UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant £☐
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INTEGRITY APPLICATIONS, INC.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
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INTEGRITY APPLICATIONS, INC.
102 Ha’Avoda Street,19 Ha’Yahalomim St., P.O. Box 43212163
Ashkelon,Ashdod, Israel L3 78103017760049
(972) (8) 675-7878
NOTICE OF 2015 ANNUAL2018 SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 22, 2015MARCH 23, 2018
To the Stockholders of Integrity Applications, Inc.:
The 2015 Annual2018 Special Meeting of Stockholders (the “Annual“Special Meeting”) of Integrity Applications, Inc., a Delaware corporation (the “Company”), will be held on Tuesday, July 22, 2015March 23, 2018 at 4:00 p.m., Israel local time (9:0010:30 a.m., EDT),Eastern Standard Time, at the Company’s offices located at 102 Ha’Avoda Street, Ashkelon, Israel L3 7810301,Hyatt Regency Morristown, 3 Speedwell Ave, Morristown, New Jersey 07960, USA, for the following purposes:
| 1. | to elect Zvi Cohen, Dr. Robert Fischell, Avner Galapprove and David Malkaratify the increase of the total number of shares authorized for issuance under the Company’s 2010 Incentive Compensation Plan (“Incentive Plan”) to 7,000,000 shares, including an amendment to the board of directors of the Company, eachIncentive Plan on April 7, 2017 to serve for a one year term expiring at the Company’s 2016 Annual Meeting of Stockholders;increase from 1,000,000 shares to 5,625,000 shares and another amendment on February 15, 2018 to increase from 5,625,000 shares to 7,000,000 shares; and |
| 2. | to ratify the appointment of Fahn Kanne & Co. Grant Thornton Israel as the Company’s independent registered public accounting firm for the 2015 fiscal year; and |
3. | to transact such other business as may properly be brought before the AnnualSpecial Meeting, and at any adjournments or postponements of the AnnualSpecial Meeting. |
Holders of record of the Company’s Common Stock, its Series A 5% Convertible Preferred Stock, and/or its Series B 5.5% Convertible Preferred Stock and Series C 5.5% Convertible Preferred Stock at the close of business on June 2, 2015 February 16, 2018 (the “Record Date”) are entitled to notice of and to vote at the AnnualSpecial Meeting and at any adjournments or postponements of the AnnualSpecial Meeting. In the event that there are insufficient shares present in person or represented by proxy at the AnnualSpecial Meeting in order to obtain a quorum, the AnnualSpecial Meeting may be adjourned or postponed in order to permit further solicitation of proxies.
Pursuant to the rules and regulations adopted by the Securities and Exchange Commission, we are providing access to our proxy materials over the Internet. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials on or about June 4, 2015 to our stockholders of record on June 2, 2015. The Notice of Internet Availability of Proxy Materials contains instructions for how to access our proxy statement and annual report to stockholders and how to vote. In addition, the Notice of Internet Availability of Proxy Materials contains instructions on how you may (i) receive a paper copyStockholders as of the proxy statement and annual report to stockholdersRecord Date may attend the meeting in person or (ii) elect to receive your proxy statement and annual report to stockholders over the Internet.telephonically by dialing in:
Israel Dial in number : +972-3-9180699; or USA Dial in number : +1-866-297-0242 or +1-868-545-1212
Participants access number: 14550#
ALL STOCKHOLDERS AS OF FEBRUARY 16, 2018 ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. HOWEVER, EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE YOUR SHARES OVER THE INTERNET, BY TELEPHONE OR BY MAIL FOLLOWING THE INSTRUCTIONS ON THE PROXY CARD SO THAT YOUR SHARES WILL BE REPRESENTED WHETHER OR NOT YOU ARE ABLE TO ATTEND THE MEETING. THE PROMPT RETURN OF PROXIES WILL SAVE US THE EXPENSE OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE MEETING. VOTING OVER THE INTERNET, BY TELEPHONE OR BY MAILING A PROXY CARD WILL NOT LIMIT YOUR RIGHT TO ATTEND THE ANNUALSPECIAL MEETING AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors,
Avner Gal,John Graham, Chief Executive Officer
Ashkelon, Israel
April 30, 2015March 1, 2018
PROXY STATEMENT
FOR THE 2015 ANNUAL2018 SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 22, 2015MARCH 23, 2018
QUESTIONS AND ANSWERS ABOUT THE ANNUALSPECIAL MEETING
Why did I receive this proxy?
The Board of Directors of Integrity Applications, Inc. (“Integrity”) is furnishing this proxy statement to solicit proxies on its behalf to be voted at the 2015 Annual2018 Special Meeting of Stockholders of Integrity (the “Annual“Special Meeting”) or at any adjournment or postponement thereof. The AnnualSpecial Meeting is scheduled to be held on Tuesday, July 22, 2015Friday, March 23, 2018 at 4:00 p.m., Israel local time (9:0010:30 a.m., EDT),Eastern Standard Time, at Integrity’s offices located at 102 Ha’Avoda Street, Ashkelon, Israel L3 7810301. This Proxy Statement summarizes theHyatt Regency Morristown, 3 Speedwell Ave, Morristown, New Jersey 07960, USA. The information you need to know to vote by proxy or in person at the Annual Meeting.Special Meeting is included in this Proxy Statement and the documents referred to or incorporated by reference in this Proxy Statement. You do not need to attend the AnnualSpecial Meeting in person in order to vote.
When is this proxy statement first being sent or given to security holders?
We will begin mailing the Notice of Internet Availability ofthis Proxy MaterialsStatement on or about June 4, 2015March 5, 2018 to holders of record of Integrity’s common stock, par value $0.001 per share (the “Common Stock”), Integrity’s Series A 5% Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”), and/or Integrity’s Series B 5.5% Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), and Series C 5.5% Convertible Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock,” and together with the Series A Preferred Stock and Series B Preferred Stock, the “Preferred Stock”) at the close of business on June 2, 2015.February 16, 2018.
Who is entitled to vote at the AnnualSpecial Meeting?
Holders of record of Integrity’s Common Stock and/or Preferred Stock (collectively, the “Voting Stock”) at the close of business on June 2, 2015,February 16, 2018, the record date for the AnnualSpecial Meeting, are entitled to notice of and to vote at the AnnualSpecial Meeting or any adjournment or postponement of the AnnualSpecial Meeting. On the record date, there were issued and outstanding: (1) 5,451,227.746,905,424 shares of Common StockStock; (2) 626376 shares of Series A Preferred Stock andStock; (3) 15,281.1315,031.130 shares of Series B Preferred Stock; and (4) 12,003.80 shares of Series C Preferred Stock. As of the date of this proxy statement,Proxy Statement, shares of Series A Preferred Stock convertible into an aggregate of 107,93683,556 shares of Common Stock, and shares of Series B Preferred Stock convertible into an aggregate of 2,634,7453,340,251 shares of Common Stock and shares of Series C Preferred Stock convertible into an aggregate of 2,667,511 shares of Common Stock are entitled to vote at the AnnualSpecial Meeting.
What is the quorum for the meeting?
The presence, in person or by proxy, of a majority of the outstanding shares of Voting Stock entitled to vote at the AnnualSpecial Meeting is necessary to constitute a quorum at the AnnualSpecial Meeting. Abstentions and broker non-votes (described below) will be counted as present for purposes of determining the presence of a quorum at the meeting but will not be counted as present for any other purpose. No business may be conducted at the AnnualSpecial Meeting if a quorum is not present. If less than a majority of outstanding shares of Voting Stock entitled to vote are represented at the AnnualSpecial Meeting, a majority of the shares so represented may adjourn the AnnualSpecial Meeting to another date, time or place. Notice need not be given of the new date, time or place if announced at the meeting before an adjournment is taken, unless a new record date is fixed for the AnnualSpecial Meeting (in which case a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting).
How many votes do I have?
Each share of Common Stock entitles its owner to one vote on all matters brought before the AnnualSpecial Meeting. Each share of Preferred Stock entitles its owner to one vote for each share of Common Stock into which such share of Preferred Stock is convertible. As of the record date, each issued and outstanding share of Preferred Stock was convertible into approximately 172.4222.22 shares of Common Stock.
How do stockholders of record vote?
If you are a record holder, which means your shares are registered in your name, you may vote or submit a proxy:
1. Over the Internet — If you have Internet access, you may authorize the voting of your shares by following the internet voting instructions set forth in the notice of internet availability of proxy materials.card. You must specify how you want your shares voted, or your vote will not be registered and you will receive an error message. Your shares will be voted according to your instructions.
2. By Telephone — You may authorize the voting of your shares by following the telephone voting instructions set forth in the notice of internet availability of proxy materials.card. You must specify how you want your shares voted, or your vote will not be registered and you will receive an error message. Your shares will be voted according to your instructions.
3. By Mail — You may request a proxy card by following the instructions in the notice of internet availability of proxy materials and mail the proxy card using the postage prepaid envelope provided. Your shares will be voted according to your instructions. If you sign your proxy card but do not specify how you want your shares voted, they will be voted in accordance with the recommendations of the Board. Unsigned proxy cards will not be voted.
4. In Person at the Meeting — If you attend the AnnualSpecial Meeting, you may deliver a completed and signed proxy card in person or you may vote by completing a ballot, which Integrity will provide to you at the AnnualSpecial Meeting. To vote in person, you will need to bring proof of identity to be allowed entry into the meeting.
How do I vote my shares in person if they are held by my broker?
If you hold your shares of Voting Stock through a broker, bank or other financial institution, you are considered the beneficial owner of shares held in “street name,” and you will receive instructions on how to vote from your broker, bank or other institution. If you hold shares of Voting Stock in street name and wish to vote in person at the meeting, you must present a recent proxy validating your ownership of the shares of Voting Stock that you intend to vote from your bank, broker or other nominee that held your shares of Voting Stock as of the record date. You will also need proof of identity for entrance to the meeting.
What am I voting on?
At the AnnualSpecial Meeting, Integrity's stockholders will be asked:
| 1. | to elect Zvi Cohen, Dr. Robert Fischell, Avner Galapprove and David Malkaratify the increase of the total number of shares authorized for issuance under the Company’s 2010 Incentive Compensation Plan (“Incentive Plan”) to 7,000,000 shares, including an amendment to the board of directors of Integrity, eachIncentive Plan on April 7, 2017 to serve for a one year term expiring at Integrity’s 2016 Annual Meeting of Stockholders;increase from 1,000,000 shares to 5,625,000 shares and another amendment on February 15, 2018 to increase from 5,625,000 shares to 7,000,000 shares; and |
| | |
| 2. | to ratify the appointment of Fahn Kanne & Co. Grant Thornton Israel (“Fahn Kanne”) as Integrity’s independent registered public accounting firm for the 2015 fiscal year; and |
| |
3. | to transact such other business as may properly be brought before the AnnualSpecial Meeting, and at any adjournments or postponements of the AnnualSpecial Meeting. |
What vote is required for the proposals?
Proposal 1 - Election of Directors
If a quorum is present, directors will be elected pursuant to the affirmative vote of a pluralityIncrease of the total number of shares of Voting Stock present in person or represented by proxy atauthorized for issuance under the Annual Meeting. This means that the four nominees who receive the most affirmative votes will be elected to the Board of Directors.
Proposal 2 - Ratification of Fahn Kanne as Integrity’s Independent Auditor for the 2015 Fiscal YearIncentive Plan
If a quorum is present, the approval and ratification of the appointmentincrease of Fahn Kanne as Integrity’s independent registered public accounting firmthe total number of shares authorized for issuance under the 2015 fiscal yearIncentive Plan to 7,000,000 shares will require the affirmative vote of a majority of the shares of Voting Stock present in person or represented by proxy at the AnnualSpecial Meeting.
How are abstentions and broker “non-votes” treated?
Abstentions
Pursuant to Delaware law, abstentions are counted as present for purposes of determining the number of shares of Voting Stock present in person or represented by proxy and entitled to vote at the AnnualSpecial Meeting. As a result, abstentions will have the same effect as a vote AGAINST Proposal 21 - the approval and ratification of the appointment of Fahn Kanne as Integrity’s independent registered public accounting firm for the 2015 fiscal year. Abstentions will have no effect on Proposal 1 – the electionincrease of the four director nominees named in this proxy statement, as this proposal is decided by a pluralitytotal number of shares authorized for issuance under the votes cast. See “What vote is required for the proposals? - Proposal 1 - Election of Directors.”Incentive Plan to 7,000,000 shares.
Broker “non-votes”
Broker non-votes occur when a beneficial owner of shares held in street name does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee can still vote the shares with respect to matters that are considered to be “routine,” but may not vote those shares with respect to “non-routine”��non-routine” matters.
Pursuant to Delaware law, broker non-votes will be counted as present for purposes of determining the presence of a quorum at the meeting but will not be counted as present for any other purpose. As a result, broker non-votes will not have any effect on the approval of the proposals contained in this proxy statement.
Proposal No. 2 (the1 (the approval and ratification of the appointmentincrease of Fahn Kanne as Integrity’s independent certified public accounting firmthe total number of shares authorized for issuance under the 2015 fiscal year) is considered a “routine” matter; Proposal No. 1 (the election of Zvi Cohen, Dr. Robert Fischell, Avner Gal and David MalkaIncentive Plan to the board of directors of Integrity, each to serve for a one year term expiring at Integrity’s 2016 Annual Meeting of Stockholders)7,000,000 shares) is considered a “non-routine” matter. As a result, a broker or nominee will not be able to vote your shares with respect to Proposal No. 1 absent your voting instructions. For this reason, we urge you to give voting instructions to your broker. If any “routine” matters (in addition to Proposal No. 2) are properly brought before the AnnualSpecial Meeting, then brokers and nominees holding shares in street name will be permitted to vote those shares in their discretion for any such routine matters.
Will there be any other items of business on the agenda?
The Board of Directors does not know of any other matters that may be brought before the AnnualSpecial Meeting nor does it foresee or have reason to believe that proxy holdersany other matters will have to vote for substitute or alternate nominees for election tobe brought before the Board of Directors.Special Meeting. In the event that any other matter should come before the AnnualSpecial Meeting, or any nominee is not available for election, the persons named in the proxy that is submitted via the Internet or mail will have discretionary authority to vote all proxies unless otherwise specified to the contrary with respect to such matters in accordance with the recommendation of the Board of Directors.
What happens if I submit or return my proxy card without voting?
If you properly submit your proxy via the Internet or mail, the shares it represents will be voted at the AnnualSpecial Meeting in accordance with your directions. If you properly submit your proxy with no direction, the proxy will be voted “FOR”:
| | · | the election of Zvi Cohen, Dr. Robert Fischell, Avner Galapproval and David Malka to the Board of Directors of Integrity, each to serve for a one year term expiring at Integrity’s 2016 Annual Meeting of Stockholders; |
| · | the ratification of the appointmentincrease of Fahn Kanne as Integrity’s independent registered public accounting firmthe total number of shares authorized for issuance under the 2015 fiscal year;Incentive Plan to 7,000,000 shares, including an amendment to the Incentive Plan on April 7, 2017 to increase from 1,000,000 shares to 5,625,000 shares and another amendment on February 15, 2018 to increase from 5,625,000 shares to 7,000,000 shares; and |
| | · | such other business as may properly be brought before the AnnualSpecial Meeting, and at any adjournments or postponements of the AnnualSpecial Meeting. |
Can I change my vote after I have voted?
If you have submitted a proxy pursuant to this solicitation, you may revoke such proxy at any time prior to its exercise by:
| | · | written notice delivered to Integrity’s Chief Financial Officer at Integrity Applications, Inc., 102 Ha’Avoda Street,19 Ha’Yahalomim St., P.O. Box 432, Ashkelon,12163, Ashdod, Israel L3 7810301;7760049; |
| | · | executing and delivering a proxy with a later date; |
| | · | submitting an Internet or telephone vote with a later date; or |
| | · | attending the AnnualSpecial Meeting and voting in person. |
With respect to Internet and telephone votes, the last vote transmitted will be the vote counted. Attendance at the AnnualSpecial Meeting will not, in itself, constitute revocation of a proxy.
If you are the beneficial owner of shares held in street name, you must submit new voting instructions to your stockbroker, bank or other nominee pursuant to the instructions you have received from them.
Will anyone contact me regarding this vote?
No arrangements or contracts have been made with any proxy solicitors as of the date of this proxy statement. However, Integrity may retain a proxy solicitor if it appears reasonably likely that it may not obtain a quorum to conduct the AnnualSpecial Meeting. In addition, Integrity’s directors, officers and employees may solicit proxies in person and by telephone or facsimile; however, these persons will not receive any additional compensation for any such solicitation efforts.
Brokerage firms, nominees, custodians and fiduciaries also may be requested to forward proxy materials to the beneficial owners of shares held as of the record date by them.
Who has paid for this proxy solicitation?
All expenses incurred in connection with the solicitation of proxies, including the printing and mailing of this Proxy Statement, should you request a printed copy of the proxy materials, will be borne by Integrity.
How do I obtain a list of Integrity’s stockholders?
A list of Integrity’s stockholders as of June 2, 2015,February 16, 2018, the record date for the AnnualSpecial Meeting, will be available for inspection at Integrity’s corporate headquarters, located at 102 Ha’Avoda Street,19 Ha’Yahalomim St., P.O. Box 432, Ashkelon,12163, Ashdod, Israel L3 7810301,7760049, during normal business hours during the 10-day period immediately prior to the AnnualSpecial Meeting.
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PROPOSAL NO. 1: INCREASE OF THE TOTAL NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
UNDER THE INCENTIVE PLAN
BACKGROUND
The Company’s Incentive Plan was adopted by the Board of Directors of the Company on September 8, 2015, and approved by the shareholders of the Company at an annual meeting of the Company’s shareholders on the same date. 529,555 shares of common stock of the Company were initially available for awards under the Incentive Plan. On March 17, 2016, the Board of Directors approved an amendment to the Incentive Plan to increase the number of shares of Common stock reserved for issuance under the Incentive Plan from 529,555 shares to 1,000,000 shares (the “First Amendment”). On April 7, 2017, the Board of Directors approved an amendment to the Plan to further increase the number of shares of common stock reserved for issuance under the Incentive Plan from 1,000,000 shares to 5,625,000 shares (the “Second Amendment”). On February 15, 2018, the Board of Directors approved another amendment to the Plan to further increase the number of shares of common stock reserved for issuance under the Incentive Plan from 5,625,000 shares to 7,000,000 shares (the “Third Amendment”).
The purposes of the Incentive Plan are to attract, motivate, retain and reward high-quality executives, officers, directors, consultants, employees and other persons who provide services to the Company or its related entities by enabling such persons to acquire or increase a proprietary interest in the Company and providing such persons with performance incentive to expand their maximum efforts in the creation of shareholder value. Prior to the Third Amendment, the number of shares available for issuance under future awards under the Incentive Plan was less than 500,000 shares. The Board of Directors of the Company did not believe that the number of shares available for issuance under the Incentive Plan was sufficient in light of the purposes of the Incentive Plan.
The amendments to the Incentive Plan are intended to ensure that the Company can continue to provide an incentive to its officers, directors, employees, and consultants by enabling them to share in the Company’s future growth. The First Amendment to the Incentive Plan adopted by the Board of Directors on March 17, 2016 was not approved by shareholders within 12 months; therefore, any issuances of shares in connection with the First Amendment, if any, will be deemed invalid. We are seeking the approval and ratification from shareholders of the increase of the total number of shares authorized for issuance under the Incentive Plan to 7,000,000 shares, which includes the Second Amendment on April 7, 2017 and the Third Amendment on February 15, 2018. If approved by the shareholders, all of the additional shares under the Second Amendment and the Third Amendment will be available for grant as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or as nonqualified stock options, restricted stock awards, stock appreciation rights, or other kinds of equity based compensation available under the Incentive Plan. If the shareholders do I submitnot approve the amendments, no shares will be added to the number of shares available for issuance under the Incentive Plan and any issuances in access of the 529,555 shares of common stock initially reserved under the Incentive Plan will be deemed invalid.
SUMMARY OF THE 2010 INCENTIVE COMPENSATION PLAN
The following description of the principal terms of the Incentive Plan is a proposalsummary and is qualified in its entirety by the full text of the Incentive Plan, which was attached as Exhibit 10.1 to the Registration Statement on Form S-1 filed on August 22, 2011.
Administration. The Compensation Committee has been designated by the Board of Directors as the committee (the “Committee”) to administer the Incentive Plan; however, if the Board of Directors does not designate a committee or if there are no longer any members on the committee so designated by the Board of Directors, the Board of directors shall serve as the Committee. The Committee shall consist of at least two directors, each of whom shall be a “non-employee director”, an “outside director”, and “independent director”. The Committee has full and final authority, subject to the provisions of the Incentive Plan, to select eligible persons to become participants under the Incentive Plan, grant awards, determine the type, number and other terms and conditions, and all other matters relating to the awards, prescribe award agreements and rules and regulations of the administration of the Incentive Plan, and make all other decisions and determinations as the Committee may deem necessary or advisable for the 2016 Annual Meetingadministration of Stockholders?the Incentive Plan.
Eligibility. Persons eligible to receive awards under the Incentive Plan are officers, directors, employees, consultants and other persons who provide services to the company or any of its related entity.
Term of Awards. In no event shall the term of any award made under the Incentive Plan exceed a period of ten years.
Shares Subject to the Incentive Plan. As amended, the aggregate number of shares of common stock available for issuance under the Incentive Plan is 7,000,000. If any awards are forfeited, expire or otherwise terminate without issuance of such shares, or any award is settled for cash or otherwise does not result in the issuance of all or a portion of the shares subject to such award, the shares to which those awards were subject shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be available for delivery with respect to awards under the Incentive Plan.
Form of Awards:
Pursuant(a) Options. Options granted under the Incentive Plan could be “incentive stock options” that are intended to Rule 14a-8meet all the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). The Board of Directors will determine the exercise price of options granted under the Incentive Plan. The exercise price of stock options may not be less than the fair market value, on the date of grant, per share of our common stock issuable upon exercise of the option (or 110% of fair market value in the case of incentive options granted to a ten-percent stockholder), and shall not, in any event, be less than the par value of a share of common stock of the Company.
The Committee shall determine the time or times at which or the circumstances under which an option may be exercised in whole or in part, the time or times at which options shall cease to be or become exercisable following termination of service of the participant or upon other conditions, the methods by which the exercise price may be paid or deemed to be paid (including a cashless exercise procedure), the form of such payment, and the methods by or forms in which shares will be delivered or deemed to be delivered to participants.
The incentive stock options granted under the Incentive Plan shall not be exercisable for more than ten years after the date such incentive stock options are granted; provided, however, that if a participant is a ten-percent stockholder, the term of the incentive stock options shall not be more than five years from the date of grant.
The aggregate fair market value of the shares with respect to which incentive stock options granted under the Incentive Plan and all other option plans of the Company that become exercisable for the first time by a participant during any calendar year shall not exceed $100,000.
(b) Stock Appreciation Rights. The Committee may grant stock appreciation rights independent of or in connection with an option. A stock appreciation right shall confer on a participant to whom it is granted a right to receive, upon exercise thereof, the excess of (a) the fair market value of one share on the date of exercise over (b) the grant price of the stock appreciation right as determined by the Committee. The grant price of a stock appreciation right shall not be less than the fair market value of a share on the date of grant, in the case of a freestanding stock appreciation right, or less than the associated option exercise price, in the case of a tandem stock appreciation right.
The Committee shall determine the time or times at which or the circumstances under which a stock appreciation right may be exercised in whole or in part, the time or times at which a stock appreciation right shall cease to be or become exercisable following termination of service of the participant or upon other conditions, the method of exercise, method of settlement, form of consideration payable in settlement, the methods by or forms in which shares will be delivered or deemed to be delivered to participants, whether or not a stock appreciation right shall be in tandem or in combination with any other award, and any other terms and conditions of any stock appreciation right.
(c) Restricted Stock Awards. The Committee is authorized to grant restricted stock awards to participants under the Incentive Plan. Restricted stock awards shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions as the Committee may impose. Except to the extent restricted under the terms of the Incentive Plan and any award agreement relating to a restricted stock award, a participant granted restricted stock shall have all the rights of a shareholder, including the right to vote the restricted stock and the right to receive dividends thereon. During the period that a restricted stock award is subject to a risk of forfeiture, the restricted stock may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the participant.
Upon termination of a participant’s service to the Company during the applicable restriction period, the participant’s restricted stock that is at that time subject to a risk of forfeiture that has not lapsed or otherwise been satisfied shall be forfeited and reacquired by the Company; provided, that, the Committee may provide, by the rule or regulation or in any award agreement, or may determine in any individual case, that forfeiture conditions relating to restricted stock awards shall be waived in whole or in part.
(d) Deferred Stock Awards. The Committee is authorized to grant deferred stock awards to participants under the Incentive Plan. Satisfaction of a deferred stock award shall occur upon expiration of the deferral period specified for such deferred stock award by the Committee. A deferred stock award shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times, separately or in combination, in installments or otherwise, as the Committee may determine. A deferred stock award may be satisfied by delivery of shares, cash equal to the fair market value of the specified number of shares covered by the deferred stock, or a combination thereof, as determined by the Committee. Prior to satisfaction of a deferred stock award, a deferred stock award carries no voting or dividend or other rights associated with share ownership.
Upon termination of a participant’s service to the Company during the applicable deferred period, the participant’s deferred stock award that is at that time subject to a risk of forfeiture that has not lapsed or otherwise been satisfied shall be forfeited; provided, that, the Committee may provide, by the rule or regulation or in any award agreement, or may determine in any individual case, that forfeiture conditions relating to deferred stock award shall be waived in whole or in part.
(e) Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant shares to participants as a bonus, or to grant shares or other awards in lieu of obligations to pay cash or deliver other property under the Incentive Plan or other plans or compensatory arrangements of the Company; provided that, in the case of participants subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), some stockholder proposals may be eligible for inclusion in the proxy statement for Integrity’s next Annual Meetingamount of Stockholders. For a stockholder proposalsuch grants remains within the discretion of the Committee to be considered for inclusion in next year’s proxy statement, it must be submitted in writing together with proofthe extent necessary to ensure the acquisition of stock ownership in accordance with Rule 14a-8 and received by Integrity’s Chief Financial Officer no later than February 5, 2016.
the shares or other awards under the Incentive Plan are exempt from liability under Section 16(b) of the Exchange Act.
(f) Dividend Equivalents. The Committee is authorized to grant dividend equivalents in connection with another award granted to any participant entitling the participant to receive cash, shares, other awards, or other property equal in value to the dividends paid with respect to a specified number of shares, or other periodic payments. Dividend equivalents may be awarded on a free-standing basis or in connection with another award.
(g) Performance Awards. The Committee is authorized to grant performance awards to any participant payable in cash, shares, or other awards, on terms and conditions established by the Committee. The performance criteria to be achieved during any performance period and the length of the performance period shall be determined by the Committee upon the grant of each performance award; provided, however, that a performance period shall not be shorter than twelve months nor longer than five years. The performance goals to be achieved for each performance period, the amount of the award and the procedures of payment shall be conclusively determined by the Committee.
(h) Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to any participant such other awards that may be denominated or payable in, value in whole or in party by reference to, or otherwise based on, or related to, shares, as deemed by the Committee to be consistent with the purposes of the Incentive Plan.
Under Integrity’s bylaws, if a stockholder wants to submit a proposal for next year’s Annual Meeting of Stockholders or wants to nominate candidates for election as directors at such Annual Meeting of Stockholders, the stockholder must provide timely notice of his or her intention in writing. To be timely, a stockholder’s notice must be delivered to Amendment, TerminationIntegrity’s Chief Financial Officer not less than 90 days nor more than 120 days prior to the first anniversary of the date of the meeting notice for the previous year’s Annual Meeting of Stockholders. This means that Integrity must receive any eligible proposal from an eligible stockholder intended to be presented at the 2016 Annual Meeting of Stockholders on or before March 6, 2016 but no earlier than February 5, 2016 for the proposal to be properly brought before the meeting. Integrity’s bylaws also specify requirements as to the form and content of a stockholder’s notice. Integrity will not entertain any proposals or nominations that do not meet these requirements.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
The Board of Directors has nominated Zvi Cohen, Dr. Robert Fischell, Avner Gal and David Malkamay amend, alter, suspend, discontinue or terminate the Incentive Plan, or the Committee’s authority to stand for electiongrant awards under the Incentive Plan, without the consent of shareholders or participants under the Incentive Plan, except that any amendment or alternation to the Board of Directors of Integrity, eachIncentive Plan shall be subject to hold office until the 2016 Annual Meeting of Stockholders and until their respective successors are elected and qualified. Allapproval of the director nominees are incumbent directors.shareholders of the Company within twelve months.
Tax Withholding. The Company and related entities are authorize to withhold from any award granted, any payment relating to an award under the Incentive Plan, including from a distribution of shares, or any payroll or other payment to a participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an award, and to take such other action as the Committee may deem advisable to enable the Company or any related entity and participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any award.
APPROVAL REQUIRED
The amendments to the Incentive Plan to increase the total number of shares authorized for issuance thereunder are subject to approval by shareholders at the Special Meeting by majority consent. The Board of Directors is currently composed of four directors, with each director holding office for a one-year term. The termsbelieves that the approval of the current directors expire at the Annual Meeting. If elected, the nominees for director will serve until the 2016 Annual Meeting of Stockholders. Proxies cannot be voted for a greater number of persons than the number of nominees named in this proxy statement.
Set forth below is biographical information for each person nominated for electionamendments to the Board of Directors, including a descriptionIncentive Plan is in the best interests of the experience, qualifications, attributesCompany and skillsrecommends that led to the conclusion that the person should serve as a director of Integrity asshareholders vote in favor of the date hereof, in light of Integrity’s business strategy, prospects and structure. Integrity has no reason to believe that any of these nominees will refuse or be unable to serve as a director if elected; however, if any of the nominees refuses or is unable to serve, each proxy that does not direct otherwise will be voted for a substitute nominee designated by the Board of Directors.
Nominees for Director
| | | | |
Zvi Cohen | | 60 | | Director |
Dr. Robert Fischell | | 85 | | Director |
Avner Gal | | 60 | | Chairman of the Board, President and Chief Executive Officer |
David Malka | | 49 | | Director and Executive Vice President of Operations |
amendments.
Zvi Cohen has served as one of Integrity’s directors since Integrity’s founding in 2001. Mr. Cohen founded Zicon Ltd. (“Zicon”), an Israeli company engaged in the businesses of assembling, manufacturing and engineering electronic components, in 1985 and served as a managing director of the company from inception until February 2001, and as President from February 2011 until September 2011. Each of Zicon and Mr. Cohen initiated insolvency proceedings in September 2011. On September 19, 2011, in connection with such insolvency proceedings, the District Court of HaMerkaz District in Petah Tikva, Israel, sitting in its capacity as a bankruptcy court (PRK 24929-09-11), appointed Adv. Israel Bachar and Mr. Uriel Alfasi, CPA as joint trustees for Zicon, and ordered that all proceedings initiated against Zicon and/or against Mr. Cohen will be stayed until further decision. In January 2012, the sale of Zicon's outstanding and issued share capital was approved by the court. However, Integrity has been advised that no distribution to creditors has been made yet. On July 24, 2013, the court approved a settlement agreement between Mr. Cohen and his creditors. Prior to founding Zicon, Mr. Cohen served in various operations capacities with Electrical Industries Manufacturing. Mr. Cohen is currently exploring available opportunities following the sale of Zicon. Mr. Cohen received a Bachelor of Science degree in industrial management and a Master of Business Administration degree, both from Tel-Aviv University, Tel-Aviv, Israel. Mr. Cohen’s experience in the medical device industry, and in particular with respect to the manufacture and assembly of such devices, led to the conclusion that he should serve as a member of Integrity’s Board of Directors.
Dr. Robert Fischell has served as one of Integrity’s directors since 2010. Dr. Fischell is an inventor and serial entrepreneur with over 160 issued U.S. patents. Starting in 1959, Dr. Fischell spent over 30 years with the Johns Hopkins University Applied Physics Laboratory, which resulted in 53 patents in both aerospace and biomedical technology. His interests at Johns Hopkins then turned to the invention of new medical devices such as pacemakers and implantable heart defibrillators. Starting in 1969, Dr. Fischell began the formation of 14 private companies that licensed his patents on medical devices. These companies include Pacesetter Systems, Inc. (purchased by Siemens and now part of St. Jude Medical, Inc.), IsoStent, Inc. (merged with Cordis Company, a Johnson and Johnson Company), NeuroPace, Inc., Neuralieve, Inc., Angel Medical Systems, Inc., and Svelte Medical Systems, Inc. As it relates to diabetes management devices, he was the inventor of the first implantable insulin pump (which became Minimed, which was sold to Medtronic). Dr. Fischell’s honors include Inventor of the Year for the USA in 1984, election to the National Academy of Engineering in 1989, the Distinguished Physics Alumnus Award of the University of Maryland, and several medals for distinguished accomplishments in science, engineering and innovation. In 2004, Discover magazine gave Dr. Fischell their annual Technology for Humanity award. In 2008, Dr. Fischell received the honorary degree of Doctor of Humane Letters from the Johns Hopkins University in recognition of his many lifesaving inventions. From June 2009 until March 2011, Dr. Fischell was a director of InspireMD, Inc. (OTCBB: NSPR), a medical device company focusing on the development and commercialization of its proprietary stent system, MGuard. Dr. Fischell received his BSME degree from Duke University and MS and Sc.D. degrees from the University of Maryland. Dr. Fischell’s extensive experience in the medical device industry, including inventing and commercializing numerous medical devices, led to the conclusion that he should serve as a member of Integrity’s Board of Directors.
Dr. Fischell was appointed to the Board of Directors by Andrew Garrett, Inc. pursuant to the placement agent agreement between Integrity and Andrew Garrett, Inc., dated September 1, 2009, which agreement permitted Andrew Garrett, Inc. to appoint one person to serve as either a director or observer on Integrity’s Board of Directors upon Andrew Garrett, Inc. placing an aggregate of $5,000,000 of Integrity’s securities.
Avner Gal has served as Integrity’s Chairman of the Board and Chief Executive Officer since Integrity’s founding in 2001. Prior to founding Integrity, Mr. Gal served as a managing director of Solid Systems, an Israeli start-up company engaged in the development of radar and ultra-sound technologies from 2000 to 2001. From 1999 to 2000, Mr. Gal served as an engineering department manager with Comverse Network Systems. From 1996 to 1999, Mr. Gal was a section head at MTI Engineering Ltd., a consulting company and electronic systems provider in the communications, aerospace and military industries. Prior to entering the private sector, Mr. Gal served for twenty-three years in various field and headquarters positions in the Israeli Navy and retired as a Naval Commander. Mr. Gal received a Bachelor of Science degree in electrical engineering from the Technion - Israeli Institute of Technology in Haifa, Israel, a Master of Science degree in electrical engineering from the Naval Postgraduate School in Monterey, California and a Masters of Business Administration in marketing management from the University of Derby, Israeli Branch, Ramat-Efaal, Israel. As an Israeli Naval Officer, Mr. Gal spent the majority of his duty as a development engineer. Among other projects, he initiated, characterized and managed the development of a full Electronic Warfare (“EW”) suite (interception and deception), which is still operational on board all missile patrol boats of the Israeli Navy. Another EW system which Mr. Gal was in charge of developing is operational on board Israeli submarines. Mr. Gal was also the head of the Israeli Navy’s technical intelligence branch and served as the managing integrator for the electronic combat suite on board Dolphin submarines. During the last 25 years, Mr. Gal has been the primary instructor in the Naval Projects’ Officers Course. Mr. Gal’s scientific and business education and experience, as well as his knowledge of Integrity and its product candidate gained through his role as Integrity’s Chief Executive Officer, are all factors that led to the conclusion that he should serve as a member of Integrity’s Board of Directors.
David Malka has served as one of Integrity’s directors and Integrity’s Executive Vice President of Operations since March 2012. Prior to that, Mr. Malka was a director and Integrity’s Vice President of Operations since 2003. Prior to joining us, Mr. Malka served as a vice president of operations for Solid Systems from 2000 to 2003. From 1994 to 2000, Mr. Malka served as a manager of production and purchasing at Kollmorgen-Servotronix, an Israeli company specializing in the design, development and manufacture of digital servo control systems. From 1991 to 1993, Mr. Malka was a production design and inspection worker at TFL Time & Frequency Systems Ltd. Mr. Malka has a degree in practical engineering - industrial management from the Institute of Work & Production Productivity, Tel-Aviv and a Bachelor of Arts degree in management from the Open University in Israel. Mr. Malka’s extensive executive experience in the medical device industry led to the conclusion that he should serve as a member of Integrity’s Board of Directors.
The Board of Directors recommends that you vote “FOR” the election of eachapproval and ratification of the nominees named above.
CORPORATE GOVERNANCE
General
Integrity’s bylaws provide that the sizeincrease of the Board of Directors shall be determined from time to time by resolution of the Board of Directors but shall not consist of less than one director nor more than fifteen. The Board of Directors currently has four members.
Director Independence
Integrity is not currently listed on any national securities exchange. As a result, Integrity is not subject to the requirements of any securities exchange providing that a majority of the Board of Directors must be comprised of independent directors. Nevertheless, for purposes of this proxy statement, Integrity applied the independence rules of the NYSE MKT to determine the independence of its directors. The independence rules of the NYSE MKT include a series of objective tests, including that an “independent” person will not be employed by Integrity and will not be engaged in various types of business dealings with Integrity. Applying these rules and based on representations from the directors with respect to their independence thereunder, the Board of Directors has determined that, other than Avner Gal and David Malka, each of the current members of Integrity’s Board of Directors is independent and, therefore, half of the members of the Board of Directors are independent directors.
Director Compensation
Directors of Integrity do not receive any compensation from Integrity other than their compensation as employees of Integrity, for those that are employees, which compensation is described below under Executive Compensation.
Board Leadership Structure
The Board of Directors of Integrity has not adopted a formal policy regarding the need to separate or combine the offices of Chairman of the Board and Chief Executive Officer and instead the Board remains free to make this determination from time to time in a manner that it determines to be most appropriate for Integrity. Currently, Avner Gal, our Chief Executive Officer and President, also serves as Chairman of the Board. Given Mr. Gal’s role in founding Integrity and leading its activities to date, the Board of Directors believes that Mr. Gal possesses the most thorough knowledge of the issues, opportunities and challenges facing Integrity and its business and, accordingly, is the person best positioned to develop agendas that ensure that the time and attention of the Board of Directors are properly directed. Mr. Gal’s service in this combined role provides Integrity decisive leadership, ensures clear accountability, and enhances Integrity’s ability to communicate to its employees, stockholders and the public with a clear and singular voice. The Board of Directors does not currently have a lead independent director and does not believe that one is necessary in light of Integrity’s size and the lengthy experience the majority of the directors have working with Mr. Gal. The Board of Directors believes that the independent directors work well together in the current board structure, and does not believe that selecting a lead independent director would add significant benefits to the Board of Directors’ oversight role.
Committees of the Board of Directors
The Board of Directors of Integrity does not currently have any formal committees because none of Integrity’s securities are listed on a securities exchange that would require the Board of Directors to maintain any such committee. However, despite the continued absence of any such requirement, the Board of Directors is considering establishing an Audit Committee, a Compensation Committee and/or a Nominating Committee. The Board of Directors has not determined whether any of the members of the Board of Directors qualifies as an “Audit Committee Financial Expert” as the Board of Directors does not yet have a separately designated, free-standing Audit Committee.
Board Meeting Attendance
During 2014, the Board of Directors met 1 time and acted by unanimous written consent 5 times. Each member of the Board of Directors attended the sole meeting of the Board of Directors held in the 2014 fiscal year during the period for which he was a director.
Integrity does not have a formal policy regarding director attendance at annual meetings of stockholders. However, all directors are encouraged to attend Integrity’s annual meetings of stockholders in person. Two of Integrity’s then current directors attended the 2014 Annual Meeting of Stockholders.
Director Qualifications and Nominating Process
Director nominees are considered by the full Board of Directors. The Board of Directors does not maintain any specific minimum qualifications for director candidates. However, the Board of Directors believes that directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of Integrity’s stockholders and must also be able to dedicate the time and resources sufficient to ensure the diligent performance of their duties. While the Board of Directors does not have a formal policy with regard to the consideration of diversity in identifying director nominees, the Board of Directors seeks to include a range of talents, experience, skills, diversity and expertise (particularly in the areas of accounting and finance, management, domestic and international markets, leadership and corporate governance, and the medical device and related industries) sufficient to provide sound and prudent guidance with respect to the operations of Integrity and the interests of Integrity and its stockholders. All of the nominees for election as directors at the Annual Meeting were nominated by the Board of Directors. Integrity did not receive any stockholder nominations for directors to be elected at the Annual Meeting.
Candidates for director may come from atotal number of sources including, among others, recommendations from current directors, recommendations from management, and recommendations from stockholders. Director candidates are evaluated to determine whether they have the qualities and skills set forth above. Such evaluation may be by personal interview, background investigation and other appropriate means. The Board of Directors has not engaged any third-party search firms to identify director candidates.
The Board of Directors considers individuals for nomination for election to the Board of Directors from any source, including stockholder recommendations. The Board of Directors does not evaluate candidates differently based on who has made the recommendation. Consideration of nominee candidates typically involves a series of internal discussions and a review of information concerning a candidate’s qualifications and perceived contributions.
Processes for the Consideration and Determination of Executive and Director Compensation
The Board of Directors is responsible for, among other things, establishing Integrity’s general compensation philosophy and overseeing the development and implementation of Integrity’s compensation and benefits program. The Board of Directors is also responsible for reviewing the performance of Integrity’s Chief Executive Officer and other executive officers and setting the compensation of the Chief Executive Officer and such other executive officers. The Board of Directors also sets and approves its own compensation. To date, the members of the Board of Directors have not received any compensation from Integrity for their service as such, other than their compensation as employees of Integrity, for those that are employees, which compensation is described below under the caption “Executive Compensation.” In considering and determining the compensation to be paid to Integrity’s executive officers, the Board of Directors receives information and recommendations from the Chief Executive Officer as to such compensation, including recommendations as to the amount and form of such compensation. Neither Integrity nor the Board of Directors has retained the services of any compensation consultant to assist in determining or recommending the amount or form of executive and director compensation.
Communications with the Board of Directors
Integrity does not have a formal procedure for stockholder communication with its Board of Directors. Stockholders who wish to contact the Board of Directors or an individual director should send their correspondence to Integrity Applications, Inc., 102 Ha’Avoda Street, P.O. Box 432, Ashkelon Israel 7810301, Attention: Chief Financial Officer. Any such communication should specify the applicable addressee or addressees to be contacted, as well as the general topic of the communication. Integrity will initially receive and process a communication before forwarding it to the addressee or addressees. Integrity generally will not forward a stockholder communication to its directors if it determines that such communication is primarily commercial in nature or is abusive, threatening or otherwise inappropriate.
Role of the Board of Directors in Risk Oversight
Integrity’s management has responsibility for managing day-to-day risk and for bringing the most material risks facing Integrity to the Board of Directors’ attention. To facilitate the Board of Directors’ risk oversight responsibility, management provides the Board of Directors with information about its identification, assessment and management of critical risks and its risk mitigation strategies. These matters are further discussed by the Board of Directors with or without the presence of management.
Code of Ethics
Integrity has adopted a code of ethics that applies to its Chief Executive Officer and its senior financial officers (currently consisting only of the Chief Financial Officer). This code of ethics is available on Integrity’s website at www.integrity-app.com. If Integrity makes any substantive amendments to the code or grants any waiver, including any implicit waiver, from a provision of the code to its principal executive, financial or accounting officer, it will disclose the nature of the amendment or waiver on its website or in a report on a Current Report on Form 8-K filed in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act and regulations of the SEC thereunder require that Integrity’s directors, executive officers and persons who own more than 10% of Integrity’s Common Stock, as well as certain affiliates of such persons, file initial reports of their ownership of Integrity’s Common Stock and subsequent reports of changes in such ownership with the SEC. Directors, executive officers and persons owning more than 10% of Integrity’s Common Stock are required by SEC regulations to file with the SEC reports of their respective ownership of Common Stock and to furnish Integrity with copies of all Section 16(a) reports they file. Based solely on a review of the copies of such reports received, Integrity believes that during the year ended December 31, 2014, directors, executive officers and owners of more than 10% of its Common Stock timely complied with all applicable filing requirements under Section 16(a), other than Eran Hertz, Integrity’s Chief Financial Officer, who filed his required Form 4 late following his receipt of options to purchase 10,000 shares of Common Stock.
Advisory Board of the Board of Directors
In addition to its executive officers and directors, Integrity also has an Advisory Board that provides advice to Integrity with respect to the development of its product candidates. The Advisory Board is an advisory body only and does not have the power to make decisions on behalf of Integrity. Members of the Advisory Board do not receive any compensation from Integrity. Biographical information regarding the members of Integrity’s Advisory Board is set forth below.
Dr. Ilana Harman-Boehm, M.D. heads the Department of Internal Medicine and is the Director of the Diabetes Unit at Soroka University Medical Center in Beer-Sheba, Israel. Dr. Harman served as deputy Chairman for the Israeli Diabetes Association and serves as Director of Educational Programs.
Professor Yariv Malimovka, M.D. is a leading expert in vascular surgery. He currently serves as a senior scientific advisor to major medical centers (such as Clínica Tara Tenerife España) in Spain, as well as in Eastern Europe. In addition, Professor Malimovka also manages International Clinic for Arterial Disease, an institute for research and treatment of arteriosclerosis in Madrid, Spain.
Mr. Adi Ickowicz, Bsc. ME serves as Director of MedicSense, a consulting firm which specializes in helping companies navigating the international regulatory maze (“MedicSense”). With more than 20 years of experience, Mr. Ickowicz has helped many companies meet regulatory demands for their products, guiding them through specific technological requirements and best practices for the collection of clinical data.
Ms. Adi Gluzberg-Ashkenazi, BSc.CE serves as Vice President of Projects of MedicSense. With more than 10 years of experience, Ms. Gluzberg-Ashkenazi specializes in developing company-tailored clinical and regulatory strategies and has helped many companies meet the regulatory demands for their products, guiding them through specific technological requirements and best practices for the collection of clinical data. Ms. Gluzberg-Ashkenazi has previously managed Quality and Regulatory Affairs departments in well-established companies as well as in start-up companies. In addition, Ms. Gluzberg-Ashkenazi has previously managed clinical trials in Israel and Europe and has been responsible for various activities in each firm for which she has worked. Ms. Gluzberg-Ashkenazi is certified to be a British Standards Institution (BSI) trainer for quality management systems for medical devices.
Professor Lutz Heinemann, Ph.D.heads the Company’s new scientific advisory board. Professor Heinemann was Chief Executive Officer and Head of Business Development for Profil Institute for Metabolic Research, Ltd., an internationally recognized research institute for clinical studies in the area of diabetes mellitus headquartered in Neuss, Germany, from 1999 until 2009. Dr. Heinemann served as Director of Scientific Services at Profil Institute for Clinical Research Inc. and serves as its Senior Scientific Consultant. Dr. Heinemann has performed clinical studies on major suppliers of insulin products in the world. Dr. Heinemann is an International Authority on insulin absorption and utilization in the human body. His glucose clamp studies have become the standard in the scientific community for assessing the pharmacodynamic and pharmacokinetic profile of insulin formulations. He serves on several advisory boards and scientific study groups within the pharmaceuticals industry. He is Managing Editor of the Journal of Diabetes Science and Technology and is a Member of the Editorial Board of Diabetes Technology & Therapeutics. In addition, he has published numerous articles on the treatment of diabetes. He earned his Engineering Degree from Polytechnic College in Dusseldorf and Degree in Biology and Doctorate in Natural Sciences from the University of Düsseldorf.
None of the members of the Advisory Board have entered into any written agreements with Integrity (directly or indirectly), except that Integrity is party to an agreement with MedicSense, of which Mr. Adi Ickowicz is a principal and Ms. Gluzberg-Ashkenazi is a vice president, pursuant to which MedicSense has agreed to assist Integrity in its efforts to obtain FDA clearance and CE Mark approval for its product candidate in consideration for a monthly fee and options to acquire shares of Integrity Common Stock.
EXECUTIVE OFFICERS
The following tables set forth information concerning Integrity’s current executive officers:
Executive Officers
| | | | |
Avner Gal | | 60 | | Chairman of the Board, President and Chief Executive Officer |
David Malka | | 49 | | Director and Executive Vice President of Operations |
Eran Hertz | | 42 | | Chief Financial Officer |
Set forth below is biographical information with respect to Eran Hertz, Integrity’s Chief Financial Officer. Biographical information for Messrs. Gal and Malka is set forth under the caption “Proposal No. 1: Election of Directors.”
Eran Hertz joined Integrity in November 2013 as its Chief Financial Officer. Prior to joining Integrity, Mr. Hertz served as the Controller of Advanced Vision Technology, Ltd., an Israel-based global developer and manufacturer of automated print inspection systems, from January 2009 through November 2013. From July 2008 through January 2009, Mr. Hertz took time off from his professional endeavors in connection with his relocation from the United States to Israel. From April 2005 to June 2008, Mr. Hertz served as a Vice President of BlackRock Inc., an investment management firm. Mr. Hertz received a bachelor’s degree in accounting and economics from Tel-Aviv University in Tel Aviv, Israel and an MBA from Technion - Israeli Institute of Technology in Tel Aviv, Israel. In addition, Mr. Hertz is a certified public accountant in both the United States and Israel.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information for the fiscal years ended December 31, 2014 and 2013 concerning the compensation of Avner Gal, Integrity’s Chief Executive Officer and President, Eran Hertz, Integrity’s Chief Financial Officer since November 17, 2013, and David Malka, Integrity’s Executive Vice President of Operations.
Name and Principal Position | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Avner Gal | | | | | | | | | | | | | | | | | |
| Chief Executive Officer | | 2014 (1) | | $ | 134,769 | | | | - | | | | - | | | $ | 109,116 | (2) | | $ | 243,885 | |
| | | 2013 (3) | | $ | 134,111 | | | $ | 61,087 | | | | - | | | $ | 59,190 | (4) | | $ | 254,388 | |
| Eran Hertz | | | | | | | | | | | | | | | | | | | | | | |
| Chief Financial Officer | | 2014 (1) | | $ | 93,256 | | | | - | | | | - | | | $ | 53,303 | (5) | | $ | 146,559 | |
| | | 2013 (3) | | $ | 11,664 | | | | - | | | | - | | | $ | 6,125 | (6) | | $ | 17,789 | |
| David Malka | | | | | | | | | | | | | | | | | | | | | | |
| Executive Vice President of Operations | | 2014 (1) | | $ | 67,302 | | | | - | | | | - | | | $ | 54,831 | (7) | | $ | 122,133 | |
| | | 2013 (3) | | $ | 66,639 | | | $ | 30,544 | | | | - | | | $ | 72,106 | (8) | | $ | 169,289 | |
——————————-
(1) | Calculated based on the average exchange rate for the year of New Israeli Shekels to U.S. Dollars of NIS 3.593 = U.S. $1.00. |
(2) | Includes $20,357 in automobile expenses paid by Integrity, including leasing costs, insurance premiums, gasoline and/or repairs incurred in connection with the executive’s automobile, $377 in cellular communications expenses paid by Integrity, representing the estimated costs of our cellular communications expenses attributable to the executive, $12,191 in tax gross-up payments, and contributions to the (a) Severance Pay-Fund, (b) retirement plan feature of Managers’ Insurance (Kupat Gemel), (c) disability insurance (Ovdan Kosher Avoda) (d) statutory national insurance (Bituach Leumi) and (e) vacation pay-out in the aggregate total amount of $75,990. |
(3) | Calculated based on the average exchange rate for the year of New Israeli Shekels to U.S. Dollars of NIS 3.601 = U.S. $1.00. |
(4) | Includes $21,129 in automobile expenses paid by Integrity, including leasing costs, insurance premiums, gasoline and/or repairs incurred in connection with the executive’s automobile, $377 in cellular communications expenses paid by Integrity, representing the estimated costs of our cellular communications expenses attributable to the executive, $12,164 in tax gross-up payments, and contributions to the (a) Severance Pay-Fund, (b) retirement plan feature of Managers’ Insurance (Kupat Gemel), (c) disability insurance (Ovdan Kosher Avoda) and (d) statutory national insurance (Bituach Leumi) in the aggregate total amount of $25,520. |
(5) | Includes $20,357 in automobile expenses paid by Integrity, including leasing costs, insurance premiums, gasoline and/or repairs incurred in connection with the executive’s automobile, $12,024 in tax gross-up payments, and contributions to the (a) Severance Pay-Fund, (b) retirement plan feature of Managers’ Insurance (Kupat Gemel), (c) disability insurance (Ovdan Kosher Avoda) and (d) statutory national insurance (Bituach Leumi) in the aggregate total amount of $20,922. |
(6) | Includes $1,693 in automobile expenses paid by Integrity, including leasing costs, insurance premiums, gasoline and/or repairs incurred in connection with the executive’s automobile, $1,945 of gross-up taxes paid by Integrity on behalf of the executive and contributions to the (a) Severance Pay-Fund, (b) retirement plan feature of Managers’ Insurance (Kupat Gemel), (c) disability insurance (Ovdan Kosher Avoda) and (d) statutory national insurance (Bituach Leumi) in the aggregate total amount of $2,489. |
(7) | Includes $20,357 in automobile expenses paid by Integrity, including leasing costs, insurance premiums, gasoline and/or repairs incurred in connection with the executive’s automobile, $377 in cellular communications expenses paid by Integrity, representing the estimated costs of our cellular communications expenses attributable to the executive, $12,191 in tax gross-up payments, and contributions to the (a) Severance Pay-Fund, (b) retirement plan feature of Managers’ Insurance (Kupat Gemel), (c) disability insurance (Ovdan Kosher Avoda) (d) statutory national insurance (Bituach Leumi) and (e) vacation pay-out in the aggregate total amount of $20,472. |
(8) | Includes $21,675 in automobile expenses paid by Integrity, including leasing costs, insurance premiums, gasoline and/or repairs incurred in connection with the executive’s automobile, $567 in cellular communications expenses paid by Integrity, representing the estimated costs of our cellular communications expenses attributable to the executive, $12,041 in tax gross-up payments, and contributions to the (a) Severance Pay-Fund, (b) retirement plan feature of Managers’ Insurance (Kupat Gemel), (c) disability insurance (Ovdan Kosher Avoda) and (d) statutory national insurance (Bituach Leumi) in the aggregate total amount of $37,823. |
Employment Agreements
Set forth below are summaries of the material terms of the employment agreements between Integrity Israel and each of Integrity’s named executive officers. Each of Integrity’s officers provides services to Integrity pursuant to an employment agreement with Integrity Israel and does not have a separate employment agreement directly with Integrity.
Avner Gal
Avner Gal entered into an employment agreement with Integrity Israel in October 2010 pursuant to which Mr. Gal agreed to continue to serve as the Chief Executive Officer and managing director of Integrity Israel. Mr. Gal’s employment agreement provides for an annual salary of NIS 480,000, or $123,266.56 based on the exchange rate of 3.894 NIS / $1.00 USD in effect on April 28, 2015, an annual bonus to be determined by the Board of Directors, an additional sum payable in the event that Mr. Gal meets certain milestones approved by the Board of Directors, as well as the payment of certain social and insurance benefits and the use of a company car. The agreement also provides that Mr. Gal’s salary and bonus shall be subject to increase from time to time at the discretion of the Board of Directors. We expect that Mr. Gal’s bonus formula, as previously determined by the Board of Directors, will be renegotiated once Integrity Israel has begun commercialization of its products. The agreement is terminable by either party on 180 days’ notice, immediately by Integrity Israel with the payment of an amount equal to 180 days of annual salary, or immediately by Integrity Israel for cause (as defined in the agreement) without the payment of severance. Mr. Gal’s employment agreement contains non-compete and confidentiality provisions effective during the term of the agreement and for one year thereafter.
Pursuant to his employment agreement, in March 2012, Mr. Gal was granted options to purchase 264,778 shares of Common Stock at an exercise price per share $6.25 per share. Mr. Gal’s options vested (or in the case of clause (iii) below, will vest) in one-third increments upon (i) submission of clinical trials’ results to the Notified Body; (ii) the receipt of CE mark approval; and (iii) the receipt of FDA approval, subject to immediate vesting in the event of a change of control.
Eran Hertz
Eran Hertz entered into an employment agreement with Integrity Israel in November 2013 pursuant to which Mr. Hertz agreed to serve as the Chief Financial Officer of Integrity and Integrity Israel. Mr. Hertz’s employment agreement provides for an annual base salary of NIS 336,000 (approximately $86,286.59 based on the exchange rate of 3.894 NIS / $1.00 USD in effect on April 28, 2015), as well as the payment of certain social and insurance benefits and the use of a company car. In addition, pursuant to the agreement, Integrity has agreed to grant to Mr. Hertz, on the one year anniversary of the commencement of his employment with the Company, options to purchase such number of shares of common stock, at an exercise price of $9.50 per share, with the number of options to be issued and the vesting provisions applicable thereto to be determined by the Board of Directors. The agreement is terminable by either party on 60 days’ notice, immediately by the Subsidiary with the payment of an amount equal to 60 days of annual salary, or immediately by Integrity Israel for cause (as defined in the agreement) without the payment of severance. Mr. Hertz’s employment agreement contains non-compete obligations applicable during the term of the agreement and for one year thereafter and confidentiality obligations that survive the termination of the Employment Agreement indefinitely.
On September 30, 2014, Mr. Hertz was granted options to purchase 10,000 shares of Common Stock at an exercise price of $7.00 per share. Such options vested or will vest in 8 equal quarterly installments beginning February 28, 2015.
David Malka
David Malka entered into an employment agreement with Integrity Israel in July 2010 pursuant to which Mr. Malka agreed to continue to serve as the vice president of operations of Integrity Israel. Mr. Malka’s employment agreement provides for an annual salary of NIS 240,000, or approximately $61,633.28 based on the exchange rate of 3.894 NIS / $1.00 USD in effect on April 28, 2015, and an annual bonus to be determined by the Board of Directors and an additional sum provided that Mr. Malka reaches certain milestones approved by the Board of Directors, as well as the payment of certain social and insurance benefits and the use of a company car. The agreement also provides that Mr. Malka’s annual salary shall be subject to increase from time to time at the discretion of the Board of Directors. We expect that Mr. Malka’s bonus formula, as previously determined by the Board of Directors, will be renegotiated once Integrity Israel has begun commercialization of its products. The agreement is terminable by either party on 90 days’ notice, immediately by Integrity Israel with the payment of an amount equal to 90 days of annual salary, or immediately by Integrity Israel for cause (as defined in the agreement) without the payment of severance. Mr. Malka’s employment agreement contains non-compete and confidentiality provisions effective during the term of the agreement and for one year thereafter.
Pursuant to his employment agreement, in March 2012, Mr. Malka was granted options to purchase 79,434 shares of Common Stock at an exercise price per share $6.25 per share. Mr. Malka’s options vested (or in the case of clause (iii) below, will vest) in one-third increments upon (i) submission of clinical trials’ results to the Notified Body; (ii) the receipt of CE mark approval; and (iii) the receipt of FDA approval, subject to immediate vesting in the event of a change of control.
Outstanding Equity Awards as of December 31, 2014
The following table sets forth for each of Integrity’s named executive officers certain information regarding unexercised options as of December 31, 2014.
Option Awards
| | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Option Exercised Price($) | | | |
| Avner Gal | | | 176,519 | | | | 88,259 | | | $ | 6.25 | (1) | | March 11, 2022 |
| Chief Executive Officer | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| Eran Hertz | | | - | | | | 10,000 | | | $ | 7.00 | (2) | | June 30, 2024 |
| Chief Financial Officer | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| David Malka | | | 52,956 | | | | 26,478 | | | $ | 6.25 | (3) | | March 11, 2022 |
| Executive Vice President of Operations | | | | | | | | | | | | | | |
__________
(1) Mr. Gal’s options vested or will vest in one-third increments upon (i) submission of clinical trials’ results to the Notified Body; (ii) the receipt of CE mark approval; and (iii) the receipt of FDA approval, subject to immediate vesting in the event of a change of control.
(2) Mr. Hertz’s options vest in 8 equal quarterly installments beginning February 28, 2015.
(3) Mr. Malka’s options vested (or in the case of clause (iii) below, will vest) in one-third increments upon (i) submission of clinical trials’ results to the Notified Body; (ii) the receipt of CE mark approval; and (iii) the receipt of FDA approval, subject to immediate vesting in the event of a change of control.
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2014 with respect to securities authorized for issuance under Integrity’s 2010the Incentive Compensation Plan (the “Plan”), which has been approved by Integrity’s stockholders, as well as securities authorized for issuance under certain compensation arrangements that were not subject to approval by Integrity’s stockholders.
| | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | | Weighted-average exercise price of outstanding options, warrants and rights | | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | |
| | | (a) | | | (b) | | | (c) | |
| Equity compensation plans approved by security holders | | | 450,847 | | | $ | 5.85 | | | | 78,708 | |
| Equity compensation plans not approved by security holders | | | 879,398(1) | | | $ | 6.57 | | | | — | |
| Total | | | 1,347,901 | | | $ | 4.35 | | | | 78,708 | |
(1) Consists of: (i) warrants to purchase 129,556 shares of Common Stock issuable to Andrew Garrett, Inc., as partial consideration for its services as the placement agent for Integrity’s private placement of 1,295,545 shares of Common Stock completed in July 2011, (ii) warrants to purchase 256,769 shares of Common Stock issued or issuable to Andrew Garrett, Inc., as partial consideration for its services as placement agent for Integrity’s private placement of the Series A Units; (iii) warrants to purchase 439,674 shares of Common Stock issued or issuable to Andrew Garrett, Inc., as partial consideration for its services as placement agent for Integrity’s private placement of the Series B Units; (iv) warrants to purchase 35,743 shares of Common Stock issued pursuant to the anti-dilution provisions of outstanding warrants held by Andrew Garrett, Inc. and (iv) options to purchase 17,656 shares of Common Stock issued to the Company’s former investor relations provider, as partial consideration for their services.7
