UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
(RULE
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant
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[X]
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Filed by a Party other than the Registrant
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Check
the appropriate box:
[X]
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Preliminary
Proxy Statement
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Confidential, for Use
of the Commission Only (as permitted by Rule 14a-6(e)(2)
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Definitive Proxy Statement
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Definitive Additional
Materials
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Soliciting Material
Pursuant to § 240.14a-12
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INTERPACE
DIAGNOSTICS GROUP, INC.
(Name
of Registrant as Specified in Its Charter)
Not
applicable
(Name
of Person(s) Filing Proxy Statement, if other than the registrant)
Payment
of Filing Fee (Check the appropriate box):
[X]
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No fee
required.
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Fee computed on table
below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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Title of
each class of securities to which transaction applies:
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Aggregate number of
securities to which transaction applies:
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Per unit price or other
underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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4)
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Proposed maximum aggregate
value of transaction:
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5)
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Total fee paid:
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Fee paid
previously with preliminary materials.
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Check box if any part
of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its
filing.
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1)
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Amount
Previously Paid:
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2)
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Form, Schedule or Registration
Statement No.:
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Filing Party:
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Date Filed:
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August
[●], 2019
Dear
Stockholder:
It
is my pleasure to invite you to attend Interpace Diagnostics Group, Inc.’s (“
Interpace
”) Annual Meeting
of Stockholders to be held on October 10, 2019, at 1:00 p.m., Eastern Time (the “
Annual Meeting
”). The Annual
Meeting will be held at the Umstead Hotel, 100 Woodland Pond Drive, Cary, North Carolina, 27513. During our Annual Meeting, we
will discuss each item of business described in the Notice of Annual Meeting and Proxy Statement and as time permits, we will
discuss our business operations. There also will be time for questions.
We
hope that you will exercise your right to vote, either by attending the Annual Meeting and voting in person or by voting through
other acceptable means as promptly as possible. Stockholders of record at the close of business on August 19, 2019 are entitled
to notice of and to vote at the meeting. We will be using the “Notice and Access” method of providing proxy materials
to you via the Internet. On or about August 22, 2019, we will mail to our stockholders a Notice of Availability of Proxy Materials
(“
Notice
”) containing instructions on how to access our Proxy Statement and our 2019 Annual Report on Form
10-K, and vote electronically via the Internet. The Notice also contains instructions on how to receive a printed copy of your
proxy materials. You may vote over the Internet, as well as by telephone or, if you requested to receive printed proxy materials,
you can also vote by mail pursuant to instructions provided on the proxy card (or voting instruction form, if you hold your shares
through a broker). Please review the instructions for each of your voting options described in the Proxy Statement, as well as
in the Notice you will receive in the mail. If you have any questions, please contact Kingsdale Shareholder Services US LLC, our
proxy solicitor, by telephone at (866) 851-1489 (within North America) or (416) 867-2272 (collect call outside North America),
or by email at contactus@kingsdaleadvisors.com.
We
are delighted to have you as a stockholder of Interpace and thank you for your ongoing support.
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Sincerely,
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Jack E. Stover
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President and Chief Executive Officer
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Morris
Corporate Center 1, Building C, 300 Interpace Parkway, Parsippany, New Jersey 07054
Phone: 412.224.6100 · Toll Free: 844.405.9655 · http://www.interpacediagnostics.com
NOTICE
OF THE 2019 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD october 10, 2019
To
the Stockholders of Interpace Diagnostics Group, Inc.:
The
2019 Annual Meeting of Stockholders (the “
Annual Meeting
”) of Interpace Diagnostics Group, Inc. (“
Interpace
”
or the “
Company
”) will be held at the Umstead Hotel, 100 Woodland Pond Drive, Cary, North Carolina, 27513 on
October 10, 2019 at 1:00 p.m., Eastern Time. At the Annual Meeting, common stockholders will act on the following matters:
1.
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Election
of one Class I director nominee named in the Proxy Statement, who will serve for a term of three years and until such director’s
successor is elected and qualified;
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2.
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Approval of the Interpace
Diagnostics Group, Inc. 2019 Equity Incentive Plan, in the form attached as Annex A to this Proxy Statement;
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3.
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Approval of the Interpace
Diagnostics Group, Inc. Employee Stock Purchase Plan, in the form attached as Annex B to this Proxy Statement;
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4.
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Approval, under applicable
rules of the Nasdaq Stock Market LLC (the “
Nasdaq Listing Rules
”), of issuances of shares of our common
stock, par value $0.01 per share, (“
Common Stock
”) upon conversion of our Preferred Stock (as defined herein)
in excess of 19.99% of our Common Stock outstanding prior to such issuances;
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5.
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Ratification
of the appointment of BDO USA, LLP (“
BDO
”) as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2019;
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6.
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To consider and vote
upon the adjournment of the Annual Meeting, if necessary or appropriate, to solicit additional proxies in favor of any or
all of the other proposals set forth in this Proxy Statement; and
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7.
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To consider and act
upon such other matters as may properly come before the meeting or any adjournments or postponements thereof.
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Only
stockholders of record at the close of business on August 19, 2019 are entitled to notice of and to vote at the Annual Meeting
and any adjournment or postponement thereof. A complete list of these stockholders will be available during the Annual Meeting
and at the Company’s corporate headquarters located at Morris Corporate Center 1, Building C, 300 Interpace Parkway, Parsippany,
NJ 07054 for at least ten days prior to the Annual Meeting. If you would like to inspect the list, please call Jim Early, the
Company’s Chief Financial Officer, at (412) 224-6665 to arrange a visit to our offices for the inspection. All stockholders
are cordially invited to attend the Annual Meeting. On or about August 22, 2019, the Company will mail to stockholders a Notice
of Availability of Proxy Materials containing instructions on how to access our Proxy Statement and our 2019 Annual Report on
Form 10-K, and vote electronically via the Internet or vote by telephone, and how to request printed proxy materials.
Your
vote is important regardless of the number of shares you own. Whether or not you expect to attend the Annual Meeting, we hope
you will take the time to vote your shares. Whether or not you plan to attend the Annual Meeting, we encourage you to read the
Proxy Statement and submit your proxy or voting instructions as soon as possible by Internet, telephone or mail. For specific
instructions on how to vote your shares, please refer to the instructions on the Notice of Internet Availability of Proxy Materials
you will receive in the mail, the section entitled “General Information About the Annual Meeting and Voting” beginning
on page 1 of the Proxy Statement or, if you request to receive printed proxy materials, your attached proxy card. Please note
that shares held beneficially in street name may be voted by you in person at the Annual Meeting only if you obtain a legal proxy
from the broker, bank, trustee, or other nominee that holds your shares giving you the right to vote the shares.
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By order of the Board of
Directors,
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/s/ Jack E. Stover
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Jack E. Stover
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President & Chief Executive Officer
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Dated:
[●], 2019
Important
Notice Regarding the Availability of Proxy
Materials for the Annual Meeting of Stockholders to Be Held
on October 10, 2019
The Company’s Proxy Statement for the 2019 Annual Meeting of Stockholders and
Annual Report on Form 10-K are available on the Internet at
http://www.astproxyportal.com/ast/21231
table
of contents
PROXY
STATEMENT
General
Information About the Annual Meeting and Voting
Why
are you receiving these proxy materials?
Interpace
Diagnostics Group, Inc., a Delaware corporation (the “
Company
”, “
Interpace
”, “
we
”,
or “
us
”) has delivered printed versions of these materials to you by mail or made them available electronically
in connection with the solicitation of proxies on behalf of the Board of Directors (the “
Board
”) for use at
our Annual Meeting. This Proxy Statement describes the matters on which you, as a stockholder, are entitled to vote. It also gives
you information on these matters so that you can make an informed decision.
Why
did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
In
accordance with rules adopted by the Securities and Exchange Commission (“
SEC
”), we are providing access to
our proxy materials over the Internet. Accordingly, we are sending a Notice Regarding Availability of Proxy Materials (the “
Notice
”)
to our stockholders of record and beneficial owners as of the record date (for more information on the record date, see “— Who
is entitled to vote at the Annual Meeting?”). The mailing of the Notice to our stockholders is scheduled to begin on or
about August 22, 2019. All stockholders will have the ability to access the proxy materials and our Annual Report on Form 10-K
for the fiscal year ended December 31, 2019 (the “
Annual Report
”) on a website referred to in the Notice or
to request to receive a printed set of the proxy materials and the Annual Report. Instructions on how to access the proxy materials
over the Internet or to request a printed copy may be found in the Notice. Stockholders may also request to receive proxy materials
and our Annual Report in printed form by mail or electronically by email on an ongoing basis.
How
do I get electronic access to the proxy materials?
The
Notice will provide you with instructions regarding how you can:
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View our proxy materials
for the Annual Meeting and our Annual Report on the Internet; and
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Instruct us to send our future proxy materials
to you electronically by email.
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Choosing
to receive your future proxy materials by email will save us the cost of printing and mailing documents to you and will reduce
the impact of printing and mailing these materials on the environment. Stockholders may also request to receive proxy materials
and our Annual Report in printed form by mail or electronically by email on an ongoing basis. If you choose to receive future
proxy materials by email, you will receive an email next year with instructions containing a link to those materials and a link
to the proxy voting website. Your election to receive proxy materials by email will remain in effect until you terminate it.
What
items will be voted on at the Annual Meeting?
The
following proposals are scheduled for a vote at the Annual Meeting:
1.
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Election
of the Class I director nominee named in the Proxy Statement, who will serve for a term of three years and until such director’s
successor is elected and qualified;
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2.
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Approval of the Interpace
Diagnostics Group, Inc. 2019 Equity Incentive Plan, in the form attached as Annex A to this Proxy Statement;
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3.
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Approval of the Interpace
Diagnostics Group, Inc. Employee Stock Purchase Plan, in the form attached as Annex B to this Proxy Statement;
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4.
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Approval,
under the rules of the Nasdaq Stock Market LLC (the “
Nasdaq Listing Rules
”), of issuances of shares
of our common stock, par value $0.01 per share, (“
Common Stock
”) upon conversion of our Preferred Stock
in excess of 19.99% of our Common Stock outstanding prior to such issuances;
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5.
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Ratification
of the appointment of BDO USA, LLP (“
BDO
”) as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2019;
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6.
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To consider and vote
upon the adjournment of the Annual Meeting, if necessary or appropriate, to solicit additional proxies in favor of any or
all of the other proposals set forth in this Proxy Statement; and
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7.
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To
consider and act upon such other matters as may properly come before the meeting or any adjournments or postponements thereof.
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In
addition, management will respond to questions from stockholders.
Why
are you being asked to approve the Interpace Diagnostics Group, Inc. 2019 Equity Incentive Plan?
The
purposes of the 2019 Equity Incentive Plan are to enable us to recruit and retain highly qualified employees, directors and consultants;
provide them with an incentive for productivity; and align a portion of their compensation with the growth and value of the Company.
The Board believes that the number of shares of Common Stock available for grants under the existing stock award plan is insufficient
to satisfy the purposes described above.
Why
are you being asked to approve the Interpace Diagnostics Group, Inc. Employee Stock Purchase Plan?
The
purpose of the Employee Stock Purchase Plan is to provide employees of the Company and its participating subsidiaries with an
opportunity to acquire a proprietary interest in the Company through the purchase of shares of Common Stock. The Company has not
previously had such a plan in the last 5 years. The Employee Stock Purchase Plan is intended to qualify as an “employee
stock purchase plan” meeting the requirements of Section 423 of the Code.
Why
is the Company seeking approval under the Nasdaq Listing Rules of issuances of shares of our Common Stock upon conversion of our
Preferred Stock in excess of 19.99% of our Common Stock outstanding prior to such issuances?
Because
our Common Stock is listed on The Nasdaq Capital Market (“
Nasdaq
”), we are subject to the Nasdaq Listing Rules.
The potential issuance of the shares of our Common Stock upon conversion of our Preferred Stock (as described below) implicates
certain of the Nasdaq Listing Rules requiring prior stockholder approval in order to maintain our listing on Nasdaq. Some of the
Preferred Stock was issued on July 15, 2019 and we expect that if the Proposal No. 4 is approved, we will shortly thereafter issue
additional shares of Preferred Stock. As described below in Proposal No. 4 under “Nasdaq Listing Rules and the Necessity
of Stockholder Approval — Effect of Affirmative Vote,” we seek your approval of Proposal No. 4 to comply with the
Nasdaq Listing Rules.
The
Board approved the issuance of Preferred Stock to Ampersand 2018 Limited Partnership (“
Ampersand
”) primarily
to finance our acquisition of the BioPharma Business of Cancer Genetics, Inc. The Board believes that with the acquisition of
the BioPharma Business, the Company has the potential to be a leader in enabling personalized and precision medicine by
offering advanced diagnostics, molecular market testing, data solution and biopharma services. The Board believes that
partnering with an entity affiliated with Ampersand Capital Partners, a private equity firm specializing in the
diagnostic and biopharma sectors, will assist the Company in adding financial support and expertise and
potentially accelerating its growth trajectory within the clinical diagnostic and BioPharma markets. The initial conversion
price into Common Stock of Ampersand’s investment in Preferred Stock was $0.80, subject to adjustment, representing a
premium of approximately 14.0% over the closing price of the Company’s Common Stock prior to the announcement of the
investment. The $0.80 conversion price, subject to adjustment, will also be applicable to the Second Ampersand Closing (as
defined below) should it occur, regardless of the market price of our Common Stock at the time of the Second Ampersand
Closing.
If
Proposal No. 4 is approved and we issue additional Preferred Stock in the Second Ampersand Closing, the proceeds from the
issuance of such stock will be used to retire debt associated with the acquisition of the BioPharma Business and to help pay integration
costs of, and liabilities assumed with respect to, the BioPharma Business.
Further,
if Proposal No. 4 is not approved, we and our stockholders may suffer adverse consequences. For example the Preferred Stock as
a result would have an increased dividend, increased liquidation preference and in certain cases, mandatory redemption.
What
are the Board’s voting recommendations?
The
Board’s recommendation is set forth together with the description of each item in this Proxy Statement. In summary,
the Board recommends a vote FOR Proposal Nos. 1, 2, 3, 4, 5 and 6.
Who
is entitled to vote at the Annual Meeting?
Only
stockholders of record at the close of business on August 19, 2019 (the “
Record Date
”) may vote at the Annual
Meeting. There were [•] shares of our Common Stock outstanding on August 19, 2019. During the 10 days before the Annual
Meeting, you may inspect a list of stockholders eligible to vote at our corporate headquarters located at Morris Corporate Center
1, Building C, 300 Interpace Parkway, Parsippany, NJ 07054. If you would like to inspect the list, please call Jim Early, the
Company’s Chief Financial Officer, at (855) 776-6419 to arrange a visit to our offices for the inspection. All stockholders
are cordially invited to attend the Annual Meeting.
What
are the voting rights of the holders of our Common Stock?
Each
outstanding share of our Common Stock will be entitled to one vote on each matter considered at the Annual Meeting.
What
are the voting rights of the holders of our Preferred Stock?
Outstanding
shares of our Preferred Stock will not be entitled to vote at the Annual Meeting on Proposal Nos. 1, 2, 3, 4, 5 and 6.
What
is the difference between holding shares as a stockholder of record and as a beneficial owner?
Record
Owners
If
your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC (“
AST
”),
you are the stockholder of record with respect to those shares, and the Proxy Statement and the form of proxy have been sent directly
to you.
Beneficial
Owners
Many
stockholders hold their shares through a broker, trustee or other nominee, rather than directly in their own name. If your shares
are held in a brokerage account or by a bank or other nominee, you are considered the “beneficial owner” of shares
held in “street name.” The Proxy Statement and the form of voting instruction card has been forwarded to you by your
broker, trustee or other nominee who is considered, with respect to those shares, the stockholder of record.
How
can you vote?
Record
Owners
If
you are a record holder, meaning your shares are registered in your name and not in the name of a broker, trustee or other nominee,
you may vote or submit a proxy:
1.
Over the Internet – If you have Internet access, you may authorize the voting of your shares by accessing www.voteproxy.com
and following the instructions set forth on the Notice. You must specify how you want your shares voted or your vote will not
be completed and you will receive an error message. Your shares will be voted according to your instructions.
2.
By Telephone – You may call toll-free 1-800-PROXIES (1-800-776-9437) in the United States, or 1-718-921-8500 from foreign
countries from any touch-tone telephone and follow the instructions provided on the WHITE proxy card attached to the Proxy Statement.
Your shares will be voted according to your instructions.
3.
By Mail – Complete and sign the attached WHITE proxy card and mail it in the enclosed postage prepaid envelope. Your shares
will be voted according to your instructions. If you sign your WHITE proxy card but do not specify how you want your shares voted,
they will be voted as recommended by our Board. Unsigned proxy cards will not be voted.
4.
In Person at the Meeting – If you attend the Annual Meeting, you may deliver a completed and signed WHITE proxy card in
person or you may vote by completing a ballot, which we will provide to you at the Annual Meeting.
Beneficial
Owners
As
the beneficial owner, you have the right to direct your broker, trustee or other nominee on how to vote your shares. For directions
on how to vote shares beneficially held in street name, please refer to the voting instruction card provided by your broker, trustee
or other nominee. Because a beneficial owner is not the stockholder of record, you may not vote these shares in person at the
Annual Meeting unless you obtain a legal proxy issued in your name from the broker, trustee or other nominee that holds your shares,
giving you the right to vote the shares at the Annual Meeting.
Beneficial
Owners and Broker Non-Votes
Brokers,
trustees, or other nominees who hold shares in street name for customers have the discretion to vote those shares with respect
to certain matters if they have not received instructions from the beneficial owners. Brokers, trustees, or other nominees will
have this discretionary authority with respect to “routine” matters such as Proposal No. 5, the ratification of the
appointment of our independent registered public accounting firm, BDO, which is the only matter scheduled for this Annual Meeting
for which such nominees have voting authority. However, brokers, trustees, or other nominees will not have this discretionary
authority with respect to non-routine matters.
Proposal
Nos. 1, 2, 3, 4 and 6 are “non-routine” matters for which discretionary voting power does not exist under applicable
rules. A broker, trustee or other nominee cannot vote without instructions on non-routine matters, and therefore, broker non-votes
may exist in connection with Proposal Nos. 1, 2, 3, 4 and 6. Broker non-votes will not be considered votes cast by the holders
of all of the shares of Common Stock present in person or by proxy at the Annual Meeting and voting affirmatively or negatively
and will therefore not have any effect with respect to Proposal Nos. 1, 2, 3, 4 and 6.
How
can you attend the Annual Meeting?
The
Annual Meeting will be held on October 10, 2019, beginning at 1:00 p.m., Eastern Time at the Umstead Hotel, 100 Woodland Pond
Drive, Cary, North Carolina, 27513. Information on how to vote in person at the Annual Meeting is discussed above under the caption
“How can you vote?” Each stockholder who wishes to attend the Annual Meeting will be required to present valid government-issued
photo identification to be admitted to the Annual Meeting.
Can
you change your vote or revoke your proxy?
If
you are a stockholder of record, you may revoke your proxy by (i) following the instructions on the Notice and entering a new
vote by telephone or over the Internet up until 11:59 p.m. Eastern Time on October 9, 2019, (ii) attending the Annual Meeting
and voting in person (although attendance at the Annual Meeting will not in and of itself revoke a proxy) or (iii) entering a
new vote by mail. Any written notice of revocation or subsequent proxy card must be received by the Secretary of the Company prior
to the holding of the vote at the Annual Meeting at 1:00 p.m., Eastern Time, on October 10, 2019. Such written notice of
revocation or subsequent proxy card should be hand delivered to the Secretary of the Company or sent to the Company’s principal
executive offices at Morris Corporate Center 1, Building C, 300 Interpace Parkway, Parsippany, New Jersey 07054, Attention: Corporate
Secretary.
If
you are the beneficial owner of shares held in street name, you must submit new voting instructions to your broker, trustee, or
other nominee in accordance with the instructions you have received from them.
The
last proxy or vote that we receive from you will be the vote that is counted.
What
is a proxy?
A
proxy is a person you appoint to vote on your behalf. By using any of the methods discussed above, you will be appointing as your
proxies Jack E. Stover, our President and Chief Executive Officer and a member of the Board, and Jim Early, our Chief Financial
Officer, Secretary and Treasurer. They may act together or individually on your behalf, and will have the authority to appoint
a substitute to act as proxy. If you are unable to attend the Annual Meeting, please use the means available to you to vote by
proxy so that your shares of Common Stock may be voted.
How
will your proxy vote your shares?
Your
proxy will vote according to your instructions. Unless otherwise directed in the proxy card, the proxy holders will vote the shares
represented by a properly executed proxy:
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i.
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FOR the election of the Class
I director nominee named in this Proxy Statement (Proposal No. 1);
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ii.
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FOR the approval of the Interpace Diagnostics
Group, Inc. 2019 Equity Incentive Plan (Proposal No. 2);
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iii.
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FOR the approval of the Interpace Diagnostics
Group, Inc. Employee Stock Purchase Plan (Proposal No. 3);
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iv.
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FOR the approval, under Nasdaq Listing Rules,
of issuances of shares of our Common Stock upon conversion of our Preferred Stock in excess of 19.99% of our Common Stock
outstanding prior to such issuances (Proposal No. 4);
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v.
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FOR
ratification of the appointment of BDO as the independent registered public accounting firm to audit our financial statements
for the fiscal year ending December 31, 2019 (Proposal No. 5);
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vi.
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FOR the approval of an adjournment of the Annual
Meeting, if necessary or appropriate, to solicit additional proxies in favor of any or all of the other proposals set forth
in this Proxy Statement (Proposal No. 6); and
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vii.
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FOR,
in the proxy holders’ discretion, to consider and act upon such other matters as may properly come before the meeting
or any adjournments or postponements thereof.
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What
constitutes a quorum?
A
quorum will be present at the Annual Meeting if holders of a majority of the shares of Common Stock outstanding on the Record
Date are represented at the Annual Meeting in person or by proxy. A quorum is necessary in order to conduct the Annual Meeting.
If you choose to have your shares represented by proxy at the Annual Meeting, you will be considered part of the quorum. Broker
non-votes and abstentions will be counted as present for the purpose of establishing a quorum. If a quorum is not present at the
Annual Meeting, the stockholders present in person or by proxy may adjourn the meeting to a date when a quorum is present. If
an adjournment is for more than 30 days or a new record date is fixed for the adjourned meeting, we will provide notice of the
adjourned meeting to each stockholder of record entitled to vote at the Annual Meeting.
What
vote is required to approve each matter and how are votes counted?
Proposal
No. 1: Election of one Class I Director. The election of a director requires a plurality of the votes of the shares cast in person
or represented by proxy at the Annual Meeting. Accordingly, the directorship to be filled at the Annual Meeting will be filled
by the nominee receiving the highest number of votes cast “FOR” such nominee. In the election of a director, votes
may be cast in favor of or withheld with respect to the nominee; votes that are withheld and broker non-votes will be excluded
entirely from the vote and will therefore have no effect on the outcome of the vote.
Proposal
No. 2: Approval of the Interpace Diagnostics Group, Inc. 2019 Equity Incentive Plan. A majority of the votes of the shares present
in person or represented by proxy at the Annual Meeting is required to approve this proposal. Abstentions and broker non-votes
will have no effect on determining whether the affirmative vote constitutes a majority of the votes of the shares present in person
or represented by proxy at the Annual Meeting.
Proposal
No. 3: Approval of the Interpace Diagnostics Group, Inc. Employee Stock Purchase Plan. A majority of the votes of the shares present
in person or represented by proxy at the Annual Meeting is required to approve this proposal. Abstentions and broker non-votes
will have no effect on determining whether the affirmative vote constitutes a majority of the votes of the shares present in person
or represented by proxy at the Annual Meeting.
Proposal
No. 4: Approval, under Nasdaq Listing Rules, of issuances of shares of our Common Stock upon conversion of our Preferred Stock
in excess of 19.99% of our Common Stock outstanding prior to such issuances. A majority of the votes of the shares present in
person or represented by proxy at the Annual Meeting is required to approve this proposal. Abstentions and broker non-votes will
have no effect on determining whether the affirmative vote constitutes a majority of the votes of the shares present in person
or represented by proxy at the Annual Meeting.
Proposal
No. 5: Ratification of Appointment of BDO as our Independent Registered Public Accounting Firm to audit our financial statements
for the fiscal year ending December 31, 2019. A majority of the votes of the shares present in person or represented by proxy
at the Annual Meeting is required to approve this proposal. Abstentions and broker non-votes will have no effect on determining
whether the affirmative vote constitutes a majority of the votes of the shares present in person or represented by proxy at the
Annual Meeting.
Proposal
No. 6: Approval of an adjournment of the Annual Meeting, if necessary or appropriate, to solicit additional proxies in favor of
any or all of the other proposals set forth in this Proxy Statement. A majority of the votes of the shares present in person or
represented by proxy at the Annual Meeting is required to approve this proposal. Abstentions and broker non-votes will have no
effect on determining whether the affirmative vote constitutes a majority of the votes of the shares present in person or represented
by proxy at the Annual Meeting.
Who
counts the votes?
We
have engaged AST as our independent agent to tabulate stockholder votes. If you are a stockholder of record, and you choose
to vote over the Internet (either prior to or during the meeting) or by telephone, AST will access and tabulate your vote electronically,
and if you choose to sign and mail your proxy card, your executed proxy card is returned directly to AST for tabulation. As noted
above, if you hold your shares through a broker, your broker (or its agent for tabulating votes of shares held in street name,
as applicable) returns one proxy card to AST on behalf of all its clients.
How
does the Board recommend that you vote?
As
to the proposals to be voted on at the Annual Meeting, the Board unanimously recommends that you vote:
|
●
|
FOR Proposal
No. 1, for the election of the Class I director nominee named in this Proxy Statement;
|
|
|
|
|
●
|
FOR Proposal No. 2,
for the approval of the Interpace Diagnostics Group, Inc. 2019 Equity Incentive Plan;
|
|
|
|
|
●
|
FOR Proposal No. 3,
for the approval of the Interpace Diagnostics Group, Inc. Employee Stock Purchase Plan;
|
|
|
|
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●
|
FOR Proposal No. 4,
for the approval, under Nasdaq Listing Rules, of issuances of shares of our Common Stock upon conversion of our Preferred
Stock in excess of 19.99% of our Common Stock outstanding prior to such issuances;
|
|
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|
●
|
FOR Proposal No. 5,
for the ratification of appointment of our independent registered public accounting firm; and
|
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●
|
FOR Proposal No. 6,
for the adjournment of the Annual Meeting, if necessary or appropriate, to solicit additional proxies in favor of any or all
of the other proposals set forth in this Proxy Statement.
|
Why
are you being asked to ratify the appointment of BDO as our independent registered public accounting firm?
Although
stockholder approval of the Audit Committee’s selection of BDO as our independent registered public accounting firm is not
required, we believe that it is advisable to give stockholders an opportunity to ratify this selection. If Proposal No. 5 is not
approved at the Annual Meeting, the Audit Committee has agreed to reconsider its selection of BDO, but will not be required to
take any action.
Are
there other matters to be voted on at the Annual Meeting?
We
do not know of any other matters that may come before the Annual Meeting other than the aforementioned matters. If any other matters
are properly presented to the Annual Meeting, the persons named as proxies in the attached WHITE proxy card intend to vote or
otherwise act in accordance with their judgment on the matter.
Where
can you find the voting results?
Voting
results will be reported in a Current Report on Form 8-K, which we will file with the SEC within four business days following
the Annual Meeting.
Who
is soliciting proxies, how are they being solicited, and who pays the cost?
The
solicitation of proxies is being made on behalf of our Board and we will pay the expenses of the preparation of proxy materials
and the solicitation of proxies for the Annual Meeting. In addition to the solicitation of proxies by mail, solicitation may be
made by certain of our directors, officers or employees who will not receive additional compensation for those services, telephonically,
electronically or by other means of communication. We have also retained Kingsdale Shareholder Services US LLC (“
Kingsdale
”)
for a fee of $12,500, plus additional fees relating to telephone and electronic solicitation and reimbursement of certain
expenses, to assist in the solicitation of proxies. In addition, we have agreed to indemnify Kingsdale against certain liabilities
arising out of or in connection with the engagement. We will reimburse brokers and other nominees for costs incurred by them in
mailing proxy materials to beneficial owners in accordance with applicable rules.
Who
is our independent registered public accounting firm, and will they be represented at the Annual Meeting?
BDO
served as our independent registered public accounting firm for the fiscal year ended December 31, 2018 and audited our financial
statements for such year. We expect that one or more representatives of BDO will be available for the Annual Meeting. They
will have an opportunity to make a statement, if they desire, and will be available to answer appropriate questions after the
Annual Meeting.
What
is “householding” and where can you obtain additional copies of the proxy materials?
For
information about householding and how to request additional copies of proxy materials, please see the section captioned “Additional
Information — Householding”.
What
should I do if I receive more than one set of proxy materials?
If
you receive more than one set of proxy materials, your shares are likely registered in more than one name or brokerage account.
Please follow the voting instructions on each proxy or voting instruction card that you receive to ensure that all of your shares
are voted.
We
encourage you to vote by proxy over the Internet by following the instructions provided in the Notice, or, if you requested to
receive printed proxy materials, you can also vote by mail or telephone pursuant to instructions provided on the proxy card.
Contact
for Questions About this Proxy Statement
If
you have additional questions about this Proxy Statement or the meeting, please contact Kingsdale, our proxy solicitor, by telephone
at (866) 851-1489 (within North America) or (416) 867-2272 (collect call outside North America), or by email at contactus@kingsdaleadvisors.com.
North
American Toll Free Phone:
1-866-581-1489
Email:
contactus@kingsdaleadvisors.com
Call
Collect Outside North America: 416-867-2272
PROPOSAL
NO. 1 —
ELECTION OF DIRECTOR
The
authorized number of directors to the Board is currently seven and is divided into three classes with two directors in Class I,
three directors in Class II and two directors in Class III. The Board currently consists of five members, with two directors in
Class I, one director in Class II and two directors in Class III. Directors serve for three-year terms with one class of directors
being elected by the Company’s stockholders at each annual meeting.
NAME
|
|
AGE
|
|
CLASS(1)
|
|
PRINCIPAL OCCUPATION OR
EMPLOYMENT
|
Stephen J. Sullivan
|
|
72
|
|
I
|
|
Founder of CRO Advisors LLC
|
Eric Lev
|
|
43
|
|
I
|
|
Partner of Ampersand Capital Partners
|
Felice Schnoll-Sussman, M.D.
|
|
49
|
|
II
|
|
Associate Professor of Clinical Medicine at
Weill Medical College of Cornell University
|
Joseph Keegan, Ph.D.
|
|
66
|
|
III
|
|
Independent
Investor
|
Jack E. Stover
|
|
66
|
|
III
|
|
President and Chief Executive Officer of Interpace
Diagnostics Group, Inc.
|
(1)
The term of the Class I directors expires in 2019; the term of the Class II director expires in 2021; and the term of the Class
III directors expires in 2020.
At
the Annual Meeting, two Class I directors will be elected to serve until the annual meeting of stockholders in 2022 and until
such director’s successor is elected and qualified. Stephen J. Sullivan is the Board’s nominee for election by the
holders of the Common Stock as a Class I director. Stephen J. Sullivan has been approved, recommended and nominated for election
to the Board by the Nominating and Corporate Governance Committee (the “
Nominating Committee
”) and by the Board.
The accompanying proxy will be voted for the election of Stephen J. Sullivan, unless the proxy contains instructions otherwise.
Management has no reason to believe that Stephen J. Sullivan will not stand for election or will be unable to serve. However,
in the event that Stephen J. Sullivan should become unable or unwilling to serve as a director, the proxy will be voted for the
election of such person or persons as shall be designated by the Board. The holders of the Series A Preferred Stock (as discussed
and defined in Proposal No. 4 below), voting as a separate class, are entitled to elect one Class I director (the “
Series
A Director”)
. Eric Lev has been designated for election as a director by Ampersand, the holder of all outstanding shares
of the Series A Preferred Stock, and approved, recommended and nominated by the Board. The holders of Common Stock are not entitled
to vote in the election of Eric Lev.
Proposal
No. 1, the election of a director, requires a plurality of the votes of the shares cast in person or represented by proxy at the
Annual Meeting. Accordingly, the directorship to be filled at the Annual Meeting will be filled by the nominee receiving
the highest number of votes cast “FOR” such nominee. In the election of a director, votes may be cast in favor of
or withheld with respect to the nominee; votes that are withheld and broker non-votes will be excluded entirely from the vote
and will therefore have no effect on the outcome of the vote.
The
Board Recommends a Vote FOR the Election of the Nominee Listed Above and Proxies that Are Returned
Will Be So Voted Unless Otherwise Instructed.
Nominees
for Election as Class I Directors, Term Expiring 2022
Stephen
J. Sullivan
. Stephen J. Sullivan was appointed Chairman of the Board effective June 21, 2016. Mr. Sullivan served as Interim
Chairman of the Board from January 1, 2016 to June 20, 2016. Mr. Sullivan joined Interpace as a director in September 2004 and
has served as Chairman of various committees of the Board. Mr. Sullivan currently serves as Chairman of the Compensation &
Management Development Committee (the “
Compensation Committee
”). In early 2010, Mr. Sullivan founded CRO Advisors
LLC, a specialty consulting firm he continues to head. Previously, Mr. Sullivan was the president and chief executive officer
and a member of the board of directors of Harlan Laboratories, Inc. (“
Harlan
”), a privately held global provider
of preclinical research tools and services, from February 2006 through January 2010, when he retired from that position. Prior
to joining Harlan in 2006, Mr. Sullivan was a senior vice president of Covance, Inc. (“
Covance
”) and the president
of Covance Central Laboratories, Inc., a major division of Covance. Prior to joining Covance, Mr. Sullivan was chairman and chief
executive officer of Xenometrix, Inc. (“
Xenometrix
”), a biotechnology company with proprietary gene expression
technology. He assisted with the merger of Xenometrix with Discovery Partners International. Prior to Xenometrix, Mr. Sullivan
was vice president and general manager of a global diagnostic sector of Abbott Laboratories. From June 2013 through January 2016,
when the company was sold, Mr. Sullivan was the chairman of the board of BioreclamationIVT, LLC, a privately-owned bio-materials
company. From May 2013 through March 2015, when the company was sold, Mr. Sullivan was a member of the board of directors of PHT
Corporation, a privately-owned leader in electronic patient recorded outcomes in clinical trials. From April 2011 through
March 2019, Mr. Sullivan was chairman of the board of MI Bioresearch, Inc. (formerly known as Molecular Imaging, Inc.), a privately
held venture-backed drug discovery services company. Since May 2015, Mr. Sullivan has been chairman of the board of Microbiology
Research Associates (now known as Analytical Lab Group since an August 2016 merger with Accuratus Labs), a privately held microbiology
services company. In January 2016, Mr. Sullivan became chairman of the board of H2O Clinical. In July 2016, Mr. Sullivan became
chairman of the board of PharmaStart. As of June 2017, both H20 Clinical and PharmaStart are doing business as Firma Clinical
Research, a privately held specialty contract research organization. As of July 2018, Firma Clinical Research has been sold and
Mr. Sullivan is no longer a member of its board. From November 2015 until August 2017, Mr. Sullivan was a member of the board
of Accel Clinical Research, a phase 1 contract research organization. Since April 2018, Mr. Sullivan has been a member of the
board of Transnetyx, Inc., a privately held genotyping company. Mr. Sullivan graduated from the University of Dayton, was a commissioned
officer in the Marine Corps, and completed his M.B.A. in Marketing and Finance at Rutgers University. Mr. Sullivan is currently
an adjunct Professor of Management at Georgetown University.
Mr.
Sullivan has held senior leadership positions in companies in the life sciences and healthcare services industries. His specific
qualifications and skills in the areas of general operations, financial operations and administration, and mergers and acquisitions
led the Board to conclude that Mr. Sullivan should serve as a director of the Company.
Eric
Lev
. Eric Lev was appointed to the Board effective July 15, 2019. Mr. Lev is currently the Series A Director. Mr. Lev has
more than 17 years of experience in life science investing. Since 2013, Mr. Lev has been a partner at Ampersand Capital Partners,
a middle market private equity firm dedicated to growth-oriented investments in the healthcare sector and an entity affiliated
with Ampersand. From 2005 to 2013, Mr. Lev was a principal at Water Street Healthcare Partners, and served before then as
Group Manager, Strategy & Business Development at Beckman Coulter from 2004 to 2005. Mr. Lev also previously served as an
associate on the healthcare/life sciences team at One Equity Partners and began his career as an analyst in the investment banking
division of Lehman Brothers. He currently serves on the boards of directors of private companies within the pharmaceutical services
market such as NEOMED-LABS and LakePharma. He previously served on the boards of directors of private companies within the clinical
laboratory services market such as Genoptix, PLUS Diagnostics, and ConVerge Diagnostics. Mr. Lev holds a B.A. from Northwestern
University and a M.B.A from the University of Chicago. Mr. Lev brings to the Board expertise in finance and extensive knowledge
of the life science industry.
Incumbent
Class II Director, Term Expiring 2021
Dr.
Felice Schnoll-Sussman
. Dr. Felice Schnoll-Sussman was appointed as a member of the Board on September 13, 2017. Dr. Schnoll-Sussman
was promoted to Professor of Clinical Medicine at Weill Medical College of Cornell University on March 1, 2019. She has been Associate
Professor of Clinical Medicine at Weill Medical College of Cornell University since 2013 and Associate Attending Physician in
Gastroenterology at New York Presbyterian Hospital since May 2013. She has been an Attending Physician at Weill Cornell Medical
College of Cornell University, Division of Gastroenterology and Hepatology since July 2001. Dr. Schnoll-Sussman has been the Director
of the Jay Monahan Center for Gastrointestinal Health at Weill Cornell Medical College since July 2014 and has overall responsibility
for all administrative, operational and financial aspects of the Center. She has been Director of Endoscopy since January 2017.
Dr. Schnoll-Sussman has her medical degree from the Mount Sinai School of Medicine and has also completed Executive Leadership
Training at the Wharton School of Business.
Dr.
Schnoll-Sussman is a well-known expert on various esophageal, pancreatic and intestinal disorders, including Barrett’s Esophagus,
and such specific qualifications led the Board to conclude that Dr. Schnoll-Sussman should serve as a director.
Incumbent
Class III Directors, Term Expiring 2020
Joseph
Keegan
. Joseph Keegan, Ph.D. was appointed to the Board effective January 1, 2016 and was subsequently appointed Chairman
of our Audit Committee and our Nominating Committee. Dr. Keegan has more than 30 years of experience in life science businesses.
From 2007 to 2012, when it was sold to Pall Corporation, Dr. Keegan was CEO at ForteBio, Inc., a life science tool company, where
he helped to lead a financing round and established product development and sales strategies for that company. From 1998 to 2007,
Dr. Keegan was CEO at Molecular Devices Corporation (NASDAQ: MDCC), a provider of bioanalytical measurement systems, software
and consumables, where Dr. Keegan helped grow the company both internally and through acquisitions. From 1992 to 1998, Dr. Keegan
worked at Becton Dickinson and Company, a medical technology company that manufactures and sells medical devices and instrument
systems, where he served as President of Worldwide Tissue Culture and Vice President, General Manager of Worldwide Flow Cytometry.
From 1988 to 1992, Dr. Keegan was Vice President of the Microscopy and Scientific Instruments Division of Leica, Inc., a life
science tool and semiconductor equipment provider. He currently serves on the boards of directors of the following privately held
companies: Nanomedical Diagnostics, Inc., Halo Labs (formerly known as Optofluidics, Inc.), and Carterra (formerly known as Wasatch
Microfluidics, Inc.). In April, 2017, he joined the board of ArrayJet, a privately held Scottish company. Dr. Keegan is a member
of the board of directors of Bio-Techne Corporation, a publicly held biotech company. Dr. Keegan is also on the board of the San
Francisco Opera. Dr. Keegan holds a B.A. in Chemistry from Boston University and a Ph.D. in Physical Chemistry from Stanford University.
Dr.
Keegan’s specific qualifications and skills in the areas of life science businesses, product development and sales strategies
led the Board to conclude that Dr. Keegan should serve as a director.
Jack
E. Stover
. Jack E. Stover has been a member of the Board of the Company and its predecessor, PDI, Inc. since 2005 and
previously served as Chairman of the Audit Committee from 2005 to December 22, 2015. He was appointed as President and Chief Executive
Officer of the Company effective June 21, 2016. Mr. Stover served as Interim President and Chief Executive Officer from
December 22, 2015 to June 20, 2016. Mr. Stover has been a member of the board of directors, chairman of the audit committee, and
a member of the compensation committee of Onconova Therapeutics, Inc., a publicly held biopharmaceutical company since May 2016.
Mr. Stover also was a member of the board of Cernostics, Inc., a privately held molecular diagnostic company, from March 2015
until July 2016. Further, Mr. Stover served as a director and chairman of the audit committee of Viatar CTC Solutions, Inc., a
publicly held circulating tumor cell company from May 2016 until December 2016. Mr. Stover was also previously chief executive
officer of Zebec Therapeutics LLC (the successor to Quadrant Pharmaceuticals LLC), a privately held clinical stage specialty pharmaceutical
company, from April 2014 until December 2015. From 2009 to February 2012, Mr. Stover served as the executive chairman of Targeted
Nano Therapeutics LLC, a privately held biotechnology company focused on targeted delivery of peptides and proteins. Mr. Stover
also provided consulting and advisory services through JE Stover Consulting, LLC from 2008 through 2015. Mr. Stover was chairman
of the audit committee and a member of the board of directors of Arbios Systems Inc., a publicly held bioartificial liver company
from 2005 to 2008 and a member of the board of directors of Influmedix, Inc. a privately held vaccine company from 2010 to 2011.
From 2004 to 2008, he served as chief executive officer, president and director of Antares Pharma Inc., a publicly held specialty
pharmaceutical and medical device company listed at the time on the American Stock Exchange. Prior to that, Mr. Stover was executive
vice president and chief financial officer of Sicor, Inc., a publicly held company which manufactured and marketed injectable
pharmaceutical products, and which was acquired by Teva Pharmaceutical Industries. Prior to that, Mr. Stover was executive vice
president and director of a privately held proprietary women’s pharmaceutical company, Gynetics, Inc., and before that he
was senior vice president, Chief Financial Officer and director of B. Braun Medical, Inc., a privately held global medical device
and pharmaceutical company. From 1975 to 1995, Mr. Stover was employed by PricewaterhouseCoopers LLC (then Coopers and Lybrand),
and was a partner from 1985, working in the bioscience industry division in Pennsylvania and New Jersey. Mr. Stover received his
B.A. in Accounting from Lehigh University and is a Certified Public Accountant.
Mr.
Stover has held several senior leadership positions in the life sciences and medical device industry. In addition, his specific
experience and skills in the areas of general operations, financial operations and administration of life sciences and device
companies, as well as his role as the Company’s President and Chief Executive Officer, led the Board to conclude that Mr.
Stover should serve as a director.
Other
Pursuant
to the Certificate of Designation of the Series A Preferred Stock, the holders of the Series A Preferred Stock may have the right
to elect up to three directors of the Company (the “
Preferred Directors
”), depending on the number of shares
of Series A Preferred Stock outstanding that are not subject to the Voting Cap (as defined in Proposal No. 4 below). For more
information, see “Proposal No. 4 — To Approve, Under Applicable Nasdaq Listing Rules, Issuances of Shares of Our Common
Stock Upon Conversion of Our Preferred Stock in Excess of 19.99% of Our Common Stock Outstanding Prior to Such Issuances —
Terms of the Preferred Stock — Voting”. Ampersand is currently the holder of all outstanding shares of the Series
A Preferred Stock. Pursuant to the Investor Rights Agreement (as defined in Proposal No. 4 below), depending on the number of
shares of Series A Preferred Stock that are held by Ampersand and/or its affiliates that are not subject to the Voting Cap, Ampersand
has the right to nominate one Class I director and two Class II directors, one of which must qualify as an “independent
director” under Rule 5605(a)(2) of the Nasdaq Listing Rules. The two Class II director seats are currently vacant. The Preferred
Directors have the right to attend all meetings of any committees or sub-committees of the Board in a non-voting observer capacity,
unless one of the other Preferred Directors is already a member of such committee. In the event the Preferred Director is attending
a meeting of a committee or sub-committee of the Board in a non-voting observer capacity, such Preferred Director can be excluded
from such meeting of a committee or sub-committee of the Board at the sole discretion of such committee or sub-committee for any
reason.
In
addition, no director is related to any of our other directors, executive officers or persons nominated or chosen by the Company
to become a director or executive officer that would require disclosure pursuant to Item 401(d) of Regulation S-K.
Executive
Officers
The
following table sets forth the names, ages and principal positions of our executive officers as of the date of this Proxy Statement:
Name
|
|
Age
|
|
Position
|
Jack E. Stover
|
|
66
|
|
President and Chief Executive Officer
|
James Early
|
|
65
|
|
Chief Financial Officer, Secretary and Treasurer
|
Gregory Richard
|
|
52
|
|
Senior Vice President, Chief Commercial Officer
|
The
principal occupation and business experience for at least the last five years for each executive officer is set forth below (except
for Mr. Stover, whose business experience is discussed above, under the heading “
Incumbent Class III Directors, Term
Expiring 2020”).
On
October 11, 2016, James Early was appointed as our Chief Financial Officer. Since August 29, 2016, we had engaged Mr. Early as
a consultant to perform the role of interim chief financial officer. Mr. Early previously served as the interim and subsequently
permanent Chief Financial Officer of AbGenomics International Inc., a clinical stage drug development company with a product pipeline
in immunology and oncology, from September 2015 to July 2016. Mr. Early also previously served as the Chief Financial Officer
of Zebec Therapeutics, LLC (the successor to Quadrant Pharmaceuticals LLC), a privately held specialty pharmaceutical company,
from October 2014 to September 2015. In addition, Mr. Early has provided interim chief financial officer and business development
services for pharmaceutical, life science and other similar companies as a sole proprietor from August 2009 to December 2013 and
through Early Financial Consulting, LLC (“
Early Financial
”) from January 2014 to March 2018. Prior to his consulting
role, Mr. Early was Senior Vice President of Finance and Administration and Corporate Secretary for Synageva BioPharma, an orphan
drug development company, from February 2006 to January 2009. Mr. Early is a Certified Public Accountant and has an M.B.A. in
Finance and Accounting from the UCLA-Anderson School of Management and a B.B.A. in Accounting from the University of Notre Dame.
Gregory
Richard has been our Chief Commercial Officer and Senior Vice President since April 2014. Prior to his employment by us, Mr. Richard
was a Senior Vice President, responsible for sales, marketing and reimbursement, for Strata Pathology Services from April 2012
through April 2014. From 2010 to 2012, Mr. Richard worked with founder Bennet LeBow to form Signal Genetics and launch its first
molecular product for multiple myeloma, MyPRS. From 2007 to 2010 he ran the international Sales and Marketing team for
Synarc/CCBR, a specialized CRO providing central imaging services to pharmaceutical companies in support of osteoporosis and cancer
trials. Mr. Richard has been in the healthcare business for over 25 years in various industries including managed care, biotech
pharmaceuticals, CRO services, and diagnostics. He started his career in sales at Aetna and moved to Genentech as the Director
of Managed Care. He transitioned in to the diagnostics industry as the Vice President of Managed Care for Quest Diagnostics and
served in this role for eight years. Mr. Richard also led the international clinical trials sales team while at Quest.
He also served as the Sr. Vice President of Sales for the Northeast Division of LabCorp. Mr. Richard is a certified Six Sigma
Green Belt and frequent speaker at healthcare industry conferences such as the G2 Lab Institute and the NextGen Dx Summit and
has a Bachelor of Arts from Westminster College, Fulton, Missouri.
There
are no arrangements or understandings between Mr. Stover and any other persons pursuant to which he was selected as an officer.
In addition, there is no family relationship between Mr. Stover and any director, executive officer or person nominated or chosen
by the Company to become a director or executive officer that would require disclosure pursuant to Item 401(d) of Regulation S-K.
There
are no arrangements or understandings between Mr. Early and any other persons pursuant to which he was selected as an officer.
In addition, there is no family relationship between Mr. Early and any director, executive officer or person nominated or chosen
by the Company to become a director or executive officer that would require disclosure pursuant to Item 401(d) of Regulation S-K.
There
are no arrangements or understandings between Mr. Richard and any other persons pursuant to which he was selected as an officer.
In addition, there is no family relationship between Mr. Richard and any director, executive officer or person nominated or chosen
by the Company to become a director or executive officer that would require disclosure pursuant to Item 401(d) of Regulation S-K.
INFORMATION
ABOUT THE COMPENSATION OF OUR DIRECTORS
Each
of our non-employee directors receives an annual director’s fee of $30,000, payable quarterly in arrears. The Chairman of
the Board receives an additional fee of $20,000 and the Chairperson of each of the Audit Committee, Compensation Committee and
Nominating Committee receive an additional annual fee of $15,000, $10,000 and $5,000, respectively. In addition, those non-employee
directors sitting on more than one committee receive additional compensation of $5,000 annually.
From
time to time, the Board may form special committees to address discrete issues and the non-employee directors sitting on such
special committees may receive additional compensation. In addition, our non-employee directors are entitled to reimbursement
for travel and related expenses incurred in connection with attendance at Board and committee meetings.
Commencing
in 2017, upon initial appointment to the Board, each non-employee director receives 20,000 stock options which vest in equal annual
installments over a three-year period. In addition, each non-employee director thereafter receives an annual grant of 10,000 stock
options (with the exception of the Chairman of the Board who receives 13,000 options).
Director
compensation is reviewed on a regular basis with the assistance of Radford Compensation Consultants.
The
following table presents information relating to total compensation for our non-employee directors for the year ended December
31, 2018. Information regarding the compensation of Mr. Stover can be found below, under the heading “Information About
Our Executive Compensation.”
DIRECTOR COMPENSATION IN 2018
|
|
|
Fees earned ($)
|
|
|
Stock
awards
($)
(1)
|
|
|
Option awards ($)
|
|
|
Total ($)
|
|
Stephen J. Sullivan
(2)
|
|
|
65,000
|
|
|
|
4,848
|
|
|
|
17,280
|
|
|
|
87,128
|
|
Joseph Keegan
(3)
|
|
|
55,000
|
|
|
|
4,848
|
|
|
|
17,280
|
|
|
|
77,128
|
|
Felice Schnoll-Sussman
(4)
|
|
|
35,000
|
|
|
|
4,848
|
|
|
|
17,280
|
|
|
|
57,128
|
|
(1)
The dollar amounts set forth under the heading “Stock Awards” represent aggregate grant date fair value computed
in accordance with FASB ASC Topic 718. For purposes of computing such amounts, we disregarded estimates of forfeitures related
to service-based vesting conditions. For additional information regarding our valuation assumptions, please refer to Note 13 -
“Stock-Based Compensation” to our consolidated financial statements included with our annual report on Form 10-K for
the year ended December 31, 2018, filed with the SEC on March 21, 2019. Outstanding stock awards held by the non-employee Directors
as of December 31, 2018 consisted of 8,133 RSUs for Mr. Sullivan, 9,056 RSUs for Dr. Keegan and 4,800 RSUs for Dr. Schnoll-Sussman
as well as 45,200 options for Mr. Sullivan, 39,200 options for Dr. Keegan, and 39,200 options for Dr. Schnoll-Sussman.
(2)
Mr. Sullivan’s fees represent the annual director’s fee of $30,000, plus the $20,000 Chairman of the Board fee,
plus the $10,000 Chair of the Compensation Committee fee, and a fee of $5,000 for serving on multiple committees.
(3)
Dr. Keegan’s fees represent the annual director’s fee of $30,000, plus the $15,000 Chair of the Audit Committee
fee, plus the $5,000 Chair of the Nominating Committee fee, and a fee of $5,000 for serving on multiple committees.
(4)
Dr. Schnoll-Sussman’s fees represent the annual director’s fee of $30,000 plus a fee of $5,000 for serving on
multiple committees.
PROPOSAL
NO. 2 —
TO APPROVE THE INTERPACE DIAGNOSTICS GROUP, INC. 2019 EQUITY INCENTIVE PLAN
On
August 2, 2019, the Compensation Committee of the Board recommended that the Board approve the Interpace Diagnostics Group,
Inc. 2019 Equity Incentive Plan (the “
2019 Equity Incentive Plan
”) and submit the 2019 Equity Incentive Plan
to a vote of our stockholders. On August 2, 2019, the Board approved the 2019 Equity Incentive Plan, subject to stockholder approval,
and directed that the 2019 Equity Incentive Plan be submitted to our stockholders for their approval at the annual meeting. If
approved by our stockholders, the 2019 Equity Incentive Plan will become effective as of the date of approval.
The
purposes of the 2019 Equity Incentive Plan are to enable us to recruit and retain highly qualified employees, directors and consultants;
provide them with an incentive for productivity; and align a portion of their compensation with the growth and value of the Company.
The
proposed 2019 Equity Incentive Plan will make 2.3 million shares of Common Stock available for issuance to eligible participants.
Summary
of the 2019 Equity Incentive Plan
The
principal provisions of the 2019 Equity Incentive Plan are summarized below. This summary is qualified in its entirety by reference
to the actual 2019 Equity Incentive Plan proposed in this Proxy Statement, a copy of which is attached as
Annex A
.
Administration
The
2019 Equity Incentive Plan vests broad powers in a committee to administer and interpret the 2019 Equity Incentive Plan. The Board
will designate the Compensation Committee to administer the 2019 Equity Incentive Plan. Except when limited by the terms of the
2019 Equity Incentive Plan, the Compensation Committee has the authority to, among other things: select the persons to be granted
awards; determine the type, size and term of awards; establish performance objectives and conditions for earning awards; determine
whether such performance objectives and conditions have been met; and accelerate the vesting or exercisability of an award. In
its discretion, the Compensation Committee may delegate all or part of its authority and duties with respect to granting awards
to one or more of our officers, subject to certain limitations and provided applicable law so permits.
The
Board may amend, alter or discontinue the 2019 Equity Incentive Plan and the Compensation Committee may amend any outstanding
award at any time; provided, however, that no such amendment or termination may adversely affect awards then outstanding without
the holder’s permission. In addition, any amendments seeking to increase the total number of shares reserved for issuance
under the 2019 Equity Incentive Plan or modifying the classes of participants eligible to receive awards under the 2019 Equity
Incentive Plan will require ratification by our stockholders in accordance with applicable law.
Eligibility
Any
of our employees, directors, consultants, and other service providers, or those of our affiliates, are eligible to participate
in the 2019 Equity Incentive Plan and may be selected by the Compensation Committee to receive an award. As of the Record Date,
we had approximately [•] employees, [•] non-employee directors and [•] consultants and other
service providers, all of whom were eligible to be selected as participants in the 2019 Equity Incentive Plan. We expect that
our number of employees may rise significantly within six months of the closing of the acquisition of the BioPharma Business of
Cancer Genetics, Inc. as its employees transition to become employees of the Company.
Vesting
The
Compensation Committee determines the vesting conditions for awards. A time-based condition requires that the participant be employed
or otherwise in the service of the Company or its affiliates for a certain amount of time in order for the award to vest. A performance-based
condition requires that certain performance criteria be achieved in order for the award to vest.
Shares
of Stock Available for Issuance
Subject
to certain adjustments, the maximum number of shares of Common Stock that may be issued under the 2019 Equity Incentive Plan in
connection with awards is 2,300,000 (the “
Share Pool
”), all of which may be utilized toward the grant
of any type of award, including incentive stock options. In addition, any shares of Common Stock that are currently available
for issuance under our Amended 2004 Plan, or become available for future issuance under such plan, may be issued to participants
under the 2019 Equity Incentive Plan. Awards that are assumed or substituted by us in connection with an acquisition will not
reduce the Share Pool. In the event of any merger, consolidation, reorganization, recapitalization, stock split, reverse stock
split, split up, spin-off, combination of shares, exchange of shares, stock dividend, dividend in kind, or other like change in
capital structure (other than ordinary cash dividends) to our stockholders, or other similar corporate event or transaction that
affects our Common Stock, the Compensation Committee shall make appropriate adjustments in the number and kind of shares authorized
by the 2019 Equity Incentive Plan and covered under outstanding awards as it determines appropriate and equitable. Shares of Common
Stock subject to awards that expire unexercised or are otherwise forfeited shall again be available for awards under the 2019
Equity Incentive Plan.
Non-employee
directors (in their capacity as such) may not be granted awards in excess of $250,000 in any single calendar year.
The
market value of a share of Common Stock as of the Record Date was [●].
Types
of Awards
The
2019 Equity Incentive Plan provides for the grant of the following equity-based and cash-based incentive awards to participants:
(i) stock options, (ii) stock appreciation rights, (iii) restricted stock, (iv) restricted stock units (“
RSUs
”),
and (v) cash awards.
Stock
Options
. An option entitles the holder to purchase from us a stated number of shares of Common Stock. An incentive stock option
(“
ISO
”), may only be granted to an employee of the Company or its eligible affiliates. The Compensation Committee
will specify the number of shares of Common Stock subject to each option, the vesting conditions, and the exercise price for such
option, provided that the exercise price may not be less than the fair market value of a share of Common Stock on the date the
option is granted. Notwithstanding the foregoing, if ISOs are granted to any 10% stockholder, the exercise price shall not be
less than 110% of the fair market value of Common Stock on the date the option is granted.
Generally,
options may be exercised in whole or in part through a cash payment. The Compensation Committee may, in its sole discretion, permit
payment of the exercise price of an option in the form of previously acquired shares based on the fair market value of the shares
on the date the option is exercised or through means of “net settlement”, which involves the cancellation of a portion
of the option to cover the cost of exercising the balance of the option.
All
options shall be exercisable in accordance with the terms of the applicable award agreement. The maximum term of an option shall
be determined by the Compensation Committee on the date of grant but shall not exceed ten (10) years (five (5) years
in the case of ISOs granted to any 10% stockholder). In the case of ISOs, the aggregate fair market value (determined as of the
date of grant) of Common Stock with respect to which such ISOs become exercisable for the first time during any calendar year
cannot exceed $100,000. ISOs granted in excess of this limitation will be treated as non-qualified stock options.
Stock
Appreciation Rights
. A stock appreciation right represents the right to receive, upon exercise, any appreciation in a share
of Common Stock over a particular time period. The base price of a stock appreciation right shall not be less than the fair market
value of a share of Common Stock on the date the stock appreciation right is granted. This award is intended to mirror the benefit
the participant would have received if the Compensation Committee had granted the participant an option. The maximum term of a
stock appreciation right shall be determined by the Compensation Committee on the date of grant but shall not exceed ten (10)
years. Distributions with respect to stock appreciation rights may be made in cash, shares of Common Stock, or a combination
of both, at the Compensation Committee’s discretion.
Unless
otherwise provided in an award agreement or determined by the Compensation Committee, if a participant terminates employment with
the Company (or its affiliates) due to death or disability, the participant’s unexercised options and stock appreciation
rights may be exercised, to the extent they were exercisable on the termination date, for a period of twelve months from the termination
date or until the expiration of the original award term, whichever period is shorter. If the participant terminates employment
with the Company (or its affiliates) for cause (as defined in the 2019 Equity Incentive Plan), (i) all unexercised options and
stock appreciation rights (whether vested or unvested) shall terminate and be forfeited on the termination date, and (ii) any
shares in respect of exercised options or stock appreciation rights for which the Company has not yet delivered share certificates
will be forfeited and the Company will refund to the participant the option exercise price paid for those shares, if any. If the
participant’s employment terminates for any other reason, any vested but unexercised options and stock appreciation rights
may be exercised by the participant, to the extent exercisable at the time of termination, for a period of ninety days from the
termination date (or such time as specified by the Compensation Committee at or after grant) or until the expiration of the original
option or stock appreciation right term, whichever period is shorter. Unless otherwise provided by the Compensation Committee,
any options and stock appreciation rights that are not exercisable at the time of termination of employment shall terminate and
be forfeited on the termination date.
Restricted
Stock
. A restricted stock award is a grant of shares of Common Stock, which are subject to forfeiture restrictions during
a restriction period. The Compensation Committee will determine the price, if any, to be paid by the participant for each share
of Common Stock subject to a restricted stock award. If the specified vesting conditions (if any) are not attained, the participant
will forfeit the portion of the restricted stock award with respect to which those conditions are not attained, and the underlying
Common Stock will be forfeited to the Company. At the end of the restriction period, if the vesting conditions, if any, have been
satisfied, the restrictions imposed will lapse with respect to the applicable number of shares. During the restriction period,
a participant will have the right to vote the shares underlying the restricted stock. However, unless otherwise provided by the
applicable award agreement or the Compensation Committee, a participant generally will not have the right to receive any cash
distributions or dividends with respect to the restricted stock prior to the lapse of the restriction period. Unless otherwise
provided in an award agreement or determined by the Compensation Committee, upon termination a participant will forfeit all restricted
stock that then remains subject to forfeiture restrictions.
Restricted
Stock Units
. RSUs are granted in reference to a specified number of shares of Common Stock and entitle the holder to receive,
on the achievement of specified vesting conditions, an amount equal to the fair market value of one share of Common Stock (at
the time of distribution) for each such share of Common Stock covered by the RSU, which may be settled in shares of Common Stock,
cash, or a combination of both, at the discretion of the Compensation Committee. Unless otherwise provided in an award agreement
or determined by the Compensation Committee, upon termination a participant will forfeit all RSUs that then remain subject to
forfeiture.
Cash
Awards
. Cash awards may be granted to participants. The Compensation Committee will determine the vesting conditions of each
cash award. Unless otherwise specified by the Compensation Committee, a participant will only be eligible to receive payment of
a cash award if he or she provided services to the Company or an affiliated company through the last day of the applicable performance
period.
Change
in Control
In
the event of a change in control (as defined in the 2019 Equity Incentive Plan), the Compensation Committee may, on a participant-by-participant
basis: (i) cause any or all outstanding awards to become vested and immediately exercisable (as applicable), in whole or in part;
(ii) cause any outstanding option or stock appreciation right to become fully vested and immediately exercisable for a reasonable
period in advance of the change in control and, to the extent not exercised prior to that change in control, cancel that option
or stock appreciation right upon closing of the change in control; (iii) cancel any unvested award or unvested portion thereof,
with or without consideration; (iv) cancel any award in exchange for a substitute award; (v) redeem any restricted stock or RSU
for cash and/or other substitute consideration with value equal to the fair market value of an unrestricted share on the date
of the change in control; (vi) cancel any outstanding option or stock appreciation right with respect to all Common Stock for
which the award remains unexercised in exchange for a cash payment equal to the excess (if any) of the fair market value of the
Common Stock subject to the option or stock appreciation right over the exercise or base price of the option or stock appreciation
right (and if the fair market value does not exceed the exercise or base price of the award, cancel the award without payment
of any consideration); (vii) take such other action as the Compensation Committee shall determine to be reasonable under the circumstances;
and/or (viii) in the case of any award subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “
Code
”),
such award shall vest and be distributed only in accordance with the terms of the applicable award agreement and the Compensation
Committee shall only be permitted to use discretion to the extent that such discretion would be permitted under Section 409A of
the Code.
Repricing
Neither
the Board nor the Compensation Committee may, without obtaining prior approval of our stockholders: (i) implement any cancellation/re-grant
program pursuant to which outstanding options or stock appreciation rights under the 2019 Equity Incentive Plan are cancelled
and new options or stock appreciation rights are granted in replacement with a lower exercise or base price per share; (ii) cancel
outstanding options or stock appreciation rights under the 2019 Equity Incentive Plan with an exercise or base price per share
in excess of the then current fair market value per share for consideration payable in our equity securities; or (iii) otherwise
directly reduce the exercise or base price in effect for outstanding options or stock appreciation rights under the 2019 Equity
Incentive Plan.
Federal
Tax Consequences
Under
the Code as currently in effect, a grant under the 2019 Equity Incentive Plan of options, stock appreciation rights, restricted
stock or RSUs would have no federal income tax consequence at the time of grant. All amounts taxable as ordinary income to participants
under the 2019 Equity Incentive Plan in respect of awards are expected to be deductible by Interpace as compensation at the same
time the participant recognizes the ordinary income, subject to certain caps on the deductibility of executive compensation imposed
by Section 162(m) of the Code.
Options
and Stock Appreciation Rights
. Upon exercise of a nonqualified stock option, the excess of the fair market value of the stock
at the date of exercise over the exercise price is taxable to a participant as ordinary income. Similarly, upon exercise of a
stock appreciation right, the value of the shares or cash received is taxable to the participant as ordinary income. Upon
exercise of an ISO that a participant has held for at least two (2) years after the date of grant and at least one (1)
year after the date of exercise, the participant will not have taxable income, except that alternative minimum tax may apply.
When there is a disposition of the shares subject to the ISO, the difference, if any, between the sale price of the shares and
the exercise price of the option, is treated as long-term capital gain or loss. If the participant does not satisfy these holding
period requirements, a “disqualifying disposition” occurs and the participant will recognize ordinary income in the
year of the disposition in an amount equal to the excess of the fair market value of the shares at the time the option was exercised
over the exercise price of the option. Any gain realized in excess of the fair market value at the time of exercise will be short
or long-term capital gain, depending on whether the shares were sold more than one (1) year after the option was exercised.
Restricted
Stock
. Unless the participant elects to recognize its value as income at the time of the grant, restricted stock is taxable
to a participant as ordinary income when it becomes vested.
Restricted
Stock Units
. When shares of Common Stock or cash with respect to RSU awards are delivered to the participant, the value of
the shares or cash is taxable to the participant as ordinary income.
Miscellaneous
Generally,
awards granted under the 2019 Equity Incentive Plan shall be nontransferable except by will or by the laws of descent and distribution.
No participant shall have any rights as a stockholder with respect to shares covered by options or RSUs, unless and until such
awards are settled in shares of Common Stock. No option shall be exercisable, no shares of Common Stock shall be issued, no certificates
for shares of Common Stock shall be delivered and no payment shall be made under the 2019 Equity Incentive Plan except in compliance
with all applicable laws. The awards will be subject to our stock ownership and clawback policies, as may be in effect from time
to time. The 2019 Equity Incentive Plan will expire ten years after it becomes effective.
New
Plan Benefits
As
of the date of the Annual Meeting, no awards will have been granted under the 2019 Equity Incentive Plan. Subject to stockholder
approval of the 2019 Equity Incentive Plan, all awards granted under the 2019 Equity Incentive Plan will be made at the discretion
of the Compensation Committee and the terms of such awards are also in the discretion of the Compensation Committee. Therefore,
it is not currently possible to determine the number, name or positions of persons who will benefit from the 2019 Equity Incentive
Plan in the current year, if it is approved by our stockholders, or the terms of any such benefits.
Proposal
No. 2, the approval of the 2019 Equity Incentive Plan, requires a majority of the votes of the shares present in person or represented
by proxy at the Annual Meeting. Abstentions and broker non-votes will have no effect on determining whether the affirmative vote
constitutes a majority of the votes of the shares present in person or represented by proxy at the Annual Meeting.
The
Board Recommends a Vote FOR the Approval of the 2019 Equity Incentive Plan and Proxies that Are Returned Will Be So Voted
Unless Otherwise Instructed.
PROPOSAL
NO. 3 —
APPROVAL OF THE
INTERPACE
Diagnostics Group, Inc.
EMPLOYEE
STOCK PURCHASE PLAN
We
are seeking stockholder approval of the Interpace Diagnostics Group, Inc. Employee Stock Purchase Plan (the “
Employee
Stock Purchase Plan
”), which was adopted by the Board, effective on August 2, 2019, subject to approval by our stockholders
at the Annual Meeting.
The
purpose of the Employee Stock Purchase Plan is to provide employees of the Company and its participating subsidiaries with an
opportunity to acquire a proprietary interest in the Company through the purchase of shares of Common Stock. The Employee Stock
Purchase Plan is intended to qualify as an “employee stock purchase plan” meeting the requirements of Section 423
of the Code.
The
maximum aggregate number of shares of Common Stock that may be purchased under the Employee Stock Purchase Plan will be 1,000,000.
A
summary of the Employee Stock Purchase Plan is set forth below. The summary is qualified in its entirety by reference to the full
text of the Employee Stock Purchase Plan, a copy of which is attached as
Annex B
.
Summary
of the Plan
Administration
Subject
to the express provisions of the Employee Stock Purchase Plan, the Compensation Committee has the authority to construe and interpret
the Employee Stock Purchase Plan, prescribe, amend and rescind rules relating to the Employee Stock Purchase Plan’s administration
and take any other actions necessary or desirable for the administration of the Employee Stock Purchase Plan, and to ensure compliance
with Section 423 of the Code and other applicable law.
Stock
Subject to the Employee Stock Purchase Plan
Subject
to adjustment as provided in the Employee Stock Purchase Plan, a total of 1,000,000 shares of Common Stock have been authorized
and reserved for issuance under the Employee Stock Purchase Plan. Such shares of Common Stock may be newly issued shares, treasury
shares or shares acquired on the open market. As of the Record Date, the closing price of our Common Stock on Nasdaq was
$
[●]
per share.
Eligibility;
Grant and Exercise of Options
Generally,
employees of the Company and its participating subsidiaries who have been employed by the Company or a participating subsidiary
for at least one (1) year and are customarily employed for at least twenty (20) hours per week and for more than five (5) months
in any calendar year are eligible to participate in the Employee Stock Purchase Plan. As of the Record Date, there were approximately
[•] such employees, all of whom are eligible to participate in the Employee Stock Purchase Plan, including employees
who are “highly compensated employees” within the meaning of Section 414(q) of the Code (“
Highly Compensated
Employees
”). Notwithstanding the foregoing, the Compensation Committee may exclude Highly Compensated Employees from
participation in the Employee Stock Purchase Plan or any offering, and no employee may be granted options to purchase shares of
Common Stock under the Employee Stock Purchase Plan if such employee (i) immediately after the grant would own capital stock possessing
5% or more of the total combined voting power or value of all classes of Interpace capital stock, or (ii) holds rights to purchase
shares of Common Stock under all of the Company’s employee stock purchase plans (as defined in Section 423 of the Code)
that accrue at a rate exceeding $25,000 (determined as of the option grant date) for each calendar year in which such rights are
outstanding.
The
Employee Stock Purchase Plan provides for six (6) month offering periods, commencing on or about January 1st and July 1st
of each year, unless specified otherwise by the Compensation Committee. Eligible employees may elect to become a participant in
the Employee Stock Purchase Plan by submitting an enrollment form, pursuant to which an employee may elect to enroll in the Employee
Stock Purchase Plan, authorize a new level of payroll deductions, or stop payroll deductions and withdraw from an offering period.
However, a participant may not purchase more than 100,000 shares of Common Stock during each offering period.
During
each six-month offering period for which a participant has enrolled, the participant may contribute through payroll deductions
between 1% and 10%, in whole percentages, of his or her compensation, including from base salary, wages, annual bonuses or commissions,
overtime, vacation pay, holiday pay, jury duty pay and funeral leave pay, but excluding education or tuition reimbursements, imputed
income arising under any group insurance or benefit program, travel expenses, business and relocation expenses, and income received
in connection with stock options or other equity-based awards. No interest shall accrue on or be payable with respect to the payroll
deductions of a participant in the Employee Stock Purchase Plan. Payroll deductions would be made before deduction for any salary
deferral contributions made by the employee to any tax-qualified or nonqualified deferred compensation plan.
On
the last trading day of an offering during each offering period, a participant’s option to purchase shares of Common Stock
will be exercised automatically. The purchase price will be the lesser of eighty-five percent (85%) of the fair market value of
one share of Common Stock on the first trading day or the last trading day of an offering period. As soon as reasonably practicable
after the last day of each trading period, the Company will arrange for the delivery to each participant of the shares of Common
Stock purchased upon exercise of his or her option. We may require that the shares be deposited and/or retained for a specified
period of time with a financial services firm or other agent it designates as broker. Neither payroll deductions nor rights with
respect to the exercise of an option or to receive Common Stock are transferable, other than by will, by the laws of descent and
distribution, or by written designation of a beneficiary with the Compensation Committee. If there is a cash balance remaining
in a participant’s account at the end of an offering representing the exercise price for a fractional share of Common Stock,
such balance will remain in the participant’s account to be aggregated with other fractional shares for contribution in
a future offering.
Termination
of Employment and Withdrawal from the Employee Stock Purchase Plan
Participants
may elect to withdraw from the Employee Stock Purchase Plan at any time and receive back any of their contributions, without interest,
not used to purchase shares; provided that if a participant wishes to withdraw his or her funds prior to purchase, he or she must
submit a revised enrollment form to the Compensation Committee at least fifteen (15) days prior to the end of the offering period.
Participants
who terminate employment at least thirty (30) days before the end of an offering period will be deemed to have withdrawn from
the Employee Stock Purchase Plan and the payroll deductions in the participant’s notional account that have not been used
to purchase shares of Common Stock will be returned to the participant.
Participants
who terminate employment within thirty (30) days before the end of an offering period will have their accumulated payroll deductions
applied to the purchase of shares at the end of the offering period.
Amendment
and Termination of the Employee Stock Purchase Plan
The
Compensation Committee may amend or terminate the Employee Stock Purchase Plan at any time for any reason. If the Employee Stock
Purchase Plan is terminated, the Compensation Committee may elect to terminate all outstanding offering periods either immediately
or once shares of Common Stock have been purchased on the last trading day of the offering period (which may, in the discretion
of the Compensation Committee, be accelerated), or the Compensation Committee may permit offering periods to expire in accordance
with their terms. If any offering period is terminated before its scheduled expiration, all amounts that have not been used to
purchase shares of Common Stock will be returned to participants as soon as administratively practicable.
Federal
Income Tax Consequences to Interpace and to Participants
The
Employee Stock Purchase Plan is designed to qualify as an Employee Stock Purchase Plan under Section 423 of the Code. A general
summary of the federal income tax consequences regarding the Employee Stock Purchase Plan is stated below. The tax consequences
of participating in the Employee Stock Purchase Plan may vary with respect to individual situations. Accordingly, participants
should consult with their tax advisors in regard to the tax consequences of participating in the Employee Stock Purchase Plan
as to both federal and state income tax considerations.
Neither
the grant nor the exercise of options under the Employee Stock Purchase Plan will have a tax impact on the participant or on the
Company. If a participant disposes of the Common Stock acquired upon the exercise of his options after at least two (2)
years from the date of grant and one (1) year from the date of exercise, then the participant must treat as ordinary income
the amount by which the lesser of (i) the fair market value of the Common Stock at the time of disposition, or (ii) the fair market
value of the Common Stock at the date of grant, exceeds the purchase price. Any additional gain or loss to this amount will be
treated as a capital gain or loss. If a participant holds Common Stock at the time of his or her death, the holding period requirements
are automatically deemed to have been satisfied and he or she will realize ordinary income in the amount by which the lesser of
(i) the fair market value of the Common Stock at the time of death, or (ii) the fair market value of the Common Stock at the date
of grant exceeds the purchase price. If a participant disposes of Common Stock before expiration of two (2) years from
the date of grant and one (1) year from the date of exercise, then the participant must treat as ordinary income the excess
of the fair market value of the Common Stock on the date of exercise of the option over the purchase price. Any additional gain
will be treated as long-term or short-term capital gain or loss, as the case may be. We are entitled to a deduction for federal
income tax purposes for dispositions of shares acquired by a participant in the Employee Stock Purchase Plan only to the extent
that the participant realizes ordinary income as a result of a disqualifying disposition of shares acquired under the Employee
Stock Purchase Plan. Any such deduction is subject to the limitations of Section 162(m) of the Code.
Benefits
to Named Executive Officers and Others
Participation
in the Employee Stock Purchase Plan is voluntary and Interpace cannot presently determine the benefits or amounts that will be
received pursuant to the Employee Stock Purchase Plan in the future, as such amounts will depend on the amount of contributions
eligible employees choose to make, the actual purchase price of shares in future offering periods, and the market value of the
Common Stock on various future dates.
New
Plan Benefits
As
of the date of the Annual Meeting, no purchase rights will have been granted under the Employee Stock Purchase Plan. Therefore,
it is not currently possible to determine the number, name or positions of persons who will benefit from the Employee Stock Purchase
Plan in the current year, if it is approved by our stockholders, or the terms of any such benefits.
Proposal
No. 3, the approval of the Employee Stock Purchase Plan, requires a majority of the votes of the shares present in person or represented
by proxy at the Annual Meeting. Abstentions and broker non-votes will have no effect on determining whether the affirmative vote
constitutes a majority of the votes of the shares present in person or represented by proxy at the Annual Meeting.
The
Board Recommends a Vote FOR the Approval of the Employee Stock Purchase Plan and Proxies that Are Returned Will Be So Voted
Unless Otherwise Instructed.
PROPOSAL
NO. 4 —
to approve, under applicable nasdaq listing rules, issuances of shares of our common stock upon conversion of our preferred stock
in excess of 19.99% of our common stock outstanding prior to such issuances
Summary
Because
our Common Stock is listed on Nasdaq, we are subject to the Nasdaq Listing Rules. The potential issuance of the shares
of our Common Stock upon conversion of our Preferred Stock (as described below) implicates certain of the Nasdaq Listing Rules
requiring prior stockholder approval in order to maintain our listing on Nasdaq. Some of the Preferred Stock was issued on July
15, 2019 and we expect that if this proposal is approved, we will shortly thereafter issue additional shares of Preferred Stock.
As described below under “Nasdaq Listing Rules and the Necessity of Stockholder Approval — Effect of Affirmative Vote,”
we seek your approval of this Proposal No. 4 to comply with the Nasdaq Listing Rules.
The
Board approved the issuance of Preferred Stock to Ampersand (as described below) primarily to finance our acquisition of the BioPharma
Business of Cancer Genetics, Inc. (as described below). The Board believes that with the acquisition of the BioPharma Business,
the Company has the potential to be a leader in enabling personalized and precision medicine by offering advanced diagnostics,
molecular market testing, data solution and biopharma services. The Board believes that partnering with an entity affiliated
with Ampersand Capital Partners, a private equity firm specializing in the diagnostics and biopharma sectors, will assist
the Company in adding financial support and expertise and potentially accelerating its growth trajectory within the clinical diagnostic
and BioPharma markets. The initial conversion price into Common Stock of Ampersand’s investment in Preferred Stock was $0.80,
subject to adjustment, representing a premium of approximately 14.0% over the closing price of the Company’s Common Stock
prior to the announcement of the investment. The $0.80 conversion price, subject to adjustment, will also be applicable to the
Second Ampersand Closing (as defined below) should it occur, regardless of the market price of our Common Stock at the time of
the Second Ampersand Closing.
If
this Proposal No. 4 is approved and we issue additional Preferred Stock in the Second Ampersand Closing, the proceeds from the
issuance of such stock will be used to retire debt associated with the acquisition of the BioPharma Business and to help pay integration
costs of, and liabilities assumed with respect to, the BioPharma Business. If this Proposal No. 4 is not approved and we are unable
to issue additional Preferred Stock, we would likely need to seek additional sources of funding to meet our obligations that we
incurred in connection with our acquisition of the BioPharma Business. Such additional sources of funding may not be available
or, if available, could be on terms less favorable to us than those available in a sale of Preferred Stock and such an alternative
financing could potentially reduce the conversion price of the existing Preferred Stock as a result of a weighted average conversion
price adjustment feature of the Preferred Stock, as described below.
Further,
if this Proposal No. 4 is not approved, we and our stockholders may suffer adverse consequences. For example, the Preferred
Stock as a result would have an increased dividend, increased liquidation preference and in certain cases, mandatory redemption.
Please see below “Consequences of Failing to Approve this Proposal No. 4”. If this Proposal No. 4 is approved,
while we believe that we and our stockholders would benefit, there may also be consequences, including dilution of our stockholders.
Please see below “Certain Consequences of Approving Proposal No. 4”. The Preferred Stock has no voting
rights with respect to this Proposal No. 4 and cannot vote with respect to this Proposal No. 4 at the Annual Meeting.
The
Board has determined that the Proposal No. 4 is in the best interest of the Company and its stockholders and unanimously recommends
that stockholders vote “
FOR
” for this Proposal No. 4.
Background
Acquisition
On
July 15, 2019, we acquired assets and certain liabilities constituting the Biopharma Services business of Cancer Genetics, Inc.
(NASDAQ: CGIX) (the “
BioPharma Business
”) for approximately $23,500,000 (paid by us partly in cash and partly
in the form of an Excess Consideration Note as defined and described below) and the assumption of certain liabilities totaling
approximately $5 million dollars, subject to certain adjustments (the “
Acquisition
”). We acquired the BioPharma
Business through a private foreclosure sale from Cancer Genetics, Inc.’s secured creditors under § 9-610 of the Uniform
Commercial Code as enacted in all relevant jurisdictions. The BioPharma Business provides pharmaceutical and biotech companies and
non-profit entities performing clinical trials with lab testing services for patient stratification and treatment selection through
an extensive suite of molecular- and biomarker-based testing services, DNA- and RNA- extraction and customized assay development
and trial design consultation. In connection with the Acquisition, we added facilities in Rutherford, New Jersey and Research
Triangle Park, North Carolina and we expect to add approximately 80 employees within six months of closing.
In
conjunction with the Acquisition, Ampersand, an entity affiliated with Ampersand Capital Partners, agreed to invest $27,000,000
in our newly issued Preferred Stock, provided that $13,000,000 of that amount will be invested at a future date, subject to certain
conditions. Ampersand Capital Partners is a private equity firm dedicated to growth-oriented investments in the healthcare sector.
We offered and sold $14,000,000 of Preferred Stock to Ampersand on July 15, 2019 (the “
First Ampersand Closing
”)
and the proceeds from such sale were primarily used by us to pay the cash consideration portion of the Acquisition. We expect
the remaining $13,000,000 will be offered and sold to Ampersand (the “
Second Ampersand Closing
”) subsequent
to our Annual Meeting, conditioned upon the satisfaction of customary closing conditions and the approval of Proposal No. 4 at
our Annual Meeting by a majority of the votes of the shares of Common Stock present in person or represented by proxy at the Annual
Meeting (the “
Affirmative Vote
”).
Excess
Consideration Note
In
conjunction with the acquisition of the BioPharma Business, a subsidiary of the Company issued to Cancer Genetics, Inc. a subordinated
seller note in the amount of $7,692,300 (the “
Excess Consideration Note
”). The Excess Consideration Note accrues
interest at 6% per annum and matures upon the earlier of July 15, 2022 or consummation of the Second Ampersand Closing by Ampersand
after an Affirmative Vote and satisfaction of customary closing conditions.
Preferred
Stock
On
July 15, 2019 in the First Ampersand Closing, the Company issued to Ampersand 60 newly created shares of Series A Preferred Stock
(the “
Series A Preferred Stock
”) at an aggregate purchase price of $6,000,000 and 80 newly created shares of
Series A-1 Preferred Stock (the “
Series A-1 Preferred Stock
” and together with the Series A Preferred Stock,
the “
Preferred Stock
”) at an aggregate purchase price of $8,000,000, both at an issuance price per share of
$100,000 (the “
Stated Value
”). If the Second Ampersand Closing occurs, the Company will issue to Ampersand
an additional 130 newly issued shares of Series A Preferred Stock with an aggregate purchase price of $13,000,000.
The
Series A Preferred Stock currently is subject to limitations both with respect to its voting power and its conversion into our
Common Stock. All such limitations would be removed upon an Affirmative Vote. The Series A-1 Preferred Stock cannot vote nor can
it be converted into our Common Stock. Upon an Affirmative Vote, each share of Series A-1 Preferred Stock would automatically
convert into one share of Series A Preferred Stock, which will not be subject to limitations with respect to its voting power
or its conversion into our Common Stock. If the Second Ampersand Closing occurs and the Company sells newly issued Series A Preferred
Stock to Ampersand, such Series A Preferred Stock will not be subject to limitations with respect to its voting power or its conversion
into our Common Stock. The terms of the Preferred Stock are described below.
Use
of Proceeds from the Second Ampersand Transaction
If
the Second Ampersand Closing is consummated, the Company expects to use the proceeds to extinguish the Excess Consideration
Note and for general corporate purposes, including the integration of the BioPharma Business.
Nasdaq
Listing Rules and the Necessity of Stockholder Approval
Overview
Because
our Common Stock is listed on Nasdaq, we are subject to the Nasdaq Listing Rules. If we do not comply with the Nasdaq Listing
Rules, our Common Stock could be delisted from Nasdaq, which could have an adverse impact on the value and liquidity of our Common
Stock and may trigger an event of default or breach of a covenant under certain of our agreements. The Preferred Stock issued
in the First Ampersand Closing complied with the Nasdaq Listing Rules, and included several limitations that will remain in place
until an Affirmative Vote occurs, or with respect to certain limitations related to voting, will terminate on the date our Annual
Meeting is held. The Second Ampersand Closing cannot be consummated without an Affirmative Vote.
Applicable
Nasdaq Listing Rules
In
order to remove the limitations on our outstanding Preferred Stock described below and to consummate the Second Ampersand Closing,
the majority of the votes of the shares of Common Stock present in person or represented by proxy at the Annual Meeting must approve
Proposal No. 4, which will constitute stockholder approval of the issuance of the Preferred Stock issued at the
First Ampersand Closing and to be issued at the Second Ampersand Closing, including all of their respective terms, voting
and director appointment rights associated with such Preferred Stock described below and the issuance of Common Stock issuable
upon conversion of such Preferred Stock, with respect to the following Nasdaq Listing Rules.
|
●
|
The
Nasdaq Acquisition Rule
. Nasdaq Listing Rule 5635(a) requires stockholder approval prior to the issuance of common
stock (or securities convertible into or exercisable for common stock) in connection with the acquisition of the stock or
assets of another company if such securities are not issued in a public offering and (1) have, or will have upon issuance,
voting power equal to or in excess of 20% of the voting power outstanding before the issuance of common stock (or securities
convertible into or exercisable for common stock); or (2) the number of shares of common stock to be issued is or will be
equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock or securities.
|
|
|
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●
|
The Nasdaq “Change
of Control” Rule
. Nasdaq Listing Rule 5635(b) requires stockholder approval when any issuance or potential issuance
will result in a “change of control” of the issuer. While Nasdaq has not adopted any bright-line rule on what
constitutes a “change of control” for purposes of Rule 5635(b), Nasdaq has previously indicated that the acquisition
of, or right to acquire, by a single investor or affiliated investor group, as little as 20% of the common stock (or securities
convertible into or exercisable for common stock) or voting power of an issuer and such ownership would be the largest ownership
position of the issuer after a transaction could constitute a change of control. Nasdaq will consider all relevant factors
when determining whether a change of control has occurred. Stockholders should note that a “change of control”
as described under Rule 5635(b) applies only with respect to the application of such rule, and does not necessarily constitute
a “change of control” for purposes of Delaware law, our organizational documents, or any other purpose.
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|
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●
|
The Nasdaq 20%
Rule
.
N
asdaq Listing Rule 5635(d) requires prior stockholder approval
to the issuance of securities in connection with a transaction other than a public offering involving the sale, issuance or
potential issuance by the company of common stock (or securities convertible into or exercisable for common stock) at a price
that is lower than the lower of (1) the closing price (as reflected on Nasdaq.com) immediately preceding the signing of the
binding agreement, or (2) the average closing price of the common stock (as reflected on Nasdaq.com) for the five trading
days immediately preceding the signing of the binding agreement (such lower number, the “
Nasdaq Minimum Price
”),
which alone or together with sales by officers, directors or substantial stockholders of the company, equals 20% or more of
common stock or 20% or more of the voting power outstanding before the issuance. Even if securities are issued at a premium
to the then current market price of the common stock, as was the case with the Preferred Stock issued in the First Ampersand
Closing, this rule will apply if the conversion price is subject to certain types of anti-dilution adjustments. The binding
agreement in the case of the First Ampersand Closing and the Second Ampersand Closing means the related securities purchase
agreement.
|
We
refer to Nasdaq Listing Rules 5635(a), (b) and (d) collectively herein as the “
Nasdaq Stockholder Approval Rules
.”
Effect
of Affirmative Vote
Upon
an Affirmative Vote, the Preferred Stock purchased by Ampersand in the First Ampersand Closing (1) may have voting power in excess
of 20% of the voting power outstanding before the issuance thereof (including certain director appointment rights described below),
(2) will be convertible into shares of Common Stock which will be in excess of 20% of the shares of Common Stock outstanding before
such issuance at a conversion price that, due to the anti-dilution and potential conversion price downward adjustment features
described below, may be less than the Nasdaq Minimum Price and (3) may constitute a “change of control” for purposes
of the Nasdaq Stockholder Approval Rules. Furthermore, upon the Affirmative Vote, if the Second Ampersand Closing is consummated,
further shares of Series A Preferred Stock would be issued to Ampersand in the Second Ampersand Closing, which would result in
further increases in voting power and further increases in the number of shares of Common Stock issuable upon conversions of Series
A Preferred Stock and may further constitute a “change of control” for purposes of the Nasdaq Stockholder Approval
Rules. By voting “FOR” this Proposal No. 4, stockholders would be consenting, for purposes of the Nasdaq Stockholder
Approval Rules, to, among other things, the removal of limits on voting rights of the Preferred Stock described below (including
on certain director appointment rights described below), the potential issuance of Common Stock upon conversion of Preferred Stock,
and any potential resultant “change of control” for purposes of the Nasdaq Stockholder Approval Rules, in each case,
whether as a result of the Preferred Stock issued in the First Ampersand Closing or to be issued if the Second Ampersand Closing
is consummated.
Series
A Preferred Stock and Series A-1 Preferred Stock Currently Subject to Certain Limitations
In
order to comply with the Nasdaq Stockholder Approval Rules, the Series A Preferred Stock and Series A-1 Preferred Stock were issued
in the First Ampersand Closing with limited conversion and voting rights, including the following limitations:
|
●
|
No
Series A Preferred Stock Conversion or Voting Rights Prior to Annual Meeting.
The Series A Preferred Stock is not convertible
into shares of our Common Stock and has no voting rights, other than as described below in “Terms of the Preferred Stock
— Voting”, on or prior to the date on which the Annual Meeting is held, subject to the protective provisions described
below in “Terms of the Preferred Stock — Protective Provisions”. These limitations will no longer apply to the
Series A Preferred Stock after the earlier of the day after the date on which the Annual Meeting is held or January 15, 2020,
whether or not an Affirmative Vote is obtained at the Annual Meeting. Accordingly, after the date of the Annual Meeting, the Series
A Preferred Stock will be convertible into shares of our Common Stock at the initial conversion price of $0.80, subject to the
downward adjustment described below to a conversion price floor of $0.59, and will have voting rights (subject to the Exchange
Cap and Voting Cap described below, if Proposal No. 4 is not approved by our stockholders).
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|
|
|
|
●
|
Series A Preferred
Stock Exchange Cap and Voting Cap.
Until an Affirmative Vote is obtained, the Series A Preferred Stock may not be
converted into shares of our Common Stock in excess of 19.99% of the shares of our Common Stock outstanding on July 15, 2019,
which we refer to as the “
Exchange Cap
,” and each share of Series A Preferred Stock that exceeds the Exchange
Cap has no voting rights, which we refer to as the “
Voting Cap
.”
|
|
|
|
|
●
|
No Series A-1
Preferred Stock Conversion or Voting Rights
. Until an Affirmative Vote is obtained, the Series A-1 Preferred Stock
may not be converted into shares of Series A Preferred Stock. In addition, the Series A-1 Preferred Stock does not have voting
rights, subject to the protective provisions described below in “Terms of the Preferred Stock — Protective Provisions”.
|
As
a result, if an Affirmative Vote is obtained, stockholders would be approving the potential sale and issuance of 130 additional
shares of Series A Preferred Stock in the Second Ampersand Closing and the conversion of the existing 80 shares of Series A-1
Preferred Stock into Series A Preferred Stock. In addition, the issuance of our Common Stock to any holder of the existing Series
A Preferred Stock could, after an Affirmative Vote (i) exceed the Exchange Cap and the Voting Cap for purposes of Rule 5635(a)
and Rule 5635(d) (and, for purposes of Rule 5635(d), potentially be at a conversion price below the Nasdaq Minimum Price), and
(ii) exceed the share threshold constituting a “change of control” for purposes of Rule 5635(b).
The
approval of our stockholders was not required for the creation and issuance of the Series A Preferred Stock and Series A-1 Preferred
Stock in the First Ampersand Closing. Pursuant to applicable provisions of the Delaware General Corporation Law and our certificate
of incorporation, as amended, our Board has the authority to divide and establish any or all of our authorized but unissued shares
of preferred stock into one or more series and to fix and determine the designation of each such series, the number of shares
that shall constitute such series and the relative rights and preferences of the shares of each series.
In
addition, we entered into an Investor Rights Agreement (as defined and described below in “Investor Rights Agreement”)
pursuant to which we are required to include in this Proxy Statement for our Annual Meeting, a proposal to our stockholders to
authorize and approve the issuance of all Common Stock issuable upon the conversion of the Series A Preferred Stock, including
the Series A Preferred Stock issuable upon conversion of the Series A-1 Preferred Stock at any time and from time to time pursuant
to and in accordance with the terms of the Certificate of Designation (as defined below). In addition, we agreed to provide a
recommendation by our Board in favor of the approval of such proposal.
Potential
Increased Dilution
As
described more fully below under “Terms of the Preferred Stock,” (i) the amount of any dividends on the Series A
Preferred Stock, including the shares of Series A Preferred Stock issuable upon conversion of the Series A-1 Preferred Stock,
that are not paid in cash will be added to the liquidation preference of the Series A Preferred Stock and (ii) the initial
conversion price of $0.80 of the Series A Preferred Stock is subject to a downward adjustment if a 2020 revenue
target of $34,000,000 related to the Company’s historical business (without giving effect to the acquisition described
above in “Background — Acquisition”) is not satisfied, subject to a conversion price floor of $0.59 (as
described below). Any increase in the liquidation preference of the Series A Preferred Stock or any reduction in the initial
conversion price of $0.80 of the Series A Preferred Stock could increase the number of shares of Common Stock due upon conversion
of the Series A Preferred Stock issued to Ampersand. See “Terms of the Preferred Stock — Conversion Price and
Price Adjustment Provisions” below for more information.
In
addition, the amount of any dividends on the Series A-1 Preferred Stock that are not paid in cash will be added to the liquidation
preference of the Series A-1 Preferred Stock and any increase in the liquidation preference of the Series A-1 Preferred Stock
would increase the number of shares of Series A Preferred Stock issued to Ampersand upon conversion of the Series A Preferred
Stock into shares of Series A Preferred Stock and accordingly, also increase the number of shares of Common Stock due upon conversion
of such Series A Preferred Stock into Common Stock. Thus, the actual number of shares of Common Stock that will be issuable upon
conversion of a share of the Series A Preferred Stock (or indirectly upon conversion of a share of Series A-1 Preferred Stock)
and the actual Conversion Price (as described and defined below) will not be known until such conversion occurs.
Accordingly,
we seek an Affirmative Vote in order to ensure compliance with the Nasdaq Stockholder Approval Rules and to satisfy our obligations
under the Investor Rights Agreement.
Terms
of the Preferred Stock
Overview
On
July 15, 2019, in connection with the issuance of the Series A Preferred Stock and the Series A-1 Preferred Stock in the First
Ampersand Closing, we filed a Certificate of Designation of Series A Convertible Preferred Stock and Series A-1 Convertible Preferred
Stock (the “
Certificate of Designation
”) creating the Series A Preferred Stock and the Series A-1 Preferred
Stock and establishing the designations, preferences, and other rights of the Series A Preferred Stock and Series A-1 Preferred
Stock.
Ranking
The
Series A Preferred Stock and Series A-1 Preferred Stock rank senior to our Common Stock with respect to dividend rights and rights
of Liquidation (including mergers and consolidations and sales of all or substantially all of the Company’s assets) (as
defined in the Certificate of Designation), winding up, and dissolution.
Conversion
Rights
The
Series A Preferred Stock is not convertible into shares of our Common Stock until the day after the date of the Annual Meeting
(the “
Voting Date
”). If an Affirmative Vote is obtained of this Proposal No. 4 at the Annual Meeting, each
share of Series A Preferred Stock will be convertible, at the option of the holder thereof, in full or in part, from time to time
and at any time, into a number of shares of Common Stock equal to its Stated Value divided by its then current Conversion Price
(as defined and described below) and then multiplied by the number of shares of Series A Preferred Stock to be converted. If we
do not receive an Affirmative Vote of this Proposal No. 4 at the Annual Meeting, the Series A Preferred Stock will be convertible
into our Common Stock but the number of shares of Common Stock which may be issued may not exceed the Exchange Cap. In addition,
upon an Affirmative Vote of this Proposal No. 4 at the Annual Meeting or if the Company obtains an Affirmative Vote at any time
prior to January 15, 2021, each share of Series A-1 Preferred Stock will automatically be converted into one share of Series A
Preferred Stock on such date. Shares of Series A-1 Preferred Stock are not convertible into shares of Common Stock. Shares of
Series A-1 Preferred Common Stock are only convertible into shares of Series A Preferred Stock automatically upon receipt of an
Affirmative Vote. Shares of Series A Preferred Stock resulting from the conversion of Series A-1 Preferred Stock are convertible
into Common Stock.
Conversion
Price and Price Adjustment Provisions
The
initial conversion price of the Series A Preferred Stock is $0.80 per share, however, the Conversion Price is subject to
a downward adjustment if a 2020 revenue target of $34,000,000 related to the Company’s historical business (without giving
effect to the acquisition) is not satisfied, subject to a floor of $0.59 (the “
Conversion Price
”). The downward
adjustment in Conversion Price is $0.03 per $1,000,000 of revenue shortfall but limited to no more than $0.21 or a potential adjustment
of the initial conversion price of $0.80 of up to 26%.
The
exact number of shares of Common Stock issuable upon conversion of the Preferred Stock is currently indeterminable for several
reasons, including that the Conversion Price may vary depending on when, or if, an Affirmative Vote of this Proposal No. 4 (or
a similar proposal) is obtained and when the Series A Preferred Stock is converted into shares of Common Stock. In addition, the
number of Common Stock issuable upon conversion of the Preferred Stock may vary if any dividends on the Preferred Stock are not
paid in cash and are added to the liquidation preference.
The
following table illustrates, at various potential Conversion Prices depending on, or if, the downward adjustment in Conversion
Price of $0.03 per $1,000,000 of revenue shortfall is triggered, (1) the number of shares of Common Stock potentially issuable
upon conversion of the Series A Preferred Stock issued at (x) the First Ampersand Closing, (y) the Second Ampersand Closing (which
also includes the conversion of each share of Series A-1 Preferred Stock issued in the First Ampersand Closing into one share
of Series A Preferred Stock and its subsequent conversion into Common Stock) and (z) the First Ampersand Closing and the Second
Ampersand Closing, combined, (2) the percentage that such shares of Common Stock would represent based on the currently outstanding
Common Stock as of the Record Date plus the shares of Common Stock resulting from such conversion and (3) the percentage
that such shares of Common Stock would represent based on the currently outstanding Common Stock as of the Record Date
plus the shares of Common Stock resulting from such conversion and exercise of all outstanding options and warrants of the Company.
The table below does not reflect any fractional shares or scrip representing fractional shares of Common Stock as the holder is
entitled to receive a cash adjustment instead of fractional shares and assumes there are no dividends on the Preferred Stock that
are not paid in cash and added to the liquidation preference.
|
|
First
Ampersand Closing Issuable Common Stock
|
|
|
As
Adjusted Total % Held
(1)
|
|
|
As
Further Adjusted Total % Held
(2)
|
|
|
Second
Ampersand Closing Issuable Common Stock
(3)
|
|
|
As
Adjusted Total % Held
(1)(3)
|
|
|
As
Further Adjusted Total % Held
(2)(3)
|
|
|
Total
Ampersand Issuable Common Stock
(3)
|
|
|
As
Adjusted Total % Held
(1)(3)
|
|
|
As
Further Adjusted Total % Held
(2)(3)
|
|
Potential Conversion Price:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.59
|
|
|
10,169,491
|
|
|
|
21.0
|
%
|
|
|
15.3
|
%
|
|
|
35,593,220
|
|
|
|
48.2
|
%
|
|
|
38.7
|
%
|
|
|
45,762,711
|
|
|
|
54.5
|
%
|
|
|
44.8
|
%
|
$0.62
|
|
|
9,677,419
|
|
|
|
20.2
|
%
|
|
|
14.7
|
%
|
|
|
33,870,000
|
|
|
|
47.0
|
%
|
|
|
37.6
|
%
|
|
|
43,548,386
|
|
|
|
53.3
|
%
|
|
|
43.6
|
%
|
$0.65
|
|
|
9,230,769
|
|
|
|
19.5
|
%
|
|
|
14.1
|
%
|
|
|
32,307,692
|
|
|
|
45.8
|
%
|
|
|
36.4
|
%
|
|
|
41,538,461
|
|
|
|
52.1
|
%
|
|
|
42.4
|
%
|
$0.68
|
|
|
8,823,529
|
|
|
|
18.8
|
%
|
|
|
13.5
|
%
|
|
|
30,882,352
|
|
|
|
44.7
|
%
|
|
|
35.4
|
%
|
|
|
39,705,882
|
|
|
|
51.0
|
%
|
|
|
41.3
|
%
|
$0.71
|
|
|
8,450,704
|
|
|
|
18.1
|
%
|
|
|
13.0
|
%
|
|
|
29,577,464
|
|
|
|
43.6
|
%
|
|
|
34.4
|
%
|
|
|
38,028,168
|
|
|
|
49.9
|
%
|
|
|
40.3
|
%
|
$0.74
|
|
|
8,108,108
|
|
|
|
17.5
|
%
|
|
|
12.6
|
%
|
|
|
28,378,377
|
|
|
|
42.6
|
%
|
|
|
33.5
|
%
|
|
|
36,486,485
|
|
|
|
48.9
|
%
|
|
|
39.3
|
%
|
$0.77
|
|
|
7,792,207
|
|
|
|
16.9
|
%
|
|
|
12.2
|
%
|
|
|
27,272,726
|
|
|
|
41.7
|
%
|
|
|
32.6
|
%
|
|
|
35,064,934
|
|
|
|
47.9
|
%
|
|
|
38.4
|
%
|
$0.80
|
|
|
7,500,000
|
|
|
|
16.4
|
%
|
|
|
11.8
|
%
|
|
|
26,250,000
|
|
|
|
40.7
|
%
|
|
|
31.8
|
%
|
|
|
33,750,000
|
|
|
|
46.9
|
%
|
|
|
37.5
|
%
|
(1)
Calculated based on the [38,196,038] shares of Common Stock currently outstanding as of the Record Date (plus shares
of Common Stock resulting from the conversion).
(2)
Calculated based on the [38,196,038] shares of Common Stock currently outstanding as of the Record Date (plus Common
Stock resulting from the conversion) and exercise of all outstanding options and warrants of the Company.
(3)
Assumes the Affirmative Vote, the consummation of the Second Ampersand Closing and automatic conversion of Series A-1 Preferred
Stock into Series A Preferred Stock.
Assuming
an Affirmative Vote is obtained at our Annual Meeting and the Second Ampersand Closing is consummated, following conversion
of all of the Series A Preferred Stock, the Common Stock issued as a result of such conversion will represent approximately
46.9% of the aggregate total of such outstanding shares of Common Stock based on the [•] shares of Common Stock
currently outstanding as of the Record Date plus the 33,750,000 shares of Common Stock issuable upon the conversion of
the Series A Preferred Stock at the initial conversion price of $0.80 and if the downward conversion price adjustment
is triggered and the Conversion Price is reduced to the limit of $0.59, approximately 54.5% of the aggregate number of
outstanding shares of Common Stock based on the [•] shares of Common Stock currently outstanding as of the Record
Date plus the 45,762,711 shares of Common Stock issuable upon the conversion of the Series A Preferred Stock at the
lowest possible Conversion Price of $0.59. As noted in the table above, it is possible that under certain
circumstances that Ampersand’s ownership of our Common Stock could in the future be in excess of 50%, or, because we
failed to redeem the Preferred Stock when required to do so, Ampersand gained the right to appoint our entire Board (as
described below under “— Redemption”). Such circumstances could be a “change of control” with
respect to (i) our existing stock options or warrants, which could result in the acceleration of the vesting of options and
mandatory warrant buy-backs by the Company and (ii) employment and other contracts, which could have various
consequences.
Anti-Dilution
Rights
If
the Company issues additional shares of Common Stock without consideration or for a consideration per share less than the Conversion
Price in effect immediately prior to such issuance, the Conversion Price will be reduced pursuant to a broad-based weighted average
formula set forth in the Certificate of Designation.
Mandatory
Conversion
If
at any time after an Affirmative Vote, the Company consummates the sale of shares of Common Stock to the public in a firm-commitment
underwritten public offering pursuant to an effective registration statement under the Securities Act pursuant to which the price
of the Common Stock in such offering is at least equal to the Series A Mandatory Conversion Price, as defined in the Certificate
of Designation (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar
recapitalization affecting such shares) and such offering does not include warrants (or any other convertible security) and results
in at least $25,000,000 in proceeds, net of the underwriting discount and commissions, to the Company and the Common Stock
continues to be listed for trading on Nasdaq or another exchange, all outstanding shares of Series A Preferred Stock will automatically
be converted into shares of Common Stock, at the then effective Series A Conversion Ratio.
Dividends
From
and after July 15, 2019, each share of Series A Preferred Stock (including any Series A Preferred Stock resulting from the conversion
of Series A-1 Preferred Stock) will accrue dividends at a rate per annum of six percent (6%) of its Stated Value, plus the amount
of any previously declared or accrued, and not previously paid dividends (subject to appropriate adjustment in the event of any
stock dividend, stock split, combination or other similar recapitalization affecting such shares). From and after July 15, 2022
(if not earlier converted into Series A following an Affirmative Vote), each share of Series A-1 Preferred Stock will accrue dividends
at a rate per annum of twelve percent (12%) of its Stated Value plus the amount of any previously declared or accrued, and not
previously paid dividends (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares). Prior to an Affirmative Vote, no dividend may be paid in Common Stock on either
the Series A Preferred Stock or Series A-1 Preferred Stock.
Voting
The
Series A-1 Preferred Stock has no voting rights and the Series A Preferred Stock has no voting rights prior to the Voting Date,
subject to the protective provisions described below in “— Protective Provisions.” From and after the Voting
Date, the holders of the Series A Preferred Stock will be entitled to cast the number of votes equal to the lesser of: (a) the
number of whole shares of Common Stock into which the shares of Series A Preferred Stock held by such holder are convertible as
of the record date for determining stockholders entitled to vote on such matter; and (b) the number of whole shares of Common
Stock equal to the Stated Value of the Series A Preferred Stock divided by $0.80 and then multiplied by the number of shares of
Series A Preferred Stock held by such holder as of the record date for determining stockholders entitled to vote on such matter.
However, prior to the Company obtaining an Affirmative Vote, at any meeting of stockholders of the Company (or by written consent
of stockholders in lieu of meeting) pursuant to which the record date for determining the stockholders entitled to vote at such
meeting (or by written consent) occurs on or after the Voting Date, each share of Series A Preferred Stock that exceeds the Voting
Cap shall have no voting rights. Therefore, if the Affirmative Vote is not obtained at the Annual Meeting, each share of Series
A Preferred Stock that exceeds the Voting Cap will have no voting rights. Except as provided by law or by the other provisions
of the Certificate of Designation, holders of Series A Preferred Stock will vote together with the holders of Common Stock as
a single class and on an as-converted to Common Stock basis.
Currently
and for as long as at least 45 shares of Series A Preferred Stock remain outstanding (subject to appropriate adjustment in the
event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares), the holders of
record of the shares of Series A Preferred Stock, exclusively and as a separate class, will be entitled to designate one (1) director
to the Board (including any committee thereof, subject to Rule 5605(a)(2) of the of the Nasdaq Listing Rules regarding director
independence). After an Affirmative Vote is obtained, (i) for as long as at least 90 shares of Series A Preferred Stock remain
outstanding that are not subject to the Voting Cap (subject to appropriate adjustment in the event of any stock dividend, stock
split, combination or other similar recapitalization affecting such shares), the holders of record of the shares of Series A Preferred
Stock, exclusively and as a separate class, will be entitled to designate two (2) directors to the Board (including any committee
thereof) and (ii) for as long as at least 135 shares of Series A Preferred Stock remain outstanding that are not subject to the
Voting Cap (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization
affecting such shares), the holders of record of the shares of Series A Preferred Stock, exclusively and as a separate class,
will be entitled to designate three (3) directors to the Board (including any committee thereof).
Protective
Provisions
For
so long as any shares of Preferred Stock are outstanding, the written consent of the holders of a majority of the then outstanding
shares of Preferred Stock is required for the Company or its subsidiaries to amend, waive, alter or repeal the preferences, rights,
privileges or powers of the holders of Preferred Stock, authorize, create or issue any equity securities senior to or
pari
passu
with either series of Preferred Stock or increase or decrease the number of directors constituting the Board. In addition,
for so long as either: (i) at least 105 shares of Preferred Stock originally issued remain outstanding; or (ii) at least 28 shares
of Series A-1 originally issued remain outstanding (each subject to appropriate adjustment in the event of any stock dividend,
stock split, combination or other similar recapitalization affecting such shares), the written consent or vote of the holders
of a majority of the then outstanding shares of Preferred Stock is required for the Company or its subsidiaries to: (A) authorize,
create or issue any debt securities for borrowed money or funded debt (1) pursuant to which the Company or any of its direct or
indirect subsidiaries issues shares, warrants or any other convertible security, or (2) in excess of $4,500,000 initially,
with such amount to be increased in connection with an aggregate consolidated revenue milestone, but excluding certain specified
permitted transactions; (B) merge with or acquire all or substantially all of the assets of one or more other companies or entities
with a value in excess of $20,000,000, to be increased in connection with an aggregate consolidated revenue milestone; (C)
materially change the nature of the business of the Company; (D) consummate any Liquidation; (E) transfer material intellectual
property rights other than in the ordinary course of business; (F) declare or pay any cash dividend or make any cash distribution
on any equity interests of the Company other than Preferred Stock; (G) repurchase or redeem any shares of capital stock of the
Company, except for the redemption of Preferred Stock pursuant to the terms of the Certificate of Designation, or repurchases
of Common Stock under agreements previously approved by the Board with employees, consultants, advisors or others who performed
services for the Company or any subsidiary in connection with the cessation of such employment or service; (H) incur any additional
individual debt, indebtedness for borrowed money or other additional liabilities pursuant to which the Company or any of its subsidiaries
issues shares, warrants or any other convertible security, or incur any individual debt, indebtedness for borrowed money or other
liabilities pursuant to which the Company or any of its subsidiaries does not issue shares, warrants or any other convertible
security exceeding $4,500,000 million initially, with such amount to be increased in connection with an aggregate consolidated
revenue milestone, but excluding certain specified permitted transactions; or (I) change any accounting methods of the Company
or any of its subsidiaries, except for those changes required by GAAP or applicable regulatory agencies or authorities. In addition,
the Company will not be restricted from adopting an at-the-market offering of Common Stock or other public offering for up to
$5,000,000 of Common Stock.
Liquidation
Upon
any Liquidation (including mergers and consolidations and sales of all or substantially all of the Company’s assets), the
holders of shares of Series A-1 Preferred Stock then outstanding will be entitled to be paid out of the assets of the Company
available for distribution to its stockholders and before any payment will be made to the holders of Series A Preferred Stock,
Common Stock or any other class or series of preferred stock ranking on liquidation junior to the Series A-1 Preferred Stock by
reason of their ownership thereof, the greater of (i) (A) until July 15, 2021, an amount per share two times (2x) the Stated Value,
(B) from July 15, 2021 to July 15, 2022, an amount per share two and one-half times (2½ x) the Stated Value, or (C) after
July 15, 2022, three times (3x) the Stated Value of such share of Series A-1 Preferred Stock, plus any dividends accrued but unpaid
thereon, or (ii) such amount per share as would have been payable in respect of such share had such share been converted into
Series A Preferred Stock and each such share of Series A Preferred Stock had been subsequently converted to Common Stock (the
“
Series A-1 Liquidation Value
”). The holders of shares of Series A Preferred Stock then outstanding will be
entitled to be paid out of the assets of the Company available for distribution to its stockholders (on a
pari passu
basis
with the holders of any class or series of preferred stock ranking on liquidation on a parity with the Series A Preferred Stock),
and before any payment will be made to the holders of Common Stock or any other class or series of preferred stock ranking on
liquidation junior to the Series A Preferred Stock by reason of their ownership thereof, an amount per share of Series A Preferred
Stock equal to the greater of (i) the Stated Value of such share of Series A Preferred Stock, plus any dividends accrued but unpaid
thereon, whether or not declared, together with any other dividends declared but unpaid thereon, or (ii) such amount per share
as would have been payable had each such share been converted into Common Stock immediately prior to such Liquidation (the “
Series
A Liquidation Value
”).
Redemption
If
no Affirmative Vote occurs by July 15, 2022, Ampersand shall have the right (the “
Redemption Right
”) beginning
on July 16, 2022 to require the Company to redeem all of the shares of Series A Preferred Stock, if any, then held by Ampersand
that are convertible into a number of shares of Common Stock that exceeds the Exchange Cap and all of the shares of Series A-1
Preferred Stock then held by Ampersand. Each of the shares of Preferred Stock subject to redemption shall be redeemed by the Company
at a price equal to the Series A-1 Liquidation Value or Series A Liquidation Value, as applicable. If we are unable to redeem
for cash in compliance with the Certificate of Designation all of the shares of Preferred Stock subject to a redemption in compliance
with applicable law, the holders of the Preferred Stock, exclusively and as a separate class, shall be entitled to elect a majority
of the directors of the Company then in-office.
Investor
Rights Agreement
In
connection with the First Ampersand Closing, the Company entered into an Investor Rights Agreement with Ampersand (the “
Investor
Rights Agreement
”). Pursuant to the Investor Rights Agreement, the Company and Ampersand established certain terms and
conditions concerning the rights of and restrictions on Ampersand with respect to the ownership of the Preferred Stock and other
capital stock of the Company.
The
Investor Rights Agreement requires that we must include in this Proxy Statement for our Annual Meeting, a proposal to our stockholders
to authorize and approve the issuance of all Common Stock issuable upon the conversion of the Series A Preferred Stock, including
the Series A Preferred Stock issuable upon conversion of the Series A-1 Preferred Stock at any time and from time to time pursuant
to and in accordance with the terms of the Certificate of Designation. In addition, we agreed to provide a recommendation by our
Board in favor of the approval of such proposal. In the event we do not obtain an Affirmative Vote at this Annual Meeting, the
Company shall call at least one special meeting of its stockholders (the “
Special Meeting
”) to solicit an Affirmative
Vote prior to July 15, 2020, unless Ampersand waives such requirement. If we do not receive an Affirmative Vote at this Annual
Meeting or the Special Meeting, prior to January 15, 2021, we will include such proposal in our proxy statement for the
annual meeting held following the Special Meeting that must be held prior to July 15, 2020 or call at least one additional special
meeting of its stockholders to solicit stockholder approval.
Ampersand
is prohibited from transferring any Common Stock issuable upon conversion of the Series A Preferred Stock for a period of 180
days from the date of the First Ampersand Closing.
Ampersand
agreed that from July 15, 2019 until July 15, 2021 (the “
Standstill Period
”), without the prior written approval
of the Company or the Board, or as otherwise expressly permitted or contemplated by the Investor Rights Agreement
(including pursuant to the exercise of Ampersand’s pre-emptive rights under the Investor Rights Agreement) or the Certificate
of Designation, Ampersand will not and will cause its affiliates not to acquire beneficial ownership of any securities (including
in derivative form) of the Company, in each case excluding (x) the Series A Preferred Stock, purchased either directly from the
Company or pursuant to a conversion of Series A-1 Preferred Stock, the Series A-1 Preferred Stock or Common Stock issuable upon
conversion of the Series A Preferred Stock, and (y) any capital stock or other equity securities of the Company pursuant to or
in accordance with the Certificate of Designation or pursuant to the exercise of Ampersand’s pre-emptive rights under the
Investor Rights Agreement.
Ampersand
also agreed not to engage, directly or indirectly, in specified transactions in the Company’s securities (including, without
limitation, any short sales involving the Company’s securities) during the period from July 15, 2019 until the earlier of
(i) the consummation of a Deemed Liquidation (as defined in the Certificate of Designation); and (ii) the date that Ampersand
and certain of its affiliates do not own any Series A Preferred Stock, Series A-1 Preferred Stock or Common Stock issuable upon
conversion of the Series A Preferred Stock, including Series A Preferred Stock issuable upon conversion of the Series A-1 Preferred
Stock.
In
addition, Ampersand will have certain consent rights, including with respect to those set forth under “Terms of the Preferred
Stock — Protective Provisions” above. Ampersand will also have the pro rata pre-emptive right to purchase securities
newly offered by the Company, based upon its then current ownership of Preferred Stock. The Investor Rights Agreement also provides
Ampersand with the right to demand shelf and piggy-back registration with respect to Common Stock issued as a result of the conversion
of Preferred Stock, commencing one year after the issuance of the Preferred Stock, subject to certain limitations.
Consequences
of Failing to Approve this Proposal No. 4
In
the event an Affirmative Vote approving this Proposal No. 4 is not obtained, we may experience the following consequences:
The
Series A-1 Preferred Stock Will Remain Outstanding for an Extended Period.
Unless an Affirmative Vote at our Annual Meeting
is received or unless our stockholders approve a similar proposal at a subsequent meeting, the Series A-1 Preferred Stock will
remain outstanding in accordance with its terms and will be subject to an escalating liquidation preference for so long as the
Preferred Stock remains outstanding and redemption preference beginning on July 16, 2022 and will earn a substantial dividend.
Increasing
Liquidation Preference of Preferred Stock.
For as long as the Series A Preferred Stock and Series A-1 Preferred Stock remains
outstanding, they will retain a senior liquidation preference over shares of our Common Stock in connection with any Liquidation
of us and, accordingly, no payments will be made to holders of our Common Stock upon any Liquidation of us unless the full liquidation
preference on the Series A Preferred Stock and Series A-1 Preferred Stock, as applicable, is paid. In the case of the Series A-1
Preferred Stock, the liquidation preference per share is the greater of (i) (A) until July 15, 2021, an amount per share two times
(2x) the Stated Value, (B) from July 15, 2021 to July 15, 2022, an amount per share two and one-half times (2½ x) the Stated
Value, or (C) after July 15, 2022, three times (3x) the Stated Value of such share of Series A-1 Preferred Stock, plus any dividends
accrued but unpaid thereon, or (ii) such amount per share as would have been payable in respect of such share had such share been
converted into Series A Preferred Stock and each such share of Series A Preferred Stock had been subsequently converted to Common
Stock.
Additional
Funding Necessary
. If an Affirmative Vote is not obtained, the conditions to the Second Ampersand Closing will not have been
met. In the event the Second Ampersand Closing does not occur, we would likely need to seek additional sources of funding to meet
our obligations that we incurred in connection with the Acquisition, including the extinguishment of the Excess Consideration
Note and to help pay the obligations we assumed in the Acquisition. Such additional sources of funding may not be available or,
if available, could be on terms less favorable to us than those of the Second Ampersand Closing, and could result in substantial
dilution to existing stockholders.
Dividend
Payment and Potential Market Effects.
If an Affirmative Vote is not obtained, we would expect that at least some of the shares
of Series A Preferred Stock and shares of the Series A-1 Preferred Stock issued in the First Ampersand Closing will remain outstanding
for the foreseeable future. Beginning July 15, 2022, and for so long as such shares of the Series A-1 Preferred Stock remain outstanding,
the Series A-1 Preferred Stock would accrue dividends, on a cumulative basis, at an annual rate of 12.0% of the Stated Value ($12,000
per share). The Series A Preferred Stock would continue to accrue dividends, on a cumulative basis, at an annual rate of 6.0%
of the Stated Value ($6,000 per share).
Redemption
Rights and Consequences of Failure to Redeem
. If an Affirmative Vote is not obtained, beginning on July 16, 2022, Ampersand
as the holder has the right to require the Company to redeem all of the shares of Series A Preferred Stock, if any, then held
by Ampersand that are convertible into a number of shares of Common Stock that exceeds the Exchange Cap and all of the shares
of Series A-1 Preferred Stock then held by Ampersand. Each of the shares of Preferred Stock subject to redemption would be redeemed
by the Company at a price equal to the Series A-1 Liquidation Value or Series A Liquidation Value. The Series A-1 Liquidation
Value per share is equal to the greater of (i) (A) until July 15, 2021, an amount per share two times (2x) the Stated Value, (B)
from July 15, 2021 to July 15, 2022, an amount per share two and one-half times (2½ x) the Stated Value, or (C) after July
15, 2022, three times (3x) the Stated Value of such share of Series A-1 Preferred Stock, plus any dividends accrued but unpaid
thereon, or (ii) such amount per share as would have been payable in respect of such share had such share been converted into
Series A Preferred Stock and each such share of Series A Preferred Stock had been subsequently converted to Common Stock. The
Series A Liquidation Value per share is equal to the greater of (i) the Stated Value of such share of Series A Preferred Stock,
plus any dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid
thereon, or (ii) such amount per share as would have been payable had each such share been converted into Common Stock immediately
prior to such Liquidation. The amount of cash required to effect such a redemption may be substantial, and it is possible that
we may not be able to timely redeem the Series A Preferred Stock and Series A-1 Preferred Stock that we are required to redeem.
If we are unable to redeem for cash in compliance with the Certificate of Designation all of the shares of Preferred
Stock subject to a redemption in compliance with applicable law, the holder of Series A Preferred Stock and Series A-1 Preferred
Stock, exclusively and as a separate class, will be entitled to elect a majority of the Board.
Continued
Separate Voting Rights of Holders of Series A Preferred Stock.
If an Affirmative Vote is not obtained, holders of the Series
A Preferred Stock have certain separate voting and consent rights, subject to the Voting Cap, and the holders of our Common Stock
will be unable to take certain actions without approval by the holders of the Series A Preferred Stock. For more information regarding
such voting, see “Terms of the Preferred Stock
—
Voting” and “Terms of the Preferred Stock
—
Protective Provisions”.
Director
Appointment Rights.
If an Affirmative Vote is not obtained, as long as at least 45 shares of Series A Preferred Stock remain
outstanding (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization
affecting such shares), the holders of Series A Preferred Stock, exclusively and as a separate class, will be entitled to designate
one (1) director to the Board (including any committee thereof).
Additional
Stockholder Meetings.
If an Affirmative Vote is not obtained, pursuant to the Investor Rights Agreement, we would be required
to call at least one Special Meeting to solicit the Affirmative Vote prior to July 15, 2020, unless Ampersand waives such requirement.
If we do not receive an Affirmative Vote at this Annual Meeting or the Special Meeting, we are required to include in our proxy
statement for the annual meeting held following the Special Meeting or call at least one additional special meeting of its stockholders
to solicit stockholder approval prior to January 15, 2021. We will bear the costs of soliciting the approval of our stockholders
in connection with these meetings. In addition, while Ampersand is not eligible to vote on the proposals at the Annual Meeting,
if this Proposal No. 4 is not approved at the Annual Meeting, the holders of the Series A Preferred Stock will be entitled
to vote on any similar future proposal at any meeting of our stockholders held after this Annual Meeting, subject to the Voting
Cap.
Restriction
on Payment of Dividends.
If an Affirmative Vote is not obtained, the shares of Series A Preferred Stock and Series A-1 Preferred
Stock will remain outstanding and for so long as such shares of Preferred Stock remain outstanding, if dividends payable on all
outstanding shares of the Series A Preferred Stock have not been declared and paid, or declared and funds set aside therefor,
we will not be permitted to declare or pay dividends with respect to, or redeem, purchase, or acquire any of our junior securities
(such as our Common Stock), or redeem, purchase or acquire any parity securities, subject to limited exceptions.
Certain
Consequences of Approving Proposal No. 4
In
the event an Affirmative Vote approving this Proposal No. 4 is obtained, we may experience the following consequences:
Potential
Consummation of the Second Ampersand Closing
. If an Affirmative Vote is obtained and certain customary closing conditions
are satisfied, we will consummate the Second Ampersand Closing and issue to Ampersand an additional 130 newly issued shares of
Series A Preferred Stock at an aggregate purchase price of $13,000,000. If the Second Ampersand Closing is consummated, the Company
expects to use the proceeds to extinguish the Excess Consideration Note and for general corporate purposes, including
the integration of the BioPharma Business.
Conversion
of the Preferred Stock
. If an Affirmative Vote is obtained, each share of Series A-1 Preferred Stock will automatically convert
into one share of Series A Preferred Stock. In addition, holders of Series A Preferred Stock will have the right to convert each
share of Series A Preferred Stock into shares of Common Stock at the then-current Conversion Price. The initial conversion price
of the Preferred Stock is $0.80, subject to adjustment as described above, representing a premium of approximately 14.0% over
the closing price of the Company’s Common Stock immediately prior to the announcement of the investment. The $0.80 initial
conversion price will be the initial conversion price of the Series A Preferred Stock to be issued in the Second Ampersand Closing,
should it occur, regardless of the market price of our Common Stock at the time of the Second Ampersand Closing.
Dilution.
If
an Affirmative Vote is obtained, the conversion of the Series A Preferred Stock will result in the issuance of up to
33,750,000 shares of our Common Stock based on the initial conversion price of $0.80 and if the downward conversion
price adjustment is triggered and the Conversion Price is reduced to the limit of $0.59, up to 45,762,711 shares of our
Common Stock based on the lowest possible Conversion Price of $0.59 (in both instances assuming there are not any dividends
on the Preferred Stock are have not been paid in cash and added to the liquidation preference). As noted above, it is
currently not possible to determine the exact number of shares of Common Stock that could be issuable pursuant to the terms
of the Series A Preferred Stock if the downward conversion price adjustment is triggered and the Conversion Price
could be reduced to the limit of $0.59. Following conversion of all of the Series A Preferred Stock, the Common Stock issued
as a result of conversion of the Series A Preferred Stock will represent approximately 46.9% of the aggregate number of
outstanding shares of Common Stock based on the [•] shares of Common Stock currently outstanding as of the Record
Date plus the 33,750,000 shares of Common Stock issuable upon the conversion of the Series A Preferred Stock at the initial
conversion price of $0.80 and approximately 54.5% of the aggregate number of outstanding shares of Common Stock based on
the [•] shares of Common Stock currently outstanding as of the Record Date plus the 45,762,711 shares of
Common Stock issuable upon the conversion of the Series A Preferred Stock at the lowest possible Conversion Price of
$0.59. Your vote “
FOR
” this Proposal No. 4 is a vote to approve the issuance of all of the shares of our
Common Stock that may conceivably be issued pursuant to the terms of the Preferred Stock we issued, or may issue, to
Ampersand.
Payment
of Dividends on Series A Preferred
Stock. Each additional share of Series A Preferred Stock issued to Ampersand accrues a
dividend at the rate of 6.0% per annum of its Stated Value, plus the amount of previously declared or accrued, and not previously
paid dividends as, and if, declared by the Board.
Market
Effects.
The conversion of the Series A Preferred Stock into Common Stock may impact trading patterns and adversely affect
the market price of our common stock. Additionally, in accordance with the Investor Rights Agreement, we may be required to file
a resale registration statement with the SEC to enable the holders of the Series A Preferred Stock to freely sell their shares
of Common Stock to be issued upon conversion of the Series A Preferred Stock. If significant quantities of the Common Stock are
sold (or if it is perceived that they may be sold) in the public market, the trading price of our Common Stock could be adversely
affected.
Rights
of Ampersand and Potential Control by Ampersand.
Ampersand will have the right to elect up to three directors of the
Board and will have approval rights for certain Company actions as described above in “Terms of the Preferred
Stock
—
Protective Provisions”. Upon the conversion of all shares of Preferred Stock that will be held by Ampersand
if we obtain an Affirmative Vote of this Proposal No. 4 and the Second Ampersand Closing is consummated, Ampersand will own a
substantial percentage of our Common Stock and could have the ability to have substantial influence over our management and operations.
Such influence may make it more difficult for, or discourage an attempt by, a third party to obtain control of the Company by
tender offer or other means without Ampersand’s consent.
Interest
of Certain Persons
We
were required to appoint Eric Lev to the Board as a condition of the First Ampersand Closing. Mr. Lev is currently a member of
the Board. Mr. Lev is a limited partner of the general partner of Ampersand and therefore has an interest in the outcome of this
Proposal No. 4. Mr. Lev disclaims beneficial ownership of the shares held by Ampersand, except to the extent of his pecuniary
interest therein.
Board
Recommendation
The
Board has determined that the Proposal No. 4 is in the best interest of the Company and its stockholders and unanimously recommends
that stockholders vote “FOR” for this Proposal No. 4.
Proposal
No. 4 requires a majority of the votes of the shares present in person or represented by proxy at the Annual Meeting. Abstentions
and broker non-votes will have no effect on determining whether the affirmative vote constitutes a majority of the votes of the
shares present in person or represented by proxy at the Annual Meeting. The Preferred Stock has no voting rights with respect
to this Proposal No. 4 and cannot vote with respect to this Proposal No. 4 at the Annual Meeting.
The
Board Unanimously Recommends a Vote to approve, under applicable nasdaq listing rules, issuances of shares of our common stock
upon conversion of our preferred stock in excess of 19.99% of our common stock outstanding prior to such issuances and Proxies
that Are Returned Will Be So Voted Unless Otherwise Instructed.
PROPOSAL
NO. 5 —
RATIFICATION OF APPOINTMENT OF OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee of our Board has appointed BDO as our independent registered public accounting firm for the fiscal year ending
December 31, 2019. Although stockholder approval is not required, we desire to obtain from the stockholders an indication of their
approval or disapproval of the Audit Committee’s action in appointing BDO as the independent registered public accounting
firm of the Company and its subsidiaries. The accompanying proxy will be voted FOR the ratification of the appointment of BDO
unless the proxy contains instructions otherwise. If the stockholders do not ratify this appointment, such appointment will be
reconsidered by the Audit Committee, but the Audit Committee will not be required to take any action.
A
representative of BDO will be available at the Annual Meeting and will be afforded an opportunity to make a statement and
to respond to questions.
The
Board Recommends a Vote FOR the Ratification of the Appointment of
BDO USA, LLP for Fiscal Year 2019 and Proxies that Are Returned
Will Be So Voted Unless Otherwise Instructed.
PROPOSAL
NO. 6 —
ADJOURNMENT OF THE ANNUAL MEETING
If
at the time of the Annual Meeting, the number of shares of the Company’s Common Stock voting in favor of one or more of
the proposals set forth in this Proxy Statement is insufficient to approve one or more of those proposals, we may move to adjourn
the Annual Meeting in order to allow us to continue to solicit additional proxies in favor of the proposals set forth in this
Proxy Statement that require additional “FOR” votes for their approval.
The
Board believes that it is in the best interests of the Company’s stockholders to have each of the proposals approved
and implemented, and, therefore, enabling us to adjourn the meeting to continue to solicit proxies for one or more of the proposals
is advisable. The time and place of the adjourned meeting will be announced at the time the adjournment is taken. Any adjournment
of the Annual Meeting for the purpose of soliciting additional proxies will allow the stockholders who have already sent
in their proxies to revoke them at any time prior to their use at the Annual Meeting as adjourned or postponed.
The
Board Recommends a Vote FOR the Adjournment of the Annual Meeting, if Necessary or Appropriate, to Solicit Additional
Proxies in Favor of Any or All of the Other Proposals Set Forth in This Proxy Statement
and Proxies that Are Returned Will Be So Voted Unless Otherwise Instructed.
Governance
of the Company
Corporate
Governance and Code of Business Conduct
Our
Board has adopted a written Code of Business Conduct that applies to our directors, officers, and employees, as well as Corporate
Governance Guidelines applicable specifically to our Board. You can find links to these documents in the “Investor Relations”
section of our website page at www.interpacediagnostics.com. The content contained in, or that can be accessed through, our website
is not incorporated into this Proxy Statement. Disclosure regarding any amendments to, or any waivers from, a provision of our
Code of Business Conduct that applies to one or more of our directors, our principal executive officer, our principal financial
or our principal accounting officer will be included in a Current Report on Form 8-K within four business days following
the date of the amendment or waiver, or posted on our website (
www.interpacediagnostics.com
).
Board
Leadership and Structure
The
Chairman of the Board, who is currently an independent director, presides at all meetings of the Board. Mr. Sullivan serves as
the Chairman of the Board, and Mr. Stover, our Chief Executive Officer, serves as a director.
The
Board believes that having an independent director serve as Chairman of the Board is in the best interests of our stockholders.
This structure provides more direct independent oversight and active participation of our independent directors in setting agendas
and establishing policies and procedures of our Board. Further, this structure permits our Chief Executive Officer to focus on
the management of our day-to-day operations.
The
Board does not have a policy on whether or not the roles of Chief Executive Officer and Chairman of the Board should be separate.
The Board believes that it should be free to make a choice from time to time in any manner that is in the best interests of the
Company and our stockholders.
Risk
Oversight by the Board
The
Board and, in particular, the Audit Committee view enterprise risk management as an integral part of the Company’s planning
process. The subject of risk management is a recurring agenda item. The Audit Committee evaluates enterprise risk with management
and the Company’s independent registered public accountants on a regular basis and also receives updates from the Company’s
internal audit consultants, and the Audit Committee in turn calls the Board’s attention to items in such reports as it deems
appropriate for review by the full Board.
Additionally,
the charters of certain of the Board’s committees assign oversight responsibility for particular areas of risk. For example,
our Audit Committee oversees management of enterprise-wide risks, including those related to accounting, auditing and financial
reporting and maintaining effective internal control over financial reporting, and for compliance with the Code of Business Conduct.
Our Nominating Committee oversees compliance with listing standards for independent directors, committee assignments and related
party transactions and other conflicts of interest. Our Compensation Committee oversees the risk related to our compensation plans,
policies and practices. All of these risks are discussed with the entire Board in the ordinary course of the chairperson’s
report of committee activities at regular Board meetings.
Board
Meetings and Committees
During
the year ended December 31, 2018, the Board held nine meetings and additionally acted three times by unanimous written consent,
the Audit Committee held seven meetings, the Compensation Committee held four meetings and the Nominating Committee held
four
meetings. Each committee member is a non-employee director of the Company who meets the
independence requirements of Nasdaq and applicable law. Each of our incumbent directors attended at least 75% of the total number
of Board meetings and committee meetings on which he or she served during 2018. We have adopted a policy encouraging our directors
to attend annual meetings of stockholders. All of our directors attended our annual stockholders’ meeting held on June 12,
2018. Our Board has three standing committees, each of which is described below.
Audit
Committee
As
of the date of this Proxy Statement, the Audit Committee is currently comprised of Dr. Keegan (Chairperson), Dr. Schnoll-Sussman
and Mr. Sullivan. The primary purposes of our Audit Committee are to assist the Board in fulfilling its legal and fiduciary obligations
with respect to matters involving the accounting, auditing, financial reporting, internal control, legal compliance and risk management
functions of the Company, including, without limitation, assisting the Board’s oversight of: (i) the integrity of our financial
statements; (ii) the effectiveness of our internal control over financial reporting; (iii) our compliance with legal and regulatory
requirements; (iv) the qualifications and independence of our independent registered public accounting firm; and (v) the performance
of our internal audit function and independent registered public accounting firm. The Audit Committee is also responsible for
preparing the report of the Audit Committee required by the rules and regulations of the SEC for inclusion in our annual proxy
statement.
Our
Board has determined that each member of our Audit Committee is independent within the meaning of the rules of Nasdaq and as required
by the Audit Committee charter. Our Board has determined that the chairperson of the Audit Committee, Dr. Keegan, is an “audit
committee financial expert,” as that term is defined in Item 407(d) of Regulation S-K under the Securities Exchange Act
of 1934, as amended (the “
Exchange Act
”).
Our
Audit Committee charter is posted and can be viewed in the “Investor Relations” section of our website at
www.interpacediagnostics.com
.
Compensation
Committee
As
of the date of this Proxy Statement, the Compensation Committee is currently comprised of Dr. Keegan, Mr. Sullivan (Chairperson)
and Dr. Schnoll-Sussman. Each member of our Compensation Committee is “independent” within the meaning of the rules
of Nasdaq and as required by the Compensation Committee charter. The primary purposes of our Compensation Committee are: (i) to
establish and maintain our executive compensation policies consistent with corporate objectives and stockholder interests; (ii)
to oversee the competency and qualifications of our senior management personnel and the provisions of senior management succession
planning; and (iii) to advise the Board with respect to director compensation issues. The Compensation Committee also administers
our equity compensation plans.
The
Compensation Committee, which is composed solely of independent directors, provides overall guidance for our executive compensation
policies and determines the value and elements of compensation for our executive officers. Our Chief Executive Officer plays a
role in recommending executive compensation to the Compensation Committee. In March 2018, we engaged Radford, an Aon Hewitt company,
to gather long-term incentives market data for the Board and our executive officers (the “
Radford Report
”).
In addition to the Radford Report, the Compensation Committee used its experience in working with emerging life science companies
as the basis for establishing compensation for 2018.
Our
Compensation Committee charter is posted and can be viewed in the “Investor Relations” section of our website at www.interpacediagnostics.com.
Nominating
Committee
As
of the date of this Proxy Statement, the Nominating Committee is currently comprised of Dr. Keegan (Chairperson), Mr. Sullivan
and Dr. Schnoll-Sussman. Each member of our Nominating Committee is “independent” within the meaning of the rules
of Nasdaq and as required by the Nominating Committee charter. The primary purposes of the Nominating Committee are: (i) to recommend
to the Board the nomination of individuals who are qualified to serve as our directors and on committees of the Board; (ii) to
advise the Board with respect to the composition, size, structure and procedures of the Board; (iii) to advise the Board with
respect to the composition, size and membership of the Board’s committees; (iv) to advise the Board with respect to corporate
governance principles applicable to the Company; and (v) to oversee the evaluation of the Board as a whole and the evaluation
of its individual members standing for re-election. The Nominating Committee also has responsibility for reviewing and approving
all transactions that are “related party” transactions under SEC rules.
The
Nominating Committee does not set specific, minimum qualifications that nominees for director must meet in order for the Nominating
Committee to recommend them to the Board, but rather believes that each nominee should be evaluated based on his or her individual
merits, taking into account our needs and the composition of the Board. Members of the Nominating Committee discuss and evaluate
possible candidates in detail, and suggest individuals to explore in more depth. Once a candidate is identified whom the Nominating
Committee wants to seriously consider and move toward nomination, the chairperson of the Nominating Committee enters into a discussion
with that nominee candidate. Subsequently, the chairperson will discuss the qualifications of the candidate with the other members
of the Nominating Committee, and the Nominating Committee will then make a final recommendation with respect to that candidate
to the Board.
The
Nominating Committee considers many factors when determining the eligibility of candidates for nomination as directors. The Nominating
Committee does not have a diversity policy; however, its goal is to nominate candidates from a broad range of experiences and
backgrounds who can contribute to the Board’s deliberations by reflecting a range of perspectives, thereby increasing its
overall effectiveness. In identifying and recommending nominees for positions on the Board, the Nominating Committee places primary
emphasis on: (i) a candidate’s judgment, character, expertise, skills and knowledge useful to the oversight of our business;
(ii) a candidate’s business or other relevant experience; and (iii) the extent to which the interplay of the candidate’s
expertise, skills, knowledge and experience with that of other members of the Board will build a Board that is effective, collegial
and responsive to our needs. The Nominating Committee will consider nominees recommended by stockholders, based on the same criteria
described above, provided such nominations comply with the applicable provisions of our
bylaws,
as amended and restated (the “
Bylaws
”)
and the procedures to be followed
in submitting proposals. No material changes have been implemented to the procedures by which stockholders may recommend nominees
to our Board since the date of our last disclosure.
Our
Nominating Committee charter is posted and can be viewed in the “Investor Relations” section of our website at www.interpacediagnostics.com.
Compensation
Committee Interlocks and Insider Participation in Compensation Decisions
As
of December 31, 2018, the Compensation Committee consisted of Mr. Sullivan, Dr. Keegan and Dr. Schnoll-Sussman. As of the date
of this Proxy Statement, the Compensation Committee also consists of Mr. Sullivan, Dr. Keegan and Dr. Schnoll-Sussman. During
2018 and as of the date of this Proxy Statement, no member of our Compensation Committee has ever been an executive officer or
employee of ours and no executive officer of ours currently serves, or has served during the last completed year, on the board
of directors, compensation committee or other committee serving an equivalent function, of any other entity that has one or more
officers serving as a member of our Board or Compensation Committee.
Policies
on Communicating with our Board and Reporting of Concerns Regarding Accounting or Auditing Matters
Stockholders
may contact an individual director, a committee of our Board or our Board as a group. The name of any specific intended director
recipient (or recipients) should be noted in the communication. Communications may be sent to Interpace Diagnostics Group, Inc.,
Morris Corporate Center 1, Building C, 300 Interpace Parkway, Parsippany, NJ 07054. Our CEO will forward such correspondence only
to the intended recipients. Prior to forwarding any correspondence, however, the CEO will review the correspondence and will not
forward any communications deemed to be of a commercial or frivolous nature or otherwise inappropriate for our Board’s consideration.
In such cases, that correspondence may be forwarded elsewhere in the Company for review and possible response.
Any
person who has a concern regarding accounting, internal accounting controls or auditing matters may, in a confidential or anonymous
manner, communicate that concern in either of the following manners: (1) by utilizing our Whistleblower Hotline to report such
concerns via a confidential and secure Internet and telephone based reporting system administered by an external vendor, which
may be reached toll-free at 1-866-238-1324; or (2) by setting forth such concerns in writing and forwarding them in a sealed envelope
to the Chairperson of the Audit Committee, Interpace Diagnostics Group, Inc., Morris Corporate Center 1, Building C, 300 Interpace
Parkway, Parsippany, NJ 07054, such envelope to be labeled with a legend such as: “Anonymous Submission of Complaint or
Concern.” All such communications will be forwarded to the chairperson of our Audit Committee.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our officers and directors and persons who beneficially own more than 10% of any class of our
equity securities registered pursuant to Section 12 of the Exchange Act to file reports of securities ownership and changes in
such ownership with the SEC. Officers, directors and greater than 10% beneficial owners (“
10% stockholders
”)
also are required by SEC rules to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of the
copies of such forms furnished to us during or with respect to the fiscal year ended December 31, 2018, as the case may be, and
upon written representations from these reporting persons, we believe that none of our officers, directors or 10% stockholders
failed to file on a timely basis, as disclosed in the forms described above, reports required by Section 16(a) during fiscal 2018.
INFORMATION
ABOUT OUR EXECUTIVE COMPENSATION
Summary
Compensation Table
The
following table sets forth certain information concerning compensation for 2017 and 2018 paid to our Chief Executive Officer and
our other two most highly compensated executive officers who served in this capacity as of December 31, 2018.
SUMMARY COMPENSATION TABLE FOR 2018 AND 2017
|
Name and Principal Position
|
|
Year
|
|
Salary ($)
|
|
|
Bonus
($)
(1)
|
|
|
Stock
Awards ($)
(2)
|
|
|
Option Awards ($)
|
|
|
Non-Equity Incentive Compensation
|
|
|
All Other Compensation
(4)
|
|
|
Total
|
|
Jack E. Stover
|
|
2018
|
|
|
337,634
|
|
|
|
270,000
|
|
|
|
150,520
|
|
|
|
535,680
|
|
|
$
|
|
|
|
|
14,046
|
|
|
|
1,307,880
|
|
CEO
|
|
2017
|
|
|
318,500
|
|
|
|
92,000
|
|
|
|
|
|
|
|
695,993
|
|
|
|
937,058
|
|
|
|
12,910
|
|
|
|
2,056,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Early
(3)
|
|
2018
|
|
|
333,842
|
|
|
|
75,000
|
|
|
|
17,380
|
|
|
|
61,920
|
|
|
|
|
|
|
|
1,128
|
|
|
|
489,270
|
|
CFO
|
|
2017
|
|
|
535,300
|
|
|
|
45,000
|
(3)
|
|
|
|
|
|
|
69,902
|
|
|
|
|
|
|
|
|
|
|
|
650,202
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory Richard
|
|
2018
|
|
|
280,000
|
|
|
|
126,000
|
|
|
|
42,752
|
|
|
|
152,256
|
|
|
|
|
|
|
|
18,235
|
|
|
|
619,243
|
|
Chief Commercial Officer
|
|
2017
|
|
|
266,250
|
|
|
|
100,000
|
|
|
|
|
|
|
|
399,085
|
|
|
|
|
|
|
|
18,418
|
|
|
|
783,753
|
|
(1)
|
The
amounts set forth in this column represents annual cash incentive bonus earned for 2017 and 2018.
|
|
|
(2)
|
The
dollar amounts set forth under the heading “Stock Awards” represent aggregate grant date fair value computed in
accordance with FASB ASC Topic 718. For purposes of computing such amounts, we disregarded estimates of forfeitures related
to service-based vesting conditions. For additional information regarding our valuation assumptions, please refer to “Note
13 – Stock-Based Compensation” to our consolidated financial statements included in our annual report on Form
10-K for the year ended December 31, 2018, filed with the SEC on March 21, 2019.
|
|
|
(3)
|
Mr.
Early’s salary for 2018 includes $135,925 in fees paid to his consulting firm, Early Financial, for
financial services as Chief Financial Officer. In March 2018, Mr. Early was hired by the Company to be its Chief Financial
Officer, Secretary and Treasurer for an annual salary of $250,000. His prior compensation had been based on an hourly rate.
Mr. Early received in April 2018 a discretionary bonus of $45,000.
|
|
|
(4)
|
For
the named executive officers, this column includes the following amounts in 2018:
|
|
|
401(k) Company Match ($)
|
|
|
Term
Life/Disability Insurance
Payment ($)
|
|
|
Other
($)
(1)
|
|
|
Total ($)
|
|
Jack E. Stover
|
|
$
|
11,000
|
|
|
$
|
3,046
|
|
|
$
|
-
|
|
|
$
|
14,046
|
|
James Early
|
|
|
-
|
|
|
|
1,128
|
|
|
|
-
|
|
|
|
1,128
|
|
Gregory Richard
|
|
|
5,600
|
|
|
|
635
|
|
|
|
12,000
|
|
|
|
18,235
|
|
(1)
|
The
amounts set forth in this column for Mr. Richard represent an auto allowance generally available to members of the sales team.
|
Narrative
Disclosure to Summary Compensation Table
Base
Salary
Initially,
base salaries are generally set according to the executive officer’s agreement with the Company and adjusted based on the
individual’s current and historical performance. The base salary levels and any changes to those levels for each executive
are reviewed each year by the Compensation Committee and adjustments may be based on factors such as new roles and/or responsibilities
assumed by the executive and the executive’s impact on our strategic goals and financial performance. While our executives’
base salaries are generally targeted to be consistent with median base salaries for similar positions based on competitive market
data, there is no specific weighting applied to any one factor in setting the level of salary, and the process ultimately relies
on the evaluation of various factors considered by the Compensation Committee with respect to each named executive officer (and
the full Board, in the case of the Chief Executive Officer). The Compensation Committee also takes into account additional
factors such as historical compensation, the financial condition of the Company in general and the individual’s potential
to be a key contributor as well as special recruiting and retention situations.
Upon
his appointment as our Interim Chief Executive Officer, Mr. Stover’s annual base salary was set at $300,000, which was not
subject to an employment agreement. Mr. Stover entered into an employment agreement with the Company as President and Chief Executive
Officer on October 28, 2016 and an amended and restated employment agreement on December 5, 2018 which set his annual base salary
at $450,000. Mr. Early’s fees for services as a consultant were $135,925 during 2018. On March 7, 2018 the Board approved
the employment agreement of Mr. Early, which set his annual base salary at $250,000 paid in accordance with the Company’s
payroll practices. Such base salary is subject to adjustment on an annual basis by the Company’s Chief Executive Officer,
in consultation with the Board’s Compensation Committee. Mr. Richard’s base salary is not determined by an employment
contract. Mr. Stover and Mr. Richard received raises of 7% and 8%, respectively, in 2018 based upon the Compensation Committee’s
appraisal of their performance.
Annual
Cash Incentives
The
annual cash incentive program provides our executive officers with an opportunity to receive a cash award at the discretion of
the Compensation Committee (and the full Board, in the case of the Chief Executive Officer). Annual cash incentive targets
and performance metrics are usually determined by the Compensation Committee typically during the first quarter of each fiscal
year, based on competitive market data generally available to the Compensation Committee as well as consideration based upon the
financial condition of the Company.
Pursuant
to Mr. Stover’s employment agreement, the Board approved a target annual cash bonus of 60% of his annual base salary based
principally upon meeting specific financial goals and objectives as recommended by the Compensation Committee and approved by
the Board in its sole discretion. Based on our achievement of our commercial, business development, finance, operations, clinical
and science goals, the Compensation Committee recommended and the Board approved a discretionary bonus for Mr. Stover of $270,000
based on 2018 performance. This bonus was paid in April 2019.
Mr.
Richard received a discretionary bonus paid in April 2019 in the amount of $126,000. Mr. Early received a discretionary bonus
paid in April 2019 in the amount of $75,000. Such bonus amounts were determined by the Compensation Committee based on its discretion.
Sign-on
bonuses may be granted from time to time at the discretion of our Compensation Committee in connection with new hires at the executive
officer level. There were no cash sign-on bonuses for any named executive officer in 2018.
Long-Term
Equity Incentives
Our
executives are also eligible to participate in a long-term equity incentive program each year, which is currently administered
under the Interpace Diagnostics Group, Inc. Amended and Restated 2004 Stock Award and Incentive Plan, (the “
Amended 2004
Plan
”); however, if approved by our shareholders, it is anticipated that such long-term equity incentive program would
instead be administered under the 2019 Equity Incentive Plan. The long-term equity incentive component of our compensation program
is used to promote alignment with stockholders and to balance the short-term focus of the annual cash incentive component by linking
a substantial part of compensation to our long-term stockholder returns. The Compensation Committee believes that long-term stock-based
compensation enhances our ability to attract and retain high quality talent and provides the motivation to improve our long-term
financial performance and increase stockholder value. In 2018, Mr. Stover was granted 224,000 stock options with an exercise price
of $1.01 and 348,000 stock options with an exercise price of $1.08, and 143,000 restricted stock units. In 2018, Mr. Early was
granted 56,000 stock options with an exercise price of $1.01 and 12,000 stock options with an exercise price of $1.08, and 17,000
restricted stock units. In 2018, Mr. Richard was granted 112,000 stock options with an exercise price of $1.01 and 53,600 stock
options with an exercise price of $1.08, and 41,400 restricted stock units. The option and restricted stock unit grants listed
above vest one-third each year over a three-year period.
Perquisites
As
a matter of practice, we provide only limited perquisites to our executive officers that are not generally provided to all employees.
Executives are eligible for the standard benefits and programs generally available to all of our employees. The value of special
perquisites, as well as additional benefits that are available generally to all of our employees, that were provided to each named
executive officer in 2018 are set forth in footnote 4 to the Summary Compensation Table.
Compensation
Features Intended to Prevent Excessive Risk Taking
The
Compensation Committee reviewed our compensation policies and practices for all employees, including executive officers, and believes
that such policies and practices do not create risks that are reasonably likely to have a material adverse effect on us. In particular,
the Compensation Committee believes that the following factors help mitigate against any such risks: (a) annual cash incentive
compensation and long-term equity incentive compensation are based on a mix of our overall performance, business unit performance
and individual performance; (b) the annual cash incentive compensation plan has no minimum funding levels, such that employees
will not receive any rewards if satisfactory financial performance is not achieved by us; and (c) base salaries are consistent
with employees’ responsibilities and general market practices so that they are not motivated to take excessive risks to
achieve a reasonable level of financial security.
Outstanding
Equity Awards
The
following table provides information concerning the number and value of unexercised options, SARs, restricted stock awards and
RSUs for the named executive officers outstanding as of the year ended December 31, 2018:
OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2018
|
|
|
Options/SARs Awards
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options/SARs
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options/SARs
(#)
Unexercisable
|
|
|
Option/
SAR
Exercise
Price ($)
|
|
|
Option/
SAR
Expiration
Date
|
|
Number of
Shares/RSUs
that have not
Vested (#)
|
|
|
Market
Value of
Shares/RSUs
that have not
Vested ($)(1)
|
|
Jack E. Stover
|
|
|
32,636
|
|
|
|
-
|
|
|
|
1.60
|
|
|
10/14/2026
|
|
|
3,333
|
(2)
|
|
|
2,666
|
|
|
|
|
134,602
|
|
|
|
-
|
|
|
|
2.12
|
|
|
3/16/2027
|
|
|
-
|
|
|
|
-
|
|
|
|
|
345,000
|
|
|
|
-
|
|
|
|
1.45
|
|
|
9/26/2027
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
224,000
|
(3)
|
|
|
1.01
|
|
|
3/7/2028
|
|
|
56,000
|
(5)
|
|
|
44,800
|
|
|
|
|
-
|
|
|
|
348,000
|
(4)
|
|
|
1.08
|
|
|
12/5/2028
|
|
|
87,000
|
(6)
|
|
|
69,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James Early
|
|
|
8,000
|
|
|
|
-
|
|
|
|
1.60
|
|
|
10/14/2026
|
|
|
-
|
|
|
|
-
|
|
|
|
|
14,475
|
|
|
|
-
|
|
|
|
2.12
|
|
|
3/16/2027
|
|
|
-
|
|
|
|
-
|
|
|
|
|
40,000
|
|
|
|
-
|
|
|
|
1.45
|
|
|
9/26/2027
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
56,000
|
(3)
|
|
|
1.01
|
|
|
3/7/2028
|
|
|
14,000
|
(5)
|
|
|
11,200
|
|
|
|
|
-
|
|
|
|
12,000
|
(4)
|
|
|
1.08
|
|
|
12/5/2028
|
|
|
3,000
|
(6)
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory Richard
|
|
|
3,742
|
|
|
|
-
|
|
|
|
45.70
|
|
|
4/2/2019
|
|
|
2,000
|
(7)
|
|
|
1,600
|
|
|
|
|
12,257
|
|
|
|
-
|
|
|
|
1.60
|
|
|
10/14/2026
|
|
|
-
|
|
|
|
-
|
|
|
|
|
17,134
|
|
|
|
-
|
|
|
|
2.12
|
|
|
3/16/2027
|
|
|
-
|
|
|
|
-
|
|
|
|
|
50,269
|
|
|
|
-
|
|
|
|
2.46
|
|
|
5/10/2027
|
|
|
-
|
|
|
|
-
|
|
|
|
|
200,000
|
|
|
|
-
|
|
|
|
1.45
|
|
|
9/26/2027
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
112,000
|
(3)
|
|
|
1.01
|
|
|
3/7/2028
|
|
|
28,000
|
(5)
|
|
|
22,400
|
|
|
|
|
-
|
|
|
|
53,600
|
(4)
|
|
|
1.08
|
|
|
12/5/2028
|
|
|
13,400
|
(6)
|
|
|
10,720
|
|
(1)
|
The
market value is based on the closing price of $0.80 on December 31, 2018, the last day of trading in 2018.
|
(2)
|
Restricted
stock units that vest February 3, 2019.
|
(3)
|
Stock
options that vest one-third on each of March 7, 2019, March 7, 2020, and March 7, 2021.
|
(4)
|
Stock
options that vest one-third on each of December 5, 2019, December 5, 2020, and December 5, 2021.
|
(5)
|
Restricted
stock units that vest one-third on each of March 7, 2019, March 7, 2020, and March 7, 2021.
|
(6)
|
Restricted
stock units that vest one-third on each of December 5, 2019, December 5, 2020, and December 5, 2021.
|
(7)
|
Restricted
stock units that vest on February 26, 2019.
|
Equity
Compensation Grants Subsequent to December 31, 2018
On
March 13, 2019, Mr. Stover was granted 86,922 restricted stock units and 347,688 stock options; Mr. Early was granted 26,340 restricted
stock units and 105,360 stock options; and Mr. Richard was granted 39,528 restricted stock units and 158,112 stock options. Both
the restricted stock units and the stock options vest annually, in equal installments, over a three-year period. The stock options
have an exercise price of $0.98.
Potential
Payments upon Termination or Change in Control
The
following table reflects the estimated amount of compensation that would be payable to each of our 2018 named executive officers
upon termination of such executive’s employment in accordance with their respective employment separation agreements and
stock agreements. In general RSUs and stock options vest upon a change of control. The amounts shown below assume that such termination
was effective as of December 31, 2018, and are estimates of the amounts which would be paid out upon termination. The actual amounts
to be paid out can only be determined at the time of separation from the Company.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
|
Name
|
|
Cash
Payment ($)
|
|
|
Continuation of
Medical/
Welfare
Benefits
(Present
Value) ($)
|
|
|
Acceleration
of Equity
Awards ($)
(1)
|
|
|
Total
Termination
Benefits ($)
|
|
Termination Without Cause or Resignation for Good Reason Not Within 24 Months Following a Change in Control:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack E. Stover
(2)
|
|
$
|
891,630
|
|
|
$
|
28,404
|
|
|
$
|
117,066
|
|
|
$
|
1,037,100
|
|
James Early
(3)
|
|
|
125,000
|
|
|
|
14,202
|
|
|
|
13,600
|
|
|
|
152,802
|
|
Gregory Richard
(4)
|
|
|
336,667
|
|
|
|
28,404
|
|
|
|
34,720
|
|
|
|
399,791
|
|
Upon a Change in Control (Not in connection with a termination)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack E. Stover
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
117,066
|
|
|
$
|
117,066
|
|
James Early
|
|
|
-
|
|
|
|
-
|
|
|
|
13,600
|
|
|
|
13,600
|
|
Gregory Richard
|
|
|
-
|
|
|
|
-
|
|
|
|
34,720
|
|
|
|
34,720
|
|
Termination Without Cause or Resignation for Good Reason Within 24 Months Following a Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jack E. Stover
(2)
|
|
$
|
1,251,630
|
|
|
$
|
42,605
|
|
|
$
|
117,066
|
|
|
$
|
1,411,302
|
|
James Early
(3)
|
|
|
125,000
|
|
|
|
14,202
|
|
|
|
13,600
|
|
|
|
152,802
|
|
Gregory Richard
(4)
|
|
|
336,667
|
|
|
|
28,404
|
|
|
|
34,720
|
|
|
|
399,791
|
|
|
(1)
|
These
amounts are based on the value of RSUs held at December 31, 2018 that would become immediately vested upon retirement or a
change of control pursuant to the applicable restricted stock grant agreement. Stock options that would become immediately
vested upon a change in control pursuant to the Amended 2004 Plan were not included as they were out of the money (option
exercise price is greater than the stock price). The market value of all equity reflected in the above table is based on the
closing stock price of $0.80 on December 31, 2018, the last day of trading in 2018.
|
|
(2)
|
Mr.
Stover’s cash payment would be paid in nine monthly installments.
|
|
(3)
|
Mr.
Early’s cash payment would be in six monthly installments.
|
|
(4)
|
Mr.
Richard’s cash payment would be paid in a lump sum within 60 days of termination.
|
Employment
Arrangements
Jack
E. Stover –Chief Executive Officer
On
October 30, 2016, we entered into an employment agreement with Mr. Stover (the “
2016 Employment Agreement
”)
pursuant to which he received an annual base salary of $300,000, subject to annual cost of living adjustments, and was eligible
to receive an annual performance bonus with a target of 50% of his base salary, based on the attainment of certain quarterly performance
targets.
In
addition, upon the occurrence of a capital raising “Transaction” (as such term is defined in the 2016 Employment Agreement),
provided he remained employed through the closing of such Transaction, Mr. Stover would have received non-equity incentive compensation
calculated based on 3% of the net transaction proceeds received in connection with such Transaction.
In
the event of a termination of Mr. Stover’s employment by the Company without “Cause” or a resignation by Mr.
Stover for “Good Reason” (as such terms are defined in the 2016 Employment Agreement), Mr. Stover would have been
entitled to receive monthly payments of $25,000 for nine months following such termination and, provided that Mr. Stover timely
elected COBRA continuation coverage, the Company would have paid his applicable COBRA premium for 12 months following such termination.
Such payments and benefits would be subject to an effective release of claims and would cease upon breach by Mr. Stover of any
applicable restrictive covenants.
On
December 5, 2018, the Board approved the amended and restated employment agreement (the “
Stover Employment Agreement
”)
of Jack E. Stover, President, Chief Executive Officer and Director of the Company. Under the Stover Employment Agreement, Mr.
Stover is to receive an annual base salary of $450,000, which is subject to annual upward adjustment by the Board, and is eligible
to receive an annual performance bonus with a target of 60% of his base salary, based on the attainment of certain annual corporate
and/or individual performance goals as determined by the Board. Under the Stover Employment Agreement,
Mr. Stover is not eligible to receive any transaction incentive compensation. On December 5, 2018, Mr. Stover received an option
to purchase 348,000 shares of the Company’s common stock and 143,000 restricted stock units of the Company, each with a
three-year vesting period. Mr. Stover shall be eligible to receive a grant of options to purchase common stock and restricted
stock units each year on the anniversary of the date of the Stover Employment Agreement. The number of shares underlying this
annual grant will be determined by the Compensation Committee. Mr. Stover is also eligible to participate
in all employee benefit plans and programs maintained by the Company on the same basis as other senior management. These include
vacation, retirement, health insurance and life insurance.
Under
the Stover Employment Agreement, in the event of a termination by the Company without “Cause” or a resignation by
Mr. Stover for “Good Reason” (as such terms are defined in the Stover Employment Agreement), not within 24 months
following a Transaction (as such term is defined in the Stover Employment Agreement, which includes, among other things, any merger
of the Company into another corporation, any acquisition of the Company and the acquisition of beneficial ownership of the Company’s
voting securities having voting power equal to 51% or more of the combined voting power of the Company’s outstanding voting
securities), Mr. Stover would be entitled to receive: any earned but unpaid bonus for any fiscal year ending prior to Mr. Stover’s
termination date, one times Mr. Stover’s then current base salary, to be paid in nine equal installments, provided that
Mr. Stover timely elected COBRA continuation coverage, payment by the Company of his applicable COBRA premium for 12 months following
such termination and all outstanding non-qualified stock option and restricted stock unit awards that were scheduled to vest during
the 24 months following the termination date shall become fully vested and exercisable and Mr. Stover shall also receive a lump
sum payment equal to the greater of 60% of his base salary or the largest discretionary bonus paid to Mr. Stover in the three
years preceding the termination date. Such payments and benefits would be subject to an effective release of claims and would
cease upon breach by Mr. Stover of any applicable restrictive covenants.
Under
the Stover Employment Agreement, if, within 24 months following a Transaction, Mr. Stover’s employment is terminated by
Mr. Stover for Good Reason or by the Company without Cause, Mr. Stover would be entitled to receive: any earned but unpaid bonus
for any fiscal year ending prior to Mr. Stover’s termination date, one and one half times Mr. Stover’s then current
base salary, to be paid in nine equal installments, one and one-half times Mr. Stover’s annual target bonus, to be paid
in nine equal installments, provided that Mr. Stover timely elected COBRA continuation coverage, payment by the Company of his
applicable COBRA premium for 18 months following such termination, and all outstanding non-qualified stock option and restricted
stock unit awards that were scheduled to vest during the 36 months following the termination date shall become fully vested and
exercisable.
Under
the Stover Employment Agreement, if Mr. Stover is terminated for Cause (as such term is defined in the Stover Employment Agreement),
he will be entitled to receive any earned but unpaid base salary and bonus for any fiscal year ending prior to the termination
date.
James
Early – Chief Financial Officer
On
October 11, 2016, Mr. Early was appointed as Chief Financial Officer for the Company by means of an Engagement Letter Agreement
executed between the Company and Early Financial. Professional fees under this agreement were charged at the hourly
rate of $250 per hour for the first 30 hours per week and $200 per hour for time in excess of 30 hours per week. Fees and travel
expenses were required to be invoiced weekly under fifteen day payment terms. Services could have been suspended if payments were
deemed delinquent, and either party may have terminated the agreement upon thirty days written notice with no severance or other
termination payments due.
On
March 7, 2018, the Board approved the employment agreement of James Early, the Company’s Chief Financial Officer, Corporate
Secretary and Treasurer (the “
Early Employment Agreement
”). Mr. Early is entitled to receive an annual base
salary of $250,000, effective March 16, 2018, paid in accordance with the Company’s payroll practices. Such base salary
is subject to adjustment on an annual basis by the Company’s Chief Executive Officer, in consultation with the Board’s
Compensation Committee. Mr. Early is also eligible to receive an annual performance bonus, subject to the attainment of
annual performance goals as set and determined by the Company’s Chief Executive Officer, in consultation with the Board’s
Compensation Committee. Mr. Early’s target bonus is up to 30% of his annual base salary. Mr. Early is also eligible
to participate in an annual stock based incentive plan under which he may be awarded restricted stock options and restricted stock
grants at the end of each year, subject to certain performance goals. Mr. Early is also eligible to participate in any benefit
plans that may be offered from time to time by the Company to its senior management. Mr. Early is an at-will employee of the Company.
However, in the event that Mr. Early is terminated by the Company for any reason other than death, total disability or “Cause”
(as defined in the Early Employment Agreement), or if Mr. Early resigns for “Good Reason” (as defined in the Early
Employment Agreement), Mr. Early is entitled to (i) payment of six months of his then current base salary and (ii) six months
continuation of his health benefits. Such payment and benefits would be subject to an effective release of claims.
Gregory
Richard – Senior Vice President, Chief Commercial Officer
Mr.
Richard is an at-will employee of the Company and his base salary is not determined by an employment contract. However, Mr. Richard
is party to an Employment Separation Agreement entered into by the Company and Mr. Richard on March 25, 2015 (the “
Richard
Agreement
”), pursuant to which Mr. Richard is eligible to receive severance in the event of a qualifying termination
of employment.
Under
the Richard Agreement, in the event of a termination of Mr. Richard’s employment by the Company without “Cause”
or a resignation by Mr. Richard for “Good Reason” (as such terms are defined in the Richard Agreement), Mr. Richard
would be entitled to receive a lump sum equal to (i) 12 times his then current base monthly salary plus (ii) the average of the
annual amounts paid to Mr. Richard during the prior three full fiscal years pursuant to any cash-based incentive or bonus plan
in which he participates. The Company would also pay his applicable COBRA premium for up to 12 months following such termination.
Such payments and benefits would be subject to an effective release of claims.
Audit
Committee Matters and Fees Paid to Independent Registered Public Accounting Firm
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
Under
its charter, the Audit Committee must pre-approve all engagements of our independent registered public accounting firm unless
an exception to such pre-approval exists under the Exchange Act or the rules of the SEC. Each year, the independent registered
public accounting firm’s retention to audit our financial statements and permissible non-audit services, including the associated
fees, is approved by the Audit Committee. At the beginning of each fiscal year, the Audit Committee evaluates other known potential
engagements of the independent registered public accounting firm, in light of the scope of the work proposed to be performed and
the proposed fees, and approves or rejects each service, taking into account whether the services are permissible under applicable
law and the possible impact of each non-audit service on the independent registered public accounting firm’s independence.
At subsequent Audit Committee meetings, the Audit Committee receives updates on the services actually provided by the independent
registered public accounting firm, and management may present additional services for approval. Typically, these would be services,
such as due diligence for an acquisition, that were not known at the beginning of the year. The Audit Committee has delegated
to the Chairperson of the Audit Committee the authority to evaluate and approve engagements on behalf of the Audit Committee in
the event that a need arises for pre-approval between committee meetings. If the Chairperson so approves any such engagements,
he will report that approval to the full Audit Committee at the next Audit Committee meeting. All of the services and corresponding
fees described above were approved by the Audit Committee.
BDO,
an independent registered public accounting firm, has served as our independent accountants beginning in 2012. Fees for services
provided by BDO for the past two completed years ended December 31 were as follows:
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
|
|
2018
|
|
|
2017
|
|
Audit Fees
|
|
$
|
266,295
|
|
|
$
|
562,101
|
|
Audit-Related Fees
|
|
|
-
|
|
|
|
-
|
|
Tax Fees
|
|
|
-
|
|
|
|
-
|
|
All Other Fees
|
|
|
-
|
|
|
|
-
|
|
Total Fees
|
|
$
|
266,295
|
|
|
$
|
562,101
|
|
Audit
fees include the audit of our consolidated financial statements.
Included
within audit fees for the year ended December 31, 2018 are those fees totaling $78,000 associated with our public offerings in
2018.
Included
within audit fees for the year ended December 31, 2017 are those fees totaling $252,106 associated with our public offerings and
debt exchange in 2017.
AUDIT
COMMITTEE REPORT
The
following Report of the Audit Committee shall not be deemed incorporated by reference into any of our filings under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent we specifically incorporate
it by reference therein.
The
Audit Committee has reviewed our audited financial statements for the fiscal year ended December 31, 2018 and discussed them with
management and BDO, the independent registered public accounting firm that audited our financial statements for fiscal 2018. The
Audit Committee has also discussed with BDO the matters required to be discussed by Public Company Accounting Oversight Board’s
Auditing Standard No. 1301 “Communications with Audit Committees.” The Audit Committee also received the written disclosures
and the letter from BDO required by Rule 3526 of the Public Company Accounting Oversight Board (Communications with Audit Committees
Concerning Independence), and the Audit Committee discussed with BDO the firm’s independence.
Management
is responsible for the preparation, presentation and integrity of our financial statements, accounting and financial reporting
principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and
regulations, including the effectiveness of internal control over financial reporting. BDO was responsible for performing an independent
audit of our financial statements and expressing an opinion as to their conformity with generally accepted accounting principles.
BDO had full access to the Audit Committee to discuss any matters they deem appropriate.
Based
on the reports and discussions described in this report, the Audit Committee recommended to the Board that our audited financial
statements for the fiscal year ended December 31, 2018 be included in our annual report on Form 10-K for the year ended December
31, 2018 for filing with the SEC.
|
Submitted
by the Audit Committee
|
|
|
|
Dr.
Joseph Keegan, Chairperson
|
|
|
|
Stephen
Sullivan
|
|
|
|
Dr.
Felice Schnoll-Sussman
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table shows, as of July 31, 2019 (unless otherwise indicated), the number of shares of our Common Stock beneficially
owned by: (i) each stockholder who is known by us to own beneficially in excess of 5% of our outstanding Common Stock; (ii) each
of our current directors; (iii) each of our named executive officers included in the section of this Proxy Statement entitled
“Summary Compensation Table”; and (iv) all directors and executive officers as a group.
Except
as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of Common
Stock owned by them and all information with respect to beneficial ownership has been furnished to us by the respective stockholder.
Except as otherwise indicated, the address of the persons listed below is c/o Interpace Diagnostics Group, Inc., Morris Corporate
Center 1, Building C, 300 Interpace Parkway, Parsippany, New Jersey 07054. The percentage of beneficial ownership is based on
38,196,038 shares of Common Stock outstanding on July 31, 2019.
Name of Beneficial Owner
|
|
Number of
Shares
Beneficially
Owned
(1)
|
|
|
Percent of
Shares
Outstanding
|
|
5% Holders:
|
|
|
|
|
|
|
|
|
Ampersand 2018 Limited Partnership
(13)
|
|
|
7,500,000
|
(14)
|
|
|
16.4
|
%
|
|
|
|
|
|
|
|
|
|
Executive officers and directors:
|
|
|
|
|
|
|
|
|
Jack E. Stover
(2)
|
|
|
827,130
|
(7)
|
|
|
2.1
|
%
|
James Early
(3)
|
|
|
84,277
|
(8)
|
|
|
*
|
|
Gregory Richard
(4)
|
|
|
332,426
|
(9)
|
|
|
*
|
|
Stephen J. Sullivan
(5)
|
|
|
56,983
|
(10)
|
|
|
*
|
|
Eric Lev
(6)(15)
|
|
|
7,500,000
|
(14)
|
|
|
16.4
|
%
|
Joseph Keegan
(6)
|
|
|
14,369
|
(11)
|
|
|
*
|
|
Felice Schnoll-Sussman
(6)
|
|
|
21,333
|
(12)
|
|
|
*
|
|
as a group (7 persons)
|
|
|
8,836,518
|
(7)
(8) (9) (10) (11) (12)(14)
|
|
|
18.8
|
%
|
*
|
Represents
beneficial ownership of less than 1% of our outstanding Common Stock
|
(1)
|
Beneficial
ownership and percentage ownership are determined in accordance with the rules and regulations of the SEC and include voting
or investment power with respect to shares of stock. This information does not necessarily indicate beneficial ownership for
any other purpose. In computing the number of shares beneficially owned by a person and the percentage ownership of that person,
we include shares underlying common stock derivatives, such as options and RSUs that a person has the right to acquire within
60 days of July 31, 2019. Such shares, however, are not deemed outstanding for the purpose of computing the percentage
ownership of any other person.
|
(2)
|
Currently
serves as our President and Chief Executive Officer and as a member of the Board.
|
(3)
|
Currently
serves as our Chief Financial Officer, Secretary and Treasurer.
|
(4)
|
Currently
serves as our Senior Vice President, Chief Commercial Officer.
|
(5)
|
Currently
serves as Chairman of the Board.
|
(6)
|
Currently
serves as a member
of the Board.
|
(7)
|
Includes
211,256 RSUs that would vest immediately upon retirement and 586,904 shares issuable pursuant to options exercisable within
60 days of July 31, 2019.
|
(8)
|
Includes
81,141 shares issuable pursuant to options exercisable within 60 days of July 31, 2019.
|
(9)
|
Includes
316,993 shares issuable pursuant to options exercisable within 60 days of July 31, 2019.
|
(10)
|
Includes
3,200 RSUs that would vest immediately upon retirement and 32,400 shares issuable pursuant to options exercisable within 60
days of July 31, 2019.
|
(11)
|
Includes
26,400 shares issuable pursuant to options exercisable within 60 days of July 31, 2019.
|
(12)
|
Includes
19,733 shares issuable pursuant to options exercisable within 60 days of July 31, 2019.
|
(13)
|
The
reported address of Ampersand 2018 Limited Partnership is 55 William Street, Suite 240, Wellesley, MA 02481.
|
(14)
|
Evidenced by 60 shares of
Series A Preferred Stock. Until the Voting Date, the Series A Preferred Stock is not
convertible into shares of Common Stock. Moreover, the Company will not issue any shares
of Common Stock upon conversion of the Series A Preferred Stock if the issuance would
exceed the Exchange Cap until the Company obtains the Affirmative Vote. From and after
the Voting Date, the Series A Preferred Stock will be convertible into 7,500,000 shares
of Common Stock based on an initial conversion price of $0.80 per share. The Preferred
Stock has no voting rights prior to the Voting Date. Does not include shares of Common
Stock issuable upon conversion of Series A-1 Preferred Stock into Series A Preferred
Stock and the conversion of such Series A Preferred Stock into Common Stock.
|
(15)
|
These securities are held of record by Ampersand
2018 Limited Partnership. Mr. Lev is a limited partner of the general partner of Ampersand 2018 Limited Partnership. Mr. Lev
disclaims beneficial ownership of these securities for purposes of Rule 16a-1(a) under the Exchange Act except to the extent
of his pecuniary interest therein. Mr. Lev does not have voting or investment power with respect to the shares held by Ampersand.
|
The
following table provides information as of December 31, 2018 with respect to shares of Common Stock that may be issued under Interpace’s
existing equity compensation plans.
Plan Category
|
|
Number of
Securities to be
Issued upon
Exercise of
Outstanding
Options,
Warrants and
Rights
|
|
|
Weighted
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
|
|
|
Number of
Securities
Remaining
Available for
Future Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in the
First Column)
|
|
Equity compensation plans approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
Amended 2004 Plan
|
|
|
2,877,595
|
|
|
$
|
2.07
|
|
|
|
1,945,113
|
|
Equity compensation plans not approved by security holders
|
|
|
11,718
|
|
|
|
17.90
|
|
|
|
-
|
|
Total
|
|
|
2,889,313
|
|
|
$
|
2.14
|
|
|
|
1,945,113
|
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
We
are required to disclose transactions since January 1, 2017, to which we have been a party, in which the amount involved in the
transaction exceeds $120,000, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of
more than 5% of our capital stock or an affiliate or immediate family member thereof had or will have a direct or indirect material
interest, other than employment, compensation, termination and change in control arrangements with our named executive officers,
which are described in “Information About Our Executive Compensation”.
On
July 15, 2019, we entered into the Securities Purchase Agreement with Ampersand pursuant to which we agreed to sell, and Ampersand
agreed to purchase up to $27.0 million of Preferred Stock. In connection with the Securities Purchase Agreement, we also entered
into the Investor Rights Agreement with Ampersand pursuant to which we established certain terms and conditions covering the rights
and restrictions of Ampersand with respect to the ownership of the Preferred Stock and other capital stock of the Company. For
more information see “Proposal No. 4” above. Eric Lev, one of our directors, was designated for election to the
Board by Ampersand and is a limited partner of the general partner of Ampersand.
Other
than as set forth in “Information About Our Executive Compensation,” and as disclosed in this section “Certain
Relationships and Related Transactions”, we are not a party to a current transaction with a related person, have not been
a party to such a transaction since January 1, 2017, and no transaction is currently proposed, in which the amount of the transaction
exceeds $120,000 and in which a related person had or will have a direct or indirect material interest.
Our directors and executive officers, who collectively hold,
as of the Record Date, approximately [•]% of the Company’s outstanding voting power, entered into Voting Agreements,
dated July 15, 2019, (the “
Voting Agreements
”), with Ampersand pursuant to which they agreed to vote in favor
of any resolution presented to the stockholders of the Company to approve or facilitate the issuance of Common Stock issuable
upon conversion of the Preferred Stock or any exercise of pre-emptive rights of under the terms of the Investor Rights Agreement
and agreed until the earlier to occur of the termination of the Voting Agreement or January 15, 2020, not to transfer any shares
of Common Stock held by such directors and executive officers.
OTHER
MATTERS
We
know of no other matters to be acted upon at the Annual Meeting. If any other matters properly come before the meeting, it is
the intention of the persons named in the attached form of proxy to vote the shares they represent as the Board may recommend.
ADDITIONAL
INFORMATION
Householding
The
SEC’s rules permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and
annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement and annual
report addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially
provides extra convenience for stockholders and cost savings for companies. The Company, as well as some brokers (or other nominees)
household the Company’s proxy materials and annual reports, delivering a single proxy statement and annual report or Notice,
as applicable to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders.
Once you have received notice from your broker (or other nominee) or from us that they or we will be householding materials to
your address, householding will continue until you are notified otherwise or until you revoke your consent. If at any time you
no longer wish to participate in householding and would prefer to receive a separate proxy statement and annual report, or if
you are receiving multiple copies of the proxy statement and wish for only one copy to be delivered to your household in the future,
please notify (i) your broker (or other nominee) if your shares are held in a brokerage or similar account or (ii) the Company
if you hold registered shares in your own name. If you would like to receive a separate copy of this year’s Proxy Statement
or Annual Report on Form 10-K, please contact us by writing to Interpace Diagnostics Group, Inc., Morris Corporate Center
1, Building C, 300 Interpace Parkway, Parsippany, New Jersey 07054, or calling 1-412-224-6100.
Stockholder
Proposals for the 2020 Annual Meeting
Any
proposal that a stockholder desires to have included in our proxy materials relating to our annual meeting of stockholders in
2020 must be received by us at our principal office at Interpace Diagnostics Group, Inc., Morris Corporate Center 1, Building
C, 300 Interpace Parkway, Parsippany, New Jersey 07054 no later than December 31, 2019, and must otherwise comply with the requirements
of Rule 14a-8 under the Exchange Act for inclusion in our proxy materials for that meeting.
The
Company’s Bylaws provide that advance written notice of stockholder-proposed business intended to be brought before an annual
meeting of stockholders must be given to the Secretary of the Company not less than 90 days (July 13, 2020) nor more than 120
days (June 13, 2020) prior to the one-year anniversary of the preceding year’s annual meeting; provided, however, that if
the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by any stockholder
of business intended to be brought must be received not later than the 90th day prior to such annual meeting or, if later, the
tenth day following the day on which public disclosure of the date of such annual meeting was first made (such advance written
notice within such time periods is defined as “
Timely Notice
”).
A
stockholder’s written notice must set forth, as to each proposed matter: (i) a brief description of the business desired
to be brought before the annual meeting and the reasons for conducting such business at the annual meeting and, if such business
includes a proposal to amend our Bylaws, the language of the proposed amendment; (ii) the name and address, as they appear on
our books, of the stockholder proposing such business; (iii) the number of shares of our Common Stock which are beneficially
owned by such stockholder; (iv) a representation that the stockholder is a holder of record of shares of the Company’s Common
Stock entitled to vote at such annual meeting and intends to appear in person or by proxy at the annual meeting to propose
such business; and (v) any Disclosable Interests (as defined in the Company’s Bylaws) of the stockholder in such proposal.
The Bylaws also provide that a stockholder may request that persons be nominated for election as directors by providing
Timely Notice (as defined above) and providing the information, agreements and questionnaires with respect to such stockholder
and its candidate for nomination as required to be set forth in the Bylaws.
Important
Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be Held on October 10, 2019.
This
Proxy Statement and our Annual Report on Form 10-K for the year
ended December 31, 2018 are available on the Internet at:
http://www.astproxyportal.com/ast/21231/
Incorporation
by Reference
To
the extent that this Proxy Statement is incorporated by reference into any other filing under the Securities Act of 1933, as amended,
or the Exchange Act, then the section of this Proxy Statement entitled “Audit Committee Report” will not be deemed
incorporated unless specifically provided otherwise in such filing. The content contained in, or that can be accessed through,
our website is not incorporated into this Proxy Statement.
Availability
of Annual Report on Form 10-K
We
will provide without charge to each person being solicited by this Proxy Statement, on the written request of any such person,
a copy of our Annual Report on Form 10-K for the year ended December 31, 2018, including the financial statements and financial
statement schedules included therein. All such requests should be directed to Interpace Diagnostics Group, Inc., Morris Corporate
Center 1, Building C, 300 Interpace Parkway, Parsippany, New Jersey 07054.
|
By
order of the Board of Directors,
|
|
|
|
/s/
Stephen J. Sullivan
|
|
Stephen
J. Sullivan
|
|
Chairman
|
[●],
2019
Annex
A
INTERPACE
DIAGNOSTICS GROUP, INC.
2019 EQUITY INCENTIVE PLAN
Section
1.
Purpose; Definitions
.
The purposes of the Interpace Diagnostics Group, Inc. 2019 Equity Incentive Plan (as amended
from time to time, the “
Plan
”) are to: (a) enable Interpace Diagnostics Group, Inc. (the “
Company
”)
and its affiliated companies to recruit and retain highly qualified employees, directors and consultants; (b) provide those employees,
directors and consultants with an incentive for productivity; and (c) provide those employees, directors and consultants with
an opportunity to share in the growth and value of the Company.
For
purposes of the Plan, the following terms will have the meanings defined below, unless the context clearly requires a different
meaning:
(a)
“
Affiliate
” means, with respect to a Person, a Person that directly or indirectly controls, is controlled by,
or is under common control with such Person.
(b)
“
Applicable Law
” means the legal requirements relating to the administration of and issuance of securities
under stock incentive plans, including, without limitation, the requirements of state corporations law, federal, state and foreign
securities law, federal, state and foreign tax law, and the requirements of any stock exchange or quotation system upon which
the Shares may then be listed or quoted.
(c)
“
Award
” means an award of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, or
Cash Awards made under this Plan.
(d)
“
Award Agreement
” means, with respect to any particular Award, the written document that sets forth the terms
of that particular Award.
(e)
“
Board
” means the Board of Directors of the Company, as constituted from time to time.
(f)
“
Cash Award
” means an award that is granted under
Section 10
.
(g)
“
Cause
” means (i) Participant’s refusal to comply with any lawful directive or policy of the Company
which refusal is not cured by the Participant within ten (10) days of such written notice from the Company; (ii) the Company’s
determination that Participant has committed any act of dishonesty, embezzlement, unauthorized use or disclosure of confidential
information or other intellectual property or trade secrets, common law fraud or other fraud against the Company or any Subsidiary
or Affiliate; (iii) a material breach by the Participant of any written agreement with or any fiduciary duty owed to any Company
or any Subsidiary or Affiliate; (iv) Participant’s conviction (or the entry of a plea of a nolo contendere or equivalent
plea) of a felony or any misdemeanor involving material dishonesty or moral turpitude; or (v) Participant’s habitual or
repeated misuse of, or habitual or repeated performance of Participant’s duties under the influence of, alcohol, illegally
obtained prescription controlled substances or non-prescription controlled substances. Notwithstanding the foregoing, if a Participant
and the Company (or any of its Affiliates) have entered into an employment agreement, consulting agreement or other similar agreement
that specifically defines “cause,” then with respect to such Participant, “Cause” shall have the meaning
defined in such other agreement.
(h)
“
Change in Control
” shall mean the occurrence of any of the following events: (i) any “person”
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes a “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the total
power to vote for the election of directors of the Company; (ii) during any twelve month period, individuals who at the beginning
of such period constitute the Board and any new director (other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in
Section 1(h)(i)
,
Section 1(h)(iii)
,
Section 1(h)(iv)
or
Section 1(h)(v)
hereof) whose election by the Board or nomination for election by the Company’s stockholders
was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning
of the period of whose election or nomination for election was previously approved, cease for any reason to constitute a majority
thereof; (iii) the merger or consolidation of the Company with another corporation where the stockholders of the Company, immediately
prior to the merger or consolidation, will not beneficially own, immediately after the merger or consolidation, shares entitling
such stockholders to 50% or more of all votes to which all stockholders of the surviving corporation would be entitled in the
election of directors (without consideration of the rights of any class of stock to elect directors by a separate class vote);
(iv) the sale or other disposition of all or substantially all of the assets of the Company; (v) a liquidation or dissolution
of the Company or (vi) acceptance by stockholders of the Company of shares in a share exchange if the stockholders of the Company
immediately before such share exchange do not or will not own directly or indirectly immediately following such share exchange
more than fifty percent (50%) of the combined voting power of the outstanding voting securities of the entity resulting from or
surviving such share exchange in substantially the same proportion as their ownership of the voting securities outstanding immediately
before such share exchange.
Notwithstanding
anything in the Plan or an Award Agreement to the contrary, if an Award is subject to Section 409A of the Code, no event that,
but for the application of this paragraph, would be a Change in Control as defined in the Plan or the Award Agreement, as applicable,
shall be a Change in Control unless such event is also a “change in control event” as defined in Section 409A of the
Code.
(i)
“
Code
” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.
(j)
“
Committee
” means the committee designated by the Board to administer the Plan under
Section 2
. To the
extent required under Applicable Law, the Committee shall have at least two members and each member of the Committee shall be
a Non-Employee Director.
(k)
“
Director
” means a member of the Board.
(l)
“
Disability
” means a condition rendering a Participant Disabled.
(m)
“
Disabled
” will have the same meaning as set forth in Section 22(e)(3) of the Code.
(n)
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended.
(o)
“
Fair Market Value
” means, as of any date, the value of a Share determined as follows: (i) if the Shares are
listed on any established stock exchange or a national market system, including, without limitation, the Nasdaq Capital Market,
the Fair Market Value of a Share will be the closing sales price for such stock as quoted on that system or exchange (or the system
or exchange with the greatest volume of trading in Shares) at the close of regular hours trading on the day of determination;
(ii) if the Shares are regularly quoted by recognized securities dealers but selling prices are not reported, the Fair Market
Value of a Share will be the mean between the high bid and low asked prices for Shares at the close of regular hours trading on
the day of determination; or (iii) if Shares are not traded as set forth above, the Fair Market Value will be determined in good
faith by the Committee taking into consideration such factors as the Committee considers appropriate, such determination by the
Committee to be final, conclusive and binding. Notwithstanding the foregoing, in connection with a Change in Control, Fair Market
Value shall be determined in good faith by the Committee, such determination by the Committee to be final conclusive and binding.
(p)
“
Incentive Stock Option
” means any Option intended to be an “Incentive Stock Option” within the
meaning of Section 422 of the Code.
(q)
“
Non-Employee Director
” will have the meaning set forth in Rule 16b-3(b)(3)(i) promulgated by the Securities
and Exchange Commission under the Exchange Act, or any successor definition adopted by the Securities and Exchange Commission.
(r)
“
Non-Qualified Stock Option
” means any Option that is not an Incentive Stock Option.
(s)
“
Option
” means any option to purchase Shares (including an option to purchase Restricted Stock, if the Committee
so determines) granted pursuant to
Section 5
hereof.
(t)
“
Parent
” means, in respect of the Company, a “parent corporation” as defined in Section 424(e)
of the Code.
(u)
“
Participant
” means an employee, consultant, Director, or other service provider of or to the Company or any
of its respective Affiliates to whom an Award is granted.
(v)
“
Person
” means an individual, partnership, corporation, limited liability company, trust, joint venture, unincorporated
association, or other entity or association.
(w)
“
Restricted Stock
” means Shares that are subject to restrictions pursuant to
Section 8
hereof.
(x)
“
Restricted Stock Unit
” means a right granted under and subject to restrictions pursuant to
Section 9
hereof.
(y)
“
Shares
” means shares of the Company’s common stock, par value $0.01, subject to substitution or adjustment
as provided in
Section 3(c)
hereof.
(z)
“
Stock Appreciation Right
” means a right granted under and subject to
Section 6
hereof.
(aa)
“
Subsidiary
” means, in respect of the Company, a subsidiary company as defined in Sections 424(f) and (g) of
the Code.
Section
2.
Administration
.
The Plan shall be administered by the Committee. Any action of the Committee in administering the
Plan shall be final, conclusive and binding on all persons, including the Company, its Subsidiaries, Affiliates, their respective
employees, the Participants, persons claiming rights from or through Participants and stockholders of the Company.
The
Committee will have full authority to grant Awards under this Plan and determine the terms of such Awards. Such authority will
include the right to:
(a)
select the individuals to whom Awards are granted (consistent with the eligibility conditions set forth in
Section 4
);
(b)
determine the type of Award to be granted;
(c)
determine the number of Shares, if any, to be covered by each Award;
(d)
establish the terms and conditions of each Award;
(e)
establish the performance conditions relevant to any Award and certify whether such performance conditions have been satisfied;
(f)
approve forms of agreements (including Award Agreements) for use under the Plan;
(g)
determine whether and under what circumstances an Option may be exercised without a payment of cash under
Section 5(d)
;
(h)
accelerate the vesting or exercisability of an Award and to modify or amend each Award, subject to
Section 11
; and
(i)
extend the period of time for which an Option or Stock Appreciation Right is to remain exercisable following a Participant’s
termination of service to the Company from the limited period otherwise in effect for that Option or Stock Appreciation Right
to such greater period of time as the Committee deems appropriate, but in no event beyond the expiration of the term of the Option
or Stock Appreciation Right.
The
Committee will have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the
Plan as it, from time to time, deems advisable; to establish the terms and form of each Award Agreement; to interpret the terms
and provisions of the Plan and any Award issued under the Plan (and any Award Agreement); and to otherwise supervise the administration
of the Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award
Agreement in the manner and to the extent it deems necessary to carry out the intent of the Plan.
The
Committee may delegate to one or more officers of the Company the authority to grant Awards to Participants who are not subject
to the requirements of Section 16 of the Exchange Act and the rules and regulations thereunder, provided that the Committee shall
have fixed the total number of Shares subject to such delegation. Any such delegation shall be subject to the applicable corporate
laws of the State of Delaware. The Committee may revoke any such allocation or delegation at any time for any reason with or without
prior notice.
No
Director will be liable for any good faith determination, act or omission in connection with the Plan or any Award.
Section
3.
Shares Subject to the Plan
.
(a)
Shares Subject to the Plan
. Subject to adjustment as provided in
Section 3(c)
of the Plan, the maximum number of
Shares that may be issued in respect of Awards under the Plan is 2,300,000 Shares (the “
Plan Limit
”),
all of which may be issued in respect of Incentive Stock Options. Any Shares issued hereunder may consist, in whole or in part,
of authorized and unissued Shares or treasury shares. Any Shares issued by the Company through the assumption or substitution
of outstanding grants in connection with the acquisition of another entity shall not reduce the maximum number of Shares available
for delivery under the Plan.
(i)
Any Shares that are available for issuance under the Interpace Diagnostics Group, Inc. Amended and Restated 2004 Stock Award and
Incentive Plan (the “
2004 Plan
”) as of the Effective Date, and any Shares that become available for issuance
under the 2004 Plan following the Effective Date in accordance with the terms of the 2004 Plan (the “
Additional Shares
”)
may be issued to Participants pursuant to the terms of this Plan. The Plan Limit shall be increased by such number of Additional
Shares.
(ii)
The maximum total grant date fair value of Awards (as measured by the Company for financial accounting purposes) granted to any
Participant in his or her capacity as a Non-Employee Director in any single calendar year shall not exceed $250,000.
(b)
Effect of the Expiration or Termination of Awards
. If and to the extent that an Option or a Stock Appreciation Right expires,
terminates or is canceled or forfeited for any reason without having been exercised in full, the Shares associated with that Award
will again become available for grant under the Plan. Similarly, if and to the extent an Award of Restricted Stock or Restricted
Stock Units is canceled or forfeited for any reason, the Shares subject to that Award will again become available for grant under
the Plan. Shares withheld in settlement of a tax withholding obligation associated with an Award, or in satisfaction of the exercise
price payable upon exercise of an Option, will not become available for grant under the Plan.
(c)
Other Adjustment
. In the event of any corporate event or transaction such as a merger, consolidation, reorganization, recapitalization,
stock split, reverse stock split, split up, spin-off, combination of shares, exchange of shares, stock dividend, dividend in kind,
or other like change in capital structure (other than ordinary cash dividends) to stockholders of the Company, or other similar
corporate event or transaction affecting the Shares, the Committee, to prevent dilution or enlargement of Participants’
rights under the Plan, shall, in such manner as it may deem equitable, substitute or adjust, in its sole discretion, the number
and kind of shares that may be issued under the Plan or under any outstanding Awards, the number and kind of shares subject to
outstanding Awards, the exercise price, grant price or purchase price applicable to outstanding Awards, and/or any other affected
terms and conditions of this Plan or outstanding Awards.
(d)
Change in Control
. Notwithstanding anything to the contrary set forth in the Plan, upon any Change in Control, the Committee
may, in its sole and absolute discretion and without the need for the consent of any Participant, take one or more of the following
actions contingent upon the occurrence of that Change in Control:
(i)
cause any or all outstanding Awards to become vested and immediately exercisable (as applicable), in whole or in part;
(ii)
cause any outstanding Option or Stock Appreciation Right to become fully vested and immediately exercisable for a reasonable period
in advance of the Change in Control and, to the extent not exercised prior to that Change in Control, cancel that Option or Stock
Appreciation Right upon closing of the Change in Control;
(iii)
cancel any unvested Award or unvested portion thereof, with or without consideration;
(iv)
cancel any Award in exchange for a substitute award;
(v)
redeem any Restricted Stock or Restricted Stock Unit for cash and/or other substitute consideration with value equal to the Fair
Market Value of an unrestricted Share on the date of the Change in Control;
(vi)
cancel any Option or Stock Appreciation Right in exchange for cash and/or other substitute consideration with a value equal to:
(A) the number of Shares subject to that Option or Stock Appreciation Right, multiplied by (B) the difference, if any, between
the Fair Market Value per Share on the date of the Change in Control and the exercise price of that Option or the base price of
the Stock Appreciation Right;
provided,
that if the Fair Market Value per Share on the date of the Change in Control does
not exceed the exercise price of any such Option or the base price of any such Stock Appreciation Right, the Committee may cancel
that Option or Stock Appreciation Right without any payment of consideration therefor; and/or
(vii)
take such other action as the Committee shall determine to be reasonable under the circumstances.
Notwithstanding
any provision of this
Section 3(d)
, in the case of any Award subject to Section 409A of the Code, such Award shall vest
and be distributed only in accordance with the terms of the applicable Award Agreement and the Committee shall only be permitted
to use discretion to the extent that such discretion would be permitted under Section 409A of the Code.
In
the discretion of the Committee, any cash or substitute consideration payable upon cancellation of an Award may be subjected to
(i) vesting terms substantially identical to those that applied to the cancelled Award immediately prior to the Change in Control,
or (ii) earn-out, escrow, holdback or similar arrangements, to the extent such arrangements are applicable to any consideration
paid to stockholders in connection with the Change in Control.
Section
4.
Eligibility
.
Employees, Directors, consultants, and other individuals who provide services to the Company or its
Affiliates are eligible to be granted Awards under the Plan;
provided, however
, that only employees of the Company, any
Parent or a Subsidiary are eligible to be granted Incentive Stock Options.
Section
5.
Options
.
Options granted under the Plan may be of two types: (i) Incentive Stock Options or (ii) Non-Qualified Stock
Options. The Award Agreement shall state whether such grant is an Incentive Stock Option or a Non-Qualified Stock Option. Any
Option granted under the Plan will be in such form as the Committee may at the time of such grant approve.
The
Award Agreement evidencing any Option will incorporate the following terms and conditions and will contain such additional terms
and conditions, not inconsistent with the terms of the Plan, as the Committee deems appropriate in its sole and absolute discretion:
(a)
Option Price
. The exercise price per Share under an Option will be determined by the Committee and will not be less than
100% of the Fair Market Value of a Share on the date of the grant. However, any Incentive Stock Option granted to any Participant
who, at the time the Option is granted, owns, either directly and/or within the meaning of the attribution rules contained in
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,
will have an exercise price per Share of not less than 110% of Fair Market Value per Share on the date of the grant.
(b)
Option Term
. The term of each Option will be fixed by the Committee, but no Option will be exercisable more than 10 years
after the date the Option is granted. However, any Incentive Stock Option granted to any Participant who, at the time such Option
is granted, owns, either directly and/or within the meaning of the attribution rules contained in 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, may not have a term
of more than 5 years. No Option may be exercised by any Person after expiration of the term of the Option.
(c)
Exercisability
. Options will vest and be exercisable at such time or times and subject to such terms and conditions as
determined by the Committee. Such terms and conditions may include the continued employment or service of the Participant, the
attainment of specified individual or corporate performance goals, or such other factors as the Committee may determine in its
sole discretion (the “
Vesting Conditions
”).
(d)
Method of Exercise
. Subject to the terms of the applicable Award Agreement, the exercisability provisions of
Section
5(c)
and the termination provisions of
Section 7
, Options may be exercised in whole or in part from time to time during
their term by the delivery of written notice to the Company specifying the number of Shares to be purchased. Such notice will
be accompanied by payment in full of the purchase price, either by certified or bank check, or such other means as the Committee
may accept. The Committee may, in its sole discretion, permit payment of the exercise price of an Option in the form of previously
acquired Shares based on the Fair Market Value of the Shares on the date the Option is exercised or through means of a “net
settlement,” whereby the Option exercise price will not be due in cash and where the number of Shares issued upon such exercise
will be equal to: (A) the product of (i) the number of Shares as to which the Option is then being exercised, and (ii) the excess,
if any, of (a) the then current Fair Market Value per Share over (b) the Option exercise price, divided by (B) the then current
Fair Market Value per Share.
No
Shares will be issued upon exercise of an Option until full payment therefor has been made. A Participant will not have the right
to distributions or dividends or any other rights of a stockholder with respect to Shares subject to the Option until the Participant
has given written notice of exercise, has paid in full for such Shares, if requested, has given the representation described in
Section 17(a)
hereof and fulfills such other conditions as may be set forth in the applicable Award Agreement.
(e)
Incentive Stock Option Limitations
. In the case of an Incentive Stock Option, the aggregate Fair Market Value (determined
as of the time of grant) of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the
Participant during any calendar year under the Plan and/or any other plan of the Company, its Parent or any Subsidiary will not
exceed $100,000. For purposes of applying the foregoing limitation, Incentive Stock Options will be taken into account in the
order granted. To the extent any Option does not meet such limitation, that Option will be treated for all purposes as a Non-Qualified
Stock Option.
(f)
Termination of Service
. Unless otherwise specified in the applicable Award Agreement or as otherwise provided by the Committee
at or after the time of grant, Options will be subject to the terms of
Section 7
with respect to exercise upon or following
termination of employment or other service.
Section
6.
Stock Appreciation Right
.
Subject to the other terms of the Plan, the Committee may grant Stock Appreciation Rights
to eligible individuals. Each Stock Appreciation Right shall represent the right to receive, upon exercise, an amount equal to
the number of Shares subject to the Award that is being exercised multiplied by the excess of (i) the Fair Market Value of a Share
on the date the Award is exercised, over (ii) the base price specified in the applicable Award Agreement. Distributions may be
made in cash, Shares, or a combination of both, at the discretion of the Committee. The Award Agreement evidencing each Stock
Appreciation Right shall indicate the base price, the term and the Vesting Conditions for such Award. A Stock Appreciation Right
base price may never be less than the Fair Market Value of the underlying common stock of the Company on the date of grant of
such Stock Appreciation Right. The term of each Stock Appreciation Right will be fixed by the Committee, but no Stock Appreciation
Right will be exercisable more than 10 years after the date the Stock Appreciation Right is granted. Subject to the terms and
conditions of the applicable Award Agreement, Stock Appreciation Rights may be exercised in whole or in part from time to time
during their term by the delivery of written notice to the Company specifying the number of Shares to be exercised. Unless otherwise
specified in the applicable Award Agreement or as otherwise provided by the Committee at or after the time of grant, Stock Appreciation
Rights will be subject to the terms of
Section 7
with respect to exercise upon or following termination of employment or
other service.
Section
7.
Termination of Service
.
Unless otherwise specified with respect to a particular Option or Stock Appreciation Right
in the applicable Award Agreement or otherwise determined by the Committee, any portion of an Option or Stock Appreciation Right
that is not exercisable upon termination of service will expire immediately and automatically upon such termination and any portion
of an Option or Stock Appreciation Right that is exercisable upon termination of service will expire on the date it ceases to
be exercisable in accordance with this
Section 7
.
(a)
Termination by Reason of Death
. If a Participant’s service with the Company or any Affiliate terminates by reason
of death, any Option or Stock Appreciation Right held by such Participant may thereafter be exercised, to the extent it was exercisable
at the time of his or her death or on such accelerated basis as the Committee may determine at or after grant, by the legal representative
of the estate or by the legatee of the Participant, for a period expiring (i) at such time as may be specified by the Committee
at or after grant, or (ii) if not specified by the Committee, then 12 months from the date of death, or (iii) if sooner than the
applicable period specified under (i) or (ii) above, upon the expiration of the stated term of such Option or Stock Appreciation
Right.
(b)
Termination by Reason of Disability
. If a Participant’s service with the Company or any Affiliate terminates by reason
of Disability, any Option or Stock Appreciation Right held by such Participant may thereafter be exercised by the Participant
or his or her personal representative, to the extent it was exercisable at the time of termination, or on such accelerated basis
as the Committee may determine at or after grant, for a period expiring (i) at such time as may be specified by the Committee
at or after grant, or (ii) if not specified by the Committee, then 12 months from the date of termination of service, or (iii)
if sooner than the applicable period specified under (i) or (ii) above, upon the expiration of the stated term of such Option
or Stock Appreciation Right.
(c)
Cause
. If a Participant’s service with the Company or any Affiliate is terminated for Cause: (i) any Option or Stock
Appreciation Right, or portion thereof, not already exercised will be immediately and automatically forfeited as of the date of
such termination, and (ii) any Shares for which the Company has not yet delivered share certificates will be immediately and automatically
forfeited and the Company will refund to the Participant the Option exercise price paid for such Shares, if any.
(d)
Other Termination
. If a Participant’s service with the Company or any Affiliate terminates for any reason other than
death, Disability or Cause, any Option or Stock Appreciation Right held by such Participant may thereafter be exercised by the
Participant, to the extent it was exercisable at the time of such termination, or on such accelerated basis as the Committee may
determine at or after grant, for a period expiring (i) at such time as may be specified by the Committee at or after grant, or
(ii) if not specified by the Committee, then 90 days from the date of termination of service, or (iii) if sooner than the applicable
period specified under (i) or (ii) above, upon the expiration of the stated term of such Option or Stock Appreciation Right.
Section
8.
Restricted Stock
.
(a)
Issuance
. Restricted Stock may be issued either alone or in conjunction with other Awards. The Committee will determine
the time or times within which Restricted Stock may be subject to forfeiture, and all other conditions of such Awards. The purchase
price for Restricted Stock may, but need not, be zero. The prospective recipient of an Award of Restricted Stock will not have
any rights with respect to such Award, unless and until such recipient has delivered to the Company an executed Award Agreement
and has otherwise complied with the applicable terms and conditions of such Award.
(b)
Certificates
. Upon the Award of Restricted Stock, the Committee may direct that a certificate or certificates representing
the number of Shares subject to such Award be issued to the Participant or placed in a restricted stock account (including an
electronic account) with the transfer agent and in either case designating the Participant as the registered owner. The certificate(s),
if any, representing such shares shall be physically or electronically legended, as applicable, as to sale, transfer, assignment,
pledge or other encumbrances during the Restriction Period and if issued to the Participant, returned to the Company, to be held
in escrow during the Restriction Period. As a condition to any Award of Restricted Stock, the Participant may be required to deliver
to the Company a share power, endorsed in blank, relating to the Shares covered by such Award.
(c)
Restrictions and Conditions
. The Award Agreement evidencing the grant of any Restricted Stock will incorporate the following
terms and conditions and such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee deems
appropriate in its sole and absolute discretion:
(i)
During a period commencing with the date of an Award of Restricted Stock and ending at such time or times as specified by the
Committee (the “
Restriction Period
”), the Participant will not be permitted to sell, transfer, pledge, assign
or otherwise encumber Restricted Stock awarded under the Plan. The Committee may condition the lapse of restrictions on Restricted
Stock upon one or more Vesting Conditions.
(ii)
While any Share of Restricted Stock remains subject to restriction, the Participant will have, with respect to the Restricted
Stock, the right to vote the Shares, but will not have the right to receive any cash distributions or dividends prior to the lapse
of the Restriction Period underlying such Shares unless otherwise provided under the applicable Award Agreement or as determined
by the Committee. If any cash distributions or dividends are payable with respect to the Restricted Stock, the Committee, in its
sole discretion, may require the cash distributions or dividends to be subjected to the same Restriction Period as is applicable
to the Restricted Stock with respect to which such amounts are paid, or, if the Committee so determines, reinvested in additional
Restricted Stock to the extent Shares are available under
Section 3(a)
of the Plan. A Participant shall not be entitled
to interest with respect to any dividends or distributions subjected to the Restriction Period. Any distributions or dividends
paid in the form of securities with respect to Restricted Stock will be subject to the same terms and conditions as the Restricted
Stock with respect to which they were paid, including, without limitation, the same Restriction Period.
(iii)
Subject to the provisions of the applicable Award Agreement or as otherwise determined by the Committee, if a Participant’s
service with the Company and its Affiliates terminates prior to the expiration of the applicable Restriction Period, the Participant’s
Restricted Stock that then remains subject to forfeiture will then be forfeited automatically.
Section
9.
Restricted Stock Units
.
Subject to the other terms of the Plan, the Committee may grant Restricted Stock Units to
eligible individuals and may impose one or more Vesting Conditions on such units. Each Restricted Stock Unit will represent a
right to receive from the Company, upon fulfillment of any applicable conditions, an amount equal to the Fair Market Value (at
the time of the distribution) of one Share. Distributions may be made in cash, Shares, or a combination of both, at the discretion
of the Committee. The Award Agreement evidencing a Restricted Stock Unit shall set forth the Vesting Conditions and time and form
of payment with respect to such Award. The Participant shall not have any stockholder rights with respect to the Shares subject
to a Restricted Stock Unit Award until that Award vests and the Shares are actually issued thereunder. Subject to the provisions
of the applicable Award Agreement or as otherwise determined by the Committee, if a Participant’s service with the Company
terminates prior to the Restricted Stock Unit Award vesting in full, any portion of the Participant’s Restricted Stock Units
that then remain subject to forfeiture will then be forfeited automatically.
Section
10.
Cash Award
. Subject to the other terms of the Plan, the Committee may grant Cash Awards to eligible individuals
and may impose one or more Vesting Conditions on such Awards. Unless otherwise determined by the Committee, a Participant must
provide services to the Company or its Affiliates through the last day of the performance period applicable to the Cash Award
in order to be eligible to receive payment. Unless otherwise specified by the Committee, payment in respect of a Cash Award will
be made in cash, by the fifteenth day of the third month following the year in which such Award is earned.
Section
11.
Amendments and Termination
.
The Board may amend, alter or discontinue the Plan at any time. However, except as
otherwise provided in
Section 3
, no amendment, alteration or discontinuation will be made which would impair the rights
of a Participant with respect to an Award without that Participant’s consent or which, without the approval of such amendment
within 365 days of its adoption by the Board or by the Company’s stockholders in a manner consistent with Treas. Reg. §
1.422-3 (or any successor provision), would: (i) increase the total number of Shares reserved for issuance hereunder, or (ii)
change the persons or class of persons eligible to receive Awards.
Section
12.
Prohibition on Repricing Programs
. Neither the Committee nor the Board shall (i) implement any cancellation/re-grant
program pursuant to which outstanding Options or Stock Appreciation Rights under the Plan are cancelled and new Options or Stock
Appreciation Rights are granted in replacement with a lower exercise or base price per share, (ii) cancel outstanding Options
or Stock Appreciation Rights under the Plan with exercise prices or base prices per share in excess of the then current Fair Market
Value per Share for consideration payable in equity securities of the Company or (iii) otherwise directly reduce the exercise
price or base price in effect for outstanding Options or Stock Appreciation Rights under the Plan, without in each such instance
obtaining stockholder approval.
Section
13.
Conditions Upon Grant of Awards and Issuance of Shares
.
(a)
The implementation of the Plan, the grant of any Award and the issuance of Shares in connection with the issuance, exercise or
vesting of any Award made under the Plan shall be subject to the Company’s procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the Awards made under the Plan and the Shares issuable pursuant to
those Awards.
(b)
No Shares or other assets shall be issued or delivered under the Plan unless and until there shall have been compliance with all
applicable requirements of Applicable Law, including the filing and effectiveness of the Form S-8 registration statement for the
Shares issuable under the Plan, and all applicable listing requirements of any stock exchange on which Shares are then listed
for trading.
Section
14.
Limits on Transferability; Beneficiaries
. No Award or other right or interest of a Participant under the Plan shall
be pledged, encumbered, or hypothecated to, or in favor of, or subject to any lien, obligation, or liability of such Participant
to, any party, other than the Company, any Subsidiary or Affiliate, or assigned or transferred by such Participant other than
by will or the laws of descent and distribution, and such Awards and rights shall be exercisable during the lifetime of the Participant
only by the Participant or his or her guardian or legal representative. Notwithstanding the foregoing, the Committee may, in its
discretion, provide that Awards or other rights or interests of a Participant granted pursuant to the Plan (other than an Incentive
Stock Option) be transferable, without consideration, to immediate family members (i.e., children, grandchildren or spouse), to
trusts for the benefit of such immediate family members and to partnerships in which such family members are the only partners.
The Committee may attach to such transferability feature such terms and conditions as it deems advisable. In addition, a Participant
may, in the manner established by the Committee, designate a beneficiary (which may be a person or a trust) to exercise the rights
of the Participant, and to receive any distribution, with respect to any Award upon the death of the Participant. A beneficiary,
guardian, legal representative or other person claiming any rights under the Plan from or through any Participant shall be subject
to all terms and conditions of the Plan and any Award Agreement applicable to such Participant, except as otherwise determined
by the Committee, and to any additional restrictions deemed necessary or appropriate by the Committee.
Section
15.
Withholding of Taxes
.
(a)
Required Withholding
. All Awards under the Plan shall be subject to applicable federal (including FICA), state and local
tax withholding requirements. The Company may require that the Participant or other person receiving or exercising Awards pay
to the Company the amount of any federal, state or local taxes that the Company is required to withhold with respect to such Awards,
or the Company may deduct from other wages paid by the Company the amount of any withholding taxes due with respect to such Awards.
(b)
Election to Withhold Shares
. If the Committee so permits, Shares subject to an Award may be withheld to satisfy tax withholding
obligations arising with respect thereto based on the Fair Market Value of such Shares at the time of withholding, to the extent
that such withholding would not result in liability classification of such Award (or any portion thereof) under applicable accounting
rules.
Section
16.
Liability of Company
.
(a)
Inability to Obtain Authority
. If the Company cannot, by the exercise of commercially reasonable efforts, obtain authority
from any regulatory body having jurisdiction for the sale of any Shares under this Plan, and such authority is deemed by the Company’s
counsel to be necessary to the lawful issuance of those Shares, the Company will be relieved of any liability for failing to issue
or sell those Shares.
(b)
Grants Exceeding Allotted Shares
. If Shares subject to an Award exceed, as of the date of grant, the number of Shares which
may be issued under the Plan without additional shareholder approval, that Award will be contingent with respect to such excess
Shares, on the effectiveness under Applicable Law of a sufficient increase in the number of Shares subject to this Plan.
(c)
Rights of Participants and Beneficiaries
. The Company will pay all amounts payable under this Plan only to the applicable
Participant, or beneficiaries entitled thereto pursuant to this Plan. The Company will not be liable for the debts, contracts,
or engagements of any Participant or his or her beneficiaries, and rights to cash payments under this Plan may not be taken in
execution by attachment or garnishment, or by any other legal or equitable proceeding while in the hands of the Company.
Section
17.
General Provisions
.
(a)
The Board may require each Participant to represent to and agree with the Company in writing that the Participant is acquiring
securities of the Company for investment purposes and without a view to distribution thereof and as to such other matters as the
Board believes are appropriate.
(b)
The Awards shall be subject to the Company’s stock ownership policies, as in effect from time to time.
(c)
All certificates for Shares or other securities delivered under the Plan will be subject to such share-transfer orders and other
restrictions as the Board may deem advisable under the rules, regulations and other requirements of the Securities Act of 1933,
as amended, the Exchange Act, any stock exchange upon which the Shares are then listed, and any other Applicable Law, and the
Board may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
(d)
Nothing contained in the Plan will prevent the Board from adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required.
(e)
Neither the adoption of the Plan nor the execution of any document in connection with the Plan will: (i) confer upon any employee
or other service provider of the Company or an Affiliate any right to continued employment or engagement with the Company or such
Affiliate, or (ii) interfere in any way with the right of the Company or such Affiliate to terminate the employment or engagement
of any of its employees or other service providers at any time.
(f)
The Awards (whether vested or unvested) shall be subject to rescission, cancellation or recoupment, in whole or in part, under
any current or future “clawback” or similar policy of the Company that is applicable to the Participant. Notwithstanding
any other provisions in this Plan, any Award which is subject to recovery under any law, government regulation or stock exchange
listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government
regulation or stock exchange listing requirement.
Section
18.
Effective Date of Plan
.
The Plan became effective on [ ] (the “
Effective Date
”), upon its approval
by the holders of a majority of the voting power of the shares deemed present and entitled to vote at the meeting of stockholders
of the Company.
Section
19.
Term of Plan
.
Unless the Plan shall theretofore have been terminated in accordance with
Section 11
, the
Plan shall terminate on the 10-year anniversary of the Effective Date, and no Awards under the Plan shall thereafter be granted.
Section
20.
Invalid Provisions
.
In the event that any provision of this Plan is found to be invalid or otherwise unenforceable
under any Applicable Law, such invalidity or unenforceability will not be construed as rendering any other provisions contained
herein as invalid or unenforceable, and all such other provisions will be given full force and effect to the same extent as though
the invalid or unenforceable provision was not contained herein.
Section
21.
Governing Law
.
The Plan and all Awards granted hereunder will be governed by and construed in accordance with the
laws and judicial decisions of the State of Delaware, without regard to the application of the principles of conflicts of laws.
Section
22.
Notices
.
Any notice to be given to the Company pursuant to the provisions of this Plan must be given in writing
and addressed, if to the Company, to its principal executive office to the attention of its Chief Financial Officer (or such other
Person as the Company may designate in writing from time to time), and, if to a Participant, to the address contained in the Company’s
personnel files, or at such other address as that Participant may hereafter designate in writing to the Company. Any such notice
will be deemed duly given: if delivered personally or via recognized overnight delivery service, on the date and at the time so
delivered; if sent via telecopier or email, on the date and at the time telecopied or emailed with confirmation of delivery; or,
if mailed, five (5) days after the date of mailing by registered or certified mail.
Annex
B
INTERPACE
DIAGNOSTICS GROUP, INC.
EMPLOYEE
STOCK PURCHASE PLAN
1.
Purpose
. The purpose of the Interpace Diagnostics Group, Inc. Employee Stock Purchase Plan is to provide employees of the
Company and its Participating Subsidiaries with an opportunity to acquire a proprietary interest in the Company through the purchase
of shares of Common Stock. The Company intends that the Plan qualify as an “employee stock purchase plan” under Code
section 423, and the Plan shall be interpreted in a manner that is consistent with that intent.
2.
Definitions
.
“
Board
”
means the Board of Directors of the Company, as constituted from time to time.
“
Code
”
means the U.S. Internal Revenue Code of 1986, as amended. Any reference to a section of the Code shall be deemed to include any
regulations promulgated thereunder.
“
Committee
”
means the Compensation and Management Committee of the Board.
“
Common
Stock
” means the common stock of the Company, par value $0.01 per share.
“
Company
”
means Interpace Diagnostics Group, Inc., a Delaware corporation, including any successor thereto.
“
Compensation
”
means base salary, wages, annual bonuses and commissions paid to an Eligible Employee by the Company or a Participating Subsidiary
as compensation for services to the Company or Participating Subsidiary, before deduction for any salary deferral contributions
made by the Eligible Employee to any tax-qualified or nonqualified deferred compensation plan, and including overtime, vacation
pay, holiday pay, jury duty pay and funeral leave pay, but excluding education or tuition reimbursements, imputed income arising
under any group insurance or benefit program, travel expenses, business and relocation expenses, and income received in connection
with stock options or other equity-based awards.
“
Corporate
Transaction
” means a merger, consolidation, acquisition of property or stock, separation, reorganization or other corporate
event described in Code section 424.
“
Designated
Broker
” means the financial services firm or other agent designated by the Company to maintain ESPP Share Accounts on
behalf of Participants who have purchased shares of Common Stock under the Plan.
“
Effective
Date
” means the date as of which this Plan is adopted by the Board, subject to the Plan obtaining shareholder approval
in accordance with Section 19.11.
“
Employee
”
means any person who renders services to the Company or a Participating Subsidiary as an employee pursuant to an employment relationship
with such employer. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual
is on military leave, sick leave or other leave of absence approved by the Company or a Participating Subsidiary that meets the
requirements of Treasury Regulations section 1.421-1(h)(2). Where the period of leave exceeds three (3) months, or such other
period of time specified in Treasury Regulations section 1.421-1(h)(2), and the individual’s right to re-employment is not
guaranteed by statute or contract, the employment relationship shall be deemed to have terminated on the first day immediately
following such three-month period, or such other period specified in Treasury Regulations section 1.421-1(h)(2).
“
Eligible
Employee
” means an Employee who (
i
) has been continuously employed by the Company or a Participating Subsidiary
for at least one (1) year and (
ii
) is customarily employed for at least twenty (20) hours per week and for more than five
(5) months in any calendar year. Notwithstanding the foregoing, the Committee may exclude from participation in the Plan or any
Offering Employees who are “highly compensated employees” of the Company or a Participating Subsidiary (within the
meaning of Code section 414(q)) or a sub-set of such highly compensated employees.
“
Enrollment
Form
” means an agreement pursuant to which an Eligible Employee may elect to enroll in the Plan, authorize a new level
of payroll deductions, or stop payroll deductions and withdraw from an Offering Period.
“
ESPP
Share Account
” means an account into which Common Stock purchased with accumulated payroll deductions at the end of
an Offering Period are held on behalf of a Participant.
“
Exchange
Act
” means the U.S. Securities Exchange Act of 1934, as amended.
“
Fair
Market Value
” means, as of any date, the value of the shares of Common Stock as determined below. If the shares are
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 (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 shares, the Fair Market Value shall be determined
in good faith by the Committee and such determination shall be conclusive and binding on all persons.
“
Offering
”
means the grant of rights to an Eligible Employee to purchase shares of Common Stock during an Offering Period in accordance with
the Plan.
“
Offering
Date
” means the first Trading Day of each Offering Period, as designated by the Committee.
“
Offering
Period
” means a period of six (6) months beginning each January 1st and July 1st;
provided
that, pursuant to
Section 5, the Committee may change the duration of future Offering Periods (subject to a maximum Offering Period of twenty-seven
(27) months) and/or the start and end dates of future Offering Periods.
“
Participant
”
means an Eligible Employee who is actively participating in the Plan.
“
Participating
Subsidiaries
” means the Subsidiaries that the Committee has designated as eligible to participate in the Plan, and such
other Subsidiaries that may be designated by the Committee from time to time in its sole discretion.
“
Plan
”
means this Interpace Diagnostics Group, Inc. Employee Stock Purchase Plan, as set forth herein, and as amended from time to time.
“
Purchase
Date
” means the last Trading Day of each Offering Period.
“
Purchase
Price
” means an amount equal to the
lesser
of (
i
) eighty-five percent (85%) of the Fair Market Value of
a share of Common Stock on the Offering Date or (
ii
) eighty-five percent (85%) of the Fair Market Value of a share of Common
Stock on the Purchase Date;
provided
that, the Purchase Price per share of Common Stock will in no event be less than the
par value of the Common Stock.
“
Securities
Act
” means the Securities Act of 1933, as amended.
“
Subsidiary
”
means any corporation, domestic or foreign, of which not less than 50% of the combined voting power is held by the Company or
a Subsidiary, whether or not such corporation exists now or is hereafter organized or acquired by the Company or a Subsidiary.
In all cases, the determination of whether an entity is a Subsidiary shall be made in accordance with Code section 424(f).
“
Trading
Day
” means any day on which the national stock exchange upon which the Common Stock is listed is open for trading or,
if the Common Stock is not listed on an established stock exchange or national market system, a business day, as determined by
the Committee in good faith.
3.
Administration
. The Committee shall administer the Plan and shall have the authority to construe and interpret the Plan,
prescribe, amend and rescind rules relating to the Plan’s administration and take any other actions necessary or desirable
for the administration of the Plan, and to ensure compliance with Code section 423 and other applicable law. The Committee’s
decisions shall be final and binding on all persons. All expenses of administering the Plan shall be borne by the Company.
4.
Eligibility
.
4.1
Unless otherwise determined by the Committee in a manner consistent with Code section 423, any individual who is an Eligible Employee
as of the first day of the enrollment period designated by the Committee for a particular Offering Period shall be eligible to
participate in such Offering Period, subject to Code section 423 requirements.
4.2
Notwithstanding any provision of the Plan to the contrary, no Eligible Employee shall be granted an option under the Plan if (
i
)
immediately after the grant of the option, such Eligible Employee (or any other person whose stock would be attributed to such
Eligible Employee pursuant to Code section 424(d)) would own capital stock of the Company or hold outstanding options to purchase
stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or any Subsidiary,
or (
ii
) such option would permit his or her rights to purchase stock under all Code section 423 employee stock ownership
plans of the Company and its Subsidiaries to accrue at a rate that exceeds $25,000 of the Fair Market Value of such stock (determined
at the time the option is granted) for each calendar year in which such option is outstanding at any time.
5.
Offering Periods
. The Plan shall be implemented by a series of Offering Periods, each of which shall be six (6) months
in duration, with new Offering Periods commencing on or about January 1
st
and July 1
st
of each year (or
such other times as determined by the Committee). The Committee shall have the authority to change the duration, frequency, start
and end dates of Offering Periods.
6.
Participation
.
6.1
Enrollment and Payroll Deductions
. An Eligible Employee may elect to participate in the Plan by completing an Enrollment
Form and submitting it to the Company, in accordance with the enrollment procedures established by the Committee. Participation
in the Plan is entirely voluntary. By submitting an Enrollment Form, an Eligible Employee authorizes payroll deductions from his
or her pay check in an amount equal to at least 1%, but not more than 10%, of his or her Compensation on each pay day occurring
during an Offering Period (or such other maximum percentage as the Committee may establish from time to time before an Offering
Period begins). Payroll deductions shall commence on the first payroll date following the Offering Date and end on the last payroll
date on or before the Purchase Date. The Company shall maintain records of all payroll deductions but shall have no obligation
to pay interest on payroll deductions or to hold such amounts in a trust or in any segregated account. Unless expressly permitted
by the Committee, a Participant may not make any separate contributions or payments to the Plan.
6.2
Election Changes
. During an Offering Period, a Participant may decrease or increase his or her rate of payroll deductions
applicable to such Offering Period only once. To make such a change, the Participant must submit a new Enrollment Form authorizing
the new rate of payroll deductions at least fifteen (15) days before the Purchase Date. A Participant may decrease or increase
his or her rate of payroll deductions for future Offering Periods by submitting a new Enrollment Form authorizing the new rate
of payroll deductions at least fifteen (15) days before the start of the next Offering Period.
6.3
Automatic Re-enrollment
. The deduction rate selected by a Participant in an Enrollment Form shall remain in effect for
subsequent Offering Periods, unless the Participant (
i
) submits a new Enrollment Form authorizing a new level of payroll
deductions in accordance with Section 6.2, (
ii
) withdraws from the Plan in accordance with Section 10, or (
iii
)
terminates employment or otherwise becomes ineligible to participate in the Plan.
7.
Grant of Option
. On each Offering Date, each Participant in the applicable Offering Period shall be granted an option to
purchase, on the Purchase Date, a number of shares of Common Stock determined by dividing the Participant’s accumulated
payroll deductions by the applicable Purchase Price;
provided
, that in no event shall any Participant purchase more than
100,000 shares of Common Stock during an Offering Period (subject to adjustment in accordance with Section 18 and the limitations
set forth in Section 13).
8.
Exercise of Option/Purchase of Shares
. A Participant’s option to purchase shares of Common Stock will be exercised
automatically on the Purchase Date of each Offering Period. The Participant’s accumulated payroll deductions will be used
to purchase the maximum number of whole shares that can be purchased with the amounts in the Participant’s notional account.
No fractional shares may be purchased but notional fractional shares of Common Stock will be allocated to the Participant’s
ESPP Share Account to be aggregated with other notional fractional shares of Common Stock on future Purchase Dates, subject to
earlier withdrawal by the Participant in accordance with Section 10 or termination of employment in accordance with Section 11.
9.
Transfer of Shares
. As soon as reasonably practicable after each Purchase Date, the Company will arrange for the delivery
to each Participant of the shares of Common Stock purchased upon exercise of his or her option. The Committee may permit or require
that the shares be deposited directly into an ESPP Share Account established in the name of the Participant with a Designated
Broker and may require that the shares of Common Stock be retained with such Designated Broker for a specified period of time.
Participants will not have any voting, dividend or other rights of a shareholder with respect to the shares of Common Stock subject
to any option granted hereunder until such shares have been delivered pursuant to this Section 9.
10.
Withdrawal
.
10.1
Withdrawal Procedure
. A Participant may withdraw from an Offering by submitting a revised Enrollment Form to the Committee
indicating his or her election to withdraw at least fifteen (15) days before the Purchase Date. The accumulated payroll deductions
held on behalf of a Participant in his or her notional account (that have not been used to purchase shares of Common Stock) shall
be paid to the Participant promptly following receipt of the Participant’s Enrollment Form indicating his or her election
to withdraw and the Participant’s option shall be automatically terminated. If a Participant withdraws from an Offering
Period, no payroll deductions will be made during any succeeding Offering Period, unless the Participant re-enrolls in accordance
with Section 6.1.
10.2
Effect on Succeeding Offering Periods
. A Participant’s election to withdraw from an Offering Period will not have
any effect upon his or her eligibility to participate in succeeding Offering Periods that commence following the completion of
the Offering Period from which the Participant withdraws.
11.
Termination of Employment; Change in Employment Status
. Upon termination of a Participant’s employment for any reason,
including death, disability or retirement, or a change in the Participant’s employment status following which the Participant
is no longer an Eligible Employee, which in either case occurs at least thirty (30) days before the Purchase Date, the Participant
will be deemed to have withdrawn from the Plan and the payroll deductions in the Participant’s notional account that have
not been used to purchase shares of Common Stock shall be returned to the Participant, or in the case of the Participant’s
death, to the person(s) entitled to such amounts under Section 17, and the Participant’s option shall be automatically terminated.
If the Participant’s termination of employment or change in status occurs within thirty (30) days before a Purchase Date,
the accumulated payroll deductions shall be used to purchase shares on the Purchase Date.
12.
Interest
. No interest shall accrue on or be payable with respect to the payroll deductions of a Participant in the Plan.
13.
Shares Reserved for Plan
.
13.1
Number of Shares
. A total of 1,000,000 shares of Common Stock have been authorized and reserved for issuance under the
Plan. Such shares of Common Stock may be newly issued shares, treasury shares or shares acquired on the open market.
13.2
Over-subscribed Offerings
. The number of shares of Common Stock which a Participant may purchase in an Offering under the
Plan may be reduced if the Offering is over-subscribed. No option granted under the Plan shall permit a Participant to purchase
shares of Common Stock which, if added together with the total number of shares of Common Stock purchased by all other Participants
in such Offering would exceed the total number of shares of Common Stock remaining available under the Plan. If the Committee
determines that, on a particular Purchase Date, the number of shares of Common Stock with respect to which options are to be exercised
exceeds the number of shares of Common Stock then available under the Plan, the Company shall make a
pro rata
allocation
of the shares of Common Stock remaining available for purchase in as uniform a manner as practicable and as the Committee determines
to be equitable.
14.
Transferability
. No payroll deductions credited to a Participant, nor any rights with respect to the exercise of an option
or any rights to receive Common Stock hereunder may be assigned, transferred, pledged or otherwise disposed of in any way by the
Participant, other than by will, the laws of descent and distribution, or as provided in Section 17. Any attempt to assign, transfer,
pledge or otherwise dispose of such rights or amounts shall be without effect.
15.
Application of Funds
. All payroll deductions received or held by the Company under the Plan may be used by the Company
for any corporate purpose to the extent permitted by applicable law, and the Company shall not be required to segregate such payroll
deductions or contributions.
16.
Statements
. Participants will be provided with statements at least annually which shall set forth the contributions made
by the Participant to the Plan, the Purchase Price of any shares of Common Stock purchased with accumulated funds, the number
of shares of Common Stock purchased, and any payroll deduction amounts remaining in the Participant’s notional account.
17.
Designation of Beneficiary
. A Participant may file, on forms supplied by the Committee, a written designation of beneficiary
who is to receive any shares of Common Stock and cash in respect of any fractional shares of Common Stock, if any, from the Participant’s
ESPP Share Account under the Plan in the event of such Participant’s death. In addition, a Participant may file a written
designation of beneficiary who is to receive any cash withheld through payroll deductions and credited to the Participant’s
notional account in the event of the Participant’s death prior to the Purchase Date of an Offering Period.
18.
Adjustments; Dissolution or Liquidation; Corporate Transactions
.
18.1
Adjustments
. In the event that any dividend or other distribution (whether in the form of cash, Common Stock, or other
property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Common Stock or other securities of the Company, or other change in the Company’s structure affecting
the Common Stock occurs, then in order to prevent dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, the Committee will, in such manner as it deems equitable, adjust the number of shares and class
of Common Stock that may be delivered under the Plan, the Purchase Price per share and the number of shares of Common Stock covered
by each outstanding option under the Plan, and the numerical limits of Section 7 and Section 13.
18.2
Dissolution or Liquidation
. Unless otherwise determined by the Committee, in the event of a proposed dissolution or liquidation
of the Company, any Offering Period then in progress will be shortened by setting a new Purchase Date, and the Offering Period
will end immediately prior to the proposed dissolution or liquidation. The new Purchase Date will be before the date of the Company’s
proposed dissolution or liquidation. Before the new Purchase Date, the Committee will provide each Participant with written notice,
which may be electronic, of the new Purchase Date and that the Participant’s option will be exercised automatically on such
date, unless before such time, the Participant has withdrawn from the Offering in accordance with Section 10.
18.3
Corporate Transaction
. In the event of a Corporate Transaction, each outstanding option will be assumed or an equivalent
option substituted by the successor corporation or a parent or Subsidiary of such successor corporation. If the successor corporation
refuses to assume or substitute the option, the Offering Period with respect to which the option relates will be shortened by
setting a new Purchase Date on which the Offering Period will end. The new Purchase Date will occur before the date of the Corporate
Transaction. Prior to the new Purchase Date, the Committee will provide each Participant with written notice, which may be electronic,
of the new Purchase Date and that the Participant’s option will be exercised automatically on such date, unless before such
time, the Participant has withdrawn from the Offering in accordance with Section 10.
19.
General Provisions
.
19.1
Equal Rights and Privileges
. Notwithstanding any provision of the Plan to the contrary and in accordance with Code section
423, all Eligible Employees who are granted options under the Plan shall have the same rights and privileges.
19.2
No Right to Continued Service
. Neither the Plan nor any compensation paid hereunder will confer on any Participant the
right to continue as an Employee or in any other capacity.
19.3
Rights as Shareholder
. A Participant will become a shareholder with respect to the shares of Common Stock that are purchased
pursuant to options granted under the Plan when the shares are transferred to the Participant’s ESPP Share Account. A Participant
will have no rights as a shareholder with respect to shares of Common Stock for which an election to participate in an Offering
Period has been made until such Participant becomes a shareholder as provided above.
19.4
Successors and Assigns
. The Plan shall be binding on the Company and its successors and assigns.
19.5
Entire Plan
. This Plan constitutes the entire plan with respect to the subject matter hereof and supersedes all prior plans
with respect to the subject matter hereof.
19.6
Compliance with Law
. The obligations of the Company with respect to payments under the Plan are subject to compliance with
all applicable laws and regulations. Common Stock shall not be issued with respect to an option granted under the Plan unless
the exercise of such option and the issuance and delivery of the shares of Common Stock pursuant thereto shall comply with all
applicable provisions of law, including, without limitation, the Securities Act, the Exchange Act, and the requirements of any
stock exchange upon which the shares may then be listed.
19.7
Notice of Disqualifying Dispositions
. Each Participant shall give the Company prompt written notice of any disposition
or other transfer of shares of Common Stock acquired pursuant to the exercise of an option acquired under the Plan, if such disposition
or transfer is made within two years after the Offering Date or within one year after the Purchase Date.
19.8
Term of Plan
. The Plan shall become effective on the Effective Date and, unless terminated earlier pursuant to Section
19.9, shall have a term of ten (10) years.
19.9
Amendment or Termination
. The Committee may, in its sole discretion, amend, suspend or terminate the Plan at any time and
for any reason. If the Plan is terminated, the Committee may elect to terminate all outstanding Offering Periods either immediately
or once shares of Common Stock have been purchased on the next Purchase Date (which may, in the discretion of the Committee, be
accelerated) or permit Offering Periods to expire in accordance with their terms (and subject to any adjustment in accordance
with Section 18). If any Offering Period is terminated before its scheduled expiration, all amounts that have not been used to
purchase shares of Common Stock will be returned to Participants (without interest, except as otherwise required by law) as soon
as administratively practicable.
19.10
Applicable Law
. The laws of the State of Delaware shall govern all questions concerning the construction, validity and
interpretation of the Plan, without regard to such state’s conflict of law rules.
19.11
Shareholder Approval
. The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months
before or after the date the Plan is adopted by the Board.
19.12
Code Section 423
. The Plan is intended to qualify as an employee stock ownership plan under Code section 423. Any provision
of the Plan that is inconsistent with Code section 423 shall be reformed to comply with Code section 423.
19.13
Withholding
. To the extent required by applicable federal, state or local law, a Participant must make arrangements satisfactory
to the Company for the payment of any withholding or similar tax obligations that arise in connection with the Plan.
19.14
Severability
. If any provision of the Plan shall for any reason be held to be invalid or unenforceable, such invalidity
or unenforceability shall not affect any other provision hereof, and the Plan shall be construed as if such invalid or unenforceable
provision were omitted.
19.15
Headings
. The headings of sections herein are included solely for convenience and shall not affect the meaning of any of
the provisions of the Plan.
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