PROPOSAL FOUR
APPROVAL OF AMENDMENT TO OUR 2012 INCENTIVE COMPENSATION PLAN
Background
Our 2012 Plan was adopted by
our Board of Directors on October 18, 2012, and subsequently amended and restated by our Board of Directors on September 9, 2013, retroactive to October 18, 2012. Our stockholders approved our 2012 Plan on October 18, 2013. In
2017, our Board of Directors and stockholders voted to amend our 2012 Plan to increase the number of shares reserved for stock-based compensation under our 2012 Plan by 900,000 shares. The purpose of our 2012 Plan is to assist us and our
subsidiaries and other designated affiliates, which we refer to as Related Entities, in attracting, motivating, retaining, and rewarding high-quality executives and other employees, officers, directors, and individual consultants who
provide services to us or our Related Entities, by enabling such persons to acquire or increase a proprietary interest in our company in order to strengthen the mutuality of interests between such persons and our stockholders, and providing such
persons with performance incentives to expend their maximum efforts in the creation of stockholder value. As of December 31, 2018, there were outstanding issued but unexercised options under our 2012 Plan to acquire 1,266,926 shares of our
common stock at a weighted average exercise price of $5.07 per share. As of December 31, 2018, 563,511 shares remained available for future grant under our 2012 Plan. As of May 24, 2019, there were outstanding issued but unexercised
options under our 2012 Plan to acquire 2,207,816 shares of our common stock at a weighted average exercise price of $3.69 per share. As of May 24, 2019, no shares remained available for future grant under our 2012 Plan.
Summary of the Proposal
Our Board of
Directors approved an amendment to our 2012 Plan on May 10, 2019, subject to approval by our stockholders at our 2019 Annual Meeting of Stockholders. We are seeking stockholder approval of an amendment to our 2012 Plan that increases the number
of shares reserved for issuance thereunder by 3,000,000 shares.
The Importance of the Proposed Increase in Shares
We believe the ability to grant competitive equity awards is a necessary recruiting tool for us to obtain and retain the quality personnel we
need to sustain and move our business forward. If we are unable to offer competitive equity packages to retain and hire quality personnel, this could significantly stymie our plans for growth and adversely affect our ability to operate our business.
In addition, if we are unable to grant competitive equity awards, we may be required to offer additional cash-based incentives to replace equity as a means of competing for talent.
Summary of our 2012 Plan
The material
features of our 2012 Plan are outlined below.
Awards.
Our 2012 Plan provides for the grant of stock options, stock appreciation
rights, restricted stock, RSUs, bonus stock, dividend equivalents, other stock-based awards, and performance awards that may be settled in cash, stock, or other property.
Shares Available for Awards.
A total of 1,830,437 shares of our common stock, adjusted for our
1-for-8
reverse split in August of 2016, are currently reserved and available for delivery under our 2012 Plan. Any shares under our 2012 Plan that are not issued because the awards terminate without the
issuance of shares, or because of the withholding of shares to pay taxes or the exercise price of an award, will be available for issuance under our 2012 Plan. If this proposal is approved by our stockholders, a total of 4,830,437 shares of our
common stock will be reserved and available for delivery under our 2012 Plan.
Limitations on Awards.
Our 2012 Plan imposes
individual limitations on certain awards, in part to comply with Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code. In any fiscal year during any part of which our 2012 Plan is in effect, no participant may be granted
(1) stock options and/or stock appreciation rights with respect to more than 1,000,000 shares of our common stock, or (2) restricted stock, RSUs, performance awards and/or other stock-based awards that are intended to qualify as
performance-based compensation exempt from the deduction limitations imposed under Section 162(m) of the Code that may be settled by the issuance of
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