UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
| Filed by the Registrant ☒ | Filed by a Party other than the Registrant ☐ |
Check the appropriate box:
| ☐ | Preliminary Proxy Statement |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material under §240.14a-12 |
IMUNON, INC.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| ☒ | No fee required. |
| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
IMUNON, INC.
997 LENOX DRIVE, SUITE 100
LAWRENCEVILLE, NJ 08648
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, JUNE 14, 2023
To Our Stockholders:
Notice is hereby given that the annual meeting (the “Annual Meeting”) of the stockholders of IMUNON, INC., a Delaware corporation (the “Company”), will be held at 10:00 a.m., local time, on Wednesday, June 14, 2023. You will be able to attend the Annual Meeting, vote, and submit your questions during the meeting via live webcast through the link www.virtualshareholdermeeting.com/IMNN2023 and entering your 16-digit control number included on the notice of Internet availability of the proxy materials, on your proxy card or in the instructions that accompanied your proxy materials. We have adopted a hybrid meeting format to expand access to the meeting, improve communications and impose lower costs on our stockholders, the Company and the environment. We believe hybrid meetings enable increased stockholder participation from locations around the world. This format allows us to continue to proceed with the meeting while mitigating the potential health and safety risks to participants. The Annual Meeting shall be held for the following purposes, all as more fully described in the accompanying Proxy Statement:
| 1) | To elect two Class I Directors to serve until the Annual Meeting of Stockholders in 2026 and until a successor is duly elected and qualified; | |
| 2) | To ratify the selection of WithumSmith+Brown PC (“Withum”) as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023; | |
| 3) | To approve, by a non-binding advisory vote, the 2022 executive compensation for the Company’s executive officers; | |
| 4) | To approve, by a non-binding advisory vote, the frequency by which future advisory votes on executive compensation will occur; | |
| 5) | To consider and act upon an Amendment to the IMUNON, INC. 2018 Stock Incentive Plan to increase the aggregate number of shares of common stock that may be delivered pursuant to all awards granted under the Plan; and | |
| 6) | To consider and act upon any other matters that may properly come before the Annual Meeting and any adjournment or postponement thereof. |
The close of business on April 21, 2023 has been fixed as the record date for the determination of stockholders of the Company entitled to notice of, and to vote at the Annual Meeting. Only stockholders of record at the close of business on April 21, 2023 are entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.
All stockholders are cordially invited to attend the Annual Meeting. However, whether you expect to attend via the live webcast, please complete, sign, date and return the enclosed Proxy Card as promptly as possible in the envelope provided for that purpose. Returning your Proxy Card will ensure your representation and help to ensure the presence of a quorum at the Annual Meeting. Your proxy is revocable, as set forth in the accompanying Proxy Statement. Therefore, you may attend the Annual Meeting and vote your shares via the live webcast even if you send in your Proxy Card.
| By Order of the Board of Directors | ||
| /s/ Jeffrey W. Church | ||
April 28, 2023 Lawrenceville, NJ |
Jeffrey W. Church Corporate Secretary |
YOUR VOTE IS IMPORTANT
THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY THE COMPANY, ON BEHALF OF THE BOARD OF DIRECTORS, FOR THE 2023 ANNUAL MEETING OF STOCKHOLDERS. THE PROXY STATEMENT AND THE RELATED PROXY FORM ARE BEING DISTRIBUTED ON OR ABOUT MAY 5, 2023.
YOU CAN VOTE YOUR SHARES USING ONE OF THE FOLLOWING METHODS:
| ● | COMPLETE AND RETURN A WRITTEN PROXY CARD | |
| ● | ATTEND THE COMPANY’S 2023 ANNUAL MEETING OF STOCKHOLDERS VIA LIVE WEBCAST AND VOTE AT THE ANNUAL MEETING | |
| ● | VOTE VIA THE INTERNET AT WWW.PROXYVOTE.COM | |
| ● | VOTE BY PHONE BY CALLING THE NUMBER PRINTED ON THE ACCOMPANYING VOTING DOCUMENT |
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE OR SUBMIT YOUR VOTE VIA THE INTERNET AT WWW.PROXYVOTE.COM OR VOTE BY PHONE BY CALLING THE NUMBER PRINTED ON THE ACCOMPANYING VOTING DOCUMENT. ANY STOCKHOLDER ATTENDING THE MEETING VIA THE LIVE WEBCAST MAY VOTE EVEN IF YOU HAVE RETURNED A PROXY CARD.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON WEDNESDAY, JUNE 14, 2023. THE PROXY STATEMENT AND OUR 2022 ANNUAL REPORT ON FORM 10-K (AS DEFINED BELOW) TO SECURITY HOLDERS ON SECURITIES AND EXCHANGE COMMISSION FORM 10-K ARE AVAILABLE AT WWW.PROXYVOTE.COM.
IMUNON, INC.
PROXY STATEMENT
TABLE OF CONTENTS
| I |
IMUNON, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of IMUNON, INC., a Delaware corporation (sometimes referred to in this Proxy Statement as the “Company”, “IMUNON”, “we” or “us”), for exercise in voting at the Company’s 2023 Annual Meeting of Stockholders to be held on Wednesday, June 14, 2023 (the “Annual Meeting”) for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. We are first sending this Proxy Statement, accompanying Proxy Card, Notice of Annual Meeting of Stockholders and Annual Report on Securities and Exchange Commission (“SEC”) Form 10-K for the fiscal year ended December 31, 2022 (our “2022 Annual Report on Form 10-K”) to our stockholders on or about May 5, 2023.
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be held on Wednesday, June 14, 2023. The Proxy Statement and our 2022 Annual Report on Form 10-K are available at www.proxyvote.com or you may request a printed or electronic set of the proxy materials at no charge.
Instructions on how to access the proxy materials over the Internet and how to request a printed copy may be found on the Notice. In addition, any stockholder may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. Choosing to receive future proxy materials by email will save us the cost of printing and mailing documents to stockholders and will reduce the impact on our environment. A stockholder who chooses to receive future proxy materials by email will receive an email prior to next year’s Annual Meeting with instructions containing a link to those materials and a link to the proxy voting website. A stockholder’s election to receive proxy materials by email will remain in effect until such election is terminated by the stockholder.
On September 19, 2022, Celsion Corporation announced a corporate name change to IMUNON, INC., reflecting the evolution of the Company’s business focus and its commitment to developing cutting-edge immunotherapies and next-generation vaccines to treat cancer and infectious diseases. The Company’s common stock trades on the Nasdaq Stock Market under the ticker symbol “IMNN.”
IMUNON, INC. is a fully integrated, clinical stage biotechnology company focused on advancing a portfolio of innovative treatments that harness the body’s natural mechanisms to generate safe, effective, and durable responses across a broad array of human diseases, constituting a differentiating approach from conventional therapies. Imunon has two platform technologies: Our TheraPlas platform for the development of immunotherapies and other anti-cancer nucleic acid-based therapies, and our PLACCINE platform for the development of nucleic acid vaccines for infectious diseases and cancer. The Company’s lead clinical program, IMNN-001 (formerly GEN-1), is a DNA-based immunotherapy for the localized treatment of advanced ovarian cancer currently in Phase II development. IMNN-001 works by instructing the body to produce safe and durable levels of powerful cancer fighting molecules, such as interleukin-12 and interferon gamma, at the tumor site. Additionally, the Company is conducting preclinical proof-of-concept studies on a nucleic acid vaccine candidate targeting SARS-CoV-2 virus in order to validate its PLACCINE platform. IMUNON’s platform technologies are based on the delivery of nucleic acids with novel synthetic delivery systems that are independent of viral vectors or devices. We will continue to leverage these platforms and to advance the technological frontier of plasmid DNA to better serve patients with difficult to treat conditions.
Our executive offices are located at 997 Lenox Drive, Suite 100, Lawrenceville, NJ 08648 and our telephone number is (609) 896-9100.
INFORMATION ABOUT THE ANNUAL MEETING
Date, Time and Place of the Annual Meeting
The Annual Meeting will be held at 10:00 a.m., local time, on Wednesday, June 14, 2023. You will be able to attend the 2023 Annual Meeting, vote, and submit your questions during the meeting via live webcast through the www.virtualshareholdermeeting.com/IMNN2023 and entering your 16-digit control number included on the notice of Internet availability of the proxy materials, on your proxy card or in the instructions that accompanied your proxy materials.
Why is the Annual Meeting a virtual, online meeting?
We have adopted this technology to expand access to the meeting, improve communications and impose lower costs on our stockholders, the Company and the environment. The online format allows us to communicate more effectively via a pre-meeting forum that you can enter by visiting the meeting via live webcast through the link www.virtualshareholdermeeting.com/IMNN2023 and entering your 16-digit control number included on the notice of Internet availability of the proxy materials, on your proxy card or in the instructions that accompanied your proxy materials. We believe that hosting a virtual meeting will facilitate shareholder attendance and participation by enabling shareholders to participate from any location around the world and improve our ability to communicate more effectively with our shareholders. We have designed the virtual meeting to provide substantially the same opportunities to participate as you would have at an in-person meeting. You will be provided with the opportunity to submit questions via the live webcast during the meeting.
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Who May Attend the Annual Meeting?
Only stockholders who own our common stock, par value $0.01 per share, as of the close of business on April 21, 2023, the record date for the Annual Meeting (the “Record Date”), will be entitled to attend the Annual Meeting. At the discretion of management, we may also permit certain individuals to attend the Annual Meeting, including the media, professional service providers and our employees.
Who May Vote at the Annual Meeting?
Each share of our common stock outstanding on the Record Date entitles the holder thereof to one vote on each matter submitted to the stockholders at the Annual Meeting. Only stockholders who own common stock as of the close of business on the Record Date are entitled to notice of, and to vote at, the Annual Meeting. As of the Record Date, there were 9,097,005 shares of our common stock issued and outstanding.
If you were a holder of our common stock as of the Record Date, you are entitled to vote at the Annual Meeting, and we encourage you to vote your shares by attending the meeting via live webcast of the Annual Meeting.
HOWEVER, WHETHER OR NOT YOU INTEND TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED PRE-ADDRESSED AND POSTAGE-PAID ENVELOPE OR SUBMIT YOUR VOTE VIA THE INTERNET AT WWW.PROXYVOTE.COM OR BY CALLING THE NUMBER PRINTED ON THE ACCOMPANYING PROXY CARD.
If your shares are held in the name of a bank, broker, or other holder of record, you will receive instructions from the holder of record that you must follow in order for your shares to be voted. If your shares are not registered in your own name and you plan to vote your shares via the live webcast at the Annual Meeting, you should contact your broker or agent to obtain a proxy in order to vote.
If you vote by proxy, the individuals named on the proxy, or their substitutes, will vote your shares in the manner you indicate. If a beneficial owner who holds shares in street name does not provide specific voting instructions to their brokerage firm, bank, broker dealer or other nominee, under the rules of certain securities exchanges, including Nasdaq Marketplace Rules, the brokerage firm, bank, broker dealer or other nominee holding those shares may generally vote as the nominee determines in its discretion on behalf of the beneficial owner on routine matters but cannot vote on non-routine matters, the latter of which results in “broker non-votes.”
Proposal No. 2 involves matters we believe to be routine in nature. Accordingly, if you do not give instructions to your broker, the broker may vote your shares in its discretion on Proposal No. 2 and therefore no broker non-votes are expected in connection with Proposal No. 2. Proposal Nos. 1, 3, 4 and 5 involve matters we consider non-routine under the applicable rules. If you do not give your broker specific instructions, the broker will not vote your shares on Proposal Nos. 1, 3, 4 and 5 and your shares will constitute broker non-votes. If you date, sign, and return the proxy card without indicating your instructions, your shares will be voted as follows:
| ● | Proposal No. 1. “FOR” (if authority to do so is not withheld) the election of the nominees for the Class I Directors to serve until the earlier of the Company’s Annual Meeting of Stockholders in 2026 and until a successor is duly elected and qualified; | |
| ● | Proposal No. 2. “FOR” the ratification of the appointment of WithumSmith+Brown PC as our independent registered public accounting firm for the year ending December 31, 2023; and | |
| ● | Proposal No. 3. “FOR” the approval of, by a non-binding advisory vote, the 2022 executive compensation for the Company’s executive officers; | |
| ● | Proposal No. 4. “EVERY THREE YEARS” to approve, by a non-binding advisory vote, the frequency by which future advisory votes on executive compensation will occur; | |
| ● | Proposal No. 5. “FOR” the approval of an amendment to the IMUNON, INC. 2018 Stock Incentive Plan; and | |
| ● | Other Business. In the discretion of your proxy holder (one of the individuals named on your proxy card), on any other matter properly presented at the Annual Meeting or any adjournment or postponement thereof. |
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You may revoke or change your proxy at any time before it is exercised by delivering to us a signed proxy with a date later than your previously delivered proxy, by voting via the live webcast at the Annual Meeting, or by sending a written revocation of your proxy addressed to our Corporate Secretary at our principal executive office. Your latest dated proxy card is the one that will be counted.
A quorum is necessary to hold a valid meeting. The presence of holders of our common stock entitled to cast one-third of all the votes entitled to be cast at the Annual Meeting constitutes a quorum for the transaction of business. Abstentions and broker non-votes are counted as present for purposes of establishing a quorum.
Proposal No. 1. The election of the Class I Directors at the Annual Meeting will be by a plurality of the votes cast. This means if the director nominees receive the greatest number of votes cast by the holders of our common stock in the election of the Class I Directors, they will be elected. Stockholders may not cumulate their votes in electing directors. Stockholders entitled to vote at the Annual Meeting may either vote “FOR” the nominee for election as a director or may “WITHHOLD” authority for the nominee. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the nominee named below in Proposal No. 1. If a stockholder withholds authority to vote with respect to the nominees for director, the shares held by that stockholder will be counted for purposes of establishing a quorum but will have no effect on the election of the nominees. Broker non-votes will have no effect on the election of the nominees.
Proposal No. 2. Stockholders may vote “FOR” or “AGAINST” or may “ABSTAIN” on Proposal No. 2 regarding the ratification of the selection of WithumSmith+Brown PC (“Withum”) as the Company’s independent registered public accounting firm for the year ending December 31, 2023. The affirmative vote of the holders of a majority of the shares of our common stock present via live webcast or represented by proxy and entitled to vote on the proposal will be required to ratify the selection of Withum. Abstentions will have the same effect as a vote against Proposal No. 2.
Proposal No. 3. Stockholders may vote “FOR” or “AGAINST” or may “ABSTAIN” on Proposal No. 3 to approve, by a non-binding advisory vote, the 2022 compensation for the Company’s executive officers. The affirmative vote of the holders of a majority of the shares of our Common Stock present via live webcast or represented by proxy and entitled to vote on the proposal will be required to ratify the 2022 compensation for the Company’s executive officers. Abstentions will have the same effect as a vote against Proposal No. 3, but broker non-votes will have no effect on Proposal No. 3.
Proposal No. 4. Stockholders may vote for “EVERY YEAR,” “EVERY TWO YEARS,” “EVERY THREE YEARS” or “ABSTAIN” on Proposal No. 4 to approve, by a non-binding advisory vote, the frequency by which future advisory votes on executive compensation will occur. Generally, approval of any matter presented to stockholders is determined by a majority of the votes cast affirmatively or negatively on the matter, assuming a quorum is present. However, given that Proposal No. 4 is advisory and non-binding, if none of the frequency options receive a majority of the votes cast, the option receiving the greatest number of votes will be considered the frequency recommended by the stockholders. In such instance, while none of the three alternatives will have been approved, stockholders will still have the ability to communicate their preference with respect to this vote. Abstentions and broker non-votes will have no effect on Proposal No. 4.
Proposal No. 5. Stockholders may vote “FOR” or “AGAINST” or may “ABSTAIN” on Proposal No. 5, to approve an Amendment to the IMUNON, INC. 2018 Stock Incentive Plan. The affirmative vote of the holders of a majority of the shares of our common stock present via the live webcast or represented by proxy and entitled to vote on the proposal will be required to approve the Amendment. Abstentions will have the same effect as a vote against Proposal No. 5. Broker non-votes will have no effect on Proposal No. 5.
Our Board of Directors knows of no other matters that may be presented for stockholder action at the Annual Meeting. It is not anticipated that other matters will be brought before the Annual Meeting. If other matters do properly come before the Annual Meeting, or any adjournments or postponements thereof, however, persons named as proxies will vote upon them in their discretion.
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Information about the Proxy Statement and the Solicitation of Proxies
The enclosed proxy is solicited by our Board of Directors, and we will bear the costs of preparing, assembling, printing and mailing this Proxy Statement, accompanying Proxy Card, Notice of Annual Meeting of Stockholders and the Company’s 2022 Annual Report on Form 10-K, as well as any additional materials that we may furnish to stockholders in connection with the Annual Meeting. Copies of our solicitation materials will be furnished to brokerage houses, fiduciaries and custodians to forward to beneficial owners of stock held in the names of such nominees. We will, upon request, reimburse those parties for their reasonable expenses in forwarding proxy materials to the beneficial owners.
Our 2022 Annual Report on Form 10-K is being mailed to stockholders together with this Proxy Statement and contains financial and other information about IMUNON, including audited financial statements for our fiscal year ended December 31, 2022. A copy of our 2022 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (“SEC”), but excluding exhibits, is available on our website and additional copies may be obtained without charge, upon written request directed to the Corporate Secretary, IMUNON, INC., 997 Lenox Drive, Suite 100, Lawrenceville, New Jersey 08648.
Householding of Annual Meeting Materials
Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our Proxy Statement or 2022 Annual Report on Form 10-K may have been sent to multiple stockholders in your household. The Company will promptly deliver a separate copy of either document to you if you write or call the Company at the following address or telephone number:
IMUNON, INC.
997 Lenox Drive
Suite 100
Lawrenceville, New Jersey 08648
Attention: Corporate Secretary
(609) 896-9100
If you would like to receive separate copies of the proxy materials in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact the Company at the address and telephone number set forth above.
PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING WHITE PROXY CARD IN THE ENCLOSED PRE-ADDRESSED AND POSTAGE-PAID ENVELOPE AS PROMPTLY AS POSSIBLE OR SUBMIT YOUR VOTE VIA THE INTERNET AT WWW.PROXYVOTE.COM OR BY CALLING THE NUMBER PRINTED ON THE ACCOMPANYING PROXY CARD.
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NUMBER OF SHARES OF COMMON STOCK BENEFICIALLY OWNED
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table is furnished by the Company and sets forth certain information known to the Company regarding the beneficial ownership of the Company’s common stock as of April 21, 2023 by:
| ● | each person or group known by us to own beneficially more than five percent of the outstanding common stock; | |
| ● | each of our directors and the director nominees, as well as each executive officer named in the Summary Compensation Table appearing under the heading “Executive Compensation;” and | |
| ● | our directors and executive officers as a group. |
We determine beneficial ownership in accordance with the rules of the SEC. Under SEC rules, beneficial ownership for purposes of this table takes into account shares as to which the individual has voting or investment power as well as shares that may be acquired within 60 days. Shares of common stock subject to options that are currently exercisable or that become exercisable within 60 days of April 21, 2023, are treated as outstanding and beneficially owned by the holder of such options. However, these shares are not treated as outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated or as to the interests of spouses, the persons included in the table have sole voting and investment power with respect to all shares beneficially owned thereby.
| NAME OF BENEFICIAL OWNER | NUMBER OF SHARES OF COMMON STOCK BENEFICIALLY OWNED | PERCENT OF SHARES OF COMMON STOCK OUTSTANDING | ||||||
| Augustine Chow* (1) | 12,096 | ** | ||||||
| James E. Dentzer* (2) | 1,556 | ** | ||||||
| Stacy R. Lindborg* (3) | 5,777 | ** | ||||||
| Frederick J. Fritz* (4) | 23,766 | ** | ||||||
| Donald P. Braun* (5) | 10,930 | ** | ||||||
| Christine Pellizzari* (6) | 5,777 | ** | ||||||
| Michael H. Tardugno* (7) | 142,513 | 1.57 | % | |||||
| Corinne Le Goff* (8) | 29,700 | ** | ||||||
| Nicholas Borys* (9) | 19,093 | ** | ||||||
| Khursheed Anwer* (10) | 45,688 | ** | ||||||
| Jeffrey W. Church* (11) | 52,617 | ** | ||||||
| Directors and Executive Officers as a group (11 persons) (12) | 349,512 | 3.84 | % | |||||
| * | The address of each of the individuals named is c/o IMUNON, INC., 997 Lenox Drive, Suite 100, Lawrenceville, NJ 08648. | |
| ** | Less than one percent. | |
| (1) | Includes 12,000 shares of common stock underlying options currently exercisable or exercisable within 60 days of April 21, 2023. | |
| (2) | Includes 1,566 shares of common stock underlying options currently exercisable or exercisable within 60 days of April 21, 2023. | |
| (3) | Includes 5,777 shares of common stock underlying options currently exercisable or exercisable within 60 days of April 21, 2023. | |
| (4) | Includes 12,000 shares of common stock underlying options currently exercisable or exercisable within 60 days of April 21, 2023. |
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| (5) | Includes 10,333 shares of common stock underlying options currently exercisable or exercisable within 60 days of April 21, 2023. | |
| (6) | Includes 5,777 shares of common stock underlying options currently exercisable or exercisable within 60 days of April 21, 2023. | |
| (7) | Includes 126,000 shares of common stock underlying options currently exercisable or exercisable within 60 days of April 21, 2023. | |
| (8) | Includes 29,700 shares of common stock underlying options currently exercisable or exercisable within 60 days of April 21, 2023. | |
| (9) | Includes 15,666 shares of common stock underlying options currently exercisable or exercisable within 60 days of April 21, 2023. | |
| (10) | Includes 42,833 shares of common stock underlying options currently exercisable or exercisable within 60 days of April 21, 2023. | |
| (11) | Includes 49,000 shares of common stock underlying options currently exercisable or exercisable within 60 days of April 21, 2023. | |
| (12) | Includes 310,652 shares of common stock underlying options currently exercisable or exercisable within 60 days of April 21, 2023. |
The Company has adopted a Code of Ethics and Business Conduct (the “Code of Ethics”) applicable to its directors, officers, including the Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and other officers performing similar functions, and employees. This Code of Ethics constitutes a code of ethics applicable to senior financial officers within the meaning of the Sarbanes-Oxley Act of 2002 and SEC rules. A copy of the Code of Ethics is available on the Company’s website at http://www.imunon.com and any stockholder may obtain a copy by making a written request to the Company’s Corporate Secretary, 997 Lenox Drive, Suite 100, Lawrenceville, NJ 08648. In the event of any amendments to or waivers of the terms of the Code of Ethics, such matters will be posted promptly to the Company’s website in lieu of disclosure on Form 8-K in accordance with Item 5.05(c) of Form 8-K.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Code of Ethics requires all of our directors, officers and employees to give their complete loyalty to the best interests of the Company and to avoid any action that may involve, or that even may appear to involve, a conflict of interest with the Company. The Code of Ethics also requires any of our directors, officers or employees who become aware of a conflict or potential conflict to bring it to the attention of supervisor, manager or other appropriate personnel or consult the compliance procedures provided in the Code of Ethics. The Board of Directors reviews and approves or ratifies all relationships and transactions between us and (i) any of our directors or executive officers, (ii) any nominee for election as a director, (iii) any security holder who is known to us to own beneficially or of record more than five percent of our common stock or (iv) any member of the immediate family of any of the foregoing.
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ELECTION OF DIRECTORS
Our Certificate of Incorporation provides that the number of directors that constitutes the Board of Directors is to be fixed by, or in the manner provided in, our Bylaws, as amended (the “Bylaws”). The Certificate of Incorporation also provides that the Board of Directors is to be divided into three classes, designated as Class I, Class II and Class III, and it is our practice to have such classes as even in size as possible. The Bylaws provide that the Board of Directors is to consist of between three and eight directors, with the exact number to be fixed by action of the Board of Directors. The current number of directors has been fixed by the Board of Directors at eight. Currently, no Board seats remain vacant, and the Board of Directors consists of eight directors, six of which are independent under applicable SEC and NASDAQ rules.
Our Board of Directors has nominated Mr. Frederick Fritz and Ms. Christine Pellizzari to stand for re-election to the Board of Directors as a Class I Director, with a term expiring at the Annual Meeting of Stockholders to be held in 2026 or with the election and qualification of a successor. Dr. Augustine Chow, who is currently a Class I director, will not stand for re-election to the Board.
The proxies named in the Proxy Card provided with this Proxy Statement intend to vote “FOR” the election of Mr. Frederick Fritz and Ms. Christine Pellizzari unless otherwise instructed. If you do not wish your shares to be voted for Mr. Frederick Fritz and Ms. Christine Pellizzari, you must so indicate by marking the “WITHHOLD” authority box on the Proxy Card next to Mr. Frederick Fritz and Ms. Christine Pellizzari, in which event your shares will not be voted for Mr. Frederick Fritz and Ms. Christine Pellizzari. In the event that Mr. Frederick Fritz and Ms. Christine Pellizzari become unavailable for election as a result of an unexpected occurrence, the designated proxies will vote in their discretion for a substitute nominee, or our Board of Directors may reduce the number of directors serving on the Board.
Class I Director Nominees (If elected, term expires in 2026)
Mr. Frederick J. Fritz. Mr. Fritz was appointed to our Board of Directors in July 2011. Mr. Fritz has served as CEO and Founder of NeuroDx, a development stage diagnostic device company focused on the neurosurgery market, since 2006. Mr. Fritz joined NeuroDx from Valeo Medical, a biotechnology company he founded in 2003 to develop the world’s first non-invasive diagnostic test for endometriosis. Prior to that, Mr. Fritz was President and CEO of Songbird Hearing, Inc., a medical device company spun out of Sarnoff Corporation. Mr. Fritz began his career in marketing management and new product development. He joined Schering Plough’s Wesley Jessen in 1985 as VP Marketing and Sales in 1986. He was promoted to general manager of Schering’s Over the Counter pharmaceutical business in 1988 and of the podiatric products business in 1990. He was President of Coleman North America from 1995 to 1997. Mr. Fritz holds a bachelor’s degree in engineering (summa cum laude) from University of Illinois and an MBA degree from Harvard University.
Ms. Christine A. Pellizzari. Ms. Pellizzari was appointed to our Board of Directors in June 2021. Ms. Pellizzari joined Insmed in 2013 as General Counsel and Corporate Secretary and was named Chief Legal Officer in 2018. She has global responsibility for legal and government affairs including corporate governance, regulatory compliance, contracting, alliance management, clinical trial oversight, labor and employment, litigation management and intellectual property strategy and portfolio management. From 2007 through 2012 Ms. Pellizzari held various legal positions of increasing responsibility at Aegerion Pharmaceuticals, most recently as Executive Vice President, General Counsel and Corporate Secretary. Prior to Aegerion, Ms. Pellizzari was Senior Vice President, General Counsel and Secretary at Dendrite International, Inc., a publicly traded company that provided sales effectiveness, promotional and compliance solutions to the pharmaceutical industry. Ms. Pellizzari received a J.D. from the University of Colorado School of Law and a B.A. from the University of Massachusetts (Amherst). She is a member of Executive Women in Bio, Women Corporate Directors, National Association of Corporate Directors, Association of Corporate Counsel, Society for Corporate Governance and National Association of Stock Plan Professionals.
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Our Board of Directors concluded that Mr. Frederick Fritz and Ms. Christine Pellizzari have the requisite experience, qualifications, attributes and skills necessary to serve as a member of our Board of Directors based on his respective leadership attributes, management experience in the pharmaceutical industry and professional and educational background.
Vote Required
The election of Class I Directors at the Annual Meeting will be by a plurality of the votes cast. This means that the director nominee receiving the greatest number of votes cast, via the live webcast or by proxy, by the holders of our common stock in the election of the Class I Director, will be elected. Stockholders may not cumulate their votes in electing directors. Stockholders entitled to vote at the Annual Meeting may either vote “FOR” the nominee for election as a director or may “WITHHOLD” authority for the nominee. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the nominee named above in Proposal No. 1. If a stockholder withholds authority to vote with respect to the nominee for director, the shares held by that stockholder will be counted for purposes of establishing a quorum but will have no effect on the election of the nominee. Broker non-votes will have no effect on the election of the nominee.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF
THE DIRECTOR NOMINEES NAMED ABOVE.
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DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Our board of directors, or our Board, currently consists of eight members and is divided into three classes of directors serving staggered three-year terms. Directors for each class are elected at the Annual Meeting of Stockholders held in the year in which the term for their class expires and hold office for a three-year term and until their successors are duly elected and qualified, or their earlier death, resignation or removal. In accordance with our amended and restated certificate of incorporation and bylaws, our Board may fill any vacancy on the Board by appointment.
Set forth below is certain information regarding our Company’s current directors, as well as our non-director executive officers.
| NAME | AGE | POSITION(S) | CLASS | |||
| Augustine Chow, Ph.D. | 70 | Director | I | |||
| Frederick J. Fritz | 72 | Director | I | |||
| Christine Pellizzari | 55 | Director | I | |||
| James E. Dentzer | 56 | Director | II | |||
| Stacy R. Lindborg, Ph.D. | 52 | Director | II | |||
| Donald P. Braun, Ph.D. | 73 | Director | III | |||
| Michael H. Tardugno | 72 | Executive Chairman | III | |||
| Corinne Le Goff, Pharm.D. | 57 | President, Chief Executive Officer and Director | II | |||
| Khursheed Anwer, Ph.D. MBA | 63 | Executive Vice President and Chief Scientific Officer | ||||
| Jeffrey W. Church | 66 | Executive Vice President and Chief Financial Officer |
Continuing Class II Directors (Term expires in 2024)
Dr. Corinne Le Goff. Dr. Le Goff was appointed to our Board of Directors and as our President and Chief Executive Officer on July 18, 2022. Prior to joining the Company, Dr. Le Goff served as Chief Commercial Officer of Moderna, Inc. from January 2021 through January 2022. Dr. Le Goff served as Senior Vice President and General Manager of the U.S. Business Organization at Amgen, Inc. from March 2019 to January 2021. During her tenure at Amgen, she also served as Senior Vice President of Global Product Strategy from June 2018 to March 2019, and Senior Vice President of the Europe Region from June 2015 to May 2018. Dr. Le Goff held various positions within the Roche Group, a publicly traded Swiss multinational healthcare company, including President of Roche’s French affiliate from May 2012 to May 2015. Dr. Le Goff served on the board of directors of the Pacific Council on International Policy from October 2019 to December 2020. Dr. Le Goff also served on the board of directors of CFAO, a trading company, from October 2014 until October 2020, where she served as a member of the Nomination and Compensation Committee, the Sustainable Development Committee and the Audit Committee. Dr. Le Goff has served on the board of directors of Longboard Pharmaceuticals, Inc. since March 2021, where she serves as a member of the Compensation Committee and the Audit Committee. Dr. Le Goff resigned from her director positions at Acticor Biotech and EuroAPI in December 2022, as per her contractual obligations following her appointment as Imunon’s President and CEO. Dr. Le Goff received a Pharm. D. from the University Paris V and an M.B.A. in Marketing from La Sorbonne University, France
Dr. Stacy R. Lindborg. Dr. Lindborg was appointed to our Board of Directors in June 2021. Dr. Lindborg brings to Imunon more than 25 years of pharmaceutical industry experience with a particular focus on R&D, executive management and strategy. She has worked with biologics, small molecules and cell therapies to address a broad range of diseases and disorders, including multiple Orphan drug products, along with extensive experience in early-stage development having taken molecules from first in man studies into the clinic through approval and launch. Dr. Lindborg’s holds the position of co-Chief Executive Officer at Brainstorm Cell Therapeutics, which she joined in 2020. From 2012 to 2020 she held positions of increasing responsibility at Biogen, where she worked in biostatistics and biometrics, and served as Vice President for Global Analytics and Data Sciences. Dr. Lindborg joined Eli Lilly and Company in 1996 moving through the organization to serve from 2010 to 2012 as Head of R&D Strategy with responsibility for characterizing the productivity of the portfolio and driving key R&D strategy projects including the annual R&D Long-Range Plan. Dr. Lindborg is a graduate of Baylor University where she received a Ph.D. and M.A. in statistics and a B.A. in psychology with a minor in mathematics. She has authored more than fifty abstracts, 200 presentations and 45 manuscripts that have been published in peer-reviewed journals. She serves on several industry advisory boards related to statistics and biotechnology.
Mr. James E. Dentzer. Mr. Dentzer was appointed to our Board of Directors in September 2022. He has been President and Chief Executive Officer and a member of the Board of Directors of Curis, Inc. since September 2018. From March 2018 to September 2018, Mr. Dentzer served as Curis’ Chief Operating Officer and Chief Financial Officer. From March 2016 to March 2018, Mr. Dentzer served as Curis’ Chief Administrative Officer and Chief Financial Officer. Mr. Dentzer has also held the positions of secretary and treasurer from March 2016 to March 2019. Prior to joining Curis, Mr. Dentzer served as Chief Financial Officer of Dicerna Pharmaceuticals, Inc., a biotechnology company, from December 2013 to December 2015. Prior to that, he was the Chief Financial Officer of Valeritas, Inc., a medical technology company, from March 2010 to December 2013. Prior to joining Valeritas, Inc., he was the Chief Financial Officer of Amicus Therapeutics, Inc., a biotechnology company, from October 2006 to October 2009. In prior positions, he spent six years as Corporate Controller of Biogen Inc., a biotechnology company, and six years in various senior financial roles at E.I. du Pont de Nemours and Company, a chemical, petroleum and biotechnology company, in the U.S. and Asia. Mr. Dentzer holds a B.A. degree in Philosophy from Boston College and an M.B.A. from the University of Chicago.
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Continuing Class III Director (Term expires in 2025)
Mr. Michael H. Tardugno. Mr. Tardugno was appointed President and Chief Executive Officer of the Company on January 3, 2007, and was elected to the Board of Directors on January 22, 2007. In October of 2014, Mr. Tardugno was appointed by our Board of Directors as our Chairman. Effective July 18, 2022, Mr. Tardugno transitioned from the roles of President, Chief Executive Officer and Chairman to the position of Executive Chairman of the Board. Prior to joining the Company and for the period from February 2005 to December 2006, Mr. Tardugno served as Senior Vice President and General Manager of Mylan Technologies, Inc., a subsidiary of Mylan Inc. From 1998 to 2005, Mr. Tardugno was Executive Vice President of Songbird Hearing, Inc., a medical device company spun out of Sarnoff Corporation. From 1996 to 1998, he was Senior Vice President of Technical Operations worldwide for a division of Bristol-Myers Squibb, and from 1977 to 1995, he held increasingly senior executive positions including Senior Vice President of Worldwide Technology Development with Bausch & Lomb and Abbott Laboratories. Mr. Tardugno holds a B.S. degree from St. Bonaventure University and completed the Harvard Business School Program for Management Development.
Dr. Donald P. Braun. Dr. Braun was appointed to our Board of Directors in December 2015. Dr. Braun has over 35 years of research experience in oncology, cancer immunology, cancer immunotherapy, and inflammatory diseases. He is the author of more than 120 published peer-reviewed manuscripts, twenty-five reviews and book chapters, and co-editor of a book on the role of prostaglandins and other COX 2 metabolites in cancer patient immunity and immunotherapy. He served from 2006 to 2014 as Vice President Clinical Research, after which he served as Vice President Translational Research and Chief Science Officer at the Cancer Treatment Centers of America until his retirement in May 2016. Prior to this role, he was the Scientific Director of the Cancer Center and Professor of Medicine and Immunology at Rush Medical College in Chicago from 1978 to 1999, and the Administrative Director of the Cancer Institute and a Professor of Surgery with tenure at the Medical College of Ohio from 1999 to 2006. He received his Ph.D. in Immunology and Microbiology from the University of Illinois at the Medical Center in Chicago. Dr. Braun has served as an advisor to numerous public agencies and private corporations concerned with cancer therapeutics and diagnostics. At the National Cancer Institute, Dr. Braun served as a member of the Experimental Therapeutics Study Section; the Small Business Innovation Grant Review Study Section; and the Experimental Therapy program for “Molecular Targets in Lung Cancer.” He served as a member of the Immunology and Immunotherapy Study Section of the American Cancer Society-National Division; as a Member of the Ohio Cancer Incidence Surveillance System; as a Member of the Biomedical Research Technology Transfer Commission for the State of Ohio; and as an advisor to the State of Arizona’s Disease Research Control Commission. Dr. Braun has also served as a consultant to numerous pharmaceutical and biotechnology companies developing cancer treatments and diagnostics including Pfizer Pharmaceuticals, Sterling Winthrop, Abbott Laboratories, Boehringer Mannheim, Serono Corporation, Biomira Inc., Centocor and Merck KGA.
Our Board of Directors concluded that all of the continuing directors have the requisite experience, qualifications, attributes and skill necessary to serve as a member of the Board of Directors based on, among other things, their:
| ● | Leadership attributes and experience; | |
| ● | Management experience in the pharmaceutical industry and/or business experience in countries in which we are conducting clinical trials; and | |
| ● | Professional and educational background. |
Executive Officers
The following are the biographical summaries for each of our executive officers. Each executive officer is elected by, and serves at the pleasure of, our Board of Directors.
Corinne Le Goff, Pharm.D. Dr. Le Goff’s biographical information appears above under the heading “Directors.”
Khursheed Anwer, Ph.D., M.B.A. Dr. Anwer joined us in June 2014 as Executive Vice President and Chief Scientific Officer, in connection with our acquisition of all the assets of EGWU, Inc. (formerly known as Egen, Inc.), an Alabama corporation (or “EGEN”). Before joining Celsion, Dr. Anwer served as EGEN’s President and Chief Scientific Officer, a position he held since 2009. He joined EGEN in July 2002 as Vice President of Research and Development and directed EGEN’s clinical and research and development functions. Before joining EGEN, Dr. Anwer was Director of Pre-Clinical Development at Valentis, Inc. from July 2000 to June 2002. From 1993 to 1999, he served in several positions at GeneMedicine, Inc., where he led several research projects in the area of non-viral gene therapy. He has authored more than 40 publications in the area of non-viral gene therapy, resulting from his active career in research and development. Dr. Anwer holds a Ph.D. in physiology/pharmacology from Ohio University and received post-doctoral training from the University of Texas Health Science Center at Houston. Dr. Anwer also has a master’s in business administration from the University of Alabama.
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Mr. Jeffrey W. Church. Mr. Church joined us in July 2010 as Vice President, Chief Financial Officer and Corporate Secretary. Mr. Church was appointed as our Senior Vice President, Corporate Strategy and Investor Relations in July 2011. In July 2013, Mr. Church was reappointed as Senior Vice President and Chief Financial Officer. In December 2018, Mr. Church was promoted to Executive Vice President. Immediately prior to joining us, Mr. Church served as Chief Financial Officer and Corporate Secretary of Alba Therapeutics Corporation, a privately held life science company from 2007 until 2010. From 2006 until 2007, he served as Vice President, Chief Financial Officer and Corporate Secretary for Novavax, Inc., a vaccine development company listed on The Nasdaq Global Select Market. From 1998 until 2006, he served as Vice President, CFO and Corporate Secretary for GenVec, Inc., a biotechnology company listed on The Nasdaq Capital Market. Prior to that, he held senior financial positions at BioSpherics Corporation and Meridian Medical Technologies, both publicly traded companies. He started his career with Price Waterhouse from 1979 until 1986. Mr. Church holds a B.S. degree in accounting from the University of Maryland.
Nicholas Borys, M.D. served as Executive Vice President and Chief Medical Officer of the Company until February 28, 2023, when he was terminated from the Company.
On October 29, 2020, a putative securities class action was filed against the Company and certain of its officers and directors (the “Spar Individual Defendants”) in the U.S. District Court for the District of New Jersey, captioned Spar v. Celsion Corporation, et al., Case No. 1:20-cv-15228. The plaintiff alleged that the Company and Individual Defendants made false and misleading statements regarding one of the Company’s product candidates, ThermoDox®, and brings claims for damages under Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder against all Defendants, and under Section 20(a) of the Exchange Act of 1934 against the Spar Individual Defendants. On February 6, 2023, the U.S. District Court granted a Motion to Dismiss filed by the Company and Spar Individual Defendants and granted Plaintiff leave to file an amended complaint within 30 days. Plaintiff did not file an amended complaint within the 30-day deadline.
In February 2021, a derivative shareholder lawsuit was filed against the Company, as the nominal defendant, and certain of its directors and officers as defendants in the U.S. District Court for the District of New Jersey, captioned Fidler v. Michael H. Tardugno et al., Case No. 3:21-cv-02662. The plaintiff alleges breach of fiduciary duty and other claims arising out of alleged statements made by certain of the Company’s directors and/or officers regarding ThermoDox®. The Company believes it has meritorious defenses to these claims and intends to vigorously contest this suit. Due to the early stage of the case neither the likelihood that a loss, if any, will be realized, nor an estimate of possible loss or range of loss, if any, can be determined.
In August of 2021, a complaint regarding a corporate books and records demand was filed against the Company in the Court of Chancery of the State of Delaware, captioned Pacheco v. Celsion Corporation, Case No. 2021-0705. The plaintiff alleges he is entitled to inspect the Company’s books and records concerning the OPTIMA Study and other materials. The Company believes that the scope of the demand is without merit and intends to defend it vigorously. Due to the early stage of the case neither the likelihood that a loss, if any, will be realized, nor an estimate of possible loss or range of loss, if any, can be determined.
In October 2021, an arbitration was commenced against the Company before the CPR Institute for Conflict Prevention & Resolution, captioned Curia New Mexico, LLC v. Celsion Corp., Case No. G-22-85-S. The claimant alleged that the Company failed to pay invoices for the manufacture of two batches of ThermoDox®. On April 19, 2023, the arbitral tribunal issued an interim award, upholding claimant’s claim with respect to one of the two batches of ThermoDox® for an aggregate amount of approximately $260,000 including interest and denied their claim with respect to the other batch of ThermoDox®. The Tribunal has directed the parties to make submissions on the allocation of the costs of the arbitration proceedings by May 12, 2023. The Company will vigorously contest any allocation of claimant’s costs to it.
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BOARD LEADERSHIP STRUCTURE AND ROLE IN RISK OVERSIGHT
Board Leadership
Our Board of Directors believes that it is important to select our Chairman of the Board and our Chief Executive Officer in the manner it considers in our best interests. The members of our Board of Directors possess considerable business experience and in-depth knowledge of the issues we face and are therefore in the best position to evaluate our needs and how best to organize and adopt our leadership structure to meet those needs. Accordingly, our Chairman and the Chief Executive Officer may be filled by one individual or by two different individuals, and our chairman may be a Company insider or an independent director. Mr. Tardugno currently serves as Executive Chairman of our Board of Directors and Dr. Corinne Le Goff currently serves as the Company’s President and Chief Executive Officer. Currently all the other directors of our Board of Directors are independent under applicable SEC and NASDAQ rules.
Board Oversight of Risk
Our Board of Directors is responsible for oversight of the various risks we face. In this regard, the Board of Directors seeks to understand and oversee the most critical risks relating to our business and operations, allocate responsibilities for the oversight of risks among the full Board of Directors and its committees, and see that management has in place effective systems and processes for managing risks we face. Overseeing risk is an ongoing process, and risk is inherently tied to our strategy and to strategic decisions. Accordingly, our Board of Directors considers risk throughout the year and with respect to specific proposed actions. Our Board of Directors recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, purposeful and appropriate risk-taking is essential for us to be competitive and to achieve our business objectives.
While our Board of Directors oversees risk, management is charged with identifying and managing risk. We have robust internal processes and a strong internal control environment to identify and manage risks and to communicate information about risk to the Board of Directors. Management communicates routinely with our Board of Directors, Board Committees (as defined below) and individual directors on the significant risks identified and how they are being managed. Our directors are free to, and indeed often do, communicate directly with senior management.
Our Board of Directors implements its risk oversight function both as a whole and through delegation to various committees (the “Board Committees”). These Board Committees meet regularly and report back to our full Board of Directors.
| ● | Our Audit Committee oversees the management of financial, accounting, internal controls, disclosure controls and the engagement arrangement and regular oversight of the independent auditors. | |
| ● | Our Compensation Committee is responsible for the design and oversight of our compensation programs. Based on a review of our company-wide compensation programs, including the compensation programs for our executive officers, our Compensation Committee has concluded that these programs do not create risks that are likely to have a material adverse effect on us. | |
| ● | Our Nominating and Governance Committee periodically reviews our corporate governance practices, including the risks that those practices are intended to address. It also periodically reviews the composition of our Board of Directors to help ensure that a diversity of skills and experiences is represented by the members of our Board of Directors, taking into account the stage of our growth and strategic direction. | |
| ● | Our Science and Technology Committee assists our Board of Directors in monitoring the state of science and technology capabilities within the Company and associated risks and overseeing the development of key technologies and major science and medicine-driven innovation initiatives essential to our long-term success. |
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COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors presently maintains separately designated Audit, Compensation, Nominating and Governance, and Science and Technology Committees.
Good Governance Practices
Our Board of Directors has a commitment to strong and sustainable corporate governance. As such, we continuously review our practices to ensure effective collaboration between management and our Board of Directors. Highlights of our Board of Directors’ best practices are:
| ● | Six of the eight Board directors are independent; | |
| ● | Our Board of Directors has adopted and published committee charters (charters are available at www.imunon.com); | |
| ● | Our Board of Directors conducts an annual review of Board Independence; | |
| ● | Our Board Committees conduct annual self-evaluations that are reviewed by our Nominating and Governance Committee and our Board of Directors; | |
| ● | New directors participate in an orientation program and receive a current state briefing before their first Board meeting; | |
| ● | We have stock ownership and stock retention guidelines for our directors; | |
| ● | We have policies and practices to specifically align executive compensation with long-term stockholder interests; | |
| ● | We have a policy prohibiting hedging and pledging, short sales, purchases or sales of puts or calls, and other derivative transactions of our stock (including any transaction that provides the economic equivalent of ownership) by our executive officers and directors; | |
| ● | An executive compensation claw back policy was adopted by our Board of Directors in 2014; | |
| ● | Our Board of Directors reviews management talent and succession annually with our chief executive officer; and | |
| ● | There is no automatic enhancement of executive incentive compensation upon a change-in-control. |
Audit Committee
Our Audit Committee consists of Mr. James A. Dentzer (Chairman), Mr. Frederick J. Fritz, Dr. Augustine Chow and Ms. Christine Pellizzari. Our Audit Committee operates under a written charter as amended and restated effective January 24, 2023. A copy of that charter, as may be amended from time to time, is available on our web site, located at http://www.imunon.com. Additional copies of the charter are available upon written request to us.
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Our Audit Committee assists our Board of Directors in fulfilling its responsibility to oversee management’s implementation of our financial reporting process. In discharging its oversight role, the Audit Committee reviewed and discussed the audited financial statements contained in our 2022 Annual Report on Form 10-K with our management and independent registered public accounting firm. Management is responsible for the financial statements and the reporting process, including the system of internal controls. Our independent registered public accounting firm is responsible for expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the U.S.
Our Board has determined that all members of the Audit Committee meet the independence standards established by the SEC and Nasdaq. Our Board has determined that Mr. Dentzer is qualified to serve as the “audit committee financial expert” as defined by Item 407(d)(5) of Regulation S-K and that Mr. Fritz, Dr. Chow and Ms. Pellizzari meet the financial literacy requirements under applicable NASDAQ rules.
Compensation Committee
Our Compensation Committee is responsible for establishing and administering the compensation policies applicable to our directors, officers, and key personnel, for determining the compensation arrangements to our President and Chief Executive Officer and for evaluating the performance of senior management. Our Compensation Committee operates under a written charter as amended and restated effective January 24, 2023. A copy of that charter, as may be amended from time to time, is available on our web site, located at www.imunon.com. Additional copies of the charter are available upon written request to us.
Our Compensation Committee does not delegate the authority to approve compensation policies and actions affecting our named executive officers or directors. Our Compensation Committee applies discretion in determining compensation for our executives. Our Compensation Committee has not established any equity or other security ownership requirements or guidelines in respect of its executive officers. Our Executive Chairman and our President and Chief Executive Officer assist the Compensation Committee in evaluating the performance of other executive officers and by providing information to directors as and when requested, such as salary surveys and compensation paid by our competitors, to the extent such information is publicly available. Members of our Compensation Committee undertake to verify such information prior to referring to it in determining executive compensation. The compensation of our President and Chief Executive Officer is determined by the Compensation Committee based on their evaluation of her performance and with reference to such external or competitive data as they consider necessary. The compensation of the other named executive officers is determined by our Compensation Committee based on its evaluation of their individual performance and the recommendations of our Executive Chairman and our President and Chief Executive Officer.
Mr. Frederick J. Fritz (Chairman), Dr. Augustine Chow and Dr. Stacy R. Lindborg currently comprise our Compensation Committee. Our Board has determined that all members of our Compensation Committee are independent under the applicable Nasdaq rules.
Nominating and Governance Committee
Our Nominating and Governance Committee is responsible for identifying and recruiting new members of our Board of Directors when vacancies arise, identifying and recruiting nominees for election as directors, reconsideration of incumbent directors in connection with nominations for elections of directors and ensuring that our Board of Directors is properly constituted to meet its corporate governance obligations. Our Nominating and Governance Committee operates under a written charter effective as of January 24, 2023. A copy of that charter, as may be amended from time to time, is available on our web site, located at www.imunon.com. The current members of our Nominating and Governance Committee are Mr. Frederick J. Fritz and Dr. Donald P. Braun. Our Board has determined that both Mr. Fritz and Dr. Braun are deemed to be independent under applicable Nasdaq rules.
Science and Technology Committee
The primary purpose of our Science and Technology Committee is to assist our Board of Directors in monitoring the state of science and technology capabilities within our Company and associated risks and overseeing the development of key technologies and major science and medicine-driven innovation initiatives essential to our long-term success. Our Science and Technology Committee’s responsibilities includes reviewing technologies and technology programs of significance to us, with special focus on major external initiatives, observing the evolution of science and medicine outside the Company, participating in the development of metrics to assess the state of our science and technology in subject areas including, but not limited to, patent estate, freedom to operate, productivity, capability and external benchmarks, providing guidance for our external science and technology alliances, and providing guidance on the direction of our science and technology activities, as appropriate. The current members of our Science and Technology Committee are Dr. Donald P. Braun and Dr. Stacy R. Lindborg.
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MEETINGS OF THE BOARD AND ITS COMMITTEES
During the year ended December 31, 2022, there were a total of four (4) regular meetings of our Board of Directors. All of our directors attended all of the meetings of our Board of Directors and the Board committees on which they served that were held during the period for which they were a director or committee member, respectively.
During the year ended December 31, 2022, our Audit Committee met four (4) times, our Compensation Committee met one (1) time and our Nominating and Governance Committee met several times in connection with the recruitment of one new Board director in September 2022. Our Science and Technology Committee did not meet during 2022.
DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of the Exchange Act requires our executive officers, directors and persons who own more than 10% of our common stock to file reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company with the SEC. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of the copies of reports furnished to us, we believe that during the year ended December 31, 2022, our executive officers, directors and greater than 10% stockholders complied with all Section 16(a) filing requirements.
The Nominating and Governance Committee
The role of our Nominating and Governance Committee is to act on behalf of our Board of Directors to ensure that our Board of Directors and its standing committees are appropriately constituted to meet their fiduciary and corporate governance obligations. In this role, our Nominating and Governance Committee is responsible for identifying and recruiting new members of our Board of Directors when vacancies arise, identifying and recruiting nominees for election as directors and reconsidering incumbent directors in connection with nominations for elections of directors. Our Nominating and Governance Committee is also charged with:
| (i) | reviewing and recommending changes in the size and composition of our Board of Directors and Board committees; | |
| (ii) | developing and maintaining criteria and processes for selecting candidates for election as directors; | |
| (iii) | identifying and recruiting candidates to stand for election as directors and determining whether incumbent directors should stand for reelection; | |
| (iv) | ensuring that we and our Board of Directors operate in accordance with current best practices; | |
| (v) | providing for ongoing director training and education; | |
| (vi) | reporting to our Board of Directors on Nominating and Governance Committee activities; | |
| (vii) | annually reviewing the Nominating and Governance Committee’s performance of its responsibilities and duties; and | |
| (viii) | annually reviewing the Nominating and Governance Committee Charter, the structure and the processes and membership requirements of the Nominating and Governance Committee and recommending to our Board of Directors any improvements or amendments that our Nominating and Governance Committee considers appropriate or necessary. |
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Director Qualifications
It is a policy of our Nominating and Governance Committee that candidates for director be determined to have unquestionable integrity and the highest ethical character. Candidates must demonstrate the ability to exercise sound, mature and independent business judgment in the best interests of the stockholders as a whole and may not have any interests that would, in the view of our Nominating and Governance Committee, impair their ability to exercise independent judgment or otherwise discharge the fiduciary duties owed as a director. Candidates must have experience and demonstrated achievement in one or more fields of business, professional, governmental, communal, scientific or educational endeavors which will complement the talents of the other members of our Board of Directors and further our interests, bearing in mind the composition of our Board of Directors and the current state of the Company and the state of the biotechnical/biopharmaceutical industry generally. In particular, our Nominating and Governance Committee believes it is important for one or more members of our Board of Directors to have in-depth experience in the biotechnical/biopharmaceutical industry. Our Nominating and Governance Committee has determined that one or more of its members, including the incumbents nominated to stand for reelection at the Annual Meeting, have such biotechnical/biopharmaceutical experience.
Candidates are expected to have an appreciation of the major issues facing public companies of a size and operational scope similar to us, including contemporary governance concerns, regulatory obligations of a public issuer, strategic business planning, competition in a global economy, and basic concepts of corporate finance. Candidates must also have the willingness and capability to devote the time necessary to participate actively in meetings of our Board of Directors and Board Committee meetings and related activities, the ability to work professionally and effectively with other members of the Board of Directors and Company management, and the ability and intention to remain on our Board of Directors long enough to make an effective contribution. Among candidates who meet the foregoing criteria, our Nominating and Governance Committee also considers the Company’s current and anticipated needs, including expertise, diversity and balance of inside, outside and independent directors.
Our Nominating and Governance Committee, encouraging diversity, endeavors to comprise our Board of Directors of members with a broad mix of professional and personal backgrounds. Thus, our Nominating and Governance Committee accords some weight to the individual professional background and experience of each director. Further, in considering nominations, our Nominating and Governance Committee considers how a candidate’s professional background would fit into the mix of experiences represented by the then-current Board of Directors. When evaluating a nominee’s overall qualifications, our Nominating and Governance Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily required of all prospective nominees. In addition to the aforementioned criteria, when evaluating a director for re-nomination to our Board of Directors, our Nominating and Governance Committee will also consider the director’s history of attendance at board and committee meetings, the director’s preparation for and participation in such meetings, and the director’s tenure as a member of our Board of Directors.
Board Diversity
| Board Diversity Matrix (As of March 30, 2023) | |||||||
| Total Number of Directors: 8 | |||||||
| Part I: Gender Identity | Female | Male | |||||
| Directors | 3 | 5 | |||||
| Part II: Demographic Background | |||||||
| African American or Black | 0 | 0 | |||||
| Alaskan Native or Native American | 0 | 0 | |||||
| Asian | 0 | 1 | |||||
| Hispanic or Latinx | 0 | 0 | |||||
| Native Hawaiian or Pacific Islander | 0 | 0 | |||||
| White | 3 | 4 | |||||
| Two or More Races or Ethnicities | 0 | 0 | |||||
| LGBTQ+ | 0 | ||||||
| Did Not Disclose Demographic Background | 0 | ||||||
Director Independence
In addition, in accordance with the rules of the SEC and NASDAQ, the Company requires that at least a majority of the directors serving at any time on the Board of Directors be independent, that at least three directors satisfy the financial literacy requirements for service on the Audit Committee and that at least one member of the Audit Committee qualify as an “audit committee financial expert” under those rules.
Mr. Dentzer acts as the chairman of our Audit Committee. The Board of Directors has determined that Mr. James E. Dentzer is qualified to serve as the “audit committee financial expert” as defined by Item 407(d)(5) of Regulation S-K and that Mr. Fritz, Dr. Chow and Ms. Pellizzari meet the financial literacy requirements under applicable SEC and NASDAQ rules. The Board of Directors determined that of the eight currently serving directors, six directors (Drs. Chow, Braun and Lindborg, Messrs. Dentzer and Fritz and Ms. Pellizzari) are independent under applicable SEC and NASDAQ rules.
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Nominating and Governance Committee Process
In selecting candidates for our Board of Directors, the Nominating and Governance Committee begins by determining whether the incumbent directors whose terms expire at the annual meeting of stockholders desire and are qualified to continue their service on our Board of Directors. Under its charter, our Nominating and Governance Committee is charged with considering incumbent directors as if they were new candidates. However, our Nominating and Governance Committee recognizes the significant value of the continuing service of qualified incumbents in promoting stability and continuity, providing the benefit of the familiarity and insight into our affairs and enhancing our Board of Directors’ ability to work as a collective body. Therefore, it is the policy of our Nominating and Governance Committee, absent special circumstances, to nominate qualified incumbent directors who our Nominating and Governance Committee believes will continue to make important contributions to our Board of Directors and who consent to stand for re-election. If any member of our Board of Directors does not wish to continue in service or if our Nominating and Governance Committee or our Board of Directors decides not to re-nominate a member, there is an existing vacancy on our Board of Directors, or our Board of Directors, upon the recommendation of the Nominating and Governance Committee, elects to expand the size of our Board of Directors, the following process would be followed:
| ● | The Nominating and Governance Committee develops a profile for candidates’ skills and experience, based on the criteria described above. | |
| ● | The Nominating and Governance Committee initiates a search, polling members of the Board of Directors and management, and retaining a search firm if the Nominating and Governance Committee deems this appropriate. | |
| ● | The Nominating and Governance Committee has a policy with respect to stockholders’ suggestions for nominees for directorships. Under this policy, stockholder nominees are given identical consideration as nominees identified by the Nominating and Governance Committee. | |
| ● | The process by which stockholders may submit potential nominees is described below under “Stockholder Recommendation Process.” | |
| ● | The Nominating and Governance Committee then determines the eligibility and suitability of any candidate based on the criteria described above and the Nominating and Governance Committee’s search profile. | |
| ● | The Chairman of the Board of Directors and at least one member of the Nominating and Governance Committee interview prospective candidate(s) who satisfy the qualifications described above. | |
| ● | The Nominating and Governance Committee offers other members of the Board of Directors the opportunity to interview the candidate(s) and then meets to consider and approve the final candidate(s). | |
| ● | The Nominating and Governance Committee seeks endorsement of the final candidate(s) from the full Board of Directors. | |
| ● | The final candidate(s) are nominated by the Board of Directors for submission to a stockholder vote or elected to fill a vacancy. |
Stockholder Recommendation Process
Our Nominating and Governance Committee will consider for nomination any qualified director candidates recommended by our stockholders. Any stockholder who wishes to recommend a director candidate is directed to submit in writing the candidate’s name, biographical information and relevant qualifications to our Corporate Secretary at our principal executive offices. All written submissions received from our stockholders will be reviewed by the Nominating and Governance Committee at the next appropriate meeting. The Nominating and Governance Committee will evaluate any suggested director candidates received from our stockholders in the same manner as recommendations received from management, committee members or members of our board. The Company or the Nominating and Governance Committee may require a stockholder who proposes a nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility or suitability of the proposed nominee to serve as director of the Company. See the section titled “Stockholder Nominations and Proposals for the 2023 Annual Meeting of Stockholders” later in this Proxy Statement.
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Revisions to Nomination Process
Our Nominating and Governance Committee and stockholder recommendation processes have been developed to provide a flexible framework to permit the director nomination process to move forward effectively. Our Nominating and Governance Committee intends to review these processes from time to time in light of our evolving needs and changing circumstances, as well as changes in legal requirements and stock exchange listing standards. The Nominating and Governance Committee may revise these processes or adopt new ones based on such periodic reviews.
Our Board of Directors has adopted a process through which interested stockholders may communicate with our Board of Directors. Stockholders who wish to send communications to our Board of Directors, or any particular director, should address such communications to the Corporate Secretary, at the Company’s headquarters at 997 Lenox Drive, Suite 100, Lawrenceville, New Jersey, 08648. The envelope containing any such communication should be prominently marked “To the Attention of the Board of Directors” or to a particular committee or director, and the communication should include a representation from the stockholder indicating the stockholder’s address and the number of shares of our common stock beneficially owned by the stockholder.
Our Corporate Secretary is primarily responsible for monitoring communications from stockholders. Depending upon the content of a particular communication, as he deems appropriate, our Corporate Secretary will: (i) forward the communication to the director, directors or committee to whom it is addressed; (ii) attempt to handle the inquiry directly, for example where the stockholder communication consists of a request for information about the Company or is a stock-related matter; or (iii) not forward communications such as solicitations, junk mail and obviously frivolous or inappropriate communications. At each meeting of our Board of Directors, the Corporate Secretary will present a summary of all communications, whether or not forwarded, received since the last meeting and will make those communications available to the directors on request.
Our Board of Directors strongly encourages, but does not require, all directors, to the extent reasonable and practicable, to attend the Company’s Annual Meetings of Stockholders in person. All of the current members of our Board of Directors were present at the Company’s 2022 Annual Meeting of Stockholders held on June 13, 2022.
2022 DIRECTOR COMPENSATION TABLE
The following table sets forth the cash and noncash compensation paid to the Company’s directors who are not employed by the Company or any of its subsidiaries (“Non-Employee Directors”) for the year ended December 31, 2022. Other than as set forth in the table, we did not pay any compensation, make any equity awards or non-equity awards to, or pay any other compensation to any of the Non-Employee Directors in 2022. The compensation paid to any director who was also one of our employees during fiscal year 2022 is presented in the “2022 Summary Compensation Table” and the information that follows that table. Such employee directors do not receive separate compensation for their service on the Board of Directors or any of its Committees.
| Name (1) | Fees Earned ($) | Option Awards ($) (2) | Total ($) | |||||||||
| Augustine Chow | $ | 45,300 | $ | 44,357 | $ | 89,657 | ||||||
| James E. Dentzer | 9,825 | 3,972 | 13,797 | |||||||||
| Frederick J. Fritz | 105,600 | 44,357 | 149,957 | |||||||||
| Donald P. Braun | 69,300 | 36,964 | 106,264 | |||||||||
| Stacy R. Lindborg | 40,500 | 14,786 | 55,286 | |||||||||
| Christine A. Pellizzari | 44,100 | 14,786 | 58,886 | |||||||||
| Robert W. Hooper (3) | 41,175 | 44,357 | 85,532 | |||||||||
| (1) | Compensation earned by Michael H. Tardugno and Corinne Le Goff for the year ended December 31, 2022 is presented in the Summary Compensation Table of the Proxy Statement. Employee directors do not receive separate compensation for their service on the Board of Directors or any of its Committees. | |
| (2) | The value reported for Option Awards is the aggregate grant date fair value of stock options granted to each Director in 2022, determined in accordance with FASB ASC Topic 718. The assumptions for making the valuation determinations are set forth in Note 12 in the Financial Statements. As of December 31, 2022, Dr. Chow had 18,333 option awards outstanding; Mr. Dentzer had 4,667 option awards outstanding; Mr. Fritz had 18,333 option awards outstanding; Dr. Braun had 15,833 option awards outstanding; and Dr. Lindborg and Ms. Pellizzari each had 9,666 option awards outstanding. | |
| (3) | Mr. Hooper resigned from the Board of Directors effective December 31, 2022. |
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The following table sets forth stock option grants awarded to the Company’s Non-Employee Directors for the year ended December 31, 2022. Stock option grants to any director who was also one of our employees during fiscal year 2022 are presented in the “2022 Grants of Plan-Based Awards Table” and the information that follows that table. Employee directors do not receive separate equity awards for service on the Board of Directors or any of the Board committees.
| Non-Employee Director Stock Option and Grant Awards Table | ||||||||||||||||
| Name | Number
of (#) (1) | Exercise Price ($) | Grant Date | Expiration Date | Grant Date Fair Value ($) | |||||||||||
| Augustine Chow | 7,500 | $ | 4.60 | 3/4/2022 | 3/4/2032 | $ | 4.16 | |||||||||
| 7,500 | $ | 1.93 | 6/13/2022 | 6/13/2032 | $ | 1.75 | ||||||||||
| James E. Dentzer | 2,666 | $ | 1.65 | 9/27/2022 | 1/1/2033 | $ | 1.49 | |||||||||
| Frederick J. Fritz | 7,500 | $ | 4.60 | 3/4/2022 | 3/4/2032 | $ | 4.16 | |||||||||
| 7,500 | $ | 1.93 | 6/13/2022 | 6/13/2032 | $ | 1.75 | ||||||||||
| Donald P. Braun | 6,250 | $ | 4.60 | 3/4/2022 | 3/4/2032 | $ | 4.16 | |||||||||
| 6,250 | $ | 1.93 | 6/13/2022 | 6/13/2032 | $ | 1.75 | ||||||||||
| Stacy R. Lindborg | 2,500 | $ | 4.60 | 3/4/2022 | 3/4/2032 | $ | 4.16 | |||||||||
| 2,500 | $ | 1.93 | 6/13/2022 | 6/13/2032 | $ | 1.75 | ||||||||||
| Christine A. Pellizzari | 2,500 | $ | 4.60 | 3/4/2022 | 3/4/2032 | $ | 4.16 | |||||||||
| 2,500 | $ | 1.93 | 6/13/2022 | 6/13/2032 | $ | 1.75 | ||||||||||
| Robert W. Hooper (2) | 7,500 | $ | 4.60 | 3/4/2022 | 3/4/2032 | $ | 4.16 | |||||||||
| 7,500 | $ | 1.93 | 6/13/2022 | 6/13/2032 | $ | 1.75 | ||||||||||
(1)
|
Each of these stock option grants vest in three equal installments, with one-third of the grant vesting on the date of grant and one third of the grant vesting on each of the first and second anniversary of the date of grant, subject to the applicable director’s continued service as a member of our Board through each applicable vesting date. | |
| (2) | Mr. Hooper resigned from the Board of Directors effective December 31, 2022. |
NARRATIVE DISCLOSURE TO DIRECTOR COMPENSATION TABLE
During the year ended December 31, 2022, each Non-Employee Director of the Company received annual cash compensation in the amount of $30,500 payable in quarterly installments, and an additional $2,200 for attendance at regular meetings of the Board of Directors and $1,200 for each meeting of a committee of the Board of Directors that was not held in conjunction with a meeting of the Board of Directors. Each Non-Employee director is reimbursed for the out-of-pocket costs of attending meetings of the Board of Directors and of committees of the Board of Directors. In 2022, the Chairman of the Audit Committee received an additional annual cash fee of $13,500 and the Chairman of the Compensation Committee received an additional annual cash fee of $10,500.
Acting on behalf of the Board of Directors, Mr. Fritz also received fees totaling $48,000 in 2022 for his role as a Board Liaison to our Board of Directors. Mr. Fritz’s responsibilities as Board Liaison include the following: (i) serve as an initial sounding board for our management regarding issues, matters, or communications to be brought or potentially to be brought before the Board of Directors; (ii) provide input and feedback to management regarding strategic matters, business matters, major scientific, clinical, collaboration, or corporate development matters, key personnel matters, or other items of significance regarding which management would like to obtain initial or further Board guidance, including, but not limited to, guidance regarding timing and content of communications regarding such matters or items with the full Board or any of its committees; (iii) remain accessible to management to provide guidance on business or strategy issues or other issues of significance on an as-needed basis; (iv) participate in meetings and relevant discussions as requested by management; (v) conduct general advisory or liaison services to the Board, including relaying to management requests from other members of the Board regarding desired additional information or clarification or suggestions or feedback regarding improvement in Board processes or communications; (vi) serve as a conduit for informal communications between management and the Board; and (vii) any other such services established by the Board from time to time.
Acting on behalf of our Board of Directors, Dr. Braun also received fees totaling $30,000 in 2022 for his role as a strategic advisor to our Executive Chairman and our Chief Executive Officer. Dr. Braun’s responsibilities as a strategic advisor include the following: (i) provide strategic and tactical advice to our Chief Executive Officer; (ii) evaluate international subsidiary options; (iii) develop strategies to secure business relationships other than in the U.S.; and (iv) having done both (ii) and (iii), develop high potential ex-US market strategies that address the objectives for broad and profitable sales of its commercial products.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Hooper, Dr. Chow and Dr. Lindborg each served on the Compensation Committee of our Board of Directors during 2022. Mr. Hooper retired from our Board of Directors effective December 31, 2022. On January 24, 2023, Mr. Frederick J. Fritz was appointed as Chairman of the Compensation Committee of our Board of Directors. No director who served on our Compensation Committee at any time during 2022 and 2023 is or was a current or former executive officer or employee of the Company or had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related party transactions. None of the members of the Compensation Committee during 2022 and 2023 was, or has ever been, an officer or employee of the Company, and, during 2022 and 2023, no executive officer of the Company served on the board and/or compensation committee of any company that employed as an executive officer any member of the Company’s Board and/or Compensation Committee.
STOCK OWNERSHIP GUIDELINES FOR NON-EMPLOYEE AND EXECUTIVE DIRECTORS
Our Board of Directors believes that, as a matter of sound corporate governance, non-employee and executive directors should have a significant personal financial stake in our performance. Consequently, in February 2011, our Board of Directors adopted stock ownership guidelines for non-employee and executive directors. Our corporate governance guidelines require that each non-employee director acquire and hold shares of our common stock having an aggregate value equal to two times the director’s total compensation in the first year of service and that our executive director acquire and hold shares of our common stock having an aggregate value equal to the executive director’s total compensation in the first year of service. Each director is expected to satisfy the applicable ownership guideline within three years after his or her appointment to the Board.
Shares of our common stock that count toward satisfaction of these ownership guidelines include, unless beneficial ownership therein is disclaimed: (i) shares owned outright by the director or executive officer or their immediate family members residing in the same household, whether held individually or jointly; (ii) shares held in a trust, family limited partnership or similar entity solely for the benefit of the director or executive officer and/or their immediate family members; (iii) shares of restricted stock and restricted stock units awarded under our equity incentive plans, including vested and unvested awards; and (iv) shares acquired upon stock option exercise, but not shares underlying unexercised stock options.
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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
Our management is primarily responsible for our internal control and financial reporting process. Our independent registered public accounting firm, WithumSmith+Brown, PC, is responsible for performing an independent audit of our consolidated financial statements and issuing opinions on the conformity of those audited financial statements with United States generally accepted accounting principles and the effectiveness of our internal control over financial reporting. Our Audit Committee monitors our financial reporting process and reports to the Board on its findings.
In this context, the Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited financial statements with our management.
2. The Audit Committee has discussed with our independent registered public accounting firm the matters required to be discussed under the rules adopted by the Public Company Accounting Oversight Board (“PCAOB”) and the SEC.
3. The Audit Committee has received from the independent registered public accounting firm the written disclosures and the letter required by the applicable requirements of the PCAOB regarding the independent registered public accounting firm’s communications with the Audit Committee concerning independence and has discussed with the independent registered public accounting firm its independence.
4. Based on the review and discussions referred to in paragraphs (1) through (3) above, our Audit Committee recommended to the Board, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, for filing with the SEC.
Members of the Audit Committee
Mr. James E, Dentzer (Chairman)
Mr. Frederick J. Fritz
Dr. Augustine Chow
Ms. Christine A. Pellizzari
This report does not constitute “soliciting material” and shall not be deemed filed or incorporated by reference into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent we specifically incorporate this report by reference and shall not otherwise be deemed filed under such Acts.
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COMPENSATION DISCUSSION AND ANALYSIS
This section describes the material elements of compensation awarded to, earned by, or paid to the following Executive Officers of the Company:
| ○ | Michael H. Tardugno, our Executive Chairman and former President and Chief Executive Officer | |
| ○ | Corinne Le Goff, Pharm. D., our President and Chief Executive Officer | |
| ○ | Nicholas Borys, M.D., our former Executive Vice President and Chief Medical Officer | |
| ○ | Khursheed Anwer, Ph.D., our Executive Vice President and Chief Science Officer | |
| ○ | Jeffrey W. Church, our Executive Vice President and Chief Financial Officer |
These individuals are listed in the 2022 Summary Compensation Table below and are referred to in this discussion as the “Named Executive Officers.”
Dr. Le Goff was appointed to the positions of President and Chief Executive Officer of the Company effective as of July 18, 2022. Michael H. Tardugno served as Chairman, President and Chief Executive Officer prior to such date and transitioned effective July 18, 2022, to the position of Executive Chairman of the Board. Dr. Borys departed the Company as of February 28, 2023.
Introduction
IMUNON is a fully integrated, clinical stage biotechnology company focused on advancing a portfolio of innovative treatments that harness the body’s natural mechanisms to generate safe, effective, and durable responses across a broad array of human diseases, constituting a differentiating approach from conventional therapies. Imunon has two platform technologies: Our TheraPlas® platform for the development of immunotherapies and other anti-cancer nucleic acid-based therapies, and our PLACCINE platform for the development of nucleic acid vaccines for infectious diseases and cancer. The Company’s lead clinical program, IMNN-001 (formerly GEN-1), is a DNA-based immunotherapy for the localized treatment of advanced ovarian cancer currently in Phase II development. IMNN-001 works by instructing the body to produce safe and durable levels of powerful cancer fighting molecules, such as interleukin-12 and interferon gamma, at the tumor site. Additionally, the Company is conducting preclinical proof-of-concept studies on a nucleic acid vaccine candidate targeting SARS-CoV-2 virus in order to validate its PLACCINE platform. Imunon’s platform technologies are based on the delivery of nucleic acids with novel synthetic delivery systems that are independent of viral vectors or devices. We will continue to leverage these platforms and to advance the technological frontier of plasmid DNA to better serve patients with difficult to treat conditions.
As a result of our drug development status, it is unlikely, in the short term, to generate revenues and income sufficient to cover product development costs. As a result, our executive compensation philosophy is to align the interests of management and stockholders by emphasizing rewards for Company performance, while remaining competitive with compensation paid by other clinical stage biotechnology companies.
The compensation practices that we have outlined below have been implemented because we believe that they are consistent with our stockholders’ interests:
| What we do: | ||
| ● | A significant portion of our executive compensation is based on actual Company performance compared to absolute and relative measures and is therefore “at risk;” | |
| ● | Multiple performance metrics between the annual and long-term incentive plans discourage excessive risk-taking by removing any incentive to focus on a single performance goal to the detriment of the Company; | |
| ● | Balance between annual and long-term compensation to discourage short-term risk taking at the expense of long-term results; | |
| ● | Our executives are encouraged to acquire and maintain meaningful ownership positions in our Company’s common stock; those executives who are also directors are subject to our stock ownership guidelines for directors discussed above. | |
| ● | Use relevant competitive compensation information compiled from compensation surveys; and | |
| ● | Provide reasonable, double trigger change in control arrangements. | |
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Following is a list of compensation practices that we have not engaged in because we do not believe that they are consistent with our stockholders’ interests:
| What we don’t do: | ||
| ● | Re-pricing or backdating of stock options; | |
| ● | Hedging or derivate transactions by our executive officers or directors; | |
| ● | Excessive perquisites for executives; | |
| ● | Single trigger or modified single trigger cash severance benefits followed by a change in control; and | |
| ● | Provision for excise tax gross ups. | |
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As noted above, we prohibit hedging or engaging in collars, short sales, or other derivative transactions by our executive officers or directors.
We have had an executive compensation claw back policy since 2014. In the event of a material restatement of the Company’s financial results, the Board is authorized to take such actions as it deems necessary and appropriate, including the recoupment of all or part of any bonus or other compensation paid to an executive officer. The Board will consider whether any executive officer received compensation based on the original financial statements because it appeared that the executive achieved financial performance targets that in fact were not achieved based on the restatement. The Board will also consider the accountability of any executive officer whose acts or omissions were responsible in whole or in part for the events that led to the restatement and whether such actions or omissions constituted misconduct. In the event of significant misconduct resulting in a violation of a significant company policy, law, or regulation that causes material harm to the Company, the Board is authorized to recoup compensation from senior executives. The Company intends to revise and update its claw back policy or adopt an additional policy as appropriate to comply with the Nasdaq listing standards to be issued in connection with the SEC rules promulgated under the Dodd-Frank Act.
Stockholder Say-on-Pay Votes
We provide our stockholders with the opportunity to cast an advisory vote to approve our executive compensation program (referred to as a “say-on-pay proposal”). In general, the Compensation Committee believes the program in place, as in prior years, includes a number of features that further the goals of the Company’s executive compensation program. The Compensation Committee will continue to consider the outcome of the Company’s say-on-pay proposals when making future compensation decisions for the Named Executive Officers.
The Compensation Committee has adopted the following executive compensation approaches, which the Company believes help to achieve the objectives for the executive compensation program and are generally favored by stockholders:
| ● | A significant amount of the executives’ compensation is at risk. For fiscal year 2022, 42.6% of Mr. Tardugno’s and 63.7% of Dr. Le Goff’s target total direct compensation was performance-based (annual cash incentive awards) and/or linked to the value of our stock price (long-term equity incentive awards). |
| ● | Executives’ bonuses under our annual incentive program are principally based on the achievement of specific performance objectives established at the beginning of the fiscal year by the Compensation Committee. Historically the Compensation Committee has awarded the annual incentive bonus for each year in the first quarter of the following year. | |
| ● | Executives’ 2022 annual equity awards were granted in the form of stock option awards. We believe the grant of stock option awards further aligns the executives’ interests with those of stockholders as the awards will not have value unless the Company’s stock price appreciates after the award is granted. The stock option awards also provide a retention incentive as they vest over a multi-year period. | |
| ● | Executives are also granted stock options and restricted stock awards at the time they join the Company as these provide the same incentives as annual equity awards. These stock option grants and restricted stock awards generally vest over a three or four-year period beginning on the first-year anniversary of the date of grant. |
The following table provides the components of Mr. Tardugno’s compensation for the last two years, reflecting his transition to Executive Chairman in mid-2022:
| (in 000’s) | 2022 | Change | 2021 | Change | ||||||||||||
| Base Salary | $ | 574 | 2 | % | $ | 561 | 1 | % | ||||||||
| Cash Incentive Awards | 383 | - | % | 381 | (5 | )% | ||||||||||
| Cash Total | 956 | 2 | % | 942 | (2 | )% | ||||||||||
| Option and Stock Awards | 507 | (62 | )% | 1,322 | 210 | % | ||||||||||
| All Other Compensation | 623 | 1,197 | % | 48 | 6 | % | ||||||||||
| Total | $ | 2,086 | (10 | )% | $ | 2,312 | 64 | % | ||||||||
The following table provides the components of Dr. Le Goff’s compensation for the last year, reflecting her partial year of service:
| (in 000’s) | 2022 | |||
| Base Salary | $ | 264 | ||
| Cash Incentive Awards | 157 | |||
| Cash Total | 421 | |||
| Option and Stock Awards | 406 | |||
| All Other Compensation | 56 | |||
| Total | $ | 883 | ||
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Executive Compensation Philosophy and Procedures
The Compensation Committee attempts to design executive compensation programs to achieve three principal objectives.
| ● | The program is intended to attract, motivate, and retain talented executives with total compensation that is competitive within the drug development and broader pharmaceutical and biotechnology industry; | |
| ● | The program is intended to create an alignment of interests between our executives and stockholders such that a significant portion of each executive’s compensation varies with business performance and is dependent on stock price appreciation; and | |
| ● | The program is designed to award behavior which results in optimizing the commercial potential of our development program. |
The Compensation Committee’s philosophy is to pay competitive total compensation, comprised of annual salaries, annual cash incentives and long-term equity awards (primarily stock options), with a significant percentage of total compensation directly linked with the Company’s performance. The Compensation Committee considers the elements of the compensation package to be reflective of compensation packages given to executives of companies of similar size in our industry. Compensation packages generally are designed to pay competitive salaries at the median of the industry compensation surveys as described below, reward superior annual performance through incentive compensation awards and allow executives to participate in increases in stockholder value through stock option and other stock-based grants.
In determining executives’ compensation levels, the Compensation Committee relies primarily on its experience and judgment to provide a package that it believes appropriately balances the need to attract and retain key executive talent with the creation of incentives that will (i) enhance the growth of the Company, (ii) align the interests of management and stockholders by emphasizing rewards for Company performance, while remaining competitive with compensation paid by other clinical stage biotechnology companies and (iii) provide value for stockholders.
As part of its decision-making process, the Compensation Committee takes into account the role and experience of each executive and reviews industry surveys (specifically, the Radford Global Life Sciences Survey, which covers a broad cross-section of the biotechnology, pharmaceuticals and life science industries and in which the Company participates) for information on the compensation paid to executive officers by companies in our industry that are similar in size, breadth, stage of development or complexity to the Company. The Compensation Committee also reviews custom surveys comparing executive compensation with that of specific peer groups (for example, pre-commercial biopharma public companies, biopharma companies with under fifty employees, biopharma companies with a market cap above $100 million and biopharma companies with a market cap below $100 million).
The Compensation Committee utilized Mercer as its independent compensation advisor to compare the Company’s executive and non-employee director compensation levels, policies, practices and procedures to a set of peer companies selected by the Compensation Committee. Mercer reported directly to the Compensation Committee and performed no work for management that was not under the Compensation Committee’s purview. The Compensation Committee assessed the independence of Mercer pursuant to the relevant SEC rules and the Nasdaq Listing Rules and concluded that no conflicts of interest exist. The Compensation Committee and Mercer reviewed the compensation surveys as summarized above as it relates to elements of yearly performance and compensation of all members of the executive management team. As part of their engagement, Mercer prepared and submitted to the Compensation Committee a report on the audit of the Company’s current compensation benchmarking practices and its recommendations relating to executive and non-employee director compensation. Mercer concluded that the Company uses appropriate market data sources to evaluate the competitive positioning of the top executives’ and the Board of Directors’ compensation packages and market positioning relative to those data sources is reasonable.
The Compensation Committee believes that an appropriate level of input from our Executive Chairman and our Chief Executive Officer provides a necessary and valuable perspective in helping the Compensation Committee formulate its own independent views on compensation. The Compensation Committee takes measures to ensure its independence with respect to our Named Executive Officers’ compensation, excusing them from portions of meetings to freely discuss their and the other Named Executive Officers performance and compensation. The Compensation Committee made all final determinations on the compensation levels for all Named Executive Officers in 2022 and 2021.
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A discussion of each individual element of compensation and the compensation for each Named Executive Officer for 2022 follows:
Annual Salaries
We participate in an ongoing industry survey, the Radford Global Life Sciences Survey, as described above. The Compensation Committee compares base salary for our executives with the levels provided to similarly situated executives and generally targets base salaries at levels in the median of the survey data.
In 2022, the Compensation Committee reviewed each executive’s job responsibilities, individual performance, our corporate performance, competitive market data, our total compensation expense and the base salaries of Mr. Tardugno, Dr. Le Goff, Dr. Borys, Dr. Anwer and Mr. Church and approved the following annualized salary adjustments for each Named Executive Officer:
| Named Executive Officer | Fiscal 2022 Salary | Fiscal 2021 Salary | Change from Previous Year | |||||||||
| Michael H. Tardugno | $ | 546,711 | $ | 586,545 | (6.8 | )% | ||||||
| Corinne Le Goff | $ | 624,000 | $ | - | - | % | ||||||
| Nicholas Borys | $ | 447,848 | $ | 434,804 | 3.0 | % | ||||||
| Khursheed Anwer | $ | 385,480 | $ | 370,654 | 4.0 | % | ||||||
| Jeffrey W. Church | $ | 412,130 | $ | 400,126 | 3.0 | % | ||||||
Incentive Compensation
We have an incentive compensation plan in which all members of our senior management participate. The plan is performance-driven based on Company and individual personal operational objectives established at the beginning of the year by the Compensation Committee in consultation with our Chief Executive Officer. These operational objectives include the completion of certain development projects, capital raising, cost controls, business development and profit and loss goals, which we believe are ultimately linked to creating stockholder value. These objectives are designed to achieve timely and efficient product development including completion of clinical studies and regulatory approvals. Each member of senior management is individually evaluated based on the achievement of the Company’s overall operational objectives and each individual’s personal performance against these objectives. This component of compensation is provided, among other reasons, to create incentives for members of senior management to meet short-term and medium-term performance goals of the Company, without regard to stock price. Objectives are weighted in terms of overall importance to meeting the Company’s operating plan.
The total annual incentive compensation a member of senior management can earn is based on his level within management, with more senior members of management eligible to earn a higher percentage of their base salary as incentive compensation than less senior members. We believe it is appropriate for executives to have a greater percentage of their compensation “at-risk” based on performance as they generally have a greater role in the achievement of objectives that we believe promote the growth of the Company and the creation of value for stockholders. The actual amount of incentive compensation paid to any member of senior management is determined on a sliding scale dependent on how successful such member of senior management was in achieving the objectives upon which his or her incentive compensation was targeted and the relative importance to the Company of the objectives achieved. The Compensation Committee retains complete discretion to adjust any incentive compensation down and retains discretion as to whether to grant any incentive compensation to any individual member of senior management at all.
Under the incentive compensation plan for 2022, the Compensation Committee established a number of annual corporate goals identified below that include research and development, regulatory, manufacturing, organizational and financial goals which we believe are essential to building stockholder value. The relative weighting of these corporate goals is based upon our assessment of the importance of each goal in creating value for the Company and our stockholders. Each corporate goal was established so that significant levels of achievement were required to meet the goal. Following the conclusion of the annual performance period, the level of achievement for each corporate goal was assessed by the Compensation Committee. The Compensation Committee determined whether each corporate goal had been met, exceeded, or not satisfied. In addition, in assessing corporate performance, the Compensation Committee had the discretion to factor in other significant corporate events that occurred during the performance period, which could have resulted in an upward or downward adjustment in the determination of corporate performance. After considering the level of attainment of each corporate goal and other appropriate corporate performance factors, the Compensation Committee assigned the overall corporate performance rating, which could have ranged from 0% to 130%. A maximum bonus pool is established by multiplying the overall corporate performance rating by the aggregate target bonuses for all individuals in the incentive plan. Certain individual downward adjustments may be made at the discretion of the Compensation Committee. The aggregate of all individual bonuses awarded under the policy cannot exceed the maximum bonus pool available such that the cost of bonuses ultimately reflects our overall performance and is not inflated by any individual performance rating.
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After the corporate performance rating is determined by the Compensation Committee, the individual performance of each Named Executive Officer is reviewed by the Compensation Committee in order to determine the appropriate annual performance percentage rating to be assigned to the executive for the performance period. Each Named Executive Officer’s actual annual performance-based incentive compensation payment is based on a combination of our corporate performance rating and their individual performance rating. The actual annual performance bonus compensation award for each Named Executive Officer is determined in the Compensation Committee’s sole discretion, and the maximum payout for each Named Executive Officer could be up to 130% of his target annual performance-based compensation target.
The Named Executive Officers were each assigned a target annual incentive for 2022 ranging from 45% to 100% of base salary. The table below shows the target annual incentive assigned to each Named Executive Officer for 2022 both as a dollar amount and as a percentage of base salary.
| Name | Target Annual Incentive for 2022 | Target
Annual (% of Base Salary) | Annual Incentive Awarded for 2022 | Annual
Incentive (% of Base Salary) | ||||||||||||
| Michael H. Tardugno | $ | 546,711 | 100 | % | $ | 382,697 | 70.0 | % | ||||||||
| Corinne Le Goff | 624,000 | 72 | % | 157,250 | 25.2 | % | ||||||||||
| Nicholas Borys | 447,848 | 45 | % | 130,996 | 29.3 | % | ||||||||||
| Khursheed Anwer | 385,480 | 50 | % | 139,737 | 36.3 | % | ||||||||||
| Jeffrey W. Church | 412,130 | 45 | % | 139,094 | 33.8 | % | ||||||||||
Corporate goals and targets are set at the beginning of the fiscal year and are approved by the Compensation Committee and Board. Executives’ bonuses under the Company’s annual incentive program are based on the achievement of specific performance measures established at the beginning of the fiscal year. For 2022 the corporate objectives and relative weightings assigned to each objective include the completion of certain development objectives, capital raising, cost controls, business development and profit and loss goals, which we believe are ultimately linked to creating stockholder value. The following 2022 corporate goals and targets were heavily weighted toward the clinical development of IMNN-001 for ovarian cancer, including targets for the timely completion of enrollment of the OVATION 2 Study, initiation of a second clinical study with IMNN-001 in combination with Avastin® and expansion of the Company’s development pipeline with a new product candidate (PlaCCine). The corporate goals also included targets for corporate development objectives related to the transition of the Company to an immuno-oncology and vaccine focus including the successful rebranding of the Company, the addition of key competencies to support vaccine clinical trials and the implementation of an executive succession plan to transition leadership with immuno-oncology and vaccine experience. There were also a series of financial and business development goals to ensure strong cash management and that sufficient levels of cash will be available to extend the Company’s operating roadway for at least twenty-four months.
The following 2022 objectives are designed to achieve timely and efficient product development including completion of clinical studies and regulatory approvals and in total represent a potential payout at 130% of the executive’s bonus target if all objectives are achieved. The Board, upon the recommendation of the Compensation Committee, reviewed our achievement against our 2022 corporate goals and determined the achievement level to have been 70% of target.
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| 1. | Research & Development Objectives (35%) – (i) Complete enrollment of the OVATION 2 Study by the third quarter of 2022 within budget while maintaining key quality metrics (15%), (ii) Initiate a second clinical study with IMNN-0011 in combination with Avastin® which will be principally funded (~50%) by a research foundation (10%) and (iii) Add at least one new product technology to the company’s development pipeline by the fourth quarter of 2022 (10%). (THE FIRST AND THIRD R&D OBJECTIVES WERE MET RESULTING IN 25% of 35% OF OBJECTIVES MET) | |
| 2. | Business Development Objectives (20%) - Develop and implement a strategy to achieve 25% of common stock ownership by institutional investors. (OBJECTIVES NOT MET) | |
| 3. | Financial Objectives (25%) - Manage cash and operating expenses, ensure cash flows are within the operating budget and maintain sufficient levels of cash to extend operating roadway into 2025. (ALL OBJECTIVES MET) | |
| 4. | Corporate Development Objectives (20%) - Successfully rebrand the Company, develop key competencies to support vaccine clinical trials, and implement the executive succession plan to effectively transition leadership with immuno-oncology and vaccine experience. (ALL OBJECTIVES MET) | |
| 5. | Bonus Objective (30%) - Monetize GEN-1 asset through an out-license or collaboration with pharma or through a major grant program. (OBJECTIVE NOT MET) |
Each of the Named Executive Officers participated in the annual incentive plan for 2022. The initial target bonus amount for each executive was established pursuant to their employment agreement and is adjusted periodically by the Board. Historically the Compensation Committee has awarded the annual incentive bonus for each year in the first quarter of the following year. In the first quarter of 2023, the Compensation Committee approved the amount and the payment of the incentive bonus for 2022 for each of the Named Executive Officers. Please see the “Non-Equity Incentive Plan Compensation” column in the 2022 Summary Compensation Table.
Stock-Based Compensation
We grant long-term equity awards to its executives and other employees that are designed to align the interests our Company employees and stockholders, encouraging participants to maintain and increase their ownership our Company common stock with the opportunity to benefit from our long-term performance. Our equity program has generally consisted of grants of stock options and occasional grants of stock awards. Because the exercise price of the options is based on the market price of our common stock on the date of grant, the Compensation Committee believes that options help to align the interests of our executives with those of its stockholders as the options will not have value unless there is appreciation in our stock price. The options also serve as a retention tool since they generally vest over a three to four-year period following the grant date. This approach is designed to focus key employees on sustainable growth of the Company and the creation of stockholder value over the long term.
Annual grants to the Named Executive Officers are generally made during the first half of the fiscal year. Annual grants are determined by the Compensation Committee based on review of each individual’s past performance as well as their potential impact on the Company’s future performance. Grants may also be made at other times during the fiscal year in certain circumstances (such as a grant in connection with the hiring or promotion of an executive or other special circumstance as deemed appropriate by the Compensation Committee).
Other Compensation
Executive officers are eligible to participate in our medical and other welfare benefit plans and for other benefits, in each case on generally the same basis as other employees. We maintain a 401(k) plan for our employees. Other than the 401(k) plan, we do not offer any of our employees a pension plan, retirement plan or other forms of compensation paid out upon retirement. The Company matches up to 50% of the first 6% of employee contributions. Dr. Anwer received a $6,000 discretionary spending allowance. During 2022, in his capacity as President and Chief Executive Officer Chief, Mr. Tardugno received a $23,000 discretionary spending allowance. Mr. Tardugno does not receive a discretionary spending allowance as Executive Chairman.
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Post-Employment Obligations
We believe that severance protections, particularly in the context of a change in control transaction, can play a valuable role in attracting and retaining key executive officers. Under their employment agreements, each of the Named Executive Officers would be entitled to severance benefits in the event of a termination of employment by the Company without cause. We have determined that it is appropriate to provide the executives with severance benefits under these circumstances in light of their positions with us and as part of their overall compensation package.
We believe that the occurrence, or potential occurrence, of a change in control transaction will create uncertainty regarding the continued employment of our executive officers as many change in control transactions result in significant organizational changes, particularly at the senior executive level. In order to encourage the Company’s executive officers to remain employed with us during an important time when their prospects for continued employment following the transaction may be uncertain, we provide each of Mr. Tardugno, Dr. Le Goff, Mr. Church and Dr. Borys with enhanced severance benefits if his employment is actually or constructively terminated by the Company without cause in connection with a change in control.
Tax Considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), provides that annual compensation in excess of $1,000,000 paid to the Chief Executive Officer or certain of the Company’s other executive officers will not be deductible by a publicly held corporation for federal income tax purposes. Historically, there was an exception to this annual deduction limit for compensation meeting the definition of “performance-based compensation” under Section 162(m) of the Code. With the enactment of tax reform in December 2017, the performance-based compensation exception under Section 162(m) of the Code has been repealed, except with respect to certain grandfathered arrangements. The Compensation Committee considers the anticipated tax treatment to the Company when determining executive compensation and, historically, has sought to structure its executive compensation program in a way that preserved the deductibility of compensation payments and benefits, subject to the satisfaction of other applicable regulatory requirements. It should be noted, however, that tax deductibility is one of many factors considered by the Compensation Committee in determining executive compensation and the Compensation Committee maintains the flexibility to compensate the Named Executive Officers in a manner it deems appropriate to attract, retain, and motivate highly qualified executive officers.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Our Compensation Committee has certain duties and powers as described in its charter. Our Compensation Committee is currently composed of the three non-employee directors named at the end of this report, each of whom our Board of Directors has determined is independent under the applicable Nasdaq rules.
Our Compensation Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this Proxy Statement. Based upon this review and discussion, our Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis section be included in this Proxy Statement.
| Compensation Committee of the Board of Directors | |
| Mr. Frederick J. Fritz (Chairman) | |
| Dr. Augustine Chow | |
| Dr. Stacy Lindborg |
This report does not constitute “soliciting material” and shall not be deemed filed or incorporated by reference into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent we specifically incorporate this report by reference and shall not otherwise be deemed filed under such Acts.
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EXECUTIVE COMPENSATION
2022 SUMMARY COMPENSATION TABLE
The following table sets forth information regarding the total compensation for services rendered in all capacities during the years ended December 31, 2022 and 2021, awarded to, paid to, or earned by each named executive officers serving as of December 31, 2022. All compensation awarded to, earned by, or paid to IMUNON’s named executive officers are included in the table below for the years ended December 31, 2022 and 2021:
| Name and Principal Position | Year | Salary | Bonus | Stock Awards | Option Awards (1)(2) | Non-Equity Incentive Plan Compensation (2) | All Other Compensation (3) | Total ($) | ||||||||||||||||||||||||
| Michael H. Tardugno (4) | 2022 | $ | 573,649 | $ | – | $ | – | $ | 506,500 | $ | 382,697 | $ | 622,545 | $ | 2,085,391 | |||||||||||||||||
| Executive Chairman | 2021 | $ | 581,586 | $ | – | $ | – | $ | 1,322,285 | $ | 381,254 | $ | 48,000 | $ | 2,312,625 | |||||||||||||||||
| Corinne Le Goff (5) | 2022 | $ | 264,000 | $ | – | $ | 97,500 | $ | 308,564 | $ | 157,250 | $ | 56,480 | $ | 883,794 | |||||||||||||||||
| President & CEO | ||||||||||||||||||||||||||||||||
| Nicholas Borys (6) | 2022 | $ | 445,340 | $ | – | $ | – | $ | 118,286 | $ | 130,996 | $ | 12,500 | $ | 707,122 | |||||||||||||||||
| Executive VP & CMO | 2021 | $ | 432,357 | $ | – | $ | – | $ | 203,410 | $ | 127,180 | $ | 27,000 | $ | 789,947 | |||||||||||||||||
| Khursheed Anwer (7) | 2022 | $ | 382,629 | $ | – | $ | 19,500 | $ | 118,286 | $ | 139,737 | $ | 18,506 | $ | 678,658 | |||||||||||||||||
| Executive VP & CSO | 2021 | $ | 362,878 | $ | – | $ | – | $ | 508,555 | $ | 120,462 | $ | 28,583 | $ | 1,020,478 | |||||||||||||||||
| Jeffrey Church | 2022 | $ | 409,822 | $ | – | $ | – | $ | 87,715 | $ | 139,094 | $ | – | $ | 636,631 | |||||||||||||||||
| Executive VP & CFO | 2021 | $ | 397,004 | $ | – | $ | – | $ | 559,422 | $ | 117,037 | $ | 14,500 | $ | 1,087,963 | |||||||||||||||||
| (1) | The value reported for option awards is the aggregate grant date fair value of stock options granted to the Named Executive Officers in the years shown, determined in accordance with FASB ASC Topic 718, disregarding adjustments for forfeiture assumptions. The assumptions for making the valuation determinations are set forth in Note 12 to the Financial Statements. | |
| (2) | Executives’ bonuses under our annual incentive program are based on the achievement of specific performance measures established at the beginning of the fiscal year by our Compensation Committee. Historically, our Compensation Committee has awarded the annual incentive bonus for each year in the first quarter of the following year. In the first quarter of 2023, our Compensation Committee approved the amount and the payment of the incentive bonus for 2022 for each of the Named Executive Officers in the form of stock awards and Non-Equity (Cash) Incentive Plan Compensation. | |
| (3) | This column includes other compensation as indicated below and matching and discretionary contributions made by the Company for the Named Executive Officers under our 401(k) plan. Our matching contribution is equal to 50% of the employee’s deferrals under the plan up to 6% of the employee’s compensation, subject to applicable IRS limitations, and are made in shares of our common stock. The 2021 discretionary contribution is 5.0% of eligible salary of each employee which was contributed in January 2022. | |
| (4) | Mr. Tardugno served as the Company’s Chairman, President and Chief Executive Officer until July 18, 2022, when he transitioned to the position of Executive Chairman of the Board. For Mr. Tardugno, “All Other Compensation” for 2022 consists of $23,000 for discretionary spending allowance for the period when he served as President and Chief Executive Officer, a 401(k)-plan matching contribution of $13,000 in our common stock and a $586,545 one-time payment made in July 2022 in connection with Mr. Tardugno’s transition to his new role as Executive Chairman. | |
| (5) | Dr. Le Goff joined the Company as President and Chief Executive Officer and as a director effective as of July 18, 2022. For Dr. Le Goff, “All Other Compensation” for 2022 consists of a 401(k)-plan matching contribution of $6,480 in our common stock and a $50,000 signing bonus. | |
| (6) | For Dr. Borys, “All Other Compensation” for 2022 consists of a 401(k)-plan matching contribution of $12,500 in our common stock. | |
| (7) | For Dr. Anwer, “All Other Compensation” for 2022 consists of $6,006 for discretionary spending allowance and a 401(k)-plan matching contribution of $12,500 in our common stock. |
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NARRATIVE DISCLOSURE TO EXECUTIVE SUMMARY COMPENSATION TABLE
Employment Agreement with Michael H. Tardugno
In March 2016, the Company and Mr. Tardugno entered into an employment agreement, effective March 30, 2016 (the “March 2016 Agreement”), which superseded the previous employment agreement with Mr. Tardugno. Subject to earlier termination pursuant to the terms of the March 2016 Agreement, the initial term of the agreement ended on January 31, 2018, with automatic one-year renewals thereafter, unless either party provides a notice of non-renewal. Mr. Tardugno’s March 2016 Agreement provided for an annual base salary of $547,342 subject to annual adjustment by the Board or the Compensation Committee. Mr. Tardugno was also eligible for an annual performance bonus from the Company, pursuant to the Company’s management incentive bonus program in effect from time to time. The Company agreed to reimburse Mr. Tardugno for all reasonable business expenses and to provide a discretionary spending allowance. Under the March 2016 Agreement, the Company agreed to grant to Mr. Tardugno, at the time of its usual annual grant to employees, annual stock options to purchase shares of the Company’s common stock as the Board of Directors or the Compensation Committee shall determine.
Effective July 18, 2022, Mr. Tardugno transitioned from his roles as Chairman, President and Chief Executive Officer to the position of Executive Chairman of the Board. Mr. Tardugno and the Company entered into an employment agreement effective as of July 18, 202 that supersedes the March 2016 Agreement. The agreement has a term ending on December 31, 2024, with the option for a one-year extension. Under the agreement, Mr. Tardugno will receive a base salary of $500,000 (prorated to $240,000) for 2022 and a base salary of $350,000 for 2023 and 2024. Mr. Tardugno will remain eligible for annual performance bonuses and equity awards and may participate in all compensation and benefit programs generally made available to other senior executives. The Company will reimburse Mr. Tardugno for all reasonable business expenses but he will no longer have a discretionary spending allowance. In the event of termination by the Company other than for cause, Mr. Tardugno will receive an amount equal to one year’s salary as a severance payment.
Employment Agreement with Corinne Le Goff
The Company and Dr. Le Goff entered into an employment agreement effective as of July 18, 2022, in connection with her appointment as President and Chief Executive Officer, Pursuant to the employment agreement, the Company will pay Dr. Le Goff an initial salary of $624,000 and a signing bonus $50,000. Dr. Le Goff’s targeted annual performance bonus is 72% of her annual base salary (pro-rated for the year ended December 31, 2022). Dr. Le Goff also received (i) an option to purchase 177,000 shares of the Company’s common stock that will vest with respect to 25% of the subject shares on July 18, 2023 and the remaining 75% percent will vest in equal quarterly installments thereafter such that the stock option will be fully vested and exercisable as of the fourth anniversary of July 18, 2022, and (ii) a restricted stock award of 53,000 restricted shares that will vest on July 18, 2023. Dr. Le Goff will not receive any additional compensation for her service on the Board. The agreement has no set term of employment. In the event of termination by the Company other than for cause, Dr. Le Goff will receive an amount equal to one year’s salary as a severance payment.
Employment Agreements with Other Named Executed Officers
Nicholas Borys
The Company and Dr. Borys entered into an employment offer letter on August 23, 2007, pursuant to which Dr. Borys agreed to serve as our Vice President and Chief Medical Officer. Dr. Borys’ employment with us was “at-will;” however, subject to Dr. Borys’ promotion to Executive Vice President in January 2019, if we terminated Dr. Borys’ employment for any reason other than just cause, we would pay Dr. Borys a salary continuation and COBRA premiums for up to twelve months. The salary and COBRA premiums would cease at the end of the twelve-month period or, if he found new employment prior to the end of the twelve-month period, the benefit would be reduced by the amount of compensation which he would receive from any new employer. Dr. Borys’ right to receive these severance benefits is subject to his providing a release of claims in favor of the Company. Dr. Borys’ separated from the Company effective as of February 28, 2023.
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Jeffrey Church
The Company and Mr. Church entered into an employment offer letter on June 15, 2010. Mr. Church’s employment is “at-will;” however, subject to Mr. Church’s promotion to Executive Vice President in January 2019, if we terminate Mr. Church’s employment for any reason other than just cause, we will pay Mr. Church a salary continuation and COBRA premiums for up to twelve months. The salary and COBRA premiums will cease at the end of the twelve-month period or if he finds new employment prior to the twelve-month period, the benefit will be reduced by the amount of compensation which he will receive from any new employer. Mr. Church’s right to receive these severance benefits is subject to his providing a release of claims in favor of the Company.
Khursheed Anwer
The Company and Dr. Anwer entered into an employment offer letter effective as of June 20, 2014. Dr. Anwer’s employment with us is “at-will”; however, subject to the retention and severance agreement between the Company and Dr. Anwer dated as of May 28, 2014, if we terminate Dr. Anwer’s employment without cause (as such term is defined in the retention and severance agreement), he will be entitled to receive cash severance equal to 12 months of his base salary and reimbursement of his COBRA premiums for up to 12 months. Dr. Anwer’s right to receive these severance benefits is subject to his providing a release of claims in favor of the Company.
CIC Agreements
We have entered into amended and restated double-trigger change in control severance agreements (CIC Agreements) with each of the Named Executive Officers (other than Dr. Anwer who is not subject to such an agreement) to provide severance benefits to these executives should their employment terminate in certain circumstances in connection with a change in control of the Company (a “CIC”).
Under the amended and restated CIC Agreements, in the event that, on or within two years after a CIC, we terminate the executive’s employment without cause or in the event that the executive terminates his employment for good reason, the executive would be entitled to receive a cash lump sum payment equal to two (2) times the sum of (1) the executive’s annual base salary and (2) the executive’s target annual bonus for the fiscal year in which the termination occurs. (For these purposes, the terms “cause,” “good reason” and “change in control” are each defined in the CIC Agreement.) In addition, we will pay or reimburse the executive for the cost of COBRA premiums and life insurance coverage for the executive and his eligible dependents, in each case for a period of up to two years following the termination. The executive would also be entitled to full acceleration of his then-outstanding equity awards granted to him by us. However, as to any equity award agreement that is subject to performance-based vesting requirements, the vesting of such an award will continue to be governed by its terms. In the case of options or similar awards, the award would generally remain exercisable for the remainder of the original term of the award (or, in the case of awards that vested after the date of the CIC, for the lesser of 12 months following the last day such award would have been exercisable under the applicable award agreement and the remainder of the original term). The benefits provided under the CIC Agreement are in addition to, and not in lieu of, any severance benefits the executive may be entitled to receive in connection with the termination of his employment under any other agreement with the Company. The executive’s right to benefits under the CIC Agreement is subject to his execution of a release of claims in favor of the Company upon the termination of his employment. The CIC Agreements do not provide for any tax gross ups.
Potential Payments Upon Termination or Change In Control
As described above under “Narrative Disclosure to Executive Compensation Tables,” the Company has entered into agreements with each of the Named Executive Officers currently employed by the Company that provide benefits that may become payable to the executives in connection with a termination of their employment. The Company has also entered into agreements with Mr. Tardugno, Dr. Le Goff, Mr. Church, and Dr. Borys that provide benefits that may become payable to the executives in connection with a termination of employment following a CIC of the Company. If in the event the Named Executive Officer is entitled to receive severance benefits in connection with a termination of employment under both their severance agreement and their CIC agreement, the executive shall be entitled to receive the benefits from both agreements. The first table below indicates the benefits that would be payable to each executive if a termination of employment in the circumstances described above had occurred on December 31, 2022 outside of a CIC. The second table below indicates the benefits that would be payable to each executive if a change in control of the Company and such a termination of employment had occurred on that date.
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| Severance Benefits (Outside of a Change in Control) | ||||||||||||||||
| Name | Cash Severance | Continuation of Health/Life Benefit | Equity Acceleration | Total | ||||||||||||
| Michael H. Tardugno- | $ | 350,000 | $ | 27,365 | – | $ | 377,365 | |||||||||
| Corinne Le Goff | $ | 468,000 | $ | 27,988 | – | $ | 495,988 | |||||||||
| Nicholas Borys | $ | 447,848 | $ | 39,830 | – | $ | 487,678 | |||||||||
| Khursheed Anwer | $ | 385,480 | $ | 28,332 | – | $ | 413,812 | |||||||||
| Jeffrey W. Church | $ | 412,130 | $ | 13,356 | – | $ | 425,486 | |||||||||
| Change of Control Severance Benefits | ||||||||||||||||
| Name | Cash Severance | Continuation of Health/Life Benefit | Equity Acceleration | Total | ||||||||||||
| Michael H. Tardugno | $ | 350,000 | $ | 27,365 | – | $ | 377,365 | |||||||||
| Corinne Le Goff | $ | 468,000 | $ | 27,988 | – | $ | 495,988 | |||||||||
| Jeffrey W. Church | $ | 1,195,177 | $ | 26,713 | – | $ | 1,221,890 | |||||||||
Material Terms of Option Grants During 2022
Each of the stock options awarded to the Named Executive Officers in 2022 and reported in the 2022 Grants of Plan-Based Awards Table below was granted under, and is subject to, the terms of the IMUNON, INC. 2018 Stock Incentive Plan (the “2018 Plan”). The 2018 Plan is administered by the Compensation Committee, which has authority to interpret the plan provisions and make all required determinations under the plan. This authority includes making required proportionate adjustments to outstanding awards upon the occurrence of certain corporate events such as reorganizations, mergers, and stock splits, and making provision to ensure that any tax withholding obligations incurred in respect of awards are satisfied. Awards granted under the plan are generally only transferable to a beneficiary of a Named Executive Officer upon his death. Under the terms of the 2018 Plan, if there is a change in control of the Company, each Named Executive Officer’s outstanding awards granted under the plan will generally terminate, unless the Compensation Committee provides for the substitution, assumption, exchange or other continuation or settlement (in cash, securities, or property) of the outstanding awards. The Compensation Committee has the discretion to provide for outstanding awards to become vested in connection with a change in control.
Each option granted to the Named Executive Officers in 2022 was granted with a per-share exercise price equal to the closing price of our common stock on the grant date. Each option is scheduled to vest in three installments, with one-third vesting on the date of grant and the balance vesting in equal annual installments over each of the next two years, subject in each case to the executive’s continued employment through the applicable vesting date and has a maximum term of ten years. However, vested options may terminate earlier in connection with a change in control transaction or a termination of the Named Executive Officer’s employment. Subject to any accelerated vesting that may apply in the circumstances, the unvested portion of the option will immediately terminate upon a termination of the Named Executive Officer’s -employment.
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2022 GRANTS OF PLAN-BASED AWARDS TABLE
The following table presents information regarding the incentive awards granted to the Named Executive Officers during 2022. Each of the equity awards reported in the table below was granted under the 2018 Plan.
| Name | Grant Date | Estimated Future Payouts Under Non- Equity Incentive Plan Awards Target ($) (1) | All other Stock Awards: Number of Shares or Units of Stock (#) | All Other Option Awards: Number of Securities Under- lying Options (#) (2) | Exercise
or (3) | Grant
Date (3) | ||||||||||||||||
| Michael H. Tardugno | N/A | $ | 350,000 | |||||||||||||||||||
| 3/04/2022 | 80,000 | $ | 4.60 | $ | 4.16 | |||||||||||||||||
| 6/13/2022 | 90,000 | $ | 1.93 | $ | 1.75 | |||||||||||||||||
| Corinne Le Goff | N/A | $ | 449,280 | |||||||||||||||||||
| 7/18/2022 | 177,000 | $ | 1.95 | $ | 1.74 | |||||||||||||||||
| 7/18/2022 | 50,000 | $ | 1.95 | |||||||||||||||||||
| Nicholas Borys | N/A | $ | – | |||||||||||||||||||
| 3/04/2022 | 20,000 | $ | 4.60 | $ | 4.16 | |||||||||||||||||
| 6/13/2022 | 20,000 | $ | 1.93 | $ | 1.75 | |||||||||||||||||
| Khursheed Anwer | N/A | $ | 192,740 | |||||||||||||||||||
| 3/04/2022 | 20,000 | $ | 4.60 | $ | 4.16 | |||||||||||||||||
| 6/13/2022 | 20,000 | $ | 1.93 | $ | 1.75 | |||||||||||||||||
| 7/18/2022 | 10,000 | $ | 1.95 | |||||||||||||||||||
| Jeffrey W. Church | N/A | $ | 185,459 | |||||||||||||||||||
| 6/13/2022 | 50,000 | $ | 1.93 | $ | 1.75 | |||||||||||||||||
| (1) | The amounts reported in this column represent the target bonus opportunity under the Company’s annual bonus program. See “Compensation Discussion and Analysis – Incentive Compensation” above for information on the terms of these bonuses. | |
| (2) | The amounts reported in this column represented stock option awards granted under the 2018 Plan. Each option granted to each Named Executive Officer is scheduled to vest in three installments, with one-third vesting on the date of grant and the balance vesting in annual installments over each of the next two years, subject in each case to the executive’s continued employment through the applicable vesting date and has a maximum term of ten years. | |
| (3) | The value reported for stock and option awards is the aggregate grant date fair value of stock options granted to the Named Executive Officers in 2022, determined in accordance with FASB ASC Topic 718, disregarding adjustments for forfeiture assumptions. The assumptions for making the valuation determinations are set forth in Note 12 to the Financial Statements. |
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2022 OUTSTANDING EQUITY AWARDS AT YEAR-END
The following table summarizes the unexercised stock options held by each of the Named Executive Officers as of December 31, 2022. None of the Named Executive Officers held any other outstanding stock awards as of December 31, 2022.
| Option Awards | ||||||||||||||||
| Name | Grant Date | No. of Securities Underlying Unexercised Options (#) Exercisable | No. of Securities Underlying Unexercised Options (#) Unexercisable | Option ($) | Option Expiration Date | |||||||||||
| Michael H. Tardugno | 10/3/2019 | 4,332 | - | $ | 25.80 | 10/3/2029 | ||||||||||
| 3/04/2022 | 26,667 | 53,333 | (1) | $ | 4.60 | 3/04/2032 | ||||||||||
| 6/13/2022 | 30,000 | 60,000 | (1) | $ | 1.93 | 6/13/2032 | ||||||||||
| Corinne Le Goff | 7/18/2022 | - | 177,000 | (2) | $ | 1.95 | 7/18/2032 | |||||||||
| Nicholas Borys | 10/3/2019 | 2,334 | - | $ | 25.80 | 10/3/2029 | ||||||||||
| 3/04/2022 | 6,667 | 13,333 | (1) | $ | 4.60 | 3/04/2032 | ||||||||||
| 6/13/2022 | 6,667 | 13,333 | (1) | $ | 1.93 | 6/13/2032 | ||||||||||
| Khursheed Anwer | 10/3/2019 | 2,832 | - | $ | 25.80 | 10/3/2029 | ||||||||||
| 3/04/2022 | 6,667 | 13,333 | (1) | $ | 4.60 | 3/04/2032 | ||||||||||
| 6/13/2022 | 6,667 | 13,333 | (1) | $ | 1.93 | 6/13/2032 | ||||||||||
| Jeffrey W. Church | 10/3/2019 | 2,334 | - | $ | 25.80 | 10/3/2029 | ||||||||||
| 6/13/2022 | 16,667 | 33,333 | (1) | $ | 1.93 | 6/13/2032 | ||||||||||
| (1) | Each of these stock option grants vest in three equal installments, with one-third of the grant vesting each immediately, on the first anniversary, and on the second anniversary of the date of grant. | |
| (2) | Each of these stock option grants vest in four equal installments, with one-fourth of the grant vesting each on the first, second, third, and fourth anniversary of the date of grant. |
2022 Option Exercises and Stock Vested
During 2022, none of the Named Executive Officers exercised any of their vested stock options. No officers were awarded shares of stock during 2022.
| Page 35 |
The following table reports the compensation of our principal executive officer (PEO) and the average compensation of the other named executive officers (Other NEOs) as reported in the Summary Compensation Table for the past two fiscal years, as well as their “compensation actually paid” as calculated pursuant to recently adopted SEC rules and certain performance measures required by the rules, including total stockholder return (TSR).
| Year (1)(2) | Summary Compensation Table (SCT) Total for First PEO | Summary Compensation Table (SCT) Total for Second PEO | Compensation
Actually Paid to First PEO (3) | Compensation
Actually Paid to Second PEO (3) | Average SCT Total for Other NEOs | Average Compensation Actual Paid to Other NEOs (3) | Value of Initial Fixed $100 Investment Based on TSR (4) | Net Loss (5) | ||||||||||||||||||||||||
| 2022 | $ | 2,085,391 | $ | 883,794 | $ | 1,876,247 | $ | 755,144 | $ | 674,137 | $ | 630,434 | $ | 12.68 | $ | (35,465,260 | ) | |||||||||||||||
| 2021 | 2,312,625 | N/A | $ | 1,664,992 | N/A | $ | 966,129 | $ | 763,895 | $ | 76.06 | $ | (20,769,250 | ) | ||||||||||||||||||
| (1) | We are a smaller reporting company and, accordingly, we have not included any information in this table for 2020. | |
| (2) | The PEOs and Other NEOs for the applicable years were as follows: |
| a. | 2022: Mr. Tardugno served as the “First” PEO until July 2022 and Dr. Le Goff joined in July 2022 as the “Second” PEO, and Dr. Anwer, Mr. Church and Dr. Borys as the Other NEO’s. Although Mr. Tardugno was an executive officer but not the PEO for the latter part of 2022, since he served as the PEO for a portion of the year he is not included as an Other NEO for any portion of 2022. | |
| b. | 2021: Mr. Tardugno served as PEO and Dr Anwer, Mr. Church and Dr. Borys as the Other NEO’s |
| (3) | The 2022 Summary Compensation Table totals reported for the PEOs and the average of the Other NEOs for each year were subject to the following adjustments per item 402(v)(2)(iii) of Regulations S-K to calculate “compensation actually paid”: |
| 2022 | 2022 | 2022 | 2021 | 2021 | ||||||||||||||||
| First PEO | Second PEO | Average for Other NEOs | PEO | Average for Other NEOs | ||||||||||||||||
| Summary Compensation Table Total | $ | 2,085,391 | $ | 883,794 | $ | 674,137 | $ | 2,312,625 | $ | 966,129 | ||||||||||
| ADJUSTMENTS | ||||||||||||||||||||
| Deductions for amounts reported under the “Stock Awards” and “Option Awards” columns of the Summary Compensation Table(a) | (506,500 | ) | (406,064 | ) | (114,596 | ) | (1,322,285 | ) | (423,796 | ) | ||||||||||
| Increase for the inclusion of Rule 402(v) Equity Value (a) | 297,356 | 277,414 | 70,893 | 674,652 | 221,561 | |||||||||||||||
| Compensation Actually Paid | $ | 1,876,247 | $ | 755,144 | $ | 630,434 | $ | 1,664,992 | $ | 763,895 | ||||||||||
a) Compensation Actually Paid excludes the Stock Awards and Option Awards columns from the relevant fiscal year’s Summary Compensation Table total. The Rule 402(v) Equity Values instead reflect the aggregate of the following components, as applicable: (i) the fair value as of the end of the listed fiscal year of unvested equity awards granted in that year; (ii) the change in fair value during the listed fiscal year of equity awards granted in prior years that remained outstanding and unvested at the end of the listed fiscal year; and (iii) the change in fair value during the listed fiscal year through the vesting date of equity awards granted in prior years that vested during the listed fiscal year, less the fair value at the end of the prior year of awards granted prior to the listed fiscal year that failed to meet applicable vesting conditions during the listed fiscal year. Equity values are calculated in accordance with FASB ASC Topic 718, and the valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of the grant.
| (4) | Measured as the value of a $100 investment in Imunon common stock at market close on December 31, 2020, the last trading day in 2020, through and including the end of the indicated year. | |
| (5) | Calculated in accordance with U.S. GAAP |
| Page 36 |
Financial Performance Measures
We do not currently use financial performance measures to link executive compensation actually paid to our NEOs to our performance. However, as discussed above under “Executive Compensation,” we do utilize non-financial measures such as clinical development progress and timelines, manufacturing measures and progress towards commercialization.
Analysis of the Information Presented in the Pay Versus Performance Table
As described in more detail above under “Compensation Discussion and Analysis” our executive compensation is designed to (1) attract, motivate and retain talented executives with total compensation that is competitive in our industry; (2) align the interests of our executives and our stockholders; and (3) award behavior which results in optimizing the commercial potential of our development program. We use various performance measures to align executive compensation with our performance which are not presented in the Pay Versus Performance table. In accordance with Item 402(v) of Regulation S-K, we are providing the following description of the relationships between the information presented in the Pay Versus Performance table.
Table Compensation Actually Paid and Cumulative TSR
The amount of compensation actually paid to Mr. Tardugno and Dr. Le Goff is aligned with our TSR over the two years presented in the table, reflecting the impact of the hiring of Dr. Le Goff as President and Chief Executive Officer and the transition of Mr. Tardugno from those roles to the role of Executive Chairman during the year and cash payments made in connection with the transition. Notwithstanding those payments, a substantial amount of Mr. Tardugno’s compensation was in the form of stock option awards that vest in three equal installments, with one-third immediately and one-third on each of the first and second anniversary of the date of grant. A substantial amount of Dr. Le Goff’s compensation was in the form of stock option awards that vest in four equal installments, with one-fourth of the grant vesting each on the first, second, third and fourth anniversary of the date of grant. As the trading price of our common stock fluctuates so does the value of the stock options and, accordingly, the amount of the compensation actually paid to the PEO. The amount of compensation actually paid to Mr. Tardugno for 2021 is more closely aligned to our TSR as a great portion of his compensation was in the form of stock option awards.
The amount of compensation actually paid to the Other NEOs is aligned with our TSR over the two years presented in the table. Each of the Other NEOs were NEOs for both 2022 and 2021. A significant portion of the compensation actually paid to the Other NEOs is composed of stock option awards which vest in three installments, commencing one-third immediately and one-third on each of the first and second anniversary of the date of grant.
Compensation Actually Paid and Net Income
The amount of compensation actually paid to Mr. Tardugno and Dr. Le Goff and to the Other NEOs is not aligned with our net income over the two years presented in the table. As a clinical stage biotechnology company, we have incurred substantial operating losses, principally from expenses associated with the Company’s research and development programs, clinical trials conducted in connection with the Company’s drug candidates, and applications and submissions to the U.S. Food and Drug Administration. We have substantial future capital requirements to continue our research and development activities and advance our drug candidates through various development stages. Accordingly, net income is not a performance measure we use in determining executive compensation. As discussed above, under “Compensation Discussion and Analysis”, we use a number of corporate goals that may include research and development, regulatory, manufacturing, organization and financial goals which we believe are important to building stockholder value.
Net losses increased 2022 over 2021 largely due to a one-time impairment of in-process research and development. Excluding one-time payments and equity grants to Mr. Tardugno and/or Dr. Le Goff, compensation actually paid to the PEOs, and the compensation actually paid to the Other NEOs declined in 2022 from 2021.
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Equity Compensation Plan Information as of December 31, 2022
| Plan Category | Number
of securities outstanding and rights (a) | Weighted- average exercise price of outstanding options, warrants and rights (b) | Number of Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) (c) | |||||||||
| Equity compensation plans approved by security holders | 555,719 | (1) | $ | 5.53 | 388,954 | (2) | ||||||
| Equity compensation plans not approved by security holders | 204,501 | (3) | 1.89 | – | ||||||||
| Total | 760,220 | $ | 4.55 | 388,954 | ||||||||
| (1) | Includes both vested and unvested options to purchase common stock and unvested stock grants under the 2018 Plan. These awards have a weighted average remaining term of 9.1 years. | |
| (2) | Represents shares available for award grant purposes under the 2018 Plan. Subject to certain express limits of the plan, shares available under the plan generally may be used for any type of award authorized under that plan including options, stock appreciation rights, restricted stock and other forms of awards granted or denominated in shares of our common stock or units of our common stock. | |
| (3) | Includes both vested and unvested options to purchase common stock and unvested stock grants under inducement grants provided certain employees as an inducement to accept employment with the Company. These awards have a weighted average remaining term of 9.6 years. These grants are similar to those granted under the 2018 Plan. |
| Page 38 |
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has appointed WithumSmith+Brown, PC (“Withum”) as the independent registered public accounting firm of the Company to audit our financial statements for the fiscal year ending December 31, 2023, and our Board requests stockholder ratification of such selection. Withum, Brown + Smith PC (“Withum”) has served as our independent accountants since 2017 and has advised us that neither Withum nor any of its members has, or has had in the past three years, any financial interest in the Company or any relation to the Company other than as auditors and accountants.
Representatives of Withum are expected to be present at the 2023 Annual Meeting and will be given the opportunity to make a statement if they so desire and respond to appropriate questions.
FEES
The following table presents fees as invoiced for professional audit services rendered for the audit of our annual financial statements included in the Company’s Form 10-K and review of quarterly financial statements included in the Company’s Forms 10-Q for the fiscal years ended December 31, 2022, and December 31, 2021, and fees for other services rendered during those periods:
| 2022 | 2021 | |||||||||||||||
| FEE CATEGORY | AMOUNT | % OF TOTAL | AMOUNT | % OF TOTAL | ||||||||||||
| Audit Fees | $ | 158,500 | 81 | % | $ | 124,500 | 75 | % | ||||||||
| Audit Related Fees | 14,246 | 7 | 17,550 | 10 | ||||||||||||
| Tax Fees | 10,800 | 6 | 24,334 | 15 | ||||||||||||
| All Other Fees | 11,850 | 6 | – | – | ||||||||||||
| Total Fees | $ | 195,396 | 100 | % | $ | 166,3840 | $ | 100 | % | |||||||
Audit fees consist of fees for professional services rendered by Withum for the audits of our annual financial statements in our Form 10-K and for reviews of the quarterly financial statements included in the Company’s Forms 10-Q. Audit related fees pertain to the work performed during our equity offerings in 2022 and 2021. Tax fees consist of fees for preparation of the Company’s federal and state tax returns. All other fees consist of fees for attendance at the Company’s annual meetings, review of registration statements and similar matters.
SERVICES BY EMPLOYEES OF WITHUM
No part of Withum’s engagement to audit the Company’s financial statements for the years ended December 31, 2022 and 2021 was attributable to work performed by persons other than Withum’s full-time, permanent employees.
AUDIT COMMITTEE POLICY ON APPROVAL OF AUDIT AND NON-AUDIT SERVICES
It is the policy of the Audit Committee to pre-approve all audit and permissible non-audit services provided by our independent accountants, in accordance with rules prescribed by the SEC. These services may include audit services, audit-related services, tax services, and other services. Pre-approval is based on a written proposal, accompanied by a cost estimate, and estimated budget. The Audit Committee has delegated to its chairman the authority to pre-approve audit and non-audit services with an estimated cost of up to $25,000, provided the exercise of such authority is reported to the Audit Committee at its next regular meeting. The Audit Committee reserves the right, from time to time, to delegate pre-approval authority to other of its members, so long as such members are independent directors. All audit and permissible non-audit services during 2022 and 2021 were approved by the Audit Committee in accordance with its pre-approval policy and the approval requirements of the SEC.
Stockholder ratification of the selection of Withum as our independent registered public accounting firm is not required by our Bylaws or other applicable legal or regulatory requirements. However, the Board, upon the recommendation of the Audit Committee, is submitting the selection of Withum to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection of Withum, the Audit Committee will reconsider whether or not to retain that firm, or whether to retain a different firm. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
Vote Required
Since this vote is not required, there are no minimum stockholder approval requirements. However, in order for the resolution to pass, a majority of the votes entitled to be cast for this vote must be received. Abstentions will have the same effect as a vote against Proposal No. 2. No broker non-votes are expected to exist in connection with this vote as ratification of the independent registered public accounting firm is considered a routine matter under applicable rules.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE PROPOSAL TO
RATIFY THE SELECTION OF WITHUM AS THE INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2023.
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ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
The Company is providing its stockholders with the opportunity to cast a non-binding, advisory vote on the compensation of our Named Executive Officers as disclosed pursuant to the SEC’s executive compensation disclosure rules and set forth in this proxy statement (including in the compensation tables and narratives accompanying those tables as well as in the Compensation Discussion and Analysis).
Our executive compensation program is guided by the principle that the compensation of the Company’s executive officers should encourage the creation of stockholder value and achievement of strategic corporate objectives. In furtherance of this principle, the Company’s executive compensation program includes a number of features intended to reflect best practices in the market and help ensure that the program reinforces stockholder interests. These features are described in more detail in the Compensation Discussion and Analysis and include the following:
| ● | A significant amount of the executives’ compensation is at risk. For fiscal year 2022, |
| o | Approximately 72.5% of Mr. Tardugno’s target total direct compensation was performance-based and/or linked to the value of the Company’s stock price. | |
| o | Approximately 70.1% of Dr. Le Goff’s target total direct compensation was performance-based and/or linked to the value of the Company’s stock price. |
| ● | Executives’ bonuses under our annual incentive program are principally based on the achievement of specific performance objectives established at the beginning of the fiscal year by the Compensation Committee. | |
| ● | Executives’ equity awards are granted in the form of stock options that help to align the executives’ interests with those of our stockholders as the options will not have value unless there is appreciation in the Company’s stock price after the option is granted. |
In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act) and the related rules of the SEC, the Board of Directors will request your advisory vote on the following resolution at the annual meeting:
RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed in this proxy statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved.
This vote is an advisory vote only and is non-binding on the Company, the Board of Directors or the Compensation Committee, and will not be construed as overruling a decision by, or creating or implying any additional fiduciary duty for, the Board of Directors or the Compensation Committee. However, the Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, values the opinions expressed by stockholders in their vote on this proposal, and will consider the outcome of the vote when making future compensation decisions for Named Executive Officers.
Vote Required
The affirmative vote of the holders of a majority of the shares of our Common Stock present via live webcast or represented by proxy and entitled to vote on the proposal will be required to ratify the 2022 executive compensation for the Company’s executive officers. Abstentions will have the same effect as a vote against Proposal No. 3, but broker non-votes will have no effect on Proposal No. 3.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR” THE ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
| Page 40 |
ADVISORY VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
As described in Proposal 3 above, the Company’s stockholders are being provided the opportunity to cast an advisory non-binding vote on the Company’s executive compensation program.
This Proposal 4 affords stockholders the opportunity to cast an advisory vote on how often the Company should include an advisory vote on executive compensation in its proxy materials for future annual stockholder meetings (or special stockholder meetings for which the Company must include executive compensation information in the proxy statement for that meeting). Under this Proposal 4, stockholders may vote to have future advisory votes on executive compensation every year, every two years, or every three years.
The Company believes that advisory votes on executive compensation should be conducted every three years, consistent with our long-term approach to executive compensation. We believe the Company maintains a consistent compensation philosophy designed to align executives’ interests with those of stockholders and that a triennial vote will provide stockholders sufficient time to evaluate the effectiveness of our executive compensation program in relation to the Company’s long-term business results. A triennial vote will also give the Board of Directors sufficient time to engage with stockholders to understand advisory vote results, respond to stockholders’ feedback about Company pay practices, and implement any necessary changes to our executive compensation program.
This proposal is advisory only and will not be binding on the Company, the Board of Directors, or the Compensation Committee. Although non-binding, the Board of Directors and the Compensation Committee will carefully review the voting results. Notwithstanding the Board’s recommendation and the outcome of the stockholder vote, the Board may in the future decide to conduct advisory votes on executive compensation on a more or less frequent basis and may vary its practice based on factors such as discussions with stockholders and the adoption of material changes to the Company’s executive compensation program.
In voting on this proposal, stockholders will be able to indicate their preference regarding the frequency of future advisory votes on executive compensation by specifying a choice of one year, two years or three years. Stockholders that do not have a preference regarding the frequency of future advisory votes on executive compensation should abstain from voting on the proposal. Stockholders will not be voting to approve or disapprove the recommendation of the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE TO
HOLD FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION EVERY THREE YEARS.
| Page 41 |
AMENDMENT OF THE IMUNON, INC. 2018 STOCK INCENTIVE PLAN
BACKGROUND
At the 2023 Annual Meeting, stockholders will be asked to approve the following amendment to the 2018 Plan, which amendment was approved by our Board of Directors on March 17, 2023.
Increase in Aggregate Share Limit. The 2018 Plan currently limits the aggregate number of shares of common stock that may be delivered pursuant to all awards granted under the 2018 Plan to 940,000 shares. Currently only 99,976 shares remain available for future grants. The proposed amendment would increase this limit by an additional 1,030,000 shares so that the new aggregate share limit for the 2018 Plan would be 1,970,000.
As of April 21, 2023, a total of 844,697 shares of common stock were subject to outstanding stock options and restricted stock awards granted under the 2018 Plan. The outstanding stock options have a weighted average strike price of $3.55 per share with a weighted average term of 8.94 years. A remainder of 99,976 shares of common stock were available for new award grants under the 2018 Plan. Our Board of Directors recommends the increase in the number of shares available under the 2018 Plan to provide us the ability to provide eligible officers, directors, key employees, and other individuals with additional incentives to contribute to our future success. In the judgment of the Board of Directors, awards under the 2018 Plan are a valuable and critical incentive and will serve to the ultimate benefit of the stockholders by aligning more closely the interests of the 2018 Plan participants with those of our stockholders.
Our Board of Directors believes that the proposed 2018 Plan amendment is essential for our ongoing success, the implementation of its product and/or technology acquisition strategy and its ability to recruit, retain and reward key employees. The Board of Directors also believes that if the proposed amendments are not approved, our ability to align the interests of key employees with stockholders through equity-based compensation would be compromised, disrupting our compensation program, and impairing our ability to recruit and retain key employees. The Board of Directors recommends approval of the proposed 2018 Plan amendment for the following reasons:
| ● | To align the interests of our stockholders and recipients of awards under the 2018 Plan by increasing the proprietary interest of such recipients in our growth and success; | |
| ● | To advance our interests of the Company by attracting and retaining non-employee directors, officers, other employees, consultants, independent contractors, and agents; and | |
| ● | To motivate such persons to act in the long-term best interests of the Company and its stockholders. |
As discussed above under “Executive Compensation — Compensation Discussion and Analysis,” we consider equity and equity-based compensation to be a key component of our compensation program and believe that it is essential to attract, motivate, and retain talented, experienced, and committed employees and to incentivize our employees to achieve our short- and long-term goals. On February 12, 2018, the Board of Directors, upon the recommendation of the Compensation Committee, adopted the IMUNON, INC. 2018 Stock Incentive Plan which later was approved by our stockholders at the 2018 Annual Meeting on May 15, 2018. The 2018 Plan replaced our 2007 Stock Incentive Plan (the “2007 Plan”). The 2018 Stock Incentive Plan constitutes the only plan we currently utilize to provide equity and equity-based incentive compensation to eligible employees, consultants, and directors.
Historical Company Equity Usage. We believe that our historic equity usage has been reasonable in light of competitive considerations and the potential dilutive impact of equity award grants on our stockholders. Our average three-year “run rate” was 5.40% as a percentage of weighted common shares outstanding which compares favorably to the non-Russell 3000 Index (Pharmaceuticals, Biotechnology & Life Science) mean run rate of 7.43% for that same three-year period (with the run rate in each case calculated the number of shares subject to stock options and other equity awards granted during that period). We do not currently anticipate that our future annual long-term incentive grants will significantly exceed this run rate. As noted above, the number of shares of common stock currently available for future grants under the 2018 Plan is only 99,976 shares, demonstrating our need for additional shares to provide us greater flexibility to structure future incentives and to better attract, retain and award key employees to execute our current business plans and strategies. For more information on our past grants under the 2018 Plan, see “Potential Dilution and Burn Rate” below.
The Need to Provide Competitive Compensation. Similar to other companies in our industry, we believe equity compensation is integral in providing a competitive total compensation package necessary to recruit, retain and reward key employees. Equity awards are commonly used by companies our size, and the ability to provide competitive grants is essential to competing in our labor markets. Therefore, we believe it is imperative to provide long-term incentive awards as a component of our compensation program. We will continue to seek an appropriate balance between meeting employee hiring, retention, and compensation goals and avoiding excessive stockholder dilution.
Cash Compensation Expense Increase. If our ability to provide equity compensation is impaired, our cash compensation costs could increase substantially to offset equity compensation typically provided in the marketplace. We believe it is important that we use our cash resources to operate and expand our business, rather than unnecessarily diverting cash to pay compensation.
If stockholders do not approve this 2018 Plan amendment, the current share limits under, and other terms and conditions of the 2018 Plan, will continue in effect.
| Page 42 |
Potential Dilution and Burn Rate
The following paragraphs include additional information to help you assess the potential dilutive impact of the Company’s outstanding equity awards under the 2018 Plan.
The following table shows the total number of shares of our common stock that were subject to outstanding restricted stock and restricted stock unit awards granted under the 2018 Plan, that were subject to outstanding stock options granted under the 2018 Plan, and that were then available for new award grants under the 2018 Plan as of December 31, 2022 and as of April 21, 2023.
| As of December 31, 2022 | As of April 21, 2023 | |||||||
| Shares subject to outstanding stock options | 555,719 | 844,697 | ||||||
| Shares subject to outstanding restricted stock and restricted stock unit awards | 400 | - | ||||||
| Shares available for new award grants | 388,954 | 99,976 | ||||||
As of December 31, 2022, a total of 555,719 shares of our common stock were subject to all outstanding awards granted under the 2018 Plan. All outstanding stock option awards were subject to outstanding stock options having a weighted average strike price of $5.53 per share with a remaining term of 9.12 years.
As of April 21, 2023, a total of 844,679 shares of our common stock were subject to all outstanding awards granted under the 2018 Plan. All outstanding stock option awards and restricted stock awards have a weighted average strike price of $3.69 per share with a remaining term of 8.93 years.
The weighted-average number of shares of our common stock issued and outstanding in each of the last three fiscal years is 2,112,750 shares issued and outstanding in 2020; 5,426,953 shares issued and outstanding in 2021; and 7,142,970 shares issued and outstanding in 2022. The number of shares of our common stock issued and outstanding as of December 31, 2022 and April 21, 2023 was 7,436,197 shares and 9,097,005 shares, respectively.
The total number of shares of our common stock subject to awards that we granted under the 2018 Plan over the last two fiscal years and to date as of April 21, 2023 are as follows:
| ● | 149,482 shares in 2021 (which was 2.8% of the weighted-average number of shares of our common stock issued and outstanding in 2021), of which 148,016 shares were subject to stock option awards and 1,466 shares were subject to restricted stock grants; | |
| ● | 512,055 shares in 2022 (which was 7.2% of the weighted-average number of shares of our common stock issued and outstanding in 2022), of which 511,655 shares were subject to stock option awards and 400 shares were subject to restricted stock grants; and | |
| ● | 331,100 shares thus far in 2023 (which was 4.0% of the weighted-average number of shares of our common stock issued and outstanding in 2022 through April 21, 2023), of which 331,100 shares were subject to stock option awards. |
The Compensation Committee anticipates that the aggregate share limit of 1,030,000 shares requested for the 2018 Plan and assuming usual levels of shares becoming available for new awards as a result of forfeitures of outstanding awards, will provide us with flexibility to continue to grant equity awards under the 2018 Plan for the next two years. However, this is only an estimate, in our judgment, based on current circumstances. The total number of shares that are subject to the Company’s award grants in any one year or from year-to-year may change based on any number of variables, including, without limitation, the value of our common stock (since higher stock prices generally require fewer shares to be issued to produce awards of the same grant date fair value), changes in competitors’ compensation practices, changes in compensation practices in the market generally, changes in the number of employees, changes in the number of directors and officers, whether and the extent to which vesting conditions applicable to equity-based awards are satisfied, acquisition activity and the need to grant awards to new employees in connection with acquisitions, the need to attract, retain and incentivize key talent, the type of awards we grant and how we choose to balance total compensation between cash and equity-based awards.
The closing market price for a share of our common stock as of April 21, 2023 was $1.25 per share. Based on this price and the maximum number of shares that would have been available for awards as of such date under the 2018 Plan together with the 1,030,000 additional shares requested in this proposed amendment, the maximum aggregate market value of the common stock that could potentially be issued under the 2018 Plan is approximately $2.47 million if this amendment is approved.
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SUMMARY DESCRIPTION OF THE 2018 PLAN
The following summary provides a description of the significant provisions of the 2018 Plan as amended to date and proposed to be amended by this Proposal No. 5. However, the summary is qualified in its entirety by reference to the full text of the 2018 Plan as proposed to be amended, which have been filed as an exhibit to the copy of this Proxy Statement that was filed electronically with the SEC and can be reviewed on the SEC’s website at http://www.sec.gov.
Plan Highlights
Some of the key features of the 2018 Plan include:
| ● | The 2018 Plan is administered by our Compensation Committee comprised entirely of independent directors; | |
| ● | Options and SARs granted under the 2018 Plan may not be repriced without shareholder approval other than in connection with a Change in Control or adjustments described in the 2018 Plan; | |
| ● | Under the 2018 Plan as proposed to be amended by Proposal No. 5 the maximum number of shares our common stock available for awards, other than awards granted as substitute awards in connection with a corporate transaction, will be 1,970,000; | |
| ● | The 2018 Plan prohibits liberal share recycling – meaning that shares tendered to pay the exercise price, or the withholding taxes related to an award may not be recycled back into the 2018 Plan; | |
| ● | The exercise price of options and the base price for SARs granted under the 2018 Plan may not be less than the fair market value of a share of our common stock on the date of grant, subject to certain exceptions for substitute awards granted in connection with a corporate transaction; | |
| ● | The 2018 Plan prohibits the grant of dividend equivalents with respect to options and SARs and subjects all dividends and dividend equivalents paid with respect to restricted stock awards, restricted stock unit awards or performance awards to the same vesting conditions as the underlying awards; | |
| ● | The 2018 Plan does not contain a liberal change in control definition; and | |
| ● | The 2018 Plan provides that awards and any cash payment or shares our common stock delivered pursuant to an award are subject to forfeiture, recovery by us or other action pursuant to the applicable award agreement or any claw back or recoupment policy that we may adopt from time to time. |
Administration
The 2018 Plan is administered by a committee designated by our Board of Directors (unless the Board elects to administer the plan), consisting of two or more members of the Board, each of whom may be (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) “independent” within the meaning of the rules of the NASDAQ Capital Market or, if Company common stock is not listed on the NASDAQ Capital Market, within the meaning of the rules of the principal stock exchange on which Company common stock is then traded. Our Compensation Committee currently administers the 2018 Plan.
Subject to the express provisions of the 2018 Plan, the Compensation Committee has the authority to select eligible persons to receive awards and determine all of the terms and conditions of each award. All awards will be evidenced by an agreement containing such provisions not inconsistent with the 2018 Plan as the Compensation Committee will approve. The Compensation Committee also has authority to establish rules and regulations for administering the 2018 Plan and to decide questions of interpretation or application of any provision of the 2018 Plan. The Compensation Committee may, in its sole discretion and for any reason at any time, take action such that (i) any or all outstanding options and SARs will become exercisable in part or in full, (ii) all or a portion of a restriction period on any award will lapse, (iii) all or a portion of any performance period applicable to any award will lapse and (iv) any performance measures applicable to any outstanding award will be deemed satisfied at target, maximum or any other level.
The Compensation Committee may delegate some or all of its power and authority under the 2018 Plan to the Board of Directors (or any members thereof) or, subject to applicable law, a subcommittee of the Board of Directors, a member of the Board of Directors, the Chief Executive Officer or other executive officer of the Company as the Compensation Committee deems appropriate, except that it may not delegate its power and authority to a member of the Board, the Chief Executive Officer or any executive officer with regard to awards to persons who are subject to Section 16 of the Exchange Act. The Compensation Committee has not made such a delegation of authority.
| Page 44 |
Available Shares
Subject to the adjustment provisions set forth in the 2018 Plan the number of shares of common stock available for awards under the 2018 Plan, as proposed to be amended by Proposal No. 5, other than substitute awards granted in connection with a corporate transaction, will be 1,970,000. All of the available shares of common stock under the 2018 Plan may be issued in connection with incentive stock options.
The number of available shares will be reduced by the sum of the aggregate number of shares of common stock which become subject to outstanding options, free-standing SARs, stock awards and performance awards. To the extent that shares of common stock subject to an outstanding option, free-standing SARs, stock award or performance award granted under the 2018 Plan or the 2007 Plan1, other than substitute awards granted in connection with a corporate transaction, are not issued or delivered by reason of (i) the expiration, termination, cancellation or forfeiture of such award (excluding shares of common stock subject to an option cancelled upon settlement of a related tandem SAR or subject to a tandem SAR cancelled upon exercise of a related option), or (ii) the settlement of such award in cash, then such shares of common stock will again be available under the 2018 Plan. Shares of common stock subject to an award under the 2018 Plan or the 2007 Plan will not again be available for issuance under the 2018 Plan if such shares are (a) shares that were subject to an option or stock-settled SAR and were not issued or delivered upon the net settlement or net exercise of such option or SAR, (b) shares delivered to or withheld by the Company to pay the purchase price or the withholding taxes relating to an outstanding award or (c) shares repurchased by the Company on the open market with the proceeds of an option exercise.
Change in Control
Subject to the terms of the applicable award agreement, in the event of a change in control, the Board, as constituted prior to the Change in Control (as defined in the 2018 Plan), may, in its discretion take one of the following actions: (i) require that (a) some or all outstanding options and SARs will become exercisable in full or in part, either immediately or upon a subsequent termination of employment, (b) the restriction period applicable to some or all outstanding stock awards will lapse in full or in part, either immediately or upon a subsequent termination of employment, (C) the performance period applicable to some or all outstanding awards will lapse in full or in part, and (D) the performance measures applicable to some or all outstanding awards will be deemed satisfied at the target, maximum or any other level; (ii) require that shares of stock of the company resulting from or succeeding to the business of the Company pursuant to such change in control, or the parent thereof, be substituted for some or all of the shares of Company common stock subject to outstanding awards as determined by the Board; and/or (iii) require outstanding awards to be surrendered to the Company in exchange for a payment of cash, shares of common stock in the company resulting from the change in control, or the parent thereof, or a combination of cash and shares.
Effective Date, Termination and Amendment
The 2018 Plan became effective on May 15, 2018 and will terminate as of the first annual meeting to occur on or after the tenth anniversary of the effective date, unless earlier terminated by the Board. If approved by the affirmative vote of a majority of the shares of common stock present via the live webcast or represented by proxy at the Annual Meeting, the amendment to the 2018 Plan to increase the aggregate number of shares reserved for issuance under the 2018 Plan will become effective as of June 14, 2023. The Board may amend the 2018 Plan at any time, subject to stockholder approval if (i) required by applicable law, rule or regulation, including any rule of the NASDAQ Capital Market or any other stock exchange on which the common stock is then traded, or (ii) such amendment modifies the option and SAR repricing provisions in the 2018 Plan. No amendment may materially impair the rights of a holder of an outstanding award without the consent of such holder.
Eligibility
Participants in the 2018 Plan will consist of such officers, other employees, non-employee directors, consultants, independent contractors and agents and persons expected to become officers, other employees, non-employee directors, consultants, independent contractors and agents of the Company and its affiliates and subsidiaries, as selected by the Compensation Committee. As of April 21, 2023, approximately 46 individuals would have been eligible to participate in the 2018 Plan which includes approximately four officers, twenty-seven employees, six non-employee directors and nine non-employee consultants would be eligible to participate in the 2018 Plan, as amended.
| Page 45 |
Stock Options and SARs
The 2018 Plan, as amended provides for the grant of non-qualified stock options, incentive stock options and SARs. The Compensation Committee will determine the conditions to the exercisability of each option and SAR.
Each option will be exercisable for no more than ten years after its date of grant, unless the option is an incentive stock option and the optionee owns greater than ten percent (10%) of the voting power of all shares of capital stock of the Company (a “ten percent holder”), in which case the option will be exercisable for no more than five years after its date of grant. Except in the case of substitute awards granted in connection with a corporate transaction, the exercise price of an option will not be less than 100% of the fair market value of a share of common stock on the date of grant, unless the option is an incentive stock option and the optionee is a ten percent holder, in which case the option exercise price will be the price required by the Code, currently 110% of fair market value.
Each SAR will be exercisable for no more than ten years after its date of grant provided that no SAR granted in tandem with an option (a “tandem SAR”) will be exercisable later than the expiration, termination, cancellation, forfeiture, or other termination of the related option. The base price of an SAR will not be less than 100% of the fair market value of a share of common stock on the date of grant (or, if earlier, the date of grant of the option for which the SAR is exchanged or substituted), provided that the base price of a tandem SAR will be the exercise price of the related option. An SAR entitles the holder to receive upon exercise (subject to withholding taxes) shares of common stock (which may be restricted stock), cash or a combination thereof with a value equal to the difference between the fair market value of the common stock on the exercise date and the base price of the SAR.
All of the terms relating to the exercise, cancellation or other disposition of options and SARs following the termination of employment of a participant, whether by reason of disability, retirement, death, or any other reason, will be determined by the Compensation Committee.
The Compensation Committee may not, without the approval of the stockholders of the Company, (i) reduce the purchase price or base price of any previously granted option or SAR, (ii) cancel any previously granted option or SAR in exchange for another option or SAR with a lower purchase price or base price or (iii) cancel any previously granted option or SAR in exchange for cash or another award if the purchase price of such option or the base price of such SAR exceeds the fair market value of a share of common stock on the date of such cancellation, in each case, other than in connection with a change in control or the adjustment provisions set forth in the 2018 Plan.
Stock Awards
The 2018 Plan provides for the grant of stock awards. The Compensation Committee may grant a stock award as a restricted stock award, a restricted stock unit award or as another stock award. Except as otherwise determined by the Compensation Committee, stock awards will be non-transferable and subject to forfeiture if the holder does not remain continuously in the employment of the Company during the restriction period or if specified performance measures (if any) are not attained during the performance period.
Unless otherwise set forth in a restricted stock award agreement, the holder of shares of restricted stock will have rights as a stockholder of the Company, including the right to vote and receive dividends with respect to the shares of restricted stock. Distributions and dividends with respect to shares of common stock, including regular cash dividends, will be deposited with the Company and will be subject to the same restrictions as the restricted stock.
The agreement awarding restricted stock units will specify (i) whether such award may be settled in shares of common stock, cash, or a combination thereof, and (ii) whether the holder will be entitled to receive dividend equivalents, with respect to such award. Any dividend equivalents with respect to restricted stock units will be subject to the same restrictions as such restricted stock units. Prior to settlement of a restricted stock unit, the holder of a restricted stock unit will have no rights as a shareholder of the Company.
The Committee may grant other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of common stock, including shares of common stock granted as a bonus and not subject to any vesting conditions, dividend equivalents, deferred stock units, stock purchase rights and shares of common stock issued in lieu of obligations of the Company to pay cash under any compensatory plan or arrangement, subject to such terms as shall be determined by the Committee.
All of the terms relating to the satisfaction of performance measures and the termination of a restriction period, or the forfeiture and cancellation of a stock award upon a termination of employment, whether by reason of disability, retirement, death, or any other reason or during a paid or unpaid leave of absence, will be determined by the Compensation Committee.
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Performance Awards
The 2018 Plan also provides for the grant of performance awards. The agreement relating to a performance award will specify whether such award may be settled in shares of common stock (including shares of restricted stock), cash or a combination thereof. The agreement relating to a performance award will provide, in the manner determined by the Compensation Committee, for the vesting of such performance award if the specified performance measures established by the Compensation Committee are satisfied or met during the specified performance period and such performance goals will be determined by the Compensation Committee at the time of grant. Any dividend or dividend equivalents with respect to a performance award will be subject to the same restrictions as such performance award.
Prior to the settlement of a performance award in shares of common stock, the holder of such award will have no rights as a stockholder of the Company with respect to such shares. All of the terms relating to the satisfaction of performance measures and the termination of a performance period, or the forfeiture and cancellation of a performance award upon a termination of employment with or service to, whether by reason of disability, retirement, death or any other reason or during a paid or unpaid leave of absence, will be determined by the Compensation Committee.
U.S. Federal Income Tax Consequences
The following is a brief summary of certain United States federal income tax consequences generally arising with respect to awards under the 2018 Plan. This discussion does not address all aspects of the United States federal income tax consequences of participating in the 2018 Plan that may be relevant to participants in light of their personal investment or tax circumstances and does not discuss any state, local or non-United States tax consequences of participating in the 2018 Plan. Each participant is advised to consult his or her personal tax advisor concerning the application of the United States federal income tax laws to such participant’s particular situation, as well as the applicability and effect of any state, local or non-United States tax laws before taking any actions with respect to any awards.
Stock Options
A participant will not recognize taxable income at the time an option is granted, and the Company will not be entitled to a tax deduction at that time. A participant will recognize compensation taxable as ordinary income (and if the participant is an employee, will be subject to income tax withholding) upon exercise of a non-qualified stock option equal to the excess of the fair market value of the shares purchased on such date over their exercise price, and the Company will be entitled to a corresponding deduction, except to the extent the deduction limits of Section 162(m) of the Code apply. A participant will not recognize income (except for purposes of the alternative minimum tax) upon exercise of an incentive stock option. If the shares acquired by exercise of an incentive stock option are held for at least two years from the date the option was granted and one year from the date it was exercised, any gain or loss arising from a subsequent disposition of those shares will be taxed as long-term capital gain or loss, and the Company will not be entitled to any deduction. If, however, those shares are disposed of within the above-described period, then in the year of that disposition the participant will recognize compensation taxable as ordinary income equal to the excess of the lesser of (i) the amount realized upon that disposition and (ii) the fair market value of those shares on the date of exercise over the exercise price, and the Company will be entitled to a corresponding deduction, except to the extent the deduction limits of Section 162(m) of the Code apply.
SARs
A participant will not recognize taxable income at the time SARs are granted, and the Company will not be entitled to a tax deduction at that time. Upon exercise, the participant will recognize compensation taxable as ordinary income (and if the participant is an employee, will be subject to income tax withholding) in an amount equal to the fair market value of any shares delivered and the amount of cash paid by the Company. This amount is deductible by the Company as compensation expense, except to the extent the deduction limits of Section 162(m) of the Code apply.
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Stock Awards
A participant will not recognize taxable income at the time stock subject to a substantial risk of forfeiture (“restricted stock”) is granted, and the Company will not be entitled to a tax deduction at that time, unless the participant makes an election to be taxed at that time. If such election is made, the participant will recognize compensation taxable as ordinary income (and if the participant is an employee, will be subject to income tax withholding) at the time of the grant in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for those shares. If such election is not made, the participant will recognize compensation taxable as ordinary income (and if the participant is an employee, will be subject to income tax withholding) at the time the restrictions constituting a substantial risk of forfeiture lapse in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for those shares. The amount of ordinary income recognized by making the above-described election or upon the lapse of restrictions constituting a substantial risk of forfeiture is deductible by the Company as compensation expense, except to the extent the deduction limits of Section 162(m) of the Code apply.
A participant will not recognize taxable income at the time a restricted stock unit is granted, and the Company will not be entitled to a tax deduction at that time. Upon settlement of restricted stock units, the participant will recognize compensation taxable as ordinary income (and if the participant is an employee, will be subject to income tax withholding) in an amount equal to the fair market value of any shares delivered and the amount of any cash paid by the Company. The amount of ordinary income recognized is deductible by the Company as compensation expense, except to the extent the deduction limits of Section 162(m) of the Code apply.
The tax treatment, including the timing of taxation, of any other type of stock award will depend on the terms of such award at the time of grant.
Performance Awards
A participant will not recognize taxable income at the time performance awards are granted, and the Company will not be entitled to a tax deduction at that time. Upon settlement of performance awards, the participant will recognize compensation taxable as ordinary income (and if the participant is an employee, will be subject to income tax withholding) in an amount equal to the fair market value of any shares delivered and the amount of cash paid by the Company. This amount is deductible by the Company as compensation expense, except to the extent the deduction limits of Section 162(m) of the Code apply.
New Plan Benefits
The Committee has the discretion to grant awards under the 2018 Plan and, therefore, it is not possible as of the date of this proxy statement to determine future awards that will be received by the Company’s named executive officers or others under the 2018 Plan. Accordingly, in lieu of providing information regarding benefits that will be received under the 2018 Plan the following table provides information concerning the benefits that were received by the following persons and groups during 2022 under the 2018 Plan: each named executive officer; all current executive officers, as a group; all current directors who are not executive officers, as a group; and all current employees who are not executive officers, as a group.
| Options | ||||||||
| Name and Position | Average Exercise Price ($) | Number of Awards (#) | ||||||
| Michael H. Tardugno
Executive Chairman | $ | 1.32 | 25,000 | |||||
| Corinne Le Goff | ||||||||
| President and Chief Executive Officer | $ | 1.32 | 90,000 | |||||
| Nicholas Borys Executive Vice President and CMO | $ | - | - | |||||
| Khursheed Anwer Executive Vice President and CSO | $ | 1.32 | 40,000 | |||||
| Jeffrey W. Church Executive Vice President and CFO | $ | 1.32 | 40,000 | |||||
| All current executive officers, as a group | $ | 1.32 | 195,000 | |||||
| All current directors who are not executive officers, as a group | $ | 1.32 | 12,000 | |||||
| All current employees who are not executive officers, as a group | $ | 1.32 | 117,750 | |||||
| (1) | Represents the weighted-average exercise price for the group. |
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The Board of Directors believes that the adoption of the increase in the number of shares available for issuance under the 2018 Plan will promote the interests of the Company and its stockholders and will help us continue to be able to attract, retain and reward persons important to our success. All members of the Board and all of our executive officers are eligible for awards under the 2018 Plan and thus have a personal interest in the approval of the proposal to increase the number of shares available for issuance under the 2018 Plan.
Vote Required
The affirmative vote of the holders of a majority of the shares of our Common Stock present via the live webcast or represented by proxy and entitled to vote on the proposal will be required to approve the amendment to the 2018 Plan. Abstentions will have the same effect as a vote against Proposal No. 5, but broker non-votes will have no effect on Proposal No. 5.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE PROPOSAL TO
APPROVE THE AMENDMENT OF THE IMUNON, INC. 2018 STOCK INCENTIVE PLAN AS
DESCRIBED ABOVE.
| Page 49 |
STOCKHOLDER NOMINATIONS AND PROPOSALS FOR
THE 2024 ANNUAL MEETING OF STOCKHOLDERS
If a stockholder wants us to include a proposal in our proxy statement for presentation at our 2024 Annual Meeting of Stockholders in accordance with Rule 14a-8 promulgated by the SEC under the Exchange Act, the proposal must be received by us no later than December 31, 2023. Such proposals should be directed to IMUNON, INC., 997 Lenox Drive, Lawrenceville, NJ 08648, Attention: Corporate Secretary.
A stockholder may also nominate directors or have other business brought before the 2024 Annual Meeting of Stockholders by submitting the nomination or proposal to the Company, not later than the close of business on the 90th calendar day, nor earlier than the close of business on the 120th calendar day, in advance of the anniversary of the 2024 Annual Meeting of Stockholders; provided, however, in the event that the date of the 2024 Annual Meeting of Stockholders is more than thirty calendar days before or more than thirty calendar days after such anniversary date, notice by the stockholder to be timely must be so received no earlier than the close of business on the 120th calendar day in advance of such date of annual meeting and not later than the close of business on the later of the 90th calendar day in advance of such date of annual meeting or the 10th calendar day following the date on which public announcement of the date of the meeting is first made. The nomination or proposal must be delivered to the Company’s executive offices at 997 Lenox Drive, Suite 100, Lawrenceville, NJ 08648, Attention: Corporate Secretary no earlier than February 14, 2024, and no later than March 14, 2024.
In addition, if a stockholder intends to utilize Rule 14a-19 under the Exchange act in connection with a nomination must give the requisite notice to the Company as indicated in the previous above sentence not later than the 60th calendar day in advance of the anniversary of the 2024 Annual Meeting, or April 14, 2024. Any stockholder considering submitting a nominee or proposal for action at our 2024 Annual Meeting of Stockholders is directed to the Company’s Bylaws, which contain additional requirements as to submission of nominations for directors or proposals for stockholder action. Copies of the Bylaws may be obtained upon request to the Company’s Corporate Secretary. Stockholder proposals or nominations must include the specified information concerning the stockholder and the proposal or nominee as described in our Bylaws.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
Our website is located at imunon.com. You can view additional information on our website, such as:
| ● | Charters of our Board Committees; | |
| ● | Code of Conduct; and | |
| ● | Other governance materials and reports that we file with the SEC. |
Copies of those documents may also be obtained free of charge by written or telephonic request directed to the Corporate Secretary, IMUNON, INC., 997 Lenox Drive, Suite 100, Lawrenceville, New Jersey 08648.
| April 28, 2023 | By Order of the Board of Directors |
| /s/ Jeffrey W. Church | |
| Jeffrey W Church | |
| Corporate Secretary |
| Page 50 |
Appendix A
IMUNON, INC.
THE 2018 STOCK INCENTIVE PLAN AS AMENDED AS OF JUNE 14, 2023
I. INTRODUCTION
1.1 Purposes. The purposes of the IMUNON, INC. 2018 Stock Incentive Plan (this “Plan”) are (i) to align the interests of the Company’s stockholders and the recipients of awards under this Plan by increasing the proprietary interest of such recipients in the Company’s growth and success, (ii) to advance the interests of the Company by attracting and retaining Non-Employee Directors, officers, other employees, consultants, independent contractors and agents and (iii) to motivate such persons to act in the long-term best interests of the Company and its stockholders.
1.2 Certain Definitions.
“Affiliate” shall mean any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own directly or indirectly not less than fifty percent (50%) of such entity.
“Agreement” shall mean the written or electronic agreement evidencing an award hereunder between the Company and the recipient of such award.
“Board” shall mean the Board of Directors of the Company.
“Change in Control” shall have the meaning set forth in Section 5.8(b).
“Code” shall mean the Internal Revenue Code of 1986, as amended.
“Committee” shall mean the Compensation Committee of the Board, or a subcommittee thereof, or such other committee designated by the Board, in each case, consisting of two or more members of the Board, each of whom is intended to be (i) a “Non-Employee Director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) “independent” within the meaning of the rules of the Nasdaq Capital Market or, if the Common Stock is not listed on the Nasdaq Capital Market, within the meaning of the rules of the principal stock exchange on which the Common Stock is then traded.
“Common Stock” shall mean the common stock, par value $0.01 per share, of the Company, and all rights appurtenant thereto.
“Company” shall mean IMUNON, Inc., a corporation organized under the laws of the State of Delaware, or any successor thereto.
“Effective Date” shall have the meaning set forth in Section 5.1.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
“Fair Market Value” shall mean the closing transaction price of a share of Common Stock as reported on the Nasdaq Capital Market on the date as of which such value is being determined or, if the Common Stock is not listed on the Nasdaq Capital Market, the closing transaction price of a share of Common Stock on the principal national stock exchange on which the Common Stock is traded on the date as of which such value is being determined or, if there shall be no reported transactions for such date, on the next preceding date for which transactions were reported; provided, however, that if the Common Stock is not listed on a national stock exchange or if Fair Market Value for any date cannot be so determined, Fair Market Value shall be determined by the Committee by whatever means or method as the Committee, in the good faith exercise of its discretion, shall at such time deem appropriate and in compliance with Section 409A of the Code.
| A-1 |
“Free-Standing SAR” shall mean an SAR which is not granted in tandem with, or by reference to, an option, which entitles the holder thereof to receive, upon exercise, shares of Common Stock (which may be Restricted Stock) or, to the extent set forth in the applicable Agreement, cash or a combination thereof, with an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of such SARs which are exercised.
“Incentive Stock Option” shall mean an option to purchase shares of Common Stock that meets the requirements of Section 422 of the Code, or any successor provision, which is intended by the Committee to constitute an Incentive Stock Option.
“Incumbent Board” shall have the meaning set forth in Section 5.8(b).
“Non-Employee Director” shall mean any director of the Company who is not an officer or employee of the Company or any Affiliate or Subsidiary.
“Nonqualified Stock Option” shall mean an option to purchase shares of Common Stock which is not an Incentive Stock Option.
“Other Stock Award” shall mean an award granted pursuant to Section 3.4 of the Plan.
“Performance Award” shall mean a right to receive an amount of cash, Common Stock, or a combination of both, contingent upon the attainment of specified Performance Measures within a specified Performance Period.
“Performance Measures” shall mean the criteria and objectives, established by the Committee, which shall be satisfied or met (i) as a condition to the grant or exercisability of all or a portion of an option or SAR or (ii) during the applicable Restriction Period or Performance Period as a condition to the vesting of the holder’s interest, in the case of a Restricted Stock Award, of the shares of Common Stock subject to such award, or, in the case of a Restricted Stock Unit Award, Other Stock Award or Performance Award, to the holder’s receipt of the shares of Common Stock subject to such award or of payment with respect to such award.
“Performance Period” shall mean any period designated by the Committee during which (i) the Performance Measures applicable to an award shall be measured and (ii) the conditions to vesting applicable to an award shall remain in effect.
“Prior Plan” shall mean the Celsion Corporation 2007 Stock Incentive Plan and each other equity plan maintained by the Company under which awards are outstanding as of the effective date of this Plan.
“Restricted Stock” shall mean shares of Common Stock which are subject to a Restriction Period and which may, in addition thereto, be subject to the attainment of specified Performance Measures within a specified Performance Period.
“Restricted Stock Award” shall mean an award of Restricted Stock under this Plan.
“Restricted Stock Unit” shall mean a right to receive one share of Common Stock or, in lieu thereof and to the extent set forth in the applicable Agreement, the Fair Market Value of such share of Common Stock in cash, which shall be contingent upon the expiration of a specified Restriction Period and which may, in addition thereto, be contingent upon the attainment of specified Performance Measures within a specified Performance Period.
“Restricted Stock Unit Award” shall mean an award of Restricted Stock Units under this Plan.
“Restriction Period” shall mean any period designated by the Committee during which (i) the Common Stock subject to a Restricted Stock Award may not be sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or disposed of, except as provided in this Plan or the Agreement relating to such award, or (ii) the conditions to vesting applicable to a Restricted Stock Unit Award or Other Stock Award shall remain in effect.
| A-2 |
“SAR” shall mean a stock appreciation right which may be a Free-Standing SAR or a Tandem SAR.
“Stock Award” shall mean a Restricted Stock Award, Restricted Stock Unit Award or Other Stock Award.
“Subsidiary” and “Subsidiaries” shall mean only a company or companies, whether now or hereafter existing, within the meaning of the definition of “subsidiary company” provided in Section 424(f) of the Code, or any successor thereto of similar import.
“Substitute Award” shall mean an award granted under this Plan upon the assumption of, or in substitution for, outstanding equity awards previously granted by a company or other entity in connection with a corporate transaction, including a merger, combination, consolidation or acquisition of property or stock; provided, however, that in no event shall the term “Substitute Award” be construed to refer to an award made in connection with the cancellation and repricing of an option or SAR.
“Tandem SAR” shall mean an SAR which is granted in tandem with, or by reference to, an option (including a Nonqualified Stock Option granted prior to the date of grant of the SAR), which entitles the holder thereof to receive, upon exercise of such SAR and surrender for cancellation of all or a portion of such option, shares of Common Stock (which may be Restricted Stock) or, to the extent set forth in the applicable Agreement, cash or a combination thereof, with an aggregate value equal to the excess of the Fair Market Value of one share of Common Stock on the date of exercise over the base price of such SAR, multiplied by the number of shares of Common Stock subject to such option, or portion thereof, which is surrendered.
“Tax Date” shall have the meaning set forth in Section 5.5.
“Ten Percent Holder” shall have the meaning set forth in Section 2.1(a).
1.3 Administration. This Plan shall be administered by the Committee except to the extent the Board elects to administer the Plan, in which case references herein to the “Committee” shall be deemed to include references to the “Board.” Any one or a combination of the following awards may be made under this Plan to eligible persons: (i) options to purchase shares of Common Stock in the form of Incentive Stock Options or Nonqualified Stock Options; (ii) SARs in the form of Tandem SARs or Free-Standing SARs; (iii) Stock Awards in the form of Restricted Stock, Restricted Stock Units or Other Stock Awards; and (iv) Performance Awards. The Committee shall, subject to the terms of this Plan, select eligible persons for participation in this Plan and determine the form, amount and timing of each award to such persons and, if applicable, the number of shares of Common Stock subject to an award, the number of SARs, the number of Restricted Stock Units, the dollar value subject to a Performance Award, the purchase price or base price associated with the award, the time and conditions of exercise or settlement of the award and all other terms and conditions of the award, including, without limitation, the form of the Agreement evidencing the award. The Committee may, in its sole discretion and for any reason at any time, take action such that (i) any or all outstanding options and SARs shall become exercisable in part or in full, (ii) all or a portion of the Restriction Period applicable to any outstanding awards shall lapse, (iii) all or a portion of the Performance Period applicable to any outstanding awards shall lapse and (iv) the Performance Measures (if any) applicable to any outstanding awards shall be deemed to be satisfied at the target, maximum or any other level. The Committee shall, subject to the terms of this Plan, interpret this Plan and the application thereof, establish rules and regulations it deems necessary or desirable for the administration of this Plan and may impose, incidental to the grant of an award, conditions with respect to the award, such as limiting competitive employment or other activities. All such interpretations, rules, regulations and conditions shall be conclusive and binding on all parties.
The Committee may delegate some or all of its power and authority hereunder to the Board (or any members thereof) or, subject to applicable law, to a subcommittee of the Board, a member of the Board, the Chief Executive Officer or other executive officer of the Company as the Committee deems appropriate; provided, however, that the Committee may not delegate its power and authority to a member of the Board, the Chief Executive Officer or other executive officer of the Company with regard to the selection for participation in this Plan of an officer, director or other person subject to Section 16 of the Exchange Act or decisions concerning the timing, pricing or amount of an award to such an officer, director or other person.
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No member of the Board or Committee, and neither the Chief Executive Officer nor any other executive officer to whom the Committee delegates any of its power and authority hereunder, shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and the members of the Board and the Committee and the Chief Executive Officer or other executive officer shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including attorneys’ fees) arising therefrom to the full extent permitted by law (except as otherwise may be provided in the Company’s Certificate of Incorporation and/or By-laws) and under any directors’ and officers’ liability insurance that may be in effect from time to time.
1.4 Eligibility. Participants in this Plan shall consist of such officers, other employees, Non-Employee Directors, consultants, independent contractors, agents, and persons expected to become officers, other employees, Non-Employee Directors, consultants, independent contractors and agents of the Company and its Affiliates and Subsidiaries as the Committee in its sole discretion may select from time to time. The Committee’s selection of a person to participate in this Plan at any time shall not require the Committee to select such person to participate in this Plan at any other time. Except as otherwise provided for in an Agreement, for purposes of this Plan, references to employment by the Company shall also mean employment by an Affiliate or Subsidiary, and references to employment shall include service as a Non-Employee Director, consultant, independent contractor or agent. The Committee shall determine, in its sole discretion, the extent to which a participant shall be considered employed during an approved leave of absence.
1.5 Shares Available. Subject to adjustment as provided in Section 5.7 and to all other limits set forth in this Plan, the number of shares of Common Stock available for all awards under this Plan, other than Substitute Awards, shall be 1,970,000. All of the shares available under the Plan may be issued under the Plan in connection with Incentive Stock Options. To the extent the Company grants an award under the Plan, the number of shares of Common Stock that remain available for future grants under the Plan shall be reduced by an amount equal to the number of shares subject to such award.
To the extent that shares of Common Stock subject to an outstanding option, SAR, Stock Award or Performance Award granted under the Plan or a similar type of award granted under the Prior Plan, other than Substitute Awards, are not issued or delivered by reason of (i) the expiration, termination, cancellation or forfeiture of such award (excluding shares subject to an option cancelled upon settlement in shares of a related Tandem SAR or shares subject to a Tandem SAR cancelled upon exercise of a related option) or (ii) the settlement of such award in cash, then such shares of Common Stock shall again be available under this Plan; provided, however, that shares of Common Stock subject to an award under this Plan or a Prior Plan shall not again be available for issuance under this Plan if such shares are (x) shares that were subject to an option or stock-settled SAR and were not issued or delivered upon the net settlement or net exercise of such option or SAR, (y) shares delivered to or withheld by the Company to pay the purchase price or the withholding taxes related to an outstanding award or (z) shares repurchased by the Company on the open market with the proceeds of an option exercise.
The number of shares of Common Stock available for awards under this Plan shall not be reduced by (i) the number of shares of Common Stock subject to Substitute Awards or (ii) available shares under a stockholder approved plan of a company or other entity which was a party to a corporate transaction with the Company (as appropriately adjusted to reflect such corporate transaction) which become subject to awards granted under this Plan (subject to applicable stock exchange requirements).
Shares of Common Stock to be delivered under this Plan shall be made available from authorized and unissued shares of Common Stock, or authorized and issued shares of Common Stock reacquired and held as treasury shares or otherwise or a combination thereof.
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II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 Stock Options. The Committee may, in its discretion, grant options to purchase shares of Common Stock to such eligible persons as may be selected by the Committee. Each option, or portion thereof, that is not an Incentive Stock Option, shall be a Nonqualified Stock Option. To the extent that the aggregate Fair Market Value (determined as of the date of grant) of shares of Common Stock with respect to which options designated as Incentive Stock Options are exercisable for the first time by a participant during any calendar year (under this Plan or any other plan of the Company, or any parent or Subsidiary) exceeds the amount (currently $100,000) established by the Code, such options shall constitute Nonqualified Stock Options.
Options shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common Stock subject to an option and the purchase price per share of Common Stock purchasable upon exercise of the option shall be determined by the Committee; provided, however, that the purchase price per share of Common Stock purchasable upon exercise of an option shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such option; provided further, that if an Incentive Stock Option shall be granted to any person who, at the time such option is granted, owns capital stock possessing more than 10 percent of the total combined voting power of all classes of capital stock of the Company (or of any parent or Subsidiary) (a “Ten Percent Holder”), the purchase price per share of Common Stock shall not be less than the price (currently 110% of Fair Market Value) required by the Code in order to constitute an Incentive Stock Option.
Notwithstanding the foregoing, in the case of an option that is a Substitute Award, the purchase price per share of the shares subject to such option may be less than 100% of the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate purchase price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor company or other entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate purchase price of such shares.
(b) Option Period and Exercisability. The period during which an option may be exercised shall be determined by the Committee; provided, however, that no option shall be exercised later than ten years after its date of grant; provided further, that if an Incentive Stock Option shall be granted to a Ten Percent Holder, such option shall not be exercised later than five years after its date of grant. The Committee may, in its discretion, establish Performance Measures which shall be satisfied or met as a condition to the grant of an option or to the exercisability of all or a portion of an option. The Committee shall determine whether an option shall become exercisable in cumulative or non-cumulative installments and in part or in full at any time. An exercisable option, or portion thereof, may be exercised only with respect to whole shares of Common Stock.
(c) Method of Exercise. An option may be exercised (i) by giving written notice to the Company specifying the number of whole shares of Common Stock to be purchased and accompanying such notice with payment therefor in full (or arrangement made for such payment to the Company’s satisfaction) either (A) in cash, (B) by delivery (either actual delivery or by attestation procedures established by the Company) of shares of Common Stock having a Fair Market Value, determined as of the date of exercise, equal to the aggregate purchase price payable by reason of such exercise, (C) authorizing the Company to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the date of exercise, equal to the amount necessary to satisfy such obligation, (D) in cash by a broker-dealer acceptable to the Company to whom the participant has submitted an irrevocable notice of exercise or (E) a combination of (A), (B) and (C), in each case to the extent set forth in the Agreement relating to the option, (ii) if applicable, by surrendering to the Company any Tandem SARs which are cancelled by reason of the exercise of the option and (iii) by executing such documents as the Company may reasonably request. Any fraction of a share of Common Stock which would be required to pay such purchase price shall be disregarded and the remaining amount due shall be paid in cash by the participant. No shares of Common Stock shall be issued and no certificate representing Common Stock shall be delivered until the full purchase price therefor and any withholding taxes thereon, as described in Section 5.5, have been paid (or arrangement made for such payment to the Company’s satisfaction).
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2.2 Stock Appreciation Rights. The Committee may, in its discretion, grant SARs to such eligible persons as may be selected by the Committee. The Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or a Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of SARs and Base Price. The number of SARs subject to an award shall be determined by the Committee. Any Tandem SAR related to an Incentive Stock Option shall be granted at the same time that such Incentive Stock Option is granted. The base price of a Tandem SAR shall be the purchase price per share of Common Stock of the related option. The base price of a Free-Standing SAR shall be determined by the Committee; provided, however, that such base price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of such SAR (or, if earlier, the date of grant of the option for which the SAR is exchanged or substituted).
Notwithstanding the foregoing, in the case of an SAR that is a Substitute Award, the base price per share of the shares subject to such SAR may be less than 100% of the Fair Market Value per share on the date of grant, provided, that the excess of: (a) the aggregate Fair Market Value (as of the date such Substitute Award is granted) of the shares subject to the Substitute Award, over (b) the aggregate base price thereof does not exceed the excess of: (x) the aggregate fair market value (as of the time immediately preceding the transaction giving rise to the Substitute Award, such fair market value to be determined by the Committee) of the shares of the predecessor company or other entity that were subject to the grant assumed or substituted for by the Company, over (y) the aggregate base price of such shares.
(b) Exercise Period and Exercisability. The period for the exercise of an SAR shall be determined by the Committee; provided, however, that (i) no Tandem SAR shall be exercised later than the expiration, cancellation, forfeiture or other termination of the related option and (ii) no Free-Standing SAR shall be exercised later than ten years after its date of grant. The Committee may, in its discretion, establish Performance Measures which shall be satisfied or met as a condition to the grant of an SAR or to the exercisability of all or a portion of an SAR. The Committee shall determine whether an SAR may be exercised in cumulative or non-cumulative installments and in part or in full at any time. An exercisable SAR, or portion thereof, may be exercised, in the case of a Tandem SAR, only with respect to whole shares of Common Stock and, in the case of a Free-Standing SAR, only with respect to a whole number of SARs. If an SAR is exercised for shares of Restricted Stock, a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section 3.2(c), or such shares shall be transferred to the holder in book entry form with restrictions on the shares duly noted, and the holder of such Restricted Stock shall have such rights of a stockholder of the Company as determined pursuant to Section 3.2(d). Prior to the exercise of a stock-settled SAR, the holder of such SAR shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such SAR.
(c) Method of Exercise. A Tandem SAR may be exercised (i) by giving written notice to the Company specifying the number of whole SARs which are being exercised, (ii) by surrendering to the Company any options which are cancelled by reason of the exercise of the Tandem SAR and (iii) by executing such documents as the Company may reasonably request. A Free-Standing SAR may be exercised (A) by giving written notice to the Company specifying the whole number of SARs which are being exercised and (B) by executing such documents as the Company may reasonably request. No shares of Common Stock shall be issued and no certificate representing Common Stock shall be delivered until any withholding taxes thereon, as described in Section 5.5, have been paid (or arrangement made for such payment to the Company’s satisfaction).
2.3 Termination of Employment or Service. All of the terms relating to the exercise, cancellation or other disposition of an option or SAR (i) upon a termination of employment with or service to the Company of the holder of such option or SAR, as the case may be, whether by reason of disability, retirement, death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable award Agreement.
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2.4 No Repricing. The Committee shall not, without the approval of the stockholders of the Company, (i) reduce the purchase price or base price of any previously granted option or SAR, (ii) cancel any previously granted option or SAR in exchange for another option or SAR with a lower purchase price or base price or (iii) cancel any previously granted option or SAR in exchange for cash or another award if the purchase price of such option or the base price of such SAR exceeds the Fair Market Value of a share of Common Stock on the date of such cancellation, in each case, other than in connection with a Change in Control or the adjustment provisions set forth in Section 5.7.
2.5 No Dividend Equivalents. Notwithstanding anything in an Agreement to the contrary, the holder of an option or SAR shall not be entitled to receive dividend equivalents with respect to the number of shares of Common Stock subject to such option or SAR.
III. STOCK AWARDS
3.1 Stock Awards. The Committee may, in its discretion, grant Stock Awards to such eligible persons as may be selected by the Committee. The Agreement relating to a Stock Award shall specify whether the Stock Award is a Restricted Stock Award, a Restricted Stock Unit Award or, in the case of an Other Stock Award, the type of award being granted.
3.2 Terms of Restricted Stock Awards. Restricted Stock Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common Stock subject to a Restricted Stock Award and the Restriction Period, Performance Period (if any) and Performance Measures (if any) applicable to a Restricted Stock Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted Stock Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of the shares of Common Stock subject to such award (i) if the holder of such award remains continuously in the employment of the Company during the specified Restriction Period and (ii) if specified Performance Measures (if any) are satisfied or met during a specified Performance Period, and for the forfeiture of the shares of Common Stock subject to such award (x) if the holder of such award does not remain continuously in the employment of the Company during the specified Restriction Period or (y) if specified Performance Measures (if any) are not satisfied or met during a specified Performance Period.
(c) Stock Issuance. During the Restriction Period, the shares of Restricted Stock shall be held by a custodian in book entry form with restrictions on such shares duly noted or, alternatively, a certificate or certificates representing a Restricted Stock Award shall be registered in the holder’s name and may bear a legend, in addition to any legend which may be required pursuant to Section 5.6, indicating that the ownership of the shares of Common Stock represented by such certificate is subject to the restrictions, terms and conditions of this Plan and the Agreement relating to the Restricted Stock Award. All such certificates shall be deposited with the Company, together with stock powers or other instruments of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate, which would permit transfer to the Company of all or a portion of the shares of Common Stock subject to the Restricted Stock Award in the event such award is forfeited in whole or in part. Upon termination of any applicable Restriction Period (and the satisfaction or attainment of applicable Performance Measures), subject to the Company’s right to require payment of any taxes in accordance with Section 5.5, the restrictions shall be removed from the requisite number of any shares of Common Stock that are held in book entry form, and all certificates evidencing ownership of the requisite number of shares of Common Stock shall be delivered to the holder of such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise set forth in the Agreement relating to a Restricted Stock Award, and subject to the terms and conditions of a Restricted Stock Award, the holder of such award shall have all rights as a stockholder of the Company, including, but not limited to, voting rights, the right to receive dividends and the right to participate in any capital adjustment applicable to all holders of Common Stock; provided, however, that a distribution or dividend with respect to shares of Common Stock, including a regular cash dividend, shall be deposited with the Company and shall be subject to the same restrictions as the shares of Common Stock with respect to which such distribution or dividend was made.
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3.3 Terms of Restricted Stock Unit Awards. Restricted Stock Unit Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common Stock subject to a Restricted Stock Unit Award, including the number of shares that are earned upon the attainment of any specified Performance Measures, and the Restriction Period, Performance Period (if any) and Performance Measures (if any) applicable to a Restricted Stock Unit Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted Stock Unit Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of such Restricted Stock Unit Award (i) if the holder of such award remains continuously in the employment of the Company during the specified Restriction Period and (ii) if specified Performance Measures (if any) are satisfied or met during a specified Performance Period, and for the forfeiture of the shares of Common Stock subject to such award (x) if the holder of such award does not remain continuously in the employment of the Company during the specified Restriction Period or (y) if specified Performance Measures (if any) are not satisfied or met during a specified Performance Period.
(c) Settlement of Vested Restricted Stock Unit Awards. The Agreement relating to a Restricted Stock Unit Award shall specify (i) whether such award may be settled in shares of Common Stock or cash or a combination thereof and (ii) whether the holder thereof shall be entitled to receive, on a deferred basis, dividend equivalents, and, if determined by the Committee, interest on, or the deemed reinvestment of, any deferred dividend equivalents, with respect to the number of shares of Common Stock subject to such award. Any dividend equivalents with respect to Restricted Stock Units that are subject to vesting conditions shall be subject to the same restrictions as such Restricted Stock Units. Prior to the settlement of a Restricted Stock Unit Award, the holder of such award shall have no rights as a stockholder of the Company with respect to the shares of Common Stock subject to such award.
3.4 Other Stock Awards. Subject to the limitations set forth in the Plan, the Committee is authorized to grant other awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, shares of Common Stock, including without limitation shares of Common Stock granted as a bonus and not subject to any vesting conditions, dividend equivalents, deferred stock units, stock purchase rights and shares of Common Stock issued in lieu of obligations of the Company to pay cash under any compensatory plan or arrangement, subject to such terms as shall be determined by the Committee. The Committee shall determine the terms and conditions of such awards, which may include the right to elective deferral thereof, subject to such terms and conditions as the Committee may specify in its discretion.
3.5 Termination of Employment or Service. All of the terms relating to the satisfaction of Performance Measures and the termination of the Restriction Period or Performance Period relating to a Stock Award, or any forfeiture and cancellation of such award (i) upon a termination of employment with or service to the Company of the holder of such award, whether by reason of disability, retirement, death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable award Agreement.
IV. PERFORMANCE AWARDS
4.1 Performance Awards. The Committee may, in its discretion, grant Performance Awards to such eligible persons as may be selected by the Committee.
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4.2 Terms of Performance Awards. Performance Awards shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Value of Performance Awards and Performance Measures. The method of determining the value of the Performance Award and the Performance Measures and Performance Period applicable to a Performance Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Performance Award shall provide, in the manner determined by the Committee, in its discretion, and subject to the provisions of this Plan, for the vesting of such Performance Award if the specified Performance Measures are satisfied or met during the specified Performance Period and for the forfeiture of such award if the specified Performance Measures are not satisfied or met during the specified Performance Period.
(c) Settlement of Vested Performance Awards. The Agreement relating to a Performance Award shall specify whether such award may be settled in shares of Common Stock (including shares of Restricted Stock) or cash or a combination thereof. If a Performance Award is settled in shares of Restricted Stock, such shares of Restricted Stock shall be issued to the holder in book entry form or a certificate or certificates representing such Restricted Stock shall be issued in accordance with Section 3.2(c) and the holder of such Restricted Stock shall have such rights as a stockholder of the Company as determined pursuant to Section 3.2(d). Any dividends or dividend equivalents with respect to a Performance Award shall be subject to the same restrictions as such Performance Award. Prior to the settlement of a Performance Award in shares of Common Stock, including Restricted Stock, the holder of such award shall have no rights as a stockholder of the Company.
4.3 Termination of Employment or Service. All of the terms relating to the satisfaction of Performance Measures and the termination of the Performance Period relating to a Performance Award, or any forfeiture and cancellation of such award (i) upon a termination of employment with or service to the Company of the holder of such award, whether by reason of disability, retirement, death or any other reason, or (ii) during a paid or unpaid leave of absence, shall be determined by the Committee and set forth in the applicable award Agreement.
V. GENERAL
5.1 Effective Date and Term of Plan. This Plan shall be submitted to the stockholders of the Company for approval at the Company’s 2018 annual meeting of stockholders and, if approved by the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at such annual meeting of stockholders, shall become effective as of the date on which the Plan was approved by stockholders (the “Effective Date”). This Plan shall terminate as of the first annual meeting of the Company’s stockholders to occur on or after the tenth anniversary of its Effective Date, unless terminated earlier by the Board. Termination of this Plan shall not affect the terms or conditions of any award granted prior to termination.
Awards hereunder may be made at any time prior to the termination of this Plan, provided that no Incentive Stock Option may be granted later than ten years after the date on which the Plan was approved by the Board. In the event that this Plan is not approved by the stockholders of the Company, this Plan and any awards hereunder shall be void and of no force or effect.
5.2 Amendments. The Board may amend this Plan as it shall deem advisable; provided, however, that no amendment to the Plan shall be effective without the approval of the Company’s stockholders if (i) stockholder approval is required by applicable law, rule or regulation, including any rule of the Nasdaq Capital Market or any other stock exchange on which the Common Stock is then traded, or (ii) such amendment seeks to modify Section 2.4 hereof; provided further, that no amendment may materially impair the rights of a holder of an outstanding award without the consent of such holder.
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5.3 Agreement. Each award under this Plan shall be evidenced by an Agreement setting forth the terms and conditions applicable to such award. No award shall be valid until an Agreement is executed by the Company and, to the extent required by the Company, executed or electronically accepted by the recipient of such award. Upon such execution or acceptance and delivery of the Agreement to the Company within the time period specified by the Company, such award shall be effective as of the effective date set forth in the Agreement.
5.4 Non-Transferability. No award shall be transferable other than by will, the laws of descent and distribution or pursuant to beneficiary designation procedures approved by the Company or, to the extent expressly permitted in the Agreement relating to such award, to the holder’s family members, a trust or entity established by the holder for estate planning purposes, a charitable organization designated by the holder or pursuant to a domestic relations order, in each case, without consideration. Except to the extent permitted by the foregoing sentence or the Agreement relating to an award, each award may be exercised or settled during the holder’s lifetime only by the holder or the holder’s legal representative or similar person. Except as permitted by the second preceding sentence, no award may be sold, transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by operation of law or otherwise) or be subject to execution, attachment or similar process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any award, such award and all rights thereunder shall immediately become null and void.
5.5 Tax Withholding. The Company shall have the right to require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash pursuant to an award made hereunder, payment by the holder of such award of any federal, state, local or other taxes which may be required to be withheld or paid in connection with such award. An Agreement may provide that (i) the Company shall withhold whole shares of Common Stock which would otherwise be delivered to a holder, having an aggregate Fair Market Value determined as of the date the obligation to withhold or pay taxes arises in connection with an award (the “Tax Date”), or withhold an amount of cash which would otherwise be payable to a holder, in the amount necessary to satisfy any such obligation or (ii) the holder may satisfy any such obligation by any of the following means (or by other means that the Committee deems appropriate): (A) a cash payment or delivery of cash equivalents to the Company; (B) delivery (either actual delivery or by attestation procedures established by the Company) to the Company of previously owned whole shares of Common Stock having an aggregate Fair Market Value, determined as of the Tax Date, equal to the amount necessary to satisfy any such obligation; (C) authorizing the Company to withhold whole shares of Common Stock which would otherwise be delivered having an aggregate Fair Market Value, determined as of the Tax Date, or withhold an amount of cash which would otherwise be payable to a holder, in either case equal to the amount necessary to satisfy any such obligation; (D) in the case of the exercise of an option, a cash payment by a broker-dealer acceptable to the Company to whom the participant has submitted an irrevocable notice of exercise or (E) any combination of (A), (B) and (C), in each case to the extent set forth in the Agreement relating to the award. Shares of Common Stock to be delivered or withheld may not have an aggregate Fair Market Value in excess of the amount determined by applying the minimum statutory withholding rate (or, if permitted by the Company, such other rate as will not cause adverse accounting consequences under the accounting rules then in effect, and is permitted under applicable IRS withholding rules). Any fraction of a share of Common Stock which would be required to satisfy such an obligation shall be disregarded and the remaining amount due shall be paid in cash by the holder.
5.6 Restrictions on Shares. Each award made hereunder shall be subject to the requirement that if at any time the Company determines that the listing, registration or qualification of the shares of Common Stock subject to such award upon any securities exchange or under any law, or the consent or approval of any governmental body, or the taking of any other action is necessary or desirable as a condition of, or in connection with, the delivery of shares thereunder, such shares shall not be delivered unless such listing, registration, qualification, consent, approval or other action shall have been effected or obtained, free of any conditions not acceptable to the Company. The Company may require that certificates evidencing shares of Common Stock delivered pursuant to any award made hereunder bear a legend indicating that the sale, transfer or other disposition thereof by the holder is prohibited except in compliance with the Securities Act of 1933, as amended, and the rules and regulations thereunder.
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5.7 Adjustment. In the event of any equity restructuring (within the meaning of Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation or any successor or replacement accounting standard) that causes the per share value of shares of Common Stock to change, such as a stock dividend, stock split, spinoff, rights offering or recapitalization through an extraordinary cash dividend, the number and class of securities available under this Plan, the terms of each outstanding option and SAR (including the number and class of securities subject to each outstanding option or SAR and the purchase price or base price per share), the terms of each outstanding Stock Award (including the number and class of securities subject thereto), the terms of each outstanding Performance Award (including the number and class of securities subject thereto, if applicable) shall be appropriately adjusted by the Committee, such adjustments to be made in the case of outstanding options and SARs in accordance with Section 409A of the Code. In the event of any other change in corporate capitalization, including a merger, consolidation, reorganization, or partial or complete liquidation of the Company, such equitable adjustments described in the foregoing sentence may be made as determined to be appropriate and equitable by the Committee to prevent dilution or enlargement of rights of participants. In either case, the decision of the Committee regarding any such adjustment shall be final, binding and conclusive.
5.8 Change in Control.
(a) Subject to the terms of the applicable award Agreements, in the event of a “Change in Control,” the Board, as constituted prior to the Change in Control, may, in its discretion:
| (1) | require that (i) some or all outstanding options and SARs shall become exercisable in full or in part, either immediately or upon a subsequent termination of employment, (ii) the Restriction Period applicable to some or all outstanding Stock Awards shall lapse in full or in part, either immediately or upon a subsequent termination of employment, (iii) the Performance Period applicable to some or all outstanding awards shall lapse in full or in part, and (iv) the Performance Measures applicable to some or all outstanding awards shall be deemed to be satisfied at the target, maximum or any other level; | |
| (2) | require that shares of capital stock of the corporation resulting from or succeeding to the business of the Company pursuant to such Change in Control, or a parent corporation thereof, be substituted for some or all of the shares of Common Stock subject to an outstanding award, with an appropriate and equitable adjustment to such award as determined by the Board in accordance with Section 5.7; and/or | |
| (3) | require outstanding awards, in whole or in part, to be surrendered to the Company by the holder, and to be immediately cancelled by the Company, and to provide for the holder to receive (i) a cash payment in an amount equal to (A) in the case of an option or an SAR, the aggregate number of shares of Common Stock then subject to the portion of such option or SAR surrendered, whether or not vested or exercisable, multiplied by the excess, if any, of the Fair Market Value of a share of Common Stock as of the date of the Change in Control, over the purchase price or base price per share of Common Stock subject to such option or SAR, (B) in the case of a Stock Award or a Performance Award denominated in shares of Common Stock, the number of shares of Common Stock then subject to the portion of such award surrendered to the extent the Performance Measures applicable to such award have been satisfied or are deemed satisfied pursuant to Section 5.8(a)(i), whether or not vested, multiplied by the Fair Market Value of a share of Common Stock as of the date of the Change in Control, and (C) in the case of a Performance Award denominated in cash, the value of the Performance Award then subject to the portion of such award surrendered to the extent the Performance Measures applicable to such award have been satisfied or are deemed satisfied pursuant to Section 5.8(a)(i); (ii) shares of capital stock of the corporation resulting from or succeeding to the business of the Company pursuant to such Change in Control, or a parent corporation thereof, having a fair market value not less than the amount determined under clause (i) above; or (iii) a combination of the payment of cash pursuant to clause (i) above and the issuance of shares pursuant to clause (ii) above. |
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(b) For purposes of this Plan, a “Change in Control” shall mean:
| (1) | The consummation of an amalgamation, merger or consolidation of the Company with or into another entity or any other corporate reorganization of the Company, if more than fifty percent (50%) of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such amalgamation, merger, consolidation or other reorganization (or, if applicable, more than fifty percent (50%) of the combined voting power of the ultimate parent company that directly or indirectly has beneficial ownership of the securities of such continuing or surviving entity) is not owned directly or indirectly by persons who were holders of the Company’s then-outstanding voting securities immediately prior to such amalgamation, merger, consolidation or other reorganization; | |
| (2) | The sale, transfer or other disposition of all or substantially all of the Company’s assets to an entity that is not a parent, a Subsidiary or an Affiliate of the Company; | |
| (3) | Any transaction as a result of which any person becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing at least fifty percent (50%) of the total voting power represented by the Company’s then-outstanding voting securities. For purposes of this subsection, the term “person” shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude: (i) any parent, Subsidiary or Affiliate of the Company; (ii) any employee benefit plan (or related trust) sponsored or maintained by the Company, a parent, or any Subsidiary or Affiliate; and (iii) any underwriter temporarily holding securities pursuant to an offering of such securities; | |
| (4) | A change in the composition of the Board over a period of twenty four (24) consecutive months or less as a result of which individuals who, at the beginning of such period, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual subsequently becoming a director whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or | |
| (5) | The stockholders of the Company approve a complete liquidation or dissolution of the Company; |
provided, that with respect to any nonqualified deferred compensation that becomes payable on account of the Change in Control, the transaction or event described in clause (1), (2), (3) or (4) also constitutes a “change in control event,” as defined in Treasury Regulation §1.409A-3(i)(5) if required in order for the payment not to violate Section 409A of the Code.
5.9 Deferrals. The Committee may determine that the delivery of shares of Common Stock or the payment of cash, or a combination thereof, upon the settlement of all or a portion of any award made hereunder shall be deferred, or the Committee may, in its sole discretion, approve deferral elections made by holders of awards. Deferrals shall be for such periods and upon such terms as the Committee may determine in its sole discretion, subject to the requirements of Section 409A of the Code.
5.10 No Right of Participation, Employment or Service. Unless otherwise set forth in an employment agreement, no person shall have any right to participate in this Plan. Neither this Plan nor any award made hereunder shall confer upon any person any right to continued employment by or service with the Company, any Subsidiary or any Affiliate or affect in any manner the right of the Company, any Subsidiary or any Affiliate to terminate the employment or service of any person at any time without liability hereunder.
5.11 Non-Uniform Determinations. The Committee’s determinations under the Plan (including without limitation determinations of the persons to receive awards, the form, amount and time of such awards, the terms and provisions of such awards and the Agreements evidencing awards) need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan, whether or not such persons are similarly situated.
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5.12 Rights as Stockholder. No person shall have any right as a stockholder of the Company with respect to any shares of Common Stock or other equity security of the Company which is subject to an award hereunder unless and until such person becomes a stockholder of record with respect to such shares of Common Stock or equity security.
5.13 Designation of Beneficiary. To the extent permitted by the Company, a holder of an award may file with the Company a written designation of one or more persons as such holder’s beneficiary or beneficiaries (both primary and contingent) in the event of the holder’s death or incapacity. To the extent an outstanding option or SAR granted hereunder is exercisable, such beneficiary or beneficiaries shall be entitled to exercise such option or SAR pursuant to procedures prescribed by the Company. Each beneficiary designation shall become effective only when filed in writing with the Company during the holder’s lifetime on a form prescribed by the Company. The spouse of a married holder domiciled in a community property jurisdiction shall join in any designation of a beneficiary other than such spouse. The filing with the Company of a new beneficiary designation shall cancel all previously filed beneficiary designations. If a holder fails to designate a beneficiary, or if all designated beneficiaries of a holder predecease the holder, then each outstanding award held by such holder, to the extent vested or exercisable, shall be payable to or may be exercised by such holder’s executor, administrator, legal representative or similar person.
5.14 Awards Subject to Clawback. The awards granted under this Plan and any cash payment or shares of Common Stock delivered pursuant to such an award are subject to forfeiture, recovery by the Company or other action pursuant to the applicable award Agreement or any clawback or recoupment policy which the Company may adopt from time to time, including without limitation any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by law.
5.15 Governing Law. This Plan, each award hereunder and the related Agreement, and all determinations made and actions taken pursuant thereto, to the extent not otherwise governed by the Code or the laws of the United States, shall be governed by the laws of the State of Delaware and construed in accordance therewith without giving effect to principles of conflicts of laws.
5.16 Foreign Employees. Without amending this Plan, the Committee may grant awards to eligible persons who are foreign nationals and/or reside outside of the United States on such terms and conditions different from those specified in this Plan as may in the judgment of the Committee be necessary or desirable to foster and promote achievement of the purposes of this Plan and, in furtherance of such purposes the Committee may make such modifications, amendments, procedures, subplans and the like as may be necessary or advisable to comply with provisions of laws in other countries or jurisdictions in which the Company or its Subsidiaries or Affiliates operates or has employees.
5.17 Severability and Reformation. If any provision of the Plan or any award is, becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any person or award, or would disqualify the Plan or any award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable law or, if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the award, such provision shall be stricken as to such jurisdiction, person or award and the remainder of the Plan and any such award shall remain in full force and effect.
5.18 Unfunded Status of Awards; No Trust of Fund Created. The Plan is intended to constitute an “unfunded” plan. Neither the Plan nor any award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Subsidiary or Affiliate and a participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any Subsidiary or Affiliate pursuant to an award, such right shall be no greater than the right of any general unsecured creditors of the Company or such Subsidiary or Affiliate.
5.19 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any parent, Subsidiary or Affiliate from adopting or continuing in effect other compensation arrangements (whether such arrangements be generally applicable or applicable only in specific cases).
5.20 No Restriction of Corporate Action. Nothing contained in the Plan shall be construed to limit or impair the power of the Company or any parent, Subsidiary or Affiliate to make adjustments, reclassifications, reorganizations, or changes in its capital or business structure, or to amalgamate, merge or consolidate, liquidate, sell or transfer all or any part of its business or assets or to take other actions which it deems to be necessary or appropriate. No employee, beneficiary or other person shall have any claim against the Company or any parent, Subsidiary or Affiliate as a result of such action.
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