Item 5.02.
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of Dr. Avtar Dhillon to the Board of Directors
Effective October 5, 2018, the Board of Directors (the “Board”) of the Company elected Dr. Avtar Dhillon to the Board and appointed him as Executive Chairman of the Board, to serve until the Company’s next annual meeting of stockholders and until his successor is duly elected and qualifies, or until his earlier resignation or removal. Dr. Dhillon is also Chair of the Finance and Business Development Special Committee; and a member of the Audit; Compensation; and Nomination and Corporate Governance Committees. In his position as Executive Chairman, Dr. Dhillon will be a member of the Company’s management team.
Dr. Dhillon, 57, is a successful entrepreneur who has been instrumental in founding and helping developing a number of companies including OncoSec Biomedical (NASDAQ: ONCS) developing leading DNA-based intratumoral cancer immunotherapies, where he has been Chairman of the Board since inception in 2011; Inovio Pharmaceuticals (NASDAQ: INO) developing next-generation DNA based vaccines where he led the turnaround of the company, served as its CEO for several years, and is currently Chairman of the Board; Vitality Biopharma (OTCQB: VBIO) combining agriculture and biotech to study potential to ferment stevia as a health sugar substitute and subsequently developing cannabinoid pro-drugs using similar techniques and bioreactors, serving as Chairman since January 2012. Avtar, also serves as Executive Chairman of the Board of Directors of Emerald Health Therapeutics (TSX.V: EMH) since April 2015 and through his involvement has taken that company from a market capitalization of $15 million to its current market capitalization of approximately $500 million. Avtar has more than 25 years of experience in building public life science companies organically and through mergers and acquisitions, leading innovation in scientific, engineering and farming enterprises, securing over US$100m government grants and NGO funding for his companies, and building dominant IP portfolios through partnering and negotiating transactions with small businesses and large multibillion dollar companies. He has collectively raised well over $500m in public equity in the past 10 years from US, Canadian, European and Asian institutions and high net worth individuals.
Dr. Dhillon will be compensated for his service on the Board in accordance with the Company’s amended director compensation program, which is described below, including the award of a one-time nonqualified stock option under the Company’s Amended Plan (as defined below) to purchase 1,000,000 shares of Common Stock. The Board, upon recommendation of the Compensation Committee, granted the stock options on October 10, 2018 with an exercise price of $0.305 per share, which is equal to the closing price of the Common Stock on October 10, 2018. These options will vest in equal monthly installments over a one-year period measured from the date of grant.
The Company entered into an indemnification agreement with Dr. Dhillon in the form of the Company’s standard form of indemnification agreement. There is no arrangement or understanding between Dr. Dhillon and any other person pursuant to which Dr. Dhillon was selected as an officer and director, and Dr. Dhillon does not have a direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Adoption of Amendment to 2014 Omnibus Incentive Plan
On October 5, 2018, the stockholders of the Company and the Board approved an Amendment to the Company’s 2014 Omnibus Incentive Plan (as amended, the “Amended Plan”). The Amended Plan provides for an “evergreen” provision whereby 10% of the issued and outstanding shares of Common Stock of the Company will be reserved for issuance under the Amended Plan. We qualify our description herein in its entirety by reference to the Amendment, which we have included as Exhibit 103 hereto and also incorporate herein by reference.
Amendments to Director Compensation Policy
On October 10, 2018, the Board, upon the recommendation of the Compensation Committee, approved certain amendments to the Company’s policy for the compensation of its non-employee directors, effective immediately. Following the amendments, the Company’s director compensation policy consists of the following:
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each non-employee director will receive, on an annual basis, a cash retainer of $40,000;
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each non-employee director will receive, on an annual basis, an option to purchase 100,000 shares of Common Stock, which shall vest in twelve equal monthly installments;
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the executive chair of the Board, if a non-employee director, will receive an additional cash retainer of $40,000;
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each non-employee director who serves on the Audit Committee will receive a cash retainer of $5,000 per year ($20,000 for the chair);
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each non-employee director who serves on the Compensation Committee will receive a cash retainer of $2,500 per year ($10,000 for the chair);
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each non-employee director who serves on the Nominating and Corporate Governance Committee will receive a cash retainer of $1,000 per year ($5,000 for the chair);
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each non-employee director who serves on the Finance and Business Development Special Committee chair will receive a cash retainer of $40,000 per year; and
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each non-employee director elected to the Board will receive a one-time award of an option to purchase 200,000 shares of Common Stock, which option shall vest in twelve equal monthly installments.
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Additionally, on October 10, 2018 and in accordance with the above, the Board, upon the recommendation of the Compensation Committee, granted to Punit Dhillon and Jim Heppell (being each of the Company’s non-employee directors other than Dr. Avtar Dhillon) one-time nonqualified stock option awards under the Amended Plan to purchase 200,000 shares of Common Stock. The stock options have an exercise price of $0.305 per share, which is equal to the closing price of the Common Stock, which is equal to the closing price of the Common Stock on October 10, 2018. These options will vest in equal monthly installments over a one-year period measured from the date of grant.