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Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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
LIPOCINE
INC.
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
☒
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.
April
23, 2024
Dear
Stockholder:
You
are cordially invited to attend Lipocine Inc.s 2024 Annual Meeting of Stockholders (the Annual Meeting) to be held
on June 5, 2024. The meeting will be held at Lipocines offices located at 675 Arapeen Drive, Suite 202, Salt Lake City, Utah 84108
at 10:00 a.m. Mountain Daylight Time. The formal meeting notice and Proxy Statement for the Annual Meeting are attached.
Whether
or not you plan to attend the Annual Meeting, it is important that your shares be represented and voted at the meeting. Therefore, you
are urged to access the proxy materials and vote via the Internet in accordance with the notice and access letter you will
receive, or if you request paper copies of the proxy materials by mail, complete, sign, date and promptly return the proxy card. Returning
your completed proxy card or voting via the Internet will ensure your representation at the Annual Meeting. If you later decide to attend
the Annual Meeting and wish to change your vote, you may do so simply by voting in person at the meeting. Due to voting rules that may
prevent your bank or broker from voting your uninstructed shares on a discretionary basis in the election of directors and other non-routine
matters, it is important that you cast your vote.
We
look forward to seeing you at the Annual Meeting.
Sincerely,
Mahesh
V. Patel, Ph.D.
President
and Chief Executive Officer
LIPOCINE
INC.
675
Arapeen Drive, Suite 202
Salt
Lake City, Utah
(801)
994-7383
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD JUNE 5, 2024
TO
THE STOCKHOLDERS OF LIPOCINE INC.
:
On
behalf of the Board of Directors of Lipocine Inc., a Delaware corporation (Lipocine or the Company), Lipocine
is pleased to deliver the accompanying Proxy Statement in connection with the annual meeting of stockholders of Lipocine (Annual
Meeting) which will be held on June 5, 2024, at 10:00 a.m. Mountain Daylight Time, at the offices of Lipocine, located at 675
Arapeen Drive, Suite 202, Salt Lake City, Utah 84108.
The
Annual Meeting will be held for the following purposes, as more fully described in the Proxy Statement accompanying this Notice of Annual
Meeting of Stockholders (the Notice):
1.
To
elect six (6) directors to our Board of Directors, to serve until the next annual meeting or until their successors are duly elected
and qualified;
2.
To
ratify the appointment of Tanner LLC as the independent registered public accounting firm of Lipocine for the year ending December
31, 2024;
3.
To
adopt, on an advisory basis, a non-binding resolution approving the compensation of the Companys named executive officers,
as described in the Proxy Statement under Executive Compensation;
4.
To
vote, on an advisory basis, on the frequency of future advisory votes to approve the compensation
of the Companys named executive officers;
5.
To
approve an amendment and restatement of our Fourth Amended and Restated 2014 Stock and Incentive
Plan to increase the annual individual award limits thereunder from 336,582 shares to 600,000
shares; and
6.
To
conduct any other business properly brought before the Annual Meeting and any adjournment or postponement thereof.
The
proposals are described in more detail in this Proxy Statement, which Lipocine encourages you to read carefully and in its entirety before
voting.
This
year, we are using the SECs Notice and Access model (Notice and Access), which allows us to deliver proxy materials
via the Internet, as the primary means of furnishing proxy materials. We believe Notice and Access provides stockholders with a convenient
method to access the proxy materials and vote, while allowing us to conserve natural resources and reduce the costs of printing and distributing
the proxy materials. On or about April 23, 2024, we will mail to stockholders holding shares in street name a Notice of
Internet Availability of Proxy Materials (Notice) containing instructions on how to access our Proxy Statement and our
Annual Report for the fiscal year ended December 31, 2023, or Annual Report, online and how to vote via the Internet. The Notice also
contains instructions on how to receive a paper copy of the proxy materials and our Annual Report.
The
close of business on April 8, 2024 has been fixed as the record date for determining those holders of Lipocine common stock entitled
to receive notice of and to vote at the Annual Meeting and any adjournments or postponements thereof. Our stock transfer books will remain
open between the record date and the date of the meeting. A list of stockholders entitled to vote at the Annual Meeting will be available
for inspection at our principal executive offices and at the Annual Meeting.
All
stockholders are cordially invited to attend the Annual Meeting in person. However, to assure your representation at the Annual Meeting,
you are urged to vote as promptly as possible in accordance with the instructions provided on your proxy card, or sign, date and promptly
return the proxy card. To ensure that all your shares are voted, please vote once for each proxy card you receive.
You
may revoke your proxy at any time prior to the Annual Meeting. If you attend the Annual Meeting and vote by ballot, your proxy will be
revoked automatically and only your vote at the Annual Meeting will be counted. If your shares are held in the name of a bank, broker,
or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record in order to be able to vote in
person at the Annual Meeting.
Please
note: If you hold your shares in the name of a broker, bank or other nominee, your nominee may determine to vote your shares at its own
discretion, absent instructions from you. However, due to voting rules that may prevent your bank or broker from voting your uninstructed
shares on a discretionary basis in the election of directors and other non-routine matters, it is important that you cast your vote.
Accordingly, please provide appropriate voting instructions to your broker or bank to ensure your vote will count.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on June 5, 2024
: This notice
of annual meeting of stockholders, the Proxy Statement, and our Annual Report on Form 10-K for 2023 are available at
https://materials.proxyvote.com/53630X
.
Sincerely,
Mahesh
V. Patel, Ph.D.
President
and Chief Executive Officer
Salt
Lake City, Utah
April
23, 2024
YOUR
VOTE IS VERY IMPORTANT.
IN
ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, WE URGE YOU TO VOTE BY COMPLETING, SIGNING, DATING AND RETURNING THE ENCLOSED PROXY
CARD AS PROMPTLY AS POSSIBLE.
LIPOCINE
INC.
675
Arapeen Drive, Suite 202
Salt
Lake City, Utah
(801)
994-7383
PROXY
STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
This
Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the Board) of Lipocine
Inc., a Delaware corporation, to be used at its 2024 Annual Meeting of Stockholders (the Annual Meeting), and which will
be held at 675 Arapeen Drive, Suite 202, Salt Lake City, Utah 84108, at 10:00 a.m. Mountain Daylight Time on June 5, 2024, and at any
adjournments or postponements thereof. Directions to the Annual Meeting may be obtained by calling (801) 994-7383, for stockholders who
plan to attend the Annual Meeting in person.
The
Notice of Annual Meeting of Stockholders (this Notice), this Proxy Statement and the enclosed proxy card are first being
sent or given to our stockholders on or about April 23, 2024, along with our Annual Report for the fiscal year ended December 31, 2023
(the Annual Report). We will bear the cost of the solicitation of proxies. The Proxy Statement and the Annual Report both
are available online at:
www.proxyvote.com
. Web links and addresses contained in this Proxy Statement are provided for convenience
only, and the content on the referenced websites does not constitute a part of this Proxy Statement.
Only
stockholders of record at the close of business on April 8, 2024 (the Record Date) are entitled to receive notice of and,
to vote at the Annual Meeting and any adjournments or postponements thereof. On the Record Date, there were 5,315,830 shares of common
stock outstanding, 0 shares of preferred stock outstanding and approximately 87 stockholders of record according to information provided
by our transfer agent.
We
will provide without charge to any person from whom a Proxy is solicited by the Board of Directors, upon the written request of such
person, a copy of our 2023 Annual Report on Form 10-K, including the financial statements and schedules thereto (as well as exhibits
thereto, if specifically requested), required to be filed with the Securities and Exchange Commission. Written requests for such information
should be directed to Lipocine Inc., 675 Arapeen Drive, Suite 202, Salt Lake City, Utah 84108, Attention: Stephanie Sorensen.
References
to the Company, Lipocine, our, us or we mean Lipocine Inc.
We
have sent you this Proxy Statement and the enclosed proxy card because the Board is soliciting your proxy to vote at our 2024 Annual
Meeting of Stockholders to be held on Wednesday, June 5, 2024 at our offices at 675 Arapeen Drive, Suite 202, Salt Lake City, Utah 84108,
at 10:00 a.m., Mountain Daylight Time, and at any adjournments or postponements thereof.
●
This
Proxy Statement summarizes information about the proposals to be considered at the Annual Meeting and other information you may find
useful in determining how to vote.
●
The
proxy card is the means by which you actually authorize another person to vote your shares in accordance with your instructions.
This
year, we are providing access to this years proxy materials primarily over the Internet under the Securities and Exchange Commissions
Notice and Access rules. The Notice of Internet Availability of Proxy Materials (the Notice) is first being
mailed on or about April 23, 2024 to each of our stockholders entitled to notice of and to vote at the Annual Meeting. This Notice will
contain instructions on how to access this Proxy Statement, our Annual Report on Form 10-K for the fiscal year ended December 31, 2023
(the Annual Report) and how to vote via the Internet and e-mail. The Notice will also include instructions on how you can
receive a paper copy of your proxy materials. The Proxy Statement and the Annual Report both are available online at:
www.proxyvote.com
.
Web links and addresses contained in this Proxy Statement are provided for convenience only, and the content on the referenced websites
does not constitute a part of this Proxy Statement.
Information
About the Annual Meeting
Why
am I receiving these materials?
The
purposes of the Annual Meeting are:
1.
To
elect six (6) directors to our Board of Directors, to serve until the next annual meeting
and until their successors are duly elected and qualified;
2.
To
ratify the appointment of Tanner LLC as the independent registered public accounting firm of Lipocine for the year ending December
31, 2024;
3.
To
adopt, on an advisory basis, a non-binding resolution approving the compensation of the Companys named executive officers,
as described in the Proxy Statement under Executive Compensation;
4.
To
vote, on an advisory basis, on the frequency of future advisory votes to approve the compensation of the Companys named executive
officers;
5.
To
approve an amendment and restatement of our Fourth Amended and Restated 2014 Stock and Incentive Plan to increase the authorized
number of shares of common stock of the Company issuable under all awards granted under such plan from 336,582 to 600,000; and
To
conduct any other business properly brought before the Annual Meeting and any adjournment or postponement thereof.
You
are receiving this Proxy Statement as a stockholder of the Company as of the Record Date, April 8, 2024, for purposes of determining
the stockholders entitled to receive notice of and vote at the Annual Meeting. As further described below, we request that you vote promptly.
THE
BOARD UNANIMOUSLY RECOMMENDS VOTING FOR THE ELECTION OF EACH OF THE BOARDS NOMINEES ON PROPOSAL NO. 1 AND FOR PROPOSAL NOS. 2,
3, 4 AND 5.
2
When
is the Annual Meeting?
The
Annual Meeting will be held at 10:00 a.m., Mountain Daylight Time, on Wednesday, June 5, 2024.
Where
is the Annual Meeting?
The
Annual Meeting will be held at our offices at 675 Arapeen Drive, Suite 202, Salt Lake City, Utah 84108.
Who
can attend the Annual Meeting?
All
stockholders as of the Record Date, or their duly appointed proxies, may attend the Annual Meeting. Each stockholder may be asked to
present valid picture identification, such as a drivers license or passport. If you hold your shares through a broker or other
nominee, you must bring a copy of a brokerage statement reflecting your stock ownership as of the Record Date. All stockholders must
check in at the registration desk at the Annual Meeting.
What
constitutes a quorum?
A
quorum of stockholders is necessary to hold a valid meeting for the transaction of business. The presence at the Annual Meeting, in person
or by proxy duly authorized, of the holders of one-third of the outstanding shares of common stock entitled to vote as of the Record
Date will constitute a quorum. Broker non-votes, abstentions and votes withheld count as shares present at the Annual Meeting for purposes
of calculating whether a quorum is present. On the Record Date, there were 5,315,830 shares of our common stock outstanding.
What
are the recommendations of the Board?
The
Boards recommendations are set forth below.
1.
FOR
the election of each Board nominee;
2.
FOR
the ratification of the appointment of Tanner LLC as our independent registered public accounting firm for the year ending December
31, 2024;
3.
FOR
the approval, on an advisory basis, of a non-binding resolution approving the compensation of the Companys named executive
officers, as described in the Proxy Statement under Executive Compensation;
4.
ONE
YEAR
(an annual vote), for the frequency of future advisory votes to approve the compensation of the Companys named executive
officers; and
5.
FOR
the approval of an amendment and restatement of the Companys Fourth Amended and Restated 2014 Stock and Incentive Plan.
If
you submit a valid proxy, the persons named as proxy holders will vote your shares as you instruct and, in the absence of any instructions,
in accordance with the recommendations of the Board. The proxy holders will vote in their own discretion with respect to any other matter
that properly comes before the Annual Meeting or any adjournments or postponements thereof.
Information
About Voting
Who
can vote at the Annual Meeting?
Only
stockholders of record as of the Record Date, are entitled to receive notice of the Annual Meeting and, to vote the shares of capital
stock of the Company that they held on that date at the meeting, or any postponement or adjournment of the meeting. Holders of our common
stock are entitled to one vote per share on each matter to be voted upon.
3
What
are the voting rights of the holders of the common stock?
Holders
of our common stock will vote on all matters to be acted upon by the stockholders at the Annual Meeting. Each outstanding share of common
stock will be entitled to one vote on each matter to be voted upon at the Annual Meeting.
How
do I vote?
You
may attend the Annual Meeting and vote in person. You may submit your proxy by mail, telephone, or the Internet. If you are submitting
your proxy by mail, you should complete, sign, and date your proxy card and return it in the envelope provided. Sign your name exactly
as it appears on the proxy card. If you plan to vote by telephone or the Internet, voting instructions are printed on your proxy card.
If you provide specific voting instructions, your shares will be voted as you have instructed. Proxy cards submitted by mail must be
received by our voting tabulator no later than June 4, 2024, to be voted at the Annual Meeting. Please note that by casting your vote
by proxy you are authorizing the individuals named as proxy holders to vote your shares in accordance with your instructions and in their
discretion with respect to any other matter that properly comes before the Annual Meeting or any adjournments or postponements thereof.
If
you hold shares of our common stock in street name, you should follow the instructions in your proxy card or your brokers instructions
to vote your shares. In these cases, you may vote by Internet or mail, as applicable. You may vote shares held through your broker in
person at the Annual Meeting only if you obtain a valid proxy from your broker giving you the legal right to vote the shares at the Annual
Meeting.
Is
my vote confidential?
Yes.
Proxy cards, ballots and voting tabulations that identify stockholders are kept confidential except in certain circumstances where it
is important to protect the interests of Lipocine and its stockholders.
What
happens if I do not vote my shares?
If
you are a stockholder of record and you do not vote by proxy card, by telephone or the Internet, or in person at the Annual Meeting,
your shares will not be voted at the Annual Meeting.
If
you hold shares of our common stock in street name and you do not direct your broker or nominee how to vote your shares, your broker
or nominee may vote your shares only on those proposals for which it has discretion to vote. Under the rules of the New York Stock Exchange,
your broker or nominee does not have discretion to vote your shares on non-routine matters such as Proposals 1, 3, 4, and 5. We believe
that Proposal 2 is a routine matter on which brokers and nominees can vote on behalf of their clients if clients do not furnish voting
instructions.
Can
I change my vote after I vote or return my proxy card?
Yes.
Even after you have voted or submitted your proxy card, you may change your vote at any time before the proxy is exercised by filing
a notice of revocation with the Secretary of Lipocine. You may also change your vote at any time before the proxy is exercised by either
casting a new vote by phone or over the Internet, or sending a duly executed proxy card bearing a later date. The powers of the proxy
holders will be suspended if you attend the Annual Meeting in person and request to recast your vote. Attendance at the Annual Meeting
will not, by itself, revoke a previously granted proxy. For information regarding how to vote in person, see
How do I vote?
above.
What
vote is required to approve each proposal?
Proposal
No. 1
, the election of six directors to our Board, will require approval of a plurality of the shares present in person or represented
by proxy at the Annual Meeting and entitled to vote, meaning that the nominees receiving the highest numbers of for votes
of the shares entitled to be voted for them, up to the number of directors to be elected by such shares, will be elected, provided a
quorum is present in person or by proxy. As a result, the six director nominees receiving the most for votes at the Annual
Meeting will be elected. The proxy card enables a stockholder to vote FOR or WITHHOLD from voting as to each
person nominated by the Board.
Proposal
Nos. 2, 3, 4, and 5
will be decided by the affirmative vote of the majority of shares of common stock that are present or represented
by proxy and entitled to vote at the Annual Meeting.
A
stockholder may vote FOR, AGAINST or ABSTAIN on Proposal Nos. 2, 3, 4, and 5.
4
What
is a broker non-vote?
A
broker non-vote occurs when a broker does not vote on a particular proposal with respect to shares of common stock held in a fiduciary
capacity (typically referred to as being held in street name) because the broker has not received voting instructions from
the beneficial owner. Under the rules that govern brokers who are voting with respect to shares held in street name, brokers have the
discretion to vote such shares on routine matters, but not on non-routine matters. Routine matters include the ratification of our auditors.
Non-routine matters include matters such as the election of directors and the approval of, and amendments to stock plans. Therefore,
if you do not give your broker or nominee specific instructions, your shares will not be voted on non-routine matters and may not be
voted on routine matters. However, shares represented by such broker non-votes will be counted in determining whether there
is a quorum present at the Annual Meeting for the purpose of transacting business.
Who
can help answer my other questions?
If
you have more questions about the Annual Meeting or require assistance in submitting your proxy or voting your shares, please contact
Krista Fogarty, our Principal Accounting Officer, at 1-801-534-6951 or by email at kf@lipocine.com. If your broker, dealer, commercial
bank, trust company or other nominee holds your shares, you should also call your broker, dealer, commercial bank, trust company or other
nominee for additional information.
VOTING
AND RELATED MATTERS
Voting
Procedures
As
a stockholder of Lipocine, you have a right to vote on certain business matters affecting us. The proposals that will be presented at
the Annual Meeting and upon which you are being asked to vote are discussed below in the Proposals section. Each share
of Lipocine common stock you owned as of the Record Date entitles you to one vote on each proposal presented at the Annual Meeting.
Methods
of Voting
You
may vote over the Internet, by mail or in person at the Annual Meeting. Please be aware that if you vote over the Internet, you may incur
costs such as Internet access charges for which you will be responsible.
Voting
by Telephone or over the Internet.
Lipocine has established telephone and Internet voting procedures for registered shareholders.
These procedures are designed to authenticate your identity, to allow you to give your voting instructions and to confirm that those
instructions have been properly recorded.
You
can vote by calling the toll-free telephone number on your proxy card. Please have your proxy card handy when you call. Easy-to-follow
voice prompts will allow you to vote your shares and confirm that your instructions have been properly recorded.
You
may also vote your shares over the Internet by following the Internet voting instructions printed on your proxy card. Please have your
notice, proxy card or electronic notification handy when you go to the website. As with telephone voting, you can confirm that your instructions
have been properly recorded.
Telephone
and Internet voting facilities for registered stockholders will be available until 11:59 p.m. Eastern Time on June 4, 2024. If you vote
by telephone or via the Internet, you do not need to return a proxy card.
If
you hold shares of common stock in street name, the availability of telephone and Internet voting will depend on the voting processes
of your broker, bank or other holder of record. We, therefore, recommend that you follow the voting instructions in the materials you
receive.
Voting
by Mail.
You may vote by mail by completing, signing, and dating your proxy card and returning it to us on or prior to June 4, 2024
(proxy cards received after June 4, 2024 (i.e., on or after the Annual Meeting date) will not be counted). Please promptly mail your
proxy card to ensure that it is received prior to the deadline.
5
Voting
in Person at the Meeting.
If you attend the Annual Meeting and plan to vote in person, we will provide you with a ballot at the Annual
Meeting. If your shares are registered directly in your name, you are considered the stockholder of record and you have the right to
vote in person at the Annual Meeting. If your shares are held in the name of your broker or other nominee, you are considered the beneficial
owner of shares held in street name. As a beneficial owner, if you wish to vote at the Annual Meeting, you will need to bring to the
Annual Meeting a legal proxy from your broker or other nominee authorizing you to vote those shares.
Revoking
Your Proxy
You
may revoke your proxy at any time before it is voted at the Annual Meeting. To do this, you must:
●
enter
a new vote over the Internet or by telephone, or by signing and returning a replacement proxy card;
●
provide
written notice of the revocation to our Principal Accounting Officer at our principal executive office,
675
Arapeen Drive, Suite 202, Salt Lake City, Utah 84108
; or
●
attend
the Annual Meeting and vote in person.
Quorum
and Voting Requirements
Stockholders
of record at the close of business on the Record Date, are entitled to receive notice and vote at the meeting. On the Record Date, there
were 5,315,830 issued and outstanding shares of our common stock. Each holder of common stock voting at the meeting, either in person
or by proxy, may cast one vote per share of common stock held on the Record Date on all matters to be voted on at the meeting. Stockholders
may not cumulate votes in the election of directors.
The
presence, in person or by proxy duly authorized, of the holders of one-third of the outstanding shares of common stock entitled to vote
as of the Record Date constitutes a quorum for the transaction of business at the meeting. Assuming that a quorum is present:
(1)
For
Proposal No. 1 a plurality of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on
the election of directors will be required to elect Board nominees;
(2)
Proposal
Nos. 2, 3, 4, and 5 require the affirmative vote of a majority of the shares of common stock that are present or represented by proxy
and entitled to vote at the Annual Meeting. A stockholder may vote FOR, AGAINST or ABSTAIN
on Proposal Nos. 2, 3, 4, and 5.
Votes
cast by proxy or in person at the meeting will be tabulated by the election inspectors appointed for the meeting who will determine whether
a quorum is present. The election inspectors will treat abstentions and broker non-votes (i.e., shares held by a broker or nominee that
are represented at the Annual Meeting, but with respect to which such broker or nominee is not instructed to vote on a particular proposal
and does not have discretionary voting power) as shares that are present for purposes of determining the presence of a quorum. With regard
to Proposal 1, broker non-votes and votes marked withheld will not be counted towards the tabulations of votes cast on
such proposal presented to the stockholders, will not have the effect of negative votes and will not affect the outcome of the vote.
With regard to Proposals 2, 3, 4 and 5, abstentions will be counted towards the tabulations of votes cast on such proposal presented
to the stockholders and will have the same effect as negative votes. Because we believe that Proposals 2 and 4 are routine matters, we
do not expect any broker non-votes with respect to Proposals 2 and 4. For Proposal 3, broker non-votes will not be counted for purposes
of determining whether such proposal has been approved and will not have the effect of negative votes.
If
your shares are held by a bank or broker in street name, it is important that you cast your vote if you want it to count in the election
of directors and other non-routine matters as determined by the New York Stock Exchange. Voting rules may prevent your bank or broker
from voting your uninstructed shares on a discretionary basis in the election of directors and other non-routine matters. Accordingly,
if your shares are held by a bank or broker in street name and you do not instruct your bank or broker how to vote in the election of
directors or any other non-routine matters, no votes will be cast on your behalf.
6
Voting
of Proxies
When
a vote is properly cast via proxy card, the shares it represents will be voted at the meeting as directed. If no specification is indicated,
the shares will be voted:
(1)
FOR
the election of each Board nominee set forth in this Proxy Statement;
(2)
FOR
the ratification of the Audit Committees appointment of Tanner LLC as our independent registered accounting firm for the year
ending December 31, 2024;
(3)
FOR
the approval, on an advisory basis, of a non-binding resolution approving the compensation of the Companys named executive
officers, as described in the Proxy Statement under Executive Compensation;
(4)
ONE YEAR (annual Vote)
on
the frequency of future advisory votes to approve the compensation of our named executive officers;
(5)
FOR
the approval of the amendment and restatement of the Companys Fourth Amended and Restated 2014 Stock and Incentive Plan; and
(6)
at
the discretion of your proxy holder, on any other matter that may be properly brought before the Annual Meeting.
Voting
Results
Voting
results will be announced at the Annual Meeting and published in a Current Report on Form 8-K that will be filed with the SEC within
four business days after the Annual Meeting.
Householding
of Proxy Materials
We
are sending only one copy of these materials to certain street-name stockholders who share a single address, unless we received contrary
instructions from any stockholder at that address. This practice, known as householding, is designed to reduce our printing
and postage costs. However, if you are residing at such an address and wish to receive a separate copy of these materials in the future,
you may contact our Principal Accounting Officer at (801) 534-6951, by email at kf@lipocine.com or write to Krista Fogarty at Lipocine
Inc., 675 Arapeen Drive, Suite 202, Salt Lake City, Utah 84108. If you are receiving multiple copies of these materials, you may request
householding by contacting the Principal Accounting Officer in the same manner.
Proxy
Solicitation
We
will bear the cost of this solicitation. In addition, we may reimburse brokerage firms and other persons representing beneficial owners
of shares for reasonable expenses incurred in forwarding solicitation materials to such beneficial owners. Proxies also may be solicited
by our directors, officers, or employees, personally, by telephone, facsimile, Internet or other means, without additional compensation.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on June 5, 2024
: The Notice
of Annual Meeting of Stockholders, this Proxy Statement, and our Annual Report on Form 10-K for 2023 are available at
https://materials.proxyvote.com/53630X
.
7
PROPOSAL
NO. 1:
ELECTION
OF DIRECTORS
Overview
There
are currently six members of our Board. The terms of all of our directors are scheduled to expire at the 2024 Annual Meeting of Stockholders,
at which time the incumbents will stand for re-election. The six director nominees, if elected, will serve a one-year term until the
2025 Annual Meeting of Stockholders and until their successors are duly elected and qualified.
Nominees
The
Board has nominated the following individuals to serve on the Board of Directors.
●
Dr.
Mahesh V. Patel, Ph.D.
●
Jeffrey
A. Fink, M.B.A.
●
John
W. Higuchi, M.B.A.
●
Dr.
Jill M. Jene, Ph.D., M.B.A.
●
Dr.
Richard Dana Ono, Ph.D.
●
Dr.
Spyros Papapetropoulos, M.D., Ph.D.
Nominees
Information
with respect to the number of shares of common stock beneficially owned by each director as of March 31, 2024, appears under the heading
Security Ownership of Certain Beneficial Owners, Directors and Management. The name, age, years of service on our Board
of Directors, and principal occupation and business experience of each director nominee is set forth below.
Name
Age
Position(s)
Director
Since
Dr.
Mahesh V. Patel, Ph.D.
*
67
President,
Chief Executive Officer and Director
1997
Jeffrey
A. Fink, M.B.A.
*+
66
Director
2014
John
W. Higuchi, M.B.A.
*
56
Director
2003
Dr.
Jill M. Jene, Ph.D., M.B.A.*
+
51
Director
2022
Dr.
Richard Dana Ono, Ph.D.
*+
71
Director
2014
Dr.
Spyros Papapetropoulos, M.D., Ph.D.*
51
Lead
Independent Director and Chairman of the Board
2022
*
Nominee
for election to Board
+
Member
of the Audit Committee
Member
of the Compensation Committee
8
Business
Experience of Nominees
Mahesh
V. Patel, Ph.D.
has served as our President and Chief Executive Officer and as a member of our Board of Directors since 1997. Dr.
Patel has more than 30 years of experience in strategic planning, technology assessment/development, technical management and product
research and development in the area of drug discovery support, drug delivery and product line extensions. Prior to co-founding Lipocine
in 1997, he led drug delivery research and development at Pharmacia and Upjohn. Dr. Patel received a B.Pharm from Karnataka University
in India, a M.S. in Physical Pharmacy at the University of Cincinnati and a Ph.D. in Pharmaceutics from the University of Utah. We believe
Dr. Patels dual role as an executive officer and director gives him unique insights into the day-to-day operations of our company
and our strategic planning and clinical development.
Jeffrey
A. Fink, M.B.A.,
has served as a member of our Board of Directors since January 2014 and has over 20 years of finance and strategy
experience within the life science and healthcare industry. Mr. Fink is currently the managing director of Gambel Oaks Advisors, a strategic
and financial advisory firm dedicated to the life sciences and allied industries, where he has worked since 2010. Mr. Fink spent over
twenty years in the investment banking industry advising life science clients in the U.S. and Europe on the full range of financing and
strategic advisory assignments. He was head of Healthcare Investment Banking for Robert W. Baird Co. in Chicago until he retired
in 2007, and prior to that was a partner in the Healthcare Group at Dresdner Kleinwort Wasserstein (the successor firm to Wasserstein
Perella) and head of Mergers and Acquisitions for Prudential Vector Healthcare, a dedicated biotechnology and life sciences investment
bank. Mr. Fink received a BA in Economics, cum laude, from Kalamazoo College and holds an MBA in finance, with distinction, from the
University of Michigan. We believe that Mr. Finks knowledge of accounting and finance and his extensive experience in the life
science industry greatly benefits the Board.
John
W. Higuchi
,
M.B.A.
has served as a member of our Board of Directors since 2003. Mr. Higuchi served as Chief Executive Officer
of Aciont Inc., an ocular therapeutics company in Utah from 2003 to 2022. Mr. Higuchi also is a co-founder and serves on the Board of
Directors on Spriaso, LLC, a specialty pharmaceutical company in Utah. From 1997 to 2003, Mr. Higuchi served as our Vice President of
Business Development and Corporate Treasurer. Mr. Higuchi received a B.S. in Chemistry from Hope College and an M.B.A. and Master of
Science in Information Systems from The George Washington University. We believe that Mr. Higuchis business development and management
experience in the therapeutics industry, together with his significant knowledge of our Company obtained while serving as a director
of our Company, greatly benefits our Board of Directors.
Dr.
Richard Dana Ono, Ph.D.
has served as a director of the Company since January 2014 and has over 35 years of experience managing public
and private life science companies as well as venture capital. Since 2013, he has been an executive-in-residence to several universities
in the United States advising their licensing offices in spin-outs and new company formation from promising technologies. Throughout
his career, he has been engaged in strategic planning, product management, technology acquisition, and commercial development of life
science start-ups and has been involved in a number of pioneering milestones in biotechnology. Dr. Ono has founded several biotech companies
in the U.S. Dr. Ono is a founding director of the Massachusetts Biotechnology Council, Inc. (MassBio) and served on the Board of Trustees
of the Marine Biological Laboratory in Woods Hole, Massachusetts. He is a Fellow of the Linnean Society of London and a National Member
of the Explorers Club. Dr. Ono received his AB in Earth Planetary Sciences from The Johns Hopkins University and his AM and Ph.D
in Biology from Harvard University, where he also completed a program in business administration. We believe that Dr. Onos extensive
experience with life science companies at each phase of development greatly benefits the Board of Directors.
Dr.
Jill Jene, Ph.D., M.B.A.
, has served as a director of the Company since April 2022 and brings more than 20 years of biopharmaceutical
strategy, leadership and deal making experience to the Companys Board of Directors. Dr. Jene has amassed a deal sheet of over
$6 billion of closed transactions and she is currently the Founder and Principal of Jene Advisors, a biopharmaceutical advisory firm,
a position she has held since November 2021. Dr. Jene was the Vice President and Head of Corporate Development, Strategy, Portfolio Planning
and Alliance Management at Adamas from August 2020, until the company was sold to Supernus in November of 2021. Before joining Adamas,
Dr. Jene was Vice President of Business Development for PDL from May 2018 to August 2020, a publicly traded biotechnology company where
she was responsible for executing deal-making to maximize value for shareholders. Before PDL, Dr. Jene led Business Development at twoXAR
from May 2017 to May 2018, where she led deal-making, resulting in closing 6 new partnerships and securing Series A funding from Softbank
and A16z. Prior to twoXAR, Dr. Jene was at Depomed (now Assertio) from April 2006 to May 2017, where she led over 36 transactions including
licensing and MA deals including acquiring 4 commercial franchises. Earlier in her career, she held positions of increasing responsibility
at Baxter International, the 3M Company (Pharmaceutical Division now part of Valeant) and Cell Genesys (acquired by Biosante). Dr. Jene
earned a BS from Bradley University, a MS and PhD in Chemistry from Northwestern University, and an MBA in strategic management from
DePaul University. We believe that Dr. Jenes extensive experience in biopharmaceutical business greatly benefits our Board of
Directors.
9
Dr.
Spyros Papapetropoulos, M.D., Ph.D
. has served as a director of the Company since April 2022, and Chairman of the Board of Directors
and Lead Independent Director since November 2022. Dr. Papapetropoulos is an experienced biopharmaceutical executive, recognized neuroscientist,
neurodegenerative disease clinician and change agent. Since January 2023, Dr. Papapetropolous has served as President, Chief Executive
Officer and as a Board Director of Bionomics Inc (NASDAQ: BNOX). Prior to Bionomics, he served as Chief Medical Officer at Vigil, a position
he has held since September 2020, where he oversaw all the clinical development and medical functions. Prior to Vigil, Dr. Papapetropoulos
served as SVP, Head of Development (CDO) at Acadia Pharmaceuticals Inc. from November 2019 to September 2020, CEO at SwanBio Therapeutics
from March 2019 to October 2020, and Head of Research Development and Chief Medical Officer at Cavion from June 2017 to March 2019.
Before Cavion, he held senior/executive positions at Biogen Inc., Allergan plc, Pfizer Inc., and Teva Pharmaceuticals Inc. Dr. Papapetropoulos
has overseen a broad spectrum of biopharmaceutical development programs including small molecules, biologics, and gene therapy leading
to successful regulatory filings and new product launches worldwide. He holds appointments as Consultant with Massachusetts General Hospital
and has been involved in research that led to the characterization of genetic forms of Parkinsons disease and development of methodologies
relating to the quantification of neuromotor function in clinical research settings. Dr. Papapetropoulos has published more than 170
peer reviewed articles and authored several book chapters and patents. Dr. Papapetropoulos received his M.D. and Ph.D. in Greece from
the University of Patras, School of Medicine. We believe that Dr. Papapetropoulos extensive experience with clinical research
and development greatly benefits our Board of Directors.
There
are no family relationships between any of our director nominees or executive officers.
Vote
Required
A
plurality of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors will
be required to elect Board nominees. The six nominees receiving the highest number of affirmative votes cast at the Annual Meeting will
be elected as our directors. Proxies cannot be voted for a greater number of persons than the number of nominees named.
Recommendation
The
Board recommends that stockholders vote
FOR
the election of each of the above-listed nominees.
Unless
marked otherwise, proxies received will be voted FOR the election of each of these director nominees.
10
CORPORATE
GOVERNANCE
BOARD
OF DIRECTORS
Overview
Our
Amended and Restated Bylaws (the Bylaws) provide that the size of our Board is to be determined by resolution of the Board.
Our Board has currently fixed the number of directors at six. Our Board currently consists of six members.
Our
common stock is listed on The NASDAQ Capital Market and we comply with The NASDAQ Capital Markets listing standards on determining
the independence of directors. Under these standards, an independent director means a person other than an executive officer or one of
our employees or any other individual having a relationship which, in the opinion of the Board of Directors, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a director. In evaluating the independence of Mr. John W. Higuchi,
we considered the transactions described under Certain Relationships and Related Transactions Spriaso LLC Assignment and
Services Agreements.
The
Board has nominated Dr. Mahesh V. Patel, Mr. Jeffrey A. Fink, Dr. Richard Dana Ono, Mr. John W. Higuchi. Dr. Jill Jene, and Dr. Spyros
Papapetropoulos for election at the Annual Meeting. Mr. Fink, Dr. Ono, Dr. Jene, and Dr. Papapetropoulos are serving as independent directors.
The nominees have agreed to serve if elected, and management has no reason to believe that the nominees will be unavailable for service.
If any nominee is unable or declines to serve as a director at the time of the Annual Meeting or any adjournment or postponement thereof,
the proxies will be voted for such other nominees as may be designated by the present Board.
We
are subject to a number of technological, regulatory, product, legal and other types of risks. The Board and its constituent committees
are responsible for overseeing these risks, and we employ a number of procedures to help them carry out that duty. For example, Board
members regularly consult with executive management about pending issues and expected challenges, and at each Board meeting directors
receive updates from, and have an opportunity to interview and ask questions of, key personnel and management. Furthermore, because our
Chief Executive Officer serves as a member of our Board, we believe that the Board has a direct channel and better access to insights
into our performance, business and challenges.
Board
Leadership Structure
The
Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board as the Board
believes it is in the best interests of the Company to make that determination based upon the position and direction of the Company and
the membership of the Board.
The
Board currently believes that it is in the best interests of the Company and its stockholders to have a person other than our Chief Executive
Officer serve as Chairman of the Board. Our Board believes that separating these roles at this time provides the appropriate balance
between strategy development, flow of information between management and the Board, and oversight of management. We believe this structure
currently provides guidance for our Board, while also positioning our Chief Executive Officer as the leader of the Company in the eyes
of our customers, employees and other stakeholders. The Board has the discretion to modify this approach as circumstances change.
The
Board has also instituted the Lead Independent Director position to provide an additional measure of balance, ensure the Boards
independence and enhance its ability to fulfill its management oversight responsibilities. The Chairman and Lead Independent Director:
●
presides
over all meetings of the directors, including executive sessions of the independent directors;
●
frequently
consults with the CEO about strategic policies;
●
provides
the CEO with input regarding Board meetings;
●
serves
as a liaison between the CEO and the independent directors; and
11
●
otherwise
assumes such responsibilities as may be assigned to him by the independent directors.
No
single leadership model is right for all companies at all times. The Board recognizes that depending on the circumstances, other leadership
models, such as a separate independent chairman of the Board, might be appropriate. Accordingly, the Board periodically reviews its leadership
structure.
Board
Role in Risk Oversight
Our
Board of Directors is responsible for overseeing the Companys management of risk. The Board strives to effectively oversee the
Companys enterprise-wide risk management in a way that balances managing risks while enhancing the long-term value of the Company
for the benefit of the stockholders. The Board of Directors understands that its focus on effective risk oversight is critical to setting
the Companys tone and culture towards effective risk management. To administer its oversight function, the Board seeks to understand
the Companys risk philosophy by having discussions with management to establish a mutual understanding of the Companys
overall appetite for risk. Our Board of Directors maintains an active dialogue with management about existing risk management processes
and how management identifies, assesses, and manages the Companys most significant risk exposures. Our Board expects frequent
updates from management about the Companys most significant risks to enable it to evaluate whether management is responding appropriately.
Our
Board relies on each of its committees to help oversee the risk management responsibilities relating to the functions performed by such
committees. Our Audit Committee periodically discusses with management the Companys major financial risk exposures and the steps
management has taken to monitor and control such exposures, including the Companys risk assessment and risk management policies.
Our Compensation Committee helps the Board to identify the Companys exposure to any risks potentially created by our compensation
programs and practices. Each of these committees is required to make regular reports of its actions and any recommendations to the Board,
including recommendations to assist the Board with its overall risk oversight function.
Board
Diversity Matrix
The
Company is committed to diversity and inclusion, and believes it is important that the Board is composed of individuals representing
the diversity of our communities. The Company seeks nominees with a broad diversity of experience, professions, skills and backgrounds.
The Board Diversity Matrix set forth below reports self-identified diversity statistics for the Board, as constituted prior to the Annual
Meeting, in the format required by Nasdaqs rules.
Board
Diversity Matrix (as of March 31, 2024)
Board
Diversity Matrix (as of March 31, 2024)
6
Male
Female
Directors
5
1
Number
of Directors who indentify in any of the categories below
African
American or Black
-
-
Alaskan
Native or Native American
-
-
Asian
3
-
Hispanic
or Latinx
-
-
Native
Hawaiian or Pacific Islander
-
-
White
2
1
Two
or more races or ethnicities
-
-
LGBTQ+
-
Did
not Disclose Demographic Background
-
12
Committees
of the Board of Directors
The
Board has established an Audit Committee and a Compensation Committee. Each committee operates pursuant to a written charter that may
be viewed on our website at www.lipocine.com. The inclusion of our website address in this Proxy Statement does not include or incorporate
by reference the information on our website into this Proxy Statement. The Board does not have a Nominating Committee or other committee
of the Board that performs similar functions.
Audit
Committee.
Our Audit Committee oversees our accounting and financial reporting processes and is responsible for (i) retaining, evaluating
and, if appropriate, recommending the termination of our independent registered public accounting firm, (ii) approving the services performed
by our independent registered public accounting firm and (iii) reviewing and evaluating our accounting principles, financial reporting
practices, and system of internal accounting controls. The Audit Committee is also responsible for maintaining communication between
the Board and our independent registered public accounting firm, and has established procedures for the receipt, retention and treatment
of complaints regarding accounting, internal accounting controls or auditing matters, and for the confidential, anonymous submission
by our employees of concerns regarding questionable accounting or auditing matters. In addition, all related person transactions are
reviewed and approved by the Audit Committee.
Our
Audit Committee currently consists of Mr. Fink, Dr. Ono, and Dr. Jene with Mr. Fink serving as the Audit Committee Chairman. The Board
has determined that all members of our Audit Committee are independent under the rules of the SEC, The NASDAQ Stock Market Rules and
the standards adopted by our Board and that Mr. Fink qualifies as an audit committee financial expert, as defined by the
rules of the SEC. During the fiscal year ended December 31, 2023, the Audit Committee held four meetings.
Compensation
Committee.
Our Compensation Committee assists our Board in determining the compensation of our executive officers and directors.
The Compensation Committee is responsible for approving the compensation package of each executive officer and recommending each executive
officers compensation to the Board. The Compensation Committee currently administers our Fourth Amended and Restated 2014 Stock
and Incentive Plan. The Compensation Committee may form and delegate any of its responsibilities to subcommittees when appropriate. The
Compensation Committee is entitled, at its discretion, to engage a compensation consultant to advise the Compensation Committee. Dr.
Patel makes recommendations to the Compensation Committee regarding the compensation of the other executive officers.
Our
Compensation Committee currently consists of Dr. Ono, Mr. Fink and Dr. Papapetropoulos with Dr. Ono serving as the Compensation Committee
Chairman. The Board has determined that all members of our Compensation Committee are independent under the rules of the SEC, The NASDAQ
Stock Market Rules and the standards adopted by our Board. During the fiscal year ended December 31, 2023, the Compensation Committee
held multiple formal discussions related to compensation.
Nominating
Committee Functions
.
Given the relatively small size of our Board of Directors and the desire to involve the entire Board of
Directors in nominating decisions, we have elected not to have a separate Nominating Committee. Since we do not have a Nominating Committee,
our independent directors, who currently constitute a majority of the Board of Directors, determine the director nominees and recommend
the director nominees to the Board of Directors, after which all of the members of the Board of Directors participate in the consideration
of director nominees. Our Board of Directors may employ a variety of methods for identifying and evaluating director nominees. If vacancies
are anticipated or arise, our Board of Directors considers various potential candidates who may come to our attention through current
Board members, professional search firms, stockholders or other persons. These candidates may be evaluated by our Board of Directors
at any time during the year.
In
evaluating a director candidate, our Board of Directors will review his or her qualifications including capability, availability to serve,
conflicts of interest, general understanding of business, understanding of the Companys business and technology, educational and
professional background, personal accomplishments and other relevant factors. Our Board of Directors has not established any specific
qualification standards for director nominees, and we do not have a formal diversity policy relating to the identification and evaluation
of nominees for director, although from time to time the Board of Directors may identify certain skills or attributes as being particularly
desirable to help meet specific needs that have arisen. Our Board of Directors may also interview prospective nominees in person or by
telephone. After completing this evaluation, the Board of Directors will determine the nominees.
The
Board has not adopted a formal process for considering director candidates who may be recommended by stockholders. However, our policy
is to give due consideration to any and all such candidates. A stockholder may submit a recommendation for director candidates to us
at our corporate offices, to the attention of Krista Fogarty.
13
Board
Meetings and Attendance at Annual Meetings
The
Board held a total of three meetings during 2023. Each incumbent director attended more than 75% of the aggregate of the total number
of meetings of the Board held during 2023 and the total number of meetings of all committees of the Board on which that director served
during the periods of such service. Although we do not have a formal policy regarding attendance by directors at our Annual Meeting,
we encourage directors to attend.
Codes
of Ethics and Business Conduct
We
have adopted a corporate Code of Ethics and Business Conduct, which may be viewed on our website at www.lipocine.com. In addition, a
copy of the Code of Ethics and Business Conduct will be provided by us without charge upon request. The Code of Ethics and Business Conduct
applies to all our officers, directors and employees, including our principal executive officer, principal financial officer,
principal accounting officer and controller, or persons performing similar functions. If we effect an amendment to, or waiver
from, a provision of our Code of Ethics and Business Conduct, we intend to satisfy our disclosure requirements by posting a description
of such amendment or waiver on the website above. The inclusion of our website address in this Proxy Statement does not include or incorporate
by reference the information on our website into this Proxy Statement.
Stockholder
Communications with Directors
Stockholders
wishing to communicate with the Board or with a particular member or committee of the Board should address communications to the Board,
or to an individual member or committee as follows: c/o Lipocine Inc., Attention: Corporate Secretary, Lipocine Inc., 675 Arapeen Drive,
Suite 202, Salt Lake City, Utah 84108. All communications will be relayed to the addressee. From time to time, the Board may change the
process through which stockholders communicate with the Board or its members or committees. There were no changes in this process in
2023. Please refer to our website at www.lipocine.com for any future changes in this process. The Board or the particular director or
committee of the Board to which a communication is addressed will, if deemed appropriate, promptly refer the matter either to management
or to the full Board depending on the nature of the communication. The inclusion of our website address in this Proxy Statement does
not include or incorporate by reference the information on our website into this Proxy Statement.
DIRECTOR
COMPENSATION
The
following table provides information regarding compensation of non-employee directors who served during 2023. In 2023, each non-employee
director received an annual retainer of $55,000; members of the Audit Committee received an additional $7,500 for such service and members
of the Compensation Committee received an additional $7,500 for such service. These 2023 amounts which exceeded 2022 compensation were
pro-rated after the 2023 annual meeting was held. Also in 2023, the Lead Director received $30,000, the Chair of the Audit Committee
received $16,500, the Chair of the Compensation Committee received $12,500, and Mr. Higuchi received an additional $6,000 for his services
advising the Board of Directors and Compensation Committee in connection with their evaluation of the Companys compensation policies
and practices. In addition, we reimburse our directors for reasonable travel expenses incurred in attending the meetings of the Board
of Directors. On May 10, 2023, directors received a stock option award of 1,764 shares of common stock.
Director
Compensation for 2023
Name
Fees
Earned or Paid in Cash ($)
Stock
Awards
($)
Option
Awards
($)(6)
Other
Compensation ($)
Total
($)
Jeffrey A. Fink (1)
73,375
-
6,282
-
79,657
John W. Higuchi (2)
56,000
-
6,282
-
62,282
Jill Jene (3)
56,875
-
6,282
-
63,157
R. Dana Ono (4)
68,750
-
6,282
-
75,032
Spyros Papapetropoulos (5)
85,625
-
6,282
-
91,907
(1)
As
of December 31, 2023, Mr. Fink had 9,762 option awards outstanding.
(2)
As
of December 31, 2023, Mr. Higuchi had 9,174 option awards outstanding.
(3)
As
of December 31, 2023, Dr. Jene had 3,646 option awards outstanding.
(4)
As
of December 31, 2023, Dr. Ono had 9,762 option awards outstanding.
(5)
As
of December 31, 2023, Dr. Papapetropoulos had 3,646 option awards outstanding.
(6)
The
amounts in this column do not reflect compensation actually received by our non-employee
directors nor do they reflect the actual value that will be recognized by the non-employee
directors. Instead, the amounts reflect the aggregate grant date fair value computed in accordance
with Accounting Standards Codification (ASC) 718 of awards of stock options
made to non-employee directors for the fiscal year ended December 31, 2023 but excludes an
estimate for forfeitures. The fair value of each option award is estimated on the date of
grant using the Black-Scholes option-pricing model. Additional information about the assumptions
used in the calculation of these amounts is included in footnote 2 to our audited financial
statements for the fiscal year ended December 31, 2023 included in our Annual Report on Form
10-K filed with the SEC on March 7, 2024.
For
the 2024 fiscal year, the Board of Directors has determined that each non-employee director will receive an annual retainer of $55,000,
plus an additional $7,500 for members of the Audit Committee and Compensation Committee. Chairs of the Audit Committee and Compensation
Committee will also receive an additional $16,500 and $12,500, respectively, and the Lead Independent Director will receive an additional
$30,000. In addition to the cash retainers, the Board of Directors also approved a director stock option award of 1,764 shares of common
stock to each non-employee director, which the Company expects to grant following the Annual Meeting.
14
PROPOSAL
NO. 2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Overview
The
Audit Committee has engaged the registered public accounting firm of Tanner LLC (Tanner) as our independent registered
public accounting firm to audit our financial statements for the year ending December 31, 2024. Tanner began auditing our financial statements
in the year ended December 31, 2018. Stockholder ratification of such selection is not required by our Bylaws or other applicable legal
requirement. However, our Board is submitting the selection of Tanner to stockholders for ratification as a matter of good corporate
practice. In the event that stockholders fail to ratify the selection, our Audit Committee will reconsider whether or not to retain that
firm. Even if the selection is ratified, our Audit Committee in its discretion may direct the appointment of a different independent
registered public accounting firm at any time during the year if our Audit Committee believes that such a change would be in our and
our stockholders best interests.
PRINCIPAL
ACCOUNTANTS
Principal
Accountant Fees and Services
The
following table sets forth the aggregate fees billed to the Company by Tanner for the fiscal years ended December 31, 2023 and 2022:
2023
2022
Audit fees
$
197,731
$
191,031
Audit-related fees
-
-
Tax fees
-
-
All other fees
-
-
Total audit and tax
fees
$
197,731
$
191,031
Audit
fees
consist of Tanners fees for services related to their audits of our annual financial statements, their review of financial
statements included in our quarterly reports on Form 10-Q, their review of SEC filed registration statements, and fees for services that
are normally incurred in connection with statutory and regulatory filings or engagements, such as the issuance of consents and comfort
letters.
Audit-related
fees
consist of fees for assurance related services by Tanner that are reasonably related to the performance of the audit or review
of our consolidated financial statements but are not considered audit fees. We did not incur any fees under this category
in 2023 or 2022.
Tax
fees
consist of advisory services consisting primarily of tax advice rendered by Tanner. We did not incur any fees under this category
in 2023 or 2022.
All
other fees
consist of fees for professional services rendered by our independent registered public accounting firm for permissible
non-audit services, if any. We did not incur any fees under this category in 2023 or 2022.
Audit
Committee Pre-Approval Policies and Procedures
The
Audit Committee charter provides that the Audit Committee will pre-approve all audit services and non-audit services to be provided by
our independent auditors before the accountant is engaged to render these services. The Audit Committee may consult with management in
the decision-making process but may not delegate this authority to management. The Audit Committee may delegate its authority to pre-approve
services to one or more committee members, provided that the designees present the pre-approvals to the full committee at the next committee
meeting. In 2023, all audit services performed by our independent accountants were pre-approved by our Audit Committee to assure that
such services did not impair the auditors independence from us.
15
Determination
of Independence
There
were no fees billed by Tanner for non-audit services.
Attendance
at Annual Meeting
Representatives
from Tanner are expected to be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so,
and are expected to be available to respond to appropriate questions.
Vote
Required
The
proposal to ratify the appointment of Tanner as our independent registered public accounting firm to audit our financial statements for
the year ending December 31, 2024, will be approved if a majority of the shares of common stock outstanding as of the Record Date that
are present or represented by proxy and entitled to vote at the Annual Meeting vote in favor of the proposal. Abstentions will have the
same effect as negative votes. Because Proposal 2 is a routine matter, we do not expect any broker non-votes with respect to Proposal
2.
Recommendation
The
Board recommends that stockholders vote
FOR
the proposal to ratify the appointment of Tanner as our independent
registered public accounting firm to audit our financial statements for the year ending December 31, 2024.
Unless
marked otherwise, proxies received will be voted FOR Proposal No. 2.
REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The
Audit Committee has reviewed and discussed our audited financial statements with our management and has discussed with Tanner the matters
required to be discussed by the requirements of the Public Company Accounting Oversight Board
.
The
Audit Committee has received the written disclosures and the letter from Tanner required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent registered public accounting firms communications with the Audit Committee
concerning independence and has discussed with Tanner its independence from us.
Based
on its review and the discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial
statements for our fiscal year ended December 31, 2023, be included in our Annual Report on Form 10-K for our fiscal year ended December
31, 2023, which was filed on March 7, 2024.
Members
of the Audit Committee
Jeffrey
A. Fink
Dr.
Richard Dana Ono
Dr.
Jill Jene
16
PROPOSAL
NO. 3
ADVISORY
VOTE ON EXECUTIVE COMPENSATION (SAY-ON-PAY)
Background
The
Dodd-Frank Wall Street Reform and Consumer Protection Act requires that stockholders have the opportunity to cast an advisory (non-binding)
vote on executive compensation (a so-called say-on-pay vote), as well as an advisory vote with respect to whether future
say-on-pay votes will be held every one, two, or three years (a so-called say-on-frequency vote).
Our
executive compensation programs are designed to attract, motivate and retain our named executive officers (NEOs), who are
critical to our success. Under these programs, our NEOs are rewarded for the achievement of both specific financial and strategic goals,
which are expected to result in increased stockholder value. Please read the tables and narrative disclosure that follow for additional
details about our executive compensation programs, including information about the year ended December 31, 2023, compensation of our
NEOs.
The
Compensation Committee regularly reviews the compensation programs for our NEOs to ensure that they achieve the desired goals of aligning
our executive compensation structure with our stockholders interests and with current market practices. This includes establishing
corporate target goals and objectives based on our strategic and operating plans. In addition, from time to time, the Compensation Committee
may, including with the assistance of outside compensation consultants, analyze compensation programs and pay levels of executives at
peer companies to ensure that our compensation program is within the norm of general market practices and competitive to attract and
retain executive talent.
We
believe that our executive compensation programs have been effective at motivating the achievement of positive results, appropriately
aligning pay and performance, and enabling us to attract and retain talented executives within our industry.
Recommendation
We
request stockholder approval of our compensation of our NEOs for the year ended December 31, 2023, as disclosed in this Proxy Statement
pursuant to the SECs compensation disclosure rules (which disclosure includes the compensation tables, and the narrative disclosures
that accompany the compensation tables within the Executive Compensation section of this Proxy Statement). This vote is not intended
to address any specific item of compensation, but rather the overall compensation of our NEOs and the philosophy, policies and practices
described in this Proxy Statement.
Accordingly,
we ask that you vote FOR the following resolution at our Annual Meeting:
RESOLVED,
that the stockholders of Lipocine Inc. (the
Company
) approve, on an advisory basis, the compensation of the named
executive officers, as disclosed in the Companys Proxy Statement for the Annual Meeting of Stockholders pursuant to the compensation
disclosure rules of the Securities and Exchange Commission, including the Summary Compensation Table and the other related tables and
disclosure within the Executive Compensation section of the Proxy Statement for this meeting.
The
vote solicited for Proposal No. 3 is advisory, and therefore is not binding on the Company, our Board of Directors or our Compensation
Committee, nor will its outcome require the Company, our Board of Directors or our Compensation Committee to take any action. Moreover,
the outcome of the vote will not be construed as overruling any decision by the Company, the Board of Directors or the Compensation Committee.
However, our Compensation Committee, which is responsible for designing and administering our executive compensation programs, values
the opinions expressed by our stockholders in their vote on this Proposal and will consider the outcome of this vote when making future
compensation decisions for our NEOs.
We
currently intend to include a stockholder advisory resolution on our executive compensation program at our annual meeting of stockholders
each year.
The
Board of Directors unanimously recommends that stockholders vote
FOR
Proposal NO. 3 to approve, on an advisory basis,
the compensation of our named executive officers as disclosed in this Proxy Statement.
17
PROPOSAL
NO. 4
ADVISORY
VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION (SAY-ON-PAY FREQUENCY VOTE)
Background
Pursuant
to Section 14A of the Exchange Act, we are asking our stockholders to provide their input with regard to the frequency of future non-binding
stockholder votes on our executive compensation programs, such as the proposal contained in Proposal No. 3 of this Proxy Statement. In
particular, we are asking whether the non-binding vote on executive compensation should occur every year, every two years or every three
years.
Summary
Our
Board of Directors has determined that an annual advisory vote on executive compensation is the most appropriate alternative for Lipocine.
The Boards determination has been influenced by the fact that the compensation of our named executive officers is evaluated, adjusted
and approved on an annual basis. As part of the annual review process, the Board believes that stockholder sentiment should be a factor
that is taken into consideration by the Board and the Compensation Committee in making decisions with respect to executive compensation.
By providing an advisory vote on executive compensation on an annual basis, our stockholders will be able to provide us with direct input
on our compensation philosophy, policies and practices as disclosed in the Proxy Statement every year. Accordingly, our Board recommends
that the advisory vote on executive compensation be held every year.
You
may cast your vote by choosing the option of one year, two years or three years or abstain from voting when you vote on the resolution
set forth below.
Resolution
RESOLVED,
that the stockholders of the Company determine, on an advisory basis, that the frequency with which the stockholders of the Company wish
to have an advisory vote on the compensation of the Companys named executive officers as disclosed pursuant to the SECs
compensation disclosure rules (which disclosure includes any Compensation Discussion and Analysis, the Summary Compensation Table, and
the related tables and disclosure) is:
●
Choice
1 one year (recommended by the Board of Directors);
●
Choice
2 two years;
●
Choice
3 three years; or
●
Choice
4 abstain from voting.
Required
Vote
A
plurality of the shares of common stock present in person or represented by proxy at the Annual Meeting and entitled to vote is required
to approve, on a non-binding basis, the frequency of a non-binding vote on the compensation of our Named Executive Officers. Thus, the
choice receiving the highest number of votes will be considered the frequency recommended by stockholders.
Abstentions
and broker non-votes will not have any effect on the outcome of this proposal because neither an abstention nor a broker non-vote represents
a vote cast.
The
say-on-pay frequency vote is advisory, and therefore not binding on the Company, the Board of Directors or the Compensation
Committee. The Board may decide that it is in the best interests of our stockholders and the Company to hold future advisory resolutions
to approve named executive officer compensation more or less frequently than the option approved by our stockholders. However, the Board
of Directors and the Compensation Committee will consider the outcome of the vote in determining the frequency with which it will hold
the non-binding vote on executive compensation.
Recommendation
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE CHOICE OF ONE YEAR AS THE FREQUENCY WITH WHICH THE COMPANY
SHOULD PROVIDE ITS STOCKHOLDERS WITH THE OPPORTUNITY TO CAST A SAY-ON-PAY ADVISORY VOTE WITH RESPECT TO THIS PROPOSAL NO.
4.
18
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT
The
following table shows information regarding the beneficial ownership of our common stock as of March 31, 2024 by (a) each stockholder,
or group of affiliated stockholders, that we know owns more than 5% of our outstanding common stock; (b) each of our named executive
officers; (c) each of our directors; and (d) all of our current directors and executive officers as a group. The table is based upon
information supplied by directors, executive officers and principal stockholders, and Schedules 13D and 13G filed with the SEC.
Percentage
ownership in the table below is based on 5,315,830 shares of common stock outstanding as of March 31, 2024. Beneficial ownership is determined
in accordance with the rules of the SEC, and generally includes voting power and/or investment power with respect to the securities held.
Any securities not outstanding but which are subject to options or warrants exercisable within 60 days of March 31, 2024, are deemed
outstanding and beneficially owned for the purpose of computing the percentage of outstanding common stock beneficially owned by the
stockholder holding such options or warrants but are not deemed outstanding for the purpose of computing the percentage of common stock
beneficially owned by any other stockholder.
Unless
otherwise indicated, each of the stockholders listed below has sole voting and investment power with respect to the shares beneficially
owned. The address for each director or named executive officer is c/o Lipocine Inc., 675 Arapeen Drive, Suite 202, Salt Lake City, Utah
84108.
Name
and Address of Beneficial Owner
Shares
Beneficially Owned
Number
Percent
Directors
and Named Executive Officers
Dr.
Mahesh V. Patel, Ph.D.
(1)
217,466
4.01
%
Krista
Fogarty, MAcc
(2)
10,876
*
Nachiappan
Chidambaram, Ph.D.
(3)
32,405
*
John
W. Higuchi, M.B.A.
(4)
49,971
*
Jeffrey
A Fink, M.B.A.
(5)
9,560
*
Dr.
R. Dana Ono, Ph.D.
(6)
10,005
*
Dr.
Jill M. Jene, Ph.D., M.B.A.
(7)
3,466
*
Dr.Spyros
Papapetropoulos, M.D., Ph.D.
(8)
4,745
*
All
executive officers and directors as a group (10 persons)
338,494
6.12
%
*
Less than 1.0%.
(1)
Includes
107,418 shares held (i) by Dr. Patel and (ii) Dr. Patels spouse, in addition to 110,048 shares Dr. Patel has the right to
acquire through the exercise of options within 60 days of March 31, 2024.
(2)
Includes
736 shares held by Ms. Fogarty and 10,140 shares Ms. Fogarty has the right to acquire through the exercise of options within 60 days
of March 31, 2024.
(3)
Includes
3,950 shares held by Dr. Chidambaram and 28,455 shares Dr. Chidambaram has the right to acquire through the exercise of options within
60 days of March 31, 2024.
(4)
Includes
40,797 shares held by Mr. Higuchi and 9,174 shares Mr. Higuchi has the right to acquire through the exercise of options within 60
days of March 31, 2024.
(5)
Includes
386 shares held by Mr. Fink and 9,174 shares Mr. Fink has the right to acquire through the exercise of options within 60 days of
March 31, 2024.
(6)
Includes
831 shares held by Dr. Ono and 9,174 shares Dr. Ono has the right to acquire through the exercise of options within 60 days of March
31, 2024.
(7)
No
shares were held by Dr. Jene as of March 31, 2024, and Dr. Jene has the right to acquire 3,466 shares through the exercise of options
within 60 days of March 31, 2024.
(8)
Includes
1,279 shares held by Dr. Papapetropoulos as of March 31, 2024, and 3,466 shares Dr. Papapetropoulos has the right to acquire through
the exercise of options within 60 days of March 31, 2024.
19
EXECUTIVE
COMPENSATION
The
following table sets forth information regarding our current executive officers as of March 31, 2024:
Name
Age
Position(s)
Dr.
Mahesh V. Patel, Ph.D.
67
President
and Chief Executive Officer
Krista
Fogarty, MAcc
57
Principal
Accounting Officer and Corporate Controller
Dr.
Nachiappan Chidambaram, Ph.D.
55
Senior
Vice President, Research and Development
Executive
Officers
Mahesh
V. Patel, Ph.D.
, is our President and Chief Executive Officer. Dr. Patels biographical information can be found under Directors
above.
Krista
Fogarty, MAcc,
has served as our Principal Accounting Officer since January 2022 and our Corporate Controller since October 2018.
Ms. Fogarty previously served as Chief Financial Officer at Alternative Behavior Strategies, a provider of ABA therapy services from
2017 to 2018, and as Controller and Associate VP Business Operations at Navigen, a pharmaceutical discovery and drug development company,
from 2016 to 2017. Prior to that she served as VP Finance at Lineagen, a personal genomics and biotechnology company from 2013 to 2016.
Ms. Fogarty also previously served as Corporate Controller at NPS Pharmaceuticals, a biotechnology company. Ms. Fogarty received a B.S.
in Accounting from Utah State University and also received a MAcc from Utah State University.
Nachiappan
Chidambaram, Ph.D.
has served as our Senior Vice President, Research and Development since December 2022 and has over 20 years of
product development experience in pharma and biotech. Prior to his promotion, Dr. Chidambaram served as our Vice President, Product Development,
since July 2014. Prior to being promoted to Vice President, Product Development, Dr. Chidambaram served in various product development
leadership roles with the Company including Associate Director, Product Development, from 2007 to 2014. Prior to joining Lipocine in
2007, Dr. Chidambaram served as the Group Leader at Banner Pharmacaps from 2000 to 2007. He received his Ph.D. in Pharmaceutics from
the University of Connecticut in 2000.
Compensation
Summary
The
following table contains information with respect to the compensation for the years ended December 31, 2023, and 2022 of each individual
who acted as our principal executive officer and our two other most highly compensated executive officers or employees during the year
ended December 31, 2023. We refer to the employees identified in this table as our Named Executive Officers.
20
SUMMARY
COMPENSATION TABLE
Name and
Principal Position
Year
Salary
($)
Option
Awards ($) (1)
Non-Equity
Incentive Plan Compensation ($) (2)
All
Other Compensation ($)
Total
($)
Mahesh V. Patel
President and
Chief Executive Officer
2023
525,000
97,816
218,768
18,759
(3)
860,343
2022
494,172
284,943
88,951
15,788
(3)
883,854
Krista Fogarty
Principal Accounting Officer
and Corporate Controller
2023
248,000
-
62,005
11,066
(4)
321,071
2022
229,305
29,661
28,663
10,150
(4)
297,779
Nachiappan Chidambaram
Senior Vice President,
Research and Development
2023
298,000
-
74,506
13,200
(5)
385,706
2022
265,749
41,029
33,219
12,200
(5)
352,197
(1)
Reflects
the aggregate grant date fair value of stock option awards computed in accordance with ASC Topic 718 but excludes an estimate for
forfeitures. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model.
Additional information about the assumptions used in the calculation of these amounts is included in footnote 2 to our audited financial
statements for the fiscal year ended December 31, 2023 included in our Annual Report on Form 10-K filed with the SEC on March 7,
2024.
(2)
Non-equity
incentive plan compensation includes cash awards granted at the discretion of the Compensation Committee under our cash bonus plan
for achieving certain performance-based criteria.
(3)
Includes
$5,559 and $3,588, respectively, in life insurance premiums we paid on behalf of the executive officer in 2023 and 2022 and $13,200
and $12,200, respectively, in 401(k) plan matching contributions in 2023 and 2022.
(4)
Includes
$11,066 and $10,150, respectively, in 401(k) plan matching contributions in 2023 and 2022.
(5)
Includes
$13,200 and $12,200, respectively, in 401(k) plan matching contributions in 2023 and 2022.
(6)
Ms.
Fogarty was promoted to Principal Accounting Officer in January 2022.
21
Outstanding
Equity Awards at Fiscal Year End
The
following table presents for each named executive officer, information regarding outstanding stock options and stock awards held as of
December 31, 2023.
Name
Option grant date
Number of securities underlying unexercised options exercisable(1)
Number of securities underlying unexercised options unexercisable
Option exercise price ($)
Option expiration date
Mahesh V. Patel, Ph.D.
08/14/2014
6,183
(2)
-
143.35
08/14/2024
01/05/2016
8,235
(2)
-
219.64
01/05/2026
12/07/2016
8,235
(2)
-
61.37
12/07/2026
12/06/2017
8,823
(2)
-
59.84
12/06/2027
12/04/2018
8,823
(2)
-
24.82
12/04/2028
01/28/2020
17,647
(2)
-
7.79
01/28/2030
12/15/2020
5,882
(2)
-
23.29
02/15/2030
01/04/2021
15,726
(2)
450
24.31
01/04/2031
12/07/2021
4,902
(2)
2,450
19.04
12/07/2031
01/03/2022
10,804
(2)
6,107
18.53
01/03/2032
12/22/2022
2,205
(2)
4,412
6.98
12/22/2032
01/03/2023
-
(2)
17,647
7.03
01/03/2033
Krista Fogarty
10/22/2018
882
(2)
-
19.21
10/22/2028
12/04/2018
294
(2)
-
24.82
12/04/2028
01/28/2020
1,529
(2)
-
7.79
01/28/2030
12/15/2020
2,705
(2)
-
23.29
12/15/2030
12/07/2021
1,804
(2)
901
19.04
12/07/2031
12/22/2022
1,801
(2)
3,601
6.98
12/22/2032
Nachiappan Chidambaram
08/14/2014
1,822
(2)
-
143.35
08/14/2024
01/05/2016
1,469
(2)
-
219.64
01/05/2026
12/07/2016
1,764
(2)
-
61.37
12/07/2026
12/06/2017
1,999
(2)
-
59.84
12/06/2027
12/04/2018
1,999
(2)
-
24.82
12/04/2028
01/28/2020
3,529
(2)
-
7.79
01/28/2030
12/15/2020
6,176
(2)
-
23.29
12/15/2030
12/07/2021
4,529
(2)
2,264
19.04
12/07/2031
12/22/2022
3,370
(2)
4,102
6.98
12/22/2032
(1)
The
options have not been, and may never be, exercised, and actual gains, if any, on exercise will depend on the value of the shares
of common stock on the date of exercise.
(2)
Vesting
of the stock option is over a three-year term with cliff vesting of one-third at the end year one with the remaining two thirds vesting
at 1/24th a month over the next 24 months.
Executive
Employment Agreements and Change-in-Control Arrangements
We
have entered into employment agreements with the following executive officers: Dr. Mahesh V. Patel, Ms. Krista Fogarty and Dr. Nachiappan
Chidambaram. Below is a description of such employment agreements.
22
Dr.
Mahesh V. Patel:
The Company has entered into an Employment Agreement with Dr. Mahesh V. Patel, who has served as our President and
Chief Executive Officer since 1997. Under the terms of the Employment Agreement between the Company and Dr. Patel, dated January 7, 2014
(the Dr. Patel Agreement), Dr. Patel received an initial base salary of $370,800 per year, which has been subsequently
increased by the Board to $565,000 per year and is subject to further adjustment by the Board. Dr. Patel will be eligible to participate
in the Companys cash bonus plan. In the event Dr. Patels employment is terminated without Cause or for Good Reason, as
such terms are defined in the Dr. Patel Agreement, Dr. Patel will be entitled to receive, among other severance benefits, up to 104 weeks
of severance pay at his then-applicable base salary, full vesting of all outstanding equity awards and, in the case of outstanding options
to purchase common stock, extension of the exercise period to at least three years after such termination.
Krista
Fogarty:
The Company has entered into an Employment Agreement with Ms. Fogarty, who was appointed Principal Accounting Officer of
the Company in January 2022. Under the terms of the Employment Agreement between the Company and Ms. Fogarty, dated March 7, 2022, (the
Fogarty Agreement), Ms. Fogarty received an initial base salary of $235,000 per year, which has subsequently been increased
by the Board to $266,000 per year, and is subject to further adjustment by the Board. Ms. Fogarty is eligible to participate in the Companys
cash bonus plan. In the event Ms. Fogartys employment is terminated without Cause or for Good Reason, as such terms are defined
in the Fogarty Agreement, Ms. Fogarty will be entitled to receive, among other severance benefits, 26 weeks of severance pay at her then-applicable
base salary and six months accelerated vesting of all outstanding equity awards.
Dr.
Nachiappan Chidambaram:
The Company has entered into an Employment Agreement with Dr. Nachiappan Chidambaram, who currently serves
as the Senior Vice President of Research and Development of the Company. Under the terms of the Employment Agreement between the Company
and Dr. Chidambaram, dated November 5, 2018 (the Dr. Chidambaram Agreement), Dr. Chidambaram received an initial base salary
of $234,000 per year, which has been subsequently increased by the Board to $320,000 per year, and is subject to further adjustment by
the Board. Dr. Chidambaram is eligible to participate in the Companys cash bonus plan. In the event Dr. Chidambarams employment
is terminated without Cause or for Good Reason, as such terms are defined in the Dr. Chidambaram Agreement, Dr. Chidambaram will be entitled
to receive, among other severance benefits, 26 weeks of severance pay at his then-applicable base salary and six months accelerated vesting
of all outstanding equity awards.
Certain
Relationships and Related Transactions
Since
January 1, 2022, there has not been, nor has there been proposed, any financial transaction, arrangement or relationship or series of
similar transactions, arrangements or relationships, including those involving indebtedness not in the ordinary course of business, to
which we or our subsidiaries were or are a party, or in which we or our subsidiaries were or are a participant, in which the amount involved
exceeded or exceeds the lesser of (i) $120,000 or (ii) 1% of the average total assets of the Company at year end for the past two fiscal
years, and in which any of our directors, nominees for director, executive officers, beneficial owners of more than 5% of any class of
our voting securities or any member of the immediate family of any of the foregoing persons, had or will have a direct or indirect material
interest, other than as described above under the heading Executive Compensation and other than the transactions described
below.
Indemnification
Agreements
We
have entered into indemnification agreements with each of our executive officers and directors that require us to indemnify such persons
against any and all expenses, including judgments, fines or penalties, attorneys fees, witness fees or other professional fees
and related disbursements and other out-of-pocket costs incurred, in connection with any action, suit, arbitration, alternative dispute
resolution mechanism, investigation, inquiry or administrative hearing, whether threatened, pending or completed, to which any such person
may be made a party by reason of the fact that such person is or was a director, officer, employee or agent of our Company, provided
that such director or officer acted in good faith and in a manner that the director or officer reasonably believed to be in, or not opposed
to, our best interests. The indemnification agreements also set forth procedures that will apply in the event of a claim for indemnification
thereunder. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and officers.
Spriaso
LLC Assignment and Services Agreements
On
July 23, 2013, we entered into assignment/license and services agreements with Spriaso LLC (Spriaso), an entity that is
majority-owned by Dr. Mahesh V. Patel, Gordhan Patel, John W. Higuchi, Dr. William I. Higuchi, and their affiliates. Dr. Mahesh V. Patel
is our President and Chief Executive Officer. Mr. Higuchi is a member of our Board of Directors and Gordhan Patel and Dr. William I.
Higuchi, former Board members, were each a member of our Board of Directors at the date the license and agreements were entered into.
23
Under
the assignment agreement, we assigned and transferred to Spriaso all of our rights, title and interest in our intellectual property for
the cough and cold field. In addition, Spriaso was assigned all rights and obligations under our product development agreement with a
co-development partner. In exchange, we are entitled to receive a potential cash royalty of 20% of the net proceeds received by Spriaso,
up to a maximum of $10 million. Spriaso also granted back to us an exclusive license to such intellectual property to develop products
outside of the cough and cold field. The assignment agreement will expire upon the expiration of all of Spriasos payment obligations
thereunder and the expiration of all of the licensed patents thereunder. Spriaso has the right to terminate the assignment agreement
with 30 days written notice. We have the right to terminate the assignment agreement upon the complete liquidation or dissolution of
Spriaso, unless the assignment agreement is assigned to an affiliate or successor of Spriaso.
The
Company also agreed to continue providing up to 10% of the services of certain employees to Spriaso for a period of time. The agreement
to provide services expired in 2021; however, it may be extended upon written agreement of Spriaso and the Company. Additionally, Spriaso
filed its first New Drug Application in 2014, and as an affiliated entity of Lipocine, it used up the one-time waiver of user fees for
a small business submitting its first human drug application to U.S. Food and Drug Administration.
Securities
Authorized for Issuance Under Equity Compensation Plans
The
following table sets forth information as of December 31, 2023, relating to all of our equity compensation plans:
Plan Category
(a) Number of shares
to be issued upon
exercise of outstanding
options
(1)
(b) Weighted-average
exercise price of
outstanding
options
(2)
(c) Number of securities
remaining available
for future issuance
under equity
compensation plans (excluding securities reflected in column (a))
Equity compensation plan approved by stockholders
262,247
$
34.21
48,660
Equity compensation plans not approved by stockholders
-
-
-
TOTAL
262,247
$
34.21
48,660
(1)
The
balance consists of shares of common stock issuable upon the exercise of outstanding stock options granted under our 2011 Equity
Incentive Plan, as amended, and our 2014 Equity and Incentive Plan, as amended. Shares available for issuance under the Fourth Amended
and Restated 2014 Equity and Incentive Plan may become subject to stock options, stock appreciation rights, restricted stock, restricted
stock units, performance shares, performance units or other equity awards, with such terms and conditions, performance requirements,
restrictions, forfeiture provisions, contingencies and other limitations as determined by the Compensation Committee.
(2)
The
weighted-average exercise price does not take into account shares of common stock issuable upon vesting of outstanding restricted
stock or restricted stock units, which have no exercise price.
24
Pay
vs. Performance
In
accordance with rules adopted by the Securities and Exchange Commission (SEC) pursuant to the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010, we provide the following disclosure regarding executive Compensation Actually Paid
(CAP) and certain performance measures required for Smaller Reporting Companies. The following table provides the information
required for our NEOs for each of the fiscal years ended December 31, 2023, December 31, 2022 and 2021, along with the financial information
required for each fiscal year:
Year
Summary Compensation Table Total for CEO ($) (1)(2)
Compensation Actually Paid to CEO ($) (1)(3)
Average Summary Compensation Table Total for Non-CEO NEOs ($) (2)(4)
Average Compensation Actually Paid to Non-CEO NEOs ($) (3)(4)
Value of Initial Fixed $100 Investment Based on: Total Shareholder Return ($)
Net Income
(in millions) ($)
2023
860,343
720,109
353,389
321,204
12.07
-16.4
2022
883,854
538,776
324,988
261,595
29.25
-10.8
2021
1,099,582
930,734
527,231
421,200
72.88
-0.6
(1)
For each year shown, the CEO was Mahesh Patel.
(2)
Amounts in this column represent the Total column set forth in the Summary Compensation Table (SCT) on page
21. See the footnotes to the SCT for further detail regarding the amounts in these columns.
(3)
The dollar amounts reported in these columns represent the amounts of compensation actually paid. The Amounts are computed in accordance with Item 402(v) of Regulation S-K by deducting and adding the following amounts from the Total column of the SCT (pursuant to SEC rules, fair value at each measurement date is computed in a manner consistent with the fair value methodology used to account for share-based payments in our financial statements under GAAP).
2023
2022
2021
Mahesh Patel
Average Non-CEO NEOs
Mahesh Patel
Average Non-CEO NEOs
Mahesh Patel
Average Non-CEO NEOs
Total Compensation from Summary Compensation Table
$
860,343
353,389
$
883,854
324,988
1,099,582
527,231
Adjustments for Equity Awards
Adjustment for grant date values in the Summary Compensation Table
$
(97,816
)
$
-
$
(284,943
)
$
(35,345
)
$
(418,063
)
$
(129,395
)
Year-end fair value of unvested awards granted in the current year
$
31,328
$
-
$
106,775
$
34,544
$
291,558
$
44,686
Year-over-year difference of year-end fair values for unvested awards granted in prior years
$
(46,048
)
$
(19,160
)
$
(115,942
)
$
(42,060
)
$
(65,708
)
$
(18,806
)
Fair values at vest date for awards granted and vested in current year
$
-
$
-
$
-
$
-
$
-
$
-
Difference in fair values between prior year-end fair values and vest date fair values for awards granted in prior years
$
(27,698
)
$
(13,292
)
$
(50,968
)
$
(20,532
)
$
23,365
$
(2,516
)
Forfeitures during current year equal to prior year-end fair value
$
-
$
-
$
-
$
-
$
-
$
-
Dividends or dividend equivalents not
otherwise included in total compensation compensation
$
-
$
-
$
-
$
-
$
-
$
-
Total Adjustments for Equity Awards
$
(140,234
)
$
(32,452
)
$
(345,078
)
$
(63,393
)
$
(168,848
)
$
(106,031
)
Compensation Actually Paid
(as calculated)
$
720,109
$
320,937
$
538,776
$
261,595
$
930,734
$
421,200
(4)
Non-CEO NEOs reflect the average Summary Compensation Table total compensation and average Compensation Actually Paid for the following executives by year:
2023:
Nachiappan Chidambaram, Krista Fogarty
2022:
Nachiappan Chidambaram, Krista Fogarty
2021:
Nachiappan Chidambaram, Morgan Brown
Narrative
Disclosure: Pay Versus Performance Table
The
illustrations below provide a geographical description of CAP (as calculated in accordance with the SEC rules) and the following measures:
●
Lipocines
cumulative TSR; and
●
Lipocines
Net Income
25
CAP
and Cumulative TSR
CAP
and Net Income
26
PROPOSAL
NO. 5
AMENDMENT
AND RESTATEMENT OF OUR FOURTH AMENDED AND RESTATED 2014 STOCK AND INCENTIVE PLAN TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON
STOCK OF THE COMPANY ISSUABLE UNDER ALL AWARDS GRANTED UNDER SUCH PLAN FROM 336,582 TO 600,000
Overview
The
Board has approved an amendment and restatement of our Fourth Amended and Restated 2014 Stock and Incentive Plan (the Plan)
and is submitting this Fifth Amended and Restated 2014 Stock and Incentive Plan to the Companys stockholders for their approval.
The Board believes that the remaining number of shares of common stock of the Company authorized for issuance under the Plan is not sufficient
for future granting needs. Accordingly, the proposed amendment and restatement of the Plan increases the number of shares of common stock
of the Company authorized for issuance under all awards under the Plan from 336,582 to 600,000 shares. The Board believes that these
additional shares would result in an adequate number of shares of common stock of the Company being available for grant under the Plan.
As
of March 31, 2024, there were 286,697 shares of common stock of the Company subject to outstanding stock options awards under the Plan
and 21,762 shares of common stock of the Company subject to outstanding restricted stock units (RSUs) and 2,448
shares were available for issuance under the Plan. The outstanding options had a weighted average exercise price of $31.07.
Assuming
the maximum shares are earned by participants on outstanding awards, we expect that, as of June 30, 2024, there will be no shares available
for future grants under the existing plan. The Compensation Committee has determined that, in order to ensure that there are shares available
for issuance under our equity incentive plans to meet our needs for future grants during the coming years, a new tranche of shareholder-approved
shares is necessary to continue granting incentives and reward opportunities to eligible individuals while assisting us in retaining
a competitive edge in todays competitive business environment.
The
Company believes approval of the Plan will give us flexibility to continue to make restricted stock unit grants and other awards permitted
under the Plan over the next five to ten years in amounts determined appropriate by the Compensation Committee, which will administer
the Plan (as discussed more fully below); however, this timeline is simply an estimate used by us to determine the number of new shares
to ask our shareholders to approve and future circumstances may require us to change our anticipated equity grant practices. Such future
circumstances include the price of our common stock, award amounts and types provided by our competitors, and hiring activity during
the next several years.
Our
directors and executive officers have an interest in the amendment and restatement of the Plan because they are eligible for awards under
the Plan.
The
Board believes that the Plan is vital to promote the interests of the Company and its stockholders by aiding the Company in attracting
and retaining employees, officers, consultants, advisors and non-employee Directors capable of assuring the future success of the Company,
to offer such persons incentives to put forth maximum efforts for the success of the Companys business and to compensate such
persons through various stock-based arrangements and provide them with opportunities for stock ownership in the Company, thereby aligning
the interests of such persons with the Companys stockholders.
If
the Fifth Amended and Restated 2014 Stock and Incentive Plan is not approved by shareholders, we will continue to use the Fourth Amended
and Restated 2014 Stock and Incentive Plan in its current form as the framework for our equity incentive compensation program. However,
if the authorized shares are depleted prior to its expiration date, we would not be able to continue to offer a long-term incentive program
that employs equity awards, which could put us at a competitive disadvantage in recruiting and retaining talent, and also make it more
difficult for us to align employee interests with those of our shareholders through a program that includes stock ownership.
27
Request
for Additional Shares and Dilution
We
manage our long-term shareholder dilution, in part, by controlling the number of equity incentive awards granted annually. The Compensation
Committee carefully monitors our annual net burn rate, total dilution, and equity expense in order to maximize shareholder value by granting
what it believes are an appropriate number of equity incentive awards to attract, reward, and retain employees. Burn rate is a measure
of the speed at which companies use shares available for grant under their equity compensation plans and is an important factor for investors
concerned about shareholder dilution. The burn rate is defined as, in a given fiscal year, the number of equity shares granted subject
to time-based awards plus performance-based equity awards that were earned and vested, divided by the weighted average number of shares
outstanding. In recommending to our shareholders to increase the number of shares to be authorized under the Plan, the Compensation Committee
considered our burn rate for the past three fiscal years as shown below:
Fiscal 2023
Fiscal 2022
Fiscal 2021
Time-based equity awards granted
26,467
74,334
65,019
Performance-based awards earned and vested
-
-
-
Weighted average common shares outstanding
5,269,671
5,231,681
5,142,118
Summary
of the Plan
Certain
provisions of the Plan are summarized below. A copy of the Plan is attached to this proxy statement as
Appendix I
and is
incorporated herein by reference. The following summary of the material terms of the Plan does not purport to be a complete description
of the Plan and is qualified in its entirety by reference to the complete copy of the Plan in
Appendix I
. Because this
summary may not contain all of the information that is important to you, you should review the Proxy Statement, including
Appendix
I
, before deciding how to vote.
The
Plan provides for the grant of nonqualified stock options, incentive stock options, restricted stock (including performance shares),
restricted stock units (including performance share units), stock appreciation rights (SARs), and dividend equivalents to employees,
officers, consultants, advisors, non-employee directors and independent contractors designated by the Compensation Committee (the Committee)
of the Board of Directors. Under the current Plan, the maximum number of shares of common stock authorized to be issued, subject to adjustment
as described below, is 336,582 shares of common stock, which includes 15,994 shares that have been rolled over from our 2011 Equity Compensation
Plan, as amended. If this amendment and restatement is approved, the maximum number of shares of common stock authorized to be issued,
subject to adjustment as described below, will be increased to 600,000 shares of common stock. In addition, any shares subject to outstanding
awards under our 2011 Equity Compensation Plan that, since the initial shareholder approval of this Plan, are not purchased by the participant
or are forfeited or reacquired by the Company due to termination or cancellation of such awards shall also be permitted to be granted
under the Plan. For stock options and SARs, the aggregate number of shares with respect to which such awards are exercisable, rather
than the number of shares actually issued upon exercise, will be counted against the number of shares available for awards under the
Plan. If awards under the Plan expire or otherwise terminate without being exercised, the shares not acquired pursuant to such awards
again become available for issuance under the Plan in accordance with its terms. However, under the following circumstances, shares will
not again be available for issuance under the Plan: (i) shares unissued due to a net exercise of a stock option or any
shares tendered in payment of the exercise price of an option, (ii) any shares withheld or shares tendered to satisfy tax withholding
obligations with respect to a stock option or SAR, (iii) shares covered by a SAR that is not settled in shares upon exercise and (iv)
shares repurchased using stock option exercise proceeds.
No
participant will be eligible to receive awards for more than an aggregate of 25,000 shares of common stock during any calendar year,
subject to adjustment as described below. Directors who are not also employees of the Company may not be granted awards in the aggregate
for more than 2,000 shares per year of the common stock available for awards under the Plan, subject to adjustment under the express
terms of the Plan. The limitations on awards under this Plan listed above have been adjusted to give effect to the May 2023 reverse stock
split and rounded for convenience.
28
Administration
The
Plan will be administered by the Committee. The Board of Directors will fill vacancies on and from time to time may remove or add members
to the Committee, and the Committee will be so constituted to permit awards granted under the Plan to be exempt from Section 16(b) of
the Securities Exchange Act of 1934 (the Exchange Act) and to permit grants of awards under the plan to comply with or
any other statutory rule or regulatory requirements, unless otherwise determined by the Board of Directors.
Subject
to the express provisions of the Plan, the Committee has authority to administer and interpret the Plan, including the authority to determine
who is eligible to participate in the Plan and to whom and when awards are granted under the Plan, to grant awards, to determine the
number of shares of common stock subject to awards and the exercise or purchase price of such shares under an award, to establish and
verify the extent of satisfaction of any performance criteria applicable to awards, to prescribe and amend the terms of the agreements
evidencing awards made under the Plan, and to make other determinations deemed necessary or advisable for the administration of the Plan.
Also, subject to the requirements of Delaware General Corporation Law and any limitations under applicable stock exchange rules, the
Committee also has the power to delegate to officers the authority to grant and determine the terms and conditions of awards granted
under the Plan. These delegated officers shall not be permitted to grant awards to any person subject to Rule 16b-3 under the Exchange
Act or Code.
Eligibility
Participants
under the Plan are limited to employees, officers, non-employee directors, consultants, independent contractors or advisors providing
services to the Company, or any person to whom an offer of employment or engagement with the Company is extended. In determining to whom
awards will be granted and the type of each such award, the Committee may take into account the nature of the services rendered by the
respective participant, their present and potential contributions to the success of the Company or such other factors as the Committee,
in its discretion, deems relevant. We estimate that approximately 22 persons are currently eligible to participate in the Plan, which
includes 14 employees, 3 named executive officers and 5 non-employee directors.
General
Terms and Conditions of Awards
Nonqualified
Stock Options
The
Committee may grant nonqualified stock options under the Plan which do not meet the requirements of Section 422 of the Code and which
will be subject to the following terms and conditions. The option exercise price per share will be determined by the Committee but will
not be less than 100% of the fair market value of the common stock on the date of grant of such option. The term fair
market value means either (a) if the common stock is listed on any established stock exchange, the closing price for the common
stock on the date of grant or (b) if the common stock is not listed on any established stock exchange, the average of the closing bid
and asked prices quoted on the OTC Bulletin Board, the National Quotation Bureau, or any comparable reporting service on
the date of grant. The exercise price of an option may be paid through various means specified by the Committee, including but not limited
to cash or check, by delivering to the Company shares of common stock or by a reduction in the number of shares issuable pursuant to
such option. Except in limited circumstances, every option which has not been exercised within ten years of its date of grant will lapse
upon the expiration of the ten-year period, unless it has lapsed at an earlier date as determined by the Committee.
During
the lifetime of a participant, except as otherwise may be provided by the Committee in its discretion, options granted to that participant
under the Plan generally will be nontransferable and exercisable only by the participant. A participant will have the right to transfer
any options granted to such participant upon such participants death either by the terms of such participants will or under
the laws of descent and distribution.
Incentive
Stock Options
The
Committee may grant incentive stock options under the Plan which meet the requirements of Section 422 of the Code. Incentive stock options
may only be granted to full-time or part-time employees, including officers and directors who are employees. Under the Plan, the aggregate
fair market value, determined at the time the option is granted, of the common stock with respect to which incentive stock options are
exercisable for the first time by any participant during any calendar year (under the plan and any other incentive stock option plans
of the Company) may not exceed $100,000, or any other limit as may be prescribed by the Code from time to time. The option exercise price
per share will be determined by the Committee but will not be less than 100% of the fair market value of the common stock
on the date of grant of such option. In the case of a grant of an incentive stock option to a participant who, at the time such option
is granted, owns stock possessing more than 10% of the combined voting power of all classes of stock of the Company, the option exercise
price per share under such option will not be less than 110% of the fair market value of the common stock on the date of
grant of such option and such option will expire and no longer be exercisable no later than five years from the date of grant of such
option. In the case of a grant of a stock option to any other participant, such option will expire and no longer be exercisable no later
than ten years from the date of grant of such option.
29
SARs
The
committee may grant SARs under the Plan. Subject to the express provisions of the Plan and as discussed in this paragraph, the Committee
has discretion to determine the grant value, term, methods of exercise, dates of exercise, methods of settlement and any other terms
and conditions of any SAR. The grant value of each SAR granted under the Plan will be determined by the Committee and will be equal to
or greater than the closing market price of a share of common stock on the date of grant of the SAR, provided, however, that if the SAR
being granted is in substitution for a SAR previously granted by an entity that is acquired by or merged with the Company, the grant
value of such SAR may be lower than the closing market price of a share of common stock on the date of grant of the SAR. Every SAR which
has not been exercised within ten years of its date of grant will lapse upon the expiration of such ten-year period, unless it has lapsed
at an earlier date as determined by the Committee.
Restricted
Stock and Restricted Stock Units
The
Committee may grant restricted stock or restricted stock units under the Plan. Restricted stock and restricted stock units will be subject
to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a share of restricted
stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately
or in combination at such time or times, in such installments or otherwise as the Committee may deem appropriate. For example, awards
may, at the Committees discretion, be conditioned upon a participants completion of a specified period of service, or upon
the achievement of one or more performance goals established by the Committee, or upon any combination of service-based and performance-based
conditions. A restricted stock or restricted stock unit award that is conditioned in whole or in part upon the achievement of one or
more financial or other company-related performance goals (including goals specific to the participants individual performance,
other than performance of service alone) is generally referred to as a performance share or performance share unit award.
Any
restricted stock granted under the Plan shall be issued at the time such awards are granted and may be evidenced in such manner as the
Committee may deem appropriate. In the case of restricted stock units, no common stock shall be issued at the time such awards are granted.
Upon the lapse or waiver of restrictions and the restricted period relating to restricted stock units evidencing the right to receive
common stock, such common stock shall be issued and delivered to the holder of the restricted stock units.
Except
as otherwise provided in an award agreement or otherwise determined by the Committee, generally if a director resigns or is removed or
if the employment of an employee holding restricted stock or restricted stock units terminates during the applicable restricted period,
the restricted stock and/or restricted stock units held by such director or employee will be forfeited and reacquired by the Company.
Dividend
Equivalents
The
holder of a dividend equivalent will be entitled to receive payments (in cash, shares, other securities, other awards or other property)
equivalent to the amount of cash dividends paid by us to our stockholders, with respect to the number of shares determined by the Compensation
Committee. Dividend equivalents will be subject to other terms and conditions determined by the Committee, but the Committee may not
(i) grant dividend equivalents in connection with options or SARs and (ii) pay a dividend equivalent with respect to an award prior to
the date on which all conditions or restrictions on such award have been satisfied, waived or lapsed.
Transferability
Generally,
no award (other than fully vested and unrestricted shares) and no right under any such award shall be transferable by a participant other
than by will or by the laws of descent and distribution, and no award (other than fully vested and unrestricted shares) or right under
any such award may be pledged, alienated, attached or otherwise encumbered. If a transfer is allowed by the Compensation Committee (other
than for fully vested and unrestricted shares), the transfer will be for no value and shall comply with the Form S-8 rules. The Committee
may establish procedures to allow a participant to designate a beneficiary or beneficiaries, to exercise the rights of the participant
and receive any property distributable with respect to an award in the event of the participants death.
30
Corporate
Transactions
In
the event of any Change-in-Control Event (as defined in the Plan), reorganization, merger, consolidation, split-up, spin-off, combination,
plan of arrangement, take-over bid or tender offer, repurchase or exchange of common stock or other securities of the Company or any
other similar corporate transaction or event involving the Company, the Committee or the Board of Directors, in its sole discretion,
can provide for one or more of the following to be effective upon the consummation of the event (or immediately prior to the consummation
of the event, provided the consummation of the event subsequently occurs):
●
either
(a) terminate any award in exchange for an amount of cash and/or other property equal to the gain that would have been attained upon
the exercise of the award or the realization of the rights under the award (in the case of an option or a SAR, the amount shall be
no less than the Black-Scholes value of the Award) or (b) replace the award with other rights or property of comparable value selected
by the Committee or the Board of Directors;
●
that
the award be assumed by the successor or survivor corporation or be substituted for by similar options, rights or awards covering
the stock of the successor or survivor corporation;
●
that
the award be exercisable or payable or fully vested with respect to all common stock covered thereby; or
●
that
the award cannot vest, be exercised or become payable after a certain date in the future.
Notwithstanding
the above, if an award (or a portion thereof) is not assumed or substituted as discussed in the second bullet point above, then the portion
of the award that is not assumed or substituted shall become fully vested, exercisable and payable with respect to all covered shares.
Furthermore, in the event the Committee or the Board uses its discretion under the first bullet point above to terminate an unexercised
option or SAR held by a participant who has not terminated employment or otherwise separated from service with the Company and its affiliates,
and if the Black Scholes value of the option or SAR (determined at the time the award is terminated) exceeds the gain that would have
been realized upon exercise of the option or SAR, the Company shall pay an additional cash bonus equal to the excess of the Black Scholes
value over the gain (if any) that would have been realized upon exercise. In such event where the Black Scholes value exceeds the gain
that would have been realized upon exercise of the option or SAR, the excess shall be treated as a short-term deferral for purposes of
Section 409A, payable upon the Change-in-Control Event to participants who are then in employment or service with the Company and its
affiliates and solely in connection with the termination of the option or SAR as described in the first bullet point above, and not in
connection with any exercise of the option or SAR.
Amendment
and Termination
No
awards may be granted pursuant to the Plan after the ten-year anniversary of the effective date of the plan which, if the shareholders
approve the amendment and restatement of the Plan, will be the date on which such approval was obtained. Except to the extent stockholder
approval or participant consent is required as provided by the Plan, the Board may amend, modify or terminate the plan.
The
Committee may amend, modify or terminate an outstanding award, provided, however, that, except as expressly provided in the Plan, the
Committee may not, without the participants consent, amend, modify or terminate an outstanding award unless it determines that
the action would not adversely alter or impair the terms or conditions of such award. However, the Committee reserves the right to reprice
any previously granted underwater option or SAR by (i) lowering the exercise price, (ii) canceling the underwater option
or SAR and granting a substitute award, or (iii) repurchasing the underwater option or SAR.
Certain
Federal Income Tax Consequences
The
following is a summary of the principal U.S. federal income tax consequences generally applicable to awards made under the Plan. The
summary does not contain a complete analysis of all the potential tax consequences relating to awards granted under the Plan, including
state, local or foreign tax consequences.
Nonqualified
Stock Options
A
participant will not be deemed to have received taxable income upon the grant of a nonqualified stock option with an exercise price equal
to the fair market value of the underlying stock on the date of the grant. Upon the exercise of a nonqualified stock option, a participant
generally will be deemed to have received taxable ordinary income in an amount equal to the excess of the fair market value of the common
stock received on the date of exercise over the option price.
31
Upon
the exercise of a nonqualified stock option, we will ordinarily be entitled to a deduction for federal income tax purposes in an amount
equal to the amount included in income by the participant as a result of such exercise. This deduction will be available to us in the
tax year in which the participant recognizes the income.
The
income arising from a participant who is an employee exercising a nonqualified stock option will be treated as compensation income for
income and payroll tax withholding purposes, and the Committee may allow the participant to satisfy the tax withholding obligation by
withholding a portion of the shares that would otherwise be delivered upon exercise. The basis of shares received upon the exercise of
a nonqualified stock option will be the option exercise price paid plus the amount recognized by the participant as taxable income attributable
to such shares as a result of the exercise. Gain or loss recognized by the participant on a subsequent disposition of any such shares
will be capital gain or loss if such shares constitute a capital asset in the hands of the participant. A participants holding
period will commence on the date of exercise.
Incentive
Stock Options
Participants
will not be deemed to recognize taxable income upon the grant or exercise of an incentive stock option with an exercise price equal to
the fair market value of the underlying stock on the date of the grant. If a participant makes no disqualifying disposition of the common
stock received upon exercise within the one year period beginning after the transfer of such common stock to the participant nor within
two years from the date of grant of the incentive stock option, and if the participant at all times from the date of the grant of the
incentive stock option to a date three months before the date of exercise has been an employee of ours, any gain recognized on the disposition
of the common stock acquired upon exercise will be long-term capital gain. The difference between the fair market value of the common
stock at the time of exercise and the exercise price will, however, be an item of tax preference, and may subject a participant to the
alternative minimum tax. We will not be entitled to any deduction with respect to the grant or exercise of the incentive stock option
or the transfer of common stock acquired upon exercise.
If
the participant makes a disqualifying disposition of the common stock before the expiration of the one or two year holding periods described
above, the participant will be deemed to have received taxable ordinary income at the time of such disposition to the extent that the
fair market value of the common stock at the time of exercise, or, if less, the amount realized on such disposition, exceeds the exercise
price. To the extent that the amount realized on such disposition exceeds the fair market value of the common stock at the time of exercise,
such excess will be taxed as capital gain if the common stock is otherwise a capital asset in the hands of the participant. To the extent
the participant recognizes ordinary income on a disqualifying disposition of the common stock, we may be entitled to a deduction for
federal income tax purposes in an amount equal to the ordinary income recognized by the participant.
SARs
A
participant will not be deemed to have received taxable income upon the grant or vesting of a SAR with an exercise price equal to the
fair market value of the underlying stock on the date of the grant. Upon the exercise of a SAR, a participant generally will be deemed
to have received income, taxable for federal income tax purposes at ordinary income rates, equal to the fair market value at the time
of exercise of any common stock received plus the amount of any cash received, and we will ordinarily be entitled to a deduction for
federal income tax purposes equal to the amount of ordinary income recognized by the participant as a result of such exercise.
The
income arising from a participant who is an employee exercising a SAR will be treated as compensation income for withholding tax purposes
and the Committee may allow the participant to satisfy the tax withholding obligation by withholding a portion of the shares that would
otherwise be delivered upon exercise. The basis of shares received upon the exercise of a SAR will equal the fair market value of the
shares at the time of exercise. Gain or loss recognized by the participant on a subsequent disposition of any such shares will be capital
gain or loss if such shares constitute a capital asset in the hands of the participant.
32
Restricted
Stock
The
federal income tax consequences of the issuance of restricted stock will depend upon whether the participant elects to be taxed at the
time of grant of the restricted stock under Section 83(b) of the Code. If no election is made, the participant will not be deemed to
have received taxable income upon the grant of restricted stock, but rather recognition of income will be postponed until such time as
the restrictions on the shares of restricted stock lapse. At that time, the participant will be deemed to have received taxable ordinary
income in an amount equal to the fair market value of the restricted stock when the restrictions lapse. If a Section 83(b) election is
made, the participant will be deemed to have received taxable ordinary income at the time of the grant of the restricted stock equal
to the fair market value of the shares of restricted stock at that time determined without regard to any of the restrictions on the shares,
and the participant will not recognize ordinary income on the lapse of the restrictions.
We
will ordinarily be entitled to a deduction for federal income tax purposes in the taxable year in which the participant recognizes any
ordinary income as a result of the lapse of restrictions on the restricted stock or as a result of a Section 83(b) election. The amount
of the deduction will equal the amount of ordinary income recognized by the participant. In the case of employees, such income will be
treated as compensation income for income and payroll tax withholding purposes, and the Committee may allow the participant to satisfy
the tax withholding obligation by withholding a portion of the shares whose restrictions have lapsed. The basis of any shares received
will equal the amount recognized by the participant as taxable income attributable to such shares as a result of the lapse of restrictions
on the restricted stock or as a result of a Section 83(b) election. Gain or loss recognized by the participant on a subsequent disposition
of any such shares will be capital gain or loss if such shares constitute a capital asset in the hands of the participant. For purposes
of determining the holding period of any such shares, there will be included only the period beginning at the time the restrictions lapse
or, if a Section 83(b) election is made, at the time of grant.
Restricted
Stock Units
A
participant will not be deemed to have received taxable income upon the grant of restricted stock units. The participant will be deemed
to have received taxable ordinary income at such time as shares are distributed to the participant. Upon the distribution of shares to
a participant with respect to restricted stock units, we will ordinarily be entitled to a deduction for federal income tax purposes in
an amount equal to the taxable ordinary income recognized by the participant. In the case of employees, such income will be treated as
compensation income for income and payroll tax withholding purposes, and the Committee may allow the participant to satisfy the tax withholding
obligation by withholding a portion of the shares that would otherwise be delivered. The basis of the shares of common stock received
will equal the amount of taxable ordinary income recognized by the participant upon receipt of such shares. Gain or loss recognized by
the participant on a subsequent disposition of any such shares will be capital gain or loss if such shares constitute a capital asset
in the hands of the participant. A participants holding period will commence on the date the shares are distributed to the participant.
Code
Section 409A of the Internal Revenue Code
The
Committee intends to administer and interpret the Plan and all award agreements in a manner designed to satisfy the requirements of Code
Section 409A of the Internal Revenue Code and to avoid any adverse tax results thereunder to a holder of an award. Section 409A of the
Code, or Section 409A, provides certain requirements for non-qualified deferred compensation arrangements with respect to an individuals
deferral and distribution elections and permissible distribution events. If an award is subject to and fails to satisfy the requirements
of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested,
which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A
fails to comply with Section 409As provisions, Section 409A imposes an additional 20% tax on compensation recognized as ordinary
income, as well as interest on such deferred compensation.
Special
Rules for Executive Officers Subject to Section 16 of the Exchange Act
.
Special
rules may apply to individuals subject to Section 16 of the Exchange Act. In particular, unless a special election is made pursuant to
83(b) of the Internal Revenue Code, shares received through the exercise or settlement of an award shall be treated as restricted as
to transferability and subject to a substantial risk of forfeiture for a period of up to six months after the date of exercise. Accordingly,
the amount of any ordinary income recognized and the amount of our income tax deduction will be determined as of the end of that period.
Clawback
or Recoupment
All
awards under the Plan will be subject to forfeiture or other penalties pursuant to our Clawback Policy, which we may amend from time
to time, as determined by the Committee.
33
New
Plan Benefits
The
awards made to eligible persons under the Plan are subject to the complete discretion of the Committee, compensation programs and policies
adopted by the Committee or the Board, the speed and nature of new hires and other factors and, therefore, we cannot currently determine
the benefits or number of shares of common stock subject to awards that may be granted in the future to our named executive officers,
all executive officers as a group or to all employees as a group under the Plan.
We
have generally granted a stock option to purchase 588 shares of the Companys common stock to each non-employee director when such
director is initially elected or appointed to the Board and a stock option to purchase shares of the Companys common stock to
each non-employee director immediately after each annual meeting of the Companys stock holders assuming such director continues
to serve as a director after such annual meeting. Beginning in 2020 the Board approved an increase in the number of stock options awarded
to non-employee directors after each annual meeting to 1,764 shares of the Companys common stock. Although we are not obligated
to make such grants, we currently expect that we will continue to grant options to our directors.
Historical
Awards under the Plan
The
following table sets forth information with respect to restricted stock, restricted stock units and stock options granted pursuant to
the current version of the 2014 Plan to our named executive officers, the director nominees and the other groups set forth below as of
December 31, 2023.
Name and Principal Position
Stock, RSUs and Options Granted
Mahesh V. Patel,
Ph.D.
President, Chief Executive Officer and Director Nominee
128,531
Krista D. Fogarty
Corporate
Controller and Principal Accounting Officer
13,517
Nachiappan Chidambaram, Ph.D.
Sr. Vice President Research and Development
33,023
Jeffrey A. Fink
Director Nominee
9,174
John W. Higuchi, M.B.A.
Director Nominee
9,174
Jill Jene, Ph.D. M.B.A.
Director Nominee
3,646
R. Dana Ono, Ph.D.
Director Nominee
9,174
Spyros Papapetropolous, M.B.A.
Chairman and Director Nominee
3,646
All named-executive officers as a group (3 persons)
175,071
All non-executive directors as a group (5 persons)
34,814
All nominees for election as a director as a group (6 persons)
163,345
All employees (other than named executive officers) as a group (14 persons)
52,362
34
Market
Value
The
closing stock price of our common stock on The NASDAQ Capital Market on April 8, 2024 was $5.26 per share.
Vote
Required
The
proposal to approve an amendment and restatement of our Fourth Amended and Restated 2014 Stock and Incentive Plan to increase the number
of shares of common stock of the Company authorized for issuance under all awards under such plan from 336,582 to 600,000 shares will
be approved if a majority of the shares of common stock outstanding as of the Record Date that are present and represented and entitled
to vote at the Annual Meeting are voted in favor of the amendment and restatement. Abstentions are considered votes present and entitled
to vote on this proposal, and thus, will have the same effect as a vote against the proposal. Broker non-votes will have
no effect on the outcome of this proposal. If a proxy card is signed and returned but no direction is made, the persons named in your
proxy will vote your shares FOR this proposal.
Recommendation
The
Board recommends that stockholders vote
FOR
the approval of an amendment and restatement of our Fourth Amended and
Restated 2014 Stock and Incentive Plan to increase the number of shares of common stock of the Company authorized for issuance under
all awards granted under such plan from 336,582 shares to 600,000.
Unless
marked otherwise, proxies received will be voted FOR Proposal No. 5.
OTHER MATTERS
Other
Business
We
know of no other matters to be submitted to the stockholders at the Annual Meeting. If any other matters properly come before the stockholders
at the Annual Meeting, the proxy holders intend to vote the shares they represent as the Board may recommend.
Annual
Report on Form 10-K
On
March 7, 2024, we filed our Annual Report on Form 10-K for the year ended December 31, 2023. A copy of the Annual Report on Form 10-K
has been made available with this Proxy Statement to all stockholders entitled to notice of and to vote at the Annual Meeting.
S
tockholder
Proposals
Stockholders
may present proposals for action at a future meeting if they comply with SEC rules, state law and our Bylaws.
Pursuant
to Rule 14a-8 under the Exchange Act, some stockholder proposals may be eligible for inclusion in the Proxy Statement for our 2025Annual
Meeting of Stockholders (the 2025 Annual Meeting). These stockholder proposals, along with proof of ownership of our stock
in accordance with Rule 14a-8(b)(2), must be received by us not later than December 24, 2024, which is 120 calendar days prior to the
anniversary date of when our Proxy Statement was released to stockholders in connection with the 2024 Annual Meeting. Stockholders are
also advised to review our Bylaws which contain additional advance notice requirements, including requirements with respect to advance
notice of stockholder proposals (other than non-binding proposals presented under Rule 14a-8) and director nominations.
35
Our
Bylaws provide that, except in the case of proposals made in accordance with Rule 14a-8, for stockholder nominations to the Board of
Directors or other proposals to be considered at an annual meeting of stockholders, the stockholder must have given timely notice thereof
in writing to us not less than 90 nor more than 120 calendar days prior to the anniversary date of the preceding years annual
meeting. To be timely for the 2025 Annual Meeting, a stockholders notice must be delivered or mailed to and received by us between
February 5, 2025, and March 7, 2025. However, in the event that the date of the annual meeting is advanced more than 30 days prior to
or delayed by more than 30 days after the anniversary of the preceding years annual meeting, notice by the stockholder to be timely
must be so received no earlier than the close of business on the one hundred twentieth 120
th
day prior to such annual meeting
and not later than the close of business on the later of the 90
th
day prior to such annual meeting or the 10th day following
the day on which public announcement of the date of such meeting is first made. In no event shall an adjournment or a postponement of
an annual meeting for which notice has been given, or the public announcement thereof has been made, commence a new time period for the
giving of a stockholders notice as described above.
The
proxies to be solicited by us through our Board for our 2025 Annual Meeting will confer discretionary authority on the proxy holders
to vote on any stockholder proposal presented at that meeting, unless we receive notice of such stockholders proposal no later
than March 9, 2025, which is 45 calendar days prior to the anniversary date of when our Proxy Statement was released to stockholders
in connection with the 2024 Annual Meeting.
Stockholder
proposals must be in writing and should be addressed to c/o Lipocine Inc., Attention: Corporate Secretary, 675 Arapeen Drive, Suite 202,
Salt Lake City, Utah 84108. It is recommended that stockholders submitting proposals direct them to our corporate secretary and utilize
certified mail, return receipt requested in order to provide proof of timely receipt. The Chairman of the Annual Meeting reserves the
right to reject, rule out of order or take other appropriate action with respect to any proposal that does not comply with these and
other applicable requirements, including conditions set forth in our Bylaws and conditions established by the SEC.
We
have not been notified by any stockholder of his or her intent to present a stockholder proposal from the floor at this years
Annual Meeting. The enclosed proxy grants the proxy holders discretionary authority to vote on any matter properly brought before this
years Annual Meeting.
By
Order of the Board of Directors
Mahesh
V. Patel, Ph.D.
President
and Chief Executive Officer
April
23, 2024
Salt
Lake City, Utah
36
APPENDIX
I
FIFTH
AMENDED AND RESTATED LIPOCINE INC.
2014 STOCK AND INCENTIVE PLAN
Section
1.
Purpose
The
purpose of the Plan is to promote the interests of the Company and its stockholders by aiding the Company in attracting and retaining
employees, officers, consultants, advisors and non-employee Directors capable of assuring the future success of the Company, to offer
such persons incentives to put forth maximum efforts for the success of the Companys business and to compensate such persons through
various stock-based arrangements and provide them with opportunities for stock ownership in the Company, thereby aligning the interests
of such persons with the Companys stockholders.
Section
2.
Definitions
As
used in the Plan, the following terms shall have the meanings set forth below:
(a)
Affiliate
shall mean any entity that, directly or indirectly through one or more intermediaries, is controlled by
the Company.
(b)
Award
shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit or Dividend Equivalent
granted under the Plan.
(c)
Award Agreement
shall mean any written agreement, contract or other instrument or document evidencing an Award granted
under the Plan (including a document in an electronic medium) executed in accordance with the requirements of Section 9(b).
(d)
Board
shall mean the Board of Directors of the Company.
(e)
Code
shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated
thereunder.
(f)
Change-in-Control Event
shall mean the occurrence, in a single transaction or in a series of related transactions,
of any one or more of the following events:
(i)
any
Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than fifty percent
(50%) of the combined voting power of the Companys then outstanding securities other than by virtue of a merger, consolidation
or similar transaction. Notwithstanding the foregoing, a Change-in-Control Event shall not be deemed to occur (A) on account of the
acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the
Companys securities in a transaction or series of related transactions the primary purpose of which is to obtain financing
for the Company through the issuance of equity securities or (B) solely because the level of Ownership held by any Exchange Act Person
(the Subject Person) exceeds the designated percentage threshold of the outstanding voting securities as a result of
a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if
a Change-in-Control Event would occur (but for the operation of this sentence) as a result of the acquisition of voting securities
by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that,
assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities
Owned by the Subject Person over the designated percentage threshold, then a Change-in-Control Event shall be deemed to occur;
(ii)
there
is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after
the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto
do not Own, directly or indirectly, either (A) outstanding voting securities representing more than fifty percent (50%) of the combined
outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than fifty percent
(50%) of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction,
in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately
prior to such transaction;
37
(iii)
there
is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the
Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated
assets of the Company and its Subsidiaries to an Entity, more than fifty percent (50%) of the combined voting power of the voting
securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding
voting securities of the Company immediately prior to such sale, lease, license or other disposition; or
(iv)
individuals
who, on the date this Plan is adopted by the Board, are members of the Board (the Incumbent Board) cease for any reason
to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination
for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still
in office, such new member shall, for purposes of this Plan, be considered as a member of the Incumbent Board.
Notwithstanding
the foregoing definition or any other provision of this Plan, (A) the term Change-in-Control Event shall not include a sale of assets,
merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change-in-Control
Event (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede
the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of Change-in-Control
Event or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply.
(g)
Committee
shall mean the Compensation Committee of the Board or such other committee designated by the Board to
administer the Plan. The Committee shall be comprised of not less than such number of Directors as shall be required to permit Awards
granted under the Plan to qualify under Rule 16b-3.
(h)
Company
shall mean Lipocine Inc., a Delaware corporation, and any successor corporation.
(i)
Director
shall mean a member of the Board.
(j)
Dividend Equivalent
shall mean any right granted under Section 6(e) of the Plan.
(k)
Eligible Person
shall mean any employee, officer, non-employee Director, consultant, independent contractor or advisor
providing services to the Company or any Affiliate, or any such person to whom an offer of employment or engagement with the Company
or any Affiliate is extended.
(l)
Entity
means a corporation, partnership, limited liability company or other entity.
(m)
Exchange Act
shall mean the Securities Exchange Act of 1934, as amended.
(n)
Exchange Act Person
means any natural person, Entity or group (within the meaning of Section 13(d)
or 14(d) of the Exchange Act), except that Exchange Act Person shall not include (i) the Company or any Subsidiary of the
Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant
to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their Ownership of stock of the Company; or (v) any natural person, Entity or group
(within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly,
of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Companys then outstanding
securities.
38
(o)
Fair Market Value
with respect to one Share as of any date shall mean (a) if the Share is listed on any established
stock exchange, the price of one Share at the close of the regular trading session of such market or exchange on such date, as reported
by The Wall Street Journal or a comparable reporting service, or, if no sale of Shares shall have occurred on such date, on the preceding
date on which there was a sale of Shares; (b) if the Shares are not so listed on any established stock exchange, the average of the closing
bid and asked prices quoted by the OTC Bulletin Board, the National Quotation Bureau, or any comparable reporting
service on such date or, if there are no quoted bid and asked prices on such date, on the next preceding
date for which there are such quotes for a Share; or (c) if the Shares are not publicly traded as of such date, the per share value of
a Share, as determined by the Board, or any duly authorized Committee of the Board, in its sole discretion, by applying principles of
valuation with respect thereto.
(p)
Incentive Stock Option
shall mean an option granted under Section 6(a) of the Plan that is intended to meet the
requirements of Section 422 of the Code or any successor provision.
(q)
Non-Qualified Stock Option
shall mean an option granted under Section 6(a) of the Plan that is not intended to be
an Incentive Stock Option.
(r)
Option
shall mean an Incentive Stock Option or a Non-Qualified Stock Option to purchase shares of the Company.
(s)
Own
,
Owned
,
Owner
,
Ownership
a person or Entity shall
be deemed to Own, to have Owned, to be the Owner of, or to have acquired Ownership
of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise,
has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.
(t)
Participant
shall mean an Eligible Person designated to be granted an Award under the Plan.
(u)
Person
shall mean any individual or entity, including a corporation, partnership, limited liability company, association,
joint venture or trust.
(v)
Plan
shall mean the Fifth Amended and Restated Lipocine Inc. 2014 Stock and Incentive Plan, as amended from time
to time.
(w)
Prior Stock Plan
shall mean the Lipocine Inc. 2011 Equity Incentive Plan, as amended from time to time.
(x)
Restricted Stock
shall mean any Share granted under Section 6(c) of the Plan.
(y)
Restricted Stock Unit
shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive
a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date.
(z)
Rule 16b-3
shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, or any successor rule or regulation.
(aa)
Section 409A
shall mean Section 409A of the Code, or any successor provision, and applicable Treasury Regulations
and other applicable guidance thereunder.
(bb)
Securities Act
shall mean the Securities Act of 1933, as amended.
(cc)
Share
or
Shares
shall mean the common stock of the Company (or such other securities or property
as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan).
(dd)
Specified Employee
shall mean a specified employee as defined in Section 409A(a)(2)(B) of the Code or applicable
proposed or final regulations under Section 409A, determined in accordance with procedures established by the Company and applied uniformly
with respect to all plans maintained by the Company that are subject to Section 409A.
(ee)
Stock Appreciation Right
shall mean any right granted under Section 6(b) of the Plan.
(ff)
Subsidiary
means, with respect to the Company, (i) any corporation of which more than fifty percent (50%) of the
outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective
of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability
company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits
or capital contribution) of more than fifty percent (50%).
39
Section
3.
Administration
(a)
Power and Authority of the Committee
. The Plan shall be administered by the Committee. Subject to the express provisions of the
Plan and to applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type
or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or the method
by which payments or other rights are to be calculated in connection with) each Award; (iv) determine the terms and conditions of any
Award or Award Agreement, including any terms relating to the forfeiture of any Award and the forfeiture, recapture or disgorgement of
any cash, Shares or other amounts payable with respect to any Award; (v) amend the terms and conditions of any Award or Award Agreement,
subject to the limitations under Section 7; (vi) accelerate the exercisability of any Award or the lapse of any restrictions relating
to any Award, subject to the limitations in Section 7, (vii) determine whether, to what extent and under what circumstances Awards may
be exercised in cash, Shares, other securities, other Awards or other property (excluding promissory notes), or canceled, forfeited or
suspended, subject to the limitations in Section 7; (viii) determine whether, to what extent and under what circumstances amounts payable
with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder thereof or the Committee,
subject to the requirements of Section 409A; (ix) interpret and administer the Plan and any instrument or agreement, including an Award
Agreement, relating to the Plan; (x) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall
deem appropriate for the proper administration of the Plan; (xi) make any other determination and take any other action that the Committee
deems necessary or desirable for the administration of the Plan; and (xii) adopt such modifications, rules, procedures and subplans as
may be necessary or desirable to comply with provisions of the laws of non-U.S. jurisdictions in which the Company or an Affiliate may
operate, including, without limitation, establishing any special rules for Affiliates, Eligible Persons or Participants located in any
particular country, in order to meet the objectives of the Plan and to ensure the viability of the intended benefits of Awards granted
to Participants located in such non-United States jurisdictions. Unless otherwise expressly provided in the Plan, all designations, determinations,
interpretations and other decisions under or with respect to the Plan or any Award or Award Agreement shall be within the sole discretion
of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary
of any Award or Award Agreement, and any employee of the Company or any Affiliate.
(b)
Delegation
. The Committee shall have the right, from time to time, to delegate to one or more officers of the Company the authority
of the Committee to grant and determine the terms and conditions of Awards granted under the Plan, subject to the requirements of Section
157(c) of the Delaware General Corporation Law (or any successor provision) and such other limitations under applicable exchange rules.
In no event shall any such delegation of authority be permitted with respect to Awards to any members of the Board or to any Eligible
Person who is subject to Rule 16b-3 under the Exchange Act or in such a manner as would cause the Plan not to comply with the requirements
of applicable exchange rules or applicable law. The Committee shall also be permitted to delegate, to any appropriate officer or employee
of the Company, responsibility for performing certain ministerial functions under the Plan. In the event that the Committees authority
is delegated to officers or employees in accordance with the foregoing, all provisions of the Plan relating to the Committee shall be
interpreted in a manner consistent with the foregoing by treating any such reference as a reference to such officer or employee for such
purpose. Any action undertaken in accordance with the Committees delegation of authority hereunder shall have the same force and
effect as if such action were undertaken directly by the Committee and shall be deemed for all purposes of the Plan to have been taken
by the Committee.
(c)
Power and Authority of the Board
. Notwithstanding anything to the contrary contained herein, (i) the Board may, at any time and
from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan, unless
the exercise of such powers and duties by the Board would cause the Plan not to comply with the requirements of Rule 16b-3; and (ii)
only the Committee (or another committee of the Board comprised of directors who qualify as independent directors, within the meaning
of independence rules of any applicable securities exchange where the Shares are then listed) may grant Awards to Directors who are not
also employees of the Company or an Affiliate
(d)
Indemnification
. To the full extent permitted by law, (i) no member of the Board, the Committee or any person to whom the Committee
delegates authority under the Plan shall be liable for any action or determination taken or made in good faith with respect to the Plan
or any Award made under the Plan, and (ii) the members of the Board, the Committee and each person to whom the Committee delegates authority
under the Plan shall be entitled to indemnification by the Company with regard to such actions and determinations. The provisions of
this paragraph shall be in addition to such other rights of indemnification as a member of the Board, the Committee or any other person
may have by virtue of such persons position with the Company.
40
Section
4.
Shares Available for Awards
(a)
Shares Available
. Subject to adjustment as provided in Section 4(c) of the Plan, the aggregate number of Shares that may be issued
under all Awards under the Plan shall be the sum of (i) 600,000 (which includes the authorized net increase of Shares in connection with
the adoption of the Fifth Amended and Restated Plan amendment plus previously approved Plan Shares, as well as all Shares rolled over
from the Prior Stock Plan upon initial approval of the Plan) and (ii) any Shares subject to any outstanding award under the Prior Stock
Plan that, since the initial approval of the Plan, are not purchased or are forfeited or reacquired by the Company, or otherwise not
delivered to the Participant due to termination or cancellation of such award. The aggregate number of Shares that may be issued under
all Awards under the Plan shall be reduced by Shares subject to awards issued under the Plan in accordance with the share counting rules
described in Section 4(b) below. Upon the initial stockholder approval of this Plan, future issuances under the Prior Stock Plan were
discontinued, but all outstanding awards previously granted under the Prior Stock Plan remained outstanding and subject to the terms
of the Prior Stock Plan.
(b)
Counting Shares
. For purposes of this Section 4, if an Award entitles the holder thereof to receive or purchase Shares, the number
of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate
number of Shares available for granting Awards under the Plan. For purposes of determining the number of Shares covered on the date of
grant by an Option or a Stock Appreciation Right, the aggregate number of Shares with respect to which the Option or Stock Appreciation
Right is to be exercised shall be counted against the number of Shares available for Awards under the Plan (without regard to the number
of actual Shares issued upon exercise or settlement). If any Shares covered by an Award or to which an Award relates are not purchased
or are forfeited or are reacquired by the Company (including shares of Restricted Stock and Restricted Stock Units, whether or not dividends
have been paid on such shares), or if an Award otherwise terminates or is cancelled without delivery of any Shares, then the number of
Shares counted pursuant to Section 4(b) of the Plan against the aggregate number of Shares available under the Plan with respect to such
Award, to the extent of any such forfeiture, reacquisition by the Company, termination or cancellation, shall again be available for
granting Awards under the Plan. Notwithstanding anything to the contrary in this Section 4, the following Shares will not again become
available for issuance under the Plan: (i) any Shares which would have been issued upon any exercise of an Option but for the fact that
the exercise price was paid by a net exercise pursuant to Section 6(a)(iii)(B) or any Shares tendered in payment of the
exercise price of an Option; (ii) any Shares withheld by the Company or Shares tendered to satisfy any tax withholding obligation with
respect to an Option or Stock Appreciation Right; (iii) Shares covered by a Stock Appreciation Right issued under the Plan that are not
issued in connection with settlement in Shares upon exercise; or (iv) Shares that are repurchased by the Company using Option exercise
proceeds.
(c)
Adjustments
. In the event that any dividend (other than regular cash dividends) or other distribution (whether in the form of
cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights
to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an
adjustment is necessary in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares
(or other securities or other property) that thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other
securities or other property) subject to outstanding Awards, (iii) the purchase price or exercise price with respect to any Award and
(iv) the limitations contained in Section 4(d)(i) below;
provided
,
however
, that the number of Shares covered by any Award
or to which such Award relates shall always be a whole number. Such adjustment shall be made by the Committee or the Board, whose determination
in that respect shall be final, binding and conclusive.
(d)
Award Limitations Under the Plan
.
(i)
Calculation
of Award Limitations.
On May 10, 2023, the Board approved a reverse stock split of 1-for-17.
The par value of the common stock and preferred stock was not adjusted as a result of the
reverse stock split. The limitations on awards under this Plan listed below have been adjusted
to give effect to the reverse stock split and rounded for convenience.
(ii)
Annual
Limitation on Individual Awards
. No Eligible Person may be granted any Award or Awards for more than 25,000 Shares (subject to
adjustment as provided for in Section 4(c) of the Plan), in the aggregate in any calendar year.
(iii)
Limit
on Awards to Non-Employee Directors
. Notwithstanding the foregoing limit in (d)(i) above, Directors who are not also employees
of the Company or an Affiliate may not be granted and Award or Awards in the aggregate in any calendar year of more than 2,000 Shares,
subject to adjustment as provided in Section 4(c) of the Plan.
41
Section
5.
Eligibility
Any
Eligible Person shall be eligible to be designated as a Participant. In determining which Eligible Persons shall receive an Award and
the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their
present and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem
relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full-time or part-time employees (which term
as used herein includes, without limitation, officers and Directors who are also employees), and an Incentive Stock Option shall not
be granted to an employee of an Affiliate unless such Affiliate is also a subsidiary corporation of the Company within
the meaning of Section 424(f) of the Code or any successor provision.
Section
6.
Awards
(a)
Options
. The Committee is hereby authorized to grant Options to Eligible Persons with the following terms and conditions and with
such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:
(i)
Exercise
Price
. The purchase price per Share purchasable under an Option shall be determined by the Committee and shall not be less than
100% of the Fair Market Value of a Share on the date of grant of such Option;
provided, however,
that the Committee may designate
a purchase price below Fair Market Value on the date of grant if the Option is granted in substitution for a stock option previously
granted by an entity that is acquired by or merged with the Company or an Affiliate.
(ii)
Option
Term
. The term of each Option shall be fixed by the Committee at the time but shall not be longer than 10 years from the date
of grant.
(iii)
Time
and Method of Exercise
. The Committee shall determine the time or times at which an Option may be exercised in whole or in part
and the method or methods by which, and the form or forms, including, but not limited to, cash, Shares (actually or by attestation),
other securities, other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal
to the applicable exercise price, in which, payment of the exercise price with respect thereto may be made or deemed to have been
made.
(A)
Promissory
Notes
. Notwithstanding the foregoing, the Committee may not accept a promissory note as consideration.
(B)
Net
Exercises
. The Committee may, in its discretion, permit an Option to be exercised by delivering to the Participant a number of
Shares having an aggregate Fair Market Value (determined as of the date of exercise) equal to the excess, if positive, of the Fair
Market Value of the Shares underlying the Option being exercised on the date of exercise, over the exercise price of the Option for
such Shares.
(iv)
Incentive
Stock Options
. Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply to the grant
of stock options which are intended to qualify as Incentive Stock Options:
(A)
To
the extent that the aggregate Fair Market Value (determined at the time of grant) of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and any Affiliates)
exceeds $100,000 (or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Stock
Options, the Options or portions thereof that exceed such limit (according to the order in which they were granted) or otherwise
do not comply with such rules will be treated as Non-Qualified Stock Options, notwithstanding any contrary provision of the applicable
Award Agreement(s).
42
(B)
All
Incentive Stock Options must be granted within ten years from the earlier of the date on which this Plan was adopted by the Board
or the date this Plan was approved by the stockholders of the Company.
(C)
Unless
sooner exercised, all Incentive Stock Options shall expire and no longer be exercisable no later than 10 years after the date of
grant;
provided
,
however
, that in the case of a grant of an Incentive Stock Option to a Participant who, at the time
such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of its Affiliates, such Incentive Stock Option shall expire and no longer
be exercisable no later than five years from the date of grant.
(D)
The
purchase price per Share for an Incentive Stock Option shall be not less than 100% of the Fair Market Value of a Share on the date
of grant of the Incentive Stock Option;
provided
,
however
, that, in the case of the grant of an Incentive Stock Option
to a Participant who, at the time such Option is granted, owns (within the meaning of Section 422 of the Code) stock possessing more
than 10% of the total combined voting power of all classes of stock of the Company or of its Affiliates, the purchase price per Share
purchasable under an Incentive Stock Option shall be not less than 110% of the Fair Market Value of a Share on the date of grant
of the Incentive Stock Option.
(E)
Any
Incentive Stock Option authorized under the Plan shall contain such other provisions as the Committee shall deem advisable but shall
in all events be consistent with and contain all provisions required in order to qualify the Option as an Incentive Stock Option.
(b)
Stock Appreciation Rights
. The Committee is hereby authorized to grant Stock Appreciation Rights to Eligible Persons subject to
the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder
thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii)
the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100% of the Fair Market
Value of one Share on the date of grant of the Stock Appreciation Right;
provided, however,
that the Committee may designate a
grant price below Fair Market Value on the date of grant if the Stock Appreciation Right is granted in substitution for a stock appreciation
right previously granted by an entity that is acquired by or merged with the Company or an Affiliate. Subject to the terms of the Plan
and any applicable Award Agreement, the grant price, term, methods of exercise, dates of exercise, methods of settlement and any other
terms and conditions of any Stock Appreciation Right shall be as determined by the Committee (except that the term of each Stock Appreciation
Right shall be subject to the term limitation in Section 6(a)(ii) applicable to Options). The Committee may impose such conditions or
restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate.
(c)
Restricted Stock and Restricted Stock Units
. The Committee is hereby authorized to grant an Award of Restricted Stock and Restricted
Stock Units to Eligible Persons with the following terms and conditions and with such additional terms and conditions not inconsistent
with the provisions of the Plan as the Committee shall determine:
(i)
Restrictions
.
Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including,
without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other
right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such
installments or otherwise as the Committee may deem appropriate. Notwithstanding the foregoing, rights to dividend or Dividend Equivalent
payments shall be subject to the limitations described in Section 6(e). Awards may, at the Committees discretion, be conditioned
upon a Participants completion of a specified period of service, or upon the achievement of one or more performance goals
established by the Compensation, or upon any combination of service-based and performance-based conditions.
(ii)
Issuance
and Delivery of Shares
. Any Restricted Stock granted under the Plan shall be issued at the time such Awards are granted and may
be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of a stock certificate
or certificates, which certificate or certificates shall be held by the Company or held in nominee name by the stock transfer agent
or brokerage service selected by the Company to provide such services for the Plan. Such certificate or certificates shall be registered
in the name of the Participant and shall bear an appropriate legend referring to the restrictions applicable to such Restricted Stock.
Shares representing Restricted Stock that are no longer subject to restrictions shall be delivered (including by updating the book-entry
registration) to the Participant promptly after the applicable restrictions lapse or are waived. In the case of Restricted Stock
Units, no Shares shall be issued at the time such Awards are granted. Upon the lapse or waiver of restrictions and the restricted
period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the
holder of the Restricted Stock Units.
43
(e)
Dividend Equivalents
. The Committee is hereby authorized to grant Dividend Equivalents to Eligible Persons under which the Participant
shall be entitled to receive payments (in cash, Shares, other securities, other Awards or other property as determined in the discretion
of the Committee) equivalent to the amount of cash dividends paid by the Company to holders of Shares with respect to a number of Shares
determined by the Committee. Subject to the terms of the Plan and any applicable Award Agreement, such Dividend Equivalents may have
such terms and conditions as the Committee shall determine. Notwithstanding the foregoing, (i) the Committee may not grant Dividend Equivalents
to Eligible Persons in connection with grants of Options or Stock Appreciation Rights to such Eligible Persons, and (ii) no dividend
or Dividend Equivalent payments shall be made to a Participant with respect to any other Award prior to the date on which all conditions
or restrictions relating to such Award (or portion thereof to which the dividend or Dividend Equivalent relates) have been satisfied,
waived or lapsed.
(f)
General
.
(i)
Consideration
for Awards
. Awards may be granted for no cash consideration or for any cash or other consideration as may be determined by the
Committee or required by applicable law.
(ii)
Awards
May Be Granted Separately or Together
. Awards may, in the discretion of the Committee, be granted either alone or in addition
to, in tandem with or in substitution for any other Award or any award granted under any other plan of the Company or any Affiliate.
Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any other plan
of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards
or awards.
(iii)
Forms
of Payment under Awards
. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be
made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee
shall determine (including, without limitation, cash, Shares, other securities (but excluding promissory notes), other Awards or
other property or any combination thereof), and may be made in a single payment or transfer, in installments or on a deferred basis,
in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without
limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting
of Dividend Equivalents with respect to installment or deferred payments.
(iv)
Limits
on Transfer of Awards
. Except as otherwise provided by the Committee in its discretion and subject to such additional terms and
conditions as it determines, no Award (other than fully vested and unrestricted Shares issued pursuant to any Award) and no right
under any such Award shall be transferable by a Participant other than by will or by the laws of descent and distribution, and no
Award (other than fully vested and unrestricted Shares issued pursuant to any Award) or right under any such Award may be pledged,
alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void
and unenforceable against the Company or any Affiliate. If the Committee does permit the transfer of an Award other than a fully
vested and unrestricted Share, such transfer shall be for no value and in accordance with the rules of Form S-8. The Committee may
establish procedures as it deems appropriate for a Participant to designate a person or persons, as beneficiary or beneficiaries,
to exercise the rights of the Participant and receive any property distributable with respect to any Award in the event of the Participants
death.
44
(v)
Restrictions;
Securities Exchange Listing
. All Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof
shall be subject to such restrictions as the Committee may deem advisable under the Plan, applicable federal or state securities
laws and regulatory requirements, and the Committee may cause appropriate entries to be made with respect to, or legends to be placed
on the certificates for, such Shares or other securities to reflect such restrictions. The Company shall not be required to deliver
any Shares or other securities covered by an Award unless and until the requirements of any federal or state securities or other
laws, rules or regulations (including the rules of any securities exchange) as may be determined by the Company to be applicable
are satisfied.
(vi)
Option
and Stock Appreciation Right Repricing
. The Committee may effect any repricing of any previously granted, underwater
Option or Stock Appreciation Right by: (i) amending or modifying the terms of the Option or Stock Appreciation Right to lower the
exercise price; (ii) canceling the underwater Option or Stock Appreciation Right and granting either (A) replacement Options or Stock
Appreciation Rights having a lower exercise price; or (B) Restricted Stock, Restricted Stock Units, or Other Stock-Based Award in
exchange; or (iii) repurchasing the underwater Option or Stock Appreciation Right. An Option or Stock Appreciation Right will be
deemed to be underwater at any time when the Fair Market Value of the Shares covered by such Option or Stock Appreciation
Right is less than the exercise price.
(vii)
Section
409A Provisions
. Notwithstanding anything in the Plan or any Award Agreement to the contrary, to the extent that any amount or
benefit that constitutes deferred compensation to a Participant under Section 409A and applicable guidance thereunder
is otherwise payable or distributable to a Participant under the Plan or any Award Agreement solely by reason of the occurrence of
a change in control or due to the Participants disability or separation from service (as such term is defined
under Section 409A), such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance
unless the Committee determines in good faith that (i) the circumstances giving rise to such change in control, disability or separation
from service meet the definition of a change in ownership or effective control, disability, or separation from service, as the case
may be, in Section 409A(a)(2)(A) of the Code and applicable proposed or final regulations, or (ii) the payment or distribution of
such amount or benefit would be exempt from the application of Section 409A by reason of the short-term deferral exemption or otherwise.
Any payment or distribution that otherwise would be made to a Participant who is a Specified Employee (as determined by the Committee
in good faith) on account of separation from service may not be made before the date which is six months after the date of the Specified
Employees separation from service (or if earlier, upon the Specified Employees death) unless the payment or distribution
is exempt from the application of Section 409A by reason of the short-term deferral exemption or otherwise..
Section
7.
Amendment and Termination; Corrections
(a)
Amendments to the Plan and Awards
. The Board may from time to time amend, suspend or terminate this Plan, and the Committee may
amend the terms of any previously granted Award, provided that no amendment to the terms of any previously granted Award may, (except
as expressly provided in the Plan) materially and adversely alter or impair the terms or conditions of the Award previously granted to
a Participant under this Plan without the written consent of the Participant or holder thereof. Any amendment to this Plan, or to the
terms of any Award previously granted, is subject to compliance with all applicable laws, rules, regulations and policies of any applicable
governmental entity or securities exchange, including receipt of any required approval from the governmental entity or stock exchange.
For greater certainty and without limiting the foregoing, the Board may amend, suspend, terminate or discontinue the Plan, and the Committee
may amend or alter any previously granted Award, as applicable, without obtaining the approval of stockholders of the Company in order
to:
(i)
amend
the eligibility for, and limitations or conditions imposed upon, participation in the Plan;
(ii)
amend
any terms relating to the granting or exercise of Awards, including but not limited to terms relating to the amount and payment of
the exercise price, or the vesting, expiry, assignment or adjustment of Awards, or otherwise waive any conditions of or rights of
the Company under any outstanding Award, prospectively or retroactively;
45
(iii)
make
changes that are necessary or desirable to comply with applicable laws, rules, regulations and policies of any applicable governmental
entity or stock exchange (including amendments to Awards necessary or desirable to maximize any available tax deduction or to avoid
any adverse tax results, and no action taken to comply with such laws, rules, regulations and policies shall be deemed to impair
or otherwise adversely alter or impair the rights of any holder of an Award or beneficiary thereof); or
(iv)
amend
any terms relating to the administration of the Plan, including the terms of any administrative guidelines or other rules related
to the Plan.
For
greater certainty, prior approval of the stockholders of the Company shall be required for any amendment to the Plan or an Award that
would:
(i)
require
stockholder approval under the rules or regulations of the Securities and Exchange Commission, the NASDAQ Stock Market or any other
securities exchange that are applicable to the Company;
(ii)
increase
the number of shares authorized under the Plan as specified in Section 4(a) of the Plan;
(iii)
increase
the number of shares or value subject to the limitations contained in Section 4(d) of the Plan;
(iv)
permit
the award of Options or Stock Appreciation Rights at a price less than 100% of the Fair Market Value of a Share on the date of grant
of such Option or Stock Appreciation Right, contrary to the provisions of Section 6(a)(i) and Section 6(b) of the Plan; or
(v)
increase
the maximum term permitted for Options and Stock Appreciation Rights as specified in Section 6(a)(ii) and Section 6(b).
(b)
Corporate Transactions
. In the event of any Change in Control Event, reorganization, merger, consolidation, split-up, spin-off,
combination, plan of arrangement, take-over bid or tender offer, repurchase or exchange of Shares or other securities of the Company
or any other similar corporate transaction or event involving the Company (or the Company shall enter into a written agreement to undergo
such a transaction or event), any such event defined herein as a Corporate Transaction, the Committee or the Board may,
in its sole discretion, provide for one or more of the following to be effective upon the consummation of the event (or effective immediately
prior to the consummation of the event, provided that the consummation of the event subsequently occurs), and no action taken under this
Section 7(b) shall be deemed to impair or otherwise adversely alter or impair the rights of any holder of an Award or beneficiary thereof:
(i)
either
(A) termination of any Award, whether or not vested, in exchange for an amount of cash and/or other property, if any, equal to the
gain that would have been attained upon the exercise of the Award or realization of the Participants rights or (B) the replacement
of the Award with other rights or property selected by the Committee or the Board, in its sole discretion;
(ii)
that
the Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by
similar options, rights or awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and prices;
(iii)
that
the Award shall be exercisable or payable or fully vested with respect to all Shares covered thereby, notwithstanding anything to
the contrary in the applicable Award Agreement; or
(iv)
that
the Award cannot vest, be exercised or become payable after a date certain in the future, which may be the effective date of the
event.
46
Notwithstanding
the foregoing, with respect to any Award, or any portion thereof, that is neither assumed by the successor or survivor corporation nor
substituted as provided in (b)(ii) above, then the portion of the Award that is not assumed or substituted shall become fully vested,
exercisable and payable with respect to all shares covered thereby. Furthermore, in the event the Committee or the Board uses its discretion
under Section 7(b)(i)(A) above to terminate an unexercised Option or Stock Appreciation Right held by a Participant who has not terminated
employment or otherwise separated from service with the Company and its Affiliates, and if the Black-Scholes value of the Option or Stock
Appreciation Right (determined at the time the Award is terminated) exceeds the gain that would have been realized upon exercise of the
Option or Stock Appreciation Right, the Company shall pay an additional cash bonus equal to the excess of the Black-Scholes value over
the gain (if any) that would have been realized upon exercise. In such event where the Black-Scholes value exceeds the gain that would
have been realized upon exercise of the Option or Stock Appreciation Right, the excess shall be treated as a short-term deferral for
purposes of Section 409A, payable upon the Corporate Transaction to Participants who are then in employment or service with the Company
and its Affiliates and solely in connection with the termination of the Option or Stock Appreciation Right as described in Section 7(b)(i)(A)
above, and not in connection with any exercise of the Option or Stock Appreciation Right.
(c)
Correction of Defects, Omissions and Inconsistencies
. The Committee may, without prior approval of the stockholders of the Company,
correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and
to the extent it shall deem desirable to implement or maintain the effectiveness of the Plan.
Section
8.
Income Tax Withholding
In
order to comply with all applicable federal, state, local or foreign income tax laws or regulations, the Company may take such action
as it deems appropriate to ensure that all applicable federal, state, local or foreign payroll, withholding, income or other taxes, which
are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. In order to assist a Participant
in paying all or a portion of the applicable taxes incurred upon exercise or receipt of (or the lapse of restrictions relating to) an
Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant
to satisfy such tax obligation by (a) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise
or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes (but only
to the extent necessary to satisfy minimum statutory withholding requirements) or (b) delivering to the Company Shares other than Shares
issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount
of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined.
Section
9.
General Provisions
(a)
No Rights to Awards
. No Eligible Person, Participant or other person shall have any claim to be granted any Award under the Plan,
and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under
the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants.
(b)
Award Agreements
. No Participant shall have rights under an Award granted to such Participant unless and until an Award Agreement
shall have been signed by the Participant (if requested by the Company), or until such Award Agreement is delivered and accepted through
an electronic medium in accordance with procedures established by the Company. An Award Agreement need not be signed by a representative
of the Company unless required by the Committee. Each Award Agreement shall be subject to the applicable terms and conditions of the
Plan and any other terms and conditions (not inconsistent with the Plan) determined by the Committee.
(c)
Plan Provisions Control
. In the event that any provision of an Award Agreement conflicts with or is inconsistent in any respect
with the terms of the Plan as set forth herein or subsequently amended, the terms of the Plan shall control.
(d)
No Rights of Stockholders
. Except with respect to Shares issued under Awards (and subject to such conditions as the Committee
may impose on such Awards pursuant to Section 6(c)(i) or Section 6(e)), neither a Participant nor the Participants legal representative
shall be, or have any of the rights and privileges of, a stockholder of the Company with respect to any Shares issuable upon the exercise
or payment of any Award, in whole or in part, unless and until such Shares have been issued.
47
(e)
No Limit on Other Compensation Arrangements
. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting
or continuing in effect other or additional compensation plans or arrangements, and such plans or arrangements may be either generally
applicable or applicable only in specific cases.
(f)
No Right to Employment
. The grant of an Award shall not be construed as giving a Participant the right to be retained as an employee
of the Company or any Affiliate, , nor will it affect in any way the right of the Company or an Affiliate to terminate a Participants
employment at any time, with or without cause, in accordance with applicable law. In addition, the Company or an Affiliate may at any
time dismiss a Participant from employment, free from any liability or any claim under the Plan or any Award, unless otherwise expressly
provided in the Plan or in any Award Agreement. Nothing in this Plan shall confer on any person any legal or equitable right against
the Company or any Affiliate, directly or indirectly, or give rise to any cause of action at law or in equity against the Company or
an Affiliate. Under no circumstances shall any person ceasing to be an employee of the Company or any Affiliate be entitled to any compensation
for any loss of any right or benefit under the Plan which such employee or Director might otherwise have enjoyed but for termination
of employment, whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise.
By participating in the Plan, each Participant shall be deemed to have accepted all the conditions of the Plan and the terms and conditions
of any rules and regulations adopted by the Committee and shall be fully bound thereby.
(g)
Governing Law
. The internal law, and not the law of conflicts, of the State of Delaware shall govern all questions concerning
the validity, construction and effect of the Plan or any Award, and any rules and regulations relating to the Plan or any Award.
(h)
Severability
. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in
any jurisdiction 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 applicable laws, or if it cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall remain in full force and effect.
(i)
No Trust or Fund Created
. 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 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 Affiliate pursuant to an Award, such right shall be no greater than the
right of any unsecured general creditor of the Company or any Affiliate.
(j)
Other Benefits
. No compensation or benefit awarded to or realized by any Participant under the Plan shall be included for the
purpose of computing such Participants compensation or benefits under any pension, retirement, savings, profit sharing, group
insurance, disability, severance, termination pay, welfare or other benefit plan of the Company, unless required by law or otherwise
provided by such other plan.
(k)
No Fractional Shares
. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash shall be paid in lieu of any fractional Share or whether such fractional Share or any rights thereto shall be
canceled, terminated or otherwise eliminated.
(l)
Headings
. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
Section
10.
Clawback or Recoupment
All
Awards under this Plan shall be subject to forfeiture or other penalties pursuant to (i) any Company clawback policy, as may be adopted
or amended from time to time, (ii) such forfeiture and/or penalty conditions or provisions as determined by the Committee, and (iii)
any applicable law, rule, or regulation or applicable stock exchange rule, including, without limitation, Section 304 of the Sarbanes-Oxley
Act of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any applicable stock exchange listing rule
adopted pursuant thereto.
Section
11.
Effective Date of the Plan
The
Plan was initially adopted by the Board on April 15, 2014 and approved by stockholders on June 10, 2014. The Plan has since been amended
and restated on several occasions. This Fifth Amended and Restated Plan was adopted by the Board on February 13, 2024. The Plan shall
be subject to approval by the stockholders of the Company at the annual meeting of stockholders of the Company to be held on June 5,
2024, and such amendment shall be effective as of the date of such stockholder approval (the Effective Date).
Section
12.
Term of the Plan
No
Award shall be granted under the Plan, and the Plan shall terminate, on February 13, 2034, or any earlier date of discontinuation or
termination established pursuant to Section 7(a) of the Plan. Unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award theretofore granted may extend beyond such dates, and the authority of the Committee provided for hereunder with
respect to the Plan and any Awards, and the authority of the Board to amend the Plan, shall extend beyond the termination of the Plan.
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