UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 10, 2018
Celcuity Inc.
(Exact name of Registrant as Specified in its Charter)
| Delaware | 001-38207 | 82-2863566 | ||
|
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
16305 36th Avenue North; Suite 450
Minneapolis, Minnesota 55446
(Address of Principal Executive Offices and Zip Code)
(763) 392-0767
(Registrant’s telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x
| Item 5.02. | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
At the Annual Meeting of Stockholders on May 10, 2018, the stockholders of Celcuity Inc. (the “Company”) approved the Celcuity Inc. 2017 Stock Incentive Plan, as amended (the “2017 Plan”) and the Celcuity Inc. 2017 Employee Stock Purchase Plan (the “ESPP”). The principal provisions of the 2017 Plan and ESPP are summarized below. The summaries below are not complete descriptions of the 2017 Plan or the ESPP, and are qualified in their entirety by reference to the 2017 Plan and the ESPP, which are included herewith as Exhibit 10.1 and Exhibit 10.2, respectively. The forms of agreement for awards under the 2017 Plan are included herewith as Exhibits 10.3 – 10.5.
2017 STOCK INCENTIVE PLAN
Description of the Plan
Purpose. The purpose of the 2017 Plan is to advance the interests of the Company and its stockholders by enabling the Company to attract and retain persons of skill and ability to perform services for the Company by providing an incentive to such individuals through equity participation in the Company and by rewarding such individuals who contribute to the achievement of the Company’s economic objectives. As of December 31, 2017, 36 individuals were eligible for selection to receive awards under the Plan.
Shares Available. The Company has reserved 750,000 shares of its common stock to be issued under the 2017 Plan. The number of shares reserved for issuance under the 2017 Plan will increase automatically on January 1 of each of 2019 through 2027 by the number of shares equal to 1.0% of the aggregate number of outstanding shares of the Company’s common stock as of the immediately preceding December 31. However, the Company’s Board of Directors may reduce the amount of the increase in any particular year. In addition, the following shares will again be available for grant and issuance under the 2017 Plan:
| · | shares subject to options or stock appreciation rights granted under the 2017 Plan that cease to be subject to the option or stock appreciation right for any reason other than exercise of the option or stock appreciation right; |
| · | shares subject to awards granted under the 2017 Plan that are subsequently forfeited or repurchased by the Company at the original issue price; |
| · | shares subject to awards granted under the 2017 Plan that otherwise terminate without shares being issued; and |
| · | shares surrendered, cancelled or exchanged for cash or a different award (or combination thereof). |
Awards Available. The 2017 Plan authorizes the award of stock options, restricted stock awards, or RSAs, stock appreciation rights, or SARs, restricted stock units, or RSUs, performance awards and stock bonuses. No person will be eligible to receive more than 250,000 shares in any calendar year under the 2017 Plan other than a new employee of the Company, who will be eligible to receive no more than 500,000 shares under the 2017 Plan in the calendar year in which the employee commences employment. No more than 750,000 shares will be issued pursuant to the exercise of incentive stock options.
The 2017 Plan provides for the grant of awards to Company employees, directors, consultants, independent contractors and advisors, provided the consultants, independent contractors, directors and advisors are natural persons that render services not in connection with the offer and sale of securities in a capital-raising transaction. The awards granted may vest based on time and/or achievement of performance conditions.
The Company’s Compensation Committee may provide for options to be exercised only as they vest or to be immediately exercisable with any shares issued on exercise being subject to the Company’s right of repurchase that lapses as the shares vest. The exercise price of stock options must be at least equal to the fair market value of the Company’s common stock on the date of grant. The maximum term of options granted under the 2017 Plan is ten years.
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A RSA is a grant by the Company of shares of its common stock subject to restrictions. The price (if any) of an RSA will be determined by the Company’s Compensation Committee. Unless otherwise determined by the Compensation Committee at the time of award, vesting will cease on the date the participant no longer provides services to the Company and unvested shares will be forfeited to or repurchased by the Company.
SARs provide for a payment, or payments, in cash or shares of the Company’s common stock, to the holder based upon the difference between the fair market value of the Company’s common stock on the date of exercise and the stated exercise price up to a maximum amount of cash or number of shares.
RSUs represent the right to receive shares of the Company’s common stock at a specified date in the future, subject to forfeiture of that right because of termination of employment or failure to achieve certain performance conditions. If an RSU has not been forfeited, then on the date specified in the RSU agreement, the Company will deliver to the holder of the restricted stock unit whole shares of the Company’s common stock (which may be subject to additional restrictions), cash or a combination of common stock and cash.
Performance shares are performance awards that cover a number of shares of the Company’s common stock that may be settled in cash or by issuance of the underlying shares. These awards are subject to forfeiture prior to settlement because of termination of employment or failure to achieve the performance conditions.
Stock bonuses may be granted as additional compensation for service or performance and, therefore, will not be issued in exchange for cash.
Transferability. Awards granted under the 2017 Plan may not be transferred in any manner other than by will or by the laws of descent and distribution or as determined by the Company’s Compensation Committee. Unless otherwise permitted by the Compensation Committee, stock options may be exercised during the lifetime of the optionee only by the optionee or the optionee’s guardian or legal representative. Options granted under the 2017 Plan generally may be exercised for a period of three months after the termination of the optionee’s service to the Company, for a period of 12 months in the case of death or disability, or such longer period as the Compensation Committee may provide. Options generally terminate immediately upon termination of employment for cause.
Certain Adjustments. In the event there is a specified type of change in the Company’s capital structure without receipt of consideration by the Company, such as a stock split, appropriate adjustments will be made to the number of shares reserved under the 2017 Plan, the maximum number of shares that can be granted in a calendar year and the number of shares and exercise price, if applicable, of all outstanding awards under the 2017 Plan.
Change of Control and Other Corporate Events. The 2017 Plan provides that, in the event of specified types of mergers or consolidations, a sale, lease, or other disposition of all or substantially all of the Company’s assets or other corporate transactions, outstanding awards under the 2017 Plan may be assumed or replaced by any surviving or acquiring corporation; the surviving or acquiring corporation may substitute similar awards for those outstanding under the 2017 Plan; outstanding awards may be settled for the full value of such outstanding award (whether or not then vested or exercisable) in cash, cash equivalents, or securities (or a combination thereof) of the successor entity with payment deferred until the date or dates the award would have become exercisable or vested; or outstanding awards may be terminated for no consideration. The Company’s Board of Directors or Compensation Committee has the discretion to provide that a stock award under the 2017 Plan will immediately vest as to all or any portion of the shares subject to the stock award at the time of a corporate transaction or in the event a participant’s service with us or a successor entity is terminated actually or constructively within a designated period following the occurrence of the transaction. Stock awards held by participants under the 2017 Plan will not vest automatically on such an accelerated basis unless specifically provided in the participant’s applicable award agreement. In the event of a corporate transaction, the vesting of all awards granted to non-employee directors shall accelerate and such awards shall become exercisable (as applicable) in full upon the consummation of the corporate transaction.
Termination; Amendment. The 2017 Plan will terminate ten years from the date the Company’s Board of Directors adopted the plan, unless it is terminated earlier by the Board of Directors. The Board of Directors may amend or terminate the 2017 Plan at any time. The Board of Directors generally may amend the 2017 Plan, without stockholder approval unless required by applicable law.
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Plan Administration. The 2017 Plan is administered by the Company’s Compensation Committee, all of the members of which are outside directors as defined under applicable federal tax laws, or by the Company’s Board of Directors acting in place of the Compensation Committee. The Compensation Committee has the authority to construe and interpret the 2017 Plan, grant awards and make all other determinations necessary or advisable for the administration of the plan.
2017 EMPLOYEE STOCK PURCHASE PLAN
Description of the Plan
Purpose. The purpose of the ESPP is to provide the Company’s employees with an opportunity to purchase shares of its common stock through periodic payroll deductions.
Shares Available. The Company has reserved a total of 100,000 shares for issuance under the ESPP, of which 9,882 have been issued as of the date hereof. The number of shares authorized and reserved for issuance under the ESPP will be automatically increased on the first day of each of the Company’s fiscal years beginning in 2019 by the number of shares equal to 0.5% of the total outstanding number of shares of common stock. However, the Company’s Board of Directors may reduce the amount of the increase in any particular year. Unless terminated earlier by the Company’s Board of Directors, the ESPP will terminate on September 6, 2027.
Eligibility. All employees are eligible to participate in the ESPP unless they are employed for less than 20 hours per week or own 5% or more of the total combined voting power or value of the Company’s common stock. As of December 31, 2017, 18 of the Company’s 21 full-time employees participated in the Plan.
Purchasing Shares. The ESPP is administered using overlapping 24 month offering periods, (each referred to as an Offering Period). A new Offering Period begins every six months on May 1 and November 1 of each year. Eligible employees must complete a subscription agreement prior to the first day of an Offering Period, or the Offering Date, to participate in an Offering Period. The subscription agreement must include the percentage of the employee’s regular cash compensation that he or she would like to deduct from their payroll check during each pay period. Employees may deduct 1% to 10% of their regular cash compensation from each payroll check to apply to the ESPP.
Each Offering Period has four (4) six-month Purchase Periods (each referred to as a Purchase Period), which begin on May 1 and November 1 of each year. Employee payroll deductions for participating employees are accumulated until the last day of each Purchase Period, currently April 30 and October 31, or the Purchase Date. On the Purchase Date, the employee’s payroll deductions are used to purchase shares of common stock at 85% of the fair market value of a share of common stock on either the Offering Date or the Purchase Date, whichever is lower. If the Purchase Date has a lower price, the employee will automatically be placed in the Offering Period beginning immediately after the Purchase Date.
The ESPP places a limit on the value and number of shares of common stock each employee may purchase. Each employee may purchase a maximum of 2,000 shares per Purchase Period and a maximum of 8,000 shares per Offering Period. The fair market value of shares of common stock purchased by each employee cannot exceed $25,000 in any calendar year.
Withdrawal and Termination. By giving written notice, each employee may withdraw the entire amount accumulated under the ESPP during a Purchase Period prior to the Purchase Date. Upon an employee’s termination of employment for any reason, including retirement or death, the employee’s participation in the ESPP is automatically terminated.
If the Company is dissolved or liquidated, any Purchase Period or Offering Period will terminate immediately prior to the dissolution or liquidation. If the Company sells substantially all of its assets to another company or engages in a merger or consolidation where its stockholders will own less than 50% of shares of stock in the resulting company, the ESPP will either be assumed by the successor entity or a new Purchase Date will be set before the transaction is completed, after which the ESPP will terminate.
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Plan Administration. The Company’s Board of Directors, or a committee appointed by it, interprets, supervises and administers the ESPP and has the authority to adopt, amend and rescind any rules governing the ESPP so long as they are consistent with the terms of the ESPP. For example, the Board of Directors has the ability to change the duration and frequency of Offering Periods and Purchase Periods as well as the maximum and minimum percentages of regular cash contribution employees may contribute to purchase stock. Additionally, in the event of reorganization, recapitalization, consolidation, merger or other increase or reduction in the number of shares of common stock outstanding, the Board of Directors has the discretion to adjust the number of shares reserved under the ESPP as well as the price paid per share for common stock purchased under the ESPP.
Plan Benefits. Two of the Company’s executive officers, Brian F. Sullivan and Lance G. Laing, are not eligible to participate in the ESPP because each of them owns more than 5% of the Company’s common stock. The Company’s other executive officers and employees have the ability to determine how much of their cash compensation they would like to allocate to the Plan, subject to the limits described above. They also have the ability to opt-out of the Plan at any time. As a result, the Company cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to the Company’s other executive officers and employees under the ESPP.
| Item 5.07 | Submission of Matters to a Vote of Security Holders. |
The Company held its 2018 Annual Meeting
of Stockholders on May 10, 2018. At the meeting:
1. Stockholders elected five nominees to the Company’s Board of Directors to hold office until the next annual meeting or until their successors are elected and qualified;
2. Stockholders ratified the appointment of Boulay PLLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2018;
3. Stockholders approved, on a non-binding and advisory basis, the compensation of the named executive officers;
4. Stockholders recommended, on a non-binding and advisory basis, a one-year frequency for the vote on named executive officer compensation;
5. Stockholders approved the Company’s 2017 Stock Incentive Plan;
6. Stockholders approved the Company’s 2017 Employee Stock Purchase Plan; and
7. Stockholders approved an amendment to the Company’s Certificate of Incorporation to decrease the authorized number of shares of the Company’s Common stock from 45,000,000 shares to 25,000,000 shares and to decrease the authorized number of shares of the Company’s preferred stock from 5,000,000 shares to 2,500,000 shares.
The voting results for each such matter were as follows:
1. Election of Directors:
| Nominee: | For: | Withheld: | Broker Non-Votes: |
| Maureen Cronin | 5,706,278 | 293,045 | 1,265,498 |
| David F. Dalvey | 5,705,738 | 293,585 | 1,265,498 |
| Lance G. Laing | 5,794,080 | 205,243 | 1,265,498 |
| Richard J. Nigon | 5,579,193 | 420,130 | 1,265,498 |
| Brian F. Sullivan | 5,811,519 | 187,804 | 1,265,498 |
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2. Ratification of the appointment of Boulay PLLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2018:
| For: | Against: | Abstain: | Broker Non-Votes: |
| 7,149,216 | 114,222 | 1,383 | 0 |
3. Approval, on a non-binding and advisory basis, of named executive officer compensation:
| For: | Against: | Abstain: | Broker Non-Votes: |
| 5,989,360 | 9,377 | 586 | 1,265,498 |
4. Recommendation, on a non-binding and advisory basis, of the frequency of the vote on named executive officer compensation:
| One year: | Two years: | Three years: | Abstain: | Broker Non-Votes: |
| 5,942,863 | 12,653 | 43,756 | 51 | 1,265,498 |
5. Approval of the Company’s 2017 Stock Incentive Plan:
| For: | Against: | Abstain: | Broker Non-Votes: |
| 5,366,201 | 630,301 | 2,821 | 1,265,498 |
6. Approval of the Company’s 2017 Employee Stock Purchase Plan:
| For: | Against: | Abstain: | Broker Non-Votes: |
| 5,859,794 | 139,209 | 320 | 1,265,498 |
7. Approval of an amendment to the Company’s Certificate of Incorporation to decrease the authorized number of shares of the Company’s Common stock from 45,000,000 shares to 25,000,000 shares and to decrease the authorized number of shares of the Company’s preferred stock from 5,000,000 shares to 2,500,000 shares:
| For: | Against: | Abstain: | Broker Non-Votes: |
| 5,992,199 | 3,970 | 3,154 | 1,265,498 |
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| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: May 16, 2018
|
|
CELCUITY INC. | ||
| By: | /s/ Brian F. Sullivan | ||
|
Brian F. Sullivan Chief Executive Officer | |||
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Exhibit 10.1
CELCUITY INC.
2017 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
| Page | |||
| 1. | Purpose of Plan | 1 | |
| 2. | Definitions | 1 | |
| 3. | Effective Date and Duration of the Plan | 4 | |
| 3.1 | Effective Date and Duration | 4 | |
| 3.2 | Stockholder Approval | 4 | |
| 4. | Shares Available for Issuance | 5 | |
| 4.1 | Plan Reserve | 5 | |
| 4.2 | Accounting for Incentive Awards | 5 | |
| 4.3 | Award Limitations Under the Plan | 5 | |
| 4.4 | Adjustments to Shares and Incentive Awards | 5 | |
| 5. | Plan Administration | 6 | |
| 5.1 | The Committee | 6 | |
| 5.2 | Authority of the Committee | 6 | |
| 6. | Participation | 7 | |
| 7. | Options | 7 | |
| 7.1 | Grant | 7 | |
| 7.2 | Exercise Price | 8 | |
| 7.3 | Exercisability and Duration | 8 | |
| 7.4 | Payment of Exercise Price | 8 | |
| 7.5 | Manner of Exercise | 8 | |
| 7.6 | Aggregate Limitation of Stock Subject to Incentive Stock Options | 8 | |
| 8. | Stock Appreciation Rights | 9 | |
| 8.1 | Grant | 9 | |
| 8.2 | Exercisability and Duration | 9 | |
| 9. | Restricted Stock and Restricted Stock Unit Awards | 9 | |
| 9.1 | Grant | 9 | |
| 9.2 | Rights as a Stockholder; Transferability | 9 | |
| 9.3 | Dividends and Distributions | 10 | |
| 9.4 | Enforcement of Restrictions | 10 | |
| 10. | Performance Awards | 10 | |
| 10.1 | Grant | 10 | |
| 10.2 | Performance Goals | 10 | |
| 10.3 | Form of Payment | 11 | |
| 11. | Stock Bonuses | 11 | |
| 12. | Effect of Termination of Employment or Other Service | 11 | |
| 12.1 | Termination Due to Death, Disability or Retirement | 11 | |
| 12.2 | Termination for Reasons Other than Death, Disability or Retirement | 12 | |
| 12.3 | Modification of Rights Upon Termination | 12 | |
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| Page | |||
| 12.4 | Exercise of Incentive Stock Options Following Termination | 12 | |
| 12.5 | Date of Termination of Employment or Other Service | 13 | |
| 13. | Payment of Withholding Taxes | 13 | |
| 13.1 | General Rules | 13 | |
| 13.2 | Special Rules | 13 | |
| 14. | Action upon Change in Control | 13 | |
| 15. | Rights of Eligible Recipients and Participants; Transferability | 14 | |
| 15.1 | Employment or Service | 14 | |
| 15.2 | Rights as a Stockholder | 14 | |
| 15.3 | Restrictions on Transfer | 14 | |
| 15.4 | Breach of Confidentiality or Non-Compete Agreements | 14 | |
| 15.5 | Non-Exclusivity of the Plan | 14 | |
| 16. | Securities Law and Other Restrictions | 15 | |
| 17. | Plan Amendment, Modification and Termination | 15 | |
| 18. | Miscellaneous | 15 | |
| 18.1 | Compliance with Section 162(m) | 15 | |
| 18.2 | Successors and Assigns | 15 | |
| 18.3 | Governing Law | 15 | |
| ii |
CELCUITY INC.
2017 STOCK INCENTIVE PLAN
| 1. | Purpose of Plan. |
The purpose of the Celcuity Inc. 2017 Stock Incentive Plan (the “Plan”) is to advance the interests of Celcuity Inc. (the “Company”) and its stockholders by enabling the Company and its Subsidiaries to attract and retain persons of skill and ability to perform services for the Company and its Subsidiaries by providing an incentive to such individuals through equity participation in the Company and by rewarding such individuals who contribute to the achievement by the Company of its economic objectives.
| 2. | Definitions. |
The following terms will have the meanings set forth below, unless the context clearly otherwise requires:
2.1. “Board” means the Board of Directors of the Company.
2.2. “Broker Exercise Notice” means a written notice pursuant to which a Participant, upon exercise of an Option, irrevocably instructs a broker or dealer to sell a sufficient number of shares or lend a sufficient amount of money to pay all or a portion of the exercise price of the Option and/or any related withholding tax obligations and remit such sums to the Company and directs the Company to deliver stock certificates to be issued upon such exercise directly to such broker or dealer.
2.3. “Cause” means:
(a) “Cause” as defined in any employment or other agreement or policy applicable to the Participant; or
(b) If no such agreement or policy exists, (i) dishonesty, fraud, misrepresentation, embezzlement or deliberate injury or attempted injury, in each case related to the Company or any Subsidiary, (ii) substantial failure on the part of the Participant to perform his or her duties to the Company or any Subsidiary or gross negligence on the part of the Participant in the performance of such duties, (iii) any unlawful or criminal activity of a serious nature, or (iv) any material breach of any employment, service, confidentiality or non-compete agreement entered into with the Company or any Subsidiary.
2.4. “Change in Control” of the Company means the occurrence of any of the following events:
(a) the sale, lease, exchange or other transfer of all or substantially all of the assets of the Company (in one transaction or in a series of related transactions) except where such sale, lease, exchange or other transfer is to an entity controlled by the Company;
(b) the approval by the stockholders of the Company of any plan or proposal for the liquidation or dissolution of the Company; or
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(c) any person becomes after the effective date of the Plan the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or more of the combined voting power of the Company’s outstanding securities ordinarily having the right to vote at elections of directors; or
(d) a merger or consolidation to which the Company is a party if the persons who are the stockholders of the Company immediately prior to effective date of such merger or consolidation have “beneficial ownership” (as defined in Rule l3d-3 under the Exchange Act), immediately following the effective date of such merger or consolidation, of securities of the surviving corporation representing 50% or less of the combined voting power of the surviving corporation’s then outstanding securities ordinarily having the right to vote at elections of directors.
2.5. “Code” means the Internal Revenue Code of 1986, as amended.
2.6. “Committee” means the group of individuals administering the Plan, as provided in Section 5 of the Plan.
2.7. “Common Stock” means the common stock of the Company, $0.001 par value, or the number and kind of shares of stock or other securities into which such common stock may be changed in accordance with Section 4.4 of the Plan.
2.8. “Disability” means the disability of the Participant such as would entitle the Participant to receive disability income benefits pursuant to the long-term disability plan of the Company or Subsidiary then covering the Participant or, if no such plan exists or is applicable to the Participant, the permanent and total disability of the Participant within the meaning of Section 22(e)(3) of the Code.
2.9. “Effective Date” shall mean the day before the effective date of the Registration Statement on Form S-1 for the initial public offering of the Company’s Common Stock.
2.10. “Eligible Recipient” means any employee of the Company or any Subsidiary and any non-employee director, consultant or independent contractor of the Company or any Subsidiary.
2.11. “Exchange Act” means the Securities Exchange Act of 1934, as amended.
2.12. “Fair Market Value” means, with respect to the Common Stock, as of any date: (i) the last reported sale price of a share of Common Stock as of such date during the regular daily trading session on the NASDAQ Capital Market or on any other national exchange (or, if no shares were traded or quoted on such date, as of the next preceding date on which there was such a trade or quote); or (ii) if the Common Stock is publicly traded but is not so listed, the average of the closing bid and asked prices on such date, as reported by The Wall Street Journal, in the over-the- counter market (or, if no shares were quoted on such date, as of the next preceding date on which there was such a quote); or (iii) if the Common Stock is not so listed or reported, such price as the Committee determines in good faith in the exercise of its reasonable discretion, taking into account all available information material to the value of the Common Stock, and consistent with the definition of “fair market value” under Section 409A of the Code.
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2.13. “Incentive Award” means an Option, Stock Appreciation Right, Restricted Stock Award, Restricted Stock Unit Award, Performance Award or Stock Bonus granted to an Eligible Recipient pursuant to the Plan.
2.14. “Incentive Stock Option” means a right to purchase Common Stock granted to an Eligible Recipient pursuant to Section 7 of the Plan that qualifies as an “incentive stock option” within the meaning of Section 422 of the Code.
2.15. “Non-Statutory Stock Option” means a right to purchase Common Stock granted to an Eligible Recipient pursuant to Section 7 of the Plan that does not qualify as an Incentive Stock Option.
2.16. “Option” means an Incentive Stock Option or a Non-Statutory Stock Option.
2.17. “Participant” means an Eligible Recipient who receives one or more Incentive Awards under the Plan.
2.18. “Performance Award” means a right granted to an Eligible Recipient pursuant to Section 10 of the Plan to receive a payment from the Company, in the form of stock, cash or a combination of both, upon the achievement of established employment, service, performance or other goals.
2.19. “Performance Goal” means one or more of the following performance goals, either individually, alternatively or in any combination, applied on a Company, Subsidiary or business unit basis: revenue, cash flow, gross profit, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization and net earnings, earnings per share, margins (including one or more of gross, operating and· net income margins), returns (including one or more of return on assets, equity, investment, capital and revenue and total stockholder return), stock price, working capital, market share, cost reductions, workforce satisfaction and diversity goals, employee retention, customer satisfaction, completion of key projects and strategic plan development and implementation. Such goals may reflect absolute entity or business unit performance or a relative comparison to the performance of a peer group of entities, prior periods of performance) or other external measures of the selected performance criteria.
Pursuant to rules and conditions adopted by the Committee on or before the earlier of the expiration of twenty-five percent (25%) of the applicable performance period or the 90th day of the applicable performance period for which Performance Goals are established, the Committee may appropriately adjust any evaluation of performance under such goals to exclude the effect of certain events, including any of the following events: asset write-downs; litigation or claim judgments or settlements; changes in tax law, accounting principles or other such laws or provisions affecting reported results; severance, contract termination and other costs related to exiting certain business activities; and gains or losses from the disposition of businesses or assets or from the early extinguishment of debt. Performance Goals may include individual objectives or other subjective criteria.
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2.20. “Previously Acquired Shares” means shares of Common Stock that are already owned by the Participant or, with respect to any Incentive Award, that are to be issued upon the grant, exercise or vesting of such Incentive Award.
2.21. “Restricted Stock Award” means an award of Common Stock granted to an Eligible Recipient pursuant to Section 9 of the Plan that is subject to the restrictions on transferability and the risk of forfeiture imposed by the provisions of such Section 9.
2.22. “Restricted Stock Unit Award” means an award granted to an Eligible Recipient pursuant to Section 9 of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date.
2.23. “Retirement” means termination of employment or service pursuant to and in accordance with the regular (or, if approved by the Board for purposes of the Plan, early) retirement/pension plan or practice of the Company or Subsidiary then covering the Participant, provided that if the Participant is not covered by any such plan or practice, the Participant will be deemed to be covered by the Company’s plan or practice for purposes of this determination.
2.24. “Securities Act” means the Securities Act of 1933, as amended.
2.25. “Share” means a share of Common Stock.
2.26. “Stock Appreciation Right” means a right granted to an Eligible Recipient pursuant to Section 8 of the Plan to receive a payment from the Company at the time of exercise, in the form of stock, cash or a combination of both, equal to the difference between the Fair Market Value of one or more shares of Common Stock and the exercise price of such shares under the terms of such Stock Appreciation Right.
2.27. “Stock Bonus” means an award of Common Stock granted to an Eligible Recipient pursuant to Section 11 of the Plan.
2.28. “Subsidiary” means any entity that is directly or indirectly controlled by the Company or any entity in which the Company has a significant equity interest, as determined by the Committee.
2.29. “Tax Date” means the date any withholding tax obligation arises under the Code or other applicable tax statute for a Participant with respect to an Incentive Award.
| 3. | Effective Date and Duration of the Plan. |
3.1. Effective Date and Duration. The Plan is effective as of the Effective Date. The Plan will terminate at midnight on September 6, 2027, and may be terminated prior to such time by Board action, and no Incentive Award may be granted after such termination. Incentive Awards outstanding upon termination of the Plan may continue to be exercised, or become free of restrictions, in accordance with their terms.
3.2. Stockholder Approval. The Plan shall be submitted to the stockholders of the Company for approval within twelve (12) months before or after the Effective Date. Incentive Awards may be granted prior to the date this Plan is approved by the stockholders of the Company; provided, however, that any incentive stock options granted after adoption of the Plan by the Board shall be treated as nonqualified stock options if stockholder approval is not obtained within such twelve-month period.
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| 4. | Shares Available for Issuance. |
4.1. Plan Reserve. Subject to adjustment as provided in Section 4.4 of the Plan, an aggregate of seven hundred fifty thousand (750,000) Shares are reserved for issuance under the Plan. On January 1 of each year commencing in 2019 and ending on (and including) January 1, 2027, an additional number of Shares shall become available for issuance under the Plan equal to the lesser of: (i) one percent (1%) of the number of Shares issued and outstanding as of the immediately preceding December 31, and (ii) another amount determined by the Board. All Shares reserved for issuance under the Plan may be issued as Incentive Stock Options.
4.2. Accounting for Incentive Awards. Shares of Common Stock that are issued under the Plan or that are subject to outstanding Incentive Awards will be applied to reduce the maximum number of shares of Common Stock remaining available for issuance under the Plan. Any shares of Common Stock that are subject to an Incentive Award that lapse, expire, are forfeited or for any reason are terminated unexercised or unvested and any shares of Common Stock that are subject to an Incentive Award that is settled or paid in cash or any form other than shares of Common Stock will automatically again become available for issuance under the Plan. Any shares of Common Stock that constitute the forfeited portion of a Restricted Stock Award, however, will not become available for re-issuance under the Plan after they have been so forfeited.
4.3. Award Limitations Under the Plan. Notwithstanding any provision in the Plan to the contrary, no Eligible Recipient may be granted an Incentive Award or Awards under the Plan, the value of which Award or Awards is based solely on an increase in the value of the Shares after the date of grant of such Award or Awards, for more than 250,000 Shares (subject to adjustment as provided in Section 4.4 of the Plan) in the aggregate in any calendar year; provided, however, that such limitation shall be 500,000 shares (subject to adjustment as provided in Section 4.4 of the Plan) in the case of Awards granted to an Eligible Recipient in the calendar year in which such Eligible Recipient commences employment with the Company or a Subsidiary.
4.4. Adjustments to Shares and Incentive Awards. In the event of any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, divestiture or extraordinary dividend (including a spin-off) or any other similar change in the corporate structure or shares of the Company, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) will make appropriate adjustment (which determination will be conclusive) as to the number and kind of securities or other property (including cash) available for issuance or payment under the Plan and, in order to prevent dilution or enlargement of the rights of Participants, (a) the number and kind of securities or other property (including cash) subject to outstanding Options, and (b) the exercise price of outstanding Options.
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| 5. | Plan Administration. |
5.1. The Committee. The Plan will be administered by the Board or by a committee of the Board. So long as the Company has a class of its equity securities registered under Section 12 of the Exchange Act, any committee administering the Plan will consist solely of two or more members of the Board who are “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act and, if the Board so determines in its sole discretion, who are “outside directors” within the meaning of Section 162(m) of the Code. Such a committee, if established, will act by majority approval of the members (but may also take action with the written consent of a majority of the members of such committee), and a majority of the members of such a committee will constitute a quorum. As used in the Plan “Committee” will refer to the Board or to such a committee, if established. To the extent consistent with corporate law, the Committee may delegate to any officers of the Company the duties, power and authority of the Committee under the Plan pursuant to such conditions or limitations as the Committee may establish; provided, however, that only the Committee may exercise such duties, power and authority with respect to Eligible Recipients who are subject to Section 16 of the Exchange Act. The Committee may exercise its duties, power and authority under the Plan in its sole and absolute discretion without the consent of any Participant or other party, unless the Plan specifically provides otherwise. Each determination, interpretation or other action made or taken by the Committee pursuant to the provisions of the Plan will be final, conclusive and binding for all purposes and on all persons, including, without limitation, the Company, the stockholders of the Company, the participants and their respective successors-in-interest. No member of the Committee will be liable for any action or determination made in good faith with respect to the Plan or any Incentive Award granted under the Plan.
| 5.2. | Authority of the Committee. |
(a) In accordance with and subject to the provisions of the Plan, the Committee will have the authority to determine all provisions of Incentive Awards as the Committee may deem necessary or desirable and as consistent with the terms of the Plan, including, without limitation, the following: (i) the Eligible Recipients to be selected as Participants; (ii) the nature and extent of the Incentive Awards to be made to each Participant (including the number of shares of Common Stock to be subject to each Incentive Award, any exercise price, the manner in which Incentive Awards will vest or become exercisable and whether Incentive Awards will be granted in tandem with other Incentive Awards) and the form of written agreement, if any, evidencing such Incentive Award; (iii) the time or times when Incentive Awards will be granted; (iv) the duration of each Incentive Award; and (v) the restrictions and other conditions to which the payment or vesting of Incentive Awards may be subject. In addition, the Committee will have the authority under the Plan in its sole discretion to pay the economic value of any Incentive Award in the form of cash, Common Stock or any combination of both.
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(b) The Committee will have the authority under the Plan to amend or modify the terms of any outstanding Incentive Award in any manner, including, without limitation, the authority to modify the number of shares or other terms and conditions of an Incentive Award, extend the term of an Incentive Award, accelerate the exercisability or vesting or otherwise terminate any restrictions relating to an Incentive Award, accept the surrender of any outstanding Incentive Award or, to the extent not previously exercised or vested, authorize the grant of new Incentive Awards in substitution for surrendered Incentive Awards; provided, however, that the amended or modified terms are permitted by the Plan as then in effect, that such amendment or modification does not cause the Incentive Award to become subject to Section 409A of the Code, and that any Participant adversely affected by such amended or modified terms has consented to such amendment or modification. No amendment or modification to an Incentive Award, however, whether pursuant to this Section 5.2 or any other provisions of the Plan, will be deemed to be a re-grant of such Incentive Award for purposes of the Plan.
(c) In the event of (i) any reorganization, merger, consolidation, recapitalization, liquidation, reclassification, stock dividend, stock split, combination of shares, rights offering, extraordinary dividend or divestiture (including a spin-off) or any other similar change in corporate structure or shares, (ii) any purchase, acquisition, sale or disposition of a significant amount of assets or a significant business, (iii) any change in accounting principles or practices, or (iv) any other similar change, in each case with respect to the Company or any other entity whose performance is relevant to the grant or vesting of an Incentive Award, the Committee (or, if the Company is not the surviving corporation in any such transaction, the board of directors of the surviving corporation) may, without the consent of any affected Participant, amend or modify the vesting criteria of any outstanding Incentive Award that is based in whole or in part on the financial performance of the Company (or any Subsidiary or division thereof) or such other entity so as equitably to reflect such event, with the desired result that the criteria for evaluating such financial performance of the Company or such other entity will be substantially the same (in the sole discretion of the Committee or the board of directors of the surviving corporation) following such event as prior to such event; provided, however, that the amended or modified terms are permitted by the Plan as then in effect.
| 6. | Participation. |
Participants in the Plan will be those Eligible Recipients who, in the judgment of the Committee, have contributed, are contributing or are expected to contribute to the achievement of economic objectives of the Company or its Subsidiaries. Eligible Recipients may be granted from time to time one or more Incentive Awards, singly or in combination or in tandem with other Incentive Awards, as may be determined by the Committee in its sole discretion. Incentive Awards will be deemed to be granted as of the date specified in the grant resolution of the Committee, which date will be the date of any related agreement with the Participant.
| 7. | Options. |
7.1. Grant. An Eligible Recipient may be granted one or more Options under the Plan, and such Options will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may designate whether an Option is to be considered an Incentive Stock Option or a Non-Statutory Stock Option. To the extent that any Incentive Stock Option granted under the Plan ceases for any reason to qualify as an “incentive stock option” for purposes of Section 422 of the Code, such Incentive Stock Option will continue to be outstanding for purposes of the Plan but will thereafter be deemed to be a Non-Statutory Stock Option.
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7.2. Exercise Price. The per share price to be paid by a Participant upon exercise of an Option will be determined by the Committee in its discretion at the time of the Option grant; provided, however, that such price will not be less than one hundred percent (100%) of the Fair Market Value of one share of Common Stock on the date of grant (or, with respect to an Incentive Stock Option, one hundred ten percent (110%) of the Fair Market Value if, at the time the Incentive Stock Option is granted, the Participant owns, directly or indirectly, more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company).
7.3. Exercisability and Duration. An Option will become exercisable at such times and in such installments as may be determined by the Committee in its sole discretion at the time of grant; provided, however, that no Incentive Stock Option may be exercisable after ten (10) years from its date of grant (five (5) years from its date of grant if, at the time the Incentive Stock Option is granted, the Participant owns, directly or indirectly, more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company).
7.4. Payment of Exercise Price. The total purchase price of the shares to be purchased upon exercise of an Option will be paid entirely in cash (including check, bank draft or money order); provided, however, that the Committee, in its sole discretion and upon terms and conditions established by the Committee, may allow such payments to be made, in whole or in part, by tender of a Broker Exercise Notice, Previously Acquired Shares, a promissory note (on terms acceptable to the Committee in its sole discretion) or a combination of such methods, or by any other form of payment the Committee may authorize.
7.5. Manner of Exercise. An Option may be exercised by a Participant in whole or in part from time to time, subject to the conditions contained in the Plan and in the agreement evidencing such Option, by delivery in person, by facsimile or electronic transmission or through the mail of written notice of exercise to the Company (Attention: Chief Financial Officer) at its principal executive office, and by paying in full the total exercise price for the shares of Common Stock to be purchased in accordance with Section 7.4 of the Plan.
7.6. Aggregate Limitation of Stock Subject to Incentive Stock Options. To the extent that the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of the shares of Common Stock with respect to which incentive stock options (within the meaning of Section 422 of the Code) are exercisable for the first time by a Participant during any calendar year (under the Plan and any other incentive stock option plans of the Company or any subsidiary or parent corporation of the Company (within the meaning of the Code)) exceeds $100,000 (or such other amount as may be prescribed by the Code from time to time), such excess Options will be treated as Non-Statutory Stock Options. The determination will be made by taking incentive stock options into account in the order in which they were granted. If such excess only applies to a portion of an Incentive Stock Option, the Committee, in its discretion, will designate which shares will be treated as shares to be acquired upon exercise of an Incentive Stock Option.
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| 8. | Stock Appreciation Rights. |
8.1. Grant. An Eligible Recipient may be granted one or more Stock Appreciation Rights under the Plan, and such Stock Appreciation Rights will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified period before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as determined by the Committee, which grant price shall not be less than one hundred percent (100%) of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. The Committee will have the sole discretion to determine the form in which payment of the economic value of Stock Appreciation Rights will be made to a Participant (i.e., cash, Common Stock or any combination thereof) or to consent to or disapprove the election by a Participant of the form of such payment.
8.2. Exercisability and Duration. A Stock Appreciation Right will become exercisable at such time and in such installments as may be determined by the Committee in its sole discretion at the time of grant; provided, however, that no Stock Appreciation Right may be exercisable after ten (10) years from its date of grant. A Stock Appreciation Right will be exercised by giving notice in the same manner as for Options, as set forth in Section 7.5 of the Plan.
| 9. | Restricted Stock and Restricted Stock Units. |
9.1. Grant. An Eligible Recipient may be granted one or more Restricted Stock Awards or Restricted Stock Unit Awards under the Plan, and such Restricted Stock Awards or Restricted Stock Unit Awards will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. The Committee may impose such restrictions or conditions, such as forfeiture or a repurchase option, not inconsistent with the provisions of the Plan, to the vesting of or the lapse of restrictions or conditions for any such Restricted Stock or Restricted Stock Units as it deems appropriate, including, without limitation, that the Participant remain in the continuous employ or service of the Company or a Subsidiary for a certain period or that the Participant or the Company (or any Subsidiary or division thereof) satisfy certain performance goals or criteria.
9.2. Rights as a Stockholder; Transferability. Except as provided in Sections 9.1, 9.3 and 15.3 of the Plan, a Participant will have all voting, dividend, liquidation and other rights with respect to shares of Common Stock issued to the Participant as a Restricted Stock Award under this Section 9 upon the Participant becoming the holder of record of such shares as if such Participant were a holder of record of shares of unrestricted Common Stock. In the case of Restricted Stock Unit Awards, no Shares shall be issued at the time such Awards are granted. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holder of the Restricted Stock Units.
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9.3. Dividends and Distributions. Unless the Committee determines otherwise in its sole discretion (either in the agreement evidencing the Restricted Stock Award at the time of grant or at any time after the grant of the Restricted Stock Award), any dividends or distributions (including regular quarterly cash dividends, if any) paid with respect to shares of Common Stock subject to the unvested portion of a Restricted Stock Award will be subject to the same restrictions as the shares to which such dividends or distributions relate. In the event the Committee determines not to pay dividends or distributions currently, the Committee will determine in its sole discretion whether any interest will be paid on such dividends or distributions. In addition, the Committee in its sole discretion may require such dividends and distributions to be reinvested (and in such case the Participant consents to such reinvestment) in shares of Common Stock that will be subject to the same restrictions as the shares to which such dividends or distributions relate.
9.4. Enforcement of Restrictions. To enforce the restrictions referred to in this Section 9, the Committee may place a legend on the stock certificates referring to such restrictions and may require the Participant, until the restrictions have lapsed, to keep the stock certificates, together with duly endorsed stock powers, in the custody of the Company or its transfer agent or to maintain evidence of stock ownership, together with duly endorsed stock powers, in a certificateless book-entry stock account with the Company’s transfer agent.
| 10. | Performance Awards. |
10.1. Grant. An Eligible Recipient may be granted one or more Performance Awards under the Plan, and such Performance Awards will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee in its sole discretion. Performance Awards are intended to be “qualified performance-based compensation” within the meaning of Section 162(m).
10.2. Performance Goals. Performance Awards shall, to the extent required by Section 162(m), be conditioned solely on the achievement of one or more objective Performance Goals, and such Performance Goals shall be established by the Committee within the time period prescribed by, and shall otherwise comply with the requirements of, Section l62(m). The Committee may impose such restrictions or conditions, not inconsistent with the provisions of the Plan, to the vesting of such Performance Awards as it deems appropriate, including, without limitation, that the Participant remain in the continuous employ or service of the Company or any Subsidiary for a certain period or that the Participant or the Company (or any Subsidiary or division thereof) satisfy certain Performance Goals. Subject to the terms of the Plan and any applicable Performance Award agreement, the Committee will have the sole discretion to determine the Performance Goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award granted, the amount of any payment or transfer to be made pursuant to any Performance Award, and any other terms and conditions of any Performance Award. The Committee shall also certify in writing that such Performance Goals have been met prior to payment of the Performance Awards to the extent required by Section 162(m).
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10.3. Form of Payment. A Performance Award granted under the Plan may be payable in cash or in Shares (including, without limitation, Restricted Stock). The Committee will have the sole discretion to determine the form in which payment of the economic value of Performance Awards will be made to a Participant (i.e., cash, Common Stock or any combination thereof) or to consent to or disapprove the election by a Participant of the form of such payment.
| 11. | Stock Bonuses. |
An Eligible Recipient may be granted one or more Stock Bonuses under the Plan, and such Stock Bonuses will be subject to such terms and conditions, consistent with the other provisions of the Plan, as may be determined by the Committee. The Participant will have all voting, dividend, liquidation and other rights with respect to the shares of Common Stock issued to a Participant as a Stock Bonus under this Section 11 upon the Participant becoming the holder of record of such shares; provided, however, that the Committee may impose such restrictions on the assignment or transfer of a Stock Bonus as it deems appropriate.
| 12. | Effect of Termination of Employment or Other Service. |
12.1. Termination Due to Death, Disability or Retirement. Unless otherwise provided by the Committee in its sole discretion in the agreement evidencing an Incentive Award:
(a) In the event a Participant’s employment or other service with the Company and all Subsidiaries is terminated by reason of death or Disability:
(i) all outstanding Options and Stock Appreciation Rights then held by the Participant will become immediately exercisable in full and remain exercisable for a period of twelve (12) months after such termination (but in no event after the expiration date of any such Option or Stock Appreciation Right);
(ii) all Restricted Stock Awards and Restricted Stock Unit Awards then held by the Participant will become fully vested; and
(iii) all Performance Awards and Stock Bonuses then held by the Participant will vest and/or continue to vest in the manner determined by the Committee and set forth in the agreement evidencing such Performance Awards or Stock Bonuses.
(b) In the event a Participant’s employment or other service with the Company and all Subsidiaries is terminated by reason of Retirement:
(i) all outstanding Options and Stock Appreciation Rights then held by the Participant will remain exercisable, to the extent exercisable as of the date of such termination, for a period of six (6) months after such termination (but in no event after the expiration date of any such Option or Stock Appreciation Right);
(ii) all Restricted Stock Awards and Restricted Stock Unit Awards then held by the Participant that have not vested as of such termination will be terminated and forfeited; and
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(iii) all Performance Awards and Stock Bonuses then held by the Participant will vest and/or continue to vest in the manner determined by the Committee and set forth in the agreement evidencing such Performance Awards or Stock Bonuses.
12.2. Termination for Reasons Other than Death, Disability or Retirement. Unless otherwise provided by the Committee in its sole discretion in the agreement evidencing an Incentive Award, in the event a Participant’s employment or other service with the Company and all Subsidiaries is terminated for any reason other than death, Disability or Retirement, or a Participant is in the employ or service of a Subsidiary and the Subsidiary ceases to be a Subsidiary of the Company (unless the Participant continues in the employ or service of the Company or another Subsidiary), all rights of the Participant under the Plan and any agreements evidencing an Incentive Award will immediately terminate without notice of any kind, and no Options or Stock Appreciation Rights then held by the Participant will thereafter be exercisable, all Restricted Stock Awards and Restricted Stock Unit Awards then held by the Participant that have not vested will be terminated and forfeited, and all Performance Awards and Stock Bonuses then held by the Participant will vest and/or continue to vest in the manner determined by the Committee and set forth in the agreement evidencing such Performance Awards or Stock Bonuses; provided, however, that if such termination is due to any reason other than voluntary termination by the Participant or termination by the Company or any Subsidiary for “Cause,” all outstanding Options and Stock Appreciation Rights then held by such Participant will remain exercisable, to the extent exercisable as of such termination, for a period of three (3) months after such termination (but in no event after the expiration date of any such Option or Stock Appreciation Right).
12.3. Modification of Rights Upon Termination. Notwithstanding the other provisions of this Section 12, upon a Participant’s termination of employment or other service with the Company and all Subsidiaries, the Committee may, in its sole discretion (which may be exercised at any time on or after the date of grant, including following such termination), cause Options and Stock Appreciation Rights (or any part thereof) then held by such Participant to become or continue to become exercisable and/or remain exercisable following such termination of employment or service and Restricted Stock Awards, Restricted Stock Unit Awards, Performance Awards and Stock Bonuses then held by such Participant to vest and/or continue to vest or become free of transfer restrictions, as the case may be, following such termination of employment or service, in each case in the manner determined by the Committee; provided, however, that no Incentive Award may remain exercisable or continue to vest beyond its expiration date. Notwithstanding the foregoing, no extension to exercise will be permitted if such extension would cause the Award to become subject to Section 409A of the Code.
12.4. Exercise of Incentive Stock Options Following Termination. Any Incentive Stock Option that remains exercisable pursuant to an agreement with the Company following termination of employment and is unexercised more than one (1) year following termination of employment by reason of death or Disability or more than three (3) months following termination for any reason other than death or Disability will thereafter be deemed to be a Non-Statutory Stock Option.
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12.5. Date of Termination of Employment or Other Service. Unless the Committee otherwise determines in its sole discretion, a Participant’s employment or other service will, for purposes of the Plan, be deemed to have terminated on the date recorded on the personnel or other records of the Company or the Subsidiary for which the Participant provides employment or other service, as determined by the Committee in its sole discretion based upon such records.
| 13. | Payment of Withholding Taxes. |
13.1. General Rules. The Company is entitled to (a) withhold and deduct from future wages of the Participant (or from other amounts that may be due and owing to the Participant from the Company or a Subsidiary), or make other arrangements for the collection of, all legally required amounts necessary to satisfy any and all foreign, federal, state and local withholding and employment-related tax requirements attributable to an Incentive Award, including, without limitation, the grant, exercise or vesting of, or payment of dividends with respect to, an Incentive Award or a disqualifying disposition of stock received upon exercise of an Incentive Stock Option, or (b) require the Participant promptly to remit the amount of such withholding to the Company before taking any action, including issuing any shares of Common Stock, with respect to an Incentive Award.
13.2. Special Rules. The Committee may, in its sole discretion and upon terms and conditions established by the Committee, permit or require a Participant to satisfy, in whole or in part, any withholding or employment-related tax obligation described in Section 13.1 of the Plan by electing to tender Previously Acquired Shares, a Broker Exercise Notice or a promissory note (on terms acceptable to the Committee in its sole discretion), or by a combination of such methods.
| 14. | Action upon Change in Control. |
If a Change in Control of the Company occurs or is about to occur, the Committee, in its sole discretion, may provide for one or more of the following:
(a) the partial or full acceleration of the exercisability of outstanding Incentive Awards held by some or all Participants, provided that the Committee, in its sole discretion, may condition such acceleration (or the Participant’s receipt of any securities or payments with respect to such acceleration) upon the Participant’s continued service to the Company or to the successor person in the Change in Control;
(b) the complete termination of the Plan and cancellation of outstanding Incentive Awards not exercised prior to a date specified by the Committee;
(c) the continuance of the Plan with respect to outstanding Incentive Awards;
(d) replacement or exchange of the Incentive Awards for options to purchase similar securities of the successor person in the Change in Control;
(e) the substitution for outstanding Incentive Awards of shares of common stock of the person acquiring control of the Company or a related corporation; or
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(f) the receipt by some or all Participants holding outstanding Incentive Awards with respect to some or all of the shares of Common Stock subject to such Incentive Awards, as of the effective date of any such Change in Control of the Company, of cash in an amount equal to the excess of the per share price paid in connection with the Change in Control of the Company over the exercise price per share of such Incentive Awards, multiplied by the number of shares subject to such Incentive Awards.
| 15. | Rights of Eligible Recipients and Participants; Transferability. |
15.1. Employment or Service. Nothing in the Plan will interfere with or limit in any way the right of the Company or any Subsidiary to terminate the employment or service of any Eligible Recipient or Participant at any time, nor confer upon any Eligible Recipient or Participant any right to continue in the employ or service of the Company or any Subsidiary.
15.2. Rights as a Stockholder. As a holder of Incentive Awards (other than Restricted Stock Awards and Stock Bonuses), a Participant will have no rights as a stockholder unless and until such Incentive Awards are exercised for, or paid in the form of, shares of Common Stock and the Participant becomes the holder of record of such shares. Except as otherwise provided in the Plan, no adjustment will be made for dividends or distributions with respect to such Incentive Awards as to which there is a record date preceding the date the Participant becomes the holder of record of such shares, except as the Committee may determine in its discretion.
15.3. Restrictions on Transfer. Except pursuant to testamentary will or the laws of descent and distribution or as otherwise expressly permitted by the Plan, unless approved by the Committee in its sole discretion, no right or interest of any Participant in an Incentive Award prior to the exercise or vesting of such Incentive Award will be assignable or transferable, or subjected to any lien, during the lifetime of the Participant, either voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise. A Participant will, however, be entitled to designate a beneficiary to receive an Incentive Award upon such Participant’s death, and in the event of a Participant’s death, payment of any amounts due under the Plan will be made to, and exercise of any Options (to the extent permitted pursuant to Section 12 of the Plan) may be made by, the Participant’s legal representatives, heirs and legatees.
15.4. Breach of Confidentiality, Assignment of Inventions or Non-Compete Agreements. Notwithstanding anything in the Plan to the contrary, in the event that a Participant materially breaches the terms of any confidentiality, assignment of inventions or non-compete agreement entered into with the Company or any Subsidiary, whether such breach occurs before or after termination of such Participant’s employment or other service with the Company or any Subsidiary, the Committee in its sole discretion may immediately terminate all rights of the Participant under the Plan and any agreements evidencing an Incentive Award then held by the Participant without notice of any kind.
15.5. Non-Exclusivity of the Plan. Nothing contained in the Plan is intended to modify or rescind any previously or subsequently approved compensation plans or programs of the Company or create any limitations on the power or authority of the Board to adopt such additional or other compensation arrangements as the Board may deem necessary or desirable.
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| 16. | Securities Law and Other Restrictions. |
Notwithstanding any other provision of the Plan or any agreements entered into pursuant to the Plan, the Company will not be required to issue any shares of Common Stock under the Plan, and a Participant may not sell, assign, transfer or otherwise dispose of shares of Common Stock issued pursuant to Incentive Awards granted under the Plan, unless (a) there is in effect with respect to such shares a registration statement under the Securities Act and any applicable state or foreign securities laws or an exemption from such registration under the Securities Act and applicable state or foreign securities laws, and (b) there has been obtained any other consent, approval or permit from any other regulatory body which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale or transfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends on certificates representing shares of Common Stock, as may be deemed necessary or advisable by the Company in order to comply with such securities law or other restrictions.
| 17. | Plan Amendment, Modification and Termination. |
The Board may suspend or terminate the Plan or any portion thereof at any time, and may amend the Plan from time to time in such respects as the Board may deem advisable in order that Incentive Awards under the Plan will conform to any change in applicable laws or regulations or in any other respect the Board may deem to be in the best interests of the Company; provided, however, that no amendments to the Plan will be effective without approval of the stockholders of the Company if stockholder approval of the amendment is then required pursuant to Section 422 of the Code or the rules of any stock exchange or Nasdaq or similar regulatory body. No termination, suspension or amendment of the Plan may adversely affect any outstanding Incentive Award without the consent of the affected Participant; provided, however, that this sentence will not impair the right of the Committee to take whatever action it deems appropriate under Sections 5.2, 4.4 and 14 of the Plan.
| 18. | Miscellaneous. |
18.1. Compliance with Section 162(m). It is intended that the Plan shall comply with and meet all the requirements of Section 162(m) of the Code so that Awards hereunder which are made to Participants who are “covered employees” (as defined in Section 162(m) of the Code) shall constitute “performance-based” compensation within the meaning of Section 162(m) of the Code. If any provision of the Plan would disqualify the Plan or would not otherwise permit the Plan to comply with Section 162(m) as so intended, such provision shall be construed or deemed amended to confirm to the requirements or provisions of Section 162(m).
18.2. Successors and Assigns. The Plan will be binding upon and inure to the benefit of the successors and permitted assigns of the Company and the Participants.
18.3. Governing Law. The validity, construction, interpretation, administration and effect of the Plan and any rules, regulations and actions relating to the Plan will be governed by and construed exclusively in accordance with the laws of the State of Minnesota, without regard to the conflicts of laws principles of any jurisdictions.
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AMENDMENT NO. 1
TO
CELCUITY INC. 2017 STOCK INCENTIVE PLAN
This Amendment No. 1 (this “Amendment”) amends the Celcuity Inc. 2017 Stock Incentive Plan (the “Plan”). This Amendment is effective as of April 5, 2018.
1. Unless otherwise expressly provided in this Amendment, all capitalized words or phrases or other defined terms used in this Amendment have the meaning ascribed to them in the Plan.
2. Section 4.3 of the Plan is hereby amended and restated in its entirety to read as follows:
“4.3. Award Limitations Under the Plan. Notwithstanding any provision in the Plan to the contrary, the number of Shares subject to an Incentive Award or Awards granted under the Plan in any calendar year to any one Eligible Recipient shall not, in the aggregate, be more than 250,000 Shares; provided, however, that such limitation shall be 500,000 Shares in the case of Awards granted to an Eligible Recipient in the calendar year in which such Eligible Recipient commences employment with the Company or a Subsidiary. Such annual Award limitations shall be subject to adjustment as provided in Section 4.4 of the Plan. For purposes of applying such annual Award limitations to Awards denominated in a form other than Shares, the number of Shares subject to such Award shall be determined by dividing the maximum amount payable under such Award by the Fair Market Value of a Share at the date of grant.”
3. Except as otherwise modified herein, all other provisions of the Plan shall remain in full force and effect.
This Amendment was duly approved by the Board of Directors of Celcuity Inc. pursuant to Section 17 of the Plan, effective as of the date set forth above.