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
(AMENDMENT
NO. ____)
Filed
by
the Registrant S
Filed
by
a Party other than the Registrant £
Check
the
appropriate box:
£ Preliminary
Proxy Statement
£ Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
S Definitive
Proxy Statement
£ Definitive
Additional Materials
£ Soliciting
Material Under Rule 14a-12
DYADIC
INTERNATIONAL, INC.
(Name
of Registrant as Specified in its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
S No
fee
required.
£
Fee
computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title
of
each class of securities to which transaction applies:
(2) Aggregate
number of securities to which transaction applies:
(3) 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):
(4) Proposed
maximum aggregate value of transaction:
(5) Total
fee
paid:
£ Fee
paid
previously with preliminary materials.
£
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.
(1) Amount
Previously Paid:
(2) Form,
Schedule or Registration Statement No.:
(3) Filing
Party:
(4) Date
Filed:
DYADIC
INTERNATIONAL, INC.
140
Intracoastal Pointe Drive, Suite 404
Jupiter,
FL 33477
(561)
743-8333
Dear
Stockholder:
You
are
cordially invited to attend the 2006 annual meeting of stockholders of Dyadic
International, Inc., which we will hold on Monday, June 12, 2006 at 10:00 a.m.,
local time, at the Doubletree Hotel located at 4431 PGA Boulevard, Palm Beach
Gardens, Florida 33410.
The
matters to be presented at the meeting are described in the Notice of 2006
Annual Meeting of Stockholders and Proxy Statement which accompany this
letter.
We
hope
you will be able to attend the meeting, but, whatever your plans, we ask that
you please complete, sign and date the enclosed proxy card and return it in
the
postage-paid envelope provided so that your shares will be represented at the
meeting.
We
look
forward to seeing you at the meeting.
Sincerely,
Mark
A.
Emalfarb
Chairman,
President and Chief Executive Officer
Jupiter,
Florida
April
28,
2006
DYADIC
INTERNATIONAL, INC.
140
Intracoastal Pointe Drive, Suite 404
Jupiter,
FL 33477
NOTICE
OF 2006 ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON MONDAY, JUNE 12, 2006
To
the
stockholders of Dyadic International, Inc.:
The
2006
annual meeting of stockholders of Dyadic International, Inc., a Delaware
corporation, will be held on Monday, June 12, 2006, at 10:00 a.m., local time,
at the Doubletree Hotel located at 4431 PGA Boulevard, Palm Beach Gardens,
Florida 33410, for the following purposes:
| 1. |
To
elect two (2) Class II directors, each for a three-year term ending
in
2009;
|
| 2. |
To
approve the Amended and Restated Dyadic International, Inc. 2001
Equity
Compensation Plan effective as of January 1, 2005 in order to (a)
reduce
the number of shares of common stock reserved for issuance under
the Plan
to 4,478,475 shares from 5,152,447 shares, (b) conform certain provisions
of the Plan to the requirements of Section 409A of the Internal Revenue
Code of 1986, as amended, and (c) increase the maximum limitation
of
shares that may be subject to awards granted under the Plan to any
one
individual for any fiscal year during the term of the Plan to 1,200,000
shares from 100,000 shares;
|
| 3. |
To
approve the Dyadic International, Inc. 2006 Stock Option
Plan;
|
| 4. |
To
ratify the appointment of Ernst & Young LLP as our independent
registered public accounting firm for the year ending December 31,
2006; and
|
| 5. |
To
transact such other business properly brought before the annual meeting
and any adjournment or postponement of the
meeting.
|
These
items of business are described in detail in the accompanying proxy statement.
This notice, together with the accompanying proxy statement and enclosed proxy
card and annual report to stockholders, will be mailed to stockholders on or
about May 5, 2006.
Our
board
of directors has fixed the close of business on April 26, 2006 as the
record date of the annual meeting. Stockholders of record at the close of
business on April 26, 2006 are entitled to notice of, and to vote at, the annual
meeting and any adjournment or postponement of the annual meeting. Each share
of
common stock is entitled to one vote.
A
list of
stockholders entitled to vote at the annual meeting will be available for
inspection by our stockholders, for any purpose germane to the meeting, at
the
annual meeting and during ordinary business hours beginning
ten (10) days prior to the date of the annual meeting, at our executive offices
at 140 Intracoastal Pointe, Drive, Suite 404, Jupiter, Florida 33477.
All
stockholders are cordially invited to attend the meeting in person.
By
Order
of the Board of Directors,
Mark
A.
Emalfarb
Chairman,
President and Chief Executive Officer
Jupiter,
Florida
April
28,
2006
Whether
or not you expect to attend the annual meeting, please complete, date and
sign
the enclosed proxy and mail it promptly in the enclosed postage-paid envelope.
If you are a holder of record, you may also cast your vote in person at the
annual meeting. If your shares are held at a brokerage firm or bank, you
must
provide them with instructions on how to vote your shares.
DYADIC
INTERNATIONAL, INC.
140
Intracoastal Pointe Drive, Suite 404
Jupiter,
FL 33477
(561)
743-8333
________________________________________________________
2006
ANNUAL MEETING OF STOCKHOLDERS
JUNE
12, 2006
________________________________________________________
PROXY
STATEMENT
________________________________________________________
This
proxy statement contains information related to our 2006 annual meeting of
stockholders to be held on Monday, June 12, 2006, at 10:00 a.m., local
time, at the Doubletree Hotel located at 4431 PGA Boulevard, Palm Beach Gardens,
Florida 33410, and at any adjournments or postponements thereof. The approximate
date that this proxy statement, the accompanying notice of annual meeting and
the enclosed form of proxy and our 2005 annual report to stockholders are first
being mailed to stockholders is May 5, 2006. We are furnishing this proxy
statement to stockholders of Dyadic as part of the solicitation of proxies
by
Dyadic’s board of directors for use at the annual meeting. You should review
this information in conjunction with our 2005 annual report to stockholders
which accompanies this proxy statement.
________________________________________________________
TABLE
OF CONTENTS
|
2
|
|
|
6
|
|
|
|
|
|
8
|
|
|
|
|
|
10
|
|
|
|
|
|
16
|
|
|
|
|
|
20
|
|
|
23
|
|
|
|
|
|
25
|
|
|
31
|
|
|
|
|
|
35
|
|
|
|
|
|
36
|
|
|
|
|
|
A-1
|
|
|
|
|
|
B-1
|
ABOUT
THE ANNUAL MEETING
What
is the purpose of the annual meeting?
At
the
annual meeting, we are asking stockholders:
| · |
To
elect two (2) Class II directors, each for a three-year term ending
in
2009;
|
| · |
To
approve the Amended and Restated
Dyadic International, Inc. 2001 Equity Compensation Plan effective
as of
January 1, 2005;
|
| · |
To
approve the Dyadic International, Inc. 2006 Stock Option Plan;
|
| · |
To
ratify the appointment of Ernst & Young LLP as our independent
registered public accounting firm for the year ending December 31,
2006; and
|
| · |
To
transact such other business properly brought before the meeting
and any
adjournment or postponement of the
meeting.
|
Who
is entitled to notice of, and to vote at the annual meeting?
You
are
entitled to vote, in person or by proxy, at the annual meeting if you owned
shares of our common stock as of the close of business (5:00 p.m. EST) on April
26, 2006, the record date of the annual meeting. On the record
date, 23,140,467 shares
of
our common stock were issued and outstanding and held by 154 holders of
record. Holders of record of our common stock on the record date are entitled
to
one vote per share at the annual meeting.
Who
can attend the meeting?
All
stockholders as of the record date, or their duly appointed proxies, may attend.
Please note that if you hold shares in “street name” (that is, through a broker
or other nominee), you will need to bring a copy of a brokerage statement
reflecting your stock ownership as of the record date.
What
shares may I vote?
You
may
vote all shares you owned as of the record date. These include (1) shares owned
directly in your name as stockholder of record and (2) shares held for you
as
the beneficial owner through a stockbroker, bank or other nominee.
What
is the difference between
holding shares as a stockholder of record and as a beneficial
owner?
Most
of
our stockholders hold their shares through a stockbroker, bank or other nominee
rather than directly in their own name. As summarized below, there are some
differences between shares held of record and those beneficially
owned.
If
our
shares are registered directly in your name with our transfer agent, Continental
Stock Transfer & Trust Company, you are considered the stockholder of record
with regard to those shares. As the stockholder of record, you have the right
to
grant your proxy directly to us to vote your shares on your behalf at the
meeting or the right to vote in person at the meeting. We have enclosed or
sent
a proxy card for you to use.
If
you
hold our shares in a stock brokerage account or by a bank or other nominee,
you
are considered the beneficial owner of the shares held in “street name,” and
these materials have been forwarded to you by your broker or nominee, which
is
considered the stockholder of record with respect to those shares. As the
beneficial owner, you have the right to direct your broker or nominee how to
vote and are also invited to attend the annual meeting so long as you bring
a
copy of a brokerage statement reflecting your ownership as of the record date.
However, since you are not the stockholder of record, you may not vote these
shares in person at the meeting unless you obtain
a
signed
proxy from your broker or nominee giving you the right to vote the shares.
Your
broker or nominee has enclosed or provided a voting instruction card for
you to
use to direct your broker or nominee how to vote these
shares.
What
constitutes a quorum?
If
a
majority of the shares of our common stock outstanding on the record date is
represented either in person or by proxy at the annual meeting, a quorum will
be
present at the annual meeting. Shares held by persons attending the annual
meeting but not voting, and shares represented in person or by proxy and for
which the holder has abstained from voting, will be counted as present at the
annual meeting for purposes of determining the presence or absence of a
quorum.
A
broker
who holds shares in nominee or “street name” for a customer who is the
beneficial owner of those shares may be prohibited from giving a proxy to vote
those shares on any proposal to be voted on at the annual meeting without
specific instructions from such customer with respect to such proposal.
Accordingly, if a broker receives voting instructions from a customer with
respect to one or more, but not all, of the proposals to be voted on at the
annual meeting, the shares beneficially owned by such customer will not
constitute “votes cast” or shares “entitled to vote” with respect to any
proposal for which the customer has not provided voting instructions to the
broker. These so-called “broker non-votes” will be counted as present at the
annual meeting for purposes of determining whether a quorum exists.
How
do I vote?
If
you
complete and properly sign and date the accompanying proxy card, and return
it
to us in the enclosed return envelope as soon as possible, it will be voted
as
you direct. If you are a registered stockholder and you attend the meeting,
you
may deliver your completed proxy card in person. “Street name” stockholders who
wish to vote at the meeting will need to obtain a proxy from the broker or
nominee that holds their shares.
All
shares of our common stock represented by properly executed proxies received
before or at the annual meeting will, unless revoked, be voted in accordance
with the instructions indicated on those proxies. If no instructions are
indicated on a properly executed proxy, the shares represented by such proxy
card will be voted “FOR” the nominees for Class II directors, “FOR” the proposal
to approve the Amended and Restated 2001 Equity Compensation Plan, “FOR” the
proposal to approve the 2006 Stock Option Plan and “FOR” the proposal to ratify
the appointment of Ernst & Young LLP as our independent registered public
accounting firm for 2006. You are urged to mark the box on your proxy to
indicate how to vote your shares.
Can
I
vote by telephone or electronically?
If
your
shares are held in “street name,” please check your proxy card or contact your
broker or nominee to determine whether you will be able to vote by telephone
or
electronically.
The
deadline for voting by telephone or electronically is 11:59 p.m., EDT, on June
11, 2006.
Can
I
change my vote after I return my proxy card?
Yes.
Even
after you have submitted your proxy card, you may change your vote at any time
before the proxy is exercised by filing with our Secretary either a notice
of
revocation or a duly executed proxy card bearing a later date. In such event,
the later submitted vote will be recorded and the earlier vote revoked. The
powers of the proxy holders will be suspended if you are a holder of record
and
attend the meeting in person and so request, although attendance at the meeting
will not by itself revoke a previously granted proxy.
If
your
shares are held in “street name,” you should contact the institution that holds
your shares to change your vote.
What
are the board’s recommendations?
The
board
recommends a vote “FOR”:
| · |
each
of the nominees for Class II directors;
|
| · |
the
proposal to approve the Amended and Restated 2001 Equity Compensation
Plan
effective as of January 1, 2005;
|
| · |
the
proposal to approve the 2006 Stock Option Plan; and
|
| · |
the
proposal to ratify the appointment of Ernst & Young LLP as our
independent registered public accounting firm for the year ending
December
31, 2006.
|
Unless
you give other instructions on your proxy card, the persons named as proxies
on
the proxy card will vote “FOR” each of the nominees for Class II directors and
the other proposals.
We
do not
expect that any other matters will be brought before the annual meeting. If,
however, other matters are properly presented, the persons named as proxies
will
vote the shares represented by properly executed proxies in accordance with
their judgment with respect to those matters, including any proposal to adjourn
or postpone the annual meeting. No proxy that is voted against all of the
proposals will be voted in favor of any adjournment or postponement of the
annual meeting for the purpose of soliciting additional proxies.
What
vote is required to approve the proposal?
Proposal
1: Election of Class II Directors.
The
affirmative vote of a plurality of the votes cast, either in person or by proxy,
at the annual meeting is required for the election of each of the Class II
director nominees. You may vote “for” or “withheld” with respect to the election
of one or more of the directors. Only votes “for” or “withheld” are counted in
determining whether a plurality has been cast in favor of a director.
Abstentions are not counted for purposes of the election of directors, although
they are counted for purposes of determining whether there is a quorum.
Stockholders do not have the right to cumulate their votes for directors.
Proposal
2: Approval of Amended and Restated 2001 Equity Compensation Plan.
The
affirmative vote of the holders of a majority of all shares casting votes,
either in person or by proxy, at the annual meeting is required to approve
the
Amended and Restated 2001 Equity Compensation Plan effective as of January
1,
2005. This approval is required (i) for purposes of compliance with certain
exclusions from the limitations of Section 162(m) of the Internal Revenue Code
of 1986, as amended, and (ii) by the applicable rules of the American Stock
Exchange. A properly executed proxy marked “abstain” with respect to this
proposal will not be voted, although it will be counted for purposes of
determining whether there is a quorum. Abstentions and broker non-votes will
have the same effect as a vote against this proposal.
Proposal
3: Approval
of 2006 Stock Option Plan. The
affirmative vote of the holders of a majority of all shares casting votes,
either in person or by proxy, at the annual meeting is required to approve
the
2006 Stock Option Plan. This approval is required (i) for purposes of compliance
with certain exclusions from the limitations of Section 162(m) of the Internal
Revenue Code of 1986, as amended, (ii) for purposes of compliance with the
requirements of incentive stock options under Section 422 of the Internal
Revenue Code, and (iii) by the applicable rules of the American Stock Exchange.
A properly executed proxy marked “abstain” with respect to this proposal will
not be voted, although it will be counted for purposes of determining whether
there is a quorum. Abstentions and broker non-votes will have the same effect
as
a vote against this proposal.
Proposal
4: Ratification of Appointment of Ernst & Young LLP as our Independent
Registered Public Accounting Firm. The
affirmative vote of the holders of a majority of all shares casting votes,
either in person or by proxy, at the annual meeting is required to ratify the
appointment of Ernst & Young LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2006. We are not
required to submit this matter to a vote of stockholders for ratification.
However, our board is doing so, based upon the recommendation of the audit
committee, as a matter of good corporate practice. As such, the voting approval
threshold is required by the
applicable
rules of the American Stock Exchange. A properly executed proxy marked “abstain”
with respect to this proposal will not be voted, although it will be counted
for
purposes of determining whether there is a quorum. Abstentions and broker
non-votes will have the same effect as a vote against this
proposal.
Other
Items.
In the
event other items are properly brought before the annual meeting, the
affirmative vote of a majority of the votes cast, either in person or by proxy,
at the meeting will be required for approval. A properly executed proxy marked
“abstain” with respect to any such matter will not be voted, although it will be
counted for purposes of determining whether there is a quorum. Accordingly,
an
abstention will have the effect of a negative vote.
As
of the
record date, our directors and executive officers and their affiliates owned
and
were entitled to vote approximately 5,943,765 shares of our common stock, which
represented approximately 25.8% of our common stock outstanding on that date.
We
currently anticipate that all of these persons will vote their and their
affiliates’ shares in favor of the Class II director nominees and the other
proposals.
Who
pays for the preparation of the proxy and soliciting proxies?
We
will
pay the cost of preparing, assembling and mailing the proxy statement and the
accompanying notice of annual meeting, proxy card and annual report to
stockholders. In addition to the use of mail, our directors, officers and
employees may solicit proxies by telephone or other electronic means or in
person. These persons will not receive additional compensation for soliciting
proxies. Arrangements also will be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
materials to the beneficial owners of stock held of record by these persons,
and
we will reimburse them for reasonable out-of-pocket expenses.
What
should I have received to enable me to vote?
In
addition to this proxy statement, you should have received the accompanying
notice of annual meeting, a proxy card, and our 2005 annual report to
stockholders. The mailing date of these materials is on or about May 5,
2006.
How
can I obtain additional copies?
For
additional copies of any of this proxy statement and the enclosed proxy card
and
annual report to stockholders, you should contact either our corporate office
at
140 Intracoastal Pointe Drive, Suite 404, Jupiter, Florida 33477, Attention:
Alexander (Sasha) Bondar, (561)743-8333 or Continental Stock Transfer &
Trust Company, 17 Battery Place, New York, NY 10004, telephone: (212)
509-4000.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS,
DIRECTORS
AND
EXECUTIVE OFFICERS
The
table
below sets forth information regarding the beneficial ownership of our common
stock as of April 26, 2006, by the following individuals or groups:
| · |
each
person or entity who is known by us to own beneficially more than
5% of
our common stock;
|
| · |
each
of our directors and nominees for
director;
|
| · |
each
of our named executive officers;
and
|
| · |
all
of our directors, director nominees and executive officers as a
group.
|
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission (“SEC”) and generally includes voting or investment power
with respect to securities. Shares of our common stock that are subject to
our
options, warrants and convertible notes that are presently exercisable or
exercisable within 60 days of April 26, 2006 are deemed to be outstanding and
beneficially owned by the person holding any of such convertible securities
for
the purpose of computing the percentage of ownership of that person, but are
not
treated as outstanding for the purpose of computing the percentage of any other
person.
Unless
indicated otherwise below, the address of our directors and executive officers
is c/o Dyadic International, Inc., 140 Intracoastal Pointe Drive, Suite 404,
Jupiter, Florida 33477. Except as indicated below, the persons named in the
table have sole voting and investment power with respect to all shares of common
stock beneficially owned by them. As of April 26, 2006, we had
outstanding 23,140,467 shares of our common stock.
|
Name
and Address of Beneficial Owner
|
Number
of
Shares
|
Percentage
Ownership
|
|||||
|
Mark
A. Emalfarb (1)(9)(10)
|
7,098,559
|
28.9
|
%
|
||||
|
The
Francisco Trust U/A/D February 28, 1996 (2)
|
4,769,578
|
20.5
|
%
|
||||
|
The
Pinnacle Fund, L.P. Barry M. Kitt (3)
|
2,277,494
|
9.9
|
%
|
||||
|
Stephen
J. Warner (4)(11)
|
461,050
|
2.0
|
%
|
||||
|
Glenn
E. Nedwin, Ph.D. (9)
|
11,990
|
*
|
|||||
|
Robert
B. Shapiro (5)(9)
|
34,688
|
*
|
|||||
|
Richard
J. Berman (5)(9)
|
56,250
|
*
|
|||||
|
Harry
Z. Rosengart (5)(11)
|
34,167
|
*
|
|||||
|
Wayne
Moor (5)(10)
|
277,889
|
1.2
|
%
|
||||
|
Ratnesh
(Ray) Chandra (6)(10)
|
103,716
|
*
|
|||||
|
Kent
M. Sproat (7)(10)
|
143,716
|
*
|
|||||
|
Alexander
V. Bondar (8)(10)
|
73,716
|
*
|
|||||
|
All
directors, director nominees and executive officers as a group (10
persons)
|
8,295,741
|
32.7
|
%
|
||||
_____________________
* Denotes
less than 1%
(1) Includes
5,570,827 shares held by Mark A. Emalfarb beneficially through the Mark A.
Emalfarb Trust U/A/D October 1, 1987, of which Mr. Emalfarb is the sole
beneficiary and serves as sole trustee. Also includes 1,276,434 shares issuable
issuable upon the exercise of warrants presently exercisable and 251,298
shares
issuable upon the exercise of a convertible note presently exercisable.
(2) Includes
222,537 shares issuable upon the exercise of a convertible note presently
exercisable. The trustee of the Francisco Trust U/A/D February 28, 1996 is
Robert S. Levin, Esq. and the beneficiaries thereof are the spouse and
descendants of Mark A. Emalfarb. The address of the Francisco Trust U/A/D
February 28, 1996 is c/o Robert S. Levin, Esq., 180 N. LaSalle, Suite 3200,
Chicago, Illinois 60601.
(3) Information
is based on a Schedule 13G/A dated February 8, 2006 filed by The Pinnacle Fund,
L.P. (“Pinnacle”) and Barry M. Kitt. Mr. Kitt may be deemed the beneficial owner
of the shares by virtue of being the sole member of Pinnacle Fund Management,
LLC, which is the general partner of Pinnacle Advisers, L.P., which is the
general partner of Pinnacle. Mr. Kitt disclaims beneficial ownership of these
shares. Does not include 435,746 shares underlying a warrant held by Pinnacle
to
purchase 500,000 shares. The 435,746 underlying shares are not included in
the
aggregate number of shares beneficially owned by Pinnacle because that portion
of the warrant is not presently exercisable. The number of shares of common
stock underlying the warrant that may be acquired upon the exercise of the
warrant is limited to 64,254 shares of the common stock to insure that,
following such exercise, the total number of shares of common stock then
beneficially owned by Pinnacle and its affiliates and other persons whose
beneficial ownership of common stock would be aggregated with Pinnacle’s for
purposes of Section 13(d) of the Act, does not exceed 9.999% of the total number
of our issued and outstanding shares. The address of Pinnacle and Mr. Kitt
is
4965 Preston Park Blvd., Suite 240, Plano, Texas 75093.
(4) Includes
274,800 shares held by Bioform, LLC, of which Mr. Warner is the managing member.
Also includes 150,000 shares issuable upon the exercise of presently exercisable
warrants held by Bioform, LLC and 36,250 shares issuable upon the exercise
of
presently exercisable options held by Mr. Warner.
(5) Represents
shares issuable upon the exercise of options presently exercisable.
(6) Includes
75,000 shares issuable upon the exercise of options presently
exercisable.
(7) Includes
90,000 shares issuable upon the exercise of options presently
exercisable.
(8) Includes
70,000 shares issuable upon the exercise of options presently
exercisable.
(9) The
named
person is a director.
(10) The
named
person is a named executive officer.
(11) The
named
person is a Class II director nominee.
PROPOSAL
1: ELECTION OF CLASS II
DIRECTORS
General
We
have a
staggered board of directors currently fixed at six members. Our board is
divided into three classes, each class consisting of one-third of the total
number of directors constituting the entire board of directors. One class of
each director is elected each year at our annual meeting of stockholders for
a
three-year term. The Class II directors’ terms expire at the 2006 annual
meeting.
The
nominating committee of the board has recommended, and the board has nominated,
each of Stephen J. Warner and Harry Z. Rosengart to stand for re-election as
a
Class II director, each for a three-year term expiring in 2009.
We
expect
each nominee for election as a Class II director to be able to serve if elected.
If any nominee is not able to serve, proxies will be voted in favor of the
other
nominee and may be voted for substitute nominees, unless the board chooses
to
reduce the number of Class II directors serving on the board.
Vote
Required
The
affirmative vote of a plurality of the votes cast, either in person or by proxy,
at the annual meeting by the holders of shares of our common stock entitled
to
vote at the annual meeting is required for the election of these nominees as
Class II directors.
Recommendation
of the Board
Dyadic’s
board of directors recommends stockholders vote “FOR”
the
election of the two nominees as Class II directors.
Nominees
for Election as Directors
The
following information is given with respect to the nominees for election as
Class II directors at the annual meeting, as of April 26, 2006.
Stephen
J. Warner,
66, has
been on our board of directors since October 2004, and a director of Dyadic
International (USA), Inc., our wholly-owned subsidiary (“Dyadic-Florida”), since
August 15, 2004. Mr. Warner currently is the managing member of Bioform
LLC, which beneficially owns 274,800 shares of our common stock. Mr. Warner
also
serves as chairman of Maxim TEP, Inc. a private energy company based in Houston,
Texas, and Search Energy Solutions, Inc., a private company offering energy
savings services for large air conditioning systems based in Palm Beach Gardens,
Florida. He also serves as a director of UCT Coatings Inc., a private, metal
finishing technology company in Stuart, Florida, and AOI Medical, Inc., a
private medical device company in Orlando, Florida. Mr. Warner has over 25
years
of venture capital experience. In 1981, Mr. Warner founded Merrill Lynch Venture
Capital Inc., a wholly-owned subsidiary of Merrill Lynch & Co. Inc. in New
York and served as its President and Chief Executive Officer from 1981 to 1990.
Under his leadership, Merrill Lynch Venture Capital managed over $250 million
and made over 50 venture capital investments. In 1999, Mr. Warner co-founded,
and became Chairman and CEO, of Crossbow Ventures Inc., a private equity fund
that invests in early and expansion stage technology companies primarily located
in Florida and the Southeast, with over 20 venture capital investments in
Florida. Mr. Warner earned a B.S. degree from the Massachusetts Institute of
Technology and an MBA from the Wharton School of Business, University of
Pennsylvania.
Harry
Z. Rosengart,
age 56,
has been on our board of directors since April 2005. During the past
five years, Mr. Rosengart has served (and currently serves) as the President
and
Chief Executive Officer of HK & Associates, an investment and consulting
firm which provides advice to small and medium-sized life sciences companies.
Mr. Rosengart is a founder of several privately held companies, including:
LigoChem, Inc., a DNA\RNA and macromolecule bioseparations company founded
in
1995, of which he is a former President and Chief Executive Officer and a
current member of its board of directors; SunPharm Corporation, a polyamine
based anti-cancer drug development-stage
company
founded in 1991, of which he is a former Chief Operating Officer, Chief
Financial Officer and member of its board of directors; and Syncom
Pharmaceuticals, Inc, a contract sales force organization founded in 1991,
of
which he has had a variety of interim positions and served on its board of
directors. Between 1981 and 1990, Mr. Rosengart spent almost 10 years as a
banker and investment banker with the Chase Manhattan Bank, NA focused on the
pharmaceutical and chemical industries. Prior to joining Chase Manhattan Bank,
Mr. Rosengart spent over 10 years with several pharmaceutical and multinational
chemical companies in various managerial positions. Mr. Rosengart holds a B.S.
in Chemical Engineering and an MBA from Rutgers University.
Directors
Continuing in Office
The
following information is provided with respect to the directors who are not
nominees for election as directors at the annual meeting, as of April 26,
2006.
|
Name
|
Age
|
Class
|
Term
Expiring
|
|
Richard
J. Berman
|
63
|
I
|
2008
|
|
Robert
B. Shapiro
|
67
|
I
|
2008
|
|
Mark
A. Emalfarb
|
51
|
III
|
2007
|
|
Glenn
E. Nedwin, Ph.D.
|
50
|
III
|
2007
|
Richard
J. Bermanhas
been
on our board of directors since January 2005, and acts as our
so-called “Lead Director.” In that capacity, he is responsible for meeting
regularly with our chairman of the board and chief executive officer to review
monthly financials, agenda and minutes of committee meetings and pertinent
Board
issues, presiding, if requested by the board, as chairman of any of the
committees of the board and presiding at any meetings of the independent and
non-employee directors. In the last five years, Mr. Berman has served as a
professional director and/or officer of about a dozen public and private
companies. He is currently Chief Executive Officer of Nexmed, Inc., a small
public biotech company; Chairman of National Investment Managers, a public
company in pension administration and investment management; and Chairman of
Candidate Resources, a private company delivering HR services over the web.
The
eight other public companies that Mr. Berman is a director of are International
Microcomputer Software, Inc., Internet Commerce Corporation, MediaBay, Inc.,
NexMed, Inc., GVI Security Solutions Inc., National Investment Managers, Nayna
Networks, Inc. and Advaxis, Inc. From 1998 - 2000, he was employed by Internet
Commerce Corporation as Chairman and Chief Executive Officer. Previously, Mr.
Berman worked at Goldman Sachs; was Senior Vice President of Bankers Trust
Company, where he started the M&A and Leveraged Buyout Departments; created
the largest battery company in the world by merging Prestolite, General Battery
and Exide to form Exide (NYSE); helped create what is now Soho (NYC) by
developing five buildings; and advised on over $4 billion of M&A
transactions. He is a past Director of the Stern School of Business of NYU
where
he obtained his B.S. and M.B.A. He also has US and foreign law degrees from
Boston College and The Hague Academy of International Law, respectively.
Robert
B. Shapirohas
been
on our board of directors since March 2005. During the past five
years Mr. Shapiro has served as a member of the Board of Directors of the New
York Stock Exchange (on which he still serves), Citigroup, Inc. and Rockwell
International, as Chairman of Pharmacia Corporation’s Board of Directors and,
prior to its merger with Phamacia & Upjohn, as Chairman and Chief Executive
Officer of Monsanto Company (1995 through 2001). Prior to becoming the Chairman
and Chief Executive Officer of Monsanto, Mr. Shapiro served in various executive
capacities with Monsanto from 1985, and with G.D. Searle & Company, a
diversified electronics company, first as its general counsel (1972 through
1982), and then as President of its newly formed NutraSweet Group (1982 to
1985). Mr. Shapiro is a 1959 graduate of Harvard College and a 1962 graduate
of
Columbia University School of Law.
Mark
A. Emalfarb has
been on our
board of directors and our Chairman, President and Chief Executive
Officer since October 2004 and has been the President, Chief Executive Officer
and Chairman of the Board of Directors of our wholly-owned subsidiary Dyadic
International (USA), Inc., a Florida corporation (“Dyadic-Florida”), since its
inception. Since founding Dyadic-Florida in 1979, Mr. Emalfarb has successfully
led and managed the evolution of Dyadic-Florida—from its origins as a pioneer
and leader in providing ingredients used in stone-washing of blue jeans—to the
discovery, development, manufacturing and commercialization of specialty enzymes
used in various
industrial
applications and the development of the C1 Expression System. Mr. Emalfarb
is an
inventor of over 25 U.S. and foreign biotechnology patents and patent
applications resulting from discoveries related to Dyadic-Florida’s proprietary
C1 microorganism, and has been the architect behind its formation of several
strategic research and development, manufacturing and marketing relationships
with U.S. and international partners. Mr. Emalfarb earned a B.A. degree from
the
University of Iowa.
Glenn
E. Nedwin, Ph.D.
has
been on our
board of directors and our Chief Scientific Officer and Executive
Vice President and President of our Biosciences Business since March 2006.
Before joining us, Dr. Nedwin co-founded and served as President of Novozymes,
Inc. since 1991. At Novozymes, Inc., a Davis, California-based research &
development subsidiary of Novozymes A/S (CSE:NZYMb.CO), Denmark, a global leader
in enzymes and microorganisms with over $1 billion in worldwide revenues, Dr.
Nedwin was responsible for all scientific, financial and administrative
activities, and was a member of Novozymes A/S global R&D management team and
its biosolutions strategy group, and was involved in technology/product
licensing. From 1989 to 1991, Dr. Nedwin served as Vice President of Corporate
Development, Xoma Corporation (NASDAQ:XOMA), a biotechnology company based
in
Berkeley, California. Earlier, he was Vice President, Business Development
and
co-founder of Ideon Corporation, Redwood City, California, and Senior Research
Scientist and co-founder of Molecular Therapeutic, Inc. (now Bayer
Pharmaceuticals Corporation), West Haven, Connecticut. Dr. Nedwin received
his
Bachelor of Science degree in Biochemistry from the State University of New
York
at Buffalo and his Ph.D. in Biochemistry from the University of California,
Riverside. Dr. Nedwin did his postdoctoral fellowship in molecular biology
at
Genentech, Inc. Dr. Nedwin also holds an M.S. in the Management of Technology
from the Massachusetts Institute of Technology and is currently a Co-Editor
of
the Industrial Biotechnology Journal.
CORPORATE
GOVERNANCE
The
board of directors is committed to good business practices, transparency in
financial reporting and the highest level of corporate governance. The board
of
directors, which is elected by the stockholders, is our ultimate decision-making
body except with respect to those matters reserved to our stockholders. It
selects the senior management team, which is charged with the conduct of our
business. Having selected the senior management team, the board of directors
acts as an advisor and counselor to senior management and ultimately monitors
its performance.
Board
of Directors Independence
In
accordance with the American Stock Exchange corporate governance listing
standards, it is our policy that the board of directors consists of a majority
of independent directors. Our board of directors reviews the relationships
that
each director has with us and other parties. Only those directors who do not
have any of the categorical relationships that preclude them from being
independent within the independence requirements of the American Stock Exchange
corporate governance listing standards and who the board of directors
affirmatively determines have no relationships that would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director, are considered to be independent directors. The board of directors
has
reviewed a number of factors to evaluate the independence of each of its
members. These factors include its members' current and historic relationships
with us and our subsidiaries; their relationships with management and other
directors; the relationships their current and former employers have with us
and
our subsidiaries; and the relationships between us and other companies of which
our board members are directors or executive officers. After evaluating these
factors, the board of directors has determined that four of its six members
are
“independent” within the independence requirements of the American Stock
Exchange corporate governance listing standards, all applicable rules and
regulations of the SEC, and for purposes of Rule 162(m) of the Internal Revenue
Code of 1986, as amended. These four directors are: Richard J. Berman, Robert
B.
Shapiro, Stephen J. Warner and Harry Z. Rosengart.
Independent
members of our board of directors meet in executive session without management
present, and are scheduled to do so at least two times per year. The board
of
directors has designated Mr. Berman as the presiding director for these
meetings.
Stockholder
Communications
Our
board
of directors believes that it is important for our stockholders to have a
process to send communications to the board. Accordingly, stockholders desiring
to send a communication to the board of directors, or to a specific director,
may do so by delivering a letter to the Secretary of Dyadic at 140 Intracoastal
Pointe Drive, Suite 404, Jupiter, Florida 33477. The mailing envelope must
contain a clear notation indicating that the enclosed letter is a
"stockholder-board communication" or "stockholder-director communication."
All
such letters must identify the author as the stockholder and clearly state
whether the intended recipients of the letter are all members of our board
of
directors or certain specified individual directors. The Secretary will open
such communications and make copies, and then circulate them to the appropriate
director or directors.
Policy
Concerning Director Attendance at Annual Stockholders'
Meetings
While
we
encourage all members of our board of directors to attend our annual
stockholders' meetings, there is no formal policy as to their attendance at
annual stockholders' meetings. All of the then members of our board of directors
attended the 2005 annual stockholders' meeting.
Codes
of Ethics
The
board
of directors has adopted a Code of Business Conduct and Ethics that applies
to
all of our directors, officers and employees, including our principal executive
officer, principal financial officer, principal accounting officer or controller
and persons performing similar functions. The Code of Business Conduct and
Ethics is available at our website at www.dyadic-group.com.
We
intend
to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding
an
amendment to, or a waiver from, a provision of our Code of Business Conduct
and
Ethics that applies to our principal executive officer, principal financial
officer, principal accounting officer or controller or persons performing
similar functions by posting such information on our website at www.dyadic-group.com.
Meetings
and Committees of the Board
The
board
of directors held eleven (11) meetings during 2005, and each of the directors
attended at least seventy-five percent (75%) of the total number of meetings
of
the board of directors and committee (if any) on which he served. The board
of
directors has a standing audit committee, compensation committee and nominating
committee. Each of the committees has a written charter which can be found
on
our website at www.dyadic-group.com. Currently,
Messrs. Warner, Berman and Rosengart are the members of each of the audit
committee and compensation committee and Messrs. Warner, Berman and Shapiro
are
the members of the nominating committee. Mr. Berman, as Lead Director, serves
as
the chairman of each committee.
Audit
Committee. The
board
of directors has determined that each of the members of the audit committee
is
independent, as defined by Rule 10A-3 of the Exchange Act of 1934, as amended
(the “Exchange Act”) and the corporate governance listing standards of the
American Stock Exchange. The board of directors also has determined that Mr.
Berman is an “audit committee financial expert” as defined in Item 401(e) of
Regulation S-B of the Securities Act of 1933, as amended.
The
audit
committee has oversight responsibility for quality and integrity of our
consolidated financial statements. The committee meets privately with members
of
our independent registered public accounting firm, has the sole authority to
retain and dismiss the independent registered public accounting firm and reviews
their performance and independence from management. The independent registered
public accounting firm has unrestricted access and reports directly to the
committee. The audit committee met five (5) times during 2005. The primary
functions of the audit committee are to oversee: (i) the audit of our
consolidated financial statements provided to the SEC and our security holders
and (ii) our internal financial and accounting processes. Additionally, the
audit committee has responsibilities and authority necessary to comply with
Rule
10A-3(b) (2), (3), (4), and (5) of the Exchange Act, concerning the
responsibilities relating to: (a) registered public accounting, (b) complaints
relating to accounting, internal accounting controls or auditing matters, (c)
authority to engage advisors and (d) funding. These and other
aspects
of the audit committee’s authority are more particularly described in the audit
committee charter.
Compensation
Committee. All
members of the compensation committee are independent within the corporate
governance listing standards of the American Stock Exchange. The compensation
committee is responsible for reviewing and approving all compensation
arrangements for our executive officers, and is also responsible for
administering our equity compensation plans. During 2005, the compensation
committee met one (1) time and otherwise acted by unanimous written
consent.
Nominating
Committee. All
members of the nominating committee are independent within the corporate
governance listing standards of the American Stock Exchange. The nominating
committee’s functions include: establishing criteria for the selection of new
directors to serve on the board of directors; identifying individuals believed
to be qualified as candidates to serve on the board of directors; recommending
for selection by the board of directors the candidates for all directorships
to
be filled by the board of directors or by the stockholders at an annual or
special meeting; reviewing the board of director’s committee structure and
recommending to the board of directors the directors to serve on the committees
of the board; recommending members of the board of directors to serve as the
respective chairs of the committees of the board of directors; developing and
recommending to the board of directors, for its approval, an annual
self-evaluation process of the board of directors and its committees and, based
on those results, making recommendations to the board of directors regarding
those board processes; and performing any other activities consistent with
the
committee’s charter, our bylaws and applicable law as the committee or the board
of directors deems appropriate. During 2005, the nominating committee acted
solely by unanimous written consent.
The
nominating committee does not currently have any formal minimum qualification
requirements that must be met by a nominee to serve as a member of the
board of directors. The nominating committee will take into account all factors
they consider appropriate, which may include experience, accomplishments,
education, understanding of the business and the industries in which we operate,
specific skills, general business acumen and the highest personal and
professional integrity.
The
nominating committee currently has no fixed process for identifying new nominees
for election as a director, thereby retaining the flexibility to adapt its
process to the circumstances. The nominating committee has the ability, if
it
deems it necessary or appropriate, to retain the services of an independent
search firm to identify new director candidates. The nominating committee has
determined that it will give consideration to any potential candidate proposed
by a member of our board or senior management. Any director candidate so
proposed will be personally interviewed by at least one member of the nominating
committee and our chief executive officer and their assessment of his or her
qualifications will be provided to the full nominating committee. For this
annual stockholders’ meeting, the nominating committee received no proposals for
new director candidates, and considered only and nominated the incumbent Class
II directors to serve as nominees for re-election.
Our
policy and procedures regarding director candidates recommended by stockholder
are contained in the nominating committee’s charter. The nominating committee
may consider for inclusion in its nominations for new directors any candidates
recommended by stockholders, but must consider any candidate for director
recommended by (i) any stockholder beneficially owning more than 5% of our
outstanding common stock for at least one year as of the date the recommendation
was made or (ii) a group of stockholders that beneficially owned, in the
aggregate, more than 5% of our outstanding common stock, with each of the shares
used to calculate that ownership held for at least one year as of the date
the
recommendation was made. The nominating committee will consider the candidate
based on the same criteria established for selection of director nominees
generally. The nominating committee reserves the right to reject any candidate
in its discretion, including, without limitation, rejection of a candidate
who
has a special interest agenda other than the best interests of us and our
stockholders, generally. Any stockholder who wishes to recommend for the
nominating committee’s consideration a director candidate should follow the
following procedures:
| · |
Submit
the following written information about the candidate by mail to
the
nominating committee, c/o Dyadic International, Inc., 140 Intracoastal
Pointe Drive, Suite 404, Jupiter, Florida 33477, Attention: chairperson
of
nominating committee, the name, mailing address, telephone number,
e-mail
address, resume,
business history, listing of other past and present directorships
and
director committees, any biotech industry experience and other relevant
information;
|
| · |
Explain
in the submission why the stockholder believes the candidate would
be an
appropriate member of our board of directors and the benefits and
attributes that the candidate will provide to us in serving as a
director;
|
| · |
Provide
evidence of the requisite ownership of our common stock along with
the
recommendation; and
|
| · |
Indicate
whether we may identify the stockholder in any public disclosures
that we
make regarding the consideration of the director
candidate.
|
For
a
director candidate to be considered by the nominating committee for nomination
at the 2007 annual meeting of stockholders, the submission must be received
by
us no later than December 28, 2006.
Compensation
of Directors
In
January 2005, our board of directors adopted a director compensation policy.
Directors who are also employees or officers of us or any of our subsidiaries
do
not receive any separate compensation as a director. Non-employee directors
receive $2,000 per month cash retainer, and options to purchase shares of our
common stock under the Dyadic International, Inc. 2001 Equity Compensation
Plan.
The chairman of the audit committee receives an additional $800 per month cash
retainer. All non-employee directors also are reimbursed for their reasonable
travel costs related to attendance at board and/or committee meetings. Upon
joining our board, a non-employee director receives options to purchase 30,000
shares of our common stock at an exercise price equal to the fair market value
of the stock on the date of grant. Upon joining our board, the lead director
receives options to purchase 50,000 shares our common stock at an exercise
price
equal to the fair market value of the stock on the date of grant. In all cases,
25% of these options vest upon grant, while the remaining portion vest in equal
installments over a four-year period subject to the director’s continued
service. The options generally expire five years from the date of grant or
earlier in the event service as a director ceases. At the beginning of each
year, non-employee directors will receive additional options to purchase 25,000
shares of our common stock, or a pro rata portion based on the number of months
that the director served on the board during the preceding year, subject to
the
same vesting provisions and other conditions as described above. On February
10,
2006, non-employee directors Messrs. Berman, Rosengart, Shapiro and Warner
received option grants of 25,000, 16,667, 18,750 and 25,000, respectively,
at an
exercise price of $2.36 per share.
Report
of the Audit Committee
The
following report of the audit committee does not constitute soliciting material
and should not be deemed filed with the Securities and Exchange Commission
nor
shall this report be incorporated by reference into any of our filings under
the
Securities Act of 1933 or the Securities Exchange Act of 1934.
The
audit
committee oversees our financial reporting process on behalf of the board of
directors. Management has the primary responsibility for the financial
statements and the reporting process including the systems of internal controls.
In fulfilling its oversight responsibilities, the audit committee has reviewed
and discussed the audited financial statements in the annual report with
management including a discussion of the quality, not just the acceptability,
of
the accounting principles, the reasonableness of significant judgments, and
the
clarity of disclosures in the financial statements.
The
audit
committee also has reviewed and discussed with our independent registered public
accounting firm Ernst & Young LLP, which is responsible for expressing an
opinion on the conformity of those financial statements with generally accepted
accounting principles, their judgments as to the quality, not just the
acceptability, of our accounting principles and such other matters as are
required to be discussed with the committee by Statement of Auditing Standards
61. In addition, the audit committee has received the written disclosures and
the letter from Ernst & Young LLP required by Independence Standards Board
No. 1 and has discussed with Ernst & Young LLP their
independence from management and the Company, and has considered the
compatibility of nonaudit services with Ernst & Young LLP’s
independence.
The
audit
committee discussed with Ernst & Young LLP the overall scope and plans for
their audit. The audit committee met with Ernst & Young LLP, with and
without management present, to discuss the results of their examination,
their
evaluation of our internal controls, and the overall quality of our financial
reporting.
In
reliance on the reviews and discussions referred to above, the audit committee
recommended to the board of directors (and the board has approved) that
the
audited financial statements for 2005 be included in our annual report
on Form
10-KSB for the year ended December 31, 2005, as filed with the Securities
and
Exchange Commission.
AUDIT
COMMITTEE
Richard
J. Berman (chairman)
Stephen
J. Warner
Harry
Z.
Rosengart
Executive
Officers
The
following table presents information with respect to our executive officers
and
key employees, as of April 26, 2006.
|
Name
|
Age
|
Position
|
|
Executive
Officers:
|
||
|
Mark
A. Emalfarb
|
51
|
Chairman
of the Board, President and Chief Executive Officer
|
|
Glenn
E. Nedwin, Ph.D
|
50
|
Chief
Scientific Officer and Executive Vice President, President, Biosciences
Business and a Director
|
|
Wayne
Moor
|
54
|
Chief
Financial Officer and Vice President
|
|
Kent
M. Sproat
|
59
|
Executive
Vice President, Enzyme Business
|
|
Ratnesh
(Ray) Chandra
|
58
|
Senior
Vice President, Marketing-Biotechnology Systems
|
|
Alexander
(Sasha) Bondar
|
34
|
Vice
President, Strategy & Corporate Development
|
|
Key
Employees:
|
||
|
Richard
Burlingame, Ph.D.
|
53
|
Executive
Director, Research & Development
|
|
Daniel
Michalopoulos, Ph.D.
|
53
|
Vice
President, Pulp & Paper
|
|
Charles
W. Kling IV
|
49
|
Vice
President of Sales and Marketing-Enzymes
|
See
“Proposal 1: Election of Directors—“Directors Continuing in Office” for
information concerning Mr. Emalfarb and Dr. Nedwin.
Wayne
Moor has
been
our Chief Financial Officer and Vice President since January 2005. During
the
past five years Mr. Moor has served as a Chief Financial Officer of several
public companies, and has over 25 years experience in real estate and hotel
operations, asset management, debt restructurings, recapitalizations and
developing strategic turnaround plans. From October 2002 through December
2004,
Mr. Moor served as the Senior Vice President, Treasurer and Chief Financial
Officer of Boca Resorts, Inc, a hospitality company. From October 2001 to
October 2002, Mr. Moor was Senior Vice President and Chief Financial
Officer for ANC, the parent company of Alamo and National rental car companies.
In November 2001, following the terrorist attacks of September 11, 2001,
ANC and its U.S. operating subsidiaries voluntarily filed petitions for
reorganization under Chapter 11 of the U.S. Bankruptcy Code in Wilmington,
Delaware. From September 2000 to October 2001, Mr. Moor was Senior Vice
President and Chief Financial Officer for Gerald Stevens, Inc., a floral
products marketer and retailer. In April 2001, Gerald Stevens, Inc. and certain
operating subsidiaries voluntarily filed petitions for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in Miami, Florida. From June 1997 to
January 2000, Mr. Moor was Executive Vice President and Chief Financial
Officer for US Diagnostic, Inc., an operator of outpatient medical diagnostic
imaging and related facilities. Prior to that, Mr. Moor held the position
of Chief Financial Officer or Executive Vice President for a number of privately
and publicly held financial institutions and real estate operating companies.
He
began his career in public accounting.
Kent
M. Sproat
has been
our Executive Vice President, Enzyme Business, responsible for all
manufacturing, applications, sales, and marketing functions of our enzymes
business activities, since April 2005. Mr. Sproat served as our Vice President,
Manufacturing from 1997 through March 2005. Mr. Sproat joined Dyadic-Florida
in
1997 from Genencor International, where since 1996 he served as its Elkhart
Site
Manager. From 1990 to 1996, Mr. Sproat was Vice President, Manufacturing, of
Solvay Enzymes, Inc. From 1989 to 1990, he was Director of International
Manufacturing of the Enzyme Division of Miles, Inc. Between 1981 and 1990,
he
served as Plant Manager of Miles’ Elkhart, Indiana and Clifton, New Jersey-based
enzyme plants. Between 1973 and 1981, Mr. Sproat was a Production Superintendent
at Miles’ Citric Acid Division; Start Up Manager of Miles’ citric acid facility
in Brazil; and Production Supervisor and Project Engineer. Mr. Sproat is the
recipient of a patent for his design in the purification process of amylases.
Mr. Sproat is a chemical engineer with a B.S. degree from Purdue
University.
Ratnesh
(Ray) Chandra
has been
our Senior Vice President, Marketing-Biotechnology Systems, responsible for
business development for the Company’s biosciences business activities, since
April 2005. Mr. Chandra served as our Vice President, Marketing - BioSciences
from 2000 through March 2005. Mr. Chandra joined Dyadic-Florida from
Genencor International in 2000. He had served at Genencor as the Director,
New
Business Development since 1993. From 1987 to 1993, he was with Merck & Co.
holding the positions of Director, Business/Market Intelligence and Director,
Business Systems in their Human Health Marketing Division. From 1976 to 1987,
he
was with Schering-Plough Corp. in the positions of Director Economic Analysis,
Manager Capital Planning and Senior Operations Analyst. Mr. Chandra has an
M.B.A. from New York University and an M.S. in engineering from Columbia
University.
Alexander
(Sasha) Bondar has
been
our Vice President, Strategy & Corporate Development, with primary
responsibility for corporate
development, organization planning, merger & acquisition opportunities,
fund-raising activities and investor and public relations,
and
secondarily, when requested, for assisting in business development for the
Company’s biosciences and enzyme businesses, since April 2005. Mr. Bondar served
as our Executive Director, Business Development from May 2003 through March
2005. Mr. Bondar joined Dyadic-Florida in May 2003 from The Aurora Funds, a
venture capital firm based in Research Triangle Park, North Carolina, where
he
was focused on investing in early stage life sciences companies. Prior to
that, from 1996 to 2001, Mr. Bondar served in a variety of management roles
at
Incyte Genomics, now Incyte Corporation, in Palo Alto, California, and from
1999
to 2001 as Associate Director, Corporate Business Development. From 1997
to 1999, he served as Manager, Pharmacogenomics Business Development, and was
a
major contributor to the successful launch of Incyte’s pharmacogenomics program.
From 1996 to 1997, he served as Technical Advisor to the intellectual property
group at Incyte, contributing to the creation of the largest portfolio of gene
patents in the world. Mr. Bondar holds a B.S. degree in Biotechnology
Management from Menlo College and an M.B.A. in Corporate Finance and Health
Sector Management from Duke University’s Fuqua School of Business.
Richard
P. Burlingame, PhD.
has been
our Executive Director, Research & Development, responsible for management
of the day-to-day research and development activities engaged in by us
worldwide, since joining us in October 2001. Dr. Burlingame is focused on
leading the Dyadic R&D team in its development of the C1 Expression System
and C1 Host Technology. Prior to joining us, Dr. Burlingame was a research
manager at BioTechnical Resources, Inc., or BTR, from 1989 to 2001, leading
a
number of programs in the areas of metabolic engineering, biocatalysis, gene
expression, and strain and process development for the production of fungal
enzymes. He was the primary liaison and chief scientific officer for BTR’s
collaborations with Dyadic. Between 1986 and 1989, Dr. Burlingame was a
researcher at Bio-Technical International, Inc. where he was primarily involved
with generating recombinant strains for the production of amino acids and
development of genetic engineering tools. His postdoctoral work was at the
University of Wisconsin-Madison in the area of bacteriophage genetics and
molecular biology.
Dr. Burlingame received his Ph.D. degree in biochemistry from the University
of
Minnesota, where he studied microbial biochemistry, physiology, and genetics
and
his B.S. degree, also in biochemistry, from the University of Illinois.
Daniel
Michalopoulos, Ph.D.
has been
our Vice President, Pulp & Paper since joining us in February 2005 and is
focused on growing our pulp and paper effort. Prior to joining us, he served
as
Senior Program Manager for Hercules’ Pulp and Paper Division from 1998 to 2005
where he managed a staff of 40 people with an annual budget of $8 million.
Prior to that, he served as Research Director at BetzDearborn Pulp and
Paper
Division and held other research and management positions at Betz PaperChem.
Dr.
Michalopoulos conducted his post-doctoral work at Rice University, received
his
Ph.D. in Chemistry from Colorado State University and his B.S. in Chemistry
from
Lowell Technological Institute.
Charles
W. Kling IV has
been
our Vice President of Sales and Marketing-Enzymes since joining us in July
2005.
Prior to joining us, Mr. Kling served as Group Manager of Hercules, Inc.’s Pulp
& Paper division, with full P&L responsibility and management of staff
of over 60 people, from 1998 to 2005. Prior to Hercules, from 1990 to 1998,
Mr.
Kling served as Global Director, Technical Marketing for BetzDearborn Inc.'s
Pulp & Paper division. From 1986 to 1990, he was Division Manager, S.D.
Warren division of Scott Paper. Prior to that, he served as Production Manager
for Buckeye Cellulose, a division of Proctor and Gamble, Inc. Mr. Kling received
his B.S. degree in Civil Engineering from University of Alabama.
Our
officers are elected annually by our board of directors at a meeting held
following each annual meeting of stockholders, or as necessary and convenient
in
order to fill vacancies or newly created offices. Each officer serves at the
discretion of our board of directors, subject to the contractual rights, if
any,
of such officer. See “—Employment Agreements.”
We
are
not aware of any family relationship among any of our directors or
officers.
EXECUTIVE
COMPENSATION
The
following table sets forth the total compensation earned, accrued or paid to
our
Chief Executive Officer and each of our four most highly compensated executive
officers who served in such capacities as of December 31, 2005, collectively
referred to below and throughout this proxy statement as the “named executive
officers,” for the years ended December 31, 2005, 2004 and 2003.
Summary
Compensation Table
|
Annual
Compensation (1)
|
Long-Term
Compensation
Awards
|
||||
|
Name
and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Restricted
Stock
Awards
|
Securities
Underlying
Option
Awards
|
|
Mark
A. Emalfarb(2)
Chairman,
President and Chief Executive Officer
|
2005
|
300,000
|
-
|
-
|
-
|
|
2004
|
300,000
|
75,000
|
-
|
-
|
|
|
2003
|
300,000
|
35,970
|
-
|
-
|
|
|
Wayne
Moor(3)
Chief
Financial Officer and Vice President
|
2005
|
207,120
|
-
|
-
|
307,889
|
|
|
|
|
|
|
|
|
Ratnesh
(Ray) Chandra (4)
Senior
Vice President, Marketing - Biotechnology Systems
|
2005
|
165,517
|
-
|
-
|
30,000
|
|
2004
|
149,856
|
30,000
|
-
|
60,000
|
|
|
2003
|
144,004
|
23,250
|
-
|
15,000
|
|
|
|
|
|
|
|
|
|
Kent
M. Sproat (5)
Executive
Vice President,
Enzyme
Business
|
2005
|
179,154
|
-
|
-
|
30,000
|
|
2004
|
145,206
|
30,000
|
-
|
80,000
|
|
|
2003
|
139,505
|
23,250
|
-
|
10,000
|
|
|
|
|||||
|
Alexander
(Sasha) Bondar (6)
Vice
President, Strategy & Corporate Development
|
2005
|
139,755
|
-
|
-
|
20,000
|
|
2004
|
138,105
|
25,000
|
-
|
45,000
|
|
|
2003
|
74,157
|
23,250
|
-
|
25,000
|
|
_____________________
|
(1)
|
Annual
compensation does not include the cost to us of benefits certain
executive
officers receive in addition to salary and cash bonuses. The aggregate
amounts of such personal benefits, however, did not exceed the lesser
of
either $50,000 or 10% of the total annual salary and bonus reported
for
such named executive officer. Any bonus amount reported for each
of the
named executive officers, other than Mr. Emalfarb, was actually paid
in
the succeeding fiscal year.
|
|
(2)
|
Mr.
Emalfarb’s bonus for 2004 has been accrued, and will be paid upon the
first to occur of (i) the closing of either (x) our next significant
financing transaction or (y) a transaction in which we receive a
significant influx of cash, as determined by the compensation committee
in
its reasonable discretion, or (ii) the date on which the percentage
of our
outstanding shares held by Mr. Emalfarb falls below 50% of what that
percentage is on the date hereof. Mr. Emalfarb’s bonus for 2003 was
accrued in such year, but was not paid until January
2005.
|
|
(3)
|
Mr.
Moor received the following awards under the Dyadic International,
Inc.
2001 Equity Compensation Plan (the “2001 Equity Compensation Plan”): (a)
in April 2006, options to purchase 30,000 shares of common stock
at an
exercise price of $4.60 per share for services rendered in 2005,
which
vest at the rate of 25% per year on the day preceding each anniversary
of
the date of grant subject to his continued employment with us; and
(b) in
May 2005, options to purchase 277,889 shares at an exercise price
of $3.68
per share, which are fully vested. Mr. Moor’s employment with us commenced
in January 2005.
|
|
(4)
|
Mr.
Chandra has received the following awards under the 2001 Equity
Compensation Plan: (a) in April 2006, options to purchase 30,000
shares of
common stock at an exercise price of $4.60 per share for services
rendered
in 2005, which vest at the rate of 25% per year on the day preceding
each
anniversary of the date of grant subject to his continued employment
with
us; (b) in March 2005, options to purchase 50,000 shares of common
stock
at an exercise price of $3.025 per share for services rendered in
2004,
which are fully vested; (c) in July 2004, options to purchase 10,000
shares of common stock at an exercise price of $3.33 per share for
services rendered in 2003 and 2004, which are fully vested; (d) in
July
2004, 3,716 shares of common stock, valued at $3.33 per share on
the date
of issuance, for services rendered in 2003, which are fully vested;
and
(e) in July 2003, options to purchase 15,000 shares of common stock
at an
exercise price of $4.50 per share for services rendered in 2003 and
2002,
which are fully vested.
|
|
(5)
|
Mr.
Sproat has received the following awards under the 2001 Equity
Compensation Plan: (a) in April 2006, options to purchase 30,000
shares of
common stock at an exercise price of $4.60 per share for services
rendered
in 2005, which vest at the rate of 25% per year on the day preceding
each
anniversary of the date of grant subject to his continued employment
with
us; (b) in March 2005, options to purchase 70,000 shares of common
stock
at an exercise price of $3.025 per share for services rendered in
2004,
which are fully vested; (c) in July 2004, options to purchase 10,000
shares of common stock at an exercise price of $3.33 per share for
services rendered in 2003 and 2004, which are fully vested; (d) in
July
2004, 3,716 shares of common stock, valued at $3.33 per share on
the date
of issuance, for services rendered in 2003, which are fully vested;
and
(e) in July 2003, options to purchase 10,000 shares of common stock
at an
exercise price of $4.50 per share for services rendered in 2003 and
2002,
which are fully vested.
|
|
(6)
|
Mr.
Bondar has received the following awards under the 2001 Equity
Compensation Plan: (a) in April 2006, options to purchase 20,000
shares of
common stock at an exercise price of $4.60 per share for services
rendered
in 2005, which vest at the rate of 25% per year on the day preceding
each
anniversary of the date of grant subject to his continued employment
with
us; (b) in March 2005, options to purchase 35,000 shares of common
stock
at an exercise price of $3.025 per share for services rendered in
2004,
which are fully vested; (c) in July 2004, options to purchase 10,000
shares of common stock at an exercise price of $3.33 per share for
services rendered in 2003 and 2004, which are fully vested; (d) in
July 2004, 3,716 shares of common stock for services rendered in
2003,
valued at $3.33 per share on the date of issuance, which are fully
vested;
and (e) in July 2003, options to purchase 25,000 shares of common
stock at an exercise price of $4.50 per share for services rendered
in
2003, which are fully vested.
|
Stock
Option Grants
The
following table sets forth grants of stock options to acquire shares of our
common stock made during the year ended December 31, 2005 to the named executive
officers. No stock appreciation rights were granted to these individuals during
that year.
Individual
Grants
|
Name
|
Number
of Securities
Underlying
Options
Granted
(#)
|
%
of Total
Options
Granted
to
Employees
in
Fiscal Year
|
Exercise
or Base
Price
($/SH)
|
Expiration
Date
|
|
Mark
A. Emalfarb
|
-
|
-
|
-
|
-
|
|
Wayne
Moor
|
277,889
|
28%
|
3.68
|
01/31/10
|
|
Ratnesh
(Ray) Chandra
|
50,000
|
5%
|
3.025
|
03/30/10
|
|
Kent
M. Sproat
|
70,000
|
7%
|
3.025
|
03/30/10
|
|
Alexander
(Sasha) Bondar
|
35,000
|
4%
|
3.025
|
03/30/10
|
Option
Exercises and Holdings
The
following table provides summary information regarding stock options held by
the
named executive officers as of December 31, 2005. No named executive officer
exercised stock options during 2005.
|
Number
of Securities Underlying
Unexercised
Options at
December
31, 2005 (#)
|
Value
of Unexercised
In-The-Money
Options at
December
31, 2005 ($) (2)
|
|||
|
Name
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|
Mark
A. Emalfarb(1)
|
-
|
-
|
-
|
-
|
|
Wayne
Moor
|
277,889
|
-
|
-
|
-
|
|
Ratnesh
(Ray) Chandra
|
75,000
|
-
|
-
|
-
|
|
Kent
M. Sproat
|
90,000
|
-
|
-
|
-
|
|
Alexander
(Sasha) Bondar
|
70,000
|
-
|
-
|
-
|
___________________________
|
(1)
|
Excludes
Bridge Loan Warrants held by Mr. Emalfarb. See “Certain Relationships and
Related Transactions.”
|
|
(2)
|
The
values of unexercised in-the-money options are based on the product
of the
(a) difference between the closing sale price per share of our common
stock of $2.00 as reported by the American Stock Exchange on December
30,
2005 and (b) number of shares of common stock underlying the
options.
|
Benefit
Plans
2001
Equity Compensation Plan. The Dyadic International, Inc. 2001 Equity
Compensation Plan was adopted by Dyadic-Florida’s board of directors and
stockholders and assumed by us on October 29, 2004 upon consummation of the
merger between us and Dyadic-Florida. The purpose of the 2001 Equity
Compensation Plan is to retain and attract key management, employees,
nonemployee directors and consultants by providing those persons with a
proprietary interest in us. The compensation committee administers the Equity
Compensation Plan and may grant stock options, which may be incentive stock
options or nonqualified stock options that do not comply with Section 422
of the
Internal Revenue Code, stock awards and performance units to eligible persons
with such terms and conditions as are determined by the committee. The committee
may grant one or more types of awards in any combination to an eligible person
in a particular year, subject to certain limitations. The Equity Compensation
Plan was recently amended and restated by our board of directors effective
as of
January 1, 2005 to (a) reduce the number of shares of common stock reserved
for
issuance under the Plan to 4,478,475 shares from 5,152,447 shares , (b) to
conform certain provisions of the Plan to the requirements of Section 409A
of
the Internal Revenue Code of 1986, as amended, and (c) increase the maximum
limitation of shares that may be subject to awards granted under the Plan
to any
one individual for any fiscal year during the term of the Plan to 1,200,000
shares from 100,000 shares. For a description of the 2001 Equity Compensation
Plan as amended and restated for which we are seeking stockholder approval
at
the annual meeting, see “Proposal 2: Approval of Amended and Restated 2001
Equity Compensation Plan” on page 25.
401(k)
Retirement Plan. We
have
established a tax qualified employee savings and retirement plan, or 401(k)
defined contribution plan, in which all employees are eligible to participate.
Participants may elect to defer up to 80% of compensation up to a maximum amount
determined annually pursuant to Internal Revenue Service regulations. Employee
contributions may begin on the date of hire and are immediately vested. We
have
the discretion to make matching contributions to this retirement plan, but
have
not done so ever.
2006
Stock Option Plan. The
Dyadic International, Inc. 2006 Stock Option Plan was adopted by our board
of
directors in April 2006 for which we are seeking stockholder approval at the
annual meeting. The purpose of the Stock Option Plan is to retain and attract
key management, employees, nonemployee directors and consultants by providing
those persons with a proprietary interest in us. The compensation committee
will
administer the Stock Option Plan and
may
grant stock options, which may be incentive stock options or nonqualified stock
options that do not comply with Section 422 of the Internal Revenue Code. The
Stock Option Plan provides for 2,700,000 shares of our common stock being
reserved for issuance under the plan. For a description of the Stock Option
Plan, see “Proposal 3: Approval of 2006 Stock Option Plan” on page 31.
EQUITY
COMPENSATION PLANS
The
following table provides information as of December 31, 2005, with respect
to our equity compensation plan in effect as of December 31, 2005, namely the
Dyadic International, Inc. 2001 Equity Compensation Plan.
|
Plan
Category
|
Number
of Securities
to be
Issued
upon Exercise
of Outstanding
Options,
Warrants and Rights (a)
|
Weighted
Average
Exercise
Price of
Outstanding
Options,
Warrants and Rights (b)
|
Number
of Securities Remaining
Available
for
Future Issuance Under
Equity
Compensation
Plans (Excluding Securities Reflected in Column (a)
(c)
|
|||
|
Equity
compensation plans approved by security holders (1) (3)
|
1,597,639
|
$3.62
|
3,536,184
(2)
|
|||
|
Equity
compensation
plans
not approved by
security holders
|
N/A
|
N/A
|
N/A
|
|||
|
Total
|
1,597,639
|
$3.62
|
3,536,184 (2)
|
___________________________
|
(1)
|
Consists
of Dyadic International, Inc. 2001 Equity Compensation Plan, which
the
Company assumed in connection with the Merger consummated on October
29,
2004.
|
|
(2)
|
Excludes
18,624 shares that were awarded to Dyadic-Florida employees under
the
Dyadic International, Inc. 2001 Equity Compensation Plan in
2004.
|
|
(3)
|
Excludes
65,000 options to purchase common stock granted to nonemployees
prior to
the Equity Compensation Plan's
adoption.
|
Employment
Agreements
We
have
employment agreements with each of our named executive officers. In April 2001,
Dyadic-Florida and Mark A. Emalfarb, our Chief Executive Officer and the
founder of Dyadic-Florida, entered into an employment agreement pursuant to
which he has been employed by Dyadic-Florida as its President and Chief
Executive Officer which we assumed incident to the consummation of the merger
with Dyadic-Florida. The initial term of Mr. Emalfarb’s employment was for three
years with an automatic two-year renewal unless either party furnishes the
other
a notice of non-renewal not less than 60 days prior to the expiration of the
then term. On March 16, 2006, we and Mr. Emalfarb amended his employment
agreement to extend the term of Mr. Emalfarb’s employment by one year, from
March 30, 2006 to March 30, 2007, and add an automatic renewal provision for
succeeding one year terms unless either party gives the other a notice of
non-renewal not less than 90 days prior to the expiration of the then term.
The
terms and conditions of Mr. Emalfarb’s employment agreement are otherwise the
same as were in effect prior to being amended.
Mr.
Emalfarb’s base annual compensation was initially fixed at $300,000. He is
eligible to earn a bonus annually based upon goals and objectives mutually
agreed upon by him and our board of directors. Mr. Emalfarb has received no
salary increases since the employment agreement was executed. The employment
agreement is terminable only on account of Mr. Emalfarb’s death or disability,
by us only “for Cause,” and by Mr. Emalfarb only “for Good Reason.” The phrase
“for Cause” is defined to include failure to substantially perform assigned
duties for a period of 20 days following a written demand for his substantial
performance that identifies the manner in which he has failed to substantially
perform, a material breach of the employment agreement, a material breach of
his
proprietary rights agreement with us, his illegal or gross misconduct which
is
willful and causes damages to us, the conviction of a felony or plea of no
contest, substance abuse or violation of our policies against racial or sexual
discrimination. The phrase “for Good Reason” is defined to mean the assignment
of duties to Mr. Emalfarb inconsistent with his position, our failure to honor
our compensation commitments to Mr. Emalfarb fixed by his employment agreement,
our failure to cause Mr. Emalfarb to be elected to our board of directors and
our demotion of Mr. Emalfarb. If Mr.
Emalfarb’s
employment is terminated by us other than “for Cause” or by Mr. Emalfarb “for
Good Reason,” he is entitled to receive a one year severance benefit plus an
amount equal to a portion of his annual bonus for the preceding year, prorated
for the portion of the current year worked. For its benefit, Dyadic-Florida
also
maintains a term life insurance policy insuring Mr. Emalfarb’s life in the face
amount of $5,000,000.
On
January 31, 2005, we hired Mr. Wayne Moor to become our Chief Financial
Officer and a Vice President pursuant to the terms of an employment agreement
of
that date. The initial term of Mr. Moor’s employment expires December 31,
2007, with automatic one-year renewals unless either party furnishes the other
a
notice of non-renewal not less than 90 days prior to the expiration of the
then
term. Mr. Moor’s annual base compensation is $225,000, and he is eligible to
earn a bonus each year of up to 40% of his annual base compensation based upon
a
bonus plan to be adopted and maintained by the compensation committee for such
year.
On
March 30, 2005, we entered into employment agreements with three of our
named executive officers, Kent M. Sproat, Ratnesh (Ray) Chandra and
Alexander (Sasha) Bondar. In the case of Mr. Chandra, his employment agreement
replaced a previously existing employment agreement dated May 1, 2000. The
initial term of employment under all three employment agreements expires
December 31, 2007, with automatic one-year renewals unless either party
furnishes the other a notice of non-renewal not less than 90 days prior to
the
expiration of the then term. The annual base compensation of Messrs. Sproat,
Chandra and Bondar is $190,000, $172,250 and $143,000, respectively, and each
of
them is eligible to earn a bonus each year of up to 40% of his annual base
compensation based upon a bonus plan to be adopted and maintained by the
compensation committee for such year.
Each
of
the employment agreements for the executives, other than Mr. Emalfarb, is
terminable on account of the executive’s death or disability, or by the Company
without cause or “for Cause.” The phrase “for Cause” is defined to include a
material breach of the employment agreement, acts of disloyalty to the Company
(including but not limited to acts of dishonesty or diversion of corporate
opportunities), the unauthorized disclosure of the Company’s confidential
information, or acts determined in good faith by the Compensation Committee
to
be detrimental to the Company’s interests, provided that the executive must be
afforded an opportunity to have a face-to-face meeting with the Compensation
Committee before any determination is made by it that he was guilty of “for
Cause” conduct. If the executive’s employment is terminated by the Company other
than “for Cause,” upon the condition that he furnish the Company with a full
general release, he is entitled to receive a severance benefit of his then
monthly base compensation for the lesser of six months or until he has obtained
other full or part-time employment as an employee or consultant. Under each
employment agreement, the Company is also obligated to indemnify the subject
executive to the fullest extent permitted by applicable law. Further, the
Company agrees to advance expenses he may spend as a result of any proceeding
against him as to which he could be indemnified.
Mr.
Sproat’s and Mr. Chandra’s employment agreements also include provisions that
might entitle them to extended severance benefits following the occurrence
of a
“Change of Control” of the Company, in the case of Mr. Chandra, and following
the occurrence of a “Change of Control” of either the Company or Dyadic-Florida,
in the case of Mr. Sproat, as those terms are defined in their respective
agreements. Under both agreements, upon a termination of the executive’s
employment by the Company or its successor-in-interest other than “for Cause,”
or a termination of his employment by the executive which is a “Constructive
Termination of Employment Without Cause” within 12 months following the
occurrence of a Change of Control, he will become entitled to a severance
benefit of his then monthly base compensation for the lesser of 18 months,
or
until he has obtained other full or part-time employment as an employee or
consultant. The phrase “Change of Control” means: (i) a sale, lease,
exchange or other transfer of all or substantially all of the assets of the
Company; (ii) a merger or consolidation of the Company in which less than a
majority of the outstanding voting securities of the surviving corporation
are
not owned by stockholders of the Company immediately prior to such merger or
consolidation; (iii) a “person” or “group” (as those terms are defined in
Section 13(d) and 14(d) of the Exchange Act of 1934, as amended) not beneficial
owners of voting securities of the Company on March 30, 2005 become the
beneficial owners, directly or indirectly, of more than 50% of the outstanding
voting securities of the Company other than as a result of the purchase of
such
voting securities from the Company in a transaction or series of transactions
approved by the affirmative vote of a majority of the directors who were members
of the Board one month prior to the date of such transaction; (iv) a sale,
lease, exchange or other transfer of all or substantially all of the assets
of
the Company’s Enzyme Business (in the case of Mr. Sproat) or the BioSciences
Business (in the case of Mr. Chandra) in a transaction in which, following
such
transaction, the transferee is not an affiliate of the Company; or (v) a
consolidation or merger of any subsidiary or affiliate of
the
Company that owns substantially all of the assets used in the conduct of the
Company’s Enzyme Business (in the case of Mr. Sproat) or the BioSciences
Business (in the case of Mr. Chandra) with another party, the survivor of which
is not an affiliate of the Company. The phrase “Constructive Termination of
Employment Without Cause” in both agreements is defined to mean a termination of
employment at the election of the executive made within 12 months following
a
Change of Control and within 60 days following the occurrence of any of the
following events: (i) a material demotion in his office, duties or
responsibilities; (ii) a reduction in his annual base compensation or
potential annual bonus; (iii) the imposition of a requirement that he
relocate his principal residence outside a 50 mile radius of the Company’s
current principal place of business; or (iv) the failure of the Company or
its successor-in-interest to comply with the terms of his employment agreement.
Incident
to the consummation of the merger with Dyadic-Florida in October 2004, we
assumed the rights and obligations of Dyadic-Florida under confidential
information, inventions assignment and non-compete agreements between
Dyadic-Florida and each of Messrs. Emalfarb, Chandra, Sproat and Bondar. Under
the terms of these agreements, each executive confers upon us customary
proprietary rights in respect of our confidential information and intellectual
work product contributed to by them, as well as his covenant not to compete
with
our business while employed by us and for three years after the termination
of
his employment. These agreements with Messrs. Chandra, Sproat and Bondar were
superceded by their new employment agreements, except to the extent therein
expressly provided.
On
March
16, 2006, we entered into an employment agreement with Glenn E. Nedwin, Ph.D.,
pursuant to which he became our Chief Scientific Officer and Executive Vice
President, the President of the BioSciences business of Dyadic-Florida and
a
member of our board of directors effective March 22, 2006. The initial term
of
Dr. Nedwin’s employment is approximately 2 years and 9 months (ending December
31, 2008), with automatic one-year renewals unless either party furnishes the
other a notice of non-renewal not less than 120 days prior to the expiration
of
the then term. Dr. Nedwin’s annual base salary is $300,000, and he is eligible
to earn a bonus each year of up to 25% of his then annual base salary based
upon
a bonus plan adopted and maintained by the compensation committee for such
year.
Upon Dr. Nedwin signing his employment agreement, we granted to him 11,990
fully
vested shares of our common stock under our 2001 Equity Compensation Plan valued
at $50,000.
The
employment agreement is terminable on account of Dr. Nedwin’s death or
disability, by Dr. Nedwin for “Good Reason” or by us without cause or “for
Cause.” The phrase “Good Reason” is defined to mean a termination of Dr.
Nedwin’s employment by him upon his delivery of a written notice to us within
thirty (30) days following the occurrence of any of the following events: (i)
the imposition of a requirement on Dr. Nedwin that he relocate his principal
residence outside a radius that is more than 50 miles from Davis, California,
unless he consents, in his discretion; (ii) our significant and material
reduction to Dr. Nedwin’s position, duties or responsibilities without his
approval, provided that he must give us reasonable advance written notice of
the
basis for his belief that such a reduction has occurred and afford us an
opportunity to cure same; (iii) our material reduction of Dr. Nedwin’s
compensation or benefits, measured against such compensation or benefits as
of
March 22, 2006, unless all of our executive officers suffer reasonably
comparable reductions in their compensation or benefits at substantially the
same time; or (iv) Dr. Nedwin is not nominated by the nominating committee
to
stand for re-election other than on account of his unwillingness or inability
to
stand for re-election. The phrase “for Cause” is defined to include a material
breach of the employment agreement, acts of disloyalty to us (including but
not
limited to acts of dishonesty or diversion of corporate opportunities), the
unauthorized disclosure of our confidential information, or acts determined
in
good faith by the compensation committee to be detrimental to our interests,
provided that Dr. Nedwin must be afforded an opportunity to have a face-to-face
meeting with the compensation committee before any determination is made by
it
that Dr. Nedwin was guilty of “for Cause” conduct. If Dr. Nedwin’s employment is
terminated by us other than “for Cause,” upon the condition that he furnish us
with a full general release, he is entitled to receive a severance benefit
of
monthly installments in the amount of 1/12th of his then annual base salary
for
the eighteen (18) month period following that termination (the “severance
period”), provided that the amount of his severance benefits are reduced on a
dollar-for-dollar basis by the amount of any remuneration he may earn during
the
severance period for the performance of services as an employee, or independent
contractor or agent. Under the employment agreement, we are also obligated
to
indemnify Dr. Nedwin to the fullest extent permitted by applicable law. Further,
we have agreed to advance expenses Dr. Nedwin may spend as a result of any
proceeding against him as to which he could be indemnified.
On
March 16, 2006, we granted Dr. Nedwin two stock
options in accordance with the 2001 Equity Compensation Plan: (i) an option
to
purchase 445,022 shares of our common stock at an exercise price of $2.96 per
share, the fair market value on our common stock on the date of grant (the
“time-vested option”) and (ii) an option to purchase 667,533 shares of our
common stock at an exercise price of $5.92 per share, two times the fair market
value of our common stock on the date of grant (the “performance-vested
option”). Each option agreement is consistent with our current standard form
2001 Equity Compensation Plan employee option agreement, except as to the
vesting of the performance-vested option, and each indicates therein that it
is
an Incentive Stock Option to the extent permitted by the terms of the 2001
Equity Compensation Plan, and a non-qualified stock option as to the balance
of
the shares
that
may
be purchased thereunder. The time-vested option becomes exercisable, conditioned
upon Dr. Nedwin’s continued service as an employee of ours, as to 25% of the
underlying shares on each of the next four anniversaries of March 16, 2006,
and
expires on March 16, 2011, but provides for the complete acceleration of vesting
of that option upon a termination of Dr. Nedwin’s employment either by the
Company without Cause or by Dr. Nedwin for Good Reason. The performance-vested
option becomes exercisable incrementally, conditioned upon Dr. Nedwin’s
continued service as an employee of ours, based upon the our achievement during
the initial period of his employment of various specified performance benchmarks
(e.g., the launching of new products, the enhancement of existing products,
our
entry into corporate and strategic alliances), and expires on March 16,
2011.
CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS
Our
President and Chief Executive Officer, Mark A. Emalfarb, is the trustee and
beneficiary of the Mark A. Emalfarb Trust, which is our largest
stockholder. The Mark A. Emalfarb Trust and our second largest stockholder,
The Francisco Trust, whose sole beneficiaries are the spouse and descendants
of
Mr. Emalfarb, have made loans to Dyadic-Florida, which we assumed in connection
with our merger with Dyadic-Florida (the “Merger”). The trustee for The
Francisco Trust is not related to or affiliated with Mr. Emalfarb or the
Mark A. Emalfarb Trust. The aggregate amount of our indebtedness to the
Mark A. Emalfarb Trust and The Francisco Trust is approximately
$4.0 million, as of December 31, 2005, which is owed to them pursuant
to the terms of three separate debt instruments:
| · |
$836,824
pursuant to a promissory note made payable to the Mark A. Emalfarb
Trust dated May 30, 2001, bearing interest at the rate of 6% per
annum and originally convertible into shares of Dyadic common stock,
which
we refer to as the Emalfarb Convertible
Note;
|
| · |
$741,048
pursuant to a promissory note made payable to the Francisco Trust
dated
May 30, 2001, bearing interest at the rate of 6% per annum and
originally convertible into shares of
Dyadic common stock , which we refer to as the Francisco
Convertible Note; and
|
| · |
$2,424,941
pursuant to a revolving note made payable to the Mark A. Emalfarb
Trust dated May 29, 2003 and bearing interest at the rate of 8% per
annum, secured by all of our assets, which we refer to as the Bridge
Loan
Note. In connection with the Bridge Loan Note, warrants, which we
refer to
as the Bridge Loan Warrants, were issued to purchase 1,500,000 shares
of
Dyadic-Florida common stock for the lesser of $4.50 or the conversion
price of the Series A convertible preferred stock of Dyadic-Florida
then outstanding, which we refer to as the Bridge Loan
Warrants.
|
In
August
2004, the Mark A. Emalfarb Trust and Dyadic-Florida entered into an
agreement to facilitate the consummation of the merger. In accordance with
this
agreement, subject to consummation of the merger:
| · |
The
Mark A. Emalfarb Trust agreed to exchange indebtedness of
Dyadic-Florida to the trust in the amount of $1,225,000 for 367,868
shares
of our common stock and warrants to purchase 183,934 shares of our
common
stock;
|
| · |
Each
of the Emalfarb Convertible Note, the Francisco Convertible Note
and the
Bridge Loan Note were amended to extend their due date from January
1,
2005 to January 1, 2007 and to permit their prepayment in whole or
part by Dyadic-Florida without premium or
penalty;
|
| · |
The
conversion prices under the Emalfarb Convertible Note and Francisco
Convertible Note were amended to fix the conversion price at $3.33
per
share in lieu of the then current fair market value of shares of
Dyadic-Florida common stock; and
|
| · |
The
Bridge Loan Warrants were amended to fix their exercise price at
$3.33 per
share.
|
The
amendments to the convertible notes and the Bridge Loan Warrants caused us
to
recognize for accounting purposes additional borrowing costs of approximately
$350,000, which will be amortized over the period from October 30, 2004
through January 1, 2007, and to recognize for accounting purposes a
beneficial conversion feature of $554,000 which will be amortized over the
same
period. All accrued and unpaid interest due under the Emalfarb Convertible
Note,
the Francisco Convertible Note and the Bridge Loan Note on the date of the
completion of the merger were added to the principal amount due under those
notes. Interest under the notes accruing after October 29, 2004, is payable
on a quarterly basis until the principal sum is paid in full.
Our
six
directors Mark A. Emalfarb, Stephen J. Warner, Richard J. Berman,
Robert B. Shapiro, Harry Z. Rosengart and Glenn E. Nedwin, Ph.D. are each
parties to indemnification agreements pursuant to which we agreed to indemnify
them against any liability arising out of their performance of their duties
to
us in their capacities as directors (except that Dr. Nedwin’s indemnification
agreement is contained in his employment agreement). The agreements
with Messrs. Emalfarb and Warner were entered into by Dyadic-Florida on
August 19, 2004 and assumed by us incident to the merger. Incident to the
consummation of the merger, they were amended to substitute applicable
Delaware
law for any references contained in those agreements to Florida law. The
agreements with Mr. Berman, Mr. Shapiro and Mr. Rosengart were entered
into
directly with us in 2005 when they became directors. The agreement with
Dr.
Nedwin was entered into in March 2006 when he became a director. All of
these
indemnification agreements indemnify our directors in addition to the
indemnification provided by our restated certificate of incorporation and
amended and restated bylaws. Among other things, these agreements indemnify
our
directors for certain expenses, including attorneys’ fees, judgments, fines and
settlement amounts incurred by them in any action or proceeding, including
any
action by or in the right of Dyadic arising out of such person’s services to us
or to any of our subsidiaries or any other company or enterprise to which
such
person provides services at our request. Further, we agree to advance expenses
they spend as a result of any proceeding against them as to which they
could be
indemnified (subject to an undertaking that they will repay such advances
if it
is ultimately determined that they are not entitled to indemnification).
Insofar
as indemnification for liabilities arising under the Securities Act of
1933 may
be permitted to our directors and executive officers pursuant to our amended
and
restated certificate of incorporation and amended and restated bylaws,
we have
been informed that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
At
present, there is no pending litigation or proceeding involving any of
our
directors where indemnification will be required or permitted, and we are
not
aware of any threatened litigation or proceeding that may result in a claim
for
such indemnification.
PROPOSAL
2: APPROVAL OF AMENDED AND RESTATED 2001 EQUITY
COMPENSATION PLAN
At
the
annual meeting, stockholders will be asked to approve the Amended and Restated
Dyadic International, Inc. 2001 Equity Compensation Plan effective as of January
1, 2005. Our board of directors adopted the Amended and Restated 2001 Equity
Compensation Plan, subject to stockholder approval, for the following purposes:
(i) to
reduce
the number of shares reserved for issuance under the Plan to 4,478,475 shares
from 5,152,447 shares;
(ii) to
conform certain provisions of the Plan to the requirements of Section 409A
of
the Internal Revenue Code of 1986, as amended; and
(iii) to
increase the maximum limitation of shares that may be subject to awards granted
under the Plan to any one individual for any fiscal year during the term of
the
Plan to 1,200,000 shares from 100,000 shares.
These
purposes are discussed in greater detail below under “Purposes of Adopting the
Amended and Restated 2001 Equity Compensation Plan.”
As
of
April 26, 2006, we had outstanding options under the 2001 Equity Compensation
Plan covering 3,258,361 shares of common stock and two fully vested stock awards
totalling 30,614 shares, and there were 1,832,722 shares remaining
available for issuance, which we are seeking to reduce to 1,158,750
shares.
The
purpose of the 2001Equity Compensation Plan is to retain and attract key
management, employees, nonemployee directors and consultants by providing those
persons with a proprietary interest in us.
The
2001
Equity Compensation Plan is not subject to any provision of the Employee
Retirement Income Security Act of 1974, as amended, and is not qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the
“Code”).
Vote
Required
The
affirmative vote of the holders of a majority of all shares casting votes,
either in person by proxy, at the annual meeting is required to approve the
Amended and Restated 2001 Equity Compensation Plan effective as of January
1,
2005.
This
approval is required (i) for purposes of compliance with certain exclusions
from
the limitations of Section 162(m) of the Code and (ii) by the applicable rules
of the American Stock Exchange. A properly executed proxy marked “abstain” with
respect to this proposal will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Abstentions and broker
non-votes will have the same effect as a vote against this
proposal.
Recommendation
of the Board
Dyadic’s
board of directors unanimously recommends a vote “FOR”
this
proposal.
Purposes
of Adopting the Amended and Restated 2001 Equity Compensation
Plan
Reduction
in Share Reserve
The
board
deems it advisable to reduce the share reserve under the Plan for two reasons.
First, assuming stockholders approve the 2006 Stock Option Plan under Proposal
3
at the annual meeting, the board intends to use the 2006 Stock Option Plan
as
the primary (but not exclusive) vehicle to make equity-based awards. Second,
the
board believes there will be a sufficient number of shares beyond the reserve
(as reduced) that will become available again for grant under the Plan from
time
to time by reason of the expiration, forfeiture, termination and cancellation
of
unexercised outstanding stock options, as well as the forfeiture of other types
of equity awards, such as performance units and restricted stock.
Conformance
to Requirements of Section 409A of the Code
The
board
deems it advisable to conform certain provisions of the Plan to the requirements
of Section 409A of the Code to avoid certain tax penalties that could be imposed
by Section 409A upon plan participants.
Section
409A of the Code (enacted in 2004) requires all amounts deferred under a
nonqualified deferred compensation plan, such as the 2001 Equity Compensation
Plan, to comply, in form and operation, with rules governing (i) prohibitions
on
acceleration of benefits, (ii) distributions and (iii) initial and subsequent
elections as to the timing of the distribution of benefits. Violation of these
rules will cause a participant to recognize deferred compensation on a current
basis to the extent it is not subject to substantial risk of forfeiture.
Additionally, if a violation of the Section 409A rules occurs, a plan
participant is required to pay retroactive interest (the underpayment rate
plus
1%) and a 20% penalty. Section 409A of the Code does not apply to amounts earned
and vested on or before December 31, 2004. Accordingly, a participant is exempt
from the rules of Section 409A of the Code with respect to any deferred
compensation that (i) he had a legally binding right to on or before that date
and (ii) was not subject to substantial risk of forfeiture on that date.
However, because a special rule applies to certain equity-based compensation,
including stock options, options that were immediately exercisable
on or before December 31, 2004 are treated as earned and vested, even if they
would terminate upon the participant’s termination of his or her services.
In
order
to conform certain provisions of the 2001 Equity Compensation Plan with the
requirements of Section 409A of the Code, the Amended and Restated 2001 Equity
Compensation Plan incorporates certain changes to the following Sections of
the
Plan:
| · |
Section
1(b) was amended to comply with the Proposed Treasury Regulations
§1.409A
(“Prop. Regs.”) and satisfy the good faith compliance standard created by
the Prop. Regs.;
|
| · |
Section
5(b)(ii) was amended to make mandatory, instead of permissive, the
requirement that all stock options have an exercise price of not
less than
the fair market value of our common stock on the date of the grant
of the
stock option, which is now fixed as the trading price of our shares
as of
the close of trading on that date;
|
| · |
Section
6(e) was amended to remove a provision providing for the payment
of
dividends or other distributions paid on such restricted stock grants
while they remain subject to forfeiture, in order to comply with
the Prop.
Regs. and satisfy the good faith compliance standard created by the
Prop.
Regs.;
|
| · |
Section
7, pertaining to “Performance Units,” was amended to comply with the Prop.
Regs. and satisfy the good faith compliance standard created by the
Prop.
Regs.;
|
| · |
Section
8, pertaining to “Qualified Performance Based Compensation” (another
category of performance-based compensation), was amended to comply
with
the Prop. Regs. and satisfy the good faith compliance standard created
by
the Prop. Regs.;
|
| · |
Section
9 contains payment deferral provisions that were conformed to the
provisions of Section 409A(a)(3) of the
Code;
|
| · |
the
definition of a “Change of Control” set forth in Section 12 has been
amended both to conform to a guidance issued under IRS Notice 2005-1
and
the Prop. Regs., and to delete a change of control alternative pertaining
to the composition of the our board of directors rendered obsolete
by our
implementation of a classified board;
|
| · |
Section
15 was amended to (i) require the compensation committee to act in
a
manner consistent with the provisions of Section 409A, and (2) provide
that no compensation committee action may be taken which would cause
the
application of the 20% penalty or immediate tax recognition under
Section
409A; and
|
| · |
a
new section 21(c) was added to make null and void any provision in
the
2001 Equity Compensation Plan that would have the effect of causing
the
application of a 20% penalty or immediate tax recognition under Section
409A of the Code.
|
Increase
in Individual Annual Limit on Shares Awards Under Section 162(m) of the
Code
The
board
deems it advisable to increase the maximum limitation of shares that may be
subject to awards granted under the Plan to any one individual for any fiscal
year during the term of the Plan to 1,200,000 shares from 100,000 shares in
order to avoid the $1 million compensation deductibility limitation of Section
162(m) of the Code. The board believes it is in the best interests of the
Company and its stockholders that the limitations on the deductibility on
compensation to named executives imposed by the provisions of Section 162(m)
of
the Code be avoided. Section 162(m) of the Code generally limits to $1 million
the amount that may be deducted as compensation expense (including options
and
restricted stock awards) paid in one year to a named executive officer. However,
an exception to this limitation applies if the compensation is (1)
“performance-based compensation,” (2) awarded pursuant to a compensation plan
which has received stockholder approval and (3) the plan includes a maximum
limitation of shares that may be subject to awards to any one individual for
any
fiscal year. Since the compensation committee has made awards to two members
of
senior management that exceed the 2001 Equity Compensation Plan’s annual
limitation of 100,000 shares, the Amended and Restated 2001 Equity Compensation
Plan increases the annual limitation to 1,200,000 shares effective as of January
1, 2005, so that the awards to such members of senior management will qualify
for the exemption from the application of the $1 million compensation
deductibility limitation of Section 162(m) of the Code. However, the increased
annual limitation will not be effective unless the Amended and Restated 2001
Equity Compensation Plan is approved by stockholders at the annual
meeting.
Effectiveness
of the Amended and Restated 2001 Equity Compensation Plan
The
Amended and Restated 2001 Equity Compensation Plan is effective as of January
1,
2005, subject to stockholder approval.
Summary
of Material Provisions of the Amended and Restated 2001 Equity Compensation
Plan
The
following is a summary of the material provisions of the Amended and Restated
2001 Equity Compensaion Plan. This summary is qualified in its entirety by
reference to the Amended and Restated 2001 Equity Compensation Plan, the full
text of which is attached as Annex A to this proxy statement. You are urged
to
read the full text of the Amended and Restated 2001 Equity Compensation Plan,
which we refer to as the “2001 Equity Compensation Plan” in this summary.
Plan
Administration.
The
compensation committee of our board of directors serves as the “plan
administrator” of the 2001 Equity Compensation Plan. In order to adhere to the
rules of the American Stock Exchange, and to assure that awards made thereunder
qualify as “performance based compensation” within the meaning of Section 162(m)
of the Code, not less than a majority of the members of our compensation
committee are “outside directors” within the meaning of Section 162(m) of the
Code and “independent directors” within the meaning of the rules of the American
Stock Exchange. The compensation committee is authorized to:
| · |
select
persons eligible to receive awards;
|
| · |
determine
the type and number of awards to be granted and the number of shares
underlying the awards;
|
| · |
specify
times at which such awards will be exercisable (including performance
conditions that may be required to be satisfied as a condition to
exercisability);
|
| · |
set
other terms and conditions of awards;
|
| · |
prescribe
forms of award agreements;
|
| · |
interpret
and specify rules and regulations relating to the 2001 Equity Compensation
Plan; and
|
| · |
make
all other decisions and determinations as the compensation committee
may
deem necessary or advisable for the administration of the 2001 Equity
Compensation Plan.
|
Eligibility.
All of
our and our subsidiaries’ officers, employees, directors, and certain consultant
determined by the compensation committee to be “Key Advisors” are eligible to be
granted awards under the 2001 Equity Compensation Plan.
Types
of Awards.
The
2001 Equity Compensation Plan provides for the award of a broad variety of
share-based compensation alternatives, including: (i) options intended to
qualify as incentive stock options (“ISOs”) under Section 422 of the Code, to
our employees, (ii) non-statutory stock options (“NSOs,” and together with
“ISOs,” collectively, “options”) to our and our subsidiaries’ directors,
employees and Key Advisors; (iii) shares of our common stock; (iv) performance
units; and (v) qualified performance-based performance units of share awards.
The maximum number of shares which may be the subject of an award to any
individual in a single year is 1,200,000 shares.
The
exercise price for all options may not be less than the closing trading price
of
our common stock on the date the option is granted, except for ISOs granted
to
10% stockholders, which must have an exercise price of not less than 110%
of the
fair market value of our common stock on the date the option is granted.
ISOs
have a maximum term of ten years, except for 10% stockholders who are subject
to
a maximum term of five years. Options are not transferable other than by
will
and the laws of descent and distribution. Options generally expire not later
than 90 days following a termination of employment, 12 months following the
optionee’s disability, or not later than 12 months following the optionee’s
death. In the administration of the 2001 Equity Compensation Plan, the
compensation committee is proscribed from taking any action which would have
the
effect of causing the provisions of Section 409A of the Code to apply.
The
exercise price for an option is payable in (a) cash, (b) with the approval
of
the compensation committee, by delivering shares of our common stock owned
by
the optionee (including shares acquired in connection with the exercise of
an
option) and having a fair market value on the date of exercise equal to the
exercise price or to the ownership of shares, have a fair market value on
the
date of exercise equal to the exercise price (c) payment through a broker
in
accordance with procedures permitted by Regulation T of the Federal Reserve,
or
(d) by such other method as the compensation committee may approve.
Each
award or option granted under the 2001 Equity Compensation Plan is required
to
be evidenced by a written agreement between us and the recipient of the award
or
option. If the Dyadic International, Inc. 2006 Stock Option Plan under Proposal
3 is approved by stockholders at the annual meeting, the compensation committee
anticipates limiting awards under the 2001 Equity Compensation Plan principally
to shares of restricted stock, as and when the compensation committee determines
that such awards are preferable to grants of options (which would otherwise
be
made under the 2006 Stock Option Plan).
Shares
Available for Awards.
The
2001 Equity Compensation Plan has 4,478,475 shares reserved for issuance
thereunder. If an option expires or is terminated or canceled without having
been exercised or settled in full, or in the case of shares, is forfeited
back
to or repurchased by us, the terminated portion of the option (or forfeited
or
repurchased shares subject to the award) will become available for future
grant
or sale under the 2001 Equity Compensation Plan (unless it has terminated).
Shares are not deemed to be issued under the 2001 Equity Compensation Plan
with
respect to any portion of an option that is settled in cash. If the exercise
or
purchase price of an Option is paid for through the tender of shares, or
withholding obligations are met through the tender or withholding of shares,
those shares tendered or withheld will again be available for issuance under
the
2001 Equity Compensation Plan.
Change
in Control. The 2001 Equity Compensation Plan permits the compensation
committee, at the time of the grant of an award, to provide in the agreement
evidencing that award for any of the following alternatives in the event
of a
change of control: (i) that a full vesting of all unvested rights occur;
(ii)
that a grantee holding performance units shall receive a payment in settlement
of the performance units in an amount determined by the committee; (iii)
that
the optionee surrender his or her outstanding options in exchange for a payment
by us, in cash or shares as determined by the committee, in an amount equal
to
the amount by which the then fair market value of the shares subject to the
optionee’s unexercised options exceeds the exercise price of the options; or
(iv) after affording the grantee of an option an opportunity exercise that
option, terminate any or all unexercised options at such time as the committee
deems appropriate. The term “change in control” is defined under the 2001 Equity
Compensation Plan to mean:
| · |
a
sale of all or substantially all of our
assets;
|
| · |
a
merger or consolidation in which our stockholders immediately prior
to the
transaction own less than a majority of the voting securities of
the
surviving corporation;
|
| · |
the
sale or disposition of assets equal to or greater than 40% of the
total
gross fair market value of our assets immediately prior to such sale
or
disposition; or
|
| · |
any
person (other than our existing stockholders who beneficially own,
directly or indirectly, more than 20% of the voting power of our
outstanding shares of common stock) coming to own more than 50% of
the
voting power of our outstanding shares of common
stock.
|
Except
to
the extent an award agreement provides otherwise, if we are not the surviving
corporation in a change in control (or survive only as a subsidiary of another
corporation), unless the compensation committee determines otherwise, all
outstanding options that are not exercised shall be assumed by, or replaced
with
comparable options or rights by the surviving corporation (or a parent of the
surviving corporation), and other outstanding awards shall he converted to
similar grants of the surviving corporation (or a parent of the surviving
corporation).
Amendment
and Termination.
The
2001 Equity Compensation Plan may be amended or terminated at any time by our
board of directors, except that no amendment may be made without stockholder
approval if such approval is necessary to comply with any tax or regulatory
requirement.
Federal
Income Tax Consequences
The
following discussion of certain relevant federal income tax consequences
applicable to stock options granted under the 2001 Equity Compensation Plan
is a
brief summary only, and reference is made to the Code and the regulations and
interpretations issued thereunder for a complete statement of all relevant
federal tax consequences. This summary is not intended to be exhaustive and
does
not address state, local or foreign tax consequences.
Incentive
Stock Options. ISOs
are
intended to be eligible for the favorable federal income tax treatment accorded
“incentive stock options” under the Code. There generally are no federal income
tax consequences to the optionee or the Company by reason of the grant or
exercise of an ISO. However, the exercise of ISOs may increase the optionee’s
alternative minimum tax liability, if any.
If
an
optionee holds stock acquired through exercise of an ISO for at least two years
from the date on which the Option is granted and at least one year from the
date
on which the shares are transferred to the optionee upon exercise of the option,
any gain or loss on a disposition of such stock will be long-term capital gain
or loss. Generally, if the optionee disposes of the stock before the expiration
of either of these holding periods (a “disqualifying disposition”), at the time
of disposition, the optionee will realize taxable ordinary income equal to
the
lesser of (a) the excess of the stock’s fair market value on the date of
exercise over the exercise price, or (b) the optionee’s actual gain, if any, on
the purchase and sale. The optionee’s additional gain, or any loss, upon the
disqualifying disposition will be a capital gain or loss. Capital gains
currently are generally subject to lower tax rates than ordinary income.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options.
To
the
extent the optionee recognizes ordinary income by reason of a disqualifying
disposition, we will generally be entitled (subject to the requirement of
reasonableness and the satisfaction of a tax reporting obligation) to a
corresponding business expense deduction in the tax year in which the
disqualifying disposition occurs.
Non-Statutory
Stock Options. Generally,
there are no tax consequences to the optionee or us by reason of the grant
of an
NSO. Upon exercise of an NSO, the optionee normally will recognize taxable
ordinary income equal to the excess of the stock’s fair market value on the date
of exercise over the option exercise price. Generally, with respect to
employees, the Company is required to withhold payroll and income taxes from
regular wages or supplemental wage payments in an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness and the
satisfaction of a reporting obligation, we will generally be entitled to
a
business expense deduction equal to the taxable ordinary income realized
by the
optionee. Upon disposition of the stock, the optionee will recognize a capital
gain or loss equal to the difference between the selling price and the purchase
price (to the extent not recognized as taxable income as described above).
Slightly different rules may apply to optionees who acquire stock subject
to
certain repurchase options or who are subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended.
Stock
Awards.
Where
the award has no vesting, the grantee will recognize taxable ordinary income
equal to the stock’s fair market on the date of grant. For an award subject to
vesting, the grantee will normally recognize taxable ordinary income equal
to
the excess, if any, of the stock’s fair market on the date of stock vests over
the purchase price paid for the shares, if any. To the extent that the grantee
files a “Section 83(b) election” pursuant to Section 83(b) of the Code, the
grantee will recognize ordinary taxable income at the time of the receipt
or
purchase of the shares of stock equal to the fair market of the stock on
the
date of receipt or purchase less the amount, if any, paid by the grantee
for the
stock. With respect to our employees, we generally are required to withhold
an
amount based on ordinary income recognized. Generally, we will be entitled
to an
income tax deduction equal to the amount of taxable ordinary income recognized
by the grantee of the award.
Performance
Units and Qualified Performance-Based
Compensation.
The
designation of an award as performance units or as qualified Performance-Based
Compensation will not change the tax treatment described above with respect
to
stock awards.
Options
Outstanding under the Amended and Restated 2001
Equity Compensation Plan
As
of
April 26, 2006, options granted under the 2001 Equity Compensation Plan to
purchase (i) an aggregate of 3,032,944 shares of common stock were outstanding
to approximately 90 employees and consultants (ii) 225,417 shares of common
stock were outstanding to non-employee directors. The options were granted
at
exercise prices ranging from $1.83 to $7.13 per share.
On
April
26, 2006, the last reported sale price per share of Dyadic common stock on
the
American Stock Exchange was $5.84.
The
table
below indicates, as of April 26, 2006, the aggregate number of options
outstanding under the 2001 Equity Compensation Plan to each of our named
executive officers and directors and the groups indicated. There are no stock
awards or performance units outstanding under the 2001 Equity Compensation
Plan
other than as described in footnotes 2 and 3 to the table and the issuance
of
7,476 shares of common stock in July 2004 to certain employees of Dyadic-Florida
for a payment of a portion of accrued bonuses.
|
Option
Grantee
|
Number
of
Options
Outstanding
|
|
Mark
A. Emalfarb(1)
Chairman,
President and Chief Executive Officer
|
--
|
|
Glenn
E. Nedwin, Ph.D.(2)
Chief
Scientific Officer, Executive Vice President and
Director
|
1,112,555
|
|
Wayne
Moor
Chief
Financial Officer and Vice President
|
307,889
|
|
Kent
M. Sproat (3)
Executive
Vice President, Enzyme Business
|
120,000
|
|
Ratnesh
(Ray) Chandra (3)
Senior
Vice President, Marketing-Biotechnology Systems
|
105,000
|
|
Alexander
(Sasha) Bondar (3)
Vice
President, Strategy & Corporate Development
|
90,000
|
|
Richard
J. Berman
Director
|
75,000
|
|
Harry
Z. Rosengart
Director
|
46,667
|
|
Robert
J. Shapiro
Director
|
48,750
|
|
Stephen
J. Warner
Director
|
55,000
|
|
All
current executive officers as a group (6 persons)
|
1,735,444
|
|
All
current directors who are not executive officers as a group
(4 persons)
|
225,417
|
|
All
employees and consultants, other than executive officers
(approximately 84)
|
1,357,500
|
___________
|
(1)
|
Excludes
Bridge Loan Warrants held by Mr. Emalfarb. See “Certain Relationships and
Related Transactions.”
|
|
(2)
|
Excludes
a fully vested stock award of 11,990 shares granted to Dr. Nedwin
in March
2006 under the 2001 Equity Compensation Plan at the inception of
his
employment with us.
|
|
(3)
|
Excludes
a fully vested stock award of 3,716 shares granted to each of Messrs.
Sproat, Chandra and Bondar, respectively, in July 2004 under the
2001
Equity Compensation Plan for a portion of accrued bonuses related
to
2003.
|
PROPOSAL
3: APPROVAL OF 2006 STOCK OPTION
PLAN
On
April
19, 2006, the board of directors adopted the Dyadic International, Inc. 2006
Stock Option Plan. The purpose of the 2006 Stock Option Plan is to retain and
attract key management, employees, nonemployee directors and consultants by
providing those persons with a proprietary interest in us. At the annual
meeting, stockholders will be asked to approve the 2006 Stock Option
Plan.
Our
board
of directors adopted the 2006 Stock Option Plan, subject to stockholder
approval, because it believes that it is in the best interests of us and our
stockholders that we rely principally upon the issuance of stock options at
exercise prices of not less than the price of the underlying shares on the
date
of grant (discussed further below) as our primary equity compensation vehicle,
and that the plan administrator of the plan, the compensation committee of
the
board of directors be afforded the greatest amount of discretion in
administering the 2006 Stock Option Plan as is permitted by applicable income
tax laws.
There
are
currently no outstanding options under the 2006 Stock Option Plan.
The
2006
Stock Option Plan is not subject to any provision of the Employee Retirement
Income Security Act of 1974, as amended, and is not qualified under
Section 401(a) of the Code.
Vote
Required
The
affirmative vote of the holders of a majority of all shares casting votes,
either in person by proxy, at the annual meeting is required to approve the
2006
Stock Option Plan.
This
approval is required (i) for purposes of compliance with certain exclusions
from
the limitations of Section 162(m) of the Code, (ii) for purposes of compliance
with the requirements of incentive stock options under Section 422 of the Code,
and (iii) by the applicable rules of the American Stock Exchange. A properly
executed proxy marked “abstain” with respect to this proposal will not be voted,
although it will be counted for purposes of determining whether there is a
quorum. Abstentions and broker non-votes will have the same effect as a vote
against this proposal.
Recommendation
of the Board
Dyadic’s
board of directors unanimously recommends a vote “FOR”
this
proposal.
Summary
of Material Provisions of the 2006 Stock Option Plan
The
following is a summary of the material provisions of the 2006 Stock Option
Plan.
This summary is qualified in its entirety by reference to the 2006 Stock Option
Plan, the full text of which is attached as Annex B to this proxy statement.
You
are urged to read the full text of the 2006 Stock Option Plan, which we refer
to
as the “Option Plan” in this summary.
Plan
Administration.
The
compensation committee of our board of directors will serve as the “plan
administrator” of the Option Plan. In order to adhere to the rules of the
American Stock Exchange, and to assure that awards made thereunder qualify
as
“performance based compensation” within the meaning of Section 162(m) of the
Code, not less than a majority of the members of our compensation committee
are
“outside directors” within the meaning of Section 162(m) of the Code and
“independent directors” within the mean of the rules of the American Stock
Exchange. The compensation committee is authorized to:
| · |
select
persons eligible to receive awards of
options;
|
| · |
determine
the type of option and number of shares as to which the option relates;
|
| · |
specify
times at which such options will be exercisable (including performance
conditions that may be required to be satisfied as a condition to
exercisability);
|
| · |
set
other terms and conditions of option awards;
|
| · |
prescribe
forms of option award agreements;
|
| · |
interpret
and specify rules and regulations relating to the Option Plan; and
|
| · |
make
all other decisions and determinations as the compensation committee
may
deem necessary or advisable for the administration of the 2006 Option
Plan.
|
Eligibility.
All of
our and our subsidiaries’ officers, employees and directors, and certain
consultants determined by the compensation committee to be “Key Advisors” are
eligible to be granted options under the Option Plan.
Types
of Options.
The
2006 Option Plan provides for the grant of options intended to qualify as
incentive stock options (“ISOs”) under Section 422 of the Code, to employees of
us and our subsidiaries and non-statutory stock options (“NSOs,” and together
with “ISOs,” collectively, “options”) to directors, employees and Key Advisors
to us and our subsidiaries.
Exercise
Prices and Exercisability. The
exercise price for options cannot be less than the closing trading price of
our
common stock on the date the option is granted, except for ISOs granted to
10%
stockholders, which must have an exercise price of not less than 110% of the
closing trading price of our common stock on the date the option is granted.
ISOs have a maximum term of ten years, except for 10% stockholders who are
subject to a maximum term of five years. Options are not transferable other
than
by will and the laws of descent and distribution. Options generally expire
not
later than 90 days following a termination of employment, 12 months following
the optionee’s disability, or not later than 12 months following the optionee’s
death. In the administration of the Option Plan, the compensation committee
is
proscribed from taking any action which would have the effect of causing the
provisions of Section 409A of the Code to apply.
Options
shall vest and become exercisable as determined by the Committee. The exercise
price for an option is payable in (a) cash, (b) with the approval of the
compensation committee, by delivering shares of our common stock owned by the
optionee (including shares acquired in connection with the exercise of an
option) and having a fair market value on the date of exercise equal to the
exercise price or to the ownership of shares have a fair market value on the
date of exercise equal to the exercise price (c) payment through a broker in
accordance with procedures permitted by Regulation T of the Federal Reserve,
or
(d) by such other method as the compensation committee may approve.
If
a
participant’s employment or relationship with us is terminated, the participant
(or his or her designated beneficiary or estate representative in the case
of
death) may exercise his or her option within such period of time as is specified
in the option agreement to the extent that the option is vested on the date
of
termination. In the absence of a specified time in the option agreement, the
option will remain exercisable for three months following the date of
termination, except in the case where termination is as a result of disability
or death, in which case the option will remain exercisable for 12 months
following the date of termination or death.
Shares
Available For Option Grants.
Subject
to adjustment as provided below, there are 2,700,000 shares of our common stock
reserved for issuance under the Option Plan. The maximum number of shares which
may be the subject of an option grant to any individual in a single year is
1,200,000 shares. If an option expires or is terminated or canceled without
having been exercised or settled in full, the terminated portion of the option
will become available for future grant under the Option Plan (unless the Option
Plan has been terminated). If the exercise or purchase price of an option is
paid for through the tender of shares, or withholding obligations are met
through the tender or withholding of shares, those shares tendered or withheld
will again be available for issuance under the Option Plan.
Amendment
and Termination of the Option Plan.
The
Option Plan will automatically terminate in 2016. In addition, the Option Plan
may be amended or terminated by our board of directors, except that no amendment
maybe made without stockholder approval if such approval
is
necessary to comply with any tax or regulatory requirement.
Change
in Control. The
compensation committee enjoys discretion with respect to the treatment of
outstanding options upon the occurrence of a “Change in Control.” The
term
“Change in Control” is defined under the Option Plan to mean:
| · |
a
sale of all or substantially all of our assets or our liquidation
or
dissolution;
|
| · |
a
merger or consolidation in which our stockholders immediately prior
to the
transaction own less than a majority of the voting securities of
the
surviving corporation;
|
| · |
the
sale or disposition of assets equal to or greater than 40% of the
total
gross fair market value of the assets of the Company immediately
prior to
such sale or disposition; or
|
| · |
any
person (other than our existing stockholders who beneficially own,
directly or indirectly, more than 20% of the voting power of our
outstanding shares of common stock) coming to own more than 50% of
the
voting power of our outstanding shares of common
stock.
|
If
we are
not the surviving corporation in a change in control (or survive only as a
subsidiary of another corporation), unless the compensation committee determines
otherwise, all outstanding options that are not exercised shall be assumed
by,
or replaced with comparable options or rights by the surviving corporation
(or a
parent of the surviving corporation). However, the compensation committee may,
instead take any of the following alternative courses of action at that
time:
| · |
determine
that outstanding options shall automatically accelerate and become
fully
exercisable;
|
| · |
require
that optionees surrender their outstanding options in exchange for
a
payment by us, in cash or shares as determined by the committee,
in an
amount equal to the amount by which the then fair market value of
our
shares subject to the optionee’s unexercised options exceeds the exercise
price of the options; or
|
| · |
after
giving optionees an opportunity to exercise their outstanding options,
terminate any or all unexercised options at such time as the committee
deems appropriate.
|
Federal
Income Tax Consequences
The
following discussion of certain relevant federal income tax consequences
applicable to stock options granted under the Option Plan is a brief summary
only, and reference is made to the Code and the regulations and interpretations
issued thereunder for a complete statement of all relevant federal tax
consequences. This summary is not intended to be exhaustive and does not address
state, local or foreign tax consequences.
Inapplicability
of Section 409A. Section
409A of the Code will not apply to the Option Plan because by its terms, no
options granted under the Option Plan will provide for the deferral of
compensation (i.e.,
each
option grant will meet the following three conditions: (i) the exercise price
is
required to be not less than the fair market value of the underlying shares
of
our common stock on the grant date; (ii) the number of shares subject to the
option are required to be fixed on the date of grant; and (iii) the option
cannot include any feature for the deferral of compensation).
Incentive
Stock Options. ISOs
are
intended to be eligible for the favorable federal income tax treatment accorded
“incentive stock options” under the Code. There generally are no federal income
tax consequences to the optionee or the Company by reason of the grant or
exercise of an ISO. However, the exercise of ISOs may increase the optionee’s
alternative minimum tax liability, if any.
If
an
optionee holds stock acquired through exercise of an ISO for at least two years
from the date on which the Option is granted and at least one year from the
date
on which the shares are transferred to the optionee upon exercise of the option,
any gain or loss on a disposition of such stock will be long-term capital gain
or loss. Generally, if the optionee disposes of the stock before the expiration
of either of these holding periods (a “disqualifying disposition”), at the time
of disposition, the optionee will realize taxable ordinary income equal to
the
lesser of (a) the excess of the stock’s fair market value on the date of
exercise over the exercise price, or (b) the optionee’s actual gain, if any, on
the purchase and sale. The optionee’s additional gain, or any loss, upon the
disqualifying disposition will be a capital gain or loss. Capital gains
currently are generally subject to lower tax rates than ordinary income.
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options.
To
the
extent the optionee recognizes ordinary income by reason of a disqualifying
disposition, we will generally be entitled (subject to the requirement of
reasonableness and the satisfaction of a tax reporting obligation) to a
corresponding business expense deduction in the tax year in which the
disqualifying disposition occurs.
Non-Statutory
Stock Options. Generally,
there are no tax consequences to the optionee or us by reason of the grant
of an
NSO. Upon exercise of an NSO, the optionee normally will recognize taxable
ordinary income equal to the excess of the stock’s fair market value on the date
of exercise over the option exercise price. Generally, with respect to
employees, the Company is required to withhold payroll and income taxes from
regular wages or supplemental wage payments in an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness and the
satisfaction of a reporting obligation, we will generally be entitled to a
business expense deduction equal to the taxable ordinary income realized by
the
optionee. Upon disposition of the stock, the optionee will recognize a capital
gain or loss equal to the difference between the selling price and the purchase
price (to the extent not recognized as taxable income as described above).
Slightly different rules may apply to optionees who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Securities
Exchange Act of 1934, as amended.
PROPOSAL
4: RATIFICATION OF APPOINTMENT
OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
By
reason
of the reverse merger of us and Dyadic-Florida consummated in October 2004,
the
historical financial statements of Dyadic-Florida have become the historical
financial statements of us. Ernst & Young LLP had been the independent
registered public accounting firm of our wholly-owned subsidiary Dyadic-Florida
before the merger and has since been our independent registered public
accounting firm.
Ernst
& Young LLP audited our consolidated financial statements for the year ended
December 31, 2005. We had no disagreements with Ernst & Young LLP on
accounting and financial disclosures. The audit committee has appointed Ernst
& Young LLP to serve as our independent registered public accounting firm
for the year ending December 31, 2006.
We
are
not required to submit the appointment of our independent registered public
accounting firm to a vote of our stockholders for ratification. However, the
audit committee has recommended that our board submit this matter to
stockholders as a matter of good corporate practice, which our board is doing.
If stockholders fail to ratify the appointment, the audit committee will
reconsider whether to retain Ernst & Young LLP, and may retain that firm or
another without re-submitting the matter to our stockholders. Even if our
stockholders ratify the appointment, the audit committee may, in its discretion,
direct the appointment of a different independent registered public accounting
firm at any time during the year if it determines that such a change would
be
advisable and in the best interests of us and our stockholders.
We
expect
representatives of Ernst & Young LLP to be present at the annual meeting.
They will have the opportunity to make a statement if they desire to do so,
and
we expect them to be available to respond to appropriate questions.
Vote
Required
The
affirmative vote of the holders of a majority of all shares casting votes,
either in person or by proxy, at the annual meeting is required to ratify the
appointment of Ernst & Young LLP as our independent registered public
accounting firm for the year ending December 31, 2006.
Recommendation
of the Board
Dyadic’s
board of directors unanimously recommends a vote “FOR”
this
proposal.
Audit
and Non-Audit Fees
Audit
Fees
For
the
year ended December 31, 2005, Ernst & Young LLP billed us $398,179 in the
aggregate for professional services rendered for the audit of our consolidated
statements, reviews of the financial statements included in our Quarterly
Reports on Form 10-Q for the quarterly period ended March 31, June 30 and
September 30, and the review of our registration statement on Form S-3 (formerly
a registration statement on Form SB-2).
For
the
year ended December 31, 2004, Ernst & Young LLP billed us $709,977 in the
aggregate for professional services rendered for the audit of our consolidated
statements, reviews of the financial statements included in our Quarterly
Reports on Form 10-Q for the quarterly period ended March 31, June 30 and
September 30, and the review of our registration statement on Form
SB-2.
Audit-Related
Fees
For
the
years ended December 31, 2005 and 2004, Ernst & Young LLP did not bill us
for audit-related fees, as no audit-related fees were performed by them during
such years.
Tax
Fees
For
the
years ended December 31, 2005 and 2004, Ernst & Young LLP did not bill us
for tax fees, as no tax services were performed by them during such years.
All
Other Fees
For
the
years ended December 31, 2005 and 2004, Ernst & Young LLP did not bill us
for other services, as no other services were by performed by them during such
years.
The
audit
committee has determined that the provision of services by the auditors reported
hereunder had no impact on either of their independence.
Audit
Committee’s Pre-Approval Policies and Procedures
Consistent
with SEC policies regarding auditor independence, the audit committee is
responsible for appointing, setting compensation and overseeing the work of
the
independent registered public accounting firm. In recognition of this
responsibility, the audit committee has established a policy to pre-approve
all
audit and permissible non-audit services provided by the independent registered
public accounting firm.
Prior
to
engagement of the independent registered public accounting firm for the next
year’s audit, management will submit to the audit committee for approval an
aggregate of services expected to be rendered during that year for each of
the
four categories of services. Prior to engagement, the audit committee
pre-approves these services by category of service. The fees are budgeted,
and
the audit committee requires the independent registered public accounting firm
and management to report actual fees versus the budget periodically throughout
the year by category of service. During the year, circumstances may arise when
it may become necessary to engage the independent registered public accounting
firm for additional services not contemplated in the original pre-approval.
In
those instances, the audit committee requires specific pre-approval before
engaging the independent registered public accounting firm.
The
audit
committee may delegate pre-approval authority to one or more of its members.
The
member to whom such authority is delegated must report, for informational
purposes only, any pre-approval decisions to the audit committee at its next
scheduled meeting.
MISCELLANEOUS
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires that our directors and
executive officers, and persons who own more than 10 percent of our common
stock, to file with the Securities and Exchange Commission initial reports
of
ownership and reports of changes in ownership of common stock. Officers,
directors and greater than 10 percent stockholders are required by SEC
regulation to furnish us with all Section 16 reports they file.
To
our
knowledge, based solely on a review of the copies of such reports furnished
to
us and representations that no other reports were required, we believe that
all
Section 16 filing requirements applicable to our officers, directors and 10
percent beneficial owners were complied with during the year ended December
31,
2005, other than a late filing for Form 4 in December 2005 by director Stephen
J. Warner for sales of our common stock in November and December
2005.
Annual
Report on Form 10-KSB
We
have
mailed copies of our 2005 annual report with this proxy statement to holders
of
shares of our common stock as of the record date. We will provide without
charge, to each holder of shares of common stock as of the record date, a copy
of our Annual Report on Form 10-KSB for the year ended December 31, 2005, as
filed with the SEC, upon the written request of any such holder addressed to
the
Secretary of Dyadic at 140 Intracoastal Pointe Drive, Suite 404, Jupiter,
Florida 33477. We will provide copies of any exhibit to the Annual Report on
Form 10-KSB upon written request and upon reimbursement of any reasonable
expenses incurred by us in furnishing the exhibit.
Stockholder
Proposals
Pursuant
to Rule 14a-8 under the Securities Exchange Act of 1934, some stockholder
proposals may be eligible for inclusion in our proxy statement for our 2007
annual meeting of stockholders. To be eligible for inclusion in our 2007 proxy
statement, any such proposals must be delivered in writing to the Secretary
of
Dyadic no later than December 28, 2006, and must meet the requirements of
Rule 14a-8 under the Securities Exchange Act of 1934. The submission of a
stockholder proposal does not guarantee that it will be included in our proxy
statement.
Stockholders
who do not wish to follow the SEC rules in proposing a matter for action at
the
2007 annual meeting of stockholders must notify Dyadic in writing of the
information required by Dyadic’s amended and restated bylaws dealing with
stockholder proposals. The notice must be delivered to Dyadic’s Secretary not
later than the close of business on March 14, 2007 nor earlier than February
12,
2007.
Other
Matters
As
of the
date of this proxy statement, our board of directors does not know of any other
matters that will be presented for consideration at the annual meeting other
than as described in this proxy statement. If, however, any other matters are
properly brought before the annual meeting, it is intended that the persons
named as proxies will vote in accordance with their best judgment with respect
to such matters.
By
Order
of the Board of Directors,
Mark
A.
Emalfarb
Chairman,
President and Chief Executive Officer
DYADIC
INTERNATIONAL, INC.
2001
EQUITY COMPENSATION PLAN
As
Amended and Restated Effective January 1, 2005
RECITALS:
WHEREAS,
effective as of May 22, 2001, the Company adopted the Dyadic International,
Inc.
2001 Equity Compensation Plan (the “Plan”) to provide (i) designated employees
of the Company and its subsidiaries, (ii) certain consultants and advisors
who
perform services for the Company or its subsidiaries and (iii) non-employee
members of the Board of Directors of the Company (the “Board”), with the
opportunity to receive grants of incentive stock options, nonqualified stock
options, stock awards and performance units; and
WHEREAS,
the
Company believed that the Plan would encourage the participants to contribute
materially to the growth of the Company, thereby benefiting the Company’s
shareholders, and would align the economic interests of the participants with
those of the shareholders; and
WHEREAS,
section
409A of the Internal Revenue Code of 1986, as amended (the “Code”), as added by
the American Jobs Creation Act of 2004, made certain changes to the rules
applicable to amounts deferred under nonqualified deferred compensation plans
on
or after January 1, 2005; and
WHEREAS,
the
Company now wishes to amend and restate the Plan effective January 1, 2005,
to
comply with section 409A of the Code, and to make certain other changes to
the
Plan.
NOW,
THEREFORE, the
Company hereby amends and restates the Plan in its entirety to read as
follows:
1. Administration.
(a) Committee.
The
Plan shall be administered by a committee appointed by the Board (the
“Committee”, which may consist of two or more persons who are “outside
directors” as defined under section 162(m) of the Code, and related Treasury
regulations and “non-employee directors” as defined under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). However, the
Board may ratify or approve any grants as it deems appropriate.
(b) Committee
Authority.
The
Committee shall have the sole authority to (i) determine the individuals to
whom
grants shall be made under the Plan, (ii) determine the type, size and terms
of
the grants to be made to each such individual, (iii) determine the time when
the
grants will be made and the duration of any applicable exercise or restriction
period, including the criteria for exercisability and the acceleration of
exercisability, (iv) amend the terms of any previously issued grant, and (v)
deal with any other matters arising under the Plan. Notwithstanding the
authority granted to the Committee in (iii) and (iv) above, the Plan shall
prohibit the acceleration of the time or schedule of any payment of deferred
compensation, except to the extent permitted under section 409A of the Code
and
the Treasury regulations thereunder.
(c) Committee
Determinations.
The
Committee shall have full power and authority to administer and interpret the
Plan, to make factual determinations and to adopt or amend such rules,
regulations, agreements and instruments for implementing the Plan and for the
conduct of its business as it deems necessary or advisable, in its sole
discretion. The Committee’s interpretations of the Plan and all determinations
made by the Committee pursuant to the powers vested in it hereunder shall be
conclusive and binding on all persons having any interest in the Plan or in
any
awards granted hereunder. All powers of the Committee shall be executed in
its
sole discretion, in the best interest of the Company, not as a fiduciary, and
in
keeping with the objectives of the Plan and need not be uniform as to similarly
situated individuals.
2. Grants.
Awards
under the Plan may consist of grants of incentive stock options as described
in
Section 5 (“Incentive Stock Options”), nonqualified stock options as described
in Section 5 (“Nonqualified Stock Options”), Incentive Stock Options and
Nonqualified Stock Options are collectively referred to as “Options,” stock
awards as described in Section 6 (“Stock Awards”), and performance units as
described in Section 7 (“Performance Units”) (hereinafter collectively referred
to as “Grants”). All Grants shall be subject to the terms and conditions set
forth herein and to such other terms and conditions consistent with this Plan
as
the Committee deems appropriate and as are specified in writing by the Committee
to the individual in a grant instrument or an amendment to the grant instrument
(the “Grant Instrument”). The Committee shall approve the form and provisions of
each Grant Instrument. Grants under a particular Section of the Plan need not
be
uniform as among the grantees.
3. Shares
Subject to the Plan.
(a) Shares
Authorized.
Subject
to adjustment as described below, the aggregate number of shares of common
stock
of the Company (“Company Stock”) that may be issued or transferred under the
Plan is 4,478,475 shares. The maximum aggregate number of shares of Company
Stock that shall be subject to Grants made under the Plan to any individual
during any calendar year shall be 1,200,000 shares, subject to adjustment as
described below. The shares may be authorized but unissued shares of Company
Stock or reacquired shares of Company Stock, including shares purchased by
the
Company on the open market for purposes of the Plan. If and to the extent
Options granted under the Plan terminate, expire, or are canceled, forfeited,
exchanged or surrendered without having been exercised or if any Stock Awards
or
Performance Units are forfeited, the shares subject to such Grants shall again
be available for purposes of the Plan.
(b) Adjustments.
If
there is any change in the number or kind of shares of Company Stock outstanding
(1) by reason of a stock dividend, spinoff, recapitalization, stock split,
or
combination or exchange of shares, (ii) by reason of a merger, reorganization
or
consolidation in which the Company is the surviving corporation, (iii) by reason
of a reclassification or change in par value, or (iv) by reason of any other
extraordinary or unusual event affecting the outstanding Company Stock as a
class without the Company’s receipt of consideration, or if the value of
outstanding shares of Company Stock is substantially reduced as a result of
a
spinoff or the Company’s payment of an extraordinary dividend or distribution,
the maximum number of shares of Company Stock available for Grants, the maximum
number of shares of Company Stock that any individual participating in the
Plan
may be panted in any year, the number of shares covered by outstanding Grants,
the kind of shares issued under the Plan, and the price per share or the
applicable market value of such Grants may be appropriately adjusted by the
Committee to reflect any increase or decrease in the number of, or change in
the
kind or value of, issued shares of Company Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits under such
Grants; provided, however, that any fractional shares resulting from such
adjustment shall be eliminated. Any adjustments determined by the Committee
shall be final, binding and conclusive.
4. Eligibility
for Participation.
(a) Eligible
Persons.
All
employees of the Company and its subsidiaries (“Employees”), including Employees
who are officers or members of the Board, and members of the Board who are
not
Employees (“Non-Employee Directors”) shall be eligible to participate in the
Plan. Consultants and advisors who perform services for the Company or any
of
its subsidiaries (“Key Advisors”) shall be eligible to participate in the Plan
if the Key Advisors render bona fide services to the Company or its
subsidiaries, the services are not in connection with the offer and sale of
securities in a capital-raising transaction and the Key Advisors do not directly
or indirectly promote or maintain a
market
for the Company’s securities.
(b) Selection
of Grantees.
The
Committee shall select the Employees, Non-Employee Directors and Key Advisors
to
receive Grants and shall determine the number of shares of Company Stock subject
to a particular Grant in such manner as the Committee determines. Employees,
Key
Advisors and Non-Employee Directors who receive Grants under this Plan shall
hereinafter be referred to as “Grantees.”
5. Granting
of Options.
(a) Number
of Shares.
The
Committee shall determine the number of shares of Company Stock that will be
subject to each Grant of Options to Employees, Non-Employee Directors and Key
Advisors.
(b) Type
of Option and Price.
(i) The
Committee may grant Incentive Stock Options that are intended to qualify as
“incentive stock options” within the meaning of section 422 of the Code or
Nonqualified Stock Options that are not intended so to qualify or any
combination of Incentive Stock Options and Nonqualified Stock Options, all
in
accordance with the terms and conditions set forth herein. Incentive Stock
Options may be granted only to Employees. Nonqualified Stock Options may be
granted to Employees, Non-Employee Directors and Key Advisors.
(ii) The
purchase price (the “Exercise Price”) of Company Stock subject to an Option
shall be determined by the Committee and shall be equal to or greater than
the
Fair Market Value (as defined below) of a share of Company Stock on the date
the
Option is granted; provided, however, that an Incentive Stock Option may not
be
granted to an Employee who, at the time of grant, owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary of the Company, unless the
Exercise Price per share is not less than one hundred ten percent (110%) of
the
Fair Market Value of Company Stock on the date of grant.
(iii) If
the
Company Stock is publicly traded, then the Fair Market Value per share shall
be
determined as follows: (x) if the principal trading market for the Company
Stock
is a national securities exchange or the Nasdaq National Market, the last
reported sale price thereof on the relevant date or (if there were no trades
on
that date) the latest preceding date upon which a sale was reported or (y)
if
the Company Stock is not principally traded on such exchange or market, the
mean
between the last reported “bid” and “asked” prices of Company Stock on the
relevant date, as reported on Nasdaq or, if not so reported, as reported by
the
National Daily Quotation Bureau, Inc. or as reported in a customary financial
reporting service, as applicable and as the Committee determines. If the Company
Stock is not publicly traded or, if publicly traded, is not subject to reported
transactions or “bid” or “asked” quotations as set forth above, the Fair Market
Value per share shall be as determined by the Committee.
(c) Option
Term.
The
Committee shall determine the term of each Option. The term of any Option shall
not exceed ten years from the date of grant. However, an Incentive Stock Option
that is granted to an Employee who, at the time of grant owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes
of
stock of the Company, or any parent or subsidiary of the Company, may not have
a
term that exceeds five years from the date of grant.
(d) Exercisability
of Options.
Options
shall become exercisable in accordance with such terms and conditions,
consistent with the Plan, as may be determined by the Committee and specified
in
the Grant Instrument. The Committee may waive or accelerate the satisfaction
of
an exercise term or condition of any or all outstanding Options at any time
for
any reason in the event the Exercise Price was equal to or greater than the
Fair
Market Value of the underlying shares of Company Stock on the date of grant,
to
the extent permitted under section 409A of the Code and the Treasury regulations
thereunder.
(e) Termination
of Employment, Disability or Death.
(i) Except
as
provided below, an Option may only be exercised while the Grantee is employed
by, or providing service to, the Company as an Employee, Key Advisor or member
of the Board. In the event that a Grantee ceases to be employed by, or provide
service to, the Company for any reason other than Disability, death, or
termination for Cause (as defined below), any Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within 90 days
after
the date on which the Grantee ceases to be employed by, or provide service
to,
the Company (or within such, other period of time as may be specified by the
Committee), but in any event no later than the date of expiration of the Option
term. Except as otherwise provided by the Committee any of the Grantee’s Options
that are not otherwise exercisable as of the date on which the Grantee ceases
to
be employed by, or provide service to, the Company shall terminate as of such
date.
(ii) In
the
event the Grantee ceases to be employed by, or provide service to, the Company
on account of a termination for Cause by the Company, any Option held by the
Grantee shall terminate as of the date the Grantee ceases to be employed by,
or
provide service to, the Company. In addition, notwithstanding any other
provisions of this Section 5, if the Committee determines that the Grantee
has
engaged in conduct that constitutes Cause at any time while the Grantee is
employed by, or providing service to, the Company or after the Grantee’s
termination of employment or service, any Option held by the Grantee shall
immediately terminate and the Grantee shall automatically forfeit all shares
underlying any exercised portion of an Option for which the Company has not
yet
delivered the share certificates, upon refund by the Company of the Exercise
Price paid by the Grantee for such shares. Upon any exercise of an Option,
the
Company may withhold delivery of share certificates pending resolution of an
inquiry that could lead to a finding resulting in a forfeiture.
(iii) In
the
event the Grantee ceases to be employed by, or provide service to, the Company
because the Grantee is Disabled, any Option which is otherwise exercisable
by
the Grantee shall terminate unless exercised within one year after the date
on
which the Grantee ceases to be employed by, or provide service to, the Company
(or within such other period of time as may be specified by the Committee),
but
in any event no later than the date of expiration of the Option term.
Except
as
otherwise provided by the Committee, any of the Grantee’s Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by, or provide service to, the Company shall terminate as of such
date.
(iv) If
the
Grantee dies while employed by, or providing service to, the Company or within
90 days after the date on which the Grantee ceases to be employed or provide
service on account of a termination specified in Section 5(e)(i) above (or
within such other period of time as may be specified by the Committee), any
Option that is otherwise exercisable by the Grantee shall terminate unless
exercised within one year after the date on which the Grantee ceases to be
employed by, or provide service to, the Company (or within such other period
of
time as may be specified by the Committee), but in any event no later than
the
date of expiration of the Option term. Except as otherwise provided by the
Committee, any of the Grantee’s Options that are not otherwise exercisable as of
the date on which the Grantee ceases to be employed by, or provide service
to,
the Company shall terminate as of such date.
(v) For
purposes of this Section 5(e), and Sections 6 and 7:
(A) The
term
“Company” shall mean the Company and its parent and subsidiary corporations or
other entities, as determined by the Committee.
(B) “Employed
by, or provide service to, the Company” shall mean employment or service as an
Employee, Key Advisor or member of the Board (so that, for purposes of
exercising Options and satisfying conditions with respect to Stock Awards and
Performance Units, a Grantee shall not be considered to have terminated
employment or service until the Grantee ceases to be an Employee, Key Advisor
and member of the Board), unless the Committee determines
otherwise.
(C) “Disability”
shall mean a Grantee’s becoming disabled within the meaning of section 22(e)(3)
of the Code.
(D) “Cause”
shall mean, except to the extent specified otherwise by the Committee, a finding
by the Committee that the Grantee (i) has breached his or her employment or
service contract with the Company, (ii) has engaged in disloyalty to the
Company, including, without limitation, fraud, embezzlement, theft, commission
of a felony or proven dishonesty in the course of his or her employment or
service, (iii) has disclosed trade secrets or confidential information of the
Company to persons not entitled to receive such information or (iv) has engaged
in such other behavior detrimental to the interests of the Company as the
Committee determines.
(f) Exercise
of Options.
A
Grantee may exercise an Option that has become exercisable, in whole or in
part,
by delivering a notice of exercise to the Company with payment of the Exercise
Price. The Grantee shall pay the Exercise Price for an Option as specified
by
the Committee (w) in cash, (x) with the approval of the Committee, by delivering
shares of Company Stock owned by the Grantee (including Company Stock acquired
in connection with the exercise of an Option, subject to such restrictions
as
the Committee deems appropriate) and having a Fair Market Value on the date
of
exercise equal to the Exercise Price or by attestation (on a form prescribed
by
the Committee) to ownership of shares of Company Stock having a Fair Market
Value on the date of exercise equal to the Exercise Price, (y) pay through
a
broker in accordance with procedures permitted by Regulation T of the Federal
Reserve Board, or (z) by such other method as the Committee may approve. The
Committee may authorize loans by the Company to Grantees in connection with
the
exercise of an Option, upon such terms and conditions as the Committee, in
its
sole discretion, deems appropriate. Shares of Company Stock used to exercise
an
Option shall have been held by the Grantee for the requisite period of time
to
avoid adverse accounting consequences to the Company with respect to the Option.
The Grantee shall pay the Exercise Price and the amount of any withholding
tax
due at the time of exercise.
(g) Limits
on Incentive Stock Options.
Each
Incentive Stock Option shall provide that, if the aggregate Fair Market Value
of
the stock on the date of the grant with respect to which Incentive Stock Options
are exercisable for the first time by a Grantee during any calendar year, under
the Plan or any other stock option plan of the Company or a parent or
subsidiary, exceeds $100,000, then the Option, as to the excess, shall be
treated as a Nonqualified Stock Option. An Incentive Stock Option shall not
be
granted to any person who is not an Employee of the Company or a parent or
subsidiary (within the meaning of section 424(f) of the Code).
6. Stock
Awards.
The
Committee may issue or transfer shares of Company Stock to an Employee,
non-Employee Director or Key Advisor under a Stock Award, upon such terms as
the
Committee deems appropriate. The following provisions are applicable to Stock
Awards:
(a) General
Requirements.
Shares
of Company Stock issued or transferred pursuant to Stock Awards may be issued
or
transferred for consideration or for no consideration, and subject to
restrictions or no restrictions, as determined by the Committee. The Committee
may, but shall not be required to, establish conditions under which restrictions
on Stock Awards shall lapse over a period of time or according to such other
criteria as the Committee deems appropriate, including, without limitation,
restrictions based upon the achievement of specific performance goals. The
period of time during which the Stock Awards will remain subject to restrictions
will be designated in the Grant Instrument as the “Restriction
Period.”
(b) Number
of Shares.
The
Committee shall determine the number of shares of Company Stock to be issued
or
transferred pursuant to a Stock Award and the restrictions applicable to such
shares.
(c) Requirement
of Employment or Services.
If the
Grantee ceases to be employed by, or provide service to, the Company (as defined
in Section 5(e)) during a period designated in the Grant Instrument as the
Restriction Period, or if other specified conditions are not met, the Stock
Award shall terminate as to all shares covered by the Grant as to which the
restrictions have not lapsed, and those shares of Company Stock must be
immediately returned to the Company. The Committee may, however, provide for
complete or partial exceptions to this requirement as it deems
appropriate.
(d) Restrictions
on Transfer and Legend Stock Certificate.
During
the Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of a Stock Award except to a Successor Grantee
under Section 11(a). Each certificate for a share of a Stock Award shall contain
a legend giving appropriate notice of the restrictions in the Grant. The Grantee
shall be entitled to have the legend removed from the stock certificate covering
the shares subject to restrictions when all restrictions on such shares have
lapsed. The Committee may determine that the Company will not issue certificates
for Stock Awards until all restrictions on such shares have lapsed, or that
the
Company will retain possession of certificates for shares of Stock Awards until
all restrictions on such shares have lapsed.
(e) Right
to Vote and to Receive Dividends.
Unless
the Committee determines otherwise, during the Restriction Period, the Grantee
shall have the right to vote shares of Stock Awards and to receive any dividends
or other distributions paid on such shares, subject to any restrictions deemed
appropriate by the Committee, including, without limitation, the achievement
of
specific performance goals. In the event the Grantee has the right to receive
dividends or other distributions paid on shares of any Stock Award, the Grant
Instrument shall be prepared to comply with the applicable requirements of
section 409A of the Code and shall be interpreted in a manner consistent with
such requirements.
(f) Lapse
of Restrictions.
All
restrictions imposed on Stock Awards shall lapse upon the expiration of the
applicable Restriction Period and the satisfaction of all conditions imposed
by
the Committee. The Committee may determine, as to any or all Stock Awards,
that
the restrictions shall lapse without regard to any Restriction
Period.
(g) Code
Section 409A.
The
terms and conditions set forth in Grant Instruments for Stock Awards shall
be
prepared to comply with the applicable requirements of section 409A of the
Code
and interpreted in a manner consistent with such requirements to the extent
the
Committee believes the Stock Award is subject to such requirements.
7. Performance
Units.
(a) General
Requirements.
The
Committee may grant performance units (“Performance Units”) to an Employee or
Key Advisor. Each Performance Unit shall represent the right of the Grantee
to
receive an amount based on the value of the Performance Unit, if performance
goals established by the Committee are met. The value of a Performance Unit
shall equal the Fair Market Value of a share of Company Stock. The Committee
shall determine the number of Performance Units to be granted and the
requirements applicable to such Units.
(b) Performance
Period and Performance Goals.
When
Performance Units are granted, the Committee shall establish the performance
period during which performance shall be measured (the “Performance Period”),
performance goals applicable to the Units (“Performance Goals”) and such other
conditions of the Grant as the Committee deems appropriate. Performance Goals
may relate to the financial performance of the Company or its operating units,
the performance of Company Stock, individual performance, or such other criteria
as the Committee deems appropriate. Performance Units shall be subject to the
following criteria:
(i) Minimum
Duration of Performance Period.
The
Committee shall not establish a Performance Period which has a duration of
less
than twelve (12) consecutive months.
(ii) Pre-established
Performance Goals.
The
Committee shall establish the Performance Goals in writing no later than ninety
(90) days after the commencement of the Performance Period, provided that the
outcome is substantially uncertain at the time the Performance Goals are
established.
(iii) Initial
Deferral Election.
An
Employee or Key Advisor receiving a Grant of Performance Units must make a
deferral election no later than the date which is six (6) months before the
end
of the Performance Period, provided that in no event may a deferral election
be
made after such Performance Goals have become both substantially certain to
be
paid and readily ascertainable.
(iv) Code
Section 409A.
The
terms and conditions set forth in a Grant of Performance Units shall comply
with
the applicable requirements of section 409A of the Code and interpreted in
a
manner consistent with such requirements to the extent the Committee believes
a
Grant of Performance Units is subject to such requirements.
(c) Payment
with respect to Performance Units.
At the
end of each Performance Period, the Committee shall determine to what extent
the
Performance Goals and other conditions of the Performance Units are met, the
value of the Performance Units (if applicable), and the amount, if any, to
be
paid with respect to the Performance Units. Payments with respect to Performance
Units shall be made in cash, in Company Stock or in a combination of the two,
as
determined by the Committee.
(d) Requirement
of Employment or Service.
If the
Grantee ceases to be employed by, or provide service to, the Company (as defined
in Section 5(e)) during a Performance Period, or if other conditions established
by the Committee are not met, the Grantee’s Performance Units shall be
forfeited. The Committee may, however, provide for complete or partial
exceptions to this requirement as it deems appropriate.
8. Qualified
Performance-Based Compensation.
(a) Designation
as Qualified Performance-Based Compensation.
The
Committee may determine that Performance Units or Stock Awards granted to an
Employee shall be considered “qualified performance-based compensation” under
Section 162(m) of the Code. The provisions of this Section 8 shall apply to
Grants of Performance Units and Stock Awards that are to be considered
“qualified performance-based compensation” under section 162(m) of the
Code.
(b) Performance
Goals.
When
Performance Units or Stock Awards that are to be considered “qualified
performance-based compensation” are granted, the Committee shall establish in
writing (i) the objective performance goals that must be met in order for
restrictions on the Stock Awards to lapse or amounts to be paid under the
Performance Units, (ii) the Performance Period during which the performance
goals must be met, (iii) the threshold, target and maximum amounts that may
be
paid if the performance goals are met, and (iv) any other conditions that the
Committee deems appropriate and consistent with the Plan and section 162(m)
of
the Code. The performance goals may relate to the Employee’s business unit or
the performance of the Company and its subsidiaries as a whole, or any
combination of the foregoing. The Committee shall use objectively determinable
performance goals based on one or more of the following criteria: stock price,
earnings per share, net earnings, operating earnings, return on assets,
shareholder return, return on equity, growth in assets, achievement of
regulatory approvals or patents, sales, market share or strategic business
criteria consisting of one or more objectives based on meeting specified revenue
goals, market penetration goals, geographic business expansion goals, cost
targets, scientific milestones, commercial milestones, goals relating to
acquisitions or divestitures, joint ventures or strategic
partnerships.
(c) Establishment
of Goals.
The
Committee shall establish the performance goals in writing either before the
beginning of the Performance Period or during a period ending no later than the
earlier of (i) ninety (90) days after the commencement of the Performance Period
or (ii) the date on which twenty-five percent (25%) of the Performance Period
has been completed, or such other date as may be required or permitted under
applicable regulations under sections 162(m) and 409A of the Code. The
performance goals shall satisfy the requirements for “qualified
performance-based compensation,” including the requirement that the achievement
of the goals be substantially uncertain at the time they are established and
that the goals be established in such a way that a third party with knowledge
of
the relevant facts could determine whether and to what extent the performance
goals have been met. The Committee shall not have discretion to increase the
amount of compensation that is payable upon achievement of the designated
performance goals.
(d) Initial
Deferral Election.
A
Grantee receiving a Grant of qualified performance-based compensation must
make
any deferral election allowed under Section 9 no later than the date which
is
six (6) months before the end of the Performance Period, provided that in no
event may a deferral election be made after such Performance Goals have become
both substantially certain to be paid and readily ascertainable.
(e) Code
Section 409A.
The
terms and conditions set forth in a Grant of qualified performance-based
compensation shall comply with the applicable requirements of section 409A
of
the Code and interpreted in a manner consistent with such requirements to the
extent the Committee believes a Grant of qualified performance-based
compensation is subject to such requirements.
(f) Maximum
Payment.
Performance Units and Stock Awards under this Section 8 may be granted to an
Employee with respect to not more than 250,000 shares of Company Stock for
any
Performance Period.
(g) Announcement
of Grants.
The
Committee shall certify and announce the results for each Performance Period
to
all Grantees immediately following the announcement of the Company’s financial
results for the Performance Period. If and to the extent that the Committee
does
not certify that the performance goals have been met, the grants of Stock Awards
or Performance Units for the Performance Period shall be forfeited.
(h) Death,
Disability, Change of Control or Other Circumstances.
The
Committee may provide in the award that Performance Units shall be payable
or
restrictions on Stock Awards shall lapse, in whole or in part, in the event
of
the Grantee’s death or Disability (as defined in Section 5(e) above) during the
Performance Period, or under other circumstances consistent with the regulations
and rulings under sections 162(m) and 409A of the Code, and the provisions
of
Section 13 shall apply in the event of a Change of Control.
9. Deferrals.
The
Committee may permit or require a Grantee to defer receipt of the payment of
cash or the delivery of shares that would otherwise be due to such Grantee
in
connection with any Option, the lapse or waiver of restrictions applicable
to
Stock Awards, or the satisfaction of any requirements or objectives with respect
to Performance Units. Awards shall comply with the applicable requirements
of
section 409A of the Code and be interpreted in a consistent manner whenever
(a)
the Grantee is permitted to defer receipt of the payment of cash or the delivery
of stock, or (b) the Committee’s lapse or waiver of restrictions brings the
compensatory arrangement within the requirements of section 409A of the
Code.
10. Withholding
of Taxes.
(a) Required
Withholding.
All
Grants under the Plan shall be subject to applicable federal (including FICA),
state and local tax withholding requirements. The Company shall have the right
to deduct from all Grants paid in cash, or from other wages paid to the Grantee,
any federal, state or local taxes required by law to be withheld with respect
to
such Grants. In the case of Options, Stock Awards and other Grants paid in
Company Stock, the Company may require that the Grantee or other person
receiving or exercising Grants pay to the Company the amount of any federal,
state or local taxes that the Company is required to withhold with respect
to
such Grants, or the Company may deduct from other wages paid by the Company
the
amount of any withholding taxes due with respect to such Grants.
(b) Election
to Withhold Shares.
If the
Committee so permits, a Grantee may elect to satisfy the Company’s income tax
withholding obligation with respect to Options, Stock Awards or Performance
Units paid in Company Stock by having shares withheld up to an amount that
does
not exceed the Grantee’s minimum applicable withholding tax rate for federal
(including FICA), state and local tax liabilities. The election must be in
a
form and manner prescribed by the Committee and may be subject to the prior
approval of the Committee.
11. Transfer
of Grants.
(a) Nontransferability
of Grants.
Except
as provided below, only the Grantee may exercise rights under a Grant during
the
Grantee’s lifetime. A Grantee may not transfer those rights except by will or by
the laws of descent and distribution or, with respect to Grants other than
Incentive Stock Options, if permitted in any specific case by the Committee,
pursuant to a domestic relations order. When a Grantee dies, the personal
representative or other person entitled to succeed to the rights of the Grantee
(“Successor Grantee”) may exercise such rights. A Successor Grantee must furnish
proof satisfactory to the Company of his or her right to receive the Grant
under
the Grantee’s will or under the applicable laws of descent and
distribution.
(b) Transfer
of Nonqualified Stock Options.
Notwithstanding the foregoing, the Committee may provide, in a Grant Instrument,
that a Grantee may transfer Nonqualified Stock Options to immediate family
members, or one or more trusts or other entities for the benefit of or owned
by
immediate family members, consistent with the applicable securities laws,
according to such terms as the Committee may determine; provided that the
Grantee receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same terms and conditions
as were applicable to the Option immediately before the transfer.
12. Change
of Control of the Company.
As
used
herein, a “Change of Control” shall be deemed to have occurred if:
(a) Any
“person” (defined to have the meaning in this definition of Change of Control as
is assigned that term in sections 13(d) and 14(d) of the Exchange Act) other
than an “Excluded Shareholder” (as defined herein) becomes a “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of
securities of the Company representing more than fifty percent (50%) of the
voting power of the then outstanding securities of the Company; provided that
a
Change of Control shall not be deemed to occur as a result of a transaction
in
which the Company becomes a subsidiary of another corporation and in which
the
shareholders of the Company, immediately prior to the transaction, will
beneficially own, immediately after the transaction, shares entitling such
shareholders to more than fifty percent (50%) of all votes to which all
shareholders of the parent 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); the term “Excluded Shareholder” meaning,
for purposes of this definition of Change of Control, any person who is the
beneficial owner, directly or indirectly of more than twenty percent (20%)
of
the voting power of the then outstanding securities of the Company;
or
(b) The
shareholders of the Company approve (or, if shareholder approval is not
required, the Board approves) an agreement providing for (i) the merger or
consolidation of the Company with another corporation where the shareholders
of
the Company, immediately prior to the merger or consolidation, will not
beneficially own, immediately after the merger or consolidation, shares
entitling such shareholders to more than fifty percent (50%) of all votes to
which all shareholders 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) or (ii) the sale or other
disposition of assets equal to or greater than forty percent (40%) of the total
gross fair market value of all assets of the Company immediately prior to such
sale or disposition.
13. Consequences
of a Change Control.
(a) Assumption
of Grants.
Upon a
Change of Control where the Company is not the surviving corporation (or
survives only as a subsidiary of another corporation), unless the Committee
determines otherwise, all outstanding Options that are not exercised shall
be
assumed by, or replaced with comparable options or rights by the surviving
corporation (or a parent of the surviving corporation), and other outstanding
Grants shall he converted to similar grants of the surviving corporation (or
a
parent of the surviving corporation).
(b) Other
Alternatives.
Notwithstanding the foregoing, the Committee may provide in the Grant Instrument
that one or more of the following actions shall occur in the event of a Change
of Control: (i) outstanding Options shall automatically accelerate and become
fully exercisable and that the restrictions and conditions on outstanding Stock
Awards shall immediately lapse, (ii) Grantees holding Performance Units shall
receive a payment in settlement of such Performance Units in an amount
determined by the Committee, (iii) Grantees shall surrender their outstanding
Options in exchange for a payment by the Company, in cash or Company Stock
as
determined by the Committee, in an amount equal to the amount by which the
then
Fair Market Value of the shares of Company Stock subject to the Grantee’s
unexercised Options exceeds the Exercise Price of the Options, or (iv) giving
Grantees an opportunity to exercise their outstanding Options, terminate any
or
all unexercised Options at such time as the Committee deems appropriate. Such
surrender, termination or settlement shall take place as of the date of the
Change of Control or such other date as the Committee may specify. The Committee
shall have no obligation to take any of the foregoing actions, and, in the
absence of any such actions, outstanding Grants shall continue in effect
according to their terms (subject to any assumption pursuant to Subsection
(a)).
14. Requirements
for Issuance or Transfer of Shares.
(a) Limitations
on Issuance or Transfer of Shares.
No
Company Stock shall be issued or transferred in connection with any Grant
hereunder unless and until all legal requirements applicable to the issuance
or
transfer of such Company Stock have been complied with to the satisfaction
of
the Committee. The Committee shall have the right to condition any Grant made
to
any Grantee hereunder on such Grantee’s undertaking in writing to comply with
such restrictions on his or her subsequent disposition of such shares of Company
Stock as the Committee shall deem necessary or advisable, and certificates
representing such shares may be legended to reflect any such restrictions.
Certificates representing shares of Company Stock issued or transferred under
the Plan will be subject to such stop-transfer orders and other restrictions
as
may be required by applicable laws, regulations and interpretations, including
any requirement that a legend be placed thereon.
(b) Lock-Up
Period.
If so
requested by the Company or any representative of the underwriters (the
“Managing Underwriter”) in connection with any underwritten offering of
securities of the Company under the Securities Act of 1933, as amended (the
“Securities Act”) a Grantee (including any successors or assigns) shall not sell
or otherwise transfer any shares or other securities of the Company during
the
30-day period preceding and the 180-day period following the effective date
of a
registration statement of the Company filed under the Securities Act for such
underwriting (or such shorter period as may be requested by the Managing
Underwriter and agreed to by the Company) (the “Market Standoff Period”). The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such Market Standoff Period.
Certificates representing Company stock issued upon exercise of Options or
otherwise pursuant to the Plan shall bear such legend regarding the lock-up
period obligations as counsel to the Company shall determine.
(c) Sales
to Competitors.
Prior
to the initial public offering of shares of Company common stock, no Company
stock issued in connection with any Grant hereunder may be sold, assigned or
otherwise transferred to any competitor of the Company or any entity which
owns
in excess of one percent (1%) of the voting stock of any such competitor,
provided Grantee has actual knowledge of such ownership. Certificates
representing shares of Company stock so issued in connection with a Grant
hereunder shall bear such legend regarding sales to competitors and other
obligations as counsel to the Company shall determine.
15. Amendment
and Termination of the Plan.
(a) Amendment.
The
Board may amend or terminate the Plan at any time; provided, however, that
the
Board shall not amend the Plan without shareholder approval if (i) such approval
is required in order for Incentive Stock Options granted or to be granted under
the Plan to meet the requirements of section 422 of the Code, (ii) such approval
is required in order to exempt compensation under the Plan from the deduction
limit under section 162(m) of the Code, or (iii) such approval is required
by
applicable stock exchange requirements. When amending or terminating the Plan,
the Board shall act in a manner consistent with section 409A of the Code and
no
Board action shall cause the application of the twenty percent (20%) penalty
or
immediate tax recognition under section 409A of the Code.
(b) Shareholder
Approval for “Qualified Performance-Based Compensation”.
If
Performance Units or Stock Awards are granted as “qualified performance-based
compensation” under Section 8 above, the Plan must be reapproved by the
shareholders no later than the first shareholders meeting that occurs in the
fifth year following the year in which the shareholders previously approved
the
provisions of Section 8, if required by section 162(m) of the Code or the
regulations thereunder.
(c) Termination
of Plan.
The
Plan shall terminate on the day immediately preceding the tenth anniversary
of
its effective date, unless the Plan is terminated earlier by the Board or is
extended by the Board with the approval of the shareholders.
(d) Termination
and Amendment of Outstanding Grants.
A
termination or amendment of the Plan that occurs after a Grant is made shall
not
materially impair the rights of a Grantee unless the Grantee consents or unless
the Committee acts under Section 21(b). The termination of the Plan shall not
impair the power and authority of the Committee with respect to an outstanding
Grant. Whether or not the Plan has terminated, an outstanding Grant may be
terminated or amended under Section 21(b) or may be amended by agreement of
the
Company and the Grantee consistent with the Plan.
(e) Governing
Document.
The
Plan shall be the controlling document. No other statements, representations,
explanatory materials or examples, oral or written, may amend the Plan in any
manner. The Plan shall be binding upon and enforceable against the Company
and
its successors and assigns.
16. Funding
the Plan.
This
Plan
shall be unfunded. The Company shall not be required to establish any special
or
separate fund or to make any other segregation of assets to assure the payment
of any Grants under this Plan. In no event shall interest be paid or accrued
on
any Grant, including unpaid installments of Grants.
17. Rights
of Participants.
Nothing
in this Plan shall entitle any Employee, Key Advisor, Non-Employee Director
or
other person to any claim or right to be granted a Grant under this Plan.
Neither this Plan nor any action taken hereunder shall be construed as giving
any individual any rights to be retained by or in the employ of the Company
or
any other employment rights.
18. No
Fractional Shares.
No
fractional shares of Company Stock shall be issued or delivered pursuant to
the
Plan or any Grant. The Committee shall determine whether cash, other awards
or
other property shall be issued or paid in lieu of such fractional shares or
whether such fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
19. Heading.
Section
headings are for reference only. In the event of a conflict between a title
and
the content of a Section, the content of the Section shall control.
20. Effective
Date of the Plan.
The
Plan
was effective May 22, 2001, and the amendment and restatement shall be effective
January 1, 2005.
21. Miscellaneous.
(a) Grants
in Connection with Corporate Transactions and Otherwise.
Nothing
contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition,
by
purchase, lease, merger, consolidation or otherwise, of the business or assets
of any corporation, firm or association, including Grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes,
or
(ii) limit the right of the Company to grant stock options or make other awards
outside of this Plan. Without limiting the foregoing, the Committee may make
a
Grant to an employee of another corporation who becomes an Employee by reason
of
a corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option or stock award grant made by such
corporation. The terms and conditions of the substitute grants may vary from
the
terms and conditions required by the Plan and from those of the substituted
stock incentives. The Committee shall prescribe the provisions of the substitute
grants.
(b) Compliance
with Law.
The
Plan, the exercise of Options and the obligations of the Company to issue or
transfer shares of Company Stock under Grants shall be subject to all applicable
laws and to approvals by any governmental or regulatory agency as may be
required. With respect to persons subject to section 16 of the Exchange Act,
it
is the intent of the Company that the Plan and all transactions under the Plan
comply with all applicable provisions of Rule 16b-3 or its successors under
the
Exchange Act. In addition, it is the intent of the Company that the Plan and
applicable Grants under the Plan comply with the applicable provisions of
section 162(m), section 409A and section 422 of the Code. To the extent that
any
legal requirement of section 16 of the Exchange Act or section 162(m), section
409A or section 422 of the Code as set forth in the Plan ceases to be required
under section 16 of the
Exchange
Act or section 162(m), section 409A or section 422 of the Code, that Plan
provision shall cease to apply. The Committee may revoke any Grant if it is
contrary to law or modify a Grant to bring it into compliance with any valid
and
mandatory government regulation. The Committee may also adopt rules regarding
the withholding of taxes on payments to Grantees. The Committee may, in its
sole
discretion, agree to limit its authority under this Section.
(c) Savings
Provision.
In the
event any provision of this Plan shall be deemed to cause the application of
the
twenty percent (20%) penalty or immediate tax recognition under section 409A
of
the Code, the provision that causes either the application of the penalty or
immediate tax recognition shall become null and void, and the Plan shall be
construed and enforced as if the provision causing the negative tax consequences
had never been contained herein.
(d) Governing
Law.
The
validity, construction, interpretation and effect of the Plan and Grant
Instruments issued under the Plan shall be governed and construed by and
determined in accordance with the laws of Florida, without giving effect to
the
conflict of laws provisions thereof.
DYADIC
INTERNATIONAL, INC.
2006
STOCK OPTION PLAN
The
purpose of the Dyadic International, Inc. 2006 Stock Option Plan (the
“Plan”)
is to
provide (i) designated Employees of DYADIC INTERNATIONAL, INC. (the
“Company”)
and
its subsidiaries, (ii) Key Advisors who perform consulting or advisory services
for the Company or its Subsidiaries and (iii) Non-Employee Directors who serve
on the Board of Directors of the Company (the “Board”)
with
the opportunity to receive grants of incentive stock options and nonqualified
stock options. The Company believes that the Plan will encourage the
participants to contribute materially to the growth of the Company, thereby
benefiting the Company’s stockholders, and will align the economic interests of
the participants with those of the stockholders. A Glossary of defined terms
used in this Plan is set forth in Section 18 hereof.
1. Administration.
(a) Committee.
The
Plan shall be administered by the Compensation Committee of the Board, a
majority of whose members are “outside directors” as defined under section
162(m) of the Code and related Treasury regulations, and “non-employee
directors” as defined under Rule 16b-3 under the Exchange Act (the “Committee”).
However, the Board may ratify or approve any grants as it deems
appropriate.
(b) Committee
Authority.
The
Committee shall have the sole authority to (i) determine the individuals to
whom
grants shall be made under the Plan, (ii) determine the type, size and terms
of
the Grants to be made to each such individual, (iii) determine the time when
the
Grants will be made and the duration of any applicable exercise or restriction
period, including the criteria for exercisability and the acceleration of
exercisability, (iv) amend the terms of any previously issued grant, and (v)
deal with any other matters arising under the Plan. In the event the Committee
determines section 409A of the Code may be applicable to an Option granted
hereunder, the Plan shall prohibit the acceleration of the time or schedule
of
payment of compensation hereunder, except to the extent permitted under section
409A of the Code and the applicable Treasury regulations
thereunder.
(c) Committee
Determinations.
The
Committee shall have full power and authority to administer and interpret the
Plan, to make factual determinations and to adopt or amend such rules,
regulations, agreements and instruments for implementing the Plan and for the
conduct of its business as it deems necessary or advisable, in its sole
discretion. The Committee’s interpretations of the Plan and all determinations
made by the Committee pursuant to the powers vested in it hereunder shall be
conclusive and binding on all persons having any interest in the Plan or in
any
awards granted hereunder. All powers of the Committee shall be executed in
its
sole discretion, in the best interest of the Company, not as a fiduciary, and
in
keeping with the objectives of the Plan and need not be uniform as to similarly
situated individuals.
2. Grants.
Grants
of
Options under the Plan may consist of Incentive Stock Options as described
in
Section 5 or Nonqualified Stock Options as described in Section 5. All Grants
shall be subject to the terms and conditions set forth herein and to such other
terms and conditions consistent with this Plan as the Committee deems
appropriate and as are specified in a Grant Instrument or amendment thereto.
The
Committee shall approve the form and provisions of each Grant Instrument. Grants
under a particular Section of the Plan need not be uniform as among the
grantees.
3. Shares
Subject to the Plan.
(a) Shares
Authorized.
Subject
to adjustment as described below, the aggregate number of shares of Company
Stock that may be issued or transferred under the Plan is 2,700,000 shares.
The
maximum aggregate number of shares of Company Stock that shall be subject to
Grants made under the Plan to any individual during any calendar year shall
be
1,200,000 shares, subject to adjustment as described below. The shares may
be
authorized but
unissued
shares of Company Stock or reacquired shares of Company Stock, including shares
purchased by the Company on the open market for purposes of the Plan. If and
to
the extent Options granted under the Plan terminate, expire, or are canceled,
forfeited, exchanged or surrendered without having been exercised, the shares
subject to such Grants shall again be available for purposes of the
Plan.
(b) Adjustments.
If
there is any change in the number or kind of shares of Company Stock outstanding
(i) by reason of a stock dividend, spinoff, recapitalization, stock split,
or
combination or exchange of shares, (ii) by reason of a merger, reorganization
or
consolidation in which the Company is the surviving corporation, (iii) by reason
of a reclassification or change in par value, or (iv) by reason of any other
extraordinary or unusual event affecting the outstanding Company Stock as a
class without the Company’s receipt of consideration, or if the value of
outstanding shares of Company Stock is substantially reduced as a result of
a
spinoff or the Company’s payment of an extraordinary dividend or distribution,
the maximum number of shares of Company Stock available for Grants, then in
that
event (A) the maximum number of shares of Company Stock that any individual
participating in the Plan may be panted in any year, (B) the number of shares
covered by outstanding Grants, (C) the kind of shares issued under the Plan,
and
(D) the price per share or the applicable market value of such Grants may be
appropriately adjusted by the Committee to reflect any increase or decrease
in
the number of, or change in the kind or value of, issued shares of Company
Stock
to preclude, to the extent practicable, the enlargement or dilution of rights
and benefits under such Grants; provided, however, that any fractional shares
resulting from such adjustment shall be eliminated. Any adjustments determined
by the Committee shall be final, binding and conclusive.
4. Eligibility
for Participation.
(a) Eligible
Persons.
All
Employees of the Company and its Subsidiaries, including Employees who are
officers or members of the Board, and Non-Employee Directors shall be eligible
to participate in the Plan. Key Advisors who perform services for the Company
or
any of its Subsidiaries shall be eligible to participate in the Plan if (i)
they
render bona fide services to the Company or its Subsidiaries, (ii) the services
are not in connection with the offer and sale of securities in a capital-raising
transaction and (iii) such Key Advisors do not directly or indirectly promote
or
maintain a market for the Company’s securities.
(b) Selection
of Grantees.
The
Committee shall select the Employees, Non-Employee Directors and Key Advisors
to
receive Grants and shall determine the number of shares of Company Stock subject
to a particular Grant in such manner as the Committee determines. Employees,
Key
Advisors and Non-Employee Directors who receive Grants under this Plan shall
hereinafter be referred to as “Grantees.”
5. Granting
of Options.
(a) Number
of Shares.
The
Committee shall determine the number of shares of Company Stock that will be
subject to each Grant of Options to Employees, Non-Employee Directors and Key
Advisors.
(b) Type
of Option and Price.
(i) The
Committee may grant Incentive Stock Options that are intended to qualify as
“Incentive Stock Options” within the meaning of section 422 of the Code or
Nonqualified Stock Options that are not intended so to qualify or any
combination of Incentive Stock Options and Nonqualified Stock Options, all
in
accordance with the terms and conditions set forth in this Plan. Incentive
Stock
Options may be granted only to Employees. Nonqualified Stock Options may be
granted to Employees, Non-Employee Directors and Key Advisors.
(ii) The
purchase price (the “Exercise Price”) of Company Stock subject to an Option
shall be determined by the Committee and shall be equal to or greater than
the
Fair Market Value (as defined below) of a share of Company Stock on the date
the
Option is granted; provided, however, that an Incentive Stock Option shall
not
be granted to an Employee who, at the time of grant, owns stock possessing
more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary of the Company, unless the
Exercise Price per share is not less than one hundred ten percent (110%) of
the
Fair Market Value of Company Stock on the date of grant.
(iii) While
the
Company Stock is publicly traded, the Fair Market Value per share shall be
determined as follows: (x) if the principal trading market for the Company
Stock
is a national securities exchange or the Nasdaq National Market, the last
reported sale price thereof on the relevant date or (if there were no trades
on
that date) the latest preceding date upon which a sale was reported. or (y)
if
the Company Stock is not principally traded on such exchange or market, the
mean
between the last reported “bid” and “asked” prices of Company Stock on the
relevant date, as reported on Nasdaq or, if not so reported, as reported by
the
National Daily Quotation Bureau, Inc. or as reported in a customary financial
reporting service, as applicable and as the Committee determines. If the Company
Stock ever ceases to be publicly traded or, if publicly traded, is not subject
to reported transactions or “bid” or “asked” quotations as set forth above, the
Fair Market Value per share shall be as determined by the
Committee.
(c) Option
Term.
The
Committee shall determine the term of each Option. The term of any Option shall
not exceed ten (10) years from the date of grant. However, an Incentive Stock
Option that is granted to an Employee who, at the time of owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes
of
stock of the Company, or any parent or subsidiary of the Company, may not have
a
term that exceeds five years from the date of grant.
(d) Exercisability
of Options.
Options
shall become exercisable in accordance with such terms and conditions,
consistent with the Plan, as may be determined by the Committee and specified
in
the Grant Instrument. The Committee may waive or accelerate the satisfaction
of
an exercise term or condition of any or all outstanding Options at any time
for
any reason.
(e) Termination
of Employment, Disability or Death.
(i) Except
as
provided below, an Option may only be exercised while the Grantee is employed
by, or providing service to, the Company as an Employee, Key Advisor or member
of the Board. In the event that a Grantee ceases to be employed by the Company
(in the case of an Employee), serve on the Board (in the case of a Non-Employee
Director) or provide service to, the Company (in the case of a Key Advisor)
for
any reason other than Disability, death, or termination for Cause, any Option
which is otherwise exercisable by the Grantee shall terminate unless exercised
within 90 days after the date on which the Grantee ceases to be employed by,
serve on the Board of, or provide service to, the Company, as applicable, or
within such other period of time as may be specified by the Committee, but
in
any event no later than the date of expiration of the Option term. Except as
otherwise provided by the Committee any of the Grantee’s Options that are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by, or provide service to, the Company shall terminate as of such
date.
(ii) In
the
event the Grantee ceases to be employed by the Company (in the case of
Employees), serve on the Board (in the case of a Non-Employee Director) or
provide service to the Company (in the case of a Key Advisor) on account of
a
termination for Cause by the Company, any Option held by that Grantee shall
terminate as of the date such Grantee ceases to be employed by, serve on the
Board or provide service to, the Company, as applicable. In addition,
notwithstanding any other provisions of this Section 5, if the Committee
determines that the Grantee has engaged in conduct that constitutes Cause at
any
time while the Grantee is employed by, serving on the Board or providing service
to, as applicable, the Company or after the Grantee’s termination of employment,
Board membership or service, as applicable, any Option held by that Grantee
shall immediately terminate and that Grantee shall automatically forfeit all
shares underlying any exercised portion of an Option for which the Company
has
not yet delivered the share certificates, upon refund by the Company of the
Exercise Price paid by that Grantee for such shares. Upon any exercise of an
Option, the Company may withhold delivery of share certificates pending
resolution of an inquiry that could lead to a finding resulting in a
forfeiture.
(iii) In
the
event the Grantee ceases to be employed by, serve on the Board or provide
service to, the Company, as applicable, because the Grantee is Disabled, any
Option which is otherwise exercisable by that Grantee shall terminate unless
exercised within one year after the date on which that Grantee ceases to be
employed by, be on the Board or provide service to, the Company, as applicable
(or within such other period of time as may be specified by the Committee),
but
in any event no later than the date of expiration of the Option term. Except
as
otherwise provided by the Committee, any of a Grantee’s Options which are not
otherwise exercisable as of the date on which the Grantee ceases to be employed
by, serve on the Board or provide service to, the Company, as applicable, shall
terminate as of such date.
(iv) If
the
Grantee dies while employed by, serving on the Board or providing service to,
the Company, as applicable, or within 90 days after the date on which the
Grantee ceases to be employed, serve on the Board or provide service on account
of a termination specified in Section 5(e)(i) above (or within such other period
of time as may be specified by the Committee), any Option that is otherwise
exercisable by that Grantee shall terminate unless exercised within one year
after the date on which that Grantee ceases to be employed by, serve on the
Board or provide service to, the Company, as applicable (or within such other
period of time as may be specified by the Committee), but in any event no later
than the date of expiration of the Option term. Except as otherwise provided
by
the Committee, any of the Grantee’s Options that are not otherwise exercisable
as of the date on which the Grantee ceases to be employed by, or provide service
to, the Company shall terminate as of such date.
(f) Exercise
of Options.
A
Grantee may exercise an Option that has become exercisable, in whole or in
part,
by delivering a notice of exercise to the Company with payment of the Exercise
Price. The Grantee shall pay the Exercise Price for an Option as specified
by
the Committee (w) in cash, (x) with the approval of the Committee, by delivering
shares of Company Stock owned by the Grantee (including Company Stock acquired
in connection with the exercise of an Option, subject to such restrictions
as
the Committee deems appropriate) and having a Fair Market Value on the date
of
exercise equal to the Exercise Price or by attestation (on a form prescribed
by
the Committee) to ownership of shares of Company Stock having a Fair Market
Value on the date of exercise equal to the Exercise Price, (y) pay through
a
broker in accordance with procedures permitted by Regulation T of the Federal
Reserve Board, or (z) by such other method as the Committee may approve. The
Committee may authorize loans by the Company to Grantees in connection with
the
exercise of an Option, upon such terms and conditions as the Committee, in
its
sole discretion, deems appropriate. Shares of Company Stock used to exercise
an
Option shall have been held by the Grantee for the requisite period of time
to
avoid adverse accounting consequences to the Company with respect to the Option.
The Grantee shall pay the Exercise Price and the amount of any withholding
tax
due at the time of exercise.
(g) Limits
on Incentive Stock Options.
Each
Incentive Stock Option shall provide that, if the aggregate Fair Market Value
of
the stock on the date of the grant with respect to which Incentive Stock Options
are exercisable for the first time by a Grantee during any calendar year, under
the Plan or any other stock option plan of the Company or a parent or
subsidiary, exceeds $100,000, then the Option, as to the excess, shall be
treated as a Nonqualified Stock Option. An Incentive Stock Option shall not
be
granted to any person who is not an Employee of the Company or a parent or
subsidiary (within the meaning of section 424(f) of the Code).
6. Withholding
of Taxes.
(a) Required
Withholding.
All
Grants under the Plan shall be subject to any applicable federal (including
FICA), state and local tax withholding requirements. The Company shall have
the
right to deduct from other wages paid to the Grantee, any federal, state or
local taxes required by law to be withheld with respect to such Grants or any
exercise thereof. In the case of Options paid in Company Stock, the Company
may
require that the Grantee or other person receiving or exercising Grants pay
to
the Company the amount of any federal, state or local taxes that the Company
is
required to withhold with respect to such Grants, or the Company may deduct
from
other wages paid by the Company the amount of any withholding taxes due with
respect to such Grants.
(b) Election
to Withhold Shares.
If the
Committee so permits, a Grantee may elect to satisfy the Company’s income tax
withholding obligation with respect to Options paid in Company Stock by having
shares withheld up to an amount that does not exceed the Grantee’s minimum
applicable withholding tax rate for federal (including FICA), state and local
tax liabilities. The election must be in a form and manner prescribed by the
Committee and may be subject to the prior approval of the
Committee.
7. Transfer
of Grants.
(a) Nontransferability
of Grants.
Except
as provided below, only the Grantee may exercise rights under a Grant during
the
Grantee’s lifetime. A Grantee may not transfer those rights except by will or by
the laws of descent and distribution or, with respect to Grants other than
Incentive Stock Options, if permitted in any specific case by the Committee,
pursuant to a domestic relations order. When a Grantee dies, such Grantee’s
Successor Grantee may exercise such rights, provided that any such Successor
Grantee must furnish proof satisfactory to the Company
of his or her right to receive the Grant under the Grantee’s will or under the
applicable laws of descent and distribution.
(b) Transfer
of Nonqualified Stock Options.
Notwithstanding the foregoing, the Committee may provide, in a Grant Instrument,
that a Grantee may transfer Nonqualified Stock Options to immediate family
members, or one or more trusts or other entities for the benefit of or owned
by
immediate family members, consistent with the applicable securities laws,
according to such terms as the Committee may determine; provided that the
Grantee receives no consideration for the transfer of an Option and the
transferred Option shall continue to be subject to the same terms and conditions
as were applicable to the Option immediately before the transfer.
8. Consequences
of a Change of Control.
(a) Assumption
of Grants.
Upon
the occurrence of a Change of Control in which the Company is not the surviving
corporation (or survives only as a subsidiary of another corporation), unless
the Committee determines otherwise, all outstanding Options that are not
exercised shall be assumed by, or replaced with comparable options or rights
by
the surviving corporation (or a parent of the surviving corporation), and other
outstanding Grants shall he converted to similar grants of the surviving
corporation (or a parent of the surviving corporation).
(b) Other
Alternatives.
Notwithstanding the foregoing, in the event of a Change in Control, the
Committee may, but shall not be obligated to, take any of the following actions
with respect to any or all outstanding Grants: the Committee may (i) determine
that outstanding Options shall automatically accelerate and become fully
exercisable, (ii) require that Grantees surrender their outstanding Options
in
exchange for a payment by the Company, in cash or Company Stock as determined
by
the Committee, in an amount equal to the amount by which the then Fair Market
Value of the shares of Company Stock subject to the Grantee’s unexercised
Options exceeds the Exercise Price of the Options or (iii) after giving Grantees
an opportunity exercise their outstanding Options, terminate any or all
unexercised Options at such time as the Committee deems appropriate. Such
surrender, termination or settlement shall take place as of the date of the
Change of Control or such other date as the Committee may specify. The Committee
shall have no obligation to take any of the foregoing actions, and, in the
absence of any such actions, outstanding Grants shall continue in effect
according to their terms (subject to any assumption pursuant to Subsection
(a)).
9. Requirements
for Issuance or Transfer of Shares.
(a) Limitations
on Issuance or Transfer of Shares.
No
Company Stock shall be issued or transferred in connection with any Grant
hereunder unless and until all legal requirements applicable to the issuance
or
transfer of such Company Stock have been complied with to the satisfaction
of
the Committee. The Committee shall have the right to condition any Grant made
to
any Grantee hereunder on such Grantee’s undertaking in writing to comply with
such restrictions on his or her subsequent disposition of such shares of Company
Stock as the Committee shall deem necessary or advisable, and certificates
representing such shares maybe legended to reflect any such restrictions.
Certificates representing shares of Company Stock issued or transferred under
the Plan will be subject to such stop-transfer orders and other restrictions
as
may be required by applicable laws, regulations and interpretations, including
any requirement that a legend be placed thereon.
(b) Lock-Up
Period.
If so
requested by the Company or any representative of the underwriters (the
“Managing Underwriter”) in connection with any underwritten offering of
securities of that Company under the Securities Act a Grantee (including any
successors or assigns) shall not sell or otherwise transfer any shares or other
securities of the Company during the 30-day period preceding and the 180-day
period following the effective date of a registration statement of the Company
filed under the Securities Act for such underwriting (or such shorter period
as
may be requested by the Managing Underwriter and agreed to by the Company)
(the
“Market Standoff Period”). The Company may impose stop-transfer instructions
with respect to securities subject to the foregoing restrictions until the
end
of such Market Standoff Period. Certificates representing Company stock issued
upon exercise of Options or otherwise pursuant to the Plan shall bear such
legend regarding the lock-up period obligations as counsel to the Company shall
determine.
10. Amendment
and Termination of the Plan.
(a) Amendment.
The
Board may amend or terminate the Plan at any time; provided, however, that
the
Board shall not amend the Plan without stockholder approval if (i) such approval
is required in order for Incentive Stock Options granted or to be granted under
the Plan to meet the requirements of section 422 of the Code, (ii) such approval
is required in order to exempt compensation under the Plan from the deduction
limit under section 162(m) of the Code, or (iii) such approval is required
by
applicable stock exchange requirements. When amending or terminating the Plan,
no Board action shall cause the application of the requirements, the twenty
percent (20%) penalty or immediate tax recognition under section 409A of the
Code.
(b) Termination
of Plan.
The
Plan shall terminate on the day immediately preceding the tenth anniversary
of
its effective date, unless the Plan is terminated earlier by the Board or is
extended by the Board with the approval of the stockholders.
(c) Termination
and Amendment of Outstanding Grants.
A
termination or amendment of the Plan that occurs after a Grant is made shall
not
materially impair the rights of a Grantee unless the Grantee consents or unless
the Committee acts under Section 16(b) hereunder. The termination of the Plan
shall not impair the power and authority of the Committee with respect to an
outstanding Grant. Whether or not the Plan has terminated, an outstanding Grant
may be terminated or amended under Section 16(b) hereunder or may be amended
by
agreement of the Company and the Grantee consistent with the Plan.
(d) Governing
Document.
The
Plan shall be the controlling document. No other statements, representations,
explanatory materials or examples, oral or written, may amend the Plan in any
manner. The Plan shall be binding upon and enforceable against the Company
and
its successors and assigns.
11. Funding
the Plan.
This
Plan
shall be unfunded. The Company shall not be required to establish any special
or
separate fund or to make any other segregation of assets to assure the payment
of any Grants under this Plan. In no event shall interest be paid or accrued
on
any Grant, including unpaid installments of Grants.
12. Rights
of Participants.
Nothing
in this Plan shall entitle any Employee, Key Advisor, Non-Employee Director
or
other person to any claim or right to be granted a Grant under this Plan.
Neither this Plan nor any action taken hereunder shall be construed as giving
any individual any rights to be retained by or in the employ of the Company
or
any other employment rights.
13. No
Fractional Shares.
No
fractional shares of Company Stock shall be issued or delivered pursuant to
the
Plan or any Grant. The Committee shall determine whether cash, other awards
or
other property shall be issued or paid in lieu of such fractional shares or
whether such fractional shares or any rights thereto shall be forfeited or
otherwise eliminated.
14. Heading.
Section
headings are for reference only. In the event of a conflict between a title
and
the content of a Section, the content of the Section shall control.
15. Effective
Date of the Plan.
Subject
to approval by the Company’s stockholders, the Plan shall be effective on April
19, 2006, the date of the adoption of this Plan by the Board of Directors of
the
Company.
16. Miscellaneous.
(a) Grants
in Connection with Corporate Transactions and Otherwise.
Nothing
contained in this Plan shall be construed to (i) limit the right of the
Committee to make Grants under this Plan in connection with the acquisition,
by purchase, lease, merger, consolidation or otherwise, of the business or
assets of any corporation, firm or association, including Grants to employees
thereof who become Employees of the Company, or for other proper corporate
purposes, or (ii) limit the right of the Company to grant stock options or
make
other awards outside of this Plan. Without limiting the foregoing, the Committee
may make a Grant to an employee of another corporation who becomes an Employee
by reason of a corporate merger, consolidation, acquisition of stock or
property, reorganization or liquidation involving the Company or any of its
Subsidiaries in substitution for a stock option or stock award grant made
by
such corporation. The terms and conditions of the substitute grants may vary
from the terms and conditions required by the Plan and from those of the
substituted stock incentives. The Committee shall prescribe the provisions
of
the substitute grants.
(b) Compliance
with Law.
The
Plan, the exercise of Options and the obligations of the Company to issue or
transfer shares of Company Stock under Grants shall be subject to all applicable
laws and to approvals by any governmental or regulatory agency as may be
required. With respect to Grantees subject to section 16 of the Exchange Act,
it
is the intent of the Company that the Plan and all transactions under the Plan
comply with all applicable provisions of Rule 16b-3 or its successors under
the
Exchange Act. In addition, it is the intent of the Company that the Plan and
applicable Grants under the Plan comply with the applicable provisions of
section 162(m), section 409A and section 422 of the Code. To the extent that
any
legal requirement of section 16 of the Exchange Act, or section 162(m), section
409A and section 422 of the Code as set forth in the Plan ceases to be required
under section 16 of the Exchange Act, or section 162(m), section 409A and
section 422 of the Code, that Plan provision shall cease to apply. The Committee
may revoke any Grant if it is contrary to law or modify a Grant to bring it
into
compliance with any valid and mandatory government regulation. The Committee
may
also adopt rules regarding the withholding of taxes on payments to Grantees.
The
Committee may, in its sole discretion, agree to limit its authority under this
Section.
(c) Savings
Provision.
In the
event any provision of this Plan shall be deemed to cause the application of
the
twenty percent (20%) penalty or immediate tax recognition under section 409A
of
the Code, the provision that causes either the application of the penalty or
immediate tax recognition shall become null and void, and the Plan shall be
construed and enforced as if the provision causing the negative tax consequences
had never been contained herein.
(d) Governing
Law.
The
validity, construction, interpretation and effect of the Plan and Grant
Instruments issued under the Plan shall be governed and construed by and
determined in accordance with the laws of Florida, without giving effect to
the
conflict of laws provisions thereof.
18. Glossary.
The
following terms shall have the meaning assigned them below:
“Board”
shall
mean the Board of Directors of the Company.
“Cause”
shall
mean, except to the extent specified otherwise by the Committee, a finding
by
the Committee that the Grantee (i) has breached his or her employment or service
contract with the Company, in the case of Employees
or Key Advisors, or breached his fiduciary duties to the Company or otherwise
been removed from the Board by the action of the Board, in the case of a
Non-Employee Director, (ii) has engaged in disloyalty to the Company, including,
without limitation, fraud, embezzlement, theft, commission of a felony or proven
dishonesty in the course of his or her employment or service, (iii) has
disclosed trade secrets or confidential information of the Company to persons
not entitled to receive such information or (iv) has engaged in such other
behavior detrimental to the interests of the Company as the Committee
determines.
“Change
of Control”
shall
mean the occurrence of any of the following events:
(i) Any
“person” (defined to have the meaning in this definition of Change of Control as
is assigned that term in sections 13(d) and 14(d) of the Exchange Act) other
than an “Excluded Stockholder”
(as defined herein) becomes a “beneficial owner” (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company
representing more than fifty percent (50%) of the voting power of the then
outstanding securities of the Company; provided that a Change of Control shall
not be deemed to occur as a result of a transaction in which the Company becomes
a subsidiary of another corporation and in which the stockholders of the
Company, immediately prior to the transaction, will beneficially own,
immediately after the transaction, shares entitling such stockholders to more
than fifty percent (50%) of all votes to which all stockholders of the parent
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); the term “Excluded Stockholder” meaning, for purposes of
this definition of Change of Control, any person who is the beneficial owner,
directly or indirectly of more than twenty percent (20%) of the voting power
of
the then outstanding securities of the Company;
(ii) The
stockholders of the Company approve (or, if stockholder approval is not
required, the Board approves) an agreement providing for (i) 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 more than fifty percent (50%) 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), (ii) the liquidation or
dissolution of the Company; or (iii) the sale or other disposition of assets
equal to or greater than forty percent (40%) of the total gross fair market
value of all assets of the Company immediately prior to such sale or
disposition; or
(iii) Any
person other than an Excluded Person has commenced a tender offer or exchange
offer for thirty percent (30%) or more of the voting power of the then
outstanding stock of the Company.
“Code”
shall
mean the Internal Revenue Code of 1986, as amended.
“Committee”
shall
mean the Compensation Committee of the Board.
“Company”
shall
mean Dyadic International, Inc., a Delaware corporation.
“Company
Stock”
shall
mean shares of common stock of the Company.
“Disability”
shall
mean a Grantee’s becoming disabled within the meaning of section 22(e)(3) of the
Code.
“Employees”
shall
mean all employees of the Company and its Subsidiaries, including Employees
who
are officers or members of the Board.
“Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended.
“Exercise
Price”
shall
mean the purchase price of Company Stock subject to an Option under a
Grant.
“Key
Advisors”
shall
mean consultants and advisors who perform services for the Company or any of
its
Subsidiaries.
“Grantee”
shall mean Key Advisors and Non-Employee Directors who receive Grants under
this
Plan.
“Grants”
shall
mean awards of Options made by the Committee under the Plan.
“Grant
Instruments”
shall
mean the written instrument evidencing the Committee’s Grant of an Option to a
Participant, or an amendment thereto.
“Incentive
Stock Options”
shall
mean Options qualifying as such within the meaning of section 422 of the
Code.
“Managing
Underwriter”
shall
have the meaning assigned that term in Section 9(b) of the Plan.
“Market
Standoff Period”
shall
have the meaning assigned that term in Section 9(b) of the
Plan.
“Non-Employee
Directors”
shall
mean members of the Board who are not Employees.
“Non-Qualifying
Options”
shall
mean Options that do not qualify as Incentive Stock Options.
“Options”
means
Incentive Stock Options and Non-Qualifying Options, without
distinction.
“Plan”
shall
mean the Dyadic International, Inc. 2006 Stock Option Plan.
“Securities
Act”
shall
mean the Securities Act of 1933, as amended.
“Subsidiary”
shall
mean any corporation or other legal entity of which the Company owns, directly
or indirectly, 50% or more of the stock or other equity interests, the holders
of which are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal
entity.
“Successor
Grantee”
shall
mean the personal representative or other person entitled to succeed to the
rights of a Grantee following his or her death.
PROXY
FORM
OF PROXY
DYADIC
INTERNATIONAL, INC.
PROXY
FOR 2006 ANNUAL MEETING OF STOCKHOLDERS
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
JUNE 12,
2006
The
undersigned stockholder(s) of Dyadic International, Inc., a Delaware corporation
(the “Company”), hereby revoking any proxy heretofore given, does hereby appoint
Mark A. Emalfarb and Wayne Moor, and each of them, with full power to act alone,
the true and lawful attorneys-in-fact and proxies of the undersigned, with
full
powers of substitution, and hereby authorize(s) them and each of them, to
represent the undersigned and to vote all shares of common stock of the Company
that the undersigned is entitled to vote at the 2006 Annual Meeting of
Stockholders of the Company to be held on June 12, 2006 at 10:00 a.m., local
time, at the Doubletree Hotel located at 4431 PGA Boulevard, Palm Beach Gardens,
Florida 33410, and any and all adjournments and postponements thereof, with
all
powers the undersigned would possess if personally present, on the following
proposals, each as described more fully in the accompanying proxy statement,
and
any other matters coming before said meeting.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL OF NOMINEES FOR CLASS II DIRECTOR
NAMED IN PROPOSAL 1 AND THE OTHER PROPOSALS.
|
1.
|
To
elect the following nominees as Class II directors, each for a three-year
term ending in 2009: Stephen J. Warner and Harry Z.
Rosengart
|
FOR
the
nominees above (except as marked below) WITHHELD
for all
nominees above
(INSTRUCTION:
To
withhold authority to vote for any individual nominee, write that nominee’s name
in the space provided below)
________________________________________________________________________
|
2.
|
To
approve the Amended and Restated Dyadic International, Inc. 2001
Equity
Compensation Plan effective as of January 1,
2005.
|
FOR AGAINST ABSTAIN
3. To
approve the Dyadic International, Inc. 2006 Stock Option Plan.
FOR AGAINST ABSTAIN
|
4.
|
To
ratify the appointment of Ernst & Young LLP as the independent
registered public accounting firm for the year ending December 31,
2006.
|
5. To
transact any other business as may properly be brought before the annual
meeting.
This
proxy will be voted in the manner directed herein by the undersigned. IF NO
DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF THE NOMINEES
FOR CLASS II DIRECTOR NAMED IN PROPOSAL 1 AND THE OTHER PROPOSALS AND IN
THE DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE ANNUAL MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW.
Receipt
of the Notice of 2006 Annual Meeting of Stockholders and accompanying Proxy
Statement, together with the Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2005 is hereby acknowledged.
IMPORTANT
— PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED
ENVELOPE.
NOTE: Please
sign exactly as your name appears on this proxy. Joint owners should each sign
personally. If signing as attorney, executor, administrator, trustee or
guardian, please include your full title. Corporate or partnership proxies
should be signed by an authorized officer.
Signature(s)
___________________ Date
___________, 2006
Signature(s)
___________________ Date
___________, 2006
2