EXECUTIVE COMPENSATION AND OTHER INFORMATION
AquaBounty Technologies, Inc. is an “emerging growth company,” as defined underMATTERSWe do not know of any matters to be presented at the Jumpstart Our Business Startups Act of 2012. As an emerging growth company, under SEC rules, we are not required to include a Compensation Discussion and Analysis sectionSpecial Meeting other than those mentioned in this proxy statement and have elected to comply withProxy Statement. If any other matters properly come before the reduced disclosure requirements applicable to emerging growth companies. In preparing to become a public company, we conducted a thorough review of all elements of our executive and director compensation program, includingSpecial Meeting, it is the function and design of our equity incentive programs. We are evaluating the need for revisions to our executive compensation program to ensure our program is competitive with thoseintention of the companies with which we compete for executive talent and is appropriate for a public company.
Executive Officers
The tables and discussion below present compensation information for our chief executive officer and our two other most highly compensated officers forpersons named in the year ended December 31, 2017, whom we referenclosed form of proxy to collectivelyvote the shares they represent as our named executive officers. These officers are:
Board recommends. |
| | |
Name | Age | Positions |
Ronald L. Stotish | 68 | Chief Executive Officer and President |
David A. Frank | 57 | Chief Financial Officer and Treasurer |
Alejandro Rojas | 56 | Chief Operating Officer, AquaBounty Farms |
Summary Compensation Table
The following table provides certain summary information concerning the compensation earned by our named executive officers in the fiscal years ended December 31, 2017 and 2016.
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| | | | | | | | |
| Name and Position | Year | Salary ($) (1) | Bonus ($) (2) | Option Awards ($) (3) | All other Compensation ($) (4) | Total ($) |
| R. Stotish | 2017 | 363,090 | — |
| 91,000 |
| 3,299 | 457,389 |
| CEO and President | 2016 | 350,659 | 116,424 |
| — |
| 7,505 | 474,588 |
| D. Frank | 2017 | 273,833 | — |
| 45,500 |
| 4,770 | 324,103 |
| CFO and Treasurer | 2016 | 263,172 | 66,250 |
| — |
| 8,109 | 337,531 |
| A. Rojas | 2017 | 227,083 | — |
| 27,300 |
| 4,840 | 259,223 |
| COO, AquaBounty Farms | 2016 | 215,000 | 5,000 |
| — |
| 4,965 | 224,965 |
| |
(1) | Represents salaries before any employee contributions under our 401(k) plan. |
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(2) | Represents discretionary cash incentive awards paid for performance during the 2016 fiscal year. |
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(3) | The Option Awards included for each individual consists of stock option awards granted under the 2016 Plan. The value for each of these awards is its grant date fair value calculated by multiplying the number of shares subject to the award by the fair value of the stock option award on the date such award was granted, computed in accordance with FASB Accounting Standards Codification Topic 718. The following table summarizes the number of stock option awards granted, the grant date, and the fair value of the stock option award to calculate the total grant date fair value for the option awards reported. The fair value of the stock option grants was measured as of the date of the grant using the Black-Scholes calculation. The assumptions included an expected stock price volatility of 78%, a risk-free interest rate of 1.8%, a dividend yield of 0%, and an expected life of five years. |
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| | | | | | | | | | | | |
| Name | | Number of Stock Option Awards | | Grant Date | | Per Share Fair Value | | Total Grant Date Fair Value |
| R. Stotish | | 20,000 | | April 21, 2017 | | $ | 4.55 |
| | $ | 91,000 |
|
| D. Frank | | 10,000 | | April 21, 2017 | | $ | 4.55 |
| | $ | 45,500 |
|
| A. Rojas | | 5,000 | | April 21, 2017 | | $ | 4.55 |
| | $ | 27,300 |
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(4) | Amounts represent our contributions under our 401(k) plan and other benefits. |
In 2017, we paid base salaries to Dr. Stotish, Mr. Frank, and Dr. Rojas of $363,090, $273,833, and $227,083, respectively. As of December 31, 2016, the base salaries of Dr. Stotish, Mr. Frank, and Dr. Rojas were $350,659, $263,172, and $215,000, respectively. Base salaries are used to recognize the experience, skills, knowledge, and responsibilities required of all of our employees, including our named executive officers, and are set by our Compensation Committee, taking into consideration recommendations from management based on each employee’s annual performance. Certain of our named executive officers are currently party to an
employment agreement that provides for the continuation of certain compensation upon termination of employment. See “—Employment Agreements.”
Our Board of Directors may, at its discretion, award bonuses to our named executive officers from time to time. We typically establish bonus targets for our named executive officers and evaluate their performance based on the achievement of specified goals and objectives by each individual employee. Our management may propose bonus awards to the Compensation Committee of the Board of Directors primarily based on such achievements. Our Board of Directors makes the final determination of the eligibility requirements for and the amounts of such bonus awards. For the fiscal year ended December 31, 2016, the bonus award for Dr. Stotish was $116,424, which represented 33% of his base salary, awarded for his achievements in progressing the approval process for AquAdvantage Salmon with the FDA. For that same fiscal year, Mr. Frank received a bonus award of $66,250 in recognition of his work in obtaining SEC registration of the Company’s stock, and Dr. Rojas received a bonus award of $5,000 for his achievements in progressing the planning of our North American operations strategy. No bonus awards were made to any named executive officer for 2017.
Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, or any formal equity ownership guidelines applicable to them, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture, and help to align the ownership interests of our executives and our stockholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention because this feature incentivizes our executive officers to remain in our employment during the vesting period.
Outstanding Equity Awards at Fiscal Year End
The following table provides certain summary information concerning outstanding equity awards held by our named executive officers as of December 31, 2017.
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| | | | | | | | | | | | |
| | | Option Awards |
| | | Number of securities underlying unexercised options | | | | |
| Name and Position | | Exercisable | | Unexercisable | | Option Exercise Price | Option Expiration Date |
| R. Stotish | | 62,334 |
| | — |
| (1) | $ | 3.30 |
| | June 30, 2019 |
| CEO and President | | 16,667 |
| | — |
| (2) | $ | 6.90 |
| | January 10, 2021 |
| | | 6,667 |
| | — |
| (3) | $ | 23.40 |
| | January 20, 2024 |
| | | 5,506 |
| | 14,494 |
| (4) | $ | 14.20 |
| | April 21, 2027 |
| D. Frank | | 15,000 |
| | — |
| (1) | $ | 3.30 |
| | June 30, 2019 |
| CFO and Treasurer | | 5,000 |
| | — |
| (2) | $ | 6.90 |
| | January 10, 2021 |
| | | 6,667 |
| | — |
| (5) | $ | 7.50 |
| | April 27, 2023 |
| | | 6,667 |
| | — |
| (3) | $ | 23.40 |
| | January 20, 2024 |
| | | 2,753 |
| | 7,247 |
| (4) | $ | 14.20 |
| | April 21, 2027 |
| A. Rojas | | 6,667 |
| | — |
| (3) | $ | 23.40 |
| | January 20, 2024 |
| COO, AquaBounty Farms | | 1,652 |
| | 4,348 |
| (4) | $ | 14.20 |
| | April 21, 2027 |
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(1) | This option grant was fully vested on July 1, 2012. |
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(2) | This option grant was fully vested on January 11, 2014. |
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(3) | This option grant was fully vested on January 20, 2017. |
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(4) | This option grant vests on a daily basis in three equal annual portions, with the first annual portion having vested as of February 27, 2018, and the grant being fully vested on February 27, 2020. |
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(5) | This option grant was fully vested on April 27, 2016. |
Employment Agreements
We have formal employment agreements with Dr. Stotish, Dr. Rojas, Mr. Frank, and Christopher Martin, our General Counsel. Each agreement provides for the payment of a base salary, an annual bonus determined at the discretion of our Board of Directors based on achievement of financial targets, and other performance criteria and, for Dr. Stotish, a one-time grant of 3,000 stock options.
Each agreement will remain in effect unless and until terminated in accordance with the terms and conditions set forth in the agreement. Mr. Frank’s agreement provides that employment may be terminated by either us or the employee after giving the other not less than twelve months’ notice. Mr. Martin’s agreement provides that employment may be terminated by either us or the employee after giving the other not less than nine months’ notice. Dr. Rojas’ agreement provides that employment may be terminated by us after
giving to Dr. Rojas not less than twelve months’ notice, and by Dr. Rojas after giving to us not less than one month’s notice. During these respective notice periods, we have the right to terminate employment prior to expiration of the notice period by paying the employee a sum equal to his basic salary and benefits during the notice period. Dr. Stotish’s agreement does not contain termination notice requirements applicable to his current employment.
In addition, under each agreement, we may terminate the employee’s employment without notice or payment at any time for cause. For these purposes, “cause” means any of the following:
performance by the employee of his duties in a manner that is deemed consistently materially unsatisfactory by our Board of Directors in its sole and exclusive discretion;
willful and material failure or refusal by the employee to perform his duties under the employment agreement (other than by reason of the employee’s death or disability);
certain breaches or nonobservance by the employee of the provisions of the employment agreement or directions of our Board of Directors or of rules issued by a stock exchange on which our securities are listed;
any intentional act of dishonesty, fraud, or embezzlement by the employee or the admission or conviction of, or entering of a plea of nolo contendere by, the employee of any felony or any lesser crime involving moral turpitude, dishonesty, fraud, embezzlement, or theft;
any negligence, willful misconduct, or personal dishonesty of the employee resulting in a good faith determination by our Board of Directors of a loss to us or a damage to our reputation;
any failure by the employee to comply with our policies or procedures to a material extent;
the employee commits any act of deliberate unlawful discrimination or harassment;
in the case of Dr. Stotish, the employee is adjudged bankrupt or enters into any composition or arrangement with or for the benefit of his creditors;
the employee becomes of unsound mind or a patient for the purposes of any law relating to mental health; or
the employee becomes prohibited by law from being an employee.
Each agreement also contains confidentiality and noncompetition provisions that we believe are typical for agreements of this type.
401(k) Plan
We provide an employee retirement plan under Section 401(k) of the Code (the “401(k) plan”), to all U.S. employees who are eligible employees as defined in the 401(k) plan. Subject to annual limits set by the Internal Revenue Service, we match 50% of eligible employee contributions up to a maximum of 3% of an employee’s salary, and vesting in our match is immediate. We made contributions in connection with the 401(k) plan during the years ended December 31, 2017 and 2016, of $31,308 and $33,422, respectively.
Registered Retirement Savings Plan
We also have a Registered Retirement Savings Plan for our Canadian employees. Subject to annual limits set by the Canadian government, we match 50% of eligible employee contributions up to a maximum of 3% of an employee’s salary, and vesting in our match is immediate. We made contributions in connection with this plan during the years ended December 31, 2017 and 2016, of $26,578 and $21,777, respectively.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires that our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, file reports of ownership and changes in ownership (Forms 3, 4, and 5) with the SEC. Executive officers, directors, and greater than 10% beneficial owners are required to furnish us with copies of all of the forms that they file.
Based solely on our review of these reports or written representations from certain reporting persons, we believe that during the fiscal year ended December 31, 2017, our officers, directors, greater than 10% beneficial owners, and other persons subject to Section 16(a) of the Exchange Act filed on a timely basis all reports required of them under Section 16(a) so that there were no late filings of any Form 3 or Form 5 reports or late Form 4 filings with respect to transactions relating to our common stock.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the section captioned “Executive Compensation and Other Information” with management. Based on such review and discussion, the Compensation Committee has recommended to the Board of Directors that the “Executive Compensation and Other Information” section be included in this proxy statement.
Submitted by the Compensation Committee of the Board of Directors:
Richard Huber (Chair)
Rick Sterling
RELATED-PARTY TRANSACTIONS, POLICIES, AND PROCEDURES
Agreements with Intrexon
Stock Purchase Agreement
On November 7, 2016, we entered into a Stock Purchase Agreement with Intrexon, pursuant to which we sold to Intrexon 2,421,073 shares of our common stock for proceeds of approximately $25 million. This sale of shares under the Stock Purchase Agreement closed on January 18, 2017, in connection with the Distribution (see “NASDAQ Listing and Intrexon Distribution,” above).
Exclusive Channel Collaboration Agreement
In February 2013, we entered into an Exclusive Channel Collaboration Agreement with Intrexon (the “ECC”), pursuant to which we are permitted to use certain technology platforms of Intrexon to develop and commercialize additional genetically modified traits in finfish for human consumption. The ECC grants us a worldwide license to use certain patents and other intellectual property of Intrexon in connection with the research, development, use, importing, manufacture, sale, and offer for sale of products involving DNA administered to finfish for human consumption. This license is exclusive with respect to any development, selling, offering for sale, or other commercialization of developed products but otherwise is non-exclusive.
Under the ECC and subject to certain exceptions, we are responsible for, among other things, the performance of the program, including development, commercialization, and certain aspects of manufacturing developed products. Among other things, Intrexon is responsible for the costs of establishing manufacturing capabilities and facilities for the bulk manufacture of certain products developed under the program; certain other aspects of manufacturing; costs of discovery-stage research with respect to platform improvements; and costs of filing, prosecution, and maintenance of Intrexon’s patents.
We agreed to pay Intrexon, on a quarterly basis, 16.66% of the gross profits calculated for each developed product. We also agreed to pay Intrexon 50% of the quarterly revenue obtained from a sublicensee in the event of a sublicensing arrangement. In addition, we agreed to reimburse Intrexon for the costs of certain services provided by Intrexon. The total Intrexon service costs incurred under the ECC during 2017 were approximately $562,039, of which approximately $135,301 was reflected as an account payable in the consolidated balance sheet as of December 31, 2017.
The ECC may be terminated by either party in the event of a material breach by the other. Intrexon may terminate the ECC (a) if we elect not to pursue the development of a “superior animal product” identified by Intrexon or (b) under certain circumstances if we assign our rights under the ECC without Intrexon’s consent. We may voluntarily terminate the ECC at any time upon 90 days’ written notice to Intrexon. Upon termination of the ECC, we may continue to develop and commercialize any collaboration product that, at the time of termination, (x) is being sold by us, (y) has received regulatory approval, or (z) is the subject of an application for regulatory approval. Our obligation to pay 16.66% of the gross profits and 50% of the quarterly revenue obtained from a sublicensee with respect to these “retained” products will survive termination of the ECC.
Relationship Agreement
In December 2012, we entered into a Relationship Agreement with Intrexon (the “Relationship Agreement”), which sets forth certain matters relating to Intrexon’s relationship with us as a major stockholder. The Relationship Agreement was entered into in connection with the acquisition in October 2012 by Intrexon of shares of our common stock constituting 47.56% of our outstanding share capital from Linnaeus Capital Partners B.V. and Tethys Aquaculture Canada, Inc. (doing business as the Center for Aquaculture Technology Canada), our former major stockholders.
Pursuant to the Relationship Agreement, we agreed to increase the size of our Board of Directors from three members to six members and to appoint three nominees of Intrexon (“Intrexon Nominees”) as directors with terms expiring at the annual meeting of stockholders held on July 10, 2013. Intrexon nominated Messrs. Thomas Barton, Thomas Kasser, and James Turk to serve as directors. Each was appointed to our Board of Directors on February 14, 2013. In addition, we agreed that, so long as the Relationship Agreement remains in effect and Intrexon and its affiliates together control 25% or more of the voting rights exercisable at meetings of our stockholders, we will (a) nominate such number of Intrexon Nominees as may be designated by Intrexon for election to our Board
of Directors at each annual meeting of our stockholders so that Intrexon will have representation on our Board of Directors proportional to Intrexon’s percentage shareholding, rounded up to the nearest whole person, and (b) recommend that stockholders vote to elect such Intrexon Nominees at the next annual meeting of stockholders occurring after the date of nomination. Subsequent to entering into the Relationship Agreement, we increased the size of our Board of Directors from six members to seven members, and Intrexon nominated Mr. Sterling to fill the Board vacancy. Mr. Sterling was appointed to our Board of Directors on September 13, 2013. On May 30, 2014, Mr. Barton resigned as a director, and Intrexon nominated Ms. St.Clare to serve as a director. Our Board of Directors approved and appointed Ms. St.Clare to the Board of Directors on May 30, 2014. On October 27, 2015, Mr. Kasser resigned as a director, and Intrexon nominated Mr. Bobo to serve as a director. Our Board of Directors approved and appointed Mr. Bobo to the Board of Directors on October 27, 2015.
In addition, we and Intrexon agreed that, so long as Intrexon and its affiliates control 10% or more of the voting rights exercisable at meetings of our stockholders, for any time period for which Intrexon has reasonably concluded that it is required to consolidate or include our financial statements with its own:
we will maintain at our principal place of business (i) a copy of our certificate of incorporation and any amendments thereto; (ii) a copy of the Relationship Agreement; (iii) copies of our federal, state, and local income tax returns and reports; and (iv) minutes of our Board of Director and stockholder meetings and actions by written consent in lieu thereof, redacted as necessary to exclude sensitive or confidential information;
we will keep our books and records consistent with United States generally accepted accounting principles (“U.S. GAAP”);
Intrexon may examine any information that it may reasonably request; make copies of and abstracts from our financial and operating records and books of account; and discuss our affairs, finances, and accounts with us and our independent auditors;
as soon as available, but no later than ninety days after the end of each fiscal year, we will furnish to Intrexon an audited balance sheet, income statement, and statements of cash flows and stockholders’ equity as of and for the fiscal year then ended, together with a report of our independent auditor that such financial statements have been prepared in accordance with U.S. GAAP and present fairly, in all material respects, our financial position, results of operation, and cash flows;
as soon as available, but no later than forty-five days after the end of each calendar quarter, we will furnish to Intrexon an unaudited balance sheet, income statement, and statements of cash flows and stockholders’ equity for such period, in each case prepared in accordance with U.S. GAAP; and
as requested by Intrexon, but no more than quarterly, we will provide to Intrexon (i) a certificate of our Chief Executive Officer or Chief Financial Officer certifying as to the accuracy of our books and records and the adequacy of our internal control over financial reporting and disclosure controls and procedures and (ii) any information requested by Intrexon for purposes of its compliance with applicable law.
The Relationship Agreement and related documents also provide for certain confidentiality obligations between the two parties. The Relationship Agreement will continue in full force and effect until Intrexon and its affiliates cease to control 10% or more of the voting rights exercisable at meetings of our stockholders.
Intrexon Participation in Public Offering
On January 17, 2018, we completed a public offering of 3,692,307 shares of our common stock and 4,246,153 warrants for net proceeds of approximately $10.6 million. Intrexon participated in this offering, purchasing 1,538,461 shares of our common stock and 1,538,461 warrants for a total of $5 million.
Policies and Procedures for Review of Related Person Transactions
Our Board of Directors has adopted a written policy with respect to related person transactions. This policy governs the review, approval, and ratification of covered related person transactions. The Audit Committee of the Board of Directors manages this policy.
For purposes of this policy, a “related person transaction” is a transaction, arrangement, or relationship (or any series of similar transactions, arrangements, or relationships) in which we (or any of our subsidiaries) were, are, or will be a participant, and in which any related person had, has, or will have a direct or indirect interest. For purposes of determining whether a transaction is a related person transaction, the Audit Committee relies upon Item 404 of Regulation S-K promulgated under the Exchange Act.
A “related person” is defined as:
any person who is, or at any time since the beginning of our last fiscal year was, one of our directors or executive officers or a nominee to become one of our directors;
any person who is known to be the beneficial owner of more than 5% of any class of our voting securities;
any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the director, executive officer, nominee, or more-than-five-percent beneficial owner and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee, or more-than-five-percent beneficial owner; and
any firm, corporation, or other entity in which any of the foregoing persons is employed or is a general partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.
The policy generally provides that we may enter into a related person transaction only if:
the Audit Committee pre-approves such transaction in accordance with the guidelines set forth in the policy;
the transaction is on terms comparable to those that could be obtained in arm’s-length dealings with an unrelated third party, and the Audit Committee (or the chairperson of the Audit Committee) approves or ratifies such transaction in accordance with the guidelines set forth in the policy;
the transaction is approved by the disinterested members of the Board of Directors; or
the transaction involves compensation approved by the Compensation Committee of the Board of Directors.
If a related person transaction is not pre-approved by the Audit Committee, and our management determines to recommend such related person transaction to the Audit Committee, such transaction must be reviewed by the Audit Committee. After review, the Audit Committee will approve or disapprove such transaction.
In addition, the Audit Committee reviews the policy at least annually and recommends amendments to the policy to the Board of Directors from time to time.
The policy provides that all related person transactions will be disclosed to the Audit Committee and all material related person transactions will be disclosed to the Board of Directors. Additionally, all related person transactions requiring public disclosure will be properly disclosed in our public filings.
The Audit Committee will review all relevant information available to it about the related person transaction. The policy provides that the Audit Committee may approve or ratify the related person transaction only if the Audit Committee determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, our best interests. The policy provides that the Audit Committee may, in its sole discretion, impose such conditions as it deems appropriate on us or the related person in connection with approval of the related person transaction.
AUDIT COMMITTEE REPORT
The following is the report of the Audit Committee with respect to our audited consolidated financial statements for the year ended December 31, 2017, included in our Annual Report on Form 10-K for that period.
Composition and Charter. The Audit Committee of our Board of Directors currently consists of three independent directors, as that term is defined in Rule 5605(a)(2) of the NASDAQ Marketplace Rules: Ms. St.Clare, who serves as Chair of the Audit Committee, and Messrs. Huber and Turk. The Audit Committee operates under a written charter adopted by our Board of Directors and is available on our corporate website (www.aquabounty.com) under “Investor Relations.” The Board of Directors and the Audit Committee review and assess the adequacy of the charter of the Audit Committee on an annual basis.
Responsibilities. The Audit Committee assists our Board of Directors in fulfilling its oversight responsibilities by reviewing the financial information that will be provided to our stockholders and others; reviewing our systems of internal control over financial reporting, disclosure controls and procedures, and our financial reporting process that management has established and the Board oversees; and endeavoring to maintain free and open lines of communication among the Audit Committee, our independent registered public accounting firm, and management. The Audit Committee is also responsible for the review of all critical accounting policies and practices to be used by us; the review and approval or disapproval of all proposed transactions or courses of dealings that are required to be disclosed by Item 404 of Regulation S-K that are not otherwise approved by a comparable committee or the entire Board of Directors; and establishing procedures for the receipt, retention, and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. The Audit Committee also has the authority to secure independent expert advice to the extent the Audit Committee determines it to be appropriate, including retaining independent counsel, accountants, consultants, or others, to assist the Audit Committee in fulfilling its duties and responsibilities.
It is not the duty of the Audit Committee to plan or conduct audits or to prepare our consolidated financial statements. Management is responsible for preparing our consolidated financial statements and has the primary responsibility for assuring their accuracy and completeness, and the independent registered public accounting firm is responsible for auditing those consolidated financial statements and expressing its opinion as to their presenting fairly in accordance with GAAP our financial condition, results of operations, and cash flows. However, the Audit Committee does consult with management and our independent registered public accounting firm prior to the presentation of consolidated financial statements to stockholders and, as appropriate, initiates inquiries into various aspects of our financial affairs. In addition, the Audit Committee is responsible for the oversight of the independent registered public accounting firm; considering and approving the appointment of and approving all engagements of, and fee arrangements with, our independent registered public accounting firm; and the evaluation of the independence of our independent registered public accounting firm.
In the absence of their possession of information that would give them a reason to believe that such reliance is unwarranted, the members of the Audit Committee rely without independent verification on the information provided to them, and on the representations made, by our management and our independent registered public accounting firm. Accordingly, the Audit Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal control over financial reporting and disclosure controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The Audit Committee’s authority and oversight responsibilities do not independently assure that the audits of our consolidated financial statements are conducted in accordance with auditing standards generally accepted in the United States, or that our consolidated financial statements are presented in accordance with GAAP.
Review with Management and Independent Registered Public Accounting Firm. The Audit Committee has reviewed and discussed the quality, not just the acceptability, of our accounting principles; the reasonableness of significant judgments; and the clarity of disclosures in the financial statements with our management and our independent registered public accounting firm, Wolf. In addition, the Audit Committee has consulted with management and Wolf prior to the presentation of our consolidated financial statements to stockholders. The Audit Committee has discussed with Wolf the matters required to be discussed by PCAOB Auditing Standard No. 16, Communications with Audit Committees. The Audit Committee has received the written disclosures and the letter from Wolf required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with Wolf its independence from us, including whether its provision of non-audit services has compromised such independence.
Conclusion and Appointment of Independent Registered Public Accounting Firm. Based on the reviews and discussions referred to above in this report, the Audit Committee recommended to our Board of Directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2017, for filing with the SEC.
Submitted by the Audit Committee of the Board of Directors:
Christine St.Clare (Chair)
Richard Huber
James Turk
Notwithstanding anything to the contrary in any of our previous or future filings under the Securities Act of 1933 or the Exchange Act that might incorporate this proxy statement or future filings made by us under those statutes, the Audit Committee report and reference to the independence of the Audit Committee members are not deemed filed with the SEC and shall not be deemed incorporated by reference into any of those prior filings or into any future filings made by us under those statutes.
ANNUAL REPORT; AVAILABLE INFORMATION
A copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on March 8, 2018, is available over the internet on our corporate website (www.aquabounty.com). The Annual Report on Form 10-K is not incorporated into this proxy statement and is not considered proxy solicitation material.
Stockholders may request a paper or email copy of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, free of charge, by following the instructions in the proxy materials. All reports and documents we file with the SEC are also available, free of charge, on our corporate website (www.aquabounty.com) under “Investor Relations.”
|
| |
| BY ORDER OF THE BOARD OF DIRECTORS
OF AQUABOUNTY TECHNOLOGIES, INC. |
| |
| Ronald L. Stotish
| /s/ Sylvia Wulf Sylvia Wulf |
| | President, Chief Executive Officer, and Director |
Maynard, Massachusetts
August 31, 2022
April 3, 2018
Appendix A
CERTIFICATERESOLUTIONS OF AMENDMENT
TO THE
THIRD AMENDED AND RESTATED CERTIFICATEBOARD OF INCORPORATION
DIRECTORS (the “Board”) OF
AQUABOUNTY TECHNOLOGIES, INC.
AquaBounty Technologies, Inc.(a Delaware corporation, the “Corporation”)
August 3, 2022
WHEREAS, the Board previously approved the amendment of the Third Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock, par value $0.001 per share (the “Common Stock”), from 80,000,000 to 150,000,000 (the “Amendment”) and the Corporation sought stockholder approval of such amendment at the Corporation’s 2022 Annual Meeting of Stockholders (the “2022 Annual Meeting of Stockholders”).
WHEREAS, the inspector of elections for the 2022 Annual Meeting of Stockholders determined that the proposal to approve the Amendment was adopted by the requisite vote of stockholders and certified that the proposal had passed.
WHEREAS, the Corporation, after determining that it had received the requisite stockholder vote to adopt the Amendment, effected the Amendment by filing a corporation organizedCertificate of Amendment to the Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware (the “Secretary of State”) on May 27, 2022.
WHEREAS, the validity of the Amendment and existing underthe effectiveness of the Certificate of Amendment upon its filing with the Secretary of State on May 27, 2022 has been challenged in a stockholder demand letter, dated June 24, 2022, alleging that disclosures in the Proxy Statement for the 2022 Annual Meeting of Stockholders regarding the authority of brokers and/or other nominees to cast votes on the Amendment without specific instructions from the beneficial holders of such stock were inconsistent with how such votes were tabulated and by virtuecounted, as the Proxy Statement for the 2022 Annual Meeting of Stockholders identified the Amendment as “non-routine.”
WHEREAS, Section 204 of the General Corporation Law of the State of Delaware (the “Corporation”“DGCL”) does hereby certify:
FIRST: That, atprovides that no “defective corporate act” or “putative stock” shall be void or voidable solely as a
meetingresult of a “failure of authorization” (as such terms are defined in subsection (h) of Section 204) if ratified as provided in Section 204 of the
DGCL.WHEREAS, Section 205 of the DGCL provides that no action asserting that a defective corporate act or putative stock ratified under Section 204 of the DGCL is void or voidable due to a failure of authorization identified in a resolution adopted in accordance with Section 204(b) of the DGCL, or that the Delaware Court of Chancery should declare in its discretion that the ratification thereof in accordance with Section 204 of the DGCL not be effective or be effective only on certain conditions, may be brought after 120 days from the later of the validation effective time and the time required to give notice of such ratification to a corporation’s stockholders pursuant to Section 204(g) of the DGCL.
WHEREAS, although the Board believes it was and is appropriate to include the affirmative votes cast by brokers and/or other nominees pursuant to their discretionary authority in the tabulation of Directorsvotes in favor of the Amendment, and thus the Amendment was properly approved by the requisite stockholders of the Corporation, on February 27, 2018, a resolution was duly adopted setting forth a proposed amendmentto avoid potential future litigation risk and to eliminate any uncertainty as to the Third AmendedAmendment and Restated Certificatethe validity of Incorporationshares of Common Stock that in the future may be issued by virtue of the Amendment, the Board has determined that it is advisable and in the best interests of the Corporation as amended,and its stockholders to adopt the following resolutions in order to ratify the form set forth below (the “Amendment”)Potentially Defective Corporate Acts (as defined below) pursuant to Section 204 of the DGCL.
NOW, THEREFORE, BE IT RESOLVED, declaringthat the Amendmentarguably defective corporate acts to be advisable and calling for considerationratified are the approval of said proposedthe Amendment by the stockholders of the Corporation.
Corporation, the filing of the Certificate of Amendment with the Secretary of State and the effectiveness of the Certificate of Amendment following such filing (the “
Potentially Defective Corporate Acts”).RESOLVED, FURTHER, that having determinedthe date of the Potentially Defective Corporate Acts is May 27, 2022.
RESOLVED, FURTHER, that a reductionthe nature of the potential failure of authorization in respect of the Potentially Defective Corporate Acts is that the disclosure set forth in the Corporation’s authorized common stock and preferred stockProxy Statement for the 2022 Annual Meeting of Stockholders may not have accurately described (i) whether brokers and/or other nominees had discretionary authority to 50,000,000 shares and 5,000,000 shares, respectively, isvote on the proposal that stockholders adopt the Amendment, in the best interestabsence of specific instructions from the beneficial owners of the shares of Common Stock at issue, and (ii) the effect of a failure by a beneficial owner of Common Stock to provide voting instructions to such beneficial owner’s broker and/or other nominee, such that the approval of the Amendment by the stockholders of the Corporation and itsthe filing and effectiveness of the Certificate of Amendment may not have been authorized and effected in manner consistent with the disclosures set forth in the Proxy Statement for the 2022 Annual Meeting of Stockholders and with Section 242 of the DGCL.
RESOLVED, FURTHER, that the Board hereby approves, adopts and authorizes, in all respects, the ratification of the Potentially Defective Corporate Acts.
RESOLVED, FURTHER, that the Board directs that the ratification of the Potentially Defective Corporate Acts be submitted to a vote of stockholders subjectat a special meeting of stockholders (the “Special Meeting”) to be held on October 12, 2022 (or at such other date or dates and time to which such meeting may be properly adjourned) for such purpose, which meeting will be held solely virtually by the considerationmeans of remote communication set forth in the Corporation’s Proxy Statement for the Special Meeting, and the Board hereby recommends that stockholders vote in favor of such ratification and any proposal to approve an adjournment of the Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of such ratification.
RESOLVED, FURTHER, that, following the approval of the Corporation's stockholders, Article 4ratification of the Third Amended and Restated Certificate of IncorporationPotentially Defective Corporate Acts by the stockholders of the Corporation, as amended,the officers of the Corporation (the “Authorized Officers”) be, and iteach of them hereby is, amended to replace subsection (a) thereof in its entirety with the following:
4. (a) The Corporation is, authorized to
issue two classesexecute a certificate of
stockvalidation in respect of the Potentially Defective Corporate Acts, with such certificate of validation to be
designated Commonin such form and filed at such time as any Authorized Officer may deem advisable (the advisability of which shall be conclusively evidenced by the execution and filing of such certificate of validation).RESOLVED, FURTHER, that the record date for determining the Corporation’s stockholders that are entitled to notice of and to vote at the Special Meeting, or any adjournment thereof, shall be the close of business on August 24, 2022 (the “Record Date”) (unless the Board subsequently fixes a later record date for such purpose), and the Authorized Officers be, and hereby are, authorized and directed to notify the transfer agent for the Corporation’s capital stock and the Nasdaq Stock Market (“Nasdaq”) of the Record Date.
RESOLVED, FURTHER, that each Authorized Officer be, and Preferred Stock. The Corporationeach of them hereby is, authorized, empowered and directed to (i) implement reasonable measures to verify that each person deemed present and permitted to vote at Special Meeting by means of remote communication is a stockholder or proxyholder, (ii) implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the Special Meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the Special Meeting substantially concurrently with such proceedings, and (iii) implement such other guidelines and procedures as any such Authorized Officer shall determine to be necessary or appropriate to hold the Special Meeting solely by means of remote communication, such implementation to be conclusive evidence of such determination.
RESOLVED, FURTHER, that the Authorized Officers be, and each of them hereby is, authorized to issue 50,000,000 sharesnotify and instruct Computershare Trust Company, N.A., as transfer agent for the Corporation, or Broadridge Financial Solutions, Inc. to commence the inquiry required by Rule 14a-13(a)(i) promulgated under the Securities Exchange Act of Common Stock,1934, as amended, in connection with the Special Meeting and that any such action taken prior to the date hereof be, and hereby is, ratified and confirmed and approved in all respects.
RESOLVED, FURTHER, that the Authorized Officers be, and each of them hereby is, authorized and directed, on behalf of the Corporation, to cause a par value $0.001 of per share, and 5,000,000 shares of Preferred Stock, with a par value of $0.01 per share.”
SECOND: That thereafter, pursuant to resolution of its Board of Directors, an annual meetinglist of the stockholders of the Corporation
as of the close of business on the Record Date to be prepared and made available as and to the extent required under Delaware law.RESOLVED, FURTHER, that the Authorized Officers be, and each of them hereby is, directed to give notice of such means of remote communication, date, time, and the purpose of the Special Meeting, together with any other statements or notices required therein under Section 204 of the DGCL, not less than twenty (20) nor more than sixty (60) days prior to the date of the Special Meeting, to each stockholder of record of valid or putative stock as of the Record Date and, except for any holders whose identities or addresses cannot be determined from the records of the Corporation, to each stockholder of record of valid or putative stock as of the record date for the 2022 Annual Meeting of Stockholders.
RESOLVED, FURTHER, that a representative from Computershare Trust Company, N.A., or designated affiliate thereof, be, and hereby is, appointed as the inspector of election for the Special Meeting and any continuation, adjournment or postponement thereof, with full power of substitution, to (i) ascertain the number of shares outstanding and the voting power of each; (ii) determine the shares represented at the Special Meeting; (iii) count all votes and ballots; (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; (v) certify the determination of the number of shares represented at the Special Meeting and the count of all votes and ballots; and (vi) to take all such other actions consistent with the appointment to such position.
RESOLVED FURTHER, that Richard J. Clothier (or, in the absence of or at the direction of Richard J. Clothier, Sylvia Wulf or David Frank is hereby appointed to serve as the presiding officer of the Special Meeting and any continuation, adjournment or postponement thereof.
RESOLVED, FURTHER, that the Authorized Officers be, and each of them hereby is, authorized to prepare or cause to be prepared the preliminary and definitive Proxy Statements, a Proxy Card, a Notice of the Special Meeting and such other documents as the Authorized Officers, or any of them acting singly, shall deem necessary or appropriate (the “Proxy Materials”), with the approval and authorization thereof to be conclusively evidenced by the execution, distribution to stockholders or filing of such Proxy Materials.
RESOLVED, FURTHER, that the Authorized Officers be, and each of them hereby is, authorized and directed to file the Proxy Materials with the Securities and Exchange Commission and Nasdaq and to cause the Proxy Materials to be provided to all stockholders of the Corporation as of the Record Date or otherwise entitled to notice under Delaware law, in the manner required by the federal securities laws and Delaware law, together with any and all amendments and supplements thereto which any such Authorized Officers shall determine to be necessary or advisable, with the approval and authorization thereof to be conclusively evidenced by the execution, distribution to stockholders or filing of such amendments or supplements.
RESOLVED, FURTHER, that the Authorized Officers be, and each of them hereby is, authorized to adopt such rules of procedure for the Special Meeting as deemed necessary or advisable in order to maintain proper decorum at the Special Meeting.
RESOLVED, FURTHER, that Sylvia Wulf, David A. Frank and Angela M. Olsen, or any one of them acting in the absence of other, with full power of substitution and re-substitution, be, and each of them hereby is, appointed to act as proxy for the proxies solicited by the Board for the Special Meeting and any continuation, adjournment or postponement thereof.
RESOLVED, FURTHER, that the Board hereby authorizes the Authorized Officers to retain a proxy solicitor and pay any fees in connection therewith, if determined appropriate in any such Authorized Officer’s or Officers’ sole discretion, to assist such Authorized Officers in the solicitation of proxies in connection with the Special Meeting.
RESOLVED, FURTHER, that at any time prior to the validation effective time in respect of any Potentially Defective Corporate Act, notwithstanding approval of the ratification of the Potentially Defective Corporate Acts by the stockholders of the Corporation, the Board may abandon the ratification of any such Potentially Defective Corporate Acts without further action of the stockholders of the Corporation.
RESOLVED, FURTHER, that the Authorized Officers be, and each of them hereby is, authorized and empowered to take any and all such further action, to execute, deliver and file any and all such further agreements, instruments, documents, certificates and communications and to pay such expenses, in the name and on behalf of the Corporation, as such Authorized Officer may deem necessary or advisable to effectuate the purposes and intent of the resolutions hereby adopted, the taking of such actions, the execution, delivery, and filing of such agreements, instruments, documents, certificates or communications and the payment of such expenses by any such Authorized Officer to be conclusive evidence of his or her authorization hereunder and the necessity, advisability, and approval thereof.
RESOLVED, FURTHER, that all actions heretofore taken by any director, officer, or agent of the Corporation, for and on behalf of the Corporation, with respect to any of the matters referenced in the foregoing resolutions are hereby ratified, approved, and confirmed in all respects.
Appendix B
§ 204. RATIFICATION OF DEFECTIVE CORPORATE ACTS AND STOCK.
(a)Subject to subsection (f) of this section, no defective corporate act or putative stock shall be void or voidable solely as a result of a failure of authorization if ratified as provided in this section or validated by the Court of Chancery in a proceeding brought under § 205 of this title.
(b)(1)In order to ratify 1 or more defective corporate acts pursuant to this section (other than the ratification of an election of the initial board of directors pursuant to paragraph (b)(2) of this section), the board of directors of the corporation shall adopt resolutions stating:
(A)The defective corporate act or acts to be ratified;
(B)The date of each defective corporate act or acts;
(C)If such defective corporate act or acts involved the issuance of shares of putative stock, the number and type of shares of putative stock issued and the date or dates upon which such putative shares were purported to have been issued;
(D)The nature of the failure of authorization in respect of each defective corporate act to be ratified; and
(E)That the board of directors approves the ratification of the defective corporate act or acts.
Such resolutions may also provide that, at any time before the validation effective time in respect of any defective corporate act set forth therein, notwithstanding the approval of the ratification of such defective corporate act by stockholders, the board of directors may abandon the ratification of such defective corporate act without further action of the stockholders. The quorum and voting requirements applicable to the ratification by the board of directors of any defective corporate act shall be the quorum and voting requirements applicable to the type of defective corporate act proposed to be ratified at the time the board adopts the resolutions ratifying the defective corporate act; provided that if the certificate of incorporation or bylaws of the corporation, any plan or agreement to which the corporation was duly calleda party or any provision of this title, in each case as in effect as of the time of the defective corporate act, would have required a larger number or portion of directors or of specified directors for a quorum to be present or to approve the defective corporate act, such larger number or portion of such directors or such specified directors shall be required for a quorum to be present or to adopt the resolutions to ratify the defective corporate act, as applicable, except that the presence or approval of any director elected, appointed or nominated by holders of any class or series of which no shares are then outstanding, or by any person that is no longer a stockholder, shall not be required.
(2)In order to ratify a defective corporate act in respect of the election of the initial board of directors of the corporation pursuant to § 108 of this title, a majority of the persons who, at the time the resolutions required by this paragraph (b)(2) of this section are adopted, are exercising the powers of directors under claim and held uponcolor of an election or appointment as such may adopt resolutions stating:
(A)The name of the person or persons who first took action in the name of the corporation as the initial board of directors of the corporation;
(B)The earlier of the date on which such persons first took such action or were purported to have been elected as the initial board of directors; and
(C) That the ratification of the election of such person or persons as the initial board of directors is approved.
(c)Each defective corporate act ratified pursuant to paragraph (b)(1) of this section shall be submitted to stockholders for approval as provided in subsection (d) of this section, unless:
(1) (A) No other provision of this title, and no provision of the certificate of incorporation or bylaws of the corporation, or of any plan or agreement to which the corporation is a party, would have required
stockholder approval of such defective corporate act to be ratified, either at the time of such defective corporate act or at the time the board of directors adopts the resolutions ratifying such defective corporate act pursuant to paragraph (b)(1) of this section; and 1 (B) such defective corporate act did not result from a failure to comply with §203 of this title 2 ; or
(2)As of the record date for determining the stockholders entitled to vote on the ratification of such defective corporate act, there are no shares of valid stock outstanding and entitled to vote thereon, regardless of whether there then exist any shares of putative stock.
(d)If the ratification of a defective corporate act is required to be submitted to stockholders for approval pursuant to subsection (c) of this section, due notice of the time, place, if any, and purpose of the meeting shall be given at least 20 days before the date of the meeting to each holder of valid stock and putative stock, whether voting or nonvoting, at the address of such holder as it appears or most recently appeared, as appropriate, on the records of the corporation. The notice shall also be given to the holders of record of valid stock and putative stock, whether voting or nonvoting, as of the time of the defective corporate act (or, in the case of any defective corporate act that involved the establishment of a record date for notice of or voting at any meeting of stockholders, for action by written consent of stockholders in lieu of a meeting, or for any other purpose, the record date for notice of or voting at such meeting, the record date for action by written consent, or the record date for such other action, as the case may be), other than holders whose identities or addresses cannot be determined from the records of the corporation. The notice shall contain a copy of the resolutions adopted by the board of directors pursuant to paragraph (b)(1) of this section or the information required by paragraphs (b)(1)(A) through (E) of this section and a statement that any claim that the defective corporate act or putative stock ratified hereunder is void or voidable due to the failure of authorization, or that the Court of Chancery should declare in its discretion that a ratification in accordance with Section 222this section not be effective or be effective only on certain conditions must be brought within 120 days from the applicable validation effective time. At such meeting, the quorum and voting requirements applicable to ratification of such defective corporate act shall be the quorum and voting requirements applicable to the type of defective corporate act proposed to be ratified at the time of the General Corporation Lawapproval of the Stateratification, except that:
(1)If the certificate of Delawareincorporation or bylaws of the corporation, any plan or agreement to which the corporation was a party or any provision of this title in effect as of the time of the defective corporate act would have required a larger number or portion of stock or of any class or series thereof or of specified stockholders for a quorum to be present or to approve the defective corporate act, the presence or approval of such larger number or portion of stock or of such class or series thereof or of such specified stockholders shall be required for a quorum to be present or to approve the ratification of the defective corporate act, as applicable, except that the presence or approval of shares of any class or series of which no shares are then outstanding, or of any person that is no longer a stockholder, shall not be required;
(2)The approval by stockholders of the ratification of the election of a director shall require the affirmative vote of the majority of shares present at the meeting and entitled to vote on May 1, 2018,the election of such director, except that if the certificate of incorporation or bylaws of the corporation then in effect or in effect at the time of the defective election require or required a larger number or portion of stock or of any class or series thereof or of specified stockholders to elect such director, the affirmative vote of such larger number or portion of stock or of any class or series thereof or of such specified stockholders shall be required to ratify the election of such director, except that the presence or approval of shares of any class or series of which meetingno shares are then outstanding, or of any person that is no longer a stockholder, shall not be required; and
(3)In the necessaryevent of a failure of authorization resulting from failure to comply with the provisions of §203 of this title, the ratification of the defective corporate act shall require the vote set forth in §203(a)(3) of this title, regardless of whether such vote would have otherwise been required.
Shares of putative stock on the record date for determining stockholders entitled to vote on any matter submitted to stockholders pursuant to subsection (c) of this section (and without giving effect to any ratification that becomes effective after such record date) shall neither be entitled to vote nor counted for quorum purposes in any vote to ratify any defective corporate act.
(e)If a defective corporate act ratified pursuant to this section would have required under any other section of this title the filing of a certificate in accordance with §103 of this title, then, whether or not a certificate was previously filed in respect of such defective corporate act and in lieu of filing the certificate otherwise required by this title, the corporation shall file a certificate of validation with respect to such defective corporate act in accordance with §103 of this title. A separate certificate of validation shall be required for each defective corporate act requiring the filing of a certificate of validation under this section, except that (i) 2 or more defective corporate acts may be included in a single certificate of validation if the corporation filed, or to comply with this title would have filed, a single certificate under another provision of this title to effect such acts, and (ii) 2 or more overissues of shares of any class, classes or series of stock may be included in a single certificate of validation, provided that the increase in the number of authorized shares of each such class or series set forth in the certificate of validation shall be effective as of the date of the first such overissue. The certificate of validation shall set forth:
(1)Each defective corporate act that is the subject of the certificate of validation (including, in the case of any defective corporate act involving the issuance of shares of putative stock, the number and type of shares of putative stock issued and the date or dates upon which such putative shares were purported to have been issued), the date of such defective corporate act, and the nature of the failure of authorization in respect of such defective corporate act;
(2)A statement that such defective corporate act was ratified in accordance with this section, including the date on which the board of directors ratified such defective corporate act and the date, if any, on which the stockholders approved the ratification of such defective corporate act; and
(3)Information required by statute were voted1 of the following paragraphs:
a. If a certificate was previously filed under §103 of this title in favorrespect of such defective corporate act and no changes to such certificate are required to give effect to such defective corporate act in accordance with this section, the Amendment.
THIRD: Thatcertificate of validation shall set forth (x) the
Amendmentname, title and filing date of the certificate previously filed and of any certificate of correction thereto and (y) a statement that a copy of the certificate previously filed, together with any certificate of correction thereto, is attached as an exhibit to the certificate of validation;b. If a certificate was dulypreviously filed under §103 of this title in respect of the defective corporate act and such certificate requires any change to give effect to the defective corporate act in accordance with this section (including a change to the date and time of the effectiveness of such certificate), the certificate of validation shall set forth (x) the name, title and filing date of the certificate so previously filed and of any certificate of correction thereto, (y) a statement that a certificate containing all of the information required to be included under the applicable section or sections of this title to give effect to the defective corporate act is attached as an exhibit to the certificate of validation, and (z) the date and time that such certificate shall be deemed to have become effective pursuant to this section; or
c. If a certificate was not previously filed under §103 of this title in respect of the defective corporate act and the defective corporate act ratified pursuant to this section would have required under any other section of this title the filing of a certificate in accordance with §103 of this title, the certificate of validation shall set forth (x) a statement that a certificate containing all of the information required to be included under the applicable section or sections of this title to give effect to the defective corporate act is attached as an exhibit to the certificate of validation, and (y) the date and time that such certificate shall be deemed to have become effective pursuant to this section.
A certificate attached to a certificate of validation pursuant to paragraph (e)(3)b. or c. of this section need not be separately executed and acknowledged and need not include any statement required by any other section of this title that such instrument has been approved and adopted in accordance with the provisions of Section 242such other section.
(f)From and after the validation effective time, unless otherwise determined in an action brought pursuant to §205 of this title:
(1) Subject to the last sentence of subsection (d) of this section, each defective corporate act ratified in accordance with this section shall no longer be deemed void or voidable as a result of the General Corporation Lawfailure of authorization described in the resolutions adopted pursuant to subsection (b) of this section and such effect shall be retroactive to the time of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendmentdefective corporate act; and(2) Subject to the Third Amendedlast sentence of subsection (d) of this section, each share or fraction of a share of putative stock issued or purportedly issued pursuant to any such defective corporate act shall no longer be deemed void or voidable and Restated Certificateshall be deemed to be an identical share or fraction of Incorporationa share of outstanding stock as of the Corporationtime it was purportedly issued.
(g) In respect of each defective corporate act ratified by the board of directors pursuant to subsection (b) of this section, prompt notice of the ratification shall be given to all holders of valid stock and putative stock, whether voting or nonvoting, as of the date the board of directors adopts the resolutions approving such defective corporate act, or as of a date within 60 days after such date of adoption, as established by the board of directors, at the address of such holder as it appears or most recently appeared, as appropriate, on the records of the corporation. The notice shall also be given to the holders of record of valid stock and putative stock, whether voting or nonvoting, as of the time of the defective corporate act, other than holders whose identities or addresses cannot be determined from the records of the corporation. The notice shall contain a copy of the resolutions adopted pursuant to subsection (b) of this section or the information specified in paragraphs (b)(1)(A) through (E) or paragraphs (b)(2)(A) through (C) of this section, as applicable, and a statement that any claim that the defective corporate act or putative stock ratified hereunder is void or voidable due to the failure of authorization, or that the Court of Chancery should declare in its discretion that a ratification in accordance with this section not be effective or be effective only on certain conditions must be brought within 120 days from the later of the validation effective time or the time at which the notice required by this subsection is given. Notwithstanding the foregoing, (i) no such notice shall be required if notice of the ratification of the defective corporate act is to be signedgiven in accordance with subsection (d) of this _____ daysection, and (ii) in the case of __________, 2018.a corporation that has a class of stock listed on a national securities exchange, the notice required by this subsection and the second sentence of subsection (d) of this section may be deemed given if disclosed in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to §13, § 14 or § 15(d) (15 U.S.C. § 78m, § 77n or § 78o(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, or the corresponding provisions of any subsequent United States federal securities laws, rules or regulations. If any defective corporate act has been approved by stockholders acting pursuant to §228 of this title, the notice required by this subsection may be included in any notice required to be given pursuant to §228(e) of this title and, if so given, shall be sent to the stockholders entitled thereto under §228(e) and to all holders of valid and putative stock to whom notice would be required under this subsection if the defective corporate act had been approved at a meeting other than any stockholder who approved the action by consent in lieu of a meeting pursuant to §228 of this title or any holder of putative stock who otherwise consented thereto in writing. Solely for purposes of subsection (d) of this section and this subsection, notice to holders of putative stock, and notice to holders of valid stock and putative stock as of the time of the defective corporate act, shall be treated as notice to holders of valid stock for purposes of §§222 and 228, 229, 230, 232 and 233 of this title.
(h)As used in this section and in §205 of this title only, the term:
(1)”Defective corporate act” means an overissue, an election or appointment of directors that is void or voidable due to a failure of authorization, or any act or transaction purportedly taken by or on behalf of the corporation that is, and at the time such act or transaction was purportedly taken would have been, within the power of a corporation under subchapter II of this chapter (without regard to the failure of authorization identified in § 204(b)(1)(D) of this title), but is void or voidable due to a failure of authorization;
(2)”Failure of authorization” means: (i) the failure to authorize or effect an act or transaction in compliance with (A) the provisions of this title, (B) the certificate of incorporation or bylaws of the corporation, or (C) any plan or agreement to which the corporation is a party or the disclosure set forth in any proxy or
consent solicitation statement, if and to the extent such failure would render such act or transaction void or voidable; or (ii) the failure of the board of directors or any officer of the corporation to authorize or approve any act or transaction taken by or on behalf of the corporation that would have required for its due authorization the approval of the board of directors or such officer;
(3)”Overissue” means the purported issuance of:
a. Shares of capital stock of a class or series in excess of the number of shares of such class or series the corporation has the power to issue under § 161 of this title at the time of such issuance; or
b. Shares of any class or series of capital stock that is not then authorized for issuance by the certificate of incorporation of the corporation;
(4)”Putative stock” means the shares of any class or series of capital stock of the corporation (including shares issued upon exercise of options, rights, warrants or other securities convertible into shares of capital stock of the corporation, or interests with respect thereto that were created or issued pursuant to a defective corporate act) that:
a. But for any failure of authorization, would constitute valid stock; or
b. Cannot be determined by the board of directors to be valid stock;
(5)”Time of the defective corporate act” means the date and time the defective corporate act was purported to have been taken;
(6)”Validation effective time” with respect to any defective corporate act ratified pursuant to this section means the latest of:
a. The time at which the defective corporate act submitted to the stockholders for approval pursuant to subsection (c) of this section is approved by such stockholders or if no such vote of stockholders is required to approve the ratification of the defective corporate act, the time at which the board of directors adopts the resolutions required by paragraph (b)(1) or (b)(2) of this section;
b. Where no certificate of validation is required to be filed pursuant to subsection (e) of this section, the time, if any, specified by the board of directors in the resolutions adopted pursuant to paragraph (b)(1) or (b)(2) of this section, which time shall not precede the time at which such resolutions are adopted; and
c. The time at which any certificate of validation filed pursuant to subsection (e) of this section shall become effective in accordance with §103 of this title.
(7)”Valid stock” means the shares of any class or series of capital stock of the corporation that have been duly authorized and validly issued in accordance with this title.
In the absence of actual fraud in the transaction, the judgment of the board of directors that shares of stock are valid stock or putative stock shall be conclusive, unless otherwise determined by the Court of Chancery in a proceeding brought pursuant to §205 of this title.
(i)Ratification under this section or validation under §205 of this title shall not be deemed to be the exclusive means of ratifying or validating any act or transaction taken by or on behalf of the corporation, including any defective corporate act, or any issuance of stock, including any putative stock, or of adopting or endorsing any act or transaction taken by or in the name of the corporation prior to the commencement of its existence, and the absence or failure of ratification in accordance with either this section or validation under §205 of this title shall not, of itself, affect the validity or effectiveness of any act or transaction or the issuance of any stock properly ratified under common law or otherwise, nor shall it create a presumption that any such act or transaction is or was a defective corporate act or that such stock is void or voidable.
§ 205. PROCEEDINGS REGARDING VALIDITY OF DEFECTIVE CORPORATE ACTS AND STOCK.
(a) Subject to subsection (f) of this section, upon application by the corporation, any successor entity to the corporation, any member of the board of directors, any record or beneficial holder of valid stock or putative
stock, any record or beneficial holder of valid or putative stock as of the time of a defective corporate act ratified pursuant to §204 of this title, or any other person claiming to be substantially and adversely affected by a ratification pursuant to §204 of this title, the Court of Chancery may:
(1) Determine the validity and effectiveness of any defective corporate act ratified pursuant to §204 of this title;
(2) Determine the validity and effectiveness of the ratification of any defective corporate act pursuant to §204 of this title;
(3) Determine the validity and effectiveness of any defective corporate act not ratified or not ratified effectively pursuant to §204 of this title;
(4) Determine the validity of any corporate act or transaction and any stock, rights or options to acquire stock; and
(5) Modify or waive any of the procedures set forth in §204 of this title to ratify a defective corporate act.
(b) In connection with an action under this section, the Court of Chancery may:
| (1) | Declare that a ratification in accordance with and pursuant to §204 of this title is not effective or shall only be effective at a time or upon conditions established by the Court; |
| (2) | Validate and declare effective any defective corporate act or putative stock and impose conditions upon such validation by the Court; |
| (3) | Require measures to remedy or avoid harm to any person substantially and adversely affected by a ratification pursuant to §204 of this title or from any order of the Court pursuant to this section, excluding any harm that would have resulted if the defective corporate act had been valid when approved or effectuated; |
| (4) | Order the Secretary of State to accept an instrument for filing with an effective time specified by the Court, which effective time may be prior or subsequent to the time of such order, provided that the filing date of such instrument shall be determined in accordance with §103(c)(3) of this title; |
| (5) | Approve a stock ledger for the corporation that includes any stock ratified or validated in accordance with this section or with §204 of this title; |
| (6) | Declare that shares of putative stock are shares of valid stock or require a corporation to issue and deliver shares of valid stock in place of any shares of putative stock; |
| (7) | Order that a meeting of holders of valid stock or putative stock be held and exercise the powers provided to the Court under §227 of this title with respect to such a meeting; |
| (8) | Declare that a defective corporate act validated by the Court shall be effective as of the time of the defective corporate act or at such other time as the Court shall determine; |
| (9) | Declare that putative stock validated by the Court shall be deemed to be an identical share or fraction of a share of valid stock as of the time originally issued or purportedly issued or at such other time as the Court shall determine; and |
| (10) | Make such other orders regarding such matters as it deems proper under the circumstances. |
(c) Service of the application under subsection (a) of this section upon the registered agent of the corporation shall be deemed to be service upon the corporation, and no other party need be joined in order for the Court of Chancery to adjudicate the matter. In an action filed by the corporation, the Court may require notice of the action be provided to other persons specified by the Court and permit such other persons to intervene in the action
(d) In connection with the resolution of matters pursuant to subsections (a) and (b) of this section, the Court of Chancery may consider the following:
| (1) | Whether the defective corporate act was originally approved or effectuated with the belief that the approval or effectuation was in compliance with the provisions of this title, the certificate of incorporation or bylaws of the corporation; |
| (2) | Whether the corporation and board of directors has treated the defective corporate act as a valid act or transaction and whether any person has acted in reliance on the public record that such defective corporate act was valid; |
| (3) | Whether any person will be or was harmed by the ratification or validation of the defective corporate act, excluding any harm that would have resulted if the defective corporate act had been valid when approved or effectuated; |
| (4) | Whether any person will be harmed by the failure to ratify or validate the defective corporate act; and |
| (5) | Any other factors or considerations the Court deems just and equitable. |
(e) The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions brought under this section.
(f) Notwithstanding any other provision of this section, no action asserting:
| (1) | That a defective corporate act or putative stock ratified in accordance with §204 of this title is void or voidable due to a failure of authorization identified in the resolution adopted in accordance with 204(b) of this title; or |
| (2) | That the Court of Chancery should declare in its discretion that a ratification in accordance with §204 of this title not be effective or be effective only on certain conditions, may be brought after the expiration of 120 days from the later of the validation effective time and the time notice, if any, that is required to be given pursuant to §204(g) of this title is given with respect to such ratification, except that this subsection shall not apply to an action asserting that a ratification was not accomplished in accordance with §204 of this title or to any person to whom notice of the ratification was required to have been given pursuant to §204(d) or (g) of this title, but to whom such notice was not given. |
AquaBounty Vote 000004 ENDORSEMENT_LINE______________ SACKPACK_____________ MR A SAMPLE
DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 C123456789 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext Your vote matters – here’s how to vote! You may vote online or by phone instead of mailing this card. Online Go to www.envisionreports.com/AQB or scan the QR code — login details are located in the shaded bar below. Phone Call toll free 1-800-652-VOTE (8683) within the USA, US territories and Canada Save paper, time and money! Sign up for electronic delivery at www.envisionreports.com/AQB Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Special Meeting Proxy Card 1234 5678 9012 345 IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. A Proposals — The Board of Directors recommends a vote FOR each proposal. For Against Abstain 1. To approve the ratification of the increase in authorized shares For Against Abstain 2. To approve an adjournment of the Special Meeting (if necessary) B Authorized Signatures — This section must be completed for your vote to count. Please date and sign below. Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. C 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND 1UPX 550525 MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 03OHRB
The Special Meeting of Stockholders of AquaBounty Technologies, Inc.
will be held on Wednesday, October 12, 2022 at 8:30 A.M., EDT, virtually via the internet at meetnow.global/MLKARJ9. To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form. Important notice regarding the Internet availability of proxy materials for the Special Meeting of Stockholders. The material is available at: www.envisionreports.com/AQB Small steps make an impact. Help the environment by consenting to receive electronic delivery, sign up at www.envisionreports.com/AQB IF VOTING BY MAIL, SIGN, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. AquaBounty Technologies, Inc. + Notice of Special Meeting of Stockholders Proxy Solicited by Board of Directors for the Special Meeting — October 12, 2022 Sylvia Wulf, David A. Frank, Angela M. Olsen, or any of them, each with the power of substitution, are hereby authorized to represent and vote the shares of the undersigned, with all the powers that the undersigned would possess if personally present, at the Special Meeting of Stockholders of AquaBounty Technologies, Inc., which will be held on October 12, 2022, at 8:30 a.m. EDT virtually via the internet, or at any postponement or adjournment thereof. Shares represented by this proxy will be voted by the stockholder. If no such directions are indicated, the Proxies will have authority to vote FOR items 1 and 2. In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. (Items to be voted appear on reverse side) C By: Non-Voting Items Change of Address — Please print new address below. Comments — Please print your comments below.
Authorized Officer
Title: President and Chief Executive Officer
Name: Ronald L. Stotish
