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

 

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 under §240.14a-12

 

BEYOND AIR, INC.

(Name of Registrant as Specified In Its Charter)

 

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

 

 

 

 
 

 

 

900 STEWART AVENUE, Suite 301

Garden City, NY 11530

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held at 4:30 p.m. Eastern Time on Friday, November 22, 2024

 

Dear Stockholders of Beyond Air, Inc.:

 

We cordially invite you to attend the 2025 annual meeting of stockholders, which we refer to as the Annual Meeting, of Beyond Air, Inc., a Delaware corporation, which will be held on Friday, November 22, 2024 at 4:30 p.m. Eastern Time, in person at the offices of Beyond Air, Inc., 900 Stewart Avenue, Suite 301, Garden City, New York, 11530, for the following purposes, as more fully described in the accompanying proxy statement:

 

  1. To elect six directors, each to hold office until the 2026 Annual Meeting of Stockholders and until his or her successor is elected and qualified;
  2. To ratify the appointment of Marcum LLP as our independent registered public accounting firm for our fiscal year ending March 31, 2025;
  3. To approve the Seventh Amended and Restated 2013 Equity Incentive Plan to increase the number of shares reserved for issuance by 3,000,000 and to give the Board authority, without stockholder approval, to (i) modify the exercise or grant price of an option or stock appreciation right after it is granted, (ii) cancel an option or stock appreciation right at a time when its exercise or grant price exceeds the Fair Market Value of the underlying stock, in exchange for cash, another option or stock appreciation right, restricted stock, or other equity award, or (iii) take any other action that is treated as a repricing under generally accepted accounting principles;
  4. To approve, by an advisory (non-binding) vote, named executive officer compensation;
  5. To approve the second amendment to our Amended and Restated Certificate of Incorporation, as amended, to increase the number of authorized shares of common stock from 100,000,000 to 500,000,000;
  6. To authorize, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of our common stock underlying warrants issued by us pursuant to the terms of that certain Securities Purchase Agreement, dated September 26, 2024, by and among Beyond Air, Inc. and the investors named therein, in an amount equal to or in excess of 20% of our common stock outstanding before the issuance of such warrants (including in accordance with the operation of anti-dilution provisions contained in such warrants);
  7. To approve, if necessary, the adjournment or postponement of the Annual Meeting, to continue to solicit votes for Proposals 3, 5 and 6; and
  8. To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

 

Our Board of Directors has fixed the close of business on October 11, 2024, as the record date for the Annual Meeting (“Record Date”). Only stockholders of record on October 11, 2024, are entitled to notice of and to vote at the Annual Meeting. Further information regarding voting rights and the matters to be voted upon is presented in the accompanying proxy statement. For specific instructions on how to vote your shares, please refer to the instructions on the proxy card you received in the mail, and the additional information in the accompanying proxy statement. Other detailed information about our business and operations, including our audited financial statements, are included in our Annual Report on Form 10-K for the year ended March 31, 2024 (the “Annual Report”). We urge you to read and consider these documents carefully.

 

YOUR VOTE IS IMPORTANT, regardless of the number of shares you own and whether or not you plan to attend the Annual Meeting, we urge you to submit your vote via the Internet, telephone or mail.

 

We appreciate your continued support of Beyond Air.

 

  By order of the Board of Directors,
   
  /s/ Steven Lisi
  Chief Executive Officer and Chairman
  Garden City, New York
  October 31, 2024

 

 
 

 

TABLE OF CONTENTS

 

    Page
     
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND OUR ANNUAL MEETING   1
     
PROPOSAL NO. 1 ELECTION OF DIRECTORS   8
     
PROPOSAL NO. 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   17
     
REPORT OF THE AUDIT COMMITTEE   19
     
PROPOSAL NO. 3 APPROVAL OF THE Sixth AMENDED and Restated 2013 Equity Incentive Plan   19
      

PROPOSAL NO. 4 ADVISORY (Non-BINDING) VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

   25
     

PROPOSAL NO. 5 approval of the SECOND amendment to our Amended and Restated Certificate of Incorporation TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 100,000,000 TO 500,000,000

   34
     

PROPOSAL NO. 6 To authorize, FOR PURPOSES OF COMPLYING WITH NASDAQ LISTING RULE 5635(D), the issuance of shares of our common stock underlying warrants issued by US pursuant to THE TERMS OF THAT certain securities purchase agreement, DATED SEPTEMBER 26, 2024, BY AND AMONG THE COMPANY AND THE INVESTORS NAMED THEREIN, IN AN AMOUNT EQUAL TO OR IN EXCESS OF 20% OF OUR COMMON STOCK OUTSTANDING BEFORE THE ISSUANCE OF SUCH WARRANTS (INCLUDING IN ACCORDANCE WITH THE OPERATION OF THE ANTI-DILUTION PROVISIONS CONTAINED IN SUCH WARRANTS)

   37
     

PROPOSAL NO. 7 Adjournment or postponement of the annual meeting, if necessary, to continue to solicit votes for proposal Nos. 3, 5, and 6

   40
     
Executive COMPENSATION   26
     
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS   40
     
RELATED PERSON TRANSACTIONS   42
     
OTHER MATTERS   42
     
APPENDIX A – SIXTH AMENDED AND RESTATED 2013 EQUITY INCENTIVE PLAN   A-1

 

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BEYOND AIR, INC.

 

PROXY STATEMENT

FOR 2025 ANNUAL MEETING OF STOCKHOLDERS

 

To Be Held at 4:30 p.m. Eastern Time on Friday, November 22, 2024

 

This proxy statement and the enclosed form of proxy are furnished in connection with the solicitation of proxies by our Board of Directors for use at the 2025 annual meeting of stockholders (the “Annual Meeting”) of Beyond Air, Inc., a Delaware corporation, and any postponements, adjournments or continuations thereof, which we refer to as the Annual Meeting. The Annual Meeting will be held on Friday, November 22, 2024, at 4:30 p.m. Eastern Time, at the offices of Beyond Air, Inc., 900 Stewart Avenue, Suite 301, Garden City, New York, 11530. These proxy materials and our Annual Report on Form 10-K for the year ended March 31, 2024 (our “Annual Report”) are first being mailed on or about October 31, 2024, to all stockholders of record, entitled to vote at the Annual Meeting.

 

The information provided in the “question and answer” 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. Information contained on, or that can be accessed through, our website is not intended to be incorporated by reference into this proxy statement and references to our website address in this proxy statement are inactive textual references only.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON NOVEMBER 22, 2024. Our proxy statement, the enclosed proxy card and our Annual Report for the fiscal year ended March 31, 2024, are electronically available at proxyvote.com.

 

Forward-Looking Statements. The Proxy Statement may contain “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, which statements are subject to substantial risks and uncertainties and are based on estimates and assumptions. All statements other than statements of historical facts included in the Proxy Statement are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from the forward-looking statements expressed or implied in the Proxy Statement. Such risks, uncertainties and other factors include those risks described in under Item 1A of our most recent Annual Report on Form 10-K, as may be updated in our subsequent Quarterly Reports on Form 10-Q, and other subsequent reports and documents that we file with the SEC. The Company expressly disclaims any obligation to update or alter any statements whether because of new information, future events or otherwise, except as required by law.

 

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND OUR ANNUAL MEETING

 

Why am I receiving these materials?

 

Our Board of Directors is soliciting your proxy to vote at our Annual Meeting, including at any adjournment, continuation, or postponement of the meeting. These proxy materials describe the proposals on which the Company would like you to vote and also give you information on these proposals so that you can make an informed decision. We are furnishing our proxy materials to all shareholders of record entitled to vote at the Annual Meeting.

 

Who is entitled to vote?

 

Holders of our common stock as of the close of business on October 11, 2024 , the “Record Date” for the Annual Meeting, may vote at the Annual Meeting. As of the Record Date, there were 72,187,636  shares of our common stock outstanding. In deciding all matters at the Annual Meeting, each stockholder will be entitled to one vote for each share of our common stock held by such stockholder on the Record Date. Stockholders are not permitted to cumulate votes with respect to the election of directors.

 

Registered Stockholders. If shares of our common stock are registered directly in your name with our transfer agent, you are considered the stockholder of record with respect to those shares and a notice and proxy statement was provided to you directly by us. As the stockholder of record, you have the right to grant your voting proxy directly to the individuals listed on the proxy card or vote in person at the Annual Meeting. Throughout this proxy statement, we refer to these registered stockholders as “stockholders of record.”

 

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Street Name Stockholders. If shares of our common stock are held on your behalf in a brokerage account or by a bank or other nominee, you are considered to be the beneficial owner of shares that are held in “street name,” and the notice and proxy statement was forwarded to you by your broker or nominee, who is considered the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct your broker, bank or other nominee as to how to vote your shares. Beneficial owners are also invited to attend the Annual Meeting. However, since a beneficial owner is not the stockholder of record, you may not vote your shares of our common stock in person at the Annual Meeting unless you follow your broker’s procedures for obtaining a legal proxy. Your broker, bank or other nominee will provide a voting instruction form for you to use. Throughout this proxy statement, we refer to stockholders who hold their shares through a broker, bank or other nominee as “street name stockholders.”

 

What is a “broker non-vote”?

 

If you are a beneficial owner of shares held by a broker, bank, trust or other nominee and you do not provide your broker, bank, trust or other nominee with voting instructions, your shares may constitute “broker non-votes”. Broker non-votes occur on a matter when the broker, bank, trust or other nominee is not permitted under applicable stock exchange rules to vote on that matter without instructions from the beneficial owner and instructions are not given. These matters are referred to as “non-routine” matters.

 

What matters am I voting on?

 

You will be voting on:

 

  ● the election of six directors, each to hold office until the 2026 Annual Meeting of Stockholders and until his or her successor is elected and qualified;
  ● a proposal to ratify the appointment of Marcum LLP (“Marcum”) as our independent registered public accounting firm for our fiscal year ending March 31, 2025;
  ● a proposal to approve the Seventh Amended and Restated 2013 Equity Incentive Plan to increase the number of shares reserved for issuance by 3,000,000 and to give the Board authority, without stockholder approval, to (i) modify the exercise or grant price of an option or stock appreciation right after it is granted, (ii) cancel an option or stock appreciation right at a time when its exercise or grant price exceeds the Fair Market Value of the underlying stock, in exchange for cash, another option or stock appreciation right, restricted stock, or other equity award, or (iii) take any other action that is treated as a repricing under generally accepted accounting principles;
  ● approval, on an advisory basis, of named executive officer compensation;
  ● a proposal to approve the second amendment to our Amended and Restated Certificate of Incorporation, as amended, to increase the number of authorized shares of common stock from 100,000,000 to 500,000,000;
  ● a proposal to authorize, for purposes of complying with Nasdaq Listing Rule 5635(d), the issuance of shares of our common stock underlying warrants issued by us pursuant to the terms of that certain Securities Purchase Agreement, dated September 26, 2024, by and among Beyond Air, Inc. and the investors named therein, in an amount equal to or in excess of 20% of our common stock outstanding before the issuance of such warrants (including in accordance with the operation of anti-dilution provisions contained in such warrants);
  ● a proposal to approve, if necessary, the adjournment or postponement of the Annual Meeting, to continue to solicit votes for Proposals 3, 5 and 6; and
  ● any other business as may properly come before the Annual Meeting or any other adjournment thereof.

 

How does the Board of Directors recommend I vote on these proposals?

 

Our Board of Directors recommends a vote:

 

  ● “FOR” the election of each director nominee;
  ● “FOR” the ratification of the appointment of Marcum as our independent registered public accounting firm for our fiscal year ending March 31, 2025;

 

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  ● “FOR” the approval of the Seventh Amended and Restated 2013 Equity Incentive Plan to increase the number of shares reserved for issuance by 3,000,000 and to give the Board authority, without stockholder approval, to (i) modify the exercise or grant price of an option or stock appreciation right after it is granted, (ii) cancel an option or stock appreciation right at a time when its exercise or grant price exceeds the Fair Market Value of the underlying stock, in exchange for cash, another option or stock appreciation right, restricted stock, or other equity award, or (iii) take any other action that is treated as a repricing;
  ● “FOR” the advisory approval of named executive officer compensation under generally accepted accounting principles;
  ● “FOR” approving the second amendment to our Amended and Restated Certificate of Incorporation, as amended, to increase the number of authorized shares of common stock from 100,000,000 to 500,000,000;
  ● “FOR” the authorization, for purposes of complying with Nasdaq Listing Rule 5635(d), of the issuance of shares of our common stock underlying warrants issued by us pursuant to the terms of that certain Securities Purchase Agreement, dated September 26, 2024, by and among Beyond Air, Inc. and the investors named therein, in an amount equal to or in excess of 20% of our common stock outstanding before the issuance of such warrants (including in accordance with the operation of anti-dilution provisions contained in such warrants); and
  ● “FOR” the adjournment or postponement of the Annual Meeting, if necessary, to continue to solicit votes for Proposals 3, 5 and 6.

 

How many votes are needed for approval of each proposal?

 

  ● Proposal No. 1: The election of directors requires a plurality vote of the shares of our common stock present in person, by remote communication, if applicable, or by proxy at the Annual Meeting and entitled to vote thereon to be approved. “Plurality” means that the nominees who receive the largest number of votes cast “for” are elected as directors. As a result, any shares not voted “for” a particular nominee (whether as a result of stockholder abstention or a broker non-vote) will not be counted in such nominee’s favor and will have no effect on the outcome of the election. You may vote “for” or “withhold” on each of the nominees for election as a director.
     
  ● Proposal No. 2: The ratification of the appointment of Marcum requires the affirmative vote of a majority of the shares of our common stock present in person, by remote communication, if applicable, or by proxy at the Annual Meeting and entitled to vote thereon to be approved. Abstentions are considered votes present and entitled to vote on this proposal, and thus, will have the same effect as a vote “against” the proposal. Because this proposal is considered a “routine” matter under applicable stock exchange rules, there will not be any broker non-votes on this proposal.
     
  ● Proposal No. 3: The approval of the Seventh Amended and Restated 2013 Plan requires the affirmative vote of a majority of the shares of our common stock present in person, by remote communication, if applicable, or by proxy at the Annual Meeting and entitled to vote thereon. Abstentions are considered votes present and entitled to vote on this proposal, and thus, will have the same effect as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of this proposal.
     
  ● Proposal No. 4: The approval, on an advisory basis, of named executive officer compensation requires the affirmative vote of a majority of the shares of our common stock present in person, by remote communication, if applicable, or by proxy at the Annual Meeting and entitled to vote thereon. Abstentions are considered votes present and entitled to vote on this proposal, and thus, will have the same effect as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of this proposal.
     
  ● Proposal No. 5: The approval of the second amendment to our Amended and Restated Certificate of Incorporation, as amended, requires the affirmative vote of a majority of the shares of our common stock present in person, by remote communication, if applicable, or by proxy at the Annual Meeting and entitled to vote thereon. Abstentions are considered votes present and entitled to vote on this proposal, and thus, will have the same effect as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of this proposal.

 

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  ● Proposal No. 6: The approval of the issuance of shares of our common stock pursuant to a certain securities purchase agreement requires affirmative vote of a majority of the shares of our common stock present in person, by remote communication, if applicable, or by proxy at the Annual Meeting and entitled to vote thereon. Abstentions are considered votes present and entitled to vote on this proposal, and thus, will have the same effect as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of this proposal.
     
  ● Proposal No. 7: The approval of the adjournment or postponement of the Annual Meeting, if necessary, requires the affirmative vote of a majority of the shares of our common stock present in person, by remote communication, if applicable, or by proxy at the Annual Meeting and entitled to vote thereon. Abstentions are considered votes present and entitled to vote on this proposal, and thus, will have the same effect as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of this proposal.

 

What is the quorum?

 

A quorum is the minimum number of shares required to be present at the Annual Meeting for the Annual Meeting to be properly held under our amended and restated bylaws (“Bylaws”) and Delaware law. The presence, in person, by remote communication, if applicable, or by proxy, of a majority of all outstanding shares of our common stock entitled to vote at the Annual Meeting will constitute a quorum at the Annual Meeting. Abstentions, withhold votes and broker non-votes are counted as shares present and entitled to vote for purposes of determining a quorum.

 

How do I vote?

 

If you are a stockholder of record, there are four ways to vote:

 

VOTE BY INTERNET www.proxyvote.com

 

Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on November 21, 2024. 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.

 

If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

 

VOTE BY PHONE 1-800-690-6903

 

Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on November 21, 2024. 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.

 

VOTE IN PERSON

 

The Annual Meeting will be held on Friday, November 22, 2024, at 4:30 p.m. Eastern Time, at our offices located at 900 Stewart Avenue, Suite 301, Garden City, New York 11530.

 

Even if you plan to attend the Annual Meeting in person, we recommend that you also vote by proxy so that your vote will be counted if you later decide not to attend.

 

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If you are a street name stockholder, you will receive voting instructions from your broker, bank or other nominee. You must follow the voting instructions provided by your broker, bank or other nominee in order to instruct your broker, bank or other nominee on how to vote your shares. Street name stockholders should generally be able to vote by returning an instruction card, or by telephone or on the Internet. However, the availability of telephone and Internet voting will depend on the voting process of your broker, bank or other nominee. As discussed above, if you are a street name stockholder, you may not vote your shares in person at the Annual Meeting unless you obtain a legal proxy from your broker, bank or other nominee.

 

Can I change my vote?

 

Yes. If you are a stockholder of record, you can change your vote or revoke your proxy any time before the Annual Meeting by:

 

  ● entering a new vote by Internet or by telephone;
  ● completing and mailing a later-dated proxy card;
  ● notifying the Secretary of Beyond Air, Inc., in writing, at 900 Stewart Avenue, Suite 301, Garden City, NY 11530; or
  ● completing a written ballot at the Annual Meeting.

 

If you are a street name stockholder, your broker, bank or other nominee can provide you with instructions on how to change your vote.

 

What do I need to do to attend the Annual Meeting in person?

 

Space for the Annual Meeting is limited. Therefore, admission will be on a first-come, first-served basis. Registration will open at 4:00 p.m. Eastern Time and the Annual Meeting will begin at 4:30 p.m. Eastern Time. Each stockholder should be prepared to present:

 

  ● valid government photo identification, such as a driver’s license or passport; and
  ● if you are a street name stockholder, proof of beneficial ownership as of the Record Date, such as your most recent account statement reflecting your stock ownership as of October 11, 2024, along with a copy of the voting instruction card provided by your broker, bank, trustee or other nominee or similar evidence of ownership.

 

Use of cameras, recording devices, computers and other electronic devices, such as smart phones and tablets, will not be permitted at the Annual Meeting. Please allow ample time for check-in. Parking is limited.

 

What is the effect of giving a proxy?

 

Proxies are solicited by and on behalf of our Board of Directors. Steven Lisi, our Chairman and Chief Executive Officer, and Adam Newman, our Corporate Secretary, have been designated as proxy holders by our Board of Directors. When proxies are properly dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the instructions of the stockholder. If no specific instructions are given, however, the shares will be voted in accordance with the recommendations of our Board of Directors as described above. If any matters not described in this proxy statement are properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote the shares. If the Annual Meeting is adjourned, the proxy holders can vote the shares on the new Annual Meeting date as well, unless you have properly revoked your proxy instructions, as described above.

 

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How are proxies solicited for the Annual Meeting?

 

Our Board of Directors is soliciting proxies for use at the Annual Meeting. All expenses associated with this solicitation will be borne by us. We will reimburse brokers or other nominees for reasonable expenses that they incur in sending our proxy materials to you if a broker, bank or other nominee holds shares of our common stock on your behalf. In addition, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Our directors and employees will not be paid any additional compensation for soliciting proxies.

 

How may my brokerage firm or other intermediary vote my shares if I fail to provide timely directions?

 

Brokerage firms and other intermediaries holding shares of our common stock in street name for their customers are generally required to vote such shares in the manner directed by their customers. In the absence of timely directions, your broker will have discretion to vote your shares on “routine” matters: the proposal to ratify the appointment of Marcum as our independent registered public accounting firm. Your broker will not have discretion to vote on the election of directors, the approval of the Seventh Amended and Restated 2013 Plan, the approval of named executive officer compensation, the approval of the second amendment to our Amended and Restated Certificate of Incorporation each, the approval of the issuance of shares of our common stock pursuant to a certain securities purchase agreement, or the approval of, if necessary, the adjournment or postponement of the Annual Meeting, each of which is a “non-routine” matter, absent direction from you.

 

Where can I find the voting results of the Annual Meeting?

 

We will announce preliminary voting results at the Annual Meeting. We will also disclose voting results on a Current Report on Form 8-K that we will file with the SEC within four business days after the Annual Meeting. If final voting results are not available to us in time to file a Current Report on Form 8-K within four business days after the Annual Meeting, we will file a Current Report on Form 8-K to publish preliminary results and will provide the final results in an amendment to the Current Report on Form 8-K as soon as they become available.

 

I share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?

 

We have adopted a procedure called “householding,” which the SEC has approved. Under this procedure, we deliver a single copy of the notice and, if applicable, our proxy materials to multiple stockholders who share the same address unless we have received contrary instructions from one or more of the stockholders. This procedure reduces our printing costs, mailing costs and fees. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written or oral request, we will deliver promptly a separate copy of the notice and, if applicable, our proxy materials to any stockholder at a shared address to which we delivered a single copy of any of these materials. To receive a separate copy, or, if a stockholder is receiving multiple copies, to request that we only send a single copy of the notice and, if applicable, our proxy materials, such stockholder may contact us at the following address:

 

Beyond Air, Inc.

Attention: Investor Relations

900 Stewart Avenue, Suite 301

Garden City, NY 11530

Tel: (516) 665-8200

 

Street name stockholders may contact their broker, bank or other nominee to request information about householding.

 

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What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or to nominate individuals to serve as directors?

 

Stockholder Proposals

 

In order for a stockholder proposal, including a director nomination, to be considered for inclusion in our proxy statement for our 2026 Annual Meeting of Stockholders, the written proposal must be received at our principal executive offices on or before July 2, 2025  . Proposals received after that date will not be included in the proxy materials we send out in connection with our 2026 Annual Meeting of Stockholders. The proposal should be addressed to Secretary, Beyond Air, Inc., 900 Stewart Avenue, Suite 301, Garden City, NY 11530. The proposal must comply with SEC regulations regarding the inclusion of stockholder proposals in company-sponsored proxy materials.

 

In accordance with Article III, Section 5(b)(iii) of our Bylaws, a stockholder who wishes to present a proposal for consideration at the 2026 Annual Meeting of Stockholders must deliver a notice of the matter the stockholder wishes to present to our principal executive offices at the address identified in the preceding paragraph, not less than 90 nor more than 120 days prior to the first anniversary of the date of the Annual Meeting. Accordingly, any notice given by or on behalf of a stockholder pursuant to these provisions of our Bylaws (and not pursuant to Rule 14a-8 of the SEC) must be received no earlier than July 25, 2025 and no later than August 24, 2025 (except that in the event that the date of the 2026 Annual Meeting of Stockholders is advanced by more than 30 days, or delayed by more than 30 days, from the first anniversary of the Annual Meeting, a stockholder’s notice must be so received no earlier than the 120th day prior to the 2026 Annual Meeting of Stockholders and not later than the close of business on the later of (A) the 90th day prior to the 2026 Annual Meeting of Stockholders or (B) the tenth day following the day on which public disclosure of the date of the 2026 Annual Meeting of Stockholders was made).

 

The notice should include a brief description of the business desired to be brought before the 2025 Annual Meeting of Stockholders, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend our Bylaws, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, and any other information concerning such matter that must be disclosed in proxy solicitations pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as if the matter had been proposed, or intended to be proposed, by our Board of Directors. As to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, the notice should include the information required by Article III, Section 5(b)(iv) of our Bylaws.

 

Nomination of Director Candidates

 

You may propose director candidates for consideration by our nominating committee and Board of Directors. Any such recommendations should include the nominee’s name, address, date of birth, principal occupation or employment (present and for the past five years) and qualifications for membership on our Board of Directors and should be directed to our Secretary at the address set forth above. For additional information regarding stockholder recommendations for director candidates, see the section of this proxy statement titled “Director Candidates”.

 

In addition, our Bylaws permit stockholders to nominate directors for election at an annual meeting of stockholders. To nominate a director, a stockholder must provide the information required by our Bylaws. In addition, a stockholder must give timely notice to our Secretary in accordance with our Bylaws, which, in general, require that the notice be received by our Secretary within the time periods described above under “Stockholder Proposals” for stockholder proposals that are not intended to be included in a proxy statement.

 

In addition to satisfying the foregoing requirements, stockholders who intend to solicit proxies in support of director nominees other than our nominees for our 2026 Annual Meeting of Stockholders must provide the notice required by Rule 14a-19 under the Exchange Act no later than July 17, 2025.

 

Availability of Bylaws

 

A copy of our Bylaws may be obtained by accessing our public filings on the SEC’s website at www.sec.gov. You may also contact our Secretary at our principal executive offices for a copy of the relevant Bylaw provisions regarding the requirements for making stockholder proposals and nominating director candidates.

 

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PROPOSAL NO. 1

 

ELECTION OF DIRECTORS

 

Our business affairs are managed under the direction of our Board of Directors, which is currently composed of six members. Five of our directors are independent within the meaning of the listing standards of The Nasdaq Stock Market (“Nasdaq”). Pursuant to our Bylaws, our directors are elected at each annual meeting of stockholders, and serve until their successors are elected and qualified at the next annual meeting of stockholders, or until their prior death, resignation or removal.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” ALL NOMINEES.

 

All of our directors bring to our Board of Directors executive leadership experience from their service as executives and/or directors of our company and/or other entities. The biography of each of the nominees below contains information regarding the person’s business experience, director positions held currently or at any time during the last five years, and the experiences, qualifications, attributes and skills that caused the nominating committee and our Board of Directors to determine that the person should serve as a director, given our business and structure.

 

Name   Age   Position
Steven A. Lisi   54   Chief Executive Officer and Chairman of the Board of Directors
Ron Bentsur   59   Director
Robert F. Carey   66   Director
Dr. William Forbes   63   Director
Yoori Lee   52   Director
Erick J. Lucera   57   Director

 

Steven A. Lisi, Chief Executive Officer and Chairman of the Board

 

Steven Lisi has served on our Board of Directors since January 13, 2017, and has served on the board of directors of BA Ltd. (“BA”), our wholly-owned subsidiary, since June 2016. Mr. Lisi has served as our Chief Executive Officer since June 14, 2017. Mr. Lisi was previously Senior Vice President of Business and Corporate Development at Avadel Technologies (AVDL), where he was instrumental in restructuring the company and transforming it from $100 million in enterprise value to $1 billion in three years. Mr. Lisi raised $121 million in equity, led the sale of Avadel’s contract manufacturing facility, rationalized the product pipeline, refocused the business development effort, transformed the investor base and established Avadel’s presence in Ireland. Prior to his position with Avadel, Mr. Lisi spent 18 years investing in healthcare companies on a global basis at Mehta and Isaly (now OrbiMed), SAC Capital (portfolio manager), Millennium Partners (portfolio manager), Panacea Asset Management (co-owner) and Deerfield Management (Partner). Mr. Lisi serves on the board of directors of Mico Innovations, a next generation coronary and neurovascular stent company. Mr. Lisi received his Master’s in International Business from Pepperdine University.

 

Our Board of Directors believes that Mr. Lisi’s experience and perspective as our Chief Executive Officer, as well as his depth of operating and senior management experience and specific skills in the areas of general operations and financial operations, provide him with the qualifications and skills to serve as a director.

 

Ron Bentsur, Director

 

Ron Bentsur joined BA in August 2015 and has served on our Board of Directors since January 2017. Mr. Bentsur has served as Chief Executive Officer, President, and Chairman of the board of directors of Nuvectis Pharma, Inc., (“Nuvectis”) since 2021. Prior to Nuvectis, Mr. Bentsur served as Chief Executive Officer and on the board of directors of UroGen Pharma, Ltd. between August 2015 and January 2019. From 2009 to April 2015, Mr. Bentsur served as Chief Executive Officer and Director of Keryx Biopharmaceuticals, Inc. Mr. Bentsur’s tenure as CEO of Keryx Biopharmaceuticals culminated in the September 2014 FDA approval of Auryxia TM (ferric citrate) and its December 2014 U.S. launch. Prior to joining Keryx Biopharmaceuticals, Inc., from 2006 to 2009, Mr. Bentsur served as Chief Executive Officer of XTL Biopharmaceuticals, Ltd. Prior to that, Mr. Bentsur served as Vice President Finance and Chief Financial Officer of Keryx Biopharmaceuticals, Inc., as Director of Technology Investment Banking at Leumi Underwriters, where he was responsible for all technology and biotechnology private placement and advisory transactions, and as a New York City-based investment banker, primarily at ING Barings Furman Selz. Mr. Bentsur holds a B.A. in Economics and Business Administration with distinction from the Hebrew University of Jerusalem and an M.B.A., magna cum laude, from New York University’s Stern Graduate School of Business. Mr. Bentsur also serves as Director of Stemline Therapeutics, Inc.

 

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Our Board of Directors believes that Mr. Bentsur’s experience and perspective advising our company and other life sciences companies, as well as his depth of operating and senior management experience in the biopharma industry, provide him with the qualifications and skills to serve as a director.

 

Robert F. Carey, Director

 

Robert Carey joined our Board of Directors in February 2019. He has an extensive track record of accomplishment within the biopharmaceutical and healthcare investment banking industry. He has assisted biotech and specialty pharma companies raise more than $10 billion in initial public offerings, follow-on offerings, debt offerings, and private placements. He has served as a financial advisor on mergers, acquisitions, and strategic alliance transactions with a total deal value of more than $10 billion. Mr. Carey is a co-founder and from July 2020 until December 2022 was President of ACELYRIN, INC., a biopharmaceutical company developing life-changing drug therapies.

 

Mr. Carey previously served as Executive Vice President and Chief Business Officer at Horizon Therapeutics plc from March 2014 to September 2019, during which Horizon Therapeutics deployed in excess of $3.5 billion to acquire or license eight commercial products and three products in development and grew net sales from $74 million in 2013 to approximately $1.2 billion in 2018, a compound annual growth rate of 75%. Before Horizon, he spent more than 11 years as Managing Director and Head of the Life Sciences Investment Banking Group at JMP Securities. Mr. Carey was also Managing Director in the healthcare groups at Dresdner Kleinwort Wasserstein and Vector Securities. He received his B.B.A. in Accounting from the University of Notre Dame. Mr. Carey currently serves on the Board of Beyond Cancer Ltd. and Sangamo Therapeutics, Inc.

 

Our Board of Directors believes that Mr. Carey’s experience and perspective advising the Company and other life sciences companies in connections with financings and strategic transactions, as well as his depth of operating and senior management experience in our industry, provide him with the qualifications and skills to serve as a director.

 

Dr. William Forbes, Director

 

Dr. William Forbes joined our Board of Directors in August 2018. He brings to our Board of Directors more than 30 years of pharmaceutical product development experience and, working with health authorities in the US and Europe, has contributed to numerous marketing approvals spanning a diverse range of therapeutic areas. Dr. Forbes has served as Chief Development Officer of Heron Therapeutics, Inc. (Nasdaq: HRTX), a Nasdaq-traded commercial-stage biotechnology company, since June 2023. Prior to joining Heron, he served as the Chief Development Officer of Trevi Therapeutics, a clinical-stage pharmaceutical company focused on serious neurologically mediated diseases, from February 2021 to September 2022. Prior to Trevi, Dr. Forbes was at Salix Pharmaceuticals as the Chief Development Officer and also Head of Medical and R&D from January 2005 to June 2015. Prior to Salix, Dr. Forbes spent 15 years in Clinical Development & Regulatory Affairs and Clinical Research at a number of global pharmaceutical companies.

 

Our Board of Directors believes that Dr. Forbes’ experience and perspective advising our company, as well as his depth of operating and senior management experience in our industry, provide him with the qualifications and skills to serve as a director.

 

Yoori Lee, Director

 

Yoori Lee joined our Board of Directors in January 2018. She has served as Co-founder and President of Trio Health Advisory Group, Inc. since 2013. Trio Health’s mission is to improve the quality of care in patient outcomes through coordinating the efforts of all patient care stakeholders. Prior to Trio Health, Ms. Lee spent over 15 years at Leerink Partners LLC, a leading healthcare investment bank, where she was Managing Director, and Director of MEDACorp Services. Additionally, she helped found the MEDACorp network, a cadre of experts including more than 35,000 healthcare professionals in diverse areas of practice such as clinical medicine, biomedical research, regulatory affairs, public policy, healthcare administration and healthcare information technology.

 

Our Board of Directors believes that Ms. Lee’s experience and perspective advising our company as well as her experience with Leerink Partners LLC and MEDACorp provide her with the qualifications and skills to serve as a director.

 

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Erick J. Lucera, Director

 

Erick J. Lucera joined our Board of Directors in August 2017. He has served as EVP and Chief Executive Officer of Editas Medicine, Inc. (Nasdaq: EDIT), a Nasdaq-listed clinical-stage genome-editing company, since May 2023. He was the Chief Financial Officer of AVEO Oncology (Nasdaq: AVEO), a Nasdaq traded biopharmaceutical company focused on targeted medicines for oncology and other unmet medical needs, from 2020 to 2023, when it was acquired by LG Chem, and was the Chief Financial Officer of Valeritas Holdings, Inc., a U.S. Nasdaq traded commercial stage company developing new technology for diabetes, from 2016 to 2019. Mr. Lucera served as Chief Financial Officer, Treasurer and Secretary of Viventia Bio from 2015 to 2016. From 2012 to 2015, he was Vice President, Corporate Development at Aratana Therapeutics, a veterinary biopharmaceutical company. While at Aratana, he helped grow the company’s product pipeline through a series of acquisitions and in licensing transactions financed through five public and private offerings of nearly $250 million. Before his career as a healthcare company executive, Mr. Lucera spent over 15 years in investment management as a healthcare analyst at Eaton Vance, the portfolio manager of the Triathlon Life Sciences Fund at Intrepid Capital and as head of the healthcare research team at Independence Investments. He has served on the board of directors of SAB Biopharmapeutics, Inc., a Nasdaq-traded clinical-stage biopharmaceutical company, since April 2023. He holds a CPH from Harvard University, an MS in quantitative finance from Boston College, an MBA from Indiana University Bloomington, and a BS in accounting from the University of Delaware. Mr. Lucera has obtained CFA, CMA, and CPA designations.

 

Our Board of Directors believes that Mr. Lucera’s experience and perspective advising the Company and other life sciences companies on strategic transactions and financings, as well as his depth of operating and senior management experience in our industry, provide him with the qualifications and skills to serve as a director.

 

EXECUTIVE OFFICERS

 

The following table sets forth certain information regarding our executive officers who are not also directors.

 

Name   Age   Position
Michael Gaul   70   Chief Operating Officer
Douglas Larson   54   Chief Financial Officer

 

Michael Gaul, Chief Operating Officer

 

Michael Gaul has been our Chief Operating Officer since July 1, 2022. Mr. Gaul joined the Company in May 2020 as Senior VP, Operations, a title he held until June 2022. Mr. Gaul has led teams in operations, sales and marketing, supply chain, distribution, quality, regulatory, human resources, and finance. He has had P&L experience with multi-plant responsibility in both the US and Asia, including roles with Sparton Corporation (Group VP, Manufacturing & Design Services Business Unit; Group VP, Medical Business Unit), a defense contractor for maritime defense, from September 2011 to February 2020, SynCardia Systems (COO; VP Operations), a manufacturer and provider of the commercially approved Total Artificial Heart, from June 2005 to February 2011, Ventana Medical Systems (now known as Roche Tissue Diagnostics) (VP & General Manager, Operations), a medical device company, from September 2003 to April 2005, and Robotic Vision Systems, Inc. (General Manager, Vanguard Division; VP Operations, Systemation Division), a maker of machine vision systems, from September 1997 to June 2003. He also currently serves on the Board of Directors of BioOhio to support and promote Ohio’s bioscience industry. Mr. Gaul has a BS, Business Administration from Delaware Valley University, and an MBA from Florida Institute of Technology.

 

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Douglas Larson, Chief Financial Officer

 

Douglas Larson has been our Chief Financial Officer since September 1, 2021. Mr. Larson joined the Company with over 20 years of international and operational financial leadership experience. Most recently, he served as an independent consultant providing operational and financial consulting services from February 2021 to August 2021. Prior to that, he served as Vice President, Finance and Head of Global Controlling at DBV Technologies, Inc. (Nasdaq: DBVT) (“DBV”), a global clinical stage biopharmaceutical company headquartered in France, from June 2017 to September 2020. Prior to DBV, Mr. Larson served as the Chief Financial Officer of The Scotts Miracle-Gro Company’s (NYSE: SMG) International division, based in Lyon, France from January 2001 to May 2015. Mr. Larson graduated from the Certified General Accountant’s Association of Canada in 2001 and HEC Paris’s Executive MBA program in 2015.

 

CORPORATE GOVERNANCE

 

Family Relationships

 

There are no family relationships among any of our current or former directors or executive officers.

 

Involvement in Certain Legal Proceedings

 

Erick J. Lucera was the Chief Financial Officer of Valeritas Holdings, Inc. until January 3, 2020. On February 9, 2020, Valeritas Holdings, Inc. filed a voluntary petition for bankruptcy protection under Chapter 11 of Title 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware in order to facilitate its sale to a Denmark-based biotechnology company. The plan of liquidation was approved on June 8, 2020 and became effective on June 30, 2020.

 

Except as set forth above, none of our directors, executive officers, significant employees, promoters or control persons has been involved in any legal proceeding in the past ten years that would require disclosure under Item 401(f) of Regulation S-K promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

 

Board Meetings and Committees

 

During our fiscal year ended March 31, 2024, our Board of Directors held five meetings (including regularly scheduled and special meetings), and each director attended at least 75% of the aggregate of (i) the total number of meetings of our Board of Directors held during the period for which he or she has been a director and (ii) the total number of meetings held by all committees of our Board of Directors on which he or she served during the periods that he or she served.

 

Although we do not have a formal policy regarding attendance by members of our Board of Directors at annual meetings of stockholders, we strongly encourage our directors to attend. Two of our directors attended our 2024 Annual Meeting of Stockholders.

 

Our Board of Directors has established three standing committees: the audit committee, the compensation committee and the nominating committee. The current members of our audit committee are Erick Lucera, Ron Bentsur and Robert F. Carey, with Erick Lucera serving as chairperson. The current members of our compensation committee are Yoori Lee, Erick J. Lucera and Ron Bentsur, with Yoori Lee serving as chairperson. The current members of our nominating committee are Erick Lucera, Yoori Lee and Dr. William Forbes, with Erick Lucera serving as chairperson.

 

Our Board of Directors has determined that each of Ron Bentsur, Erick Lucera, Yoori Lee, William Forbes and Robert F. Carey is independent within the meaning of Rule 5605(a)(2) of the Nasdaq Listing Rules and the rules and regulations promulgated by the SEC. In making its independence determinations, the Board of Directors sought to identify and analyze all of the facts and circumstances related to any relationship between a director, his or her immediate family and our company and our affiliates and did not rely on categorical standards other than those contained in the Nasdaq rule referenced above. Our Board of Directors has determined that Erick Lucera, Ron Bentsur and Robert F. Carey meet the additional test for independence for audit committee members imposed by SEC regulations and Section 5605(c)(2)(A) of the Nasdaq Stock Market listing rules and that Erick J. Lucera, Yoori Lee and Ron Bentsur meet the additional test for independence for compensation committee members imposed by Section 5605(d)(2)(A) of the Nasdaq Stock Market listing rules.

 

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Audit Committee

 

The primary purpose of our audit committee is to assist our Board of Directors in the oversight of the integrity of our accounting and financial reporting process, the audits of our consolidated financial statements, and our compliance with applicable legal and regulatory requirements. It also oversees internal controls, and discusses Company policies related to risk assessment and risk management. Our audit committee met four times during the fiscal year ended March 31, 2024. The functions of our audit committee include, among other things:

 

  ● hiring the independent registered public accounting firm to conduct the annual audit of our consolidated financial statements and monitoring its independence and performance;
  ● reviewing and approving the planned scope of the annual audit and the results of the annual audit;
  ● pre-approving all audit services and permissible non-audit services provided by our independent registered public accounting firm;
  ● reviewing the significant accounting and reporting principles to understand their impact on our consolidated financial statements;
  ● reviewing our internal financial, operating and accounting controls with management, our independent registered public accounting firm and our internal audit provider;
  ● reviewing with management and our independent registered public accounting firm, as appropriate, our financial reports, earnings announcements and our compliance with legal and regulatory requirements;
  ● periodically reviewing and discussing with management the effectiveness and adequacy of our system of internal controls;
  ● in consultation with management and the independent auditors, reviewing the integrity of our financial reporting process and adequacy of disclosure controls;
  ● reviewing potential conflicts of interest under and violations of our code of conduct;
  ● establishing procedures for the treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and confidential submissions by our employees of concerns regarding questionable accounting or auditing matters;
  ● reviewing and approving related-party transactions; and
  ● reviewing and evaluating, at least annually, our audit committee’s charter.

 

With respect to reviewing and approving related-party transactions, our audit committee will review related-party transactions for potential conflicts of interests or other improprieties. Under SEC rules, related-party transactions are those transactions to which we are or may be a party in which the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years, and in which any of our directors or executive officers or any other related person had or will have a direct or indirect material interest, excluding, among other things, compensation arrangements with respect to employment and Board of Directors membership. Our audit committee could approve a related-party transaction if it determines that the transaction is in our best interests. Our directors are required to disclose to this committee or the full Board of Directors any potential conflict of interest, or personal interest in a transaction that our Board of Directors is considering. Our executive officers are required to disclose any related-party transaction to the audit committee. We also poll our directors on an annual basis with respect to related-party transactions and their service as an officer or director of other entities. Any director involved in a related-party transaction that is being reviewed or approved must recuse himself or herself from participation in any related deliberation or decision. Whenever possible, the transaction should be approved in advance and if not approved in advance, must be submitted for ratification as promptly as practical. The Company has written policies and procedures with respect to related person transactions for managing any such situations.

 

The financial literacy requirements of the SEC require that each member of our audit committee be able to read and understand fundamental financial statements. In addition, at least one member of our audit committee must qualify as an audit committee financial expert, as defined in Item 407(d)(5) of Regulation S-K promulgated under the Securities Act, and have financial sophistication in accordance with the Nasdaq Stock Market listing rules. Our Board of Directors has determined that Erick Lucera qualifies as an audit committee financial expert.

 

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Both our independent registered public accounting firm and management periodically meet privately with our audit committee.

 

Our audit committee charter is available on our website at www.beyondair.net under “Investors—Governance” . Information contained on or accessible through this website is not a part of this proxy statement, and the inclusion of such website address in this proxy statement is an inactive textual reference only.

 

Compensation Committee

 

The primary purpose of our compensation committee is to assist our Board of Directors in exercising its responsibilities relating to compensation of our executive officers and employees and to administer our equity compensation and other benefit plans. Our compensation committee met one time during the fiscal year ended March 31, 2024. In carrying out these responsibilities, this committee reviews all components of executive officer and employee compensation for consistency with its compensation philosophy, as in effect from time to time. The functions of our compensation committee include, among other things:

 

  ● designing and implementing competitive compensation, retention and severance policies to attract and retain key personnel;
  ● reviewing and formulating policy and determining the compensation of our Chief Executive Officer, our other executive officers and employees;
  ● reviewing and recommending to our Board of Directors the compensation of our non-employee directors;
  ● reviewing and evaluating our compensation risk policies and procedures;
  ● administering our equity incentive plans and granting equity awards to our employees, consultants and directors under these plans;
  ● administering our performance bonus plans and granting bonus opportunities to our employees, consultants and non-employee directors under these plans;
  ● if required from time to time, preparing the analysis or reports on executive officer compensation required to be included in our annual proxy statement;
  ● engaging compensation consultants or other advisors it deems appropriate to assist with its duties; and
  ● reviewing and evaluating, at least annually, our compensation committee’s charter.

 

The compensation committee retains sole authority to hire any compensation consultant, approve such consultant’s compensation, determine the nature and scope of its services, evaluate its performance, and terminate its engagement.

 

The compensation committee reviews our compensation policies and practices for all employees, including our named executive officers, as they relate to risk management practices and risk-taking incentives to assess and determine that there are no risks arising from these policies and practices that are reasonably likely to have a material adverse effect on us.

 

Our compensation committee charter is available on our website at www.beyondair.net under “Investors—Governance”. Information contained on or accessible through this website is not a part of this proxy statement, and the inclusion of such website address in this proxy statement is an inactive textual reference only.

 

Nominating Committee

 

The primary purpose of our nominating committee is to assist our Board of Directors in promoting the best interest of our company and our stockholders through the implementation of sound corporate governance principles and practices. Our nominating committee met one time during the fiscal year ended March 31, 2024. The functions of our nominating committee include, among other things:

 

  ● identifying, reviewing and evaluating candidates to serve on our Board of Directors;
  ● determining the minimum qualifications for service on our Board of Directors;

 

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  ● considering developing and recommending to our Board of Directors an annual self-evaluation process for our Board of Directors and overseeing the annual self-evaluation process;
  ● considering developing, as appropriate, a set of corporate governance principles, and reviewing and recommending to our Board of Directors any changes to such principles; and
  ● periodically reviewing and evaluating our nominating committee’s charter.

 

Our nominating committee charter is available on our website at www.beyondair.net under “Investors—Governance”. Information contained on or accessible through this website is not a part of this proxy statement, and the inclusion of such website address in this proxy statement is an inactive textual reference only.

 

Director Candidates

 

Our Board of Directors has a critical role in guiding our strategic direction and overseeing the management of our business, and accordingly, we seek to attract and retain highly qualified directors who have sufficient time to engage in the activities of our Board of Directors and to understand and enhance their knowledge of our industry and business plans. In evaluating the suitability of individual candidates, our Board of Directors, in approving (and, in the case of vacancies, appointing) such candidates, may take into account many factors, including: personal and professional integrity; ethics and values; experience in corporate management, such as serving as an officer or former officer of a publicly held company; strong finance experience; experience relevant to our industry; experience as a board member or executive officer of another publicly held company; relevant academic expertise or other proficiency in an area of our operations; diversity of expertise and experience in substantive matters pertaining to our business relative to other board members; diversity of background and perspective, including, but not limited to, with respect to age, gender, race, place of residence and specialized experience; practical and mature business judgment, including, but not limited to, the ability to make independent analytical inquiries; and any other relevant qualifications, attributes or skills. The core competencies of directors should address accounting or finance experience, market familiarity, business or management experience, industry knowledge, customer-base experience or perspective, crisis response, leadership, and/or strategic planning. Our Board of Directors evaluates each individual in the context of the Board of Directors as a whole, with the objective of assembling a group that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas.

 

Our Board of Directors will consider candidates for director recommended by stockholders, so long as such recommendations comply with our Certificate of Incorporation, Bylaws, nominating committee charter and applicable laws, rules and regulations, including those promulgated by the SEC. Our Board of Directors will evaluate such recommendations in accordance with our Bylaws and our policies and procedures for director candidates, including our corporate governance guidelines. This process is designed to ensure that our Board of Directors includes members with diverse backgrounds, skills and experience, including appropriate financial and other expertise relevant to our business. Eligible stockholders wishing to recommend a candidate for nomination should contact us in writing. Such recommendations must include information about the candidate, a statement of support by the recommending stockholder, evidence of the recommending stockholder’s ownership of our common stock and a signed letter from the candidate confirming willingness to serve on our Board of Directors.

 

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Board Diversity

 

The table below provides certain highlights of the composition of our Board of Directors. Each of the categories listed in the below table has the meaning as it is used in Nasdaq Listing Rule 5605(f)(1).

 

Board Diversity Matrix (As of October 31, 2024)
Total Number of Directors   Female   Male   Non-Binary   Did Not Disclose Gender
Part I: Gender Identity                
Directors   1   5       -
Part II: Demographic Background                
African American or Black   -   -       -
Alaskan Native or Native American   -   -       -
Asian   -   -       -
Hispanic or Latino   -   -       -
Native Hawaiian or Pacific Islander   -   -       -
White   -   -       -
Two or More Races or Ethnicities   -   -       -
LGBTQ+   -   -        
Did Not Disclose Demographic Background   1   5        

 

Stockholder Communications

 

Although we do not have a formal policy regarding stockholder communications with our Board of Directors, stockholders may communicate with our Board of Directors, or any individual director on our Board of Directors, by writing to us at the address of our principal executive offices, addressing the communication to the attention of our Chief Executive Officer, and specifying the Board of Directors or, if applicable, the individual member thereof as the intended recipient of the communication. Our Corporate Secretary will forward to the directors all communications that, in his judgment, are appropriate for consideration by the directors. Examples of communications that would not be appropriate for consideration by the directors include commercial solicitations and matters not relevant to the stockholders, to the functioning of the Board of Directors or to the affairs of our Company. Any correspondence received that is addressed generically to the Board of Directors will be forwarded to the Chairman of the Board of Directors.

 

Board Leadership Structure and Role in Risk Oversight

 

The Board of Directors does not have a formal policy on whether or not the roles of Chairman of the Board and Chief Executive Officer should be separate and believes that it should retain the flexibility to make this determination in the manner it believes will provide the most appropriate leadership for our company from time to time. Currently, Steven Lisi serves as Chairman of the Board and Chief Executive Officer. We do not have a lead independent director. Mr. Lisi sets the strategic direction for the company and provides day-to-day leadership. As Chairman of the Board of Directors, Mr. Lisi further oversees the agenda for board meetings in collaboration with the other board members. Our Board of Directors believes that it is in the best interest of the company and its stockholders for Mr. Lisi to serve in both roles at this time given his knowledge of our company and industry. We believe that this structure provides appropriate leadership and oversight of the company and facilitates effective functioning of both management and our Board of Directors. Our Board of Directors will continue to reassess the structure to determine what is in the best interests of the Company and stockholders.

 

The Board of Directors oversees our exposure to risk through its interaction with management and receipt from management of periodic reports outlining matters related to financial, operational, regulatory, legal and strategic risks. Risk assessment and oversight are an integral part of our governance and management processes. Our Board of Directors encourages management to promote a culture that incorporates risk management into our corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings, and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing us. Throughout the year, senior management reviews these risks with the Board of Directors at regular board meetings as part of management presentations that focus on particular business functions, operations or strategies and presents the steps taken by management to mitigate or eliminate such risks.

 

Code of Conduct

 

We have adopted a Code of Business Conduct and Ethics that applies to all our directors, officers (including our Chief Executive Officer, Chief Financial Officer and any person performing similar functions) and employees. We have made our Code of Business Conduct and Ethics available on our website at www.beyondair.net under “Investors—Governance”. We expect that any future amendments to our Code of Business Conduct and Ethics, or any waivers of its requirements, will be disclosed on our website. Information contained on or accessible through this website is not a part of this proxy statement, and the inclusion of such website address in this proxy statement is an inactive textual reference only.

 

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Hedging Transactions

 

Our Insider Trading Policy requires that all speculative hedging by our employees (including officers) and directors be pre-cleared by the Company and prohibits the purchase of public puts and calls by such individuals, in each case, even when not in possession of material non-public information. Except for the foregoing, we do not have a policy that prohibits our directors and our officers and other employees from purchasing financial instruments, including prepaid variable forward contracts, equity swaps, collars, and exchange funds, or to otherwise engage in transactions that hedge or offset, or that are designed to hedge or offset, risks of any decrease in the market value of our common stock or other equity securities granted to the employee or director as part of their compensation, or held, directly or indirectly, by the employee or director. Therefore such transactions described in the foregoing sentence are generally permitted.

 

Clawback Policy

 

The Board of Directors adopted a clawback policy effective October 2, 2023 (the “Clawback Policy”) that complies with the final SEC regulations mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Nasdaq Listing Rule 5608. The Clawback Policy provides for recoupment of incentive compensation in the event of an accounting restatement resulting from noncompliance with financial reporting requirements under federal securities laws. The policy applies to current and former executives and requires reimbursement or forfeiture of any excess incentive compensation received by an executive during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement.

 

Director Compensation

 

Persons serving as both an officer and a director of the Company are only included in the Summary Compensation Table below for the fiscal year ended March 31, 2024  .

 

Name  Fees earned or
paid in cash
($)		   Stock awards
($)		   Option awards
($)
(1) (2)		   Non-equity incentive plan compensation
($)		   Nonqualified deferred compensation earnings
($)		   All other compensation
($)		   Total
($)		 
                             
Dr. William Forbes   -    -    51,300    -    -    -    51,300 
Ron Bentsur   -    -    51,300    -    -    -    51,300 
Erick J. Lucera   -    -    51,300    -    -    -    51,300 
Yoori Lee   -    -    51,300    -    -    -    51,300 
Robert F. Carey   -    -    102,600    -    -    -    102,600 

 

(1) During the year ended March 31, 2024, each director on the Board of Directors received options to purchase 45,000 shares of Beyond Air’s common stock and each option expires in ten years from the date of grant. Mr. Carey provided additional strategic support to the Company in 2024 and received an additional 45,000 shares of Beyond Air’s common stock. Compensation expense was based upon the grant date fair value of the award in accordance with stock-based compensation rules under ASC Topic 718. As of March 31, 2024, the aggregate number of options to purchase Beyond Air’s common stock held by each director on the Board of Directors was as follows: (i) 198,000 by Dr. Forbes; (ii) 189,000 by Mr. Bentsur; (iii) 210,000 by Mr. Lucera; (iv) 205,000 by Ms. Lee; and (v) 236,000 by Mr. Carey. As of March 31, 2024, Mr. Carey additionally held an aggregate of 65,000 options to purchase Beyond Cancer’s common stock.
   
(2) The respective agreements include a change of control provision that would automatically vest any unvested restricted stock or unvested stock options if triggered.

 

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PROPOSAL NO. 2

 

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Our audit committee has appointed Marcum LLP (“Marcum”), independent registered public accountants, to audit our financial statements for our fiscal year ending March 31, 2025. Marcum was appointed on October 6, 2022, after Marcum combined with Friedman LLP (“Friedman”), our prior independent registered accounting firm. Following the combination, Friedman continued to operate as an independent registered public accounting firm but the services provided by Friedman are now provided by Marcum. Friedman previously served as our independent registered public accounting firm between April 16, 2019 and October 6, 2022. The audit reports of Friedman on the consolidated financial statements of the Company for each of the two fiscal years ended March 31, 2022 and March 31, 2021 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles.

 

During the Company’s two fiscal years ended March 31, 2022 and 2021 and the subsequent interim period through October 6, 2022, the date of Marcum’s engagement, there were no (i) disagreements with Friedman on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures which, if not resolved to Friedman’s satisfaction, would have caused it to make reference to the subject matter of the disagreement in connection with its reports, or (ii) “reportable events” as defined in Item 304(a)(1)(v) of Regulation S-K.

 

We requested that Friedman furnish a letter addressed to the SEC stating whether it agrees with the above statements. A copy of Friedman’s letter dated October 6, 2022, is attached as Exhibit 16.1 to the Current Report on Form 8-K filed with the SEC on October 6, 2022.

 

As stated above, on October 6, 2022, our audit committee approved the appointment of Marcum as our independent registered public accounting firm. During the Company’s two fiscal years ended March 31, 2022 and 2021 and the subsequent interim period through October 6, 2022, neither the Company nor anyone on its behalf has consulted with Marcum regarding either (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 neither a written report nor oral advice was provided to the Company that Marcum concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue, or (ii) any matter that was either the subject of a “disagreement” or a “reportable event,” as such terms are defined in Regulation S-K Item 304(a)(1)(iv) and (v), respectively.

 

Notwithstanding the appointment of Marcum and even if our stockholders ratify the appointment, our audit committee, in its discretion, may appoint another independent registered public accounting firm at any time during our fiscal year if our audit committee believes that such a change would be in the best interests of our company and our stockholders. At the Annual Meeting, our stockholders are being asked to ratify the appointment of Marcum as our independent registered public accounting firm for our fiscal year ending March 31, 2025. Our audit committee is submitting the appointment of Marcum to our stockholders because we value our stockholders’ views on our independent registered public accounting firm and as a matter of good corporate governance. Representatives of Marcum will be present at the Annual Meeting either in person or by teleconference, and they will have an opportunity to make a statement and will be available to respond to appropriate questions from our stockholders.

 

If our stockholders do not ratify the appointment of Marcum, our Board of Directors may reconsider the appointment.

 

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Fees Paid to the Independent Registered Public Accounting Firms

 

In September 2022, Marcum acquired certain assets of Friedman, at which point the Company’s auditor became Marcum. The aggregate fees billed for (i) the fiscal year ended March 31, 2023, for professional services rendered in part by Friedman and in part by Marcum for the audit of our annual financial statements, and (ii) the fiscal year ended March 31, 2024 for professional services rendered by Marcum, in connection with statutory and regulatory filings or engagements for this fiscal period were as follows:

 

   

Year Ended

March 31, 2024

    

Year Ended

March 31, 2023

  
             
Audit Fees   $ 325,090     $ 267,580  
Audit Related Fees   $ -       -  
Tax Fees   $ -       -  
All Other Fees   $ -       39,140  
Total   $ 325,090     $ 306,720  

 

In the above table, “audit fees” are fees billed by our independent registered public accounting firm for services provided in auditing our annual financial statements for the subject year. Audit fees also include professional services performed for filing of our registration statement on Form S-3 for equity offerings, Form S-8 for shares of our common stock underlying our 2013 Equity Incentive Option Plan and for the resale of certain shares of our common stock and other filings. “Audit-related fees” are fees not included in audit fees that are billed by the independent registered public accounting firm for assurance and related services that are reasonably related to the performance of the audit review of our financial statements. “Tax fees” are fees billed by the independent registered public accounting firm for professional services rendered for tax compliance, tax advice and tax planning. “All other fees” are fees billed by the independent registered public accounting firm for products and services not included in the foregoing categories.

 

Policy on Pre-Approval by Audit Committee of Services Performed by Independent Auditors

 

The audit committee pre-approves all services provided by our independent registered public accounting firm. All of the above services and fees were reviewed and approved by the audit committee before the respective services were rendered.

 

The Board of Directors has considered the nature of the tax and other non-audit services provided by, and amount of fees billed by, Marcum and Friedman, and believes that the provision of such services, if any, is compatible with maintaining Marcum’s and Friedman’s independence.

 

Vote Required

 

The ratification of the appointment of Marcum as our independent registered public accounting firm requires the affirmative vote of a majority of the shares of our common stock present in person, by remote communication, if applicable, or by proxy at the Annual Meeting and entitled to vote thereon. Abstentions will have the effect of a vote “against” the proposal. Because the appointment of an independent registered public accounting firm is considered a routine matter under applicable stock exchange rules, there will not be any broker non-votes with respect to this proposal. If a proxy card is signed and returned but no direction is made, the persons named in your proxy will vote your shares “FOR” this proposal.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF MARCUM AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

 

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REPORT OF THE AUDIT COMMITTEE

 

The audit committee is a committee of the Board of Directors comprised solely of independent directors as required by the Nasdaq listing standards and rules and regulations of the SEC. The audit committee operates under a written charter approved by the Board of Directors, which is available on our website at www.beyondair.net under “Investors—Governance”. Information contained on or accessible through this website is not a part of this proxy statement, and the inclusion of such website address in this proxy statement is an inactive textual reference only.

 

The composition of the audit committee, the attributes of its members and the responsibilities of the audit committee, as reflected in its charter, are intended to be in accordance with applicable requirements for corporate audit committees. The audit committee will review and assesses the adequacy of its charter and the audit committee’s performance on an annual basis.

 

With respect to the Company’s financial reporting process, the management of the company is responsible for (1) establishing and maintaining internal controls and (2) preparing the company’s financial statements. The Company’s independent registered public accounting firm is responsible for auditing these financial statements. It is the responsibility of the audit committee to oversee these activities. It is not the responsibility of the audit committee to prepare the company’s financial statements. These are the fundamental responsibilities of management. In the performance of its oversight function, the audit committee has:

 

  ● reviewed and discussed the audited financial statements for the fiscal year ended March 31, 2024 with management and Marcum;
  ● discussed with Marcum the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) and the SEC; and
  ● received written disclosures and the letter from Marcum required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with Marcum its independence.

 

Based on the audit committee’s review and discussions with management and Marcum, the audit committee recommended to the Board of Directors that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2024 for filing with the SEC.

 

Respectfully submitted by the members of the audit committee of the Board of Directors:

Erick Lucera (Chair)

Ron Bentsur

Robert Carey

 

This report of the audit committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act, or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.

 

PROPOSAL NO. 3

 

APPROVAL OF THE seventh AMENDED and Restated 2013 Equity Incentive Plan

 

The Board of Directors is asking stockholders to approve the Beyond Air, Inc. Seventh Amended and Restated 2013 Equity Plan, as amended and restated (the “Seventh Amended Plan”). On October 11, 2024, acting on the recommendation of our compensation committee, the Board of Directors unanimously approved the Seventh Amended Plan, subject to stockholder approval and, accordingly, the Board of Directors directed that the Seventh Amended Plan be submitted to the Company’s stockholders for approval at the Annual Meeting.

 

The Seventh Amended Plan is an amendment and restatement of the Beyond Air, Inc. Amended and Restated 2013 Equity Plan, which was first adopted by the Board of Directors in 2013, then amended and restated in August 2018, March 2020, March 2021, March 2022, March 2023, and March 2024 (the “Sixth Amended Plan”). Stockholder approval of the Seventh Amended Plan is being sought in order to meet Nasdaq listing requirements.

 

Our Board of Directors believes that our future success depends on our ability to attract and retain talented employees, consultants and directors and that the ability to grant equity awards is a necessary and powerful recruiting and retention tool for our company. The Board of Directors believes that equity awards motivate high levels of performance, more closely align the interests of employees, consultants, directors and stockholders by giving employees, consultants and directors an opportunity to hold an ownership stake in our Company and provide an effective means of recognizing employee contributions to the success of the company.

 

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The only changes to the Sixth Amended Plan are: (a) to increase the number of shares of common stock reserved for issuance by an additional 3,000,000 shares, for an aggregate of 16,600,000 shares to be reserved, and (b) to give the Board authority, without stockholder approval, to (i) modify the exercise or grant price of an option or stock appreciation right after it is granted, (ii) cancel an option or stock appreciation right at a time when its exercise or grant price exceeds the Fair Market Value of the underlying stock, in exchange for cash, another option or stock appreciation right, restricted stock, or other equity award, or (iii) take any other action that is treated as a repricing under generally accepted accounting principles. In any event, any modifications that result in a reduction of the exercise price of an option or a stock appreciation right, or that are deemed a repricing, shall not set the new exercise price lower than the consolidated closing bid price per share on the trading day immediately preceding the execution of the binding agreement for the issuance or modification of such options or rights in compliance with the rules of the Nasdaq Stock Market, LLC.

 

Other than adding these additional shares for issuance and providing the Board with the above requested authority, the Sixth Amended Plan has not been amended in any way.

 

Reasons for Voting for the Proposal

 

For the following principal reasons, we request that the stockholders approve the Seventh Amended Plan and increase the available shares by an additional 3,000,000 shares and provide the Board the requested authority to (i) modify the exercise or grant price of an option or stock appreciation right after it is granted, (ii) cancel an option or stock appreciation right at a time when its exercise or grant price exceeds the Fair Market Value of the underlying stock, in exchange for cash, another option or stock appreciation right, restricted stock, or other equity award, or (iii) take any other action that is treated as a repricing under generally accepted accounting principles:

 

  ○ We no longer have adequate equity incentive shares available in plan reserve to attract, retain and motivate employees and consultants to execute our current strategic plan and growth.
  ○ Substantially all of our outstanding stock options have exercise prices that are not significantly lower than the market price of our common stock, and therefore do not currently serve as an effective employee incentive compensation tool.
  ○ We believe that our employees, consultants and directors are our critical corporate assets, and that the approval of the Seventh Amended Plan is crucial to the Company’s future success.
  ○ We depend heavily on equity incentive awards to attract and retain top-caliber employees, consultants and directors. The ability to grant equity awards is a necessary and powerful recruiting and retention tool for us to retain and motivate the quality personnel we need to drive our long-term growth and financial success.
  ○ We believe that equity awards are a vital component of our employee, consultant and director compensation programs, since they allow us to compensate employees and consultants based on Company performance, while at the same time, provide an incentive to build long-term stockholder value.
  ○ If we do not have a sufficient number of shares available to grant under our plan, we may need to instead offer material cash-based incentive to compete for talent, which could impact our results of operations and balance sheet and may make us less competitive compared to other medical device technology companies and our peer companies in hiring and retaining top talent.
  ○ To replace underwater equity incentives, we considered whether we could substantially increase cash compensation. However, significant increases in cash compensation would substantially increase our compensation expenses and reduce our cash flow from operations, which could adversely affect our business and operating results.  

 

As of October 25, 2024, there were 11,018,223 shares of common stock subject to outstanding option awards and 611,100 restricted shares outstanding under the Sixth Amended Plan. There were also 697,979 shares of common stock available for issuance pursuant to future awards. The weighted-average exercise price of outstanding stock option awards was $4.37 per share as of October 25, 2024. If this Proposal No. 3 is approved by our stockholders, an additional 3,000,000 shares of common stock will be authorized for issuance under the Seventh Amended Plan, which would provide us with approximately 16,600,000 shares (based on the proposed 3,000,000 share increase plus the number of shares available for grant under the Sixth Amended Plan as of October 25, 2024). We anticipate the proposed 3,000,000 share increase will provide us with a pool of shares we expect will last for approximately 12 months. However, a change in business conditions, Company strategy or equity market performance could alter this projection. If this Proposal No. 3 is approved, we intend to register the additional shares available for grant under the Seventh Amended Plan on Form S-8 prior to making awards of such additional shares.

 

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Based on our 72,187,636  total shares of common stock outstanding as of October 25, 2024, 11,018,223 shares of common stock issuable upon exercise of outstanding stock options as of October 25, 2024, 611,100 shares of common stock issuable upon vesting of restricted stock units as of October 25, 2024, and 10,224,586 shares of common stock issuable upon exercise of outstanding warrants as of October 25, 2024, if all issued and outstanding stock options and warrants as of October 25, 2024 were exercised, there would be 94,041,545 shares  of common stock outstanding. The final determination of the number of shares granted under the Seventh Amended Plan will be determined by the compensation committee.

 

If the Seventh Amended Plan is not approved by our stockholders, the Sixth Amended Plan will remain in effect and awards will continue to be made under Sixth Amended Plan to the extent any shares remain available. However, we may not be able to continue our equity incentive program in an amount sufficient to provide competitive equity compensation. This could preclude us from successfully attracting and retaining highly skilled employees, consultants and directors. The Board of Directors believes that the Seventh Amended Plan will be sufficient to achieve our recruiting, retention and incentive goals for the next twelve months and will be essential to our future success.

 

Description of the Seventh Amended Plan

 

The following paragraphs provide a summary of the principal features of the Seventh Amended Plan and its operation. However, this summary is not a complete description of all of the provisions of the Seventh Amended Plan and is qualified in its entirety by the specific language of the Seventh Amended Plan. A copy of the Seventh Amended Plan is provided as Appendix A to this proxy statement.

 

Purposes. The purposes of the Seventh Amended Plan are to attract and retain the best available personnel for positions of substantial responsibility; to provide additional incentive to employees, directors, and consultants; and to promote the success of our business. These incentives will be provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and performance shares as the administrator of the Seventh Amended Plan may determine.

 

Authorized Shares. Subject to the adjustment provisions contained in the Seventh Amended Plan, assuming this Proposal No. 3 is approved by our stockholders, the maximum number of shares of common stock that may be issued pursuant to awards under the Seventh Amended Plan would equal 16,600,000.

 

The shares reserved for issuance under the plan may be authorized, but unissued, or reacquired shares. If an option or stock appreciation right expires or becomes unexercisable without having been exercised in full, or if shares subject to other types of awards are forfeited to or repurchased by us due to failure to vest, those shares will become available for issuance again under the Seventh Amended Plan. With respect to stock appreciation rights settled in common stock, the net number of shares exercised under the stock appreciation right award will cease to be available under the Seventh Amended Plan. In addition, to the extent that we pay out an award in cash rather than common stock, such cash payment will not reduce the number of shares available for issuance under the Seventh Amended Plan.

 

Plan Administration. The Board of Directors or a committee appointed by the Board of Directors administers the Seventh Amended Plan. With respect to awards granted or to be granted to certain officers and key employees intended to be an exempt transaction under Rule 16b-3 of the Exchange Act (“Rule 16b-3”), the members of the committee administering the Seventh Amended Plan with respect to those awards must qualify as “non-employee directors” under Rule 16b-3 and only such non-employee directors will administer the Seventh Amended Plan with respect to such awards.

 

Subject to the provisions of the Seventh Amended Plan, the administrator has the power to determine the award recipients and the terms of the awards not inconsistent with the Seventh Amended Plan, including the exercise price, the number of shares subject to each such award, the exercisability of the awards, and the form of consideration, if any, payable by an option holder upon exercise. The administrator has the authority to amend existing awards, to determine fair market value of shares, to construe and interpret the Seventh Amended Plan and awards granted under the Seventh Amended Plan, to implement an exchange program, to establish rules and regulations, including sub-plans for the purpose of satisfying, or qualifying for favorable tax treatment under, applicable laws in jurisdictions outside of the U.S., and to make all other determinations necessary or advisable for administering the Seventh Amended Plan.

 

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In this regard, assuming this Proposal 3 is approved by our stockholders, the administrator shall have the authority to, without stockholder approval, (i) modify the exercise or grant price of an option or stock appreciation right after it is granted, (ii) cancel an option or stock appreciation right at a time when its exercise or grant price exceeds the Fair Market Value of the underlying stock, in exchange for cash, another option or stock appreciation right, restricted stock, or other equity award. or (iii) take any other action that is treated as a repricing under generally accepted accounting principles. The administrator’s decisions and interpretations are final and binding on all participants and any other holders of awards, and are given the maximum deference permitted by law. In any event, any modifications that result in a reduction of the exercise price of an option or a stock appreciation right, or that are deemed a repricing, shall not set the new exercise price lower than the consolidated closing bid price per share on the trading day immediately preceding the execution of the binding agreement for the issuance or modification of such options or rights in compliance with the rules of the Nasdaq Stock Market, LLC.

 

Eligibility. The Seventh Amended Plan permits the grant of stock options, stock appreciation rights, restricted stock, RSUs and performance shares to our employees, consultants, and non-employee directors and employees and consultants of our subsidiary corporations. We are able to grant incentive stock options under the Seventh Amended Plan only to individuals who, as of the time of grant, are employees of ours or of any parent or subsidiary corporation of ours. As of October 25, 2024, we had 5 non-employee directors, and 98 employees (including 6 executive officers) and 25 consultants, who are eligible to receive awards under the Seventh Amended Plan.

 

Stock Options. Each option granted under the Seventh Amended Plan will be evidenced by an award agreement that specifies the exercise price, the number of shares of common stock subject to the option, vesting provisions, the maximum term of the option, forms of consideration for exercise, and such other terms and conditions as the administrator determines, subject to the terms of the Seventh Amended Plan. The exercise price of options granted under the Seventh Amended Plan must be at least equal to the fair market value of our common stock on the date of grant, except in special, limited circumstances as set forth in the Seventh Amended Plan.

 

On October 25, 2024, the closing price of our common stock on Nasdaq was $0.40 per share.

 

Stock Appreciation Rights. Stock appreciation rights allow the recipient to receive the appreciation in the fair market value of the underlying shares between the exercise date and the date of grant. Each stock appreciation right will be evidenced by an award agreement that specifies the base price, the term of the stock appreciation right, and other terms and conditions as determined by the administrator, subject to the terms of the Seventh Amended Plan. The per share exercise price of a stock appreciation right will be no less than 100% of the fair market value per share of common stock on the date of grant. Stock appreciation rights will be exercisable at such times and under such conditions as determined by the administrator and set forth in the applicable award agreement. At the discretion of the administrator, the payment upon exercise of a stock appreciation right may be paid in cash, shares of common stock, or a combination of both.

 

Restricted Stock. Restricted stock awards are grants of shares that are subject to various restrictions, which may include restrictions on transferability and forfeiture provisions. Each restricted stock award granted will be evidenced by an award agreement specifying the number of shares of common stock subject to the award, any period of restriction, and other terms and conditions of the award, as determined by the administrator, subject to the terms of the Seventh Amended Plan.

 

Restricted stock awards may (but are not required to) be subject to vesting conditions, as the administrator specifies, and the shares of common stock acquired may not be transferred by the participant until the vesting conditions (if any) are satisfied. The administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed. Recipients of restricted stock awards generally will have full voting rights, and rights to dividends and other distributions, with respect to such shares upon grant without regard to vesting, unless the administrator provides otherwise. Such dividends and other distributions, if any, that are paid in shares of stock will be subject to the same restrictions of transferability and forfeitability as the shares of restricted stock on which they were paid.

 

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Restricted Stock Units. Each RSU granted under the Seventh Amended Plan is a bookkeeping entry representing an amount equal to the fair market value of one share on the date of grant. Each RSU award will be evidenced by an award agreement that specifies the number of RSUs subject to the award, vesting criteria (which may include accomplishing specified performance criteria or continued service to us), form of pay out, and other terms and conditions of the award, as determined by the administrator, subject to the terms of the Seventh Amended Plan. RSUs result in a payment to a participant if the performance goals or other vesting criteria are achieved or the awards otherwise vest. The administrator, in its sole discretion, may accelerate the time at which any restrictions will lapse or be removed (subject to the minimum vesting requirements). The administrator determines in its sole discretion whether an award will be settled in cash, shares of common stock, or a combination of both.

 

Performance Shares. Performance shares are awards that will result in a payment to a participant only if performance goals or other vesting criteria established by the administrator are achieved or the awards otherwise vest. Each award of performance shares will be evidenced by an award agreement specifying the number of shares, the vesting conditions, the performance period, and other terms and conditions of the award, as determined by the administrator, subject to the terms and conditions of the Seventh Amended Plan. Each performance share will have an initial value equal to the fair market value of a share of our common stock on the date of grant. The administrator in its discretion will establish performance goals or other vesting criteria (which may include continued service), which, depending on the extent to which they are met, will determine the value or number of performance shares to be paid out. After the grant of performance shares, the administrator, in its sole discretion, may reduce or waive any performance objectives or other vesting provisions for such performance shares (subject to the minimum vesting requirements). The administrator, in its sole discretion, may pay earned performance shares in the form of cash, shares of common stock, or in some combination of both.

 

Non-Transferability of Awards. Unless the administrator provides otherwise, the Seventh Amended Plan generally will not allow for the transfer of awards, and only the recipient of an award may exercise an award during his or her lifetime.

 

Certain Adjustments. In the event of any dividend or other distribution (whether in the form of cash, shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, reincorporation, reclassification, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of our common stock or our other securities, or other change in our corporate structure affecting our common stock, then in order to prevent diminution or enlargement of the benefits or potential benefits intended to be made available under the Seventh Amended Plan, the administrator will adjust the number and class of shares that may be delivered under the Seventh Amended Plan and/or the number, class and price of shares covered by each outstanding award, and the numerical share limits set forth in the Seventh Amended Plan. In the event of our proposed liquidation or dissolution, the administrator will notify participants as soon as practicable and all awards will terminate immediately prior to the completion of such proposed transaction.

 

Change in Control. The Seventh Amended Plan provides that in the event of our change in control, as defined in the Seventh Amended Plan, each outstanding award will be treated as the administrator determines, in accordance with the following: the assumption or substitution of the award by the acquirer or successor corporation or its parent or subsidiary, termination of the award upon or immediately prior to the consummation of the merger or change in control following written notice, termination of the award in exchange for an amount of cash and/or property in an amount that would have been attained upon exercise or realization of the award as of the date of the merger or change in control, replacement of the award with other rights or property, or any combination of the above. The administrator will not be required to treat all awards, all awards held by a participant, or all awards of the same type, similarly.

 

Plan Amendment; Termination. The Board of Directors has the authority to amend, alter, suspend, or terminate the Seventh Amended Plan at any time, provided such action does not impair the existing rights of any participant unless mutually agreed in writing. The Seventh Amended Plan will terminate automatically in 2028, unless we terminate it sooner.

 

Israeli Annex. The Seventh Amended Plan contains provisions applicable to grantees who are residents of Israel on the date of grant or who are deemed to be residents of Israel for tax purposes, and United States tax provisions and regulations shall not apply to any grants to residents of Israel or to persons or entities who are deemed to be residents of Israel for tax purposes.

 

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Certain U.S. Federal Income Tax Consequences

 

The following paragraphs are intended as a summary of certain U.S. federal income tax consequences to U.S. taxpayers and the Company with respect to the grant and vesting or exercise of awards under the Seventh Amended Plan. This summary does not attempt to describe all possible federal or other tax consequences of such actions or based on particular circumstances. In addition, it does not describe any state, local or non-U.S. tax consequences. A participant in the Seventh Amended Plan should not rely on this description and instead should consult his or her own tax advisor.

 

Incentive Stock Options. A participant recognizes no taxable income as the result of the grant or exercise of an incentive stock option qualifying under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). However, for purposes of the alternative minimum tax, the spread on the exercise of an incentive stock option will be considered as part of the participant’s income. If the participant exercises the option and then later sells or otherwise disposes of the shares acquired through the exercise of the option after both the two-year anniversary of the grant date and the one-year anniversary of the exercise date, the difference between the sale price and the exercise price will be taxed as capital gain or loss. If the participant exercises the option and then later sells or otherwise disposes of the shares on or before the two- or one-year anniversaries described above (a “disqualifying disposition”), he or she generally will have ordinary income at the time of the sale equal to the fair market value of the shares on the exercise date (or the sale price, if less) minus the exercise price of the option.

 

Nonstatutory Stock Options. A participant generally recognizes no taxable income on the date of grant of a nonstatutory stock option. Upon the exercise of a nonstatutory stock option, the participant generally will recognize ordinary income equal to the excess of the fair market value of the shares on the exercise date over the exercise price of the option. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of shares acquired through the exercise of a nonstatutory stock option, any subsequent gain or loss (generally based on the difference between the sale price and the fair market value on the exercise date) will be treated as long-term or short-term capital gain or loss, depending on how long the shares were held by the participant.

 

Stock Appreciation Rights. A participant generally recognizes no taxable income on the date of grant of a stock appreciation right. Upon exercise of the stock appreciation right, the participant generally will be required to include as ordinary income an amount equal to the sum of the amount of any cash received and the fair market value of any shares received upon the exercise. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of shares acquired by an exercise of the stock appreciation right, any gain or loss (generally based on the difference between the sale price and the fair market value on the exercise date) will be treated as long-term or short-term capital gain or loss, depending on how long the shares were held by the participant.

 

Restricted Stock, Restricted Stock Units, Performance Units and Performance Shares. A participant generally will not have taxable income at the time an award of restricted stock, RSUs, performance shares, or performance units is granted. Instead, he or she generally will recognize ordinary income in the first taxable year in which his or her interest in the shares underlying the award becomes either (i) freely transferable, or (ii) no longer subject to substantial risk of forfeiture. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. However, the recipient of a restricted stock award may elect to recognize income at the time he or she receives the award in an amount equal to the fair market value of the shares underlying the award (less any cash paid for the shares) on the date the award is granted.

 

Section 409A. Section 409A of the Code (“Section 409A”) provides certain requirements for non-qualified deferred compensation. It is the intention of the Company that awards granted under the Seventh Amended Plan either be exempt from, or comply with Section 409A. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A’s provisions, Section 409A imposes an additional 20% tax on compensation recognized as ordinary income, as well as interest.

 

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Tax Effect for the Company. We generally will be entitled to a tax deduction in connection with an award under the Seventh Amended Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income. However, special rules limit the deductibility of compensation paid to our CEO, CFO and other “covered employees” as determined under Section 162(m) and applicable guidance. Under Section 162(m), the annual compensation paid to any of these specified individuals will be deductible only to the extent that it does not exceed $1,000,000.

 

Interests of Officers and Directors in this Proposal

 

Our executive officers and directors have an interest in the approval of the Seventh Amended Plan by our stockholders because they are eligible to receive awards under the Seventh Amended Plan.

 

Vote Required

 

Approval of the Seventh Amended Plan requires the affirmative vote of a majority of the shares of our common stock present in person, by remote communication, if applicable, or by proxy at the Annual Meeting and entitled to vote thereon. Abstentions are considered votes present and entitled to vote on this proposal, and thus, will have the same effect as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of this proposal. If a proxy card is signed and returned but no direction is made, the persons named in your proxy will vote your shares “FOR” this proposal.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE seventh AMENDED and Restated 2013 Equity Incentive Plan.

 

PROPOSAL NO. 4

 


ADVISORY (Non-BINDING) VOTE ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

 

In accordance with Section 14A of the Exchange Act and the rules and regulations of the SEC, we are providing our stockholders with an opportunity to cast an advisory, non-binding vote on the approval of the compensation of our named executive officers. The “named executive officers” are those executive officers who are listed in the Summary Compensation Table. We ask that you provide an advisory vote to approve the following, non-binding resolution on named executive officer compensation:

 

“RESOLVED, that the stockholders of Beyond Air, Inc. approve the compensation paid to the named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Executive Compensation section, compensation tables and related footnotes, and narrative disclosures.”

 

This advisory vote is commonly referred to as a “say-on-pay” vote and is required by Section 14A of the Exchange Act. Because this is an advisory vote, the stockholder vote will not be binding on us. Nevertheless, our compensation committee and Board value the opinions expressed by our stockholders and will take the outcome of the vote into account in future determinations concerning our executive compensation program.

 

Our executive compensation programs are designed to attract, motivate and retain our executive officers, who are critical to our success. The Executive Compensation section of this proxy statement contains details on the compensation of our named executive officers.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS AN ADVISORY (NON-BINDING) VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.

 

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EXECUTIVE COMPENSATION

 

Processes and Procedures for Compensation Decisions

 

Our compensation committee is responsible for the executive compensation programs for our executive officers and reports to our Board of Directors on its discussions, decisions and other actions. Our compensation committee reviews and approves corporate goals and objectives relating to the compensation of our Chief Executive Officer, evaluates the performance of our Chief Executive Officer in light of those goals and objectives and determines and approves the compensation of our Chief Executive Officer based on such evaluation. Our compensation committee has the sole authority to determine our Chief Executive Officer’s compensation. In addition, our compensation committee, in consultation with our Chief Executive Officer, reviews and approves all compensation for other officers, as well as the directors.

 

The compensation committee is authorized to retain the services of one or more executive compensation and benefits consultants or other outside experts or advisors as it sees fit, in connection with the establishment of our compensation programs and related policies.

 

The compensation committee has full authority to form and delegate authority to one or more subcommittees consisting solely of one or more members of the compensation committee as it deems appropriate from time to time. The compensation committee may delegate to the Chief Executive Officer or any other executive officer the authority to grant equity awards to employees of the Company who are not directors or officers of the Company, on such terms and subject to such limitations as the compensation committee may determine in compliance with Delaware corporate law.

 

Summary Compensation Table

 

The following table provides information regarding the compensation earned by our named executive officers for the fiscal years ended March 31, 2024 and March 31, 2023.

 

Name and Principal Position   Year   Salary
Beyond Air		     RSUs Beyond Air (A) (B)     Stock Options
Beyond Air
(B) (C)		     Stock Options
Beyond Cancer (B) (C) (D) (E)		     Total Cash
Compensation		     Total Cash &
non-Cash
Compensation		  
                                         
Steven A. Lisi.   2024     650,000       -       1,083,000       -       650,000       1,733,000  
Chief Executive Officer and Chairman of the Board   2023     650,000       -       3,680,000       2,546,500       650,000       6,876,500  
                                                     
Amir Avniel*   2024     495,997       -       456,000       -       495,997       951,997  
President, Chief Business Officer and Director   2023     400,000       1,507,200       368,000       926,000       400,000       3,201,200  
                                                     
Michael Gaul   2024     400,000       -       399,000       -       400,000       799,000  
Chief Operating Officer   2023     350,000       -       782,000       -       350,000       1,132,000  

 

  * resigned as the President, Chief Business Officer and Director effective August 15, 2024

 

  (A) The fair market value of the restricted stock units for stock-based expense is equal to the closing price of the Company’s stock at the date of grant based upon the total award. The restricted stock units vest over five years.
     
  (B) This column represents the grant date fair value of the award in accordance with stock-based compensation rules under ASC Topic 718. For a more detailed discussion of the valuation model and assumptions used to calculate the fair value of each restricted stock award and option award, refer to Note 5 of the consolidated financial statements included in our Annual Report.

 

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  (C) The respective agreements include a change of control provision that would automatically vest any unvested restricted stock units or unvested stock options if triggered.
     
  (D) In September 2023, the Company adjusted the exercise price of all previously issued stock options in Beyond Cancer to $5.50. The Company has restated the compensation table to reflect the decrease in fair value of the stock options due to the higher exercise price. The net effect for Mr. Lisi was a reduction of $2,051,500 of compensation in 2023. The net effect for Mr. Avniel was a reduction of $746,000 of compensation in 2023.
     
  (E) Beyond Cancer is a privately held biotech corporation and its equity is not traded on established public markets. Fair Market Value of one share has been determined pursuant to the requirements if the Internal Revenue Code Section 409A and the value of one option in accordance with stock-based compensation rules under ASC Topic 718, with expected volatility rates in excess of 100%.

 

Employment Agreements with Named Executive Officers

 

Our employment agreements with our executive officers contain provisions standard for a company in our industry regarding non-competition, confidentiality of information and assignment of inventions.

 

Employment Agreement with Steven Lisi

 

On June 30, 2018, we entered into an employment agreement with Mr. Lisi to serve as our Chief Executive Officer with an annual base salary of $450,000, subject to review of the compensation committee at least annually. In April 2022, Mr. Lisi’s annual base salary was increased to $650,000. In addition to his base salary, Mr. Lisi is eligible to receive a short-term incentive bonus equal to a percentage of his base salary in effect at the end of the fiscal year, based partially on performance weighted bonus objectives established for Mr. Lisi by the Board of Directors (which includes both corporate objectives and individual objectives) for the fiscal year, with such objectives to be discussed with Mr. Lisi prior to being established, and partially based on the discretion of the Board of Directors. The target bonus percentage each fiscal year is an amount equal to 60% of Mr. Lisi’s base salary in effect at the end of each fiscal year. However, the actual short-term incentive bonus as determined by the Board of Directors may range from 0% to higher than 100% of the base salary. Any short-term incentive bonus shall be paid on or before April 15 of the following year and may include cash, stock options and restricted stock awards. If paid in stock options or restricted stock awards, the short-term incentive bonus must be paid separately from, and independently of, any long-term equity incentive award. Pursuant to the employment agreement, Mr. Lisi is also eligible to receive awards of stock options or restricted stock grants as may be determined from time to time by the Board of Directors or the compensation committee of the Board of Directors. Pursuant to the terms and conditions of employment, Mr. Lisi received options to purchase 400,000 shares of our common stock at an exercise price of $4.25 per share. 25% of the options vested on June 30, 2018 and thereafter an additional 25% vested on December 31, 2018 and December 31st of each of the two ensuing years thereafter until the options vested in full. The options expire on the tenth anniversary of the date of grant and were fully vested as of March 31, 2021.

 

In the event of Mr. Lisi’s termination without “cause” or his resignation for “good reason”, as such terms are defined in his employment agreement, Mr. Lisi, subject to his execution and non-revocation of a release of claims and compliance with the restrictive covenants set forth in his employment agreement, will be entitled to (i) severance equal to twenty-four months of base salary, payable in a lump sum, (ii) a lump sum payment equal to 1.5 times that of the most recent earned short-term incentive award, (iii) all outstanding options and restricted common stock awards held by Mr. Lisi would automatically vest and (iv) provided Mr. Lisi timely elects to continue health care coverage under the Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”), continued participation by Mr. Lisi and his eligible dependents in our standard group medical and dental plans until the earlier of (a) the end of the 18th month following Mr. Lisi’s termination and (b) the date Mr. Lisi secures subsequent employment with medical and dental coverage.

 

In the event of Mr. Lisi’s termination without “cause” or his resignation for “good reason”, in each case within three months prior to a “change of control”, as such term is defined in Mr. Lisi’s employment agreement, or within 18 months following a “change of control”, Mr. Lisi, subject to his execution and non-revocation of a release of claims and compliance with the restrictive covenants set forth in his employment agreement, will be entitled to (i) a one-time grant of 650,000 shares of our common stock, (ii) all outstanding options and restricted common stock awards held by Mr. Lisi would automatically vest and (iii) provided Mr. Lisi timely elects to continue health care coverage under COBRA, continued participation by Mr. Lisi and his eligible dependents in our standard group medical and dental plans until the earlier of (a) the end of the 24th month following Mr. Lisi’s termination and (b) the date Mr. Lisi secures subsequent employment with medical and dental coverage.

 

Mr. Lisi’s employment agreement contains restrictive covenants relating to non-disclosure of confidential information, assignment of inventions, and non-solicitation of employees and customers that runs for a period of one year following his termination of employment for any reason.

 

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Employment Agreement with Amir Avniel

 

Effective August 15, 2024, Mr. Avniel resigned as the President, Chief Business Officer and Director of the Company. Mr. Avniel’s resignations were voluntary and are not due to any disagreement with the Company on any matters related to the Company’s operations, policies, or practices. Mr. Avniel will remain President of the Company’s Beyond Air Ltd. subsidiary. His employment agreement is still being negotiated. Below is a description of his employment agreement prior to the changes in his positions.

 

On June 30, 2018, we entered into an employment agreement with Mr. Avniel to serve as our President and Chief Operating Officer with an annual base salary of $400,000, subject to review of the compensation committee at least annually. In addition to his base salary, Mr. Avniel is eligible to receive a short-term incentive bonus equal to a percentage of his base salary in effect at the end of the fiscal year, based partially on performance weighted bonus objectives established for Mr. Avniel by the Board of Directors (which includes both corporate objectives and individual objectives) for the fiscal year, with such objectives to be discussed with Mr. Avniel prior to being established, and partially based on the discretion of the Board of Directors. The target bonus percentage each fiscal year is an amount equal to 60% of Mr. Avniel’s base salary in effect at the end of each fiscal year. However, the actual short-term incentive bonus as determined by the Board of Directors may range from 0% to higher than 100% of the base salary. Any short-term incentive bonus shall be paid on or before April 15 of the following year and may include cash, stock options and restricted stock awards. If paid in stock options or restricted stock awards, the short-term incentive bonus must be paid separately from, and independently of, any long-term equity incentive award. Pursuant to the employment agreement, Mr. Avniel is also eligible to receive awards of stock options or restricted stock grants as may be determined from time to time by the Board of Directors or the compensation committee of the Board of Directors. Pursuant to the terms and conditions of employment, Mr. Avniel received options to purchase 250,000 shares of our common stock at an exercise price of $4.25 per share. 25% of the options vested on June 30, 2018 and thereafter an additional 25% vested on December 31, 2018 and December 31st of each of the two ensuing years thereafter until the options vested in full. The options expire on the tenth anniversary of the date of grant and the options were fully vested as of March 31, 2021. On July 2, 2022, Mr. Avniel stepped down as Chief Operating Officer and assumed the role of Chief Business Officer. Notwithstanding this titular change, the other terms of his employment agreement with us, did not change.

 

In the event of Mr. Avniel’s termination without “cause” or his resignation for “good reason”, as such terms are defined in his employment agreement, Mr. Avniel, subject to his execution and non-revocation of a release of claims and compliance with the restrictive covenants set forth in his employment agreement, will be entitled to (i) severance equal to twenty-four months of base salary, payable in a lump sum, (ii) a lump sum payment equal to 1.5 times that of the most recent earned short-term incentive award, (iii) all outstanding options and restricted common stock awards held by Mr. Avniel would automatically vest and (iv) provided Mr. Avniel timely elects to continue health care coverage under COBRA, continued participation by Mr. Avniel and his eligible dependents in our standard group medical and dental plans until the earliest of (a) the end of the 18th month following Mr. Avniel’s termination and (b) the date Mr. Avniel secures subsequent employment with medical and dental coverage.

 

In the event of Mr. Avniel’s termination without “cause” or his resignation for “good reason”, in each case within three months prior to a “change of control”, as such terms are defined in Mr. Avniel’s employment agreement, or within 18 months following a “change of control”, Mr. Avniel, subject to his execution and non-revocation of a release of claims and compliance with the restrictive covenants set forth in his employment agreement, will be entitled to (i) a one-time grant of 350,000 shares of our common stock, (ii) all outstanding options and restricted common stock awards held by Mr. Avniel would automatically vest and (iii) provided Mr. Avniel timely elects to continue health care coverage under COBRA, continued participation by Mr. Avniel and his eligible dependents in our standard group medical and dental plans until the earliest of (a) the end of the 24th month following Mr. Avniel’s termination and (b) the date Mr. Avniel secures subsequent employment with medical and dental coverage.

 

Mr. Avniel’s employment agreement contains restrictive covenants relating to non-disclosure of confidential information, assignment of inventions, and non-solicitation of employees and customers that runs for a period of one year following his termination of employment for any reason.

 

Employment Agreement with Michael Gaul

 

On April 24, 2020, we entered into an employment agreement with Michael Gaul to serve as our Senior VP, Operations, effective May 4, 2020. Mr. Gaul’s employment agreement provides that his employment will continue until either the Company or Mr. Gaul terminates his employment in accordance with the terms of the employment agreement. Pursuant to the employment agreement, Mr. Gaul is entitled to receive an annual base salary of $250,000, which is subject to adjustment pursuant to the Company’s employee compensation practices. In April 2022, Mr. Gaul’s base salary was increased to $350,000. In addition, Mr. Gaul is eligible to be considered for an incentive bonus for each fiscal year of the Company, which will be awarded based on objective or subjective criteria established by the Chief Executive Officer and approved by the Board of Directors or a committee thereof. As of his start date, the Company also granted Mr. Gaul a stock option award, subject to the Company’s 2013 Equity Incentive Plan, for the purchase of 10,000 shares of the Company’s common stock, at an exercise price of $5.32. This option vests over a four-year period, with 25% of the shares underlying the stock option award vesting on the first anniversary of the date of grant after one-year of continuous service and annually thereafter in three equal installments. This option is in addition to those granted previously to Mr. Gaul pursuant to that certain Consulting Agreement, dated February 26, 2020. On July 1, 2022, Mr. Gaul stepped down as Senior VP, Operations of the Company and assumed the role of Chief Operating Officer. Notwithstanding this titular change, the other terms of his employment agreement with us did not change.

 

In the event of Mr. Gaul’s termination by the Company without “cause,” or by Mr. Gaul for “Good Reason,” as such terms are defined in Mr. Gaul’s employment agreement, the Company shall pay severance to Mr. Gaul. Upon any such termination, and subject to the terms of the employment agreement and the Company’s policies, Mr. Gaul will be entitled to receive his base salary for a period of six months, plus an additional month of severance payments for every two months of employment, with such additional amounts to be cumulative and not to exceed a total of 12 months of severance payments. The Company will also continue to contribute to Mr. Gaul’s health and dental benefits in the same proportion as during employment for the same duration as severance payments are made. In the event of a “Change of Control” (as such term is defined in the employment agreement), Mr. Gaul will receive severance payments equal to six months’ base salary and the Company will continue to provide health and dental benefits in the same proportion as during employment for six months. Mr. Gaul will also receive an additional month of severance for every two months of employment, with such amounts to be cumulative and not to exceed a total of 12 months of severance payments. In addition, all of Mr. Gaul’s options to acquire Company stock and restricted common stock awards which have not vested as of the date of termination will become immediately vested as of the date of termination.

 

Mr. Gaul’s employment agreement also contains customary non-solicitation and non-competition covenants, which covenants remain in effect for 1 year following any cessation of employment with respect to Mr. Gaul.

 

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Option Awards Granted During the Fiscal Year Ended March 31, 2024

 

On March 20, 2024, Messrs. Lisi, Avniel and Gaul were granted options to purchase 950,000, 400,000 and 350,000 shares of our common stock, respectively, with an exercise price of $1.53 per share, which was equal to the closing price of our common stock on the date of grant. The options vest in equal annual installments over four years commencing on December 31, 2024.

 

Equity Compensation Plan Information

 

We maintain the Sixth Amended Plan. The Sixth Amended Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance share awards, and other stock-based awards (collectively, the “stock awards”). Stock awards may be granted under the Sixth Amended Plan to our employees, directors and consultants, other than incentive stock options which may only be granted to employees of the Company.

 

The maximum number of shares of common stock available for issuance under the Sixth Amended Plan is 13,600,000 shares.

 

The Sixth Amended Plan is scheduled to terminate on August 13, 2028. No stock awards shall be granted pursuant to the Sixth Amended Plan after such date, but Awards theretofore granted may extend beyond that date. The Board of Directors may suspend or terminate the Plan at any earlier date pursuant to the Sixth Amended Plan. No stock awards may be granted under the Plan while the Plan is suspended or after it is terminated.

 

The following table summarizes the total number of outstanding options and shares available for other future issuances of options under the Sixth Amended Plan and the 2021 Employee Stock Purchase Plan as of March 31, 2024.

 

Plan Category  Number of Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights   Weighted-Average Exercise Price of Outstanding Options,
Warrants and Rights		   Number of Shares
Remaining Available for Future Issuance
Under the Equity
Compensation Plan
(Excluding Shares
in First Column)		 
Equity compensation plans approved by stockholders (1)   10,032,625   $4.42    1,048,933 (3) 
Equity compensation plans not approved by stockholders (2)   1,250,844   $4.64    - 
Total   11,283,469   $4.44    1,048,933 

 

(1) Represents shares of common stock issuable upon exercise of outstanding stock options under the Sixth Amended Plan that were approved by our stockholders.
(2) Represents shares of common stock issuable upon exercise of outstanding stock options under the 2013 BA Plan that were not approved by our stockholders including 75,000 options issued as inducement awards.
(3) Represents 298,933 shares of common stock reserved for future issuance under the Sixth Amended Plan and 750,000 shares of common stock reserved for future issuance under the 2021 Employee Stock Purchase Plan.

 

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Outstanding Equity Awards as of March 31, 2024

 

    Option awards   Stock Awards  
Name   Date of Grant   Number of securities underlying unexercised options (#) exercisable     Number of securities underlying unexercised options (#)     Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)     Option exercise price ($)     Option expiration date     Number of shares or units of stock that have not vested (#)     Market value of shares or units of stock that have not vested ($) (6)  
Steven A. Lisi   8/31/2018     400,000 (1)     -       -       4.25       8/13/2029       -       -  
    3/31/2019     250,000 (2)     -       -       4.80       3/31/2029       -       -  
    3/11/2020     72,000 (2)     -       -       5.32       3/11/2030       -       -  
    3/4/2021     150,000 (2)     50,000       -       5.45       3/4/2031       -       87,000-  
    3/3/2022     140,000 (2)     140,000       -       6.87       3/3/2032       -       243,600  
    3/29/2023     200,000 (2)     600,000       -       6.28       3/29/2033       -       1,044,000  
    3/20/2024     - (2)     950,000               1.53       3/20/2034               1,653,000  
    12/31/2019     - (3)     -       -       -       -       20,900       36,366  
    1/4/2020     - (3)     -       -       -       -       3,100       5,394  
    10/5/2021     - (4)     -       -       -       -       40,000       69,600  
    3/3/2022     - (4)     -       -       -       -       84,000       146,160  
Amir Avniel*   2/20/2017     100,000 (1)     -       -       4.25       2/20/2027       -       -  
    8/31/2018     250,000 (1)     -       -       4.25       8/13/2029       -       -  
    3/31/2019     140,000 (2)     -       -       4.80       3/31/2029       -       -  
    3/11/2020     40,000 (2)     -       -       5.32       3/11/2030       -       -  
    3/4/2021     75,000 (2)     25,000       -       5.45       3/4/2031       -       43,500  
    3/3/2022     70,000 (2)     70,000       -       6.87       3/3/2032       -       121,800  
    3/29/2023     20,000 (2)     60,000       -       6.28       3/29/2033       -       104,400  
    3/20/2024     -(2)       400,000               1.53       3/20/2034               696,000  
    12/31/2019     - (3)     -       -       -       -       10,100       17,574  
    1/4/2020     - (3)     -       -       -       -       2,900       5,046  
    10/5/2021     - (4)     -       -       -       -       20,000       34,800  
    3/3/2022     - (4)     -       -       -       -       42,000       73,080  
    3/29/2023     - (4)     -       -       -       -       192,000       334,080  
Michael Gaul   3/11/2020     40,000 (2)     -       -       5.32       3/11/2030       -       -  
    5/4/2020     7,500 (2)     2,500       -       5.32       5/4/2030       -       4,350  
    3/4/2021     18,750 (2)     6,250       -       5.45       3/4/2031       -       10,875  
    3/3/2022     35,000 (2)     35,000       -       6.87       3/3/2032       -       60,900  
    3/29/2023     42,500 (2)     127,5000       -       6.28       3/29/2033       -       221,850  
    3/20/2024       -     350,000       -       1.53       3/20/2034       -       609,000  
    10/5/2021     - (4)     -       -       -       -       5,000       8,700  
    3/3/2022     - (4)     -        -       -       -       18,000       31,320  

 

* resigned as the President, Chief Business Officer and Director effective August 15, 2024

 

(1) 25% options vests immediately, 25% vests December 31, 2018, 25% vests each following December 31.
   
(2) 25% options vests on December 31 of the year of grant, 25% vests each following December.
   
(3) Restricted stock units vest 20% per year at the date of grant.
   
(4) Restricted stock units vest 20% per year, with the first tranche vesting in December in the year of grant.
   
(5) 25% options vests on the anniversary of the grant, 25% each following year on the anniversary date.
   
(6) Market value was calculated based upon the stock price at the last trading day of the fiscal year ended March 31, 2024 ($1.74).

 

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Pay Versus Performance 

 

The following table sets forth information concerning the compensation actually paid to our Principal Executive Officers (PEO’s) and to our other named officers (NEO’s) compared to certain performance measures for the fiscal years ended March 31, 2024 (Fiscal 2024) and March 31, 2023 (Fiscal 2023).

 

The disclosure included in this section is prescribed by SEC rules and does not necessarily align with how we or our Compensation Committee views the link between company performance and our Named Executive Officers’ pay. Our executive compensation program does not utilize the company’s financial results as the primary indicator to determine executive compensation. We believe that the creation of sustainable long-term stockholder value depends on our ability to both commercialize LungFit PH and successfully advance our pipeline, and ultimately, continue to bring additional product candidates to market. In determining the amount of the annual incentive award for each of our executive officers, including each of our Named Executive Officers, the Compensation Committee evaluated the corporate performance objectives that had been established at the beginning of the fiscal year as well as other corporate and individual achievements and performance throughout the year. These performance objectives included commercial metrics, research and development milestones and other business objectives. Additionally, grants of equity awards, primarily stock options, to our executive officers are intended to incentivize future value creation and to align the long-term interests of our executive officers with shareholders. The Compensation Committee did not consider the pay versus performance disclosure below in making its pay decisions for any of the years shown.

 

The “Compensation Actually Paid”, which is presented in the table below, is defined by the SEC and does not reflect amounts actually paid, earned or received by our Named Executive Officers. A significant portion of the “Compensation Actually Paid” amounts shown relate to changes in values of unvested awards over the course of the applicable reporting year. These unvested awards remain subject to significant risk from forfeiture conditions and possible future declines in value based on changes in our share price. The ultimate values actually realized by our Named Executive Officers from unvested equity awards, if any, cannot be determined until the awards fully vest and are exercised or settled, as the case may be.

 

Year   Summary Compensation Table Total for PEO (1) (3)   Compensation Actually Paid to PEO (1) (4)   Average Summary Compensation Table Total for non-PEO NEO’s (2) (3)   Average Compensation Actually Paid to non-PEO NEO’s (2) (4)   Value of initial fixed $100 investment based on total shareholder returns (TSR’s)  

Net Loss

(in thousands)

 
Fiscal 2024   $1,733,000   $(4,130,490)  $875,499   $(1,139,505)  $              25.78   $              (64,295)
Fiscal 2023   $6,876,500   $6,771,558   $2,166,600   $2,098,903   $101.05   $(59,401)
Fiscal 2022   $6,461,550   $7,246,896   $1,916,683   $2,021,675   $121.45   $(44,060)

 

  (1) Steve Lisi has served as our PEO since July 1, 2017.
  (2) For Fiscal 2023 and Fiscal 2024, our other NEOs were Amir Avniel and Mike Gaul. For Fiscal 2022, our other NEOs were Amir Avniel, Douglas Larson (for 7 months) and Douglas Beck (for 5 months).
  (3) The values reflected in this column reflect the “Total” compensation set forth in the Summary Compensation Table (“SCT”) on page 25. See the footnotes to the SCT for further details regarding the amounts in these columns.
  (4) In accordance with SEC rules, the Compensation Actually Paid reflected in these columns is computed by deducting and adding the following amounts from the “Total” column of the SCT (pursuant to SEC rules, fair value at each measurement date is computed in a manner consistent with the fair value methodology used to account for share-based payments in our financial statements under GAAP):

 

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   Fiscal 2024   Fiscal 2023   Fiscal 2022 
   PEO   Non-PEO NEO’s   PEO   Non-PEO NEO’s   PEO   Non-PEO NEO’s 
SCT Total Compensation  $1,733,000   $875,499   $6,876,500   $2,166,600        6,461,550    1,916,683 
Deduct amounts reported under the “Stock Awards” and “Option Awards” column of the SCT   (1,083,000)   (427,500)   (6,226,500)   (1,791,600)   (6,011,550)   (1,622,152)
Total Cash Compensation   650,000    447,999    650,000    375,000    450,000    294,531 
Add Fair Value of Awards Granted in the Fiscal year that were Unvested as of 3/31   1,083,000    427,500    6,475,000    1,828,600    5,682,100    1,443,073 
Add Change in Fair Value of Awards Granted in Prior Years Unvested as of 3/31   (4,045,130)   (1,412,250)   (204,313)   (62,116)   317,735    85,012 
Add Fair Value of Awards Granted and Vested in the Fiscal year as of the Vesting Date   -    -    -    -    195,800    54,049 
Add Change in Fair Value of Awards Granted in Prior Years that Vested during the Fiscal year as of the Vesting Date   (1,818,360))   (602,754)   (149,100)   (42,581)   601,261    195,069 
Deduct Fair Value of any Awards Granted in Prior Years that Failed to Meet Vesting Conditions during Fiscal 2024   -    -    -    -    -    (50,058)
Total Compensation Actually Paid  $(4,130,490)  $(1,139,505)  $6,771,588   $2,098,903   $7,246,896   $2,021,675 

 

Compensation Actually Paid and Cumulative Total Shareholder Return

 

The graph below compares the compensation actually paid to our PEO and the average of the compensation actually paid to our remaining NEOs, with our cumulative total shareholder return for the fiscal years ended December 31, 2022, 2023, and 2024. Total Shareholder Return amounts reported in the graph assume an initial fixed investment of $100 on March 31, 2022.

 

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Compensation Actually Paid and Net Loss

 

The graph below compares the compensation actually paid to our PEO and the average of the compensation actually paid to our remaining NEOs, with our net loss for the fiscal years ended March 31, 2022, 2023 and 2024.

 

 

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PROPOSAL NO. 5

 

APPROVAL OF THE SECOND AMENDMENT TO OUR AMENDED AND RESTATED CERTIFICATE

 

of Incorporation TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 100,000,000 TO 500,000,000

 

Overview

 

On October 18, 2024, our Board unanimously approved, subject to stockholder approval, the second amendment to our Amended and Restated Certificate of Incorporation, as further amended, (the “Certificate of Incorporation”). We are asking our stockholders to approve an amendment to our Certificate of Incorporation to increase our authorized number of shares of Common Stock from 100,000,000 shares to 500,000,000 shares (the “Authorized Share Increase Proposal”). If stockholders approve this Authorized Share Increase Proposal, we expect to file the second amendment to our Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to increase the total number of authorized shares of our Common Stock as soon as practicable following stockholder approval.

 

As of the close of business on the Record Date, 72,187,636 shares of our Common Stock were issued and outstanding, out of the 100,000,000 shares that we are authorized to issue. In addition to the shares of Common Stock outstanding on the Record Date, there were an aggregate of 93,729,086 shares reserved for issuance pursuant to certain outstanding pre-funded warrants, warrants, outstanding options and RSUs. As of the Record Date, if all shares of Common Stock that are currently reserved were to be issued by the Company, the Company would not have sufficient shares available to meet the needs of our business described below under “— Reasons for the Increase in Authorized Shares”. Approval of the Authorized Share Increase Proposal will grant the Board the authority, without further action by the stockholders, to carry out the amendment to the Certificate of Incorporation after the date stockholder approval for the amendment is obtained.

 

If approved, the proposed amendment to our Certificate of Incorporation would increase the number of shares of Common Stock that we are authorized to issue from 100,000,000 shares of Common Stock to 500,000,000 shares of Common Stock, representing an increase of 400,000,000 shares of authorized Common Stock. The proposed Certificate of Amendment would not increase the number of shares of preferred stock that we are authorized to issue.

The text of the proposed Certificate of Amendment, to effect the Authorized Share Increase Proposal, is set forth in Appendix B, and is attached to this proxy statement.

 

Reasons for the Increase in Authorized Shares

 

The Company currently has authorized capital stock of 100,000,000 shares of our common stock, with 72,187,636 shares issued and outstanding and 10,000,000 shares of blank check preferred stock, none of which have been designated. The Board has determined that the increase in our authorized shares of Common Stock is in the best interests of the Company and unanimously recommends approval by the stockholders. The Board believes that the availability of additional authorized shares of Common Stock is required for several reasons including, but not limited to, the Company’s need to satisfy its existing obligations under the Purchase Agreement related to the recent PIPE financing (as further described in Proposal 6), and the additional flexibility to issue shares of Common Stock for a variety of general corporate purposes as the Board may determine to be desirable including, without limitation, future financings, investment opportunities, acquisitions, strategic partnerships, or other distributions and to facilitate stock splits (including splits effected through the declaration of stock dividends).

 

In addition, pursuant to the terms of the Purchase Agreement (as further described in Proposal 6), we agreed to use our best efforts to hold a special or annual meeting of stockholders to approve an increase in our number of authorized Common Stock sufficient to issue the shares of Common Stock issuable pursuant to the Common Warrants issued in the Private Placement Offering (as further described in Proposal 6).

 

The extra shares of authorized Common Stock would be available for issuance from time to time as determined by the Board for any proper corporate purpose. Such purposes might include, without limitation, issuance in public or private sales for cash as a means of obtaining additional capital for use in our business and operations, and issuance as part or all of the consideration required to be paid by us for acquisitions of other businesses or assets. The proposed increase will provide the Company with sufficient authorized shares of Common Stock to accommodate these potential needs without requiring additional stockholder approval, except as otherwise required by law. Notwithstanding the foregoing, we have no obligation to issue such additional shares and there are no plans, proposals or arrangements currently contemplated by us that would involve the issuance of the additional shares to acquire another company or its assets, or for any other corporate purpose stated.

 

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Current Plans, Proposals or Arrangements to issue shares of Common Stock

 

As of the Record Date, the Company had:

 

●11,035,473 shares of Common Stock issuable upon the exercise of outstanding stock options with a weighted-average exercise price of $4.37 per share;
●612,100 shares of Common Stock issuable upon the settlement of restricted stock units outstanding;
●25,384,090 shares of Common Stock issuable upon the exercise of outstanding warrants at a weighted-average exercise price of $1.14 per share;
●678,729 shares of Common Stock available for future issuance under our Sixth Amended and Restated 2013 Equity Incentive Plan (as amended from time to time, the “2013 Plan”);
●750,000 shares of Common Stock reserved for future issuance under our 2021 Employee Stock Purchase Plan;
●15,848,712 shares of Common Stock issuable upon the exercise of Pre-Funded Warrants issued pursuant to the Purchase Agreement, at an exercise price of $0.0001 per share; and
●40,848,711 shares of Common Stock issuable upon the exercise of Common Stock Warrants issued pursuant to the Purchase Agreement, at an exercise price of $0.3793 per share.

 

Other than as set forth above, the Company has no current plans, proposals or arrangements, written or oral, to issue any of the additional authorized shares of common stock that would become available as a result of the filing of the proposed Certificate of Amendment.

 

In addition, following the approval and filing of the Certificate of Amendment, the Company may explore additional financing opportunities or strategic transactions that would require the issuance of additional shares of Common Stock, but no such plans are currently in existence and the Company has not begun any negotiations with any party related thereto. If we issue additional shares, the ownership interest of holders of our capital stock will be diluted.

 

Principal Effects of the Increase in Authorized Shares

 

The Company’s stockholders will not realize any dilution in their ownership or voting rights as a result of the increase in authorized shares of our Common Stock but will experience dilution to the extent additional shares are issued in the future.

 

In addition to satisfying our obligations under the Purchase Agreement (as further described in Proposal 6), having an increased number of authorized but unissued shares of our Common Stock would allow us to take prompt action with respect to corporate opportunities that develop, without the delay and expense of convening a special meeting of stockholders for the purpose of approving an increase in our capitalization. The issuance of additional shares of our Common Stock may, if such shares are issued at prices below what current stockholders paid for their shares, reduce stockholders’ equity per share and dilute the value of current stockholders’ shares. It is not the present intention of the Board to seek stockholder approval prior to any issuance of shares of our Common Stock that would become authorized by our Certificate of Amendment unless otherwise required by law or regulation. Frequently, opportunities arise that require prompt action, and it is the belief of the Board that the delay necessitated for stockholder approval of a specific issuance could be to the detriment of us and our stockholders.

 

When issued, the additional shares of our Common Stock authorized by the Certificate of Amendment will have the same rights and privileges as the shares of our Common Stock currently authorized and outstanding. Holders of our Common Stock shares have no preemptive rights and, accordingly, stockholders would not have any preferential rights to purchase any of the additional shares of our common stock when such shares are issued.

 

Shares of authorized and unissued Common Stock could be issued in one or more transactions that could make it more difficult, and therefore less likely, that any takeover of us could occur. Issuance of additional shares of our Common Stock could have a deterrent effect on persons seeking to acquire control. The Board also could, although it has no present intention of so doing, authorize the issuance of shares of our Common Stock to a holder who might thereby obtain sufficient voting power to assure that any proposal to effect certain business combinations or amendment to our Certificate of Incorporation or Bylaws would not receive the required stockholder approval. Accordingly, the power to issue additional shares of our Common Stock could enable the Board to make it more difficult to replace incumbent directors and to accomplish business combinations opposed by the incumbent Board.

 

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Procedure for Implementing the Amendment

 

The increase in our authorized shares of Common Stock will become effective upon the filing of the Certificate of Amendment or such later time as specified in the filing with the Secretary of State of the State of Delaware. The form of the Certificate of Amendment is attached hereto as Appendix B. If stockholders approve this Authorized Share Increase Proposal, we expect to file the Certificate of Amendment as soon as practicable following stockholder approval.

 

Consequences of Not Approving this Proposal

 

Pursuant to the Purchase Agreement (as further described in Proposal 6), if the Company does not obtain stockholder approval of the Authorized Share Increase Proposal, the Company will be required to use its best efforts to call a meeting every 180 days thereafter to seek stockholder approval until the earlier of the date stockholder approval is obtained or the Common Warrants are no longer outstanding.

 

In addition, the lack of sufficient authorized Common Stock will severely limit the ability of the Company to issue Common Stock for a variety of general corporate purposes as the Board may determine to be desirable including, without limitation, future financings, investment opportunities, acquisitions, or other distributions and stock splits (including splits effected through the declaration of stock dividends).

 

Interests of Officers and Directors in this Proposal

 

Our officers and directors do not have any substantial interest, direct or indirect, in this Authorized Share Increase Proposal.

 

Vote Required

 

A quorum being present, the approval of this Authorized Share Increase Proposal requires the affirmative vote of a majority of the votes cast of our common stock present in person or by proxy at the Annual Meeting and entitled to vote thereon as of the Record Date. Abstentions and broker non-votes will have no effect on the proposal.

 

Effectiveness of the Amendment

 

If approved, the amendment to the Certificate of Incorporation will become effective upon the filing of the amendment with the Secretary of State of the State of Delaware.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE SECOND amendment to our Amended and Restated Certificate of Incorporation TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 100,000,000 TO 500,000,000.

 

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PROPOSAL NO. 6

 


To authorize, FOR PURPOSES OF COMPLYING WITH NASDAQ LISTING RULE 5635(D), the issuance of shares of our common stock underlying warrants issued by US pursuant to THE TERMS OF THAT certain securities purchase agreement, DATED SEPTEMBER 26, 2024, BY AND AMONG THE COMPANY AND THE INVESTORS NAMED THEREIN, IN AN AMOUNT EQUAL TO OR IN EXCESS OF 20% OF OUR COMMON STOCK OUTSTANDING BEFORE THE ISSUANCE OF SUCH WARRANTS (INCLUDING IN ACCORDANCE WITH THE OPERATION OF THE ANTI-DILUTION PROVISIONS CONTAINED IN SUCH WARRANTS)

 

The Private Placement Offering

 

On September 26, 2024, we entered into a securities purchase agreement (the “Purchase Agreement”) with certain accredited investors, pursuant to which the Company sold shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) and accompanying warrants to purchase shares of Common Stock, in a private placement priced at-the-market under the rules of the Nasdaq Stock Market (the “Private Placement”).

 

Pursuant to the Purchase Agreement, the investors purchased from the Company an aggregate of (i) 24,999,999 shares (the “Shares”) of the Company’s Common Stock, at a purchase price of $0.5043 per Share, (ii) pre-funded warrants to purchase up to 15,848,712 shares of Common Stock (the “Pre-funded Warrants”) at a purchase price of $0.5042 per Pre-funded Warrant and (iii) warrants to purchase up to 40,848,711 shares of Common Stock (the “Common Warrants”, and together with the Pre-funded Warrants the “Warrants”), for aggregate gross proceeds under the Purchase Agreement of $20,600,000. Each Share and each Pre-funded Warrant was sold with an accompanying Common Warrant to purchase one share of Common Stock. The Pre-funded Warrants have an exercise price of $0.0001 per share, and the Common Warrants have an exercise price of $0.38 per share. The Private Placement offering closed on September 30, 2024 (the “Closing Date”). The Purchase Agreement contains representations and warranties of us and the investors, which are typical for transactions of this type. In addition, the Purchase Agreement contains customary covenants on our part that are typical for transactions of this type, as well as the additional covenant to use our best efforts to hold a meeting of the stockholders, no later than one-hundred eighty (180) days after the Closing Date, at which we would solicit our stockholders’ affirmative vote for the approval of allowing for the exercise price of the Common Warrants to be adjusted in accordance with the terms of the Common Warrants pursuant to the rules and regulations of the Nasdaq Stock Market (the “Issuance Proposal”). This Issuance Proposal is intended to fulfill this covenant.

 

Warrants

 

The Pre-funded Warrants are exercisable immediately after this Issuance Proposal is approved and will expire when exercised in full. The Common Warrants are exercisable immediately after this Issuance Proposal is approved and expire on the date that is five (5) years after its date of issuance. Both the Pre-funded Warrants and Common Warrants are exercisable on a cashless basis in the event that, at the time of exercise, there is not an effective registration statement for the resale of the shares underlying the Pre-funded Warrants or Common Warrants, as applicable. The respective Pre-funded Warrants or Common Warrants may not be exercised to the extent such exercise would cause the holder to beneficially own more than 4.99% (or at the option of the holder 9.99%) of the Company’s issued and outstanding Common Stock. The exercise price of the Warrants and number of shares of Common Stock issuable upon exercise of the Warrants is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events and also upon any distributions of assets, including cash, stock or other property to our stockholders.

 

Subject to certain exemptions outlined in the Common Warrant, if at any time while the Common Warrants are outstanding, the Company issues or sells, or is deemed to have issued or sold, shares of Common Stock at an effective price per share less than the exercise price of the Common Warrants then in effect (the “Trigger Issuance”), the exercise price of the Common Warrant shall be reduced in accordance with a weighted average formula, as follows:

 

Adjusted Exercise Price = (A x B) + D

     A+C

 

Where:

“A” equals the Common Stock Deemed Outstanding immediately preceding such Trigger Issuance;

 

“B” equals the exercise price of the Common Warrants in effect immediately preceding such Trigger Issuance;

 

“C” equals the aggregate number of shares of Common Stock issued or deemed issued hereunder in such Trigger Issuance; and

 

“D” equals the aggregate consideration, if any, received or deemed to be received by the Company upon such Trigger Issuance.

 

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provided, however, that in no event shall the Exercise Price after giving effect to such Trigger Issuance be greater than the Exercise Price immediately prior to such Trigger Issuance.

 

“Common Stock Deemed Outstanding” means, at any given time, the sum of (I) the number of shares of Common Stock actually outstanding at such time, plus (II) the number of shares of Common Stock issuable upon exercise of options (as defined in the Common Warrants) actually outstanding at such time, plus (III) the number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities (as defined in the Common Warrants) actually outstanding at such time (treating as actually outstanding any Convertible Securities issuable upon exercise of Options actually outstanding at such time), in each case, regardless of whether the Options or Convertible Securities are actually exercisable at such time; provided, that Common Stock Deemed Outstanding at any given time shall not include shares owned or held by or for the account of the Company or any of its wholly-owned subsidiaries.

 

In no event shall the exercise price of the Common Warrants be adjusted to a price that is lower than a price that is equal to $0.07584 (20% of the Nasdaq Minimum Price (as defined in Nasdaq Listing Rule 5635(d)(1)(A)) in effect as of the execution of the Purchase Agreement; which price shall be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction).

 

Registration Rights Agreement

 

In connection with the private placement, we entered into a Registration Rights Agreement (the “Registration Rights Agreement”) dated September 26, 2024 with the investors pursuant to which we granted to the investors certain demand resale registration rights with respect to the Common Stock issuable pursuant to the Purchase Agreement, or exercise of the Warrants, or resulting from the anti-dilution provisions in the Warrants or any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event (the “Registrable Securities”). Pursuant to the Registration Rights Agreement, we filed a registration statement covering the resale of the Registrable Securities by the investors on October 25, 2024 and are required to have such Registration Statement declared effective. The Company will be obligated to pay liquidated damages to the investors if the Company fails to file the Registration Statement when required or fails to cause the Registration Statement to be declared effective by the SEC when required.

 

Background to the Private Placement

 

We believe that the Private Placement, which yielded gross proceeds of $20.6 million, was necessary in light of the Company’s cash and funding requirements at the time. We also believe that the anti-dilution protections contained in the Warrants were reasonable in light of market conditions and the size and type of the offering in the Private Placement, and that we would not have been able to complete the sale of the securities unless such anti-dilution provisions were offered. In addition, at the time of the Private Placement, our Board considered numerous other alternatives to the transaction, none of which proved to be feasible or, in the opinion of our Board, would have resulted in aggregate terms equivalent to, or more favorable than, the terms obtained in the Private Placement.

 

Why We Need Stockholder Approval

 

We are seeking stockholder approval to comply with a provision in the Purchase Agreement and the Common Warrant, that require us to do so and Nasdaq Listing Rule 5635(d). The Purchase Agreement requires us to seek stockholder approval every 180 days until such time as we obtain approval, or the Common Warrants are no longer outstanding. Until stockholder approval has been obtained, the Purchase Agreement states that we, or any of our subsidiaries, cannot issue any shares of Common Stock or common stock equivalents, or file any registration statement or an amendment or supplement thereto.

 

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Nasdaq Rule 5635(d)

 

Pursuant to Nasdaq Listing Rule 5635(d), stockholder approval is required prior to a 20% Issuance at a price that is less than the Minimum Price. For purposes of Nasdaq Listing Rule 5635(d), (i) “20% Issuance” means a transaction, other than a public offering, involving the sale, issuance or potential issuance by us of common stock (or securities convertible into or exercisable for common stock), which alone or together with sales by our officers, directors or substantial stockholders equals 20% or more of common stock or 20% or more of the voting power outstanding before the issuance, and (ii) “Minimum Price” means a price that is the lower of: (A) the closing price (as reflected on nasdaq.com) immediately preceding the signing of the binding agreement; and (B) the average closing price of common stock (as reflected on nasdaq.com) for the five (5) trading days immediately preceding the signing of the binding agreement. In determining whether multiple issuances should be aggregated for purposes of Nasdaq Listing Rule 5635(d), Nasdaq will consider several factors, including the timing of the issuances. Although more than 20% of our common stock may be issued in connection with the Private Placement, the Private Placement was intended to comply with the Minimum Price. However, given the possibility of issuance of additional shares of common stock in the event we are required to make an Exercise Price adjustment, as defined below, or in the event we are otherwise required to amend the Securities Purchase Agreement to issue additional shares of Common Stock following an event of default, we are seeking stockholder approval under this Proposal, to comply with Nasdaq Listing Rule 5635(d), at this time to avoid the cost of re-solicitation later. Stockholder approval of this proposal will constitute stockholder approval for purposes of Listing Rule 5635(d) of Nasdaq.

 

Effect of Issuance of shares of Common Stock

 

The issuance of shares pursuant to the exercise of the Common Warrants issued in the Private Placement, will cause a reduction in the percentage interests of our current stockholders in the voting power, any liquidation value, our book and market value, and in any future earnings. Further, the issuance or resale of our Common Stock issued to the investors upon exercise of the Common Warrants could cause the market price of our Common Stock to decline. In addition to the foregoing, the increase in the number of issued shares of our Common Stock that may be issued upon exercise of the Common Warrants may have an incidental anti-takeover effect in that additional shares could be used to dilute the stock ownership of parties seeking to obtain control of us. The increased number of issued shares could discourage the possibility of, or render more difficult, certain mergers, tender offers, proxy contests or other change of control or ownership transactions. Because of potential adjustments to the number of shares of Common Stock issuable upon exercise of the Common Warrants, the exact magnitude of the dilutive effect of the Common Warrants and underlying shares of Common Stock cannot be conclusively determined. However, the dilutive effect may be material to our current stockholders.

 

Consequences of Not Approving this Proposal

 

If our stockholders do not approve this Issuance Proposal, we will be required to call a meeting of stockholders every 180 days thereafter to seek approval until the earlier of the date approval is obtained or the Common Warrants are no longer outstanding. The requirement to seek approval at one or more additional stockholder meetings will be burdensome to the Company both in time and expense.

 

If our stockholders do not approve this Issuance Proposal, the investors would be entitled to cash payment, as partial liquidated damages, equal to the product of 0.50% multiplied by the aggregate purchase price paid by each such investor, for the securities purchased pursuant to the Purchase Agreement in the Private Placement. If we are unable to obtain stockholder approval at any subsequent meetings, the investors would be entitled to cash payment, as partial liquidated damages, equal to the product of 0.50% multiplied by the aggregate purchase price paid by each such investor for the securities purchased pursuant to the Purchase Agreement in the Private Placement. The payments described in this paragraph shall not exceed 1.0% of the aggregate purchase price paid by such holder for the securities purchased by such holder under the Purchase Agreement.

 

If our stockholders do not approve this Issuance Proposal, and, following any adjustment events if we are otherwise required to issue additional shares of Common Stock, we would not be permitted to issue additional shares of Common Stock in a manner that violates Nasdaq Listing Rule 5635(d). We are seeking stockholder approval under this Issuance Proposal, to comply with our contractual obligation and Nasdaq Listing Rule 5635(d), should it apply in the future.

 

Additional Information

 

This summary is intended to provide you with basic information concerning the Purchase Agreement, and Warrants. The full text of the Purchase Agreement, Pre-funded Warrants, Common Warrants, and the Registration Rights Agreement are included as exhibits to our Current Report on Form 8-K filed with the SEC on September 27, 2024.

 

Vote Required

 

A quorum being present, the approval of this Issuance Proposal requires the affirmative vote of a majority of the votes cast of our common stock present in person or by proxy at the Annual Meeting and entitled to vote thereon as of the Record Date. Abstentions and broker non-votes will have no effect on the proposal.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” authorizing for the purposes of complying with nasdaq rule 5635(d), THE issuance of shares of our common stock underlying warrants issued by US pursuant to the terms of that certain securities purchase agreement, DATED SEPTEMBER 26, 2024, BY AND AMONG THE COMPANY AND THE INVESTORS NAMED THEREIN, IN AN AMOUNT EQUAL TO OR IN EXCESS OF 20% OF OUR COMMON STOCK OUTSTANDING BEFORE THE ISSUANCE OF SUCH WARRANTS (INCLUDING IN ACCORDANCE WITH THE OPERATION OF THE ANTI-DILUTION PROVISIONS CONTAINED IN SUCH WARRANTS).

 

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PROPOSAL NO. 7

 

Adjournment or postponement of the annual meeting, if necessary, to continue to solicit votes for proposal Nos. 3, 5, and 6

 

Adjournment of the Annual Meeting

 

In the event that the number of shares of common stock present or represented by proxy at the special meeting and voting “for” the adoption of any of the foregoing Proposal Nos. 3, 5 and 6 are insufficient to approve any such proposal, we may move to adjourn the Annual Meeting in order to enable us to solicit additional proxies in favor of the adoption of any such proposal. In that event, we may ask stockholders to vote only upon this Adjournment Proposal. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

Required vote and recommendation

 

In accordance with our Bylaws, the approval of this Adjournment Proposal for the purpose of soliciting additional proxies requires the affirmative vote of a majority of the votes of our common stock present in person, by remote communication, if applicable, or represented by proxy at the Annual Meeting and entitled to vote thereon as of the Record Date. Abstentions and broker non-votes, if any, with respect to this proposal are not counted as votes cast and will not affect the outcome of this proposal.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE Adjournment or postponement of the annual meeting, if necessary, to continue to solicit votes for proposals 3, 5, and 6.

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth information with respect to the beneficial ownership of our common stock by each person known by us to beneficially own more than 5.0% of any class of our voting securities together with:

 

  ● each of our directors;
     
  ● each of our named executive officers; and
     
  ● all of our directors and executive officers as a group.

 

The percentages of common stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Except as indicated in the footnotes to this table, each beneficial owner named in the table below has sole voting and sole investment power with respect to all shares beneficially owned. Percentage computations are based on 72,187,636 shares of our common stock outstanding as of October 11, 2024.

 

Under the terms of the warrants issued by us to each of Alyeska, Avenue Capital, Atlas, Bob Carey and Steve Lisi, they may not exercise a warrant to the extent such exercise would cause them, together with their affiliates and any other persons acting as a group with them or any of their affiliates, to have acquired a number of shares of common stock which would exceed 9.99%, excluding for purposes of such determination shares of common stock issuable upon exercise of warrants that have not been exercised. We refer to the foregoing limitations as the “Ownership Cap.” The share numbers in the table below do not reflect the Ownership Cap, but the figures contained in the “Percentage of Outstanding Shares” column reflect the Ownership Cap applicable to the relevant parties.

 

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Name and Address of Beneficial Owner (1) 

Number of

Shares

  Percentage of Outstanding Shares % (2)
5% Owners          
Alyeska   29,744,200(3)   9.99%
Avenue Capital   13,619,587(4)   9.99%
Atlas   11,897,680(5)   9.99%
Named Executive Officers and Directors          
Steven A. Lisi   10,322,537(6)   9.99%
Ron Bentsur   237,486(7)   * 
Dr. William Forbes   116,605(8)   * 
Robert F. Carey   17,626,551(9)   9.99%
Erick Lucera   157,358(10)   * 
Yoori Lee   121,404(11)   * 
Michael Gaul   208,900(12)   * 
Douglas Larson   126,846(13)   * 
All executive officers and directors (8 persons)   28,917,687    20.1%

 

* Less than one percent (1.0%).

 

(1) The address of these persons, unless otherwise noted, is c/o Beyond Air, Inc., 900 Stewart Avenue, Suite 301 Garden City, New York, 11530.
   
(2) Shares of common stock beneficially owned and, except as limited by the Ownership Cap as discussed above, the respective percentages of beneficial ownership of common stock includes for each person or entity shares issuable on the exercise of all options and warrants and the conversion of other convertible securities beneficially owned by such person or entity that are currently exercisable or will become exercisable or convertible within 60 days following October 11, 2024. Such shares, however, are not included for the purpose of computing the percentage ownership of any other person.
   
(3) Includes 7,727,201# pre-funded warrants and 14,872,100#  warrants to purchase common stock.
   
(4) Includes 1,696,175# pre-funded warrants and 6,642,872 warrants to purchase common stock.
   
(5) Includes 3,007,664# pre-funded warrants and 5,948,840 warrants to purchase common stock.
   
(6) Includes 506,321# pre-funded warrants, 5,356,805 warrants and 1,210,000 vested options to purchase common stock.
   
(7) Includes 92,750 vested options to purchase common stock.
   
(8) Includes 101,750 vested options to purchase common stock.
   
(9) Includes 506,321# pre-funded warrants, 12,471,990 warrants and 94,750 vested options to purchase common stock.
   
(10) Includes 113,750 vested options to purchase common stock.
   
(11) Includes 108,750 vested options to purchase common stock.
   
(12) Includes 143,750 vested options to purchase common stock.
   
(13) Includes 12,048 warrants and 96,250 vested options to purchase common stock.

 

# these include the warrants and/ or pre-funded warrants, as applicable, that are only exercisable after stockholders’ approval of the relevant proposals contained in this proxy statement.

 

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RELATED PERSON TRANSACTIONS

 

Under SEC rules, related-party transactions are those transactions to which we are or may be a party in which the amount involved exceeds the lesser of $120,000 or one percent of the average of total assets at year-end for the last two completed fiscal years, and in which any of our directors or executive officers or any other related person had or will have a direct or indirect material interest, excluding, among other things, compensation arrangements with respect to employment and Board of Directors membership. Our audit committee could approve a related-party transaction if it determines that the transaction is in our best interests. Our directors are required to disclose to this committee or the full Board of Directors any potential conflict of interest, or personal interest in a transaction that our Board of Directors is considering. Our executive officers are required to disclose any related-party transaction to the audit committee. We also poll our directors on an annual basis with respect to related-party transactions and their service as an officer or director of other entities. Any director involved in a related-party transaction that is being reviewed or approved must recuse himself or herself from participation in any related deliberation or decision. Whenever possible, the transaction should be approved in advance and if not approved in advance, must be submitted for ratification as promptly as practical. The Company has written policies and procedures with respect to related person transactions for managing any such situations.

 

On September 27, 2024, the Company issued 9,886,633 warrants with a strike price of $0.3793 to Robert Carey upon signature of a binding term sheet whereby Mr. Carey will loan $7,500,000 to the Company. On that same say, the Company issued 3,295,544 warrants with a strike price of $0.3793 to Steve Lisi upon signature of a binding term sheet whereby Mr. Lisi will loan $2,500,000 to the Company.

 

There were no other transactions to which we have been a party in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of the company’s total assets at year-end for the last two completed fiscal years, and in which any of our directors, executive officers or beneficial owners of more than 5% of our capital stock, or any members of their immediate family, had or will have a direct or indirect material interest, other than compensation arrangements that are described in the “Executive Compensation” and “Director Compensation” sections above.

 

OTHER MATTERS

 

Delinquent Section 16(a) Reports

 

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

 

SEC regulations require us to identify in this proxy statement anyone who filed a required report late during the most recent fiscal year. To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended March 31, 2024, all of our officers, directors and greater than 10% beneficial owners have complied with Section 16(a) filing requirements on a timely basis .

 

Fiscal Year 2024 Annual Report and SEC Filings

 

Our financial statements for our fiscal year ended March 31, 2024 are included in our Annual Report, which we will make available to stockholders at the same time as this proxy statement. This proxy statement and our Annual Report are posted on our website at www.beyondair.net and are available from the SEC at its website at www.sec.gov. You may also obtain a copy of our Annual Report without charge by sending a written request to Beyond Air, Inc., Attention: Investor Relations, 900 Stewart Avenue, Suite 301, Garden City, NY 11530. Information contained on or accessible through this website is not a part of this proxy statement, and the inclusion of such website address in this proxy statement is an inactive textual reference only.

 

* * *

 

The Board of Directors does not know of any other matters to be presented at the Annual Meeting. If any additional matters are properly presented at the Annual Meeting, the persons named in the enclosed proxy card will have discretion to vote the shares of our common stock they represent in accordance with their own judgment on such matters.

 

It is important that your shares of our common stock be represented at the Annual Meeting, regardless of the number of shares that you hold. You are, therefore, urged to vote by telephone or by using the Internet as instructed on the enclosed proxy card or execute and return, at your earliest convenience, the enclosed proxy card in the envelope that has also been provided.

 

  THE BOARD OF DIRECTORS
  Garden City, NY
  October 31, 2024

 

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APPENDIX A

 

BEYOND AIR, INC.

Seventh AMENDED AND RESTATED 2013 EQUITY INCENTIVE PLAN

(effective November 22, 2024, subject to stockholder approval)

 

1. Purpose; Eligibility.

 

1.1 General Purpose. This Beyond Air, Inc. Seventh Amended and Restated 2013 Equity Incentive Plan (the “Plan”) is hereby established by Beyond Air, Inc., a Delaware corporation (the “Company”), which amends and restates the Sixth Amended and Restated Beyond Air, Inc. 2013 Equity Incentive Plan. The purposes of the Plan are to (a) enable the Company and any Affiliate to attract and retain the types of Employees, Consultants and Directors who will contribute to the Company’s long range success; (b) provide incentives that align the interests of Employees, Consultants and Directors with those of the shareholders of the Company; and (c) promote the success of the Company’s business.

 

1.2 Eligible Award Recipients. The persons eligible to receive Awards are the Employees, Consultants and Directors of the Company and its Affiliates and such other individuals designated by the Committee who are reasonably expected to become Employees, Consultants and Directors after the receipt of Awards.

 

1.3 Available Awards. Awards that may be granted under the Plan include: (a) Incentive Stock Options, (b) Non-qualified Stock Options, (c) Stock Appreciation Rights, (d) Restricted Awards, (e) Performance Share Awards, (f) Cash Awards, and (g) Other Equity-Based Awards.

 

2. Definitions.

 

“Affiliate” means a corporation or other entity that, directly or through one or more intermediaries, controls, is controlled by or is under common control with, the Company.

 

“Applicable Laws” means the requirements related to or implicated by the administration of the Plan under applicable state corporate law, United States federal and state securities laws, the Code, any stock exchange or quotation system on which the shares of Common Stock are listed or quoted, and the applicable laws of any foreign country or jurisdiction where Awards are granted under the Plan.

 

“Award” means any right granted under the Plan, including an Incentive Stock Option, a Non-qualified Stock Option, a Stock Appreciation Right, a Restricted Award, a Performance Share Award, a Cash Award, or an Other Equity-Based Award.

 

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“Award Agreement” means a written agreement, contract, certificate or other instrument or document evidencing the terms and conditions of an individual Award granted under the Plan which may, in the discretion of the Company, be transmitted electronically to any Participant. Each Award Agreement shall be subject to the terms and conditions of the Plan.

 

“Beneficial Owner” has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial ownership of any particular Person, such Person shall be deemed to have beneficial ownership of all securities that such Person has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms “Beneficially Owns” and “Beneficially Owned” have a corresponding meaning.

 

“Board” means the Board of Directors of the Company, as constituted at any time.

 

“Cash Award” means an Award denominated in cash that is granted under Section 7.4 of the Plan.

 

“Cause” means:

 

With respect to any Employee or Consultant, unless the applicable Award Agreement states otherwise:

 

(a) If the Employee or Consultant is a party to an employment or service agreement with the Company or its Affiliates and such agreement provides for a definition of Cause, the definition contained therein; or

 

(b) If no such agreement exists, or if such agreement does not define Cause: (i) the commission of, or plea of guilty or no contest to, a felony or a crime involving moral turpitude or the commission of any other act involving willful malfeasance or material fiduciary breach with respect to the Company or an Affiliate; (ii) conduct that results in or is reasonably likely to result in harm to the reputation or business of the Company or any of its Affiliates; (iii) gross negligence or willful misconduct with respect to the Company or an Affiliate; or (iv) material violation of state or federal securities laws.

 

With respect to any Director, unless the applicable Award Agreement states otherwise, a determination by a majority of the disinterested Board members that the Director has engaged in any of the following:

 

(a) malfeasance in office;

 

(b) gross misconduct or neglect;

 

(c) false or fraudulent misrepresentation inducing the director’s appointment;

 

(d) willful conversion of corporate funds; or

 

(e) repeated failure to participate in Board meetings on a regular basis despite having received proper notice of the meetings in advance.

 

The Committee, in its absolute discretion, shall determine the effect of all matters and questions relating to whether a Participant has been discharged for Cause.

 

“Change in Control”

 

(a) The direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Company and its subsidiaries, taken as a whole, to any Person that is not a subsidiary of the Company;

 

(b) The Incumbent Directors cease for any reason to constitute at least a majority of the Board;

 

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(c) The date which is 10 business days prior to the consummation of a complete liquidation or dissolution of the Company;

 

(d) The acquisition by any Person of Beneficial Ownership of 50% or more (on a fully diluted basis) of either (i) the then outstanding shares of Common Stock of the Company, taking into account as outstanding for this purpose such Common Stock issuable upon the exercise of options or warrants, the conversion of convertible stock or debt, and the exercise of any similar right to acquire such Common Stock (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this Plan, the following acquisitions shall not constitute a Change in Control: (A) any acquisition by the Company or any Affiliate, (B) any acquisition by any employee benefit plan sponsored or maintained by the Company or any subsidiary, (C) any acquisition which complies with clauses, (i), (ii) and (iii) of subsection (e) of this definition or (D) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of persons including the Participant (or any entity controlled by the Participant or any group of persons including the Participant); or

 

(e) The consummation of a reorganization, merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company that requires the approval of the Company’s shareholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (i) more than 50% of the total voting power of (A) the entity resulting from such Business Combination (the “Surviving Company”), or (B) if applicable, the ultimate parent entity that directly or indirectly has beneficial ownership of sufficient voting securities eligible to elect a majority of the members of the board of directors (or the analogous governing body) of the Surviving Company (the “Parent Company”), is represented by the Outstanding Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which the Outstanding Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of the Outstanding Company Voting Securities among the holders thereof immediately prior to the Business Combination; (ii) no Person (other than any employee benefit plan sponsored or maintained by the Surviving Company or the Parent Company) is or becomes the Beneficial Owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect members of the board of directors of the Parent Company (or the analogous governing body) (or, if there is no Parent Company, the Surviving Company); and (iii) at least a majority of the members of the board of directors (or the analogous governing body) of the Parent Company (or, if there is no Parent Company, the Surviving Company) following the consummation of the Business Combination were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination.

 

“Code” means the Internal Revenue Code of 1986, as it may be amended from time to time. Any reference to a section of the Code shall be deemed to include a reference to any regulations promulgated thereunder.

 

“Committee” means a committee of one or more members of the Board appointed by the Board to administer the Plan in accordance with Section 3.3 and Section 3.4.

 

“Common Stock” means the common stock, $0.0001 par value per share, of the Company, or such other securities of the Company as may be designated by the Committee from time to time in substitution thereof.

 

“Company” means Beyond Air, Inc. a Delaware corporation, and any successor thereto.

 

“Consultant” means any individual or entity which performs bona fide services to the Company or an Affiliate, other than as an Employee or Director, and who may be offered securities registerable pursuant to a registration statement on Form S-8 under the Securities Act.

 

“Continuous Service” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Consultant or Director, is not interrupted or terminated. The Participant’s Continuous Service shall not be deemed to have terminated merely because of 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 Continuous Service; provided further that if any Award is subject to Section 409A of the Code, this sentence shall only be given effect to the extent consistent with Section 409A of the Code. For example, a change in status from an Employee of the Company to a Director of an Affiliate will not constitute an interruption of Continuous Service. The Committee or its delegate, in its sole discretion, may determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by that party, including sick leave, military leave or any other personal or family leave of absence. The Committee or its delegate, in its sole discretion, may determine whether a Company transaction, such as a sale or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in a termination of Continuous Service for purposes of affected Awards, and such decision shall be final, conclusive and binding.

 

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“Deferred Stock Units (DSUs)” has the meaning set forth in Section 7.2 hereof.

 

“Director” means a member of the Board.

 

“Disability” means, unless the applicable Award Agreement says otherwise, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment; provided, however, for purposes of determining the term of an Incentive Stock Option pursuant to Section 6.10 hereof, the term Disability shall have the meaning ascribed to it under Section 22(e)(3) of the Code. The determination of whether an individual has a Disability shall be determined under procedures established by the Committee. Except in situations where the Committee is determining Disability for purposes of the term of an Incentive Stock Option pursuant to Section 6.10 hereof within the meaning of Section 22(e)(3) of the Code, the Committee may rely on any determination that a Participant is disabled for purposes of benefits under any long-term disability plan maintained by the Company or any Affiliate in which a Participant participates.

 

“Disqualifying Disposition” has the meaning set forth in Section 14.12.

 

“Effective Date” shall mean the date that the Company’s shareholders approve this Plan if such shareholder approval occurs before the first anniversary of the date the Plan is adopted by the Board.

 

“Employee” means any person, including an Officer or Director, employed by the Company or an Affiliate; provided, that, for purposes of determining eligibility to receive Incentive Stock Options, an Employee shall mean an employee of the Company or a parent or subsidiary corporation within the meaning of Section 424 of the Code. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Fair Market Value” means, as of any date, the value of the Common Stock as determined below. If the Common Stock is listed on any established stock exchange or a national market system, including without limitation, the New York Stock Exchange or the NASDAQ Stock Market, the Fair Market Value shall be the closing price of a share of Common Stock (or if no sales were reported the closing price on the date immediately preceding such date) as quoted on such exchange or system on the day of determination, as reported in the Wall Street Journal. In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Committee and such determination shall be conclusive and binding on all persons.

 

“Fiscal Year” means the Company’s fiscal year.

 

“Free Standing Rights” has the meaning set forth in Section 7.1(a).

 

“Good Reason” means, unless the applicable Award Agreement states otherwise:

 

(a) If an Employee or Consultant is a party to an employment or service agreement with the Company or its Affiliates and such agreement provides for a definition of Good Reason, the definition contained therein; or

 

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(b) If no such agreement exists or if such agreement does not define Good Reason, the occurrence of one or more of the following without the Participant’s express written consent, which circumstances are not remedied by the Company within thirty (30) days of its receipt of a written notice from the Participant describing the applicable circumstances (which notice must be provided by the Participant within ninety (90) days of the Participant’s knowledge of the applicable circumstances): (i) any material, adverse change in the Participant’s duties, responsibilities, authority, title, status or reporting structure; or (ii) a material reduction in the Participant’s base salary or bonus opportunity.

 

“Grant Date” means the date on which the Committee adopts a resolution, or takes other appropriate action, expressly granting an Award to a Participant that specifies the key terms and conditions of the Award or, if a later date is set forth in such resolution, then such date as is set forth in such resolution.

 

“Incentive Stock Option” means an Option that is designated by the Committee as an incentive stock option within the meaning of Section 422 of the Code and that meets the requirements set out in the Plan.

 

“Incumbent Directors” means individuals who, on the Effective Date, constitute the Board, provided that any individual becoming a Director subsequent to the Effective Date whose election or nomination for election to the Board was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for Director without objection to such nomination) shall be an Incumbent Director. No individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to Directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be an Incumbent Director.

 

“Non-Employee Director” means a Director who is a “non-employee director” within the meaning of Rule 16b-3.

 

“Non-qualified Stock Option” means an Option that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

 

“Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

“Option” means an Incentive Stock Option or a Non-qualified Stock Option granted pursuant to the Plan.

 

“Optionholder” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.

 

“Option Exercise Price” means the price at which a share of Common Stock may be purchased upon the exercise of an Option.

 

“Other Equity-Based Award” means an Award that is not an Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, or Performance Share Award that is granted under Section 7.4 and is payable by delivery of Common Stock and/or which is measured by reference to the value of Common Stock.

 

“Participant” means an eligible person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Award.

 

“Performance Goals” means, for a Performance Period, the one or more goals established by the Committee for the Performance Period based upon business criteria or other performance measures determined by the Committee in its discretion.

 

“Performance Period” means the one or more periods of time, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Performance Share Award or a Cash Award.

 

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“Performance Share Award” means any Award granted pursuant to Section 7.3 hereof.

 

“Performance Share” means the grant of a right to receive a number of actual shares of Common Stock or share units based upon the performance of the Company during a Performance Period, as determined by the Committee.

 

“Permitted Transferee” means: (a) a member of the Optionholder’s immediate family (child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships), any person sharing the Optionholder’s household (other than a tenant or employee), a trust in which these persons have more than 50% of the beneficial interest, a foundation in which these persons (or the Optionholder) control the management of assets, and any other entity in which these persons (or the Optionholder) own more than 50% of the voting interests; (b) third parties designated by the Committee in connection with a program established and approved by the Committee pursuant to which Participants may receive a cash payment or other consideration in consideration for the transfer of a Non-qualified Stock Option; and (c) such other transferees as may be permitted by the Committee in its sole discretion.

 

“Person” means a person as defined in Section 13(d)(3) of the Exchange Act.

 

“Plan” means this Beyond Air, Inc. Seventh Amended and Restated 2013 Equity Incentive Plan, as amended and/or amended and restated from time to time.

 

“Related Rights” has the meaning set forth in Section 7.1(a).

 

“Restricted Award” means any Award granted pursuant to Section 7.2(a).

 

“Restricted Period” has the meaning set forth in Section 7.2(a).

 

“Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act or any successor to Rule 16b-3, as in effect from time to time.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Stock Appreciation Right” means the right pursuant to an Award granted under Section 7.1 to receive, upon exercise, an amount payable in cash or shares equal to the number of shares subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (a) the Fair Market Value of a share of Common Stock on the date the Award is exercised, over (b) the exercise price specified in the Stock Appreciation Right Award Agreement.

 

“Stock for Stock Exchange” has the meaning set forth in Section 6.4.

 

“Substitute Award” has the meaning set forth in Section 4.6.

 

“Ten Percent Shareholder” means a person who owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any of its Affiliates.

 

“Total Share Reserve” has the meaning set forth in Section 4.1.

 

3. Administration.

 

3.1 Authority of Committee. The Plan shall be administered by the Committee or, in the Board’s sole discretion, by the Board. Subject to the terms of the Plan, the Committee’s charter and Applicable Laws, and in addition to other express powers and authorization conferred by the Plan, the Committee shall have the authority:

 

(a) to construe and interpret the Plan and apply its provisions;

 

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(b) to promulgate, amend, and rescind rules and regulations relating to the administration of the Plan;

 

(c) to authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan;

 

(d) to delegate its authority to one or more Officers of the Company with respect to Awards that do not involve “insiders” within the meaning of Section 16 of the Exchange Act;

 

(e) to determine when Awards are to be granted under the Plan and the applicable Grant Date;

 

(f) from time to time to select, subject to the limitations set forth in this Plan, those eligible Award recipients to whom Awards shall be granted;

 

(g) to determine the number of shares of Common Stock to be made subject to each Award;

 

(h) to determine whether each Option is to be an Incentive Stock Option or a Non-qualified Stock Option;

 

(i) to prescribe the terms and conditions of each Award, including, without limitation, the exercise price and medium of payment and vesting provisions, and to specify the provisions of the Award Agreement relating to such grant;

 

(j) to determine the target number of Performance Shares to be granted pursuant to a Performance Share Award, the performance measures that will be used to establish the Performance Goals, the Performance Period(s) and the number of Performance Shares earned by a Participant;

 

(k) to amend any outstanding Awards, including for the purpose of modifying the time or manner of vesting, or the term of any outstanding Award; provided, however, that if any such amendment impairs a Participant’s rights or increases a Participant’s obligations under his or her Award or creates or increases a Participant’s federal income tax liability with respect to an Award, such amendment shall also be subject to the Participant’s consent;

 

(l) to determine the duration and purpose of leaves of absences which may be granted to a Participant without constituting termination of their employment for purposes of the Plan, which periods shall be no shorter than the periods generally applicable to Employees under the Company’s employment policies;

 

(m) to make decisions with respect to outstanding Awards that may become necessary upon a change in corporate control or an event that triggers anti-dilution adjustments;

 

(n) to interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan;

 

(o) to exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the Plan;

 

(p) to modify the exercise or grant price of an outstanding Award after it is granted;

 

(q) to cancel an outstanding Award at a time when its exercise or grant price exceeds the Fair Market Value of the underlying stock, in exchange for cash, another option or stock appreciation right, restricted stock, or other equity award; and

 

(r) to take any other action that is treated as a repricing under generally accepted accounting principles.

 

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Notwithstanding, the Committee’s authority to modify, amend, or adjust the exercise price of any outstanding stock option or stock appreciation right, shall not in any manner result in the exercise price being set at less than the consolidated closing bid price per share on the trading day immediately preceding the execution of the binding agreement effecting such modification.

 

3.2 Committee Decisions Final. All decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on the Company and the Participants, unless such decisions are determined by a court having jurisdiction to be arbitrary and capricious.

 

3.3 Delegation. The Committee or, if no Committee has been appointed, the Board may delegate administration of the Plan to a committee or committees of one or more members of the Board, and the term “Committee” shall apply to any person or persons to whom such authority has been delegated. The Committee shall have the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board or the Committee shall thereafter be to the committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration of the Plan. The members of the Committee shall be appointed by and serve at the pleasure of the Board. From time to time, the Board may increase or decrease the size of the Committee, add additional members to, remove members (with or without cause) from, appoint new members in substitution therefor, and fill vacancies, however caused, in the Committee. The Committee shall act pursuant to a vote of the majority of its members or, in the case of a Committee comprised of only two members, the unanimous consent of its members, whether present or not, or by the written consent of the majority of its members and minutes shall be kept of all of its meetings and copies thereof shall be provided to the Board. Subject to the limitations prescribed by the Plan and the Board, the Committee may establish and follow such rules and regulations for the conduct of its business as it may determine to be advisable.

 

3.4 Committee Composition. Except as otherwise determined by the Board, the Committee shall consist solely of two or more Non-Employee Directors. The Board shall have discretion to determine whether or not it intends to comply with the exemption requirements of Rule 16b-3. However, if the Board intends to satisfy such exemption requirements, with respect to any insider subject to Section 16 of the Exchange Act, the Committee shall be a compensation committee of the Board that at all times consists solely of two or more Non-Employee Directors. Within the scope of such authority, the Board or the Committee may delegate to a committee of one or more members of the Board who are not Non-Employee Directors the authority to grant Awards to eligible persons who are not then subject to Section 16 of the Exchange Act. Nothing herein shall create an inference that an Award is not validly granted under the Plan in the event Awards are granted under the Plan by a compensation committee of the Board that does not at all times consist solely of two or more Non-Employee Directors.

 

3.5 Indemnification. In addition to such other rights of indemnification as they may have as Directors or members of the Committee, and to the extent allowed by Applicable Laws, the Committee shall be indemnified by the Company against the reasonable expenses, including attorney’s fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which the Committee may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted under the Plan, and against all amounts paid by the Committee in settlement thereof (provided, however, that the settlement has been approved by the Company, which approval shall not be unreasonably withheld) or paid by the Committee in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee did not act in good faith and in a manner which such person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful; provided, however, that within 60 days after the institution of any such action, suit or proceeding, such Committee shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding.

 

4. Shares Subject to the Plan.

 

4.1 Subject to adjustment in accordance with Section 11, no more than 16,600,000 shares of Common Stock shall be available for the grant of Awards under the Plan (the “Total Share Reserve”). During the terms of the Awards, the Company shall keep available at all times the number of shares of Common Stock required to satisfy such Awards.

 

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4.2 Shares of Common Stock available for distribution under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner.

 

4.3 Subject to adjustment in accordance with Section 11, no more than 16,600,000 shares of Common Stock may be issued in the aggregate pursuant to the exercise of Incentive Stock Options (the “ISO Limit”).

 

4.4 Reserved.

 

4.5 Any shares of Common Stock subject to an Award that expires or is canceled, forfeited, or terminated without issuance of the full number of shares of Common Stock to which the Award related will again be available for issuance under the Plan. Notwithstanding anything to the contrary contained herein: shares subject to an Award under the Plan shall not again be made available for issuance or delivery under the Plan if such shares are (a) shares tendered in payment of an Option, (b) shares delivered or withheld by the Company to satisfy any tax withholding obligation, or (c) shares covered by a stock-settled Stock Appreciation Right or other Awards that were not issued upon the settlement of the Award.

 

4.6 Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by the Company or with which the Company combines (“Substitute Awards”). Substitute Awards shall not be counted against the Total Share Reserve; provided, that, Substitute Awards issued in connection with the assumption of, or in substitution for, outstanding options intended to qualify as Incentive Stock Options shall be counted against the ISO limit. Subject to applicable stock exchange requirements, available shares under a shareholder-approved plan of an entity directly or indirectly acquired by the Company or with which the Company combines (as appropriately adjusted to reflect such acquisition or transaction) may be used for Awards under the Plan and shall not count toward the Total Share Limit.

 

5. Eligibility.

 

5.1 Eligibility for Specific Awards. Incentive Stock Options may be granted only to Employees. Awards other than Incentive Stock Options may be granted to Employees, Consultants and Directors and those individuals whom the Committee determines are reasonably expected to become Employees, Consultants and Directors following the Grant Date.

 

5.2 Ten Percent Shareholders. A Ten Percent Shareholder shall not be granted an Incentive Stock Option unless the Option Exercise Price is at least 110% of the Fair Market Value of the Common Stock on the Grant Date and the Option is not exercisable after the expiration of five years from the Grant Date.

 

6. Option Provisions. Each Option granted under the Plan shall be evidenced by an Award Agreement. Each Option so granted shall be subject to the conditions set forth in this Section 6, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options shall be separately designated Incentive Stock Options or Non-qualified 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. Notwithstanding the foregoing, the Company shall have no liability to any Participant or any other person if an Option designated as an Incentive Stock Option fails to qualify as such at any time or if an Option is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code and the terms of such Option do not satisfy the requirements of Section 409A of the Code. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option or otherwise) the substance of each of the following provisions:

 

6.1 Term. Subject to the provisions of Section 5.2 regarding Ten Percent Shareholders, no Incentive Stock Option shall be exercisable after the expiration of 10 years from the Grant Date. The term of a Non-qualified Stock Option granted under the Plan shall be determined by the Committee; provided, however, no Non-qualified Stock Option shall be exercisable after the expiration of 10 years from the Grant Date.

 

6.2 Exercise Price of an Incentive Stock Option. Subject to the provisions of Section 5.2 regarding Ten Percent Shareholders, the Option Exercise Price of each Incentive Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing, an Incentive Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 424(a) of the Code.

 

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6.3 Exercise Price of a Non-qualified Stock Option. The Option Exercise Price of each Non-qualified Stock Option shall be not less than 100% of the Fair Market Value of the Common Stock subject to the Option on the Grant Date. Notwithstanding the foregoing, a Non-qualified Stock Option may be granted with an Option Exercise Price lower than that set forth in the preceding sentence if such Option is granted pursuant to an assumption or substitution for another option in a manner satisfying the provisions of Section 409A of the Code.

 

6.4 Consideration. The Option Exercise Price of Common Stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (a) in cash or by certified or bank check at the time the Option is exercised or (b) in the discretion of the Committee, upon such terms as the Committee shall approve, the Option Exercise Price may be paid: (i) by delivery to the Company of other Common Stock, duly endorsed for transfer to the Company, with a Fair Market Value on the date of delivery equal to the Option Exercise Price (or portion thereof) due for the number of shares being acquired, or by means of attestation whereby the Participant identifies for delivery specific shares of Common Stock that have an aggregate Fair Market Value on the date of attestation equal to the Option Exercise Price (or portion thereof) and receives a number of shares of Common Stock equal to the difference between the number of shares thereby purchased and the number of identified attestation shares of Common Stock (a “Stock for Stock Exchange”); (ii) a “cashless” exercise program established with a broker; (iii) by reduction in the number of shares of Common Stock otherwise deliverable upon exercise of such Option with a Fair Market Value equal to the aggregate Option Exercise Price at the time of exercise; (iv) by any combination of the foregoing methods; or (v) in any other form of legal consideration that may be acceptable to the Committee. Unless otherwise specifically provided in the Option, the exercise price of Common Stock acquired pursuant to an Option that is paid by delivery (or attestation) to the Company of other Common Stock acquired, directly or indirectly from the Company, shall be paid only by shares of the Common Stock of the Company that have been held for more than six months (or such longer or shorter period of time required to avoid a charge to earnings for financial accounting purposes). Notwithstanding the foregoing, during any period for which the Common Stock is publicly traded (i.e., the Common Stock is listed on any established stock exchange or a national market system) an exercise by a Director or Officer that involves or may involve a direct or indirect extension of credit or arrangement of an extension of credit by the Company, directly or indirectly, in violation of Section 402(a) of the Sarbanes-Oxley Act of 2002 shall be prohibited with respect to any Award under this Plan.

 

6.5 Transferability of an Incentive Stock Option. An Incentive Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.

 

6.6 Transferability of a Non-qualified Stock Option. A Non-qualified Stock Option may, in the sole discretion of the Committee, be transferable to a Permitted Transferee, upon written approval by the Committee to the extent provided in the Award Agreement. If the Non-qualified Stock Option does not provide for transferability, then the Non-qualified Stock Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the Optionholder only by the Optionholder. Notwithstanding the foregoing, the Optionholder may, by delivering written notice to the Company, in a form satisfactory to the Company, designate a third party who, in the event of the death of the Optionholder, shall thereafter be entitled to exercise the Option.

 

6.7 Vesting of Options. Each Option may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Option may be subject to such other terms and conditions on the time or times when it may be exercised (which may be based on performance or other criteria) as the Committee may deem appropriate. The vesting provisions of individual Options may vary. No Option may be exercised for a fraction of a share of Common Stock. The Committee may, but shall not be required to, provide for an acceleration of vesting and exercisability in the terms of any Award Agreement upon the occurrence of a specified event.

 

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6.8 Termination of Continuous Service. Unless otherwise provided in an Award Agreement or in an employment agreement the terms of which have been approved by the Committee, in the event an Optionholder’s Continuous Service terminates (other than upon the Optionholder’s death or Disability), the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination) but only within such period of time ending on the earlier of (a) the date three months following the termination of the Optionholder’s Continuous Service or (b) the expiration of the term of the Option as set forth in the Award Agreement; provided that, if the termination of Continuous Service is by the Company for Cause, all outstanding Options (whether or not vested) shall immediately terminate and cease to be exercisable. If, after termination, the Optionholder does not exercise his or her Option within the time specified in the Award Agreement, the Option shall terminate.

 

6.9 Extension of Termination Date. An Optionholder’s Award Agreement may also provide that if the exercise of the Option following the termination of the Optionholder’s Continuous Service for any reason would be prohibited at any time because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act or any other state or federal securities law or the rules of any securities exchange or interdealer quotation system, then the Option shall terminate on the earlier of (a) the expiration of the term of the Option in accordance with Section 6.1 or (b) the expiration of a period after termination of the Participant’s Continuous Service that is three months after the end of the period during which the exercise of the Option would be in violation of such registration or other securities law requirements.

 

6.10 Disability of Optionholder. Unless otherwise provided in an Award Agreement, in the event that an Optionholder’s Continuous Service terminates as a result of the Optionholder’s Disability, the Optionholder may exercise his or her Option (to the extent that the Optionholder was entitled to exercise such Option as of the date of termination), but only within such period of time ending on the earlier of (a) the date 12 months following such termination or (b) the expiration of the term of the Option as set forth in the Award Agreement. If, after termination, the Optionholder does not exercise his or her Option within the time specified herein or in the Award Agreement, the Option shall terminate.

 

6.11 Death of Optionholder. Unless otherwise provided in an Award Agreement, in the event an Optionholder’s Continuous Service terminates as a result of the Optionholder’s death, then the Option may be exercised (to the extent the Optionholder was entitled to exercise such Option as of the date of death) by the Optionholder’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by a person designated to exercise the Option upon the Optionholder’s death, but only within the period ending on the earlier of (a) the date 12 months following the date of death or (b) the expiration of the term of such Option as set forth in the Award Agreement. If, after the Optionholder’s death, the Option is not exercised within the time specified herein or in the Award Agreement, the Option shall terminate.

 

6.12 Incentive Stock Option $100,000 Limitation. 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 its Affiliates) exceeds $100,000, the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Non-qualified Stock Options.

 

7. Provisions of Awards Other Than Options.

 

7.1 Stock Appreciation Rights.

 

(a) General

 

Each Stock Appreciation Right granted under the Plan shall be evidenced by an Award Agreement. Each Stock Appreciation Right so granted shall be subject to the conditions set forth in this Section 7.1, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. Stock Appreciation Rights may be granted alone (“Free Standing Rights”) or in tandem with an Option granted under the Plan (“Related Rights”).

 

(b) Grant Requirements

 

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Any Related Right that relates to a Non-qualified Stock Option may be granted at the same time the Option is granted or at any time thereafter but before the exercise or expiration of the Option. Any Related Right that relates to an Incentive Stock Option must be granted at the same time the Incentive Stock Option is granted.

 

(c) Term of Stock Appreciation Rights

 

The term of a Stock Appreciation Right granted under the Plan shall be determined by the Committee; provided, however, no Stock Appreciation Right shall be exercisable later than the tenth anniversary of the Grant Date.

 

(d) Vesting of Stock Appreciation Rights

 

Each Stock Appreciation Right may, but need not, vest and therefore become exercisable in periodic installments that may, but need not, be equal. The Stock Appreciation Right may be subject to such other terms and conditions on the time or times when it may be exercised as the Committee may deem appropriate. The vesting provisions of individual Stock Appreciation Rights may vary. No Stock Appreciation Right may be exercised for a fraction of a share of Common Stock. The Committee may, but shall not be required to, provide for an acceleration of vesting and exercisability in the terms of any Stock Appreciation Right upon the occurrence of a specified event.

 

(e) Exercise and Payment

 

Upon exercise of a Stock Appreciation Right, the holder shall be entitled to receive from the Company an amount equal to the number of shares of Common Stock subject to the Stock Appreciation Right that is being exercised multiplied by the excess of (i) the Fair Market Value of a share of Common Stock on the date the Award is exercised, over (ii) the exercise price specified in the Stock Appreciation Right or related Option. Payment with respect to the exercise of a Stock Appreciation Right shall be made on the date of exercise. Payment shall be made in the form of shares of Common Stock (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Committee in its sole discretion), cash or a combination thereof, as determined by the Committee.

 

(f) Exercise Price

 

The exercise price of a Free Standing Right shall be determined by the Committee. A Related Right granted simultaneously with or subsequent to the grant of an Option and in conjunction therewith or in the alternative thereto shall have the same exercise price as the related Option, shall be transferable only upon the same terms and conditions as the related Option, and shall be exercisable only to the same extent as the related Option; provided, however, that a Stock Appreciation Right, by its terms, shall be exercisable only when the Fair Market Value per share of Common Stock subject to the Stock Appreciation Right and related Option exceeds the exercise price per share thereof and no Stock Appreciation Rights may be granted in tandem with an Option unless the Committee determines that the requirements of Section 7.1(b) are satisfied.

 

(g) Reduction in the Underlying Option Shares

 

Upon any exercise of a Related Right, the number of shares of Common Stock for which any related Option shall be exercisable shall be reduced by the number of shares for which the Stock Appreciation Right has been exercised. The number of shares of Common Stock for which a Related Right shall be exercisable shall be reduced upon any exercise of any related Option by the number of shares of Common Stock for which such Option has been exercised.

 

7.2 Restricted Awards.

 

(a) General

 

A Restricted Award is an Award of actual shares of Common Stock (“Restricted Stock”) or hypothetical Common Stock units (“Restricted Stock Units”) having a value equal to the Fair Market Value of an identical number of shares of Common Stock, which may, but need not, provide that such Restricted Award may not be sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as collateral for a loan or as security for the performance of any obligation or for any other purpose for such period (the “Restricted Period”) as the Committee shall determine. Each Restricted Award granted under the Plan shall be evidenced by an Award Agreement. Each Restricted Award so granted shall be subject to the conditions set forth in this Section 7.2, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement.

 

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(b) Restricted Stock and Restricted Stock Units

 

(i) Each Participant granted Restricted Stock shall execute and deliver to the Company an Award Agreement with respect to the Restricted Stock setting forth the restrictions and other terms and conditions applicable to such Restricted Stock. If the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than delivered to the Participant pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (A) an escrow agreement satisfactory to the Committee, if applicable and (B) the appropriate blank stock power with respect to the Restricted Stock covered by such agreement. If a Participant fails to execute an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and stock power, the Award shall be null and void. Subject to the restrictions set forth in the Award, the Participant generally shall have the rights and privileges of a shareholder as to such Restricted Stock, including the right to vote such Restricted Stock and the right to receive dividends; provided that, any cash dividends and stock dividends with respect to the Restricted Stock shall be withheld by the Company for the Participant’s account, and interest may be credited on the amount of the cash dividends withheld at a rate and subject to such terms as determined by the Committee. The cash dividends or stock dividends so withheld by the Committee and attributable to any particular share of Restricted Stock (and earnings thereon, if applicable) shall be distributed to the Participant in cash or, at the discretion of the Committee, in shares of Common Stock having a Fair Market Value equal to the amount of such dividends, if applicable, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends.

 

(ii) The terms and conditions of a grant of Restricted Stock Units shall be reflected in an Award Agreement. No shares of Common Stock shall be issued at the time a Restricted Stock Unit is granted, and the Company will not be required to set aside funds for the payment of any such Award. A Participant shall have no voting rights with respect to any Restricted Stock Units granted hereunder. The Committee may also grant Restricted Stock Units with a deferral feature, whereby settlement is deferred beyond the vesting date until the occurrence of a future payment date or event set forth in an Award Agreement (“Deferred Stock Units”). At the discretion of the Committee, each Restricted Stock Unit or Deferred Stock Unit (representing one share of Common Stock) may be credited with an amount equal to the cash and stock dividends paid by the Company in respect of one share of Common Stock (“Dividend Equivalents”).

 

(c) Restrictions

 

(i) Restricted Stock awarded to a Participant shall be subject to the following restrictions until the expiration of the Restricted Period, and to such other terms and conditions as may be set forth in the applicable Award Agreement: (A) if an escrow arrangement is used, the Participant shall not be entitled to delivery of the stock certificate; (B) the shares shall be subject to the restrictions on transferability set forth in the Award Agreement; (C) the shares shall be subject to forfeiture to the extent provided in the applicable Award Agreement; and (D) to the extent such shares are forfeited, the stock certificates shall be returned to the Company, and all rights of the Participant to such shares and as a shareholder with respect to such shares shall terminate without further obligation on the part of the Company.

 

(ii) Restricted Stock Units and Deferred Stock Units awarded to any Participant shall be subject to (A) forfeiture until the expiration of the Restricted Period, and satisfaction of any applicable Performance Goals during such period, to the extent provided in the applicable Award Agreement, and to the extent such Restricted Stock Units or Deferred Stock Units are forfeited, all rights of the Participant to such Restricted Stock Units or Deferred Stock Units shall terminate without further obligation on the part of the Company and (B) such other terms and conditions as may be set forth in the applicable Award Agreement.

 

(iii) The Committee shall have the authority to remove any or all of the restrictions on the Restricted Stock, Restricted Stock Units and Deferred Stock Units whenever it may determine that, by reason of changes in Applicable Laws or other changes in circumstances arising after the date the Restricted Stock or Restricted Stock Units or Deferred Stock Units are granted, such action is appropriate.

 

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(d) Restricted Period

 

With respect to Restricted Awards, the Restricted Period shall commence on the Grant Date and end at the time or times set forth on a schedule established by the Committee in the applicable Award Agreement.

 

(e) Delivery of Restricted Stock and Settlement of Restricted Stock Units

 

Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in Section 7.2(c) and the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used, upon such expiration, the Company shall deliver to the Participant, or his or her beneficiary, without charge, the stock certificate evidencing the shares of Restricted Stock which have not then been forfeited and with respect to which the Restricted Period has expired (to the nearest full share). Upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, or at the expiration of the deferral period with respect to any outstanding Deferred Stock Units, the Company shall deliver to the Participant, or his or her beneficiary, without charge, one share of Common Stock for each such outstanding vested Restricted Stock Unit or Deferred Stock Unit (“Vested Unit”); provided, however, that, if explicitly provided in the applicable Award Agreement, the Committee may, in its sole discretion, elect to pay cash or part cash and part Common Stock in lieu of delivering only shares of Common Stock for Vested Units. If a cash payment is made in lieu of delivering shares of Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the Restricted Period lapsed in the case of Restricted Stock Units, or the delivery date in the case of Deferred Stock Units, with respect to each Vested Unit.

 

(f) Stock Restrictions

 

Each certificate representing Restricted Stock awarded under the Plan shall bear a legend in such form as the Company deems appropriate.

 

7.3 Performance Share Awards.

 

(a) Grant of Performance Share Awards

 

Each Performance Share Award granted under the Plan shall be evidenced by an Award Agreement. Each Performance Share Award so granted shall be subject to the conditions set forth in this Section 7.3, and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. The Committee shall have the discretion to determine: (i) the number of shares of Common Stock or stock-denominated units subject to a Performance Share Award granted to any Participant; (ii) the Performance Period applicable to any Award; (iii) the conditions that must be satisfied for a Participant to earn an Award; and (iv) the other terms, conditions and restrictions of the Award.

 

(b) Earning Performance Share Awards

 

The number of Performance Shares earned by a Participant will depend on the extent to which the performance goals established by the Committee are attained within the applicable Performance Period, as determined by the Committee.

 

7.4 Other Equity-Based Awards and Cash Awards. The Committee may grant Other Equity-Based Awards, either alone or in tandem with other Awards, in such amounts and subject to such conditions as the Committee shall determine in its sole discretion. Each Equity-Based Award shall be evidenced by an Award Agreement and shall be subject to such conditions, not inconsistent with the Plan, as may be reflected in the applicable Award Agreement. The Committee may grant Cash Awards in such amounts and subject to such Performance Goals, other vesting conditions, and such other terms as the Committee determines in its discretion. Cash Awards shall be evidenced in such form as the Committee may determine.

 

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8. Securities Law Compliance.

 

Each Award Agreement shall provide that no shares of Common Stock shall be purchased or sold thereunder unless and until (a) any then applicable requirements of state or federal laws and regulatory agencies have been fully complied with to the satisfaction of the Company and its counsel and (b) if required to do so by the Company, the Participant has executed and delivered to the Company a letter of investment intent in such form and containing such provisions as the Committee may require. The Company shall use reasonable efforts to seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Awards and to issue and sell shares of Common Stock upon exercise of the Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act the Plan, any Award or any Common Stock issued or issuable pursuant to any such Award. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Awards unless and until such authority is obtained.

 

9. Use of Proceeds from Stock.

 

Proceeds from the sale of Common Stock pursuant to Awards, or upon exercise thereof, shall constitute general funds of the Company.

 

10. Miscellaneous.

 

10.1 Acceleration of Exercisability and Vesting. The Committee shall have the power to accelerate the time at which an Award may first be exercised or the time during which an Award or any part thereof will vest in accordance with the Plan, notwithstanding the provisions in the Award stating the time at which it may first be exercised or the time during which it will vest.

 

10.2 Shareholder Rights. Except as provided in the Plan or an Award Agreement, no Participant shall 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 such Award unless and until such Participant has satisfied all requirements for exercise of the Award pursuant to its terms and no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions of other rights for which the record date is prior to the date such Common Stock certificate is issued, except as provided in Section 11 hereof.

 

10.3 No Employment or Other Service Rights. Nothing in the Plan or any instrument executed or Award granted pursuant thereto shall confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or shall affect the right of the Company or an Affiliate to terminate (a) the employment of an Employee with or without notice and with or without Cause or (b) the service of a Director pursuant to the By-laws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.

 

10.4 Transfer; Approved Leave of Absence. For purposes of the Plan, no termination of employment by an Employee shall be deemed to result from either (a) a transfer of employment to the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another, or (b) an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the Employee’s right to reemployment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Committee otherwise so provides in writing, in either case, except to the extent inconsistent with Section 409A of the Code if the applicable Award is subject thereto.

 

10.5 Withholding Obligations. To the extent provided by the terms of an Award Agreement and subject to the discretion of the Committee, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (a) tendering a cash payment; (b) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the maximum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned and unencumbered shares of Common Stock of the Company.

 

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11. Adjustments Upon Changes in Stock. In the event of changes in the outstanding Common Stock or in the capital structure of the Company by reason of any stock or extraordinary cash dividend, stock split, reverse stock split, an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, exchange, or other relevant change in capitalization occurring after the Grant Date of any Award, Awards granted under the Plan and any Award Agreements, the exercise price of Options and Stock Appreciation Rights, the Performance Goals to which Performance Share Awards and Cash Awards are subject, the maximum number of shares of Common Stock subject to all Awards stated in Section 4 will be equitably adjusted or substituted, as to the number, price or kind of a share of Common Stock or other consideration subject to such Awards to the extent necessary to preserve the economic intent of such Award. In the case of adjustments made pursuant to this Section 11, unless the Committee specifically determines that such adjustment is in the best interests of the Company or its Affiliates, the Committee shall, in the case of Incentive Stock Options, ensure that any adjustments under this Section 11 will not constitute a modification, extension or renewal of the Incentive Stock Options within the meaning of Section 424(h)(3) of the Code and in the case of Non-qualified Stock Options, ensure that any adjustments under this Section 11 will not constitute a modification of such Non-qualified Stock Options within the meaning of Section 409A of the Code. Any adjustments made under this Section 11 shall be made in a manner which does not adversely affect the exemption provided pursuant to Rule 16b-3 under the Exchange Act. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.

 

12. Effect of Change in Control.

 

12.1 Unless otherwise provided in an Award Agreement, notwithstanding any provision of the Plan to the contrary:

 

(a) In the event of a Participant’s termination of Continuous Service without Cause or for Good Reason during the 3-month period following a Change in Control, notwithstanding any provision of the Plan or any applicable Award Agreement to the contrary, all outstanding Options and Stock Appreciation Rights shall become immediately exercisable with respect to 100% of the shares subject to such Options or Stock Appreciation Rights, and/or the Restricted Period shall expire immediately with respect to 100% of the outstanding shares of Restricted Stock or Restricted Stock Units as of the date of the Participant’s termination of Continuous Service.

 

(b) With respect to Performance Share Awards and Cash Awards, in the event of a Change in Control, all incomplete Performance Periods in respect of such Awards in effect on the date the Change in Control occurs shall end on the date of such change and the Committee shall (i) determine the extent to which Performance Goals with respect to each such Performance Period have been met based upon such audited or unaudited financial information then available as it deems relevant and (ii) cause to be paid to the applicable Participant partial or full Awards with respect to Performance Goals for each such Performance Period based upon the Committee’s determination of the degree of attainment of Performance Goals or, if not determinable, assuming that the applicable “target” levels of performance have been attained, or on such other basis determined by the Committee.

 

To the extent practicable, any actions taken by the Committee under the immediately preceding clauses (a) and (b) shall occur in a manner and at a time which allows affected Participants the ability to participate in the Change in Control with respect to the shares of Common Stock subject to their Awards.

 

12.2 In addition, in the event of a Change in Control, the Committee may in its discretion and upon at least 10 days’ advance notice to the affected persons, cancel any outstanding Awards and pay to the holders thereof, in cash or stock, or any combination thereof, the value of such Awards based upon the price per share of Common Stock received or to be received by other shareholders of the Company in the event. In the case of any Option or Stock Appreciation Right with an exercise price (or SAR Exercise Price in the case of a Stock Appreciation Right) that equals or exceeds the price paid for a share of Common Stock in connection with the Change in Control, the Committee may cancel the Option or Stock Appreciation Right without the payment of consideration therefor.

 

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12.3 The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to all or substantially all of the assets and business of the Company and its Affiliates, taken as a whole.

 

13. Amendment of the Plan and Awards.

 

13.1 Amendment of Plan. The Board at any time, and from time to time, may amend or terminate the Plan. However, except as provided in Section 11 relating to adjustments upon changes in Common Stock and Section 13.3, no amendment shall be effective unless approved by the shareholders of the Company to the extent shareholder approval is necessary to satisfy any Applicable Laws. At the time of such amendment, the Board shall determine, upon advice from counsel, whether such amendment will be contingent on shareholder approval.

 

13.2 Shareholder Approval. The Board may, in its sole discretion, submit any other amendment to the Plan for shareholder approval.

 

13.3 Contemplated Amendments. It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees, Consultants and Directors with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options or to the nonqualified deferred compensation provisions of Section 409A of the Code and/or to bring the Plan and/or Awards granted under it into compliance therewith.

 

13.4 No Impairment of Rights. Rights under any Award granted before amendment of the Plan shall not be impaired by any amendment of the Plan unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.

 

13.5 Amendment of Awards. The Committee at any time, and from time to time, may amend the terms of any one or more Awards; provided, however, that the Committee may not affect any amendment which would otherwise constitute an impairment of the rights under any Award unless (a) the Company requests the consent of the Participant and (b) the Participant consents in writing.

 

14. General Provisions.

 

14.1 Forfeiture Events. The Committee may specify in an Award Agreement that the Participant’s rights, payments and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture or recoupment upon the occurrence of certain events, in addition to applicable vesting conditions of an Award. Such events may include, without limitation, breach of non-competition, non-solicitation, confidentiality, or other restrictive covenants that are contained in the Award Agreement or otherwise applicable to the Participant, a termination of the Participant’s Continuous Service for Cause, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Affiliates.

 

14.2 Clawback. Notwithstanding any other provisions in this Plan, the Company may cancel any Award, require reimbursement of any Award by a Participant, and effect any other right of recoupment of equity or other compensation provided under the Plan in accordance with any Company policies that may be adopted and/or modified from time to time (“Clawback Policy”). In addition, a Participant may be required to repay to the Company previously paid compensation, whether provided pursuant to the Plan or an Award Agreement, in accordance with the Clawback Policy. By accepting an Award, the Participant is agreeing to be bound by the Clawback Policy, as in effect or as may be adopted and/or modified from time to time by the Company in its discretion (including, without limitation, to comply with applicable law or stock exchange listing requirements).

 

14.3 Other Compensation Arrangements. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to shareholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

 

14.4 Sub-Plans. The Committee may from time to time establish sub-plans under the Plan for purposes of satisfying securities, tax or other laws of various jurisdictions in which the Company intends to grant Awards. Any sub-plans shall contain such limitations and other terms and conditions as the Committee determines are necessary or desirable. All sub-plans shall be deemed a part of the Plan, but each sub-plan shall apply only to the Participants in the jurisdiction for which the sub-plan was designed.

 

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14.5 Deferral of Awards. The Committee may establish one or more programs under the Plan to permit selected Participants the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Participant to payment or receipt of shares of Common Stock or other consideration under an Award. The Committee may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Committee deems advisable for the administration of any such deferral program.

 

14.6 Unfunded Plan. The Plan shall be unfunded. Neither the Company, the Board nor the Committee shall be required to establish any special or separate fund or to segregate any assets to assure the performance of its obligations under the Plan.

 

14.7 Recapitalizations. Each Award Agreement shall contain provisions required to reflect the provisions of Section 11.

 

14.8 Delivery. Upon exercise of a right granted under this Plan, the Company shall issue Common Stock or pay any amounts due within a reasonable period of time thereafter. Subject to any statutory or regulatory obligations the Company may otherwise have, for purposes of this Plan, 30 days shall be considered a reasonable period of time.

 

14.9 No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan. The Committee shall determine whether cash, additional Awards or other securities or property shall be issued or paid in lieu of fractional shares of Common Stock or whether any fractional shares should be rounded, forfeited or otherwise eliminated.

 

14.10 Other Provisions. The Award Agreements authorized under the Plan may contain such other provisions not inconsistent with this Plan, including, without limitation, restrictions upon the exercise of Awards, as the Committee may deem advisable.

 

14.11 Section 409A. The Plan is intended to comply with Section 409A of the Code to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless Applicable Laws require otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following the Participant’s termination of Continuous Service shall instead be paid on the first payroll date after the six-month anniversary of the Participant’s separation from service (or the Participant’s death, if earlier). Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any additional tax or penalty on any Participant under Section 409A of the Code and neither the Company nor the Committee will have any liability to any Participant for such tax or penalty.

 

14.12 Disqualifying Dispositions. Any Participant who shall make a “disposition” (as defined in Section 424 of the Code) of all or any portion of shares of Common Stock acquired upon exercise of an Incentive Stock Option within two years from the Grant Date of such Incentive Stock Option or within one year after the issuance of the shares of Common Stock acquired upon exercise of such Incentive Stock Option (a “Disqualifying Disposition”) shall be required to immediately advise the Company in writing as to the occurrence of the sale and the price realized upon the sale of such shares of Common Stock.

 

14.13 Section 16. It is the intent of the Company that the Plan satisfy, and be interpreted in a manner that satisfies, the applicable requirements of Rule 16b-3 as promulgated under Section 16 of the Exchange Act so that Participants will be entitled to the benefit of Rule 16b-3, or any other rule promulgated under Section 16 of the Exchange Act, and will not be subject to short-swing liability under Section 16 of the Exchange Act. Accordingly, if the operation of any provision of the Plan would conflict with the intent expressed in this Section 14.13, such provision to the extent possible shall be interpreted and/or deemed amended so as to avoid such conflict.

 

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14.14 Beneficiary Designation. Each Participant under the Plan may from time to time name any beneficiary or beneficiaries by whom any right under the Plan is to be exercised in case of such Participant’s death. Each designation will revoke all prior designations by the same Participant, shall be in a form reasonably prescribed by the Committee and shall be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime.

 

14.15 Expenses. The costs of administering the Plan shall be paid by the Company.

 

14.16 Severability. If any of the provisions of the Plan or any Award Agreement is held to be invalid, illegal or unenforceable, whether in whole or in part, such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions shall not be affected thereby.

 

14.17 Plan Headings. The headings in the Plan are for purposes of convenience only and are not intended to define or limit the construction of the provisions hereof.

 

14.18 Non-Uniform Treatment. The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who are eligible to receive, or actually receive, Awards. Without limiting the generality of the foregoing, the Committee shall be entitled to make non-uniform and selective determinations, amendments and adjustments, and to enter into non-uniform and selective Award Agreements.

 

15. Effective Date of Plan. The Plan shall become effective as of the Effective Date, but no Award shall be exercised (or, in the case of a stock Award, shall be granted) unless and until the Plan has been approved by the shareholders of the Company, which approval shall be within twelve (12) months before or after the date the Plan is adopted by the Board.

 

16. Termination or Suspension of the Plan. The Plan shall terminate automatically on August 13, 2028. No Award shall be granted pursuant to the Plan after such date, but Awards theretofore granted may extend beyond that date. The Board may suspend or terminate the Plan at any earlier date pursuant to Section 13.1 hereof. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.

 

17. Choice of Law. The law of the State of Delaware shall govern all questions concerning the construction, validity and interpretation of this Plan, without regard to such state’s conflict of law rules.

 

As adopted by the Board of Directors of Beyond Air, Inc. on October 11, 2024. As approved by the shareholders of Beyond Air, Inc. on November 22, 2024.

 

ANNEX A TO

THE Seventh AMENDED AND RESTATED 2013 EQUITY INCENTIVE PLAN OF
BEYOND AIR, INC.

 

DEFINITIONS

 

For purposes of this Annex and the Grant Notification Letter, the following definitions shall apply:

 

(a) “Affiliate” - any “employing company” within the meaning of Section 102(a) of the Ordinance.

 

(b) “Approved 102 Option” - an Option granted pursuant to Section 102(b) of the Ordinance and held in trust by a Trustee for the benefit of the Grantee.

 

(c) “Capital Gain Option (CGO)” - an Approved 102 Option elected and designated by the Company to qualify under the capital gain tax treatment in accordance with the provisions of Section 102(b)(2) of the Ordinance.

 

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(d) “Controlling Shareholder” - shall have the meaning ascribed to it in Section 32(9) of the Ordinance.

 

(e) “Date of Grant” – the date upon which the Option is granted to the Grantee.

 

(f) “Employee” - a person who is employed by the Company or its Affiliates, including an individual who is serving as a director or an office holder, but excluding any Controlling Shareholder, all as determined in Section 102 of the Ordinance.

 

(g) “Grantee” – a person who receives an Option under this Annex.

 

(h) “ITA” - the Israeli Tax Authorities.

 

(i) “Non-Employee” - a consultant, adviser, service provider, Controlling Shareholder or any other person who is not an Employee.

 

(j) “Ordinary Income Option (OIO)” - an Approved 102 Option elected and designated by the Company to qualify under the ordinary income tax treatment in accordance with the provisions of Section 102(b)(1) of the Ordinance.

 

(k) “102 Option” - any Option granted to Employees pursuant to Section 102 of the Ordinance.

 

(l) “3(i) Option” - an Option granted pursuant to Section 3(i) of the Ordinance to any person who is a Non-Employee.

 

(m) “Ordinance” - the Israeli Income Tax Ordinance [New Version] 1961 as now in effect or as hereafter amended.

 

(n) “Section 102” - Section 102 of the Ordinance and any regulations, rules, orders or procedures promulgated thereunder as now in effect or as hereafter amended.

 

(o) “Trustee” - any individual appointed by the Company to serve as a trustee and approved by the ITA, all in accordance with the provisions of Section 102(a) of the Ordinance.

 

(p) “Unapproved 102 Option” - an Option granted pursuant to Section 102(c) of the Ordinance and not held in trust by a Trustee.

 

For the avoidance of any doubt, it is hereby clarified that any capitalized terms not specifically defined in this Annex shall be construed according to the interpretation given to it in the Plan.

 

ISRAEL ANNEX

 

1. GENERAL

 

1.1 This Annex (the: “Annex”) shall apply only to Grantees who are residents of the State of Israel at the Date of Grant or those who are deemed to be residents of the state of Israel for the payment of tax at the Date of Grant. The provisions specified hereunder shall form an integral part of Section 4 of the Amended and Restated 2013 Equity Incentive Plan (the: “Plan”) of Beyond Air, Inc. (the: “Company”) and in particular Section 4 of the Plan (hereinafter: the “Scheme”), which applies to the issuance of options to purchase shares of Common Stock (the “Shares”) of the Company. According to the Scheme, Options to purchase the Company’s Shares may be issued to employees, directors, consultants and service providers of the Company or its affiliates. The tax rules and the US tax provisions and regulations shall not apply to any grants hereunder to a Grantee who is a resident of the State of Israel at the Date of Grant or those who are deemed to be residents of the State of Israel for the payment of tax at the Date of Grant.

 

1.2 This Annex is effective with respect to Options granted following Amendment no. 132 of the Ordinance, which entered into force on January 1, 2003.

 

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1.3 This Annex is to be read as a continuation of the Scheme and only modifies Options granted to Israeli Grantees so that they comply with the requirements set by the Israeli law in general, and in particular with the provisions of Section 102 (as specified herein), as may be amended or replaced from time to time. For the avoidance of doubt, this Annex does not add to or modify the Scheme in respect of any other category of Grantees.

 

1.4 The Scheme and this Annex are complementary to each other and shall be deemed as one. In any case of contradiction, whether explicit or implied, between the provisions of this Annex and the Scheme, the provisions set out in the Annex shall prevail.

 

2. ISSUANCE OF OPTIONS

 

2.1 The persons eligible for participation in the Scheme as Grantees shall include any Employees and/or Non-Employees of the Company or of any Affiliate; provided, however, that (i) Employees may only be granted 102 Options; and (ii) Non-Employees and/or Controlling Shareholders may only be granted 3(i) Options.

 

2.2 The Company may designate Options granted to Employees pursuant to Section 102 as Unapproved 102 Options or Approved 102 Options.

 

2.3 The grant of Approved 102 Options shall be made under this Annex adopted by the Board, and shall be conditioned upon the approval of this Annex by the ITA.

 

2.4 Approved 102 Options may either be classified as Capital Gain Options (“CGOs”) or Ordinary Income Options (“OIOs”).

 

2.5 No Approved 102 Options may be granted under this Annex to any eligible Employee, unless and until, the Company’s election of the type of Approved 102 Options as CGO or OIO granted to Employees (the: “Election”), is appropriately filed with the ITA. Such Election shall become effective beginning the first date of grant of an Approved 102 Option under this Annex and shall remain in effect at least until the end of the year following the year during which the Company first granted Approved 102 Options. The Election shall obligate the Company to grant only the type of Approved 102 Option it has elected, and shall apply to all Grantees who were granted Approved 102 Options during the period indicated herein, all in accordance with the provisions of Section 102(g) of the Ordinance. For the avoidance of doubt, such Election shall not prevent the Company from granting Unapproved 102 Options simultaneously.

 

2.6 All Approved 102 Options must be held in trust by a Trustee, as described in Section 3 below.

 

2.7 For the avoidance of doubt, the designation of Unapproved 102 Options and Approved 102 Options shall be subject to the terms and conditions set forth in Section 102.

 

3. TRUSTEE

 

3.1 Approved 102 Options which shall be granted under this Annex and/or any Shares allocated or issued upon exercise of such Approved 102 Options and/or other shares received subsequently following any realization of rights, including without limitation bonus shares, shall be allocated or issued to the Trustee and held for the benefit of the Grantees for such period of time as required by Section 102 or any regulations, rules or orders or procedures promulgated thereunder (the: “Holding Period”). In the case the requirements for Approved 102 Options are not met, then the Approved 102 Options may be regarded as Unapproved 102 Options, all in accordance with the provisions of Section 102.

 

3.2 Notwithstanding anything to the contrary, the Trustee shall not release any Shares allocated or issued upon exercise of Approved 102 Options prior to the full payment of the Grantee’s tax liabilities arising from Approved 102 Options which were granted to him and/or any Shares allocated or issued upon exercise of such Options.

 

3.3 With respect to any Approved 102 Option, subject to the provisions of Section 102 and any rules or regulation or orders or procedures promulgated thereunder, a Grantee shall not sell or release from trust any Share received upon the exercise of an Approved 102 Option and/or any share received subsequently following any realization of rights, including without limitation, bonus shares, until the lapse of the Holding Period required under Section 102 of the Ordinance. Notwithstanding the above, if any such sale or release occurs during the Holding Period, the sanctions under Section 102 of the Ordinance and under any rules or regulation or orders or procedures promulgated thereunder shall apply to and shall be borne by such Grantee.

 

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3.4 Upon receipt of Approved 102 Option, the Grantee will sign an undertaking in which he or she will give his or her consent to the grant of the Option under Section 102, and will undertake to comply with the terms of Section 102 and the trust agreement between the Company and the Trustee. Furthermore, each Grantee shall sign and execute an undertaking in relation to the voting of any Share received upon the exercise of an Approved 102 Option.

 

4. THE OPTIONS

 

The terms and conditions, upon which the Options shall be issued and exercised, shall be as specified in a letter to be executed pursuant to the Scheme and to this Annex (the: “Grant Notification Letter”). Each Grant Notification Letter shall state, inter alia, the number of Shares to which the Option relates, the type of Option granted thereunder (whether a CGO, OIO, Unapproved 102 Option or a 3(i) Option), the vesting provisions and the Purchase Price.

 

5. FAIR MARKET VALUE

 

Without derogating from the definition of “Fair Market Value” enclosed in the Scheme and solely for the purpose of determining the tax liability pursuant to Section 102(b)(3) of the Ordinance, if at the date of grant the Company’s shares are listed on any established stock exchange or a national market system or if the Company’s shares will be registered for trading within ninety (90) days following the date of grant of the CGOs, the fair market value of the Shares at the date of grant shall be determined in accordance with the average value of the Company’s shares on the thirty (30) trading days preceding the date of grant or on the thirty (30) trading days following the date of registration for trading, as the case may be.

 

6. EXERCISE OF OPTIONS

 

6.1 Options shall be exercised by the Grantee by giving a written notice to the Company and/or to any third party designated by the Company (the: “Representative”), in such form and method as may be determined by the Company and, when applicable, by the Trustee, in accordance with the requirements of Section 102, which exercise shall be effective upon receipt of such notice by the Company and/or the Representative and the payment of the Purchase Price for the number of Shares with respect to which the option is being exercised, at the Company’s or the Representative’s principal office. The notice shall specify the number of Shares with respect to which the option is being exercised.

 

6.2 Without derogating from Section 11(2) of the Plan, and in addition thereto, with respect to Approved 102 Options, any shares of Common Stock allocated or issued upon the exercise of an Approved 102 Option, shall be voted in accordance with the provisions of Section 102 and any rules, regulations or orders promulgated thereunder.

 

7. ASSIGNABILITY AND SALE OF OPTIONS

 

7.1 Notwithstanding any other provision of the Scheme, no Option or any right with respect thereto, purchasable hereunder, whether fully paid or not, shall be assignable, transferable or given as collateral or any right with respect to them given to any third party whatsoever, and during the lifetime of the Grantee each and all of such Grantee’s rights to purchase Shares hereunder shall be exercisable only by the Grantee.

 

Any such action made directly or indirectly, for an immediate validation or for a future one, shall be void.

 

7.2 As long as Options or Shares purchased pursuant to thereto are held by the Trustee on behalf of the Grantee, all rights of the Grantee over the shares are personal, cannot be transferred, assigned, pledged or mortgaged, other than by will or laws of descent and distribution.

 

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8. INTEGRATION OF SECTION 102 AND TAX ASSESSING OFFICER’S PERMIT

 

8.1 With regards to Approved 102 Options, the provisions of the Scheme and/or the Annex and/or the Grant Notification Letter shall be subject to the provisions of Section 102 and the Tax Assessing Officer’s permit, and the said provisions and permit shall be deemed an integral part of the Scheme and of the Annex and of the Grant Notification Letter.

 

8.2 Any provision of Section 102 and/or the said permit which is necessary in order to receive and/or to keep any tax benefit pursuant to Section 102, which is not expressly specified in the Scheme or the Annex or the Grant Notification Letter, shall be considered binding upon the Company and the Grantees.

 

9. DIVIDEND

 

Subject to the Company’s incorporation documents, with respect to all Shares (but excluding, for avoidance of any doubt, any unexercised options) allocated or issued upon the exercise of Options and held by the Grantee or by the Trustee as the case may be, the Grantee shall be entitled to receive dividends in accordance with the quantity of such shares, and subject to any applicable taxation on distribution of dividends, and when applicable subject to the provisions of Section 102 and the rules, regulations or orders promulgated thereunder.

 

10. TAX CONSEQUENCES

 

10.1 Any tax consequences arising from the grant or exercise of any Option, from the payment for Shares covered thereby or from any other event or act (of the Company, and/or its Affiliates, and the Trustee or the Grantee), hereunder, shall be borne solely by the Grantee. The Company and/or its Affiliates, and/or the Trustee shall withhold taxes according to the requirements under the applicable laws, rules, and regulations, including withholding taxes at source. Furthermore, the Grantee shall agree to indemnify the Company and/or its Affiliates and/or the Trustee and hold them harmless against and from any and all liability for any such tax or interest or penalty thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Grantee.

 

10.2 The Company and/or, when applicable, the Trustee shall not be required to release any share certificate to a Grantee until all required payments have been fully made.

 

10.3 With respect to Unapproved 102 Option, if the Grantee ceases to be employed by the Company or any Affiliate, the Grantee shall extend to the Company and/or its Affiliate a security or guarantee for the payment of tax due at the time of sale of Shares, all in accordance with the provisions of Section 102 and the rules, regulation or orders promulgated thereunder.

 

11. GOVERNING LAW & JURISDICTION

 

This Annex shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed therein, without giving effect to the principles of conflict of laws. The competent courts of the State of Delaware shall have sole jurisdiction in any matters pertaining to this Annex.

 

* * *

 

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ANNEX B

 

SECOND CERTIFICATE OF AMENDMENT

 

SECOND CERTIFICATE OF AMENDMENT OF THE

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF

BEYOND AIR, INC.

 

Beyond Air, Inc. (the “Corporation”), a corporation organized and existing under the laws of the State of Delaware hereby certifies as follows:

 

1. The name of the Corporation is Beyond Air, Inc. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on April 28, 2015. The original Certificate of Incorporation was amended and restated and filed with the Secretary of State of the State of Delaware effective January 13, 2017 (the “Amended and Restated Certificate of Incorporation”). A Certificate of Amendment to the Amended and Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware effective June 26, 2019.

 

2. The Amended and Restated Certificate of Incorporation, as amended, is hereby further amended by deleting in its entirety Section A of Article IV thereof and replacing therewith with the following new Section A of Article IV:

 

“A. This Company is authorized to issue two classes of stock to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares which the Company is authorized to issue is 510,000,000 shares. 500,000,000 shares shall be Common Stock, each having a par value of one-hundredth of one cent ($0.0001). 10,000,000 shares shall be Preferred Stock, each having a par value of one-hundredth of one cent ($0.0001).”

 

3. The Board of Directors of the Corporation has duly adopted resolutions (i) declaring this Second Certificate of Amendment to be advisable, (ii) adopting and approving this Second Certificate of Amendment, (iii) directing that this Second Certificate of Amendment be submitted to the stockholders of the Corporation for their approval at the 2025 annual meeting of the stockholders of the Corporation and (iv) recommending to the stockholders of the Corporation that this Second Certificate of Amendment be approved.

 

4. This Second Certificate of Amendment was submitted to and duly adopted and approved by the stockholders of the Corporation at the 2025 annual meeting of the stockholders of the Corporation in accordance with Sections 222 and 242 of the Delaware General Corporation Law.

 

5. This Second Certificate of Amendment has been duly authorized, adopted and approved by the Corporation’s Board of Directors in accordance with the provisions of Sections 141 and 242 of the Delaware General Corporation Law.

 

6. This Second Certificate of Amendment shall be effective upon its filing with the Secretary of State of the State of Delaware.

 

[signature page follows]

 

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IN WITNESS WHEREOF, Beyond Air, Inc. has caused this Second Certificate of Amendment to be signed by a duly authorized officer of the Corporation on _______________, 2024.

 

  BEYOND AIR, INC.
   
   
  Steven Lisi
  Chief Executive Officer

 

[Signature Page to Second Certificate of Amendment of the Amended and Restated Certificate of Incorporation of Beyond Air, Inc.]

 

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