DEF 14A of Maxcyte, Inc.
Filed Apr 26, 2024 · FY20230001104659-24-053089
ELECTION OF DIRECTORS
ELECTION OF DIRECTORS MaxCyte’s Board is divided into three classes. Each class has a three-year term. Vacancies on the Board may be filled only by persons elected by a majority of the remaining directors. A director elected by the Board to fill a vacancy in a class, including vacancies created by an increase in the number of directors, shall serve for the remainder of the full term of that class and until the director’s successor is duly elected and qualified. The Board presently has nine members. There are three directors in Class III whose term of office expires in 2024. Each of the three nominees listed below is currently a director of the Company, and each of whom was previously elected by stockholders. If elected at the Annual Meeting, each of these three nominees would serve until the 2027 annual meeting and until his successor has been duly elected and qualified, or, if sooner, until the director’s death, resignation or removal. Directors are elected by a plurality of the votes of the holders of shares present in person or represented by proxy and entitled to vote on the election of directors. Accordingly, the three nominees receiving the highest number of affirmative votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the three nominees named below. If any nominee becomes unavailable for election as a result of an unexpected occurrence, shares that would have been voted for that nominee will instead be voted for the election of a substitute nominee proposed by the Board. Each person nominated for election has agreed to serve if elected. The Company’s management has no reason to believe that any nominee will be unable to serve. The following is a brief biography of each nominee for director and each director whose term will continue after the Annual Meeting, including a discussion of the specific experience, qualifications, attributes or skills of each nominee and continuing director that led the Nominating and Corporate Governance Committee (the “N&CG Committee”) of the Board to recommend that person as a nominee for director or that describes the reasons as to why the Company believes that the director should continue to serve on the Board. The N&CG Committee seeks to assemble a board that, as a whole, possesses the appropriate balance of professional and industry knowledge, financial expertise, and high-level management experience necessary to oversee and direct the Company’s business. To that end, the N&CG Committee has identified and evaluated nominees in the broader context of the Board’s overall composition, with the goal of recruiting members who complement and strengthen the skills of other members and who also exhibit integrity, collegiality, sound business judgment, and other qualities that the N&CG Committee views as critical to effective functioning of the Board. To provide a mix of experience and perspective on the Board, the N&CG Committee also takes into account gender, age and ethnic diversity.
Nominees for Election for a Three-Year Term Expiring at the 2027 Annual Meeting
Nominees for Election for a Three-Year Term Expiring at the 2027 Annual Meeting
Richard Douglas, PhD, age 71
Richard Douglas, PhD, age 71 Richard Douglas has served on our Board since 2018 and as our Non-Executive Chairman since October 2021. Dr. Douglas served as the senior vice president of corporate development of Genzyme Corporation where he worked from 1989 until 2011 when Genzyme was acquired by Sanofi. Prior to joining Genzyme, Dr. Douglas served in science and corporate development capacities at Integrated Genetics prior to its acquisition by Genzyme in 1989. Since 2011, Dr. Douglas has served as an adviser to RedSky Partners, a biotechnology-focused advisory firm, and also as executive director of Labyrinth Choir, Inc. He is chairman of the board of directors of the publicly held company Aldeyra Therapeutics, Inc., which he joined in 2016, and has been a board member of Novavax, Inc. since 2010. He has a B.S. in chemistry from the University of Michigan, where he now serves on the National Advisory Board, and a Ph.D. in biochemistry from the University of California, Berkeley. Our Board believes that Dr. Douglas’s significant business experience and scientific background qualify him to serve as a director.
Will Brooke, age 68
Will Brooke, age 68 Will Brooke has served on our Board since 2004. Mr. Brooke retired from Harbert Management Corporation (“HMC”), a U.S. investment management company, in December 2021, having served in various capacities since co-founding HMC in 1993. He most recently served as Executive Vice President and Limited Partner prior to his retirement from HMC and also served as Managing Partner of HMC’s venture capital funds family from 2003 to 2014. Mr. Brooke has been advising and investing in early-stage and growth companies for more than 30 years, and previously served on the boards of numerous pharmaceutical and medical equipment companies such as nContact, Inc., NovaMin Technology, Inc. and Emageon Corporation. Since December 2018 he has also served as a board member of KPX, LLC, an environmental, social and governance advisory firm serving the investment and advisory sectors. Prior to joining HMC, Mr. Brooke practiced law for a decade. Mr. Brooke received a B.S. in Business Management and a J.D. from the University of Alabama. Our Board believes Mr. Brooke’s extensive business experience and deep financial knowledge qualify him to serve as a director.
John Johnston, age 65
John Johnston, age 65 John Johnston has served on our Board since 2016. From 2011 until his retirement from his financial career in 2013, Mr. Johnston served as managing director of institutional sales at Nomura Code Securities Ltd, a brokerage company, and from 2008 to 2011, he was director of sales and trading at the investment bank Seymour Pierce. In 2003, Mr. Johnston founded Revera Asset Management, where he oversaw an investment trust, a unit trust and a hedge fund, which he ran until 2007. Mr. Johnston began his investment career at the Royal Bank of Scotland and previously held positions at investment firms Legg Mason Investors and Murray Johnstone. Within the past five years, Mr. Johnston served as a non-executive director of the publicly held company Midatech Pharma plc (now Biodexa Pharmaceuticals plc). Mr. Johnston received his B.A. in commerce from Abertay University and his M.B.A. from the University of Dundee. Our Board believes Mr. Johnston’s executive leadership and operational experience qualify him to serve as a director. THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
Directors Continuing in Office Until the 2025 Annual Meeting
Directors Continuing in Office Until the 2025 Annual Meeting
Maher Masoud, age 49
Maher Masoud, age 49 Maher Masoud was named President and Chief Executive Officer of MaxCyte in January 2024. He brings more than 25 years of experience in the biopharmaceutical industry, most recently through his service as Executive Vice President, Head of Global Development, and Chief Counsel to MaxCyte from January 2020 to January 2024. He also served as MaxCyte’s Vice President of Legal from 2017 to January 2020 and as our Corporate Secretary from July 2021 to December 2023. During his tenure, MaxCyte’s Strategic Platform License Partnerships grew to include 24 partners (as of January 2024). Mr. Masoud started his biopharmaceutical career as a research associate at Glen Research, a Maravai company, before joining Human Genome Sciences as a director and Corporate Counsel, overseeing legal activities for the company’s global clinical trials, until its acquisition by GlaxoSmithKline in August 2012. Prior to joining MaxCyte, he oversaw the operations of six business subsidiaries at Wellstat, a life science holding company. During his tenure at Human Genome Sciences and Wellstat, Mr. Masoud supported the launch of three therapies approved by the U.S. Food and Drug Administration, Benlysta®, Vistogard® and Xuriden®. Mr. Masoud earned his Juris Doctor degree from Michigan State University College of Law after completing his Bachelor of Science degree in cell and molecular biology and genetics at the University of Maryland
Yasir Al-Wakeel, BM BCh, age 42
Yasir Al-Wakeel, BM BCh, age 42 Yasir Al-Wakeel has served on our Board since 2021. Dr. Al-Wakeel served as Chief Financial Officer and Head of Corporate Development of Kronos Bio, Inc., a clinical-stage biopharmaceutical company developing therapeutics that target the dysregulated transcription that causes cancer, from August 2020 to September 2023, before leaving to become chief executive officer of a new formed biotechnology company. Dr. Al-Wakeel previously served as the Chief Financial Officer of Neon Therapeutics, Inc., a biotechnology company developing novel neoantigen-based T-cell therapies, from 2017 to May 2020. Previously, Dr. Al-Wakeel served as the Chief Financial Officer and Head of Corporate Development at Merrimack Pharmaceuticals, Inc. from 2015 until 2017. Dr. Al-Wakeel previously served in various capacities at Credit Suisse, an investment banking firm, from 2008 to 2015. While at Credit Suisse, Dr. Al-Wakeel was Director of Healthcare Investment Banking, focused on biotechnology, and, prior to that role, he was an Equity Research Analyst covering the biotechnology and specialty pharmaceuticals sectors. Before joining Credit Suisse, Dr. Al-Wakeel was a practicing physician, holding both clinical and academic medical posts. Dr. Al-Wakeel received his BM BCh (Doctor of Medicine and Surgery) from Oxford University and his M.A. in theology from Cambridge University. Our Board believes that Dr. Al-Wakeel’s significant scientific and finance background qualifies him to serve as a director.
Rekha Hemrajani, age 54
Rekha Hemrajani, age 54 Rekha Hemrajani has served on our Board since 2021. Ms. Hemrajani served as Chief Executive Officer and a director of Jiya Acquisition Corporation, a publicly held special purpose acquisition company, from its inception in August 2020 until November 2022. She previously served as President and Chief Executive Officer and a director of Aravive, Inc., a publicly held clinical-stage biotechnology company, from January 2020 to April 2020. From March 2019 to September 2019, Ms. Hemrajani served as the Chief Operating Officer and Chief Financial Officer of Arcus Biosciences, a biotechnology company. From 2016 to March 2019, she served as Chief Operating Officer of FLX Bio, Inc. (now RAPT Therapeutics, Inc.), a biotechnology company. From 2015 to 2016, Ms. Hemrajani served as Chief Financial Officer and Senior Vice President of Business and Financial Operations at 3-V Biosciences, Inc. (now Sagimet Biosciences, Inc.), a biotechnology company. From 2013 to 2015, Ms. Hemrajani advised privately held companies on strategic corporate development and financing activities at Ravinia Consulting, a consulting firm she founded. Ms. Hemrajani currently serves as a director of the publicly held company ALX Oncology Holdings Inc. and within the past five years also served as a director of the publicly held company Adverum Biotechnologies, Inc. She holds a B.S. in Economics and Computer Science from the University of Michigan and an M.B.A. from the Kellogg Graduate School of Management at Northwestern University. Our Board believes Ms. Hemrajani is qualified to serve as a director due to her executive and financial experience at multiple companies in the biopharmaceutical and biotechnology industries.
Directors Continuing in Office Until the 2026 Annual Meeting
Directors Continuing in Office Until the 2026 Annual Meeting
Art Mandell, age 71
Art Mandell, age 71 Art Mandell has served on our Board since 2006. Since 2008, Mr. Mandell has been an advisor to companies in the healthcare and technology industries. Mr. Mandell served as president and chief operating officer of Prestwick Pharmaceuticals, Inc. from 2005 to 2007. Prior to Prestwick, Mr. Mandell was president and chief executive officer and a director of Cellective Therapeutics, Inc. from 2004 to 2005, when it was acquired by Astra Zeneca/MedImmune. Before Cellective, Mr. Mandell served as president and chief executive officer and director of Stemron Corporation from 2001 to 2003, and as senior vice president and chief business officer of Human Genome Sciences, Inc. from 1997 to 2001. Mr. Mandell began his healthcare career at Syntex Pharmaceutical Corporation where he spent 14 years in various senior management positions both domestically and abroad. Mr. Mandell received his B.S. from San Jose State University and his M.B.A. from Santa Clara University. Our Board believes Mr. Mandell’s extensive knowledge and experience in the pharmaceuticals and biotechnology industries qualify him to serve as a director.
Stanley C. Erck, age 76
Stanley C. Erck, age 76 Stanley Erck has served on our Board since 2005. Mr. Erck served as president and chief executive officer of Novavax, Inc., a biotechnology company that develops vaccines to counter serious infectious diseases, from 2011, and as a director of Novavax from 2009, until his retirement from these positions in January 2023. Mr. Erck previously served as executive chairman of Novavax from 2010 to 2011 and interim chief financial officer from 2017 to 2018. From 2000 to 2008, Mr. Erck served as president and chief executive officer of Iomai Corporation, a developer of vaccines and immune system therapies, which was acquired in 2008 by Intercell AG. He also previously held leadership positions at Procept, a publicly traded immunology company, Integrated Genetics, now Sanofi Genzyme and Baxter International. Mr. Erck received a B.S. in economics from the University of Illinois and an M.B.A. from the University of Chicago. During his tenure as chief executive officer of Novavax, Mr. Erck led the company from preclinical development through global commercialization with first year revenues of over $2 billion. Our Board believes Mr. Erck’s public company board experience and extensive knowledge and experience in the biotechnology industry qualify him to serve as a director.
Patrick J. Balthrop, age 67
Patrick J. Balthrop, age 67 Patrick Balthrop has served on our Board since 2022. Mr. Balthrop has more than three decades of experience in the healthcare sector, particularly in diagnostics, life science tools and medical devices. From 2004 until his retirement in 2014, Mr. Balthrop was President, Chief Executive Officer and a director of Luminex Corporation, a publicly held life science tools and molecular diagnostics company. From 2002 to 2004, he served as president of Fisher Healthcare, now a division of Thermo Fisher Scientific, Inc. He previously served for more than 20 years in roles of increasing responsibility with Abbott Laboratories, including as head of Abbott Vascular and Corporate VP of Worldwide Operations for Abbott Diagnostics. He currently serves as chairman of the board of the privately held life sciences companies Agendia, Inc. and Discovery Life Sciences, as director of the privately held contract research and manufacturing company Ascential Technologies, and as director of the privately held life sciences company Pattern Biosciences. Within the past five years, he served as a director of the publicly held diagnostics company Oxford Immunotec Global PLC, including as its chairman from June 2019 until March 2021. He also served as a member of the board of directors of Personalis, Inc., a publicly held cancer genomics company, from 2015 until March 2021. In 2015, Mr. Balthrop founded and has since served as Principal of Apalachee Ventures, LLC (“Apalachee”), an investment and advisory firm. He also serves as executive adviser to Water Street Healthcare Partners, a healthcare- focused private equity firm. Mr. Balthrop holds a B.S. in Biology from Spring Hill College and an M.B.A. from the Kellogg School of Management at Northwestern University. Our Board believes Mr. Balthrop’s public company board experience and extensive knowledge and experience in the biotechnology industry qualify him to serve as a director.
Board Diversity
Board Diversity The Board Diversity Matrix below provides the diversity statistics for our Board. Last year’s Board Diversity Matrix is available in our 2023 proxy statement filed with the SEC on April 28, 2023. The Board Diversity Matrix sets forth certain self-identified personal demographic characteristics of our directors.
Board Diversity Matrix (as of April 26, 2024)*
Board Diversity Matrix (as of April 26, 2024)*
Board Diversity Matrix (as of April 26, 2024)*
| Total Number of Directors: | 9 | | | | Female | Male | | Gender Identity | | | | Totals | 1 | 8 | | Demographic Background | | | | Asian | 1 | — | | White | — | 8* |
Board Diversity Matrix (as of April 26, 2024)*
Although Nasdaq’s classification system does not include Middle Eastern individuals as an underrepresented demographic group, other classification systems and our Board consider them to be diverse. Under the ISS definition, “Middle Eastern” is defined as a person with origins in any of the Persian or Arab countries in the Middle East or North Africa. Two of our directors self-identify as “Middle Eastern” based on this definition.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Equity Awards Are an Important Part of Our Compensation Philosophy
Equity Awards Are an Important Part of Our Compensation Philosophy Our Board believes that our future success depends, in large part, on our ability to maintain a competitive position in retaining and motivating our employees, consultants, and directors and that the issuance of equity awards is a key element in accomplishing these goals. The Amendment will allow us to continue to provide equity-based incentives to our eligible employees. Therefore, the Board believes that the Amendment is in the best interests of the Company and its stockholders and recommends a vote in favor of this Proposal 2.
We Manage Our Equity Incentive Award Use Carefully, and Dilution Is Reasonable
We Manage Our Equity Incentive Award Use Carefully, and Dilution Is Reasonable We continue to believe that equity awards are a vital part of our overall compensation program. However, we recognize that equity awards dilute existing stockholders, and, therefore, we must responsibly manage the growth of our equity compensation program. We are committed to effectively monitoring our equity compensation share reserve, including our “burn rate,” to maximize stockholders’ value by granting the appropriate number of equity incentive awards deemed necessary to attract, reward, and retain employees. The tables below show our overhang and burn rate information.
Overhang
| | As of April 15, 2024 (Record Date) | | Total number of shares subject to outstanding stock options | 15,416,420 | | Weighted-average exercise price of outstanding stock options | $5.78 | | Weighted-average remaining term of outstanding stock options (years) | 6.9 | | Total number of shares subject to outstanding full value awards(1) | 2,509,373 | | Total number of shares available for grant under the 2022 Plan | 4,353,262 | | Total number of shares outstanding | 17,925,793 | | Per-share closing price of common stock as reported on Nasdaq Global Market | $4.19 |
Burn Rate
| | Fiscal Year | | | | | 2023 | 2022 | 2021 | | Total number of shares subject to stock options granted | 2,713,395 | 4,408,400 | 4,117,956 | | Total number of shares subject to full value awards granted | 1,043,150 | 662,900 | — | | Weighted-average number of shares outstanding | 103,268,502 | 101,702,664 | 90,619,057 | | Gross Burn Rate(1) | 3.6% | 5.0% | 4.5% |
Key Plan Features
Key Plan Features The 2022 Plan includes provisions that are designed to protect our stockholders’ interests and to reflect corporate governance best practices including: • Repricing is not allowed without stockholder approval. The 2022 Plan prohibits the repricing of outstanding stock options and stock appreciation rights and the cancelation of any outstanding stock options or stock appreciation rights that have an exercise or strike price greater than the then-current fair market value of our shares in exchange for cash or other awards under the 2022 Plan without prior stockholder approval. • Stockholder approval is required for additional shares. The 2022 Plan does not contain an annual “evergreen” provision. The 2022 Plan authorizes a fixed number of shares, so that stockholder approval is required to issue any additional shares, allowing our stockholders to have direct input on our equity compensation programs. • Fungible share counting structure. The 2022 Plan contains a “fungible share counting” structure, whereby the number of shares of our common stock available for issuance under the 2022 Plan will be reduced by: (i) one share for each share issued pursuant to an Appreciation Award; and (ii) 1.14 shares for each share issued pursuant to a Full Value Award. This structure allows us to use the share reserve more effectively with regard to the value of each type of award. Under the 2022 Plan, Appreciation Awards consist of stock options and stock appreciation rights, with an exercise price equal to at least 100% of the fair market value on the date of grant, and Full Value Awards consist of all other types of equity-based awards under the 2022 Plan. • No liberal share counting. The following shares will not become available again for issuance under the 2022 Plan: (i) shares that are reacquired or withheld (or not issued) by us to satisfy the exercise or strike price of an Appreciation Award or the purchase price of a Full Value Award; (ii) shares that are reacquired or withheld (or not issued) by us to satisfy a tax withholding obligation in connection with an Appreciation Award or Full Value Award; (iii) shares repurchased by us on the open market with the proceeds of the exercise or strike price of an Appreciation Award or the purchase price of a Full Value Award; and (iv) in the event that a stock appreciation right is settled in shares of common stock, the gross number of shares of common stock subject to the award. • Minimum vesting provision. No award may vest (and/or, if applicable, be exercisable) until at least 12 months following the date of grant of the award; provided, however, that up to 5% of the share reserve may be subject to awards that do not meet such vesting (and/or, if applicable, exercisability) requirements. • Restrictions on dividends. The 2022 Plan provides that (i) no dividends or dividend equivalents may be paid with respect to any shares of our common stock subject to an equity award before the date such shares have vested, (ii) any dividends or dividend equivalents that are credited with respect to any such shares will be subject to all of the terms and conditions applicable to such shares under the terms of the applicable equity award agreement (including any vesting conditions), and (iii) any dividends or dividend equivalents that are credited with respect to any such shares will be forfeited to us on the date such shares are forfeited to or repurchased by us due to a failure to vest. Dividends or dividend equivalents may not be paid or credited with respect to stock options and stock appreciation rights. • Equity award vesting for failure to assume employee awards in a corporate transaction or change in control. The 2022 Plan specifically provides that in the event of a corporate transaction or change in control of the Company if the surviving or acquiring corporation (or its parent company) does not assume or continue outstanding equity awards held by employees under the 2022 Plan, or substitute similar equity awards for such outstanding equity awards, then with respect to any such employee equity award that have not been assumed, continued or substituted and that are held by employees whose continuous service has not terminated prior to a Transaction, as defined below, the vesting of such equity awards will be accelerated in full (and with respect to any performance-based equity awards, vesting will be deemed to be satisfied at the target level of performance). Limit on non-employee director compensation. The aggregate value of all cash and equity-based compensation paid or granted by us to any individual for service as a non-employee director of our Board with respect to any fiscal year of the Company will not exceed (i) $900,000 in total value or (ii) in the event such non-employee director is first appointed or elected to the Board during such fiscal year, $1,400,000 in total value, in each case, calculating the value of any equity awards based on the grant date fair value of such equity awards for financial reporting purposes. No discounted stock options or stock appreciation rights. All stock options and stock appreciation rights must have an exercise price equal to or greater than the fair market value of our shares on the date the stock option or stock appreciation right is granted. • Awards subject to forfeiture/clawback. Awards granted under the 2022 Plan are subject to recoupment in accordance with the Amended and Restated Incentive Compensation Recoupment Policy that we adopted in November 2023, which policy is designed to comply with Section 10D of the Exchange Act, Rule 10D-1 promulgated thereunder and Nasdaq Listing Rule 5608. • Administration by independent committee. The 2022 Plan will be administered by the members of our Compensation Committee, all of whom are “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act and “independent” within the meaning of the Nasdaq listing standards.
Description of the 2022 Plan
Description of the 2022 Plan The material features of the 2022 Plan, as amended by the Amendment, are described below. This summary is, however, qualified in its entirely by and subject to the full text of the 2022 Plan, as proposed to be amended by the Amendment, which is attached as Appendix A-1. For ease of reference, the marked copy of the 2022 Plan attached as Appendix A-2 shows the proposed changes of the Amendment with the added text underlined. Stockholders are urged to read the actual text of the 2022 Plan and the Amendment in its entirety. General. The 2022 Plan provides for the grant of incentive stock options to our employees and employees of certain affiliates, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of stock awards to our employees, directors and consultants and the employees and consultants of our affiliates. Eligibility. Participants in the 2022 Plan consist of such employees, non-employee directors, and consultants of the Company and its affiliates as selected by the plan administrator. As of March 31, 2024, we had 130 employees, five consultants and eight non-employee directors who would be eligible to receive grants under the 2022 Plan if selected by the plan administrator. Authorized Shares and Share Counting Provisions. Subject to adjustment for certain changes in our capitalization, the aggregate number of shares of our common stock that may be issued under the 2022 Plan, as amended by the Amendment, will not exceed the sum of (i) 2,300,000 new shares, plus (ii) 6,069,000 shares approved by our stockholders at our 2023 Annual Meeting, plus (iii) the 1,928,000 shares originally reserved under the 2022 Plan, plus (iv) the number of unallocated shares remaining available for grant under the LTIP as of the original effective date of the 2022 Plan, plus (v) the Prior Plans’ Returning Shares, as such shares become available from time to time. The number of shares available for issuance under the 2022 Plan will be reduced by: (a) one share for each share issued pursuant to an Appreciation Award; and (b) 1.14 shares for each share issued pursuant to a Full Value Award. The number of shares available for issuance under the 2022 Plan will be increased by: (A) one share for each share subject to an Appreciation Award that returns from the LTIP, Inducement Plan or 2022 Plan; and (B) 1.14 shares for each Prior Plans’ Returning Share or the 2022 Plan Returning Share (as defined below) subject to a Full Value Award. The aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options is 37,200,000 shares. The following actions will not result in an issuance of shares under the 2022 Plan and accordingly do not reduce the number of shares subject to the share reserve and available for issuance under the 2022 Plan: (i) the expiration or termination of any portion of an award without the shares covered by such portion of the award having been issued; or (ii) the settlement of any portion of an award granted under the 2022 Plan in cash. The following shares of our common stock (collectively, the “2022 Plan Returning Shares”) will become available again for issuance under the 2022 Plan: any shares that are forfeited back to or repurchased by the Company because of a failure to meet a contingency or condition required for the vesting of such shares. The following shares of our common stock will not become available again for issuance under the 2022 Plan: (1) any shares that are reacquired or withheld (or not issued) by the Company to satisfy the exercise or strike price of an Appreciation Award or the purchase price of a Full Value Award; (2) any shares that are reacquired or withheld (or not issued) by the Company to satisfy a tax withholding obligation in connection with an Appreciation Award or a Full Value Award; (3) any shares repurchased by us on the open market with the proceeds of the exercise or strike price of an Appreciation Award or the purchase price of a Full Value Award; and (4) in the event that a stock appreciation right is settled in shares of common stock, the gross number of shares of common stock subject to such award. Plan Administration. Our Board, or a duly authorized committee of our Board, administers the 2022 Plan. Our Board may also delegate to one or more of our officers the authority to (1) designate employees (other than officers) to receive specified stock awards and (2) determine the number of shares subject to such stock awards. Under the 2022 Plan, our Board has the authority to determine the terms of awards, including recipients, the exercise, purchase or strike price of stock awards, if any, the number of shares subject to each stock award, the fair market value of a share, the vesting schedule applicable to the awards, together with any vesting acceleration, the form of consideration, if any, payable upon exercise or settlement of the award and the terms of the award agreements. No Repricing Without Stockholder Approval. Under the 2022 Plan, the plan administrator does not have the authority to reprice any outstanding stock option or stock appreciation right by reducing the exercise or strike price of the stock option or stock appreciation right or to cancel any outstanding stock option or stock appreciation right that has an exercise or strike price greater than the then-current fair market value of our common stock in exchange for cash or other stock awards without obtaining the approval of our stockholders. Such approval must be obtained within 12 months prior to such an event. Minimum Vesting Requirements. Under the 2022 Plan, no award may vest (and/or, if applicable, be exercisable) until at least 12 months following the date of grant of the award; provided, however, that up to 5% of the share reserve may be subject to awards that do not meet such vesting (and/or, if applicable, exercisability) requirements. Dividends and Dividend Equivalents. The 2022 Plan provides that dividends or dividend equivalents may be paid or credited with respect to any shares of our common stock subject to an award, as determined by the plan administrator and contained in the applicable award agreement; provided, however, that (i) no dividends or dividend equivalents may be paid with respect to any such shares before the date such shares have vested, (ii) any dividends or dividend equivalents that are credited with respect to any such shares will be subject to all of the terms and conditions applicable to such shares under the terms of the applicable award agreement (including any vesting conditions), and (iii) any dividends or dividend equivalents that are credited with respect to any such shares will be forfeited to us on the date such shares are forfeited to or repurchased by us due to a failure to vest. Dividends or dividend equivalents may not be paid or credited with respect to stock options and stock appreciation rights. Stock Options. Incentive stock options and nonstatutory stock options are granted pursuant to stock option agreements adopted by the plan administrator. The plan administrator determines the exercise price for stock options, within the terms and conditions of the 2022 Plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value of a share on the date of grant. Options granted under the 2022 Plan vest at the rate specified in the stock option agreement as determined by the plan administrator.
Description of the 2022 Plan
Restricted Stock Unit Awards. Restricted stock unit awards are granted pursuant to restricted stock unit award agreements adopted by the plan administrator. Restricted stock unit awards may be granted in consideration for any form of legal consideration that may be acceptable to our Board, or a duly authorized committee of our Board, and permissible under applicable law. A restricted stock unit award may be settled by cash, delivery of stock, a combination of cash and stock as deemed appropriate by the plan administrator or in any other form of consideration set forth in the restricted stock unit award agreement. Except as otherwise provided in the applicable award agreement, restricted stock units that have not vested will be forfeited upon the participant’s cessation of continuous service for any reason. Restricted Stock Awards. Restricted stock awards are granted pursuant to restricted stock award agreements adopted by the plan administrator. A restricted stock award may be awarded in consideration for cash, check, bank draft or money order, past services to us or any other form of legal consideration that may be acceptable to our Board, or a duly authorized committee of our Board, and permissible under applicable law. The plan administrator determines the terms and conditions of restricted stock awards, including vesting and forfeiture terms. If a participant’s service relationship with us ceases for any reason, we may receive through a forfeiture condition or a repurchase right any or all of the shares held by the participant that have not vested as of the date the participant terminates service with us. Stock Appreciation Rights. Stock appreciation rights are granted pursuant to stock appreciation grant agreements adopted by the plan administrator. The plan administrator determines the purchase price or strike price for a stock appreciation right, which generally cannot be less than 100% of the fair market value of a share on the date of grant. A stock appreciation right granted under the 2022 Plan vests at the rate specified in the stock appreciation right agreement as determined by the plan administrator. Performance Awards. The 2022 Plan permits the grant of performance-based stock and cash awards. Our Compensation Committee may structure awards so that the stock or cash will be issued or paid only following the achievement of certain pre-established performance goals during a designated performance period. Other Stock Awards. The plan administrator may grant other awards based in whole or in part by reference to our shares. The plan administrator will set the number of shares under the stock award and all other terms and conditions of such awards. Changes to Capital Structure. In the event there is a specified type of change in our capital structure, such as a stock split, reverse stock split or recapitalization, appropriate adjustments will be made to (1) the class and maximum number of shares reserved for issuance under the 2022 Plan, (2) the class and maximum number of shares that may be issued upon the exercise of incentive stock options, and (3) the class and number of shares and exercise price, strike price or purchase price, if applicable, of all outstanding stock awards.
Corporate Transaction and Change in Control
Corporate Transaction and Change in Control The following provisions will apply to outstanding awards under the 2022 Plan in the event of a corporate transaction (as defined in the 2022 Plan and described below) or a change in control (as defined in the 2022 Plan and described below) (each, a “Transaction”), unless otherwise provided in the instrument evidencing the award, in any other written agreement between us or one of our affiliates and the participant, or in our director compensation policy. In the event of a Transaction, any surviving or acquiring corporation (or its parent company) may assume or continue any or all outstanding awards under the 2022 Plan, or may substitute similar stock awards for such outstanding awards (including, but not limited to, awards to acquire the same consideration paid to the stockholders of the Company pursuant to the Transaction), and any reacquisition or repurchase rights held by the Company in respect of shares issued pursuant to any outstanding awards under the 2022 Plan may be assigned by the Company to the surviving or acquiring corporation (or its parent company). In the event of a Transaction in which the surviving or acquiring corporation (or its parent company) does not assume or continue outstanding awards under the 2022 Plan, or substitute similar stock awards for such outstanding awards, then with respect to any such awards that have not been assumed, continued or substituted and that are held by participants whose continuous service has not terminated prior to the effective time of the Transaction (the “Current Participants”), the vesting (and exercisability, if applicable) of such awards will be accelerated in full (and with respect to any such awards that are subject to performance-based vesting conditions or requirements, vesting will be deemed to be satisfied at the target level of performance to a date prior to the effective time of the Transaction (contingent upon the closing or completion of the Transaction)) as the plan administrator will determine, and such awards will terminate if not exercised (if applicable) prior to the effective time of the Transaction in accordance with the exercise procedures determined by the plan administrator, and any reacquisition or repurchase rights held by the Company with respect to such awards will lapse (contingent upon the closing or completion of the Transaction). In the event of a Transaction in which the surviving or acquiring corporation (or its parent company) does not assume or continue outstanding awards under the 2022 Plan, or substitute similar stock awards for such outstanding awards, then with respect to any such awards that have not been assumed, continued or substituted and that are held by participants other than the Current Participants, such awards will terminate if not exercised (if applicable) prior to the effective time of the Transaction; provided, however, that any reacquisition or repurchase rights held by the Company with respect to such awards will not terminate and may continue to be exercised notwithstanding the Transaction. In the event any outstanding award under the 2022 Plan held by a participant will terminate if not exercised prior to the effective time of a Transaction, the plan administrator may provide that the participant may not exercise such award but instead will receive a payment, in such form as may be determined by the plan administrator, equal in value to the excess, if any, of (i) the value of the property the participant would have received upon the exercise of such award immediately prior to the effective time of the Transaction, over (ii) any exercise price payable by the participant in connection with such exercise. For purposes of the 2022 Plan, a “corporate transaction” generally will be deemed to occur in the event of the consummation of: • a sale or other disposition of all or substantially all of the consolidated assets of the Company and its subsidiaries; • a sale or other disposition of at least 50% of the outstanding securities of the Company; • a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or • a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of common stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise. For purposes of the 2022 Plan, a “change in control” generally will be deemed to occur in the event: • a person, entity or group acquires, directly or indirectly, our securities representing more than 50% of the combined voting power of our then outstanding securities, other than by virtue of a merger, consolidation, or similar transaction; • there is consummated a merger, consolidation, or similar transaction and, immediately after the consummation of such transaction, our stockholders immediately prior thereto do not own, directly or indirectly, more than 50% of the combined outstanding voting power of the surviving entity or the parent of the surviving entity in substantially the same proportions as their ownership of our outstanding voting securities immediately prior to such transaction; • there is consummated a sale or other disposition of all or substantially all of our consolidated assets, other than a sale or other disposition to an entity in which more than 50% of the entity’s combined voting power is owned by our stockholders in substantially the same proportions as their ownership of our outstanding voting securities immediately prior to such sale or other disposition; or • a majority of our Board becomes comprised of individuals whose nomination, appointment, or election was not approved by a majority of the Board members or their approved successors. Transferability. A participant may not transfer a stock option or stock appreciation right under the 2022 Plan other than by will, the laws of descent and distribution or as otherwise provided under the 2022 Plan. Plan Amendment or Termination. Our Board has the authority to amend, suspend or terminate the 2022 Plan, provided that such action does not materially impair the existing rights of any participant without such participant’s written consent. Certain material amendments also require the approval of our stockholders under Nasdaq listing rules. No incentive stock options may be granted after the tenth anniversary of the date our Board initially adopted the 2022 Plan. No stock awards may be granted under the 2022 Plan while it is suspended or after it is terminated.
Nonstatutory Stock Options
Nonstatutory Stock Options Generally, there is no taxation upon the grant of a nonstatutory stock option if the stock option is granted with an exercise price equal to the fair market value of the underlying stock on the grant date. On exercise, an optionholder will recognize ordinary income equal to the excess, if any, of the fair market value on the date of exercise of the stock over the exercise price. If the optionholder is employed by us or one of our affiliates, that income will be subject to withholding taxes. We (or the affiliated employer) will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the optionholder, subject to any applicable deduction limitations under Section 162(m) of the Code.
Incentive Stock Options
Incentive Stock Options The 2022 Plan provides for the grant of stock options that qualify as “incentive stock options,” as defined in Section 422 of the Code. Under the Code, an optionholder generally is not subject to ordinary income tax upon the grant or exercise of an incentive stock option (“ISO”) (although, in certain circumstances, there may be an item of adjustment included for alternative minimum tax purposes). If the optionholder holds a share received on exercise of an ISO for more than two years from the date the stock option was granted and more than one year from the date the stock option was exercised, which is referred to as the required holding period, the difference, if any, between the amount realized on a sale or other taxable disposition of that share and the holder’s tax basis in that share will be long-term capital gain or loss. If, however, an optionholder disposes of a share acquired on exercise of an ISO before the end of the required holding period, which is referred to as a disqualifying disposition, the optionholder generally will recognize ordinary income in the year of the disqualifying disposition equal to the excess, if any, of the fair market value of the share on the date the ISO was exercised over the exercise price. We are not allowed an income tax deduction with respect to the grant or exercise of an ISO or the disposition of a share acquired on exercise of an ISO after the required holding period. If there is a disqualifying disposition of a share, however, we (or the affiliated employer) are generally allowed a deduction in an amount equal to the ordinary income includible in income by the optionholder, subject to any applicable deduction limitations under Section 162(m) of the Code.
Restricted Stock Awards
Restricted Stock Awards Generally, the recipient of a restricted stock award (i.e., stock subject to a substantial risk of forfeiture, such as a vesting requirement that the employee work for a period of time in order to have the right to sell the stock) will not recognize income until the substantial risk of forfeiture lapses, at which time the recipient will recognize ordinary income equal to the excess, if any, of the fair market value of the stock on the date the substantial risk of forfeiture lapses over any amount paid by the recipient in exchange for the stock. A recipient may, however, file an election with the Internal Revenue Service under Section 83(b) of the Code within 30 days following his or her receipt of the stock award, to recognize ordinary income, as of the date the recipient receives the award, equal to the excess, if any, of the fair market value of the stock on the date the award is granted over any amount paid by the recipient for the stock. We (or the affiliated employer) will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the stock award (upon grant or lapse of the substantial risk of forfeiture), subject to any applicable deduction limitations under Section 162(m) of the Code.
Restricted Stock Unit Awards
Restricted Stock Unit Awards Generally, the recipient of a stock unit structured to conform to the requirements of Section 409A of the Code or an exception to Section 409A of the Code will recognize ordinary income at the time the stock is delivered equal to the excess, if any, of any cash received or the fair market value of the shares received over any amount paid by the recipient in exchange for the shares. We (or the affiliated employer) will generally be entitled to a tax deduction equal to the taxable ordinary income realized by the recipient of the stock award, subject to the deduction limitations under Section 162(m) of the Code.
Plan Benefits under 2022 Plan
| Name and position | Stock Options Granted | Weighted Average Exercise Price | Restricted Stock Units Granted | Performance Stock Units Granted | | Doug Doerfler | 400,000 | $4.19 | — | — | | Former President, Chief Executive Officer | | | | | | Maher Masoud | 520,000 | $4.37 | — | 400,000 | | President, Chief Executive Officer, Former Vice President and General Counsel | | | | | | Douglas Swirsky | 575,000 | $4.19 | 81,250 | 31,250 | | Chief Financial Officer | | | | | | All current executive officers as a group (4 persons) | 1,402,625 | $4.31 | 152,163 | 460,163 | | All current directors who are not executive officers as a group (8 persons | 768,300 | $4.78 | — | — | | All employees, including all current officers who are not executive officers, as a group (approximately 166 persons) | 2,035,720 | $4.59 | 2,423,105 | 90,675 |
Securities Authorized for Issuance Under Equity Compensation Plans
Securities Authorized for Issuance Under Equity Compensation Plans The following table provides certain information with respect to all of the Company’s equity compensation plans in effect as of December 31, 2023.
Securities Authorized for Issuance Under Equity Compensation Plans
| | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) | Weighted average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) | | Equity compensation plans approved by security holders | | | | | 2022 Equity Incentive Plan | 4,355,595 | $4.54 | 6,202,089 | | Long-Term Incentive Plan | 11,540,171 | $6.28 | — | | Equity compensation plans not approved by | | | | | security holders | | | | | Inducement Plan(1) | 818,400 | $5.69 | — | | Total | | | |
Securities Authorized for Issuance Under Equity Compensation Plans
(1) In December 2021, the Board adopted the Inducement Plan, which is a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq listing rules. Simultaneous with approval of the 2022 Plan, we retired the Inducement Plan.
2023 Summary Compensation Table
2023 Summary Compensation Table The following table presents all of the compensation awarded to or earned by or paid to our NEOs for the fiscal years ended December 31, 2023 and, to the extent required by SEC disclosure rules, December 31, 2022.
2023 Summary Compensation Table
| Name and Principal Position | Year | Salary ($) | Option Awards ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | All Other Compensation ($)(3) | Total $ | | Doug Doerfler Former President and Chief Executive Officer | 2023 | 641,300 | 797,936 | 572,100 | 1,124,948 | 3,136,284 | | | 2022 | 605,000 | 375,679 | 576,000 | 18,638 | 1,575,317 | | Maher Masoud President and Chief Executive Officer, former Executive Vice President | 2023 | 450,000 | 239,381 | 186,600 | 14,384 | 890,365 | | | 2022 | 412,500 | 178,806 | 184,800 | 14,765 | 790,871 | | Douglas Swirsky, Chief Financial Officer(4) | 2023 | 326,129 | 684,923 | 161,500 | 17,382 | 1,189,934 |
2023 Summary Compensation Table
(1) Amounts reported represent the aggregate grant date fair value of the stock options granted to our NEOs during the indicated year, computed in accordance with Financial Accounting Standard Board Accounting Standards Codification Topic 718 (“ASC 718”). The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The assumptions used in calculating the grant date fair value of the stock options reported in this column are set forth in Notes 2 and 4 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. This amount does not reflect the actual economic value that may be realized by the NEOs upon the exercise of the options or the sale of the underlying shares. (2) Represents amounts paid pursuant to our annual incentive compensation program, described below. (3) Consists of matching contributions under our 401(k) plan paid by us during 2023 and 2022 and de minimis incentives provided to all employees based on company-wide sales performance. For 2023, amounts for Mr. Doerfler also include costs incurred in connection with his retirement and employment transition, consisting of $961,950 in accrued severance payments, $40,069 in accrued post-employment health insurance benefits, $89,409 for accrued but unused vacation that was cashed out, and $15,000 in legal fees reimbursed to him in connection with entering into a transition agreement and consulting agreement with us. See “Retirement Benefits and Other Compensation — Transition Agreement and Consulting Agreement with Doug Doerfler” for additional information. (4) Mr. Swirsky was not employed by our company prior to March 2023.
2023 Outstanding Equity Awards at Fiscal Year End
2023 Outstanding Equity Awards at Fiscal Year End The following table presents information regarding outstanding stock options held by our NEOs as of December 31, 2023. None of our NEOs held restricted stock or other stock awards at the end of 2023.
2023 Outstanding Equity Awards at Fiscal Year End
| | Number of Securities Underlying Unexercised Options Exercisable | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price ($) | Option Expiration Date | | Doug Doerfler | 85,080 | — | 0.04 | 11/11/2024 | | | 296,000 | — | 1.09 | 6/13/2026 | | | 296,000 | — | 3.17 | 7/14/2027 | | | 296,000 | — | 3.18 | 7/18/2028 | | | 390,200 | — | 2.35 | 3/4/2029 | | | 382,071 | 8,129(1) | 1.81 | 1/20/2030 | | | 276,392 | 113,808(2) | 14.46 | 2/16/2031 | | | 5,833 | 4,167(3) | 16.63 | 8/9/2031 | | | 218,750 | 281,250(4) | 7.12 | 3/25/2032 | | | — | 400,000(5) | 4.19 | 3/20/2033 | | Maher Masoud | 35,000 | — | 3.18 | 7/18/2028 | | | 46,100 | — | 2.35 | 3/4/2029 | | | 45,140 | 960(1) | 1.81 | 1/20/2030 | | | 69,792 | 5,208(6) | 2.13 | 2/25/2030 | | | 70,833 | 29,167(2) | 14.46 | 2/16/2031 | | | 5,833 | 4,167(3) | 16.63 | 8/9/2031 | | | 45,833 | 54,167(7) | 6.32 | 2/25/2032 | | | 62,125 | 79,875(4) | 7.12 | 3/25/2032 | | | — | 120,000(5) | 4.19 | 3/20/2033 | | Douglas Swirsky | — | 350,000(8) | 4.11 | 3/27/2033 |
2023 Outstanding Equity Awards at Fiscal Year End
Represents an option to purchase shares of our common stock granted on January 20, 2020. The shares underlying this option vest as follows: 1/16th of the shares vested 90 calendar days following the grant date and the remainder vests monthly in 45 monthly installments thereafter, subject to the applicable holder’s continued service to our company through the applicable vesting date. Represents an option to purchase shares of our common stock granted on February 16, 2021. The shares underlying this option vest as follows: 1/4th of the shares vested one calendar year following the grant date and the remainder vests monthly in 36 monthly installments thereafter, subject to the applicable holder’s continued service to our company through the applicable vesting date. (3) Represents an option to purchase shares of our common stock granted on August 9, 2021. The shares underlying this option vest as follows: 1/4th of the shares vested one calendar year following the grant date and the remainder vests monthly in 36 monthly installments thereafter, subject to the applicable holder’s continued service to our company through the applicable vesting date. (4) Represents an option to purchase shares of our common stock granted on March 25, 2022. The shares underlying this option vest as follows: 1/4th of the shares vested one calendar year following the grant date and the remainder vests monthly in 36 monthly installments thereafter, subject to the applicable holder’s continued service to our company through the applicable vesting date. (5) Represents an option to purchase shares of our common stock granted on March 20, 2023. The shares underlying this option vest as follows: 1/4th of the shares vested one calendar year following the grant date and the remainder vests monthly in 36 monthly installments thereafter, subject to the applicable holder’s continued service to our company through the applicable vesting date. (6) Represents an option to purchase shares of our common stock granted on February 25, 2020. The shares underlying this option vest as follows: 1/16th of the shares vested 90 calendar days following the grant date and the remainder vests monthly in 45 monthly installments thereafter, subject to the applicable holder’s continued service to our company through the applicable vesting date. (7) Represents an option to purchase shares of our common stock granted on February 25, 2022. The shares underlying this option vest as follows: 1/4th of the shares vested one calendar year following the grant date and the remainder vests monthly in 36 monthly installments thereafter, subject to the applicable holder’s continued service to our company through the applicable vesting date. (8) Represents an option to purchase shares of our common stock granted on March 27, 2023. The shares underlying this option vest as follows: 1/4th of the shares vested one calendar year following the grant date and the remainder vests monthly in 36 monthly installments thereafter, subject to the applicable holder’s continued service to our company through the applicable vesting date.
Potential Payments Upon Termination or Change in Control
Potential Payments Upon Termination or Change in Control We have entered into severance agreements with each of the NEOs in connection with his employment with us, which sets forth the terms and conditions of his specified payments and benefits in connection with a termination of employment in certain circumstances. In each case, the officer must sign and not revoke a release of claims in our favor in order to receive these payments and benefits. Our goal in providing these severance and change in control payments and benefits is to offer sufficient cash continuity protection such that the NEOs will focus their full time and attention on the requirements of the business rather than the potential implications of a qualifying employment termination or change in control for their respective positions. We prefer to have certainty regarding the potential severance amounts payable to the NEOs, rather than negotiating severance at the time that an NEO’s employment terminates. We have also determined that accelerated vesting provisions with respect to outstanding equity awards in connection with a qualifying termination of employment in certain circumstances are appropriate because they encourage our NEOs to stay focused on the business in those circumstances, rather than focusing on the potential implications of the termination of employment for them personally. The material terms of the severance agreements we have entered into with our NEOs are summarized below. Doug Doerfler We previously entered into a severance agreement with Mr. Doerfler on July 20, 2021. As described above, on December 11, 2023, we and Mr. Doerfler entered into the Transition Agreement, which supersedes the previous severance agreement. Under the Transition Agreement, subject to Mr. Doerfler executing a general release of claims in our favor and allowing it to become effective, Mr. Doerfler became entitled to the equivalent of 18 months of his base salary in effect as of December 31, 2023, to be paid in 18 equal monthly installments beginning on February 1, 2024, and up to 18-months of Company-paid COBRA coverage for Mr. Doerfler and his covered dependents. Maher Masoud We and Mr. Masoud entered into a severance agreement dated January 11, 2021, setting forth the terms of his severance eligibility. Under Mr. Masoud’s severance agreement that was in effect on December 31, 2023, if he had been terminated by us other than for “cause” (as defined in the severance agreement), or if he had resigned for “good reason” (as defined in the severance agreement), and if such termination or resignation occurred on the date of or within 24 months following a “change of control” (as defined in the severance agreement), then Mr. Masoud would have been eligible to receive (i) payment of his monthly base salary (calculated as his total base salary during the 12 month period prior to his date of termination divided by 12) for the 9 months following his departure (less applicable tax withholdings), (ii) 75% of his “target bonus” (as defined in the severance agreement) (less applicable tax withholdings) paid in monthly installments over 9 months, (iii) COBRA premium coverage for up to 9 months, and (iv) full acceleration of the vesting of the unvested shares subject to his outstanding stock options. If he had been terminated by us other than for “cause,” or if he had resigned for “good reason,” and if such termination or resignation occurred at any time prior to a “change of control,” then Mr. Masoud would have been eligible to receive (i) payment of his monthly base salary (calculated as his total base salary during the 12 month period prior to his date of termination divided by 12) for the nine months following his departure (less any amounts paid to Mr. Masoud during such nine month period under our Short Term or Long Term Disability Plan, and less applicable tax withholdings), (ii) COBRA premium coverage for up to nine months, and (iii) if the termination or resignation occurs within 180 days prior to a “change of control,” then Mr. Masoud would also have receive full acceleration of the vesting of the unvested shares subject to his outstanding stock options. In connection with Mr. Masoud’s appointment as our President and Chief Executive Officer effective as of January 1, 2024, the Board approved, at the recommendation of the Compensation Committee, and on December 11, 2023, we and Mr. Masoud entered into, a letter agreement (the “Promotion Letter”) setting forth certain changes to Mr. Masoud’s compensation upon the effectiveness of his promotion. The Promotion Letter modifies and amends the terms of Mr. Masoud’s severance agreement described above. Under the terms of the severance agreement, as modified by the Promotion Letter, if Mr. Masoud is terminated by us other than for “cause” or if he resigns for “good reason” (each such termination, a “Triggering Event”), and if such Triggering Event occurs on or within three months prior to, or 24 months following, a “change of control,” then Mr. Masoud will be eligible to receive a severance amount equal to (a) 18 months of his then current base salary plus (b) 1.5 times his then current “target bonus,” which is defined as greater of (i) the actual bonus amount earned under our annual bonus plan with respect to the calendar year prior to the calendar year in which the termination occurs, (ii) the actual bonus amount earned under our bonus plan for the calendar year in which the termination occurs, or (iii) the target bonus amount under the Company’s bonus plan for the calendar year in which the termination occurs. The foregoing target bonus amount will not be subject to proration, and the severance amount described in the preceding sentence will be paid in equal monthly installments over an 18-month period (the “CIC Severance Period”), subject to standard payroll deductions and withholdings. In the event of a Triggering Event that occurs more than three months prior to or more than 24 months following a change of control, then Mr. Masoud will be eligible to receive a severance amount equal to 12 months of his then current base salary, payable in equal monthly installments over a 12-month period (the “Non-CIC Severance Period”), subject to standard payroll deductions and withholdings. In addition, upon a Triggering Event that occurs on or within 180 days prior to, or 24 months following, a change of control, all of the unvested shares subject to any stock options granted to Mr. Masoud that remain outstanding and would otherwise not be vested and exercisable as of the date of termination will be treated as vested and exercisable as of the date of termination. Upon the occurrence of a Triggering Event, if Mr. Masoud timely elects continued coverage under COBRA for himself and his covered dependents under our group health plans following the date of termination, then we will also pay the federal COBRA (or, if applicable, state continuation coverage) premiums to continue healthcare coverage for Mr. Masoud and his covered dependents for the CIC Severance Period or Non-CIC Severance Period, as applicable, or, if earlier, until the date when he becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment or the date on which he ceases to be eligible for COBRA or state continuation coverage for any reason. Douglas Swirsky
Potential Payments Upon Termination or Change in Control
We and Mr. Swirsky entered into a severance agreement dated March 27, 2023, setting forth the terms of Mr. Swirsky’s severance eligibility. Under Mr. Swirsky’s severance agreement, if he had been terminated by us other than for “cause” (as defined in the severance agreement), or if he had resigned for “good reason” (as defined in the severance agreement), and if such termination or resignation occurred on the date of or within 24 months following a “change of control” (as defined in the severance agreement), then Mr. Swirsky would be eligible to receive (i) payment of his monthly base salary (calculated as his total base salary during the 12 month period prior to his date of termination divided by 12) for the 12 months following his departure (less applicable tax withholdings), (ii) 100% of his “target bonus” (as defined in the severance agreement) (less applicable tax withholdings) paid in monthly installments over 9 months, (iii) COBRA premium coverage for up to 9 months, and (iv) full acceleration of the vesting of the unvested shares subject to his outstanding stock options. Under Mr. Swirsky’s severance agreement, if he had been terminated by us other than for “cause,” or if he had resigned for “good reason,” and if such termination or resignation occurred at any time prior to a “change of control,” then Mr. Swirsky would be eligible to receive (i) payment of his monthly base salary (calculated as his total base salary during the 12 month period prior to his date of termination divided by 12) for the nine months following his departure (less any amounts paid to Mr. Swirsky during such nine month period under our Short Term or Long Term Disability Plan, and less applicable tax withholdings), (ii) COBRA premium coverage for up to nine months, and (iii) if the termination or resignation occurs within 180 days prior to a “change of control,” then Mr. Swirsky would also have received full acceleration of the vesting of the unvested shares subject to his outstanding stock options.
Director Compensation
Director Compensation We have historically provided our non-employee directors with an annual cash retainer as well as additional annual retainers for service as chair of the Board and service as chair or member of the Board’s committees. The fees for committee service are in addition to the annual cash retainer for Board service. Members of committees can receive either a chair or a member retainer for service on the committee, but not both.
Director Compensation
| Position | | Annual Cash Retainer ($) | | Board of Directors | Chair | 80,000 | | | Member | 40,000 | | Audit Committee | Chair | 20,000 | | | Member | 10,000 | | Compensation Committee | Chair | 15,000(1) | | | Member | 7,500(1) | | Nominating & Corporate Governance Committee | Chair | 10,000 | | | Member | 5,000 |
Director Compensation
(1) Annual Retainers for the Compensation Committee Chair and members were $14,000 and $6,000, respectively prior to July 1, 2023. In addition to annual cash retainers, in accordance with our equity grant policy, our non-employee directors are granted options to purchase shares of our common stock under our 2022 Plan in an amount determined by our Board annually. In June 2023, at the time of our 2023 Annual Meeting, each of our non-employee directors was granted an option to purchase 50,000 shares of our common stock. In March 2023, Dr. Al-Wakeel and Ms. Hemrajani were each granted an additional option to purchase 40,000 shares of our common stock. Dr. Al-Wakeel and Ms. Hemrajani joined our Board shortly before our U.S. initial public offering in August 2021, and it was determined that the equity awards issued to them at the commencement of their service on the Board was below those of our peer companies listed on Nasdaq and therefore that an upward adjustment was appropriate in the form of a new grant. Our non-employee directors are also reimbursed upon request for out-of-pocket expenses incurred in connection with their attendance at Board meetings.
2023 Director Compensation Table
2023 Director Compensation Table The following table sets forth information regarding the compensation earned for service on our Board in 2023 by our non-employee directors. Doug Doerfler, our former President and Chief Executive Officer, was also a member of our Board in 2023 but did not receive any additional compensation for service as a director. Information about compensation for Mr. Doerfler with respect to 2023 is set forth above under “2023 Summary Compensation Table.”
2023 Director Compensation Table
| Name | Fees Earned or Paid in Cash ($) | Option Awards(1)(2) ($) | Total ($) | | Will Brooke | 66,750 | 110,494 | 177,244 | | Richard Douglas, PhD | 80,000 | 110,494 | 190,494 | | Stanley Erck | 51,750 | 110,494 | 162,244 | | John Johnston | 50,000 | 110,494 | 160,494 | | Art Mandell | 60,000 | 110,494 | 170,494 | | Yasir Al-Wakeel | 50,000 | 188,527 | 238,527 | | Rekha Hemrajani | 54,500 | 188,527 | 243,027 | | Patrick J. Balthrop, | 45,000 | 110,494 | 155,494 |
2023 Director Compensation Table
(1) This column reflects the full grant date fair value of options granted during the year measured pursuant to ASC 718, the basis for computing stock-based compensation in our financial statements. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The assumptions used in calculating the grant date fair value of the stock options reported in this column are set forth in Notes 2 and 4 to our audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. This amount does not reflect the actual economic value that may be realized by the director upon the exercise of the options or the sale of the underlying shares. (2) The following table provides information regarding the aggregate number of option awards granted to our non-employee directors that were outstanding as of December 31, 2023:
2023 Director Compensation Table
| Name | | | Will Brooke | 215,400 | | Richard Douglas, PhD | 208,500 | | Stanley Erck | 378,867 | | John Johnston | 177,217 | | Art Mandell | 235,800 | | Yasir Al-Wakeel | 207,600 | | Rekha Hemrajani | 207,600 | | Patrick J. Balthrop | 150,000 |