GridAI Technologies Corp DEFR14A, filed Aug 11, 2020
GridAI Technologies Corp. (GRDX)
DEFR14A
2020-08-11
View Original
Added on
October 17, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. 1)
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [ ]
Check
the appropriate box:
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[
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Preliminary
Proxy Statement
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[
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Confidential,
for Use of the SEC Only (as permitted by
Rule 14a-6(e)(2))
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[X]
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Definitive
Proxy Statement
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[
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Definitive
Additional Materials
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[
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Soliciting
Material Pursuant to 14a-12
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AZURRX BIOPHARMA, INC.
(Name
of Registrant as Specified in Its Charter)
___________________________
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
[X]
No fee required.
[
] Fee computed on table below per
Exchange Act Rules 14a-6(i)(4) and 0-11.
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1.
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Title
of each class of securities to which transaction
applies:
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Aggregate
number of securities to which transaction applies:
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3.
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Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined):
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4.
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Proposed
maximum aggregate value of transaction:
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5.
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Total
fee paid:
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[
] Fee paid previously with
preliminary materials.
[
] Check box if any part of the fee
is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
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1.
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Amount
Previously Paid:
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2.
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Form,
Schedule or Registration Statement No.:
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3.
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Filing
Party:
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Date
Filed:
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EXPLANATORY NOTE
This
Amendment No. 1 to Schedule 14A (this “Amendment”) is
being filed to amend and restate the definitive proxy statement of
AzurRx BioPharma, Inc. (“we,” “us” and
“our”) that we previously filed with the Securities and
Exchange Commission on August 7, 2020 (the “Prior Proxy
Statement” and, as amended and restated by this Amendment,
the “Proxy Statement”), for our 2020 Annual Meeting of
Stockholders (the “Annual Meeting”) to be held on
September 11, 2020. Capitalized terms not otherwise defined in this
Explanatory Note have the meanings ascribed to them in the Proxy
Statement.
This
Amendment is being filed to reflect certain revised terms of an
amended and restated AzurRx BioPharma, Inc. 2020 Omnibus Equity
Incentive Plan (as amended and restated, the “2020
Plan”) that is being submitted to our stockholders for
approval as Proposal No. 5 at the Annual Meeting. The Board has
approved the amended and restated 2020 Plan and has recommended
that it be submitted to our stockholders for such
approval.
Since
the Prior Proxy Statement was filed on August 7, 2020, Proposal No.
5 has generated a number of comments from our stockholders, which
the Board wishes to address. Although the Board believes that the
2020 Plan, as initially proposed, reflected terms consistent with
market practice, based upon this stockholder input, the Board has
decided to make certain revisions as described in this
Amendment.
The
revisions to the 2020 Plan give effect to the following
changes:
1.
The 2020 Plan, as
revised, provides that the initial number of shares of Common Stock
available for issuance thereunder (which is 10,000,000 shares)
will, on January 1 of each calendar year, unless the Board decides
otherwise, automatically increase to equal ten percent (10%) of the
total number of shares of Common Stock outstanding on December 31
of the immediately preceding calendar year, calculated on an as
converted basis (the “As Converted Shares”). As
Converted Shares include all outstanding shares of Common Stock and
all shares of Common Stock issuable upon the conversion of
outstanding preferred stock, warrants and other convertible
securities, but will not include any shares of Common Stock
issuable upon the exercise of options and other convertible
securities issued pursuant to either the 2014 Plan or the 2020
Plan.
As revised,
this provision reflects similar calculation mechanics as are
currently applicable under the 2014 Plan. Unlike the 2014 Plan,
however, this provision (i) allows for increases to the 2020
Plan’s share reserve on an annual basis, not a rolling basis,
and (ii) provides the Board discretion not to have the increase
take effect for a year or to have the increase take effect as to a
lesser number of shares.
2.
The 2020 Plan
decreases the number of shares permitted to be issued as
“incentive stock options” (“ISOs”) from
100,000,000 to 15,000,000.
Contrary to certain
stockholder input received since August 7, 2020, the ISO limit
included in the prior Proxy Statement did not authorize 100,000,000
shares of Common Stock to be issued pursuant to the 2020 Plan.
Rather, it was intended to establish a permanent maximum limit for
issuances of ISOs under the 2020 Plan, to allow for reasonable
capital expansion over the ten-year life of the 2020 Plan. In all
cases, the ISO limit would have been constrained by (i) the
aggregate share reserve limit under the 2020 Plan, which initially
was 10,000,000 shares (subject to annual increase), and (ii)
therefore, by extension, the undiluted amount of Common Stock at
any time outstanding. In addition, any annual increase to the
aggregate share reserve limit would have been subject to cutback at
the Board’s discretion.
Nevertheless, in
light of the change in the 2020 Plan’s share reserve
increase, as described in Item 1 above, and in response to certain
stockholder input, the Board has determined that the original ISO
limit was substantially higher than any amount it currently
anticipates will be required, based upon its current expectations
of our long-term capital needs, and has therefore reduced the ISO
limit to equal 10% of the total number of shares of Common Stock
currently authorized for issuance under our Certificate of
Incorporation. Under regulations issued by the Internal Revenue
Service under Section 422 of the Internal Revenue Code as currently
in effect, this reduced 15,000,000 ISO share limit will not be
subject to increase without stockholder approval.
In
addition to the foregoing changes to the 2020 Plan, this Amendment
also adds certain clarifying disclosure that, if the 2020 Plan is
approved, no further grants will be made under the 2014 Plan. As of
August 7, 2020, under the 2014 Plan, an aggregate of 4,699,506
shares of Common Stock were issuable upon the exercise or
conversion of existing awards, which will remain outstanding even
if the 2020 Plan is approved, and an aggregate of 3,625,039 shares
of common stock were available for future awards, in the event that
the 2020 Plan is not approved.
As of
the date of this Amendment, we have not previously mailed the proxy
statement, the proxy card or a copy of our annual report to any of
our stockholders. Accordingly, the anticipated mailing date of such
materials to our stockholders has been revised to be on or about
August 11, 2020.
AzurRx BioPharma, Inc.
760 Parkside Avenue
Downstate Biotechnology Incubator, Suite 304
Brooklyn, New York 11226
(646) 699-7855
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Dear
Fellow Stockholder,
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August
11, 2020
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On
behalf of the Board of Directors and management of AzurRx
BioPharma, Inc., (“we”, “us” and
“our”), a Delaware corporation, you are invited to
attend our 2020 Annual Meeting of Stockholders including any
adjournment or postponement thereof (the “Annual
Meeting”) to be held on September 11, 2020 at 9:00 A.M., Eastern Time and at any
adjournment or postponement thereof, virtually via the
Internet at
www.virtualshareholdermeeting.com/AZRX2020.
Details
of the business to be conducted at the Annual Meeting are described
in this proxy statement. We have also made available a copy of our
Annual Report on Form 10-K for the year ended December 31, 2019
(the “Annual Report”) with this proxy statement. We
encourage you to read our Annual Report. It includes our audited
financial statements and provides information about our business
and services.
Your vote is important. Regardless of whether
you plan to attend the Annual Meeting
virtually, please
read the accompanying proxy statement and then vote by internet,
telephone or e-mail as promptly as possible. Returning your proxy
will help us assure that a quorum will be present at the Annual
Meeting and avoid the additional expense of duplicate proxy
solicitations. Any stockholder attending the virtual Annual Meeting
may vote during the virtual meeting, even if he or she has returned
a proxy. Please refer to the “Voting” section contained
within this proxy statement for instructions on submitting your
vote. Voting promptly will save us additional expense in soliciting
proxies and will ensure that your shares are represented at the
Annual Meeting.
Our Board of Directors has unanimously approved the proposals set
forth in the proxy statement and recommends that you vote in favor
of each such proposal.
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Sincerely,
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/s/
Edward J. Borkowski
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EDWARD
J. BORKOWSKI
Chair of the Board
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If
you have any questions or require any assistance in voting your
shares, please call:
Alliance Advisors LLC
200
Broadacres Drive, 3rd Floor, Bloomfield, NJ 07003
(833)
550-0994
NOTICE OF THE AZURRX BIOPHARMA, INC. ANNUAL MEETING OF
STOCKHOLDERS
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Date and Time
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September 11, 2020 at 9:00 A.M., Eastern Time.
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Place
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Solely virtual via the Internet at
www.virtualshareholdermeeting.com/AZRX2020.
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Items of Business
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1.
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Election of six director nominees named in this proxy statement,
each for a term of one year expiring at our 2021 annual meeting of
stockholders or until their respective successors are duly elected
and qualified;
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2.
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Approval of the issuance of more than 20% of shares of our common
stock, par value $0.0001 per share (the “Common Stock”)
pursuant to a private placement (the “Private
Placement”) and related exchange transaction (the
“Exchange”), for purposes of Nasdaq Listing Rule
5635(d);
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3.
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Approval of the issuance of shares of our Common Stock to certain
officers and directors in the Private Placement and the Exchange,
for purposes of Nasdaq Listing Rule 5635(c);
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4.
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Approval of the issuance of more than 20% of our Common Stock
pursuant to a purchase agreement with Lincoln Park Capital Fund,
LLC, for purposes of Nasdaq Listing Rule 5635(d);
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5.
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Approval of the AzurRx BioPharma, Inc. 2020 Omnibus Equity
Incentive Plan;
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6.
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Ratification of Mazars USA LLP, as our independent registered public accounting
firm for the fiscal year ending December 31, 2020;
and
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7.
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Approval of the adjournment of the annual meeting to the extent
there are insufficient proxies at the annual meeting to approve any
one or more of the foregoing proposals.
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Adjournments and Postponements
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Any action on the items of business described above may be
considered at the Annual Meeting at the time and on the date
specified above or at any time and date to which the Annual Meeting
may be properly adjourned or postponed.
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Record Date
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August 7, 2020 (the “Record Date”). Only holders of
record of our Common Stock as of the close of business on the
Record Date are entitled to notice of and to vote at the Annual
Meeting.
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Meeting Admission
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You are invited to virtually attend the 2020 Annual Meeting
of Stockholders (the “Annual
Meeting”) if you are a stockholder of record or a beneficial
owner of shares of our Common Stock as of the Record
Date.
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Availability of Proxy Materials
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Our proxy materials and the Annual Report for the year ended
December 31, 2019 are also available on the internet at:
proxyvote.com.
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Voting
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If your
shares are held in the name of a bank, broker or other fiduciary,
please follow the instructions on the proxy card. Whether or not you expect to attend virtually,
we urge you to vote your shares as promptly as possible by
following the proxy card instructions attached to this Proxy
Statement that you received in the mail so that your shares may be
represented and voted at the Annual Meeting. Your vote is very
important.
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BY ORDER OF THE BOARD OF DIRECTORS,
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/s/
James Sapirstein
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Brooklyn,
New York
August 11, 2020
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JAMES
SAPIRSTEIN
President and Chief Executive Officer
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760 Parkside Avenue
Downstate Biotechnology Incubator, Suite 304
Brooklyn, New York 11226
(646) 699-7855
PROXY STATEMENT
The
enclosed proxy is solicited on behalf of the Board of Directors
(the “Board”) of AzurRx BioPharma, Inc. (the
“Company,” “we,” “us,” or
“our”), for use at the upcoming 2020 Annual Meeting of
Stockholders including any adjournment or postponement thereof (the
“Annual Meeting”) to be held on September 11, 2020 at
9:00 A.M. Eastern Time, and at any adjournment or postponement
thereof, virtually via the Internet at
www.virtualshareholdermeeting.com/AZRX2020.
This
proxy statement, the enclosed proxy card and a copy of our annual
report are first being mailed on or about August 11, 2020 to
stockholders entitled to vote as of the close of business on August
7, 2020 (the “Record Date”). These proxy materials
contain instructions on how to access this proxy statement and our
annual report online at: proxyvote.com, and how to submit your vote
via the internet, telephone and/or e-mail.
Voting
The
specific proposals to be considered and acted upon at our Annual
Meeting are each described in this proxy statement. Only
holders of shares of our common stock, par value $0.0001 per share
(the “Common Stock”) as of the close of business on
the Record Date are entitled to
notice of and to vote at the Annual Meeting. As of August 7, 2020,
there were 28,502,850 shares of Common
Stock issued and outstanding. Each holder of Common Stock is
entitled to one vote for each share held as of the Record
Date.
Quorum
In
order for any business to be conducted at the Annual Meeting,
holders of a majority of the shares entitled to vote must be
represented at the Annual Meeting, either in person, by means of
remote communication in a manner, if any, authorized by the Board
in its sole discretion, or represented by proxy. If a quorum is not
present at the scheduled time of the Annual Meeting, the Board, the
chairman of the meeting or, if directed to be voted on by the
chairman of the meeting, the stockholders present or represented at
the Annual Meeting and entitled to vote thereon, although less than
a quorum, may adjourn the Annual Meeting until a quorum is present.
The time and place of the adjourned Annual Meeting will be
announced at the time the adjournment is taken, and no other notice
will be given unless the adjournment is for more than 30 days, in
which case a notice of the adjourned meeting will be given to each
stockholder of record entitled to vote at the Annual Meeting. An
adjournment will have no effect on the business that may be
conducted at the Annual Meeting.
Required Vote for Approval
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No.
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Proposal
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1.
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Election of Directors. The six director nominees who receive
the highest number of affirmative votes cast by shares present or
represented by proxy and entitled to vote at the Annual Meeting
will be elected.
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2.
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Approval of the Issuance of More than 20% of Our Common Stock
pursuant to a private placement (the “Private
Placement”) and related exchange transaction (the
“Exchange”) for purposes of Nasdaq Listing Rule
5635(d). To approve the sale and issuance of the shares of
Common Stock underlying the securities sold and issued in the
Private Placement and the Exchange. This proposal requires the affirmative
(“FOR”) vote of a majority of votes cast by shares
present or represented by proxy and entitled to vote at the Annual
Meeting.
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3.
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Approval of the Issuance of Our Common Stock to certain Officers
and Directors in the Private Placement and the Exchange for
Purposes of Nasdaq Listing Rule 5635(c). To approve the sale and issuance of the shares of
Common Stock underlying the securities sold and issued in the
Private Placement and the Exchange to Edmund J. Borkowski, Chairman
of the Board, and James Sapirstein, President, Chief Executive
Officer and Director. This proposal requires the affirmative
(“FOR”) vote of a majority of votes cast by shares
present or represented by proxy and entitled to vote at the Annual
Meeting.
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4.
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Approval of the Issuance of More than 20% of Our Common Stock
pursuant to a purchase agreement with Lincoln Park Capital Fund,
LLC, for Purposes of Nasdaq Listing Rule 5635(d).
To approve the sale and issuance of
Common Stock pursuant to the Lincoln Park Purchase Agreement of up
to $15,000,000 of our Common Stock. This proposal requires the
affirmative (“FOR”) vote of a majority of votes cast by
shares present or represented by proxy and entitled to vote at the
Annual Meeting.
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5.
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Approval of the AzurRx BioPharma, Inc. 2020 Omnibus Equity
Incentive Plan. To approve the
adoption of the AzurRx BioPharma, Inc. 2020 Omnibus Equity
Incentive Plan. This proposal requires the affirmative
(“FOR”) vote of a majority of votes cast by shares of
the Company entitled to vote generally in the election of
directors. present or represented by proxy and entitled to vote at
the Annual Meeting.
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6.
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Ratification of Mazars USA LLP as Our Independent Registered Public
Accounting Firm for the Fiscal Year Ending December 31,
2020. To approve the ratification of Mazars USA LLP as our
independent registered public accounting firm for the current
fiscal year. This proposal requires
the affirmative (“FOR”) vote of a majority of votes
cast by shares present or represented by proxy and entitled to vote
at the Annual Meeting.
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7.
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Approval of the Adjournment of the Annual Meeting to the Extent
There Are Insufficient Proxies at the Annual Meeting to Approve Any
One or More of the Foregoing Proposals. To approve the adjournment of the Annual Meeting
in the event that the number of shares of Common Stock present or
represented by proxy at the Annual Meeting and voting
“FOR” the adoption of any one or more of the foregoing
proposals are insufficient to approve any proposal. This proposal
requires the affirmative (“FOR”) vote of a majority of
votes cast by the shares present or represented by proxy and
entitled to vote at the Annual Meeting.
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Abstentions and Broker Non-Votes
All votes will be tabulated by the inspector of election appointed
for the Annual Meeting, who will separately tabulate affirmative
and negative votes, abstentions and broker non-votes. An abstention
is the voluntary act of not voting by a stockholder who is present
at an Annual Meeting and entitled to vote. A broker
“non-vote” occurs when a broker nominee holding shares
for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary power for that
particular item and has not received instructions from the
beneficial owner. If you hold your shares in “street
name” through a broker or other nominee, your broker or
nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. If you do not give
your broker or nominee specific instructions regarding such
matters, your proxy will be deemed a “broker
non-vote.”
The question of whether your broker or nominee may be permitted to
exercise voting discretion with respect to a particular matter
depends on whether the New York Stock Exchange (the
“NYSE”) deems the particular proposal to be a
“routine” matter and how your broker or nominee
exercises any discretion they may have in the voting of the shares
that you beneficially own. Brokers and nominees can use their
discretion to vote “uninstructed” shares with respect
to matters that are considered to be “routine,” but not
with respect to “non-routine” matters. Under the rules
and interpretations of the NYSE, “non-routine” matters
are matters that may substantially affect the rights or privileges
of stockholder, such as mergers, stockholder proposals, elections
of directors (even if not contested), executive compensation
(including any advisory stockholder votes on executive compensation
and on the frequency of stockholder votes on executive
compensation), and certain corporate governance proposals, even if
management-supported.
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For any proposal that is considered a “routine” matter,
your broker or nominee may vote your shares in its discretion
either for or against the proposal even in the absence of your
instruction. For proposal that is considered a
“non-routine” matter for which you do not give your
broker instructions, the shares will be treated as broker
non-votes. “Broker non-votes” occur when a beneficial
owner of shares held in street name does not give instructions to
the broker or nominee holding the shares as to how to vote on
matters deemed “non-routine.” Broker non-votes will not
be considered to be shares “entitled to vote” on any
“non-routine” matter and therefore will not be counted
as having been voted on the applicable proposal. Therefore, if you
are a beneficial owner and want to ensure that shares you
beneficially own are voted in favor or against any or all of the
proposals in this proxy statement, the only way you can do so is to
give your broker or nominee specific instructions as to how the
shares are to be voted.
Under Delaware law and our Amended and Restated Bylaws (our
“Bylaws”), abstentions and broker non-votes are not
counted as votes cast on an item and therefore will not affect the
outcome of any proposal presented in this proxy statement.
Abstention and broker non-votes will be counted for purposes of
determining whether there is a quorum present at the Annual
Meeting.
Voting, Revocation and Solicitation of Proxies
The
enclosed proxy is solicited by and on behalf of the Board, with the
cost of solicitation borne by us. Solicitation may also be made by
our directors and officers without additional compensation for such
services. In addition to mailing proxy materials, the directors,
officers and employees may solicit proxies in person, by telephone
or otherwise.
We have
also retained Alliance Advisors LLC to assist it in the
solicitation of proxies. Alliance Advisors LLC will solicit proxies
on our behalf from individuals, brokers, bank nominees and other
institutional holders in the same manner described above. Alliance
Advisors LLC will receive a base fee of $7,500, plus approved and
reasonable out-of-pocket expenses and additional processing fees
for any call campaigns, for its services to us for the solicitation
of the proxies. We have also agreed to indemnify Alliance Advisors
LLC against certain claims.
If your
proxy is properly returned to us, the shares represented thereby
will be voted at the Annual Meeting in accordance with the
instructions specified thereon. If you return your proxy without
specifying how the shares represented thereby are to be voted, the
proxy will be voted (i) FOR the election of the
six director nominees named in this proxy statement;
(ii) FOR the
approval of the issuance of more than 20% of our Common Stock
pursuant to the Private Placement and the Exchange for purposes of
Nasdaq Listing Rule 5635(d); (iii) FOR the approval of the
issuance of our Common Stock to certain officers and directors in
the Private Placement and the Exchange for purposes of Nasdaq
Listing Rule 5635(c); (iv) FOR the approval of the
issuance of more than 20% of our Common Stock pursuant to a
purchase agreement with Lincoln Park Capital Fund, LLC, for
purposes of Nasdaq Listing Rule 5635(d); (v) FOR the approval of the AzurRx
BioPharma, Inc. 2020 Omnibus Equity Incentive Plan; (vi)
FOR ratification of Mazars
USA LLP as our independent registered public accounting firm for
the fiscal year ending December 31, 2020; (vii) FOR the approval of the
adjournment of the Annual Meeting to the extent there are
insufficient proxies at the Annual Meeting to approve any one or
more of the foregoing proposals and (vii) at the discretion of the
proxy holders, on any other matter that may properly come before
the Annual Meeting or any adjournment or postponement
thereof.
If you
have additional questions, need assistance in submitting your proxy
or voting your shares of Common Stock, or need additional copies of
the proxy statement or the enclosed proxy card, please contact
Alliance Advisors LLC.
Alliance Advisors LLC
200
Broadacres Drive, 3rd Floor, Bloomfield, NJ 07003
(833)
550-0994
If you
are a stockholder of record, you may revoke or change your proxy at
any time before the Annual Meeting by filing, with our Chief
Financial Officer at 760 Parkside Avenue, Downstate Biotechnology
Incubator, Suite 304, Brooklyn, New York 11226, a notice of
revocation or another signed proxy with a later date. If you are a
stockholder of record, you may also revoke your proxy by attending
the Annual Meeting and voting. Attendance at the Annual
Meeting alone will not revoke your proxy. If you are a
beneficial owner whose shares are not registered in your own name,
you will need additional documentation from your broker or record
holder to vote personally at the Annual Meeting.
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No Appraisal Rights
Our stockholders have no dissenter’s or appraisal rights in
connection with any of the proposals described herein.
Solicitation
We will
bear the entire cost of solicitation, including the preparation,
assembly, printing and mailing of this proxy statement and the
annual report, as well as the preparation and posting of this proxy
statement, the annual report and any additional solicitation
materials furnished to the stockholders. Copies of any solicitation
materials will be furnished to brokerage houses, fiduciaries and
custodians holding shares in their names that are beneficially
owned by others so that they may forward this solicitation material
to such beneficial owners. In addition, we may reimburse such
persons for their costs in forwarding the solicitation materials to
such beneficial owners. The original solicitation of proxies may be
supplemented by a solicitation by telephone, e-mail or other means
by our directors, officers or employees. No additional compensation
will be paid to these individuals for any such services. Except as
described above, we do not presently intend to solicit proxies
other than by e-mail, telephone and mail.
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PROPOSAL NO. 1:
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ELECTION OF DIRECTORS
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General
Our
Bylaws provide that the Board shall consist of one or more members,
and that any newly created directorship that results from an
increase in the number of directors or any vacancy on the Board
will be filled solely by the affirmative vote of a majority of the
directors then in office; provided that a vacancy created by the
removal of a director by the stockholders may be filled by the
stockholders. A director elected by the Board in the case of a
newly created directorship will hold office for his or her full
term until his or her successor is elected and qualified. A
director elected by the Board in the case of a vacancy will hold
office for the remaining term of his or her predecessor until his
or her successor is elected and qualified.
Our
Board currently consists of six directors. Each of the director
nominees identified below has confirmed that he is able and willing
to serve as a director if elected. If any of the director nominees
become unable or unwilling to serve, your proxy will be voted for
the election of a substitute director nominee recommended by the
current Board.
Upon
recommendation of the Corporate Governance and Nominating
Committee, the Board has nominated Edward J. Borkowski, Charles J.
Casamento, Alastair Riddell, Vern L. Schramm, Gregory Oakes and
James Sapirstein for election at the Annual Meeting, each to serve
for a one-year term until the conclusion of the 2021 annual meeting
of stockholders or until their successor is duly elected and
qualified.
As we previously disclosed in our Current Reports on Form 8-K filed
April 14, 2020 and May 1, 2020, the Board appointed Gregory Oakes
to the Board effective April 13, 2020. Former director Johan
(Thijs) Spoor resigned from his position as a director effective
April 29, 2020. The Board wishes to formally thank Mr. Spoor for
his dedication and service on the Board.
Please
see “Directors” below for more information, including
the background and business experience of each director nominee
taken into consideration by the Corporate Governance and Nominating
Committee.
Required Vote and Recommendation
The
election of directors requires the affirmative (“FOR”)
vote of a plurality of votes cast by shares present or represented
by proxy and entitled to vote at the Annual Meeting. The six
director nominees receiving the highest number of affirmative votes
cast will be elected. Unless otherwise instructed on the proxy or
unless authority to vote is withheld, shares represented by
executed proxies will be voted “FOR” the election of
each of the below director nominees. Any abstentions or broker
non-votes are not counted as votes cast and will not affect the
outcome of this proposal, although they will be counted for
purposes of determining whether there is a quorum
present.
OUR BOARD RECOMMENDS A VOTE
“FOR” THE ELECTION OF MESSRS.
BORKOWSKI,
CASAMENTO, OAKES AND SAPIRSTEIN AND DRS. RIDDELL AND SCHRAMM UNDER
PROPOSAL ONE.
- 4 -
DIRECTOR COMPENSATION
The
following section sets forth certain information regarding the
nominees for election as directors. There are no family
relationships between any of the directors and our Named Executive
Officers.
|
Director Nominee, Title
|
Age
|
|
Edward J. Borkowski – Chair and Independent
Director
|
60
|
|
Charles J. Casamento – Independent Director
|
75
|
|
Alastair Riddell, MSc., MBChB., DSc. – Independent
Director
|
71
|
|
Vern L. Schramm, Ph.D. – Independent Director
|
78
|
|
James Sapirstein – President, Chief Executive Officer and
Non-Independent Director
|
58
|
|
Gregory Oakes –Independent Director
|
52
|
Edward J. Borkowski was appointed to
the Board in May 2015, and currently serves as its Chair. Mr.
Borkowski is a healthcare executive who currently serves as
Executive Vice President for Therapeutics MD. He served as
Executive Vice President of MiMedx Group, Inc.
(Nasdaq: MDGX) from April 2018 until December 2019. Mr. Borkowski
also served as a director for Co-Diagnostics, Inc. (Nasdaq: CODX),
from May 2017 until June 2019. Previously, he served as the Chief
Financial Officer of Aceto
Corporation (Nasdaq: ACET) from February 2018 to April 2018, and
has held several executive positions with Concordia
International, an international specialty pharmaceutical company,
between May
2015 to February 2018. Mr. Borkowski has
also served as Chief Financial Officer of Amerigen Pharmaceuticals,
a generic pharmaceutical company with a focus on oral, controlled
release products and as the Chief
Financial Officer and Executive Vice President of Mylan N.V. In
addition, Mr. Borkowski previously held the position of Chief
Financial Officer with Convatec, a global medical device company
focused on wound care and ostomy, and Carefusion, a global medical
device company for which he helped lead its spin-out from Cardinal
Health into an independent public company. Mr. Borkowski has also
served in senior financial positions at Pharmacia and American Home
Products (Wyeth). He started his career with Arthur Andersen &
Co. after receiving his MBA in accounting from Rutgers University
subsequent to having earned his degree in Economics and Political
Science from Allegheny College. Mr. Borkowski is currently a
Trustee and a member of the Executive Committee of Allegheny
College.
Mr. Borkowski’s extensive healthcare and financial expertise,
together with his public company experience provides the Board and
management with valuable insight in the growth of our business
plan.
Charles J. Casamento was appointed to
the Board in March 2017. Since 2007, Mr. Casamento has been
executive director and principal of The Sage Group, a health care
advisory group. Prior to that, Mr. Casamento was president and
Chief Executive Officer of Osteologix, a startup company which he
oversaw going public, from October 2004 until April 2007. Mr.
Casamento was the founder of Questcor Pharmaceuticals where he was
President, Chief Executive Officer and Chair from 1999 through
2004. During his time at Questcor, the company acquired Acthar, a
product with sales that would eventually exceed $1.0 billion. Mr.
Casamento also served as President, Chief Executive Officer and
Chair of RiboGene Inc. until 1999 when RiboGene was merged another
company to form Questcor. He was also the Co-Founder, President and
Chief Executive Officer of Indevus (formerly Interneuron
Pharmaceuticals) and has held senior management positions at
Genzyme Corporation, where he was Senior Vice President, American
Hospital Supply, where he was Vice President of Business
Development for the Critical Care division, Johnson & Johnson,
Hoffmann-LaRoche and Sandoz. He currently serves as Chairman of the
Board of Directors of Relmada Therapeutics (OTCQB: RLMD) and also
serves on the Board of Directors of Eton Pharmaceuticals (Nasdaq:
ETON), and was previously a Director and Vice Chair of the Catholic
Medical Missions Board, a large not for profit international
organization. Mr. Casamento holds a bachelor's degree in Pharmacy
from Fordham University and an MBA from Iona
College.
Mr. Casamento’s expertise and knowledge of the financial
community combined with his experience in the healthcare sector
makes him a valued member of the Board
Dr. Alastair Riddell was
appointed to the Board in September 2015. Since June 2016, Dr.
Riddell has served as Chair of Nemesis Biosciences Ltd and Chair of
Feedback plc (LON: FDBK). He has also served as Chair of the South
West Academic Health Science network in the UK since January 2016.
Since his appointment in December 2015, Dr. Riddell has served as
Non-Executive Director of Cristal Therapeutics in The Netherlands.
From September 2012 to February 2016, he served as Chair of
Definigen Ltd., and from November 2013 to September 2015 as Chair
of Silence Therapeutics Ltd., and from October 2009 to November
2012 as Chair of Procure Therapeutics. Between 2007 to
2009, Dr. Riddell served as the Chief Executive Officer of Stem
Cell Sciences plc. and between 2005 to 2007, served at Paradigm
Therapeutics Ltd. as the Chief Executive Officer. Between 1998 to
2005, Dr. Riddell also served as the Chief Executive Officer of
Pharmagene plc. Dr. Ridell began his career as a
doctor in general practice in a variety of hospital specialties and
holds a Master of Science and a Bachelor of Medicine and Surgery
degrees. He was recently awarded a Doctorate of Science, Honoris
Causa by Aston University.
- 5 -
Dr. Riddell’s medical background coupled with his expertise
in the life sciences industry, directing all phases of clinical
trials, before moving to sales, marketing and general management,
makes him a well-qualified member of the Board.
Dr. Vern L. Schramm was
appointed to the Board in October 2017. Dr. Schramm has served as
Professor of the Albert Einstein College of Medicine since 1987 and
Chair of the Department of Biochemistry from 1987 to 2015, and was
awarded the Ruth Merns Endowed Chair in Biochemistry. His
fields of interest include enzymatic transition state analysis,
transition state inhibitor design, biological targets for inhibitor
design, and mechanisms of N-ribosyltransferases. Dr. Schramm was
elected to the National Academy of Sciences in 2007, and served as
the Associate Editor for the Journal of the American
Chemical Society between
2003 to 2012. A frequent lecturer and presenter in topics related
to chemical biology, Dr. Schramm has been a consultant and advisor
to Pico Pharmaceuticals, Metabolon Inc., Sirtris Pharmaceuticals,
and BioCryst Pharmaceuticals. Dr. Schramm obtained his BS in
Bacteriology with an emphasis in chemistry from South Dakota State
College and holds a Master’s Degree in Nutrition with an
emphasis in biochemistry from Harvard University, a Ph.D. in
Mechanism of Enzyme Action from the Australian National University
and completed his postdoctoral training at NASA Ames Research
Center, Biological Sciences, with an NSF-NRC
fellowship.
Dr. Schramm’s substantial experience in biochemistry and
expertise in the chemistry related to non-systemic biologics makes
him a respected member of the Board and an asset to us specifically
in the development of its product candidates.
James Sapirstein was appointed
to the Board on October 8, 2019 and as our President and Chief
Executive Officer effective that same day. Prior to joining us, Mr.
Sapirstein served as Chief Executive Officer and as a director of
ContraVir Pharmaceuticals, Inc. (now known as Hepion
Pharmaceuticals, Inc.) from March 2014 to October 2018. Previously,
Mr. Sapirstein was the Chief Executive Officer of Alliqua
Therapeutics from October 2012 to February 2014. He founded and
served as Chief Executive Officer of Tobira Therapeutics from
October 2006 to April 2011 and served as Executive Vice President,
Metabolic and Endocrinology for Serono Laboratories from June 2002
to May 2005. Mr. Sapirstein’s earlier career included a
number of senior level positions in the area of marketing and
commercialization, including as Global Marketing Lead for Viread
(tenofovir) while at Gilead Sciences and as Director of
International Marketing of the Infectious Disease Division at
Bristol Myers Squibb. Mr. Sapirstein is currently the Chair
Emeritus of BioNJ, the New Jersey affiliate of the Biotechnology
Innovation Organization, and also serves on the Emerging Companies
and Health Section Boards of the Biotechnology Innovation
Organization. Mr. Sapirstein received his bachelor’s degree
in pharmacy from Rutgers University and holds an MBA degree in
management from Fairleigh Dickinson University.
Mr. Sapirstein’s nearly 36 years of pharmaceutical industry
experience which spans areas such as drug development and
commercialization, including participation in 23 product launches,
six of which were global launches led by him makes him a valuable
asset to the Board and in his oversight and execution of our
business plan.
Gregory Oakes was appointed to the
Board on April 13, 2020. Mr. Oakes brings over 25 years of
pharmaceutical industry and leadership experience and currently
serves as Corporate Vice President, Global Integration Lead for
Otezla® (apremilast) at Amgen, Inc. where he is
responsible for the integration and continued success for sustained
growth of the brand with $2 billion in assets. Prior to Amgen from
2017 - 2019, Mr. Oakes served as Corporate Vice President and U.S.
General Manager at Celgene Corp., a global biopharmaceutical
company which develops and commercializes medicines for cancer and
inflammatory disorders. Mr. Oakes also served as the Global
Commercial Integration Lead at Celgene where he helped steer the
$74 billion acquisition by Bristol-Myers Squibb and the $13.4
billion divestiture of Otezla®. From 2010 to 2017, Mr. Oakes
held several positions at Novartis AG, the most recent as Head of
Sandoz Biopharmaceuticals, North America. He began his career at
Schering-Plough (Merck) where he held executive roles in both the
U.S. and Europe. Mr. Oakes holds a bachelor's degree in Marketing
and Business Administration from Edinboro University and a M.B.A.
from Clemson University. He currently sits on the Board of BioNJ
and previously served on various Executive Committees at Celgene,
Novartis, and Schering- Plough (Merck).
Mr. Oakes’ background of over 25 years of pharmaceutical
industry and leadership experience combined with broad experience
in pharmaceutical commercialization and acquisitions makes him a
qualified member of the Board.
- 6 -
Non-Executive Director Compensation
For the fiscal year ended December 31, 2019, each of our
non-executive directors was entitled to receive (i) an annual
retainer of $35,000 for their service on the Board payable in
either cash or shares of Common Stock in quarterly installments, at
our discretion; and (ii) an annual grant of 30,000 shares of Common
Stock. During the year ended December 31, 2019, we elected to pay
the annual retainer to non-executive directors in
cash.
The following table provides information regarding compensation
paid to non-employee directors for the year ended December 31,
2019. Messrs. Sapirstein, Shenouda and Spoor did not receive
compensation for their service on the Board as employee directors
for the year ended December 31, 2019. Information regarding
executive compensation paid to Messrs. Sapirstein, Shenouda and
Spoor during 2019 is reflected in the Summary Compensation table
under “Executive Compensation” of this proxy statement.
|
Name (1)
|
Fees Earned or Paid in Cash
|
Stock Awards
(2)
|
Option Awards
(3)
|
All Other
Compensation
|
Total
|
|
Edward
J. Borkowski
|
$35,000
|
$43,350
|
$31,500
|
-
|
$109,850
|
|
Charles
J. Casamento
|
$35,000
|
$43,350
|
$31,500
|
-
|
$109,850
|
|
Alastair
Riddell
|
$35,000
|
$43,350
|
$31,500
|
-
|
$109,850
|
|
Vern
L. Schramm
|
$35,000
|
$43,350
|
$31,500
|
-
|
$109,850
|
|
(1)
|
Mr. Oakes was appointed to the board effective April 13, 2020, and
therefore has been excluded from the table.
|
|
(2)
|
Represents the aggregate grant date fair value of an aggregate of
30,000 shares of Common Stock issued to each of our non-employee
directors in 2019 as partial payment of fees payable for each
director’s service on the Board in 2019, calculated in
accordance with ASC Topic 718.
|
|
(3)
|
Represents the aggregate grant date fair value of 30,000 stock
options issued to each of our non-employee directors on June 13,
2019, calculated in accordance with ASC Topic 718.
|
Compensation Committee Interlocks and Insider
Participation
None of our executive officers currently serves, or has served
during the last three years, on the Compensation Committee of any
other entity that has one or more officers serving as a member of
our Board.
Although
Mr. Shenouda was a member of our Compensation Committee prior to
his appointment as Chief Financial Officer, he resigned from the
Compensation Committee when he was appointed our Chief Financial
Officer in October of 2017 in order to comply with Compensation
Committee independence requirements.
CORPORATE GOVERNANCE AND BOARD MATTERS
Board Leadership Structure
Currently, Mr. James Sapirstein serves as our President and Chief
Executive Officer and Mr. Edward J. Borkowski serves as Chair
of our Board. Our Board of Directors has determined that it is
in the best interests of the Board and us to maintain separate the
roles for the Chief Executive Officer and Chair of the Board. The
Board believes this structure increases the Board’s
independence from management and, in turn, leads to better
monitoring and oversight of management. Although the Board believes
we are currently best served by separating the role of Board
Chairman and Chief Executive Officer, the Board of
Directors will review and consider the continued
appropriateness of this structure on an annual basis.
Director Independence
The Board has determined that all of its members, other than Mr.
Sapirstein, our President and Chief Executive Officer are
“independent” within the meaning of Nasdaq Listing Rule
5605(a)(2) under the rules of the Nasdaq Stock Market
(“Nasdaq”), and the Securities and Exchange Commission
(“SEC”) rules regarding independence.
- 7 -
Director Nomination Process
The Corporate Governance and Nominating Committee identifies
director nominees by first considering those current members of the
Board who are willing to continue service. Current members of the
Board with skills and experience that are relevant to our business
and are willing to continue their service as a director are
considered for re-election, balancing the value of continuity of
service by existing members of the Board with that of obtaining a
new perspective. Nominees for director are selected by a majority
of the members of the Board. Although we do not have a formal
diversity policy, in considering the suitability of director
nominees, the Corporate Governance and Nominating Committee
considers such factors as it deems appropriate to develop a Board
and its committees that are diverse in nature and comprised of
experienced and seasoned advisors. Factors considered by the
Corporate Governance and Nominating Committee include sound
judgment, knowledge, skill, diversity, integrity, experience with
businesses and other organizations of comparable size, including
experience in the biopharma industry, clinical studies, U.S. Food
and Drug Administration (“FDA”) compliance, intellectual
property, business, finance, administration or public service, the
relevance of a candidate’s experience to our needs and
experience of other Board members, experience with accounting rules
and practices, the desire to balance the considerable benefit of
continuity with the periodic injection of the fresh perspective
provided by new members, and the extent to which a director
candidate would be a desirable addition to the Board and its
committees.
The Board may consider suggestions for persons to be nominated for
director that are submitted by stockholders. The Corporate
Governance and Nominating Committee will evaluate stockholder
suggestions for director nominees in the same manner as it
evaluates suggestions for director nominees made by management,
then-current directors or other appropriate sources.
The Role of the Board in Risk Oversight
Our Board oversees a company-wide approach to risk management,
determines our appropriate risk level in general, assesses the
specific risks faced by us and reviews steps taken by management to
manage those risks. Although our Board has ultimate oversight
responsibility for the risk management process, specific areas of
risk are overseen by designation of such duties and
responsibilities to certain committees of the Board.
Specifically, the Board has designated certain fiduciary duties to
its Compensation Committee, which is responsible for overseeing the
management of risks relating to our executive compensation plans
and arrangements, and the incentives created by the compensation
awards it administers. The Board has also designated specific
fiduciary duties to its Audit Committee, which is responsible for
overseeing the management of enterprise risks and financial risks,
as well as potential conflicts of interests. The Board is
responsible for overseeing the management of risks associated with
the independence of the Board.
Code of Business Conduct and Ethics
The Board adopted a code of business conduct and ethics (the
“Code”) that applies to our directors, officers and
employees. A copy of this Code is available on our website
at www.azurrx.com/investors.
We intend to disclose on our website any amendments to and waivers
of the Code that apply to our principal executive officer,
principal financial officer, principal accounting officer,
controller, or persons performing similar
functions.
Stockholder Communications
If you
wish to communicate with the Board, you may send your communication
in writing to AzurRx BioPharma, Inc., Attention: Chief Financial
Officer – 760 Parkside Avenue, Downstate Biotechnology
Incubator, Suite 304, Brooklyn, New York 11226.
You
must include your name and address in the written communication and
indicate whether you are a stockholder of the Company. The Chief
Financial Officer will review any communication received from a
stockholder, and all material and appropriate communications from
stockholders will be forwarded to the appropriate director or
directors or committee of the Board based on the subject
matter.
- 8 -
Meetings of the Board
Each of our directors who served during the year ended December 31,
2019 attended or participated in no less than 75% or more of the
aggregate of (i) the total number of meetings of the Board;
and (ii) the total number of meetings held by all committees
of the Board on which such director served as a member during such
year. Although directors are not required to attend our annual
meeting of stockholders, they are encouraged to
attend.
The following table represents the composition of each committee of
the Board and meetings held as well as actions taken by unanimous
written consent (“UWC”) in lieu of holding a meeting,
during the fiscal year ended December 31, 2019:
|
|
|
Committees
|
||
|
Director
|
Board
|
Audit
|
Compensation
|
Corporate Governance
and Nominating
|
|
Edward
J. Borkowski
|
C
|
CC
|
X
|
CC
|
|
Charles
J. Casamento
|
X
|
X
|
X
|
X
|
|
Alastair
Riddell
|
X
|
X
|
CC
|
X
|
|
Vern L.
Schramm
|
X
|
|
|
|
|
James
Sapirstein
|
X
|
|
|
|
|
Johan
M. (Thijs) Spoor
|
X
|
|
|
|
|
Meetings Held During 2019
|
8
|
3
|
1
|
-
|
|
Actions Taken by UWC During 2019
|
13
|
-
|
-
|
-
|
|
C – Chair of the Board
CC – Committee Chair
X – Member
|
|
|
|
|
Board Committees
The standing committees of the Board consist of the Audit
Committee, Compensation Committee, and Corporate Governance and
Nominating Committee. Our Board has adopted written charters
for each of these committees, copies of which are available on our
website at www.azurrx.com/investors.
Our Board may establish other committees as it deems necessary or
appropriate from time to time.
|
Audit Committee
|
The
duties and responsibilities of the Audit Committee include but are
not limited to:
●
appointing, compensating, retaining, evaluating, terminating, and
overseeing our independent registered public accounting
firm;
●
discussing with our independent registered public accounting firm
the independence of its members from its management;
●
reviewing with our independent registered public accounting firm
the scope and results of their audit;
●
approving all audit and permissible non-audit services to be
performed by our independent registered public accounting
firm;
●
overseeing the financial reporting process and discussing with
management and our independent registered public accounting firm
the interim and annual financial statements that are filed with the
SEC;
●
reviewing and monitoring our accounting principles, accounting
policies, financial and accounting controls, and compliance with
legal and regulatory requirements;
●
coordinating oversight of the Code and our disclosure controls and
procedures on behalf of the Board;
●
establishing procedures for the confidential and/or anonymous
submission of concerns regarding accounting, internal controls or
auditing matters; and
●
reviewing and approving related-person transactions.
|
|
The
rules of Nasdaq require our Audit Committee to consist of at least
three directors, all of whom must be deemed to be independent
directors under Nasdaq rules. The Board has affirmatively
determined that Messrs. Borkowski and Casamento, and Dr. Riddell,
each meet the definition of “independent director” for
purposes of serving on an Audit Committee under Nasdaq rules.
Additionally, the Board has determined that Messrs. Borkowski and
Casamento each qualify as an “audit committee financial
expert,” as such term is defined in Item 407(d)(5) of
Regulation S-K.
|
|
- 9 -
|
Compensation Committee
|
The
duties and responsibilities of the Compensation Committee include
but are not limited to:
●
reviewing key employee compensation goals, policies, plans and
programs;
●
reviewing and approving the compensation of our directors and
executive officers;
●
reviewing and approving employment agreements and other similar
arrangements between us and our executive officers;
and
●
appointing and overseeing any compensation consultants or advisors
to the Company.
|
|
The rules of Nasdaq require our Compensation Committee to consist
entirely of independent directors. The Board has affirmatively
determined that Mr. Borkowski and Dr. Riddell meet the definition
of “independent director” for purposes of serving on
the Compensation Committee under Nasdaq rules.
|
|
|
Corporate Governance
and Nominating Committee
|
The
duties and responsibilities of the Corporate Governance and
Nominating Committee include but are not limited to:
●
assisting the Board in identifying qualified individuals to become
members of the Board;
●
determining the composition of the Board and monitoring the
activities of the Board to assess overall effectiveness;
and
●
developing and recommending to our Board corporate governance
guidelines applicable to the Company and advising our Board on
corporate governance matters.
|
EXECUTIVE COMPENSATION
The
following table sets forth information regarding our current
executive officers as appointed by the Board, each to serve in such
position until their respective successors have been duly appointed
and qualified or until their earlier death, resignation or removal
from office.
|
Executive Officer
|
Age
|
Title
|
|
James Sapirstein
|
58
|
President, Chief Executive Officer and Director
|
|
Daniel Schneiderman
|
42
|
Chief Financial Officer
|
|
James E. Pennington
|
77
|
Chief Medical Officer
|
Our
executive officers are appointed by and serve at the discretion of
the Board, subject to the terms of any employment agreements they
may have with us. The following is a brief description of the
qualifications and business experience of each of our current
executive officers.
James Sapirstein. Please see Mr. Sapirstein’s
biography under the “Directors” section of this proxy
statement.
Daniel Schneiderman was
appointed as our Chief Financial Officer on January 2, 2020. Prior
to joining us, from November 2018 through December 2019 Mr.
Schneiderman served as Chief Financial Officer of Biophytis SA,
(ENXTPA: ALBPS) and its U.S. subsidiary, Biophytis, Inc., a
European-based, clinical-stage biotechnology company focused on the
development of drug candidates for age-related diseases, with a
primary focus on neuromuscular diseases. From February 2012 through
August 2018, Mr. Schneiderman served as Vice President of Finance,
Controller and Secretary of MetaStat, Inc. (OTCQB: MTST), a
publicly traded biotechnology company with a focus on Rx/Dx
precision medicine solutions to treat patients with aggressive
(metastatic) cancer. From 2008 through February 2012, Mr.
Schneiderman was Vice President of Investment Banking at Burnham
Hill Partners LLC, a boutique investment bank providing capital
raising, advisory and merchant banking services. From 2004 through
2008, Mr. Schneiderman served in various roles and increasing
responsibilities, including as Vice President of Investment Banking
at Burnham Hill Partners, a division of Pali Capital, Inc.
Previously, Mr. Schneiderman worked at H.C. Wainwright & Co.,
Inc. in 2004 as an investment banking analyst. Mr.
Schneiderman holds a bachelor’s degree in economics from
Tulane University.
- 10 -
Dr. James E. Pennington was appointed as our Chief Medical
Officer in May 2018. Prior to joining
us, Dr. Pennington served as Senior Clinical Fellow from 2010 to
2018 and as Executive Vice President and Chief Medical Officer from
2007 to 2010 at Anthera Pharmaceuticals, Inc. (Nasdaq: ANTH). From
2004 to 2007, Dr. Pennington served as Executive Vice President and
Chief Medical Officer at CoTherix, Inc., and has held various
executive positions at a number of pharmaceutical companies,
including InterMune Inc., Shaman Pharmaceuticals and Bayer
Corporation. He has served on several editorial boards, and has
authored numerous original research publications and reviews. Dr.
Pennington is currently a Clinical Professor of Medicine with the
University of California San Francisco, where he has taught since
1986. Prior to that, he was a professor at Harvard Medical School.
Dr. Pennington received a Bachelor of Arts from the University of
Oregon and a Doctor of Medicine from the University of Oregon
School of Medicine, and is Board Certified in internal medicine and
infectious diseases.
Summary Compensation
The
table set forth below reflects certain information regarding the
compensation paid or accrued during
the years ended December 31, 2019 and 2018 to our Chief Executive
Officer and our executive officers, other than our Chief Executive
Officer, who were serving as an executive officer as of December
31, 2019, and whose annual compensation exceeded $100,000 during
such year (collectively the “Named Executive
Officers”).
As previously reported on our Current Report on Form 8-K filed on
March 28, 2019, Dr. Dupret retired and resigned from his position
as President of AzurRx SAS, a wholly owned French subsidiary of the
Company effective July 1, 2019. Due to the resignation of Mr. Spoor
as President and Chief Executive Officer effective October 8, 2019,
Mr. Sapirstein was appointed as our President and Chief Executive
Officer effective that same day. Compensation paid to Dr. Dupret
and Mr. Spoor during the years ended December 31, 2019 and 2018 is
reflected in the table below.
|
Current Named Executive
Officers (1)
|
Year
|
Salary
|
Bonus
|
Equity
Awards
|
|
All Other
Compensation
|
Total
|
|
James
Sapirstein(1)
|
2019
|
$102,404
|
-
|
$232,900
|
(3)
|
-
|
$335,304
|
|
President and Chief Executive Officer
|
2018
|
-
|
-
|
-
|
(4)
|
-
|
-
|
|
James E.
Pennington(3)
|
2019
|
$255,000
|
$75,000
|
$115,000
|
(3)
|
-
|
$445,000
|
|
Chief Medical Officer
|
2018
|
$148,718
|
-
|
$155,475
|
(5)
|
-
|
$304,193
|
|
Former Named Executive Officers
(2)
|
|
|
|
|
|
|
|
|
Johan
M. (Thijs) Spoor
|
2019
|
$340,177
|
-(6)
|
$157,500
|
(3)
|
-
|
$497,677
|
|
Former President and Chief Executive Officer
|
2018
|
$425,000
|
$212,500
|
$608,000
|
(5)
|
-
|
$1,245,500
|
|
Maged Shenouda (3)
|
2019
|
$308,035
|
-(7)
|
$105,000
|
(5)
|
-
|
$413,035
|
|
Former Chief Financial Officer
|
2018
|
$296,666
|
$82,5000
|
$207,300
|
(5)
|
|
$586,466
|
|
Daniel
Dupret
|
2019
|
$151,393
|
-
|
-
|
|
-
|
$151,393
|
|
Former Chief Scientific Officer
|
2018
|
$234,999
|
-
|
$169,980
|
(5)
|
-
|
$404,979
|
|
(1)
|
Daniel
Schneiderman was appointed as Chief Financial Officer subsequent to
the year ended December 31, 2019, and therefore is excluded from
the table. Mr. Sapirstein was appointed as President and Chief
Executive Officer effective October 8, 2019 and received no
compensation prior to his employment. Dr. Pennington was appointed
as Chief Medical Officer effective May 30, 2018 and received no
compensation prior to his employment.
|
|
(2)
|
Mr. Spoor’s employment with us as President and Chief
Executive Officer terminated effective October 8, 2019 due to his
resignation. In addition, Mr. Spoor resigned as a member of the
Board on April 29, 2020.
Mr. Shenouda’s employment with us as Chief Financial Officer
terminated effective November 30, 2019 due to his resignation. Dr.
Dupret retired and resigned from his position as President of
AzurRx SAS, a wholly owned French subsidiary of the Company
effective July 1, 2019.
|
- 11 -
|
(3)
|
Represents the grant date fair value of restricted stock and stock
options issued during the year ended December 31, 2019, calculated
in accordance with ASC Topic 718. The assumptions used in the
calculation of these amounts are included in Note 13 of the notes
to the consolidated financial statements contained in our 10-K,
filed with the SEC on March 30, 2020.
|
|
(4)
|
Mr. Sapirstein received no compensation during this period or prior
to his appointments as our President and Chief Executive Officer
effective October 8, 2019.
|
|
(5)
|
Represents the grant date fair value of restricted stock and stock
options issued during the year ended December 31, 2018, calculated
in accordance with ASC Topic 718. The assumptions used in the
calculation of these amounts are included in Note 13 of the notes
to the consolidated financial statements contained in our 10-K,
filed with the SEC on April 1, 2019.
|
|
(6)
|
On June 28, 2019, we accrued an incentive bonus in the amount of
$255,000 payable to Mr. Spoor. Subsequent to Mr. Spoor’s
resignation, the Compensation Committee reviewed the accrued bonus
and determined that such amount was not owed, which determination
is being challenged by Mr. Spoor. As a result of management’s
determination, we reversed the accrual in the quarter ended
December 31, 2019. This bonus has been excluded from the
table.
In addition, all unvested shares of restricted stock and stock
options subject to time and other performance-based vesting
conditions have been forfeited in connection with Mr. Spoor's
resignation as our President and Chief Executive
Officer. Mr. Spoor also forfeited the right to receive
241,667 earned, but unissued shares of restricted stock in
connection with his resignation from the Board on April 29,
2020.
|
|
(7)
|
On June 28, 2019, we accrued an incentive bonus in the amount of
$100,000 payable to Mr. Shenouda. Subsequent to Mr.
Shenouda’s resignation, the Compensation Committee reviewed
the accrued bonus and determined that such amount was not owed, and
we reversed the accrual in the quarter ended December 31, 2019.
This bonus has been excluded from the table.
|
Employment Arrangements and Potential Payments upon Termination or
Change of Control
Sapirstein Employment Agreement. Effective October 8, 2019, we entered into an
employment agreement with Mr. Sapirstein to serve as its President
and Chief Executive Officer for a term of three years, subject to
further renewal upon agreement of the parties. The employment
agreement with Mr. Sapirstein provides for a base salary of
$450,000 per year. In addition to the base salary, Mr. Sapirstein
is eligible to receive (i) a bonus of up to 40% of his base salary
on an annual basis, based on certain milestones that are yet to be
determined; (ii) 1% of net fees received by us upon entering into
license agreements with any third-party with respect to any product
current in development or upon the sale of all or substantially all
of our assets; (iii) a grant of 200,000 restricted shares of our
Common Stock which are subject to vest as follows (a) 100,000 upon
the first commercial sale of MS1819 in the United States, and (b)
100,000 upon our total market capitalization exceeding $1.0 billion
for 20 consecutive trading days; (iv) a grant of 300,000 10-year
stock options to purchase shares of our Common Stock which are
subject to vest as follows (a) 50,000 upon us initiating our next
Phase II clinical trial in the United States for MS1819, (b) 50,000
upon us completing our next or subsequent Phase II clinical trial
in the United States for MS1819, (c) 100,000 upon us initiating a
Phase III clinical trial in the United States for MS1819, and (d)
100,000 upon us initiating a Phase I clinical trial in the United
States for any product other than MS1819. Mr. Sapirstein is
entitled to receive 20 days of paid vacation, participate in full
employee health benefits and receive reimbursement for all
reasonable expenses incurred in connection with his services to
us.
In the event that Mr. Sapirstein’s employment is terminated
by us for Cause, as defined in his employment agreement, or by Mr.
Sapirstein voluntarily, then will not be entitled to receive any
payments beyond amounts already earned, and any unvested equity
awards will terminate. In the event that Mr. Sapirstein’s
employment is terminated as a result of an Involuntary Termination
Other than for Cause, as defined in the Agreement, Mr. Sapirstein
will be entitled to receive the following compensation: (i)
severance in the form of continuation of his salary (at the Base
Salary rate in effect at the time of termination, but prior to any
reduction triggering Good Reason) for a period of 12 months
following the termination date; (ii) payment of Executive’s
premiums to cover COBRA for a period of 12 months following the
termination date; and (iii) a prorated annual bonus.
- 12 -
Schneiderman Employment Agreement. Effective January 2, 2020, we entered into an
employment agreement with Mr. Schneiderman to serve as our Chief
Financial Officer for a term of three years, subject to further
renewal upon agreement of the parties. The employment agreement
with Mr. Schneiderman provides for a base salary of $285,000 per
year. In addition to the base salary, Mr. Schneiderman is eligible
to receive (a) an annual milestone cash bonus based on certain
milestones that will be established by our Board or the
Compensation Committee, (b) grants of stock options to purchase
such number of shares equal to one and a quarter percent (1.25%) of
the issued and outstanding Common Stock on January 2, 2020, or
335,006 shares of Common Stock with an exercise price of $1.03 per
share, which shall vest in over a term of three years. Mr.
Schneiderman is entitled to receive 20 days of paid vacation,
participate in full employee health benefits and receive
reimbursement for all reasonable expenses incurred in connection
with his service to us. We may terminate Mr. Schneiderman’s
employment agreement at any time, with or without Cause, as such
term is defined in his employment agreement. Effective July 16,
2020, our Board approved an amended and restated option grant to
Mr. Schneiderman, amending and restating the grant previously made
on January 2, 2020, to reduce the amount of shares issuable upon
exercise of such option to be the maximum number of shares Mr.
Schneiderman was eligible to receive under the Amended and Restated
2014 Omnibus Equity Incentive Plan (the “2014 Plan”) on
the original grant date (or 300,000 shares), due to the 2014 Plan
provisions relating to Section 162(m)
limitations.
In the event that Mr. Schneiderman’s employment is terminated
by us for Cause, as defined in Mr. Schneiderman’s employment
agreement, or by Mr. Schneiderman voluntarily, then he will not be
entitled to receive any payments beyond amounts already earned, and
any unvested equity awards will terminate. If we terminate his
employment agreement without Cause, not in connection with a Change
of Control, as such term is defined in Mr. Schneiderman’s
employment agreement, he will be entitled to (i) all salary owed
through the date of termination; (ii) any unpaid annual milestone
bonus; (iii) severance in the form of continuation of his salary
for the greater of a period of six months following the termination
date or the remaining term of the employment agreement; (iv)
payment of premiums to cover COBRA for a period of six months
following the termination date; (v) a prorated annual bonus equal
to the target annual milestone bonus, if any, for the year of
termination multiplied by the formula set forth in the agreement.
If we terminate Mr. Schneiderman’s employment agreement
without Cause, in connection with a Change of Control, he will be
entitled to the above and immediate accelerated vesting of any
unvested options or other unvested awards.
Pennington Employment Agreement. Effective May 28, 2018, we entered into an
employment agreement with Mr. Pennington to serve as its Chief
Medical Officer. The employment agreement with Dr. Pennington
provides for a base annual salary of $250,000. In addition to his
salary, Dr. Pennington is eligible to receive an annual milestone
bonus, awarded at the sole discretion of the Board based on his
attainment of certain financial, clinical development, and/or
business milestones established annually by the Board or
Compensation Committee. The employment agreement is terminable by
either party at any time. In the event of termination by us other
than for cause, Dr. Pennington is entitled to three months’
severance payable over such period. In the event of termination by
us other than for cause in connection with a Change of Control, Dr.
Pennington will receive six months’ severance payable over
such period.
Spoor Employment Agreement. On
January 3, 2016, we entered into an employment agreement with its
former President and Chief Executive Officer, Johan Spoor. The
employment agreement provided for a term expiring January 2, 2019.
Although Mr. Spoor’s employment agreement expired, he
remained employed as our President and Chief Executive Officer
under the terms of his prior employment agreement through his
resignation as President and Chief Executive Officer on October 8,
2019. In addition, Mr. Spoor resigned as a member of the Board on
April 29, 2020.
The employment agreement with Mr. Spoor provided for a base salary
of $425,000 per year. At the sole discretion of the Board or the
Compensation Committee of the Board, following each calendar year
of employment, Mr. Spoor was eligible to receive an additional cash
bonus based on his attainment of certain financial, clinical
development, and/or business milestones to be established annually
by the Board or the Compensation Committee. Mr. Spoor’s
employment agreement was terminable by either party at any time. In
the event of termination by us without Cause or by Mr. Spoor for
Good Reason not in connection with a Change of Control, as those
terms are defined in Mr. Spoor’s employment agreement, he was
entitled to twelve months’ severance payable over such
period. In the event of termination by us without Cause or by Mr.
Spoor for Good Reason in connection with a Change of Control, as
those terms are defined in Mr. Spoor’s employment agreement,
he was eligible to receive eighteen months’ worth of his base
salary in a lump sum as severance.
- 13 -
Mr. Spoor was originally entitled to 10-year stock options to
purchase 380,000 shares of Common Stock, pursuant to the 2014 Plan.
During the year ended December 31, 2017, stock options to purchase
100,000 shares of Common Stock with an exercise price of $4.48 per
share with a grant date fair value of $386,900 were granted and
vested. On September 29, 2017, Mr. Spoor was granted 100,000 shares
of restricted Common Stock subject to milestone-based vesting, in
satisfaction of our obligation to issue an additional 280,000
options to Mr. Spoor, with an estimated grant date fair value of
$425,000. During the year ended December 31, 2018, all 100,000
shares of restricted Common Stock vested, but the separate stock
options covering 100,000 shares of Common Stock were cancelled as a
result of Mr. Spoor’s resignation as our President and Chief
Executive Officer.
Mr. Spoor resigned from his position as our President and Chief
Executive Office effective October 8, 2019. Mr. Spoor received no
additional or severance compensation and all unvested stock options
and shares of restricted Common Stock granted to Mr. Spoor were
cancelled as a result of Mr. Spoor’s resignation. Mr. Spoor
has a period of twelve months following his resignation to exercise
all vested stock options.
On June 29, 2019, we accrued an incentive bonus in the amount of
$255,000. Subsequent to Mr. Spoor’s resignation, the
Compensation Committee reviewed the accrued bonus and determined
that such amount was not owed and we reversed the accrual in the
quarter ended December 31, 2019, which determination was challenged
by Mr. Spoor. As part of a settlement and general release effective
July 9, 2020, Mr. Spoor waived all claims to the incentive bonus in
the amount of $255,000 and also waived all claims to an amount of
$348,000 due to JIST Consulting, a company controlled by Mr. Spoor.
Also, in connection with the settlement and general release, Mr.
Spoor received warrants to purchase an aggregate of 150,000 shares
of Common Stock with an exercise price of $1.00 per share and an
expiration term of five years and we agreed to pay Mr.
Spoor’s legal expenses in the amount of $51,200.
Mr. Spoor received no additional or severance compensation and all
unvested stock options and shares of restricted Common Stock
granted to Mr. Spoor were cancelled as a result of Mr.
Spoor’s resignation. As of December 31, 2019, there were
241,667 earned but unissued shares of restricted Common Stock due
to Mr. Spoor. However, Mr. Spoor forfeited the right to receive
these shares on April 29, 2020 in connection with his resignation
from the Board.
Shenouda Employment Agreement.
On September 26, 2017, we entered into an employment agreement
with Mr. Shenouda to serve as its Executive Vice-President of
Corporate Development and Chief Financial Officer for a term of
three years, during which time he received a base salary of
$275,000. In addition to the base salary, Mr. Shenouda was eligible
to receive an annual milestone cash bonus based on the achievement
of certain financial, clinical development, and/or business
milestones, which milestones were established annually at the sole
discretion of our Board or the Compensation Committee. Mr.
Shenouda’s employment agreement provided for the issuance of
stock options to purchase 100,000 shares of Common Stock, pursuant
to the 2014 Plan, with an exercise price of $4.39 per share and a
term of ten years. These stock options vested upon the achievement
of certain strategic milestones during the year ended December 31,
2018.
Mr. Shenouda’s employment agreement was terminable by us any
time, with or without Cause, as such term is defined in the
agreement. If we terminated the agreement without Cause, or if the
agreement was terminated due to a Change of Control, as such term
is defined in the agreement, Mr. Shenouda was entitled to (i) all
salary owed through the date of termination; (ii) any unpaid annual
milestone bonus; (iii) severance in the form of continuation
of his salary for the greater of a period of 12 months following
the termination date or the remaining term of his employment
agreement; (iv) payment of premiums to cover COBRA for a period of
12 months following the termination date; (v) a prorated annual
bonus equal to the target annual milestone bonus, if any, for the
year of termination multiplied by the formula set forth in the
agreement; and (vi) immediate accelerated vesting of any unvested
options or other unvested awards.
Mr. Shenouda resigned from his position as our Chief Financial
Officer effective November 30, 2019. Mr. Shenouda received no
additional or severance compensation and all unvested stock options
and shares of restricted Common Stock granted to Mr. Shenouda were
cancelled as a result of Mr. Shenouda’s resignation. Mr.
Shenouda has a period of twelve months following his resignation to
exercise all vested stock options.
On
June 28, 2019, the Compensation Committee had approved the accrual
of an incentive bonus in the amount of $100,000. Subsequent to Mr.
Shenouda’s resignation, the Compensation Committee reviewed
the accrued bonus and determined that such amount was not owed, and
we reversed the accrual in the quarter ended December 31, 2019. As
part of a settlement and general release entered into on July 2,
2020, Mr. Shenouda waived all claims to the incentive bonus in the
amount of $100,000 and we agreed to pay Mr. Shenouda a settlement
sum of $15,000, which includes $10,000 due to Mr. Shenouda
reflected in our accounts payable as of June 30,
2020.
- 14 -
Outstanding Equity Incentive Awards at Fiscal Year-End
The following table sets forth information regarding unexercised
options, stock that has not vested and equity incentive awards held
by each of the Named Executive Officers outstanding as of
December 31, 2019 and 2018:
|
|
|
Option Awards
|
|
Stock Awards
|
|||||
|
Current Named
Executive Officers (1)
|
Grant date
|
Number
of securities underlying unexercised options (#)
exercisable
|
Equity incentive
plan awards: Number of underlying unexercised unearned options
(#)
|
Option
exercise
price ($)
|
Option
expiration
date
|
Number of shares or units of stock that have not vested (#) |
Market value of shares or units of stock that have not vested
($)
|
Equity incentive
plan awards: Number of Unearned shares, units or other rights that
have not vested (#)
|
Equity incentive
plan awards: Market or Payout value of unearned shares, units or
other rights that have not vested ($)
|
|
James
Sapirstein
|
10/8/2019
|
-
|
300,000(2)
|
$0.56
|
10/7/2029
|
-
|
-
|
200,000(3)
|
112,000
|
|
10/8/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James E.
Pennington
|
6/28/2018
|
75,000
|
-
|
$3.04
|
6/27/2023
|
-
|
-
|
-
|
-
|
|
|
6/13/2019
|
-
|
110,000
|
$1.70
|
6/12/2024
|
|
|
|
|
|
Former
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
Maged
Shenouda
|
2/3/2017
|
30,000
|
-
|
$4.48
|
2/2/2027
|
|
|
|
|
|
|
9/26/2017
|
100,000
|
-
|
$4.39
|
9/24/2027
|
|
|
|
|
|
|
6/28/2018
|
100,000
|
-
|
$3.04
|
6/27/2023
|
|
|
|
|
|
Johan M. (Thijs)
Spoor (4)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
(1)
|
Daniel Schneiderman was appointed as Chief Financial Officer
subsequent to the year ended December 31, 2019, and therefore is
excluded from the table.
|
|
(2)
|
Represents stock options issued to Mr. Sapirstein on October 8,
2019 under the terms of his employment agreement, which options
will vest as follows: (i) 50,000 upon initiating its next U.S.
Phase II clinical trial MS1819, (ii) 50,000 upon completing the
next U.S. Phase II clinical trial, (iii) 100,000 upon us initiating
a Phase III clinical trial in the U.S. for MS1819, and (iv) 100,000
upon initiating a U.S. Phase I clinical trial for any product other
than MS1819.
|
|
(3)
|
Represents the restricted stock unit (“RSU”) award
issued to Mr. Sapirstein on October 8, 2019 under the terms of his
employment agreement, which RSU will vest as follows: (i) 100,000
upon the first commercial sale in the U.S. of MS1819, and (ii)
100,000 upon our total market capitalization exceeding $1.0 billion
for 20 consecutive trading days.
|
|
(4)
|
As of December 31, 2019, there were 241,667 earned, but unissued
shares of restricted Common Stock due to Mr. Spoor. However, Mr.
Spoor forfeited the right to receive these shares on April 29, 2020
in connection with his resignation from the Board.
|
- 15 -
Securities
Authorized for Issuance Under Equity Compensation
Plans
The following table provides information as of December 31, 2019
regarding equity compensation plans approved by our security
holders and equity compensation plans that have not been approved
by our security holders:
|
Plan category
|
Number of securities to be
issued upon exercise of outstanding options, warrants and
rights
|
Weighted-average exercise
price of outstanding options,
warrants and rights
|
Number of securities remaining
available for future issuance under equity compensation
plans (1)
|
|
Equity compensation plans approved by security
holders (1)
|
1,677,500
|
$2.30
|
1,274,819
|
|
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
|
Total
|
1,677,500
|
$2.30
|
1,274,819
|
|
(1)
|
Includes 632,667 shares of Common Stock are reserved under the 2014
Plan as of December 31, 2019, subject to the issuance of restricted
stock and RSUs. Subsequent to December 31, 2019, Mr.
Spoor forfeited a total of 241,667 reserved shares in connection
with his resignation from the Board on April 29, 2020.
|
Amended and Restated 2014 Omnibus Equity Incentive
Plan
The Board and stockholders have adopted and approved the 2014 Plan,
which is a comprehensive incentive compensation plan under which we
can grant equity-based and other incentive awards to our officers,
employees, directors, consultants and advisers. The purpose of the
2014 Plan is to help us attract, motivate and retain such persons
with awards under the 2014 Plan and thereby enhance stockholder
value.
Administration. The 2014 Plan
is administered by our Compensation Committee. The Compensation
Committee may grant stock options, stock appreciation rights
(“SARs”), performance stock awards, performance unit
awards, distribution equivalent right awards, restricted stock
awards, restricted stock unit awards and unrestricted stock awards
to non-employee directors, officers, employees and nonemployee
consultants of us or our affiliates. Among other things, the
Compensation Committee has complete discretion, subject to the
express limits of the 2014 Plan, to determine the directors,
employees and nonemployee consultants to be granted an award, the
type of award to be granted, the terms and conditions of the award,
the form of payment to be made and/or the number of shares of
Common Stock subject to each award, the exercise price of each
option and base price of each SAR, the term of each award, the
vesting schedule for an award, whether to accelerate vesting, the
value of the Common Stock underlying the award, and the required
withholding, if any. The Compensation Committee may amend, modify
or terminate any outstanding award, provided that the
participant’s consent to such action is required if the
action would materially and adversely impair the
participant’s rights with respect to that award. The
Compensation Committee is also authorized to construe the award
agreements, and may prescribe rules relating to the 2014
Plan.
Eligibility. Employees,
directors and nonemployee consultants of the Company or an
affiliate are eligible to participate in the 2014 Plan. Currently,
we have nine employees, five non-executive directors and
approximately ten nonemployee consultants.
Shares Available for Awards.
The aggregate number of shares of Common Stock that may be issued
under the 2014 Plan shall not exceed 10% of the issued and
outstanding shares of Common Stock on an as converted basis (the
“As Converted Shares”), on a rolling basis. The number
of authorized shares of Common Stock reserved for issuance under
the 2014 Plan shall automatically be increased concurrently with
our issuance of fully paid and non-assessable shares of As
Converted Shares. Shares shall be deemed to have been
issued under the 2014 Plan solely to the extent actually issued and
delivered pursuant to an award. If any award lapses, expires, is
cancelled, or terminates unexercised or is forfeited, the number of
shares subject thereto is again available for grant under the 2014
Plan.
- 16 -
Stock Options. The 2014 Plan
permits the grant of “incentive stock options”
(“ISOs”), which are intended to meet the requirements
for special federal income tax treatment under the Code, and
“nonqualified stock options” (“NQSOs”) that
do not meet the requirements of Section 422 of the Code. Stock
options may be granted on such terms and conditions as the
Compensation Committee may determine; provided,
however, that the per share
exercise price under a stock option may not be less than the fair
market value of a share of Common Stock on the date of grant and
the term of the stock option may not exceed 10 years (110% of such
value and five years in the case of an ISO granted to an employee
who owns (or is deemed to own) more than 10% of the total combined
voting power of all classes of our capital stock or a parent or
subsidiary of the Company). ISOs may only be granted to employees.
In addition, the aggregate fair market value of Common Stock
covered by one or more ISOs (determined at the time of grant),
which are exercisable for the first time by an employee during any
calendar year may not exceed $100,000. Any excess is treated as a
NQSO. Stock options granted under the 2014 Plan will be exercisable
at such time or times as the Compensation Committee prescribes at
the time of grant and recipients will be permitted to pay the
exercise price as set forth by the Compensation Committee in the
applicable option agreement. No stock option may be transferred
other than by will or by the laws of descent and distribution, and
during a recipient’s lifetime a stock option may be exercised
only by the recipient. However, the Compensation Committee may
permit the holder of a stock option, SAR or other award to transfer
the stock option, right or other award to immediate family members
or a family trust for estate planning purposes. The Compensation
Committee will determine the extent to which a holder of a stock
option may exercise the option following termination of service
with us.
Stock Appreciation Rights. A
SAR entitles the participant, upon exercise, to receive an amount,
in cash or stock or a combination thereof, equal to the increase in
the fair market value of the underlying Common Stock between the
date of grant and the date of exercise. SARs may be granted in
tandem with, or independently of, stock options granted under the
2014 Plan. A SAR granted in tandem with a stock option (i) is
exercisable only at such times, and to the extent, that the related
stock option is exercisable in accordance with the procedure for
exercise of the related stock option; (ii) terminates upon
termination or exercise of the related stock option (likewise, the
Common Stock option granted in tandem with a SAR terminates upon
exercise of the SAR); (iii) is transferable only with the related
stock option; and (iv) if the related stock option is an ISO, may
be exercised only when the value of the stock subject to the stock
option exceeds the exercise price of the stock option. A SAR that
is not granted in tandem with a stock option is exercisable at such
times as the Compensation Committee may specify. The Compensation
Committee will determine the other terms applicable to SARs. The
exercise price per share of a SAR will be determined by the
Compensation Committee, but will not be less than 100% of the fair
market value of a share of our Common Stock on the date of grant,
as determined by the Compensation Committee. The maximum term of
any SAR granted under the 2014 Plan is ten years from the date of
grant. Generally, each SAR will entitle a participant upon exercise
to an amount equal to: (i) the excess of the fair market value on
the exercise date of one share of our Common Stock over the
exercise price, multiplied by
(ii) the number of shares of Common
Stock covered by the SAR. Payment may be made in shares of our
Common Stock, in cash, or partly in Common Stock and partly in
cash, all as determined by the Compensation
Committee.
Performance Stock and Performance Unit Awards. Performance stock and performance unit awards
entitle the participant to receive cash or shares of Common Stock
upon the attainment of specified performance goals. In the case of
performance units, the right to acquire the units is denominated in
cash values. The Compensation Committee will determine the
restrictions and conditions applicable to each award of performance
stock and performance units.
Distribution Equivalent Right Awards. A distribution equivalent right award entitles
the participant to receive bookkeeping credits, cash payments
and/or Common Stock distributions equal in amount to the
distributions that would have been made to the participant had the
participant held a specified number of shares of Common Stock
during the period the participant held the distribution equivalent
right. A distribution equivalent right may be awarded as a
component of another award under the 2014 Plan, where, if so
awarded, such distribution equivalent right will expire or be
forfeited by the participant under the same conditions as under
such other award.
Restricted Stock Awards and Restricted Stock Unit
Awards. A restricted stock
award is a grant or sale of Common Stock to the participant,
subject to our right to repurchase all or part of the shares at
their purchase price (or to require forfeiture of such shares if
issued to the participant at no cost) in the event that conditions
specified by the Compensation Committee in the award are not
satisfied prior to the end of the time period during which the
shares subject to the award may be repurchased by or forfeited to
us. A restricted stock unit entitles the participant to receive a
cash payment equal to the fair market value of a share of Common
Stock for each restricted stock unit subject to such restricted
stock unit award, if the participant satisfies the applicable
vesting requirement. The Compensation Committee will determine the
restrictions and conditions applicable to each award of restricted
stock award or restricted stock unit award, which may include
performance-based conditions.
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Unrestricted Stock Awards. An
unrestricted stock award is a grant or sale of shares of our Common
Stock to the participant that is not subject to transfer,
forfeiture or other restrictions, in consideration for past
services rendered to us or an affiliate or for other valid
consideration.
Change-in-Control Provisions.
In connection with the grant of an award, the Compensation
Committee may provide that, in the event of a change in control,
such award will become fully vested and immediately
exercisable.
Amendment and Termination. The
Compensation Committee may adopt, amend and rescind rules relating
to the administration of the 2014 Plan, and the Board may amend,
suspend or terminate the 2014 Plan, but no such amendment or
termination will be made that materially and adversely impairs the
rights of any participant with respect to any award received under
the 2014 Plan without the participant’s consent, other than
amendments that are necessary to permit the granting of awards in
compliance with applicable laws. The 2014 Plan provides that
approval by the holders of a majority of our shares of our Common
Stock entitled to vote generally in the election of directors is
required for an amendment or modification of the 2014 Plan that (i)
materially increases the benefits accruing to award holders, (ii)
materially increases the number of shares of Common Stock subject
to the 2014 Plan or the individual award agreements, (iii)
materially modifies the requirements for participation in the 2014
Plan, or (iv) amends, modifies or suspends re-pricing prohibitions,
all subject to the terms of the 2014 Plan.
Potential Limitation on Company Deductions
Section
162(m) of the Code generally disallows a tax deduction for
compensation in excess of $1 million paid in a taxable year by a
publicly held corporation to its chief executive officer and
certain other “covered employees.” Effective for
taxable years beginning prior to January 1, 2018, an exception to
this deduction limit applied to “performance-based
compensation” that satisfied certain criteria. Under
regulations issued by the Internal Revenue Service under Section
162(m), stock options and stock appreciation rights were treated as
performance-based compensation if, among other things, an annual
limit was placed on issuing such awards to a single
individual.
In
order to comply with the foregoing exception to the $1 million
deduction limit under Section 162(m), the 2014 Plan previously
contained an annual limit on issuing awards of stock options and
stock appreciation rights to a single individual, which was
intended to allow us to deduct such awards granted as
performance-based compensation. Pursuant to the Tax Cut and Jobs
Act of 2017, however, the exception for performance-based
compensation under Section 162(m) of the Code was repealed. As a
result, the annual limit in the 2014 Plan was no longer effective
to allow us to claim this deduction. Accordingly, effective July
16, 2020, our Board approved an amendment to the 2014 Plan that
removed this annual limit. For additional information, see the
disclosure included under the heading “Proposal No. 5:
Approval of the AzurRx BioPharma, Inc. 2020 Omnibus Equity
Incentive Plan – New Plan Benefits – Stockholder Demand
Letter.”
Our
Board and Compensation Committee intend to consider the potential
impact of Section 162(m) on grants made under the 2014 Plan, but
reserve the right to approve grants of options and other awards for
an executive officer that exceeds the deduction limit of Section
162(m).
- 18 -
Related Party Transactions
Johan (Thijs) Spoor
During
the year ended December 31, 2015, we employed the services of JIST
Consulting (“JIST”), a company controlled by Johan
(Thijs) Spoor, our former Chief Executive Officer and President, as
a consultant for business strategy, financial modeling, and
fundraising. Included in accounts payable at December 31, 2019 and
2018, is $348,400 and $478,400, respectively, for JIST relating to
Mr. Spoor’s services. The $348,400 included in the accounts
payable at December 31, 2019 has since been waived by Mr. Spoor,
pursuant to a settlement and general release, effective July 9,
2020. Mr. Spoor received no other compensation from us other than
as specified in his employment agreement. On October 8, 2019, Mr.
Spoor resigned as our Chief Executive Officer and President, and on
April 29, 2020, Mr. Spoor resigned as a member of the
Board.
On June
28, 2019, we accrued an incentive bonus in the amount of $255,000
payable to Mr. Spoor. Subsequent to Mr. Spoor’s resignation,
the Compensation Committee reviewed the accrued bonus and
determined that such amount was not owed, which determination is
being challenged by Mr. Spoor. As a result of management’s
determination, we reversed the accrual in the quarter ended
December 31, 2019. As part of a
settlement and general release effective July 9, 2020, Mr. Spoor
waived all claims to the incentive bonus in the amount of $255,000
and also waived all claims to the amount of $348,000 due to JIST
Consulting, a company controlled by Mr. Spoor. Also in connection
with the settlement and general release, Mr. Spoor received
warrants to purchase an aggregate of 150,000 shares of Common Stock
and we agreed to pay Mr. Spoor’s legal expenses in the amount
of $51,200.
As of
December 31, 2019, Mr. Spoor was
entitled to an aggregate of 241,667 shares of restricted Common
Stock with an aggregate grant date fair value of $855,668 that have
vested but not been issued. Mr. Spoor forfeited the right to
receive these shares on April 29, 2020 in connection with his
resignation from the Board.
Mr. Spoor received no additional or severance compensation and all
unvested stock options and shares of restricted Common Stock
granted to Mr. Spoor were cancelled as a result of Mr.
Spoor’s resignation.
Maged Shenouda
From
October 1, 2016 until his appointment as our Chief Financial
Officer on September 25, 2017, we employed the services of Maged
Shenouda as a financial consultant. Included in accounts payable at
December 31, 2019 and 2018 is $10,000 and $50,000, respectively,
for Mr. Shenouda’s services. On November 1, 2019, Mr.
Shenouda submitted his resignation as our Chief Financial Officer,
effective November 30, 2019.
On June
28, 2019, we accrued an incentive bonus in the amount of $100,000
payable to Mr. Shenouda. Subsequent to Mr. Shenouda’s
resignation, the Compensation Committee reviewed the accrued bonus
and determined that such amount was not owed, and we reversed the
accrual in the quarter ended December 31, 2019. As part of a settlement and general release
entered into on July 2, 2020, Mr. Shenouda waived all claims to the
incentive bonus in the amount of $100,000 and we agreed to pay Mr.
Shenouda a settlement sum of $15,000, which includes $10,000 due to
Mr. Shenouda reflected in our accounts payable as of June 30,
2020.
Mr.
Shenouda resigned from his position as our Chief Financial Officer
effective November 30, 2019. Mr. Shenouda received no additional or
severance compensation and all unvested stock options and shares of
restricted Common Stock granted to Mr. Shenouda were cancelled as a
result of Mr. Shenouda’s resignation. Mr. Shenouda has a
period of twelve months following his resignation to exercise all
vested stock options.
Promissory Notes, Private Placement and Exchange
On
December 20, 2019, Edward J. Borkowski, Chairman of the Board,
purchased a Promissory Note for an original principal amount of
$100,000, together with related warrants exercisable for 51,547
shares of Common Stock at an exercise price of $1.07, pursuant to a
Note Purchase Agreement by and between us and certain accredited
investors. The Promissory Note accrued interest at a rate of 9% per
annum and was convertible at the option of the holder into shares
of Common Stock at a price of $0.97 per share. On July 16, 2020, in
connection with the Private Placement and the Exchange, Mr.
Borkowski purchased $250,000 worth of Series B Preferred Stock and
related Series B Warrants for cash, and Mr. Borkowski also
exchanged the balance of his outstanding Promissory Note of
$105,128 (including outstanding principal amount and accrued and
unpaid interest thereon) for 13.653087 shares of Series B Preferred
Stock convertible into 136,531 shares of Common Stock, Series B
Warrants for 68,266 shares of Common Stock and Exchange Warrants
for 25,774 shares of Common Stock.
- 19 -
On
January 3, 2020, Edmund Burke Ross, Jr., a stockholder that
beneficially owns greater than 5% of our outstanding shares,
purchased a Promissory Note for an original amount of $750,000,
together with related warrants exercisable for 375,000 shares of
Common Stock at an exercise price of $1.07, pursuant to a Note
Purchase Agreement by and between us and certain accredited
investors. The Promissory Note accrued interest at a rate of 9% per
annum and was convertible at the option of the holder into shares
of Common Stock at a price of $0.97 per share. On July 16, 2020, in
connection with the Private Placement and the Exchange, Mr. Ross
exchanged the balance of his outstanding Promissory Note of
$785,877 (including outstanding principal amount and accrued and
unpaid interest thereon) for 102.06191 shares of Series B Preferred
Stock convertible into 1,020,620 shares of Common Stock, Series B
Warrants for 510,310 shares of Common Stock and Exchange Warrants
for 193,299 shares of Common Stock.
On July
16, 2020, in connection with the Private Placement and the
Exchange, James Sapirstein, President, Chief Executive Officer and
Director purchased $100,000 worth of Series B Preferred Stock and
related Series B Warrants for cash. Mr. Sapirstein received
12.987013 shares of Series B Preferred Stock convertible into
129,871 shares of Common Stock and Series B Warrants for 64,936
shares of Common Stock.
Policy and Procedures Governing Related Party
Transactions
The Board is committed to upholding the highest legal and ethical
conduct in fulfilling its responsibilities and recognizes that
related party transactions can present a heightened risk of
potential or actual conflicts of interest.
The SEC rules define a related party transaction to include any
transaction, arrangement or relationship which: (i) we are a
participant; (ii) the amount involved exceeds $120,000; and (iii)
executive officer, director or director nominee, or any person who
is known to be the beneficial owner of more than 5% of our Common
Stock, or any person who is an immediate family member of an
executive officer, director or director nominee or beneficial owner
of more than 5% of our Common Stock had or will have a direct or
indirect material interest.
Although we do not maintain a formal written procedure for the
review and approval of transactions with such related persons, it
is our policy for the disinterested members of our Board to review
all related party transactions on a case-by-case basis. To
receive approval, a related-party transaction must have a
legitimate business purpose for us and be on terms that are fair
and reasonable to us and our stockholders and as favorable to us
and our stockholders as would be available from non-related
entities in comparable transactions.
All related party transactions must be disclosed in our applicable
filings with the SEC as required under SEC rules.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of the Exchange Act, requires our officers,
directors, and persons who beneficially own more than 10% of our
Common Stock to file reports of ownership and changes in ownership
with the SEC. Officers, directors, and greater-than-ten-percent
stockholders are also required by the SEC to furnish us with copies
of all Section 16(a) forms that they file.
Based solely upon a review of these forms that were furnished to
us, we believe that all reports required to be filed by these
individuals and persons under Section 16(a) were filed during the
year ended December 31, 2019 and that such filings were
timely, except for the
following:
● Mr.
Borkowski, a director, filed two late Form 4s reporting an
aggregate of two transactions;
● Mr.
Casamento, a director, filed a late Form 4 reporting one
transaction;
● Dr.
Pennington, the Chief Medical Officer, filed a late Form 4
reporting one transaction;
● Dr.
Riddell, a director, filed a late Form 4 reporting one
transaction;
● Dr.
Schramm, a director, filed a late Form 4 reporting one
transaction.
- 20 -
Report of the Audit Committee
The following Report of the Audit Committee of the Board of
Directors shall not be deemed to be soliciting material or to be
incorporated by reference by any general statement incorporating by
reference this proxy statement into any filing under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent the Company specifically incorporates
this Report therein, and shall not otherwise be deemed filed under
such Acts.
The
Audit Committee has reviewed and discussed with management
and Mazars USA LLP, our independent registered public
accounting firm, the audited consolidated financial statements in
the AzurRx BioPharma, Inc. Annual Report on Form 10-K for
the year ended December 31, 2019. The Audit Committee has also
discussed with Mazars USA LLP those matters required to be
discussed by Public Company Accounting Oversight Board
(“PCAOB”) Auditing Standard 1301.
Mazars
USA LLP also provided the Audit Committee with the written
disclosures and the letter required by the applicable requirements
of the PCAOB regarding the independent auditor’s
communication with the Audit Committee concerning independence. The
Audit Committee has discussed with the registered public accounting
firm their independence from our Company.
Based
on its discussions with management and the independent registered
public accounting firm, and its review of the representations and
information provided by management and the independent registered
public accounting firm, including as set forth above, the Audit
Committee recommended to our Board of Directors that the audited
consolidated financial statements be included in our Annual Report
on Form 10-K for the year ended December 31, 2019.
|
April 29, 2020
|
RESPECTFULLY SUBMITTED,
Edward J. Borkowski, Chair
Alastair Riddell
Charles J. Casamento
|
- 21 -
|
PROPOSAL NO. 2:
|
APPROVAL OF THE ISSUANCE OF MORE THAN 20% OF OUR COMMON STOCK
PURSUANT TO THE PRIVATE PLACEMENT AND THE EXCHANGE FOR PURPOSES OF
NASDAQ LISTING RULE 5635(d)
|
Background and Overview
On July
16, 2020, we consummated the Private Placement whereby we entered
into a Convertible Preferred Stock and Warrant Securities Purchase
Agreement (the “Purchase Agreement”) with certain
accredited and institutional investors (the
“Investors”). Pursuant to the Purchase Agreement, we
issued an aggregate of 2,912.583005 shares of Series B Convertible
Preferred Stock, par value $0.0001 per share (the “Series B
Preferred Stock”), at a price of $7,700.00 per share,
initially convertible into an aggregate of 29,125,756 shares of
Common Stock at $0.77 per share, together with warrants (the
“Series B Warrants”) to purchase an aggregate of
14,562,826 shares of Common Stock at an exercise price of $0.85 per
share. The amount of the Series B Warrants is equal to 50% of the
shares of Common Stock into which the Series B Preferred Stock is
initially convertible.
In
connection with the Private Placement, an aggregate of 1,975.578828
shares of Series B Preferred Stock initially convertible into
19,755,748 shares of Common Stock and related 9,877,835 Series B
Warrants was issued to certain Investors for cash consideration,
resulting in aggregate gross proceeds to us of approximately $15.2
million in the Private Placement.
In
addition, in connection with the related Exchange the balance of an
aggregate of 937.004177 shares of Series B Preferred Stock
initially convertible into 9,370,008 shares of Common Stock and
related Series B Warrants to purchase 4,684,991 shares of Common
Stock was issued to certain Investors (the “Exchange
Investors”) in exchange for consideration consisting of
approximately $7.2 million aggregate outstanding principal amount,
together with accrued and unpaid interest thereon through the date
of the Private Placement of $0.3 million, of certain Senior
Convertible Promissory Notes (the “Promissory Notes”)
issued between December 20, 2019 and January 9, 2020, pursuant to
an Exchange Addendum (the “Exchange Addendum”) executed
by us and the Exchange Investors. As additional consideration to
the Exchange Investors, we also issued certain additional warrants
(the “Exchange Warrants”) to purchase an aggregate of
1,772,937 shares of Common Stock at an exercise price of $0.85 per
share. The amount of the Exchange Warrants is equal to 25% of the
shares of Common Stock into which such Promissory Notes were
originally convertible upon the initial issuance thereof. The terms
of the Exchange Warrants are otherwise the same as the terms of the
Series B Warrants. We anticipate prepaying the outstanding balance
of $25,000 aggregate principal amount of Promissory Notes, together
with accrued and unpaid interest thereon through such prepayment
date, held by non-participating holders in the Exchange, following
which no Promissory Notes will remain outstanding. We will use the
remaining net proceeds of the Private Placement, less placement
agent fees and expenses for corporate and general working capital
purposes, including its clinical trials.
The
Private Placement was approved by the Board on July 16, 2020. The
Board determined that the Private Placement was advisable and in
the best interest of our stockholders for a number of reasons,
including the need to raise funds to achieve our clinical
milestones, corporate and general working capital purposes and the
repayment of Promissory Notes held by nonparticipating holders
following the Private Placement.
The
issuance of shares of Common Stock upon full conversion of the
Series B Preferred Stock and the issuance of shares of Common Stock
issuable upon full exercise of the Series B Warrants, Exchange
Warrants and Placement Agent Warrants (as defined below) are
subject to the approval of this proposal. In addition, if this
proposal is approved, in the event we
effect any issuance by us or any of our subsidiaries of Common
Stock or Common Stock equivalents for cash consideration, or a
combination of units thereof (a “Subsequent
Financing”), each holder of the Series B Preferred Stock will
have the right, subject to certain exceptions set forth in the
Certificate of Designations, at its option, to exchange (in lieu of
cash subscription payments) all or some of the Series B Preferred
Stock then held (with a value per share of Series B Preferred Stock
equal to the Liquidation Preference (as defined below)) for any
securities or units issued in a Subsequent Financing on
dollar-for-dollar basis.
Pursuant
to the Private Placement and the Purchase Agreement, for purposes
of complying with Nasdaq Listing Rule 5635(d), we are required to
hold a meeting of stockholders not later than 60 days following the
date of the Private Placement to seek approval (the
“Stockholder Approval”) for the issuance of shares
Common Stock upon (i) full conversion of the Series B Preferred
Stock; and (ii) full exercise of the Series B Warrants and the
Exchange Warrants. In the event the this proposal is not approved
on or prior
- 22 -
to the
90th day following the date of the Private Placement, subject to
extension upon the prior written approval of the holders of at
least a majority of the Series B Preferred Stock then outstanding
(the “Stockholder Approval Deadline”), we are required
to repurchase all of the then outstanding shares of Series B
Preferred Stock at a price equal to 150% of the then applicable
Liquidation Preference (as defined below), in cash. Each Investor
has agreed to vote in favor of the Stockholder
Approval.
The
terms of the Private Placement and the Purchase Agreement were
previously reported in the Form 8-K filed on July 20,
2020.
Description of Series B Preferred Stock
Under the Certificate of Designations of the Series B
Preferred Stock (the “Certificate of Designations”),
subject to the Stockholder Approval, each share of Series B
Preferred Stock will be convertible, at the holder’s option
at any time, into Common Stock at a conversion rate equal to the
quotient of (i) the $7,700 stated value (the “Series B Stated
Value”) divided by (ii) the initial conversion price of
$0.77, subject to specified adjustments for stock splits, cash or
stock dividends, reorganizations, reclassifications other similar
events as set forth in the Certificate of Designations. In
addition, subject to the Stockholder Approval, if at any time after
the six month anniversary of the date of the closing of the Private
Placement, the closing sale price per share of Common Stock exceeds
250% of the initial conversion price, or $1.925, for 20 consecutive
trading days, then all of the outstanding shares of Series B
Preferred Stock will automatically convert (the “Automatic
Conversion”) into such number of shares of Common Stock as is
obtained by multiplying the number of shares of Series B Preferred
Stock to be so converted, plus the amount of any accrued and unpaid
dividends thereon, by the Series B Stated Value per share and
dividing the result by the then applicable conversion
price.
The Series B Preferred Stock contain limitations that prevent the
holder thereof from acquiring shares of Common Stock upon
conversion (including pursuant to the Automatic Conversion) that
would result in the number of shares beneficially owned by such
holder and its affiliates exceeding 9.99% of the total number of
shares of Common Stock outstanding immediately after giving effect
to the conversion, which percentage may be increased or decreased
at the holder’s election not to
exceed 19.99%.
Each holder of shares of Series B Preferred Stock, in preference
and priority to the holders of all our other classes or series of
stock, is entitled to receive dividends, commencing from the date
of issuance. Such dividends may be paid by us only when, as and if
declared by the Board, out of assets legally available therefore,
semiannually in arrears on the last day of June and December in
each year, commencing December 31, 2020, at the dividend rate of
9.0% per year, which is cumulative and continues to accrue on a
daily basis whether or not declared and whether or not we have
assets legally available therefore. We may pay such dividends at
our option either in cash or in kind in additional shares of Series
B Preferred Stock (rounded down to the nearest whole share),
provided we must pay in cash the fair value of any such fractional
shares in excess of $100.00. In the event that a registration
statement pursuant to the Registration Rights Agreement (as defined
below) has not been declared effective on or prior to the date that
is 30 days after the date of the Stockholder Approval (or 30 days
after the date of the Stockholder Approval if the SEC conducts a
full review of such registration statement), the dividend rate will
be adjusted to equal a fixed rate of one and one half percent 1.5%
per calendar month.
Under the Certificate of Designations, each share of Series B
Preferred Stock carries a liquidation preference equal to the
Series B Stated Value (as adjusted thereunder) plus accrued and
unpaid dividends thereon (the “Liquidation
Preference”).
After the date of the Stockholder Approval, in the event we effect
a Subsequent Financing, the holders of the Series B Preferred Stock
have the right, subject to certain exceptions set forth in the
Certificate of Designations, at their option, to exchange (in lieu
of cash subscription payments) all or some of the Series B
Preferred Stock then held (with a value per share of Series B
Preferred Stock equal to the Liquidation Preference) for any
securities or units issued in a Subsequent Financing on
dollar-for-dollar basis.
The holders of the Series B Preferred Stock, voting as a separate
class, have customary consent rights with respect to certain of our
corporate actions. We may not take the following actions without
the prior consent of the holders of at least a majority of the
Series B Preferred Stock then outstanding: (a) authorize, create,
designate, establish, issue or sell an increased number of shares
of Series B Preferred Stock or any other class or series of capital
stock ranking senior to or on parity with the Series B Preferred
Stock as to dividends or upon liquidation; (b) reclassify any
shares of Common Stock or any other class or series of capital
stock into shares having any preference or priority as to dividends
or upon liquidation superior to or on parity with any such
preference or priority of Series B Preferred Stock; (c) amend,
alter or repeal our Certificate of Incorporation or Bylaws and the
powers, preferences, privileges, relative, participating, optional
and other special rights and qualifications,
- 23 -
limitations and restrictions thereof, which would adversely affect
any right, preference, privilege or voting power of the Series B
Preferred Stock; (d) issue any indebtedness or debt security, other
than trade accounts payable, insurance premium financings and/or
letters of credit, performance bonds or other similar credit
support incurred in the ordinary course of business, or amend,
renew, increase, or otherwise alter in any material respect the
terms of any such indebtedness existing as of the date of first
issuance of shares of Series B Preferred Stock; (e) redeem,
purchase, or otherwise acquire or pay or declare any dividend or
other distribution on (or pay into or set aside for a sinking fund
for any such purpose) any of our capital stock; (f) declare
bankruptcy, dissolve, liquidate, or wind up our affairs; (g)
effect, or enter into any agreement to effect, a Change of Control
(as defined in the Certificate of Designations); or (h) materially
modify or change the nature of our business.
Description of Series B Warrants and Exchange Warrants
The Series B Warrants are exercisable at a price of $0.85 per
share, subject to adjustment, for that number of shares of Common Stock (the
“Series B Warrant Shares”) equal to 50% of the total
number of shares of Common Stock issuable upon conversion of the
shares of Series B Preferred Stock purchased by each Investor, or
14,562,826 shares in the aggregate. The Series B Warrants expire
five years from the date of issuance and, in the event that we have
not obtained the Stockholder Approval on or prior to the
90th day following the date of
the Private Placement, the Investors must surrender the Series B
Warrants to us for cancellation in connection with our repurchase
of the Series B Preferred Stock at a 150% premium, as described
above. The holders of the Series B Warrants may exercise the Series
B Warrants on a cashless basis, solely to the extent no resale
registration statement (or applicable exemption from registration)
is available at the time of exercise. We are prohibited from
effecting an exercise of any Series B Warrants to the extent that
such exercise would result in the number of shares of Common Stock
beneficially owned by such holder and its affiliates exceeding
9.99% of the total number of shares of Common Stock outstanding
immediately after giving effect to the exercise, which percentage
may be increased or decreased at the holder’s election not to
exceed 19.99%. The Series B Warrants are not exercisable until
the Stockholder Approval is obtained and will expire unvested to
the extent the Stockholder Approval is not obtained on or before
the Stockholder Approval Deadline.
As additional consideration for the Exchange, we have also agreed
to issue solely to the Exchange Investors, in addition to the
Series B Warrants, Exchange Warrants representing the right to
purchase, at an exercise price equal to $0.85 per share, that
number of shares of Common Stock (the “Exchange Warrant
Shares”), assuming conversion of the entire balance of such
Exchange Investor’s Promissory Note, equal to 25% of the
shares of Common Stock into which such Promissory Note was
originally convertible upon the initial issuance thereof, or
1,772,937 shares in the aggregate. The Exchange Warrants have the
same terms as the Series B Warrants including with respect to the
exercisability and expiration thereof.
In addition, the Series B Warrants and the Exchange Warrants, are
subject to a call provision. If at any time, the closing sale price
per share of Common Stock exceeds 350% of the then applicable
exercise price for 20 consecutive trading days, or $2.975 based on
the initial exercise price on the date of the Private Placement,
we, at our sole option, may provide notice to the holders of the
Series B Warrants and the Exchange Warrants (the “Call
Notice”), to exercise the Series B Warrant Shares and
Exchange Warrant Shares (the “Called Warrant Shares”).
If the warrants are not exercised by the 10th trading day following
the Call Notice, we will remit to the holders $0.01 per Called
Warrant Share, and the related portion of the Series B Warrants and
Exchange Warrants will be cancelled.
Placement Agent Compensation
Alexander
Capital L.P. (“Alexander”) acted as placement agent for
the Private Placement pursuant to an engagement letter dated May 1,
2020 (the “Engagement Letter”). We have agreed to pay
Alexander 9.0% of the gross cash proceeds received by us from
Investors introduced by Alexander and 4.0% of the gross cash
proceeds received by us from all other Investors, or approximately $1.3 million. We have also
paid Alexander a non-accountable cash fee equal to 1.0% of the
gross cash proceeds in the Private Placement and a cash financial
advisory fee equal to 3.0% of the outstanding principal balance of
the Promissory Notes that were submitted in the Exchange, excluding
certain specified holders, or
approximately $0.3 million in additional cash fees in the
aggregate. Also, pursuant to the terms of the Engagement
Letter, we have reimbursed Alexander for up to $100,000 in legal
and other out-of-pocket expenses.
- 24 -
In
addition, we have issued to Alexander, or its designees, warrants
(the “Placement Agent Warrants”) to purchase up to 7.0%
of the aggregate number of shares of Common Stock underlying the
Series B Preferred Stock sold for cash consideration in the Private
Placement, or 1,382,902 shares.
The Placement Agent Warrants have substantially the same terms as
the Series B Warrants, except that the Placement Agent Warrants
have an exercise price equal to $1.06 per share, are not callable,
and are not exercisable until the earlier of the Stockholder
Approval (as defined below) and the date that is six months
following the issuance thereof. The issuance of shares of Common
Stock issuable upon full exercise of the Placement Agent Warrants
is subject to the approval of this proposal.
We
received net cash proceeds from the Private Placement after
deducting the placement agent compensation and expenses of
approximately $13.5 million.
Registration Rights Agreement
In connection with the Private Placement, we entered into a
registration rights agreement, dated as of July 16, 2020 (the
“Registration Rights Agreement”), with the Investors,
pursuant to which we will undertake to file, by July 26, 2020, a
registration statement to register the shares of Common Stock
issuable upon conversion of the shares of Series B Preferred Stock
issuable pursuant to the Purchase Agreement and upon exercise of
the Series B Warrants and the Exchange Warrants; and to cause such
registration statement to be declared effective by the
SEC promptly following the
Stockholder Approval, but in no event later than thirty (30) days
after the date of the Stockholder Approval (or 60 days after the
date of the Stockholder Approval if the SEC conducts a full review
of the registration statement) and maintain the effectiveness of
the registration statement until all such shares of Common Stock
registered have been sold or are otherwise able to be sold pursuant
to Rule 144. The Registration Rights Agreement also provides
for piggy-back registration rights, subject to the terms
and conditions of the Registration Rights
Agreement.
The
terms of the Purchase Agreement, the Series B Warrants, the
Exchange Warrants, the Registration Rights Agreement and the
Certificate of Designations are complex and only briefly summarized
above. For further information, please refer to the descriptions
contained in our Current Report on Form 8-K filed with the SEC on
July 20, 2020, and the transaction documents filed as exhibits to
such report. The discussion herein is qualified in its entirety by
reference to such filed transaction documents.
Why We Need Stockholder Approval
We are
seeking stockholder approval in order to comply with Nasdaq Listing
Rule 5635(d).
Under
Nasdaq Listing Rule 5635(d), stockholder approval is required for a
transaction other than a public offering involving the sale,
issuance or potential issuance by an issuer of common stock (or
securities convertible into or exercisable for common stock) at a
price that is less than the greater of book or market value of the
stock if the number of shares of common stock to be issued is or
may be equal to 20% or more of the common stock, or 20% or more of
the voting power, outstanding before the issuance. The conversion
price of the Series B Preferred Stock will be $0.77 per share and
the exercise price of the Series B Warrants and Exchange Warrants
will be $0.85 per share. Given that the initial conversion price of
the Series B Preferred Stock could potentially be lower than the
market price of our Common Stock on the date of issuance of the
Series B Preferred Stock, the Series B Warrants and Exchange
Warrants, we may issue through the Private Placement more than 20%
of our Common Stock outstanding at a price that is less than the
greater of book or market value.
We are
therefore seeking stockholder approval for the sale and issuance of
the shares of Common Stock underlying the Series B Preferred Stock,
the Series B Warrants, the Exchange Warrants and the Placement
Agent Warrants in connection with the Private Placement to satisfy
the requirements of Nasdaq Listing Rule 5635(d).
Effect of this Proposal on Current Stockholders
If this
proposal is adopted, the Series B Preferred Stock becomes
immediately convertible and the Series B Warrants, the Exchange
Warrants and the Placement Agent Warrants also become immediately
exercisable. The issuance of Common Stock upon the conversion of
the Series B Preferred Stock will result in certain dilution to our
stockholders, and would afford our stockholders a smaller
percentage interest in our voting power, liquidation value and
aggregate book value. The sale or any resale of the Common Stock
issued upon conversion of the Series B Preferred Stock could cause
the market price of our Common Stock to decline. In addition, the
issuance of Common Stock upon the exercise of the Series B
Warrants, the Exchange Warrants and the Placement Agent Warrants
will result in similar dilution to our stockholders, in particular
to the extent of any cashless exercise.
- 25 -
Additionally,
in the event we effect a Subsequent Financing, the holders of the
Series B Preferred Stock have the right, subject to certain
exceptions set forth in the Certificate of Designations, at its
option, to exchange (in lieu of cash
subscription payments) all or some of the Series B Preferred Stock
then held (with a value per share of Series B Preferred Stock equal
to the Liquidation Preference) for any securities or units issued
in a Subsequent Financing on dollar-for-dollar
basis.
If this
proposal is not approved by our stockholders by October 14, 2020,
we are required to repurchase all of the then outstanding shares of
Series B Preferred Stock at a price equal to 150% of the then
applicable Liquidation Preference, in cash. In addition, Investors
shall surrender the Series B Warrants and Exchange Warrants to us
for cancellation. The Placement Agent Warrants would remain
outstanding, exercisable after six months from the date of
issuance. As a result, our liquidity would be severely impaired and
we may need to enter into future financing arrangements to meet our
obligations. We have incurred significant operating losses and
negative cash flows from operations since inception and we are
dependent on obtaining the necessary funding for our operations
from outside sources including the sale of securities to continue
our operations. If this proposal is not approved by our
stockholders, it may harm our ability to raise capital in the
future through the sale of our securities. Without adequate
funding, we may not be able to meet our obligations. Accordingly,
if we do not obtain approval for this proposal, we believe that the
benefits of the Private Placement would be materially extinguished,
that there may be an impact on our future capital raising efforts
and that we may need to enter into future financing arrangements to
meet our obligations that could be disadvantageous to the
accomplishment of our corporate goals.
Required Vote and Recommendation
This
proposal requires the affirmative (“FOR”) vote of a
majority of votes cast by shares present or represented by proxy
and entitled to vote at the Annual Meeting and voting affirmatively
or negatively on such matter. Unless otherwise instructed on the
proxy or unless authority to vote is withheld, shares represented
by executed proxies will be voted “FOR” this proposal.
Any abstentions or broker non-votes are not counted as votes cast
and will not affect the outcome of this proposal, although they
will be counted for purposes of determining whether there is a
quorum present.
OUR BOARD RECOMMENDS A VOTE
“FOR” PROPOSAL TWO.
- 26 -
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PROPOSAL NO. 3:
|
APPROVAL OF THE ISSUANCE OF SHARES OF OUR COMMON STOCK TO CERTAIN
OFFICERS AND DIRECTORS IN THE PRIVATE PLACEMENT AND THE EXCHANGE,
FOR PURPOSES OF NASDAQ LISTING RULE 5635(c)
|
Overview
James Sapirstein, President, Chief Executive Officer and
Non-Independent Director, and Edward J. Borkowski, Chairman of the
Board, are participating in the Private Placement on the same terms
and conditions as the other Investors. The participation of Messrs.
Sapirstein and Borkowski in the Private Placement is conditioned on
the approval of this proposal.
Mr. Sapirstein purchased $100,000 worth of Series B Preferred Stock
and related Series B Warrants for cash, and Mr. Borkowski purchased
$250,000 worth of Series B Preferred Stock and related Series B
Warrants for cash and exchanged $105,129 of Promissory Notes
(including outstanding principal amount and accrued and unpaid
interest thereon) for Series B Preferred Stock and related Series B
Warrants and Exchange Warrants in the Exchange.
Why We Need Stockholder Approval
We are
seeking stockholder approval in order to comply with Nasdaq Listing
Rule 5635(c).
Under
Nasdaq Listing Rule 5635(c), stockholder approval is required prior
to the issuance of Common Stock in connection with certain
non-public offerings involving the sale, issuance or potential
issuance by a listed company of equity compensation. For this
purpose, “equity compensation” includes Common Stock
(and/or securities convertible into or exercisable for Common
Stock) issued to our officers, directors, employees or consultants
at a discount to the market value of the Common Stock, and
“market value” is the closing bid price immediately
preceding the time that the listed company enters into a binding
agreement with such officer, director, employee or consultant to
issue the equity compensation.
The
closing price of our Common Stock immediately preceding the closing
of the Private Placement was $0.85 per share. The conversion price
per share of the Series B Preferred Stock upon issuance was $0.77.
The exercise price of the Series B Warrants and Exchange Warrants
is $0.85 and the Series B Warrants and Exchange Warrants will be
immediately exercisable upon shareholder approval.
The
issuance of Common Stock upon conversion of the Series B Preferred
Stock and the exercise of the Series B Warrants may be considered
“equity compensation” under Nasdaq Listing Rule 5635(c)
because James Sapirstein serves as President, Chief Executive
Officer and director and Edward J. Borkowski serves as Chairman of
the Board. Accordingly, we are seeking stockholder approval of the
issuance of Common Stock upon conversion of the Series B Preferred
Stock and the exercise of the Series B Warrants in order to ensure
compliance with Nasdaq Listing Rule 5635(c).
Required Vote and Recommendation
This
proposal requires the affirmative (“FOR”) vote of a
majority of votes cast by shares present or represented by proxy
and entitled to vote at the Annual Meeting and voting affirmatively
or negatively on such matter. Unless otherwise instructed on the
proxy or unless authority to vote is withheld, shares represented
by executed proxies will be voted “FOR” this proposal.
Any abstentions or broker non-votes are not counted as votes cast
and will not affect the outcome of this proposal, although they
will be counted for purposes of determining whether there is a
quorum present.
OUR BOARD RECOMMENDS A VOTE
“FOR” PROPOSAL THREE.
- 27 -
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PROPOSAL NO. 4:
|
APPROVAL OF THE ISSUANCE OF MORE THAN 20% OF OUR COMMON STOCK
PURSUANT TO A PURCHASE AGREEMENT WITH LINCOLN PARK CAPITAL FUND,
LLC, FOR PURPOSES OF NASDAQ LISTING RULE 5635(d)
|
Overview
On November 13, 2019, we entered into a purchase agreement (the
“Lincoln Park Purchase Agreement”) and a registration
rights agreement (the “Lincoln Park Registration Rights
Agreement”), with Lincoln Park Capital Fund, LLC
(“Lincoln Park”), pursuant to which Lincoln Park
committed to purchase up to $15,000,000 of our Common
Stock.
Under the terms and subject to the conditions of the Lincoln Park
Purchase Agreement, we have the right, but not the obligation, to
sell to Lincoln Park, and Lincoln Park is obligated to purchase, up
to $15,000,000 of shares of Common Stock. Such sales of Common
Stock by us, if any, will be subject to certain limitations, and
may occur from time to time, at our sole discretion, over the
30-month period commencing on January 14, 2020, which is the date
that a registration statement covering the resale of shares of
Common Stock issued or issuable under the Lincoln Park Purchase
Agreement was declared effective by the SEC, and that certain other
conditions set forth in the Lincoln Park Purchase Agreement were
satisfied, all of which were outside the control of Lincoln
Park.
From January 14, 2020, under the Lincoln Park Purchase Agreement,
on any business day over the term of the Lincoln Park Purchase
Agreement, we have the right, in our sole discretion, to present
Lincoln Park with a purchase notice directing Lincoln Park to
purchase up to 150,000 shares per business day (the “Regular
Purchase”), (subject to adjustment for any reorganization,
recapitalization, non-cash dividend, stock split, reverse stock
split or other similar transaction as provided in the Lincoln Park
Purchase Agreement). In each case, Lincoln Park’s maximum
commitment in any single Regular Purchase may not exceed
$1,000,000. The Lincoln Park Purchase Agreement provides for a
purchase price per share equal to the lesser of: the lowest sale
price of our Common Stock on the purchase date; and the average of
the three lowest closing sale prices for our Common Stock during
the ten consecutive business days ending on the business day
immediately preceding the purchase date of such
shares.
In addition, on any date on which we submit a Regular Purchase
notice to Lincoln Park, we also have the right, in our sole
discretion, to present Lincoln Park with certain additional
purchase notices, directing Lincoln Park to purchase up to an
aggregate additional amount of six times the number of shares
purchased under the Regular Purchase notice, subject to reduction
based on certain trading volume and minimum trading price
requirements relating to our Common Stock, in each case as
specified in the Lincoln Park Purchase Agreement.
Lincoln Park has no right to require us to sell any shares of our
Common Stock to Lincoln Park, but Lincoln Park is obligated to make
purchases as we direct, subject to certain conditions. There are no
upper limits on the price per share that Lincoln Park must pay for
shares of Common Stock.
We have agreed with Lincoln Park that we will not enter into any
“variable rate” transactions with any third party until
August 1, 2022, pursuant to the terms of the Lincoln Park Purchase
Agreement. We issued to Lincoln Park 487,168 shares of Common Stock
as commitment shares in consideration for entering into the Lincoln
Park Purchase Agreement.
The net proceeds under the Lincoln Park Purchase Agreement to us
will depend on the frequency and prices at which we sell shares of
our stock to Lincoln Park. We expect that any proceeds received by
us from such sales to Lincoln Park will be used for general
corporate purposes, including advancing our drug development
pipeline.
The terms of the Lincoln Park Purchase Agreement and the Lincoln
Park Registration Rights Agreement are complex and only briefly
summarized above. For further information, please refer to our
Current Report on Form 8-K filed on November 14, 2019 and the
transaction documents filed as exhibits to such report. The
discussion herein is qualified in its entirety by reference to such
filed transaction documents.
- 28 -
Why We Need Stockholder Approval
Nasdaq Listing Rule 5635(d) requires shareholder approval for
certain transactions, other than public offerings, involving the
issuance of 20% or more of the total pre-transaction shares
outstanding at less than the applicable Minimum Price (as defined
in Listing Rule 5635(d)(1)(A)).
Pursuant to the terms of the Lincoln Park Purchase Agreement, the
aggregate number of shares that we are permitted to sell to Lincoln
Park may in no case exceed 19.99% of the Common Stock outstanding
immediately prior to the execution of the Lincoln Park Purchase
Agreement (the “Exchange Cap”), or 5,231,022 shares,
unless (i) stockholder approval is obtained to issue more, in which
case the Exchange Cap will not apply, or (ii) the average price of
all applicable sales of our Common Stock to Lincoln Park under the
Lincoln Park Purchase Agreement equals or exceeds $0.70 per share
(calculated by reference to the Minimum Price under Listing Rule
5635(d)); provided that at no time shall Lincoln Park, together
with its affiliates, beneficially own more than 9.99% of our common
stock.
The Lincoln Park Purchase Agreement provides that the Exchange Cap
shall be reduced, on a share-for-share basis, by the number of
shares of Common Stock that may be aggregated with the shares of
Common Stock issued or issuable under the Lincoln Park Purchase
Agreement, under the applicable rules of Nasdaq. As a result, after
giving effect to (x) aggregate issuances to date under the Lincoln
Park Purchase Agreement of 1,982,367 shares, including 487,168 in
commitment shares, for aggregate gross proceeds to date of
approximately $1.0 million, and (y) additional aggregable below
Minimum Price issuances since November 13, 2020 of 1,130,266
shares, the current Exchange Cap has been reduced to 2,118,389
shares of Common Stock, worth approximately $2.4 million, assuming
the closing stock price per share of our Common Stock of $1.15 as
of July 23, 2020.
In order to retain maximum flexibility to issue and sell up to the
maximum of $15,000,000 of our Common Stock under the Lincoln Park
Purchase Agreement, we are therefore seeking stockholder approval
for the sale and issuance of Common Stock in connection with the
Lincoln Park Purchase Agreement to satisfy the requirements of
Nasdaq Listing Rule 5635(d).
Required Vote and Recommendation
This
proposal requires the affirmative (“FOR”) vote of a
majority of votes cast by shares present or represented by proxy
and entitled to vote at the Annual Meeting and voting affirmatively
or negatively on such matter. Unless otherwise instructed on the
proxy or unless authority to vote is withheld, shares represented
by executed proxies will be voted “FOR” this proposal.
Any abstentions or broker non-votes are not counted as votes cast
and will not affect the outcome of this proposal, although they
will be counted for purposes of determining whether there is a
quorum present.
OUR BOARD RECOMMENDS A VOTE
“FOR” PROPOSAL FOUR.
-
- 29 -
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PROPOSAL NO. 5:
|
APPROVAL OF THE AZURRX BIOPHARMA, INC. 2020 OMNIBUS EQUITY
INCENTIVE PLAN
|
Overview
Stockholders are requested in this proposal to approve the AzurRx
BioPharma, Inc. 2020 Omnibus Equity Incentive Plan, as amended and
restated (the “2020 Plan”). The 2020 Plan is a
comprehensive incentive compensation plan under which we can grant
equity-based and other incentive awards to our officers, employees,
directors and consultants. The purpose of the 2020 Plan is to help
us attract, motivate and retain such persons with awards under the
2020 Plan and thereby enhance stockholder value.
The Board approved the 2020 Plan, as amended and restated, on
August 11, 2020. The 2020 Plan is being submitted for approval by
our stockholders in order to permit us to use the 2020 Plan to
achieve our performance, recruiting, retention and incentive goals.
We strongly believe that the approval of the 2020 Plan is essential
to our continued success. The Board and management believe that
equity awards motivate high levels of performance, align the
interests of our employees, directors and consultants and
shareholders by giving directors, employees and consultants the
perspective of an owner with an equity stake, and provide an
effective means of recognizing their contributions to our
success.
If approved, the proposed 2020 Plan would initially reserve for
issuance 10,000,000 shares of Common Stock. The number of shares of
Common Stock reserved for issuance under the 2020 Plan is subject
to automatic increase, but not decrease, each January 1 (commencing
January 1, 2021) so that the number of shares of Common Stock
reserved for issuance will be equal to ten percent (10%) of the
issued and outstanding shares of the Company’s Common Stock
as of December 31 of the preceding calendar year on an as converted
basis (the “As Converted Shares”). The Board, however,
has discretion not to have the increase take effect for a year or
to have the increase take effect as to a lesser number of shares.
As Converted Shares include all shares of outstanding Common Stock
and all shares of Common Stock issuable upon the conversion of
outstanding preferred stock, warrants and other convertible
securities, but will not include any shares of Common Stock
issuable upon the exercise of options and other convertible
securities issued pursuant to the Plan or the 2014
Plan.
If our stockholders approve the 2020 Plan, no further grants will
be made under the 2014 Plan. If our stockholders do not approve the
2020 Plan, we will continue to operate the 2014 Plan under its
current provisions until all shares available thereunder have been
issued or the 2014 Plan expires. As of August 7, 2020, under the
2014 Plan, an aggregate of 4,699,506 shares of Common Stock were
issuable upon the exercise and conversion of existing awards, which
will remain outstanding even if the 2020 Plan is approved, and an
aggregate of 3,625,039 shares of Common Stock were available for
future awards, in the event the 2020 Plan is not
approved.
Immediately below is a summary of the 2020 Plan and a discussion of
the federal income tax consequences of the issuance and exercise of
certain awards under the 2020 Plan to recipients and to us. This
summary of the 2020 Plan is qualified entirely by reference to the
complete text of the 2020 Plan, a copy of which is attached to this
proxy statement as Appendix A.
Summary of the 2020 Omnibus Equity Incentive Plan
Administration. The 2020 Plan
is administered by the Compensation Committee of the Board (the
“Compensation Committee”), which consists of three
members of the Board, each of whom is a “non-employee
director” within the meaning of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). The Compensation Committee may grant
stock options, stock appreciation rights (“SARs”),
performance stock awards, performance unit awards, dividend
equivalent right awards, restricted stock awards, restricted stock
unit awards, unrestricted stock awards, incentive bonus awards and
other cash-based awards and other stock-based awards to our
non-employee directors, officers, employees and nonemployee
consultants or our affiliates. Among other things, the Compensation
Committee has complete discretion, subject to the express limits of
the 2020 Plan, to determine the directors, employees and individual
consultants to be granted an award, the type of award to be
granted, the terms and conditions of the award, the form of payment
to be made and/or the number of shares of Common Stock subject to
each award, the exercise price of each option and base price of
each SAR, the term of each award, the vesting schedule for an
award, whether to accelerate vesting, the value of the Common Stock
underlying the award, and the required withholding, if any. Except
as prohibited by applicable law or stock exchange rules, the
Compensation Committee may delegate administrative functions under
the 2020 Plan and may authorize a Reporting Person (as defined in
the Exchange Act) to make certain awards under the 2020 Plan.
Subject to the terms of the Plan, the Compensation Committee shall
have the authority to amend the terms of an award in any manner
that is not inconsistent with the Plan (including to extend the
post-termination exercisability period of options and SARs),
provided that no such action (except an action relating to a change
of control) shall materially and adversely impair the rights of an
award recipient with respect to such an outstanding award without
the consent of the award recipient. The Compensation Committee is
also authorized to construe the award agreements, and may prescribe
rules relating to the 2020 Plan.
- 30 -
Eligibility. Employees,
directors and individual consultants of the Company or an affiliate
as well as prospective employees, directors and individual
consultants of the Company or an affiliate are eligible to
participate in the 2020 Plan. The 2020 Plan allows for grants to
employees, directors and individual consultants of the Company or
an affiliate who are non-US persons. Currently, we have nine
employees (including one executive director), five non-executive
directors and approximately ten non-employee
consultants.
Shares Subject to the 2020 Plan. The number of shares of Common Stock initially
reserved for issuance under the 2020 Plan is 10,000,000 shares. As
described above, the number of shares of Common Stock reserved for
issuance under the 2020 Plan is subject to automatic increase each
January 1 (commencing January 1, 2021) so that the number of shares
of Common Stock reserved for issuance will be equal to ten percent
(10%) of the Company’s issued and outstanding As Converted
Shares as of December 31 of the preceding calendar year.
The Board, however, has
discretion not to have the increase take effect for a year or to
have the increase take effect as to a lesser number of shares. As
Converted Shares include all outstanding shares of Common Stock and
all shares of Common Stock issuable upon the conversion of
outstanding preferred stock, warrants and other convertible
securities, but will not include any shares of Common Stock
issuable upon the exercise of options and other convertible
securities issued pursuant to the 2020 Plan or the 2014
Plan.
Although the initial number of shares of Common Stock reserved for
issuance under the 2020 Plan is 10,000,000 shares, in order to
reflect possible automatic increases in the number of shares
reserved under the Plan as described above, the 2020 Plan will
allow for up to 15,000,000 shares of Common Stock to be issued as
“incentive stock options” (“ISOs”). In no
event, however, may the number of shares subject to ISO grants be
greater than the 2020 Plan’s share reserve (as adjusted for
increases as described above) in effect at the time of such
grants.
If any award expires, is cancelled, or terminates unexercised or is
forfeited, the number of shares subject thereto is again available
for grant under the 2020 Plan. The maximum number of shares of
Common Stock that may be subject to awards to outside directors, in
the aggregate, during any calendar year is 250,000.
The number of shares authorized for issuance under the 2020 Plan
and each of the preceding share limitations are subject to
customary adjustments for stock splits, stock dividends,
recapitalization, reorganization, merger, combination, exchange or
similar transactions.
Stock Options. The 2020 Plan
provides for either ISOs, which are intended to meet the
requirements for special federal income tax treatment under the
United States of America Internal Revenue Code of 1986, as amended
(the “Code”), or “nonqualified stock
options” (“NQSOs”) that do not meet the
requirements of Section 422 of the Code. Stock options may be
granted on such terms and conditions as the Compensation Committee
may determine; provided,
however, that the per share
exercise price under a stock option may not be less than the fair
market value of a share of Common Stock on the date of grant and
the term of the stock option may not exceed 10 years (110% of such
value and five years in the case of an ISO granted to an employee
who owns (or is deemed to own) more than 10% of the total combined
voting power of all classes of our capital stock or our parent or
subsidiary). ISOs may only be granted to employees. In addition,
the aggregate fair market value of Common Stock covered by one or
more ISOs (determined at the time of grant), which are exercisable
for the first time by an employee during any calendar year may not
exceed $100,000. Any excess is treated as a NQSO. Stock options
granted under the 2020 Plan will be exercisable at such time or
times as the Compensation Committee prescribes at the time of grant
and recipients will be permitted to pay the exercise price as set
forth by the Compensation Committee in the applicable option
agreement. No stock option may be transferred other than by will or
by the laws of descent and distribution, and during a
recipient’s lifetime a stock option may be exercised only by
the recipient. However, the Compensation Committee may permit the
holder of a stock option, SAR or other award to transfer the stock
option, right or other award to immediate family members or a
family trust for estate planning purposes. The Compensation
Committee will determine the extent to which a holder of a stock
option may exercise the option following termination of service
with us.
- 31 -
Stock Appreciation Rights. A
SAR entitles the participant, upon exercise, to receive an amount,
in cash or stock or a combination thereof, equal to the increase in
the fair market value of the underlying Common Stock between the
date of grant and the date of exercise. SARs may be granted in
tandem with, or independently of, stock options granted under the
2020 Plan. A SAR granted in tandem with a stock option (i) is
exercisable only at such times, and to the extent, that the related
stock option is exercisable in accordance with the procedure for
exercise of the related stock option; (ii) terminates upon
termination or exercise of the related stock option (likewise, the
Common Stock option granted in tandem with a SAR terminates upon
exercise of the SAR); (iii) is transferable only with the related
stock option; and (iv) if the related stock option is an ISO, may
be exercised only when the value of the stock subject to the stock
option exceeds the exercise price of the stock option. A SAR that
is not granted in tandem with a stock option is exercisable at such
times as the Compensation Committee may specify. The Compensation
Committee will determine the other terms applicable to SARs. The
exercise price per share of a SAR will be determined by the
Compensation Committee, but will not be less than 100% of the fair
market value of a share of our Common Stock on the date of grant,
as determined by the Compensation Committee. The maximum term of
any SAR granted under the 2020 Plan is ten years from the date of
grant. Generally, each SAR will entitle a participant upon exercise
to an amount equal to: (i) the excess of the fair market value on
the exercise date of one share of our Common Stock over the
exercise price, multiplied by
(ii) the number of shares of Common
Stock covered by the SAR. Payment may be made in shares of our
Common Stock, in cash, or partly in Common Stock and partly in
cash, all as determined by the Compensation
Committee.
Performance Shares and Performance Unit Awards. Performance share and performance unit awards
entitle the participant to receive cash or shares of Common Stock
upon the attainment of specified performance goals. In the case of
performance units, the right to acquire the units is denominated in
cash values. The Compensation Committee will determine the
restrictions and conditions applicable to each award of performance
shares and performance units.
Dividend Equivalent Right Awards. A dividend equivalent right award entitles the
participant to receive bookkeeping credits, cash payments and/or
Common Stock distributions equal in amount to the distributions
that would have been made to the participant had the participant
held a specified number of shares of Common Stock during the period
the participant held the dividend equivalent right. A dividend
equivalent right may be awarded as a component of another award
under the 2020 Plan, where, if so awarded, such dividend equivalent
right will expire or be forfeited by the participant under the same
conditions as under such other award.
Restricted Stock Awards and Restricted Stock Unit
Awards. A restricted stock
award is a grant or sale of Common Stock to the participant,
subject to our right to repurchase all or part of the shares at
their purchase price (or to require forfeiture of such shares if
issued to the participant at no cost) in the event that conditions
specified by the Compensation Committee in the award are not
satisfied prior to the end of the time period during which the
shares subject to the award may be repurchased by or forfeited to
us. Restricted stock units entitle the participant to receive a
cash payment equal to the fair market value of a share of Common
Stock for each restricted stock unit subject to such restricted
stock unit award, if the participant satisfies the applicable
vesting requirement. The Compensation Committee will determine the
restrictions and conditions applicable to each award of restricted
stock award or restricted stock unit award, which may include
performance-based conditions.
Unrestricted Stock Awards. An
unrestricted stock award is a grant or sale of shares of our Common
Stock to the participant that is not subject to transfer,
forfeiture or other restrictions, in consideration for past
services rendered to us or an affiliate or for other valid
consideration.
Other Cash-Based Awards and Other Stock-Based
Awards. The Compensation
Committee may award other types of cash-based or equity-based
awards under the 2020 Plan, including the grant or offer for sale
of shares of unrestricted shares and the right to receive one or
more cash payments subject to satisfaction of such conditions as
the Compensation Committee may impose.
Incentive Bonus Awards.
Incentive bonus awards may be awarded to the participant based upon
the attainment of specified levels of our performance as measured
by pre-established, objective performance criteria determined at
the discretion of the Compensation Committee.
- 32 -
Change-of-Control Provisions.
The Compensation Committee may, at the time of the grant of an
award, provide for the effect of a change of control (as defined in
the 2020 Plan) on an award, including (i) accelerating or extending
the time periods for exercising, vesting in, or realizing gain from
any award, (ii) eliminating or modifying the performance or other
conditions of an award, or (iii) providing for the cash settlement
of an award for an equivalent cash value, as determined by the
Compensation Committee. The Compensation Committee may, in its
discretion and without the need for the consent of any recipient of
an award, also take one or more of the following actions contingent
upon the occurrence of a change of control: (a) cause any or all
outstanding stock options and SARs to become immediately
exercisable, in whole or in part; (b) cause any other
awards to become non-forfeitable, in whole or in part;
(c) cancel any stock option or SAR in exchange for a substitute
option; (d) cancel any award of restricted stock, restricted stock
units, performance shares or performance units in exchange for a
similar award of the capital stock of any successor corporation;
(e) redeem any restricted stock, restricted stock unit, performance
share or performance unit for cash and/or other substitute
consideration with a value equal to the fair market value of an
unrestricted share of our Common Stock on the date of the change of
control; (f) cancel any stock option or SAR in exchange for cash
and/or other substitute consideration based on the value of our
Common Stock on the date of the change in
control,
and cancel any stock option or SAR
without any payment if its exercise price exceeds the value of our
Common Stock on the date of the change of control; or (g) make such
other modifications, adjustments or amendments to outstanding
awards as the Compensation Committee deems necessary or
appropriate.
Amendment and Termination. The
Compensation Committee may adopt, amend and rescind rules relating
to the administration of the 2020 Plan, and amend, suspend or
terminate the 2020 Plan, provided, that (a) to the extent necessary
and desirable to comply with any applicable law, regulation, or
stock exchange rule, we shall obtain stockholder approval of any
2020 Plan amendment in such a manner and to such a degree as
required, and (b) stockholder approval is required for any
amendment to the 2020 Plan that (i) increases the aggregate number
of shares available for issuance under the 2020 Plan (other than
the automatic increases described above (see Shares Subject to the 2020
Plan)), or (ii) changes the
persons or class of persons eligible to receive
awards.
Federal Income Tax Consequences
The following is a summary of the principal federal income tax
consequences of certain grants under the 2020 Plan based upon an
analysis of the Code as currently in effect, existing laws,
judicial decisions, administrative rulings, regulations and
proposed regulations, all of which are subject to change. It does
not describe all federal tax consequences under the 2020 Plan, nor
does it describe state or local tax
consequences. Optionees
and recipients of other rights and awards granted under the 2020
Plan are advised to consult their personal tax
advisors.
Incentive Options. No taxable income is
generally realized by the optionee upon the grant or exercise of an
incentive option. If shares issued to an optionee pursuant to the
exercise of an incentive option are sold or transferred after two
years from the date of grant and after one year from the date of
exercise, then (i) upon sale of such shares, any amount
realized in excess of the option price (the amount paid for the
shares) will be taxed to the optionee as a long-term capital gain,
and any loss sustained will be a long-term capital loss, and
(ii) there will be no deduction for us for federal income tax
purposes. The exercise of an incentive option will give rise to an
item of tax preference that may result in alternative minimum tax
liability for the optionee.
If shares acquired upon the exercise of an incentive option are
disposed of prior to the expiration of the two-year and one-year
holding periods described above (a "disqualifying disposition"),
generally (i) the optionee will realize ordinary income in the
year of disposition in an amount equal to the excess (if any)
of the fair market value of the shares at exercise (or, if less,
the amount realized on a sale of such shares) over the option price
thereof, and (ii) we will be entitled to deduct such amount.
Special rules will apply where all or a portion of the exercise
price of the incentive option is paid by tendering
shares.
If an incentive option is exercised at a time when it no longer
qualifies for the tax treatment described above (e.g., if the
holding periods described above are not satisfied), the option is
treated as a non-qualified option. In addition, an incentive option
will not be eligible for the tax treatment described above if it is
exercised more than three months following termination of
employment (or one year in the case of termination of employment by
reason of disability). In the case of termination of employment by
reason of death, the three-month rule does not apply.
- 33 -
Non-Qualified Options. No income is realized by
the optionee at the time the option is granted. Generally
(i) at exercise, ordinary income is realized by the optionee
in an amount equal to the difference between the option price and
the fair market value of the shares on the date of exercise, and we
receive a tax deduction for the same amount, and (ii) at
disposition, appreciation or depreciation after the date of
exercise is treated as either short-term or long-term capital gain
or loss depending on how long the shares have been held. Special
rules will apply where all or a portion of the exercise price of
the non-qualified option is paid by tendering shares. Upon
exercise, the optionee will also be subject to Social Security
taxes on the excess of the fair market value over the exercise
price of the option.
Stock Appreciation Rights.
Generally, a participant granted a stock appreciation right under
the 2020 Plan will not recognize income, and we will not be allowed
a tax deduction, at the time the award is granted. When the
participant exercises the stock appreciation right, the amount of
cash and the fair market value of any shares or other consideration
received will be ordinary income to the participant and we will be
allowed a corresponding federal income tax deduction at that time.
Treatment of Stock Awards. Generally, absent an election to be taxed
currently under Section 83(b) of the Code (a “Section 83(b)
Election”), there will be no federal income tax consequences
to either the recipient or us upon the grant of a restricted stock
award or award of performance shares. At the expiration of the
restriction period and the satisfaction of any other restrictions
applicable to the restricted shares, the recipient will recognize
ordinary income and we generally will be entitled to a
corresponding deduction equal to the fair market value of the
Common Stock at that time. If a Section 83(b) Election is made
within 30 days after the date the restricted stock award is
granted, the recipient will recognize an amount of ordinary income
at the time of the receipt of the restricted shares, and we
generally will be entitled to a corresponding deduction, equal to
the fair market value (determined without regard to applicable
restrictions) of the shares at such time, less any amount paid by
the recipient for the shares. If a Section 83(b) Election is made,
no additional income will be recognized by the recipient upon the
lapse of restrictions on the shares (and prior to the sale of such
shares), but, if the shares are subsequently forfeited, the
recipient may not deduct the income that was recognized pursuant to
the Section 83(b) Election at the time of the receipt of the
shares.
The recipient of an unrestricted stock award, including a
performance unit award, will recognize ordinary income, and we
generally will be entitled to a corresponding deduction, equal to
the fair market value of our Common Stock that is the subject of
the award when the Award is made.
The recipient of a restricted stock unit will recognize ordinary
income as and when the units vest. The amount of the income will be
equal to the fair market value of the shares of our Common Stock
issued at that time, and we will be entitled to a corresponding
deduction. The recipient of a restricted stock unit will not be
permitted to make a Section 83(b) Election with respect to such
award.
Tax Withholding. We have the
right to deduct or withhold, or require a participant to remit to
us, an amount sufficient to satisfy federal, state and local taxes
(including employment taxes) required by law to be withheld with
respect to any exercise, lapse of restriction or other taxable
event arising as a result of the 2020 Plan. The Compensation
Committee may, at the time the award is granted or thereafter,
require or permit that any such withholding requirement be
satisfied, in whole or in part, by delivery of, or withholding from
the award, shares having a fair market value on the date of
withholding equal to the amount required to be withheld for tax
purposes.
Parachute Payments
The vesting of any portion of an option or other award that is
accelerated due to the occurrence of a change of control may cause
a portion of the payments with respect to such accelerated awards
to be treated as "parachute payments" as defined in
Section 280G of the Code. Any such parachute payments may be
non-deductible to us, in whole or in part, and may subject the
recipient to a non-deductible 20% federal excise tax on all or a
portion of such payment (in addition to other taxes ordinarily
payable).
- 34
-
Securities Authorized for Issuance Under Equity Compensation
Plans
The following table provides information as of December 31, 2019
regarding equity compensation plans approved by our security
holders and equity compensation plans that have not been approved
by our security holders:
|
Plan category
|
Number of securities to be issued
upon exercise of outstanding
options, warrants and rights
|
Weighted-average exercise
price of outstanding options,
warrants and rights
|
Number of securities remaining available for future issuance under
equity compensation plans (1)
|
|
Equity
compensation plans approved by security holders (1)
|
1,677,500
|
$2.30
|
1,274,819
|
|
Equity
compensation plans not approved by security holders
|
-
|
-
|
-
|
|
Total
|
1,677,500
|
$2.30
|
1,274,819
|
|
(1)
|
Includes 632,667 shares of Common Stock are reserved under the 2014
Plan as of December 31, 2019, subject to the issuance of restricted
stock and RSUs. Subsequent to December 31, 2019, Mr. Spoor
forfeited a total of 241,667 reserved shares in connection with his
resignation from the Board on April 29, 2020.
|
New Plan Benefits
General
Incentive
awards under the 2020 Plan are subject to the discretion of the
Compensation Committee. Therefore, it is generally not possible to
determine the incentive awards that will be granted or awarded
under the 2020 Plan in the future to any person. However, we expect
to issue options to each of our non-executive directors in
accordance with our non-executive director compensation policy,
which is described in more detail in the section titled
"Non-Executive Director Compensation"; except that, for 2020, the
Compensation Committee determined to decrease the cash component to
zero and to increase the equity component to include stock option
awards covering 80,000 shares of Common Stock, vesting quarterly,
which awards were granted to each director on April 6, 2020.
Furthermore, information about awards granted in 2019 and 2018 to
our Named Executive Officers can be found in the table under the
heading "Summary Compensation" in the section titled "Executive
Compensation."
Stockholder Demand Letter
As
previously disclosed in our Form 8-K filed with the SEC on July 20,
2020 (the “Prior Form 8-K”), on July 16, 2020, the
Board approved an amendment to the 2014 Plan (the “2014 Plan
Amendment”). The 2014 Plan Amendment eliminated an individual
award limit (the “Individual Award Limit”), which we
believe was intended to comply with an exception permitting the
deductibility of “performance-based compensation” under
Section 162(m) of the Code.
The
Individual Award Limit previously restricted the amount of stock
options and stock appreciation rights that could be awarded under
the 2014 Plan to any one person during any calendar year to 300,000
shares of Common Stock. We believe that the purpose of the
Individual Award Limit was to permit stock options and stock
appreciation rights awarded under the 2014 Plan to be treated as
“performance-based compensation” pursuant to Section
162(m) of the Code. Pursuant to the Tax Cut and Jobs Act of 2017,
however, the exception for “performance-based
compensation” under Section 162(m) of the Code was repealed.
Accordingly, the 2014 Plan Amendment was intended to remove the
Individual Award Limit, because the purpose of the Individual Award
Limit was determined no longer to be applicable.
- 35
-
Following
the 2014 Plan Amendment, as previously disclosed in the Prior Form
8-K, effective July 16, 2020, the Board also approved the award of
certain stock options under the 2014 Plan. Of such stock option
awards, certain awards issued to Messrs. Sapirstein and
Schneiderman would have been in excess of the Individual Award
Limit, had such limit continued to apply, as follows (collectively,
the “Excess Awards”):
●
awards
to Mr. Sapirstein covering 900,000 shares of Common Stock,
comprised of awards covering 300,000 shares subject to time-based
vesting, beginning 19 months after the date of grant in equal
monthly installments through July 16, 2023, and awards covering
600,000 shares subject to milestone-based vesting based upon the
achievement of certain strategic milestones specified by the
Compensation Committee; and
●
awards
to Mr. Schneiderman covering an aggregate of 285,006 shares of
Common Stock, comprised of awards covering 250,000 shares subject
to time based vesting in equal monthly installments over a term of
three years commencing on the one month anniversary of the grant
date and a replacement award covering 35,006 shares subject to
time-based vesting in equal monthly installments on each monthly
anniversary of January 2, 2020 (the original award date) through
January 2, 2023.
The
Excess Awards each have an exercise price of $0.85 per share, which
was the closing sale price of our Common Stock on the date of
grant. In addition to the Excess Awards, stock option awards under
the 2014 Plan not in excess of the Individual Award Limit were also
made during 2020, including to Messrs. Sapirstein and Schneiderman,
as disclosed in the Prior Form 8-K.
Following
public announcement of the 2014 Plan Amendment and the issuance of
option awards including the Excess Awards, on or about July 27,
2020, the Board received a letter from counsel for a purported
stockholder. Among other things, the letter asserted that the Board
did not have authority, without the approval of our stockholders,
to amend the 2014 Plan to remove the Individual Award Limit. The
letter demanded, among other things, that the Board deem the 2014
Plan Amendment to be invalid, or seek stockholder approval thereof,
and that the Board rescind the Excess Awards unless and until such
stockholder approval is obtained.
In
response to the demand letter, the Board has subsequently formed a
special committee to consider the facts and circumstances
surrounding such letter and to recommend to the Board whether or
not the actions demanded are in the best interests of AzurRx
BioPharma, Inc. and our stockholders. In addition, upon the request
and approval of the Board, Messrs. Sapirstein and Schneiderman have
each agreed not to exercise the Excess Awards, regardless of
vesting, until the special committee completes its consideration of
the demand letter and a determination is made by the Board as to
the extent to which the Excess Awards may be
exercised.
While
the Board has not yet made a determination regarding the demand, it
is possible that the Board may determine to rescind the Excess
Awards. In that circumstance, the Board may also determine to
reissue such awards, or other awards with reasonably equivalent
terms, value or effect, pursuant to the 2020 Plan. In any event,
the Board in all circumstances reserves full authority to issue
incentive awards generally to any and all eligible participants
under the 2020 Plan, including to Messrs. Sapirstein and
Schneiderman, in each case as it may deem appropriate and
consistent with its fiduciary obligations under Delaware law, the
requirements of applicable securities laws, including the
applicable rules and regulations of the SEC and Nasdaq, and our
policies and practices described elsewhere in this proxy
statement.
Vote Required and Recommendation
This proposal requires the affirmative (“FOR”) vote of
a majority of votes cast by shares present or represented by proxy
and entitled to vote at the Annual Meeting and voting
affirmatively or negatively on such matter. Unless otherwise instructed on the proxy or
unless authority to vote is withheld, shares represented by
executed proxies will be voted “FOR” this proposal. Any
abstentions or broker non-votes are not counted as votes cast and
will not affect the outcome of this proposal, although they will be
counted for purposes of determining whether there is a quorum
present.
OUR BOARD RECOMMENDS A VOTE
“FOR” PROPOSAL FIVE.
- 36 -
|
PROPOSAL NO. 6:
|
RATIFICATION OF THE APPOINTMENT OF MAZARS TO SERVE TO SERVE AS OUR
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE CURRENT FISCAL
YEAR
|
General
Upon
recommendation of the Audit Committee, the Board appointed Mazars
USA LLP (“Mazars”), as our independent registered
public accounting firm for the year ending December 31, 2020, and
hereby recommends that the stockholders ratify such appointment.
The Board may terminate the appointment of Mazars as our
independent registered public accounting firm without the approval
of our stockholders whenever the Board deems such termination
necessary or appropriate.
Representatives
of Mazars will be present at the Annual Meeting or available by
telephone and will have an opportunity to make a statement if they
so desire and to respond to any appropriate questions from
stockholders.
Audit Fees
The following table represents fees for professional services
billed by Mazars for the fiscal years ended December 31, 2019 and
2018 in relation to services rendered in connection with the audit
of our consolidated financial statements and for tax services
rendered with respect to tax-related compliance, advice and
planning.
|
|
For the years
ended
December 31,
|
|
|
|
2019
|
2018
|
|
Audit
fees(1)
|
$124,640
|
$129,031
|
|
Audit-related
fees(2)
|
71,500
|
28,101
|
|
Tax
fees(3)
|
31,087
|
23,772
|
|
All
other fees(4)
|
-
|
-
|
|
Total
|
$227,227
|
$180,904
|
|
(1)
|
Professional
services rendered by the Mazars for the audit of our annual
financial statements and review of financial statements included in
our Form 10-Q’s.
|
|
(2)
|
The aggregate fees billed for assurance and related services by
Mazars USA LLP that are reasonably related to the performance of
the audit or review of our financial statements and are not
reported under Note 1 above, principally related to registration
statement filings.
|
|
(3)
|
The aggregate fees billed for professional services rendered by
Mazars for tax compliance, tax advice, and tax
planning.
|
|
(4)
|
The aggregate fees billed for products and services provided by
Mazars USA LLP other than the services reported in Notes 1 through
3 above.
|
Audit Committee Pre-Approval Policies and Procedures
The Audit Committee has the sole authority for the appointment,
compensation and oversight of the work of our independent
accountants, who prepare or issue an audit report for
us.
Required Vote and Recommendation
This
proposal requires the affirmative (“FOR”) vote of a
majority of votes cast by shares present or represented by proxy
and entitled to vote at the Annual Meeting and voting affirmatively
or negatively on such matter. Unless otherwise instructed on the
proxy or unless authority to vote is withheld, shares represented
by executed proxies will be voted “FOR” this proposal.
Any abstentions or broker non-votes are not counted as votes cast
and will not affect the outcome of this proposal, although they
will be counted for purposes of determining whether there is a
quorum present.
OUR BOARD RECOMMENDS A VOTE
“FOR” PROPOSAL SIX.
- 37 -
|
PROPOSAL NO. 7:
|
APPROVAL OF THE ADJOURNMENT OF THE ANNUAL MEETING TO THE EXTENT
THERE ARE INSUFFICIENT PROXIES AT THE MEETING TO APPROVE ANY ONE OR
MORE OF THE FOREGOING PROPOSALS.
|
Adjournment of the Annual Meeting
In the
event that the number of shares of Common Stock present or
represented by proxy at the Annual Meeting and voting
“FOR” the adoption of any one or more of the foregoing
proposals are insufficient to approve any such proposal, we may
move to adjourn the Annual Meeting in order to enable us to solicit
additional proxies in favor of the adoption of any such proposal.
In that event, we will ask stockholders to vote only upon the
adjournment proposal and not on any other proposal discussed in
this proxy statement. If the adjournment is for more than thirty
(30) days, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
For the
avoidance of doubt, any proxy authorizing the adjournment of the
Annual Meeting shall also authorize successive adjournments
thereof, at any meeting so adjourned, to the extent necessary for
us to solicit additional proxies in favor of the adoption of any
such proposal.
Required Vote and Recommendation
This
proposal requires the affirmative (“FOR”) vote of a
majority of votes cast by shares present or represented by proxy
and entitled to vote at the Annual Meeting and voting affirmatively
or negative on such matter. Unless otherwise instructed on the
proxy or unless authority to vote is withheld, shares represented
by executed proxies will be voted “FOR” this proposal.
Any abstentions or broker non-votes are not counted as votes cast
and will not affect the outcome of this proposal, although they
will be counted for purposes of determining whether there is a
quorum present.
OUR BOARD RECOMMENDS A VOTE
“FOR” PROPOSAL SEVEN.
- 38 -
BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding shares of our
Common Stock beneficially owned as of April 27, 2020
by:
●
each
of our officers and directors;
●
all
officers and directors as a group; and
●
each person known by us to beneficially own five
percent or more of the outstanding shares of our Common Stock.
Percentage of ownership is calculated based on 28,502,850
shares of Common Stock outstanding as
of August 7, 2020.
Beneficial Ownership of Common Stock
|
Name and Address of Beneficial Owner (1)
|
Number of Shares (2)
|
Percent Ownership of Class (3)
|
|
Current Named Executive Officers and Directors
|
|
|
|
James Sapirstein,
President and Chief Executive Officer (4)
|
50,000
|
*
|
|
Daniel Schneiderman, Chief Financial
Officer (5)
|
56,834
|
*
|
|
James E. Pennington, Chief Medical Officer
(6)
|
75,000
|
*
|
|
Edward J. Borkowski, Director Nominee
(7)
|
603,474
|
2.1%
|
|
Charles J. Casamento, Director Nominee
(8)
|
186,998
|
*
|
|
Alastair Riddell, Director Nominee
(9)
|
232,049
|
*
|
|
Vern L. Schramm, Director Nominee
(10)
|
160,498
|
*
|
|
Gregory Oakes, Director Nominee
(11)
|
20,000
|
|
|
Former Named Executive Officers
|
|
|
|
Johan M. (Thijs) Spoor, Former Chief Executive
Officer, President and Director (12)
|
448,468
|
1.6%
|
|
Maged Shenouda, Former Chief Financial
Officer (13)
|
230,000
|
*
|
|
Daniel Dupret, Former Chief Scientific
Officer (14)
|
15,000
|
*
|
|
All Directors, Executive Officers and Former Named Executive
Officers as a group (11 persons)
|
2,078,321
|
7.3%
|
|
|
|
|
|
5% Stockholders
|
|
|
|
Edmund Burke Ross, Jr. (15)
|
2,857,151
|
9.9%
|
*
Less than 1%.
|
(1)
|
Unless otherwise indicated, the address of such individual is c/o
AzurRx BioPharma, Inc., 760 Parkside Avenue, Downstate
Biotechnology Incubator, Suite 304, Brooklyn, NY
11226.
|
|
(2)
|
Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with
respect to securities. All entries exclude beneficial ownership of
shares issuable pursuant to warrants, options or other derivative
securities that have not vested or that are not otherwise
exercisable as of the date hereof or which will not become vested
or exercisable within 60 days of the Record Date.
|
|
(3)
|
Percentages are rounded to nearest tenth of a percent. Percentages
are based on 28,502,850 shares of Common Stock outstanding.
Warrants, options or other derivative securities that are presently
exercisable or exercisable within 60 days are deemed to be
beneficially owned by the person holding such securities for the
purpose of computing the percentage ownership of that person, but
are not treated as outstanding for the purpose of computing the
percentage of any other person.
|
- 39 -
|
(4)
|
Includes 50,000 shares of Common Stock issuable upon exercise of
vested options. Excludes (i) 1,450,000 shares of Common Stock
issuable upon exercise of unvested options; and (ii) 129,870 shares
of Common Stock issuable upon conversion of 12.987012 shares of
Series B Preferred Stock, and 64,935 shares of Common Stock
issuable upon exercise of Series B Warrants subject, in each case,
to the receipt of the Stockholder Approval pursuant to Proposal No.
2 and Proposal No. 3 herein.
|
|
(5)
|
Includes 1,000 shares of Common Stock and 55,834 shares of Common
Stock issuable upon exercise of vested options. Excludes 529,172
shares of Common Stock issuable upon exercise of unvested
options.
|
|
(6)
|
Includes 75,000 shares of Common Stock issuable upon exercise of
vested options. Excludes 410,000 shares of Common Stock issuable
upon exercise of unvested options.
|
|
(7)
|
Includes (i) 409,773 shares of Common Stock; (ii) 80,021 shares of
Common Stock issuable upon the exercise of warrants; (iii) 100,000
shares of Common Stock issuable upon exercise of vested options;
and (iv) 13,680 shares of Common Stock held by Mr.
Borkowski’s spouse. Excludes (i) 40,000 shares of Common
Stock issuable upon exercise of unvested options; and (ii) 461,205
shares of Common Stock issuable upon conversion of 46.120619 shares
of Series B Preferred Stock, 230,602 shares of Common Stock
issuable upon exercise of Series B Warrants and 25,774 shares of
Common Stock issuable upon exercise of Exchange Warrants subject,
in each case, to the receipt of the Stockholder Approval pursuant
to Proposal No. 2 and Proposal No. 3 herein.
|
|
(8)
|
Includes (i) 107,998 shares of Common Stock; (ii) 70,000 shares of
Common Stock issuable upon exercise of vested options; and (iii)
9,000 shares of Common Stock held by La Jolla Lenox Trust, a family
trust of which the trustee is someone other than Mr. Casamento. Mr.
Casamento and members of his immediate family are the sole
beneficiaries of such trust. Excludes 40,000 shares of Common Stock
issuable upon exercise of unvested options.
|
|
(9)
|
Includes (i) 132,049 shares of Common Stock; and (ii) 100,000
shares of Common Stock issuable upon exercise of vested options.
Excludes (i) 30,000 unvested restricted shares of Common Stock; and
(ii) 40,000 shares of Common Stock issuable upon exercise of
unvested options.
|
|
(10)
|
Includes (i) 90,498 shares of Common Stock; and (ii) 70,000 shares
of Common Stock issuable upon exercise of vested options. Excludes
40,000 shares of Common Stock issuable upon exercise of unvested
options.
|
|
(11)
|
Includes 20,000 shares of Common Stock issuable upon exercise of
vested options. Excludes 40,000 shares of Common Stock issuable
upon exercise of unvested options.
|
|
(12)
|
Includes (i) 138,617 shares of Common Stock; (ii) 20,000 shares of
Common Stock issuable upon exercise of vested options; (iii)
100,000 shares of common stock that may be purchased pursuant to
options written by third parties at an exercise price of $1.00 per
share; (iv) 150,000 shares of Common Stock issuable upon exercise
of warrants; and (v) 39,851 shares of Common Stock held in a trust
for the benefit of Mr. Spoor’s spouse and minor children. Mr.
Spoor disclaims beneficial ownership with respect to such shares of
Common Stock held in trust.
|
|
(13)
|
Includes 230,000 shares of Common Stock issuable upon the exercise
of vested options, which expire on November 30, 2020, which is
twelve months following the date of Mr. Shenouda’s
termination.
|
|
(14)
|
Includes 15,000 shares of earned but unissued restricted Common
Stock.
|
|
(15)
|
Based upon information contained in a Schedule 13D filed by Edmund
Burke Ross, Jr. on February 26, 2019 and records maintained by the
Company. Includes a total of (i) 1,750,813 shares of Common Stock;
and 1,106,338 shares of Common Stock issuable upon exercise of
warrants. Of these holdings, (i) 1,676,009 shares are held by ADEC
Private Equity Investment, LLC, which include 1,031,268 shares of
Common Stock and 644,741 shares of Common Stock issuable upon
exercise of warrants; (ii) 1,181,142 shares are held by EBR
Ventures, LLC, which include 719,545 shares of Common Stock and
461,597 shares of Common Stock issuable upon exercise of warrants.
Excludes 1,020,619 shares of Common Stock issuable upon conversion
of 102.06191 shares of Series B Preferred Stock, 510,309 shares of
Common Stock issuable upon exercise of Series B Warrants and
193,299 shares of Common Stock issuable upon exercise of Exchange
Warrants held by EBR Ventures, LLC, subject, in each case, to the
receipt of the Stockholder Approval pursuant to Proposal No. 2
herein. Mr. Ross, Jr. is the Manager of EBR Ventures, LLC and ADEC
Private Equity Investment, LLC and has voting and dispositive power
over the shares of Common Stock held by such entities. The address
of Mr. Ross, Jr. and such entities is c/o JDJ Family Office
Services, P.O. Box 962049, Boston, MA 02196.
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- 40 -
ADDITIONAL INFORMATION
Deadline for Receipt of Stockholder Proposals for the 2021 Annual
Meeting
Pursuant to Rule 14a-8 under the Exchange Act, stockholder
proposals to be included in our next proxy statement must be
received by our Chief Financial Officer by writing to AzurRx
BioPharma, Inc., Attention: Chief Financial Officer – 760
Parkside Avenue, Downstate Biotechnology Incubator, Suite 304,
Brooklyn, NY 11226, no later than 90
days nor more than 120 days prior to the first anniversary of the
preceding year’s annual meeting. Submitted proposals must
comply with applicable Delaware law, the rules and regulations
promulgated by the SEC and the procedures set forth in our
Bylaws.
We reserve the right to reject, rule out of order, or take other
appropriate action with respect to any proposal that does not
comply with these and all other applicable
requirements.
Householding of Proxy Materials
The SEC
has adopted rules that permit companies and intermediaries (e.g.,
brokers) to satisfy the delivery requirements for proxy statements
and annual reports with respect to two or more stockholders sharing
the same address by delivering a single proxy statement and annual
report addressed to those stockholders. This process, which is
commonly referred to as “householding,” potentially
means extra convenience for stockholders and cost savings for
companies.
A
number of brokers with account holders who are stockholders of the
Company will be “householding” our proxy materials. A
single set of our proxy materials will be delivered to multiple
stockholders sharing an address unless contrary instructions have
been received from the affected stockholders. Once you have
received notice from your broker that they will be
“householding” communications to your address,
“householding” will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no
longer wish to participate in “householding” and would
prefer to receive a separate set of our proxy materials at no
charge, please notify your broker or direct a written request to
AzurRx BioPharma, Inc., Attention: Chief Financial Officer –
760 Parkside Avenue, Downstate Biotechnology Incubator, Suite 304,
Brooklyn, NY 11226, or contact us at (646) 699-7855. We undertake
to deliver promptly, upon any such verbal or written request, a
separate copy of its proxy materials to a stockholder at a shared
address to which a single copy of these documents was delivered.
Stockholders who currently receive multiple copies of our proxy
materials at their address and would like to request
“householding” of their communications should contact
their broker, bank or other nominee, or contact us at the above
address or phone number.
Other Matters
At the
date of this proxy statement, we know of no other matters, other
than those described above, that will be presented for
consideration at the Annual Meeting. If any other business should
come before the Annual Meeting, it is intended that the proxy
holders will vote all proxies using their best judgment in the
interest of the Company and the stockholders.
Solicitation of Proxies
The
solicitation of proxies pursuant to this proxy statement is being
made by us. Proxies may be solicited, among other methods, by mail,
facsimile, telephone, telegraph, Internet and in
person.
The
expenses of preparing, printing and distributing this proxy
statement and the accompanying form of proxy and the cost of
soliciting proxies will be borne by us.
Copies
of soliciting materials will be furnished to banks, brokerage
houses and other custodians, nominees and fiduciaries for
forwarding to the beneficial owners of shares of Common Stock for
whom they hold shares, and we will reimburse them for their
reasonable out-of-pocket expenses in connection
therewith.
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We have
also retained Alliance Advisors LLC to assist it in the
solicitation of proxies. Alliance Advisors LLC will solicit proxies
on behalf of us from individuals, brokers, bank nominees and other
institutional holders in the same manner described above. Alliance
Advisors LLC will receive a base fee of $7,500, plus approved and
reasonable out of pocket expenses and additional processing fees
for any call campaigns, for its services to us for the solicitation
of the proxies. We have also agreed to indemnify Alliance Advisors
LLC against certain claims.
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING
VIRTUALLY, PLEASE READ THE ACCOMPANYING PROXY STATEMENT AND
THEN VOTE BY INTERNET, TELEPHONE OR MAIL AS PROMPTLY AS POSSIBLE TO
ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL
MEETING.
|
|
|
|
|
BY ORDER OF THE BOARD OF DIRECTORS,
/s/
James Sapirstein
|
|
Brooklyn,
New York
|
JAMES
SAPIRSTEIN
|
|
August 11, 2020
|
President, Chief Executive Officer and Director
|
If
you have any questions or require any assistance in voting your
shares, please call:
Alliance Advisors LLC
200
Broadacres Drive, 3rd Floor, Bloomfield, NJ 07003
(833)
550-0994
- 42 -
Appendix
A
AZURRX BIOPHARMA, INC.
2020 OMNIBUS EQUITY
INCENTIVE PLAN
(AS AMENDED AND RESTATED THROUGH AUGUST 11, 2020)
ARTICLE I
PURPOSE
The
purpose of this AzurRx BioPharma, Inc. 2020 Omnibus Equity
Incentive Plan as amended and restated (the “Plan”) is to benefit
AzurRx BioPharma, Inc., a Delaware corporation (the
“Company”) and its
shareholders, by assisting the Company and its subsidiaries to
attract, retain and provide incentives to key management employees,
officers, directors, and consultants of the Company and its
Affiliates, and to align the interests of such service providers
with those of the Company’s shareholders. Accordingly, the
Plan provides for the granting of Non-qualified Stock Options,
Incentive Stock Options, Restricted Stock Awards, Restricted Stock
Unit Awards, Stock Appreciation Rights, Performance Stock Awards,
Performance Unit Awards, Unrestricted Stock Awards, Dividend
Equivalent Rights, Incentive Bonus Awards, Other Cash-Based Awards
and Other Stock-Based Awards or any combination of the
foregoing.
ARTICLE II
DEFINITIONS
The
following definitions shall be applicable throughout the Plan
unless the context otherwise requires:
2.1 “Affiliate”
shall mean any corporation which, with respect to the Company, is a
“subsidiary corporation” within the meaning of Section
424(f) of the Code or other entity in which the Company has a
controlling interest in such entity or another entity which is part
of a chain of entities in which the Company or each entity has a
controlling interest in another entity in the unbroken chain of
entities ending with the applicable entity.
2.2
“Award”
shall mean, individually or collectively, any Option, Restricted
Stock Award, Restricted Stock Unit Award, Performance Stock Award,
Performance Unit Award, Stock Appreciation Right, Dividend
Equivalent Right, Incentive Bonus Award, Other Cash-Based Award and
Other Stock-Based Award or Unrestricted Stock Award.
2.3 “Award
Agreement” shall mean a
written agreement between the Company and the Holder with respect
to an Award, setting forth the terms and conditions of the Award,
as amended.
2.4 “Board”
shall mean the Board of Directors of the Company.
2.5 “Base
Value” shall have the meaning given to such term in
Section 14.2.
2.6 “Cause”
shall mean (i) if the Holder is a party to an employment or service
agreement with the Company or an Affiliate which agreement defines
“Cause” (or a similar term), “Cause” shall have the
same meaning as provided for in such agreement, or (ii) for a
Holder who is not a party to such an agreement, “Cause” shall mean
termination by the Company or an Affiliate of the employment (or
other service relationship) of the Holder by reason of the
Holder’s (A) intentional failure to perform reasonably
assigned duties, (B) dishonesty or willful misconduct in the
performance of the Holder’s duties, (C) involvement in a
transaction which is materially adverse to the Company or an
Affiliate, (D) breach of fiduciary duty involving personal profit,
(E) willful violation of any law, rule, regulation or court order
(other than misdemeanor traffic violations and misdemeanors not
involving misuse or misappropriation of money or property), (F)
commission of an act of fraud or intentional misappropriation or
conversion of any asset or opportunity of the Company or an
Affiliate, (G) conviction of, or the entry of a plea of guilty or
no contest to, a felony or any other crime that causes the Company
or an Affiliates public disgrace or disrepute, or materially and
adversely affects the Company’s or an Affiliates’
operations or financial performance or the relationship the Company
has with its customer, (H) any breach of any obligation or duty to
the Company or any of its Affiliates (whether arising by statute,
common law or agreement) relating to confidentiality,
noncompetition, nonsolicitation or proprietary rights, or (I)
material breach of any provision of the Plan or the Holder’s
Award Agreement or any other written agreement between the Holder
and the Company or an Affiliate, in each case as determined in good
faith by the Board, the determination of which shall be final,
conclusive and binding on all parties.
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2.7 “Change
of Control” shall mean: the satisfaction of any one or
more of the following conditions (and the “Change of
Control” shall be deemed to have occurred as of the first day
that any one or more of the following conditions shall have been
satisfied):
(a) Any
person (as such term is used in paragraphs 13(d) and 14(d)(2) of
the Exchange Act, hereinafter in this definition,
“Person”), other than the
Company or an Affiliate or an employee benefit plan of the Company
or an Affiliate, becomes the beneficial owner (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Company’s then
outstanding securities;
(b) The
closing of a merger, consolidation or other business combination (a
“Business
Combination”) other than a Business Combination in
which holders of the Shares immediately prior to the Business
Combination have substantially the same proportionate ownership of
the common stock or ordinary shares, as applicable, of the
surviving corporation immediately after the Business Combination as
immediately before;
(c) The
closing of an agreement for the sale or disposition of all or
substantially all (50% or more) of the Company’s assets to
any entity that is not an Affiliate;
(d) The
approval by the holders of Shares of a plan of complete liquidation
of the Company, other than a merger of the Company into any
subsidiary or a liquidation as a result of which persons who were
shareholders of the Company immediately prior to such liquidation
have substantially the same proportionate ownership of shares of
common stock or ordinary shares, as applicable, of the surviving
corporation immediately after such liquidation as immediately
before; or
(e) Within
any twenty-four (24) month period, the Incumbent Directors shall
cease to constitute at least a majority of the Board or the board
of directors of any successor to the Company; provided, however, that any director
elected to the Board, or nominated for election, by a majority of
the Incumbent Directors then still in office, shall be deemed to be
an Incumbent Director for purposes of this paragraph (e), but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or
threatened election contest with respect to the election or removal
of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of an individual, entity or
“group” other than the Board (including, but not
limited to, any such assumption that results from paragraphs (a),
(b), (c), or (d) of this definition).
Notwithstanding the
foregoing, no event or condition shall constitute a Change of
Control to the extent that, if it were, a penalty tax would be
imposed under Section 409A of the Code; provided that, in such a
case, the event or condition shall continue to constitute a Change
of Control to the maximum extent possible (e.g., if applicable, in
respect of vesting without an acceleration of distribution) without
causing the imposition of such penalty tax.
2.8 “Code”
shall mean the United States of America Internal Revenue Code of
1986, as amended. Reference in the Plan to any section of the Code
shall be deemed to include any amendments or successor provisions
to any section and any regulation under such section.
2.9 “Committee”
shall mean a committee comprised of not less than two (2) members
of the Board who are selected by the Board as provided in Section
4.1.
2.10 “Company”
shall have the meaning given to such term in the introductory
paragraph, including any successor thereto.
2.11 “Consultant”
shall mean any non-Employee (individual) advisor to the Company or
an Affiliate who or which has contracted directly with the Company
or an Affiliate to render bona fide consulting or advisory services
thereto.
2.12 “Director”
shall mean a member of the Board or a member of the board of
directors of an Affiliate, in either case, who is not an
Employee.
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2.13 “Dividend
Equivalent Right” shall mean an Award
granted under Article XIII of the Plan which entitles the Holder to
receive bookkeeping credits, cash payments and/or Share
distributions equal in amount to the distributions that would have
been made to the Holder had the Holder held a specified number of
Shares during the period the Holder held the Dividend Equivalent
Right.
2.14 “Dividend
Equivalent Right
Award Agreement” shall mean a
written agreement between the Company and a Holder with respect to
a Dividend Equivalent Right Award.
2.15 “Effective
Date” shall mean August 11, 2020.
2.16 “Employee”
shall mean any employee, including any officer, of the Company or
an Affiliate.
2.17 “Exchange
Act” shall mean the Securities Exchange Act of 1934,
as amended.
2.18 “Fair
Market Value” shall mean, as of any specified date,
the closing sales price of the Shares for such date (or, in the
event that the Shares are not traded on such date, on the
immediately preceding trading date) on the Nasdaq Stock Market or a
domestic or foreign national securities exchange (including
London’s Alternative Investment Market) on which the Shares
may be listed, as reported in The Wall Street Journal or The
Financial Times. If the Shares are not listed on the Nasdaq Stock
Market or on a national securities exchange, but are quoted on the
OTC Bulletin Board or by the National Quotation Bureau, the Fair
Market Value of the Shares shall be the mean of the highest bid and
lowest asked prices per Share for such date. If the Shares are not
quoted or listed as set forth above, Fair Market Value shall be
determined by the Board in good faith by any fair and reasonable
means (which means may be set forth with greater specificity in the
applicable Award Agreement). The Fair Market Value of property
other than Shares shall be determined by the Board in good faith by
any fair and reasonable means consistent with the requirements of
applicable law.
2.19
“Family
Member” of an individual shall mean any child,
stepchild, grandchild, parent, stepparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law or sister-in-law, including
adoptive relationships, any person sharing the Holder’s
household (other than a tenant or employee of the Holder), a trust
in which such persons have more than fifty percent (50%) of the
beneficial interest, a foundation in which such persons (or the
Holder) control the management of assets, and any other entity in
which such persons (or the Holder) own more than fifty percent
(50%) of the voting interests.
2.20 “Holder”
shall mean an Employee, Director or Consultant who has been granted
an Award or any such individual’s beneficiary, estate or
representative, who has acquired such Award in accordance with the
terms of the Plan, as applicable.
2.21 “Incentive
Bonus Award” means an Award granted under Article XVI
of the Plan.
2.22 “Incentive
Stock Option” shall mean an Option which is intended
by the Committee to constitute an “incentive stock
option” and conforms to the applicable provisions of Section
422 of the Code.
2.23 “Incumbent
Director” shall mean, with respect to any period of
time specified under the Plan for purposes of determining whether
or not a Change of Control has occurred, the individuals who were
members of the Board at the beginning of such period.
2.24 “Non-qualified
Stock Option” shall mean an Option which is not an
Incentive Stock Option or which is designated as an Incentive Stock
Option but does not meet the applicable requirements of Section 422
of the Code.
2.25 “Option”
shall mean an Award granted under Article VII of the Plan of an
option to purchase Shares and shall include both Incentive Stock
Options and Non-qualified Stock Options.
2.26 “Option
Agreement” shall mean a
written agreement between the Company and a Holder with respect to
an Option.
2.27 “Other
Cash-Based Award” means a contractual right granted
under Article XV hereof entitling such Holder to receive a cash
payment at such times, and subject to such conditions, as are set
forth in the Plan and the applicable Other Cash-Based Award
Agreement.
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2.28 “Other
Cash-Based Award Agreement” shall mean a
written agreement between the Company and a Holder with respect to
an Other Cash-Based Award.
2.29 “Other
Stock-Based Award” means a contractual right granted
under Article XV representing a notional unit interest equal in
value to a share of Common Stock to be paid and distributed at such
times, and subject to such conditions as are set forth in the Plan
and the applicable Other Stock-Based Award Agreement.
2.30 “Other
Stock-Based Award Agreement” shall mean a
written agreement between the Company and a Holder with respect to
an Other Stock-Based Award.
2.31
“Performance Stock
Award” or “Performance Stock” shall
mean an Award granted under Article XII of the Plan.
2.32 “Performance
Stock Agreement” shall mean a
written agreement between the Company and a Holder with respect to
a Performance Stock Award.
2.33 “Performance
Unit” shall mean a Unit awarded to a Holder pursuant
to a Performance Unit Award.
2.34 “Performance
Unit Award” shall mean an Award granted under Article
XI of the Plan.
2.35 “Performance
Unit Agreement” shall mean a
written agreement between the Company and a Holder with respect to
a Performance Unit Award.
2.36 “Plan”
shall mean this AzurRx BioPharma, Inc. 2020 Omnibus Equity
Incentive Plan initially adopted on July 23, 2020, as amended and
restated through the Effective Date, and as may be further amended
from time to time, together with each of the Award Agreements
utilized hereunder.
2.37 “Reporting
Person” shall mean an officer, director or greater
than ten percent stockholder of the Company within the meaning of
Rule 16a-2 under the Exchange Act, who is required to file reports
pursuant to Rule 16a-3 under the Exchange Act.
2.38 “Restricted
Stock Award” and “Restricted Stock” shall
mean an Award granted under Article VIII of the Plan of Shares, the
transferability of which by the Holder is subject to
Restrictions.
2.39 “Restricted
Stock Agreement” shall mean a
written agreement between the Company and a Holder with respect to
a Restricted Stock Award.
2.40 “Restricted
Stock Unit Award” and “RSUs” shall refer to an
Award granted under Article X of the Plan under which, upon the
satisfaction of predetermined individual service-related vesting
requirements, a cash payment shall be made to the Holder, based on
the number of Units awarded to the Holder.
2.41 “Restricted
Stock Unit Agreement” shall mean a
written agreement between the Company and a Holder with respect to
a Restricted Stock Award.
2.42 “Restriction
Period” shall mean the period of time for which Shares
subject to a Restricted Stock Award shall be subject to
Restrictions, as set forth in the applicable Restricted Stock
Agreement.
2.43 “Restrictions”
shall mean the forfeiture, transfer and/or other restrictions
applicable to Shares awarded to an Employee, Director or Consultant
under the Plan pursuant to a Restricted Stock Award and set forth
in a Restricted Stock Agreement.
2.44 “Rule
16b-3” shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act, as such
may be amended from time to time, and any successor rule,
regulation or statute fulfilling the same or a substantially
similar function.
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2.45 “Shares”
or “Stock” shall mean the
shares of the Company’s common stock, par value $0.0001 per
share.
2.46 “Stock
Appreciation Right” or
“SAR”
shall mean an Award granted under Article XIV of the Plan of a
right, granted alone or in connection with a related Option, to
receive a payment equal to the increase in value of a specified
number of Shares between the date of Award and the date of
exercise.
2.47 “Stock
Appreciation Right
Agreement” shall mean a
written agreement between the Company and a Holder with respect to
a Stock Appreciation Right.
2.48 “Tandem
Stock Appreciation Right” shall mean a Stock
Appreciation Right granted in connection with a related Option, the
exercise of some or all of which results in termination of the
entitlement to purchase some or all of the Shares under the related
Option, all as set forth in Article XIV.
2.49 “Ten
Percent Shareholder” shall mean an Employee who, at
the time an Option is granted to him or her, owns shares possessing
more than ten percent (10%) of the total combined voting power of
all classes of shares of the Company or of any parent corporation
or subsidiary corporation thereof (both as defined in Section 424
of the Code), within the meaning of Section 422(b)(6) of the
Code.
2.50 “Termination
of Service” shall mean a termination of a
Holder’s employment with, or status as a Director or
Consultant of, the Company or an Affiliate, as applicable, for any
reason, including, without limitation, Total and Permanent
Disability or death, except as provided in Section 6.4. In the
event Termination of Service shall constitute a payment event with
respect to any Award subject to Code Section 409A, Termination of
Service shall only be deemed to occur upon a “separation from
service” as such term is defined under Code Section 409A and
applicable authorities.
2.51 “Total
and Permanent Disability” shall mean an individual
being considered “disabled” within the meaning of Code
Section 409A and Treasury Regulation 1.409A-3(i)(4), as well as any
successor regulation or interpretation.
2.52 “Unit”
shall mean a bookkeeping unit, which represents such monetary
amount as shall be designated by the Committee in each Performance
Unit Agreement, or represents one Share for purposes of each
Restricted Stock Unit Award.
2.53 “Unrestricted
Stock Award” shall mean an Award granted under Article
IX of the Plan of Shares which are not subject to
Restrictions.
2.54 “Unrestricted
Stock Agreement” shall mean a
written agreement between the Company and a Holder with respect to
an Unrestricted Stock Award.
ARTICLE III
EFFECTIVE DATE OF
PLAN
The
Plan shall be effective as of the Effective Date.
ARTICLE IV
ADMINISTRATION
A - 5
member
shall have no authority hereunder with respect to his or her own
Award. If and to the extent permitted by law, the Committee may
authorize one or more Reporting Persons (or other officers) to make
Awards to Employees, Directors or Consultants who are not Reporting
Persons (or other officers whom the Committee has specifically
authorized to make Awards). Subject to law and the restrictions set
forth in the Plan, the Committee may delegate administrative
functions to individuals who are Reporting Persons, officers, or
employees of the Company.
4.2 Powers.
Subject to the provisions of the Plan, the Committee shall have the
sole authority, in its discretion, to make all determinations under
the Plan, including but not limited to determining which Employees,
Directors or Consultants shall receive an Award, the time or times
when an Award shall be made (the date of grant of an Award shall be
the date on which the Award is awarded by the Committee), what type
of Award shall be granted, the term of an Award, the date or dates
on which an Award vests (including acceleration of vesting), the
form of any payment to be made pursuant to an Award, the terms and
conditions of an Award (including the forfeiture of the Award
(and/or any financial gain) if the Holder of the Award violates any
applicable restrictive covenant thereof), the Restrictions under a
Restricted Stock Award and the number of Shares which may be issued
under an Award, performance goals applicable to any Award and
certification of the achievement of such goals, and the waiver of
any restrictions or performance goals, subject to compliance with
applicable laws, all as may be applicable. In making such
determinations the Committee may take into account the nature of
the services rendered by the respective Employees, Directors and
Consultants, their present and potential contribution to the
Company’s (or the Affiliate’s) success and such other
factors as the Committee in its discretion may deem
relevant.
4.3 Additional
Powers. The Committee shall have such additional powers as
are delegated to it under the other provisions of the Plan. Subject
to the express provisions of the Plan, the Committee is authorized
to construe the Plan and the respective Award Agreements executed
hereunder, to prescribe such rules and regulations relating to the
Plan as it may deem advisable to carry out the intent of the Plan,
to determine the terms, restrictions and provisions of each Award
and to make all other determinations necessary or advisable for
administering the Plan. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in any Award
Agreement in the manner and to the extent the Committee shall deem
necessary, appropriate or expedient to carry it into effect. The
determinations of the Committee on the matters referred to in this
Article IV shall be conclusive and binding on the Company and all
Holders.
4.4 Committee
Action. Subject to compliance with all applicable laws,
action by the Committee shall require the consent of a majority of
the members of the Committee, expressed either orally at a meeting
of the Committee or in writing in the absence of a meeting. No
member of the Committee shall have any liability for any good faith
action, inaction or determination in connection with the
Plan.
ARTICLE V
SHARES SUBJECT TO
PLAN AND LIMITATIONS THEREON
A - 6
available
for the grant of a new Award. Shares that otherwise would have been
issued upon the exercise of an Option or Stock Appreciation Right
or in payment with respect to any other form of Award, that are
surrendered in payment or partial payment of the exercise price
thereof and/or taxes withheld with respect to the exercise thereof
or the making of such payment, will no longer be counted against
the foregoing maximum share limitations and may again be made
subject to Awards under the Plan pursuant to such
limitations.
5.2 Individual
Holder Limitations. Subject to adjustment as provided
in Article XVIII, the number of Shares with respect to which Awards
may be granted during any calendar year to any one Director who is
a non-employee director of the Board shall not exceed
250,000.
ARTICLE VI
ELIGIBILITY AND
TERMINATION OF SERVICE
6.1 Eligibility.
Awards made under the Plan may be granted solely to individuals
who, at the time of grant, are Employees, Directors or Consultants,
or any other person who is determined by the Committee to be a
prospective Employee, Director or Consultant; provided, that the
Award for any grant to a prospective Employee, Director or
Consultant will contain appropriate forfeiture provisions in the
event such individual does not become employed or engaged by the
Company. An Award may be granted on more than one occasion to the
same Employee, Director or Consultant, and, subject to the
limitations set forth in the Plan, such Award may include, a
Non-qualified Stock Option, a Restricted Stock Award, a Restricted
Stock Unit Award, an Unrestricted Stock Award, a Dividend
Equivalent Right Award, a Performance Stock Award, a Performance
Unit Award, a Stock Appreciation Right, a Tandem Stock Appreciation
Right, an Incentive Bonus Award, an Other Cash-Based Award, an
Other Stock-Based Award or any combination thereof, and solely for
Employees, an Incentive Stock Option. The Committee shall determine
the terms and conditions of all Awards in accordance with its
authority under Article IV.
6.2 Termination
of Service. Except to the extent inconsistent with the terms
of the applicable Award Agreement and/or the provisions of Sections
6.3 or 6.4, the following terms and conditions shall apply with
respect to a Holder’s Termination of Service with the Company
or an Affiliate, as applicable:
(i) The
Holder’s rights, if any, to exercise any then exercisable
Options and/or Stock Appreciation Rights shall
terminate:
(A) If
such termination is for a reason other than the Holder’s
Total and Permanent Disability or death, ninety (90) days after the
date of such Termination of Service;
(B) If
such termination is on account of the Holder’s Total and
Permanent Disability, one (1) year after the date of such
Termination of Service; or
(C) If
such termination is on account of the Holder’s death, one (1)
year after the date of the Holder’s death.
Upon
such applicable date the Holder (and such Holder’s estate,
designated beneficiary or other legal representative) shall forfeit
any rights or interests in or with respect to any such Options and
Stock Appreciation Rights. Notwithstanding the forgoing, the
Committee, in its sole discretion, may provide for a different time
period in the Award Agreement, or may extend the time period,
following a Termination of Service, during which the Holder has the
right to exercise any vested Non-qualified Stock Option or Stock
Appreciation Right, which time period may not extend beyond the
expiration date of the Award term.
(ii) In
the event of a Holder’s Termination of Service for any reason
prior to the actual or deemed satisfaction and/or lapse of the
Restrictions, vesting requirements, terms and conditions applicable
to a Restricted Stock Award, Incentive Bonus Award, Other
Cash-Based Award, Other Stock-Based Award and/or Restricted Stock
Unit Award, such Award shall immediately be canceled, and the
Holder (and such Holder’s estate, designated beneficiary or
other legal representative) shall forfeit any rights or interests
in and with respect to any such Award. Notwithstanding the
immediately preceding sentence, the Committee, in its sole
discretion, may determine, prior to or within thirty (30) days
after the date of such Termination of Service that all or a portion
of any such Holder’s Award shall not be so canceled and
forfeited.
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6.3 Special
Termination Rule. Except to the extent inconsistent with the
terms of the applicable Award Agreement, and notwithstanding
anything to the contrary contained in this Article VI, if a
Holder’s employment with, or status as a Director of, the
Company or an Affiliate shall terminate, and if, within ninety (90)
days of such termination, such Holder shall become a Consultant,
such Holder’s rights with respect to any Award or portion
thereof granted thereto prior to the date of such termination may
be preserved, if and to the extent determined by the Committee in
its sole discretion, as if such Holder had been a Consultant for
the entire period during which such Award or portion thereof had
been outstanding. Should the Committee effect such determination
with respect to such Holder, for all purposes of the Plan, such
Holder shall not be treated as if his or her employment or Director
status had terminated until such time as his or her Consultant
status shall terminate, in which case his or her Award, as it may
have been reduced in connection with the Holder’s becoming a
Consultant, shall be treated pursuant to the provisions of Section
6.2, provided, however, that any such Award which is intended to be
an Incentive Stock Option shall, upon the Holder’s no longer
being an Employee, automatically convert to a Non- qualified Stock
Option. Should a Holder’s status as a Consultant terminate,
and if, within ninety (90) days of such termination, such Holder
shall become an Employee or a Director, such Holder’s rights
with respect to any Award or portion thereof granted thereto prior
to the date of such termination may be preserved, if and to the
extent determined by the Committee in its sole discretion, as if
such Holder had been an Employee or a Director, as applicable, for
the entire period during which such Award or portion thereof had
been outstanding, and, should the Committee effect such
determination with respect to such Holder, for all purposes of the
Plan, such Holder shall not be treated as if his or her Consultant
status had terminated until such time as his or her employment with
the Company or an Affiliate, or his or her Director status, as
applicable, shall terminate, in which case his or her Award shall
be treated pursuant to the provisions of Section 6.2.
6.4 Termination
for Cause. Notwithstanding anything in this Article VI or
elsewhere in the Plan to the contrary, and unless a Holder’s
Award Agreement specifically provides otherwise, in the event of a
Holder’s Termination for Cause, all of such Holder’s
then outstanding Awards shall expire immediately and be forfeited
in their entirety upon such termination. A Holder may not vest in
any Award nor exercise any Option after such time he or she is
notified of the Company’s intention to termination his/her
employment or service for Cause.
ARTICLE VII
OPTIONS
7.1 Option
Period. The term of each Option shall be as specified in the
Option Agreement; provided, however, that except as set
forth in Section 7.3, no Option shall be exercisable after the
expiration of ten (10) years from the date of its
grant.
7.2 Limitations
on Exercise of Option. An Option shall be exercisable in
whole or in such installments and at such times as specified in the
Option Agreement.
7.3 Special
Limitations on Incentive Stock Options. To the extent that
the aggregate Fair Market Value (determined at the time the
respective Incentive Stock Option is granted) of Shares with
respect to which Incentive Stock Options are exercisable for the
first time by an individual during any calendar year under all
plans of the Company and any parent corporation or subsidiary
corporation thereof (both as defined in Section 424 of the Code)
which provide for the grant of Incentive Stock Options exceeds One
Hundred Thousand Dollars ($100,000) (or such other individual limit
as may be in effect under the Code on the date of grant), the
portion of such Incentive Stock Options that exceeds such threshold
shall be treated as Non-qualified Stock Options. The Committee
shall determine, in accordance with applicable provisions of the
Code, Treasury Regulations and other administrative pronouncements,
which of a Holder’s Options, which were intended by the
Committee to be Incentive Stock Options when granted to the Holder,
will not constitute Incentive Stock Options because of such
limitation, and shall notify the Holder of such determination as
soon as practicable after such determination. No Incentive Stock
Option shall be granted to an Employee if, at the time the
Incentive Stock Option is granted, such Employee is a Ten Percent
Shareholder, unless (i) at the time such Incentive Stock Option is
granted the Option price is at least one hundred ten percent (110%)
of the Fair Market Value of the Shares subject to the Incentive
Stock Option, and (ii) such Incentive Stock Option by its terms is
not exercisable after the expiration of five (5) years from the
date of grant. No Incentive Stock Option shall be granted more than
ten (10) years from the earlier of the Effective Date or date on
which the Plan is approved by the Company’s shareholders. The
designation by the Committee of an Option as an Incentive Stock
Option shall not guarantee the Holder that the Option will satisfy
the applicable requirements for “incentive stock
option” status under Section 422 of the Code. An Incentive
Stock Option may only be granted to Employee who is considered an
employee under Treasury Regulation §1.421-7(h) of the
Company.
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7.4 Option
Agreement.
Each Option shall be evidenced by an Option Agreement in such form
and containing such provisions not inconsistent with the provisions
of the Plan as the Committee from time to time shall approve,
including, but not limited to, provisions intended to qualify an
Option as an Incentive Stock Option. An Option Agreement may
provide for the payment of the Option price, in whole or in part,
by the delivery of a number of Shares (plus cash if necessary) that
have been owned by the Holder for at least six (6) months and
having a Fair Market Value equal to such Option price, or such
other forms or methods as the Committee may determine from time to
time, in each case, subject to such rules and regulations as may be
adopted by the Committee. Each Option Agreement shall, solely to
the extent inconsistent with the provisions of Sections 6.2, 6.3,
and 6.4, as applicable, specify the effect of Termination of
Service on the exercisability of the Option. The Committee may, in
its discretion, accelerate the vesting of an Option at any time.
Moreover, without limiting the generality of the foregoing, a
Non-qualified Stock Option Agreement may provide for a
“cashless exercise” of the Option, in whole or in part,
by (a) establishing procedures whereby the Holder, by a
properly-executed written notice, directs (i) an immediate market
sale or margin loan as to all or a part of Shares to which he is
entitled to receive upon exercise of the Option, pursuant to an
extension of credit by the Company to the Holder of the Option
price, (ii) the delivery of the Shares from the Company directly to
a brokerage firm and (iii) the delivery of the Option price from
sale or margin loan proceeds from the brokerage firm directly to
the Company, or (b) reducing the number of Shares to be issued upon
exercise of the Option by the number of such Shares having an
aggregate Fair Market Value equal to the Option price (or portion
thereof to be so paid) as of the date of the Option’s
exercise. An Option Agreement may also include provisions relating
to: (i) subject to the provisions hereof, accelerated vesting of
Options, including but not limited to, upon the occurrence of a
Change of Control, (ii) tax matters (including provisions covering
any applicable Employee wage withholding requirements) and (iii)
any other matters not inconsistent with the terms and provisions of
the Plan that the Committee shall in its sole discretion determine.
The terms and conditions of the respective Option Agreements need
not be identical.
7.5 Option
Price and Payment. The price at which a Share may be
purchased upon the exercise of an Option shall be determined by the
Committee; provided, however, that such
Option’s exercise price (i) shall not be less than the Fair
Market Value of a Share on the date such Option is granted (or 110%
of Fair Market Value for an Incentive Stock Option held by a Ten
Percent Shareholder, as provided in Section 7.3), and (ii) shall be
subject to adjustment as provided in Article XVIII. The Option or
portion thereof may be exercised by delivery of an irrevocable
notice of exercise to the Company. The exercise price for the
Option or portion thereof shall be paid in full in the manner
prescribed by the Committee as set forth in the Plan and the
applicable Option Agreement, which manner, with the consent of the
Committee, may include the withholding of Shares otherwise issuable
in connection with the exercise of the Option. Separate share
certificates shall be issued by the Company for those Shares
acquired pursuant to the exercise of an Incentive Stock Option and
for those Shares acquired pursuant to the exercise of a
Non-qualified Stock Option.
7.6 Shareholder
Rights and
Privileges.
The Holder of an Option shall be entitled to all the privileges and
rights of a shareholder of the Company solely with respect to such
Shares as have been purchased under the Option and for which share
certificates have been registered in the Holder’s
name.
7.7 Options
and Rights in Substitution for Stock or Options Granted by Other
Corporations. Options may be granted under the Plan from
time to time in substitution for stock options held by individuals
employed by entities who become Employees, Directors or Consultants
as a result of a merger or consolidation of the employing entity
with the Company or any Affiliate, or the acquisition by the
Company or an Affiliate of the assets of the employing entity, or
the acquisition by the Company or an Affiliate of stock or shares
of the employing entity with the result that such employing entity
becomes an Affiliate.
7.8 Disqualifying
Dispositions. If Shares acquired by exercise of an Incentive
Stock Option are disposed of within two (2) years following
the date of grant or one (1) year following the transfer of
such shares to the Holder upon exercise, the Holder shall, promptly
following such disposition, notify the Company in writing of the
date and terms of such disposition and provide such other
information regarding the disposition as the Company may reasonably
require.
7.9 Prohibition
Against
Re-Pricing. Except to the extent (i) approved in advance by
holders of a majority of the shares of the Company entitled to vote
generally in the election of directors, or (ii) as a result of any
Change of Control or any adjustment as provided in Article XVIII,
the Committee shall not have the power or authority to reduce,
whether through amendment or otherwise, the exercise price under
any outstanding Option or Stock Appreciation Right, or to grant any
new Award or make any payment of cash in substitution for or upon
the cancellation of Options and/or Stock Appreciation Rights
previously granted.
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ARTICLE VIII
RESTRICTED STOCK
AWARDS
8.1 Award.
A Restricted Stock Award shall constitute an Award of Shares to the
Holder as of the date of the Award which are subject to a
“substantial risk of forfeiture” as defined under
Section 83 of the Code during the specified Restriction Period. At
the time a Restricted Stock Award is made, the Committee shall
establish the Restriction Period applicable to such Award. Each
Restricted Stock Award may have a different Restriction Period, in
the discretion of the Committee.
8.2 Terms
and Conditions. At the time any Award is made under this
Article VIII, the Company and the Holder shall enter into a
Restricted Stock Agreement setting forth each of the matters
contemplated thereby and such other matters as the Committee may
determine to be appropriate. Shares awarded pursuant to a
Restricted Stock Award shall be represented by a share certificate
registered in the name of the Holder of such Restricted Stock
Award. If provided for under the Restricted Stock Agreement, the
Holder shall have the right to vote Shares subject thereto and to
enjoy all other shareholder rights, including the entitlement to
receive dividends on the Shares during the Restriction Period,
except that (i) the Holder shall not be entitled to delivery of the
share certificate until the Restriction Period shall have expired,
(ii) the Company shall retain custody of the share certificate
during the Restriction Period (with a share power endorsed by the
Holder in blank), (iii) the Holder may not sell, transfer, pledge,
exchange, hypothecate or otherwise dispose of the Shares during the
Restriction Period and (iv) a breach of the terms and conditions
established by the Committee pursuant to the Restricted Stock
Agreement shall cause a forfeiture of the Restricted Stock Award.
At the time of such Award, the Committee may, in its sole
discretion, prescribe additional terms and conditions or
restrictions relating to Restricted Stock Awards, including, but
not limited to, rules pertaining to the effect of Termination of
Service prior to expiration of the Restriction Period. Such
additional terms, conditions or restrictions shall, to the extent
inconsistent with the provisions of Sections 6.2, 6.3 and 6.4, as
applicable, be set forth in a Restricted Stock Agreement made in
conjunction with the Award. The Committee may subject the grant of
any Restricted Stock Award to the execution of a voting agreement
with the Company. Such Restricted Stock Agreement may also include
provisions relating to: (i) subject to the provisions hereof,
accelerated vesting of Awards, including but not limited to
accelerated vesting upon the occurrence of a Change of Control,
(ii) tax matters (including provisions covering any applicable
Employee wage withholding requirements) and (iii) any other matters
not inconsistent with the terms and provisions of the Plan that the
Committee shall in its sole discretion determine. The terms and
conditions of the respective Restricted Stock Agreements need not
be identical. All Shares delivered to a Holder as part of a
Restricted Stock Award shall be delivered and reported by the
Company or the Affiliate, as applicable, to the Holder at the time
of vesting. The Committee may, in its discretion, accelerate the
vesting of a Restricted Stock Award.
8.3 Payment
for Restricted Stock. The Committee shall determine the
amount and form of any payment from a Holder for Shares received
pursuant to a Restricted Stock Award, if any, provided that in the
absence of such a determination, a Holder shall not be required to
make any payment for Shares received pursuant to a Restricted Stock
Award, except to the extent otherwise required by law.
8.4 Section
83(b) Election. If a Holder makes an election pursuant to
Section 83(b) of the Code with respect to a Restricted Stock Award,
the Holder shall file, within 30 days following the date of grant,
a copy of such election with the Company (directed to the Secretary
thereof) and with the Internal Revenue Service, in accordance with
the regulations under Section 83 of the Code. The Committee may
provide in an Award Agreement that the Restricted Stock Award is
conditioned upon the Holder’s making or refraining from
making an election with respect to the Award under Section 83(b) of
the Code.
ARTICLE IX
UNRESTRICTED STOCK
AWARDS
9.1 Award.
Shares may be awarded (or sold) to Employees, Directors or
Consultants under the Plan which are not subject to Restrictions of
any kind, in consideration for past services rendered thereby to
the Company or an Affiliate or for other valid
consideration.
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9.2 Terms
and Conditions. At the time any Award is made under this
Article IX, the Company and the Holder shall enter into an
Unrestricted Stock Agreement setting forth each of the matters
contemplated hereby and such other matters as the Committee may
determine to be appropriate.
9.3 Payment
for Unrestricted Stock. The Committee shall determine the
amount and form of any payment from a Holder for Shares received
pursuant to an Unrestricted Stock Award, if any, provided that in
the absence of such a determination, a Holder shall not be required
to make any payment for Shares received pursuant to an Unrestricted
Stock Award, except to the extent otherwise required by
law.
ARTICLE X
RESTRICTED STOCK
UNIT AWARDS
10.1 Award.
A Restricted Stock Unit Award shall constitute a promise to grant
Shares (or cash equal to the Fair Market Value of Shares) to the
Holder at the end of a specified Restriction Period. At the time a
Restricted Stock Unit Award is made, the Committee shall establish
the Restriction Period applicable to such Award. Each Restricted
Stock Unit Award may have a different Restriction Period, in the
discretion of the Committee. A Restricted Stock Unit shall not
constitute an equity interest in the Company and shall not entitle
the Holder to voting rights, dividends or any other rights
associated with ownership of Shares prior to the time the Holder
shall receive a distribution of Shares pursuant to Section
10.3.
10.2 Terms
and Conditions. At the time any Award is made under this
Article X, the Company and the Holder shall enter into a Restricted
Stock Unit Agreement setting forth each of the matters contemplated
thereby and such other matters as the Committee may determine to be
appropriate. The Restricted Stock Unit Agreement shall set forth
the individual service-based vesting requirement which the Holder
would be required to satisfy before the Holder would become
entitled to distribution pursuant to Section 10.3 and the number of
Units awarded to the Holder. Such conditions shall be sufficient to
constitute a “substantial risk of forfeiture” as such
term is defined under Section 409A of the Code. At the time of such
Award, the Committee may, in its sole discretion, prescribe
additional terms and conditions or restrictions relating to
Restricted Stock Unit Awards in the Restricted Stock Unit
Agreement, including, but not limited to, rules pertaining to the
effect of Termination of Service prior to expiration of the
applicable vesting period. The Committee may, in its discretion,
accelerate the vesting of a Restricted Stock Unit at any time. The
terms and conditions of the respective Restricted Stock Unit
Agreements need not be identical.
ARTICLE XI
PERFORMANCE UNIT
AWARDS
11.1 Award.
A Performance Unit Award shall constitute an Award under which,
upon the satisfaction of predetermined individual and/or Company
(and/or Affiliate) performance goals, a cash payment shall be made
to the Holder, based on the number of Units awarded to the Holder.
Performance Unit Award shall not constitute an equity interest in
the Company and shall not entitle the Holder to voting rights,
dividends or any other rights associated with ownership of
Shares.
11.2 Terms
and Conditions. At the time any Award is made under this
Article XI, the Company and the Holder shall enter into a
Performance Unit Agreement setting forth each of the matters
contemplated thereby and such other matters as the Committee may
determine to be appropriate. The Committee shall set forth in the
applicable Performance Unit Agreement the performance goals which
the Holder and/or the Company would be required to satisfy before
the Holder would become entitled to payment pursuant to Section
11.3, the number of Units awarded to the Holder and the dollar
value or formula assigned to each such Unit. Such payment shall be
subject to a “substantial risk of forfeiture” under
Section 409A of the Code. At the time of such Award, the Committee
may, in its sole discretion, prescribe additional terms and
conditions or restrictions relating to Performance Unit Awards,
including, but not limited to, rules pertaining to the effect of
Termination of Service prior to expiration of the applicable
performance period. The terms and conditions of the respective
Performance Unit Agreements need not be identical.
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ARTICLE XII
PERFORMANCE STOCK
AWARDS
12.1 Award.
A Performance Stock Award shall constitute a promise to grant
Shares (or cash equal to the Fair Market Value of Shares) to the
Holder subject to achievement of specified performance goal. The
Committee shall establish the performance goals for the Performance
Stock Award, in its sole discretion. A Performance Stock Award
shall not constitute an equity interest in the Company and shall
not entitle the Holder to voting rights, dividends or any other
rights associated with ownership of Shares unless and until the
Holder shall receive a distribution of Shares pursuant to Section
12.3.
12.2 Terms
and Conditions. At the time any Award is made under this
Article XII, the Company and the Holder shall enter into a
Performance Stock Agreement setting forth each of the matters
contemplated thereby and such other matters as the Committee may
determine to be appropriate. The Committee shall set forth in the
applicable Performance Stock Agreement the performance goals which
the Holder and/or the Company would be required to satisfy before
the Holder would become entitled to the receipt of Shares pursuant
to such Holder’s Performance Stock Award and the number of
Shares subject to such Performance Stock Award. Such distribution
shall be subject to a “substantial risk of forfeiture”
under Section 409A of the Code. If such performance goals are
achieved, the distribution of Shares (or the payment of cash, as
determined in the sole discretion of the Committee), shall be made
no later than by the fifteenth (15th) day of the third (3rd)
calendar month next following the end of the Company’s fiscal
year to which such goals and objectives relate. At the time of such
Award, the Committee may, in its sole discretion, prescribe
additional terms and conditions or restrictions relating to
Performance Stock Awards, including, but not limited to, rules
pertaining to the effect of the Holder’s Termination of
Service prior to the expiration of the applicable performance
period. The terms and conditions of the respective Performance
Stock Agreements need not be identical.
ARTICLE XIII
DIVIDEND EQUIVALENT
RIGHTS
13.1 Award.
A Dividend Equivalent Right shall entitle the Holder to receive
bookkeeping credits, cash payments and/or Share distributions equal
in amount to the distributions that would have been made to the
Holder had the Holder held a specified number of Shares during the
specified period of the Award.
13.2 Terms
and Conditions. At the time any Award is made under this
Article XIII, the Company and the Holder shall enter into a
Dividend Equivalent Rights Award Agreement setting forth each of
the matters contemplated thereby and such other matters as the
Committee may determine to be appropriate. The Committee shall set
forth in the applicable Dividend Equivalent Rights Award Agreement
the terms and conditions, if any, including whether the Holder is
to receive credits currently in cash, is to have such credits
reinvested (at Fair Market Value determined as of the date of
reinvestment) in additional Shares or is to be entitled to choose
among such alternatives. Such receipt shall be subject to a
“substantial risk of forfeiture” under Section 409A of
the Code and, if such Award becomes vested, the distribution of
such cash or Shares shall be made no later than by the fifteenth
(15th) day of the third (3rd) calendar month next following the end
of the Company’s fiscal year in which the Holder’s
interest in the Award vests. Dividend Equivalent Rights Awards may
be settled in cash or in Shares, as set forth in the applicable
Dividend Equivalent Rights Award Agreement. A Dividend Equivalent
Rights Award may, but need not be, awarded in tandem with another
Award (other than an Option or a SAR), whereby, if so awarded, such
Dividend Equivalent Rights Award shall expire, terminate or be
forfeited by the Holder, as applicable, under the same conditions
as under such other Award.
13.3 Interest
Equivalents. The Dividend Equivalent Rights Award Agreement
for a Dividend Equivalent Rights Award may provide for the
crediting of interest on a Dividend Rights Award to be settled in
cash at a future date (but in no event later than by the fifteenth
(15th) day of the third (3rd) calendar month next following the end
of the Company’s fiscal year in which such interest is
credited and vested), at a rate set forth in the applicable
Dividend Equivalent Rights Award Agreement, on the amount of cash
payable thereunder.
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ARTICLE XIV
STOCK APPRECIATION
RIGHTS
14.1 Award.
A Stock Appreciation Right shall constitute a right, granted alone
or in connection with a related Option, to receive a payment equal
to the increase in value of a specified number of Shares between
the date of Award and the date of exercise.
14.2 Terms
and Conditions. At the time any Award is made under this
Article XIV, the Company and the Holder shall enter into a Stock
Appreciation Right Agreement setting forth each of the matters
contemplated thereby and such other matters as the Committee may
determine to be appropriate. The Committee shall set forth in the
applicable Stock Appreciation Right Agreement the terms and
conditions of the Stock Appreciation Right, including (i) the base
value (the “Base
Value”) for the Stock Appreciation Right, which shall
be not less than the Fair Market Value of an Share on the date of
grant of the Stock Appreciation Right, (ii) the number of Shares
subject to the Stock Appreciation Right, (iii) the period during
which the Stock Appreciation Right may be exercised; provided, however, that no Stock
Appreciation Right shall be exercisable after the expiration of ten
(10) years from the date of its grant, and (iv) any other special
rules and/or requirements which the Committee imposes upon the
Stock Appreciation Right. Upon the exercise of some or all of the
portion of a Stock Appreciation Right, the Holder shall receive a
payment from the Company, in cash or in the form of Shares having
an equivalent Fair Market Value or in a combination of both, as
determined in the sole discretion of the Committee, equal to the
product of:
(a) The
excess of (i) the Fair Market Value of an Share on the date of
exercise, over (ii) the Base Value, multiplied by,
(b) The
number of Shares with respect to which the Stock Appreciation Right
is exercised.
14.3 Tandem
Stock Appreciation Rights. If the Committee grants a
Stock Appreciation Right which is intended to be a Tandem Stock
Appreciation Right, the Tandem Stock Appreciation Right shall be
granted at the same time as the related Option, and the following
special rules shall apply:
(a) The
Base Value shall be equal to or greater than the per Share exercise
price under the related Option;
(b) The
Tandem Stock Appreciation Right may be exercised for all or part of
the Shares which are subject to the related Option, but solely upon
the surrender by the Holder of the Holder’s right to exercise
the equivalent portion of the related Option (and when a Share is
purchased under the related Option, an equivalent portion of the
related Tandem Stock Appreciation Right shall be
canceled);
(c) The
Tandem Stock Appreciation Right shall expire no later than the date
of the expiration of the related Option;
(d) The
value of the payment with respect to the Tandem Stock Appreciation
Right may be no more than one hundred percent (100%) of the
difference between the per Share exercise price under the related
Option and the Fair Market Value of the Shares subject to the
related Option at the time the Tandem Stock Appreciation Right is
exercised, multiplied by the number of the Shares with respect to
which the Tandem Stock Appreciation Right is exercised;
and
(e) The
Tandem Stock Appreciation Right may be exercised solely when the
Fair Market Value of the Shares subject to the related Option
exceeds the per Share exercise price under the related
Option.
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ARTICLE XV
OTHER CASH-BASED AWARDS AND OTHER STOCK-BASED AWARDS
Section 15.1
Other Cash-Based and
Stock-Based Awards. The Committee may grant other types of
equity-based or equity-related Awards not otherwise described by
the terms of this Plan (including the grant or offer for sale of
unrestricted Shares) in such amounts and subject to such terms and
conditions, as the Committee shall determine. Such Awards may
involve the transfer of Shares to a Holder, or payment in cash or
otherwise of amounts based on the value of Shares. In addition, the
Committee, at any time and from time to time, may grant Cash-Based
Awards to a Holder in such amounts and upon such terms as the
Committee shall determine, in its sole discretion.
Section 15.2
Value of Cash-Based Awards
and Other Stock-Based Awards. Each Other Stock-Based Award
shall be expressed in terms of Shares or units based on Shares, as
determined by the Committee, in its sole discretion. Each Other
Cash-Based Award shall specify a payment amount or payment range as
determined by the Committee, in its sole discretion. If the
Committee exercises its discretion to establish performance goals,
the value of Other Cash-Based Awards that shall be paid to the
Holder will depend on the extent to which such performance goals
are met.
Section 15.3
Payment of Cash-Based
Awards and Other Stock-Based Awards. Payment, if any, with
respect to Other Cash-Based Awards and Other Stock-Based Award
shall be made in accordance with the terms of the Award, in cash or
Shares as the Committee determines.
ARTICLE XVI
INCENTIVE BONUS AWARDS
Section 16.1
Incentive Bonus
Awards. The Committee, at its discretion, may grant
Incentive Bonus Awards to such Employees, Directors or Consultants
as it may designate from time to time. The terms of a
Holder’s Incentive Bonus Award shall be set forth in the
Holder’s Award Agreement. Each Award Agreement shall specify
such general terms and conditions as the Committee shall
determine.
Section 16.2
Incentive Bonus Award
Performance Criteria. The determination of Incentive Bonus
Awards for a given year or years may be based upon the attainment
of specified levels of Company performance as measured by
pre-established, objective performance criteria determined at the
discretion of the Committee. The Committee shall (i) select those
Employees, Directors or Consultants who shall be eligible to
receive an Incentive Bonus Award, (ii) determine the performance
period, (iii) determine target levels of performance, and (iv)
determine the level of Incentive Bonus Award to be paid to each
selected Employee, Director or Consultant upon the achievement of
each performance level. The Committee generally shall make the
foregoing determinations prior to the commencement of services to
which an Incentive Bonus Award relates, to the extent applicable,
and while the outcome of the performance goals and targets is
uncertain.
Section 16.3
Payment of
Incentive Bonus
Awards.
(a)
Incentive Bonus Awards shall be paid in cash or Shares, as set
forth in a Holder’s Award Agreement. Payments shall be made
following a determination by the Committee that the performance
targets were attained and shall be made within two and one-half
months after the later of the end of the fiscal or calendar year in
which the Incentive Award is no longer subject to a substantial
risk of forfeiture.
(b) The
amount of an Incentive Bonus Award to be paid upon the attainment
of each targeted level of performance shall equal a percentage of a
Holder’s base salary for the fiscal year, a fixed dollar
amount, or such other formula, as determined by the
Committee.
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ARTICLE XVII
CHANGE OF CONTROL
Section
17.1 Effect of Change of
Control.
(a) The
Committee may, at the time of the grant of an Award and as set
forth in an Award Agreement, provide for the effect of a
“Change of Control” on an Award. Such provisions may
include any one or more of the following: (i) the acceleration
or extension of time periods for purposes of exercising, vesting
in, or realizing gain from any Award, (ii) the elimination or
modification of performance or other conditions related to the
payment or other rights under an Award, (iii) provision for
the cash settlement of an Award for an equivalent cash value, as
determined by the Committee, or (iv) such other modification
or adjustment to an Award as the Committee deems appropriate to
maintain and protect the rights and interests of Holders upon or
following a Change of Control. To the extent necessary for
compliance with Section 409A of the Code, an Award Agreement
shall provide that an Award subject to the requirements of
Section 409A that would otherwise become payable upon a Change
of Control shall only become payable to the extent that the
requirements for a “change in control” for purposes of
Section 409A have been satisfied.
(b) Notwithstanding
anything to the contrary set forth in the Plan, unless otherwise
provided by an Award Agreement, upon or in anticipation of any
Change of Control, the Committee may, in its sole and absolute
discretion and without the need for the consent of any Holder, take
one or more of the following actions contingent upon the occurrence
of that Change of Control: (i) cause any or all outstanding
Stock Options and Stock Appreciation Rights held by Holders
affected by the Change of Control to become vested and immediately
exercisable, in whole or in part; (ii) cause any or all
outstanding Restricted Stock Awards, Restricted Stock Unit Awards,
Performance Stock Awards, Performance Units Awards, Unrestricted
Stock Awards, Incentive Bonus Award and any other Award held by
Holders affected by the Change of Control to become
non-forfeitable, in whole or in part; (iii) cancel any Stock
Option or Stock Appreciation Right in exchange for a substitute
option in a manner consistent with the requirements of Treasury
Regulation. §1.424-1(a) or §1.409A-1(b)(5)(v)(D), as
applicable (notwithstanding the fact that the original Stock Option
may never have been intended to satisfy the requirements for
treatment as an Incentive Stock Option); (iv) cancel any
Restricted Stock Award, Restricted Stock Units Awards, Performance
Stock Award or Performance Unit Award held by a Holder in exchange
for restricted stock or performance shares of or stock or
performance units in respect of the capital stock of any successor
corporation; (v) redeem any Restricted Stock Award held by a
Holder affected by the Change of Control for cash and/or other
substitute consideration with a value equal to the Fair Market
Value of an unrestricted Share on the date of the Change of
Control; (vi) terminate any Award in exchange for an amount of
cash and/or property equal to the amount, if any, that would have
been attained upon the exercise of such Award or realization of the
Holder’s rights as of the date of the occurrence of the
Change of Control (the “Change of Control
Consideration”); provided, however that if the Change of
Control Consideration with respect to any Option or Stock
Appreciation Right does not exceed the exercise price of such
Option or Stock Appreciation Right, the Committee may cancel the
Option or Stock Appreciation Right without payment of any
consideration therefor. Any such Change of Control Consideration
may be subject to any escrow, indemnification and similar
obligations, contingencies and encumbrances applicable in
connection with the Change of Control to holders of Shares. Without
limitation of the foregoing, if as of the date of the occurrence of
the Change of Control the Committee determines that no amount would
have been attained upon the realization of the Holder’s
rights, then such Award may be terminated by the Company without
payment. The Committee may cause the Change of Control
Consideration to be subject to vesting conditions (whether or not
the same as the vesting conditions applicable to the Award prior to
the Change of Control) and/or make such other modifications,
adjustments or amendments to outstanding Awards or this Plan as the
Committee deems necessary or appropriate.
(c) The
Committee may require a Holder to (i) represent and warrant as to
the unencumbered title to the Holder’s Awards, (ii) bear such
Holder’s pro rata share of any post-closing indemnity
obligations, and be subject to the same or similar post-closing
purchase price adjustments, escrow terms, offset rights, holdback
terms and similar conditions as the other holders of Shares, and
(iii) execute and deliver such documents and instruments as the
Committee may reasonably require for the Holder to be bound by such
obligations. The Committee will endeavor to take action under this
Section 17 in a manner that does not cause a violation of Section
409A of the Code with respect to an Award.
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ARTICLE XVIII
RECAPITALIZATION OR
REORGANIZATION
18.1 Adjustments
to Shares. The shares with respect to which Awards may be
granted under the Plan are Shares as presently constituted;
provided,
however, that if,
and whenever, prior to the expiration or distribution to the Holder
of Shares underlying an Award theretofore granted, the Company
shall effect a subdivision or consolidation of the Shares or the
payment of an Share dividend on Shares without receipt of
consideration by the Company, the number of Shares with respect to
which such Award may thereafter be exercised or satisfied, as
applicable, (i) in the event of an increase in the number of
outstanding Shares, shall be proportionately increased, and the
purchase price per Share shall be proportionately reduced, and (ii)
in the event of a reduction in the number of outstanding Shares,
shall be proportionately reduced, and the purchase price per Share
shall be proportionately increased. Notwithstanding the foregoing
or any other provision of this Article XVIII, any adjustment made
with respect to an Award (x) which is an Incentive Stock Option,
shall comply with the requirements of Section 424(a) of the Code,
and in no event shall any adjustment be made which would render any
Incentive Stock Option granted under the Plan to be other than an
“incentive stock option” for purposes of Section 422 of
the Code, and (y) which is a Non-qualified Stock Option, shall
comply with the requirements of Section 409A of the Code, and in no
event shall any adjustment be made which would render any
Non-qualified Stock Option granted under the Plan to become subject
to Section 409A of the Code.
18.2 Recapitalization.
If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise or satisfaction, as
applicable, of a previously granted Award, the Holder shall be
entitled to receive (or entitled to purchase, if applicable) under
such Award, in lieu of the number of Shares then covered by such
Award, the number and class of shares and securities to which the
Holder would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to such recapitalization,
the Holder had been the holder of record of the number of Shares
then covered by such Award.
18.3 Other
Events. In the event of changes to the outstanding Shares by
reason of an extraordinary cash dividend, reorganization, merger,
consolidation, combination, split-up, spin-off, exchange or other
relevant change in capitalization occurring after the date of the
grant of any Award and not otherwise provided for under this
Article XVIII, any outstanding Awards and any Award Agreements
evidencing such Awards shall be adjusted by the Board in its
discretion in such manner as the Board shall deem equitable or
appropriate taking into consideration the applicable accounting and
tax consequences, as to the number and price of Shares or other
consideration subject to such Awards. In the event of any
adjustment pursuant to Sections 18.1, 18.2 or this Section 18.3,
the aggregate number of Shares available under the Plan pursuant to
Section 5.1 may be appropriately adjusted by the Board, the
determination of which shall be conclusive. In addition, the
Committee may make provision for a cash payment to a Holder or a
person who has an outstanding Award. The number of Shares subject
to any Award shall be rounded to the nearest whole
number.
18.4 Powers
Not Affected. The existence of the Plan and the Awards
granted hereunder shall not affect in any way the right or power of
the Board or of the shareholders of the Company to make or
authorize any adjustment, recapitalization, reorganization or other
change of the Company’s capital structure or business, any
merger or consolidation of the Company, any issue of debt or equity
securities ahead of or affecting Shares or the rights thereof, the
dissolution or liquidation of the Company or any sale, lease,
exchange or other disposition of all or any part of its assets or
business or any other corporate act or proceeding.
18.5 No
Adjustment for
Certain Awards. Except as hereinabove expressly provided,
the issuance by the Company of shares of any class or securities
convertible into shares of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants
to subscribe therefor or upon conversion of shares or obligations
of the Company convertible into such shares or other securities,
and in any case whether or not for fair value, shall not affect
previously granted Awards, and no adjustment by reason thereof
shall be made with respect to the number of Shares subject to
Awards theretofore granted or the purchase price per Share, if
applicable.
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ARTICLE XIX
AMENDMENT AND
TERMINATION OF PLAN
The
Plan shall continue in effect, unless sooner terminated pursuant to
this Article XIX, until the tenth (10th) anniversary of the date on
which it is adopted by the Board (except as to Awards outstanding
on that date) (the “Expiration Date”). The Board in its
discretion may terminate the Plan at any time with respect to any
shares for which Awards have not theretofore been granted;
provided,
however, that the
Plan’s termination shall not materially and adversely impair
the rights of a Holder with respect to any Award theretofore
granted without the consent of the Holder. The Board shall have the
right to alter or amend the Plan or any part hereof from time to
time; provided that (a) to the extent necessary and desirable to
comply with any applicable law, regulation, or stock exchange rule,
the Company shall obtain stockholder approval of any Plan amendment
in such a manner and to such a degree as required, and (b)
stockholder approval is required for any amendment to the Plan that
(i) increases the aggregate number of Shares available for issuance
under the Plan (other than any automatic increases to the Share
Reserve in accordance with Section 5.1), or (ii) changes the
persons or class of persons eligible to receive Awards. Subject to
the terms of the Plan, the Committee shall have the authority to
amend the terms of an Award in any manner that is not inconsistent
with the Plan (including to extend the post-termination
exercisability period of Options and Stock Appreciation Rights),
provided that no such action (except an action relating to a Change
of Control) shall materially and adversely impair the rights of a
Holder with respect to an outstanding Award without the
Holder’s consent. For purposes of the foregoing, any action
of the Board or the Committee that alters or affects the tax
treatment of any Award shall not be considered to materially and
adversely impair any rights of any Holder.
ARTICLE XX
MISCELLANEOUS
20.1 No
Right to
Award. Neither the adoption of the Plan by the Company nor
any action of the Board or the Committee shall be deemed to give an
Employee, Director or Consultant any right to an Award except as
may be evidenced by an Award Agreement duly executed on behalf of
the Company, and then solely to the extent and on the terms and
conditions expressly set forth therein.
20.2 Substitute
Awards in Corporate Transactions. Nothing contained in the
Plan shall be construed to limit the right of the Committee to
grant Awards under the Plan in connection with the acquisition,
whether by purchase, merger, consolidation or other corporate
transaction, of the business or assets of any corporation or other
entity. Without limiting the foregoing, the Committee may grant
Awards under the Plan to an employee or director of another
corporation who becomes an Employee, Director or Consultant by
reason of any such corporate transaction in substitution for Awards
previously granted by such corporation or entity to such person.
The terms and conditions of the substitute Awards may vary from the
terms and conditions that would otherwise be required by the Plan
solely to the extent the Committee deems necessary for such
purpose. Any Shares subject to these substitute Awards shall not be
counted against any of the maximum share limitations set forth in
the Plan.
20.3 Stock
Certificates; Book Entry Form. Notwithstanding any provision
of the Plan to the contrary, unless otherwise determined by the
Committee or required by any applicable law, rule or regulation,
any obligation set forth in the Plan pertaining to the delivery or
issuance of stock certificates evidencing Shares may be satisfied
by having issuance and/or ownership of such shares recorded on the
books and records of the Company (or, as applicable, its transfer
agent or stock plan administrator).
20.4 No
Guarantee of Tax Consequences. Neither the Company, the
Board, the Committee nor any other person make any commitment or
guarantee that any federal, state, local or foreign tax treatment
will apply or be available to any Holder or any other person
hereunder.
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20.5 No
Rights
Conferred. Nothing contained in the Plan shall (i) confer
upon any Employee any right with respect to continuation of
employment with the Company or any Affiliate, (ii) interfere in any
way with any right of the Company or any Affiliate to terminate the
employment of an Employee at any time, (iii) confer upon any
Director any right with respect to continuation of such
Director’s membership on the Board, (iv) interfere in any way
with any right of the Company or an Affiliate to terminate a
Director’s membership on the Board at any time, (v) confer
upon any Consultant any right with respect to continuation of his
or her consulting engagement with the Company or any Affiliate, or
(vi) interfere in any way with any right of the Company or an
Affiliate to terminate a Consultant’s consulting engagement
with the Company or an Affiliate at any time.
20.6 Other
Laws; No Fractional Shares; Withholding. The Company shall
not be obligated by virtue of any provision of the Plan to
recognize the exercise of any Award or to otherwise sell or issue
Shares in violation of any laws, rules or regulations, and any
postponement of the exercise or settlement of any Award under this
provision shall not extend the term of such Award. Neither the
Company nor its directors or officers shall have any obligation or
liability to a Holder with respect to any Award (or Shares issuable
thereunder) (i) that shall lapse because of such postponement, or
(ii) for any failure to comply with the requirements of any
applicable law, rules or regulations, including but not limited to
any failure to comply with the requirements of Section 409A of this
Code. No fractional Shares shall be delivered, nor shall any cash
in lieu of fractional Shares be paid. The Company shall have the
right to deduct in cash (whether under this Plan or otherwise) in
connection with all Awards any taxes required by law to be withheld
and to require any payments required to enable it to satisfy its
withholding obligations. In the case of any Award satisfied in the
form of Shares, no Shares shall be issued unless and until
arrangements satisfactory to the Company shall have been made to
satisfy any tax withholding obligations applicable with respect to
such Award. Subject to such terms and conditions as the Committee
may impose, the Company shall have the right to retain, or the
Committee may, subject to such terms and conditions as it may
establish from time to time, permit Holders to elect to tender,
Shares (including Shares issuable in respect of an Award) to
satisfy, in whole or in part, the amount required to be
withheld.
20.7 Forfeiture
Events/Representations. The Committee may specify in an
Award Agreement at the time of the Award that the Holder’s
rights, payments and benefits with respect to an Award shall be
subject to reduction, cancellation, forfeiture or recoupment upon
the occurrence of certain specified events, in addition to any
otherwise applicable vesting or performance conditions of an Award.
Such events shall include, but shall not be limited to, termination
of service for Cause, violation of material Company policies,
breach of noncompetition, confidentiality or other restrictive
covenants that may apply to the Holder, or other conduct by the
Holder that is detrimental to the business or reputation of the
Company. The Committee may also specify in an Award Agreement that
the Holder’s rights, payments and benefits with respect to an
Award shall be conditioned upon the Holder making a representation
regarding compliance with noncompetition, confidentiality or other
restrictive covenants that may apply to the Holder and providing
that the Holder’s rights, payments and benefits with respect
to an Award shall be subject to reduction, cancellation, forfeiture
or recoupment on account of a breach of such representation.
Notwithstanding the foregoing, the confidentiality restrictions set
forth in an Award Agreement shall not, and shall not be interpreted
to, impair a Holder from exercising any legally protected
whistleblower rights (including under Rule 21 of the Exchange
Act). In addition and without limitation of the foregoing,
any amounts paid hereunder shall be subject to recoupment in
accordance with The Dodd–Frank Wall Street Reform and
Consumer Protection Act and any implementing regulations
thereunder, any “clawback” policy adopted by the
Company or as is otherwise required by applicable law or stock
exchange listing condition.
20.8 No
Restriction on Corporate Action. Nothing contained in the
Plan shall be construed to prevent the Company or any Affiliate
from taking any corporate action which is deemed by the Company or
such Affiliate to be appropriate or in its best interest, whether
or not such action would have an adverse effect on the Plan or any
Award made under the Plan. No Employee, Director, Consultant,
beneficiary or other person shall have any claim against the
Company or any Affiliate as a result of any such
action.
20.9 Restrictions
on Transfer. No Award under the Plan or any Award Agreement
and no rights or interests herein or therein, shall or may be
assigned, transferred, sold, exchanged, encumbered, pledged or
otherwise hypothecated or disposed of by a Holder except (i) by
will or by the laws of descent and distribution, or (ii) where
permitted under applicable tax rules, by gift to any Family Member
of the Holder, subject to compliance with applicable laws. An Award
may be exercisable during the lifetime of the Holder only by such
Holder or by the Holder’s guardian or legal representative
unless it has been transferred by gift to a Family Member of the
Holder, in which case it shall be exercisable solely by such
transferee. Notwithstanding any such transfer, the Holder shall
continue to be subject to the withholding requirements provided for
under Section 20.3 hereof.
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20.10 Beneficiary
Designations. Each Holder may, from time to time, name a
beneficiary or beneficiaries (who may be contingent or successive
beneficiaries) for purposes of receiving any amount which is
payable in connection with an Award under the Plan upon or
subsequent to the Holder’s death. Each such beneficiary
designation shall serve to revoke all prior beneficiary
designations, be in a form prescribed by the Company and be
effective solely when filed by the Holder in writing with the
Company during the Holder’s lifetime. In the absence of any
such written beneficiary designation, for purposes of the Plan, a
Holder’s beneficiary shall be the Holder’s
estate.
20.11 Rule
16b-3. It is intended that the Plan and any Award made to a
person subject to Section 16 of the Exchange Act shall meet all of
the requirements of Rule 16b-3. If any provision of the Plan or of
any such Award would disqualify the Plan or such Award under, or
would otherwise not comply with the requirements of, Rule 16b-3,
such provision or Award shall be construed or deemed to have been
amended as necessary to conform to the requirements of Rule
16b-3.
20.12 Section
409A. Notwithstanding any other provision of the Plan, the
Committee shall have no authority to issue an Award under the Plan
with terms and/or conditions which would cause such Award to
constitute non-qualified “deferred compensation” under
Section 409A of the Code unless such Award shall be structured to
be exempt from or comply with all requirements of Code Section
409A. The Plan and all Award Agreements are intended to comply with
the requirements of Section 409A of the Code (or to be exempt
therefrom) and shall be so interpreted and construed and no amount
shall be paid or distributed from the Plan unless and until such
payment complies with all requirements of Code Section 409A. It is
the intent of the Company that the provisions of this Agreement and
all other plans and programs sponsored by the Company be
interpreted to comply in all respects with Code Section 409A,
however, the Company shall have no liability to the Holder, or any
successor or beneficiary thereof, in the event taxes, penalties or
excise taxes may ultimately be determined to be applicable to any
payment or benefit received by the Holder or any successor or
beneficiary thereof.
20.13 Indemnification.
Each person who is or shall have been a member of the Committee or
of the Board shall be indemnified and held harmless by the Company
against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred thereby in connection with or
resulting from any claim, action, suit, or proceeding to which such
person may be made a party or may be involved by reason of any
action taken or failure to act under the Plan and against and from
any and all amounts paid thereby in settlement thereof, with the
Company’s approval, or paid thereby in satisfaction of any
judgment in any such action, suit, or proceeding against such
person; provided,
however, that such
person shall give the Company an opportunity, at its own expense,
to handle and defend the same before he or she undertakes to handle
and defend it on his or her own behalf. The foregoing right of
indemnification shall not be exclusive and shall be independent of
any other rights of indemnification to which such persons may be
entitled under the Company’s Articles of Incorporation or
By-laws, by contract, as a matter of law, or
otherwise.
20.14 Other
Benefit Plans. No Award, payment or amount received
hereunder shall be taken into account in computing an
Employee’s salary or compensation for the purposes of
determining any benefits under any pension, retirement, life
insurance or other benefit plan of the Company or any Affiliate,
unless such other plan specifically provides for the inclusion of
such Award, payment or amount received. Nothing in the Plan shall
be construed to limit the right of the Company to establish other
plans or to pay compensation to its employees, in cash or property,
in a manner which is not expressly authorized under the
Plan.
20.15 Limits
of Liability. Any liability of the Company with respect to
an Award shall be based solely upon the contractual obligations
created under the Plan and the Award Agreement. None of the
Company, any member of the Board nor any member of the Committee
shall have any liability to any party for any action taken or not
taken, in good faith, in connection with or under the
Plan.
20.16 Foreign
Jurisdictions. The Committee may adopt, amend and terminate
such arrangements and grant such Awards, not inconsistent with the
intent of the Plan, as it may deem necessary or desirable to comply
with any tax, securities, regulatory or other laws of other
jurisdictions with respect to Awards that may be subject to such
laws. The terms and conditions of such Awards may vary from the
terms and conditions that would otherwise be required by the Plan
solely to the extent the Committee deems necessary for such
purpose. Moreover, the Board may approve such supplements to or
amendments, restatements or alternative versions of the Plan, not
inconsistent with the intent of the Plan, as it may consider
necessary or appropriate for such purposes, without thereby
affecting the terms of the Plan as in effect for any other
purpose.
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20.17 Governing
Law. Except as
otherwise provided herein, the Plan shall be construed in
accordance with the laws of the State of Delaware, without regard
to principles of conflicts of law.
20.18 Severability
of Provisions. If any provision of the Plan is held invalid or
unenforceable, such invalidity or unenforceability shall not affect
any other provision of the Plan, and the Plan shall be construed
and enforced as if such invalid or unenforceable provision had not
been included in the Plan.
20.19 No
Funding. The Plan shall be unfunded. The Company shall not
be required to establish any special or separate fund or to make
any other segregation of funds or assets to ensure the payment of
any Award. Prior to receipt of Shares or a cash distribution
pursuant to the terms of an Award, such Award shall represent an
unfunded unsecured contractual obligation of the Company and the
Holder shall have no greater claim to the Shares underlying such
Award or any other assets of the Company or Affiliate than any
other unsecured general creditor.
20.20 Award
Agreements. The Committee may provide for the use of
electronic, internet or other non-paper Award Agreements, and the
use of electronic, internet or other non-paper means for the
acceptance thereof and actions thereunder by a Holder. Each Award
Agreement shall be subject to the terms and conditions of the Plan
and need not be identical.
20.21 Headings.
Headings used throughout the Plan are for convenience only and
shall not be given legal significance.
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