Material Effects of Proposed Reverse Stock Split
The Board believes that the reverseawards, restricted stock split will increase the price level of Adverum’s commonunit awards, performance awards, dividend equivalent awards, deferred stock in orderawards, deferred stock unit awards, stock payment awards to among other things, ensure continued compliance with The Nasdaq Global Market’s minimum bid price listing standardour employees, directors and generate interest in Adverum among investors. The Board cannot predict, however, the effect of the reverse stock split upon the market price for the common stock,consultants and the historyemployees and consultants of similar reverse stock splitsour affiliates.
Authorized Shares and Share Counting Provisions. Subject to adjustment for companiescertain changes in like circumstancesour capitalization, if this Proposal 4 is varied. The market price per share of common stock afterapproved by our stockholders, the reverse stock split may not rise in proportion to the reduction in the number of shares of common stock outstanding resulting from the reverse stock split, which would reduce the market capitalization of Adverum. The market price per post-reverse stock split share may not remain in excess of the $1.00 minimum bid price as required by The Nasdaq Global Market, or Adverum may not otherwise meet the additional requirements for continued listing on The Nasdaq Global Market. The market price of the common stock may also be based on our performance and other factors, the effect of which the Board cannot predict.
The reverse stock split will affect all stockholders of Adverum uniformly and will not affect any stockholder’s percentage ownership interests or proportionate voting power, except to the extent that the reverse stock split results in any stockholders owning a fractional share. In lieu of issuing fractional shares, stockholders of record who otherwise would be entitled to receive fractional shares will be entitled to cash in lieu of the fractional share.
The principal effects of the reverse stock split will be that, depending on the exact split ratio chosen by the Board, (i) the number of shares of common stock issued and outstanding will be reduced to 1/5, 1/7, 1/10, 1/12 or 1/20 of the number of shares of common stock outstanding immediately prior to the reverse stock split, (ii) all outstanding options entitling the holders thereof to purchase shares of common stock will enable such holders to purchase, upon exercise of their options, between 1/5, 1/7, 1/10, 1/12 or 1/20 of theaggregate number of shares of common stock that such holders would have been able to purchase upon exercise of their options immediately precedingmay be issued under the reverse stock split, at an exercise price2024 Plan will be equal to 5, 7, 10, 12the sum of (i) 2,160,600 shares of common stock and (ii) any of the shares of common stock which as of the effective date of the 2024 Plan are available for issuance under the 2014 Plan, or 20 timesare subject to awards under the exercise price specified before2014 Plan that, on or after the reverse stock split, resulting ineffective date of the same aggregate price being required to be paid upon exercise thereof immediately preceding2024 plan, terminate, expire or lapse for any reason without the reverse stock split, (iii) all outstanding restricted stock units entitling the holders thereof to the vestingdelivery of shares of common stock to the holder thereof, up to a maximum of 2,488,380 shares of common stock.
To the extent that an award terminates, expires or lapses for any reason or an award is settled in cash without the delivery of shares, any shares subject to the award at such time will be reducedavailable for future grants under the 2024 Plan. However, the following shares shall not be available for future grants of awards under the 2024 Plan: (a) shares tendered to between 1/5, 1/7, 1/10, 1/12 or 1/20withheld to satisfy the grant, exercise price or tax withholding obligation with respect to an award under the 2024 Plan; (b) shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right on exercise thereof; and (c) shares repurchased on the open market with the cash proceeds from the exercise of options.
To the extent that shares of our common stock are repurchased by us prior to vesting at the same price paid by the holder (or a lower price) so that shares are returned to us, such shares will be available for future grants under the 2024 Plan. The payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2024 Plan. To the extent permitted by applicable law or any exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by us or any of our subsidiaries will not be counted against the shares available for issuance under the 2024 Plan.
The aggregate maximum number of shares of Common Stock that may be issued pursuant to the exercise of incentive stock options is 2,160,600 shares.
Plan Administration. The compensation committee of our board of directors administers the 2024 Plan unless our Board of directors assumes authority for administration. The 2024 Plan provides that the board or compensation committee may delegate its authority to grant awards to employees other than executive officers and certain senior executives of the company to a committee consisting of one or more members of our board of directors or one or more of our officers. Subject to the terms and conditions of the 2024 Plan, the administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares immediately precedingto be subject to awards and the reverse stock split;terms and (iv)conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the number of shares reserved for issuance pursuant to Adverum’s 2014 Equity Incentive Award Plan (“2014 EIP”), 2017 Inducement Plan and Adverum’s 2014 Employee Stock Purchase Plan (“ESPP”) will be reduced to between 1/5, 1/7, 1/10, 1/12 or 1/20administration of the number of shares currently included in each such plan.
2024 Plan. The reverse stock split will not affect the par valueadministrator is also authorized to adopt, amend or rescind rules relating to administration of the common stock. As a result, on2024 Plan.
No Repricing Without Stockholder Approval. Without the effective dateapproval of the reverse stock split, the stated capital on Adverum’s balance sheet and statement of stockholders’ equity attributable to the common stock will be reduced to between 1/5, 1/7, 1/10, 1/12 or 1/20 of its present amount, depending on the exact amountstockholders of the split, andCompany, the additional paid-in capital account willterms of outstanding awards may not be credited withamended to (i) reduce the amount by whichexercise price or grant price of an outstanding option or stock appreciation right, (ii) grant a new option, stock appreciation right or other award in substitution for, or upon the stated capital is reduced. The per share net losscancellation of, any previously granted option or stock appreciation right that has the commoneffect of reducing the exercise price or grant price thereof, (iii) exchange any option or stock will be retroactively increasedappreciation right for each period because there will be fewer shares of common stock, outstanding.
The amendment will not changecash or other consideration when the terms of the common stock. After the reverse stock split, the sharesexercise price or grant price per share of common stock will haveunder such option or stock appreciation right equals or exceeds the same voting rights and rights to dividends and distributions and willfair market value of a share of common stock or (iv) take any other action that would be identical in all other respects toconsidered a “repricing” of an option or stock appreciation right under the applicable listing standards of the national securities exchange on which the common stock now authorized. Each stockholder’s percentage ownershipis listed.
Dividends and Dividend Equivalents: No Payment Until Vesting of the new common stock will notUnderlying Award. The 2024 Plan provides that dividends or dividend equivalents may be altered except for the effect of not issuing fractional shares. The common stock issued pursuantpaid or credited with respect to the reverse stock split will remain fully paid and non-assessable.
The reverse stock split is not intended as, and will not have the effect of, a “going private transaction” covered by Rule 13e-3 under the Securities Exchange Act of 1934. Following the reverse stock split, Adverum will continue to be subject to the periodic reporting requirements of the Securities Exchange Act of 1934.
As noted above, if the reverse stock split is implemented, the number of issued and outstanding shares of common stock will be proportionally reduced. Any future issuances will have the effect of diluting the percentage of stock ownership and voting rights of the present holders of common stock.
The reverse stock split would result in some stockholders owning “odd-lots” of less than 100any shares of our common stock. Brokerage commissionsstock subject to an award (other than an option or stock appreciation right), as determined by the plan administrator and other costs of transactionscontained in odd-lots are generally higher than the costs of transactions in “round-lots” of multiples of 100 shares.applicable award agreement, but no dividends or dividend equivalents may be paid with respect to any such shares before the date such shares have vested.