PROPOSAL 3
APPROVAL OF AN AMENDMENT TO OUR 2017 EQUITY INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK THAT WE WILL HAVE AUTHORITY TO GRANT UNDER THE PLAN FROM 1,750,000 TO 3,500,000
On October
9, 2017, the board of directors adopted, and our stockholders subsequently approved on October
9, 2017, the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan (the “2017 Equity Incentive Plan”); however, the 2017 Equity Incentive Plan did not become effective until the business day prior to the public trading of our common stock on the Nasdaq. As of June
25, 2019, there were (i) 508,100
shares of common stock available for grant under the 2017 Equity Incentive Plan and (ii) 1,241,900
shares of common stock subject to awards were outstanding under the 2017 Equity Incentive Plan.
In an effort to preserve cash and to attract, retain and motivate persons who make important contributions to our business, we would like to issue securities to our officers, directors and consultants. The 2017 Equity Incentive Plan currently only has 508,100 number of shares of common stock available for issuance. Management believes that the number of shares of common stock currently available for issuance under the 2017 Equity Incentive Plan is insufficient to ensure it can meet its needs to provide for awards to the 2017 Equity Incentive Plan participants for the next 12
months and that it may be insufficient in order to allow us the ability to compete successfully for talented employees and consultants.
The board of directors has approved, subject to stockholder approval, the amendment to the 2017 Equity Incentive Plan to increase by 1,750,000 the number of shares that may be granted under the 2017 Equity Incentive Plan. The amendment to our 2017 Equity Incentive Plan will increase the number of shares of common stock with respect to which awards may be granted under the 2017 Equity Incentive Plan from 1,750,000 to 3,500,000. If the amendment to the 2017 Equity Incentive Plan is approved by our stockholders, the number of shares available for future awards will increase to 2,258,100 based on the number shares remaining available for grant under the 2017 Equity Incentive Plan as of June
25, 2019. The closing price of our common stock as reported on the Nasdaq on July
5, 2019 was $1.84 per share.
Purpose of the 2017 Equity Incentive Plan
The board of directors believes that the 2017 Equity Incentive Plan is necessary for us to attract, retain and motivate our employees, directors and consultants through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and other equity
-based
or equity
-related
awards. The Company believes the 2017 Equity Incentive Plan is best designed to provide the proper incentives for our employees, directors and consultants, ensures our ability to make performance
-based
awards, and meets the requirements of applicable law. There are currently ten individuals that would be eligible to participate in the 2017 Equity Incentive Plan as directors or employees, of which eight are directors or executive officers and two are employees. Additional individuals may be awarded awards under the 2017 Equity Incentive Plan as consultants.
We manage our long
-term
stockholder dilution by limiting the number of equity incentive awards granted annually. The board of directors monitors our annual stock award Burn Rate, Dilution and Overhang (each as defined below), among other factors, in its efforts to maximize stockholders’ value by granting what, in the board of directors’ judgment, are the appropriate number of equity incentive awards necessary to attract, reward, and retain employees, consultants and directors. The table below illustrates our Burn Rate, Dilution, and Overhang for 2018 (the year in which such plan became effective) with details of each calculation noted below the table.
|
|
|
|
2018
|
|
|
Burn Rate
(1)
|
|
1.45
|
%
|
|
Dilution
(2)
|
|
20.32
|
%
|
|
Overhang
(3)
|
|
0.80
|
%
|
|
Limitation on Awards and Shares Available
On October
9, 2017, we adopted the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan; however, the 2017 Equity Incentive Plan did not become effective until the business day prior to the public trading of our common stock on the Nasdaq. Initially, the aggregate number of shares of our common stock that was available to be issued pursuant to stock awards under the 2017 Equity Incentive Plan was 1,750,000
shares. To date, we have issued options to purchase an aggregate of 1,241,900
shares of our common stock under the 2017 Equity Incentive Plan. As of June
25, 2019, there are 508,100
shares of our common stock available for grants that may be made under the 2017 Equity Incentive Plan.
2017 Equity Incentive Plan
The principal provisions of the 2017 Equity Incentive Plan, as amended, are summarized below and the proposed amendment to the 2017 Equity Incentive Plan is attached hereto as
Appendix A
. The following discussion is qualified in its entirety by reference to the 2017 Equity Incentive Plan.
Administration
The 2017 Equity Incentive Plan generally is administered by our Compensation Committee, which has been appointed by the board of directors to administer the 2017 Equity Incentive Plan. The Compensation Committee will have full authority to establish rules and regulations for the proper administration of the 2017 Equity Incentive Plan, to select the employees, directors and consultants to whom awards are granted, and to set the date of grant, the type of award and the other terms and conditions of the awards, consistent with the terms of the 2017 Equity Incentive Plan.
Eligibility
Persons eligible to participate in the 2017 Equity Incentive Plan include all of our officers, employees, directors, and consultants. There are currently 16 individuals who would be eligible to participate in the 2017 Equity Incentive Plan, of which nine are directors or executive officers and two are non
-executive
employees and five are consultants who are not executive officers.
Awards
The 2017 Equity Incentive Plan provides for the grant of: (i) incentive stock options; (ii) nonstatutory stock options; (iii) stock appreciation rights; (iv) restricted stock; and (v) other stock
-based
and cash
-based
awards to eligible individuals. The terms of the awards will be set forth in an award agreement, consistent with the terms of the 2017 Equity Incentive Plan. No stock option will be exercisable later than ten years after the date it is granted.
The 2017 Equity Incentive Plan permits the grant of awards intended to qualify as “performance
-based
compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).
Stock Options
The Compensation Committee may grant incentive stock options as defined in Section 422 of the Code, and nonstatutory stock options. Options shall be exercisable for such prices, shall expire at such times, and shall have such other terms and conditions as the Compensation Committee may determine at the time of grant and as set forth in the award agreement; however, the exercise price must be at least equal to 100% of the fair market value at the date of grant. The option price is payable in cash or other consideration acceptable to us.
Stock Appreciation Rights
The Compensation Committee may grant stock appreciation rights with such terms and conditions as the Compensation Committee may determine at the time of grant and as set forth in the award agreement. The grant price of a stock appreciation right shall be determined by the Compensation Committee and shall be specified in the award agreement; however, the grant price must be at least equal to 100% of the fair market value of a share on the date of grant. Stock appreciation rights may be exercised upon such terms and conditions as are imposed by the Compensation Committee and as set forth in the stock appreciation right award agreement.
EXECUTIVE COMPENSATION
NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE
Overview of Our Compensation Program
A. Philosophy and Objectives
Our primary objective with respect to executive compensation is to design compensation programs that will align executives’ compensation with our overall business strategies for the creation of stockholder value and attract, motivate and retain highly qualified executives, drive high performance by connecting compensation to our financial operating, and strategic goals and results and appropriately reward high performance. To accomplish this objective, executive compensation is reviewed annually to ensure that compensation levels are competitive and reasonable given our level of performance and other comparable companies with which we compete for talent. Our executive compensation program is designed to appropriately reward both individual and collective performance that meets and exceeds our annual, long
-term
and strategic goals. To accomplish this objective, a substantial percentage of total compensation is variable, “at risk”, both through cash bonus compensation and equity compensation.
Adial seeks to achieve these objectives through four key compensation elements:
•
a base salary;
•
cash bonuses;
•
equity awards; and
•
benefits.
The Compensation Committee uses a simple and straightforward approach in compensating our named executive officers in which base salary, annual incentives and stock options are the principal components. In addition, executives generally participate in the same benefit programs as other full
-time
employees.
In order to enhance the Compensation Committee’s ability to carry out its responsibilities effectively, as well as maintain strong links between executive pay and performance, the Compensation Committee reviews compensation information for each named executive officer which includes the following information:
•
the annual compensation and benefit values that are being offered to each executive;
•
the value of all outstanding equity awards; and
•
the Compensation Committee also meets with our senior management in connection with compensation matters, and may retain and meet in executive session with, compensation and other advisors from time to time.
B. Compensation Administration
Roles and Responsibilities of Compensation Committee
The primary purpose of the Compensation Committee is to conduct reviews of our general executive compensation policies and strategies and oversee and evaluate our overall compensation structure and programs. The Compensation Committee seeks to confirm that total compensation paid to the Chief Executive Officer and Chief Financial Officer/Chief Operating Officer is reasonable and competitive. All of these responsibilities of the Compensation Committee include, but are not limited to:
•
Establishing on an annual basis performance goals and objectives for purposes of determining the compensation of our Chief Executive Officer and other senior executive officers, evaluating the performance of such officers in light of those goals and objectives, and setting the compensation level for those officers based on this evaluation.
•
Recommending to the Board the compensation for Board members (including retainer, committee and committee chair’s fees, stock options and other similar items as appropriate).
30
•
Reviewing the competitive position of, and making recommendations to the Board with respect to, the cash
-based
and equity
-based
compensation plans and other programs of Adial relating to compensation and benefits.
•
Reviewing the financial performance and the operations of our major benefit plans.
•
Overseeing the administration of our stock option and other executive compensation plans, including recommending to the Board of Directors the granting of options and awards under the plans, and the approval or disapproval of the participation of individual employees in those plans.
•
Reviewing and approving for our Chief Executive Officer and other senior executive officers material perquisites or other in
-kind
benefits.
Additional information regarding the Compensation Committee’s responsibilities is set forth in its charter, which is posted on our website at
www.adialpharma.com
.
C. Competitive Considerations and Components of Compensation
In making compensation decisions with respect to each element of compensation, the Compensation Committee considers the competitive market for executives and compensation levels provided by comparable companies. The Compensation Committee regularly reviews the compensation practices at companies with which it competes for talent, such as businesses engaged in activities similar to those of Adial, including other similarly sized companies in the biopharmaceutical industry.
Base Salary
We provide our named executive officer’s a base salary commensurate with their position, responsibilities and experience. In setting the base salary, the Compensation Committee considers the scope and accountability associated with each named executive officer’s position and such factors as performance and experience of each named executive officer. We design base pay to provide the essential reward for an employee’s work, and are required to be competitive in attracting talent. Once base pay levels are initially determined, increases in base pay may be provided to recognize an employee’s specific performance achievements. For example, subsequent to becoming a public company, we raised the base salaries of our Chief Executive Officer and Chief Operating Officer/Chief Financial Officer. The base salaries are targeted to be competitive with other similar companies.
The base salaries (2018 and current) for our named executive officers are:
Named Executive Officer
|
|
2018
Base Salary
|
|
Current
Base Salary
|
William B. Stilley, Chief Executive Officer
|
|
$
|
350,000
|
|
$
|
400,000
|
Joseph Truluck, Chief Operating Officer/Chief Financial Officer*
|
|
$
|
143,000
|
|
$
|
150,000
|
Bonuses; Long Term Equity Incentive Awards
In an effort to preserve cash, we did not provide cash bonuses in 2017 and 2018. However, in 2018 long term equity incentive awards were an important component of the compensation of our Chief Executive Officer and Chief Operating Officer/Chief Financial Officer and as such in 2018, we issued to our Chief Executive Officer and Chief Operating Officer/Chief Financial Officer shares of common stock in compensation for retirement of the performance bonus plan. In addition, in March 2019, we issued to our Chief Executive Officer and Chief Operating Officer/Chief Financial Officer options to purchase 500,000 and 180,000
shares of our common stock, respectively. We believe that the ownership position of the Chief Executive Officer and Chief Operating Officer/Chief Financial Officer in Adial equity, together with the long
-term
equity incentive awards to our Chief Executive Officer and Chief Operating Officer/Chief Financial Officer, motivates their achievement of our financial and strategic objectives and aligns their interests with those of our stockholders.
31
Role of the Chief Executive Officer and Chief Financial Officer
Our Chief Executive Officer, Mr.
Stilley, makes recommendations to the Compensation Committee regarding the compensation of our other Named Executive Officer. Mr.
Stilley does not participate in any discussions or processes concerning his own compensation, and participates in a non
-voting
capacity in discussions or processes concerning the compensation of our Chief Operating Officer/Chief Financial Officer and other members of management.
Summary Compensation Table
The following table sets forth the information as to compensation paid to or earned by our executive officers during the years ended December
31, 2018 and 2017 whose total compensation did exceed $100,000. The persons listed in the following table are referred to herein as the “named executive officers.”
Name and Principal Position
|
|
Fiscal
Year
|
|
Salary
|
|
Profits
Interest
Unit, Stock, &
Option
Award(s)
|
|
All Other
Compensation
|
|
Total
|
William B. Stilley
|
|
2018
|
|
$
|
180,833
|
|
$
|
988,365
|
(1)
|
|
$
|
42,458
|
(2)
|
|
$
|
1,211,656
|
Chief Executive Officer and Member of the board of directors
|
|
2017
|
|
|
60,000
|
|
|
276,667
|
(3)
|
|
|
28,362
|
(2)
|
|
|
365,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph A. M. Truluck
|
|
2018
|
|
$
|
85,183
|
|
$
|
223,180
|
(4)
|
|
$
|
—
|
|
|
$
|
308,363
|
Chief Operating Officer and Chief Financial Officer
|
|
2017
|
|
|
26,400
|
|
|
145,049
|
(5)
|
|
|
723
|
(6)
|
|
|
172,172
|
The table does not include the board of directors discretionary cash performance bonuses granted to Mr.
Stilley and Mr.
Truluck in March 2019 of $500,000 and $50,000, respectively and the options to purchase 500,000 and 180,000
shares of our common stock issued to Mr.
Stilley and Mr.
Truluck in March 2019.
32
Outstanding Equity Awards at Fiscal Year-End (December 31, 2018)
The following table provides information about the number of outstanding equity awards held by each of our named executive officers as of December
31, 2018:
|
|
Option Awards
|
|
Stock Awards
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(Exercisable)
|
|
Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)
|
|
Option
Exercise
Price
|
|
Option
Expiration
Date
|
|
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares That
Have Not
Vested
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout Value
of Unearned
Shares That
Have Not
Vested
|
William B. Stilley
Chief Executive Officer and Member of the board of directors
|
|
27,141
|
|
30,333
|
|
$
|
5.70
|
|
6/30/26
|
|
0
|
|
NA
|
Joseph Truluck
Chief Operating Officer and Chief Financial Officer
|
|
14,229
|
|
15,903
|
|
$
|
5.70
|
|
6/30/26
|
|
0
|
|
NA
|
Employment Agreements and Consulting Agreement
Employment Agreements
We are currently a party to employment agreements with each of Messrs. Stilley and Truluck.
Effective upon the closing of our initial public offering, we entered into a five
-year
employment agreement with Mr.
Stilley to continue to serve as our Chief Executive Officer (the “Stilley EA”). Under the Stilley EA, as amended on March
10, 2019, Mr.
Stilley will receive an annual salary of $400,000 and has a target bonus opportunity equal to 30% of his salary. Mr.
Stilley’s annual salary will be subject to increase at the discretion of our board of directors. Our board of directors may, in its discretion, pay a portion of Mr.
Stilley’s annual bonus in the form of equity or equity
-based
compensation, provided that commencing with the year following the year in which a Change of Control (as defined in the Stilley EA) occurs, Mr.
Stilley’s annual bonus will be paid in cash. Mr.
Stilley will also subject to certain restrictive covenants, including a non
-competition
(applicable during employment and for 24
months thereafter), customer non
-solicitation
and employee and independent contractor non
-solicitation
(each applicable during employment and for 12
months thereafter), as well as confidentiality (applicable during employment and 7 years thereafter) and non
-disparagement
restrictions (applicable during employment and at all times thereafter).
Effective upon the closing of the initial public offering, we entered into a three
-year
employment agreement with Joseph Truluck to serve as our Chief Operating Officer and Chief Financial Officer (the “Truluck EA”). Under the Truluck EA, Mr.
Truluck devotes no less than 50% of his business time to the affairs of our company. Pursuant to the terms of the Truluck EA, as amended on March
10, 2019, he receives an annual salary of $150,000 and has a target bonus opportunity equal 20% of his salary. Mr.
Truluck’s annual salary is subject to increase at the discretion of our board of directors. Our board of directors may, in its discretion, pay a portion of Mr.
Truluck’s annual bonus in the form of equity or equity
-based
compensation. Mr.
Truluck is also subject to certain restrictive covenants, including a non
-competition
(applicable during employment and for 24
months thereafter), customer non
-solicitation
and employee and independent contractor non
-solicitation
(each applicable during employment and for 12
months thereafter), as well as confidentiality (applicable during employment and 7 years thereafter) and non
-disparagement
restrictions (applicable during employment and at all times thereafter).
In the event that Mr.
Stilley’s or Mr.
Truluck’s (each an “Executive”) employment is terminated by us other than for Cause, or upon his resignation for Good Reason (as such terms are defined in the Employment Agreement), the Executive will be entitled to any unpaid bonus earned in the year prior to the termination, a pro
-rata
portion of the bonus earned during the year of termination, continuation of base salary for 12
months for Mr.
Stilley and 6
months in the case of Mr.
Truluck, plus 12
months of COBRA premium reimbursement. If Mr.
Stilley’s termination occurs within 60 days before or within 24
months following a Change of Control, then Mr.
Stilley will be entitled to receive
33
the same severance benefits as provided above except he will receive (a) a payment equal to two times the sum of his base salary and the higher of his target annual bonus opportunity and the bonus payment he received for the year immediately preceding the year in which the termination occurred instead of 12
months of base salary continuation and (b) 24 times the monthly COBRA premium for himself and his eligible dependents instead of 12
months of COBRA reimbursements (the payments in clauses (a) and (b) are paid in a lump sum in some cases and partly in a lump sum and partly in installments over 12
months in other cases). In addition, if Mr.
Stilley’s employment is terminated by us without Cause or by the Executive for Good Reason, in either case, upon or within 24
months following a Change of Control, then the Executive will be entitled to full vesting of all equity awards received by the Executive from us (with any equity awards that are subject to the satisfaction of performance goals deemed earned at not less than target performance).
In the event that the Executive’s employment is terminated due to his death or Disability, the Executive (or his estate) will be entitled to any unpaid bonus earned in the year prior to the termination, a pro
-rata
portion of the bonus earned during the year of termination, 12
months of COBRA premium reimbursement and accelerated vesting of (a) all equity awards received in payment of base salary or an annual bonus and (b) with respect to any other equity award, the greater of the portion of the unvested equity award that would have become vested within 12
months after the termination date had no termination occurred and the portion of the unvested equity award that is subject to accelerated vesting (if any) upon such termination under the applicable equity plan or award agreement (with performance goals deemed earned at not less than target performance, and with any equity award that is in the form of a stock option or stock appreciation right to remain outstanding and exercisable for 12
months following the termination date or, if longer, such period as provided under the applicable equity plan or award agreement (but in no event beyond the expiration date of the applicable option or stock appreciation right).
All severance payments to the Executives will be subject to the execution and non
-revocation
of a release of claims by the Executive or his estate, as applicable.
For purpose of each of the Stilley EA and Truluck EA, “Good Reason” is defined as the occurrence of any of the following events without the respective Executive’s consent: (i) a material reduction in the Executive’s duties, responsibilities or authority; (ii) a reduction of the Executive’s base salary; (iii) failure or refusal of a successor to us to either materially assume our obligations under the employment agreement or enter into a new employment agreement with the Executive on terms that are materially similar to those provided under this Agreement, in any case, in the event of a Change of Control; (iv) relocation of the Executive’s primary work location that results in an increase in the Executive’s one
-way
driving distance by more than twenty
-five
(25) miles from the Executive’s then
-current
principal residence; or (v) a material breach of the employment agreement by us.
For purposes of the Stilley EA and Truluck EA, “Cause” is defined as that the Executive shall have engaged in any of the following acts or that any of the following events shall have occurred, all as determined by the board of directors in its sole and absolute discretion: (i) conviction for, or entering of a plea of guilty or nolo contendere (or its equivalent under any applicable legal system) with respect to (A) a felony or (B) any crime involving moral turpitude; (ii) commission of fraud, misrepresentation, embezzlement or theft against any person; (iii) engaging in any intentional activity that injures or would reasonably be expected to injure (monetarily or otherwise), in any material respect, the reputation, the business or a business relationship of the Company or any of its affiliates; (iv) gross negligence or willful misconduct in the performance of the Executive’s duties to us or its affiliates under this Agreement, or willful refusal or failure to carry out the lawful instructions of the board of directors that are consistent with the Executive’s title and position; (v) violation of any fiduciary duty owed to us or any of its affiliates; or (vi) breach of any restrictive covenant (as defined) or material breach or violation of any other provision of the employment agreement, of a written policy or code of conduct of our company or any of our affiliates (as in effect from time to time) or any other agreement between the Executive and we or any of our affiliates. Except when such acts constituting Cause which, by their nature, cannot reasonably be expected to be cured, the Executive will have twenty (20) days following the delivery of written notice by the Company of its intention to terminate the Executive’s employment for Cause within which to cure any acts constituting Cause. Following such twenty (20) day cure period, and if the reason stated in the notice is not cured, the Executive shall be given five (5) business days prior written notice to appear (with or without counsel) before the full Board for the opportunity to present information regarding his views on the alleged Cause event. After we provide the original notice of our intent to terminate Executive’s employment for Cause, we may suspend the Executive, with pay, from all his duties and responsibilities and prevent him from accessing our or our affiliates premises or contacting any of our personal or any of our affiliates until a final determination on the hearing is made. The Executive will not be terminated for Cause until a majority of the independent directors approve such termination following the hearing.
34
For the purposes of each of the Stilley EA and Truluck EA, “Change in Control” is defined as: (i) the accumulation over a twelve (12) month period, whether directly or indirectly, by any individual, entity or group of our securities representing over fifty (50%) percent of the total voting power of all our then outstanding voting securities; (ii) a merger or consolidation of us in which our voting securities immediately prior to the merger or consolidation do not represent, or are not converted into securities that represent, a majority of the voting power of all voting securities of the surviving entity immediately after the merger or consolidation; (iii) a sale of substantially all of our assets; or (iv) during any period of twelve (12) consecutive months, our current directors, together with any new director whose election by the board of directors or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then still in office, cease for any reason to constitute at least a majority of the board of directors.
Consulting Agreement
On March
24, 2019, we entered into a three year consulting agreement with Bankole Johnson. Dr. Johnson’s consulting agreement with us (the “Consulting Agreement”) provides that Dr. Johnson will serve as our Chief Medical Officer and devote 75% of his working time to our business and affairs and will receive: (i) an annual fee of $370,000 a year; (ii) a signing bonus of $250,000; and (iii) an option to purchase 250,000
shares of our common stock. The shares of common stock underlying the option award vests pro rata on a monthly basis over a thirty
-six
month period. The options are exercisable for a period of ten years from the date of grant and have an exercise price of $3.01 per share.
The Consulting Agreement may be terminated by us upon Dr. Johnson’s death, upon thirty days’ notice for a material breach of the Consulting Agreement by Dr. Johnson that can be cured, after notice of breach and failure to cure; upon notice for a breach of the Consulting Agreement by Dr. Johnson that cannot be cured; upon thirty days’ notice for any other cause; or upon thirty days’ notice (but not before 12
months from the effective date of the Consulting Agreement) at any time without cause; provided that if terminated by us without cause then Dr. Johnson will be entitled to receive his monthly payments for an additional six (6) months and his options will continue to vest for an additional six (6) months from the effective date of the notice of termination, subject to the terms of the 2017 Incentive Plan and the option agreement that we entered into with Dr. Johnson. In the event that Dr. Johnson’s termination is without cause and occurs within three months before or after a Significant Investment Event (as defined below), Dr. Johnson will be entitled to a buy
-out
payment in an amount equal to $31,250 times the number of months remaining on the initial term of the consulting agreement as of the effective date of the termination, minus the payment of the six (6) months of monthly payments provided for above (in addition to the immediate vesting at the time of termination of all remaining shares of our common stock or options to purchase shares of our common stock that would have otherwise been scheduled to vest during the remainder of the initial term). The term “Significant Investment Event” is defined as a sale or series of sales of our equity securities within any three month period resulting in gross proceeds to us of at least $20
million or (i) any consolidation or merger of us with or into any other corporation or other entity, or (ii) series of such consolidations or mergers within any three month period, or (iii) any other corporate reorganization whereby either (x) forty percent or more of the market value of our common shares as of the beginning of the three
-month
period or the date of the single transaction, whichever is applicable, or (y) forty percent or more of our voting power is transferred and becomes controlled, directly, or indirectly, by a single entity or multiple related entities.
The Consulting Agreement may be terminated by Dr. Johnson upon thirty days’ notice for a material breach of the Consulting Agreement by us which can be cured, after notice of breach and failure to cure; upon notice for a breach of the Consulting Agreement by us that cannot be cured; upon thirty days’ notice for any other cause; or upon sixty days’ notice (but not before 12
months from the effective date of the Consulting Agreement) at any time without cause; provided that, if so terminated without cause by Dr. Johnson, upon termination all of our payment obligations shall cease and all equity vesting shall cease, subject to the terms of the 2017 Incentive Plan and the option agreement that we entered into with Dr. Johnson.
35
OTHER INFORMATION REGARDING THE COMPANY
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of June
25, 2019, with respect to the beneficial ownership of our common stock by each of the following:
•
each person who is known by us to be the beneficial owner of more than 5% of our outstanding common stock;
•
each of our directors;
•
each of our named executive officers; and
•
all of our directors and executive officers as a group.
As of June
25, 2019, we had 10,223,699
shares of common stock outstanding. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of warrants or other rights that are either immediately exercisable or exercisable on or before August
24, 2019, which is approximately 60 days after the date of this proxy statement. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.
Except as otherwise noted below, the address for each of the individuals and entities listed in this table is c/o Adial Pharmaceuticals, Inc., 1001 Research Park Blvd., Suite 100, Charlottesville, Virginia 22911.
|
|
Number of shares
(pro forma)
|
|
Percentage of
shares
|
|
|
beneficially
owned
|
|
beneficially
owned
|
Name and address of beneficial owner
|
|
|
|
|
|
Directors and named executive officers
|
|
|
|
|
|
William B. Stilley, III (
Chief Executive Officer, President and Director
)
(1)
|
|
1,030,344
|
|
9.70
|
%
|
Joseph Truluck (
Chief Operating Officer and Chief Financial Officer
)
(2)
|
|
120,512
|
|
1.17
|
%
|
J. Kermit Anderson (
Director
)
(3)
|
|
4,030
|
|
*
|
|
Robertson H. Gilliland, MBA (
Director
)
(4)
|
|
222,878
|
|
2.16
|
%
|
Bankole Johnson, DSc, MD (
Chief Medical Officer and former Chairman of the board of directors and Director
)
(5)
|
|
1,554,473
|
|
14.83
|
%
|
James W. Newman, Jr. (
Director
)
(6)
|
|
684,304
|
|
6.42
|
%
|
Kevin Schuyler, CFA (
Director
)
(7)
|
|
1,447,717
|
|
12.91
|
%
|
Tony Goodman (
Director
)
(8)
|
|
23,815
|
|
*
|
|
All current executive officers and directors as a group (8 persons)
|
|
5,088,073
|
|
40.81
|
%
|
5% or greater stockholders
|
|
|
|
|
|
En Fideicomiso De Mi Vida 11/23/2010 (Trust)
(5)
|
|
848,336
|
|
8.30
|
%
|
Becker Specialty Corporation
(9)
|
|
519,640
|
|
5.01
|
%
|
MVA 151 Investors, LLC
(7)
|
|
673,600
|
|
6.26
|
%
|
36
37
NO DISSENTERS’ RIGHTS
The corporate actions described in this proxy statement will not afford stockholders the opportunity to dissent from the actions described herein or to receive an agreed or judicially appraised value for their shares.
38
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
Pursuant to our charter, our Audit Committee shall review on an on
-going
basis for potential conflicts of interest, and approve if appropriate, all our “Related Party Transactions” as required by of Nasdaq Rule 4350(h). For purposes of the Audit Committee Charter, “Related Party Transactions” shall mean those transactions required to be disclosed pursuant to SEC Regulation S
-K
, Item 404.
The following is a summary of transactions since January
1, 2017 to which we have been a party in which the amount involved exceeded $120,000 and in which any of our executive officers, directors or beneficial holders of more than five percent of our capital stock had or will have a direct or indirect material interest, other than compensation arrangements which are described under the sections of this proxy statement “2018 Director Compensation” and “Executive Compensation.”
2019 Transactions
On March
10, 2019, our Compensation Committee of the board of directors awarded William B. Stilley and Joseph Truluck discretionary cash performance bonuses of $500,000 and $50,000, respectively. In addition, the Compensation Committee granted to each of Mr.
Stilley and Mr.
Truluck an option to purchase 500,000 and 180,000
shares of our common stock, respectively. The shares of common stock underlying the option awards each vest pro rata on a monthly basis over a thirty
-six
month period. The options are exercisable for a period of ten years from the date of grant and have an exercise price of $3.39 per share.
In addition, on March
10, 2019, the Compensation Committee approved an amendment, to our employment agreements with Mr.
Stilley and Mr.
Truluck to increase their annual base salary to $400,000 and $150,000, respectively.
On March
24, 2019, we entered into a three year consulting agreement with Dr. Bankole Johnson (the “Consulting Agreement”). The Consulting Agreement provides that Dr. Johnson will serve as our Chief Medical Officer and devote 75% of his working time to our business and affairs and will receive: (i) an annual fee of $370,000 a year; (ii) a signing bonus of $250,000; and (iii) an option to purchase 250,000
shares of our common stock. The shares of common stock underlying the option award vest pro rata on a monthly basis over a thirty
-six
month period. The options are exercisable for a period of ten years from the date of grant and have an exercise price of $3.01 per share.
On July
5, 2019, we entered into a Master Services Agreement (the “MSA”) and attached related statement of work with Psychological Education Publishing Company (“PEPCO”) to administer a behavioral therapy program during our upcoming Phase 3 clinical trial (the “Trial”) using our lead investigational new drug product, AD04, for the treatment of alcohol use disorder. Specifically, PEPCO is engaged in the business of training and certifying clinical investigators in the administration of Brief Behavioral Compliance Enhancement Treatment (“BBCET”). PEPCO is owned by Dr. Bankole Johnson.
We may terminate the MSA at any time upon ten (10) days prior written notice to PEPCO. Unless otherwise indicated in our notice of termination, Work (as defined in the MSA) under any statement of work in progress at the time of the delivery of notice of termination shall continue as if the applicable statement of work had not been terminated, and the terms hereof shall continue to apply to such work. We may also terminate the MSA for cause due to PEPCO’s failure to perform its obligations thereunder upon three (3) days prior written notice to PEPCO; provided, however, we may terminate the MSA immediately in the event of PEPCO’s violation, or threatened violation, of certain provisions contained therein. The statement of work under the MSA will terminate upon the completion the final study report for the Trial and delivery of the final report by PEPCO on the supervision and monitoring of the BBCET, including, without limitation, data reports. Notwithstanding the forgoing, the statement of work may be terminated by the Company upon written notice to PEPCO.
It is anticipated that the compensation to be paid to PEPCO for services under the MSA will be approximately $300,000, of which subject to approval of the Nasdaq shares of our common stock having a value equal to twenty percent (20%) of the fees due thereunder (the “Company Shares”) will be issued to Dr. Johnson as a consultant under our 2017 Equity Incentive Plan. The Company Shares which are issued will be subject to a six month lock
-up
for a period of six months from their date of issuance.
2018 and 2017 Transactions
Simultaneous with his appointment as a director on July
1, 2017, Tony Goodman purchased 9,434 Class B units at $1.06 per unit for $10,000. The Class B units converted into 1,755
shares of our common stock as a result of the corporate conversion/reorganization.
39
On November
21, 2017, we issued to four of our directors at that time (Messrs. Johnson, Newman, Schuyler and Stilley) and a consultant in consideration of our receipt of an aggregate of $100,000, Subordinated Notes in the principal amount of $115,00 together with a warrant with a cashless exercise feature exercisable to purchase shares of common stock equal to $115,000 divided by the initial offering price of our common stock in this offering or at an exercise price equal to the price of common stock sold in our next financing of $250,000 or more.
On February
22, 2018, we issued to four of our then directors and an officer (Messrs. Schuyler, Newman, Stilley, and Johnson) and entities under their control Senior Notes in the principal amount of $262,000, $140,000, $46,000, and $22,000, respectively, for cash payments of $242,000, $100,000, $21,000 and $17,000, respectively, and the exchange of subordinated secured notes in the aggregate principal amount of $103,500 previously issued. We were obligated to issue to each Senior Note holder upon the consummation of our next financing which was our initial public offering (i) a warrant to purchase a number of units equal to 400% of the principal amount of the holder’s Senior Note divided by the price per unit in the initial public offering and (i.e., the offering price) and (ii) a number of units equal to 400% of the principal amount of the holder’s Senior Note divided by price per unit in the initial public offering (i.e., the offering price). In addition, on February
22, 2018, we concluded an agreement with a director, Mr.
Schuyler, by which he agreed to provide funding to us equal to the difference between $400,000 and the amount of cash funding we received from investors, which amounted to $242,000 (the “Backstop Amount”). For his backstop commitment, we agreed to issue Mr.
Schuyler upon consummation of our next financing which was our initial public offering, (I) warrants to purchase a number of units equal to 150% of the Backstop Amount divided by the price per unit of the initial public offering (i.e., the offering price); and (II) a number of units equal to 50% of the Backstop Amount divided by the price per unit of the initial public offering in addition to the other warrants and units issuable to all holders of the Senior Notes described above.
Medical Translation Services Agreement
On January
29, 2018, we entered a Medical Translation Services Agreement with a firm controlled by Dr. Johnson. Under this agreement, the firm is responsible for translating our allowed patent for validation in 22 countries in Europe that require translation into the native language. In return for these services, we agreed to pay the firm $67,304 in instalments through April 2018 and issue shares of our common stock upon consummation of our initial public offering or any other the sale by us of our equity securities resulting in gross proceeds of $2,000,000 or more, with the stock to be issued valued at $201,911 based on the price per share of the common stock in such offering. During 2018, we paid the firm controlled by Dr. Johnson a total of $68,540 and upon consummation of our initial public offering, we issued such firm 40,463
shares of our common stock in full payment of all amounts owed under this agreement.
CEO Legal Payment
On January
29, 2018, the CEO made a payment of $21,000 to Kilburn & Strode, a patent firm, on our behalf for expenses relating to validation of Adial patents, and for which he submitted an expense report. On March
1, 2018 the expense report payable was converted to the principal balance of a Senior Note.
Grant Incentive Plan
On April
1, 2018, the board of directors approved and then revised, respectively, a Grant Incentive Plan to provide incentive for Bankole A. Johnson (the “Plan Participant”), to secure grant funding for us. Under the Grant Incentive Plan, we will make a cash payment to the Plan Participant each year based on the grant funding received by us in the preceding year in an amount equal to 10% of the first $1
million of grant funding received and 5% of grant funding received in the preceding year above $1
million. Amounts to be paid to the Plan Participants will be paid to each as follows: 50% in cash and 50% in stock. As of December
31, 2018, no grant funding that would result in a payment to the Plan Participant had been obtained.
Retirement of Performance Bonus Plan and Compensatory Stock Grants
On April
1, 2018, we granted 197,673, 50,000, and 44,636
shares of restricted common stock to Mr.
Stilley, Dr. Johnson, and Mr.
Truluck, respectively, in lieu of cash payments that were to be made to each executive officer under our performance bonus plan that we recently terminated. These shares of common stock are restricted from sale until March
31, 2021.
Participation in Initial Public Offering
As described below, William B. Stilley, III, our Chief Executive Officer, President, and one of our directors at that time, Bankole Johnson, who at that time served as the Chairman of our board of directors, Kevin Schuyler, one
40
of our directors, James W. Newman, Jr., one of our directors, and Keller Enterprises, an investment firm of which Robertson H. Gilliland, one of our directors, is a principal, participated in our initial public offering.
Upon consummation of our initial public offering, (i) Mr.
Truluck was issued 5,927
shares of common stock and a warrant to purchase 5,927
shares of common stock at an exercise price of $6.25 upon conversion of a convertible note he held in the principal amount of $1,980 that converted at a conversion price of $0.44 per share; (ii) Mr.
Stilley was issued (x) 52,227
shares of common stock and a warrant to purchase 52,227
shares of common stock at an exercise price of $6.25 upon conversion of a convertible note he held in the principal amount of $17,499 that converted at a conversion price of $0.44 per share; (y) 80,000
shares of common stock and warrants to purchase 80,000
shares of common stock at an exercise price of $6.25 per share that were included in the units he acquired in the initial public offering; (z) 36,800
shares of common stock, warrants to purchase 36,800
shares of common stock at an exercise price of $6.25 per share and warrants to purchase 36,800 Warrant Units in accordance with the terms of a Securities Purchase Agreement he entered into with us on February
22, 2018; (iii) Mr.
Schuyler was issued (x) 82,461
shares of common stock and a warrant to purchase 82,461
shares of common stock at an exercise price of $6.25 upon conversion of a convertible note he held in the principal amount of $27,550 that converted at a conversion price of $0.44 per share; (y) 90,000
shares of common stock and warrants to purchase 90,000
shares of common stock at an exercise price of $6.25 per share that were included in the units he acquired in the initial public offering; and (z) 89,600
shares of common stock, warrants to purchase 89,600
shares of common stock at an exercise price of $6.25 per share and warrants to purchase 89,600 Warrant Units in accordance with the terms of a Securities Purchase Agreement he entered into with us on February
22, 2018; and MVA 151 Investors LLC, an affiliated entity, was issued 144,200
shares of common stock, warrants to purchase 144,200
shares of common stock at an exercise price of $6.25 per share and warrants to purchase 192,600 Warrant Units in accordance with the terms of a Securities Purchase Agreement it entered into with us on February
22, 2018; (iv) Mr.
Newman was issued (x) 29,931
shares of common stock and a warrant to purchase 29,931
shares of common stock at an exercise price of $6.25 upon conversion of a convertible note he held in the principal amount of $10,000 that converted at a conversion price of $0.44 per share; (y) Virga Ventures, LLC, an affiliated entity was issued 21,715
shares of common stock and a warrant to purchase 21,715
shares of common stock at an exercise price of $6.25 upon conversion of a convertible note it held in the principal amount of $7,255.02 that converted at a conversion price of $0.44 per share; (z) Ivy Cottage Group, LLC, an affiliated entity was issued 5,178
shares of common stock and a warrant to purchase 5,178
shares of common stock at an exercise price of $6.25 upon conversion of a convertible note it held in the principal amount of $1,729.95 that converted at a conversion price of $0.44 per share (aa) Virga Ventures, LLC was issued 92,000
shares of common stock, warrants to purchase 92,000
shares of common stock at an exercise price of $6.25 per share and warrants to purchase 92,000 Warrant Units in accordance with the terms of a Securities Purchase Agreement it entered into with us on February 22, 2018; (bb) Ivy Cottage Group LLC was issued 20,000
shares of common stock and warrants to purchase 20,000
shares of common stock at an exercise price of $6.25 per share that were included in the units it was issued in accordance with the terms of a Securities Purchase Agreement it entered into with us on February
22, 2018; (cc) Mr.
Newman was issued 10,000
shares of common stock and warrants to purchase 10,000
shares of common stock at an exercise price of $6.25 per share that were included in the units he acquired in the initial public offering; and (dd) A Roth IRA for the benefit of Mr.
Newman was issued 10,000
shares of common stock and warrants to purchase 10,000
shares of common stock at an exercise price of $6.25 per share that were included in the units it acquired in the initial public offering; (v) Dr. Johnson was issued (x)153,114
shares of common stock and a warrant to purchase 153,114
shares of common stock at an exercise price of $6.25 upon conversion of a convertible note he held in the principal amount of $52,000 that converted at a conversion price of $0.44 per share; (y) 17,600
shares of common stock, warrants to purchase 17,600
shares of common stock at an exercise price of $6.25 per share and warrants to purchase 17,600 Warrant Units in accordance with the terms of a Securities Purchase Agreement he entered into with us on February
22, 2018; (z) 1,400
shares of common stock and warrants to purchase 1,400
shares of common stock at an exercise price of $6.25 per share that were included in the units he acquired in the initial public offering; (aa) Medico
-Trans
Company, LLC was issued 40,382
shares of common stock for services performed; (vi) Mr.
Goodman was issued 7,000
shares of common stock and warrants to purchase 7,000
shares of common stock at an exercise price of $6.25 per share that were included in the units it acquired in the initial public offering and (vi) Keller Enterprises LLC, and affiliate of Mr.
Gilliland, was issued (x) 29,931
shares of common stock and a warrant to purchase 29,931
shares of common stock at an exercise price of $6.25 upon conversion of a convertible note he held in the principal amount of $10,000 that converted at a conversion price of $0.44 per share and (y) 14,000
shares of common stock and warrants to purchase 14,000
shares of common stock at an exercise price of $6.25 per share that were included in the units it acquired in the initial public offering.
Unit Warrant Exchanges
In an effort to simplify our capitalization table, on November
12, 2018, we entered into an exchange agreement with the holders of an aggregate of 480,600 Unit Warrants (each Unit Warrant exercisable at $5.00 per a unit consisting
41
of a share of common stock and a warrant to purchase a share of common stock at $6.25 per share of common stock) to exchange the 480,600 Unit Warrants for warrants to purchase 480,600
shares of common stock at an exercise price of $5.00 per share and warrants to purchase an aggregate of 480,600
shares of common stock at an exercise price of $6.25 per share. The Unit Warrants were ultimately exercisable for an aggregate of 961,200
shares of common stock at a weighted average exercise price of $5.63; the warrants issued in exchange for the Unit warrants are exercisable for an aggregate of 961,200
shares of common stock at weighted average exercise price of $5.63. As a result of the exchange agreement, the 480,600 Unit Warrants were cancelled. This exchange had no effect on the calculation of our fully diluted shares. Mr.
Schuyler owned 120,000 Unit Warrants, which were exchanged for 120,000 warrants for the purchase of common stock at an exercise price of $5.00 and 120,000 warrants for the purchase of common stock at an exercise price of $6.25. MVA 151 Investors, LLC, an entity affiliated with Mr.
Schuyler, owned 162,200 Unit Warrants, which were exchanged for 162,200 warrants for the purchase of common stock at an exercise price of $5.00 and 162,200 warrants for the purchase of common stock at an exercise price of $6.25. Ivy Cottage Group, LLC, an entity affiliated with Mr.
Newman, owned 20,000 Unit Warrants, which were exchanged for 20,000 warrants for the purchase of common stock at an exercise price of $5.00 and 20,000 warrants for the purchase of common stock at an exercise price of $6.25. Virga Ventures, LLC, another entity affiliated with Mr.
Newman, owned 92,000 Unit Warrants, which were exchanged for 92,000 warrants for the purchase of common stock at an exercise price of $5.00 and 92,000 warrants for the purchase of common stock at an exercise price of $6.25. Mr.
Stilley who owned 36,800 Unit warrants, which were exchanged for 36,800 warrants for the purchase of common stock at an exercise price of $5.00 and 36,800 warrants for the purchase of common stock at an exercise price of $6.25. Dr. Johnson owned 17,600 Unit Warrants, which were exchanged for 17,600 warrants for the purchase of common stock at an exercise price of $5.00 and 17,600 warrants for the purchase of common stock at an exercise price of $6.25.
OTHER MATTERS
As of the date of this proxy statement, the board of directors of Adial knows of no other matters to be presented for stockholder action at the 2019 Annual Meeting. However, other matters may properly come before the 2019 Annual Meeting or any adjournment or postponement thereof. If any other matter is properly brought before the 2019 Annual Meeting for action by the stockholders, proxies in the enclosed form returned to Adial will be voted in accordance with the recommendation of the board of directors.
ANNUAL REPORT/FORM 10-K
Adial’s Annual Report on Form 10
-K
for the year ended December
31, 2018 is being mailed to certain stockholders concurrently with this proxy statement. Copies of the Company’s Annual Report on Form 10
-K
as filed with the SEC and any amendments thereto may be obtained without charge by writing to Adial Pharmaceuticals, Inc., 1001 Research Park Blvd., Suite 100, Charlottesville, Virginia 22911, Attention: Corporate Secretary. A complimentary copy may also be obtained at the internet website maintained by the SEC at
www.sec.gov
, and by visiting our internet website at
www.adialpharma.com
.
NOTICE REGARDING DELIVERY OF STOCKHOLDER DOCUMENTS
(“HOUSEHOLDING” INFORMATION)
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for Proxy Statements and annual reports by delivering a single copy of these materials to an address shared by two or more Adial stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies and intermediaries. A number of brokers and other intermediaries with account holders who are our stockholders may be householding our stockholder materials, including this proxy statement. In that event, a single Proxy Statement, as the case may be, will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or other intermediary that it will be householding communications to your address, householding will continue until you are notified otherwise or until you revoke your consent, which is deemed to be given unless you inform the broker or other intermediary otherwise when you receive or received the original notice of householding. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate Proxy Statement, please notify your broker or other intermediary to discontinue householding and direct your written request to receive a separate Proxy Statement to us at: Adial Pharmaceuticals, Inc., Attention: Corporate Secretary, 1001 Research Park Blvd., Suite 100, Charlottesville, Virginia 22911 or by calling us at (434) 422
-9800
. Stockholders who currently receive multiple copies of the Proxy Statement at their address and would like to request householding of their communications should contact their broker or other intermediary.
42
STOCKHOLDER PROPOSALS FOR THE 2020 ANNUAL MEETING
Stockholders who intend to present proposals at the 2020 Annual Meeting of Stockholders under SEC Rule 14a
-8
must ensure that such proposals are received by the Corporate Secretary of the Company not later than March
10, 2020. Such proposals must meet the requirements of the SEC to be eligible for inclusion in the Company’s 2020 proxy materials.
The Company’s Bylaws provide that the nomination of persons for election to the board of directors and the proposal of business to be considered by stockholders may be made at the annual meeting as set out in the Company’s notice of such meeting, by or at the direction of the board of directors or by any stockholder of the Company who is entitled to vote at the meeting on such nomination or other proposal, and who, in the case of a holder of common stock, complies with certain notice procedures. Any holder of common stock proposing to nominate an individual for election to the board of directors or proposing business to be considered by the Company’s stockholders at an annual meeting must give written notice and certain information to the Corporate Secretary of the Company generally not less than 90 days nor more than 120 days before the first anniversary of the preceding year’s annual meeting (however, if we hold the 2020 Annual Meeting of Stockholders on a date that is not within 30 days before or 70 days after such anniversary date, we must receive the notice no earlier than 120 days prior to such annual meeting and no later than 90 days prior to such annual meeting or 10 days after the day on which public announcement of the date of such meeting is first made by us we announce it publicly). As a result, stockholders who intend to present proposals at the 2020 Annual Meeting of Stockholders under these provisions must give written notice to the Corporate Secretary, and otherwise comply with the Bylaw requirements, no earlier than the close of business on April
17, 2020, and no later than the close of business on May
18, 2020.
All proposals should be addressed to the Corporate Secretary, Adial Pharmaceuticals, Inc., 1001 Research Park Blvd., Suite 100, Charlottesville, Virginia 22911.
|
|
By order of the board of directors,
|
|
|
/s/ William B. Stilley
|
|
|
William B. Stilley
|
|
|
Chief Executive Officer and President and Director
|
Charlottesville, Virginia
July
8, 2019
43
APPENDIX A
AMENDMENT NO. 1 TO THE
ADIAL PHARMACEUTICALS, INC.
2017 Equity Incentive Plan
This amendment (the “
Amendment
”) to the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan (the “
Plan
”), is hereby adopted this 19
th
day of June, 2019, by the board of directors (the “
Board
”) of Adial Pharmaceuticals, Inc. (the “
Company
”). All capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings set forth in the Plan.
WITNESSETH:
WHEREAS
, the Company adopted the Plan for the purposes set forth therein; and
WHEREAS
, pursuant to Section 15 of the Plan, the board of directors has the right to amend the Plan with respect to certain matters, provided that any material increase in the number of Shares available under the Plan shall be subject to stockholder approval; and
WHEREAS
, the board of directors has approved and authorized this Amendment to the Plan and has recommended that the stockholders of the Company approve this Amendment;
NOW, THEREFORE, BE IT RESOLVED
, that the Plan is hereby amended, subject to and effective as of the date of stockholder approval hereof, in the following particulars:
2. Section 4(a) of the Plan is hereby amended by increasing the share references in such section from 1,750,000 to 3,500,000, so that Section 4(a) reads in its entirety as follows:
“(a)
Shares Available for Awards
. The maximum aggregate number of shares of Company Stock reserved for issuance under the Plan (all of which may be granted as Incentive Stock Options) shall be Three Million Five Hundred Thousand (3,500,000) shares. Shares reserved under the Plan may be authorized but unissued Company Stock or authorized and issued Company Stock held in the Company’s treasury. The Compensation Committee may direct that any stock certificate evidencing shares issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares pursuant to the Plan.”
2. Except as specifically set forth herein, the terms of the Plan shall be and remain unchanged, and the Plan as amended shall remain in full force and effect.
The foregoing is hereby acknowledged as being the Amendment to the Adial Pharmaceuticals, Inc. 2017 Equity Incentive Plan, as adopted by the board of directors on June
19, 2019, and approved by the Company’s stockholders on August
16, 2019.
|
|
ADIAL PHARMACEUTICALS, INC.
|
|
|
By:
|
|
/s/ William B. Stilley
|
|
|
Name:
|
|
William B. Stilley
|
|
|
Title:
|
|
Chairman, President and Chief Executive Officer
|
A-1