UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) (Rule 14a-101) of the
Securities Exchange Act of 1934
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☒
Definitive Proxy
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☐
Definitive Additional
Materials
☐
Soliciting Material Pursuant
to §240.14a-12
Celcuity Inc.
(Name
of Registrant as Specified in its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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CELCUITY INC.
16305
36th
Avenue North, Suite 100
Minneapolis,
MN 55446
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 2020
TO THE STOCKHOLDERS OF CELCUITY INC.:
Please Take Notice that Celcuity
Inc. (“Celcuity”) will hold its 2020 Annual Meeting of
Stockholders at the offices of Celcuity Inc., 16305 36th Avenue North, Suite
100, Minneapolis, MN 55446, on May 14, 2020 at 2:00 p.m. local
time. Celcuity is holding this meeting for the purpose of
considering and taking appropriate action with respect to the
following:
1.
To elect the six
director nominees named in the Proxy Statement to the Celcuity
Board of Directors, to serve until the earlier of the next annual
meeting of stockholders, the election of such director’s
successor, or such director’s death, resignation or
removal;
2.
To ratify the
appointment of Boulay PLLP as Celcuity’s independent
registered public accounting firm for the year ending December 31,
2020;
3.
To approve, on an
advisory basis, named executive officer compensation;
4.
To approve the
Celcuity Inc. Amended and Restated 2017 Stock Incentive Plan;
and
5.
To transact any
other business as may properly come before the meeting or any
adjournments thereof, including matters incident to the conduct of
the meeting.
Holders
of record of Celcuity common stock at the close of business on
March 17, 2020 will be entitled to vote at the meeting or any
adjournments thereof. Your attention is directed to the Proxy
Statement accompanying this Notice for a more complete statement of
the matters to be considered at the meeting. A copy of the Annual
Report on Form 10-K for the year ended December 31, 2019 also
accompanies this Notice.
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By
Order of the Board of Directors,
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/s/ Brian F.
Sullivan
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Chairman of the
Board of Directors and
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Date: March 31,
2020
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Chief Executive
Officer
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Your
vote is important. To vote your shares, please vote by telephone or
Internet, as directed in the Proxy Statement, or, if you received a
proxy card or voting instruction form by mail, please complete,
sign, date and mail the proxy card or voting instruction form
promptly in the envelope provided. The prompt return of proxies
will save Celcuity the expense of further requests for
proxies.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 14,
2020:
This Notice, the Proxy Statement, and the Annual Report on
Form 10-K are available at www.proxyvote.com and on the
Investor Relations section of Celcuity’s website at
www.celcuity.com/home/investors/.
1
CELCUITY INC.
16305
36th
Avenue North, Suite 100
Minneapolis,
MN 55446
PROXY STATEMENT
2020 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 2020
This
Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the “Board”) of
Celcuity Inc., a Delaware corporation (“Celcuity,” the
“Company,” “we,” “our” or
“us”), for use at the 2020 Annual Meeting of
Stockholders (the “Annual Meeting”) to be held at the
Celcuity corporate offices, 16305 36th Avenue North, Suite
100, Minneapolis, MN 55446, at 2:00 p.m. local time on May 14,
2020.
Purposes of the Annual Meeting
The
purposes of the Annual Meeting are:
1.
To elect the six
director nominees named in this Proxy Statement to the Celcuity
Board of Directors, to serve until the earlier of the next annual
meeting of stockholders, the election of such director’s
successor, or such director’s death, resignation or
removal;
2.
To ratify the
appointment of Boulay PLLP as Celcuity’s independent
registered public accounting firm for the year ending December 31,
2020;
3.
To approve, on an
advisory basis, named executive officer compensation;
4.
To approve the
Celcuity Inc. Amended and Restated 2017 Stock Incentive Plan;
and
5.
To transact any
other business as may properly come before the Annual Meeting or
any adjournments thereof, including matters incident to the conduct
of the Annual Meeting.
Action
may be taken on any one of the foregoing proposals on the date
specified above for the Annual Meeting, or on any date or dates to
which the Annual Meeting may be adjourned.
Notice and Access Delivery
In
accordance with rules and regulations adopted by the U.S.
Securities and Exchange Commission (the “SEC”), we have
elected to provide our beneficial owners and stockholders of record
access to our proxy materials over the Internet. Beneficial owners
are stockholders whose shares are held in the name of a broker,
bank, or other nominee (i.e., in “street name”).
Accordingly, a Notice of Internet Availability of Proxy Materials
(the “Notice”) will be mailed on or about March
31, 2020 to our beneficial owners and stockholders of record
who owned our common stock at the close of business on March
17, 2020. Beneficial owners and stockholders of record will have
the ability to access the proxy materials on a website referred to
in the Notice or to request a printed set of the proxy materials be
sent to them by following the instructions in the Notice.
Beneficial owners and stockholders of record who have previously
requested to receive paper copies of our proxy materials will
receive paper copies of the proxy materials instead of a
Notice.
You
can choose to receive our future proxy materials electronically by
visiting www.proxyvote.com. Your choice to receive proxy materials
electronically will remain in effect until you instruct us
otherwise by following the instructions contained in your Notice
and visiting www.proxyvote.com, sending an email to
sendmaterial@proxyvote.com, or calling 1-800-579-1639.
2
Solicitation
This
solicitation is made by Celcuity, and Celcuity will pay the cost of
soliciting proxies for the Annual Meeting. In addition to
soliciting proxies by mail, we may solicit proxies personally or by
telephone, email, facsimile or other means of communication by our
directors, officers and employees. These persons will not
specifically be compensated for these activities, but they may be
reimbursed for reasonable out-of-pocket expenses in connection with
this solicitation. We will not specifically engage any employees or
paid solicitors for the purpose of soliciting proxies for the
Annual Meeting. We will arrange with brokerage firms and other
custodians, nominees and fiduciaries to forward solicitation
materials to the beneficial owners of shares held of record by
these persons. We will reimburse these brokerage firms, custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses
incurred by them in connection with this solicitation.
Record Date and Shares Outstanding
Only
holders of record of our common stock at the close of business on
March 17, 2020 will be entitled to vote at the Annual Meeting or
any adjournments thereof. As of March 17, 2020, there were
10,253,988 shares of our common stock outstanding and entitled to
vote. Each share of common stock entitles the holder thereof to one
vote upon each matter to be presented at the Annual
Meeting.
If
you are a stockholder of record, you may vote in person at the
Annual Meeting, vote by proxy using the enclosed proxy card (if you
received paper copies of the proxy materials), vote by proxy over
the telephone, or vote by proxy over the Internet. Whether or not
you plan to attend the Annual Meeting, we urge you to vote by proxy
to ensure your vote is counted. You may still attend the Annual
Meeting and vote in person even if you have already voted by
proxy.
●
To vote in person,
come to the Annual Meeting and we will give you a ballot when you
arrive.
●
If you received
paper copies of the proxy materials, to vote using the proxy card,
simply complete, sign and date the enclosed proxy card and return
it promptly in the envelope provided. If you return your signed
proxy card to us before the Annual Meeting, we will vote your
shares as you direct.
●
To
vote over the telephone, dial toll-free 1-800-690-6903 using a
touch-tone phone and follow the recorded instructions. Please have
available the 16-Digit Control Number from the enclosed proxy card,
if you received one, or from your Notice. Your vote must be
received by 11:59 p.m., Eastern Time (10:59 p.m., Central Time) on
May 13, 2020, to be counted.
●
To
vote over the Internet, go to www.proxyvote.com to complete an
electronic proxy card. Please have available the 16-Digit Control
Number from the enclosed proxy card, if you received one, or from
your Notice. Your vote must be received by 11:59 p.m., Eastern Time
(10:59 p.m., Central Time) on May 13, 2020, to be
counted.
We are providing Internet proxy voting to allow you to vote your
shares online, with procedures designed to ensure the authenticity
and correctness of your proxy vote instructions. However, please be
aware that you must bear any costs associated with your Internet
access, such as usage charges from Internet access providers and
telephone companies.
If
you are a beneficial owner of shares registered in the name of your
broker, bank, or other nominee, you may have received a proxy card
and voting instructions with these proxy materials from that
organization rather than from us. Simply complete and mail the
proxy card to ensure that your vote is submitted to your broker.
Alternatively, you may vote by telephone or over the Internet as
instructed by your broker. To vote in person at the Annual Meeting,
you must obtain a valid proxy from your broker. Follow the
instructions from your broker included with these proxy materials
or contact your broker to request a proxy form.
Quorum
A
quorum, consisting of a majority of the outstanding shares of our
common stock entitled to vote at the Annual Meeting, must be
present in person or by proxy before any action can be taken by the
stockholders at the Annual Meeting. Abstentions and withheld votes
are counted as present and entitled to vote for purposes of
determining a quorum.
If you are a beneficial owner of shares registered
in the name of your broker, bank, or other nominee, such shares may
be voted by the broker on “routine” matters, which
includes ratification of the appointment of our independent
registered public accounting firm (Proposal 2). All other proposals
in this Proxy Statement are considered “non-routine.”
Your broker will not be able to vote your shares on non-routine
matters being considered at the Annual Meeting unless you have
given instructions to your broker prior to the Annual Meeting on
how to vote your shares. When the
broker does not obtain direction to vote the shares, the
broker’s abstention is referred to as a “broker
non-vote.” Broker non-votes will be considered present for
quorum purposes at the Annual Meeting.
3
So long
as a quorum is present at the beginning of the Annual Meeting, the
stockholders present may continue to transact business until
adjournment, even if enough stockholders have left the meeting to
leave less than a quorum, and even if any stockholder present in
person or by proxy refuses to vote or participate in the Annual
Meeting. If the Annual Meeting is adjourned for any reason, the
approval of the proposals may be considered and voted upon by
stockholders at the subsequent reconvened meeting. All proxies will
be voted in the same manner as they would have been voted at the
original Annual Meeting except for any proxies that have been
properly withdrawn or revoked.
Board Recommendation and Voting of Proxies
The
Board recommends a vote:
●
FOR the election of each of the director
nominees (Proposal 1).
●
FOR the ratification of the appointment
of Boulay PLLP as our independent registered public accounting firm
for the year ending December 31, 2020 (Proposal 2).
●
FOR the approval, on an advisory basis,
of named executive officer compensation (Proposal 3).
●
FOR the approval of the Celcuity Inc.
Amended and Restated 2017 Stock Incentive Plan (Proposal
4).
If
you complete and submit your proxy before the Annual Meeting, the
persons named as proxy agents will vote the shares represented by
your proxy in accordance with your instructions. If you submit a
proxy without giving voting instructions, your shares will be voted
in the manner recommended by the Board on all matters presented in
this Proxy Statement. If any other matters are properly presented
for consideration at the Annual Meeting, including, among other
things, consideration of a motion to adjourn the Annual Meeting to
another time or place (including, without limitation, for the
purpose of soliciting additional proxies), the persons named as
proxy agents will have discretion to vote on those matters in
accordance with their best judgment. We do not currently anticipate
that any other matters will be raised at the Annual
Meeting.
Vote Required
For the
election of directors, you have the option to vote
“For” or “Withhold” authority to vote for
any of the director nominees. Assuming a quorum is present, a
plurality of the votes cast is required for the election of
directors. This means that the six director nominees with the most
votes will be elected. If you “Withhold” authority to
vote on any or all nominees, your vote will have no effect on the
outcome of the election. If you hold your shares in “street
name” and do not provide instructions to your broker, your
broker will not have discretionary authority with respect to the
proposal to elect directors and will therefore provide a
“broker non-vote.” Since broker non-votes are not
deemed votes cast, they will have no effect on the outcome of the
election.
For the
ratification of the appointment of Boulay PLLP as our independent
registered public accounting firm, you have the option to vote
“For,” “Against” or “Abstain”
from voting. Assuming a quorum is present, the affirmative vote of
a majority of the shares of common stock of Celcuity represented at
the Annual Meeting, either in person or by proxy, and entitled to
vote is required to ratify the appointment of Boulay PLLP as our
independent registered public accounting firm. If you
“Abstain” from voting with respect to this proposal,
your shares will be counted as present and entitled to vote and
your vote will have the same effect as a vote against the proposal.
If you hold your shares in “street name” and do not
provide instructions to your broker, your broker will have
discretionary authority to vote your shares with respect to this
proposal.
For the
approval, on an advisory basis, of the compensation of our named
executive officers, you have the option to vote “For,”
“Against” or “Abstain” from voting.
Assuming a quorum is present, the affirmative vote of a majority of
the shares of common stock of Celcuity represented at the Annual
Meeting, either in person or by proxy, and entitled to vote is
required to approve the compensation of our named executive
officers. If you mark “Abstain” from voting with
respect to this proposal, your shares will be counted as present
and entitled to vote and your vote will have the same effect as a
vote against the proposal. If you hold your shares in “street
name” and do not provide instructions to your broker, your
broker will not have discretionary authority to vote your shares
with respect to this proposal and will therefore provide a
“broker non-vote.” Since broker non-votes are not
deemed present and entitled to vote on this proposal, they will
have no effect on the outcome of the proposal. The vote on approval
of the compensation of our named executive officers is an advisory
vote, which means that the result of the vote is not binding on the
Company, our Board or the Compensation Committee. To the extent
there is any significant vote against our named executive officer
compensation as disclosed in this Proxy Statement, the Board and
the Compensation Committee will evaluate whether any actions are
necessary to address the concerns of stockholders.
For the
approval of the Celcuity Inc. Amended and Restated 2017 Stock
Incentive Plan, you have the option to vote “For,”
“Against” or “Abstain” from voting.
Assuming a quorum is present, the affirmative vote of a majority of
the shares of common stock of Celcuity represented at the Annual
Meeting, either in person or by proxy, and entitled to vote is
required to approve the Celcuity Inc. Amended and Restated 2017
Stock Incentive Plan. If you mark “Abstain” from voting
with respect to this proposal, your shares will be counted as
present and entitled to vote and your vote will have the same
effect as a vote against the proposal. If you hold your shares in
“street name” and do not provide instructions to your
broker, your broker will not have discretionary authority to vote
your shares with respect to this proposal and will therefore
provide a “broker non-vote.” Since broker non-votes are
not deemed present and entitled to vote on this proposal, they will
have no effect on the outcome of the proposal.
4
Revocability of Proxies
Any
person giving a proxy for the Annual Meeting has the power to
revoke it at any time before it is voted. If you are a record
holder of your shares, you may revoke your proxy in any one of the
following ways: (1) sending a written notice of revocation dated
after the date of the proxy to our Corporate Secretary, Celcuity
Inc., 16305 36th Avenue North, Suite
100, Minneapolis, MN 55446; (2) submitting a properly signed proxy
with a later date; (3) submitting a new vote by telephone or
Internet; or (4) attending the Annual Meeting and voting in person.
Attendance at the Annual Meeting will not, in and of itself,
constitute a revocation of a proxy.
If
you are a beneficial owner of shares
registered in the name of your broker, bank, or other
nominee, you must contact them in order to find out how to
revoke your proxy.
Other Business
Our
Board currently has no knowledge of any matters to be presented at
the Annual Meeting other than those referred to in this Proxy
Statement. The solicited proxies give discretionary authority to
the proxy agents named therein to vote in accordance with the
recommendation of the Board if any other matters are
presented.
FINANCIAL INFORMATION
Our
2019 Annual Report on Form 10-K filed with the SEC, including, but
not limited to, the balance sheets and the related statements of
operations, changes in stockholders’ equity and cash flows
for Celcuity as of and for the years ended December 31, 2019 and
2018 accompanies these materials. A copy of the 2019 Annual Report
on Form 10-K may be obtained without charge upon request to our
Chief Financial Officer, Celcuity Inc., 16305 36th Avenue North, Suite
100, Minneapolis, MN 55446. Our 2019 Annual Report on Form 10-K is
also available on our website at
www.celcuity.com/home/investors/sec-filings/.
5
PROPOSAL NO. 1
ELECTION
OF DIRECTORS
Celcuity’s
business and affairs are managed under the direction of the Board.
All our directors are elected at each annual meeting to serve until
their successors are duly elected or until their earlier death,
resignation or removal. If any of the nominees for director at the
Annual Meeting becomes unavailable for election for any reason
(none being presently known), the proxy agents will have
discretionary authority to vote, pursuant to the proxies, for a
suitable substitute or substitutes selected in accordance with the
best judgment of the proxy agents.
Nominees for Election
The
Board, upon the recommendation of the Nominating and Corporate
Governance Committee, has nominated the six persons named in the
table below for election as directors at the Annual Meeting. Each
nominee listed below currently serves as a director of Celcuity.
Each of Dr. Buller and Dr. Furcht is standing for election for the
first time at the Annual Meeting. Dr. Furcht was appointed in May
2019 and Dr. Buller was appointed in December 2019 and each was
recommended for appointment by the current directors.
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Name of Nominee
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Age
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Position Held with Celcuity Inc.
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Director Since
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Richard
E. Buller
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70
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Director
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2019
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David
F. Dalvey
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61
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Director
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2014
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Leo T.
Furcht
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73
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Director
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2019
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Lance
G. Laing
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58
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Director,
Chief Science Officer, Vice President, and Secretary
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2012
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Richard
J. Nigon
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72
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Director
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2017
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Brian
F. Sullivan
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58
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Chairman
of the Board and Chief Executive Officer
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2012
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The
Board has determined that each of Richard E. Buller, David F.
Dalvey, Leo T. Furcht, and Richard J. Nigon qualifies as an
independent director under the rules
of the Nasdaq Stock Market (the “Nasdaq Listing
Rules”). Accordingly, the Board is and will be
composed of a majority of independent directors.
Set
forth below with respect to each director nominee standing for
election at the Annual Meeting is each nominee’s principal
occupation and business experience during at least the past five
years, the names of other publicly-held companies for which such
nominee serves or has served as a director during such period, and
the experience, qualifications, attributes or skills that has led
the Board to conclude that each nominee should serve as a director
of the Company.
Richard E. Buller, M.D.,
Ph.D., was appointed to
Celcuity’s Board in December 2019. Dr. Buller has over 15
years of experience leading oncology clinical development and
translational medicine departments at major pharmaceutical
companies. He has participated in the development of 15 drugs and
several companion diagnostics that received U.S. FDA
approval. Dr. Buller most recently served as Head Oncology
Clinical Development and Vice President of Translational Oncology
at Pfizer, Inc, one of the world’s largest pharmaceutical
companies, until he retired in 2016. He had previously served as
Vice President of Translational Medicine at Exelixis, a leading
biopharmaceutical company, where he led efforts to study patients
selected by molecular testing for inclusion in their phase 2 and
phase 3 clinical trials. He began his pharmaceutical company career
at GlaxoSmithKline as Director of the Oncology Medicine Development
Center. Prior to his leadership positions in drug development, he
was Professor of Gynecologic Oncology at the University of Iowa,
where he led laboratory research focused on identifying genomic
variants involved in ovarian cancer. He received his M.D. from the
Baylor College of Medicine, where he also received his Ph.D. in
cell biology. Among other attributes,
skills, and qualifications, the Board believes Dr. Buller is
uniquely qualified to serve as a director based on his oncology
drug and diagnostic development expertise.
David F. Dalvey
has served as a member of
Celcuity’s Board since February 2014. Mr. Dalvey
has more than 30 years of experience in the fields of corporate
finance and venture capital, working primarily with growth-oriented
technology and life-science businesses. He has over 10 years of
corporate finance advisory experience with two national investment
banks, completing over 150 individual transactions. He has been the
General Partner of Brightstone Venture Capital, a venture capital
management company, since September 2000. Brightstone is a
25-year old venture capital management company that has raised and
managed ten venture partnerships. Previously, he held management
positions with R.J. Steichen and Company, an investment bank, from
1995 to 2000, The Food Fund LP, a venture capital firm, from 1992
to 1995 and Wessels, Arnold & Henderson, an investment bank,
from 1987 to 1992. Mr. Dalvey served on the board of directors for
Navarre Corporation (now Speed Commerce, Inc.) from 2009 until
November 2012, on the board of managers for Blue Rock Market
Neutral Fund, a mutual fund registered under the Investment Company
Act of 1940, from 2000 to 2014 and on the board of directors for
Digitiliti, Inc. from July 2011 until October 2012. Mr.
Dalvey has significant operational exposure as a board director or
advisor to many other public and privately held growth businesses
and has served on these companies’ audit, strategic or
governance committees, including companies such as HomeSpotter,
Definity Health, AppTec Laboratories, CHF Solutions, BiteSquad,
Agiliti, and Nature Vision. Mr. Dalvey received a B.S. in
Business/Management Economics from University of Minnesota. Among
other attributes, skills, and qualifications, the Board believes
Mr. Dalvey is uniquely qualified to serve as a director based on
his leadership experience in operating both public and private
companies and his experience working in the investment community
and with investment firms, which enable him to bring valuable
insight and knowledge to our Board.
6
Leo T. Furcht, M.D.,
was appointed to Celcuity’s
Board in May 2019. Dr. Furcht is currently Allen-Pardee
Professor of Cancer Biology and Head of the Department of
Laboratory Medicine and Pathology at the University of Minnesota
and a member of the Division of Molecular Pathology and Genomics.
He served as Chairman of the Board of Directors for University of
Minnesota Physicians, the Medical School practice plan with
approximately 700 physicians, from 2004-2014. He was also the
founding Director of the Biomedical Engineering Center from
1990-2001, where he led efforts to establish stem cell and
molecular diagnostics expertise at the University of Minnesota. He
has published more than 180 scientific papers and holds more than
30 patents in the fields of polypeptides, biomaterials, and adult
stem cells. His business experience includes co-founding two
medical technology companies, South Bay Medical, a medical device
company that was acquired by Mentor Corporation, and Diascreen, a
diagnostics company, which was later acquired by Chronimed.
Among other attributes, skills, and
qualifications, the Board believes Dr. Furcht is uniquely qualified
to serve as a director based on his research in tumor cell behavior
and extracellular matrix proteins, Head of the University of
Minnesota’s Department of Laboratory Medicine and Pathology,
and his experience in several biotechnology
start-ups.
Lance G. Laing, Ph.D.
is our co-founder and has served as
Chief Science Officer, Vice President, Secretary and a director
since we commenced operations in 2012. Dr. Laing’s career
spans more than 15 years in drug discovery research and technology
development. He received his doctorate in biophysics and
biochemistry from The Johns Hopkins University and completed a
National Institutes of Health post-doctoral fellowship at
Washington University Medical School. He has received 18 U.S.
patents and has an additional 24 U.S. patents pending. His drug
discovery research career began at Scriptgen/Anadys Pharmaceuticals
(purchased by Novartis), where he worked under Professor Peter Kim,
who became President of Merck Research. He also was Director of
Chemistry and Bioapplications and Director of Detection Product
Development for two companies that each developed instruments
similar to those Celcuity uses to perform the CELsignia tests. His
work at these two instrument companies gave him unique expertise
and experience in developing a variety of patented applications for
these instruments. Most recently, he served as an executive
director for an international drug discovery and development
company. Among other attributes, skills, and qualifications, the
Board believes Dr. Laing is uniquely qualified to serve as a
director based on his significant research, medical and scientific
expertise.
Richard J.
Nigon, is currently Senior Vice
President of Cedar Point Capital, LLC., a private company that
raises capital for early stage companies, where he has served since
2007. Mr. Nigon has also been a board member for Tactile Systems
Technology since September 2012 and Northern Technologies
International Corp. since February 2010, including serving as
its non-executive Chairman of the board of directors since
November 2012. Mr. Nigon also serves as a director of several
private companies. Mr. Nigon previously served as a board member
for Vascular Solutions, Inc. from November 2000 to
February 2017, when it was acquired by Teleflex, Incorporated
and as a board member for Virtual Radiologic Corporation from
May 2007 until it was acquired in July 2010. From
February 2001 until December 2006, Mr. Nigon was a
Director of Equity Corporate Finance for Miller Johnson Steichen
Kinnard, a privately held investment firm, which was acquired in
December 2006 by Stifel Nicolaus, a brokerage and investment
banking firm. After that acquisition, Mr. Nigon became a Managing
Director of Private Placements of Stifel Nicolaus until
May 2007. From February 2000 to February 2001, Mr.
Nigon served as the Chief Financial Officer of Dantis, Inc., a web
hosting company. Prior to joining Dantis, Mr. Nigon was employed by
Ernst & Young LLP from 1970 to 2000, where he served as a
partner from 1981 to 2000. While at Ernst & Young, Mr. Nigon
served as the Director of Ernst & Young’s Twin Cities
Entrepreneurial Services Group and was the coordinating partner on
several publicly-traded companies in the consumer retailing and
manufacturing sectors. Among other attributes, skills, and
qualifications, the Board believes Mr. Nigon is qualified to serve
as a director because of his extensive public accounting and
auditing experience, including experience with emerging growth
companies. The Board also believes that Mr. Nigon will bring a
strong background in financial controls and reporting, financial
management, financial analysis, SEC reporting requirements and
mergers and acquisitions. His strategic planning expertise gained
through his management and leadership roles at private investment
firms also makes him well-suited to serve as a member of the
Board.
Brian F. Sullivan
is our co-founder and has served as
Chairman of the Board and Chief Executive Officer since we
commenced operations in 2012. Mr. Sullivan has over 25 years of
experience founding and building successful, high growth technology
companies. He was Chairman and CEO of SterilMed, a medical device
reprocessing company, from 2003, when he led an investment group to
acquire a majority interest, until its sale to Ethicon Endo-Surgery
Inc., a Johnson & Johnson company, for $330 million in 2011.
Previously, he was co-founder and Chief Executive Officer of
Recovery Engineering, a filtration company, which he took public
and subsequently sold to Procter & Gamble for $265 million in
1999. Since 2003, Mr. Sullivan has served on the board of directors
of Entegris, Inc., a publicly-held company. Mr. Sullivan has
received six U.S. patents and has several patents pending. He
graduated magna cum laude
with distinction from Harvard College
with an A.B. in economics. Among other attributes, skills, and
qualifications, the Board believes Mr. Sullivan is uniquely
qualified to serve as a director based on his extensive operational
and business development experience, and his knowledge in building
stockholder value, growing a company from inception and navigating
significant corporate transactions and the public company
process.
Vote
Required
Assuming a quorum
is present, the affirmative vote of a plurality of the votes cast
at the Annual Meeting is required for the election of
directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR THE
SLATE OF NOMINEES NAMED ABOVE.
7
PROPOSAL NO. 2
RATIFICATION
OF APPOINTMENT OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Boulay
PLLP (“Boulay”), an independent registered public
accounting firm, has audited the Company’s financial
statements for the years ended December 31, 2019, and 2018. The
Audit Committee appointed Boulay as the Company’s independent
registered public accounting firm for the year ending December 31,
2020 and has also reviewed and approved the scope and nature of the
services to be performed for Celcuity by Boulay. Representatives of
Boulay are expected to be present at the Annual Meeting to make a
statement if they wish to do so, and to respond to appropriate
stockholder questions. The engagement agreement entered into with
Boulay for 2020 is subject to mediation and arbitration procedures
as the sole method for resolving disputes.
Ratification
of the appointment of Boulay as the Company’s independent
registered public accounting firm is not required to be submitted
to our stockholders for a vote. The Sarbanes-Oxley Act of 2002
requires the Audit Committee to be directly responsible for the
appointment, compensation and oversight of the audit work of the
independent registered public accounting firm. However, the Board
is submitting this matter to the stockholders for ratification as a
matter of good corporate governance. If the appointment of Boulay
is not ratified by the stockholders at the Annual Meeting, the
Audit Committee may reconsider whether to retain Boulay, and may
retain Boulay or another firm without resubmitting the matter to
the Company’s stockholders. Even if the stockholders vote in
favor of ratification of 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 in the best
interests of the Company and the stockholders.
Representatives
of Boulay regularly attend meetings of the Audit Committee. The
Audit Committee pre-approves and reviews audit and non-audit
services performed by Boulay, as well as the fees charged by Boulay
for such services. In its pre-approval and review of non-audit
service fees, the Audit Committee considers, among other factors,
the possible effect of the performance of such services on
Boulay’s independence. To avoid potential conflicts of
interest, publicly traded companies are prohibited from obtaining
certain non-audit services, such as bookkeeping or actuarial
services, from its independent registered public accounting firm.
In 2019 and 2018, we did not obtain any of these prohibited
services from Boulay. For additional information concerning the
Audit Committee and its relationship with Boulay, see
“Corporate Governance” and “Audit Committee
Report” below.
Audit and Non-Audit Fees Billed to the Company by Independent
Registered Public Accounting Firm
The
following table summarizes the fees we were billed for audit and
non-audit services rendered by Boulay for 2019 and
2018.
|
|
2019
|
2018
|
|
Audit
Fees
|
$56,855
|
$55,728
|
|
Audit-Related
Fees
|
-
|
-
|
|
Tax
Fees
|
3,375
|
3,000
|
|
All
Other Fees
|
-
|
2,395
|
|
Total
|
$60,230
|
$61,123
|
Audit Fees. These fees were
for professional services rendered for 2019 and 2018 in connection
with the audit of our annual financial statements and review of the
financial statements included in our Quarterly Reports on Form
10-Q. The amounts also include fees for services that
are normally provided by Boulay in connection with statutory and
regulatory filings and engagements for the years
identified.
Audit-Related Fees. These
fees were for assurance and related services that were related to
the performance of the audit or review of our financial statements
and were not reported under the caption “Audit
Fees.” This category may include fees related to the
performance of audits and attestation services not required by
statute or regulations, or accounting consultations about the
application of generally accepted accounting principles to proposed
transactions.
Tax Fees. These fees were for tax
compliance, tax planning, tax advice and corporate tax services.
Corporate tax services encompass a variety of permissible services,
including technical tax advice related to tax matters; assistance
with withholding-tax matters; assistance with state and local
taxes; preparation of reports to comply with local tax authority
transfer pricing documentation requirements; and assistance with
tax audits.
All Other Fees. These fees were
primarily for services related to our Registration Statement on
Form S-3.
Pre-Approval Policy
The
charter of the Audit Committee requires the pre-approval of all
non-audit services before any such non-audit services are performed
for the Company. The charter of the Audit Committee is posted on
the Company’s website at
www.celcuity.com/home/investors/corporate-governance/. We formed
our Audit Committee in connection with our initial public offering
in 2017.
Vote Required
Assuming a quorum
is present, the affirmative vote of a majority of the shares of
common stock of Celcuity represented at the Annual Meeting, either
in person or by proxy, and entitled to vote is required to ratify
the appointment of Boulay as our independent registered public
accounting firm.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR RATIFICATION
OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM.
8
PROPOSAL NO. 3
ADVISORY
VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
The
Dodd-Frank Wall Street Reform and Consumer Protection Act and
Section 14A of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), require companies to provide their
stockholders with the opportunity to vote to approve, on a
non-binding, advisory basis, the compensation of their named
executive officers. We are an “emerging growth company”
as defined under the Jumpstart Our Business Startups Act (the
“JOBS Act”) and are therefore not required to provide
our stockholders with this opportunity. However, because we seek to
closely align the interests of our named executive officers with
the interests of our stockholders, our Board is nonetheless
requesting our stockholders approve, on a non-binding, advisory
basis, the compensation of our named executive officers as
disclosed in this Proxy Statement.
We
designed our compensation program to reward our named executive
officers for their individual performance and contributions to our
overall business objectives, and for achieving and surpassing the
financial goals set by our Compensation Committee and our
Board.
The
vote on this resolution is not intended to address any specific
element of compensation. Instead, the vote relates to the overall
compensation of our named executive officers, as described in this
Proxy Statement in accordance with the compensation disclosure
rules of the SEC.
Accordingly, we ask
our stockholders to vote on the following resolution at the Annual
Meeting:
“RESOLVED,
that the Company’s stockholders approve, on an advisory
basis, the compensation of the named executive officers, as
disclosed in the Company’s Proxy Statement for the 2020
Annual Meeting of Stockholders pursuant to the compensation
disclosure rules of the SEC, including the summary compensation
table and the other related tables and
disclosure.”
While
the Board and especially the Compensation Committee intend to
carefully consider the results of the voting on this proposal when
making future decisions regarding executive compensation, the vote
is not binding on the Company or the Board and is advisory in
nature. To the extent there is any significant vote against the
compensation of our named executive officers, the Board and the
Compensation Committee will evaluate what actions may be necessary
to address our stockholders’ concerns.
Vote Required
Assuming a quorum
is present, the affirmative vote of a majority of the shares of
common stock of Celcuity represented at the Annual Meeting, either
in person or by proxy, and entitled to vote is required to approve
the compensation of our named executive officers. This vote is
advisory and is not binding on the Company, the Board or the
Compensation Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE
APPROVAL OF THE COMPENSATION OF THE NAMED EXECUTIVE
OFFICERS.
9
PROPOSAL NO. 4
APPROVAL OF THE COMPANY’S AMENDED AND RESTATED 2017 STOCK
INCENTIVE PLAN
General
We
are seeking stockholder approval of the Celcuity Inc. Amended and
Restated 2017 Stock Incentive Plan, or the 2017 Plan. The 2017 Plan
was adopted by our Board on March 20, 2020, subject to stockholder
approval. The 2017 Plan amends and restates in its entirety the
Celcuity Inc. 2017 Stock Incentive Plan, which was previously
approved by our stockholders on May 10, 2018.
A general description of the 2017 Plan is set
forth below, but such description is qualified in its entirety by
reference to the full text of the 2017 Plan, a copy of which is
attached hereto as Appendix A. The 2017 Plan incorporates, among
other minor updates, updates to
reflect the total amount of shares reserved for issuance under the
2017 Plan as of the date hereof, as well as the number of shares
that may be issued as incentive stock options; clarification that
shares of common stock withheld to satisfy tax withholding
obligations on an award or to pay the exercise price of a stock
option will not become available for re-issuance under the 2017
Plan after they have been withheld for such purposes; clarification
that the Compensation Committee’s ability to amend or modify
any outstanding award extends to the ability to reduce the exercise
price of any outstanding options; clarification that no termination
of employment or other service by a participant in the 2017 Plan
occurs as a result of a transfer of employment between the Company
and any subsidiary or among subsidiaries or as a result of a leave
of absence approved by the Company; and removal of
provisions related to the prior version of Section 162(m) of the
Internal Revenue Code, which is no longer applicable to the
Company.
Description of the Plan
Purpose. The purpose of the 2017 Plan is to advance the
interests of the Company and its stockholders by enabling us to
attract and retain persons of skill and ability to perform services
for the Company by providing an incentive to such individuals
through equity participation in the Company and by rewarding such
individuals who contribute to the achievement of our economic
objectives. As of December 31, 2019, 44 individuals were eligible
for selection to receive awards under the Plan.
Shares
Available. We initially
reserved 750,000 shares of our common stock to be issued under our
2017 Plan. The number of shares reserved for issuance was
automatically increased by 102,540 shares on January 1, 2020 and
will increase automatically on January 1 of each of 2021 through
2027 by the number of shares equal to 1.0% of the aggregate number
of outstanding shares of our common stock as of the immediately
preceding December 31. However, our Board may reduce the amount of
the increase in any particular year. Any shares of common stock
that are subject to an award that lapses, expires, is forfeited or
for any reason is terminated unexercised or unvested and any shares
of common stock that are subject to an award that is settled or
paid in cash or any form other than shares of common stock will
automatically again become available for issuance under the 2017
Plan. Any shares of common
stock that constitute the forfeited portion of a restricted stock
award, however, will not become available for re-issuance under the
2017 Plan after they have been so forfeited. Any shares of common
stock withheld to satisfy tax withholding obligations on an award
or to pay the exercise price of a stock option will not become
available for re-issuance under the 2017 Plan after they have been
withheld for such purposes. As of February 29, 2020, 8,258 shares
had been issued or withheld under the 2017 Plan, 412,438 shares
were subject to outstanding awards, and 431,844 shares were
available for additional grants under the 2017
Plan.
Awards
Available. Our 2017 Plan
authorizes the award of stock options, restricted stock awards, or
RSAs, stock appreciation rights, or SARs, restricted stock units,
or RSUs, performance awards and stock bonuses. No person will be
eligible to receive more than 250,000 shares in any calendar year
under our 2017 Plan other than a new employee of ours, who will be
eligible to receive no more than 500,000 shares under the 2017 Plan
in the calendar year in which the employee commences employment. No
more than 750,000 shares will be issued pursuant to the exercise of
incentive stock options.
Our
2017 Plan provides for the grant of awards to our employees,
directors, consultants, independent contractors and advisors,
provided the consultants, independent contractors, directors and
advisors are natural persons that render services not in connection
with the offer and sale of securities in a capital-raising
transaction. The awards granted may vest based on time and/or
achievement of performance conditions.
Stock
options granted under the 2017 Plan may either be granted as
incentive stock options or as non-qualified stock options. Our
Compensation Committee may provide for options to be exercised only
as they vest or to be immediately exercisable with any shares
issued on exercise being subject to our right of repurchase that
lapses as the shares vest. The exercise price of stock options must
be at least equal to the fair market value of our common stock on
the date of grant. The maximum term of options granted under our
2017 Plan is ten years.
A
RSA is a grant by us of shares of our common stock subject to
restrictions. The price (if any) of an RSA will be determined by
the Compensation Committee. Unless otherwise determined by the
Compensation Committee at the time of award, vesting will cease on
the date the participant no longer provides services to us and
unvested shares will be forfeited to or repurchased by
us.
10
SARs
provide for a payment, or payments, in cash or shares of our common
stock, to the holder based upon the difference between the fair
market value of our common stock on the date of exercise and the
stated exercise price up to a maximum amount of cash or number of
shares.
RSUs
represent the right to receive shares of our common stock at a
specified date in the future, subject to forfeiture of that right
because of termination of employment or failure to achieve certain
performance conditions. If an RSU has not been forfeited, then on
the date specified in the RSU agreement, we will deliver to the
holder of the RSU whole shares of our common stock (which may be
subject to additional restrictions), cash or a combination of our
common stock and cash.
Performance
shares are performance awards that cover a number of shares of our
common stock that may be settled in cash or by issuance of the
underlying shares. These awards are subject to forfeiture prior to
settlement because of termination of employment or failure to
achieve the performance conditions.
Stock
bonuses may be granted as additional compensation for service or
performance and, therefore, will not be issued in exchange for
cash.
Transferability.
Awards granted under our 2017 Plan may not be transferred in any
manner other than by will or by the laws of descent and
distribution or as determined by our Compensation Committee. Unless
otherwise permitted by our Compensation Committee, stock options
may be exercised during the lifetime of the optionee only by the
optionee or the optionee’s guardian or legal representative.
Options granted under our 2017 Plan generally may be exercised for
a period of three months after the termination of the
optionee’s service to us, for a period of 12 months in the
case of death or disability, or such longer period as our
Compensation Committee may provide. Options generally terminate
immediately upon termination of employment for
cause.
Certain
Adjustments. In the event there
is a specified type of change in our capital structure without our
receipt of consideration, such as a stock split, appropriate
adjustments will be made to the number of shares reserved under our
2017 Plan, the maximum number of shares that can be granted in a
calendar year and the number of shares and exercise price, if
applicable, of all outstanding awards under our 2017
Plan.
Change of Control and Other
Corporate Events. Our 2017 Plan
provides that, in the event of specified types of mergers or
consolidations, a sale, lease, or other disposition of all or
substantially all of our assets or other corporate transactions,
outstanding awards under our 2017 Plan may be assumed or replaced
by any surviving or acquiring corporation; the surviving or
acquiring corporation may substitute similar awards for those
outstanding under our 2017 Plan; outstanding awards may be settled
for the full value of such outstanding award (whether or not then
vested or exercisable) in cash, cash equivalents, or securities (or
a combination thereof) of the successor entity with payment
deferred until the date or dates the award would have become
exercisable or vested; or outstanding awards may be terminated for
no consideration. Our Board or its Compensation Committee has the
discretion to provide that a stock award under our 2017 Plan will
immediately vest as to all or any portion of the shares subject to
the stock award at the time of a corporate transaction or in the
event a participant’s service with us or a successor entity
is terminated actually or constructively within a designated period
following the occurrence of the transaction. Stock awards held by
participants under our 2017 Plan will not vest automatically on
such an accelerated basis unless specifically provided in the
participant’s applicable award agreement. In the event of a
corporate transaction, the vesting of all awards granted to
non-employee directors shall accelerate and such awards shall
become exercisable (as applicable) in full upon the consummation of
the corporate transaction.
Termination;
Amendment. Our 2017 Plan will
terminate on September 6, 2027, unless it is terminated earlier by
our board of directors. Our Board may amend or terminate our 2017
Plan at any time. Our Board generally may amend our 2017 Plan,
without stockholder approval unless required by applicable
law.
Plan
Administration. Our 2017 Plan
is administered by our Compensation Committee or by our Board
acting in place of our Compensation Committee. The Compensation
Committee has the authority to construe and interpret our 2017
Plan, grant awards, amend or modify any outstanding award (subject
to certain limitations), and make all other determinations
necessary or advisable for the administration of the plan. This
authority includes the ability to modify the number of shares or
other terms and conditions of an award, extend the term of an
award, accelerate the exercisability or vesting or otherwise
terminate any restrictions relating to an award, reduce the
exercise price of any outstanding option, accept the surrender of
any outstanding award or, to the extent not previously exercised or
vested, authorize the grant of new awards in substitution for
surrendered awards.
11
Tax Consequences
Options and SARs.
Stock options granted under the 2017
Plan may either be granted as incentive stock options, which are
governed by Internal Revenue Code Section 422, as amended, or as
non-qualified stock options, which are governed by Internal Revenue
Code Section 83, as amended. Generally, no federal income tax is
payable by the participant upon the grant or exercise of an
incentive stock option and no deduction is taken by us. If the
participant holds the stock acquired upon exercise of the option
for a certain period, all appreciation in the value of the shares
will be taxed at favorable capital gains tax rates. If the required
holding period is not met, then any appreciation in the stock up to
the date of exercise will be taxed at ordinary income tax rates. If
after exercise, the participant disposes of the shares within a
certain time period, we will be entitled to deduct the appreciation
on the shares at the time of exercise. Under current tax laws, if a
participant exercises a non-qualified stock option, the participant
will be taxed on the difference between the fair market value of
the stock on the exercise date and the exercise price and we will
be entitled to a corresponding tax deduction. Similar rules apply
to SARs.
RSAs, RSUs and Performance
Shares. RSAs, RSUs and
performance shares under the 2017 Plan generally are not subject to
federal income tax when awarded, unless, solely in the case of
RSAs, the participant properly elects to accelerate the tax
recognition. RSAs are generally subject to ordinary income tax at
the time the restrictions lapse, and performance shares are taxed
at the time the performance targets are met. RSUs are generally
subject to ordinary tax at the time of payment, even if vested
earlier. We are entitled to a corresponding deduction at the time
the participant recognizes taxable income on the RSAs, RSUs or
performance shares.
New Plan Benefits
The awards, if any, that will be made to eligible
persons under the Plan are subject to the discretion of the
Compensation
Committee and, therefore, we
cannot currently determine the benefits or number of shares subject
to awards that may be granted in the future to our executive
officers, employees and directors under the 2017 Plan. Therefore, a
New Plan Benefits Table has not been provided.
Assuming
a quorum is present, the affirmative vote of a majority of the
shares of common stock of Celcuity represented at the Annual
Meeting, either in person or by proxy, and entitled to vote is
required to approve the Company’s Amended and Restated 2017
Stock Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT
THE STOCKHOLDERS VOTE FOR
APPROVAL OF THE COMPANY’S
AMENDED AND RESTATED 2017 STOCK INCENTIVE PLAN.
12
CORPORATE GOVERNANCE
Our
Board believes that adherence to good corporate governance
principles is essential to running our business efficiently, to
maintaining our integrity in the marketplace, and to ensuring that
the Company is managed for the long-term benefit of our
stockholders. The Board recognizes that maintaining and ensuring
good corporate governance is a continuous process. Our Board has
adopted the Celcuity Inc. Code of Ethical Business Conduct for
Senior Financial Officers (the “Code of Ethics”) and a
charter for each committee of the Board. The Code of Ethics and the
Charters of the Audit Committee, the Compensation Committee and the
Nominating and Governance Committee, as amended from time to time,
are available on the Company’s website at
www.celcuity.com/home/investors/corporate-governance/ and will be
provided in printed form to any stockholder who requests them from
us. Requests should be directed to Investor
Relations, Celcuity Inc., 16305 36th Avenue
North, Suite 100, Minneapolis, MN 55446.
Board of Directors
Our
bylaws provide that the size of our Board will be determined from
time to time by resolution of our Board. Under our bylaws, a
director elected for an indefinite term serves until the next
regular meeting of the stockholders and until the director’s
successor is elected, or until the earlier death, resignation or
removal of the director. Our bylaws provide that members of our
Board will be elected by a plurality vote of our
stockholders.
Director Independence
The
Board has determined that Richard E. Buller, David F. Dalvey, Leo
T. Furcht, and Richard J. Nigon are independent directors under the
Nasdaq Listing Rules. In
evaluating independence, the Board considered Mr. Nigon’s
role as a broker with Cedar Point Capital, LLC, which served as our
placement agent for certain private placements prior to our initial
public offering and that we have paid Dr. Buller certain consulting
fees in connection with services he has provided to us based on his
expertise in translational medicine. The Board determined that
these relationships will not interfere with the exercise of
independent judgment by these individuals.
Board Leadership Structure
Our bylaws provide our Board with flexibility to combine or separate the
positions of Chairman of our Board and Chief Executive Officer and/or to implement a
presiding or lead director in accordance with its determination
that utilizing one or the other structure would be in the best
interests of the Company. Currently, Brian F. Sullivan, our Chief
Executive Officer, is the Chairman of our Board. We believe that this leadership structure is
appropriate at this time because:
●
it
promotes unified leadership and direction for the
Company;
●
it
allows for a single, clear focus for management to execute the
Company’s strategic initiatives and business
plans;
●
our
Chief Executive Officer is in the best position to chair board
meetings and to ensure that the key business issues and risks
facing the Company are brought to the Board’s attention;
and
●
we can more effectively execute our strategy and
business plans to maximize stockholder value if the Chairman of
the Board is also a member of
the management team.
Our Board will
periodically review our leadership structure and may make such
changes in the future as it deems appropriate.
Family Relationships
Dr.
Laing, our Chief Science Officer and a director, is a
brother-in-law of Mr. Sullivan, the Chairman of our Board and Chief
Executive Officer.
Involvement in Certain Legal Proceedings
To the
best of our knowledge, none of our directors or executive officers
have, during the past ten years, been involved in any legal
proceedings described in subparagraph (f) of Item 401 of Regulation
S-K.
13
Risk Oversight
Our Board has
oversight responsibility for the Company’s risk management
process. The Board administers
its oversight function through its committees but it retains
responsibility for general oversight of risks. The committee chairs
are responsible for reporting findings regarding material risk
exposure to the Board as
quickly as possible. The Board delegates to the Audit Committee oversight
responsibility to review our Code of Ethics, including whether the
Code of Ethics is successful in preventing illegal or improper
conduct, and our management’s risk assessments and
management’s financial risk management policies, including
the policies and guidelines used by management to identify, assess
and manage our exposure to financial risk. Our Compensation
Committee assesses and monitors any major compensation-related risk
exposures and the steps management should take to monitor or
mitigate such exposures.
Code of Ethics
We have adopted a Code of Ethics applicable to our
principal executive officer and principal financial and accounting
officer, in accordance with Section 406 of the Sarbanes-Oxley Act,
the rules of the SEC promulgated thereunder, and the Nasdaq Listing
Rules. If any changes are made to, or any waivers given from, the
Code of Ethics, these events would be disclosed on our website or
in a Current Report on Form 8-K filed with the SEC within four
business days of such event. The Code of Ethics is posted on our
website at
www.celcuity.com/home/investors/corporate-governance/.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During
2019, our Board met five times. During 2019, all directors attended
in person or via teleconference 100% of the meetings that occurred
during each director’s service on the Board.
The
standing committees of our Board are the Audit Committee, the
Compensation Committee and the Nominating and Corporate Governance
Committee. During 2019, the Audit Committee met five times and the
Compensation Committee and the Nominating and Corporate Governance
Committee each met three times. All directors attended at least 75%
of the meetings of each committee on which they
served.
Executive Sessions; Attendance at Annual Meeting of
Stockholders
The
independent members of the Board periodically meet outside the
presence of management. The Audit Committee has adopted a policy of
meeting in executive session, without management being present, on
a regular basis. During 2019, the members of the Audit Committee
met in executive session once.
The
Board’s policy is that each member of the Board should attend
our annual meetings of stockholders whenever practical and that at
least one member of the Board must attend each annual meeting. Four
of the five members of the Board attended the 2019 annual meeting
of stockholders.
Audit Committee
We have established an Audit Committee in
accordance with Section 3(a)(58)(A) of the Exchange Act. The
primary duties and responsibilities of our Audit Committee are to
oversee (1) the integrity of our accounting and financial reporting
processes and the audits of our financial statements; (2) our
systems of internal controls; (3) our Code of Ethics; and (4) our
compliance with legal and regulatory requirements. In addition, our
Audit Committee appoints and monitors the independence,
qualifications and performance of our independent auditors,
provides an avenue of communication between our independent
auditors, management and the Board; and reviews and approves related party
transactions as required by the Nasdaq Listing
Rules.
Mr. Dalvey, Dr. Furcht, and Mr. Nigon are the
members of our Audit Committee. The members of the Audit Committee
are “independent directors” as that term is defined in
Rules 5605(a)(2) and 5605(c)(2)(A) of the Nasdaq Listing Rules and
Rule 10A-3 of the Exchange Act. The Board has determined that Mr. Nigon and Mr. Dalvey are
each an “audit committee financial expert” as defined
by Item 407(d)(5)(ii) of Regulation S-K. The Audit Committee
operates under a written charter that satisfies the applicable
standards of the SEC and the Nasdaq Listing
Rules.
Compensation Committee
We
have established a Compensation Committee. Our Compensation
Committee reviews and approves corporate goals and objectives
relevant to compensation of our chief executive officer and other
executive officers, evaluates the performance of these officers in
light of those goals and objectives, and sets the compensation of
these officers based on such evaluations. The Compensation
Committee also reviews and makes recommendations to the Board with
respect to director compensation and the issuance of stock options,
restricted stock and other awards under our equity compensation
plans. The Compensation Committee reviews and prepares the
necessary compensation disclosures required by the SEC.
Additionally, the Compensation Committee reviews and evaluates, on
an annual basis, the Compensation Committee charter and
performance.
14
Our
Compensation Committee has approved the compensation arrangements
currently in place for our named executive officers. The
Compensation Committee evaluates the performance of our Chairman
and Chief Executive Officer and determines his compensation based
on this evaluation without our Chairman and Chief Executive Officer
present during voting or deliberations on his compensation. With
respect to the other named executive officers, the Compensation
Committee considers the recommendations of our Chairman and Chief
Executive Officer as to performance evaluations and recommended
compensation arrangements.
The
Compensation Committee may approve executive compensation
arrangements or, in its discretion, may recommend such matters to
the full Board for approval. All executive compensation is based on
assessments of executive performance, which are prepared by the
Compensation Committee and submitted to the full Board for review
and discussion. All Compensation Committee recommendations
regarding director compensation are subject to approval by the full
Board. Pursuant to its charter, the Compensation Committee may
delegate any of its responsibilities to a subcommittee comprised of
one or more members of the Compensation Committee.
Mr.
Dalvey, Dr. Furcht, and Mr. Nigon are the members of our
Compensation Committee. The members of the Compensation Committee
are “independent directors” as that term is defined in
Rule 5605(a)(2) of the Nasdaq Listing Rules and qualify as
“non-employee directors” under Rule 16b-3 of the
Exchange Act.
Nominating and Corporate Governance Committee
We
have established a Nominating and Corporate Governance Committee.
Mr. Dalvey, Dr. Furcht, and Mr. Nigon are the members of our
Nominating and Corporate Governance Committee. The members of the
Nominating and Corporate Governance Committee are
“independent directors” as that term is defined in Rule
5605(a)(2) of the Nasdaq Listing Rules. The principal functions of
the Nominating and Corporate Governance Committee are
to:
●
develop and recommend to the Board
minimum qualifications for director
nominees;
●
identify and evaluate potential candidates for
the Board and committee
positions;
●
recommend to the Board a slate of nominees for election as directors at
our annual meetings of stockholders;
●
recommend to the Board individuals to be appointed to the Board in
connection with vacancies or newly created director positions and
the termination of directors for cause or other appropriate
reasons;
●
review the size and composition of the
Board and its
committees;
●
oversee
our corporate governance practices;
●
evaluate and make recommendations regarding
stockholder proposals submitted to the Board for inclusion in the company’s proxy
statement; and
●
develop, recommend and oversee an annual
self-evaluation process for the Board and its committees.
QUALIFICATIONS OF CANDIDATES FOR ELECTION TO THE BOARD
The
Nominating and Corporate Governance Committee identifies and
recommends candidates it believes are qualified to stand for
election as directors of Celcuity or to fill any vacancies on the
Board. In identifying director candidates, the Nominating and
Corporate Governance Committee may retain third party search firms.
The Nominating and Governance Committee will make reasonable
efforts to include at least one qualified woman or minority
candidate in the initial list of director candidates for potential
recommendation to the Board.
In
order to evaluate and identify director candidates, the Nominating
and Corporate Governance Committee considers the suitability of
each director candidate, including the current members of the
Board, in light of the current size, composition and current
perceived needs of the Board. The Nominating and Corporate
Governance Committee seeks highly qualified and experienced
director candidates and considers many factors in evaluating such
candidates, including issues of character, judgment, independence,
background, age, expertise, diversity of experience, length of
service and other commitments. Additionally, while the Nominating
and Corporate Governance Committee does not have a formal policy
with respect to diversity, it seeks a Board that is diverse in
these factors and gives due consideration to contributions to
diversity on the Board when evaluating the qualifications of any
potential director candidate. In particular, the Board will
consider the manner in which a nominee’s appointment would
impact the overall composition of the Board with regard to
diversity of viewpoint, professional experience, education, skill,
race, ethnicity, gender identity, sexual orientation, and national
origin.
The Nominating and
Corporate Governance Committee does not assign any particular
weight or priority to any of these factors. The Nominating and
Corporate Governance Committee has established the following
minimum requirements for director candidates: being able to read
and understand fundamental financial statements; having at least 10
years of relevant business experience; having no identified
conflicts of interest as a director of Celcuity; having not been
convicted in a criminal proceeding other than traffic violations
during the ten years before the date of selection; and being
willing to comply with any code of ethics of the Company. The
Nominating and Corporate Governance Committee retains the right to
modify these minimum qualifications from time to time. Exceptional
candidates who do not meet all of these criteria may still be
considered.
15
The
Nominating and Corporate Governance Committee may review director
candidates by reviewing information provided to it, through
discussions with persons familiar with the candidate, or other
actions that the Nominating and Corporate Governance Committee
deems proper. After such review and consideration, the Nominating
and Corporate Governance Committee designates any candidates who
are to be interviewed and by whom they are to be interviewed. After
interviews, the Nominating and Corporate Governance Committee
recommends for Board approval any new directors to be
nominated.
The
Nominating and Corporate Governance Committee will consider
director candidates recommended by stockholders in the same manner
that it considers all director candidates. Stockholders who wish to
nominate a qualified candidate for the 2021 annual meeting must
submit such nomination in writing to our Corporate Secretary,
Celcuity Inc., 16305 36th Avenue North, Suite
100, Minneapolis, MN 55446, in
accordance with the stockholder proposal requirements summarized
under “Stockholder Proposals”
below.
BOARD OF DIRECTORS VACANCIES
Our bylaws authorize only our Board
to fill vacant directorships,
including newly created seats. In addition, the number of directors
constituting our Board is
permitted to be set only by a resolution adopted by our
Board. These provisions prevent a
stockholder from increasing the size of our Board
and then gaining control of our
Board by filling the resulting
vacancies with its own nominees. This makes it more difficult to
change the composition of our Board but promotes continuity of
management.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Our
stockholders may contact our Board, or any committee of our Board,
by regular mail at Chief Executive Officer, Celcuity Inc., 16305
36th
Avenue North, Suite 100, Minneapolis, MN 55446. All communications
will be reviewed by management and, if appropriate to the duties
and responsibilities of the Board, forwarded to the appropriate
director or directors or to the full Board, as
appropriate.
DIRECTOR COMPENSATION
During
2019, Celcuity’s non-employee directors received compensation
in the form of an equity award with a fair market value of $75,000
as of May 16, 2019, the date of grant. Each director could elect to
receive the equity award in the form of restricted stock or stock
options and each director then-serving on the Board elected to
receive the equity award in the form of a stock option. Each stock
option is for the purchase of 5,054 shares, the number of shares
that results in the option having a Black Scholes value of $75,000
as of the date of grant. The stock options have an exercise price
of $22.45 per share, which is equal to the closing price of a share
of the Company’s common stock on the date of grant. In
December 2019, upon his appointment to the Board, Dr. Buller
received pro-rata compensation in the form of an equity award with
a fair market value of $31,930. The stock option is for the
purchase of 4,555 shares, the number of shares that results in the
option having a Black Scholes value of $31,930 as of the date of
grant. The stock option has an exercise price of $10.68 per share,
which is equal to the closing price of a share of the
Company’s common stock on the date of grant. The above stock
options will vest and become exercisable with respect to 100% of
the shares on April 30, 2020 and will remain exercisable for the
remainder of the 10-year term. The Compensation Committee has not
yet determined compensation for the non-employee directors for
2020.
In
addition, non-employee directors are reimbursed for their
out-of-pocket expenses incurred in connection with services as a
director.
Fiscal Year 2019 Director Compensation
The
table below summarizes the compensation paid by the Company to its
non-employee directors for the fiscal year ended December 31, 2019.
Mr. Sullivan and Dr. Laing are not included in this table since
they are each an employee of the Company and receive no
compensation for their services as a director. Each of Mr. Sullivan
and Dr. Laing are included in the Summary Compensation Table under
“Executive Compensation” below.
|
Name
|
|
Option Awards(1)(2)
|
|
|
All Other Compensation
|
|
|
Total
|
|
|||
|
Maureen
Cronin
|
|
$
|
75,000
|
|
|
$
|
-
|
|
|
$
|
75,000
|
|
|
Richard
E. Buller
|
|
$
|
31,930
|
|
|
$
|
14,951(3)
|
|
|
$
|
46,881
|
|
|
David
F. Dalvey
|
|
$
|
75,000
|
|
|
$
|
-
|
|
|
$
|
75,000
|
|
|
Leo
T. Furcht
|
|
$
|
75,000
|
|
|
$
|
-
|
|
|
$
|
75,000
|
|
|
Richard
J. Nigon
|
|
$
|
75,000
|
|
|
$
|
-
|
|
|
$
|
75,000
|
|
(1)
Reflects the
aggregate grant date fair value of equity awards to each director
during 2019, calculated in accordance with FASB ASC Topic 718. Dr.
Buller received an option to purchase 4,555 shares of common stock
at an exercise price of $10.68. Dr. Cronin, Mr. Dalvey, Dr. Furcht
and Mr. Nigon each received an option to purchase 5,054 shares of
common stock at an exercise price of $22.45. Dr. Cronin forfeited
her unvested stock option upon her resignation from the Board on
June 12, 2019. Refer to “Note 10 – Stock-Based
Compensation” in the audited financial statements included in
Item 8 of our Annual Report on Form 10-K for the year ended
December 31, 2019 for a discussion of the assumptions used in
calculating the award amount.
(2)
The aggregate
number of stock options held by each of the directors listed in the
table above as of December 31, 2019 was as follows: Dr. Buller,
options to purchase 4,555 shares; Mr. Dalvey, options to purchase
16,455 shares; Dr. Furcht, options to purchase 7,304; and Mr.
Nigon, options to purchase 16,455 shares. Dr. Cronin does not hold
any options.
(3)
Consists of $14,951
in consulting fees incurred by the Company for consulting fees
payable to Dr. Buller in connection with services he has provided
to us based on his expertise in translational
medicine.
16
BENEFICIAL OWNERSHIP OF COMMON STOCK
The
following table contains information regarding the beneficial
ownership of Celcuity’s common stock as of March 17, 2020
(except as otherwise indicated) by (i) each person who is known by
Celcuity to beneficially own more than 5% of the outstanding shares
of our common stock; (ii) each director of Celcuity; (iii) each
director nominee; (iv) each named executive officer of Celcuity;
and (v) all executive officers and directors as a group. Unless
otherwise noted, each person or group identified possesses sole
voting and investment power with respect to such shares and the
business address of each person is c/o Celcuity Inc., 16305
36th
Avenue North, Suite 100, Minneapolis, MN 55446.
|
Name of Beneficial Owner
|
Amount and Nature of Beneficial
Ownership (1)
|
Percent of Class(2)
|
|
5% Stockholders
|
|
|
|
The Globe Resources Group, LLC (3)
|
680,556
|
6.6%
|
|
|
|
|
|
Officers and Directors
|
|
|
|
Richard
E. Buller
|
4,555
|
*
|
|
David F. Dalvey (4)
|
266,455
|
2.6%
|
|
Leo
T. Furcht
|
7,304
|
*
|
|
Vicky
Hahne
|
31,954
|
*
|
|
Lance
G. Laing
|
1,270,960
|
12.4%
|
|
Richard J. Nigon (5)
|
149,901
|
1.5%
|
|
Brian
F. Sullivan
|
2,795,071
|
27.2%
|
|
All
directors and executive officers as a group (7
individuals)
|
4,526,200
|
43.5%
|
* less
than 1%
(1)
The
beneficial ownership reported in the table includes shares of
common stock the beneficial owners have the right to acquire within
60 days of March 17, 2020 upon the exercise of stock options or
warrants as follows: Dr. Buller, 4,555 shares; Mr. Dalvey, 16,455
shares; Dr. Furcht, 7,304 shares; Ms. Hahne, 28,305 shares; Dr.
Laing, 20,960 shares; Mr. Nigon, 39,323 shares; Mr. Sullivan,
39,297 shares; and all directors and executive officers as a group,
156,199 shares.
(2)
Calculated
based on 10,253,988 issued and outstanding shares of Celcuity
common stock as of March 17, 2020, plus, for each individual, any
securities that such individual has the right to acquire within 60
days of March 17, 2020.
(3)
The address of The Globe Resources Group, LLC is
8301 E. 21st
Street North, Suite 420, Wichita, KS
67206. The number of shares owned by The Globe Resources Group, LLC
is based on information provided by the Company’s transfer
agent.
(4)
Mr.
Dalvey’s beneficial ownership includes 250,000 shares of
common stock owned by Brightstone Venture Capital Fund, LP, of
which Mr. Dalvey is the General Partner.
(5)
Mr. Nigon’s
beneficial ownership includes 20,300 shares of common stock
held as trustee of a trust for certain family members.
Mr. Nigon disclaims beneficial ownership of such
shares.
EXECUTIVE OFFICERS
The
following table identifies our current executive officers, the
positions they hold, and their current age. Our executive officers
are appointed by our Board of Directors to hold office until their
successors are elected or their earlier death, resignation or
removal.
|
Name
|
Age
|
Positions
|
|
Brian F. Sullivan
|
58
|
Chairman
of the Board and Chief Executive Officer
|
|
Lance G. Laing
|
58
|
Chief
Science Officer, Vice President, Secretary and
Director
|
|
Vicky Hahne
|
54
|
Chief
Financial Officer
|
For
biographical information about Mr. Sullivan and Dr. Laing, please
refer to Proposal 1 entitled “Election of Directors.”
Biographical information about Ms. Hahne is as
follows:
17
Vicky
Hahne, Chief Financial Officer
Ms.
Hahne joined as our Chief Financial Officer in July 2017. She has
more than 20 years of financial leadership experience, including
the most recent 10 years in the healthcare industry. Prior to
joining Celcuity, Ms. Hahne served as Controller of Respiratory
Technologies Inc., a medical device manufacturer, from 2015 to
2017. While at Respiratory Technologies, she played a key role in
the due diligence process to sell the company to Koninklijke
Philips. In 2014, she served as Controller for Ability Network
Inc., a healthcare information technology company. From 2007 to
2012, Ms. Hahne served as Controller of Sterilmed Inc., a medical
device reprocessing company, where she was significantly involved
in the sale of the company to Johnson & Johnson. Prior to these
roles, Ms. Hahne held several senior financial positions at
SimonDelivers Inc., including Chief Financial Officer. Ms. Hahne
has extensive experience in early stage, high growth companies with
responsibilities including financial controls and stewardship,
financial analysis, mergers and acquisitions, building
infrastructure and systems. She received a B.S. degree in Finance
and Accounting from Northern State University and received her CPA
certificate in 1990.
EXECUTIVE COMPENSATION
Overview
The
compensation of our executive officers is structured with the goal
of providing a competitive compensation program that will enable us
to attract and retain highly-qualified executives, which is
necessary to achieve our financial and strategic objectives and
create long-term value for our stockholders. Our Chief Executive
Officer, Chief Science Officer, and Chief Financial Officer
(collectively, our “named executive officers”) are
currently compensated with a base salary and milestone-based
incentive pay. In addition, we have equity incentive plans and an
employee stock purchase plan, under which we grant and have granted
options and other equity awards to our named executive officers,
employees, directors, consultants and independent contractors. See
the “Employee Benefit Plans” subsection below for
additional information on these plans.
Milestone Incentive Pay
We
provide our named executive officers and other senior managers the
opportunity to earn incentive payments under a milestone-based
incentive pay program. Payments under the incentive program are
based on our achievement of milestones that advance our core
business strategy. Milestones currently in effect are the
establishment of companion diagnostic, or CDx, development programs
with pharmaceutical companies. Future milestones will be
established by our Compensation Committee. Each participant is
granted the opportunity to earn incentive pay up to a maximum
percentage of his or her base salary. The range of milestone-based
incentive pay for each of our named executive officers is 25 - 80%
of base salary. Incentive payments under the incentive program may
be made entirely in the form of equity awards or partly in cash and
partly in the form of equity awards. No payments were made under
the program in fiscal year 2019.
Employment Agreements, Severance and Change in Control
Agreements
We
have not entered into employment agreements, severance agreements
or change-of-control agreements with our named executive officers.
Mr. Sullivan, Dr. Laing, and Ms. Hahne have each entered into a
confidentiality, assignment of inventions and non-competition
agreement with us, which provides, among other things, that the
named executive officer will not engage in a competitive business
or solicit our employees or consultants for a period of 24 months
after termination of employment.
Summary Compensation Table
The
following table summarizes the compensation for fiscal 2019 and
2018 of Celcuity’s named executive officers:
|
Name and Principal Position
|
Year
|
Salary
|
Option Awards (1)
|
Non-Equity Incentive Plan Compensation
|
Total
|
|
Brian
F. Sullivan
|
2019
|
$250,000
|
$741,544
|
$-
|
$991,544
|
|
Chairman
and Chief Executive Officer
|
2018
|
$250,000
|
$314,196
|
$-
|
$564,196
|
|
Lance
G. Laing
|
2019
|
$315,000
|
$676,300
|
$-
|
$991,300
|
|
Chief
Science Officer
|
2018
|
$285,461
|
$31,145
|
$94,500
|
$411,106
|
|
Vicky
Hahne
|
2019
|
$164,615
|
$40,578
|
$-
|
$205,193
|
|
Chief
Financial Officer
|
2018
|
$154,615
|
$62,540
|
$25,000
|
$242,155
|
(1)
Reflects the
aggregate grant date fair value of equity awards to each named
executive officer during 2019, calculated in accordance with FASB
ASC Topic 718. Refer to “Note 10
– Stock-Based Compensation” in the audited financial
statements included in Item 8 of our Annual Report on Form 10-K for
the year ended December 31, 2019 for a discussion of the
assumptions used in calculating the award
amount.
18
Outstanding Equity Awards at Fiscal Year End 2019
The
following table lists the outstanding equity awards held by each of
our named executive officers as of December 31, 2019:
|
|
|
|
OPTION
AWARDS
|
|||||||
|
Name
|
Grant
Date
|
|
Number of
Securities Underlying Unexercised Options (#)
Exercisable
|
|
Number of
Securities Underlying Unexercised Options (#)
Unexercisable
|
|
Option Exercise
Price ($)
|
|
Option
Expiration Date
|
|
|
Brian
F. Sullivan
|
5/17/2017
|
|
21,500
|
|
0
|
|
$
|
8.40
|
|
5/17/2027
|
|
|
9/19/2017
|
|
8,220
|
|
0
|
|
$
|
9.50
|
|
9/19/2027
|
|
|
8/13/2018
|
|
3,769
|
|
0
|
|
$
|
26.00
|
|
8/13/2028
|
|
|
10/17/2018
|
|
4,280
|
|
10,395(1)
|
|
$
|
25.77
|
|
10/17/2028
|
|
|
8/12/2019
|
|
0
|
|
4,985(2)
|
|
$
|
19.72
|
|
8/12/2029
|
|
|
8/12/2019
|
|
0
|
|
50,000(3)
|
|
$
|
19.72
|
|
8/12/2029
|
|
Lance
G. Laing
|
5/17/2017
|
|
16,125
|
|
0
|
|
$
|
8.40
|
|
5/17/2027
|
|
|
9/19/2017
|
|
4,110
|
|
0
|
|
$
|
9.50
|
|
9/19/2027
|
|
|
10/17/2018
|
|
534
|
|
1,300(4)
|
|
$
|
25.77
|
|
10/17/2028
|
|
|
8/12/2019
|
|
0
|
|
50,000(5)
|
|
$
|
19.72
|
|
8/12/2029
|
|
Vicky
Hahne
|
5/17/2017
|
|
22,656
|
|
14,844(6)
|
|
$
|
8.40
|
|
5/17/2027
|
|
|
7/5/2018
|
|
1,062
|
|
1,938(7)
|
|
$
|
23.48
|
|
7/05/2028
|
|
|
10/17/2018
|
|
271
|
|
661(8)
|
|
$
|
25.77
|
|
10/17/2028
|
|
|
8/12/2019
|
|
0
|
|
3,000(9)
|
|
$
|
19.72
|
|
8/12/2029
|
(1)
This option vests
as to 305.75 shares in 34 remaining installments on the
1st of
each of month beginning January 1, 2020 and ending October 1,
2022.
(2)
This option vests
as to 100% of the shares on September 19, 2020.
(3)
This option vests
as to 12,500 shares on August 12, 2020 and as to 1,041.67 shares in
36 installments on the 1st of each of month
beginning September 1, 2020 and ending August 1, 2023.
(4)
This option vests
as to 38.22 shares in 34 remaining installments on the
1st of
each of month beginning January 1, 2020 and ending October 1,
2022.
(5)
This option vests
as to 12,500 shares on August 12, 2020 and as to 1,041.67 shares in
36 installments on the 1st of each of month
beginning September 1, 2020 and ending August 1, 2023.
(6)
This option vests
as to 781.25 shares in 19 remaining installments on the
1st of
each of month beginning January 1, 2020 and ending July 1,
2021.
(7)
This option vests
as to 62.50 shares in 31 remaining installments on the
1st of
each of month beginning January 1, 2020 and ending July 1,
2022.
(8)
This option vests
as to 19.42 shares in 34 remaining installments on the
1st of
each of month beginning January 1, 2020 and ending October 1,
2022.
(9)
This option vests
as to 750 shares on August 12, 2020 and as to 62.50 shares in 36
installments on the 1st of each of month
beginning September 1, 2020 and ending August 1, 2023.
19
Employee Benefit Plans
2017 Stock Incentive Plan. Our 2017 Stock Incentive Plan (the “2017
Plan”) was adopted by our Board on September 6, 2017, became effective
September 15, 2017, and was approved by our stockholders at the
Company’s annual meeting on May 10, 2018. The Company
reserved a total of 750,000 shares for issuance under the 2017
Plan. As of December 31, 2019, options
to purchase 355,564 of shares were outstanding. The number
of shares reserved for issuance under the 2017 Plan will increase
automatically on January 1, 2019 and each subsequent anniversary
through January 1, 2027 by the number of shares equal to 1.0% of
the aggregate number of outstanding shares of the Company’s
common stock as of the immediately preceding December 31. However,
the Board may reduce the amount of the increase in any particular
year, and the Board decided that no increase would occur on January
1, 2019. The Board did allow an automatic increase in the number of
shares reserved for issuance by 102,540 shares on January 1, 2020,
for a total of 488,718 shares remaining under the 2017 Plan as of
January 1, 2020. The maximum permitted term of options granted
under the 2017 Plan is ten years. The 2017 Plan provides for share
options, restricted stock awards, stock appreciation rights,
restricted stock units, performance awards and stock
bonuses.
Our
2017 Plan provides that, in the event of specified types of mergers
or consolidations, a sale, lease, or other disposition of all or
substantially all of our assets or other corporate transactions,
outstanding awards under our 2017 Plan may be assumed or replaced
by any surviving or acquiring corporation; the surviving or
acquiring corporation may substitute similar awards for those
outstanding under our 2017 Plan; outstanding awards may be settled
for the full value of such outstanding award (whether or not then
vested or exercisable) in cash, cash equivalents, or securities (or
a combination thereof) of the successor entity with payment
deferred until the date or dates the award would have become
exercisable or vested; or outstanding awards may be terminated for
no consideration. Our Board or its Compensation Committee has the
discretion to provide that a stock award under our 2017 Plan will
immediately vest as to all or any portion of the shares subject to
the stock award at the time of a corporate transaction or in the
event a participant’s service with us or a successor entity
is terminated actually or constructively within a designated period
following the occurrence of the transaction. Stock awards held by
participants under our 2017 Plan will not vest automatically on
such an accelerated basis unless specifically provided in the
participant’s applicable award agreement. In the event of a
corporate transaction, the vesting of all awards granted to
non-employee directors shall accelerate and such awards shall
become exercisable (as applicable) in full upon the consummation of
the corporate transaction.
See
Proposal 4 in this Proxy Statement for additional information on
the proposed Amended and Restated 2017 Stock Incentive
Plan.
2017 Employee Stock Purchase
Plan. Our 2017 Employee Stock
Purchase Plan (the “ESPP”) was adopted by our
Board on September 6, 2017
and approved by our stockholders at the Company’s annual
meeting on May 10, 2018. The Company has reserved a total of
100,000 shares for issuance under the ESPP. As of December 31, 2019, 26,636 shares had been
issued and 73,364 remain available for issuance. The number
of shares reserved for issuance under the ESPP will increase
automatically on the first day of each fiscal year beginning in
2019 by the number of shares equal to 0.5% of the total outstanding
number of shares of common stock. However, the Board may reduce the
amount of the increase in any particular year, and the Board
decided that no increase would occur on January 1, 2019. The Board
did allow an automatic increase in the number of shares reserved
for issuance by 51,270 shares on January 1, 2020, for a total of
124,634 shares remaining under the ESPP as of January 1, 2020. The
ESPP provides participating employees with an opportunity to
purchase shares of the Company’s common stock at a discount
through payroll deductions. The ESPP is available to all employees
unless they are employed for less than 20 hours per week or own 5%
or more of the total combined voting power or value of the
Company’s common stock. The ESPP is administered using
overlapping 24 month offering periods, referred to as an Offering
Period. Each Offering Period has four six-month purchase periods. A
new Offering Period and purchase period begin every six months on
May 1 and November 1 of each year. Participating employees may
purchase common stock, on a voluntary after tax-basis, at a price
equal to 85% of the fair market value of a share of common stock on
either the offering date or the purchase date, whichever is lower.
If the purchase date has a lower price, the employee will
automatically be placed in the Offering Period beginning
immediately after the purchase date. If the Company is dissolved or
liquidated, any purchase period or Offering Period will terminate
immediately prior to the dissolution or liquidation. If we sell
substantially all of our assets to another company or engage in a
merger or consolidation where our stockholders will own less than
50% of shares of stock in the resulting company, the ESPP will
either be assumed by the successor entity or a new purchase date
will be set before the transaction is completed, after which the
ESPP will terminate.
2012 Equity Incentive Plan. Prior to
adopting the 2017 Plan, our 2012
Equity Incentive Plan (the “2012 Plan”) was adopted by
the board of governors and approved by the members of Celcuity LLC
on August 10, 2012 and was subsequently amended on
November 12, 2012. We had originally reserved 625,000 shares
for issuance under the 2012 Plan. As of December 31, 2019, options
to purchase 229,651 of these shares were outstanding. We have
ceased granting any additional awards under the 2012 Plan. However,
any outstanding options granted under the 2012 Plan will remain
outstanding subject to the terms of our 2012 Plan and the related
option agreements until such outstanding options are exercised or
until they terminate or expire by their terms. In the event of our
merger, consolidation, sale of substantially all assets,
liquidation or dissolution or other change of control, the 2012
Plan provides that the Board may accelerate the exercisability of
awards, terminate the 2012 Plan and unexercised awards, continue
the 2012 Plan with respect to outstanding awards, replace or
exchange incentive awards for similar securities of the successor,
substitute the awards with similar awards of the successor or
provide for cash payment for outstanding awards (net of exercise
price).
Retirement Savings Plans. Celcuity
maintains an employee benefit plan qualified under Section 401(k)
of the Internal Revenue Code of 1986, as amended. The Company
currently matches up to $1,000 per employee per year.
20
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION
PLANS
The
following table summarizes equity securities authorized for
issuance under our equity compensation plans as of December 31,
2019:
|
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)
(1)(2)
|
|
Equity
compensation plans approved by stockholders
|
585,215
|
$14.37
|
459,542
|
|
Equity
compensation plans not approved by stockholders
|
-
|
-
|
-
|
|
Total
|
585,215
|
$14.37
|
459,542
|
(1)
Includes 386,178
shares of common stock available for issuance under the 2017 Plan
and 73,364 shares of common stock available for issuance under the
ESPP as of December 31, 2019.
(2)
Warrants to
purchase 353,585 shares of Company common stock also remain
outstanding. These warrants were not issued as part of an equity
compensation plan and are not reflected in this table.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except
as described below, since January 1, 2018, there were no related
party transactions arising or existing requiring disclosure under
applicable Nasdaq Listing Rules or SEC rules and
regulations.
Indemnification Agreements
We
have entered into indemnification agreements with each of our
directors and executive officers. These agreements, among other
things, require us to indemnify our directors and executive
officers for certain expenses, including attorneys’ fees,
judgments, penalties, fines and settlement amounts actually
incurred by these individuals in any action or proceeding arising
out of their service to us or any of our subsidiaries or any other
company or enterprise to which these individuals provide services
at our request. Subject to certain limitations, our indemnification
agreements also require us to advance expenses incurred by our
directors and officers for the defense of any action for which
indemnification is required or permitted.
Policies and Procedures for Related Party Transactions
We
have a written related person transactions policy that our
executive officers, directors, nominees for election as a director,
beneficial owners of more than 5% of our common stock, and any
members of the immediate family of and any entity affiliated with
any of the foregoing persons, are not permitted to enter into a
material related person transaction with us without the review and
approval of our Audit Committee, or a committee composed solely of
independent directors in the event it is inappropriate for our
Audit Committee to review such transaction due to a conflict of
interest. The policy provides that any request for us to enter into
a transaction with an executive officer, director, nominee for
election as a director, beneficial owner of more than 5% of our
common stock or with any of their immediate family members or
affiliates in which the amount involved exceeds $120,000 will be
presented to our Audit Committee for review, consideration and
approval. In approving or rejecting any such proposal, our Audit
Committee will consider the relevant facts and circumstances
available and deemed relevant to the Audit Committee, including,
but not limited to, whether the transaction is on terms no less
favorable than terms generally available to an unaffiliated third
party under the same or similar circumstances and the extent of the
related person’s interest in the transaction.
21
AUDIT COMMITTEE REPORT
Management is
responsible for Celcuity's financial reporting process, including
the system of internal controls, and for preparing Celcuity's
financial statements in accordance with accounting principles
generally accepted in the United States of America. Our independent
registered public accounting firm is responsible for auditing those
financial statements and expressing an opinion as to their
conformity with accounting principles generally accepted in the
United States of America. The Audit Committee's responsibility is
to monitor and review these processes. The members of the Audit
Committee rely, without independent verification, on the
information provided to them and on the representations made by
Celcuity's management and the independent registered public
accounting firm.
During
2019, the Audit Committee, consisting of Richard J. Nigon
(chairman), David F. Dalvey, and Leo T. Furcht held five meetings.
The meetings were designed to, among other things, facilitate and
encourage communication among the Audit Committee, management and
Celcuity's independent registered public accounting firm, Boulay
PLLP (“Boulay”). The Audit Committee discussed with
Boulay the overall scope and plans for its 2019 audit. The Audit
Committee met with Boulay, with and without management present, to
discuss the results of its examinations and its evaluations of
Celcuity's system of internal controls.
During
the meetings held in 2019, the Audit Committee reviewed and
discussed, among other things:
●
Celcuity’s
financial statements, its Quarterly Reports on Form 10-Q, and any
reports received from the independent registered public accounting
firm;
●
recent accounting
pronouncements and the Company’s significant accounting
policies;
●
disclosure controls
and procedures and internal controls over financial reporting;
and
●
engagement of
Celcuity’s independent registered public accounting
firm.
In
March 2020, the Audit Committee reviewed and discussed the 2019
audited financial statements and notes to the financial statements
proposed for inclusion in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2019 with management and
Boulay, including a discussion of the application of accounting
principles generally accepted in the United States, the
reasonableness of significant judgments, and the clarity of
disclosures in the financial statements. The Audit Committee also
has discussed with our independent registered public accounting
firm the firm's independence from management, including whether the
provision of non-audit services is compatible with maintaining the
firm's independence, and matters required to be discussed by the
applicable requirements of the Public Company Accounting Oversight
Board. The Audit Committee received the written disclosures and the
letter from the independent registered public accounting firm
required by the Public Company Accounting Oversight Board regarding
such firm’s communications with the Audit Committee
concerning independence and has discussed with such firm its
independence.
Based
on this review and prior discussions with management and the
independent registered public accounting firm, the Audit Committee
recommended to the Board that Celcuity’s audited financial
statements be included in its Annual Report on Form 10-K for the
fiscal year ended December 31, 2019 as filed with the
SEC.
Audit Committee
Richard
J. Nigon (chairman)
David
F. Dalvey
Leo T.
Furcht
22
STOCKHOLDER PROPOSALS
Any
stockholder desiring to submit a proposal for action by the
stockholders at our next annual meeting, which will be our 2021
annual meeting, must satisfy the requirements set for in the
advance notice provision under our bylaws. To be timely submitted for our 2021 annual
meeting, any such proposal must be delivered in writing to
our Corporate Secretary at the principal executive offices of the
Company between the close of business
on January 15, 2021 and the close of business on
February 14, 2021. If the date of the 2021 annual meeting is
advanced more than 30 days prior to or delayed by more than 60 days
after the first anniversary of the 2020 Annual Meeting, notice by
the stockholder must be delivered not earlier than the close of
business on the 120th
day prior to the 2021 annual meeting
and not later than the close of business on the later of the 90th
day prior to the 2021 annual meeting or, if the first public
announcement of the date of the 2021 annual meeting is less than
100 days prior to the date of the 2021 annual meeting, the
10th
day following the day on which public
announcement of the date of the 2021 annual meeting is first
made.
Notwithstanding the foregoing, if the number of
directors to be elected to our Board is increased and no public announcement naming all
of the nominees for director or specifying the size of the
increased Board is made by the
Company at least 100 days prior to the first anniversary of the
2020 Annual Meeting, a stockholder’s notice will be
considered timely, but only with respect to nominees for any new
positions created by such increase, if the stockholder delivers
such notice to our Corporate Secretary at the principal executive
offices of the Company not later than the close of business on the
10th
day following the day on which a
public announcement naming all of the nominees for director or
specifying the size of the increased Board is first made by the Company. Notice sent to the
Company must comply with the requirements set forth in the
Company’s bylaws. You are advised to review the
Company’s bylaws, and due to the complexity of the
respective rights of the stockholders and the Company in this area,
you are advised to consult with your legal counsel with respect to
such rights.
In
addition, any stockholder proposal intended to be included in the
proxy statement for the 2021 annual meeting must also satisfy
Rule 14a-8 of the Exchange Act and be received no later than
December 3, 2020. If the date of the 2021 annual meeting is moved
by more than 30 days from the first anniversary of the 2020
Annual Meeting, then notice must be received within a reasonable
time before we begin to print and send proxy
materials.
By
Order of the Board of Directors:
/s/
Brian F. Sullivan
Chairman of the
Board of Directors and Chief Executive Officer
Dated:
March 31, 2020
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE 2020
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 14,
2020.
The Notice, this Proxy Statement, and the Annual Report on
Form 10-K are available at www.proxyvote.com and on the
Investor Relations section of Celcuity’s website at
www.celcuity.com/home/investors/.
23
Appendix
A
CELCUITY
INC.
AMENDED
AND RESTATED
2017
STOCK INCENTIVE PLAN
24
TABLE
OF CONTENTS
|
|
|
Page
|
|
1
|
Purpose of
Plan
|
1
|
|
2
|
Definitions
|
1
|
|
3
|
Effective Date and
Duration of the Plan
|
3
|
|
|
3.1 Effective Date and Duration
|
3
|
|
|
3.2 Stockholder Approval
|
3
|
|
4
|
Shares Available for
Issuance
|
3
|
|
4.1 Plan Reserve
|
3
|
|
|
4.2 Accounting for Incentive Awards
|
3
|
|
|
4.3 Incentive Award Limitations Under the
Plan
|
4
|
|
|
|
4.4 Adjustments to Shares and Incentive
Awards
|
4
|
|
5
|
Plan
Administration
|
4
|
|
|
5.1 The Committee
|
4
|
|
|
5.2 Authority of the Committee
|
4
|
|
6
|
Participation
|
5
|
|
7
|
Options
|
5
|
|
|
7.1 Grant
|
5
|
|
|
7.2 Exercise Price
|
5
|
|
|
7.3 Exercisability and Duration
|
5
|
|
|
7.4 Payment of Exercise Price
|
5
|
|
|
7.5 Manner of Exercise
|
5
|
|
|
7.6 Aggregate Limitation of Stock Subject to
Incentive Stock Options
|
5
|
|
8
|
Stock Appreciation
Rights
|
6
|
|
|
8.1 Grant
|
6
|
|
|
8.2 Exercisability and Duration
|
6
|
|
9
|
Restricted Stock Awards
and Restricted Stock Unit Awards
|
6
|
|
|
9.1 Grant
|
6
|
|
|
9.2 Rights as a Stockholder;
Transferability
|
6
|
|
|
9.3 Dividends and Distributions
|
6
|
|
|
9.4 Enforcement of Restrictions
|
6
|
|
10
|
Performance
Awards
|
6
|
|
|
10.1 Grant
|
6
|
|
|
10.2 Performance Goals
|
6
|
|
|
10.3 Form of Payment
|
7
|
|
11
|
Stock
Bonuses
|
7
|
|
12
|
Effect of Termination
of Employment or Other Service
|
7
|
|
|
12.1 Termination Due to Death, Disability or
Retirement
|
7
|
|
|
12.2 Termination for Reasons Other than Death, Disability or
Retirement
|
7
|
|
|
12.3 Modification of Rights Upon Termination
|
8
|
|
|
12.4 Exercise of Incentive Stock Options Following
Termination
|
8
|
|
|
12.5 Date of Termination of Employment or Other
Service
|
8
|
|
13
|
Payment of Withholding
Taxes
|
8
|
|
|
13.1 General Rules
|
8
|
|
|
13.2 Special Rules
|
8
|
|
14
|
Action upon Change in
Control
|
8
|
|
15
|
Rights of Eligible Recipients
and Participants; Transferability
|
9
|
|
|
15.1 Employment or Service
|
9
|
|
|
15.2 Rights as a Stockholder
|
9
|
|
|
15.3 Restrictions on Transfer
|
9
|
|
|
15.4 Breach of Confidentiality or Non-Compete
Agreements
|
9
|
|
|
15.5 Non-Exclusivity of the Plan
|
9
|
|
16
|
Securities Law and Other
Restrictions
|
9
|
|
17
|
Plan Amendment, Modification
and Termination
|
10
|
|
18
|
Miscellaneous
|
10
|
|
|
18.1 Successors and Assigns
|
10
|
|
|
18.2 Governing Law
|
10
|
25
CELCUITY
INC.
AMENDED
AND RESTATED
2017
STOCK INCENTIVE PLAN
1. Purpose of Plan.
The purpose of the
Celcuity Inc. Amended and Restated 2017 Stock Incentive Plan (the
“Plan”)
is to advance the interests of Celcuity Inc. (the
“Company”) and its
stockholders by enabling the Company and its Subsidiaries to
attract and retain persons of skill and ability to perform services
for the Company and its Subsidiaries by providing an incentive to
such individuals through equity participation in the Company and by
rewarding such individuals who contribute to the achievement by the
Company of its economic objectives.
2. Definitions.
The following terms
will have the meanings set forth below, unless the context clearly
otherwise requires:
2.1. “Board” means the Board of
Directors of the Company.
2.2. “Broker Exercise Notice”
means a written notice pursuant to which a Participant, upon
exercise of an Option, irrevocably instructs a broker or dealer to
sell a sufficient number of shares or lend a sufficient amount of
money to pay all or a portion of the exercise price of the Option
and/or any related withholding tax obligations and remit such sums
to the Company and directs the Company to deliver stock
certificates to be issued upon such exercise directly to such
broker or dealer.
2.3. “Cause”
means:
(a) “Cause”
as defined in any employment or other agreement or policy
applicable to the Participant; or
(b) If no such
agreement or policy exists, (i) dishonesty, fraud,
misrepresentation, embezzlement or deliberate injury or attempted
injury, in each case related to the Company or any Subsidiary, (ii)
substantial failure on the part of the Participant to perform his
or her duties to the Company or any Subsidiary or gross negligence
on the part of the Participant in the performance of such duties,
(iii) any unlawful or criminal activity of a serious nature, or
(iv) any material breach of any employment, service,
confidentiality or non-compete agreement entered into with the
Company or any Subsidiary.
2.4. “Change in Control” of the
Company means the occurrence of any of the following
events:
(a) the sale, lease,
exchange or other transfer of all or substantially all of the
assets of the Company (in one transaction or in a series of related
transactions) except where such sale, lease, exchange or other
transfer is to an entity controlled by the Company;
(b) the approval by the
stockholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company; or
(c) any person becomes
after the Effective Date the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of fifty percent (50%) or more of the combined voting
power of the Company’s outstanding securities ordinarily
having the right to vote at elections of directors; or
(d) a merger or
consolidation to which the Company is a party if the persons who
are the stockholders of the Company immediately prior to effective
date of such merger or consolidation have “beneficial
ownership” (as defined in Rule l3d-3 under the Exchange Act),
immediately following the effective date of such merger or
consolidation, of securities of the surviving corporation
representing 50% or less of the combined voting power of the
surviving corporation’s then outstanding securities
ordinarily having the right to vote at elections of
directors.
2.5. “Code” means the Internal
Revenue Code of 1986, as amended.
2.6. “Committee” means the
group of individuals administering the Plan, as provided in
Section 5 of the Plan.
1
2.7. “Common Stock” means the
common stock of the Company, $0.001 par value, or the number and
kind of shares of stock or other securities into which such common
stock may be changed in accordance with Section 4.4 of the
Plan.
2.8. “Disability” means the
disability of the Participant such as would entitle the Participant
to receive disability income benefits pursuant to the long-term
disability plan of the Company or Subsidiary then covering the
Participant or, if no such plan exists or is applicable to the
Participant, the permanent and total disability of the Participant
within the meaning of Section 22(e)(3) of the Code.
2.9. “Effective Date” means
September 18, 2017.
2.10. “Eligible Recipient” means
any employee of the Company or any Subsidiary and any non-employee
director, consultant or independent contractor of the Company or
any Subsidiary.
2.11. “Exchange Act” means the
Securities Exchange Act of 1934, as amended.
2.12. “Fair Market Value” means,
with respect to the Common Stock, as of any date: (i) the last
reported sale price of a share of Common Stock as of such date
during the regular daily trading session on the Nasdaq Capital
Market or on any other national exchange (or, if no shares were
traded or quoted on such date, as of the next preceding date on
which there was such a trade or quote); or (ii) if the Common
Stock is publicly traded but is not so listed, the average of the
closing bid and asked prices on such date, as reported by The Wall
Street Journal, in the over-the- counter market (or, if no shares
were quoted on such date, as of the next preceding date on which
there was such a quote); or (iii) if the Common Stock is not
so listed or reported, such price as the Committee determines in
good faith in the exercise of its reasonable discretion, taking
into account all available information material to the value of the
Common Stock, and consistent with the definition of “fair
market value” under Section 409A of the Code.
2.13. “Incentive Award” means an
Option, Stock Appreciation Right, Restricted Stock Award,
Restricted Stock Unit Award, Performance Award or Stock Bonus
granted to an Eligible Recipient pursuant to the Plan.
2.14. “Incentive Stock Option”
means a right to purchase Common Stock granted to an Eligible
Recipient pursuant to Section 7 of the Plan that qualifies as
an “incentive stock option” within the meaning of
Section 422 of the Code.
2.15. “Non-Statutory Stock
Option” means a right to purchase Common Stock granted
to an Eligible Recipient pursuant to Section 7 of the Plan
that does not qualify as an Incentive Stock Option.
2.16. “Option” means an
Incentive Stock Option or a Non-Statutory Stock
Option.
2.17. “Participant” means an
Eligible Recipient who receives one or more Incentive Awards under
the Plan.
2.18. “Performance Award” means
a right granted to an Eligible Recipient pursuant to
Section 10 of the Plan to receive a payment from the Company,
in the form of stock, cash or a combination of both, upon the
achievement of established employment, service, performance or
other goals.
2.19. “Performance Goal” means
one or more of the following performance goals, either
individually, alternatively or in any combination, applied on a
Company, Subsidiary or business unit basis: revenue, cash flow,
gross profit, earnings before interest and taxes, earnings before
interest, taxes, depreciation and amortization and net earnings,
earnings per share, margins (including one or more of gross,
operating and· net income margins), returns (including one or
more of return on assets, equity, investment, capital and revenue
and total stockholder return), stock price, working capital, market
share, cost reductions, workforce satisfaction and diversity goals,
employee retention, customer satisfaction, completion of key
projects and strategic plan development and implementation. Such
goals may reflect absolute entity or business unit performance or a
relative comparison to the performance of a peer group of entities,
prior periods of performance, or other external measures of the
selected performance criteria.
Pursuant to rules
and conditions adopted by the Committee on or before the earlier of
the expiration of twenty-five percent (25%) of the applicable
performance period or the 90th day of the applicable performance
period for which Performance Goals are established, the Committee
may appropriately adjust any evaluation of performance under such
goals to exclude the effect of certain events, including any of the
following events: asset write-downs; litigation or claim judgments
or settlements; changes in tax law, accounting principles or other
such laws or provisions affecting reported results; severance,
contract termination and other costs related to exiting certain
business activities; and gains or losses from the disposition of
businesses or assets or from the early extinguishment of debt.
Performance Goals may include individual objectives or other
subjective criteria.
2.20. “Previously Acquired
Shares” means shares of Common Stock that are already
owned by the Participant.
2
2.21. “Restricted Stock Award”
means an award of Common Stock granted to an Eligible Recipient
pursuant to Section 9 of the Plan that is subject to the
restrictions on transferability and the risk of forfeiture imposed
by the provisions of such Section 9.
2.22. “Restricted Stock Unit
Award” means an award granted to an Eligible Recipient
pursuant to Section 9 of the Plan evidencing the right to
receive a Share (or a cash payment equal to the Fair Market Value
of a Share) at some future date.
2.23. “Retirement” means
termination of employment or service pursuant to and in accordance
with the regular (or, if approved by the Board for purposes of the
Plan, early) retirement/pension plan or practice of the Company or
Subsidiary then covering the Participant, provided that if the Participant is not
covered by any such plan or practice, the Participant will be
deemed to be covered by the Company’s plan or practice for
purposes of this determination.
2.24. “Securities Act” means the
Securities Act of 1933, as amended.
2.25. “Share” means a share of
Common Stock.
2.26. “Stock Appreciation Right”
means a right granted to an Eligible Recipient pursuant to
Section 8 of the Plan to receive a payment from the Company at
the time of exercise, in the form of stock, cash or a combination
of both, equal to the difference between the Fair Market Value of
one or more shares of Common Stock and the exercise price of such
shares under the terms of such Stock Appreciation
Right.
2.27. “Stock Bonus” means an
award of Common Stock granted to an Eligible Recipient pursuant to
Section 11 of the Plan.
2.28. “Subsidiary” means any
entity that is directly or indirectly controlled by the Company or
any entity in which the Company has a significant equity interest,
as determined by the Committee.
3. Effective Date and Duration of the
Plan.
3.1. Effective Date and Duration.
The Plan is effective as of the Effective Date. The Plan will
terminate at midnight on September 6, 2027 and may be terminated
prior to such time by Board action, and no Incentive Award may be
granted after such termination. Incentive Awards outstanding upon
termination of the Plan may continue to be exercised, or become
free of restrictions, in accordance with their terms.
3.2. Stockholder Approval. The Plan
shall be submitted to the stockholders of the Company for approval
within twelve (12) months before or after the Effective Date.
Incentive Awards may be granted prior to the date this Plan is
approved by the stockholders of the Company; provided, however, that any Incentive
Stock Options granted after adoption of the Plan by the Board shall
be treated as Non-Statutory stock options if stockholder approval
is not obtained within such twelve-month period.
4. Shares Available for
Issuance.
4.1. Plan Reserve. Subject to
adjustment as provided in Section 4.4 of the Plan, an
aggregate of Eight Hundred Forty-Four Thousand Two Hundred
Eighty-Two (844,282) Shares are reserved for issuance under the
Plan. On January 1 of each year commencing in 2021 and ending on
(and including) January 1, 2027, an additional number of Shares
shall become available for issuance under the Plan equal to the
lesser of: (i) one percent (1%) of the number of Shares issued
and outstanding as of the immediately preceding December 31, and
(ii) another amount determined by the Board. Notwithstanding
the foregoing, the number of Shares available under the Plan to be
issued as Incentive Stock Options shall not exceed Seven Hundred
Fifty Thousand (750,000) Shares, subject to adjustment as provided
in the Plan and Section 422 or 424 of the Code or any successor
provisions.
4.2. Accounting for Incentive
Awards. Shares of Common Stock that are issued under the
Plan or that are subject to outstanding Incentive Awards will be
applied to reduce the maximum number of shares of Common Stock
remaining available for issuance under the Plan. Any shares of
Common Stock that are subject to an Incentive Award that lapses,
expires, is forfeited or for any reason is terminated unexercised
or unvested and any shares of Common Stock that are subject to an
Incentive Award that is settled or paid in cash or any form other
than shares of Common Stock will automatically again become
available for issuance under the Plan. Any shares of Common Stock
that constitute the forfeited portion of a Restricted Stock Award,
however, will not become available for re-issuance under the Plan
after they have been so forfeited. Any shares of Common Stock
withheld to satisfy tax withholding obligations on an Incentive
Award or shares of Common Stock withheld to pay the exercise price
of an Option will not become available for re-issuance under the
Plan after they have been withheld for such purposes.
3
4.3. Incentive Award Limitations Under the
Plan. Notwithstanding any provision in the Plan to the
contrary, the number of Shares subject to an Incentive Award or
Awards granted under the Plan in any calendar year to any one
Eligible Recipient shall not, in the aggregate, be more than
250,000 Shares; provided, however, that such limitation shall be
500,000 Shares in the case of Incentive Awards granted to an
Eligible Recipient in the calendar year in which such Eligible
Recipient commences employment with the Company or a Subsidiary.
Such annual Incentive Award limitations shall be subject to
adjustment as provided in Section 4.4 of the Plan. For
purposes of applying such annual Incentive Award limitations to
Incentive Awards denominated in a form other than Shares, the
number of Shares subject to such Incentive Award shall be
determined by dividing the maximum amount payable under such
Incentive Award by the Fair Market Value of a Share at the date of
grant
4.4. Adjustments to Shares and Incentive
Awards. In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification,
stock dividend, stock split, combination of shares, rights
offering, divestiture or extraordinary dividend (including a
spin-off) or any other similar change in the corporate structure or
shares of the Company, the Committee (or, if the Company is not the
surviving corporation in any such transaction, the board of
directors of the surviving corporation) will make appropriate
adjustment (which determination will be conclusive) as to the
number and kind of securities or other property (including cash)
available for issuance or payment under the Plan and, in order to
prevent dilution or enlargement of the rights of Participants, (a)
the number and kind of securities or other property (including
cash) subject to outstanding Options, and (b) the exercise price of
outstanding Options.
5.1. The Committee. The Plan will be
administered by the Board or by a committee of the Board. So long
as the Company has a class of its equity securities registered
under Section 12 of the Exchange Act, any committee administering
the Plan will consist solely of two or more members of the Board
who are “non-employee directors” within the meaning of
Rule 16b-3 under the Exchange Act. Such a committee, if
established, will act by majority approval of the members (but may
also take action with the written consent of a majority of the
members of such committee), and a majority of the members of such a
committee will constitute a quorum. As used in the Plan
“Committee” will refer to the Board or to such a
committee, if established. To the extent consistent with corporate
law, the Committee may delegate to any officers of the Company the
duties, power and authority of the Committee under the Plan
pursuant to such conditions or limitations as the Committee may
establish; provided,
however, that only the
Committee may exercise such duties, power and authority with
respect to Eligible Recipients who are subject to Section 16 of the
Exchange Act. The Committee may exercise its duties, power and
authority under the Plan in its sole and absolute discretion
without the consent of any Participant or other party, unless the
Plan specifically provides otherwise. Each determination,
interpretation or other action made or taken by the Committee
pursuant to the provisions of the Plan will be final, conclusive
and binding for all purposes and on all persons, including, without
limitation, the Company, the stockholders of the Company, the
Participants and their respective successors-in-interest. No member
of the Committee will be liable for any action or determination
made in good faith with respect to the Plan or any Incentive Award
granted under the Plan.
(a) In accordance with
and subject to the provisions of the Plan, the Committee will have
the authority to determine all provisions of Incentive Awards as
the Committee may deem necessary or desirable and as consistent
with the terms of the Plan, including, without limitation, the
following: (i) the Eligible Recipients to be selected as
Participants; (ii) the nature and extent of the Incentive Awards to
be made to each Participant (including the number of shares of
Common Stock to be subject to each Incentive Award, any exercise
price, the manner in which Incentive Awards will vest or become
exercisable and whether Incentive Awards will be granted in tandem
with other Incentive Awards) and the form of written agreement, if
any, evidencing such Incentive Award; (iii) the time or times when
Incentive Awards will be granted; (iv) the duration of each
Incentive Award; and (v) the restrictions and other conditions to
which the payment or vesting of Incentive Awards may be subject. In
addition, the Committee will have the authority under the Plan in
its sole discretion to pay the economic value of any Incentive
Award in the form of cash, Common Stock or any combination of
both.
(b) The Committee will
have the authority under the Plan to amend or modify the terms of
any outstanding Incentive Award in any manner, including, without
limitation, the authority to reduce the exercise price of any
outstanding Option, modify the number of shares or other terms and
conditions of an Incentive Award, extend the term of an Incentive
Award, accelerate the exercisability or vesting or otherwise
terminate any restrictions relating to an Incentive Award, accept
the surrender of any outstanding Incentive Award or, to the extent
not previously exercised or vested, authorize the grant of new
Incentive Awards in substitution for surrendered Incentive Awards;
provided, however, that the amended or modified
terms are permitted by the Plan as then in effect, that such
amendment or modification does not cause the Incentive Award to
become subject to Section 409A of the Code, and that any
Participant adversely affected by such amended or modified terms
has consented to such amendment or modification. No amendment or
modification to an Incentive Award, however, whether pursuant to
this Section 5.2 or any other provisions of the Plan, will be
deemed to be a re-grant of such Incentive Award for purposes of the
Plan.
4
(c) In the event of (i)
any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, extraordinary dividend or
divestiture (including a spin-off) or any other similar change in
corporate structure or shares, (ii) any purchase, acquisition, sale
or disposition of a significant amount of assets or a significant
business, (iii) any change in accounting principles or practices,
or (iv) any other similar change, in each case with respect to the
Company or any other entity whose performance is relevant to the
grant or vesting of an Incentive Award, the Committee (or, if the
Company is not the surviving corporation in any such transaction,
the board of directors of the surviving corporation) may, without
the consent of any affected Participant, amend or modify the
vesting criteria of any outstanding Incentive Award that is based
in whole or in part on the financial performance of the Company (or
any Subsidiary or division thereof) or such other entity so as
equitably to reflect such event, with the desired result that the
criteria for evaluating such financial performance of the Company
or such other entity will be substantially the same (in the sole
discretion of the Committee or the board of directors of the
surviving corporation) following such event as prior to such event;
provided, however, that the amended or modified
terms are permitted by the Plan as then in effect.
6. Participation.
Participants in the
Plan will be those Eligible Recipients who, in the judgment of the
Committee, have contributed, are contributing or are expected to
contribute to the achievement of economic objectives of the Company
or its Subsidiaries. Eligible Recipients may be granted from time
to time one or more Incentive Awards, singly or in combination or
in tandem with other Incentive Awards, as may be determined by the
Committee in its sole discretion. Incentive Awards will be deemed
to be granted as of the date specified in the grant resolution of
the Committee, which date will be the date of any related agreement
with the Participant.
7.1. Grant. An Eligible Recipient
may be granted one or more Options under the Plan, and such Options
will be subject to such terms and conditions, consistent with the
other provisions of the Plan, as may be determined by the Committee
in its sole discretion. The Committee may designate whether an
Option is to be considered an Incentive Stock Option or a
Non-Statutory Stock Option. To the extent that any Incentive Stock
Option granted under the Plan ceases for any reason to qualify as
an “incentive stock option” for purposes of Section 422
of the Code, such Incentive Stock Option will continue to be
outstanding for purposes of the Plan but will thereafter be deemed
to be a Non-Statutory Stock Option.
7.2. Exercise Price. The per share
price to be paid by a Participant upon exercise of an Option will
be determined by the Committee in its discretion at the time of the
Option grant; provided,
however, that such price
will not be less than one hundred percent (100%) of the Fair Market
Value of one share of Common Stock on the date of grant (or, with
respect to an Incentive Stock Option, one hundred ten percent
(110%) of the Fair Market Value if, at the time the Incentive Stock
Option is granted, the Participant owns, directly or indirectly,
more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any parent or subsidiary
corporation of the Company).
7.3. Exercisability and Duration. An
Option will become exercisable at such times and in such
installments as may be determined by the Committee in its sole
discretion at the time of grant; provided, however, that no Incentive Stock Option
may be exercisable after ten (10) years from its date of grant
(five (5) years from its date of grant if, at the time the
Incentive Stock Option is granted, the Participant owns, directly
or indirectly, more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any parent
or subsidiary corporation of the Company).
7.4. Payment of Exercise Price. The
total purchase price of the shares to be purchased upon exercise of
an Option will be paid entirely in cash (including check, bank
draft or money order); provided, however, that the Committee, in its
sole discretion and upon terms and conditions established by the
Committee, may allow such payments to be made, in whole or in part,
by tender of a Broker Exercise Notice, of Previously Acquired
Shares, or of a promissory note (on terms acceptable to the
Committee in its sole discretion), through the withholding of
shares of Common Stock from the number of shares of Common Stock
otherwise issuable upon the exercise of the Option, or by a
combination of such methods, or by any other form of payment the
Committee may authorize.
7.5. Manner of Exercise. An Option
may be exercised by a Participant in whole or in part from time to
time, subject to the conditions contained in the Plan and in the
agreement evidencing such Option, by delivery in person, by
facsimile or electronic transmission or through the mail of written
notice of exercise to the Company (Attention: Chief Financial
Officer) at its principal executive office, and by paying in full
the total exercise price for the shares of Common Stock to be
purchased in accordance with Section 7.4 of the
Plan.
7.6. Aggregate Limitation of Stock Subject
to Incentive Stock Options. To the extent that the aggregate
Fair Market Value (determined as of the date an Incentive Stock
Option is granted) of the shares of Common Stock with respect to
which incentive stock options (within the meaning of Section 422 of
the Code) are exercisable for the first time by a Participant
during any calendar year (under the Plan and any other incentive
stock option plans of the Company or any subsidiary or parent
corporation of the Company (within the meaning of the Code))
exceeds $100,000 (or such other amount as may be prescribed by the
Code from time to time), such excess Options will be treated as
Non-Statutory Stock Options. The determination will be made by
taking Incentive Stock Options into account in the order in which
they were granted. If such excess only applies to a portion of an
Incentive Stock Option, the Committee, in its discretion, will
designate which shares will be treated as shares to be acquired
upon exercise of an Incentive Stock Option.
5
8.1. Grant. An Eligible Recipient
may be granted one or more Stock Appreciation Rights under the
Plan, and such Stock Appreciation Rights will be subject to such
terms and conditions, consistent with the other provisions of the
Plan, as may be determined by the Committee in its sole discretion.
A Stock Appreciation Right granted under the Plan shall confer on
the holder thereof a right to receive upon exercise thereof the
excess of (i) the Fair Market Value of one Share on the date of
exercise (or, if the Committee shall so determine, at any time
during a specified period before or after the date of exercise)
over (ii) the grant price of the Stock Appreciation Right as
determined by the Committee, which grant price shall not be less
than one hundred percent (100%) of the Fair Market Value of one
Share on the date of grant of the Stock Appreciation Right. The
Committee will have the sole discretion to determine the form in
which payment of the economic value of Stock Appreciation Rights
will be made to a Participant (i.e., cash, Common Stock or any
combination thereof) or to consent to or disapprove the election by
a Participant of the form of such payment.
8.2. Exercisability and Duration. A
Stock Appreciation Right will become exercisable at such time and
in such installments as may be determined by the Committee in its
sole discretion at the time of grant; provided, however, that no Stock Appreciation
Right may be exercisable after ten (10) years from its date of
grant. A Stock Appreciation Right will be exercised by giving
notice in the same manner as for Options, as set forth in
Section 7.5 of the Plan.
9.1. Grant. An Eligible Recipient
may be granted one or more Restricted Stock Awards or Restricted
Stock Unit Awards under the Plan, and such Restricted Stock Awards
or Restricted Stock Unit Awards will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as
may be determined by the Committee in its sole discretion. The
Committee may impose such restrictions or conditions, such as
forfeiture or a repurchase option, not inconsistent with the
provisions of the Plan, to the vesting of or the lapse of
restrictions or conditions for any such Restricted Stock Award or
Restricted Stock Unit Award as it deems appropriate, including,
without limitation, that the Participant remain in the continuous
employ or service of the Company or a Subsidiary for a certain
period or that the Participant or the Company (or any Subsidiary or
division thereof) satisfy certain performance goals or
criteria.
9.2. Rights as a Stockholder;
Transferability. Except as provided in Sections 9.1,
9.3 and 15.3 of the Plan, a Participant will have all voting,
dividend, liquidation and other rights with respect to shares of
Common Stock issued to the Participant as a Restricted Stock Award
under this Section 9 upon the Participant becoming the holder
of record of such shares as if such Participant were a holder of
record of shares of unrestricted Common Stock. In the case of
Restricted Stock Unit Awards, no Shares shall be issued at the time
such Restricted Stock Awards are granted. Upon the lapse or waiver
of restrictions and the restricted period relating to Restricted
Stock Unit Awards evidencing the right to receive Shares, such
Shares shall be issued and delivered to the holder of the
Restricted Stock Unit Award.
9.3. Dividends and Distributions.
Unless the Committee determines otherwise in its sole discretion
(either in the agreement evidencing the Restricted Stock Award at
the time of grant or at any time after the grant of the Restricted
Stock Award), any dividends or distributions (including regular
quarterly cash dividends, if any) paid with respect to shares of
Common Stock subject to the unvested portion of a Restricted Stock
Award will be subject to the same restrictions as the shares to
which such dividends or distributions relate. In the event the
Committee determines not to pay dividends or distributions
currently, the Committee will determine in its sole discretion
whether any interest will be paid on such dividends or
distributions. In addition, the Committee in its sole discretion
may require such dividends and distributions to be reinvested (and
in such case the Participant consents to such reinvestment) in
shares of Common Stock that will be subject to the same
restrictions as the shares to which such dividends or distributions
relate.
9.4. Enforcement of Restrictions. To
enforce the restrictions referred to in this Section 9, the
Committee may place a legend on the stock certificates referring to
such restrictions and may require the Participant, until the
restrictions have lapsed, to keep the stock certificates, together
with duly endorsed stock powers, in the custody of the Company or
its transfer agent or to maintain evidence of stock ownership,
together with duly endorsed stock powers, in a certificateless
book-entry stock account with the Company’s transfer
agent.
10.1. Grant. An Eligible Recipient
may be granted one or more Performance Awards under the Plan, and
such Performance Awards will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as
may be determined by the Committee in its sole
discretion.
10.2. Performance Goals. The
Committee may impose such restrictions or conditions, not
inconsistent with the provisions of the Plan, to the vesting of
such Performance Awards as it deems appropriate, including, without
limitation, that the Participant remain in the continuous employ or
service of the Company or any Subsidiary for a certain period or
that the Participant or the Company (or any Subsidiary or division
thereof) satisfy certain Performance Goals. Subject to the terms of
the Plan and any applicable Performance Award agreement, the
Committee will have the sole discretion to determine the
Performance Goals to be achieved during any performance period, the
length of any performance period, the amount of any Performance
Award granted, the amount of any payment or transfer to be made
pursuant to any Performance Award, and any other terms and
conditions of any Performance Award.
6
10.3. Form of Payment. A Performance
Award granted under the Plan may be payable in cash or in Shares
(including, without limitation, Restricted Stock Awards). The
Committee will have the sole discretion to determine the form in
which payment of the economic value of Performance Awards will be
made to a Participant (i.e., cash, Common Stock or any combination
thereof) or to consent to or disapprove the election by a
Participant of the form of such payment.
An Eligible
Recipient may be granted one or more Stock Bonuses under the Plan,
and such Stock Bonuses will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as
may be determined by the Committee. The Participant will have all
voting, dividend, liquidation and other rights with respect to the
shares of Common Stock issued to a Participant as a Stock Bonus
under this Section 11 upon the Participant becoming the holder
of record of such shares; provided, however, that the Committee may impose
such restrictions on the assignment or transfer of a Stock Bonus as
it deems appropriate.
12.1. Termination Due to Death, Disability
or Retirement. Unless otherwise provided by the Committee in
its sole discretion in the agreement evidencing an Incentive
Award:
(a) In the event a
Participant’s employment or other service with the Company
and all Subsidiaries is terminated by reason of death or
Disability:
(i) all outstanding
Options and Stock Appreciation Rights then held by the Participant
will become immediately exercisable in full and remain exercisable
for a period of twelve (12) months after such termination (but in
no event after the expiration date of any such Option or Stock
Appreciation Right);
(ii) all Restricted
Stock Awards and Restricted Stock Unit Awards then held by the
Participant will become fully vested; and
(iii) all Performance
Awards and Stock Bonuses then held by the Participant will vest
and/or continue to vest in the manner determined by the Committee
and set forth in the agreement evidencing such Performance Awards
or Stock Bonuses.
(b) In the event a
Participant’s employment or other service with the Company
and all Subsidiaries is terminated by reason of
Retirement:
(i) all outstanding
Options and Stock Appreciation Rights then held by the Participant
will remain exercisable, to the extent exercisable as of the date
of such termination, for a period of six (6) months after such
termination (but in no event after the expiration date of any such
Option or Stock Appreciation Right);
(ii) all Restricted
Stock Awards and Restricted Stock Unit Awards then held by the
Participant that have not vested as of such termination will be
terminated and forfeited; and
(iii) all Performance
Awards and Stock Bonuses then held by the Participant will vest
and/or continue to vest in the manner determined by the Committee
and set forth in the agreement evidencing such Performance Awards
or Stock Bonuses.
12.2. Termination for Reasons Other than
Death, Disability or Retirement. Unless otherwise provided
by the Committee in its sole discretion in the agreement evidencing
an Incentive Award, in the event a Participant’s employment
or other service with the Company and all Subsidiaries is
terminated for any reason other than death, Disability or
Retirement, or a Participant is in the employ or service of a
Subsidiary and the Subsidiary ceases to be a Subsidiary of the
Company (unless the Participant continues in the employ or service
of the Company or another Subsidiary), all rights of the
Participant under the Plan and any agreements evidencing an
Incentive Award will immediately terminate without notice of any
kind, and no Options or Stock Appreciation Rights then held by the
Participant will thereafter be exercisable, all Restricted Stock
Awards and Restricted Stock Unit Awards then held by the
Participant that have not vested will be terminated and forfeited,
and all Performance Awards and Stock Bonuses then held by the
Participant will vest and/or continue to vest in the manner
determined by the Committee and set forth in the agreement
evidencing such Performance Awards or Stock Bonuses; provided, however, that if such termination is
due to any reason other than voluntary termination by the
Participant or termination by the Company or any Subsidiary for
“Cause,” all outstanding Options and Stock Appreciation
Rights then held by such Participant will remain exercisable, to
the extent exercisable as of such termination, for a period of
three (3) months after such termination (but in no event after the
expiration date of any such Option or Stock Appreciation
Right).
7
12.3. Modification of Rights Upon
Termination. Notwithstanding the other provisions of this
Section 12, upon a Participant’s termination of
employment or other service with the Company and all Subsidiaries,
the Committee may, in its sole discretion (which may be exercised
at any time on or after the date of grant, including following such
termination), cause Options and Stock Appreciation Rights (or any
part thereof) then held by such Participant to become or continue
to become exercisable and/or remain exercisable following such
termination of employment or service and Restricted Stock Awards,
Restricted Stock Unit Awards, Performance Awards and Stock Bonuses
then held by such Participant to vest and/or continue to vest or
become free of transfer restrictions, as the case may be, following
such termination of employment or service, in each case in the
manner determined by the Committee; provided, however, that no Incentive Award may
remain exercisable or continue to vest beyond its expiration date.
Notwithstanding the foregoing, no extension to exercise will be
permitted if such extension would cause the Incentive Award to
become subject to Section 409A of the Code.
12.4. Exercise of Incentive Stock Options
Following Termination. Any Incentive Stock Option that
remains exercisable pursuant to an agreement with the Company
following termination of employment and is unexercised more than
one (1) year following termination of employment by reason of death
or Disability or more than three (3) months following termination
for any reason other than death or Disability will thereafter be
deemed to be a Non-Statutory Stock Option.
12.5. Date of Termination of Employment or
Other Service. Unless the Committee otherwise determines in
its sole discretion, a Participant’s employment or other
service will, for purposes of the Plan, be deemed to have
terminated on the date recorded on the personnel or other records
of the Company or the Subsidiary for which the Participant provides
employment or other service, as determined by the Committee in its
sole discretion based upon such records. For purposes of the Plan,
no termination of employment or other service by a Participant
shall be deemed to result from either (a) a transfer of employment
to the Company from a Subsidiary or from the Company to a
Subsidiary, or from one Subsidiary to another, or (b) an approved
leave of absence for military service or sickness, or for any other
purpose approved by the Company, if the Participant’s right
to reemployment or continuation of service is guaranteed either by
a statute or by contract or under the policy pursuant to which the
leave of absence was granted or if the Committee otherwise so
provides in writing, in either case, except to the extent
inconsistent with Section 409A of the Code if the applicable
Incentive Award is subject thereto.
13. Payment of Withholding
Taxes.
13.1. General Rules. The Company is
entitled to (a) withhold and deduct from future wages of the
Participant (or from other amounts that may be due and owing to the
Participant from the Company or a Subsidiary), or make other
arrangements for the collection of, all legally required amounts
necessary to satisfy any and all foreign, federal, state and local
withholding and employment-related tax requirements attributable to
an Incentive Award, including, without limitation, the grant,
exercise or vesting of, or payment of dividends with respect to, an
Incentive Award or a disqualifying disposition of stock received
upon exercise of an Incentive Stock Option, or (b) require the
Participant promptly to remit the amount of such withholding to the
Company before taking any action, including issuing any shares of
Common Stock, with respect to an Incentive Award.
13.2. Special Rules. The Committee
may, in its sole discretion and upon terms and conditions
established by the Committee, permit or require a Participant to
satisfy, in whole or in part, any withholding or employment-related
tax obligation described in Section 13.1 of the Plan by
electing to tender a Broker Exercise Notice, Previously Acquired
Shares, or a promissory note (on terms acceptable to the Committee
in its sole discretion), to have the Company withhold shares of
Common Stock from the number of shares of Common Stock otherwise
issuable to the Participant, or by a combination of such
methods.
If a Change in
Control of the Company occurs or is about to occur, the Committee,
in its sole discretion, may provide for one or more of the
following:
(a) the partial or full
acceleration of the exercisability of outstanding Incentive Awards
held by some or all Participants, provided that the Committee, in its
sole discretion, may condition such acceleration (or the
Participant’s receipt of any securities or payments with
respect to such acceleration) upon the Participant’s
continued service to the Company or to the successor person in the
Change in Control;
(b) the complete
termination of the Plan and cancellation of outstanding Incentive
Awards not exercised prior to a date specified by the
Committee;
(c) the continuance of
the Plan with respect to outstanding Incentive Awards;
8
(d) replacement or
exchange of the Incentive Awards for options to purchase similar
securities of the successor person in the Change in
Control;
(e) the substitution
for outstanding Incentive Awards of shares of common stock of the
person acquiring control of the Company or a related corporation;
or
(f) the receipt by some
or all Participants holding outstanding Incentive Awards with
respect to some or all of the shares of Common Stock subject to
such Incentive Awards, as of the effective date of any such Change
in Control of the Company, of cash in an amount equal to the excess
of the per share price paid in connection with the Change in
Control of the Company over the exercise price per share of such
Incentive Awards, multiplied by the number of shares subject to
such Incentive Awards.
15. Rights of Eligible Recipients and
Participants; Transferability.
15.1. Employment or Service. Nothing
in the Plan will interfere with or limit in any way the right of
the Company or any Subsidiary to terminate the employment or
service of any Eligible Recipient or Participant at any time, nor
confer upon any Eligible Recipient or Participant any right to
continue in the employ or service of the Company or any
Subsidiary.
15.2. Rights as a Stockholder. As a
holder of Incentive Awards (other than Restricted Stock Awards and
Stock Bonuses), a Participant will have no rights as a stockholder
unless and until such Incentive Awards are exercised for, or paid
in the form of, shares of Common Stock and the Participant becomes
the holder of record of such shares. Except as otherwise provided
in the Plan, no adjustment will be made for dividends or
distributions with respect to such Incentive Awards as to which
there is a record date preceding the date the Participant becomes
the holder of record of such shares, except as the Committee may
determine in its discretion.
15.3. Restrictions on Transfer.
Except pursuant to testamentary will or the laws of descent and
distribution or as otherwise expressly permitted by the Plan,
unless approved by the Committee in its sole discretion, no right
or interest of any Participant in an Incentive Award prior to the
exercise or vesting of such Incentive Award will be assignable or
transferable, or subjected to any lien, during the lifetime of the
Participant, either voluntarily or involuntarily, directly or
indirectly, by operation of law or otherwise. A Participant will,
however, be entitled to designate a beneficiary to receive an
Incentive Award upon such Participant’s death, and in the
event of a Participant’s death, payment of any amounts due
under the Plan will be made to, and exercise of any Options (to the
extent permitted pursuant to Section 12 of the Plan) may be
made by, the Participant’s legal representatives, heirs and
legatees.
15.4. Breach of Confidentiality, Assignment
of Inventions or Non-Compete Agreements. Notwithstanding
anything in the Plan to the contrary, in the event that a
Participant materially breaches the terms of any confidentiality,
assignment of inventions or non-compete agreement entered into with
the Company or any Subsidiary, whether such breach occurs before or
after termination of such Participant’s employment or other
service with the Company or any Subsidiary, the Committee in its
sole discretion may immediately terminate all rights of the
Participant under the Plan and any agreements evidencing an
Incentive Award then held by the Participant without notice of any
kind.
15.5. Non-Exclusivity of the Plan.
Nothing contained in the Plan is intended to modify or rescind any
previously or subsequently approved compensation plans or programs
of the Company or create any limitations on the power or authority
of the Board to adopt such additional or other compensation
arrangements as the Board may deem necessary or
desirable.
16. Securities Law and Other
Restrictions.
Notwithstanding any
other provision of the Plan or any agreements entered into pursuant
to the Plan, the Company will not be required to issue any shares
of Common Stock under the Plan, and a Participant may not sell,
assign, transfer or otherwise dispose of shares of Common Stock
issued pursuant to Incentive Awards granted under the Plan, unless
(a) there is in effect with respect to such shares a registration
statement under the Securities Act and any applicable state or
foreign securities laws or an exemption from such registration
under the Securities Act and applicable state or foreign securities
laws, and (b) there has been obtained any other consent, approval
or permit from any other regulatory body which the Committee, in
its sole discretion, deems necessary or advisable. The Company may
condition such issuance, sale or transfer upon the receipt of any
representations or agreements from the parties involved, and the
placement of any legends on certificates representing shares of
Common Stock, as may be deemed necessary or advisable by the
Company in order to comply with such securities law or other
restrictions.
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17. Plan Amendment, Modification and
Termination.
The Board may
suspend or terminate the Plan or any portion thereof at any time,
and may amend the Plan from time to time in such respects as the
Board may deem advisable in order that Incentive Awards under the
Plan will conform to any change in applicable laws or regulations
or in any other respect the Board may deem to be in the best
interests of the Company; provided, however, that no amendments to the Plan
will be effective without approval of the stockholders of the
Company if stockholder approval of the amendment is then required
pursuant to Section 422 of the Code or the rules of any stock
exchange or Nasdaq or similar regulatory body. No termination,
suspension or amendment of the Plan may adversely affect any
outstanding Incentive Award without the consent of the affected
Participant; provided,
however, that this sentence
will not impair the right of the Committee to take whatever action
it deems appropriate under Sections 5.2, 4.4 and 14 of the
Plan.
18. Miscellaneous.
18.1. Successors and Assigns. The
Plan will be binding upon and inure to the benefit of the
successors and permitted assigns of the Company and the
Participants.
18.2. Governing Law. The validity,
construction, interpretation, administration and effect of the Plan
and any rules, regulations and actions relating to the Plan will be
governed by and construed exclusively in accordance with the laws
of the State of Minnesota, without regard to the conflicts of laws
principles of any jurisdictions.
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