option had not been an ISO (i.e.,if required from time to time, reviewing with management our disclosures under the difference betweencaption “Executive Compensation” and recommending to the fair market valuefull board its inclusion in our periodic reports to be filed with the SEC;
if required from time to time, preparing the report of the shares onCompensation Committee to be included in our annual proxy statement;
engaging compensation consultants or other advisors it deems appropriate to assist with its duties; and
reviewing and evaluating, at least annually, our Compensation Committee’s charter.
In 2021, the date of exercise andCompensation Committee engaged the option’s exercise price). As a result, unless the shares acquired upon the exercisecompensation consulting firm Radford, which is part of the ISO are disposed of in a taxable transaction in the same year in which such option is exercised, the option holder may incur AMT as a result of the exercise of an ISO.
Except as provided in the paragraph immediately below, if an option holder electsRewards Solutions practice at Aon plc, (“Radford”), to tender shares in partial or full payment of the option price for shares to be acquired upon the exercise of an ISO, the option holder will not recognize any gain or loss on such tendered shares. No income will be recognized by the option holderassess and make recommendations with respect to the shares received by the option holder upon the exerciseamount and types of the ISO if the requirements of the 2014 Plancompensation to provide our executives and the Code described above are met. The number of shares received equaldirectors. Radford reported directly to the number of shares surrendered will have a tax basis equal to the tax basis of the surrendered shares. Shares received in excess of the number of shares surrendered will have a tax basis of zero. The holding period of the shares received equal to the number of shares tendered will be the same as such tendered shares’ holding period, and the holding period for the excess shares received will begin on the date of exercise. Solely for purposes of determining whether a disqualifying disposition has occurredCompensation Committee; however, our Chief Executive Officer consulted with Radford with respect to shares received upon exerciseits assessments of the ISO, all shares are deemedcompensation of executive officers other than the Chief Executive Officer. The Compensation Committee reviewed assessments provided by Radford comparing our compensation to havethat of a holding period beginninggroup of peer companies within our industry and met with Radford to discuss compensation of our executive officers and our Board, including the Chief Executive Officer, and to receive input and advice, as needed. The Compensation Committee has considered the adviser independence factors required under SEC rules as they relate to Radford and does not believe Radford’s work in 2021 raised a conflict of interest.
The Compensation Committee uses competitive compensation data from an annual study of peer companies performed by Radford to inform the Compensation Committee’s decisions on overall compensation of our executive officers and directors, as well as specific pay elements. The Compensation Committee applies judgment and discretion in establishing targeted pay levels, taking into account not only competitive market data, but also factors such as Company, business and individual performance, experience, scope of responsibility, criticality and skill sets, leadership potential and succession planning.
The Board has adopted a charter for the Compensation Committee that complies with SEC and Nasdaq Stock Market listing rules. The charter is available on our website at www.pdsbiotech.com.
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee has ever been an executive officer or employee of ours. None of our officers currently serve, or served during 2021, on the datecompensation committee or board of exercise.
If an option holder tenders sharesdirectors of any other entity that were previously acquired upon the exercise of an ISO in partialhas one or full paymentmore officers serving as a member of the option price for sharesBoard or Compensation Committee.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee currently consists of Ms. Ali-Jackson, Mr. Freitag and Sir Richard Sykes, each of whom our Board has determined to be acquired uponindependent under the exerciseNasdaq listing standards. The chairperson of another ISO,our Nominating and each such exercise occurs within two years afterCorporate Governance Committee is Ms. Ali-Jackson. PDS’s Nominating and Corporate Governance Committee held four (4) meetings in 2021.
The primary purpose of our Nominating and Corporate Governance Committee is to assist the date of grant of such ISO or within one year after such shares were transferred to the option holder, the tender of such shares will be a disqualifying disposition with the tax consequences described above regarding disqualifying dispositions. The shares acquired upon such exercise will be treated as shares acquired upon the exercise of an ISO.
If the holding rules described above are not satisfied, gain recognized on the disposition of the shares acquired upon the exercise of an ISO will be characterized as ordinary income, and, subject to Section 162(m) of the Code, the company or one of its subsidiaries will be entitled to a corresponding deduction. The amount of such gain will be equal to the difference between the exercise priceBoard in promoting our best interests and the fair market valuebest interests of our stockholders through the sharesimplementation of sound corporate governance principles and practices. The functions of our Nominating and Corporate Governance Committee include, among other things:
identifying, reviewing and evaluating candidates to serve on our board;
determining the minimum qualifications for service on our board;
developing and recommending to our board an annual self-evaluation process for our board and overseeing the annual self-evaluation process;
developing, as appropriate, a set of corporate governance principles, and reviewing and recommending to our board any changes to such principles; and
periodically reviewing and evaluating our Nominating and Corporate Governance Committee’s charter.
The Board has adopted a charter for the Nominating and Corporate Governance Committee that complies with SEC and Nasdaq Stock Market listing rules. The charter is available on our website at the time of exercise. Special rules may apply to disqualifying dispositions where the amount recognized is less than the value at exercise. Any excess of the amount recognized upon such disposition over the fair market value at exercise will generally be long-term or short-term capital gain depending on the holding period involved. Notwithstanding the foregoing, in the event that the exercise of the option is permitted other than by cash payment of the exercise price, various special tax rules may apply.
Non-Qualified Options. An option holder will not recognize taxable income, and the company or a subsidiary, as applicable, is not entitled to a deduction, when a non-qualified option is granted. Upon the exercise of a non-qualified option, an option holder will recognize compensation taxable as ordinary income equal to the excess of the fair market value of the shares received over the option price of the non-qualified option and, subject to Section 162(m) of the Code, the company or one of its subsidiaries will be entitled to a corresponding deduction. An option holder’s tax basis in the shares received upon the exercise of a non-qualified option will be equal to the fair market value of such shares on the exercise date, and the option holder’s holding period for such shares will begin at that time. Upon the subsequent sale of the shares received in exercise of a non-qualified option, the option holder will recognize short-term or long-term capital gain or loss, depending upon whether the shares have been held for more than one year. The amount of such gain or loss will be equal to the difference between the amount recognized in connection with the sale of the shares and the option holder’s tax basis in such shares.www.pdsbiotech.com
If a non-qualified option is exercised in whole or in part with shares held by the option holder, the option holder will not recognize any gain or loss on such tendered shares. The number of shares received by the option holder upon such an exchange that are equal in number to the number of tendered shares will retain the tax basis and the holding period of the tendered shares for capital gain purposes. The shares received by the option holder in excess of the number of shares used to pay the exercise price of the option will have a basis equal to the fair market value on the date of exercise and their holding period will begin on such date.
Restricted Stock. Upon the grant of an award of restricted stock, the shares are considered to be subject to a substantial risk of forfeiture for federal income tax purposes. If a participant who receives restricted stock does not make the election described below, the participant does not recognize any taxable income upon the receipt of restricted stock and the company or a subsidiary, as applicable, is not entitled to a deduction at such time. When the forfeiture restrictions with respect to the restricted stock lapse, the participant will recognize compensation taxable.