Item
1.01 Entry into a Material Definitive Agreement.
As
further disclosed in item 5.07 below, effective December 7, 2018 the shareholders of Akers Biosciences, Inc. (the “Company”),
upon the recommendation of the Board of Directors (the “Board”) of the Company, approved and adopted the Akers Biosciences,
Inc. 2018 Equity Incentive Plan (the “2018 Plan”).
Highlights
of the 2018 Plan
We
adopted our 2018 Plan to enable us and our affiliated companies to: (a) recruit and retain highly qualified employees, directors
and consultants; (b) offer them a greater stake in our success and a closer identity with our company; and (c) encourage ownership
of our stock by such individuals.
The
2018 Plan permits the grant of (i) nonqualified stock options (“Options”); (ii) restricted stock awards; (iii) restricted
stock units (“RSUs”), (iv) stock appreciation rights (“SARs”) and (v) other stock-based awards, which
we refer to collectively as “Awards,” as more fully described below.
Some
of the key features of the 2018 Plan that reflect our commitment to effective management of incentive compensation are as follows:
No
In-the-Money Options
. The 2018 Plan prohibits the grant of Options with an exercise or base price less than the fair
market value of our common stock as of the date of grant.
Section
162(m) Qualification
. The 2018 Plan is designed to allow Awards made under the 2018 Plan to qualify as performance-based
compensation under Section 162(m) of the Code.
Recoupment
. Awards
made under the 2018 Plan may be subject to rescission, cancellation or recoupment, in whole or in part, under any current or future
“clawback” or similar policy maintained by us that is applicable to any participant.
Independent
Administration
. The compensation committee of the Board (the “Compensation Committee”), which consists of
only independent directors, will be responsible for the general administration of the 2018 Plan with respect to Awards, provided
however, that the Compensation Committee may delegate to one or more officers or Board members the authority to grant Awards to
eligible individuals, who are neither subject to the requirements of Rule 16b-3 of the Exchange Act nor “covered employees”
within the meaning of Section 162(m) of the Code
All
Awards granted under the 2018 Plan are governed by separate written agreements, or Award Agreements, between us and the participants.
No Awards may be granted after the 10
th
anniversary of the date on which the 2018 Plan was approved by the Board,
although Awards granted before that time will remain valid in accordance with their terms.
Eligibility
. Any
of our employees, officers, directors, consultants (who are natural persons) are eligible to participate in the 2018 Plan if selected
by the Compensation Committee (the “Participants”). Currently we have twenty (20) employees, two (2) officers, three
(3) directors, and one (1) consultant who are eligible to be Participants in the 2018 Plan. The basis of participation of an individual
under the 2018 Plan, and the type and amount of any Award that an individual will be entitled to receive under the 2018 Plan,
will be determined by the Compensation Committee based on its judgment as to the best interests of the Company and our stockholders,
and therefore cannot be determined in advance.
Subject
to certain adjustments, the maximum number of shares of common stock that may be issued under the 2018 Plan in connection with
Awards is one million eight hundred seventy-five thousand (1,875,000). In any calendar year, no Participant may receive any Award
or any combination of Awards that relate to more than six hundred twenty-five thousand (625,000) shares.
The
Board has initiated a process to evaluate strategic alternatives to maximize shareholder value. This process will consider a range
of potential strategic alternatives including, but not limited to, business combinations, while simultaneously supporting the
Company’s management and employees in the execution of the Company’s current business activities. The Company does
not plan to disclose or comment on developments regarding the strategic review process until it is complete or further disclosure
is deemed appropriate. There can be no assurance that the exploration of strategic alternatives will result in any transaction
or other alternative. Upon the successful consummation of a strategic alternative the Company may issue securities of up to six
hundred twenty-five thousand (625,000) shares pursuant to the 2018 Plan to each of its officers and directors.
Any
shares tendered by a Participant in payment of an exercise price for an Award or the tax liability with respect to an Award, including
shares withheld from any such Award, shall not be available for future Awards hereunder. Any shares of Common Stock issued by
the Company through the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares
of Common Stock available for Awards under the Plan. Additionally, subject to counting procedures adopted by the Compensation
Committee, any shares subject to an Award under the Plan that are forfeited or terminated without an actual distribution of shares
shall again be available for Awards under the Plan.
In
the event of any stock dividend, recapitalization, forward split or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase or share exchange, extraordinary or unusual cash distribution or other similar corporate transaction or
event, which affects the Common Stock, the Compensation Committee may make such adjustment, which is appropriate in order to prevent
dilution or enlargement of the rights of Participants under the Plan, to (i) the number and kind of shares of Common Stock which
may thereafter be issued in connection with Awards, (ii) the number and kind of shares of Common Stock issuable in respect of
outstanding Awards, (iii) the aggregate number and kind of shares of Common Stock available under the Plan, (iv) the limits described
in above, (v) the exercise price or grant price relating to any Award or, if deemed appropriate, make provision for a cash payment
with respect to any outstanding Award, and (vi) if applicable to the performance goals applicable to any such Award.
Options
. An
Option entitles the holder to purchase from us a stated number of shares of common stock at a set price. The Compensation Committee
will specify the number of shares of common stock subject to each Option and the exercise price for such Option, provided that
the exercise price may not be less than the fair market value of a share of common stock on the date the Option is granted. Generally,
all or part of the exercise price may be paid (i) in cash, (ii) with shares of Common Stock of the Company owned by the optionee,
(iii) with other legal consideration that the Committee may deem appropriate, which may include payment through cashless and net
exercise arrangements, to the extent permitted by applicable law, or (iv) by any combination of such methods. Participants who
are subject to the reporting requirements of Section 16 of the Exchange Act may elect to pay all or a portion of the exercise
price of an Option by directing the Company to withhold shares of Common Stock that would otherwise be received upon exercise
of such Option.
All
Options shall be exercisable in accordance with the terms of the applicable Award Agreement. The maximum term of an Option shall
be determined by the Compensation Committee on the date of grant but shall not exceed 10 years.
Unless
otherwise provided in an Award Agreement or as may be determined by the Compensation Committee, upon a Participant’s termination
of service with the Company, the unvested portion of such Participant’s Options shall cease to vest and shall be forfeited
with no further compensation due to the Participant and the vested portion of such Participant’s Options shall remain exercisable
by the Participant or the Participant’s beneficiary or legal representative, as the case may be, for a period of (i) 90
days in the event of a Participant’s termination of service by the Company or a Subsidiary without Cause (as such term is
defined in the Plan), (ii) one year in the event of a Participant’s termination of service due to death or disability and
(iii) 30 days in the event of a Participant’s voluntary termination of service; provided, however, that in no event shall
any Option be exercisable after its stated term has expired. All of a Participant’s Options shall be forfeited immediately
upon such Participant’s termination by the Company for Cause.
Restricted
Stock
. A restricted stock award is a grant of shares of common stock, which are subject to forfeiture restrictions
during a restriction period. The Compensation Committee will determine the price, if any, to be paid by the Participant for each
share of common stock subject to a restricted stock award. The Compensation Committee may condition the expiration of the restriction
period, if any, upon: (i) the Participant’s continued service over a period of time with us or our affiliates; (ii) the
achievement by the Participant, us or our affiliates of any other performance goals set by the Compensation Committee; or (iii)
any combination of the above conditions as specified in the Award Agreement. If the specified conditions are not attained, the
Participant will forfeit the portion of the restricted stock award with respect to which those conditions are not attained, and
the underlying common stock will be forfeited to us. At the end of the restriction period, if the conditions, if any, have been
satisfied, the restrictions imposed will lapse with respect to the applicable number of shares. During the restriction period,
unless otherwise provided in an Award Agreement, a Participant will have the right to vote the shares underlying the restricted
stock; however, all dividends will remain subject to restriction until the stock with respect to which the dividend was issued
lapses. The Compensation Committee may, in its discretion, accelerate the vesting and delivery of shares of restricted stock.
Unless otherwise provided in an Award Agreement or as may be determined by the Compensation Committee, upon a Participant’s
termination of service with the Company, the unvested portion of a restricted stock award will be forfeited.
RSUs
. RSUs
are granted in reference to a specified number of shares of common stock and entitle the holder to receive, on achievement of
specific performance goals established by the Compensation Committee, after a period of continued service with us or our affiliates
or any combination of the above as set forth in the applicable Award Agreement, one share of common stock for each such share
of common stock covered by the RSU. The Compensation Committee may, in its discretion, accelerate the vesting of RSUs. Unless
otherwise provided in an Award Agreement or as may be determined by the Compensation Committee, upon a Participant’s termination
of service with the Company, the unvested portion of the RSUs will be forfeited.
Stock
Appreciation Rights
. An SAR entitles the recipient to receive, upon exercise of the SAR, the increase in the fair
market value of a specified number of shares of common stock from the date of the grant of the SAR and the date of exercise payable
in shares of common stock. Any grant may specify a vesting period or periods before the SAR may become exercisable and permissible
dates or periods on or during which the SAR shall be exercisable. No SAR may be exercised more than ten years from the grant date.
Upon a Participant’s termination of service the same general conditions applicable to Options as described above would be
applicable to the SAR.
Other
Stock-Based Awards
. Other Stock-Based Awards may be granted by the Compensation Committee in the form and on such
terms and conditions as the Committee shall determine.
Performance
Goals
. Performance goals may be linked to a variety of factors including the Participant’s completion of a
specified period of employment or service with us or an affiliated company. Additionally, performance goals can include objectives
stated with respect to an individual Participant, the Company or the subsidiary, division, department or function in which the
Participant is employed. Performance goals may be measured on an absolute or relative basis. Relative performance may be measured
by a group of peer companies or by a financial market index. The performance goals are limited to one or more of the following:
|
●
|
specified
levels of or increases in the Company’s, a division’s or a subsidiary’s return on capital, equity or assets;
|
|
●
|
earnings
measures/ratios (on a gross, net, pre-tax or post-tax basis), including diluted earnings per share, total earnings, operating
earnings, earnings growth, earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation and
amortization (EBITDA);
|
|
●
|
net
economic profit (which is operating earnings minus a charge to capital);
|
|
●
|
net
income;
|
|
●
|
operating
income;
|
|
●
|
sales;
|
|
●
|
sales
growth;
|
|
●
|
gross
margin;
|
|
●
|
direct
margin;
|
|
●
|
share
price (including but not limited to growth measures and total stockholder return), operating profit; per period or cumulative
cash flow (including but not limited to operating cash flow and free cash flow) or cash flow return on investment (which equals
net cash flow divided by total capital);
|
|
●
|
inventory
turns;
|
|
●
|
financial
return ratios;
|
|
●
|
market
share;
|
|
●
|
balance
sheet measurements such as receivable turnover;
|
|
●
|
improvement
in or attainment of expense levels;
|
|
●
|
improvement
in or attainment of working capital levels;
|
|
●
|
debt
reduction;
|
|
●
|
strategic
innovation, including but not limited to entering into, substantially completing, or receiving payments under, relating to,
or deriving from a joint development agreement, licensing agreement, or similar agreement;
|
|
●
|
customer
or employee satisfaction;
|
|
●
|
individual
objectives;
|
|
●
|
any
other financial or other measurement deemed appropriate by the Committee as it relates to the results of operations or other
measurable progress of the Company and its subsidiaries (or any business unit of the Company or any of its subsidiaries);
and/or
|
|
●
|
any
combination of any of the foregoing criteria.
|
The
Compensation Committee may impose restrictions on the grant, exercise or payment of an Award as it determines appropriate. Generally,
Awards granted under the 2018 Plan shall be nontransferable except by will or by the laws of descent and distribution. No Participant
shall have any rights as a stockholder with respect to shares covered by Options, SARs, or RSUs, unless and until such Awards
are settled in shares of common stock.
No
Option (or, if applicable, SARs) shall be exercisable, no shares of common stock shall be issued, no certificates for shares of
common stock shall be delivered and no payment shall be made under the 2018 Plan except in compliance with all applicable laws.
Our
board of directors may amend, suspend or terminate the 2018 Plan and the Compensation Committee may amend any outstanding Award
at any time; provided that (a) such amendment, alteration, suspension, discontinuation, or termination shall be subject to the
approval of the Company’s stockholders if (i) such action would decrease the price at which outstanding Awards may be exercised
or (ii) such stockholder approval is required by any applicable federal, state or foreign law or regulation or the rules of any
stock exchange or automated quotation system on which the Common Stock may then be listed or quoted and (b) no such amendment
or termination may adversely affect Awards then outstanding without the holder’s permission, unless such amendment is necessary
to ensure a deduction under Section 162(m) of the Code, if applicable, or to avoid the additional tax described in Section 409A
of the Code.
In
the event of a change in control (as defined in the 2018 Plan), the Compensation Committee may, in its discretion, (i) accelerate
the vesting and, if applicable, exercisability of all outstanding Awards, (ii) cancel all outstanding Options or SARs in exchange
for a cash payment in an amount equal to the excess, if any, of the fair market value of the Common Stock underlying the unexercised
portion of the Option or SAR over the exercise price or grant price, as the case may be, of such portion, , (iii) terminate all
Options or SARs, effective immediately prior to the change in control, provided that the Company provides the Participant an opportunity
to exercise such Award within a specified period following the Participant’s receipt of a written notice of such change
in control and the Company’s intention to terminate such Awards, or (iv) require the successor corporation, following a
change in control if the Company does not survive such change in control, to assume all outstanding Options or SARs and to substitute
such Options or SARs with awards involving the common stock of such successor corporation on terms and conditions necessary to
preserve the rights of Participants with respect to such Options or SARs. The judgment of the Compensation Committee with respect
to a change in control shall be conclusive and binding upon each Participant without the need for any amendment to the Plan.
New
Plan Benefits
Because
our Compensation Committee has discretion to grant future awards of a design and amount determined in its discretion, (i) it is
not possible at present to specify the persons to whom Awards will be granted under the 2018 Plan in the future or the amounts
and types of individual grants and (ii) nor would it be possible to predict what awards would have been had the 2018 Plan been
in existence in the prior fiscal year. However, it is anticipated that, among others, all of our current executive officers, including
our named executive officers, will receive Awards under the 2018 Plan.
Section
162(m) of the Internal Revenue Code
Section
162(m) of the Code limits the federal income tax deductions a publicly held company can claim for compensation in excess of $1,000,000
paid to certain executive officers (generally, the officers who are “named executive officers” in the summary compensation
table in the issuer’s proxy statement, excluding the issuer’s principal financial officer). “Qualified performance-based
compensation” is not counted against the $1,000,000 deductibility limit. Under the 2018 Plan, options and SARs granted with
an exercise price at least equal to 100% of the fair market value of the underlying shares at the date of grant may satisfy the
requirements for treatment as “qualified performance-based compensation.” In addition, Performance Awards that are
conditioned upon achievement of certain Performance Goals may satisfy the requirements for treatment as “qualified performance-based
compensation.” A number of other requirements must be met, however, in order for those awards to so qualify. Accordingly,
there can be no assurance that awards under the 2018 Plan will be fully deductible under all circumstances.
Federal
Income Tax Consequences Relating to Awards Under the 2018 Plan
.
The
material United States federal income tax treatment of awards under the 2018 Plan is generally described below. This description
of tax consequences is not a complete description. There may be different income tax consequences under certain circumstances,
and there may be gift and estate tax consequences. Local, state and other taxing authorities may also tax awards under the plan.
Tax laws are subject to change.
Nonqualified
Stock Options
There
are generally no federal income tax consequences to a Participant or to the Company upon the grant of a nonqualified stock option.
Upon the exercise of a nonqualified stock option, a Participant will recognize ordinary income in an amount equal to the excess
of the fair market value of the shares at the time of exercise over the aggregate exercise price paid. The Company generally will
be entitled to a corresponding federal income tax deduction. The Participant will have a tax basis in the shares equal to the
exercise price plus the amount of income recognized at the time of exercise.
When
a Participant sells shares of stock acquired through the exercise of a nonqualified stock option, the Participant will have a
capital gain or loss in an amount equal to the difference between the amount realized on the sale and the tax basis in the shares.
The capital gain tax rate will depend on a number of factors, including the length of time the Participant held the shares prior
to selling them.
Restricted
Stock
Unless
a Participant makes a valid Section 83(b) election as described below, such Participant will generally not recognize federal taxable
income when he or she receives a grant of restricted stock, and the Company will not be entitled to a deduction, until the stock
is transferable by the Participant or is otherwise no longer subject to a substantial risk of forfeiture. When the stock is either
transferable or is no longer subject to a substantial risk of forfeiture, a Participant will recognize ordinary income in an amount
equal to the fair market value of the shares at that time (less any amounts paid for the shares), and generally, the Company will
be entitled to a deduction in the same amount. Any gain or loss recognized by the Participant upon a later disposition of the
shares will be capital gain or loss. A Participant’s holding period for purposes of determining whether that capital gain
or loss is long-term or short-term will be counted from the date the stock became transferable or ceased to be subject to a substantial
risk of forfeiture.
A
Participant may elect to recognize ordinary income in the year when the share award is granted in an amount equal to the fair
market value of the shares subject to the award (less any amounts paid for such shares) at the time of grant, determined without
regard to certain restrictions. This election is referred to as a Section 83(b) election. In that event, the Company will be entitled
to a corresponding deduction in the same year. Any gain or loss recognized by the Participant upon a later disposition of the
shares will be capital gain or loss. A Participant’s holding period for purposes of determining whether that capital gain
or loss is long-term or short-term will be counted from the date of the original transfer to the Participant. The Participant
may not claim a credit for any tax previously paid on stock that is later forfeited.
Restricted
Stock Units
If
a Participant is granted a restricted stock unit, he or she will not be required to recognize any taxable income at the time of
grant. Upon distribution of shares or cash in respect of a restricted stock unit, the fair market value of those shares or the
amount of that cash will be taxable to the Participant as ordinary income and the Company will receive a deduction equal to the
income recognized by the Participant. The subsequent disposition of shares acquired pursuant to a restricted stock unit will result
in capital gain or loss (based on the difference between the price received on disposition and the market value of the shares
at the time of their distribution). The capital gain tax rate will depend on a number of factors, including the length of time
the Participant held the shares prior to selling them.
SARs
A
Participant realizes no taxable income and the Company is not entitled to a deduction when a SAR is granted. Upon exercising a
SAR, a Participant will realize ordinary income in an amount equal to the fair market value of the shares received minus any amount
paid for the shares, and the Company will be entitled to a corresponding deduction. A Participant’s tax basis in the shares
of common stock received upon exercise of a SAR will be equal to the fair market value of such shares on the exercise date, and
the Participant’s holding period for such shares will begin at that time. Upon sale of the shares of common stock received
upon exercise of a SAR, the Participant will realize short-term or long-term capital gain or loss, depending upon whether the
shares have been held for more than one year. The amount of such gain or loss will be equal to the difference between the amount
realized in connection with the sale of the shares and the Participant’s tax basis in such shares.
Other
Stock-Based Awards
The
tax consequences of receiving other stock-based Awards will generally be governed by the principles set forth in the Code. These
tax consequences may vary depending upon the terms and conditions of such awards.
Equity
Awards
The
grant of options and other equity or cash awards under the 2018 Plan is discretionary and we cannot determine now the specific
number or type of equity or cash awards to be granted in the future to any particular person or group. Any such grants of awards
will be made in the sole discretion of our Compensation Committee, in such amounts and to such persons, as our Compensation Committee
deems appropriate.
The
above description of the 2018 Plan does not purport to be complete and is qualified in its entirety by reference to the
full text of the 2018 Plan, which is attached as Exhibit 10.1 to this Current Report on Form 8-K is are incorporated by reference
herein.