Common Stock or other consideration resulting from such
exercise. In the absence of such a designation, upon the death of
the Participant, the executor or administrator of the Participant’s
estate or the Participant’s legal heirs will be entitled to
exercise the Option or SAR and receive the Common Stock or other
consideration resulting from such exercise. However, the Company
may prohibit designation of a beneficiary at any time, including
due to any conclusion by the Company that such designation would be
inconsistent with the provisions of applicable laws.
(f) Vesting
Generally. The total number of shares of Common Stock subject
to an Option or SAR may vest and become exercisable in periodic
installments that may or may not be equal. The Option or SAR may be
subject to such other terms and conditions on the time or times
when it may or may not be exercised (which may be based on the
satisfaction of Performance Goals or other criteria) as the Board
may deem appropriate. The vesting provisions of individual Options
or SARs may vary. The provisions of this Section 5(f) are
subject to any Option or SAR provisions governing the minimum
number of shares of Common Stock as to which an Option or SAR may
be exercised.
(g) Termination
of Continuous Service. Except as otherwise provided in the
applicable Award Agreement or other agreement between the
Participant and the Company, if a Participant’s Continuous Service
terminates (other than for Cause and other than upon the
Participant’s death or Disability), the Participant may exercise
his or her Option or SAR (to the extent that the Participant was
entitled to exercise such Award as of the date of termination of
Continuous Service or as set forth in the Award Agreement or other
written agreement between the Participant and the Company relating
to the Option) within the period of time ending on the earlier of
(i) the date which occurs three (3) months following the
termination of the Participant’s Continuous Service (or such longer
or shorter period specified in the applicable Award Agreement,
which period will not be less than 30 days if necessary to comply
with applicable laws unless such termination is for Cause), and
(ii) the expiration of the term of the Option or SAR as set forth
in the Award Agreement. If, after termination of Continuous
Service, the Participant does not exercise his or her Option or SAR
(as applicable) within the applicable time frame, the Option or SAR
will terminate.
(h) Extension
of Termination Date. Except as otherwise provided in the
applicable Award Agreement or other agreement between the
Participant and the Company, if the exercise of an Option or SAR
following the termination of the Participant’s Continuous Service
would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements
under the Securities Act, then the Option or SAR will terminate on
the earlier of (i) the expiration of a total period of time (that
need not be consecutive) equal to the applicable post termination
exercise period after the termination of the Participant’s
Continuous Service during which the exercise of the Option or SAR
would not be in violation of such registration requirements, and
(ii) the expiration of the term of the Option or SAR as set forth
in the applicable Award Agreement. In addition, unless otherwise
provided in a Participant’s Award Agreement, if the sale of any
Common Stock received upon exercise of an Option or SAR following
the termination of the Participant’s Continuous Service would
violate the Company’s insider trading policy, then the Option or
SAR will terminate on the earlier of (i) the expiration of the
period of time (that need not be consecutive) equal to the
applicable post-termination exercise period after the termination
of the Participant’s Continuous Service during which the sale of
the Common Stock received upon exercise of the Option or SAR would
not be in violation of the Company’s insider trading policy, or
(ii) the expiration of the term of the Option or SAR as set forth
in the applicable Award Agreement.
(i) Disability
of Participant. Except as otherwise provided in the applicable
Award Agreement or other agreement between the Participant and the
Company, if a Participant’s Continuous Service terminates as a
result of the Participant’s Disability, the Participant may
exercise his or her Option or SAR (to the extent that the
Participant was entitled to exercise such Option or SAR as of the
date of termination of Continuous Service), but only within such
period of time ending on the earlier of (i) the date which occurs
12 months following such termination of Continuous Service (or such
longer or shorter period specified in the Award Agreement, which
period will not be less than six months if necessary to comply with
applicable laws unless such termination is for Cause), and (ii) the
expiration of the term of the Option or SAR as set forth in the
Award Agreement. If, after termination of Continuous Service, the
Participant does not exercise his or her Option or SAR within the
applicable time frame, the Option or SAR (as applicable) will
terminate.
(j) Death
of Participant. Except as otherwise provided in the applicable
Award Agreement or other agreement between the Participant and the
Company, if (i) a Participant’s Continuous Service terminates as a
result of the Participant’s death, or (ii) the Participant dies
within the period (if any) specified in the Award Agreement for
exercisability after the termination of the Participant’s
Continuous Service for a reason other than death, then the Option
or SAR may be exercised (to the extent the Participant was entitled
to exercise such Option or SAR as of the date of death) by the
Participant’s estate, by a person who acquired the right to
exercise the Option or SAR by bequest or inheritance or by a person
designated to exercise the Option or SAR upon the Participant’s
death, but only within the period ending on the earlier of (i) the
date 18 months following the date of death (or such longer or
shorter period specified in the Award Agreement, which period will
not be less than six months if necessary to comply with applicable
laws unless such termination is for Cause), and (ii) the expiration
of the term of such Option or SAR as set forth in the Award
Agreement. If, after the Participant’s death, the Option or SAR is
not exercised within the applicable time frame, the Option or SAR
(as applicable) will terminate.
(k) Termination
for Cause. Except as explicitly provided otherwise in the
applicable Award Agreement or other written agreement between the
Participant and the Company, if a Participant’s Continuous Service
is terminated for Cause, the Option or SAR will terminate
immediately upon such Participant’s termination of Continuous
Service, and the Participant will be prohibited from exercising his
or her Option or SAR from and after the date of such termination of
Continuous Service. If a Participant’s Continuous Service is
suspended pending an investigation of the existence of Cause, all
of the Participant’s rights under the Option or SAR will also be
suspended during the investigation period.
(l) Non-Exempt
Employees. If an Option or SAR is granted to an Employee who is
a non-exempt employee for purposes of the U.S. Fair Labor Standards
Act of 1938, as amended, the Option or SAR will not be first
exercisable for any shares of Common Stock until at least six
months following the date of grant of the Option or SAR (although
the Award may vest prior to such date). To the extent consistent
with the provisions of the U.S. Worker Economic Opportunity Act,
(i) if such non-exempt Employee dies or suffers a Disability, (ii)
upon a Corporate Transaction in which such Option or SAR is not
assumed, continued, or substituted, or (iii) upon the Participant’s
retirement (as such term may be defined in the Participant’s Award
Agreement in another agreement between the Participant and the
Company, or, if no such definition, in accordance with the
Company’s then current employment policies and guidelines), the
vested portion of any Options and SARs may be exercised earlier
than six months following the date of grant. The foregoing
provision is intended to operate so that any income derived by a
non-exempt employee in connection with the exercise or vesting of
an Option or SAR will be exempt from his or her regular rate of
pay. To the extent permitted and/or required for compliance with
the U.S. Worker Economic Opportunity Act to ensure that any income
derived by a non-exempt employee in connection with the exercise,
vesting or issuance of any shares under any other Award will be
exempt from the employee’s regular rate of pay, the provisions of
this Section 5(l) will apply to all Awards and are hereby
incorporated by reference into such Award Agreements.
|
6. |
PROVISIONS OF STOCK AWARDS OTHER
THAN OPTIONS AND SARS. |
(a) Restricted
Stock Awards. Each Restricted Stock Award Agreement will be in
such form and will contain such terms and conditions as the Board
will deem appropriate. To the extent consistent with the Company’s
bylaws, at the Board’s election, shares of Common Stock may be (x)
held in book entry form subject to the Company’s instructions until
any restrictions relating to the Restricted Stock Award lapse; or
(y) evidenced by a certificate, which certificate will be held in
such form and manner as determined by the Board. The terms and
conditions of Restricted Stock Award Agreements may change from
time to time, and the terms and conditions of separate Restricted
Stock Award Agreements need not be identical. Each Restricted Stock
Award Agreement will conform to (through incorporation of the
provisions hereof by reference in the agreement or otherwise) the
substance of each of the following provisions:
(i) Consideration.
A Restricted Stock Award may be awarded in consideration for (A)
cash, check, bank draft or money order payable to the Company, (B)
past services to the Company or an Affiliate, or (C) any other form
of legal consideration (including future services) that may be
acceptable to the Board, in its sole discretion, and permissible
under applicable law.
(ii) Vesting.
Shares of Common Stock awarded under the Restricted Stock Award
Agreement may be subject to forfeiture to the Company in accordance
with a vesting schedule to be determined by the Board.
(iii) Termination
of Participant’s Continuous Service. If a Participant’s
Continuous Service terminates, the Company may receive through a
forfeiture condition or a repurchase right any or all of the shares
of Common Stock held by the Participant that have not vested as of
the date of termination of Continuous Service under the terms of
the Restricted Stock Award Agreement.
(iv) Transferability.
Rights to acquire shares of Common Stock under the Restricted Stock
Award Agreement will be transferable by the Participant only upon
such terms and conditions as are set forth in the Restricted Stock
Award Agreement, as the Board will determine in its sole
discretion, so long as Common Stock awarded under the Restricted
Stock Award Agreement remains subject to the terms of the
Restricted Stock Award Agreement.
(v) Dividends.
A Restricted Stock Award Agreement may provide that any dividends
paid on Restricted Stock will be subject to the same vesting and
forfeiture restrictions as apply to the shares of Common Stock
subject to the Restricted Stock Award to which they relate.
(b) Restricted
Stock Unit Awards. Each Restricted Stock Unit Award Agreement
will be in such form and will contain such terms and conditions as
the Board will deem appropriate. The terms and conditions of
Restricted Stock Unit Award Agreements may change from time to
time, and the terms and conditions of separate Restricted Stock
Unit Award Agreements need not be identical. Each Restricted Stock
Unit Award Agreement will conform to (through incorporation of the
provisions hereof by reference in the Agreement or otherwise) the
substance of each of the following provisions:
(i) Consideration.
At the time of grant of a Restricted Stock Unit Award, the Board
will determine the consideration, if any, to be paid by the
Participant upon delivery of each share of Common Stock subject to
the Restricted Stock Unit Award. The consideration to be paid (if
any) by the Participant for each share of Common Stock subject to a
Restricted Stock Unit Award may be paid in any form of legal
consideration that may be acceptable to the Board in its sole
discretion and permissible under applicable law.
(ii) Vesting.
At the time of the grant of a Restricted Stock Unit Award, the
Board may impose such restrictions on or conditions to the vesting
of the Restricted Stock Unit Award as it, in its sole discretion,
deems appropriate.
(iii) Payment.
A Restricted Stock Unit Award may be settled by the delivery of
shares of Common Stock, their cash equivalent, any combination
thereof or in any other form of consideration, as determined by the
Board and contained in the Restricted Stock Unit Award
Agreement.
(iv) Additional
Restrictions. At the time of the grant of a Restricted Stock
Unit Award, the Board, as it deems appropriate, may impose such
restrictions or conditions that delay the delivery of the shares of
Common Stock (or their cash equivalent) subject to a Restricted
Stock Unit Award to a time after the vesting of such Restricted
Stock Unit Award.
(v) Dividend
Equivalents. Dividend equivalents may be credited in respect of
shares of Common Stock covered by a Restricted Stock Unit Award, as
determined by the Board and contained in the Restricted Stock Unit
Award Agreement. At the sole discretion of the Board, such dividend
equivalents may be converted into additional shares of Common Stock
covered by the Restricted Stock Unit Award in such manner as
determined by the Board. Any additional shares covered by the
Restricted Stock Unit Award credited by reason of such dividend
equivalents will be subject to all of the same terms and conditions
of the underlying Restricted Stock Unit Award Agreement to which
they relate.
(vi) Termination
of Participant’s Continuous Service. Except as otherwise
provided in the applicable Restricted Stock Unit Award Agreement,
such portion of the Restricted Stock Unit Award that has not vested
will be forfeited upon the Participant’s termination of Continuous
Service.
(vii) Termination
of Participant’s Continuous Service. Notwithstanding anything
to the contrary set forth herein, any Restricted Stock Unit Award
granted under the Plan that is not exempt from the requirements of
Section 409A of the Code shall contain such provisions so that
such Restricted Stock Unit Award will comply with the requirements
of Section 409A of the Code. Such restrictions, if any, shall
be determined by the Board and contained in the Restricted Stock
Unit Award Agreement evidencing such Restricted Stock Unit Award.
For example, such restrictions may include, without limitation, a
requirement that any Common Stock that is to be issued in a year
following the year in which the Restricted Stock Unit Award vests
must be issued in accordance with a fixed pre-determined
schedule.
(c) Performance
Stock Awards.
(i) Performance
Stock Awards. A Performance Stock Award is a Stock Award that
is payable (including that may be granted, may vest or may be
exercised) contingent upon the attainment during a Performance
Period of certain Performance Goals. A Performance Stock Award may
but need not require the Participant’s completion of a specified
period of Continuous Service. The length of any Performance Period,
the Performance Goals to be achieved during the Performance Period,
and the measure of whether and to what degree such Performance
Goals have been attained will be conclusively determined by the
Board or Committee, in its sole discretion. In addition, to the
extent permitted by applicable law and the applicable Stock Award
Agreement, the Board may determine that cash may be used in payment
of Performance Stock Awards.
(ii) Board
Discretion. The Board retains the discretion to adjust or
eliminate the compensation or economic benefit due upon attainment
of Performance Goals and to define the manner of calculating the
Performance Criteria it selects to use for a Performance
Period.
(d) Other
Stock Awards. Other forms of Stock Awards valued in whole or in
part by reference to, or otherwise based on, Common Stock,
including the appreciation in value thereof (e.g., options or stock
rights with an exercise price or strike price less than 100% of the
Fair Market Value of the Common Stock at the time of grant) may be
granted either alone or in addition to Stock Awards provided for
under Section 5 and the preceding provisions of this Section 6.
Subject to the provisions of the Plan, the Board will have sole and
complete authority to determine the persons to whom and the time or
times at which such Other Stock Awards will be granted, the number
of shares of Common Stock (or the cash equivalent thereof) to be
granted pursuant to such Other Stock Awards and all other terms and
conditions of such Other Stock Awards.
|
7. |
COVENANTS OF THE
COMPANY. |
(a) Availability
of Shares. The Company will keep available at all times the
number of shares of Common Stock reasonably required to satisfy
then-outstanding Stock Awards.
(b) Compliance
with Law. The Company will seek to obtain from each regulatory
commission or agency, as necessary, such authority as may be
required to grant Stock Awards and to issue and sell shares of
Common Stock upon exercise or vesting of the Stock Awards;
provided, however, that this undertaking will not require
the Company to register under the Securities Act the Plan or other
securities or applicable laws, any Stock Award or any Common Stock
issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts and at a reasonable cost, the Company is unable
to obtain from any such regulatory commission or agency the
authority that counsel for the Company deems necessary or advisable
for the lawful issuance and sale of Common Stock under the Plan,
the Company will be relieved from any liability for failure to
issue and sell Common Stock upon exercise or vesting of such Stock
Awards unless and until such authority is obtained. A Participant
will not be eligible for the grant of a Stock Award or the
subsequent issuance of cash or Common Stock pursuant to the Stock
Award if such grant or issuance would be in violation of any
applicable law.
(c) No
Obligation to Notify or Minimize Taxes. The Company will have
no duty or obligation to any Participant to advise such holder as
to the time or manner or tax treatment of exercising such Stock
Award. Furthermore, the Company will have no duty or obligation to
warn or otherwise advise such holder of a pending termination or
expiration of a Stock Award or a possible period in which the Stock
Award may not be exercised. The Company has no duty or obligation
to minimize the tax consequences of a Stock Award to the holder of
such Stock Award.
(a) Use
of Proceeds from Sales of Common Stock. Proceeds from the sale
of shares of Common Stock pursuant to Stock Awards will constitute
general funds of the Company.
(b) Corporate
Action Constituting Grant of Stock Awards. Corporate action
constituting a grant by the Company of a Stock Award to any
Participant will be deemed completed as of the date of such
corporate action, unless otherwise determined by the Board,
regardless of when the instrument, certificate, or letter
evidencing the Stock Award is communicated to, or actually received
or accepted by, the Participant. In the event that the corporate
records (e.g., Board consents, resolutions or minutes) documenting
the corporate action constituting the grant contain terms (e.g.,
exercise price, vesting schedule or number of shares) that are
inconsistent with those in the Stock Award Agreement or related
grant documents as a result of a clerical error in the papering of
the Stock Award Agreement or related grant documents, the corporate
records will control and the Participant will have no legally
binding right to the incorrect term in the Stock Award Agreement or
related grant documents.
(c) Stockholder
Rights. No Participant will be deemed to be the holder of, or
to have any of the rights of a holder with respect to, any shares
of Common Stock subject to a Stock Award unless and until (i) such
Participant has satisfied all requirements for exercise of, or the
issuance of shares of Common Stock under, the Stock Award pursuant
to its terms, and (ii) the issuance of the Common Stock subject to
such Stock Award has been entered into the books and records of the
Company.
(d) No
Employment or Other Service Rights. Nothing in the Plan, any
Stock Award Agreement or any other instrument executed thereunder
or in connection with any Stock Award granted pursuant thereto will
confer upon any Participant any right to continue to serve the
Company or an Affiliate in the capacity in effect at the time the
Stock Award was granted or will affect the right of the Company or
an Affiliate to terminate (i) the employment of an Employee with or
without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant’s agreement
with the Company or an Affiliate, or (iii) the service of a
Director pursuant to the bylaws of the Company or an Affiliate, and
any applicable provisions of the corporate law of the state in
which the Company is incorporated, as the case may be. Furthermore,
to the extent the Company is not the employer of a Participant, the
grant of a Stock Award will be not establish an employment or other
service relationship between the Company and the Participant.
(e) Change
in Time Commitment. In the event a Participant’s regular level
of time commitment in the performance of his or her services for
the Company and any Affiliates is reduced (for example, and without
limitation, if the Participant is an Employee of the Company and
the Employee has a change in status from a full-time Employee to a
part-time Employee or takes an extended leave of absence) after the
date of grant of any Stock Award to the Participant, the Board has
the right in its sole discretion to (x) make a corresponding
reduction in the number of shares or cash amount subject to any
portion of such Stock Award that is scheduled to vest or become
payable after the date of such change in time commitment, and (y)
in lieu of or in combination with such a reduction, extend the
vesting or payment schedule applicable to such Stock Award. In the
event of any such reduction, the Participant will have no right
with respect to any portion of the Stock Award that is so
reduced.
(f) Incentive
Stock Option Limitations. To the extent that the aggregate Fair
Market Value (determined at the time of grant) of Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all
plans of the Company and any Affiliates) exceeds U.S. $100,000 (or
such other limit established in the Code) or otherwise does not
comply with the rules governing Incentive Stock Options, the
Options or portions thereof that exceed such limit (according to
the order in which they were granted) or otherwise do not comply
with such rules will be treated as Nonstatutory Stock Options,
notwithstanding any contrary provision of the applicable Option
Agreement(s).
(g) Investment
Assurances. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock
Award, (i) to give written assurances satisfactory to the Company
as to the Participant’s knowledge and experience in financial and
business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that such
Participant is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the
Stock Award; and (ii) to give written assurances satisfactory to
the Company stating that the Participant is acquiring Common Stock
subject to the Stock Award for the Participant’s own account and
not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances
given pursuant to such requirements, will be inoperative if (A) the
issuance of the shares upon the exercise or acquisition of Common
Stock under the Stock Award has been registered under a then
currently effective registration statement under the Securities
Act, or (B) as to any particular requirement, a determination is
made by counsel for the Company that such requirement need not be
met in the circumstances under the then applicable securities laws.
The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel
deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting
the transfer of the Common Stock.
(h) Withholding.
Whenever shares are to be issued in satisfaction of Awards granted
under this Plan or a tax event occurs, the Company may require the
Participant to remit to the Company, or to the Parent, Subsidiary,
or Affiliate, as applicable, employing the Participant an amount
sufficient to satisfy applicable U.S. federal, state, local, and
international tax or any other tax or social insurance liability
(the “Tax-Related Items”) legally due from the
Participant prior to the delivery of shares pursuant to exercise or
settlement of any Award. Whenever payments in satisfaction of
Awards granted under this Plan are to be made in cash, such payment
will be net of an amount sufficient to satisfy applicable
withholding obligations for Tax-Related Items. Unless prohibited by
the terms of a Stock Award Agreement, the Company may, in its sole
discretion, require or permit a Participant to satisfy any U.S.
federal, state or local tax withholding obligation or other
Tax-Related Items legally due from the Participant relating to a
Stock Award by any of the following means or by a combination of
such means, in whole or in part and without limitation: (i) causing
the Participant to tender a cash payment; (ii) withholding shares
of Common Stock from the shares of Common Stock issued or otherwise
issuable to the Participant in connection with the Stock Award;
provided, however, that (A) no shares of Common Stock are
withheld with a value exceeding the maximum amount of tax that may
be required to be withheld by law (or such other amount as may be
permitted while still avoiding classification of the Stock Award as
a liability for financial accounting purposes), and (B) with
respect to a Stock Award held by any Participant who is subject to
the filing requirements of Section 16 of the Exchange Act, any such
share withholding must be specifically approved by the Compensation
Committee as the applicable method that must be used to satisfy the
tax withholding obligation or such share withholding procedure must
otherwise satisfy the requirements for an exempt transaction under
Section 16(b) of the Exchange Act; (iii) withholding cash from
a Stock Award settled in cash; (iv) withholding payment from any
amounts otherwise payable to the Participant; (v) by means of a
“cashless exercise” pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board;
(vi) delivering to the Company already-owned shares having a
Fair Market Value equal to the Tax-Related Items to be withheld; or
(vii) by such other method as may be set forth in the Stock Award
Agreement. The Company may withhold or account for these
Tax-Related Items by considering applicable statutory withholding
rates or other applicable withholding rates, including up to the
maximum permissible statutory tax rate for the applicable tax
jurisdiction, to the extent consistent with applicable laws.
(i) Electronic
Delivery. Any reference herein to a “written” agreement or
document will include any agreement or document delivered
electronically, filed publicly at www.sec.gov (or any successor
website thereto) or posted on the Company’s intranet (or other
shared electronic medium controlled by the Company to which the
Participant has access).
(j) Deferrals.
To the extent permitted by applicable law, the Board, in its sole
discretion, may determine that the delivery of Common Stock or the
payment of cash, upon the exercise, vesting or settlement of all or
a portion of any Stock Award may be deferred and may establish
programs and procedures for deferral elections to be made by
Participants. Deferrals by Participants will be made in accordance
with Section 409A of the Code. Consistent with Section 409A of the
Code, the Board may provide for distributions while a Participant
is still an employee or otherwise providing services to the
Company. The Board is authorized to make deferrals of Stock Awards
and determine when, and in what annual percentages, Participants
may receive payments, including lump sum payments, following the
Participant’s termination of Continuous Service, and implement such
other terms and conditions consistent with the provisions of the
Plan and in accordance with applicable law.
(k) Compliance
with Section 409A of the Code. Unless otherwise expressly
provided for in a Stock Award Agreement, the Plan and Stock Award
Agreements will be interpreted to the greatest extent possible in a
manner that makes the Plan and the Stock Awards granted hereunder
exempt from Section 409A of the Code, and, to the extent not so
exempt, in compliance with Section 409A of the Code. If the Board
determines that any Stock Award granted hereunder is not exempt
from and is therefore subject to Section 409A of the Code, the
Stock Award Agreement evidencing such Stock Award will incorporate
the terms and conditions necessary to avoid the consequences
specified in Section 409A(a)(1) of the Code, and to the extent a
Stock Award Agreement is silent on terms necessary for compliance,
such terms are hereby incorporated by reference into the Stock
Award Agreement. Notwithstanding anything to the contrary in this
Plan (and unless the Stock Award Agreement specifically provides
otherwise), if the shares of Common Stock are publicly traded, and
if a Participant holding a Stock Award that constitutes “deferred
compensation” under Section 409A of the Code is a “specified
employee” for purposes of Section 409A of the Code, no distribution
or payment of any amount that is due because of a “separation from
service” (as defined in Section 409A of the Code without regard to
alternative definitions thereunder) will be issued or paid before
the date that is six months following the date of such
Participant’s “separation from service” or, if earlier, the date of
the Participant’s death, unless such distribution or payment can be
made in a manner that complies with Section 409A of the Code, and
any amounts so deferred will be paid in a lump sum on the day after
such six month period elapses, with the balance paid thereafter on
the original schedule.
(l) Exchange
Program. Without prior stockholder approval, the Board may
engage in an Exchange Program.
(m) Clawback/Recovery.
All Stock Awards granted under the Plan will be subject to
recoupment in accordance with any clawback policy that the Company
adopts or is required to adopt pursuant to the listing standards of
any national securities exchange or association on which the
Company’s securities are listed or as is otherwise required by the
U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act or
other applicable law, and in addition to any other remedies
available under such policy and applicable law, may require the
cancellation of outstanding Awards and the recoupment of any gains
realized with respect to Awards. In addition, the Board may impose
such other clawback, recovery or recoupment provisions in a Stock
Award Agreement as the Board determines necessary or appropriate,
including but not limited to a reacquisition right in respect of
previously acquired shares of Common Stock or other cash or
property upon the occurrence of an event constituting Cause. No
recovery of compensation under such a clawback policy will be an
event giving rise to a right to resign for “good reason” or
“constructive termination” (or similar term) under any agreement
with the Company or an Affiliate.
|
9. |
ADJUSTMENTS UPON CHANGES IN
COMMON STOCK; OTHER CORPORATE EVENTS. |
(a) Capitalization
Adjustments. In the event of a Capitalization Adjustment, the
Board will appropriately and proportionately adjust: (i) the
class(es) and maximum number of securities subject to the Plan
pursuant to Section 3(a), (ii) the class(es) and maximum number of
securities that may be issued pursuant to the exercise of Incentive
Stock Options pursuant to Section 3(c), and (iii) the class(es) and
number of securities and price per share of stock subject to
outstanding Stock Awards. The Board will make such adjustments, and
its determination will be final, binding and conclusive.
(b) Dissolution
or Liquidation. Except as otherwise provided in the Stock Award
Agreement, in the event of a dissolution or liquidation of the
Company, all outstanding Stock Awards (other than Stock Awards
consisting of vested and outstanding shares of Common Stock not
subject to a forfeiture condition or the Company’s right of
repurchase) will terminate immediately prior to the completion of
such dissolution or liquidation, and the shares of Common Stock
subject to the Company’s repurchase rights or subject to a
forfeiture condition may be repurchased or reacquired by the
Company notwithstanding the fact that the holder of such Stock
Award is providing Continuous Service; provided, however,
that the Board may, in its sole discretion, cause some or all Stock
Awards to become fully vested, exercisable and/or no longer subject
to repurchase or forfeiture (to the extent such Stock Awards have
not previously expired or terminated) before the dissolution or
liquidation is completed but contingent on its completion.
(c) Corporate
Transaction. The following provisions will apply to Stock
Awards in the event of a Corporate Transaction unless otherwise
provided in the Stock Award Agreement or any other written
agreement between the Company or any Affiliate and the Participant
or unless otherwise expressly provided by the Board at the time of
grant of a Stock Award. In the event of a Corporate Transaction,
then, notwithstanding any other provision of the Plan, the Board
may take one or more of the following actions with respect to Stock
Awards:
(i) arrange
for the surviving corporation or acquiring corporation (or the
surviving or acquiring corporation’s parent company) to assume or
continue the Stock Award or to substitute a similar stock award for
the Stock Award (including, but not limited to, an award to acquire
substantially similar consideration paid to the stockholders of the
Company pursuant to the Corporate Transaction, after taking into
account the existing provisions of the Awards);
(ii) arrange
for the assignment of any reacquisition or repurchase rights held
by the Company in respect of Common Stock issued pursuant to the
Stock Award to the surviving corporation or acquiring corporation
(or the surviving or acquiring corporation’s parent company);
(iii) accelerate
the vesting, in whole or in part, of the Stock Award (and, if
applicable, the time at which the Stock Award may be exercised) to
a date prior to the effective time of such Corporate Transaction as
the Board determines (or, if the Board does not determine such a
date, to the date that is five days prior to the effective date of
the Corporate Transaction), with such Stock Award terminating if
not exercised (if applicable) at or prior to the effective time of
the Corporate Transaction; provided, however, that the Board
may require Participants to complete and deliver to the Company a
notice of exercise before the effective date of a Corporate
Transaction;
(iv) arrange
for the lapse, in whole or in part, of any reacquisition or
repurchase rights held by the Company with respect to the Stock
Award;
(v) cancel
or arrange for the cancellation of the Stock Award, to the extent
not vested or not exercised prior to the effective time of the
Corporate Transaction, in exchange for such cash consideration, if
any, as the Board, in its sole discretion, may consider
appropriate. For clarity, this payment may be $0.00 if the amount
per share (or value of property per share) payable to the holders
of Common Stock is equal to or less than the exercise price of the
Stock Award. Payments under this provision may be delayed to the
same extent that payment of consideration to the holders of Common
Stock in connection with the Corporate Transaction is delayed as a
result of escrows, earn outs, holdbacks or any other contingencies.
In addition, the Board, in its sole discretion, may condition a
Participant’s right to receive such payment upon the Participant’s
delivery of an agreement (x) acknowledging such escrows, earn
outs, holdbacks or other contingencies, (y) appointing a
representative to act on the Participant’s behalf following the
Corporate Transaction with respect to matters relating to the
Corporate Transaction, and/or (z) agreeing to or acknowledging
any indemnification obligations required of holders of Common Stock
pursuant to the Corporate Transaction.; and
(vi) make
a payment, in such form as may be determined by the Board equal to
the excess, if any, of (A) the per share amount (or value of
property per share) payable to holders of Common Stock in
connection with the Corporate Transaction, over (B) the per share
exercise price under the applicable Stock Award, multiplied by the
number of shares subject to the Stock Award. For clarity, this
payment may be zero (U.S. $0.00) if the amount per share (or value
of property per share) payable to the holders of the Common Stock
is equal to or less than the exercise price of the Stock Award. In
addition, any escrow, holdback, earnout or similar provisions in
the definitive agreement for the Corporate Transaction may apply to
such payment to the holder of the Stock Award to the same extent
and in the same manner as such provisions apply to the holders of
Common Stock. Payments under this provision may be delayed to the
same extent that payment of consideration to the holders of Common
Stock in connection with the Corporate Transaction is delayed as a
result of escrows, earn outs, holdbacks or any other
contingencies.
(vii) Except
as otherwise stated in a Stock Award Agreement, in the event of a
Corporate Transaction, the vesting of Stock Awards (and, with
respect to Options and SARs, the time at which such Stock Awards
may be exercised) shall be accelerated in full to a date prior to
the effective time of such Corporate Transaction as the Board shall
determine (or, if the Board shall not determine such a date, to the
date that is five (5) days prior to the effective time of the
Corporate Transaction), and if the surviving corporation or
acquiring corporation (or its parent company) does not assume or
continue such outstanding Stock Awards or substitute similar stock
awards for such outstanding Stock Awards, then with respect to
Stock Awards that have not been assumed, continued or substituted,
such Stock Awards shall terminate if not exercised (if applicable)
at or prior to the effective time of the Corporate Transaction, and
any reacquisition or repurchase rights held by the Company with
respect to such Stock Awards shall lapse.
(viii) Notwithstanding
any provision to the contrary herein, in the event of a Corporate
Transaction, the vesting of all Awards granted to Non-Employee
Directors will accelerate and such Awards will become exercisable
(as applicable) in full prior to the consummation of such event at
such times and on such conditions as the Committee determines.
The Board need not take the same action or actions with respect to
all Stock Awards or portions thereof or with respect to all
Participants. The Board may take different actions with respect to
different Participants and the vested and unvested portions of a
Stock Award.
(d) Assumption
of Awards by the Company. The Company, from time to time, also
may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other
company or otherwise, by either: (a) granting an Award under
this Plan in substitution of such other company’s award, or
(b) assuming such award as if it had been granted under this
Plan if the terms of such assumed award could be applied to an
Award granted under this Plan. Such substitution or assumption will
be permissible if the holder of the substituted or assumed award
would have been eligible to be granted an Award under this Plan if
the other company had applied the rules of this Plan to such grant.
In the event the Company assumes an award granted by another
company, the terms and conditions of such award will remain
unchanged (except that the Purchase Price or the Exercise Price, as
the case may be, and the number and nature of Shares issuable upon
exercise or settlement of any such Award will be adjusted
appropriately pursuant to Section 424(a) of the Code). In the
event the Company elects to grant a new Option in substitution
rather than assuming an existing option, such new Option may be
granted with a similarly adjusted Exercise Price. Substitute Awards
will not reduce the number of Shares authorized for grant under the
Plan or authorized for grant to a Participant in a calendar
year.
(e) Additional
Provisions. A Stock Award may be subject to additional
acceleration of vesting and exercisability upon or after a
Corporate Transaction as may be provided in the Stock Award
Agreement for such Stock Award or as may be provided in any other
written agreement between the Company or any Affiliate and the
Participant, but in the absence of such provision, no such
acceleration will occur.
(f) Appointment
of Stockholder Representative. As a condition to the receipt of
an Award under this Plan, a Participant will be deemed to have
agreed that the Award will be subject to the terms of any agreement
governing a Corporate Transaction involving the Company, including,
without limitation, a provision for the appointment of a
shareholder representative that is authorized to act on the
Participant’s behalf with respect to any escrow or other contingent
consideration.
(g) No
Restriction on Right to Undertake Transactions. The grant of
any Award under the Plan and the issuance of shares pursuant to any
Award does not affect or restrict in any way the right or power of
the Company or the stockholders of the Company to make or authorize
any adjustment, recapitalization, reorganization or other change in
the Company’s capital structure or its business, any merger or
consolidation of the Company, any issue of stock or of options,
Options or rights to purchase stock or of bonds, debentures,
preferred or prior preference stocks whose rights are superior to
or affect the Common Stock or the rights thereof or which are
convertible into or exchangeable for Common Stock, or the
dissolution or liquidation of the Company, or any sale or transfer
of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or
otherwise.
|
10. |
TERMINATION OR SUSPENSION OF THE
PLAN. |
(a) Plan
Term. The Board may suspend or terminate the Plan at any time.
Unless terminated sooner by the Board, the Plan will automatically
terminate on the day before the 10th anniversary of the
earlier of (i) the Adoption Date, or (ii) the date the Plan is
approved by the stockholders of the Company. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is
terminated.
(b) No
Impairment of Rights. Suspension or termination of the Plan
will not impair rights and obligations under any Stock Award
granted while the Plan is in effect except with the written consent
of the affected Participant or as otherwise permitted in the
Plan.
|
11. |
EFFECTIVE DATE OF THE PLAN;
FIRST AWARD, GRANT OR EXERCISE. |
The Plan will become effective on the Effective Date; provided,
however, that no Awards may be granted prior to the Effective Date.
In addition: no Stock Award will be exercised (or, in the case of a
Restricted Stock Award, Restricted Stock Unit Award, Performance
Stock Award, or Other Stock Award, will be granted) unless and
until the Plan has been approved by the stockholders of the
Company, which approval will be within 12 months before or after
the Adoption Date.
The law of the State of Delaware shall govern all questions
concerning the construction, validity and interpretation of this
Plan, without regard to that state’s conflict of laws rules.
|
13. |
AUTOMATIC GRANTS TO NON-EMPLOYEE
DIRECTORS. |
(a) Eligibility.
Non-Employee Directors are eligible for Options granted pursuant to
this Section 13. Notwithstanding the foregoing, this
Section 13 does not limit the ability of the Board to grant
discretionary Awards to Non-Employee Directors.
(b) Initial
Grant. Subject in all events to the provisions of Section 11
above, each Non-Employee Director who first becomes a member of the
Board after the Effective Date will automatically be granted an
Option to purchase fifty thousand (50,000) Shares on the date such
Non-Employee Director first becomes a member of the Board. Each
Option granted pursuant to this Section 13(b) shall be called
an “Initial Grant.”
(c) Succeeding
Grant. Subject in all events to the provisions of Section 11
above, on the first business day following the annual meeting of
the Company’s Stockholders, each Non-Employee Director who is
continuing in service as a member of the Board will on the first
business day following such annual meeting of stockholders
automatically be granted an Option to purchase thirty thousand
(30,000) Shares. Each Option granted pursuant to this
Section 13(c) shall be called a “Succeeding Grant”.
(d) Vesting
and Exercisability.
(i) Initial
Grants. Initial Grants shall vest and become exercisable as to
1/36 of the total Shares subject to the Initial Grant on each
monthly anniversary of the date of grant, such that Initial Grants
are fully vested and exercisable on the third anniversary of the
date of grant, so long as the Non-Employee Director continuously
remains a director, consultant or employee of the Company.
(ii) Succeeding
Grants. Succeeding Grants shall vest and become exercisable as
to 1/12 of the total Shares subject to the Succeeding Grant on each
monthly anniversary of the date of grant, such that Succeeding
Grants are fully vested and exercisable on the first anniversary of
the date of grant, so long as the Non-Employee Director
continuously remains a director, consultant or employee of the
Company.
(iii) Corporate
Transaction. In the event of a Corporate Transaction, the
vesting of all Options granted to Non-Employee Directors pursuant
to this Section 13 whose service as a director has not
terminated before the consummation of the Corporate Transaction
shall accelerate and such Options will become exercisable in full
immediately prior to the consummation of the Corporate Transaction
at such times and on such conditions as the Committee
determines.
(e) Form
of Option Grant. Each Option granted under this Section 13
shall be a NSO and shall be evidenced by a Non-Employee Director
Stock Award Agreement in such form as the Board from time to time
approve and which shall comply with and be subject to the terms and
conditions of this Plan.
(f) Exercise
Price. The Exercise Price per Share of each Option granted
under this Section 13 shall be the Fair Market Value of the
Share on the date the Option is granted.
(g) Termination
of Option. Except as provided in Section 13.(d)(iii) or
this Section 13(g), each Option granted under this
Section 13 shall expire ten (10) years after its date of
grant. The date on which the Non-Employee Director ceases to be a
member of the Board, a consultant or employee of the Company shall
be referred to as the “Non-Employee Director Termination Date” for
purposes of this Section 13(g). An Option may be exercised
after the Non-Employee Director Termination Date only as set forth
below:
(i) Termination
Generally. If the Non-Employee Director ceases to be a member
of the Board, consultant or employee of the Company for any reason
except death, Disability or a Corporate Transaction, each Initial
Grant and Succeeding Grant, to the extent then vested pursuant to
Section 13(d) above, then held by such Non-Employee Director
may be exercised by the Non-Employee Director within 12 months
after the Non-Employee Director Termination Date, but in no event
later than the Expiration Date.
(ii) Death.
If the Non-Employee Director ceases to be a member of the Board,
consultant or employee of the Company because of his or her death,
then each Initial Grant and Succeeding Grant, to the extent then
vested pursuant to Section 13(d) above, then held by such
Non-Employee Director, may be exercised by the Non-Employee
Director or his or her legal representative within twelve (12)
months after the Non-Employee Director Termination Date, but in no
event later than the Expiration Date.
(iii) Disability.
If the Non-Employee Director ceases to be a member of the Board,
consultant or employee of the Company because of his or her
Disability, then each Initial Grant and Succeeding Grant, to the
extent then vested pursuant to Section 13(d) above, then held
by such Non-Employee Director, may be exercised by the Non-Employee
Director or his or her legal representative within twelve (12)
months after the Non-Employee Director Termination Date, but in no
event later than the Expiration Date.
(iv) Corporate
Transaction. If the Non-Employee Director ceases to be a member
of the Board, consultant or employee of the Company because of a
Corporate Transaction, then unless otherwise determined by the
Board pursuant to the provisions of Section 9(c) above, each
Initial Grant and Succeeding Grant, to the extent then vested
pursuant to Section 13(d) above, then held by such
Non-Employee Director, may be exercised by the Non-Employee
Director or his or her legal representative within twelve (12)
months after the Non-Employee Director Termination Date (unless
otherwise determined by the Board pursuant to Section 9(c) above),
but in no event later than the Expiration Date.
A Cash Award (“Cash Award”) is an award that is
denominated in, or payable to an eligible Participant solely in,
cash, as deemed by the Committee to be consistent with the purposes
of the Plan. Cash Awards shall be subject to the terms, conditions,
restrictions and limitations determined by the Committee, in its
sole discretion, from time to time. Awards granted pursuant to this
Section may be granted with value and payment contingent upon the
achievement of Performance Goals.
As used in the Plan, the definitions contained in this
Section 15 shall apply to the capitalized terms indicated
below:
(a) “Adoption
Date” means the date the Plan is adopted by the Board.
(b) “Affiliate”
means, at the time of determination, any “parent” or “subsidiary”
of the Company as such terms are defined in Rule 405 of the
Securities Act. The Board will have the authority to determine the
time or times at which “parent” or “subsidiary” status is
determined within the foregoing definition.
(c) “Board”
means the Board of Directors of the Company.
(d) “Capital
Stock” means each and every class of common stock of the
Company, regardless of the number of votes per share.
(e) “Capitalization
Adjustment” means any change that is made in, or other
events that occur with respect to, the Common Stock subject to the
Plan or subject to any Stock Award after the Adoption Date without
the receipt of consideration by the Company through merger,
consolidation, reorganization, recapitalization, reincorporation,
stock dividend, dividend in property other than cash, large
nonrecurring cash dividend, stock split, reverse stock split,
liquidating dividend, combination of shares, exchange of shares,
change in corporate structure or any similar equity restructuring
transaction, as that term is used in Statement of Financial
Accounting Standards Board Accounting Standards Codification Topic
718 (or any successor thereto). Notwithstanding the foregoing, the
conversion of any convertible securities of the Company will not be
treated as a Capitalization Adjustment.
(f) “Cause”
will have the meaning ascribed to such term in any written
agreement between the Participant and the Company defining such
term and, in the absence of such agreement, such term means, with
respect to a Participant, the occurrence of any of the following
events: (i) such Participant’s commission of any felony or any
crime involving fraud, dishonesty or moral turpitude under the laws
of the United States, any state thereof, or any applicable foreign
jurisdiction; (ii) such Participant’s attempted commission of, or
participation in, a fraud or act of dishonesty against the Company
or any Affiliate; (iii) such Participant’s intentional, material
violation of any contract or agreement between the Participant and
the Company or any Affiliate, of any policy of the Company or any
Affiliate applicable to Participant or of any statutory or
fiduciary duty owed to the Company or any Affiliate; (iv) such
Participant’s unauthorized use or disclosure of the Company’s or
any Affiliate’s confidential information or trade secrets; or (v)
such Participant’s gross misconduct. The determination that a
termination of the Participant’s Continuous Service is either for
Cause or without Cause shall be made by the Company in its sole
discretion. Any determination by the Company that the Continuous
Service of a Participant was terminated by reason of dismissal
without Cause for the purposes of outstanding Stock Awards held by
such Participant shall have no effect upon any determination of the
rights or obligations of the Company or such Participant for any
other purpose.
(g) “Code”
means the Internal Revenue Code of 1986, as amended, including any
applicable regulations and guidance thereunder.
(h) “Committee”
means a committee of one or more Directors to whom authority has
been delegated by the Board in accordance with Section 2(c).
(i) “Common
Stock” means the Common Stock of the Company.
(j) “Company”
means Adamis Pharmaceuticals Corporation, a Delaware
corporation.
(k) “Consultant”
means any person, including an advisor, who is (i) engaged by the
Company or an Affiliate to render consulting or advisory services
and is compensated for such services, or (ii) serving as a member
of the board of directors of an Affiliate and is compensated for
such services. However, service solely as a Director, or payment of
a fee for such service, will not cause a Director to be considered
a “Consultant” for purposes of the Plan. Notwithstanding the
foregoing, a person is treated as a Consultant under this Plan only
if a Form S-8 Registration Statement under the Securities Act is
available to register either the offer or the sale of the Company’s
securities to such person.
(l) “Continuous
Service” means that the Participant’s service with the
Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. A change in the
capacity in which the Participant renders service to the Company or
an Affiliate as an Employee, Consultant or Director or a change in
the Entity for which the Participant renders such service, provided
that there is no interruption or termination of the Participant’s
service with the Company or an Affiliate, will not terminate a
Participant’s Continuous Service; provided, however, that if
the Entity for which a Participant is rendering services ceases to
qualify as an Affiliate, as determined by the Board, in its sole
discretion, such Participant’s Continuous Service will be
considered to have terminated on the date such Entity ceases to
qualify as an Affiliate. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or to a
Director will not constitute an interruption of Continuous Service.
To the extent permitted by law, the Board or the chief executive
officer of the Company, in that party’s sole discretion, may
determine whether Continuous Service will be considered interrupted
in the case of (i) any leave of absence approved by the Board or
chief executive officer, including sick leave, military leave or
any other personal leave, or (ii) transfers between the Company, an
Affiliate, or their successors. Notwithstanding the foregoing, a
leave of absence will be treated as Continuous Service for purposes
of vesting in a Stock Award only to such extent as may be provided
in the Company’s leave of absence policy, in the written terms of
any leave of absence agreement or policy applicable to the
Participant, or as otherwise required by law. In addition, to the
extent required for exemption from or compliance with Section 409A
of the Code, the determination of whether there has been a
termination of Continuous Service will be made, and such term will
be construed, in a manner that is consistent with the definition of
“separation from service” as defined under Treasury Regulation
Section 1.409A-1(h) (without regard to any alternative
definition thereunder).
(m) “Corporate
Transaction” means the occurrence, in a single transaction
or in a series of related transactions, of any one or more of the
following events:
(i) a
change in the ownership of the Company which occurs on the date
that any Exchange Act Person becomes the Owner, directly or
indirectly, of securities of the Company that, together with stock
held by such Exchange Act Person, represents more than 50% of the
total combined voting power of the Company’s then outstanding
securities other than by virtue of a merger, consolidation or
similar transaction, provided, however, that for purposes of this
subclause (i) the acquisition of additional securities by any
one Exchange Act Person who is considered to own more than 50% of
the combined voting power of the securities of the Company will not
be considered a Corporate Transaction. Notwithstanding the
foregoing, a Corporate Transaction will not be deemed to occur (A)
on account of the acquisition of securities of the Company directly
from the Company, (B) on account of the acquisition of securities
of the Company by an investor, any affiliate thereof or any other
Exchange Act Person that acquires the Company’s securities in a
transaction or series of related transactions the primary purpose
of which is to obtain financing for the Company through the
issuance of equity securities, or (C) solely because the level
of Ownership held by any Exchange Act Person (the “Subject
Person”) exceeds the designated percentage threshold of the
outstanding voting securities as a result of a repurchase or other
acquisition of voting securities by the Company reducing the number
of shares outstanding, provided that if a Corporate Transaction
would occur (but for the operation of this sentence) as a result of
the acquisition of voting securities by the Company, and after such
share acquisition, the Subject Person becomes the Owner of any
additional voting securities that, assuming the repurchase or other
acquisition had not occurred, increases the percentage of the then
outstanding voting securities Owned by the Subject Person over the
designated percentage threshold, then a Corporate Transaction will
be deemed to occur;
(ii) a
change in the ownership of the Company which occurs when
there is consummated a merger, consolidation or similar transaction
involving (directly or indirectly) the Company and, immediately
after the consummation of such merger, consolidation or similar
transaction, the stockholders of the Company immediately prior
thereto do not Own, directly or indirectly, either (A) outstanding
voting securities representing more than 50% of the combined
outstanding voting power of the surviving Entity in such merger,
consolidation or similar transaction, or (B) more than 50% of the
combined outstanding voting power of the parent of the surviving
Entity in such merger, consolidation or similar transaction, in
each case in substantially the same proportions as their Ownership
of the outstanding voting securities of the Company immediately
prior to such transaction;
(iii) a
change in the ownership of all or substantially all of the
Company’s assets which occurs when there is consummated a sale or
other disposition of all or substantially all of the consolidated
assets of the Company and its Subsidiaries, other than a sale,
lease, license or other disposition of all or substantially all of
the consolidated assets of the Company and its Subsidiaries to an
Entity, more than 50% of the combined voting power of the voting
securities of which are Owned by stockholders of the Company in
substantially the same proportions as their Ownership of the
outstanding voting securities of the Company immediately prior to
such sale, lease, license or other disposition; or
(iv) a
change in the effective control of the Company that occurs when
individuals who, on the date the Plan is adopted by the Board, are
members of the Board (the “Incumbent Board”) cease
for any reason to constitute at least a majority of the members of
the Board; provided, however, that if the appointment or
election (or nomination for election) of any new Board member was
approved or recommended by a majority vote of the members of the
Incumbent Board then still in office, such new member will, for
purposes of this Plan, be considered as a member of the Incumbent
Board. For purpose of this subclause (iv), if any Person is
considered to be in effective control of the Company, the
acquisition of additional control of the Company by the same Person
will not be considered a Corporate Transaction. For purposes of
this definition, Persons will be considered to be acting as a group
if they are owners of a corporation that enters into a merger,
consolidation, purchase, or acquisition of stock, or similar
business transaction with the Company.
Notwithstanding the foregoing or any other provision of the Plan,
the term Corporate Transaction will not include a sale of assets,
merger or other transaction effected exclusively for the purpose of
changing the domicile of the Company and the definition of
Corporate Transaction (or any analogous term, including without
limitation Change in Control or Change of Control) in an individual
written agreement between the Company or any Affiliate and the
Participant will supersede the foregoing definition with respect to
Stock Awards subject to such agreement; provided, however,
that if no definition of Corporate Transaction or any analogous
term is set forth in such an individual written agreement, the
foregoing definition will apply. To the extent required for
compliance with Section 409A of the Code, in no event will a
Corporate Transaction be deemed to have occurred if such
transaction is not also a “change in the ownership or effective
control of” the Company or “a change in the ownership of a
substantial portion of the assets of” the Company as determined
under Treasury Regulations Section 1.409A-3(i)(5) (without regard
to any alternative definition thereunder). The Board may, in its
sole discretion and without a Participant’s consent, amend the
definition of “Corporate Transaction” to conform to the definitions
of change in control or other similar terms under Section 409A of
the Code, and the regulations thereunder. Notwithstanding the
foregoing, to the extent that any amount constituting deferred
compensation (as defined in Section 409A of the Code) would
become payable under this Plan by reason of a Corporate
Transaction, such amount will become payable only if the event
constituting a Corporate Transaction would also qualify as a change
in ownership or effective control of the Company or a change in the
ownership of a substantial portion of the assets of the Company,
each as defined within the meaning of Code Section 409A, as it
has been and may be amended from time to time, and any proposed or
final Treasury Regulations and IRS guidance that has been
promulgated or may be promulgated thereunder from time to time.
(n) “Director”
means a member of the Board.
(o) “Disability”
means, with respect to a Participant, the inability of such
Participant to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment that
can be expected to result in death or that has lasted or can be
expected to last for a continuous period of not less than 12
months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of
the Code, and will be determined by the Board on the basis of such
medical evidence as the Board deems warranted under the
circumstances.
(p) “Effective
Date” means the date on which this Plan is approved by
the Board or by the stockholders of the Company, whichever occurs
earlier.
(q) “Employee”
means any person employed by the Company or an Affiliate. However,
service solely as a Director, or payment of a fee for such
services, will not cause a Director to be considered an “Employee”
for purposes of the Plan.
(r) “Entity”
means a corporation, partnership, limited liability company or
other entity.
(s) “Exchange
Act” means the U.S. Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(t) “Exchange
Act Person” means any natural person, Entity or “group”
(within the meaning of Section 13(d) or 14(d) of the Exchange Act),
except that “Exchange Act Person” will not include (i) the Company
or any Subsidiary of the Company, (ii) any employee benefit plan of
the Company or any Subsidiary of the Company or any trustee or
other fiduciary holding securities under an employee benefit plan
of the Company or any Subsidiary of the Company, (iii) an
underwriter temporarily holding securities pursuant to a registered
public offering of such securities, (iv) an Entity Owned, directly
or indirectly, by the stockholders of the Company in substantially
the same proportions as their Ownership of stock of the Company, or
(v) any natural person, Entity or “group” (within the meaning of
Section 13(d) or 14(d) of the Exchange Act) that, as of the
Effective Date, is the Owner, directly or indirectly, of securities
of the Company representing more than 50% of the combined voting
power of the Company’s then outstanding securities.
(u) “Fair
Market Value” means, as of any date, the value of the
Common Stock determined as follows:
(i) If
the Common Stock is listed on any established stock exchange or
traded on any established market, the Fair Market Value of a share
of Common Stock will be, unless otherwise determined by the Board,
the closing sales price for such stock as quoted on such exchange
or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the date of determination, as
reported in a source the Board deems reliable.
(ii) Unless
otherwise provided by the Board, if there is no closing sales price
for the Common Stock on the date of determination, then the Fair
Market Value will be the closing selling price on the last
preceding date for which such quotation exists.
(iii) In
the absence of such markets for the Common Stock, the Fair Market
Value will be determined by the Board in good faith and in a manner
that complies with Sections 409A and 422 of the Code.
(v) “Incentive
Stock Option” means an option granted pursuant to Section 5
of the Plan that is intended to be, and qualifies as, an “incentive
stock option” within the meaning of Section 422 of the Code.