ITEM 10. Directors, Executive Officers and Corporate Governance
Directors
The following table sets forth certain information about the current directors of our Company. Directors are elected to hold office until the next annual meeting of stockholders and until their successors are elected and qualified.
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Nominee’s or
Director’s Name
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Year First
Became
Director
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Position with the Company
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Jonathan Will McGuire
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2015
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President, Chief Executive Officer and Director
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William J. Link
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2003
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Independent Director
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Aaron Mendelsohn
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1998
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Independent Director
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Gregg Williams
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2009
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Independent Director, Non-Executive Chairman
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Matthew Pfeffer1
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2015
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Independent Director
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The following biographical descriptions set forth certain information with respect to the directors of our Board, based on information furnished to us by each director.
Jonathan Will McGuire, 57, Chief Executive Officer, President and Director
Biographical information for Mr. McGuire is set forth under “Executive Officers”. Our board believes that Mr. McGuire’s executive and managerial experience together with his leadership skills make him well qualified to continue serving as one of our directors.
William J. Link, Ph.D, 73, Director and Chairman of the Compensation Committee
Dr. Link is Founder and Managing Partner of Flying L Partners and a Founder and Managing Director of Versant Ventures. Dr. Link specializes early-stage investing in medical devices. Prior to co-founding Versant Ventures, Dr. Link was a general partner at Brentwood Venture Capital, and has over two decades of operations experience in the healthcare industry. Dr. Link was previously Founder, Chairman, and CEO of Chiron Vision, which was sold to Bausch and Lomb in 1997. Prior to Chiron Vision, Dr. Link founded and served as President of American Medical Optics (AMO), a division of American Hospital Supply Corporation, which was sold to Allergan in 1986. Later, he served on the Board of AMO’s successor company, Advanced Medical Optics (AMO) which was acquired by Abbott in 2009 and then by Johnson and Johnson in 2016. Before entering the healthcare industry, he was an Assistant Professor in the Department of Surgery at the Indiana University School of Medicine. Dr. Link currently serves on the board of several private companies and three public companies, Edwards Lifesciences, Glaukos, and Second Sight Medical Products. He received his B.S., M.S., and Ph.D. from Purdue University.
Aaron Mendelsohn, 67, Director
Mr. Mendelsohn is a founder and has served as a director of Second Sight since inception. Mr. Mendelsohn served on the board of Advanced Bionics since shortly after its founding in 1993 until its sale in 2004 to Boston Scientific Corp. Mr. Mendelsohn was also a founder and director of Medical Research Group from its inception in 1998 until its sale in 2001 to Medtronic, Inc. Mr. Mendelsohn previously served on the board of directors for the Alfred E. Mann Institute for Biomedical Engineering at the University of Southern California since its inception in 1998 until mid-2016. Mr. Mendelsohn is a founder and, since 2007, a director of Nanoprecision Holding Company, Inc., a company engaged in manipulating materials at nanometer scale. He is also a founder and director of Nanoprecision Medical, Inc., a drug delivery company working in nanotechnology, since its inception in 2011. Mr. Mendelsohn is a founder and serves as Chairman of the Maestro Foundation since it was organized in 1983. The
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Mr. Pfeffer was appointed acting Chief Executive Officer of the Company effective March 27, 2020, immediately following Mr. McGuire’s resignation as chief executive officer effective March 27, 2020 and since this appointment Mr. Pfeffer is no longer an independent director.
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Maestro Foundation is a leading non-profit musical philanthropic organization which hosts a premier chamber music series and lends professional-level instruments and bows to young, career-bound classical musicians. Mr. Mendelsohn received his B.A. from UCLA and J.D. from Loyola University School of Law Los Angeles. Our Board believes that Mr. Mendelsohn’s business experience, including his experience as a founder, board member and executive officer of medical device companies, combined with his financial experience, business acumen and judgment provide our Board with valuable managerial and operational expertise and leadership skills making him well qualified to continue serving as one of our directors.
Gregg Williams, 60, Chairman of the Board of Directors
Mr. Williams has served as a member of our Board since June 2009 and was appointed Chairman of our board in March 2018. Mr. Williams is the Chairman, President, and Chief Executive Officer at Williams International (www.williams-int.com), a leading developer and manufacturer of gas turbine engines and one of the largest privately owned companies in the aviation industry, positions he has held since July 1999. Previously, Mr. Williams held several key managerial positions within Williams International including serving as its President and Chief Operating Officer, Vice President, Advanced Technology, Director, Program Management and Director, Engineering. In addition, Mr. Williams is Chairman and majority owner of Ramos Arizpe Manufacturing (www.ram-mx.com) a high volume automotive engine parts manufacturing company located in Mexico. Mr. Williams also is a member of the board of directors of Nanoprecision Medical, Inc. (www.nanoprecisionmedical.com), a drug delivery company working in nanotechnology. Mr. Williams received a Bachelor of Science in Mechanical Engineering from the University of Utah and holds numerous patents related to gas turbine engines, turbo machinery, rocket engines and control systems. He is a board member of General Aviation Manufacturers Association and former member of the Henry Ford Hospital Board of Trustees. Our Board believes that Mr. William’s executive and managerial experience together with his leadership skills make him well qualified to continue serving as one of our directors.
Matthew Pfeffer, 62, Director and Chairman of Audit Committee
Mr. Pfeffer served as a member of the board of directors of MannKind Corporation from January 2016 through October 2017, and served as a special adviser to the company from November 2017 through February 2019. He served as Chief Executive Officer and Chief Financial Officer of MannKind from January 2016 through May 2017, and as Corporate Vice President and Chief Financial Officer of MannKind from April 2008 until January 2016. Previously, Mr. Pfeffer served as Chief Financial Officer and Senior Vice President of Finance and Administration of VaxGen, Inc. from March 2006 until April 2008, with responsibility for finance, tax, treasury, human resources, information technology, purchasing and facilities functions. Prior to VaxGen, Mr. Pfeffer served as Chief Financial Officer of Cell Genesys, Inc. During his nine-year tenure at Cell Genesys, Mr. Pfeffer served as Director of Finance before being named Chief Financial Officer in 1998. Prior to that, Mr. Pfeffer served in a variety of financial management positions at other companies, including roles as Corporate Controller, Manager of Internal Audit and Manager of Financial Reporting. Mr. Pfeffer began his career at Price Waterhouse. Mr. Pfeffer graduated from the University of California, Berkeley and is a Certified Public Accountant. Our Board believes that Mr. Pfeffer’s executive and managerial experience together with his leadership skills make him well qualified to continue serving as one of our directors.
Executive Officers
The following table sets forth certain information regarding our executive officers:
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Name of Individual
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Age
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Position and Office
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Jonathan Will McGuire2
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57
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President, Chief Executive Officer, Director
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John T. Blake
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43
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Chief Financial Officer
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Patrick Ryan3
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59
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Chief Operating Officer
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2
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Mr. McGuire resigned as President and Chief Executive Officer of the Company effective March 27, 2020
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3
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Mr. Ryan was separated from the Company effective April 17, 2020.
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Our executive officers are elected by, and serve at the discretion of, our Board. The business experience for the past five years, and in some instances, for prior years, of each of our executive officers is as follows:
Jonathan Will McGuire
Mr. McGuire, 57, has served as our President and Chief Executive Officer since August 2015. Prior to that, Mr. McGuire served at Volcano Corporation, where he was President of Americas Commercial since 2014 and prior to that, Senior Vice President and General Manager of Coronary Imaging, Systems and Program Management since 2013. Volcano, a global leader in intravascular imaging for coronary and peripheral applications and physiology, was acquired by Royal Philips in February 2015. Prior to joining Volcano, Mr. McGuire served as Vice President and General Manager of Patient Monitoring at Covidien. He previously served as President and Chief Executive Officer of AtheroMed, Inc., a venture capital-backed peripheral atherectomy company, prior to which he was Chief Operating Officer at Spectranetics Corporation, a publicly-traded medical device company. In addition, Mr. McGuire held various positions at Guidant Corporation from 1998 to 2005 including General Manager of Guidant Latin America; Director of U.S. Marketing for Vascular Intervention (VI); Director of Global Marketing for VI; and, Production Manager for Coronary Stents. Prior to 1998, Mr. McGuire held positions in Finance and Production at IVAC Medical Systems. A graduate of the Georgia Institute of Technology, Mr. McGuire received his M.B.A. from the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill.
John T. Blake
Mr. Blake, 43, has served as our Chief Financial Officer since March 2018. Prior to that Mr. Blake served as Senior Vice President, Finance from February 2017 to March 2018, Vice President, Finance from October 2015 to February 2017 and Senior Director Finance and Controller from March 2015 to October 2015 at aTyr Pharma, a publicly-traded biotechnology company. Mr. Blake served as the Director, Financial Planning and Analysis of Volcano Corporation, a publicly-traded medical device company, from March 2010 to March 2015 and as the SEC Reporting Manager from November 2008 to March 2010. Mr. Blake is a Certified Public Accountant and holds a Master of Business Administration from the Marshall School of Business at the University of Southern California. In addition, Mr. Blake has completed leadership executive education at Harvard Business School and the Strategic Financial Leadership Program at Stanford Graduate School of Business.
Patrick Ryan
Mr. Ryan, 59, has served as our Chief Operating Officer since August 2018. Prior to that Mr. Ryan served as Chief Operations Officer at Synaptive Medical from January 2016 to March 2018, Chief Operating Officer at Lucerno Dynamics from July 2015 to December 2015 and Insulet Corporation from January 2014 to July 2015. He also served as Chief Operating Officer and President, International, at Alphatec Spine from May 2011 to January 2014. Earlier in Mr. Ryan’s career, he held multiple leadership positions at Guidant and Abbott Vascular, including Divisional Vice President of Worldwide Operations at Abbott Vascular as well as Vice President & Managing Director for Guidant’s manufacturing facility in Ireland. Following his graduation from the United States Naval Academy with a Bachelor of Science degree in Economics, Mr. Ryan served as an officer in the U.S. Navy. He then received a Master of Science degree in Petroleum Management from the University of Kansas.
There are no family relationships among any of our directors and executive officers.
Corporate Governance
The Board of Directors and Its Committees
Our business, property and affairs are managed by, or under the direction of, our Board, in accordance with the California Corporations Code and our Bylaws. Members of the Board are kept informed of our business through discussions with the Chief Executive Officer and other key members of management, by reviewing materials provided to them by management, and by participating in regular and special meetings of the Board and its Committees.
Shareholders may communicate with the members of the Board, either individually or collectively, or with any independent directors as a group by writing to the Board at 12744 San Fernando Road, Suite 400, Sylmar, California 91342. These communications will be reviewed by the office of the Corporate Secretary who, depending
7
on the subject matter, will (a) forward the communication to the director or directors to whom it is addressed or who is responsible for the topic matter, (b) attempt to address the inquiry directly (for example, where it is a request for publicly available information or a stock related matter that does not require the attention of a director), or (c) not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic. At each meeting of the Nominating and Governance Committee, the Corporate Secretary presents a summary of communications received and will make those communications available to any director upon request.
Independence of Directors
In determining the independence of our directors, we apply the definition of “independent director” provided under the listing rules of The NASDAQ Stock Market LLC (“NASDAQ”). After considering all relevant facts and circumstances, the Board affirmatively determined that all of the directors currently serving on the Board with the exception of Will McGuire, who was employed as our Chief Executive Officer and President until March 27, 2020 and Matthew Pfeffer who was appointed as our acting Chief Executive Officer effective March 27, 2020, are independent directors under NASDAQ’s rules.
Board Meetings and Committees of our Board
The Board has three standing committees each of which has the composition described below and responsibilities that satisfy the independence standards of the Securities Exchange Act of 1934 and NASDAQ’s rules: the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee. Mr. Matthew Pfeffer is Chairman of the Audit Committee, Dr. William Link is Chairman of the Compensation Committee, and of the Nominating and Governance Committee. During the year ended December 31, 2019, the Board held seven meetings, the Audit Committee held four meetings, the Compensation Committee held two meetings, and the Nominating and Governance Committee held one meeting. Each of our directors attended 100% of the combined Board meetings and meetings of the Board committee(s) of which he is a member with exception of Mr. Link who was absent at one of the meetings of the Board and Mr. Mendelsohn who was absent at one of the meetings of the Audit Committee of the Board. We do not have a policy with regard to Board attendance at the Annual Meeting.
Audit Committee
The Audit Committee consists of Matthew Pfeffer, William Link, and Aaron Mendelsohn, three non-employee directors, all of whom are “independent” as defined under section 5605(a)(2) of the NASDAQ Listing Rules. Mr. Pfeffer is the chair of the Audit Committee. In addition, the Board has determined that Mr. Pfeffer qualifies as an “audit committee financial expert” as defined in the rules of the Securities and Exchange Commission (SEC). The Audit Committee met four times during 2019 with all members in attendance at the meetings, except for Mr. Mendelsohn who was not in attendance at one of the meetings. The role of the Audit Committee is to:
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•
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oversee management’s preparation of our financial statements and management’s conduct of the accounting and financial reporting processes;
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•
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oversee management’s maintenance of internal controls and procedures for financial reporting;
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•
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oversee our compliance with applicable legal and regulatory requirements, including without limitation, those requirements relating to financial controls and reporting;
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•
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oversee the independent auditor’s qualifications and independence;
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•
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oversee the performance of the independent auditors, including the annual independent audit of our financial statements;
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•
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prepare the report required by the rules of the SEC to be included in our Proxy Statement; and
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•
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discharge such duties and responsibilities as may be required of the Committee by the provisions of applicable law, rule or regulation.
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A copy of the charter of the Audit Committee is available on our website at www.secondsight.com (under “Investors – Corporate Governance”).
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Compensation Committee
The Compensation Committee consists of William Link, Gregg Williams and Matthew Pfeffer, three non-employee directors, each of whom we deem to be “independent” as defined in section 5605(a)(2) of the NASDAQ Listing Rules. The Compensation Committee met two times during 2019 with all members in attendance at the meetings. The role of the Compensation Committee is to:
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•
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develop and recommend to the Board the annual compensation (base salary, bonus, equity compensation and other benefits) for our President/Chief Executive Officer;
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•
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review, approve and recommend to the Board the annual compensation (base salary, bonus, equity compensation and other benefits) for all of our executives;
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•
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review, approve and recommend to the Board the aggregate number of equity awards to be granted to employees below the executive level;
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•
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ensure that a significant portion of executive compensation is reasonably related to the long-term interest of our shareholders; and
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•
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prepare certain portions of our annual Proxy Statement, including an annual report on executive compensation.
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A copy of the charter of the Compensation Committee is available on our website at www.secondsight.com (under “Investors – Corporate Governance”).
The Compensation Committee may form and delegate a subcommittee consisting of one or more members to perform the functions of the Compensation Committee. The Compensation Committee may engage outside advisers, including outside auditors, attorneys and consultants, as it deems necessary to discharge its responsibilities. The Compensation Committee has sole authority to retain and terminate any compensation expert or consultant to be used to provide advice on compensation levels or assist in the evaluation of director, President/Chief Executive Officer or senior executive compensation, including sole authority to approve the fees of any expert or consultant and other retention terms. In addition, the Compensation Committee considers, but is not bound by, the recommendations of our Chief Executive Officer with respect to the compensation packages of our other executive officers.
Nominating and Governance Committee
The Nominating and Governance Committee consists of William Link and Gregg Williams, two non-employee directors, each of whom we deemed to be “independent” as defined in section 5605(a)(2) of the NASDAQ Listing Rules. The Nominating and Governance Committee met once during 2019 with all members in attendance at the meetings. The role of the Nominating and Governance Committee is to:
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•
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evaluate from time to time the appropriate size (number of members) of the Board and recommend any increase or decrease;
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•
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determine the desired skills and attributes of members of the Board, taking into account the needs of the business and listing standards;
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•
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establish criteria for prospective members, conduct candidate searches, interview prospective candidates, and oversee programs to introduce the candidate to us, our management, and operations;
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•
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review planning for succession to the position of Chairman of the Board and Chief Executive Officer and other senior management positions;
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•
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annually recommend to the Board persons to be nominated for election as directors;
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•
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recommend to the Board the members of all standing Committees;
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•
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adopt or develop for Board consideration corporate governance principles and policies; and
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•
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periodically review and report to the Board on the effectiveness of corporate governance procedures and the Board as a governing body.
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A copy of the charter of the Nominating and Governance Committee is available on our website www.secondsight.com (under “Investors – Corporate Governance”).
Policy with Regard to Security Holder Recommendations
The Nominating and Governance Committee does not presently have a policy with regard to consideration of any director candidates recommended by security holders. No security holder (other than members of the Nominating and Governance Committee) has recommended a candidate to date.
Director Qualifications and Diversity
The Board seeks independent directors who represent a diversity of backgrounds and experiences that will enhance the quality of the Board’s deliberations and decisions who each will represent the best interests of the Company and its shareholders. Candidates should have substantial experience with one or more publicly traded companies or should have achieved a high level of distinction in their chosen fields. The Board is particularly interested in maintaining a mix that includes individuals who are active or retired executive officers and senior executives, particularly those with experience in medical devices, biotechnology, intellectual property, early stage technology companies, research and development, strategic planning, business development, compensation, finance, accounting or banking.
Our Board believes that the directors nominated collectively have the experience and skills effectively to oversee the management of the Company, including a high level of personal and professional integrity, an ability to exercise sound business judgement on a broad range of issues, sufficient experience and background to have an appreciation of the issues facing the Company, and a willingness to devote the necessary time to Board duties.
Compensation Committee Interlocks and Insider Participation
During 2019, Messrs. William Link, Gregg Williams and Matthew Pfeffer served on the Compensation Committee. None of these individuals had ever been an officer or employee of ours. In addition, none of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board or the Compensation Committee.
Code of Conduct
We adopted a Code of Business Conduct and Ethics (“Code of Ethics”) applicable to our principal executive officer and principal financial and accounting officer and any persons performing similar functions. In addition, the Code of Ethics applies to our employees, officers, directors, agents and representatives. The Code of Ethics requires, among other things, that our employees avoid conflicts of interest, comply with all laws and other legal requirements, conduct business in an honest and ethical manner, and otherwise act with integrity and in our best interest. The Code of Ethics is available on our website at www.secondsight.com (under “Investors – Code of Business Conduct and Ethics”).
Risk Oversight
Enterprise risks are identified and prioritized by management and each prioritized risk is assigned to a Board committee or the full Board for oversight as follows:
Full Board — Risks and exposures associated with strategic, financial and execution risks and other current matters that may present material risk to our operations, plans, prospects or reputation.
Audit Committee — Risks and exposures associated with financial matters, particularly financial reporting, tax, accounting, disclosure, internal control over financial reporting, financial policies, investment guidelines and credit and liquidity matters.
10
Nominating and Governance Committee — Risks and exposures relating to corporate governance and management and director succession planning.
Compensation Committee — Risks and exposures associated with leadership assessment and compensation programs and arrangements, including incentive plans.
Board Leadership Structure
The Chairman of the Board presides at all meetings of the Board.
Review, Approval or Ratification of Transactions with Related Persons
The Nominating and Governance Committee reviews issues involving potential conflicts of interest, other than Related Party transactions, which are reviewed by the Audit Committee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who beneficially own more than 10% of our common stock, to file with the SEC reports about their ownership of common stock and other equity securities of the Company. Such directors, officers and 10% shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of the reports provided to us and on representations received from our directors and executive officers, we believe that all of our executive officers, directors and persons who beneficially own more than 10% of our common stock complied with all Section 16(a) filing requirements applicable to them with respect to transactions during fiscal year 2019.
ITEM 11. Executive Compensation
Summary Compensation Table
The following table provides information regarding the compensation of our named executive officers, or “NEOs” during 2019. As a smaller reporting company we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure requirements.
The amounts represented in the “Option Awards” column reflect the aggregate grant date fair value of stock awards and option awards granted, calculated in accordance with ASC Topic 718, disregarding the estimate for forfeitures. The assumptions we used for calculating the grant date fair values are set forth in Note 9 of Notes to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and does not necessarily equate to the income that will ultimately be realized by the NEOs for such awards.
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Salary
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Bonus
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Option
Awards
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Other
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Total
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Name and Principal Position
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Year
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($)
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($)
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($)
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($)
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($)
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(1)
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(2)
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(3)
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(4)
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Will McGuire
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2019
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460,198
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193,361
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170,508
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115,631
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939,698
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Chief Executive Officer (5)
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2018
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413,907
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183,913
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576,000
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51,285
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1,225,105
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John T. Blake
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2019
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307,754
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88,610
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78,511
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5,794
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480,669
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Chief Financial Officer(6)
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2018
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219,439
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66,049
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615,000
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82,838
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983,326
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Patrick Ryan
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2019
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312,952
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90,400
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110,300
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5,794
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519,446
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Chief Operating Officer (7)
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2018
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90,417
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29,494
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530,000
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83,497
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733,408
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1.
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2019 includes retroactive salary increase of $8,411 for Mr. McGuire, $2,029 for Mr. Blake and $385 for Mr. Ryan. 2018 includes retroactive salary increase of $6,117 for Mr. McGuire and $1,170 for Mr. Blake which was not paid until 2019.
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2.
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Represents the amounts earned and payable as cash bonuses for the indicated year.
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3.
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Represents the aggregate grant date fair value of stock option awards granted during the years shown as measured pursuant to ASC Topic 718 as stock-based compensation in our consolidated financial statements. This calculation does not give effect to any estimate of forfeitures related to service-based vesting but assumes that the executive will perform the requisite service for the award to vest in full. The assumptions we used in valuing equity awards are described in Note 9 to our audited consolidated financial statements included in our Annual Report on Form 10-K, for the fiscal year ended December 31, 2019.
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4.
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Includes contributions to the officer’s retirement plan, and payments for supplemental life and health insurance plans. In addition, in 2019, Mr. McGuire received a commuting and corporate housing allowance of $88,927 and $22,850 of related tax gross up for this allowance, respectively.
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5.
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Effective August 18, 2015 Will McGuire joined the Company as Director, President and Chief Executive Officer.
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6.
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Mr. Blake became the Company’s Chief Financial Officer in March 2018.
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7.
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Mr. Ryan became the Company’s Chief Operating Officer in September 2018.
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Narrative Disclosure to Summary Compensation Table
Employment Agreements
We entered into an at-will Executive Employment Agreement as of June 19, 2015 with Will McGuire, our Chief Executive Officer.
A copy of our agreement with Will McGuire is attached as an exhibit to our Form 8-K filed with the SEC on June 25, 2015. Salary increases, bonuses and other compensatory items relating to employment are subject to periodic review and approval by our Compensation Committee. See Summary Compensation Table above.
We entered into an at-will Executive Employment Agreement as of March 21, 2018 with John T. Blake, our Chief Financial Officer, by which principally we agreed to:
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pay him an annual starting salary of $300,000,
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•
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grant him upon Board approval an option under our equity incentive plan to purchase 500,000 shares of our common stock,
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•
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make him eligible for annual bonuses at Board discretion,
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provide him with various benefits including vacation and sick leave,
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provide life insurance in the amount of $350,000,
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reimburse reasonable commuting costs,
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provide him his annual base salary, targeted cash bonus in effect on date of separation from the Company and a prorated portion of his target annual bonus for the portion of the calendar year completed prior to the termination date if we terminate his employment without cause, or if such employment is terminated as a result of a change of control, for a period of 12 months,
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Reimburse up to $100,000 to a prior employer for certain education expenses subject to repayment on a prorated basis during the first three years of his employment.
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A copy of our Executive Employment Agreement with John T. Blake is attached as an exhibit to our Form 8-K filed with the SEC on March 27, 2018 and the foregoing description is qualified in its entirety by reference to that agreement.
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We entered into an at-will Executive Employment Agreement as of August 28, 2018 with Patrick Ryan, our Chief Operating Officer, by which principally we agreed to:
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pay him an annual starting salary of $310,000,
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grant him upon Board approval an option under our equity incentive plan to purchase 500,000 shares of our common stock,
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make him eligible for annual bonuses at Board discretion,
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provide him with various benefits including vacation and sick leave,
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provide life insurance in the amount of $350,000,
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•
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reimburse reasonable commuting costs,
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•
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provide him his annual base salary, targeted cash bonus in effect on date of separation from the company and a prorated portion of his target annual bonus for the portion of the calendar year completed prior to the termination date if we terminate his employment without cause, or if such employment is terminated as a result of a change of control, for a period of 12 months,
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•
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pay him a signing bonus of $60,000 to cover the cost of relocation to Southern California subject to repayment to the Company on a pro-rated basis during the first two years of employment.
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A copy of our Executive Employment Agreement with Patrick Ryan is attached as an exhibit to our Form 8-K filed with the SEC on September 4, 2018 and the foregoing description is qualified in its entirety by reference to that agreement.
The Board approved the following executive and management compensation policies in December 2016 as further amended in January 2019:
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•
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Adopted a “double-trigger” change of control severance plan for the Company’s Chief Executive Officer and certain officers who report directly to the Chief Executive Officer. The two triggers for payment of severance are (1) a change of control and (2) a “qualifying” termination, which would be termination without cause by a buyer or a voluntary resignation for good reason. A change of control is defined to include (i) an acquisition or merger in which 50% or more of outstanding voting power changes hands, and (ii) a transaction in which the sale of all or substantially all of the company’s assets occurs.
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|
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•
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For the Chief Executive Officer, Chief Financial Officer and Chief Operating Officer cash severance includes one year of salary continuation, bonus equal to a prorated amount for the year-to-date bonus earned but not yet paid, 100% of target bonus for the cash severance period, and a continuation of health insurance benefits for the severance period. For officers subject to the change of control severance plan, cash severance includes for the severance period (i) six months of salary continuation, (ii) bonus equal to a prorated amount for the year-to-date bonus earned but not yet paid, (iii) 100% of target bonus for the cash severance period, and (iv) a continuation of health insurance benefits for the severance period.
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Outstanding Equity Awards at Fiscal Year End
The following table sets forth certain information, on an award-by-award basis, concerning unexercised options to purchase common stock, restricted shares of common stock and common stock that has not yet vested for each named executive officer and outstanding as of December 31, 2019.
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The following table sets forth certain information concerning outstanding unexercised, unvested, and/or unearned equity awards that were held as of December 31, 2019 by our named executive officers. Unless otherwise noted, all awards expire 10 years after the grant date.
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OPTION AWARDS
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STOCK AWARDS
|
|
Name
|
Option
Grant
Date
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
|
|
Option
Exercise
Price ($)
|
Stock
Award
Grant
Date
|
Number of
Shares or
Units of
Stock That
Have Not
Vested
|
Market Value
of Shares
or Units of
Stock That
Have Not
Vested($)
|
|
|
|
|
|
|
|
|
|
|
|
Will McGuire
|
2/19/2019
|
9,219
|
35,031
|
(1)
|
5.92
|
2/19/2019
|
22,125
|
131,334
|
|
|
1/4/2018
|
24,610
|
31,640
|
(2)
|
16.48
|
|
|
|
|
|
1/3/2017
|
49,099
|
22,317
|
(2)
|
15.76
|
|
|
|
|
|
1/21/2016
|
2,495
|
166
|
(2)
|
32.80
|
|
|
|
|
|
8/17/2015
|
52,500
|
|
(2)
|
99.44
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John T. Blake
|
2/19/2019
|
4,245
|
16,130
|
(1)
|
5.92
|
2/19/2019
|
10,250
|
60,844
|
|
|
3/26/2018
|
27,344
|
35,156
|
(2)
|
15.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pat Ryan
|
2/19/2019
|
5,964
|
22,661
|
(1)
|
5.92
|
2/19/2019
|
14,375
|
85,330
|
|
|
9/1/2018
|
19,531
|
42,969
|
(2)
|
13.52
|
|
|
|
|
(1)
|
Vests monthly over a four year term.
|
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(2)
|
Vests over a four year term, with 25% vesting on the one year anniversary date of the grant and thereafter vesting in 12 equal quarterly installments of 6.25%.
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Compensation of Directors
During 2019 our non-employee directors were compensated with an annual retainer of $35,000. These non-employee directors were paid their annual base compensation retainers for serving on the board and committees in cash on the first business day of every quarter. Our non-employee director who serve as Audit Committee chair also receives $18,000 per year for their service as committee chair and non-chair committee members receive $8,000 per year. The retainer for the Compensation Committee chairman is $12,000 per year and the retainer for each other Compensation Committee member is $6,000 per year. The retainer for the Nominating and Governance Committee chairman is $10,000 per year and each other Nominating Committee member is $5,000 per year. Additionally, our non-employee directors were paid an equity compensation retainer in the form of stock options that equal $25,000 divided by the Black-Scholes value of the stock on the date of their issuance. The stock options (i) have a 10 year term, (ii) fully vest on the earlier of one year anniversary of grant or the date of next shareholder meeting, no partial vesting is allowed and (iv) upon ceasing to be a board member, the options may be exercised (x) for 30 days in the event of resignation, (y) 60 days in the event of termination, and (z) 90 days in the event of death. One of our non-employee directors elected, on the date of our annual shareholder meeting, to receive his base compensation retainers in the form of stock options on the same terms as the aforementioned equity compensation retainer.
The following Director Compensation Table sets forth information concerning compensation for services rendered by our non-employee directors for fiscal year 2019. The amounts represented in the “Fees Earned or Paid in
14
Cash” column reflects the stock compensation expense recorded by the Company and does not necessarily equate to the income that will ultimately be realized by the directors for such awards in lieu of actual cash fees, as noted above.
|
Name
|
Fees Earned or
Paid in Cash ($)
|
Stock
Options ($)
|
Total
($)
|
|
Gregg Williams
|
14,000
|
56,000
|
70,000
|
|
William J. Link, Ph.D.
|
65,000
|
25,000
|
90,000
|
|
Aaron Mendelsohn
|
43,000
|
25,000
|
68,000
|
|
Matthew Pfeffer
|
59,000
|
25,000
|
84,000
|
|
|
|
|
|
ITEM 13. Certain Relationships and Related Transactions and Director Independence
Policies and Procedures for Related Party Transactions
Our Audit Committee is responsible for reviewing any related party transactions of the Company, which we define as transactions between us and our executive officers, directors, nominees for election as directors, beneficial owners of more than 5% of any class of our common stock and any member of the immediate family of any of the foregoing persons where the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year. In approving or rejecting any such proposal, our Audit Committee considers the facts and circumstances available and deemed relevant by our Committee, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction.
Related Party Transactions
In addition to the compensation arrangements, including employment, termination of employment and change in control arrangements discussed above in the sections titled “Board of Directors and Corporate Governance – Director Compensation” and “Executive Compensation,” we describe below transactions and series of similar transactions, since the beginning of our last fiscal year, to which we were a party or will be a party, in which:
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•
|
the amounts involved exceeded or will exceed $120,000; and
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17
|
|
•
|
any of our directors, nominees for director, executive officers or holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest.
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Rights Offering and Private Placements
On February 15, 2019, we completed a registered rights offering to our shareholders which resulted in the issuance of 5,976,000 units, each priced at $5.792 for net proceeds of $34.4 million. Each unit consisted of one share of common stock and one warrant to purchase a share of common stock at a price of $11.76 per share. Entities affiliated with Gregg Williams, our Chairman of the Board, participated in the rights offering and purchased an aggregate of acquired approximately 5,180,000 units in the offering for an aggregate investment of approximately $30 million. See our Form 8-K filed with the Securities and Exchange Commission (“SEC”) on February 22, 2019.
On December 12, 2018, we entered into a securities purchase agreement with the Gregg G. Williams 2006 Trust and the Sam B. Williams 1995 Generation-Skipping Trust, two trusts for which Gregg Williams is the trustee (“Purchasers”), pursuant to which we agreed to issue and sell to the Purchasers 409,387 shares of common stock in the aggregate at a price per share of $7.33 for net proceeds of approximately $3 million. See our Form 8-K filed with the SEC on December 14, 2018.
On October 18, 2018, we entered into a securities purchase agreement with the Purchasers, pursuant to which we agreed to issue and sell to the Purchasers 308,465 shares of common stock in the aggregate at a price per share of $12.96 for net proceeds of approximately $4 million. See our Form 8-K filed with the SEC on October 22, 2018.
On August 14, 2018, we entered into a securities purchase agreement with the Purchasers, pursuant to which we agreed to issue and sell to the Purchasers 403,225 shares of common stock in the aggregate at a price per share of $12.40 for net proceeds of approximately $5 million. See our Form 8-K filed with the SEC on August 16, 2018.
On May 3, 2018, we entered into a securities purchase agreement with the Purchasers, pursuant to which we agreed to issue and sell to the Purchasers 844,594 shares of common stock in the aggregate at a price per share of $11.84 for net proceeds of approximately $10 million. See our Form 8-K filed with the SEC on May 8, 2018.
Other Transactions
We have granted stock options to our named executive officers and certain of our directors. See the sections titled “Board of Directors and Corporate Governance – Director Compensation” and “Executive Compensation,” for a description of these stock options.