TENAX THERAPEUTICS, INC.
10-Ks and 10-Qs
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
SCHEDULE 14A
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TENAX THERAPEUTICS, INC.
ONE Copley Parkway, Suite 490
Morrisville, North Carolina 27560
April 28, 2017
Dear
Stockholders:
It is
my pleasure to invite you to the Annual Meeting of Stockholders of
Tenax Therapeutics, Inc., to be held on
June 14, 2017
, at 9:00 a.m. at the offices
of Tenax Therapeutics, Inc. located at ONE Copley Parkway, Suite
490, Morrisville, North Carolina, 27560. This booklet includes the
Notice of Annual Meeting of Stockholders and Proxy Statement. The
Proxy Statement provides information about the business we will
conduct at the meeting. We hope you will be able to attend the
meeting, where you can vote in person.
The
matters to be acted upon at the meeting are described in the
accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement.
Whether
or not you plan to attend the Annual Meeting personally, and
regardless of the number of shares you own, it is important that
your shares be represented at the Annual Meeting. We need more than
half of our outstanding common shares to be represented at the
Annual Meeting to establish a quorum. Every vote counts!
Accordingly, we urge you to complete the enclosed proxy and return
it to our vote tabulators promptly in the envelope provided. If you
do attend the Annual Meeting and wish to vote in person, you may
withdraw your proxy at that time. You may also elect to vote your
shares by telephone or electronically via the Internet. With
respect to shares held through a broker, bank or nominee, please
follow the separate instructions from your broker, bank or nominee
on how to vote your shares.
Sincerely,
/s/ Michael B.
Jebsen
Michael
B. Jebsen
Interim
Chief Executive Officer
YOUR SHARES CANNOT BE VOTED UNLESS YOU SIGN AND RETURN THE ENCLOSED
PROXY, VOTE YOUR SHARES BY TELEPHONE OR INTERNET, OR ATTEND THE
ANNUAL MEETING IN PERSON.
TENAX THERAPEUTICS, INC.
ONE Copley Parkway, Suite 490
Morrisville, North Carolina 27560
Notice of Annual Meeting of Stockholders
To Be Held on June 14, 2017
To the
Stockholders:
The
stockholders of Tenax Therapeutics, Inc. will hold an annual
meeting (the “Annual Meeting”) on
June 14, 2017
, at 9:00 a.m. at the offices
of Tenax Therapeutics, Inc. located at ONE Copley Parkway, Suite
490, Morrisville, North Carolina, 27560.
The
purpose of the meeting is to propose and act upon the following
matters:
1.
the election of the
six director
nominees described in the
Proxy Statement
to serve as directors until the sooner of
the 2018 Annual Meeting of Stockholders or the election and
qualification of their successors;
2.
the ratification of
the appointment of Cherry Bekaert LLP as our independent registered
public accounting firm for the fiscal year ending December 31,
2017; and
3.
the advisory
(non-binding) approval of Named Executive Officer
compensation.
At the
Annual Meeting we may transact such other business as may properly
come before the meeting or any adjournment thereof.
The
above matters are described in the Proxy Statement accompanying
this notice.
The
Board has fixed the close of business on
April 17, 2017
as the record date for
determining those stockholders who will be entitled to notice of
and to vote at the Annual Meeting. Representation of at least a
majority in voting interest of our common stock, either in person
or by proxy, is required to constitute a quorum for purposes of
voting on the proposals set forth above.
It
is important that your shares be represented at the Annual Meeting
to establish a quorum.
WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
Your proxy may be revoked at any time prior to the time it is voted
at the Annual Meeting.
Your
vote is important, and we appreciate your cooperation in
considering and acting on the matters presented.
By
order of the Board of Directors,
/s/ Nancy J. Hecox
Nancy
J. Hecox, Corporate Secretary
April 28, 2017
TENAX THERAPEUTICS, INC.
PROXY STATEMENT
Important Notice Regarding the Availability of Proxy
Materials
For the Stockholder Meeting to be held on
June 14, 2017
The Notice of Annual Meeting of Stockholders, Proxy Statement, Form
of Proxy, and 2017 Annual Report
to Stockholders are available at
www.iproxydirect.com/TENX
The
board of directors (the “Board of Directors” or the
“Board”) of Tenax Therapeutics, Inc. is asking for your
proxy for use at the 2017 Annual Meeting of Stockholders (the
“Annual Meeting”) and any adjournments of the meeting.
The meeting will be held at the offices of Tenax Therapeutics, Inc.
located at ONE Copley Parkway, Suite 490, Morrisville, North
Carolina, 27560 on June 14, 2017, at 9:00 a.m. local time, to elect
the six director nominees described in this Proxy Statement, to
ratify the appointment of Cherry Bekaert LLP as our independent
registered public accounting firm, to solicit advisory (nonbinding)
approval of named executive officer compensation and to conduct
such other business as may be properly brought before the
meeting.
The Board of Directors recommends that you vote “FOR”
the election of the director nominees listed in this proxy
statement, “FOR” ratification of the appointment of
Cherry Bekaert LLP as our independent registered public accounting
firm, and “FOR” the approval of the resolution
regarding the advisory (nonbinding) vote on named executive officer
compensation.
This
proxy statement and the accompanying proxy card are first being
delivered to stockholders on or about April 28, 2017.
All
references in this Proxy Statement to “Tenax,”
“we,” “our,” and “us” mean
Tenax Therapeutics, Inc. All numbers of shares or share prices
relating to our common stock in this Proxy Statement reflect the
1-for-20 reverse stock split of our common stock on May 10,
2013.
What is the difference between holding shares as a stockholder of
record and as a beneficial owner?
Many of
our stockholders hold their shares through a broker, bank or other
nominee rather than directly in their own name as the stockholder
of record. As summarized below, there are some distinctions between
shares held of record and those owned beneficially.
Stockholder of Record
. If your shares
are registered directly in your name with our transfer agent,
Interwest Transfer Company
(“Interwest”)
, you are considered, with respect
to those shares, the stockholder of record, and these proxy
materials are being sent directly to you by Interwest on our
behalf. As the stockholder of record, you have the right to grant
your voting proxy directly to us or to vote in person at the Annual
Meeting. We have enclosed a proxy card for you to use.
Beneficial Owner
. If your shares are
held in a stock brokerage account or by a bank or other nominee,
you are considered the beneficial owner of shares held in street
name and the proxy materials are being sent to you by your broker
or nominee who is considered, with respect to those shares, the
stockholder of record. As the beneficial owner, you have the right
to direct your broker or nominee on how to vote and are also
invited to attend the Annual Meeting. However, since you are not
the stockholder of record, you may not vote these shares in person
at the meeting unless you receive a proxy from your broker or
nominee. Your broker or nominee has enclosed a voting instruction
card for you to use. If you wish to attend the Annual Meeting and
vote in person, please mark the box on the voting instruction card
received from your broker or nominee and return it to them so that
you can receive a legal proxy to present at the Annual
Meeting.
1
How many votes do I have?
You
are entitled to one vote for each share of our common stock that
you hold.
How is the vote counted?
Votes cast by proxy or in person at the Annual
Meeting will be counted by persons appointed by us to act as
tellers for the meeting. The tellers will count shares represented
by proxies that withhold authority to vote for a nominee for
election as a director only as shares that are present and entitled
to vote for purposes of determining the presence of a quorum. None
of the withheld votes will be counted as votes “for” a
director. Shares properly voted to “abstain” and broker
non-votes on a particular matter are considered as shares that are
entitled to vote for the purpose of determining a quorum but
are generally not
treated as votes
cast for the matter.
Abstentions do not count as a vote
against the proposals.
A broker
non-vote occurs when a broker holding shares for a customer does
not vote on a particular proposal because the broker has not
received voting instructions on the matter from its customer and is
barred by stock exchange rules from exercising discretionary
authority to vote on the matter.
How do I vote?
If
you are a stockholder of record, you may vote using any of the
following methods:
●
Proxy Vote by Mail.
Return the enclosed proxy form by mail
using the enclosed prepaid envelope. Be sure to complete, sign and
date the form before mailing. If you are a stockholder of record
and you return your signed proxy form but do not indicate your
voting preferences, the persons named in the proxy form will
vote
FOR
the election of each director nominated by the
Board of Directors,
FOR
the ratification of the appointment of Cherry
Bekaert LLP as our independent registered public accounting firm
and
FOR
the approval of the resolution regarding the
advisory (nonbinding) vote on named executive officer compensation,
and at the discretion of the persons named in the proxy on any
other matter that comes before the meeting for a
vote.
●
Proxy Vote by
Internet.
You may use the Internet to
transmit your voting instructions up until 11:59 p.m. Eastern
Daylight Time on
June 13, 2017
by going to the website
www.iproxydirect.com/TENX.
Please
have your proxy card in hand when you access the website and follow
the instructions to obtain your records and to create an electronic
voting instruction form.
●
Proxy Vote by
Phone.
You may use any touch-tone telephone to transmit
your voting instructions up until 11:59 p.m. Eastern Daylight Time
on
June 13, 2017
by calling the toll-free number
866-752-VOTE(8683). Have your proxy card in hand when you call and
then follow the instructions.
●
In Person at the Annual
Meeting.
All stockholders may
vote in person at the Annual Meeting. You may also be represented
by another person at the meeting by executing a proper proxy
designating that person.
If
you are a beneficial owner because your shares are held in a stock
brokerage account or by a bank or other nominee, to vote your
shares you must direct your broker, bank or nominee how to vote
your shares by using the voting instructions included in the
mailing you received, or attend the Annual Meeting by following the
directions below under “Who Can Attend the Annual
Meeting?”
What can I do if I change my mind after I vote my
shares?
If
you are a stockholder of record, you may revoke your proxy at any
time before it is voted at the Annual Meeting by:
●
sending
written notice of revocation to our Corporate
Secretary;
2
●
submitting
a new, proper proxy by mail (not by Internet or phone) after the
date of the revoked proxy; or
●
attending
the Annual Meeting and voting in person.
If
you are a beneficial owner of shares, you may submit new voting
instructions by contacting your broker, bank or
nominee.
When is the record date for the Annual Meeting?
The Board has fixed the record date for the Annual
Meeting as of the close of business on
April 17, 2017
.
How many votes can be cast by all stockholders?
There
were 28,236,494 shares of our common stock outstanding on the
record date and entitled to vote at the Annual Meeting. Each share
of common stock is entitled to one vote on each
matter.
What constitutes a quorum?
A
majority of the outstanding shares present or represented by proxy,
or 14,118,247 shares, constitutes a quorum for the purpose of
adopting proposals at the Annual Meeting. If you submit a properly
executed proxy, then you will be considered part of the
quorum.
What vote is required to approve each item?
For
the election of the directors, the six directors who receive the
greatest number of votes cast in person or by proxy will be elected
directors.
The
ratification of
Cherry Bekaert LLP as our independent registered
public accounting firm and the proposal relating to the advisory
(nonbinding) vote on named executive officer compensation each
require approval by a majority of the total votes cast in person or
by proxy. Although ratification is not required by our bylaws or
otherwise, the Board is submitting the selection of Cherry Bekaert
LLP to our stockholders for ratification as a matter of good
corporate practice. If our stockholders do not ratify the
appointment, the Audit and Compliance Committee will reconsider
whether or not to retain Cherry Bekaert LLP but still may retain
them. Even if the selection is ratified, the Audit and Compliance
Committee may change the appointment at any time during the year if
it determines that such change would be in the best interests of us
and our stockholders.
If
there are insufficient votes to approve the proposals, your proxy
may be voted by the persons named in the proxy to adjourn the
Annual Meeting in order to solicit additional proxies in favor of
the approval of such proposals. If the Annual Meeting is adjourned
or postponed for any purpose, at any subsequent reconvening of the
Annual Meeting your proxy will be voted in the same manner as it
would have been voted at the original convening of the Annual
Meeting unless you withdraw or revoke your proxy. Your proxy may be
voted in this manner even though it may have been voted on the same
or any other matter at a previous session of the Annual
Meeting.
Who can attend the Annual Meeting?
All
stockholders as of
April 17,
2017
may attend the Annual Meeting. If you are listed as
stockholder of record you may attend the Annual Meeting if you
bring proof of identification. If you are the beneficial owner of
shares held in street name, you will need to bring proof of
identification and provide proof of ownership by bringing either a
copy of a brokerage statement or a letter from the record holder
indicating that you owned the shares as of
April 17, 2017
.
What does it mean if I receive more than one proxy card or voting
instruction form?
It
means that you have multiple accounts at the transfer agent or with
brokers. Please complete and return all proxy cards or voting
instruction forms to ensure that all of your shares are
voted.
3
What is Tenax Therapeutics’ fiscal year?
We
recently changed our fiscal year end from April 30 to December 31
and filed an Annual Report on Form 10-KT for the eight month
transition period ended December 31, 2015 (“Transition Period
2015”). Our fiscal years ended December 31, 2016, April 30,
2015 and April 30, 2014 are referred to herein as “Fiscal
2016,” “Fiscal 2015,” and “Fiscal
2014,” respectively.
Where can I find more information about Tenax
Therapeutics?
We file
periodic reports with the Securities and Exchange Commission (the
“SEC”) pursuant to Section 13(a) of the Securities
Exchange Act of 1934. Our SEC filings are available from the
SEC’s Internet site at http://www.sec.gov, which contains
reports and other information regarding issuers that file
electronically. Our filings with the SEC are available without
charge on our website (http://www.tenaxthera.com) as soon as
reasonably practicable after filing. Further, the reports filed
with the SEC may be inspected without charge at the SEC’s
Public Reference Room at 100 F Street N.E., Washington, D.C. 20549.
Please call the SEC at (800) 732-0330 for further information on
the Public Reference Room.
Who can help answer my questions about the Annual Meeting or how to
submit or revoke my proxy?
If you
are the stockholder of record, please contact:
Tenax
Therapeutics, Inc.
Attn:
Investor Relations
ONE
Copley Parkway, Suite 490
Morrisville, NC
27560
Telephone: (919)
855-2100
If your
shares are held in street name, please call the telephone number
provided on your voting instruction form or contact your broker
directly.
4
PROPOSAL 1: ELECTION OF DIRECTORS
Nominees for Election as Directors
All six
of the persons nominated for election to the Board of Directors at
the Annual Meeting are currently serving as our directors. We are
not aware of any nominee who will be unable or will decline to
serve as a director. If a nominee becomes unable or declines to
serve, the Board will either select a substitute nominee or reduce
the size of the Board. If you have submitted a proxy and a
substitute nominee is selected, your shares will be voted for
election of the substitute nominee, if any, designated by the Board
of Directors. The term of office of each person elected as a
director will continue
until the
sooner of the 2018 Annual Meeting of Stockholders
or the
election and qualification of their successors.
The
following table lists the nominees for election and information
about each as of
April 28,
2017
:
|
Name
|
|
Age
|
|
Position with Tenax Therapeutics, Inc.
|
|
Director Since
|
|
Ronald R. Blanck, DO
|
|
75
|
|
Chairman
|
|
December 2009
|
|
Anthony A. DiTonno
|
|
68
|
|
Director
|
|
December 2011
|
|
James Mitchum
|
|
64
|
|
Director
|
|
September 2015
|
|
Gregory Pepin
|
|
34
|
|
Director
|
|
August 2009
|
|
Gerald T. Proehl
|
|
58
|
|
Director
|
|
April 2014
|
|
Chris A. Rallis
|
|
63
|
|
Director
|
|
December 2011
|
Ronald R. Blanck, DO
has served as a director since December 2009 and as Chairman since
September 2011. Dr. Blanck has served as chairman of Martin, Blanck
& Associates, a federal health services consulting firm based
in Falls Church, VA since August 2006. Dr. Blanck has also served
as director and chairman of Pyng Medical Corp, a medical device
company since July 2012, as a director of Nanotherapeutics, Inc., a
pharmaceutical manufacturing company since March 2014, and as
chairman of VetFed Resources, Inc., a health solutions provider,
since July 2015. He began his military career in 1968 as a medical
officer and battalion surgeon in Vietnam, retiring 32 years later
as a Lieutenant General and Surgeon General of the U.S. Army and
commander of the U.S. Army Medical Command. He also served as
commander of Walter Reed Medical Center and the North Atlantic
Region Medical Command. His background also includes serving as
president of the University of North Texas Health Science Center at
Fort Worth, chair of the Board of Regents of Uniformed Services
University and Vice-chair of the Education Commission on Foreign
Medical Graduates. Dr. Blank has also been recognized as a Master
of the American College of Physicians.
We
believe Dr. Blanck’s extensive medical background and
treatment of critical care patients qualify him to serve on our
Board and his many leadership positions throughout his military
career qualify him to serve as our Chairman of the
Board.
Dr.
Blanck serves as a member of the Corporate Governance and
Nominating Committee and the Audit and Compliance
Committee.
Anthony A. DiTonno
has served as a
director since December 2011. Since January 2013, Mr. DiTonno has
served as Chief Executive Officer of Avantis Medical Systems, Inc.,
a medical device company that develops and manufactures
catheter-based endoscopic devices. From April 2003 until
December 2011, Mr. DiTonno was President and Chief Executive
Officer of Neurogesx Inc., a biopharmaceutical company based in the
San Francisco Bay area (“Neurogesx”). During his time
at Neurogesx, Mr. DiTonno also served on its board of
directors. Mr. DiTonno has funded companies through a
variety of financial arrangements including private and public
financings, partnerships and debt. He has also been successful in
gaining regulatory approvals in both the United States and European
Union. Previously, he was Executive Vice President of Marketing and
Sales at Enteric Medical Technologies Inc., which was acquired by
Boston Scientific Company; President and Chief Executive Officer of
Lifesleep Systems, Inc.; and Vice President and General Manager of
Olcassen Pharmaceuticals, which was sold to Watson Laboratories.
Early in his career, he held a variety of positions of increasing
responsibility at Rorer Group, Inc. (Rhône Poulenc Rorer) and
Wyeth Laboratories. Mr. DiTonno received an M.B.A. from Drexel
University and a B.S. in Business Administration from St.
Joseph’s University.
5
We
believe that Mr. DiTonno’s extensive corporate experience and
financial background qualify him to serve on our Board and provides
valuable insight to the company.
Mr.
DiTonno serves as chair of the Compensation Committee.
James Mitchum
has
served as a director since September 2015. Mr. Mitchum
has served as the Chief Executive Officer of Heart to Heart
International, a non-profit international humanitarian
organization, since September 2014. From March 2009 to
July 2012, Mr. Mitchum served as President of the Americas for EUSA
Pharma, Inc., where he oversaw the streamlining of that business as
well as the development, FDA approval and successful launch of a
pediatric oncology drug in 2011. From 2005 to 2008, Mr. Mitchum
served as President and Chief Executive Officer of Enturia, Inc., a
privately owned drug-device company, based in Kansas City. From
2003 to 2005, Mr. Mitchum served as the President and Chief
Executive Officer of Sanofi-Aventis Group Japan and was Chief
Executive for Aventis Pharma UK from 2000 through 2002. He served
in many senior financial roles from 1985 until 1999 with HMR and
predecessor companies and was the Corporate Controller for HMR from
1997 until 2000. Mr. Mitchum currently serves as a
director for NephroGenex Inc., a publicly traded company developing
drugs to treat kidney disease. Mr. Mitchum has also served as
a director on numerous private company and organization
boards. Mr. Mitchum earned an MBA in Business from the
University of Tennessee in Knoxville, Tennessee and a Bachelor of
Science degree in Business and Math from Milligan College in
Johnson City, Tennessee.
We
believe that Mr. Mitchum’s experience in managing companies
in the life sciences industry, as well as his financial and
operational expertise, qualify him to serve on our
Board.
Mr.
Mitchum serves as chair of the Audit and Compliance
Committee.
Gregory Pepin
has
served as a director since August 2009. Since October 2013, Mr.
Pepin has served as an independent financial consultant and
managing director for Cedrus Capital LLC, an investment and
business strategy consulting firm, primarily for foreign clients.
From December 2011 until September 2013, Mr. Pepin served as
managing director of FGP Capital France (“FGP”), a
business strategy consulting firm. In May 2010, he co-founded EOS
Investment, Ltd. (“EOS”), an investment company based
in the Cayman Islands, which serves as investment manager of Vatea
Fund, a stakeholder in our company, and as investment manager and
managing director of OXBT Fund, one of our principal stockholders.
EOS serves as the investment manager and the managing director for
two other funds that are not affiliated with us. In May 2010, Mr.
Pepin also co-founded Independent Wealth Management, SA, an
investment management company based in Switzerland, and he served
as a financial analyst for the company until December 2011. From
July 2008 until April 2010, he was engaged as a Senior Vice
President at Melixia SA (“Melixia”), an investment
management company based in Switzerland. During his time at
Melixia, Mr. Pepin’s primary responsibility was to oversee
the formation of Vatea Fund. After establishing Vatea Fund, Mr.
Pepin left Melixia, but has continued to serve as a Managing
Director of Vatea Fund since June 2009. From September 2005 through
the end of June 2008, Mr. Pepin was employed as a consultant in
finance and insurance by Winter & Associates located in Paris,
France. In July 2005, Mr. Pepin earned the degree of Master of
Science and Economy, Finance and Actuaries, from HEC
Lausanne.
We
believe that Mr. Pepin’s investment management experience and
skills qualify him to serve on our Board, and provide the Board
with valuable insight into the investment community.
Mr.
Pepin serves as a member of the Compensation Committee and of the
Corporate Governance and Nominating Committee.
Gerald T.
Proehl
has
served as a director since April 2014. Currently, Mr. Proehl is a
Founder, President, CEO and Director of Dermata Therapeutics, LLC,
a private biotechnology company. From January 2002 to January 2014,
Mr. Proehl was the President, Chief Executive Officer and a
Director of Santarus, Inc. (“Santarus”), a company that
he helped to found in 1999. From March 2000 through
December 2001, Mr. Proehl was President and Chief Operating Officer
of Santarus, and from April 1999 to March 2000, Mr. Proehl was Vice
President, Marketing and Business Development of
Santarus. Mr. Proehl helped lead the sale of Santarus to
Salix Pharmaceuticals for $2.6 billion in January of
2014. Prior to joining Santarus, Mr. Proehl was with HMR
for 14 years where he served in various capacities, including Vice
President of Global Marketing. During his career at HMR he worked
across numerous therapeutic areas, including CNS, cardiovascular,
and gastrointestinal. Mr. Proehl currently serves on the
Board of Directors of Sophiris Bio Inc., a publicly traded company
developing a late-stage, targeted treatment for benign prostatic
hyperplasia, and Ritter Pharmaceuticals, Inc., a publicly traded
company developing therapeutic products that modulate the human gut
microbiome to treat gastrointestinal diseases. Mr.
Proehl also serves on a number of private company boards including
Kinetek Sports, Inc., Patara Pharma, LLC and MDRejuvena,
Inc. Mr. Proehl holds a B.S. in education from the State
University of New York at Cortland, an M.A. in exercise physiology
from Wake Forest University and an M.B.A. from Rockhurst
University.
6
We
believe that Mr. Proehl’s general business and commercial
experience in the pharmaceutical industry, as well as his strong
background in business operations developed through his leadership
at other companies, qualify him to serve on our Board.
Mr.
Proehl serves as chair of the Corporate Governance and Nominating
Committee and as a member of the Compensation
Committee.
Chris A. Rallis
has
served as a director since December 2011. Since January 2008, Mr.
Rallis has served as an Executive-in-Residence at Pappas Ventures,
a life science venture capital firm based in Durham, NC. From April
2006 until June 2007, he was President and Chief Executive Officer
of ImmunoBiosciences, Inc., a vaccine technology company formerly
located in Raleigh, NC. He has served as a consultant for Duke
University and Panacos Pharmaceuticals, Inc., and is the former
President and Chief Operating Officer of Triangle Pharmaceuticals,
Inc. (“Triangle”), which was acquired by Gilead
Sciences in January 2003 for approximately $465 million. While at
Triangle, he participated in 11 equity financings generating gross
proceeds of approximately $500 million. He was also primarily
responsible for all business development activities which included
a worldwide alliance with Abbott Laboratories and the in-licensing
of 10 compounds. Earlier, he served in various business development
and legal management roles with Burroughs Wellcome, Co. Mr. Rallis
serves on the boards of Aeolus Pharmaceuticals and Fennec
Pharmaceuticals (formerly Adherex Technologies) and chairs the
Audit Committee of both boards, both of which are publicly traded
companies. He received his A.B. degree in economics from Harvard
College and a J.D. from Duke University.
We
believe that Mr. Rallis’ strong background in raising
capital, business development and operations developed through his
leadership at other companies operating within the biomedical
industry qualifies him to serve on our Board.
Mr.
Rallis serves as a member of the Audit and Compliance
Committee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE
ELECTION OF EACH OF THE DIRECTOR NOMINEES.
CORPORATE GOVERNANCE MATTERS
Code of Ethics
We have
adopted a Code of Ethics applicable to all of our officers,
directors and employees, including our principal executive officer,
principal financial officer, principal accounting officer,
controller, or persons performing similar functions. A copy of this
code of conduct is posted on our website at
http://investors.tenaxthera.com/corporate_governance. In the event
the code of conduct is revised, or any waiver is granted under the
Code of Ethics with respect to our principal executive officer,
principal financial officer, principal accounting officer,
controller, or persons performing similar functions, notice of such
revision or waiver will be posted on our website or disclosed on a
current report on Form 8-K as required.
Board Composition and Independence of Directors
Our
Board of Directors currently has six members. Dr. Ronald R. Blanck
is our Chairman and Anthony DiTonno, James Mitchum, Gregory Pepin,
Gerald T. Proehl and Chris A Rallis are Directors.
7
In
accordance with the listing rules of The Nasdaq Stock Market LLC
(“NADAQ”), our Board of Directors must consist of a
majority of “independent directors,” as determined in
accordance with NASDAQ Rule 5605(a)(2). The Board has determined
that
current directors
Messrs.
Blanck, DiTonno, Mitchum, Pepin, Proehl and Rallis are independent
directors in accordance with applicable Nasdaq listing rules. The
Board performed a review to determine the independence of the
director nominees and made a subjective determination as to each of
these independent director nominees that no transactions,
relationships, or arrangements exist that, in the opinion of the
Board, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director of our company. In
making these determinations, the Board reviewed the information
provided by the director nominees with regard to each
individual’s business and personal activities as they may
relate to us and our management.
Attendance at Meetings
The
Board met four times during Fiscal 2016, and each of our directors
attended at least 75% of the aggregate of the total number of board
meetings held during the period each has been a director and the
total number of meetings held by all committees on which each
director then served. From time to time the Board also acted
through written consents. We have no formal policy requiring
director attendance at the Annual Meeting, although all directors
are expected to attend the Annual Meeting if they are able to do
so. All six directors of the company who were members of the Board
at the time of the Annual Meeting in 2016 attended the 2016 Annual
Meeting.
Board Leadership Structure
The
Board recognizes that one of its key responsibilities is to
evaluate and determine its optimal leadership structure so as to
provide independent oversight of management. The Board understands
that there is no single, generally accepted approach to providing
Board leadership and that given the dynamic and competitive
environment in which we operate, the right Board leadership
structure may vary as circumstances warrant. Consistent with this
understanding, the independent Directors consider the Board’s
leadership structure on an annual basis. This consideration
includes the pros and cons of alternative leadership structures in
light of our operating and governance environment at the time, with
the goal of achieving the optimal model for effective oversight of
management by the Board.
Currently, Mr.
Jebsen serves as our Interim Chief Executive Officer and Dr.
Blanck, who has been a member of our board since December 2009,
serves as our Chairman of the Board. Based on the Board’s
most recent review of our Board leadership structure, the Board has
determined that this leadership structure is optimal for the
company because it allows Mr. Jebsen to focus on leading our
business and operations and carrying out our strategy, and Dr.
Blanck, our Chairman of the Board, to focus on leading our
Board’s oversight of our strategy and business.
In
considering its leadership structure, the Board has taken a number
of factors into account. The Board, which consists of highly
qualified and experienced directors, a majority of whom are
independent, exercises a strong, independent oversight function.
This oversight function is enhanced by the fact that all of the
Board’s three key Committees—Audit and Compliance,
Compensation, and Corporate Governance and Nominating—are
comprised entirely of independent directors. A number of Board and
Committee processes and procedures, including regular executive
sessions of directors, periodic executive sessions of the
independent directors, and annual evaluations of our Chief
Executive Officer’s performance against pre-determined goals,
provide substantial independent oversight of our Chief Executive
Officer’s performance. The Board believes that these factors
provide the appropriate balance between the authority of those who
oversee the company and those who manage it on a day-to-day
basis.
Board’s Role in Risk Oversight
We
operate in a highly complex and regulated industry and are subject
to a number of significant risks. The Board plays a key role with
respect to our risk oversight, such as determining whether and
under what circumstances we will engage in financing transactions
or enter into strategic alliances and collaborations. The Board is
also involved in our management of risks related to our financial
condition or to the development and commercialization of our
product candidates.
8
One of
the Board’s risk oversight roles is to provide guidance to
management. The Board receives regular business updates from
members of senior management in order to identify matters that
involve operational, financial, legal or regulatory
risks.
To
facilitate its oversight of our company, the Board of Directors has
delegated certain functions (including the oversight of risks
related to these functions) to Board committees. The Audit and
Compliance Committee reviews and discusses with management our
major financial risk exposures and the steps management has taken
to monitor and control such exposures, the Compensation Committee
evaluates the risks presented by our compensation programs and
analyzes these risks when making compensation decisions, and the
Corporate Governance and Nominating Committee evaluates whether the
composition of the Board is appropriate to respond to the risks
that we face. The roles of these committees are discussed in more
detail below.
Although the Board
of Directors has delegated certain functions to various committees,
each of these committees regularly reports to and solicits input
from the full Board regarding its activities.
Standing Committees
Our
Board of Directors has three standing committees: the Audit and
Compliance Committee, the Compensation Committee and the Corporate
Governance and Nominating Committee. Copies of the charters of the
Audit and Compliance, Compensation, and Corporate Governance and
Nominating Committees, as they may be amended from time to time,
are available on our website at
http://www.tenaxthera.com.
The
Board has determined that all of the members of each of the Audit
and Compliance, Compensation, and Corporate Governance and
Nominating Committees are independent as defined under Nasdaq
rules, and, in the case of all members of the Audit and Compliance
Committee, that they meet the additional independence requirements
of Rule 10A-3 under the Securities Exchange Act of
1934.
Audit and Compliance
Committee
.
The
Audit and Compliance Committee’s principal responsibilities
include:
●
overseeing the
accounting and financial reporting processes of our company and
audits of our financial statements;
●
acting on behalf of
the Board in providing oversight with respect to (i) the quality
and integrity of our financial statements and internal accounting
and financial controls; (ii) all audit, review and attest services
relating to our financial statements and internal control over
financial reporting (collectively, “Audit Services”),
including the appointment, compensation, retention and oversight of
the work of the independent auditors engaged to provide Audit
Services to us; and (iii) our compliance with legal and regulatory
requirements;
●
reporting to the
Board on such matters as the Audit and Compliance Committee deems
necessary or appropriate to assure that the Board is informed of
any significant developments within the scope of the Audit and
Compliance Committee’s responsibilities that merit the
attention of the Board;
●
providing the
report required of the Audit and Compliance Committee by the rules
of the SEC for inclusion in our annual proxy
statement;
●
conducting review
and oversight of any related person transactions, other than
related person transactions for which the Board has delegated
review to another independent body of the Board;
and
●
fulfilling such
other responsibilities as may be required of the Audit and
Compliance Committee under applicable laws and
regulations.
9
The
members of the Audit and Compliance Committee are Messrs. Mitchum
and Rallis and Dr. Blanck. Mr. Mitchum serves as chair of the Audit
and Compliance Committee. The Board of Directors has determined
that Messrs. Mitchum and Rallis and Dr. Blanck each qualify as an
“audit committee financial expert” as defined by
applicable SEC rules. The Audit and Compliance Committee met four
times during Fiscal 2016.
Compensation Committee.
The
Compensation Committee’s primary responsibilities
include:
●
assisting the Board
in discharging its overall responsibility relating to executive
officer and director compensation and overseeing and reporting to
the Board as appropriate on our compensation and benefit policies,
programs and plans, including our stock-based compensation
programs;
●
approving the
compensation of all executive officers and recommending
compensation for non-employee directors;
●
engaging and
evaluating any compensation consultants, independent counsel and
other advisers used to assist in the evaluation of director or
executive compensation, including evaluation of the advisors’
independence in advance of engagement
;
●
reviewing our
succession and development plans for executive officers and other
members of senior management; and
●
preparing an annual
report on executive compensation for inclusion in our proxy
statement, if required by applicable laws.
The
members of the Compensation Committee are Messrs. DiTonno, Pepin
and Proehl. Mr. DiTonno serves as chair of the Compensation
Committee. The Compensation Committee met two times during Fiscal
2016.
Corporate Governance and Nominating Committee.
The
Corporate Governance and Nominating Committee’s primary
responsibilities include:
●
identifying
individuals qualified to become directors and recommending that the
Board select the candidates for all directorships to be filled by
the Board or by the stockholders;
●
upon the
recommendation of the Compensation Committee, determining
compensation arrangements for non-employee directors;
●
developing and
recommending to the Board corporate governance principles for our
company; and
●
otherwise taking a
leadership role in shaping the corporate governance of our
company
.
The
members of the Corporate Governance and Nominating Committee are
Messrs. Proehl and Pepin and Dr. Blanck. Mr. Proehl serves as chair
of the Corporate Governance and Nominating Committee. The Corporate
Governance and Nominating Committee met one time during Fiscal
2016.
Processes and Procedures for Executive and Director
Compensation
The
Compensation Committee has the authority to determine and approve
the compensation of the Chief Executive Officer and all other
executive officers, as described in “Compensation Discussion
and Analysis.” The Corporate Governance and Nominating
Committee has authority to determine and approve all matters
pertaining to compensation of our directors. In making its
determination with respect to the compensation of the Chief
Executive Officer, the Compensation Committee considers, among
other things, the Chief Executive Officer’s performance in
light of established corporate goals and objectives. In making its
determination with respect to the compensation of other executive
officers, the Compensation Committee takes into account, among
other things, each executive officer’s performance in light
of established goals and objectives as well as the recommendations
of the Chief Executive Officer. The Chief Executive Officer has no
input and may not be present during voting or deliberations about
his compensation. In addition, the Compensation Committee has
engaged Arnosti Consulting, Inc. (“Arnosti
Consulting”), an independent executive compensation
consultant, to provide advice to it regarding the compensation of
our executive officers. Arnosti Consulting focuses on executive
compensation and does not provide services other than those related
to executive compensation and benefits. In making its determination
with respect to director compensation, the Corporate Governance and
Nominating Committee considers, among other things, the
Compensation Committee’s recommendation, the Board’s
overall level of performance, the individual director’s
participation in committees, the compensation paid to other
director’s in similarly situated companies, and our financial
growth.
10
Our
Compensation Committee may delegate its authority to the chair of
the committee to the extent it deems necessary to finalize matters
as to which the committee has given its general
approval.
The
Compensation and Corporate Governance and Nominating Committees
have the authority to retain compensation consultants and other
outside advisors to assist in discharging their responsibilities.
The recommendations of such consultants are considered in
conjunction with the other considerations listed above. As more
fully described in “Compensation Discussion and
Analysis,” our Compensation Committee looks to Arnosti
Consulting to analyze our executive compensation structure and plan
designs, and to assess whether the compensation programs are
competitive with the market and support the Compensation
Committee’s goal to align stockholders’ interests with
those of our executive officers. To ensure Arnosti
Consulting’s independence, Arnosti Consulting reports
directly to our Compensation Committee and works specifically for
the committee solely on compensation and benefits.
Procedures for Director Nominations
Under the charter of the Corporate
Governance and Nominating Committee, the Committee is responsible
for
identifying from a wide field of candidates, including
women and minority candidates, and recommending that the Board
select qualified candidates for membership on the Board.
In evaluating the
suitability of individual director candidates, the Committee
takes into account such factors as it considers appropriate, which
may include (i) ensuring that the Board, as a whole, is diverse as
to race, gender, culture, thought and geography, such that the
Board reflects a range of viewpoints, backgrounds, skills,
experience and expertise, and consists of individuals with relevant
technical skills, industry knowledge and experience, financial
expertise and local or community ties; (ii) minimum individual
qualifications, including strength of character, mature judgment,
relevant career experience, independence of thought and an ability
to work collegially; (iii) questions of independence, possible
conflicts of interest and whether a candidate has special interests
or a specific agenda that would impair his or her ability to
effectively represent the interests of all stockholders; (iv) the
extent to which the candidate would fill a present need on the
Board; and (v) whether the candidate can make sufficient time
available to perform the duties of a director.
The Corporate
Governance and Nominating Committee implements and assesses the
effectiveness of these factors and the Board’s commitment to
diversity by considering these factors in our assessment of
potential director nominees and the overall make-up of our
Board.
In
determining whether to recommend a director for re-election, the
Committee will consider the director’s past attendance at
meetings and participation in and contributions to the activities
of the Board.
The
Corporate Governance and Nominating Committee does not set
specific, minimum qualifications that nominees must meet in order
to be recommended to the Board, but rather the Board believes that
each nominee should be evaluated based on his or her individual
merits, taking into account the needs of our company and the
composition of the Board. The Corporate Governance and Nominating
Committee conducts appropriate inquiries into the backgrounds and
qualifications of possible nominees, and investigates and reviews
each proposed nominee’s qualifications for service on the
Board. The Corporate Governance and Nominating Committee may engage
outside search firms to assist in identifying or evaluating
potential nominees.
11
The
Corporate Governance and Nominating Committee will consider
candidates recommended by stockholders. It is the policy of the
Corporate Governance and Nominating Committee that candidates
recommended by stockholders will be given appropriate consideration
in the same manner as other candidates. The procedure for
submitting candidates for consideration by the Corporate Governance
and Nominating Committee for election at our 2018 Annual Meeting is
described under “Other Matters—Stockholder
Proposals.”
Stockholder Communications with Directors
It is
the policy of our company and the Board to encourage free and open
communication between stockholders and the Board. Any stockholder
wishing to communicate with the Board should send any communication
to Tenax Therapeutics, Inc., Attn: Corporate Secretary, ONE Copley
Parkway, Suite 490, Morrisville, North Carolina 27560. Any such
communication must be in writing and must state the number of
shares beneficially owned by the stockholder making the
communication. Our Corporate Secretary will forward such
communication to the full Board or to any individual director or
directors to whom the communication is directed unless the
communication is unduly hostile, threatening, illegal, or similarly
inappropriate, in which case the Corporate Secretary has the
authority to discard the communication or take appropriate legal
action regarding the communication. This policy is not designed to
preclude other communications between the Board and stockholders on
an informal basis.
12
AUDIT COMMITTEE REPORT
The
Audit and Compliance Committee has reviewed our audited financial
statements for the year ended December 31, 2016, and has discussed
these statements with management. The Audit and Compliance
Committee has also discussed with Cherry Bekaert LLP, our
independent registered public accounting firm during the year ended
December 31, 2016, the matters required to be discussed by the
Public Company Accounting Oversight Board Auditing Standard No.
1301, Communications with Audit Committees.
The
Audit and Compliance Committee also received from Cherry Bekaert
LLP the written disclosures and the letter required by PCAOB Ethics
and Independence Rule 3526 (Communication with Audit Committees
Concerning Independence), and discussed with them their
independence.
Based
on the review and discussions noted above, the Audit and Compliance
Committee recommended to the Board that the audited financial
statements be included in our Annual Report on Form 10-K for the
year ended December 31, 2016, for filing with the SEC.
With
respect to the above matters, the Audit and Compliance Committee
submits this report.
James
Mitchum
Chris
A. Rallis
Ronald
R. Blanck
13
MANAGEMENT
The names and ages of our executive officers as of
April 28, 2017 are listed below. Our executive officers are
appointed by our Board of Directors to hold office until their
successors are
duly appointed and qualified, or until their
resignation, retirement, death, removal, or
disqualification
.
The
information appearing below and certain information regarding
beneficial ownership of securities by certain executive officers
contained in this proxy statement has been furnished to us by the
executive officers.
|
Name
|
|
Age
|
|
Position
|
|
Michael
B. Jebsen, CPA
|
|
45
|
|
President, Interim Chief Executive Officer and Chief Financial
Officer
|
Michael B.
Jebsen
joined our company as
our Accounting Manager in April 2009, and was elected Chief
Financial Officer, Executive Vice President Finance and
Administration in August 2009 and was appointed as Interim Chief
Executive Officer on April 3, 2017. Mr. Jebsen also served as our
Interim Chief Executive Officer from August 2011 until November
2013. Before joining us, he was an auditor with Grant Thornton, LLP
from July 2003 through December 2005 and from April 2008 through
April 2009. In addition, he held various positions, including Chief
Ethics Officer, Senior Internal Auditor, and Senior Financial
Analyst with RTI International, a non-profit research and
development organization, from January 2006 to February 2008. Mr.
Jebsen holds a Master of Science in Accounting from East Carolina
University and is a Certified Public Accountant, licensed in North
Carolina.
EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
The
following discussion and analysis describes our executive
compensation philosophy, components and policies, including
analysis of the compensation earned by our named executive officers
(the “Named Executive Officers”) in Fiscal
2016.
The
following executives were our Named Executive Officers serving
during Fiscal 2016:
|
Name
|
|
Position
|
|
|
|
|
|
John P. Kelley
|
|
Former
Chief Executive Officer
|
|
|
|
|
|
Michael
B. Jebsen
|
|
President,
Interim Chief Executive Officer and Chief Financial
Officer
|
Mr.
Kelley served as our Chief Executive Officer until April 3, 2017,
at which time, Mr. Jebsen was appointed as our Interim Chief
Executive Officer.
This
discussion and analysis is comprised of the following sections
explaining the decisions that were made in determining the
compensation for each Named Executive Officer during Fiscal
2016:
(1)
Executive Summary
: highlights our
compensation philosophy and elements, and Fiscal 2016 performance
and pay;
(2)
Compensation Philosophy and Objectives
:
discusses the philosophy behind our compensation
practices;
(3)
Compensation Process
: discusses how
each element of compensation is determined; and
(4)
Elements of Executive Compensation and
Analysis of Fiscal 2016 Compensation Decisions
: provides
greater detail on each element of compensation and the individual
compensation of each Named Executive Officer.
Executive Summary
The
Compensation Committee is responsible for assisting the Board in
determining executive officer compensation and overseeing and
reporting to the Board as appropriate on our compensation and
benefit policies, programs and plans, including our stock-based
compensation programs. The Compensation Committee is also
responsible for engaging and evaluating any compensation
consultants, independent counsel and other advisers used to assist
in the evaluation of director or executive
compensation.
14
In
making its determination with respect to the compensation of the
Chief Executive Officer and other executive officers, the
Compensation Committee considers, among other things, the
officers’ performance against pre-established operational
goals and objectives. In making its determination with respect to
the compensation of other executive officers, the Compensation
Committee also takes into account the recommendations of the Chief
Executive Officer.
We
compensate our executive officers generally through a mix of (i)
base salary, (ii) annual cash bonus based on achievement of
predetermined operational goals and (iii) long-term equity
compensation, in the form of options or restricted common stock.
Our executive compensation program is designed to attract, retain
and motivate talented executive officers who are capable of
providing leadership, innovation and implementation necessary to
achieve our corporate objectives. The Compensation Committee
believes that executive officer compensation should align the
interests of the executive officers with those of our stockholders
and provide individual executive officers with the opportunity to
earn compensation at levels that are competitive with executives in
comparable jobs at comparable companies within our peer company
group.
During
Fiscal 2016, the Compensation Committee engaged Arnosti Consulting,
Inc. (“Arnosti Consulting”), an independent executive
compensation consultant, to analyze our executive compensation
structure and plan designs, and to assess whether the compensation
programs are competitive with the market and support the
Compensation Committee’s goal to align stockholders’
interests with those of the Named Executive Officers. Arnosti
Consulting also provided the Compensation Committee with market
data derived from our peer companies, which the Compensation
Committee referenced when determining compensation for the Named
Executive Officers.
Key
actions the Compensation Committee took during Fiscal 2016 with
respect to the Named Executive Officers are summarized below. These
actions are discussed in depth below under “Elements of
Executive Compensation and Analysis of Fiscal 2016 Compensation
Decisions.”
●
Base salaries
.
The
2016 base salaries of Mr. Kelley and Mr. Jebsen remained the same
as their 2015 base salaries, as such amounts, when combined with
potential bonus payments, continued to fall at or below the
60
th
percentile of the “market data” (as such term is
described and defined in “Role of Benchmarking and
Comparative Analysis” below).
●
Cash bonus
. The Compensation
Committee determined that each of Mr. Kelley and Mr. Jebsen
achieved approximately 90% of the pre-established operational goals
during Fiscal 2016. Accordingly, the Compensation Committee awarded
Mr. Kelley with a bonus of $290,250, but determined that half would
be paid in cash and half would be paid in the form of a stock
grant, and awarded Mr. Jebsen a cash bonus of
$146,250.
●
Long-term equity compensation
.
The Compensation Committee granted equity awards to Mr. Kelley and
Mr. Jebsen, recognizing that such equity compensation aligns
executives’ interests with stockholders’ interests,
emphasizes long-term financial and operational performance, and
helps retain key executives.
Compensation Philosophy and Objectives
The
Compensation Committee believes that the compensation packages
provided to our Named Executive Officers should typically include
both cash and, when appropriate, stock-based compensation and
should, in part, be correlated with our results to reward
performance as measured against established operational goals. For
Fiscal 2016, the Compensation Committee endeavored to create
compensation packages for our Named Executive Officers with the
general goal that a substantial portion of such individuals’
total cash compensation would be at risk, and would generally only
be earned by the executives if they achieved the predetermined
operational goals set by the Compensation Committee.
15
For
Fiscal 2016, the Compensation Committee generally targeted total
compensation for our Named Executive Officers to be between the
25
th
and
50
th
percentiles of the market data. In setting Fiscal 2016 compensation
for our Named Executive Officers, the Compensation
Committee:
●
evaluated each
element of compensation as compared to executives in similar roles
in the Peer Group (as defined below);
●
assessed the
performance of the Named Executive Officers, and considered the
scope of responsibility and strategic impact of their respective
roles within our company;
●
emphasized variable
and performance-based compensation to motivate executives to
achieve our business objectives and align pay with the market and
performance; and
●
assessed whether
our Named Executive Officers had sufficient equity interests in our
company to ensure their alignment with stockholder
interests.
Compensation Process
Role of Say-on-Pay Vote
At our
2015 Annual Meeting of Stockholders, approximately 98% of our
stockholders who voted on the say-on-pay proposal approved the
compensation of our Named Executive Officers. The Compensation
Committee believes that this vote endorses our compensation
philosophy and programs. Due to the support received and the
relative similarities from year-to-year in our executive
compensation structures, the 2015 advisory vote has had no
measurable impact on our deliberations approving our current
executive compensation programs. The Compensation Committee will
continue to monitor stockholder feedback and the outcome of this
year’s and our future say-on-pay proposal votes as it reviews
and establishes future executive compensation plans and determines
awards for our Named Executive Officers.
Executive Officers’ Roles
No
executive officer, including our Chief Executive Officer, provides
input to the Compensation Committee in setting his own
compensation. However, in making its determination with respect to
the compensation of our other executive officers, the Compensation
Committee takes into account the recommendations of the Chief
Executive Officer, who is responsible for annually evaluating the
performance of the executive officers (except himself) and making
recommendations to the Compensation Committee based on those
reviews for the compensation of those executives. The Chief
Executive Officer’s recommendations are one factor the
Compensation Committee considers in making final compensation
decisions.
Role of Compensation Consultant
The
Compensation Committee has engaged Arnosti Consulting to act as its
independent compensation consultant. The Compensation Committee has
assessed Arnosti Consulting’s independence and determined
that Arnosti Consulting had no conflicts of interest in connection
with its provision of services to the Compensation Committee.
Arnosti Consulting reports directly to the Compensation Committee
and works with management only at the Compensation
Committee’s direction. During Fiscal 2016, Arnosti Consulting
was given the directive to analyze our executive compensation
structure and plan designs, and to assess whether the compensation
programs are competitive with the market and support the
Compensation Committee’s goal to align the Named Executive
Officers’ interests with those of our stockholders. Arnosti
Consulting also provided the Compensation Committee with market
data, which the Compensation Committee reviewed as part of the
information used to determine compensation for the Named Executive
Officers.
Role of Benchmarking and Comparative Analysis
During
Fiscal 2016, the Compensation Committee used market analyses
provided by Arnosti Consulting as a reference point to evaluate the
competitiveness of our compensation packages for the executive
officers. Arnosti Consulting developed a market overview (referred
to herein as “market data”) using data from public
company filings from a select peer group (the “Peer
Group”). Jobs of similar scope and responsibility as those at
the Peer Group companies are identified and a market overview is
created for each of the executive officer roles. The Compensation
Committee used this market data to analyze base salary, short-term
cash incentive compensation and long-term equity compensation for
Fiscal 2016.
16
Arnosti
Consulting worked with the chair of the Compensation Committee,
with input from management, to select the Peer Group based on the
following criteria:
●
comparable market
capitalization;
●
comparable
development stage; and
●
comparable number
of employees.
The
Compensation Committee intends to review the Peer Group each year
to determine if companies should be added or removed from the Peer
Group list. Based on the criteria listed above, Arnosti Consulting
and the chair of the Compensation Committee recommended that the
Compensation Committee should include, and the Compensation
Committee approved, the following companies:
|
Advaxis, Inc.
|
Ocera Therapeutics, Inc.
|
|
Akebia Therapeutics, Inc.
|
Opexa Therapeutics, Inc.
|
|
Anthera Pharmaceuticals Inc.
|
Pain Therapeutics, Inc.
|
|
Arqule Inc.
|
Paratek Pharmaceuticals, Inc.
|
|
Arrowhead Research Corporation
|
Proteon Therapeutics, Inc.
|
|
Athersys, Inc.
|
Repros Pharmaceuticals, Inc.
|
|
CEL-SCI Corporation
|
Rigel Pharmaceuticals, Inc.
|
|
Celsion Corporation
|
Sunesis Pharmaceuticals, Inc.
|
|
Eleven Biotherapeutics, Inc.
|
TG Therapeutics, Inc.
|
|
Inotek Pharmaceuticals, Inc.
|
Threshold Pharmaceuticals, Inc.
|
|
Nivalis Therapeutics, Inc.
|
Trevena, Inc.
|
In
September 2016, the Compensation Committee evaluated our Named
Executive Officer compensation against the compensation for similar
officers of the Peer Group through the last completed fiscal years
for which data was available. The Compensation Committee determined
that compensation of our Named Executive Officers should track
approximately to the relative market capitalization of our company
compared to the other companies in the Peer Group, which was
between the 25
th
and 50
th
percentile.
Determination of Objectives
At a
meeting shortly after the end of the fiscal year, the Compensation
Committee approves one or more operational goals that align with
our strategic goals for the coming fiscal year. The operational
goals, and their respective weighting, approved by the Compensation
Committee for Fiscal 2016 included the following:
●
achievement of
certain milestones related to our Phase III trial for levosimendan
(50%);
●
achievement of
certain milestones related to the ongoing LeoPARDS Trial
(Levosimendan for the Prevention of Acute oRgan Dysfunction in
Sepsis) (20%);
●
the implementation
and execution of a pediatric strategy (10%);
●
achievement of
certain business development goals (10%); and
●
finalization of
plans for commercialization (10%).
17
Each
Named Executive Officer’s performance is assessed against
these goals and objectives. Achievement of these pre-determined
operational objectives determines the eventual cash bonus
payouts.
Elements of Executive Compensation and Analysis of Fiscal 2016
Compensation Decisions
The
primary elements of our Named Executive Officer compensation are
described below. The term “market data” is described
under “Role of Benchmarking and Comparative Analysis”
above.
|
Compensation Element
|
|
Purpose
|
|
Approach
|
|
Base Salary
|
|
Annual cash compensation for services rendered during the
year.
|
|
Competitive market ranges are established using
original data from the peer companies. The Committee focused on the
25
th
to 50
th
percentile as the most relevant range
for decision-making. Actual executive salary is based on a holistic
assessment by the Compensation Committee of the scope of position,
experience, overall contributions to our company's success and
individual performance and may be outside of this
range.
|
|
|
|
|
|
|
|
Cash Bonus
|
|
Annual cash payments for achievement of predetermined
operational
goals and
objectives.
|
|
Target annual cash bonus, as a percentage of a Named Executive
Officer’s base salary, is established based on a review and
evaluation of the market data. Actual payout is linked directly to
the achievement of specified predetermined goals and objectives.
The target annual cash bonus is based on 100% achievement of goals
(with no cap on the bonus for greater than 100% achievement of
goals and no pre-identified threshold amount).
|
|
|
|
|
|
|
|
Long-term Equity Compensation
|
|
Stock options or restricted common stock that are designed to drive
Named Executive Officers’ focus on long-term growth and
increased stockholder value.
|
|
Equity award grants are established based on a review and
evaluation of the market data and corporate performance. Equity
levels vary among participants based on position and current equity
interests.
|
Base Salary
We use
base salaries to recognize the experience, skills, knowledge and
responsibilities of our employees, including the Named Executive
Officers. The Compensation Committee annually reviews and evaluates
the base salaries of the Named Executive Officers for adjustments
based on the scope of each executive officerís
responsibilities, individual contribution, prior experience and
sustained performance. Base salaries are also reviewed and
adjusted, as deemed appropriate, in other circumstances, such as
significant changes in responsibility. The Named Executive Officers
are not entitled to any specific base salary increase in any given
year. In making decisions regarding salary increases, the
Compensation Committee may also draw on the Peer Group market data
reviewed by the Compensation Committee. During Fiscal 2016, the
Compensation Committee determined that total compensation of our
Named Executive Officers should be in line with the relative market
cap of our company compared to the other companies in the Peer
Group, which was between the 25
th
and 50
th
percentile.
Accordingly, the Compensation Committeeís review of the market
data and our companyís overall performance resulted in a
determination that our Chief Executive Officerís and our Chief
Financial Officerís annual base salaries remain at $430,000
and $325,000, respectively. The resulting annual base salaries for
our Chief Executive Officer and Chief Financial Officer placed at
approximately the 15
th
and 25
th
percentiles,
respectively, of the relevant Peer Group market data.
18
The
following table sets forth the annual base salaries of the Named
Executive Officers as of December 31, 2016, December 31, 2015 and
April 30, 2015, as well as the percentage increase from the
Transition Period 2015 to Fiscal 2016:
|
Name
|
Fiscal 2015 Base Salary
|
Transition Period 2015 Base Salary
|
Percent Increase
|
Fiscal 2016 Base Salary
|
|
John
P. Kelley
|
$
330,000
|
$
430,000
|
0.0
%
|
$
430,000
|
|
Michael
B. Jebsen
|
$
285,000
|
$
325,000
|
0.0
%
|
$
325,000
|
Cash Bonus
We use
annual cash bonuses to compensate the Named Executive Officers for
the achievement of our
specified
predetermined goals and objectives.
Under each of their
employment agreements, during Fiscal 2016 Mr. Kelley and Mr. Jebsen
were eligible to receive annual cash bonuses based on achievement
of annual goals. During Fiscal 2016, Mr. Kelley and Mr. Jebsen were
eligible to receive a target cash bonus consisting of 75% and 50%,
respectively, of their base salaries, based on 100% achievement of
the predetermined operational goals. There is no cap on the bonuses
for greater than 100% achievement of goals, and there is no
pre-identified threshold amount that must be achieved to receive
any cash bonus payment.
The
following table shows the Fiscal 2016 target annual cash bonus
amount calculated as a percentage of the annual base salary for
which each of Mr. Kelley and Mr. Jebsen was eligible.
|
Name and Principal Position
|
Fiscal 2016 Target Bonus Amount Percentage
|
Fiscal 2016 Target Bonus Amount
|
|
John
P. Kelley
|
75
%
|
$
322,500
|
|
Michael
B. Jebsen
|
50
%
|
$
162,500
|
As
stated above, during Fiscal 2016, the Compensation Committee
determined that compensation of our Named Executive Officers should
be in line with 25
th
and 50
th
percentile of our
Peer Group. Accordingly, the Compensation Committee’s review
of the market data and our company’s overall performance
resulted in a determination to (i) maintain our Chief Executive
Officer’s target annual cash bonus at 75% of his base salary
and (ii) maintain our Chief Financial Officer’s target annual
cash bonus at 50% of his base salary. In effect, the resulting
target annual cash bonuses for our Chief Executive Officer and
Chief Financial Officer placed annual total cash compensation at
approximately the 35
th
and 60
th
percentiles,
respectively, of the relevant Peer Group market data.
The
Compensation Committee determined that each of Mr. Kelley and Mr.
Jebsen achieved approximately 90% of the pre-established
operational goals for Fiscal 2016. Accordingly, the Compensation
Committee awarded Mr. Kelley an annual bonus of $290,250, but
determined that half would be paid in cash and half would be paid
in the form of a stock grant, and awarded Mr. Jebsen a cash bonus
of $146,250.
The
Compensation Committee determined that during the fiscal year
ending December 31, 2017, Mr. Kelley and Mr. Jebsen would be
eligible to receive a target cash bonus consisting of 75% and 50%,
respectively, of their base salaries, based on 100% achievement of
the predetermined operational goals. There is no cap on the bonuses
for greater than 100% achievement of goals, and there is no
pre-identified threshold amount that must be achieved to receive
any cash bonus payment.
The
establishment and approval of operational goals for the year ending
December 31, 2017, will be developed and approved by the
Compensation Committee once we have had an opportunity to analyze
the results of the recently completed Phase III trial for
levosimendan, including the feedback provided by the FDA and to
conduct a review of available strategic alternatives.
19
Long-term Equity Compensation
In
December 2016, the Compensation Committee established an equity
awards policy, which it believed would appropriately align the
interests of the Named Executive Officers with the interests of our
stockholders, drive appropriate performance, be market competitive
and be effective for retention purposes. The Compensation
Committee’s considerations included:
●
market data
regarding the long-term incentive design among the Peer Group
companies;
●
the appropriate way
to incentivize executives toward the success of our
company;
●
the portfolio of
existing long-term incentive awards and their combined influence on
focusing executive behavior on critical activities;
●
the availability of
shares under shareholder approved plans; and
●
the views of the
larger proxy advisory services.
As a
result of its analysis, and with input from its independent
compensation consultant, the Compensation Committee developed an
equity awards policy for 2016 that utilized stock
options.
Management, with
the assistance of the independent compensation consultant presented
multiple factors to the Compensation Committee for consideration,
noting, among other things, that all companies in the Peer Group
provided time-vested equity awards to assure that there are
sufficient performance and retention incentives for their
executives. After considering the market data, the pros and cons of
the alternatives presented by management and the appropriate use of
equity, the Compensation Committee determined to include
performance- and time-based equity awards for 2016.
After
assessing all appropriate factors, in December 2016, the
Compensation Committee granted 240,000 and 150,000 stock options to
Mr. Kelley and Mr. Jebsen, respectively. Mr. Kelley’s stock
options were made in two separate grants. The first grant of
120,000 stock options will vest over three years, with 34% vesting
on December 15, 2017 and 33% vesting on each of December 15, 2018
and 2019, provided, however, that no portion of the stock options
will vest unless a new drug application for levosimendan has been
filed with the U.S. Food and Drug Administration on or before May
31, 2017. Mr. Kelley’s second grant of 120,000 stock options
and Mr. Jebsen’s grant of 150,000 stock options will vest in
four equal annual instruments beginning on December 15, 2017. All
of the options granted to Mr. Kelley and Mr. Jebsen have a term of
ten years and an exercise price of $2.07.
Benefits and Other Compensation
We
maintain broad based benefits that are provided to all employees,
including health and dental insurance. Our executive officers are
eligible to participate in all of our employee benefit plans, in
each case, on the same basis as other employees.
Severance and Change-of-Control Benefits
Pursuant to
employment agreements we have entered into with the Named Executive
Officers, each such officer is entitled to specified benefits in
the event of the termination of his employment under specified
circumstances, including termination following a change in control
of our company. We have provided more detailed information about
these benefits, along with estimates of their value under various
circumstances, under the caption “—Employment and other
Contracts” below.
Summary of Compensation
The following table provides certain summary
information concerning compensation earned for services rendered in
all capacities to us for the fiscal years or transition period
indicated, by our Named Executive Officers. We had no other
executive officers during any part of
Fiscal
2016
. This information includes the
dollar values of base salaries, bonus awards, restricted stock,
stock options and all other compensation, if any, whether paid or
deferred.
The
amounts for Mr. Kelley and Mr. Jebsen under the Option Awards
column for Fiscal 2014 below reflect option grants made pursuant to
their respective employment agreements, which were negotiated in
connection with our acquisition of a license for levosimendan in
our transaction with Phyxius Pharma, Inc. in November 2013. Prior
to the acquisition of our license for levosimendan, our stock price
was approximately $1.50 per share of common stock, however the
amounts indicated in the Option Awards column for Fiscal 2014 below
are based upon a stock price of approximately $5.65 per share of
common stock.
20
In
addition, at the time Mr. Jebsen was first appointed as interim
Chief Executive Officer in August 2011, the Board determined that,
upon completion of his service as interim Chief Executive Officer,
he would be eligible to receive a discretionary bonus based upon
his performance as interim Chief Executive Officer. In November
2013, Mr. Jebsen’s initial term of service as interim Chief
Executive Officer was complete, with the appointment of Mr. Kelley
as Chief Executive Officer following the Phyxius transaction.
Following a review of Mr. Jebsen’s performance as interim
Chief Executive Officer, and in light of his long period of service
in that role, the Board awarded Mr. Jebsen a discretionary bonus
consisting of $225,000 in cash and 32,143 shares of restricted
common stock. These amounts are reflected in the Bonus and Stock
Awards columns for Fiscal 2014 below.
Summary Compensation Table
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus ($)
|
Stock
Awards
(1)
($)
|
Option
Awards
(1)
($)
|
Non-Equity Incentive
Plan
(2)
($)
|
All Other
Compensation
(3)
($)
|
Total ($) |
|
John
P. Kelley
|
Fiscal
2016
|
430,000
|
—
|
—
|
373,068
|
290,250
(45)
|
—
|
1,093,318
|
|
Former Chief Executive Officer
(4)
|
Transition
Period 2015
|
286,667
|
—
|
—
|
—
|
159,000
|
—
|
445,667
|
|
|
Fiscal
2015
|
330,000
|
—
|
—
|
—
|
148,500
|
—
|
478,500
|
|
|
Fiscal
2014
|
151,250
|
—
|
—
|
3,954,628
|
82,500
|
—
|
4,188,378
|
|
Michael B. Jebsen, CPA
(6)
|
Fiscal
2016
|
325,000
|
—
|
—
|
233,168
|
146,250
|
—
|
704,418
|
|
President,
Interim Chief Executive Officer and Chief Financial
Officer
|
Transition
Period 2015
|
216,667
|
—
|
—
|
—
|
81,000
|
—
|
297,667
|
|
|
Fiscal
2015
|
285,000
|
—
|
2,141
(7)
|
—
|
128,250
|
9,600
|
424,991
|
|
|
Fiscal
2014
|
309,375
|
225,000
|
332,150
|
3,954,628
|
176,150
|
9,600
|
5,007,003
|
(1)
The amounts in
these columns reflect the aggregate grant date fair value of awards
granted during the year computed in accordance with Financial
Accounting Standards Board ASC Topic 718, Compensation —
Stock Compensation. The assumptions made in determining the fair
values of our stock and option awards are set forth in Note G to
our Financial Statements included in our Form 10-K for Fiscal 2016,
filed with the SEC on March 16, 2017.
(2)
These payments were
made based on achievement of annual goals in accordance with each
of Mr. Kelley’s and Mr. Jebsen’s employment agreement,
which is described below in the section entitled “Employment
and other Contracts.”
(3)
The amounts in this
column represent payments for automobile allowances issued in
accordance with the terms of Mr. Jebsen’s employment
agreement, which is described below in the section entitled
“Employment and other Contracts.”
(4)
On April 3, 2017,
Mr. Kelley resigned as our Chief Executive Officer and as a
director.
(5)
$145,125, or 50%,
of this payment was settled by a grant of 213,420 shares of common
stock, with the remainder of $145,125 paid in cash.
(6)
Mr. Jebsen served
as our Interim Chief Executive Officer from August 2011 until
November 2013. In connection with such service, Mr. Jebsen received
additional compensation of $10,000 per month. Mr. Jebsen’s
salary for Fiscal 2014 reflects the additional compensation he
received during the portion of Fiscal 2014 in which he served as
our Interim Chief Executive Officer.
(7)
Represents the
grant date fair value of the shares issued in accordance with the
terms of Mr. Jebsen’s employment agreement, which is
described below in the section entitled “Employment and other
Contracts.”
21
Employment and other Contracts
John P. Kelley
In
connection with Mr. Kelley’s appointment as Chief Executive
Officer, we entered into an employment agreement with Mr. Kelley
effective as of November 13, 2013 (the “Kelley Employment
Agreement”). Under the Kelley Employment Agreement, Mr.
Kelley received an annual base salary of $330,000. Mr. Kelley also
received participation in medical insurance, dental insurance and
other benefit plans on the same basis as our other officers. Under
the Kelley Employment Agreement, Mr. Kelley also received an annual
cash bonus consisting of 50% of his base salary, based on 100%
achievement of annual goals (with no cap on the bonus for greater
than 100% achievement of goals). The Kelley Employment Agreement
also provided for the Kelley Contingent Option Award described
below.
On June
18, 2015, we entered into an amendment to the Kelley Employment
Agreement. The amendment to Mr. Kelley’s employment agreement
increased his base salary to $430,000 from $330,000, effective as
of May 1, 2015, and also increased his target annual cash bonus to
75% of his base salary, based on 100% achievement of annual goals
(with no cap on the bonus for greater than 100% achievement of
goals).
The
Kelley Employment Agreement was effective for a one-year term, and
automatically renewed for additional one-year terms, unless the
Kelley Employment Agreement was terminated in advance of renewal or
either party gave notice at least 90 days prior to the end of the
then current term of an intention not to renew.
Pursuant to Kelley
Employment Agreement, Mr. Kelley received a one-time non-statutory
stock option grant of 893,220 shares of common stock in April 2014,
following stockholder approval of the amendment to the 1999 Stock
Plan to increase the amount of stock options authorized for
issuance under the 1999 Stock Plan to 4,000,000 shares of common
stock (the “Kelley Contingent Option
Award”).
On
April 3, 2017, Mr. Kelley resigned as our Chief Executive Officer
and as a director effective immediately. In connection with his
resignation, Mr. Kelley entered into a Separation and General
Release Agreement (the “Separation Agreement”), dated
April 7, 2017.
Under
the Separation Agreement, Mr. Kelley is entitled to receive
severance in an amount equal to one year of his current base annual
salary and a pro-rated amount of his annual bonus that would have
been received had 100% of his annual goals been achieved (less
applicable taxes and withholdings), payable in a lump sum on the
60th day following the date of his resignation in exchange for a
standard release of employment claims. We will also reimburse COBRA
premiums for coverage of Mr. Kelley and his eligible dependents for
up to 12 months if Mr. Kelley timely and properly elects
continuation coverage. The Separation Agreement also contains such
confidentiality provisions and other terms and conditions as are
usual and customary for agreements of this type. All of Mr.
Kelley’s obligations under his Employee Non-Disclosure,
Inventions Assignment, and Competitive Business Activities
Agreement, dated November 13, 2013, regarding confidentiality and
proprietary information will continue.
Pursuant to the
Separation Agreement, for the 12-month period following the date of
his resignation, Mr. Kelley will provide consulting services as may
be reasonably requested by us. The parties intend that such
services shall not exceed 20% of Mr. Kelley’s average amount
of work time during the 36 month period prior to the date of his
resignation. Mr. Kelley will be paid a consulting rate of $500 per
hour for all services provided during the consulting
period.
Michael B. Jebsen
Pursuant to the
employment agreement with Mr. Jebsen that was effective during a
portion of Fiscal 2014 (the “Prior Jebsen Employment
Agreement”), Mr. Jebsen received as compensation (i) an
annual base salary of $210,000, (ii) a fixed monthly automobile
allowance of $800, and (iii) participation in medical insurance,
dental insurance, and other benefit plans on the same basis as our
other officers. Under the Prior Jebsen Employment Agreement, Mr.
Jebsen received an annual cash bonus consisting of 50% of his base
salary, based on 100% achievement of annual goals (with no cap on
the bonus for greater than 100% achievement of goals). In addition
to the foregoing, Mr. Jebsen received annual grants totaling 430
shares of our restricted common stock, vesting over a 12-month
period, of which 180 shares will only vest so long as he continued
serving as our Corporate Secretary.
22
The
Prior Jebsen Employment Agreement (i) was to be effective for a
one-year term, and automatically renewed for additional one-year
terms, unless the Prior Jebsen Employment Agreement was terminated
in advance of renewal or either party gave notice at least 90 days
prior to the end of the then current term of an intention not to
renew, and (ii) provided that we would indemnify Mr. Jebsen against
any adverse tax consequences in connection with the Prior Jebsen
Employment Agreement or any prior employment agreement that may
result from any non-compliance with Section 409A of the Internal
Revenue Code of 1986, as amended (the “IRC”). In
addition, the Prior Jebsen Employment Agreement included certain
severance arrangements.
On
March 21, 2011, we entered into an indemnification agreement with
Mr. Jebsen, which provides that in respect of acts or omissions
occurring prior to such time as Mr. Jebsen ceases to serve as our
officer Mr. Jebsen will receive (i) indemnification and advancement
of expenses to the extent provided under our Certificate of
Incorporation and to the fullest extent permitted by applicable law
and (ii) indemnification against any adverse tax consequences in
connection with prior option awards that may have been
non-compliant with Section 409A of the IRC.
Effective November
13, 2013, we entered into a new amended and restated employment
agreement with Mr. Jebsen (the “Jebsen Employment
Agreement”). The Jebsen Employment Agreement was effective
during a portion of Fiscal 2014, Fiscal 2015, Transition Period
2015 and Fiscal 2016. Under the Jebsen Employment Agreement, Mr.
Jebsen receives an annual base salary of $285,000. Mr. Jebsen also
receives participation in medical insurance, dental insurance and
other benefit plans on the same basis as our other officers. Under
the Jebsen Employment Agreement, Mr. Jebsen is also eligible to
receive an annual cash bonus consisting of 50% of his base salary,
based on 100% achievement of annual goals (with no cap on the bonus
for greater than 100% achievement of goals). The Jebsen Employment
Agreement also provides for the Jebsen Contingent Option Award
described below. In addition to the foregoing, Mr. Jebsen also
received a fixed monthly automobile allowance of $800 and annual
grants totaling 430 shares of restricted common stock, vesting over
a 12-month period, of which 180 shares will only vest so long as he
continues serving as our Treasurer. In addition, on November 13,
2013, the Board also awarded Mr. Jebsen a discretionary bonus
consisting of $225,000 in cash and 32,143 shares of restricted
common stock, one half of which vested immediately and one-half
which vested six months after the grant, in recognition of his
service as our interim Chief Executive Officer from August 2011
through November 2013.
On June
18, 2015, we entered into an amendment to the Jebsen Employment
Agreement. The amendment to Mr. Jebsen’s employment agreement
increased his base salary to $325,000 from $285,000, effective as
of May 1, 2015, while removing the fixed monthly automobile
allowance of $800.
The
Jebsen Employment Agreement was effective for a one-year term, and
automatically renews for additional one-year terms, unless the
Jebsen Employment Agreement is terminated in advance of renewal or
either party gives notice at least 90 days prior to the end of the
then current term of an intention not to renew. If Mr. Jebsen is
terminated without cause, if he terminates his employment for good
reason, or if we elect not to renew the Jebsen Employment
Agreement, Mr. Jebsen would be entitled to receive (i) one year of
base salary, (ii) a pro-rated amount of the annual bonus that he
would have received had 100% of goals been achieved, and (iii) one
year of COBRA reimbursements or benefits payments, as applicable.
Mr. Jebsen’s entitlement to these payments is conditioned
upon execution of a release of claims.
For
purposes of the Jebsen Employment Agreement: (i)
“cause” includes (a) a willful material breach of the
Employment Agreement by Mr. Jebsen, (b) material misappropriation
of our company’s property, (c) material failure to comply
with our company’s policies, (d) abuse of illegal drugs or
abuse of alcohol in a manner that interferes with the performance
of Mr. Jebsen’s duties, (e) dishonest or illegal action that
is materially detrimental to our company, and (f) failure to
disclose material conflicts of interest, and (ii) “good
reason” includes (a) a material reduction in base salary, (b)
a material reduction of Mr. Jebsen’s authority, duties or
responsibility, (c) certain changes in geographic location of Mr.
Jebsen’s employment, or (d) a material breach of the Jebsen
Employment Agreement by us.
23
Pursuant to Jebsen
Employment Agreement, Mr. Jebsen received a one-time non-statutory
stock option grant of 893,220 shares of common stock in April 2014,
following stockholder approval of the amendment to the 1999 Stock
Plan to increase the amount of stock options authorized for
issuance under the 1999 Stock Plan to 4,000,000 shares of common
stock (the “Jebsen Contingent Option
Award”).
On
April 3, 2017, the Board appointed Mr. Jebsen as our Interim Chief
Executive Officer, and he will continue to serve as our President
and Chief Financial Officer. In connection with Mr. Jebsen’s
appointment as Interim Chief Executive Officer, we will provide Mr.
Jebsen with additional compensation of $10,000 per month for each
month that he serves as Interim Chief Executive Officer. In
addition, Mr. Jebsen was granted, on the effective date of his
appointment as Interim Chief Executive Officer, a stock option to
purchase 200,000 shares of our common stock. The award will vest
over a four-year period, with 25% of the option award vesting on
the first four anniversaries of the grant date provided Mr. Jebsen
remains continuously employed with us through each anniversary,
however, the vesting of the stock option shall accelerate and
become fully vested upon the achievement of specified performance
goals.
Equity Awards
In
September 1999, our Board of Directors approved the 1999 Amended
Stock Plan, which provided for the granting of incentive and
nonstatutory stock options to employees and directors to purchase
up to 13,333 shares of our common stock. The 1999 Amended Stock
Plan was approved by stockholders on October 10, 2000. Options
granted under the 1999 Amended Stock Plan generally have vesting
schedules of up to four years and have expiration periods of
generally ten years. On June 17, 2008, our stockholders approved an
amendment and restatement to the 1999 Amended Stock Plan to
increase the number of shares of common stock available for awards
under the plan from 13,333 to 40,000, to increase the maximum
number of shares covered by awards granted under the 1999 Amended
Stock Plan to an eligible participant from 13,333 to 16,667 shares,
and to make additional technical changes to update the plan. On
September 30, 2011, our stockholders approved an amendment to the
1999 Amended Stock Plan, to increase the number of shares of common
stock available for awards under the plan from 40,000 to 300,000.
On March 13, 2014, our stockholders approved a second amendment to
the 1999 Amended Stock Plan, to increase the number of shares of
common stock available for awards under the plan from 300,000 to
4,000,000. On September 15, 2015, our stockholders approved a third
amendment to the 1999 Amended Stock Plan, to increase the number of
shares of common stock available for awards under the plan from
4,000,000 to 5,000,000. Persons eligible to receive grants under
the 1999 Amended Stock Plan consist of all of our employees,
including executive officers and non-employee directors. As of
December 31, 2016, December 31, 2015 and April 30, 2015, we had
4,733,698, 4,007,698 and 3,693,298 outstanding options under the
1999 Amended Stock Plan, respectively. As of December 31, 2016,
December 31, 2015 and April 30, 2015, we had 214, 394 and 90
outstanding shares of restricted stock under the 1999 Amended Stock
Plan, respectively. As of December 31, 2016, December 31, 2015 and
April 30, 2015, there were 268,500, 994,713 and 122,399,
respectively, shares available for grant under the 1999 Amended
Stock Plan.
In
addition, we have issued options outside the 1999 Amended Stock
Plan. At December 31, 2016, the total number of options outstanding
that were issued outside the 1999 Amended Stock Plan was 8,334 with
a weighted average exercise price of $3.22.
On
June 16, 2016, our stockholders approved the 2016 Stock Incentive
Plan (the “2016 Plan”), which provides for the issuance
of up to 3,000,000 shares of common stock. Under the 2016 Plan,
with the approval of the Compensation Committee, the Company may
grant stock options, stock appreciation rights, restricted stock,
restricted stock units, performance shares, performance units,
cash-based awards or other stock-based awards. As of December 31,
2016 the Company had not issued any awards under the 2016 Plan and
there were 3,000,000 shares of common stock available for grant
under the 2016 Plan.
The
following table summarizes certain information as of December 31,
2016 concerning the stock options and restricted stock granted to
the Named Executive Officers during the year ended December 31,
2016. No stock appreciation rights or long-term performance awards
had been granted as of December 31, 2016.
24
Fiscal 2016 Grants of Plan-Based Awards
|
Name
|
Grant
Date
|
Estimated Future
Payouts under Non-equity Incentive Plan Awards
(1)
Target
($)
|
Estimated Future
Payouts under Equity Incentive Plan Awards
Target
($)
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)
|
All Other
Option
Awards:
Number of
Securities
Underlying Options
(2)
(#)
|
Exercise or Base
Price of Option Awards
($/Sh)
|
Grant Date
Fair
Value of
Stock
and
Option
Awards
(3)
($)
|
|
John P.
Kelley
|
|
322,500
|
—
|
—
|
—
|
—
|
—
|
|
Former
Chief Executive Officer
|
12/15/16
|
—
|
—
|
—
|
120,000
|
$
2.07
|
186,534
|
|
|
12/15/16
|
—
|
120,000
(4)
|
—
|
—
|
$
2.07
|
186,534
|
|
|
|
|
|
|
|
|
|
|
Michael B. Jebsen,
CPA
|
|
162,500
|
—
|
—
|
—
|
—
|
—
|
|
President,
Interim Chief Executive Officer and Chief Financial
Officer
|
12/15/16
|
—
|
—
|
—
|
150,000
|
$
2.07
|
233,168
|
|
|
5/1/2016
|
—
|
—
|
430
(5)
|
—
|
—
|
1,170
|
(1)
The amounts in this
column reflect the target annual cash bonus opportunities under
each
Named Executive Officer’s
employment agreement
for Fiscal 2016. There are no threshold
or maximum payouts under the
Named
Executive Officers’ employment agreements.
The actual
cash bonuses paid to the
Named
Executive Officers
for Fiscal 2016 are set forth in the
Summary Compensation Table under the “Non-Equity Incentive
Plan” column.
(2)
The stock option
awards granted to Messrs. Kelley and Jebsen vest and become
exercisable in four equal annual installments beginning on December
15, 2017.
(3)
The amounts in this
column reflects the aggregate grant date fair value of awards
granted during the year computed in accordance with Financial
Accounting Standards Board ASC Topic 718, Compensation —
Stock Compensation. The assumptions made in determining the fair
values of our stock and option awards are set forth in Note G to
our Financial Statements included in our Form 10-K for Fiscal 2016,
filed with the SEC on March 16, 2017.
(4)
This stock option
award granted to Mr. Kelley vests and becomes exercisable over
three years, with 34% vesting on December 15, 2017 and 33% vesting
on each of December 15, 2018 and 2019, provided, however, that no
portion of the stock options will vest unless a new drug
application for levosimendan has been filed with the U.S. Food and
Drug Administration on or before May 31, 2017.
(5)
Reflects shares of
restricted common stock granted pursuant to Mr. Jebsen’s
employment agreement that
vest
monthly over a 12 month period.
Outstanding Equity Awards
The
following table provides information about outstanding equity
awards held by the Named Executive Officers as of December 31,
2016.
25
Outstanding Equity Awards as of December 31, 2016
|
|
Option
Awards
(1)
|
Stock Awards
|
|||||
|
Name and Principal Position
|
Number of securities underlying unexercised options
(Exercisable)
(#)
|
Number of securities underlying unexercised options
(Unexercisable)
(#)
|
Equity incentive plan award: number of securities underlying
unexercised unearned options
(#)
|
Option exercise price
($/Sh)
|
Option expiration date
|
Number of shares or units of stock that have not
vested
(#)
|
Market value of shares or units of stock that have not
vested
($)
|
|
John
P. Kelley
|
446,610
(2)
|
—
|
446,610
(2)
|
5.65
|
4/2/2024
|
—
|
—
|
|
Former
Chief Executive Officer
|
—
|
120,000
(3)
|
—
|
2.07
|
12/15/2026
|
—
|
—
|
|
|
—
|
—
|
120,000
(4)
|
2.07
|
12/15/2026
|
—
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael
B. Jebsen, CPA
|
34
|
—
|
—
|
123.00
|
7/20/2019
|
—
|
—
|
|
President,
Interim Chief Executive Officer and Chief Financial
Officer
|
167
|
—
|
—
|
117.00
|
8/12/2019
|
—
|
—
|
|
|
34
|
—
|
—
|
127.60
|
9/1/2019
|
—
|
—
|
|
|
34
|
—
|
—
|
117.00
|
10/1/2019
|
—
|
—
|
|
|
34
|
—
|
—
|
129.00
|
11/1/2019
|
—
|
—
|
|
|
34
|
—
|
—
|
111.60
|
12/1/2019
|
—
|
—
|
|
|
34
|
—
|
—
|
115.80
|
1/1/2020
|
—
|
—
|
|
|
34
|
—
|
—
|
114.60
|
2/1/2020
|
—
|
—
|
|
|
34
|
—
|
—
|
102.00
|
3/1/2020
|
—
|
—
|
|
|
34
|
—
|
—
|
100.00
|
4/1/2020
|
—
|
—
|
|
|
34
|
—
|
—
|
100.00
|
5/1/2020
|
—
|
—
|
|
|
34
|
—
|
—
|
59.40
|
6/1/2020
|
—
|
—
|
|
|
34
|
—
|
—
|
57.80
|
7/1/2020
|
—
|
—
|
|
|
34
|
—
|
—
|
54.80
|
8/1/2020
|
—
|
—
|
|
|
167
|
—
|
—
|
55.80
|
8/13/2020
|
—
|
—
|
|
|
34
|
—
|
—
|
60.80
|
9/1/2020
|
—
|
—
|
|
|
34
|
—
|
—
|
50.60
|
10/1/2020
|
—
|
—
|
|
|
34
|
—
|
—
|
42.20
|
11/1/2020
|
—
|
—
|
|
|
34
|
—
|
—
|
43.00
|
12/1/2020
|
—
|
—
|
|
|
625
|
—
|
—
|
43.00
|
12/1/2020
|
—
|
—
|
|
|
34
|
—
|
—
|
38.40
|
1/1/2021
|
—
|
—
|
|
|
34
|
—
|
—
|
41.00
|
2/1/2021
|
—
|
—
|
|
|
34
|
—
|
—
|
38.60
|
3/1/2021
|
—
|
—
|
|
|
34
|
—
|
—
|
36.80
|
4/1/2021
|
—
|
—
|
|
|
446,610
(2)
|
—
|
446,610
(2)
|
5.65
|
4/2/2024
|
—
|
—
|
|
|
—
|
150,000
(3)
|
—
|
2.07
|
12/15/2026
|
—
|
—
|
(1)
Except as otherwise
noted, the option awards reflected in these columns vested
immediately on the date of grant. The date of grant for each of
these options is the date 10 years prior to the expiration date
reflected in this table.
(2)
These options were
granted with the following vesting schedule: 25% on the (i)
Initiation of the Phase III Clinical Trial or (ii) Parent attaining
a Market Capitalization of at least $50,000,000; 25% on the (i)
Database Lock with respect to the Phase III Clinical Trial or (ii)
Parent attaining a Market Capitalization of at least $100,000,000;
25% on the Acceptance For Review of an NDA for the Product for
LCOS; 25% on the Approval of the Product for LCOS.
26
(3)
These options were
granted with the following vesting schedule: 25% on each
anniversary of the grant date.
(4)
This option was
granted with the following vesting schedule: 34% vesting on
December 15, 2017 and 33% vesting on each of December 15, 2018 and
2019, provided, however, that no portion of the stock options will
vest unless a new drug application for levosimendan has been filed
with the U.S. Food and Drug Administration on or before May 31,
2017.
Option Exercises and Stock Vested
The
following table provides information about options exercised by the
Named Executive Officers during Fiscal 2016.
Option Exercises and Stock Vested during Fiscal 2016
|
|
Option Awards
|
Stock Awards
|
||
|
|
Number of Shares Acquired on Exercise
(#)
|
Value Realized on Exercise
($)
|
Number of Shares Acquired on Vesting
(#)
|
Value Realized on Vesting
($)
(1)
|
|
Name
and Principal Position
|
|
|
|
|
|
John
P. Kelley
|
—
|
—
|
—
|
—
|
|
Former
Chief Executive Officer
|
|
|
|
|
|
Michael
B. Jebsen, CPA
|
—
|
—
|
221
|
536
|
|
President,
Interim Chief Executive Officer and Chief Financial
Officer
|
|
|
|
|
(1)
Value
realized is determined by multiplying (i) the market value of the
underlying shares on the vesting date by (ii) the number of
underlying shares.
Potential Payments Upon Termination or Change of
Control
Employment
Agreements
We have
entered into employment agreements with each of Mr. Kelley and Mr.
Jebsen that include severance arrangements as described above under
“Employment and other Contracts.”
1999
Amended Stock Plan
Each of
Mr. Kelley and Mr. Jebsen have received equity awards under our
1999 Amended Stock Plan, which provide for accelerated vesting
under certain circumstances. Pursuant to the terms of the option
grants to each of Mr. Kelley and Mr. Jebsen, if either was
terminated other than as a result of his death or disability, his
unvested options would terminate on his termination date and his
vested options would remain exercisable until 3 months after the
termination date. If Mr. Kelley or Mr. Jebsen was terminated as a
result of his death or disability, his unvested options would
terminate on his termination date and his vested options would
remain exercisable until 12 months after the termination
date.
Additionally, upon
a change of control, except as otherwise determined by the Board of
Directors in its discretion, all options would become fully vested
and exercisable. Upon a change of control, except as determined in
the discretion of the Board of Directors, restrictions on shares of
restricted stock would not automatically lapse. For this purpose, a
“change of control” means: (i) the acquisition of
shares of our stock representing fifty percent (50%) or more of the
combined voting power of the shares entitled to vote on the
election of directors; (ii) the consummation of a merger, share
exchange, consolidation or reorganization involving us and any
other company or other entity as a result of which less than fifty
percent (50%) of the combined voting power of the surviving or
resulting company or entity after such transaction is held in the
aggregate by the holders of the combined voting power of our
outstanding shares immediately prior to such transaction; (iii) the
approval by our stockholders of an agreement for the sale or
disposition by us of all or substantially all of our assets; or
(iv) a change in the composition of the Board of Directors
occurring within a two-year period, as a result of which fewer than
a majority of directors were current directors.
27
Summary of Potential Payments Upon Termination or Change of Control
as of December 31, 2016
The
following table quantifies the amounts that would be payable to the
Named Executive Officers upon termination of their employment under
the circumstances described above under “Employment and other
Contracts.” We calculated the amounts shown based upon each
such Named Executive Officer’s employment agreement, if
applicable, described above and upon the hypothetical assumption
that we terminated each Named Executive Officer effective December
31, 2016. Due to the numerous factors involved in estimating these
amounts, the actual value of benefits and amounts to be paid can
only be determined upon an executive’s actual termination of
employment.
|
|
Company
Termination
|
Executive
Termination
|
|
|
|||
|
|
For Cause
($)
|
Without Cause
($)
|
Through Notice of
Non-Renewal ($)
|
Through Notice of
Non-Renewal ($)
|
For Good
Reason
($)
|
Death or
Disability
($)
|
Change of Control
(no termination)
($)
|
|
John
P. Kelley
|
|
|
|
|
|
|
|
|
Cash Severance
(1)
|
-
|
752,500
|
752,500
|
-
|
752,500
|
-
|
-
|
|
Insurance Benefits
(2)
|
-
|
32,742
|
32,742
|
-
|
32,742
|
-
|
-
|
|
Vesting
Acceleration (3)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Total
|
-
|
785,242
|
785,242
|
-
|
785,242
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
Michael
B. Jebsen
|
|
|
|
|
|
|
|
|
Cash Severance
(1)
|
-
|
487,500
|
487,500
|
-
|
487,500
|
-
|
-
|
|
Insurance Benefits
(2)
|
-
|
24,782
|
24,782
|
-
|
24,782
|
-
|
-
|
|
Vesting of
Acceleration (3)
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Total
|
-
|
512,282
|
512,282
|
-
|
512,282
|
-
|
-
|
|
(1)
|
Equals
one year of base salary and a pro-rated amount of the annual bonus
that would have been received had 100% of goals been achieved.
Amount would be paid in monthly installments following
termination.
|
|
(2)
|
Equal
to 12 times our monthly cost of providing medical, dental, vision,
long-term disability and term life insurance benefits. The amount
above also includes the estimated value of additional payments
related to taxes incurred (at an assumed tax rate of 35%) as a
result of our reimbursement of these expenses. Amount would be paid
in monthly installments following termination.
|
|
(3)
|
Equal
to the number of unvested options that would be accelerated upon a
change of control, multiplied by the difference between the
exercise price of each such stock option, and the fair market value
of $1.95 per share as of December 31, 2016 based on the
closing price of our shares of common stock as reported on
Nasdaq.
|
On
April 3, 2017, Mr. Kelley resigned as our Chief Executive Officer
and as a director effective immediately. In connection with his
resignation, Mr. Kelley entered into the Separation Agreement,
pursuant to which Mr. Kelley is entitled to receive severance as
set forth above under “Employment and other
Contracts.”
28
Equity Compensation Plan Information
The
following table provides information about the securities
authorized for issuance under our equity compensation plans as of
December 31, 2016.
|
|
(a)
|
(b)
|
(c)
|
|
|
Number of securities to be issued upon exercise
of outstanding options, warrants and rights
|
Weighted-average exercise price of outstanding options,
warrants and rights
|
Number of securities remaining available for future
issuances under equity compensation plans (excluding securities
reflected in column (a))
|
|
Plan category
|
|
|
|
|
Equity
compensation plans approved by security holders
|
4,733,912
|
$
4.98
|
268,500
(1)
|
|
Equity compensation plans not
approved by security holders
(2)
|
8,334
|
$
3.22
|
0
|
|
Total
|
4,742,246
|
$
4.98
|
268,500
|
|
(1)
|
All of these shares are available for issuance as restricted stock
under the 1999 Amended Stock Plan.
|
|
(2)
|
Inducement stock option grants outside of the 1999 Amended Stock
Plan.
|
Compensation of Directors
The
following table summarizes the compensation paid to non-employee
directors for Fiscal 2016.
Fiscal 2016 Director Compensation
|
Director
|
Fees Earned or Paid in Cash
($)
|
Option Awards
($)
|
Stock Awards
($)
|
All Other Compensation
($)
|
Total
($)
|
|
Ronald R. Blanck,
DO
(1)
|
63,625
|
22,385
|
—
|
—
|
86,010
|
|
Anthony
DiTonno
(1)
|
49,167
|
22,385
|
—
|
—
|
71,552
|
|
James Mitchum
(1)
|
51,875
|
54,243
|
—
|
—
|
106,118
|
|
Gregory Pepin
(1)
|
50,292
|
22,385
|
—
|
—
|
72,677
|
|
Gerald T.
Proehl
(1)
|
52,250
|
22,385
|
—
|
—
|
74,635
|
|
Chris A.
Rallis
(1)
|
48,125
|
22,385
|
—
|
—
|
70,510
|
|
(1)
|
As of December 31, 2016, our non-employee directors held the
following aggregate stock options: Dr. Blanck, 40,507; Mr. DiTonno,
41,488; Mr. Mitchum, 35,000; Mr. Pepin, 30,000; Mr. Proehl, 45,000;
Mr. Rallis, 39,798.
|
During
Fiscal 2016, all of our non-employee directors were paid the
following compensation for service on the Board and Board
Committees according to the policies established for director
compensation by the Corporate Governance and Nominating
Committee:
●
An
annual director fee in each fiscal year of $45,000 ($55,000 for our
board chairman), which was paid in equal quarterly installments on
the first day of each fiscal quarter;
●
An
annual audit committee member fee in each fiscal year of $7,500
($15,000 for our audit committee chairman), which was paid in equal
quarterly installments on the first day of each fiscal
quarter;
●
An
annual compensation committee member fee in each fiscal year of
$5,000 ($10,000 for our compensation committee chairman), which was
paid in equal quarterly installments on the first day of each
fiscal quarter;
29
●
An
annual nominating and corporate governance committee member fee in
each fiscal year of $3,500 ($7,000 for our nominating and corporate
governance committee chairman), which was paid in equal quarterly
installments on the first day of each fiscal quarter;
●
An
annual grant of 10,000 stock options, which vest one year after the
grant date and are exercisable for a period of ten years, issued on
the first day of each fiscal year; and
●
Reimbursement
of travel and related expenses for attending Board and Committee
meetings, as incurred.
In
addition to the compensation described above, Dr. Blanck was
granted a 2,000 stock option award on his initial nomination to the
Board. The options vested immediately, and were exercisable for a
period of three years. Mr. Proehl and Mr. Mitchum were each granted
a 25,000 stock option award on their initial nomination to the
Board. The options vested one year after the grant date and are
exercisable for a period of ten years. We shall maintain an
appropriate director’s and officer’s insurance policy
at all times for our non-employee directors.
Compensation Committee Interlocks and Insider
Participation
The
members of the Compensation Committee throughout Fiscal 2016 were
Messrs. DiTonno (Chair), Pepin and Proehl. None of the members
of the Compensation Committee has ever been an officer or employee
of our company, and none of the members were parties to any related
party transaction with our company during Fiscal 2016. None of our
executive officers serves, or has served during Fiscal 2016, as a
member of the board of directors, compensation committee or other
board committee performing equivalent functions of any entity that
has one or more executive officers serving as one of our directors
or on our Compensation Committee.
Compensation Policies and Practices as They Relate to Risk
Management
We have
reviewed our compensation policies and practices for all employees
and concluded that any risks arising from our policies and programs
are not reasonably likely to have a material adverse effect on our
company.
Compensation Committee Report
The
Compensation Committee has reviewed and discussed the Compensation
Discussion and Analysis section of this Proxy Statement required by
Item 402(b) of Regulation S-K with management. Based on the review
and discussions, the Compensation Committee recommended to our
Board, and the Board has approved, the inclusion of the
Compensation Discussion and Analysis in this Proxy
Statement.
COMPENSATION
COMMITTEE
Anthony
A. DiTonno (Chair)
Gregory
Pepin
Gerald
T. Proehl
OWNERSHIP OF SECURITIES
Principal Stockholders and Share Ownership by
Management
The
following table sets forth, as of April 17, 2017, the number and
percentage of the outstanding shares of common stock and warrants
and options that, according to the information supplied to us, were
beneficially owned by (i) each person who is currently a director
or a director nominee, (ii) our Named Executive Officers, (iii) all
current directors and executive officers as a group and (iv) each
person who, to our knowledge, is the beneficial owner of more than
five percent of the outstanding common stock. Except as otherwise
indicated, the persons named in the table have sole voting and
dispositive power with respect to all shares beneficially owned,
subject to community property laws where applicable.
30
|
Beneficial Owner
Name and
Address
(1)
|
Amount and Nature of Beneficial Ownership
|
Percent of Class
|
|
Principal
Stockholders
|
|
|
|
Sabby Healthcare Master Fund,
Ltd.
(2)
|
2,740,535
|
9.71
%
|
|
c/o Ogier Fiduciary Services (Cayman) Limited
89 Nexus Way, Camana Bay
Grand Cayman KY1-9007
Cayman Islands
|
|
|
|
RA Capital Management, LLC
(3)
|
2,389,700
|
8.46
%
|
|
20 Park Plaza, Suite 1200
Boston, MA 02116
|
|
|
|
JP SPC3 OXBT FUND
(4)
|
2,180,643
|
7.18
%
|
|
Rue Du Mont-Blanc
Geneva, Switzerland 1201
|
|
|
|
Broadfin Capital, LLC
(5)
|
1,968,631
|
6.97
%
|
|
300 Park Avenue, 25th Floor
New York, New York 10022
|
|
|
|
Doug Randall
|
1,613,121
|
5.62
%
|
|
Douglas Hay
|
1,413,121
|
4.93
%
|
|
John P. Kelley
(7)
|
1,729,542
|
6.03
%
|
|
Officers and
Directors
|
|
|
|
Gregory Pepin
(6)
|
2,225,477
|
7.87
%
|
|
Michael B. Jebsen, CPA(7)
|
516,377
|
1.80
%
|
|
Ronald R. Blanck, DO
(7)
|
66,785
|
*
|
|
James Mitchum
(7)
|
61,000
|
*
|
|
Anthony DiTonno
(7)
|
47,252
|
*
|
|
Chris A. Rallis
(7)
|
56,853
|
*
|
|
Gerald T. Proehl
(7)
|
74,882
|
*
|
|
All officers and directors as a group (7
persons)
(7)
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3,048,626
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9.81
%
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* Less than 1%
|
(1)
|
Unless
otherwise noted, all addresses are in care of Tenax Therapeutics,
Inc. at ONE Copley Parkway, Suite 490, Morrisville, North Carolina
27560.
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(2)
|
The
number of shares beneficially owned and the description of such
ownership contained herein are based solely on a Schedule 13G filed
with the SEC on January 6, 2017 by Sabby Healthcare Master Fund,
Ltd., Sabby Management, LLC and Mr. Hal Mintz, each of whom is
deemed to have shared voting power and shared dispositive power
with respect to
2,740,535
shares of common stock. Sabby Management, LLC, a Delaware limited
liability company, serves as the investment manager of Sabby
Healthcare Master Fund, Ltd., and Mr. Mintz serves as manager of
Sabby Management, LLC.
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(3)
|
The
number of shares beneficially owned and the description of such
ownership contained herein are based solely on a Schedule 13G filed
with the SEC on February 14, 2017 by RA Capital Management, LLC and
Mr. Peter Kolchinsky. RA Capital Management, LLC is the general
partner of RA Capital Healthcare Fund, L.P. and serves as
investment adviser for a separately managed account. Mr. Kolchinsky
is the manager of RA Capital Management, LLC. Each of RA Capital
Management, LLC and Mr. Kolchinsky is deemed to have shared voting
power and shared dispositive power with respect to 2,389,700 shares
of common stock.
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(4)
|
Includes
30,898
shares of common stock,
and
2,149,745
shares of common
stock subject to warrants that are exercisable or convertible, as
applicable within 60 days of
April 17,
2017
.
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31
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(5)
|
The
number of shares beneficially owned and the description of such
ownership contained herein are based solely on a Schedule 13G filed
with the SEC on February 17, 2015 by Broadfin Capital, LLC,
Broadfin Healthcare Master Fund, Ltd. and Mr. Kevin Kotler, each of
whom is deemed to have shared voting power and shared dispositive
power with respect to 1,968,631 shares of common
stock.
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(6)
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Includes
14,834
shares of restricted
common stock and 30,000 shares of common stock subject to options
that are vested, vesting, exercisable or convertible, as
applicable, within 60 days of
April 17, 2017.
Mr. Pepin is a co-founder
of EOS, an investment company, which serves as the Investment
Manager and Managing Director for OXBT Fund, and consequently he
may be deemed to be the beneficial owner of shares held by OXBT
Fund. Mr. Pepin disclaims beneficial ownership of the shares held
by OXBT Fund except to the extent of his pecuniary interest
therein.
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(7)
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With
respect to Dr. Blanck, includes
5,129
shares of common stock subject to
warrants and
40,507
shares of
common stock subject to options that are vested, vesting,
exercisable or convertible, as applicable, within 60 days
of
April 17, 2017;
With
respect to Mr. DiTonno, includes
2,565
shares of common stock subject to
warrants and
41,488
shares of
common stock subject to options that are vested, vesting,
exercisable or convertible, as applicable, within 60 days of
April 17, 2017;
With
respect to Mr. Rallis, includes 2,565 shares of common stock
subject to warrants
and
39,798
shares of common stock subject to options that are vested, vesting,
exercisable or convertible, as applicable, within 60 days of
April 17, 2017;
With
respect to Mr. Jebsen, includes
448,283
shares of common stock subject to
options that are vested, vesting, exercisable or convertible, as
applicable, within 60 days of
April
17, 2017
;
On
April 3, 2017, Mr. Kelley resigned as our Chief Executive Officer
and as a director effective immediately. In connection with his
resignation, Mr. Kelley entered into the Separation Agreement,
pursuant to which Mr. Kelley is entitled to receive severance as
set forth above under “Employment and other
Contracts”;
With
respect to Mr. Proehl, includes 4
5,000
shares of common stock subject to
options that are vested, vesting, exercisable or convertible, as
applicable, within 60 days of
April
17, 2017 and 29,882 shares for which voting and investment power is
shared with Mr. Proehlís spouse
;
With
respect to Mr. Mitchum, includes 35,000 shares of common stock
subject to options that are vested, vesting, exercisable or
convertible, as applicable, within 60 days of
April 17, 2017 and 26,000 shares for which voting
and investment power is shared with Mr. Mitchumís
spouse
; and
With
respect to all officers and directors as a group, includes 10,259
shares of common stock subject to warrants and 680,076 shares of
common stock subject to options that are vested, vesting,
convertible, or exercisable, as applicable, within 60 days of
April 17, 2017.
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32
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions
Review and Approval of Related Person Transactions
Our
Audit and Compliance Committee is responsible for the review,
approval and oversight of all related party transactions. The Audit
and Compliance Committee reviews all related party transactions for
potential conflict of interest situations on an ongoing basis;
provided, however, our Board may from time to time delegate to
another independent body of the Board the authority to conduct
appropriate review and oversight of related party transactions for
potential conflict of interest situations. We are not authorized to
engage in any related party transaction unless the Audit and
Compliance Committee or another independent body of the Board
delegated by the Board approves the transaction.
We have
not engaged in any related party transaction since January 1, 2016
in which the amount involved exceeds $120,000 and in which any of
our directors, executive officers or any holder of more than 5% of
our common stock, or any member of the immediate family of any of
these persons or entities controlled by any of them, had or will
have a direct or indirect material interest, other than the
compensation arrangements described in “Executive and
Director Compensation.”
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
The
members of our Board of Directors, our executive officers, and
persons who hold more than 10% of our outstanding common stock are
subject to the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), which requires them to file reports with respect to
their ownership of our common stock and their transactions in such
common stock.
Based
solely upon our review of the Section 16(a) reports in our records
for Fiscal 2016 transactions in our common stock, we believe that
during the fiscal year ended December 31, 2015 our officers,
directors and greater than 10% owners timely filed all reports they
were required to file under Section 16(a), except that: 1 report,
covering a total of 1 transaction, was filed late by Mr. Blanck; 4
reports, covering a total of 4 transactions were filed late by Mr.
Jebsen; 1 report, covering a total of 1 transaction, was filed late
by Mr. Kelley; 1 report, covering a total of 2 transaction were
filed late by Mr. Proehl and Mr. Proehl did not timely file his
Form 3.
33
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Independent Registered Public Accounting Firm
The
Audit and Compliance Committee has selected Cherry Bekaert LLP as
our independent registered public accounting firm for Fiscal 2016.
Cherry Bekaert LLP served as our independent registered public
accounting firm for Fiscal 2016.
Representatives of
Cherry Bekaert LLP
are expected to be present at the
Annual Meeting and will have the opportunity to make a statement,
if they desire to do so, and will be available to respond to
appropriate questions from our stockholders.
Cherry
Bekaert LLP has served as our independent auditor since January
2009. In determining whether to reappoint Cherry Bekaert LLP, our
Audit and Compliance Committee reviewed the quality of the
committee’s discussions with the lead audit partner, the
performance of the audit team assigned to our account, Cherry
Bekaert LLP’s technical expertise and industry knowledge,
Cherry Bekaert LLP’s tenure as our independent auditor and
the potential impact of changing auditors. Our Audit and Compliance
Committee believes that these factors, in particular Cherry Bekaert
LLP’s long-term knowledge of our company, enable it to
perform its audits with effectiveness and efficiency.
Our
organizational documents do not require that the stockholders
ratify the selection of Cherry Bekaert LLP as our independent
registered public accounting firm. We request such ratification as
a matter of good corporate practice. If the stockholders do not
ratify the selection, the Audit and Compliance Committee will
reconsider whether to retain Cherry Bekaert LLP, but still may
retain them. Even if the selection is ratified, the Audit and
Compliance Committee, in its discretion, may change the appointment
at any time during the year if it determines that such a change
would be in the best interests of us and our
stockholders.
The
aggregate fees billed for professional services by professional
accounting firms in Fiscal 2016, Transition Period 2015 and Fiscal
2015 were as follows:
|
|
Fiscal 2016
|
Transition Period 2015
|
Fiscal 2015
|
|
Audit fees
(1)
|
$
179,000
|
$
123,900
|
$
125,973
|
|
Audit-Related
Fees
(2)
|
—
|
—
|
—
|
|
Tax fees
(3)
|
25,050
|
3,550
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13,600
|
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All Other Fees
(4)
|
—
|
—
|
—
|
|
Total
fees
|
$
204,050
|
$
127,450
|
$
139,573
|
|
(1)
|
This
category includes fees billed for the fiscal years shown for
professional services for the audit of our annual financial
statements, review of financial statements included in our
quarterly reports on Form 10-Q, and services that are normally
provided by the independent auditor in connection with statutory
and regulatory filings or engagements for the relevant fiscal
years.
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(2)
|
This
category includes fees billed in the fiscal years shown for
assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements and
are not reported under the category “Audit Fees.” There
were no audit-related fees billed to us in Fiscal 2016, Transition
Period 2015 and Fiscal 2015.
|
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(3)
|
This
category includes fees billed in the fiscal years shown for
professional services for tax compliance, tax advice, and tax
planning.
|
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(4)
|
This
category includes fees billed in the fiscal years shown for
products and services provided by the principal accountant that are
not reported in any other category. There were no other fees billed
to us in Fiscal 2016, Transition Period 2015 and Fiscal
2015.
|
It is
our Audit
and Compliance
Committee’s policy and procedure to approve in advance all
audit engagement fees and terms and all permitted non-audit
services provided by our independent registered public accounting
firm. We believe that all audit engagement fees and terms and
permitted non-audit services provided by our independent registered
public accounting firm as described in the above table were
approved in advance by our Audit
and
Compliance
Committee.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF THE SELECTION OF CHERRY BEKAERT LLP, AS OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
34
PROPOSAL 3: ADVISORY (NONBINDING) APPROVAL OF
NAMED EXECUTIVE OFFICER COMPENSATION
Our
executive compensation program is designed to attract and retain
the executive talent essential to the achievement of our strategic
and operational goals and to create and maintain stockholder value.
We believe that our compensation policies and procedures reward our
Named Executive Officers for both their performance and our
company’s performance, and we believe such compensation
policies and procedures create interests for our Named Executive
Officers that are strongly aligned with the short- and long-term
interests of our stockholders.
As
required by Section 14A of the Exchange Act, we are providing our
stockholders with an advisory (nonbinding) vote to approve the
compensation of our executive officer. This proposal, commonly
known as a “Say-on-Pay” proposal, is designed to give
you as a stockholder the opportunity to endorse or not endorse our
executive compensation program through the following
resolution:
“
RESOLVED
, that the stockholders approve,
on an advisory basis, the compensation of our Named Executive
Officers, as disclosed in this proxy statement pursuant to the
compensation disclosure rules of the Securities and Exchange
Commission, including the Compensation Discussion and Analysis, the
compensation tables and the related narrative
disclosure.”
When
you cast your vote, we urge you to consider the description of our
executive compensation program contained in this proxy statement,
including in the Compensation Discussion and Analysis, the
compensation tables and narrative disclosure, as well as the
following factors:
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●
|
Compensation
decisions for our Named Executive Officers are made by a committee
of independent directors.
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●
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A
substantial portion of our Named Executive Officers’
compensation is in the form of equity, which aligns our Named
Executive Officers’ interests with those of our stockholders
and incentivizes our Named Executive Officers to create stockholder
value.
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●
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The
Compensation Committee attempts to set challenging pre-established
operational goals related to our Named Executive Officers’
cash bonuses, as demonstrated by the fact that neither of our Named
Executive Officers achieved 100% of their operational
goals.
|
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●
|
Our Named Executive Officers' base salaries increased between
Fiscal 2015 and Fiscal 2017 but when combined with potential bonus
payments, continued to fall at or below the 60
th
percentile of our
Peer Group.
|
Because
your vote is advisory, it will not be binding upon the Board, it
will not overrule any decision by the Board, and it will not create
or imply any additional fiduciary duties on the Board or any of its
members. However, the Compensation Committee will take into account
the outcome of the vote when considering future executive
compensation arrangements.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADVISORY
(NONBINDING) APPROVAL OF NAMED EXECUTIVE OFFICER
COMPENSATION.
35
OTHER MATTERS
Other Business
As of the date of this proxy statement, the Board
knows of no other matters that may come before the Annual Meeting.
However, if any matters other than those referred to herein should
be presented properly for consideration and action at the Annual
Meeting, or any adjournment or postponement thereof, the proxies
will be voted with respect thereto in accordance with the best
judgment and in the discretion of the proxy
holders.
Stockholder Proposals
Under
certain conditions, stockholders may request us to include a
proposal for action at a forthcoming meeting of our stockholders in
the proxy materials for such meeting. All stockholder proposals
intended to be presented at our 2018 Annual Meeting of Stockholders
must be received by us no later than
December 29, 2017
for inclusion in the
proxy statement and proxy card relating to such meeting.
However, if the date of the 2018
Annual Meeting is changed by more than 30 days from the date
of the first anniversary of the 2017 Annual Meeting, then the
deadline is a reasonable time before we begin to print and mail our
proxy statement for the 2018 Annual Meeting.
In
addition, our bylaws require that we be given advance notice of
stockholder nominations for election to the Board of Directors and
of other matters that stockholders wish to present for action at an
annual meeting of stockholders, other than matters included in our
proxy statement. The required notice must be in writing, include
the information set forth in the bylaws and be received by our
corporate secretary at our principal offices not less than 120 days
nor more than 150 days prior to the one-year anniversary of the
preceding yearís annual meeting, provided, however, that if
the date of the annual meeting is more than 30 days before or more
than 60 days after the one-year anniversary of the preceding
yearís annual meeting, a stockholderís notice must be
received not later than the 90
th
day prior to such
annual meeting, or if later, the 10
th
day following the
day on which public disclosure of the date of the annual meeting
was first made. The date of our 2018 Annual Meeting of Stockholders
has not yet been established, but assuming it is held on June 14,
2018, in order to comply with the time periods set forth in our
bylaws, appropriate notice for the 2018 Annual Meeting would need
to be provided to our corporate secretary no earlier than January
15, 2018, and no later than February 14, 2018.
Costs of Soliciting Proxies
We will
bear the cost of this solicitation, including the preparation,
printing, and mailing of the proxy statement, proxy card, and any
additional soliciting materials sent by us to stockholders. Our
directors, officers, and employees may solicit proxies personally
or by telephone without additional compensation. We will also
reimburse brokerage firms and other persons representing beneficial
owners of shares for reasonable expenses incurred in forwarding
proxy soliciting materials to the beneficial owners.
Availability of Report on Form 10-K
Copies of our Annual Report on
Form 10-K for the year ended December 31, 2016, including financial
statements and schedules, are available on our website at
http://www.tenaxthera.com and will be provided upon written
request, without charge, to any person whose proxy is being
solicited. Written requests should be made to Tenax Therapeutics,
Inc., Attn: Investor Relations, ONE Copley Parkway, Suite 490,
Morrisville, North Carolina 27560.
Stockholders Sharing the Same Last Name and Address
Only
one annual report or proxy statement, as applicable, may be
delivered to multiple stockholders sharing an address unless we
have received contrary instructions from one or more of the
stockholders. We will deliver promptly upon written or oral request
a separate copy of the annual report or proxy statement, as
applicable, to a stockholder at a shared address to which a single
copy was delivered. Requests for additional copies should be
directed to Investor Relations by e-mail addressed to
n.hecox@tenaxthera.com, by mail addressed to Tenax Therapeutics,
Inc., Attn: Investor Relations, ONE Copley Parkway, Suite 490,
Morrisville, North Carolina 27560, or by telephone at (919)
855-2100. Stockholders sharing an address and currently receiving a
single copy may contact Investor Relations as described above to
request that multiple copies be delivered in future years.
Stockholders sharing an address and currently receiving multiple
copies may request delivery of a single copy in future years by
contacting Investor Relations as described above.
36
REQUESTS FOR DIRECTIONS TO OUR COMPANY’S ANNUAL
MEETING
The
2017 Annual Meeting of Stockholders will be held on
June 14, 2017
at the offices of Tenax
Therapeutics, Inc. located at ONE Copley Parkway, Suite 490,
Morrisville, North Carolina 27560 at
9:00 a.m.,
Eastern Daylight Time. Requests
for directions to the meeting location may be directed to Tenax
Therapeutics, Inc., Attn: Investor Relations, ONE Copley Parkway,
Suite 490, Morrisville, North Carolina 27560.
37
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TENAX THERAPEUTICS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS – JUNE 14, 2017 AT 9:00 AM
ET
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CONTROL ID:
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REQUEST ID:
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The undersigned stockholder of Tenax Therapeutics,
Inc. hereby appoints
Nancy J.M. Hecox and Michael B. Jebsen, or
either of them as proxies, each with full powers of substitution,
to represent and to vote as proxy, as designated, all shares of
common stock of Tenax Therapeutics, Inc. held of record by the
undersigned on April 17, 2016, at the Annual Meeting of
Stockholders (the “Annual Meeting”) to be held on
Thursday, June 14, 2017 at 9:00 a.m., local time, at the offices of
Tenax Therapeutics, Inc. located at ONE Copley Parkway, Suite 490,
Morrisville, North Carolina, 27560, or at any adjournment or
postponement thereof. The undersigned hereby revokes all
prior proxies.
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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VOTING INSTRUCTIONS
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If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
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MAIL:
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Please
mark, sign, date, and return this Proxy Card promptly using the
enclosed envelope.
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INTERNET:
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https://www.iproxydirect.com/TENX
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PHONE:
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1-866-752-VOTE
(8683)
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ANNUAL MEETING OF THE STOCKHOLDERS OF
TENAX THERAPEUTICS, INC.
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PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE:
☒
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PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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Proposal 1
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FOR
ALL
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WITHHOLD
ALL
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FOR
ALL
EXCEPT
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Election
of Directors:
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☐
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☐
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CONTROL ID:
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Ronald
R. Blanck, DO
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☐
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REQUEST ID:
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Anthony
A. DiTonno
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☐
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James
Mitchum
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☐
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Gregory
Pepin
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☐
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Gerald
T. Proehl
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☐
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Chris
A. Rallis
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☐
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Proposal 2
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FOR
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AGAINST
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ABSTAIN
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Ratification
of the appointment of Cherry Bekaert LLP as our independent
registered public accounting firm for the fiscal year ending
December 31, 2017.
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☐
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☐
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☐
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Proposal 3
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FOR
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AGAINST
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ABSTAIN
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An
advisory, non-binding, approval of Named Executive Officer
compensation.
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☐
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☐
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☐
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MARK
“X” HERE IF YOU PLAN TO ATTEND THE MEETING:
☐
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THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION
OF EACH OF THE DIRECTOR NOMINEES. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE FOR THE APPROVAL OF THE TENAX THERAPEUTICS, INC. 2017
STOCK INCENTIVE PLAN. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR THE RATIFICATION OF THE SELECTION OF CHERRY BEKAERT LLP,
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
SPECIFIED HEREIN BY THE UNDERSIGNED STOCKHOLDER. THIS PROXY, IF
DULY EXECUTED AND RETURNED, WILL BE VOTED “FOR” THE
ELECTION OF EACH OF THE DIRECTOR NOMINEES AND “FOR”
EACH OF PROPOSALS 2 AND 3 IF NO INSTRUCTION TO THE CONTRARY IS
INDICATED. THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OF
STOCKHOLDERS IN ACCORDANCE WITH THEIR JUDGMENT.
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MARK HERE FOR ADDRESS CHANGE
☐
New Address (if applicable):
_________________________
_________________________
_________________________
IMPORTANT:
Please sign exactly as your name or names appear
on this Proxy. When shares are held jointly, each holder should
sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized
person.
Dated:
________________________, 2017
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(Print Name of
Stockholder and/or Joint Tenant)
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(Signature of
Stockholder)
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(Second Signature
if held jointly)
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TABLE OF CONTENTS