TENAX THERAPEUTICS, INC.
10-Ks and 10-Qs
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE
14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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THERAPEUTICS, INC.
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TENAX THERAPEUTICS, INC.
ONE Copley Parkway, Suite 490
Morrisville, North Carolina 27560
April 19, 2019
Dear
Stockholders:
It is
my pleasure to invite you to the Annual Meeting of Stockholders of
Tenax Therapeutics, Inc., to be held on
June 13, 2019
, 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/ Anthony
DiTonno
Anthony
DiTonno
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 13, 2019
To the
Stockholders:
The
stockholders of Tenax Therapeutics, Inc. (the
“Company”) will hold an annual meeting (the
“Annual Meeting”) on
June
13, 2019
, 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 2020 Annual Meeting of Stockholders or the election and
qualification of their successors;
2.
the approval of
Amendment No. 1 to our 2016 Stock Incentive Plan to increase the
number of shares authorized for issuance under the plan by 600,000
shares;
3.
the ratification of
the appointment of Cherry Bekaert LLP as our independent registered
public accounting firm for the fiscal year ending December 31,
2019;
4.
the
advisory (nonbinding) approval of named executive officer
compensation; and
5.
the
advisory (nonbinding) vote on the frequency of future advisory
votes on 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 of directors (the “Board”)
recommends that you vote “FOR” the election of the
director nominees listed in the Proxy Statement, “FOR”
the approval of Amendment No. 1 to our 2016 Stock Incentive Plan to
increase the number of shares authorized for issuance thereunder,
“FOR” ratification of the appointment of Cherry Bekaert
LLP as the independent registered public accounting firm of the
Company, “FOR” the approval of the resolution regarding
the advisory (nonbinding) vote on named executive officer
compensation and for “TWO YEARS” (as opposed to one
year or three years) for the frequency of future advisory votes on
named executive officer compensation.
The
Board has fixed the close of business on
April 16, 2019
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 19, 2019
TENAX THERAPEUTICS, INC.
PROXY STATEMENT
Important Notice Regarding the Availability of Proxy
Materials
For the Stockholder Meeting to be held on
June 13, 2019
The Notice of Annual Meeting of Stockholders, Proxy Statement, Form
of Proxy, and 2018 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 2019 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 13, 2019, at 9:00 a.m. local time, to elect
the six director nominees described in this Proxy Statement, to
approve Amendment No. 1 to our 2016 Stock Incentive Plan (the
“2016 Plan”) to increase the number of shares
authorized for issuance under the 2016 Plan by 600,000 shares, 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, to solicit an
advisory (nonbinding) vote on the
frequency of future advisory votes on 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” the amendment to our 2016 Plan to
increase the number of shares authorized for issuance thereunder,
“FOR” ratification of the appointment of Cherry Bekaert
LLP as our independent registered public accounting firm,
“FOR” the approval of the resolution regarding the
advisory (nonbinding) vote on named executive officer compensation
and for “TWO YEARS” (as opposed to one year or three
years) for the frequency of future advisory votes on named
executive officer compensation.
This
Proxy Statement and the accompanying proxy card are first being
delivered to stockholders on or about April 19, 2019.
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 February 23,
2018.
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,
Issuer Direct Corporation
(“Issuer Direct”)
, you are considered, with
respect to those shares, the stockholder of record, and these proxy
materials are being sent directly to you by
Issuer Direct
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 amendment to our 2016 Plan to increase the
number of shares authorized for issuance thereunder,
FOR
the ratification of the appointment of
Cherry Bekaert LLP as our independent registered public accounting
firm,
FOR
the approval of the resolution regarding the
advisory (nonbinding) vote on named executive officer compensation
, and for
TWO YEARS
(as opposed to one year or three years)
for
the frequency of future advisory votes 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 12, 2019
by going to the
websit
e
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 12,
2019
by calling the toll-free
number
1-866-752-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?”
2
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;
●
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 16, 2019
.
How many votes can be cast by all stockholders?
There
were 6,154,434 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 3,077,218 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.
3
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 approval of the amendment to our 2016 Plan to
increase the number of shares authorized for issuance thereunder,
the
ratification of
Cherry Bekaert LLP as our independent
registered public accounting firm, the proposal relating to the
advisory (nonbinding) vote on named executive officer compensation
and the proposal relating to the advisory (nonbinding) vote on the
frequency of future advisory votes on named executive officer
compensation each requires 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 16,
2019
may attend the Annual Meeting. If you are listed as a
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 16, 2019
.
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.
Where can I find more information about Tenax
Therapeutics?
We file
periodic reports and proxy statements with the Securities and
Exchange Commission (the “SEC”). 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.
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 2020 Annual Meeting of Stockholders
or the
election and qualification of his successor.
The
following table lists the nominees for election and information
about each as of
April 16,
2019
:
|
Name
|
|
Age
|
|
Position with Tenax Therapeutics,
Inc.
|
|
Director Since
|
|
Ronald
R. Blanck, DO
|
|
77
|
|
Chairman
|
|
December
2009
|
|
Anthony
A. DiTonno
|
|
70
|
|
Chief
Executive Officer and Director
|
|
December
2011
|
|
James
Mitchum
|
|
66
|
|
Director
|
|
September
2015
|
|
Gregory
Pepin
|
|
36
|
|
Director
|
|
August
2009
|
|
Gerald
T. Proehl
|
|
60
|
|
Director
|
|
April
2014
|
|
Chris
A. Rallis
|
|
65
|
|
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 and partner 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 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 of the Health Sciences and chair of the Education
Commission on Foreign Medical Graduates. Dr. Blanck 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 and as our Chief
Executive Officer since June 2018. From January 2013 until May
2018, Mr. DiTonno 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.
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.
James Mitchum
has
served as a director since September 2015. Mr. Mitchum
has served as the Chief Executive Officer of RegaloRX, a patient
assistance provider, since January 2019. From September 2014 to
December 2018, he served as Chief Executive Officer of Heart to
Heart International, a non-profit international humanitarian
organization. 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 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.
5
Gregory Pepin
has
served as a director since August 2009. Since August 2017, Mr.
Pepin has served as executive manager at Deltec Bank and Trust and
fund manager for Hades Investment Ltd. From October 2013 until
August 2017, Mr. Pepin 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 the 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. Mr. Pepin also currently serves on the board of directors
of Theravectys S.A., a development-stage biotechnology company
headquartered in France.
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. 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.
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 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 Capital, 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 Fennec Pharmaceuticals, a publicly traded
company, and Aeolus Pharmaceuticals (which has ceased operations).
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 and
the Compensation Committee.
6
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 and Business Conduct (the “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 Ethics
is posted on our website at
http://investors.tenaxthera.com/TENX/corporate_governance.
In the event the Code of Ethics 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 A. DiTonno, James Mitchum, Gregory
Pepin, Gerald T. Proehl and Chris A. Rallis are
directors.
In
accordance with the listing rules of The Nasdaq Stock Market LLC
(“Nasdaq”), 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
Dr.
Blanck and Messrs. 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 the 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.
Mr.
DiTonno was also determined to be an “independent
director” during the year ended December 31, 2018
(“Fiscal 2018”) until he was appointed as our Chief
Executive Officer effective June 1, 2018.
Attendance at Meetings
The
Board met four times during Fiscal 2018, 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 were members of the Board at
the time of the Annual Meeting in 2018 and attended the 2018 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.
DiTonno, who has been a member of our Board of Directors since
December 2011, serves as our Chief Executive Officer and Dr.
Blanck, who has been a member of our Board of Directors 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. DiTonno 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
composed 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.
7
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.
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 the 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 the 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.
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 2018.
8
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 advisers’
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. Proehl, Pepin and
Rallis. Mr. Proehl serves as chair of the Compensation Committee.
The Compensation Committee met one time during Fiscal
2018.
●
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 the
Company; and
●
otherwise taking a
leadership role in shaping the corporate governance of the
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
2018.
9
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. 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 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.
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.
In setting 2018 compensation, neither of these committees engaged
an outside compensation consultant.
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 the 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.
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 2020 Annual Meeting is
described under “Other Matters—Stockholder
Proposals.”
Stockholder Communications with Directors
It is
the policy of the 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.
10
AUDIT COMMITTEE REPORT
The
Audit and Compliance Committee has reviewed our audited financial
statements for the year ended December 31, 2018 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, 2018, 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 applicable
requirements of the Public Company Accounting Oversight Board
regarding Cherry Bekaert LLP’s communications with the Audit
and Compliance Committee concerning independence and discussed with
Cherry Bekaert LLP its 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, 2018, for filing with the SEC.
With
respect to the above matters, the Audit and Compliance Committee
submits this report.
James
Mitchum
Ronald
R. Blanck
Chris
A. Rallis
11
MANAGEMENT
The names and ages of our executive officers as of
April 16, 2019 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. Information regarding Mr. DiTonno is included
in the director nominee profiles set forth above.
|
Name
|
|
Age
|
|
Position
|
|
Anthony
A. DiTonno
|
|
70
|
|
Chief Executive Officer
|
|
Michael
B. Jebsen, CPA
|
|
47
|
|
President and Chief Financial Officer
|
Michael B.
Jebsen
joined the Company as
our Accounting Manager in April 2009, was elected Chief Financial
Officer, Executive Vice President Finance and Administration in
August 2009, and served as Interim Chief Executive Officer from
April 2017 through May 2018. 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 COMPENSATION
The
following tables and narrative discussion summarize the
compensation we paid for services in all capacities rendered to us
during the years ended December 31, 2018 and 2017 by our principal
executive officer and all other “Named Executive
Officers” during Fiscal 2018.
We
had no other executive officers during any part of
Fiscal
2018
.
Summary Compensation Table
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards
(1)
($)
|
Option Awards
(1)
($)
|
Non-Equity Incentive Plan Compensation
(2)
($)
|
All Other Compensation
($)
|
Total
($)
|
|
Anthony
A. DiTonno
|
2018
|
278,333
(4)
|
—
|
—
|
256,556
|
80,625
|
30,252
(5)
|
645,766
|
|
Chief
Executive Officer
(3)
|
|
|
|
|
|
|
|
|
|
Michael
B. Jebsen, CPA
|
2018
|
381,500
|
175,000
|
175,000
|
—
|
124,313
|
—
|
855,813
|
|
President
and Chief Financial Officer
(6)
|
2017
|
420,417
|
—
|
—
|
92,563
|
82,875
|
—
|
595,855
|
(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 D to
our Financial Statements included in our Form 10-K for Fiscal 2018,
filed with the SEC on April 1, 2019.
(2)
These payments were
made based on achievement of annual goals in accordance with each
of Mr. DiTonno’s and Mr. Jebsen’s employment
agreements, which are described below in the section entitled
“—Employment and Other Contracts.”
(3)
Mr. DiTonno was
appointed as a member of our Board on December 15, 2011 and as our
Chief Executive Officer effective June 1, 2018. During Mr.
DiTonno’s service as our Chief Executive Officer, he has not
received compensation for his service on our Board.
(4)
Includes $250,833
received as salary for service as our Chief Executive Officer and
$27,500 cash compensation for Board fees received in Fiscal 2018
for Mr. DiTonno’s service as a non-employee director prior to
being appointed our Chief Executive Officer.
(5)
Represents
relocation expenses paid to Mr. DiTonno pursuant to his employment
agreement, as described below in the section entitled
“—Employment and Other Contracts.”
(6)
Mr. Jebsen served
as our Interim Chief Executive Officer from April 2017 through May
2018. In connection with such service, Mr. Jebsen received
additional compensation of $10,000 per month. Mr. Jebsen’s
salary reflects the additional compensation he received during the
portions of the year ended December 31, 2017 (“Fiscal
2017”) and Fiscal 2018 in which he served as our Interim
Chief Executive Officer.
12
Narrative to Summary Compensation Table
Elements of Compensation
During
Fiscal 2018, we compensated our Named 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.
Annual Base Salaries
The
Named Executive Officers receive a base salary to compensate them
for services rendered to us. The base salary payable to each Named
Executive Officer is intended to provide a fixed component of
compensation reflecting the executive’s skill set,
experience, role and responsibilities. In Fiscal 2018, we paid an
annual base salary of $430,000 to Mr. DiTonno and $331,500 to Mr.
Jebsen. In connection with Mr. Jebsen’s service as Interim
Chief Executive Officer from April 3, 2017 to May 31, 2018, we also
agreed to pay Mr. Jebsen additional compensation of $10,000 per
month for each month that he serves as Interim Chief Executive
Officer.
Cash Bonuses
Under
each of their employment agreements, each of our Named Executive
Officers were eligible to receive annual cash bonuses based on
achievement of annual goals. During Fiscal 2018, Mr. DiTonno and
Mr. Jebsen were eligible to receive a target cash bonus consisting
of 50% 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. Our Compensation Committee evaluated
performance for Fiscal 2018 and determined that Mr. DiTonno and Mr.
Jebsen would receive 75% of their target cash bonuses.
Long-Term Equity Compensation
We
award stock options to our key employees, including to our
non-executive employees, on an annual basis and subject to approval
by the Compensation Committee. In connection with Mr.
Jebsen’s appointment as Interim Chief Executive Officer on
April 3, 2017, we also agreed to grant Mr. Jebsen an additional
option to purchase 10,000 shares of common stock. We also agreed to
grant Mr. DiTonno an option to purchase 50,000 shares of common
stock in connection with his appointment as Chief Executive Officer
effective June 1, 2018.
Discretionary Bonus
Mr. Jebsen received a
discretionary cash bonus of $175,000 and a discretionary restricted
stock award of 28,090 shares of our common stock with a grant date
of June 14, 2018. Half of the restricted stock award vested
immediately and the remainder vested on the six-month anniversary
of the grant date. These discretionary awards were granted in
recognition of Mr. Jebsen’s service as Interim Chief
Executive Officer.
Other Elements of
Compensation
Employee Benefits and Perquisites
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.
No Tax Gross-Ups
We do
not make gross-up payments to cover our Named Executive
Officers’ personal income taxes that may pertain to any of
the compensation or perquisites paid or provided by
us.
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 the Company. We have provided more detailed information about
these benefits under the caption “—Employment and Other
Contracts” below.
13
Employment and Other Contracts
Anthony A. DiTonno
Effective June 1,
2018, we entered into an employment agreement with Mr. DiTonno (the
“DiTonno Employment Agreement”). Under the DiTonno
Employment Agreement, Mr. DiTonno receives an annual base salary of
$430,000. Mr. DiTonno also receives participation in medical
insurance, dental insurance, and other benefit plans on the same
basis as the Company’s other officers. Under the DiTonno
Employment Agreement, Mr. DiTonno 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 DiTonno Employment
Agreement also provides for a one-time non-statutory stock option
grant of 50,000 shares of common stock. The DiTonno Employment
Agreement states that the Company will pay Mr. DiTonno up to
$30,000 to cover costs associated with relocation
expenses.
The
DiTonno Employment Agreement is effective for a one-year term, and
automatically renews for additional one-year terms, unless the
DiTonno 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. DiTonno is
terminated without cause, if he terminates his employment for good
reason, or if we elect not to renew the DiTonno Employment
Agreement, Mr. DiTonno 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. DiTonno’s entitlement to these payments is conditioned
upon execution of a release of claims.
For
purposes of the DiTonno Employment Agreement: (i)
“cause” includes (a) a willful material breach of the
agreement by Mr. DiTonno, (b) material misappropriation of Company
property, (c) material failure to comply with Company policies, (d)
abuse of illegal drugs or abuse of alcohol in a manner that
interferes with the performance of Mr. DiTonno’s duties, (e)
dishonest or illegal action that is materially detrimental to the
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.
DiTonno’s authority, duties or responsibility, (c) certain
changes in geographic location of Mr. DiTonno’s employment,
or (d) a material breach of the DiTonno Employment Agreement by the
Company.
Michael B. Jebsen
Effective November
13, 2013, we entered into an amended and restated employment
agreement with Mr. Jebsen (the “Jebsen Employment
Agreement”). Under the Jebsen Employment Agreement, Mr.
Jebsen received 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 provided for a one-time non-statutory stock option
grant of 44,662 shares of common stock upon stockholder approval of
an amendment to our 1999 Amended Stock Plan (as defined below) to
increase the amount of stock options authorized for issuance
thereunder, which occurred in April 2014. In addition to the
foregoing, Mr. Jebsen also received a fixed monthly automobile
allowance of $800 and annual grants totaling 22 shares of
restricted common stock, vesting over a 12-month period, of which
nine shares will only vest so long as he continues serving as our
Treasurer.
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 is 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
agreement by Mr. Jebsen, (b) material misappropriation of the
Company’s property, (c) material failure to comply with the
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 the 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.
14
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.
On
April 3, 2017, the Board appointed Mr. Jebsen as our Interim Chief
Executive Officer, and he continued to serve as our President and
Chief Financial Officer. In connection with Mr. Jebsen’s
appointment as Interim Chief Executive Officer, we provided Mr.
Jebsen with additional compensation of $10,000 per month for each
month that he served 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 10,000 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 will accelerate and become
fully vested upon the achievement of specified performance goals.
Mr. Jebsen completed his service as our Interim Chief Executive
Officer on May 31, 2018.
Equity Awards
In
September 1999, our Board of Directors approved the 1999 Stock
Plan, which provided for the granting of incentive and nonstatutory
stock options to employees and directors to purchase up to 667
shares of our common stock. The 1999 Stock Plan was approved by
stockholders on October 10, 2000. Options granted under the 1999
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
Stock Plan (the “1999 Amended Stock Plan”) to increase
the number of shares of common stock available for awards under the
plan from 667 to 2,000, to increase the maximum number of shares
covered by awards granted under the 1999 Stock Plan to an eligible
participant from 667 to 834 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 2,000 to 15,000. 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 15,000 to 200,000. 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 200,000 to 250,000.
Persons eligible to receive grants under the 1999 Amended Stock
Plan consisted of all of our employees, including executive
officers and non-employee directors. As of December 31, 2018 and
2017, we had 191,735 and 188,744 outstanding options under the 1999
Amended Stock Plan, respectively. As of December 31, 2018 and 2017,
there were 19,914 and zero outstanding shares of restricted stock
under the 1999 Amended Stock Plan, respectively. The 1999 Amended
Stock Plan expired on June 17, 2018 and no new grants may be made
under that plan after that date. However, unexpired awards granted
under the 1999 Amended Stock Plan remain outstanding and subject to
the terms of the 1999 Amended Stock Plan.
On
June 16, 2016, our stockholders approved the 2016 Stock Incentive
Plan (the “2016 Plan”), which provides for the issuance
of up to 150,000 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,
2018 and 2017, there were 50,000 and zero outstanding options under
the 2016 Plan, respectively. As of December 31, 2018 and 2017,
there were 150,000 and 100,000 shares of common stock available for
grant under the 2016 Plan, respectively. See Proposal 2 in this
Proxy Statement for a description of the proposed amendment to the
2016 Plan to increase the number of shares authorized for issuance
under the 2016 Plan by 600,000 shares.
15
Outstanding Equity Awards
The
following table provides information about outstanding equity
awards held by the Named Executive Officers as of December 31,
2018.
Outstanding Equity Awards as of December 31, 2018
|
|
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
|
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
|
|
|
(#)
|
(#)
|
(#)
|
($/Sh)
|
|
(#)
|
($)
|
|
Anthony A.
DiTonno
|
—
|
50,000
(2)
|
—
|
6.10
|
6/1/2028
|
—
|
—
|
|
Chief Executive
Officer
|
25
|
—
|
—
|
760.00
|
12/16/2021
|
—
|
—
|
|
|
64
|
—
|
—
|
712.00
|
5/1/2022
|
—
|
—
|
|
|
487
|
—
|
—
|
93.20
|
5/1/2023
|
—
|
—
|
|
|
500
|
—
|
—
|
96.40
|
5/1/2024
|
—
|
—
|
|
|
500
|
—
|
—
|
68.40
|
5/1/2025
|
—
|
—
|
|
|
500
|
—
|
—
|
54.40
|
5/1/2026
|
—
|
—
|
|
|
500
|
—
|
—
|
10.60
|
5/1/2027
|
—
|
—
|
|
|
500
|
—
|
—
|
6.23
|
5/1/2028
|
—
|
—
|
|
|
|
|
|
|
|
|
|
|
Michael B. Jebsen,
CPA
|
2
|
—
|
—
|
2,460.00
|
7/20/2019
|
—
|
—
|
|
President and Chief
Financial Officer
|
9
|
—
|
—
|
2,340.00
|
8/12/2019
|
—
|
—
|
|
|
2
|
—
|
—
|
2,552.00
|
9/1/2019
|
—
|
—
|
|
|
2
|
—
|
—
|
2,340.00
|
10/1/2019
|
—
|
—
|
|
|
2
|
—
|
—
|
2,580.00
|
11/1/2019
|
—
|
—
|
|
|
2
|
—
|
—
|
2,232.00
|
12/1/2019
|
—
|
—
|
|
|
2
|
—
|
—
|
2,316.00
|
1/1/2020
|
—
|
—
|
|
|
2
|
—
|
—
|
2,292.00
|
2/1/2020
|
—
|
—
|
|
|
2
|
—
|
—
|
2,040.00
|
3/1/2020
|
—
|
—
|
|
|
2
|
—
|
—
|
2,000.00
|
4/1/2020
|
—
|
—
|
|
|
2
|
—
|
—
|
2,000.00
|
5/1/2020
|
—
|
—
|
|
|
2
|
—
|
—
|
1,188.00
|
6/1/2020
|
—
|
—
|
|
|
2
|
—
|
—
|
1,156.00
|
7/1/2020
|
—
|
—
|
|
|
2
|
—
|
—
|
1,096.00
|
8/1/2020
|
—
|
—
|
|
|
9
|
—
|
—
|
1,116.00
|
8/13/2020
|
—
|
—
|
|
|
2
|
—
|
—
|
1,216.00
|
9/1/2020
|
—
|
—
|
|
|
2
|
—
|
—
|
1,012.00
|
10/1/2020
|
—
|
—
|
|
|
2
|
—
|
—
|
844.00
|
11/1/2020
|
—
|
—
|
|
|
2
|
—
|
—
|
860.00
|
12/1/2020
|
—
|
—
|
|
|
32
|
—
|
—
|
860.00
|
12/1/2020
|
—
|
—
|
|
|
2
|
—
|
—
|
768.00
|
1/1/2021
|
—
|
—
|
|
|
2
|
—
|
—
|
772.00
|
2/1/2021
|
—
|
—
|
|
|
2
|
—
|
—
|
772.00
|
3/1/2021
|
—
|
—
|
|
|
2
|
—
|
—
|
736.00
|
4/1/2021
|
—
|
—
|
|
|
22,331
(3)
|
—
|
22,331
(3)
|
113.00
|
4/3/2020
|
—
|
—
|
|
|
3,750
(2)
|
3,750
(2)
|
—
|
41.40
|
12/15/2026
|
—
|
—
|
|
|
2,500
(2)
|
7,500
(2)
|
—
|
11.20
|
4/3/2027
|
—
|
—
|
(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 each
anniversary of the grant date.
(3)
These options were
granted with the following vesting schedule: 25% on the (i)
Initiation of the Phase 3 Clinical Trial or (ii) the Company
attaining a Market Capitalization of at least $50,000,000; 25% on
the (i) Database Lock with respect to the Phase 3 Clinical Trial or
(ii) the Company attaining a Market Capitalization of at least
$100,000,000; 25% on the Acceptance For Review of an NDA for
levosimendan for low cardiac output syndrome (“LCOS”);
25% on the Approval of levosimendan for LCOS.
16
DIRECTOR COMPENSATION
The
following table summarizes the compensation paid to non-employee
directors for Fiscal 2018 other than Anthony A. DiTonno, whose 2018
director compensation is fully reflected in the tables and
narrative disclosures above related to our Named Executive
Officers.
Fiscal 2018 Director Compensation
|
Director
|
Fees Earned or Paid in Cash
($)
|
Option Awards
($)
|
Stock Awards
($)
|
All Other Compensation
($)
|
Total
($)
|
|
Ronald R. Blanck,
DO
(1)
|
66,000
|
2,624
|
—
|
—
|
68,624
|
|
James Mitchum
(1)
|
60,000
|
2,624
|
—
|
—
|
62,624
|
|
Gregory Pepin
(1)
|
53,500
|
2,624
|
—
|
—
|
56,124
|
|
Gerald T.
Proehl
(1)
|
59,500
|
2,624
|
—
|
—
|
62,124
|
|
Chris A.
Rallis
(1)
|
55,000
|
2,624
|
—
|
—
|
57,624
|
|
(1)
|
As of December 31, 2018, our non-employee directors held the
following aggregate stock options: Dr. Blanck,
3,026
; Mr. Mitchum,
2,750
; Mr. Pepin,
2,500
; Mr. Proehl,
3,250
; and Mr. Rallis,
2,990
.
|
During
Fiscal 2018, 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 and Compliance Committee member fee in each fiscal
year of $7,500 ($15,000 for our Audit and Compliance 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;
●
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 500 stock options, which vest one year after the
grant date and are exercisable for a period of ten years;
and
●
Reimbursement
of travel and related expenses for attending Board and committee
meetings, as incurred.
In
addition to the compensation described above, Mr. Proehl and Mr.
Mitchum were each granted a 1,250 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
will maintain an appropriate director’s and officer’s
insurance policy at all times for our non-employee
directors.
17
OWNERSHIP OF SECURITIES
Principal Stockholders and Share Ownership by
Management
The
following table sets forth, as of April 16, 2019, the number and
percentage of the outstanding shares of common stock 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.
|
Beneficial
Owner
Name and Address
(1)
|
Amount and Nature of
Beneficial Ownership
(2)
|
Percent of Class
|
|
Principal Stockholders
|
|
|
|
Iroquois Capital Management,
LLC
(3)
641
Lexington Avenue, 26th Floor
New
York, NY 10022
|
682,800
|
9.99
%
|
|
Hudson Bay Capital Management
LP
(4)
777
Third Ave., 30th Floor
New
York, NY 10017
|
682,800
|
9.99
%
|
|
Officers and Directors
|
|
|
|
Gregory Pepin
(5)
|
112,275
|
1.82
%
|
|
Michael B. Jebsen, CPA
(6)
|
60,232
|
*
|
|
Ronald R. Blanck, DO
(6)
|
4,345
|
*
|
|
James Mitchum
(6)
|
4,050
|
*
|
|
Anthony DiTonno
(6)
|
15,865
|
*
|
|
Chris A. Rallis
(6)
|
3,848
|
*
|
|
Gerald T. Proehl
(6)
|
4,745
|
*
|
|
All officers and directors as a group (7
persons)
(6)
|
205,360
|
3.30
%
|
* Less than 1%
18
|
(1)
|
Unless
otherwise noted, all addresses are in care of Tenax Therapeutics,
Inc. at ONE Copley Parkway, Suite 490, Morrisville, North Carolina
27560.
|
|
(2)
|
Based
upon 6,154,434 shares of common stock outstanding on April
16
, 2019. The number and
percentage of shares beneficially owned is determined in accordance
with Rule 13d-3 of the Exchange Act and the information is not
necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares
as to which the person has sole or shared voting power or
investment power and also any shares that the person has the right
to acquire within 60 days of April
16
, 2019
through the exercise of any stock
options, warrants or other rights or the conversion of preferred
stock. Any shares that a person has the right to acquire within 60
days are deemed to be outstanding for the purpose of computing the
percentage ownership of such person but are not deemed outstanding
for the purpose of computing the percentage ownership of any other
person.
|
|
(3)
|
Based
on a Schedule 13G/A filed with the SEC on February 14, 2019 to
report beneficial ownership as of December 31, 2018, Iroquois
Master Fund Ltd. (“Iroquois Master Fund”) held 21,519
shares of common stock, shares of preferred stock convertible into
191,710 shares of common stock and warrants to purchase 569,950
shares of common stock and Iroquois Capital Investment Group LLC
(“ICIG”) held 41,886 shares of common stock, shares of
preferred stock convertible into 326,422 shares of common stock and
warrants to purchase 984,454 shares of common stock. Richard Abbe
shares authority and responsibility for the investments made on
behalf of Iroquois Master Fund with Kimberly Page, each of whom is
a director of the Iroquois Master Fund. As such, Mr. Abbe and Ms.
Page may each be deemed to be the beneficial owner of all shares of
common stock underlying the preferred stock and warrants (each
subject to the Blockers described below) held by Iroquois Master
Fund. Iroquois Capital Management, LLC (“Iroquois
Capital”) is the investment advisor for Iroquois Master Fund
and Mr. Abbe is the President of Iroquois Capital. Mr. Abbe has the
sole authority and responsibility for the investments made on
behalf of ICIG. As such, Mr. Abbe may be deemed to be the
beneficial owner of all shares of common stock underlying the
preferred stock and warrants (each subject to the Blockers
described below) held by Iroquois Master Fund and ICIG. Each of
Iroquois Capital, Mr. Abbe and Ms. Page (collectively, the
“Reporting Persons”) disclaims any beneficial ownership
of any shares of common stock except to the extent of their
pecuniary interest therein. Pursuant to the terms of (i) the
certificate of designations containing the terms of the preferred
stock, the Reporting Persons cannot convert the preferred stock to
the extent the Reporting Persons would beneficially own, after any
such conversion, more than 9.99% of the outstanding shares of the
Company’s common stock (the “Preferred Stock
Blockers”) and (ii) the warrants, the Reporting Persons
cannot exercise the warrants to the extent the Reporting Persons
would beneficially own, after any such exercise, more than 9.99% of
the outstanding shares of common Stock (the “Warrant
Blockers” and collectively with the Preferred Stock Blockers,
the “Blockers”). Consequently, the Reporting Persons
currently are not able to exercise all of their warrants due to the
Blockers.
|
|
(4)
|
Based
on a Schedule 13G filed with the SEC on February 5, 2019, Hudson
Bay Capital Management LP (“HBCM”) and Sander Gerber
have shared voting and dispositive power over the securities. HBCM
serves as the investment manager of Hudson Bay Master Fund. As
such, HBCM may be deemed to be the beneficial owner of all shares
of common stock (subject to the Warrant Blockers applicable to
warrants to purchase 344,877 shares of common stock), if any,
underlying the warrants held by Hudson Bay Master Fund. Mr. Gerber
serves as the managing member of Hudson Bay Capital GP LLC, which
is the general partner of the HBCM. Mr. Gerber disclaims beneficial
ownership of these securities.
|
|
(5)
|
Includes
742
shares of restricted common
stock and 2,500 shares of common stock subject to options that are
vested, vesting, exercisable or convertible, as applicable, within
60 days of April
16
,
2019
.
Mr. Pepin is a co-founder
of EOS, an investment company, which serves as the Investment
Manager and Managing Director for JP SPC3 OXBT Fund (“OXBT
Fund”), and consequently he may be deemed to be the
beneficial owner of the 1,545 shares held by OXBT Fund and 107,488
shares of common stock subject to warrants. Mr. Pepin disclaims
beneficial ownership of the shares held by OXBT Fund except to the
extent of his pecuniary interest therein.
|
|
(6)
|
With
respect to Dr. Blanck, includes
257
shares of common stock subject to
warrants and
3,026
shares of
common stock subject to options that are vested, vesting,
exercisable or convertible, as applicable, within 60 days of April
16
, 2019
;
With
respect to Mr. DiTonno, includes
129
shares of common stock subject to
warrants and
15,576
shares of
common stock subject to options that are vested, vesting,
exercisable or convertible, as applicable, within 60 days of April
16
, 2019
;
With
respect to Mr. Rallis, includes 129 shares of common stock subject
to warrants
and
2,990 shares of
common stock subject to options that are vested, vesting,
exercisable or convertible, as applicable, within 60 days of April
16
, 2019
;
With
respect to Mr. Jebsen, includes
31,173
shares of common stock subject to
options that are vested, vesting, exercisable or convertible, as
applicable, within 60 days of April
16
, 2019;
With
respect to Mr. Proehl, includes 3,250 shares of common stock
subject to options that are vested, vesting, exercisable or
convertible, as applicable, within 60 days of April
16
, 2019
and
1,495 shares for which voting and investment power is shared with
Mr. Proehl’s spouse
;
With
respect to Mr. Mitchum, includes 2,750
s
hares of common stock subject to options
that are vested, vesting, exercisable or convertible, as
applicable, within 60 days of April
16
, 2019
and
1,300 shares for which voting and investment power is shared with
Mr. Mitchum’s spouse
; and
With
respect to all officers and directors as a group, includes 515
shares of common stock subject to warrants and 61,265 shares of
common stock subject to options that are vested, vesting,
convertible, or exercisable, as applicable, within 60 days of April
16
, 2019
.
|
19
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related Party Transactions
We have
not engaged in any related party transaction since January 1, 2017
in which the amount involved exceeds $116,140 (which is 1% of the
average of our total assets at year end for the last two fiscal
years) 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 2018 transactions in our common stock, we believe that
during the fiscal year ended December 31, 2018 our officers,
directors and greater than 10% owners timely filed all reports they
were required to file under Section 16(a), except that
(i) Mr. Jebsen had three late Form 4
filings, resulting in the failure to timely report three
transactions, (ii) Mr. DiTonno had two late Form 4 filings,
resulting in the failure to timely report two transactions, and
(iii) each of Dr. Blanck and Messrs. Rallis, Proehl, Pepin and
Mitchum had one late Form 4 filing, resulting in the failure to
timely report one transaction
.
20
PROPOSAL 2: APPROVAL OF AMENDMENT NO. 1 TO THE 2016 STOCK INCENTIVE
PLAN
Our
2016 Stock Incentive Plan originally authorized for issuance
3,000,000 shares of our common stock under the plan. As a result of
the 1-for-20 reverse stock split effected on February 23, 2018, the
number of shares authorized for issuance under the 2016 Plan was
reduced to 150,000. On April 18, 2019, our Board of Directors
approved, subject to stockholder approval, Amendment No. 1 to the
2016 Plan to increase the number of shares of common stock
authorized for issuance under the 2016 Plan to a total of 750,000
shares, representing an increase of 600,000 shares. The additional
requested shares represent approximately 10% of our total
outstanding shares as of April 16, 2019. Based upon our assessment
of our anticipated grants under the 2016 Plan, as amended, we
believe that the proposed increase in the number of shares will be
sufficient to meet our equity compensation requirements for
approximately three years from the date of the Annual
Meeting.
The
purpose of the 2016 Plan is to advance the interests of our company
and our stockholders through awards that give eligible employees,
directors and third party service providers a personal stake in our
growth, development and financial success. Awards under the 2016
Plan are also intended to motivate eligible employees, directors
and third party service providers to devote their best efforts to
our business and help us attract and retain the services of
eligible employees, directors and third party service providers who
are in a position to make significant contributions to our future
success and align them with stockholder interests.
We are
requesting that stockholders approve Amendment No. 1 to the 2016
Plan to satisfy Nasdaq rules relating to equity compensation. In
addition, approval would allow us to qualify additional options for
treatment as incentive stock options for purposes of Section 422 of
the Internal Revenue Code. If stockholder approval is not received,
the Compensation Committee will reconsider Amendment No. 1 to the
2016 Plan, and the present 2016 Plan would remain in effect without
such amendment. In addition, if stockholder approval is not
received, we
may seek to hold
additional stockholder meetings until stockholder approval is
obtained.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF
AMENDMENT NO. 1 TO THE 2016 STOCK INCENTIVE PLAN.
Summary of the 2016 Plan Features
The
following is a brief summary of the 2016 Plan, as amended by
Amendment No. 1, and is qualified in its entirety by reference to a
copy of the 2016 Plan and Amendment No. 1 attached to this proxy
statement as Appendix A.
Shares Available
The
total number of shares of common stock available for issuance under
the 2016 Plan is 100,000, subject to adjustment for future stock
splits, stock dividends and similar changes in the capitalization
of our company.
Any
shares related to Awards (as defined below) which terminate by
expiration, forfeiture, cancellation, or otherwise without the
issuance of such shares, are settled in cash in lieu of shares, or
are exchanged with the Compensation Committee’s permission,
prior to the issuance of shares, for Awards not involving shares,
shall be available again for grant under the 2016
Plan.
Shares
of common stock covered by an Award will be reserved for that Award
while it remains outstanding but shall only be counted as used to
the extent they are actually issued; provided, however, that the
full number of stock appreciation rights granted that are to be
settled by the issuance of shares shall be counted against the
number of shares available for award under the 2016 Plan,
regardless of the number of shares actually issued upon settlement
of such stock appreciation rights. Further, any shares
of common stock withheld to satisfy tax withholding obligations on
Awards issued under the 2016 Plan and shares tendered to pay the
exercise price of Awards under the 2016 Plan will not be eligible
to be returned as available shares under the 2016
Plan.
21
Description of Awards
The
2016 Plan provides for the grant of stock options, stock
appreciation rights, restricted stock, restricted stock units,
performance shares, performance units, cash-based awards, or other
stock-based awards (collectively
“Awards”).
Stock Options
. Optionees
receive the right to purchase a specified number of shares of our
common stock at a specified option price and subject to such other
terms and conditions as are specified in connection with the option
grant. The option price for each grant of an option
under the 2016 Plan will be determined by the Compensation
Committee in its sole discretion and shall be specified in the
Award agreement; provided, however, the option price on the date of
grant must be at least equal to 100% of the fair market value of
the common stock on the date of grant; provided, further, however,
that the option price must be at least equal to 110% of the fair
market value of the common stock on the date of grant with respect
to any incentive stock option issued to a participant who, on the
date of such grant, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of our company
or of any subsidiary corporation (a “10%
Shareholder”). The term of an option and the
period or periods during which, and conditions pursuant to which,
an option may vest and be exercised will be determined by the
Compensation Committee, although the option term may not exceed 10
years (or five years with respect to incentive options granted to
an employee who is a 10% Shareholder). Any option not exercised
before expiration of the option period will terminate. Options
generally are subject to certain restrictions on exercise if the
participant terminates employment or service. The 2016
Plan permits the Compensation Committee to determine the manner of
payment of the exercise price of options, including through payment
by cash or its equivalent, in connection with a “cashless
exercise” through a broker, by surrender to us of shares of
common stock, or by any other lawful means.
Stock Appreciation
Rights
. Stock Appreciation Rights
(“SARs”) entitle recipients to profit from increases in
the value of our common stock, without buying
shares. Like options, SARs benefit the holder when our
common stock price increases. The primary difference is
that the recipient is not required to pay an exercise price, but
instead just receives the amount of the increase in the form of
cash or stock. Upon the exercise of a SAR, the holder of
a SAR is entitled to receive payment from our company in an amount
determined by multiplying (i) the difference between the fair
market value of a share of common stock on the date of exercise
over the grant price per share of such SAR by (ii) the number of
shares of common stock with respect to which the SAR is being
exercised. The grant price may be no less than 100% of the fair
market value per share of the common stock on the date the SAR is
granted. SARs vest and become exercisable according to
the terms established by the Compensation Committee. No
SAR may be exercised more than 10 years after it was granted, or
such shorter period as may apply with respect to a particular SAR.
SARs generally are subject to certain restrictions on exercise if
the participant terminates employment or service.
Restricted Stock and Restricted Stock
Units
. Subject to the limitations of the 2016
Plan, the Compensation Committee may grant shares of restricted
stock and/or restricted stock units to participants in such amounts
as the Compensation Committee determines. Restricted stock units
are similar to restricted stock except that no shares of common
stock are actually awarded to the participant on the date of
grant. Restricted stock and restricted stock units will
be subject to certain conditions which must be met in order for the
restricted stock or restricted stock units to vest and/or be earned
(in whole or in part) and no longer subject to forfeiture.
Restricted stock awards may be payable in shares of common stock,
and restricted stock units may be payable in cash or whole shares
of common stock, or partly in cash and partly in whole shares of
common stock, in accordance with the Compensation Committee’s
discretion. The Compensation Committee has authority to
determine the restriction period for each grant of restricted stock
and/or restricted stock units and will determine the conditions
that must be met in order for such Award to be granted or to vest
or be earned (in whole or in part). These conditions may include
(but are not limited to) payment of a stipulated purchase price,
restrictions based upon the achievement of specific performance
goals, time-based restrictions on vesting following the attainment
of the performance goals, time-based restrictions, and/or
restrictions under applicable laws or under the requirements of any
stock exchange or market upon which such shares are listed or
traded, or holding requirements or sale restrictions placed on the
shares by us upon vesting of such restricted stock or restricted
stock units. Restricted stock and/or restricted stock
units generally are subject to certain restrictions on vesting if
the participant terminates employment or service.
Performance Shares and Performance
Units
. Subject to the limitations of the 2016
Plan, the Compensation Committee may grant performance units and/or
performance shares to participants in such amounts and upon such
terms as the Compensation Committee determines. An award
of a performance share is a grant of a right to receive shares of
common stock or the cash value thereof, or a combination thereof
(as determined in the Compensation Committee’s discretion),
which is contingent upon the achievement of performance goals
during a specified period and which has a value equal to the fair
market value of a share of common stock on the grant date. An award
of a performance unit is a grant of a right to receive shares of
common stock, a designated dollar value amount of common stock, or
a combination thereof (as determined in the Compensation
Committee’s discretion) which is contingent upon the
achievement of performance goals during a specified period, and
which has an initial value established by the Compensation
Committee at the time of grant. The Compensation
Committee will set performance goals in its discretion which,
depending on the extent to which they are met, will determine the
value and/or number of performance units and/or performance shares
that will be paid out to a participant. Performance
units and/or performance shares generally are subject to certain
restrictions on vesting if the participant terminates employment or
service.
22
Cash-Based Awards and Other Stock-Based
Awards
. Subject to the limitations of the 2016
Plan, the Compensation Committee may grant cash-based awards to
participants in such amounts and upon such terms as the
Compensation Committee may determine. The Compensation
Committee may also grant other types of equity-based or
equity-related Awards not otherwise described by the terms of the
2016 Plan in such amounts and subject to such terms and conditions
as the Compensation Committee may determine. Such Awards may
involve the transfer of actual shares of common stock to
participants, or payment in cash or otherwise of amounts based on
the value of shares, and may include, without limitation, Awards
designed to comply with or take advantage of the applicable local
laws of jurisdictions other than the United States. Each
cash-based award will specify a payment amount or payment range as
determined by the Compensation Committee. Each other
stock-based award will be expressed in terms of shares of common
stock or units based on shares of common stock, as determined by
the Compensation Committee. If the Compensation
Committee exercises its discretion to establish performance goals,
the number and/or value of cash-based awards or other stock-based
awards that will be paid out to a participant will depend on the
extent to which the performance goals are
met. Cash-based awards or other stock-based awards may
be payable in cash or shares of common stock, in accordance with
the Compensation Committee’s
discretion. Cash-based awards or other stock-based
awards generally are subject to certain restrictions on vesting if
the participant terminates employment or service.
Dividend and Dividend
Equivalents
. The Compensation Committee may grant
dividends or dividend equivalents based on the dividends declared
on shares that are subject to any Award, to be credited as of
dividend payment dates, during the period between the date the
Award is granted and the date the Award is exercised, vests, or
expires, as determined by the Compensation Committee; provided,
however, that dividends or dividend equivalents credited with
respect to performance-based Awards will be subject to the same
underlying performance-based vesting conditions as the Awards and
will not be subject to discretion. The dividends or
dividend equivalents may be subject to any limitations and/or
restrictions determined by the Compensation Committee.
Limitations on Awards
The
maximum number of shares that may be issued pursuant to awards
granted under the 2016 Plan may not exceed 750,000 shares. In
addition, under the 2016 Plan, unless and until the Compensation
Committee determines that an Award to a Covered Employee (as
defined in section 162(m) of the IRC) shall not be designed to
qualify as performance-based compensation under section 162(m) of
the IRC, the following annual award limits shall apply to grants of
such Awards under the 2016 Plan:
●
Options
: The maximum aggregate
number of shares of common stock subject to options granted in any
one year to any one participant will be 1,000,000 shares, as
adjusted pursuant to the 2016 Plan;
●
SARs
: The maximum aggregate
number of shares of common stock subject to SARs granted in any one
year to any one participant will be 1,000,000 shares, as adjusted
pursuant to the 2016 Plan;
●
Restricted Stock or Restricted Stock
Units
: The maximum aggregate Awards of restricted stock or
restricted stock units in any one year to any one participant will
be 500,000 shares, as adjusted pursuant to the 2016
Plan;
●
Performance Units or Performance
Shares
: The maximum aggregate Awards of performance units or
performance shares that a participant may receive in any one year
will be 500,000 shares, as adjusted pursuant to the 2016 Plan, or
equal to the value of 500,000 shares, as adjusted pursuant to the
2016 Plan, determined as of the date of vesting or payout, as
applicable;
●
Cash-Based Awards
: The maximum
aggregate amount awarded or credited with respect to cash-based
awards to any one participant in any one year may not exceed the
greater of the value of $4,000,000 or 1,000,000 shares, as adjusted
pursuant to the 2016 Plan, determined as of the date of vesting or
payout, as applicable; and
●
Other Stock-Based Awards
: The
maximum aggregate grants with respect to other stock-based awards
in any one year to any one participant will be 1,000,000 shares, as
adjusted pursuant to the 2016 Plan.
23
Change
in Control
Unless
otherwise expressly provided in an Award agreement, with respect to
each outstanding Award that is assumed or substituted in connection
with a change in control (as defined in the 2016 Plan), in the
event that (i) a change in control occurs and (ii) the
participant’s employment or service is involuntarily
terminated by us, our successor or affiliate thereof without cause
(as defined in the 2016 Plan) on or after the effective time of the
change in control but prior to 18 months following such change in
control, then Awards will be treated as follows:
●
Options and SARs
: Any and all
options and SARs granted under the 2016 Plan will become
exercisable, and will remain exercisable in accordance with their
terms;
●
Restricted Stock, Restricted Stock
Units or Other Stock-Based Awards
: Any restriction periods
and restrictions imposed on all outstanding Awards of restricted
stock, restricted stock units or other stock-based awards will
lapse and be settled as soon as reasonably practicable, but in no
event later than 10 days following such termination of employment;
and
●
Performance Units, Performance Shares
or other Performance-Based Awards
: For each performance
unit, performance share or other performance-based Awards, all
performance goals or similar performance-based vesting criteria
will be deemed achieved at 100% of target levels and all other
terms and conditions will be deemed met as of the date of the
participant’s termination of employment or service and the
Award shall be settled as soon as reasonably practicable but in no
event later than 10 days following termination of
employment.
For
purposes of the 2016 Plan, an Award will be considered assumed if,
following the change in control, the Award confers the right to
purchase or receive, for each share subject to the Award
immediately prior to the change in control, the consideration
received in the change in control by holders of common stock for
each share held on the effective date of the transaction; provided,
however, that if the consideration received in the change in
control is not solely common stock of the successor corporation or
its parent, the Compensation Committee may, with the consent of the
successor corporation, provide for the consideration to be received
upon the exercise of an option or SAR, for each share subject to
the Award, to be solely common stock of the successor corporation
or its parent equal in fair market value to the per share
consideration received by holders of common stock in the change in
control.
For
purposes of the 2016 Plan, an Award will be considered assumed or
substituted if, upon the occurrence of a change in control after
which there will be a generally recognized U.S. public market for
(i) our stock, (ii) common stock for which our stock is exchanged,
or (iii) the common stock of a successor or acquirer entity (such
publicly traded stock, “Public Shares”), the then
outstanding Awards are assumed, exchanged or substituted for by a
successor or acquirer entity such that following the change in
control, the Awards relate to the Public Shares and, except as
otherwise provided by the 2016 Plan, remain subject to the terms
and conditions that were applicable to the Awards prior to the
change in control.
24
Unless
otherwise expressly provided in an Award agreement, with respect to
each outstanding Award that is not assumed or substituted in
connection with a change in control, then prior to the occurrence
of the change in control Awards will be treated as
follows:
●
Options and SARs
: Any and all
options and SARs granted under the 2016 Plan will vest in full and
become immediately exercisable in accordance with their terms and
the Compensation Committee will notify the participant in writing
that the options or SARs will be exercisable for a period of time
determined by the Compensation Committee in its sole discretion and
the option or SAR will terminate upon the expiration of the stated
period; and
●
Restricted Stock, Restricted Stock
Units, Performance Units, Performance Shares or Other Stock-Based
Awards
: Any restriction periods and restrictions imposed on
all outstanding Awards of restricted stock, restricted stock units,
performance units, performance shares or other stock-based awards
will lapse and be settled as soon as reasonably practicable, but in
no event later than 10 days following the change in
control.
Notwithstanding any
other provisions of the 2016 Plan, in the event that each
outstanding Award is not assumed or substituted in connection with
a change in control and except as would otherwise result in adverse
tax consequences under section 409A of the IRC, the Compensation
Committee may, in its discretion, provide that each Award shall,
immediately upon the occurrence of a change in control, be
cancelled in exchange for a payment in cash or securities in an
amount equal to (i) the excess if any of the consideration paid per
share in the change in control over the exercise or purchase price
per share subject to the Award multiplied by (ii) the number of
shares granted under the Award. Without limiting the
generality of the foregoing, in the event that the consideration
paid per share in the change in control is less than or equal to
the exercise price or purchase price per share subject to the
Award, the Compensation Committee may, in its discretion, cancel
such Award without any consideration upon the occurrence of a
change in control.
Transferability
Except
as otherwise provided in the 2016 Plan, during a
participant’s lifetime, his or her Awards will be exercisable
only by such participant or such participant’s legal
representative. Awards will not be transferable other
than by will or the laws of descent and distribution; no Awards
will be subject, in whole or in part, to attachment, execution, or
levy of any kind; and any purported transfer in violation of these
restrictions will be null and void. The
Compensation Committee may establish procedures as it deems
appropriate for a participant to designate a beneficiary to whom
any amounts payable or shares deliverable in the event of, or
following, such participant’s death, may be
provided.
Eligibility of Recipients
Employees,
directors and third party service providers of Tenax Therapeutics
are eligible to be granted Awards under the 2016
Plan. As of April 16, 2019, approximately 10 employees,
including two executive officers, and five non-employee directors
are eligible to receive Awards under the 2016
Plan.
On
April 16, 2019, the last reported sale price of our common stock on
the Nasdaq Capital Market was $1.69.
25
Federal Income Tax Consequences
The
following generally describes the principal federal (but not state
and local) income tax consequences of awards granted under the 2016
Plan as of this time. The summary is general in nature and is not
intended to cover all tax consequences that may apply to a
particular participant or to our company. The provisions of the IRC
and related regulations are complicated and their impact in any one
case may depend upon the particular circumstances.
Incentive Stock
Options. A
participant will not have income upon the grant of an incentive
stock option. Also, except as described below, a participant will
not have income upon exercise of an incentive stock option if the
participant has been employed by us or a 50% or more owned
corporate subsidiary at all times beginning with the option grant
date and ending three months before the date the participant
exercises the option. If the participant has not been so employed
during that time, then the participant will be taxed as described
below under “Nonqualified Stock Options.” The exercise
of an incentive stock option may subject the participant to the
alternative minimum tax.
A
participant will have income upon the sale of the stock acquired
under an incentive stock option at a profit (if sales proceeds
exceed the exercise price). The type of income will depend on when
the participant sells the stock. If a participant sells the stock
more than two years after the option was granted and more than one
year after the option was exercised, then all of the profit will be
long-term capital gain. If a participant sells the stock prior to
satisfying these waiting periods, then the participant will have
engaged in a disqualifying disposition and a portion of the profit
will be ordinary income and a portion may be capital gain. This
capital gain will be long-term if the participant has held the
stock for more than one year and otherwise will be short-term. If a
participant sells the stock at a loss (sales proceeds are less than
the exercise price), then the loss will be a capital loss. This
capital loss will be long-term if the participant held the stock
for more than one year and otherwise will be
short-term.
Nonqualified Stock Options (Nonstatutory Stock
Options)
. A participant will not have income upon
the grant of a nonqualified stock option. A participant will have
compensation income upon the exercise of a nonqualified stock
option equal to the value of the stock on the day the participant
exercised the option less the exercise price. Upon sale of the
stock, the participant will have capital gain or loss equal to the
difference between the sales proceeds and the value of the stock on
the day the option was exercised. This capital gain or loss will be
long-term if the participant has held the stock for more than one
year and otherwise will be short-term.
Stock Appreciate Rights
. A
participant will not have income upon the grant of a
SAR. However, a participant will have compensation taxed
at ordinary income tax rates when a SAR is exercised, to the extent
of the difference between the grant price and the value of the
stock on the date of exercise.
26
Restricted Stock
. A
participant will not have income upon the grant of restricted stock
unless an election under section 83(b) of the IRC is made within 30
days of the date of grant. If a timely 83(b) election is made, then
a participant will have compensation income on each share equal to
the value of the stock at date of grant less the purchase price
paid, if any. When the stock is sold, the participant will have
capital gain or loss equal to the difference between the sales
proceeds and the value of the stock on the date of grant. If the
participant does not make an 83(b) election, then when the stock
vests the participant will have compensation taxed at ordinary
income tax rates on the value of the stock on the vesting date less
the purchase price, if any. When the stock is later sold, the
participant will also incur capital gain or loss equal to the sales
proceeds less the value of the stock on the vesting date. Any
capital gain or loss will be long-term if the participant held the
stock for more than one year and otherwise will be
short-term.
Restricted Stock Units, Performance Share
Awards, Performance Unit Awards, Dividends and Dividend
Equivalents
. The federal income tax consequences
of the award of restricted stock units, performance share awards,
performance unit awards or dividend equivalents will depend on the
conditions of the particular award. Generally, the grant of one of
these Awards does not result in taxable income to the participant.
However, the participant will recognize ordinary compensation
income (taxable at ordinary income tax rates) at settlement of the
Award in an amount equal to any cash and/or the fair market value
of any common stock received (determined as of the date that the
award is not subject to a substantial risk of forfeiture or freely
transferable).
Cash-Based Awards and Other Stock-Based
Awards
. A participant will not have income upon
the grant of a cash-based award or other stock-based
award. However, a participant will have ordinary
compensation income (taxed at ordinary income tax rates) for cash
payments and/or the fair market value of any shares or other
property received in connection with cash-based awards or other
stock-based awards in the year such payments or shares are received
or made available to the participant without substantial
limitations or restrictions. When any shares received in
connection with cash-based awards or other stock-based awards is
sold, the participant will have capital gain or loss equal to the
sales proceeds less the value of the stock on the vesting date. Any
capital gain or loss will be long-term if the participant held the
stock for more than one year and otherwise will be
short-term.
Tax Consequences to Tenax
Therapeutics
. There will be no tax consequences
to Tenax Therapeutics except that we will be entitled to a
deduction when a participant has compensation income. Any such
deduction will be subject to the limitations of section 162(m) of
the IRC.
Section 409A of the IRC
Section
409A of the IRC imposes certain requirements on nonqualified
deferred compensation. Certain awards provided under the
2016 Plan could be viewed as deferring income for participants and
may, therefore, be subject to section 409A of the
IRC. While it is our intent to have the 2016 Plan and
all awards under the 2016 Plan be exempt from or comply with the
requirements of section 409A of the IRC, including related
regulations and guidance, there can be no assurance that awards
made under the 2016 Plan will satisfy those
requirements. In the event an award is subject to
section 409A of the IRC but does not satisfy the requirements of
section 409A of the IRC, the participant may be subject to
immediate income tax inclusion of the deferred amounts, an
additional 20% excise tax on amounts includible in income, and
interest and penalty charges on such amounts from the date the
amounts became vested. We undertake no responsibility to
take, or to refrain from taking, any actions in order to achieve a
certain
Plan Awards
The
following table sets forth with respect to each individual and
group listed below (i) the number of shares of common stock issued
or issuable pursuant to stock options granted under the 2016 Plan
and (ii) the number of shares underlying restricted stock awards
granted under the 2016 Plan, in each case since the 2016
Plan’s effectiveness on June 16, 2016 through April 16, 2019.
Any future awards to eligible participants under the 2016 Plan are
subject to the discretion of the Compensation Committee or Board
and therefore are not determinable at this time. The table does not
include grants made under any other compensation plan.
27
CUMULATIVE GRANTS SINCE PLAN INCEPTION IN 2016
|
|
Number of Shares Underlying Options Granted
|
Number of Shares Underlying Restricted Stock Awards
Granted
|
|
Anthony
DiTonno
|
50,000
|
--
|
|
Michael
B. Jebsen, CPA
|
--
|
--
|
|
Ronald
R. Blanck, DO
|
--
|
--
|
|
James
Mitchum
|
--
|
--
|
|
Gregory
Pepin
|
--
|
--
|
|
Gerald
T. Proehl
|
--
|
--
|
|
Chris
A. Rallis
|
--
|
--
|
|
All
current executive officers as a group
|
50,000
|
--
|
|
All
current directors who are not executive officers as a
group
|
--
|
--
|
|
All
associates of directors, executive officers or
nominees
|
50,000
|
--
|
|
All
other persons who received or are to receive 5% of plan
awards
|
--
|
--
|
|
All
employees, including all current officers who are not executive
officers, as a group
|
--
|
--
|
Equity Compensation Plan Information
The
following table provides information about the securities
authorized for issuance under our equity compensation plans as of
December 31, 2018.
|
|
(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
|
191,735
|
$
93.72
|
100,000
(1)
|
|
Equity
compensation plans not approved by security holders
|
—
|
—
|
—
|
|
Total
|
191,735
|
$
93.72
|
100,000
|
|
(1)
|
Represents the number of shares available for future issuance under
the 2016 Plan. All of these shares are available for issuance as
restricted stock or other stock-based awards under the 2016
Plan.
|
28
PROPOSAL 3: 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 the year
ending December 31, 2019. Cherry Bekaert LLP served as our
independent registered public accounting firm for the year ending
December 31, 2018.
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 the 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 the years ending December 31, 2018 and 2017
were as follows:
|
|
2018
|
2017
|
|
Audit fees
(1)
|
$
174,649
|
$
133,000
|
|
Audit-Related
Fees
(2)
|
—
|
—
|
|
Tax fees
(3)
|
13,300
|
15,350
|
|
All Other Fees
(4)
|
—
|
—
|
|
Total
fees
|
$
187,949
|
$
148,350
|
|
(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.
|
|
(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 2018 and
2017.
|
|
(3)
|
This
category includes fees billed in the fiscal years shown for
professional services for tax compliance, tax advice, and tax
planning.
|
|
(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 2018 and 2017.
|
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.
29
PROPOSAL 4: 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 officers. 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 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 tables and narrative disclosure, as
well as the following factors:
●
Compensation
decisions for our named executive officers are made by a committee
of independent directors.
●
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.
●
The
Compensation Committee attempts to set challenging pre-established
operational goals related to our names executive officers’
cash bonuses, as demonstrated by the fact that neither of our named
executive officers achieved 100% of their operational
goals.
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.
30
PROPOSAL 5: ADVISORY (NONBINDING) VOTE ON FREQUENCY OF FUTURE
ADVISORY VOTES ON NAMED EXECUTIVE OFFICER COMPENSATION
As
discussed in Proposal 4 above, we are providing our stockholders an
advisory (nonbinding) vote on the compensation of our named
executive officers. The advisory vote described in Proposal 4 above
is referred to as a “Say-on-Pay” vote. In this Proposal
5, we are asking our stockholders to determine, on an advisory
(nonbinding) basis, whether the preferred frequency of a Say-on-Pay
advisory vote should be every year, every two years, or every three
years. Section 14A of the Exchange Act requires that we submit this
proposal on the frequency of the Say-on-Pay vote to our
stockholders at least once every six years.
At the
2013 Annual Meeting of Stockholders, a majority of stockholders
voted, in an advisory (nonbinding) vote, that future Say-on-Pay
votes should be held every two years. The Board of Directors had
recommended a vote for annual frequency of Say-on-Pay votes. In
light of the shareholder vote and other factors it considered, the
Board of Directors determined that the Company would hold future
say-on-pay votes every two years until the next advisory vote on
the frequency of Say-on-Pay votes.
You may
cast your advisory vote on whether the Say-on-Pay vote will occur
every one, two, or three years, or you may abstain from voting on
the matter. 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 Board will take into
account the outcome of the vote when making future decisions
regarding the frequency of future Say-on-Pay votes. In this
Proposal 5, you are not voting “for” or
“against” any proposal or recommendation by the Board
but, rather, you are voting for the option (every one, two, or
three years) you believe is the most appropriate.
The
Board recommends that stockholders vote in favor of holding our
Say-on-Pay advisory vote to approve executive compensation every
two years. In making this recommendation, our Board considered the
relevant merits of each of the three frequency alternatives. The
Board believes that holding the Say-on-Pay advisory vote every two
years, in line with our stockholders’ prior preference, will
allow our stockholders to provide appropriate input on our
executive compensation policies and procedures as disclosed in our
proxy statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR “TWO
YEARS” (AS OPPOSED TO ONE YEAR OR THREE YEARS) FOR THE
FREQUENCY OF FUTURE STOCKHOLDER VOTES TO APPROVE NAMED EXECUTIVE
OFFICER COMPENSATION.
31
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 2020 Annual Meeting of Stockholders
must be received by us no later than
December 21, 2019
for inclusion in the
proxy statement and proxy card relating to such meeting.
However, if the date of the 2020
Annual Meeting is changed by more than 30 days from the date
of the first anniversary of the 2019 Annual Meeting, then the
deadline is a reasonable time before we begin to print and mail our
proxy statement for the 2020 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 year’s 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
year’s annual meeting, a stockholder’s 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 2020 Annual Meeting of Stockholders
has not yet been established, but assuming it is held on June 16,
2020, in order to comply with the time periods set forth in our
bylaws, appropriate notice for the 2020 Annual Meeting would need
to be provided to our corporate secretary no earlier than January
18, 2020, and no later than February 17, 2020.
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, 2018, 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.
REQUESTS FOR DIRECTIONS TO OUR COMPANY’S ANNUAL
MEETING
The
2019 Annual Meeting of Stockholders will be held on
June 13, 2019
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.
32
Appendix A
Tenax Therapeutics, Inc.
2016 Stock Incentive Plan
(As adopted on April 21, 2016 and approved by stockholders on June
16, 2016)
Article
1.
Establishment, Purpose, and Duration
1.1
Establishment
.
Tenax Therapeutics, Inc. (the “Company”) hereby
establishes an incentive compensation plan to be known as the Tenax
Therapeutics, Inc. 2016 Stock Incentive Plan (the
“Plan”), as set forth in this document. The Plan
permits the grant of Nonqualified Stock Options, Incentive Stock
Options, Stock Appreciation Rights, Restricted Stock, Restricted
Stock Units, Performance Shares, Performance Units, Cash-Based
Awards,
and Other
Stock-Based Awards. The Plan shall become effective on the date
that it is approved by the Company’s shareholders (the
“Effective Date”) and remain in effect as provided in
Section 1.3 hereof.
1.2
Purpose
of the Plan
. The purpose of the Plan is to advance the
interests of the Company and its shareholders through Awards that
give Employees, Directors and Third Party Service Providers a
personal stake in the Company’s growth, development and
financial success. Awards under the Plan will motivate Employees,
Directors and Third Party Service Providers to devote their best
efforts to the business of the Company. They will also help the
Company attract and retain the services of Employees, Directors and
Third Party Service Providers who are in a position to make
significant contributions to the Company’s future success and
align them with shareholder interests.
1.3
Duration
of the Plan
. Unless sooner terminated as provided herein,
the Plan shall terminate ten (10) years from the Effective Date.
After the Plan’s termination, no new Awards may be granted,
but Awards previously granted shall remain outstanding in
accordance with their applicable terms and conditions, including
the terms and conditions of the Plan. Notwithstanding the
foregoing, no Incentive Stock Options may be granted more than ten
(10) years after the earlier of: (a) the date the Plan is adopted
by the Board, or (b) the Effective Date.
Article
2.
Definitions
Whenever used in
this Plan, the following terms shall have the meanings set forth
below, and when the meaning is intended, the initial letter of the
word shall be capitalized:
2.1
“Affiliate”
shall mean any corporation or other entity (including, but not
limited to, a partnership or a limited liability company) that is
affiliated with the Company through stock or equity ownership or
otherwise, and is designated as an Affiliate for purposes of this
Plan by the Committee.
2.2
“Annual
Award Limit”
or
“Annual Award Limits”
have
the meaning set forth in Section 4.3.
2.3
“Award”
means, individually or collectively, a grant under this Plan
of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock, Restricted Stock Units,
Performance Shares, Performance Units, Cash-Based Awards, or Other
Stock-Based Awards, in each case subject to the terms of this
Plan.
2.4
“Award
Agreement”
means either: (a) a written agreement
entered into by the Company and a Participant setting forth the
terms and provisions applicable to an Award granted under this
Plan, or (b) a written or electronic statement issued by the
Company to a Participant describing the terms and provisions of
such Award, including any amendment or modification thereof. The
Committee may provide for the use of electronic, Internet, or other
nonpaper Award Agreements, and the use of electronic, Internet, or
other nonpaper means for the acceptance thereof and actions
thereunder by a Participant.
2.5
“Beneficial
Owner”
or
“Beneficial Ownership”
shall
have the meaning ascribed to such terms in Rule 13d-3 promulgated
under the Exchange Act.
2.6
“Board”
or
“Board of
Directors”
means the Board of Directors of
the Company.
2.7
“Cash-Based
Award”
means an Award, denominated in cash, granted to
a Participant as described in Article 10.
2.8
“Cause”
shall have the meaning ascribed thereto in any employment agreement
between the Company or any of its subsidiaries and the Participant,
or, if there is no employment agreement or if any such employment
agreement does not contain a definition of “cause”,
then Cause shall mean a finding by the Committee that the
Participant has (i) been charged with a felony or a crime involving
moral turpitude, (ii) committed an act of fraud or embezzlement
against the Company or its subsidiaries, (iii) materially violated
any policy of the Company or its subsidiaries, (iv) failed, refused
or neglected to substantially perform their duties (other than by
reason of a physical or mental impairment) or to implement the
directives of the Company, or (v) willfully engaged in conduct that
is materially injurious to the Company, monetarily or
otherwise.
A-1
2.9
“
Change
in Control
” for purposes of this Plan means the
happening of any of the following:
(i)
When any
“person” as such term is used in Section 13(d) and
14(d) of the Exchange Act (other than the Company, a Subsidiary or
a Company benefit plan, including any trustee of such plan acting
as a trustee) is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company’s
then outstanding securities entitled to vote generally in the
election of directors;
(ii)
A merger or
consolidation of the Company with any other corporation, other than
a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at
least fifty percent (50%) of the total voting power represented by
the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the
shareholders of the Company approve an agreement for the sale or
disposition by the Company of all or substantially all the
Company’s assets; or
(iii)
A change in the
composition of the Board of Directors of the Company occurring
within a two-year period, as a result of which fewer than a
majority of the directors are Incumbent Directors. “Incumbent
Directors” for such purposes shall mean non-executive
Directors who either (A) are Directors of the Company as of the
date the Plan is approved by shareholders, or (B) are elected, or
nominated for election to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such
election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or
threatened proxy contest relating to the election of Directors to
the Company).
Notwithstanding the
foregoing, an Award that is subject to Code Section 409A will not
be paid or settled upon a Change in Control unless the Change in
Control constitutes a “change in control event” under
Code Section 409A and Treasury Regulation Section
1.409A-3(i)(5).
2.10
“Change
in Control Price”
means the price per Share paid in
conjunction with any transaction resulting in a Change in Control
(as determined in good faith by the Committee if any part of the
offered price is payable other than in cash) or, in the case of a
Change in Control occurring solely by reason of events not related
to a transfer of Shares, the highest Fair Market Value of a Share
on any of the thirty (30) consecutive trading days ending on the
last trading day before the Change in Control occurs.
2.11
“Code”
means the U.S. Internal Revenue Code of 1986, as amended from time
to time. For purposes of this Plan, references to sections of the
Code shall be deemed to include references to any applicable
regulations thereunder and any successor or similar
provision.
2.12
“Committee”
means the Compensation Committee of the Board or a subcommittee
thereof, or any other committee designated by the Board to
administer this Plan. The members of the Committee shall be
appointed from time to time by and shall serve at the discretion of
the Board. If the Committee does not exist or cannot function for
any reason, the Board may take any action under the Plan that would
otherwise be the responsibility of the Committee in which case
references to the “Committee” shall be deemed
references to the Board.
2.13
“Company”
means Tenax Therapeutics, Inc., a Delaware corporation, and any
successor thereto as provided in Article 19
herein.
2.14
“
Covered
Employee
” means any Employee who is or may become a
“Covered Employee,” as defined in Code Section 162(m),
and who is designated, either as an individual Employee or class of
Employees, by the Committee within the shorter of: (a) ninety (90)
days after the beginning of the Performance Period, or (b)
twenty-five percent (25%) of the Performance Period having elapsed,
as a “Covered Employee” under this Plan for such
applicable Performance Period.
2.15
“Director”
means any individual who is a member of the Board of Directors of
the Company.
2.16
“Effective
Date”
has the meaning set forth in Section
1.1.
2.17
“Employee”
means any individual who is providing, or has agreed to provide,
services to the Company, an Affiliate or a Subsidiary, as an
employee. An Employee shall not include any individual during any
period he or she is classified or treated by the Company, Affiliate
or Subsidiary as an independent contractor, a consultant, or any
employee of an employment, consulting, or temporary agency or any
other entity other than the Company, Affiliate or Subsidiary,
without regard to whether such individual is subsequently
determined to have been, or is subsequently retroactively
reclassified as a common-law employee of the Company, Affiliate or
Subsidiary during such period.
2.18
“Exchange
Act”
means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act
thereto.
2.19
“
Fair
Market Value
” or “
FMV
” means the closing price of a
Share reported on an established stock exchange on the applicable
date, the preceding trading day, the next succeeding trading day,
or an average of trading days, as determined by the Committee in
its discretion. In the event Shares are not publicly traded at the
time a determination of their value is required to be made
hereunder, the determination of their Fair Market Value shall be
made in good faith by the Committee, taking into account such
factors as the Committee deems appropriate.
A-2
2.20
“Full-Value
Award”
means an Award other than in the form of an
ISO, NQSO, or SAR, and which is settled by the issuance of
Shares.
2.21
“Grant
Price”
means the price established at the time of
grant of an SAR pursuant to Article 7, used to determine whether
there is any payment due upon exercise of the SAR.
2.22
“Incentive
Stock Option” or “ISO”
means an Option to
purchase Shares granted under Article 6 to an Employee and that is
designated as an Incentive Stock Option and that is intended
to meet the requirements of Code Section 422 or any successor
provision.
2.23
“Insider”
shall mean an individual who is, on the relevant date, an officer
or Director of the Company, or a more than ten percent (10%)
Beneficial Owner of any class of the Company’s equity
securities that is registered pursuant to Section 12 of the
Exchange Act, as determined by the Board or Committee in accordance
with Section 16 of the Exchange Act.
2.24
“Nonemployee
Director”
means a Director who is not an
Employee.
2.25
“Nonemployee
Director Award”
means any NQSO, SAR, or Full-Value
Award granted, whether singly, in combination, or in tandem, to a
Participant who is a Nonemployee Director pursuant to such
applicable terms, conditions, and limitations as the Board or
Committee may establish in accordance with this Plan.
2.26
“Nonqualified
Stock Option”
or
“NQSO”
means an Option
that is not intended to meet the requirements of Code
Section 422, or that otherwise does not meet such
requirements.
2.27
“Option”
means an Incentive Stock Option or a Nonqualified
Stock Option, as described in Article 6.
2.28
“Option
Price”
means the price at which a Share may be
purchased by a Participant pursuant to an Option.
2.29
“Other
Stock-Based Award”
means an equity-based or
equity-related Award not otherwise described by the terms of this
Plan, granted pursuant to Article 10.
2.30
“Participant”
means any eligible individual as set forth in Article 5 to whom an
Award is granted.
2.31
“Performance-Based
Compensation”
means compensation under an Award that
is intended to satisfy the requirements of Code Section 162(m) for
certain performance-based compensation paid to Covered Employees.
Notwithstanding the foregoing, nothing in this Plan shall be
construed to mean that an Award which does not satisfy the
requirements for performance-based compensation under Code Section
162(m) does not constitute performance-based compensation for other
purposes, including Code Section 409A.
2.32
“Performance
Measures”
means measures as described in Article 12 on
which the performance goals are based and which are approved by the
Company’s shareholders pursuant to this Plan in order to
qualify Awards as Performance-Based Compensation.
2.33
“Performance
Period”
means the period of time during which the
performance goals must be met in order to determine the degree of
payout and/or vesting with respect to an Award.
2.34
“Performance
Share”
means an Award under Article 9 herein and
subject to the terms of this Plan, denominated in Shares, the value
of which at the time it is payable is determined as a function of
the extent to which corresponding performance criteria or
Performance Measure(s), as applicable, have been
achieved.
2.35
“Performance
Unit”
means an Award under Article 9 herein and
subject to the terms of this Plan, denominated in units, the value
of which at the time it is payable is determined as a function of
the extent to which corresponding performance criteria or
Performance Measure(s), as applicable, have been
achieved.
A-3
2.36
“Period
of Restriction”
means the period when Restricted Stock
or Restricted Stock Units are subject to a substantial risk of
forfeiture (based on the passage of time, the achievement of
performance goals, or the occurrence of other events as determined
by the Committee, in its discretion), as provided in Article
8.
2.37
“Person”
shall have the meaning ascribed to such term in Section 3(a)(9) of
the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a “group” as defined in Section 13(d)
thereof.
2.38
“Plan”
means this Tenax Therapeutics, Inc. 2016 Stock Incentive
Plan.
2.39
“Plan
Year”
means the calendar year.
2.40
“Restricted
Stock
” means an Award of Shares granted to a
Participant pursuant to Article 8.
2.41
“Restricted
Stock Unit”
means an Award granted to a Participant
pursuant to Article 8, except no Shares are actually awarded to the
Participant on the date of grant.
2.42
“Share”
means a share of common stock of the Company, par value $0.0001 per
share.
2.43
“Stock
Appreciation Right”
or “
SAR
” means an Award, designated as
an SAR, pursuant to the terms of Article 7 herein.
2.44
“Subsidiary”
means any corporation or other entity, whether domestic or foreign,
in which the Company has or obtains, directly or indirectly, a
proprietary interest of more than fifty percent (50%) by reason of
stock ownership or otherwise.
2.45
“Termination”
or
“Terminate”
means: (a) if a Participant is an
Employee, cessation of the employee-employer relationship between a
Participant and the Company and all Affiliates and Subsidiaries for
any reason; (b) if a Participant is a Nonemployee Director,
termination of the Nonemployee Director’s service on the
Board for any reason; and (c)
if a Participant is
a Third Party Service Provider, termination of the Third Party
Service Provider’s service relationship with the Company and
all Affiliates and Subsidiaries for any reason
.
Notwithstanding the foregoing, with respect to any Award subject to
Code Section 409A, any such cessation or termination also must
constitute a “separation from service” as defined under
Treasury Regulation Section 1.409A-1(h).
2.46
“Third
Party Service Provider”
means any consultant, agent,
advisor, or independent contractor who renders services to the
Company, a Subsidiary, or an Affiliate that (a) are not in
connection with the offer or sale of the Company’s securities
in a capital market raising transaction, and (b) do not directly or
indirectly promote or maintain a market for the Company’s
securities.
Article
3.
Administration
3.1
General
.
The Committee shall be responsible for administering the Plan,
subject to this Article 3 and the other provisions of this Plan.
The Committee may employ attorneys, consultants, accountants,
agents, and other advisors, any of whom may be an Employee, and the
Committee, the Company, and its officers and Directors shall be
entitled to rely upon the advice, opinions, or valuations of any
such advisors. All actions taken and all interpretations and
determinations made by the Committee shall be final and binding
upon the Participants, the Company, and all other interested
individuals.
3.2
Authority
of the Committee
. Subject to any express provisions set
forth in the Plan, the Committee shall have full and exclusive
discretionary power to (i) designate Employees, Directors and Third
Party Service Providers to be recipients of Awards; (ii) determine
the type and size of Awards; (iii) determine the terms and
conditions of Awards; (iv) certify satisfaction of performance
goals for purposes of satisfying the requirements of Code Section
162(m), if applicable; (v) construe and interpret the terms and the
intent of the Plan and any Award Agreement or other instrument
entered into under the Plan; (vi) establish, amend, or waive rules
and regulations for the Plan’s administration; (vii) subject
to the provisions of Section 4.4., authorize conversion or
substitution under the Plan of any or all outstanding option or
other awards held by service providers of an entity acquired by the
Company on terms determined by the Committee (without regard to
limitations set forth in Section 6.3 and 7.5); (viii) subject to
the provisions of Articles 15 and 17, amend the terms and
conditions of any outstanding Award; (ix) grant Awards as an
alternative to, or as the form of payment for, grants or rights
earned or due under compensation plans or similar arrangements of
the Company; and (x) make any other determination and take any
other action that it deems necessary or desirable for the
administration of the Plan.
3.3
Delegation
.
To
the extent permitted by law and any applicable rules of a stock
exchange
,
the Committee may,
by resolution, authorize one or more officers of the Company to do
one or both of the following on the same basis as can the
Committee: (a) designate Employees and Third Party Service
Providers to be recipients of Awards; and (b) determine the type
and size of any such Awards; provided, however: (i) the authority
to make Awards to any Nonemployee Director or to any Employee who
is considered an Insider may not be delegated; (ii) the resolution
providing such authorization shall set forth the total number of
Shares and Awards such officer(s) may grant to any one Participant
and in the aggregate; and (iii) the officer(s) shall report
periodically to the Committee regarding the nature and scope of the
Awards granted pursuant to the authority delegated.
Article
4.
Shares Subject to This Plan and Maximum Awards
4.1
Number
of Shares Available for Awards
. Subject to adjustment as
provided in Section 4.4 herein, the maximum number of Shares
currently available for issuance under this Plan (the “Share
Authorization”) shall be three million (3,000,000) Shares.
All such Shares shall be available for issuance in the form of any
of the Awards authorized under the Plan, including, but not limited
to, Full Value Awards or ISOs, as determined by the Committee in
its discretion. An individual Nonemployee Director shall not be
granted Awards in any Plan Year that would result in the Company
recognizing an aggregate compensation expense for such Awards in
excess of five hundred thousand dollars (
$500,000
).
A-4
4.2
Share
Usage
. Shares covered by an Award shall be reserved for that
award while the reward remains outstanding but shall only be
counted as used to the extent they are actually issued; provided,
however, that the full number of Stock Appreciation Rights granted
that are to be settled by the issuance of Shares shall be counted
against the number of Shares available for award under the Plan,
regardless of the number of Shares actually issued upon settlement
of such Stock Appreciation Rights. Further, any Shares withheld to
satisfy tax withholding obligations on Awards issued under the Plan
and Shares tendered to pay the exercise price of Awards under the
Plan will not be eligible to be returned as available Shares under
the Plan. Any Shares related to Awards which terminate by
expiration, forfeiture, cancellation, or otherwise without the
issuance of such Shares, are settled in cash in lieu of Shares, or
are exchanged with the Committee’s permission, prior to the
issuance of Shares, for Awards not involving Shares, shall be
available again for grant under this Plan.
4.3
Annual
Award Limits
. Unless and until the Committee determines that
an Award to a Covered Employee shall not be designed to qualify as
Performance-Based Compensation, the following limits (each an
“Annual Award Limit” and, collectively, “Annual
Award Limits”) shall apply to grants of such Awards under
this Plan:
(a)
Options: The
maximum aggregate number of Shares subject to Options granted in
any one Plan Year to any one Participant shall be one million
(1,000,000), as adjusted pursuant to Sections 4.4 and/or
17.2.
(b)
SARs: The maximum
aggregate number of Shares subject to Stock Appreciation Rights
granted in any one Plan Year to any one Participant shall be one
million (1,000,000), as adjusted pursuant to Sections 4.4 and/or
17.2.
(c)
Restricted Stock or
Restricted Stock Units: The maximum aggregate Awards of Restricted
Stock or Restricted Stock Units in any one Plan Year to any one
Participant shall be five hundred thousand (500,000) Shares, as
adjusted pursuant to Sections 4.4 and/or 17.2.
(d)
Performance Units
or Performance Shares: The maximum aggregate Awards of Performance
Units or Performance Shares that a Participant may receive in any
one Plan Year shall be five hundred thousand (500,000) Shares, as
adjusted pursuant to Sections 4.4 and/or 17.2, or equal to the
value of five hundred thousand (500,000) Shares, as adjusted
pursuant to Sections 4.4 and/or 17.2, determined as of the date of
vesting or payout, as applicable.
(e)
Cash-Based Awards:
The maximum aggregate amount awarded or credited with respect to
Cash-Based Awards to any one Participant in any one Plan Year may
not exceed the greater of the value of four million dollars
($4,000,000) or one million (1,000,000) Shares, as adjusted
pursuant to Sections 4.4 and/or 17.2, determined as of the date of
vesting or payout, as applicable.
(f)
Other Stock-Based
Awards: The maximum aggregate grants with respect to Other
Stock-Based Awards pursuant to Section 10.2 in any one Plan Year to
any one Participant shall be one million (1,000,000) Shares, as
adjusted pursuant to Sections 4.4 and/or 17.2.
4.4
Adjustments
in Authorized Shares.
In the event any recapitalization,
forward or reverse split, reorganization, merger, consolidation,
incorporation, spin-off, combination, repurchase, exchange of
Shares or other securities, dividend or distribution of Shares or
other special and nonrecurring dividend or distribution (other than
cash dividends or distributions), liquidation, dissolution, sale or
purchase of assets or other similar transactions or events, affects
the Shares such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or enlargement of
the rights of Grantees under the Plan, then the Committee shall
equitably adjust any or all of (i) the number and kind of
securities deemed to be available thereafter for grants of Awards
under this Plan or under particular forms of Awards, (ii) the
number and kind of securities subject to outstanding Awards, (iii)
the Option Price or Grant Price applicable to outstanding Awards,
(iv) the Annual Award Limits or (v) other value determinations
applicable to outstanding Awards.
In
addition, the Committee is authorized to make adjustments in the
terms and conditions of, and the criteria included in, outstanding
Awards (including, without limitation, acceleration of the
expiration date of such Awards, cancellation of such Awards in
exchange for the intrinsic (i.e., in-the-money) value, if any, of
the vested portion thereof, substitution of outstanding Awards
using securities or other obligations of a successor or other
entity, modifications of performance goals, changes in the length
of Performance Periods, or payment of a bonus or dividend
equivalent) in recognition of unusual or nonrecurring events
(including, without limitation, a Change in Control of the Company,
an event described in the preceding sentence, or a cash dividend or
distribution) affecting the Company or any subsidiary of the
Company or the financial statements of the Company or any
subsidiary of the Company, or in response to changes in applicable
laws, regulations, or accounting principles.
Notwithstanding
anything to the contrary in this Section 4.4, an adjustment to an
Option or SAR shall be made only to the extent such adjustment
complies with the requirements of Code Section 409A.
Subject
to the provisions of Article 17 and notwithstanding anything else
herein to the contrary, without affecting the number of Shares
reserved or available hereunder, the Committee may authorize the
issuance or assumption of benefits under this Plan in connection
with any merger, consolidation, acquisition of property or stock,
or reorganization upon such terms and conditions as it may deem
appropriate (including, but not limited to, a conversion of equity
awards into Awards under this Plan in a manner consistent with
applicable accounting standards, subject to compliance with the
rules under Code Sections, 422 and 424, as and where
applicable.
A-5
Article
5.
Eligibility and Participation
5.1
Eligibility
.
Individuals eligible to participate in this Plan include all
Employees, Directors and Third Party Service Providers. An Employee
on “leave of absence” (as such term is defined in the
Company’s employee handbook, or, if no such definition
exists, as otherwise defined by the Committee in its direction) may
be considered as still in the employ of the Company, an Affiliate
or Subsidiary for purposes of eligibility for participation in the
Plan, as well as continued vesting of Awards under the Plan, if so
determined by the Committee in its discretion.
5.2
Actual
Participation
. Subject to the provisions of this Plan, the
Committee may, from time to time in its sole discretion, select
from the individuals eligible to participate, those to whom Awards
shall be granted.
Article
6.
Stock Options
6.1
Grant
of Options
. Subject to the terms and provisions of this
Plan, Options may be granted to Participants in such number, and
upon such terms, and at any time and from time to time as
shall be determined by the Committee, in its sole discretion,
provided that ISOs may be granted only to eligible Employees of the
Company or of any parent or subsidiary corporation (as permitted
under Code Sections 422 and 424). An Employee who is employed by an
Affiliate and/or Subsidiary and is subject to Code Section 409A may
only be granted Options to the extent the Affiliate and/or
Subsidiary is part of the Company’s consolidated group for
United States federal tax purposes.
6.2
Award
Agreement
. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the maximum duration
of the Option, the number of Shares to which the Option pertains,
the conditions upon which an Option shall become vested and
exercisable, and such other provisions as the Committee shall
determine which are not inconsistent with the terms of this Plan.
The Award Agreement also shall specify whether the Option is
intended to be an ISO or an NQSO.
6.3
Option
Price
. The Option Price for each grant of an Option under
this Plan shall be determined by the Committee in its sole
discretion and shall be specified in the Award Agreement; provided,
however, the Option Price on the date of grant must be at least
equal to one hundred percent (100%) of the FMV of the Shares as
determined on the date of grant; provided, further, however, that
the Option Price must be at least equal to one hundred and ten
percent (110%) of the FMV of a Share on the date of grant with
respect to any ISO issued to a Participant who, on the date of
grant, owns (as defined in Code Section 424(d)) stock possessing
more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or of its subsidiary
corporation (as defined in Code Section 424(f)) (a “10%
Shareholder”).
6.4
Term
of Options
. Each Option granted to a Participant shall
expire at such time as the Committee shall determine at the time of
grant; provided, however, no Option shall be exercisable later than
the tenth (10
th
) anniversary date
of its grant; provided, further, however, that no ISO granted
to a 10% Shareholder shall be exercisable later than the day before
the fifth (5th) anniversary of its date of
grant.”)
6.5
Exercise
of Options
. Options granted under this Article 6 shall
be exercisable at such times and be subject to such restrictions
and conditions as the Committee shall in each instance approve,
which terms and restrictions need not be the same for each grant or
for each Participant. Notwithstanding anything in this Plan to the
contrary, to the extent that the aggregate FMV of the Shares
(determined as of the date of grant of the applicable ISO) with
respect to which ISOs are exercisable for the first time by a
Participant during any calendar year (under all plans of the
Company and its subsidiary corporations (as defined in
Code Section 424(f)) exceeds $100,000, such Options shall be
treated as NQSOs.
Options
granted under this Article 6 shall be exercised by the delivery of
a notice of exercise to the Company or an agent designated by the
Company in a form specified or accepted by the Committee setting
forth the number of Shares with respect to which the Option is to
be exercised, accompanied by full payment for the Shares, or by
complying with any alternative exercise procedures the Committee
may authorize.
6.6
Payment
.
A condition of the issuance of the Shares as to which an Option
shall be exercised shall be the payment of the Option Price. The
Option Price of any Option shall be payable to the Company in full
either: (a) in cash or its equivalent; (b) by tendering
(either by actual delivery or attestation) previously acquired
Shares having an aggregate Fair Market Value at the time of
exercise equal to the Option Price (provided that the Committee may
in its discretion require the Shares that are tendered have been
held by the Participant for at certain period of time prior to
their tender to satisfy the Option Price if acquired under this
Plan or any other compensation plan maintained by the Company or
purchased on the open market); (c) by a cashless (broker-assisted)
exercise; (d) by a combination of (a), (b), and/or (c); or (e) any
other method approved or accepted by the Committee in its sole
discretion.
Unless
otherwise determined by the Committee, all payments under all of
the methods indicated above shall be paid in United States
dollars.
6.7
Restrictions
on Shares
. The Committee may impose such restrictions on any
Shares acquired pursuant to the exercise of an Option granted under
this Article 6 as it deems advisable, including, without
limitation, minimum holding period requirements, restrictions under
applicable federal securities laws, under the requirements of any
stock exchange or market upon which such Shares are then listed
and/or traded, or under any blue sky or state securities laws
as may be applicable to such Shares.
6.8
Termination
of Employment/Service
.
Each Participant’s Award
Agreement shall set forth the extent to which the Participant shall
have the right to exercise the Option following the
Participant’s Termination. Such provisions shall be
determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with each Participant,
need not be uniform among all Options issued pursuant to this
Article 6, and may reflect distinctions based on the reasons for
Termination.
6.9
Notification
of Disqualifying Disposition.
If any Participant shall make
any disposition of Shares issued pursuant to the exercise of an ISO
under the circumstances described in Code Section 421(b) (relating
to certain disqualifying dispositions), such Participant shall
notify the Company of such disposition within ten (10) calendar
days thereof.
A-6
Article
7.
Stock Appreciation Rights
7.1
Grant
of SARs
. Subject to the terms and conditions of this Plan,
SARs may be granted to Participants at any time and from time to
time as shall be determined by the Committee. However, an Employee
who is employed by an Affiliate and/or Subsidiary and is subject to
Code Section 409A may only be granted SARs to the extent the
Affiliate and/or the Subsidiary is part of the Company’s
consolidated group for United States federal tax
purposes.
Subject
to the terms and conditions of this Plan, the Committee shall have
complete discretion in determining the number of SARs granted to
each Participant and, consistent with the provisions of this Plan,
in determining the terms and conditions pertaining to such
SARs.
The
Grant Price for each grant of a SAR shall be determined by the
Committee and shall be specified in the Award Agreement; provided,
however, the Grant Price on the date of grant must be at least
equal to one hundred percent (100%) of the FMV of the Shares as
determined on the date of grant.
7.2
SAR
Agreement
. Each SAR Award shall be evidenced by an Award
Agreement that shall specify the Grant Price, the term of the SAR,
and such other provisions as the Committee shall
determine.
7.3
Term
of SAR
. The term of an SAR granted under this Plan shall be
determined by the Committee, in its sole discretion, and except as
determined otherwise by the Committee and specified in the SAR
Award Agreement, no SAR shall be exercisable later than the tenth
(10
th
)
anniversary date of its grant.
7.4
Exercise
of SARs
. SARs may be exercised upon whatever terms and
conditions the Committee, in its sole discretion,
imposes.
7.5
Settlement
of SAR
. Upon the exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount
determined by multiplying:
(a)
The excess of the
Fair Market Value of a Share on the date of exercise over the Grant
Price; by
(b)
The number of
Shares with respect to which the SAR is exercised.
At the
discretion of the Committee, the payment upon SAR exercise may be
in cash, Shares, or any combination thereof, or in any other manner
approved by the Committee in its sole discretion. The
Committee’s determination regarding the form of SAR payout
shall be set forth in the Award Agreement pertaining to the grant
of the SAR.
7.6
Termination
of Employment/Service
. Each Award Agreement shall set forth
the extent to which the Participant shall have the right to
exercise the SAR following the Participant’s Termination.
Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into
with Participants, need not be uniform among all SARs issued
pursuant to this Plan, and may reflect distinctions based on the
reasons for Termination.
7.7
Other
Restrictions.
The Committee may impose such restrictions on
Shares received upon exercise of a SAR granted pursuant to this
Plan as it deems advisable. These restrictions may include, but
shall not be limited to, a requirement that the Participant hold
the Shares received upon exercise of an SAR for a specified period
of time.
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Article
8.
Restricted Stock and Restricted Stock Units
8.1
Grant
of Restricted Stock or Restricted Stock Units
. Subject to
the terms and provisions of this Plan, the Committee, at any time
and from time to time, may grant Shares of Restricted Stock and/or
Restricted Stock Units to Participants in such amounts as the
Committee shall determine. Restricted Stock Units shall be similar
to Restricted Stock except that no Shares are actually awarded to
the Participant on the date of grant.
8.2
Restricted
Stock or Restricted Stock Unit Agreement
. Each Restricted
Stock and/or Restricted Stock Unit grant shall be evidenced by an
Award Agreement that shall specify the Period(s) of Restriction,
the number of Shares of Restricted Stock or the number of
Restricted Stock Units granted, and such other provisions as the
Committee shall determine.
8.3
Other
Restrictions
. The Committee may impose such conditions
and/or restrictions on Shares of Restricted Stock granted pursuant
to this Plan and Shares received upon settlement of a Restricted
Stock Unit as it deems advisable including, without limitation, a
requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock or each Restricted Stock Unit,
restrictions based upon the achievement of specific performance
goals, time-based restrictions on vesting following the attainment
of the performance goals, time-based restrictions, and/or
restrictions under applicable laws or under the requirements of any
stock exchange or market upon which such Shares are listed or
traded, or holding requirements or sale restrictions placed on the
Shares by the Company upon vesting of such Restricted Stock or
Restricted Stock Units.
To the
extent deemed appropriate by the Committee, the Company may retain
the certificates representing Shares of Restricted Stock in the
Company’s possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied or
lapse.
Except
as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock Award shall become freely
transferable by the Participant after all conditions and
restrictions applicable to such Shares have been satisfied or lapse
(including satisfaction of any applicable tax withholding
obligations), and Restricted Stock Units shall be paid in cash,
Shares, or a combination of cash and Shares as the Committee, in
its sole discretion, shall determine.
8.4
Certificate
Legend
. In addition to any legends placed on certificates
pursuant to Section 8.3, each certificate representing Shares
of Restricted Stock granted pursuant to this Plan may bear a legend
such as the following or as otherwise determined by the Committee
in its sole discretion:
“The
transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) of the Tenax Therapeutics, Inc. 2016 Stock
Incentive Plan and a Restricted Stock Agreement. Copies of such
Plan and Agreement are on file at the offices of Tenax
Therapeutics, Inc., One Copley Parkway, Suite 490, Morrisville,
North Carolina 27560.”
8.5
Voting
Rights
. Unless otherwise determined by the Committee and set
forth in a Participant’s Award Agreement, to the extent
permitted or required by law, as determined by the Committee,
Participants holding Shares of Restricted Stock granted hereunder
may be granted the right to exercise full voting rights with
respect to those Shares during the Period of Restriction. A
Participant shall have no voting rights with respect to any
Restricted Stock Units granted hereunder.
8.6
Termination
of Employment/Service
. Each Award Agreement shall set forth
the extent to which the Participant shall have the right to retain
Restricted Stock and/or Restricted Stock Units following the
Participant’s Termination. Such provisions shall be
determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with each Participant,
need not be uniform among all Shares of Restricted Stock or
Restricted Stock Units issued pursuant to this Plan, and may
reflect distinctions based on the reasons for
Termination.
8.7
Section
83(b) Election
. The Committee may provide in an Award
Agreement that the Award of Restricted Stock is conditioned upon
the Participant making or refraining from making an election with
respect to the Award under Code Section 83(b). If a Participant
makes an election pursuant to Code Section 83(b) concerning a
Restricted Stock Award, the Participant shall be required to file
promptly a copy of such election with the Company.
Article
9.
Performance Units / Performance Shares
9.1
Grant
of Performance Units / Performance Shares
. Subject to the
terms and provisions of this Plan, the Committee, at any time and
from time to time, may grant Performance Units and/or Performance
Shares to Participants in such amounts and upon such terms as the
Committee shall determine.
9.2
Value
of Performance Units / Performance Shares
. Each Performance
Unit shall have an initial value that is established by the
Committee at the time of grant. Each Performance Share shall have
an initial value equal to the Fair Market Value of a Share on the
date of grant. The Committee shall set performance goals in its
discretion which, depending on the extent to which they are met,
will determine the value and/or number of Performance
Units/Performance Shares that will be paid out to the
Participant.
A-8
9.3
Earning
of Performance Units / Performance Shares
. Subject to the
terms of this Plan, after the applicable Performance Period
has ended, the holder of Performance Units/Performance Shares shall
be entitled to receive payout on the value and number of
Performance Units/Performance Shares earned by the Participant over
the Performance Period, to be determined as a function of the
extent to which the corresponding performance goals have been
achieved.
9.4
Form
and Timing of Payment of Performance Units / Performance
Shares
. Payment of earned Performance Units/Performance
Shares shall be as determined by the Committee and as evidenced in
the Award Agreement. Subject to the terms of this Plan,
the Committee, in its sole discretion, may pay
earned Performance Units/Performance Shares in the form of
cash or in Shares (or in a combination thereof) equal to the value
of the earned Performance Units/Performance Shares at the close of
the applicable Performance Period, or as soon as practicable after
the end of the Performance Period. Any Shares may be granted
subject to any restrictions deemed appropriate by the Committee.
The determination of the Committee with respect to the form of
payout of such Awards shall be set forth in the Award Agreement
pertaining to the grant of the Award.
9.5
Termination
of Employment / Service
. Each Award Agreement shall set
forth the extent to which the Participant shall have the right to
retain Performance Units and/or Performance Shares following the
Participant’s Termination. Such provisions shall be
determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with each Participant,
need not be uniform among all Awards of Performance Units or
Performance Shares issued pursuant to this Plan, and may reflect
distinctions based on the reasons for Termination.
Article
10.
Cash-Based Awards and Other Stock-Based Awards
10.1
Grant
of Cash-Based Awards
. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time,
may grant Cash-Based Awards to Participants in such amounts and
upon such terms as the Committee may determine.
10.2
Other
Stock-Based Awards
. The Committee may grant other types of
equity-based or equity-related Awards not otherwise described by
the terms of this Plan (including the grant or offer for sale of
unrestricted Shares) in such amounts and subject to such terms and
conditions as the Committee shall determine. Such Awards may
involve the transfer of actual Shares to Participants, or payment
in cash or otherwise of amounts based on the value of Shares, and
may include, without limitation, Awards designed to comply with or
take advantage of the applicable local laws of jurisdictions other
than the United States.
10.3
Value
of Cash-Based and Other Stock-Based Awards
. Each Cash-Based
Award shall specify a payment amount or payment range as determined
by the Committee. Each Other Stock-Based Award shall be expressed
in terms of Shares or units based on Shares, as determined by the
Committee. The Committee may establish performance goals in its
discretion. If the Committee exercises its discretion to establish
performance goals, the number and/or value of Cash-Based Awards or
Other Stock-Based Awards that will be paid out to the Participant
will depend on the extent to which the performance goals are
met.
10.4
Payment
of Cash-Based Awards and Other Stock-Based Awards; Restrictions on
Shares
. Payment, if any, with respect to a Cash-Based Award
or any Other Stock-Based Award shall be made in accordance with the
terms of the Award, in cash or Shares as the Committee determines.
Any Shares issued pursuant to this Article 10 shall be subject to
the restrictions set forth in the Award Agreement.
10.5
Termination
of Employment / Service
. The Committee shall determine the
extent to which the Participant shall have the right to receive
Cash-Based Awards or Other Stock-Based Awards following the
Participant’s Termination. Such provisions shall be
determined in the sole discretion of the Committee, such provisions
may be included in an agreement entered into with each Participant,
but need not be uniform among all Awards of Cash-Based Awards
or
Other Stock-Based
Awards issued pursuant to the Plan, and may reflect distinctions
based on the reasons for Termination.
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Article
11.
Transferability and Forfeiture of Awards
11.1
Transfer
Restrictions
. Except as provided in Section 11.2 below,
during a Participant’s lifetime, his or her Awards shall be
exercisable only by the Participant or the Participant’s
legal representative. Awards shall not be transferable other than
by will or the laws of descent and distribution; no Awards shall be
subject, in whole or in part, to attachment, execution, or levy of
any kind; and any purported transfer in violation hereof shall be
null and void. The Committee may establish such procedures as it
deems appropriate for a Participant to designate a beneficiary to
whom any amounts payable or Shares deliverable in the event of, or
following, the Participant’s death, may be
provided.
11.2
Committee
Action.
The Committee may, in its discretion, determine that
notwithstanding Section 11.1, any or all Awards (other than ISOs)
shall be transferable to and exercisable by such transferees, and
subject to such terms and conditions, as the Committee may deem
appropriate; provided, however, no Award may be transferred for
value (as defined in the General Instructions to Form
S-8).
11.3
Forfeiture
of Awards.
Notwithstanding anything else to the contrary
contained herein, the Committee in granting any Award shall have
the full power and authority to determine whether, to what extent
and under what circumstances such Award shall be forfeited,
cancelled or suspended. Unless an Award Agreement includes
provisions expressly superseding the provisions of this Section
11.3, the provisions of this Section 11.3 shall apply to all
Awards. Any such forfeiture shall be effected by the Company in
such manner and to such degree as the Committee, in its sole
discretion, determines, and will in all events (including as to the
provisions of this Section 11.3) be subject to applicable
laws.
In
order to effect a forfeiture under this Section 11.3, the Committee
may require that the Participant sell Shares received upon exercise
or settlement of an Award to the Company or to such other person as
the Company may designate at such price and on such other terms and
conditions as the Committee in its sole discretion may require.
Further, as a condition of each Award, the Company shall have, and
each Participant shall be deemed to have given the Company, a proxy
on each Participant’s behalf, and each Participant shall be
required and be deemed to have agreed to execute any other
documents necessary or appropriate to carry out this Section
11.3.
Unless
otherwise specified by the Committee, in addition to any vesting or
other forfeiture or repurchase conditions that may apply to an
Award and Shares issued pursuant to an Award, each Award granted
under the Plan will be subject to the following forfeiture
conditions:
(a)
Breach of a Restrictive Covenant.
All
outstanding Awards and Shares issued pursuant to an Award held by
an Participant will be forfeited in their entirety (including as to
any portion of an Award or Shares subject thereto that are vested
or as to which any repurchase or resale rights or forfeiture
restrictions in favor of the Company or its designee with respect
to such Shares have previously lapsed) if the Participant breaches
any noncompetition, confidentiality or other restrictive covenant
that may apply to the Participant, as determined by the Committee
in its sole discretion;
provided
, that if a Participant has
sold Shares issued upon exercise or settlement of an Award within
six (6) months prior to the date on which the Participant would
otherwise have been required to forfeit such Shares or the Option
under this subsection (a) as a result of the Participant’s
breach, then the Company will be entitled to recover any and all
profits realized by the Participant in connection with such
sale.
(b)
Termination for Cause.
All outstanding
Awards and Shares issued pursuant to an Award held by a Participant
will be forfeited in their entirety (including as to any portion of
an Award or Shares subject thereto that are vested or as to which
any repurchase or resale rights or forfeiture restrictions in favor
of the Company or its designee have previously lapsed) if the
Participant’s employment or service is terminated by the
Company for Cause;
provided
,
however
, that if a Participant has sold
Shares issued upon exercise or settlement of an Award within six
(6) months prior to the date on which the Participant would
otherwise have been required to forfeit such Shares under this
subsection (b) as a result of termination of the
Participant’s employment or service for Cause, then the
Company will be entitled to recover any and all profits realized by
the Participant in connection with such sale; and
provided further
, that in the event the
Committee determines that it is necessary to establish whether
grounds exist for termination for Cause, the Award will be
suspended during any period required to conduct such determination,
meaning that the vesting, exercisability and/or lapse of
restrictions otherwise applicable to the Award will be tolled and
if grounds for such termination are determined to exist, the
forfeiture specified by this subsection (b) will apply as of the
date of suspension, and if no such grounds are determined to exist,
the Award will be reinstated on its original terms.
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Article
12.
Performance Measures
12.1
Performance
Measures
. The performance goals upon which the payment or
vesting of an Award to a Covered Employee that is intended to
qualify as Performance-Based Compensation shall be limited to the
following Performance Measures:
(a)
Net earnings or net
income (before or after taxes);
(b)
Earnings per
share;
(c)
Net new
business;
(d)
Net sales or
revenue growth;
(e)
Net operating
profit (including, but not limited to, operating income and
operating surplus);
(f)
Return measures
(including, but not limited to, return on assets, capital, invested
capital, equity, sales, or revenue);
(g)
Cash flow
(including, but not limited to, operating cash flow, free cash
flow, cash generation, cash flow return on equity, and cash flow
return on investment);
(h)
Earnings before or
after taxes, interest, depreciation, and/or
amortization;
(i)
Gross,
contribution, or operating margins;
(j)
Share price
(including, but not limited to, growth measures and total
shareholder return);
(k)
Expense
targets;
(l)
Operating
efficiency (including, but not limited to, productivity
measurements);
(m)
Market
share;
(n)
Working capital
targets and change in working capital;
(o)
Economic value
added or EVA
®
(net operating
profit after tax minus the sum of capital multiplied by the cost of
capital); and
(p)
Segment income from
operations and income from operations.
(q)
Commercial
milestones
(r)
Clinical
development milestones
(s)
Regulatory
development milestones
Any
Performance Measure(s) may be used to measure the performance of
the Company, Subsidiary, and/or Affiliate as a whole or any
business unit of the Company, Subsidiary, and/or Affiliate or any
combination thereof, as the Committee may deem appropriate, or any
of the above Performance Measures as compared to the performance of
a group of comparator companies, or published or special index that
the Committee, in its sole discretion, deems appropriate, or the
Company may select Performance Measure (j) above as compared to
various stock market indices. The Committee also has the authority
to provide for accelerated vesting of any Award based on the
achievement of performance goals pursuant to the Performance
Measures specified in this Article 12.
12.2
Evaluation
of Performance
. The Committee may provide in any such Award
that any evaluation of achievement of Performance Measures may
include or exclude any of the following events that occur during a
Performance Period: (a) asset write-downs, (b) litigation or claim
judgments or settlements, (c) the effect of changes in tax laws,
accounting principles, or other laws or provisions affecting
reported results, (d) any reorganization and restructuring
programs, (e) extraordinary nonrecurring items as described in
Accounting Principles Board Opinion No. 30 and/or in
management’s discussion and analysis of financial condition
and results of operations appearing in the Company’s annual
report to shareholders for the applicable year, (f) acquisitions or
divestitures, and (g) foreign exchange gains and losses; and (h)
changes in material liability estimates. To the extent such
inclusions or exclusions affect Awards to Covered Employees, they
shall be prescribed in a form that meets the requirements of Code
Section 162(m) for deductibility.
12.3
Adjustment
of Performance-Based Compensation
. Awards that are intended
to qualify as Performance-Based Compensation may not be adjusted
upward. The Committee shall retain the discretion to adjust such
Awards downward, either on a formula or discretionary basis, or any
combination, based on market, performance or service conditions, as
the Committee determines.
12.4
Committee
Discretion
. In the event that applicable tax and/or
securities laws change to permit Committee discretion to alter the
governing Performance Measures without obtaining shareholder
approval of such changes, the Committee shall have sole discretion
to make such changes without obtaining shareholder approval. In
addition, in the event that the Committee determines that it is
advisable to grant Awards that shall not qualify as
Performance-Based Compensation, the Committee may make such grants
without satisfying the requirements of Code Section 162(m) and base
vesting on Performance Measures other than those set forth in
Section 12.1.
Article
13.
Nonemployee Director Awards
The
Board shall set the amount(s) and type(s) of equity awards that
shall be granted to all Nonemployee Directors on a periodic,
nondiscriminatory basis pursuant to the Plan, as well as any
additional amount(s), if any, to be awarded, also on a periodic,
nondiscriminatory basis. Subject to the foregoing, the Board shall
grant such Awards to Nonemployee Directors, as it shall from time
to time determine.
Article
14.
Dividends and Dividend Equivalents
Any
Participant selected by the Committee may be granted dividends or
dividend equivalents based on the dividends declared on Shares that
are subject to any Award, to be credited as of dividend payment
dates, during the period between the date the Award is granted and
the date the Award is exercised, vests, or expires, as determined
by the Committee; provided, however, that dividends or dividend
equivalents credited with respect to performance-based Awards will
be subject to the same underlying performance-based vesting
conditions as the Awards and will not be subject to Committee
discretion. The dividends or dividend equivalents may be subject to
any limitations and/or restrictions determined by the Committee.
Such dividend equivalents shall be converted to cash or additional
Shares by such formula and at such time and subject to such
limitations as may be determined by the Committee.
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Article
15.
Change in Control of the Company
15.1
Awards
Assumed or Substituted in Connection with a Change in
Control
. Unless otherwise expressly provided in an Award
Agreement, with respect to each outstanding Award that is assumed
or substituted in connection with a Change in Control of the
Company, in the event that (1) a Change in Control occurs and (2)
the Participant’s employment or service is involuntarily
terminated by the Company, its successor or affiliate thereof
without Cause on or after the effective time of the Change in
Control but prior to eighteen (18) months following said Change in
Control, then:
(a)
Any and all Options
and Stock Appreciation Rights granted hereunder shall become
exercisable, and shall remain exercisable in accordance with their
terms;
(b)
Any
restriction periods and restrictions imposed on all outstanding
Awards of Restricted Stock, Restricted Stock Units, or Other
Stock-Based Awards shall lapse and be settled as soon as reasonably
practicable, but in no event later than ten (10) days following
such termination of employment. For each Performance Share,
Performance Unit or other performance-based Awards, all Performance
Measures, performance goals or similar performance-based vesting
criteria will be deemed achieved at one hundred percent (100%) of
target levels and all other terms and conditions will be deemed met
as of the date of the Participant’s termination of employment
or service and the Award shall be settled as soon as reasonably
practicable but in no event later than ten (10) days following
termination of employment.
(c)
For Plan purposes,
an Award will be considered assumed if, following the Change in
Control, the Award confers the right to purchase or receive, for
each Share subject to the Award immediately prior to the Change in
Control, the consideration (whether stock, cash, or other
securities or property) received in the Change in Control by
holders of Common Stock for each Share held on the effective date
of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if
such consideration received in the Change in Control is not solely
common stock of the successor corporation or its parent, the
Committee may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of
an Option or Stock Appreciation Right, for each Share subject to
such Award, to be solely common stock of the successor corporation
or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Change in
Control.
(d)
Awards shall be
considered assumed or substituted if, upon the occurrence of a
Change in Control after which there will be a generally recognized
U.S. public market for (1) the Company’s Stock, (2) common
stock for which the Company’s Stock is exchanged, or
(3) the common stock of a successor or acquirer entity (such
publicly traded stock, “Public Shares”), the then
outstanding Awards are assumed, exchanged or substituted for by a
successor or acquirer entity such that following the Change in
Control, the Awards relate to such Public Shares and, except as
otherwise provided by this Section 15.1, remain subject to
such terms and conditions that were applicable to the Awards prior
to the Change in Control.
15.2
No
Assumption or Substitution in Connection with Change in
Control
.
Unless
otherwise expressly provided in an Award Agreement, with respect to
each outstanding Award that is not assumed or substituted in
connection with a Change in Control, then prior to the occurrence
of a Change in Control:
(a)
Any and all Options
and Stock Appreciation Rights granted hereunder shall vest in full
and become immediately exercisable in accordance with their terms
and the Committee will notify the Participant in writing that the
Options or Stock Appreciation Rights will be exercisable for a
period of time determined by the Committee in the Committee’s
sole discretion and the Option or Stock Appreciation Right will
terminate upon the expiration of said period; and
(b)
Any restriction
periods and restrictions imposed on all outstanding Awards of
Restricted Stock, Restricted Stock Units, Performance Shares,
Performance Units or Other Stock-Based Awards shall lapse and be
settled as soon as reasonably practicable, but in no event later
than ten (10) days following the Change in Control.
15.3
Cashout
and Cancellation of Awards.
Notwithstanding any other
provisions of the Plan, in the event that each outstanding Award is
not assumed or substituted in connection with a Change in Control
and except as would otherwise result in adverse tax consequences
under Section 409A of the Code, the Committee may, in its
discretion, provide that each Award shall, immediately upon the
occurrence of a Change in Control, be cancelled in exchange for a
payment in cash or securities in an amount equal to (x) the excess
if any of the consideration paid per Share in the Change in Control
over the exercise or purchase price per Share subject to the Award
multiplied by (y) the number of Shares granted under the Award.
Without limiting the generality of the foregoing, in the event that
the consideration paid per Share in the Change in Control is lesser
than or equal to the exercise price or purchase price per Share
subject to the Award, the Committee may, in its discretion, cancel
such Award without any consideration upon the occurrence of a
Change in Control.
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Article
16.
Rights of Participants
16.1
Employment
/ Service
. Nothing in this Plan or an Award Agreement shall
interfere with or limit in any way the right of the Company, its
Affiliates, and/or its Subsidiaries to terminate any
Participant’s employment or service on the Board or to the
Company at any time or for any reason not prohibited by law, nor
confer upon any Participant any right to continue his employment or
service as a Director
or Third Party Service Provider
for any specified period of time.
Neither
an Award nor any benefits arising under this Plan shall constitute
an employment contract with the Company, its Affiliates, and/or its
Subsidiaries and, accordingly, subject to Articles 3 and 17,
this Plan and the benefits hereunder may be terminated at any time
in the sole and exclusive discretion of the Committee without
giving rise to any liability on the part of the Company, its
Affiliates, and/or its Subsidiaries.
16.2
Participation
.
No individual shall have the right to be selected to receive an
Award under this Plan or, having been so selected, to be selected
to receive a future Award.
16.3
Rights
as a Shareholder
. Except as otherwise provided herein or in
any Award Agreement, a Participant shall have none of the rights of
a shareholder with respect to Shares covered by any Award until the
Participant becomes the record holder of such Shares.
Article
17.
Amendment, Modification, Suspension, and Termination
17.1
Amendment,
Modification, Suspension, and Termination
. Subject to
Section 17.3, the Committee may, at any time and from time to
time, alter, amend, modify, suspend, or terminate this Plan and any
Award Agreement in whole or in part; provided, however, that,
without the prior approval of the Company’s shareholders and
except as provided in Section 4.4, (a) Options or SARs issued under
this Plan will not be repriced, replaced, or regranted through
cancellation, or by lowering the Option Price of a previously
granted Option or the Grant Price of a previously granted SAR, and
(b) no payment shall be made to cancel an Option or SAR when the
Option Price or Grant Price, as the case may be, exceeds the Fair
Market Value. No material
amendment of this Plan shall be
made without shareholder approval if shareholder approval is
required by law, regulation, or stock exchange rule.
17.2
Adjustment
of Awards Upon the Occurrence of Certain Unusual or Nonrecurring
Events.
The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition
of unusual or nonrecurring events (including, without limitation,
the events described in Section 4.4 hereof) affecting the Company
or the financial statements of the Company or of changes in
applicable laws, regulations, or accounting principles, whenever
the Committee determines that such adjustments are appropriate in
order to prevent unintended dilution or enlargement of the benefits
or potential benefits intended to be made available under this
Plan. The determination of the Committee as to the foregoing
adjustments, if any, shall be conclusive and binding on
Participants under this Plan.
17.3
Awards
Previously Granted.
Notwithstanding any other
provision of this Plan to the contrary (other than Section 17.4),
no termination, amendment, suspension, or modification of this Plan
or an Award Agreement shall adversely affect in any material
way any Award previously granted under this Plan, without the
written consent of the Participant holding such Award.
17.4
Amendment
to Conform to Law.
Notwithstanding any other
provision of this Plan to the contrary, the Board may amend the
Plan or an Award Agreement, to take effect retroactively or
otherwise, as deemed necessary or advisable for the purpose of
conforming the Plan or an Award Agreement to any present or future
law relating to plans of this or similar nature (including, but not
limited to, Code Section 409A), and to the administrative
regulations and rulings promulgated thereunder. By accepting an
Award under this Plan, each Participant agrees to any amendment
made pursuant to this Section 17.4 to any Award granted under the
Plan without further consideration or action.
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Article
18.
Withholding
18.1
Tax
Withholding
. The Company shall have the power and the right
to deduct or withhold, or require a Participant to remit to the
Company, the minimum statutory amount to satisfy federal, state,
and local taxes, domestic or foreign, required by law or regulation
to be withheld with respect to any taxable event arising as a
result of this Plan.
18.2
Share
Withholding
. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on
Restricted Stock and Restricted Stock Units, or upon the
achievement of performance goals related to Performance Shares, or
any other taxable event arising as a result of an Award granted
hereunder, a Participant may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in
part, by having the Company withhold Shares having a Fair Market
Value on the date the tax is to be determined equal to the minimum
statutory total tax that could be imposed on the transaction. All
such elections shall be irrevocable, made in writing, and signed by
the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems
appropriate.
Article
19.
Successors
All
obligations of the Company under this Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct
or indirect purchase, merger, consolidation, or otherwise, of all
or substantially all of the business and/or assets of the
Company.
Article
20.
General Provisions
20.1
Legend
.
The certificates for Shares may include any legend that the
Committee deems appropriate to reflect any restrictions on transfer
of such Shares.
20.2
Gender
and Number
. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the
plural shall include the singular, and the singular shall include
the plural.
20.3
Severability
.
In
the event any provision of this Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of this Plan, and this Plan shall be
construed and enforced as if the illegal or invalid provision had
not been included.
20.4
Requirements
of Law
.
The
granting of Awards and the issuance of Shares under this Plan shall
be subject to all applicable laws, rules, and regulations, and to
such approvals by any governmental agencies or stock exchange as
may be required.
20.5
Delivery
of Title
.
The
Company shall have no obligation to issue or deliver evidence of
title for Shares issued under this Plan prior to:
(a)
Obtaining any
approvals from governmental agencies that the Company determines
are necessary or advisable; and
(b)
Completion of any
registration or other qualification of the Shares under any
applicable national or foreign law or ruling of any governmental
body that the Company determines to be necessary or
advisable.
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20.6
Inability
to Obtain Authority
.
The inability of the Company to
obtain authority from any regulatory body having jurisdiction,
which authority is deemed by the Company’s counsel to be
necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the
failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
20.7
Investment
Representations
.
The Committee may require any
individual receiving Shares pursuant to an Award under this Plan to
represent and warrant in writing that the individual is acquiring
the Shares for investment and without any present intention to sell
or distribute such Shares.
20.8
Employees
Based Outside of the United States
. Notwithstanding any
provision of this Plan to the contrary, in order to comply with the
laws in other countries in which the Company, its Affiliates,
and/or its Subsidiaries operate or have Employees, Directors or
Third Party Service Providers, the Committee, in its sole
discretion, shall have the power and authority to:
(a)
Determine which
Affiliates and Subsidiaries shall be covered by this
Plan.
(b)
Determine which
Employees, Directors or Third Party Service Providers outside the
United States are eligible to participate in this
Plan.
(c)
Modify the terms
and conditions of any Award granted to Employees, Directors or
Third Party Service Providers outside the United States to comply
with applicable foreign laws.
(d) Establish
subplans and modify exercise procedures and other terms and
procedures, to the extent such actions may be necessary or
advisable. Any subplans and modifications to Plan terms and
procedures established under this Section 20.8 by the Committee
shall be attached to this Plan document as appendices.
(e) Take
any action, before or after an Award is made, that it deems
advisable to obtain approval or comply with any necessary local
government regulatory exemptions or approvals.
Notwithstanding the
above, the Committee may not take any actions hereunder, and no
Awards shall be granted that would violate applicable
law.
20.9
State
Securities Laws.
Notwithstanding any provision of this Plan
to the contrary, the Committee, in its sole discretion, shall have
the power and authority to modify the terms and conditions of any
Award granted to Employees, Directors or Third Party Service
Providers who reside in one or more individual states to the extent
necessary or desirable under applicable state securities laws. Any
modifications to Plan terms and procedures established under this
Section 20.9 by the Committee shall be attached to this Plan
document as appendices.
20.10
Uncertificated
Shares.
To the extent that this Plan provides for issuance
of certificates to reflect the transfer of Shares and the Shares
are Publicly Traded, the transfer of such Shares may be effected on
a noncertificated basis, to the extent not prohibited by applicable
law or the rules of any stock exchange.
20.11
Unfunded
Plan
.
Participants shall have no right,
title, or interest whatsoever in or to any investments that the
Company and/or its Subsidiaries and/or its Affiliates may make to
aid it in meeting its obligations under this Plan. Nothing
contained in this Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Company and any
Participant, beneficiary, legal representative, or any other
individual. To the extent that any individual acquires a right to
receive payments from the Company, its Subsidiaries, and/or its
Affiliates under this Plan, such right shall be no greater than the
right of an unsecured general creditor of the Company, a
Subsidiary, or an Affiliate, as the case may be. All payments to be
made hereunder shall be paid from the general funds of the Company,
a Subsidiary, or an Affiliate, as the case may be, and no special
or separate fund shall be established and no segregation of assets
shall be made to assure payment of such amounts except as expressly
set forth in this Plan.
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20.12
No
Fractional Shares
. No fractional Shares shall be issued or
delivered pursuant to this Plan or any Award. The Committee shall
determine whether cash, Awards, or other property shall be issued
or paid in lieu of fractional Shares or whether such fractional
Shares or any rights thereto shall be forfeited or otherwise
eliminated.
20.13
Retirement
and Welfare Plans
. Neither Awards made under this Plan nor
Shares or cash paid pursuant to such Awards may be included as
“compensation” for purposes of computing the benefits
payable to any Participant under the Company’s or any
Subsidiary’s or Affiliate’s retirement plans (both
qualified and nonqualified) or welfare benefit plans unless such
other plan expressly provides that such compensation shall be taken
into account in computing a Participant’s
benefit.
20.14
Deferred
Compensation
.
Except for any deferral feature
build into an Award of Restricted Stock Units, no deferral of
compensation (as defined under Code Section 409A or guidance
thereto) is intended under this Plan. Notwithstanding this intent,
if any Award would be considered deferred compensation as defined
under Code Section 409A, and if this Plan fails to meet the
requirements of Code Section 409A with respect to such Award, then
such Award shall be null and void. However, the Committee may
permit deferrals of compensation pursuant to the terms of a
Participant’s Award Agreement, a separate plan, or a subplan
which meets the requirements of Code Section 409A and any related
guidance. Additionally, to the extent any Award is subject to Code
Section 409A, notwithstanding any provision herein to the contrary,
the Plan does not permit the acceleration of the time or schedule
of any distribution related to such Award, except as permitted by
Code Section 409A, the regulations thereunder, and/or the Secretary
of the United States Treasury.
20.15
Nonexclusivity
of This Plan
. The adoption of this Plan shall not be
construed as creating any limitations on the power of the Board or
Committee to adopt such other compensation arrangements as it may
deem desirable for any Participant.
20.16
No
Constraint on Corporate Action
. Nothing in this Plan shall
be construed to: (a) limit, impair, or otherwise affect the
Company’s or a Subsidiary’s or an Affiliate’s
right or power to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure,
or to merge or consolidate, or dissolve, liquidate, sell, or
transfer all or any part of its business or assets; or, (b) limit
the right or power of the Company or a Subsidiary or an Affiliate
to take any action which such entity deems to be necessary or
appropriate.
20.17
Governing
Law
. The Plan and each Award Agreement shall be governed by
the laws of the State of Delaware, excluding any conflicts or
choice of law rule or principle that might otherwise refer
construction or interpretation of this Plan to the substantive law
of another jurisdiction. Unless otherwise provided in the Award
Agreement, recipients of an Award under this Plan are deemed to
submit to the exclusive jurisdiction and venue of the federal or
state courts of Delaware to resolve any and all issues that may
arise out of or relate to this Plan or any related Award
Agreement.
20.18
Indemnification
.
Subject
to requirements of Delaware law, each individual who is or shall
have been a member of the Board, or a committee appointed by the
Board, or an officer of the Company to whom authority was delegated
in accordance with Article 3, shall be indemnified and held
harmless by the Company against and from any loss, cost, liability,
or expense that may be imposed upon or reasonably incurred by the
Participant in connection with or resulting from any claim, action,
suit, or proceeding to which the Participant may be a party or in
which the Participant may be involved by reason of any action taken
or failure to act under this Plan and against and from any and all
amounts paid by the Participant in settlement thereof, with the
Company’s approval, or paid by the Participant in
satisfaction of any judgment in any such action, suit, or
proceeding against the Participant, provided the Participant shall
give the Company an opportunity, at its own expense, to handle and
defend the same before the Participant undertakes to handle and
defend it on the Participant’s own behalf, unless such loss,
cost, liability, or expense is a result of the Participant’s
own willful misconduct or except as expressly provided by
statute.
The
foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such individuals may be
entitled under the Company’s Articles of Incorporation or
Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them
harmless.
20.19
Recoupment.
A Participant will be obligated to return to the Company payments
received with respect to Awards in the event of an overpayment to
the Participant of incentive compensation due to inaccurate
financial data, in accordance with any applicable Company clawback
or recoupment policy, as such policy may be amended and in effect
from time to time, or as otherwise required by law or applicable
stock exchange listing standards, including, without limitation
Section 10D of the Securities Exchange Act of 1934, as amended.
Each Participant, by accepting an Award pursuant to the Plan,
agrees to return the full amount required under this Section 20.19
at such time and in such manner as the Committee shall determine in
its sole discretion and consistent with applicable
law.
A-16
AMENDMENT NO. 1 TO
TENAX THERAPEUTICS, INC.
2016 STOCK INCENTIVE PLAN
This
Amendment No. 1 (the “Amendment”) to the Tenax
Therapeutics, Inc. 2016 Stock Incentive Plan (the
“Plan”) to increase the number of shares of common
stock issuable under the Plan is made on April 18, 2019, effective
as of the time provided below.
WHEREAS
, Tenax Therapeutics, Inc. (the
“Company”) has heretofore adopted the
Plan;
WHEREAS
, as a result of the February 23,
2018 reverse stock split, the number of shares of the
Company’s common stock issuable under the Plan was reduced
from 3,000,000 to 150,000; and
WHEREAS
, the Board of Directors of the
Company has approved the Amendment contingent upon the approval of
the Amendment by the stockholders of the Company.
NOW, THEREFORE
,
BE IT RESOLVED
, that, pursuant to
Section 17.1 of the Plan, the Plan is hereby amended as follows,
effective as of such time as the Amendment is approved by the
stockholders of the Company:
Section
4.1 of the Plan is amended by replacing “three million
(3,000,000) Shares” with seven hundred fifty thousand
(750,000) Shares.”
Except
as expressly amended hereby, all provisions of the Plan shall
remain unamended and shall continue to be, and shall remain, in
full force and effect in accordance with their respective
terms.
The
Amendment shall have no effect until such time as it is approved by
the stockholders of the Company.
The
provisions of the Amendment shall be governed by and interpreted in
accordance with the laws of the State of Delaware.
A-17
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TENAX THERAPEUTICS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS – JUNE 13, 2019 AT 9:00 AM LOCAL
TIME
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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 16,
2019, at the Annual Meeting of Stockholders (the “Annual
Meeting”) to be held on Thursday, June 13, 2019 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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Approval
of Amendment No. 1 to our 2016 Stock Incentive Plan to increase the
number of shares authorized for issuance under the plan by 600,000
shares.
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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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Ratification
of the appointment of Cherry Bekaert LLP as our independent
registered public accounting firm for the fiscal year ending
December 31, 2019
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☐
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☐
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Proposal
4
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FOR
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AGAINST
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ABSTAIN
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Advisory
(nonbinding) approval of named executive officer
compensation.
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☐
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☐
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Proposal
5
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ONE
YEAR
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TWO
YEARS
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THREE
YEARS
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ABSTAIN
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Advisory
(nonbinding) vote on the frequency of future advisory votes on
named executive officer compensation.
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☐
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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
AMENDMENT NO. 1 TO OUR 2016 STOCK INCENTIVE PLAN TO INCREASE THE
NUMBER OF SHARES AUTHORIZED FOR ISSUANCE THEREUNDER,
“FOR” RATIFICATION OF THE APPOINTMENT OF CHERRY BEKAERT
LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE
COMPANY, “FOR” THE APPROVAL OF THE RESOLUTION REGARDING
THE ADVISORY (NONBINDING) VOTE ON NAMED EXECUTIVE OFFICER
COMPENSATION AND FOR “TWO YEARS” (AS OPPOSED TO ONE
YEAR OR THREE YEARS) FOR THE FREQUENCY OF FUTURE ADVISORY VOTES ON
NAMED EXECUTIVE OFFICER COMPENSATION.
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”
PROPOSALS 2, 3 AND 4 AND "TWO YEARS" FOR PROPOSAL 5 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:
________________________, 2019
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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