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. )
Filed by the Registrant ☒
Filed by a party other than the Registrant ☐
Check the appropriate box:
☐ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material Under §240.14a-12
EOS ENERGY ENTERPRISES, INC.
(Exact Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ No fee required.
☐ Fee paid previously with preliminary materials.
☐ Fee computed on table in exhibit required by Item 25(b)25 (b) per Exchange Act Rules 14a-6(i)(1) and 0-11.
Eos Energy Enterprises, Inc.
3920 Park Avenue
Edison, New Jersey 08820
NOTICE OF SPECIALANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 28, 2022MAY 16, 2023
To the Stockholders of Eos Energy Enterprises, Inc.:
NOTICE IS HEREBY GIVEN that a Specialthe Annual Meeting of Stockholders (the “Special“Annual Meeting”) of Eos Energy Enterprises, Inc., a Delaware corporation (the “Company”), will be a virtual meeting conducted exclusively via live webcast at www.virtualshareholdermeeting.com/EOSE2022SMEOSE2023 on June 28, 2022,May 16, 2023, at 10:00 a.m. Eastern time for the following purposes:
1.to elect the three directors as Class III directors of Eos Energy Enterprises, Inc., each to serve for three years and until his successor has been elected and qualified, or until his earlier death, resignation or removal;
2.to ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023;
3.to approve a non-binding advisory resolution approving the compensation of the named executive officers;
4.to grant the Board of Directors the discretionary authority to amend the Company's Third Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company's common stock (the “Reverse Stock Split Proposal”);
5.to approve an amendment to our Third Amended and Restated Certificate of Incorporation to update the exculpation provision (the “Exculpation Amendment”);
6.to approve, in accordance with Nasdaq Marketplace Rule 5635(d), the issuance of our common stock to YA II PN, Ltd. (“Yorkville”) in excess of the exchange cap of the Standby Equity Purchase Agreement dated April 28, 2022, by and between the Company and Yorkville (included in Appendix A(the “SEPA“), the issuance of certain promissory notes to this proxy statement)Yorkville and the offset of amounts due thereunder pursuant to the SEPA and the issuance of our common stock to Yorkville pursuant to advances under the SEPA and any amounts remaining for issuance pursuant to the SEPA under the exchange cap, including the issuance pursuant to any future advances (the “Exchange Cap“SEPA Matters Proposal”); and
2.
7.to approve an amendment to our Third Amended and Restated Certificate of Incorporation to increase the authorized shares of common stock from 200,000,000 to 300,000,000 (the “Authorized Shares Amendment”); and2020 Incentive Plan.
3.to approve an adjournment of the Special Meeting, if necessary, to solicit additional proxies if there are not sufficient votes in favor of the Exchange Cap Proposal and/or the Authorized Shares Amendment (the “Adjournment Proposal”).
The Company will also transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice of SpecialAnnual Meeting of Stockholders. Only stockholders who owned common stock of the Company at the close of business on May 25, 2022March 22, 2023 (the “Record Date”) can vote at this meeting or any adjournments that take place.The presence, in person or represented by proxy, atCompany will begin mailing the Special MeetingNotice of the holdersInternet Availability to our stockholders of shares of outstanding common stock representing a majority of the voting power of all outstanding shares of common stock entitled to vote at the Special Meeting will be required to establish a quorum at the Special Meeting. Abstentions and “broker non-votes” will be treated as shares present and entitled to vote for quorum purposes.Approval of the Exchange Cap Proposal and the Adjournment Proposal will require the affirmative vote of the majority of the total votes cast on such proposal. Approval of the Authorized Shares Amendment will require the affirmative vote of the holders of at least 662⁄3% of outstanding shares of our common stockrecord as of the Record Date.Date for the first time on or about March 27, 2023.
The Board of Directors recommends that you vote:
Proposal 1:FOR the Exchange Cap Proposal;election of the three director nominees;
Proposal 2: FORthe Authorized Shares Amendment;ratification of the appointment of Deloitte & Touche LLP, as the independent registered public accounting firm;
Proposal 3:FOR the approval of the non-binding advisory resolution to approve the compensation of our named executive officers;
Proposal 4: FOR the AdjournmentReverse Stock Split Proposal;
2022
Proposal 5: FOR the Exculpation Amendment;
Proposal 6: FORthe SEPA Matters Proposal; and
Proposal 7: FOR the approval of an amendment to our Amended and Restated 2020 Incentive Plan.
2023 Virtual SpecialAnnual Stockholder Meeting
The Board of Directors has determined to hold the Special Meetingannual meeting virtually in order to facilitate stockholder attendance and participation by stockholders from all locations at no cost. We believe this is the right choice for the Company at this time, as it enables engagement with our stockholders, regardless of size, resources, or physical location while safeguarding the health of our stockholders, Board and management. We are committed to ensuring that stockholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting. You will be able to attend the meeting online, vote your shares electronically and submit questions during the meeting by visiting www.virtualshareholdermeeting.com/EOSE2022SMEOSE2023 at the meeting date and time. The meeting webcast will begin promptly at 10:00 a.m. Eastern Time. We encourage you to access the meeting prior to the start time. Online log-incheck-in will begin at 9:45 a.m. Eastern Time, and you should allow ample time for the log-in process.check-in procedures. If you experience technical difficulties during the log-incheck-in process or during the meeting please call the technical support number that will be posted on the virtual SpecialAnnual Meeting login page for assistance. Technical assistance will be available through the conclusion of the SpecialAnnual Meeting.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE VIRTUAL MEETING ONLINE, WE ENCOURAGE YOU TO READ THE ACCOMPANYING PROXY STATEMENT AND OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022, AND SUBMIT YOUR PROXY AS SOON AS POSSIBLE USING ONE OF THE THREE CONVENIENT VOTING METHODS DESCRIBED IN “INFORMATION ABOUT THE PROXY PROCESS AND VOTING” IN THE PROXY STATEMENT. IF YOU RECEIVE MORE THAN ONE SET OF PROXY MATERIALS OR NOTICE OF INTERNET AVAILABILITY BECAUSE YOUR SHARES ARE REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH PROXY SHOULD BE SIGNED AND SUBMITTED TO ENSURE THAT ALL OF YOUR SHARES WILL BE VOTED.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 16, 2023
The Notice of Annual Meeting of Stockholders to be held on May 16, 2023, the accompanying Proxy Statement and the Company’s 2022 Annual Report on Form 10-K are available, free of charge, at www.proxyvote.com.
The Notice contains instructions on how to access our proxy materials and vote over the internet at www.proxyvote.com and how stockholders can receive a paper copy of our proxy materials, including the accompanying Proxy Statement, a proxy card or voting instruction card and our fiscal year ended December 31, 2022 Annual Report on Form 10-K. Stockholders can also request to receive future proxy materials in printed form by mail or electronically by email by contacting Investor Relations Department at 312-445-2870 or email ir@eose.com.
By Order of the Board of Directors
/s/Melissa Berube
Melissa Berube
General Counsel and Corporate Secretary
MayMarch 27, 2022
2023
TABLE OF CONTENTS
Eos Energy Enterprises, Inc.
3920 Park AvenuePARK AVENUE
Edison, New JerseyEDISON, NEW JERSEY 08820
PROXY STATEMENT
FOR THE SPECIAL2023 ANNUAL MEETING OF STOCKHOLDERS
June 28, 2022MAY 16, 2023
We have made available our proxy materials because the Board of Directors (the “Board”) of Eos Energy Enterprises, Inc. (referred to herein as the “Company,” “Eos,” “we,” “us” or “our”) is soliciting your proxy to vote at our Special2023 Annual Meeting of Stockholders (the “Special“Annual Meeting”) to be held on June 28, 2022,May 16, 2023, at 10:00 a.m. Eastern time, at www.virtualshareholdermeeting.com/EOSE2022SM.EOSE2023.
◦This Proxy Statement summarizes information about the proposals to be considered at the SpecialAnnual Meeting and other information you may find useful in determining how to vote.
◦The Proxy Card or voting instruction form is the means by which you actually authorize another person to vote your shares in accordance with your instructions.
In addition to solicitations by mail, our directors, officers and employees, without additional remuneration, may solicit proxies by telephone, e-mail and personal interviews. All costs of solicitation of proxies will be borne by us. Brokers, custodians and fiduciaries will be requested to forward proxy soliciting material to the owners of stock held in their names, and we will reimburse them for their reasonable out-of-pocket expenses incurred in connection with the distribution of proxy materials.
Pursuant to the rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxyAnnual Meeting materials, by sending youwhich include this full setProxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “Form 10-K”), over the internet in lieu of proxy materials, including a Proxy Card. Accordingly,mailing printed copies. We will begin mailing the proxy statement and accompanying Proxy Card will first be mailedNotice of Internet Availability to our stockholders of record as of May 25, 2022March 22, 2023 (the “Records“Record Date”) for the first time on or about MayMarch 27, 2022.
Corporate Information
On November 16, 2020 (the “Closing Date”), B. Riley Principal Merger Corp. II. (“BMRG”), Eos Energy Storage LLC ("EES LLC"), BMRG Merger Sub, LLC (“Merger Sub I”), BMRG Merger Sub II, LLC (“Merger Sub II”), New Eos Energy LLC (“Newco”)2023. The Notice of Internet Availability will contain instructions on how to access and AltEnergy Storage VI, LLC consummatedreview the transactions contemplated under the Merger Agreement entered intoAnnual Meeting materials and will also contain instructions on September 7, 2020 between the parties, following the approval at the special meetinghow to request a printed copy of the stockholdersAnnual Meeting materials. Additionally, we have provided brokers, dealers, banks, voting trustees and their nominees, at our expense, with additional copies of BMRG heldour proxy materials and our Annual Report on October 15, 2020. OnForm 10-K so that they can supply these materials to the Closing Date, (1) Merger Sub I merged with and into Newco, with Newco continuingbeneficial owners of shares of our common stock as the surviving company and a wholly-owned subsidiary of the Company,Record Date. Our Annual Report on Form 10-K and (2) Newco then merged with and into Merger Sub II, with Merger Sub II continuing as the surviving company and a wholly-owned subsidiary2023 Proxy Statement are available, free of the Company (together, the “Business Combination”). In connection with the Business Combination, the registrant changed its name from B. Riley Merger Corp. II to Eos Energy Enterprises, Inc., and Merger Sub II changed its name from BMRG Merger Sub II, LLC to Eos Energy Enterprises Intermediate Holdings, LLC.charge, at proxyvote.com.
PROPOSAL NO. 1
APPROVAL, IN ACCORDANCE WITH NASDAQ MARKETPLACE RULE 5635(D),ELECTION OF THE ISSUANCE OF OUR COMMON STOCK TO YORKVILLE IN EXCESS OF THE EXCHANGE CAP OF THE STANDBY EQUITY PURCHASE AGREEMENT DATED APRIL 28, 2022, BY AND BETWEEN THE COMPANY AND YORKVILLE (THE “EXCHANGE CAP PROPOSAL”)DIRECTORS
BackgroundOur Board is divided into three (3) classes with only one class of directors being elected in each year and each class serving a three (3) year term. The directors hold their office for a term of three (3) years or until their respective successors are elected and qualified, subject to such director’s earlier death, resignation, disqualification or removal. Class I directors are Marian “Mimi” Walters and Audrey Zibelman; Class II directors are Joe Mastrangelo, our CEO, and Alex Dimitrief; and Class III directors are Russell Stidolph, the Chair of our Board, Jeff Bornstein and Claude Demby.
As previously disclosed, on April 28, 2022, we entered into a Standby Equity Purchase Agreement (the “SEPA,” included as Appendix A to this Proxy Statement) with YA II PN, Ltd. (“Yorkville”). Pursuant to the SEPA, the Company has the right, but not the obligation, to sell to Yorkville up to $200,000,000 of its shares of common stock (the “SEPA Shares”), par value $0.0001 per share,Class III directors standing for re-election at the Company’s request any time duringAnnual Meeting are Russell Stidolph, the commitment period commencing on April 28, 2022Chair of our Board, Jeff Bornstein and terminating onClaude Demby. Class I and Class II directors will stand for election at the earliest2024 and 2025 annual meetings of (i) the first daystockholders, respectively.
Each of the month following the 24-month anniversary of the SEPA and (ii) the date on which Yorkville has made payment of any advances requested pursuant to the SEPAnominees for shares of the Company’s common stock equal to the commitment amount of $200,000,000. Each sale the Company requests under the SEPA (an “Advance”) may be forelection as Class III directors is currently a number of shares of common stock with an aggregate value of up to $20,000,000. The shares would be purchased at 97.0% of the Market Price (as defined below) and would be subject to certain limitations, including that Yorkville could not purchase any shares that would result in it owning more than 9.99% of the Company’s outstanding common stockdirector. If elected at the time of an Advance (the "Ownership Limitation") or 19.99% of the Company's outstanding common stock as of the date of the SEPA (the "Exchange Cap"). “Market Price” is defined in the SEPA as the average of the VWAPs (as defined below) duringAnnual Meeting, each of the nominees for election as Class III directors would serve for three consecutive trading days commencing onyears and until his successor is duly elected and qualified, or until his earlier death, resignation or removal. If any nominee is unable or unwilling to be a candidate for election, the trading day followingBoard may appoint another nominee or reduce the Company’s submission of an Advance notice to Yorkville. “VWAP” is defined in the SEPA to mean, for any trading day, the daily volume weighted average pricesize of the Company’s common stockBoard.
The following table sets forth information for such date on The Nasdaq Capital Market as reported by Bloomberg L.P. during regular trading hours.the nominees who are currently standing for election:
As | | | | | | | | |
| Name | Age | Director Since |
| Russell Stidolph (1) | 47 | 2020 |
| Jeff Bornstein (2) | 57 | 2022 |
| Claude Demby (3) | 58 | 2021 |
(1) Chair of the dateLeadership Development & Compensation Committee and member of the SEPA, there were 53,980,608 sharesNominating and Corporate Governance Committee.
(2) Chair of the Company’s common stock issuedAudit Committee and outstanding. Accordingly, the Exchange Cap is 10,790,723 shares. The SEPA provides that (a) the Exchange Cap will not apply if the Company’s stockholders have approved issuances in excessmember of the Exchange Cap in accordance with the rules of The Nasdaq Capital Market, and (b) as to any Advance, if the purchase price of shares in respect of such Advance equals or exceeds $2.15 per share (which represents the lower of (i) the closing price of common stock as reported on the “Historical NOCP” sectionLeadership Development & Compensation Committee.
(3) Member of the web site Nasdaq.comAudit Committee and member of the Nominating and Corporate Governance Committee.
Set forth below is biographical information for the ticker symbol “EOSE.” (the “Nasdaq Official Closing Price”) onnominees. The following includes certain information regarding the trading day immediately precedingnominees’ individual experience, qualifications, attributes and skills that led the date of the SEPA; or (ii) the average Nasdaq Official Closing Price for the five trading days immediately preceding the date of the SEPA). As of the date of this proxy statement, we have offered and soldBoard to Yorkville an aggregate of 3,967,939 shares of our common stock, all of which are counted against the Exchange Cap.
Pursuant to the SEPA, we will use the proceeds from the sale of SEPA Shares for working capital and other general corporate purposes or, if different, inconclude that they should serve as a manner consistent with the application thereof described in the registration statement pursuant to which such shares are registered with the SEC. There are no other restrictions in the SEPA on future financing transactions, provided such use of proceeds also does not violate the laws and regulations set forth by the U.S. Office of Foreign Assets Control.
Reasons for Seeking Stockholder Approval
Our common stock is currently listed on The Nasdaq Capital Market and, as such, we are subject to Nasdaq Marketplace Rules (the “Nasdaq Rules”). Nasdaq Listing Rule 5635(d) requires us to obtain stockholder approvaldirector.
prior toRussell Stidolph, 47, has served as a member of our Board since the sale, issuance or potential issuance of common stock (or securities convertible into or exercisable for common stock) in connection with a transaction other than a public offering at a price less than the “Minimum Price” which either alone or together with sales by officers, directors or substantial stockholdersclosing of the company equals 20% or moreBusiness Combination in 2020. He has also served as a director of Eos Energy Storage LLC (“EES LLC”) since 2014 and the chairman of the common stock or 20% or moreboard of EES LLC since 2018, and continued in both positions following the closing of the voting power outstanding before the issuance. For Nasdaq purposes, “Minimum Price” means a price thatBusiness Combination. Mr. Stidolph is the lower of: (i)founder of AltEnergy, LLC a private equity firm focused on alternative energy investing, where he has served as Managing Director since 2006 and is the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately precedingChairman and CEO of AltEnergy Acquisition Corp. (NASDAQ: AEAE). Prior to forming AltEnergy, Mr. Stidolph was a Principal at J.H. Whitney & Co., LLC, a middle-market private equity firm based in New Canaan, Connecticut. While at J.H. Whitney Mr. Stidolph was responsible for starting and developing the signingfirm’s alternative energy investing practice where he was responsible for Hawkeye Renewables, LLC and Iowa Winds, LLC. Mr. Stidolph was both the Chief Financial Officer and Vice Chairman of Hawkeye Renewables, LLC before it was sold in 2006 to Thomas H. Lee Partners, LP. Prior to joining J.H. Whitney, Mr. Stidolph was a member of the binding agreement; or (ii)corporate finance group at PaineWebber, Inc., that was responsible for high yield and leverage finance origination. Mr. Stidolph also acted as Senior Vice President and the average Nasdaq Official Closing PriceChief Financial Officer of Tres Amigas, LLC and he still sits on the company’s board of directors, and was Chair of the common stock (as reflectedboard of directors of Viridity Energy, Inc. before it was sold to Ormat Technologies in 2017. Russell received a Bachelor of Arts degree from Dartmouth College. Mr. Stidolph’s qualifications to serve on Nasdaq.com) forour Board include: his background in financial investments, financial and risk management, equity capital markets and the five trading days immediately preceding the signingrenewable energy industry.
Jeff Bornstein, 57, has served as a member of the binding agreement. Stockholder approval of this proposal will constitute stockholder approval for purposes of Nasdaq Listing Rule 5635(d). Ourour Board has determined that the SEPAsince September 2022, and was recommended by both a non-management director and our abilitychief executive officer. Mr. Bornstein is the founder, principal and co-managing partner of Whipstick Ventures LLC, an investment company focused on early stage companies with novel solutions across energy storage and efficiency, services, bio-tech and fin-tech. He also currently serves as the managing partner of Generation Capital Partners and sits on the board of AlloVir (NASDAQ: ALVR) and as Chair of their Audit Committee. Prior to issue the SEPA Shares thereunderfounding Whipstick Ventures in excess2018, he served as Vice Chairman and Chief Financial Officer of the Exchange Cap is in the best interests of the Company and its stockholders because the abilityGeneral Electric from 2013 to sell the SEPA Shares to Yorkville provides us with a reliable source of capital for working capital and general corporate purposes.
We cannot predict the Market Price (as defined above) of our common stock at any future date, and therefore cannot predict the number of SEPA Shares to be issued under the SEPA or whether the Market Price for any Advance will be greater than the Minimum Price (as defined above) under the Nasdaq Rules. Under certain circumstances, it is possible that we may need to issue shares of common stock to Yorkville at a price that is less than the Minimum Price in excess of the Exchange Cap, which would require stockholder approval pursuant to Nasdaq Listing Rule 5635(d).
Therefore, we are seeking stockholder approval under2017. In this Proposal No. 1 to issue shares of common stock in excess of the Exchange Cap, if necessary, to Yorkville under the terms of the SEPA. The failure of the Company’s stockholders to approve this Proposal No. 1 will make it impossible for the Company to sell, at less than the Minimum Price, shares of common stock to Yorkville in excess of the Exchange Cap. However, it would be possible to sell shares to Yorkville in excess of the Exchange Cap ifrole, he focused on portfolio transformation, including the sale of shares covered by any Advance is equal to or greater than the Minimum PriceAppliances division of GE, executing the merger of GE Oil & Gas with Baker Hughes, the sale of businesses and assets of GE Capital worth over $300 billion and GE’s acquisition of Alstom, as well as driving down structural costs. Previously, Mr. Bornstein served as Senior Vice President and Chief Financial Officer of GE Capital for such Advance.
Consequences of Non-Approval
As previously disclosed, as of December 31, 2021,12 years. During his tenure, he played a pivotal role managing the Company concluded that there was substantial doubt about its ability to continue to operate as a going concern forcompany through the 12 months followingfinancial crisis and, subsequently, the issuance of its consolidated financial statements. The abilityon-boarding of the CompanyFederal Reserve as Regulator. Mr. Bornstein originally joined GE in 1989 with the GE Power Systems’ Financial Management Program. In 1992, he joined the GE Corporate Audit Staff and then became Executive Audit Manager. In 1996, he was named Chief Financial Officer for GE Aircraft Engine Services and Vice President in 1998. In 1999, he was promoted to continue asChief Financial Officer of GE Plastics and served in that role until 2002. He is a going concern is dependent upontrustee of Northeastern University and on the Company’s abilityboard of Build On. He has also been involved in a number of youth programs. He received his B.S. in Business Administration from Northeastern University. Mr. Bornstein's qualifications to access additional sources of capital, including, but not limited to, equity and/or debt financings, licensing revenue, and government loans or grants. If the Company is unable to raise additional capital, the Company may have to significantly delay, scale back or discontinue the development or commercialization of its product and/or consider a sale or other strategic transaction. Accordingly,serve on our Board believes that providing the Company the flexibility to issue shares of common stockinclude: his background in excess of the Exchange Cap is advisablefinance, extensive executive leadership experience, and experience in the best interests of the Company and our stockholders.
Effect on Current Stockholders
The issuance of shares of common stock under the SEPA, including any shares that may be issued in excess of the Exchange Cap (including any such shares issued below the Minimum Price that are the subject of this Proposal No. 1), would result in an increase in the number of shares of common stock outstanding, and our stockholders will incur dilution of their percentage ownership. Because the number of SEPA Shares that may be issued to Yorkville pursuant to the SEPA is determined based on the Market Price at the time of issuance, the exact magnitude of the dilutive effect cannot be conclusively determined. However, the dilutive effect may be material to our current stockholders.energy industry.
Required Vote
ApprovalClaude Demby, 58, has served as a member of Proposal No. 1 requiresour Board since 2021, and was recommended by a third-party search firm. He has led complex global organizations through turnaround and fast growth periods with his extensive executive leadership experience within the affirmative voteautomotive, aerospace and materials technology industries. He has established international operations and infrastructure throughout the world including Asia, Europe and the Americas during his career. Claude served as President of Cree LED, a majoritylighting and industrials innovation company with 2,400 employees, 13 global locations servicing over 25,000 customers in 101 different countries from 2018 to 2022. In this role, Claude led the turnaround and growth of this recognized global brand delivering application optimized solutions worldwide. Prior to leading the LED business, Claude led Mergers and Acquisitions for Cree Inc., driving the M&A strategy establishing the foundation for Cree’s future growth platform into the power, communications and infrastructure sectors. Prior to joining Cree, Claude served as the CEO and Director of Noel Group, an industrial holding company owning 5 global businesses focused on the manufacture of synthetic materials. At Noel Group, Claude led the turnaround of this business across the globe establishing the strategy, processes and global footprint significantly improving company financial health and shareholder value. And prior to joining Noel Group, Claude served as the President and COO of L&L Products Inc., a global automotive and aerospace OEM delivering solutions to reduce the noise and vibration while reinforcing application structural integrity. Claude led L&L Products through one of its fastest growth periods in the company’s history establishing operations throughout the world. Claude began his career in engineering roles with Proctor and Gamble and GE. Claude has extensive public and private board experience. He currently serves as the Chair of Nominating and Governance Committee and Director on the board of Brown Capital Management Mutual Fund Trust; and as the Chair of the votes castNominating and Governance Committee, member of the Audit Committee, and Director on the proposal. Abstentions and “broker non-votes,” if any, will have no effectboard of Piedmont Lithium Incorporated (NASDAQ: PLL), a clean energy company, with prior service as a Director on the outcomeboard of this vote.the Federal Reserve Bank of Richmond Charlotte branch from 2012 to 2017 including a period as Chairman. In addition to his professional experience and corporate board service, Claude has a strong record of community service through his founding and leadership of Valour Academy Schools Inc. Raleigh, past service on multiple leadership committees on Raleigh Chamber of Commerce Board including Chair Elect and past service as an advisor. Mr. Demby's qualifications to serve on our Board include: his extensive experience in industrial manufacturing, materials technology, executive level leadership as well as his experience in international operations.
THE BOARD RECOMMENDS A VOTE
FOR THE ELECTION OF EACH OF THE ABOVE-NAMED CLASS III NOMINEES
DIRECTORS
The following table sets forth the name, age as of March 1, 2023 and position of the nominees for election at the Annual Meeting and the other current directors of Eos Energy Enterprises, Inc. whose terms extend past the Annual Meeting. The following also includes certain information regarding our directors’ individual experience, qualifications, attributes and skills and brief statements of those aspects of our directors’ backgrounds that led us to conclude that they are qualified to serve as directors (information for Messrs. Stidolph, Bornstein and Demby is set forth above in “Proposal No. 1 Election of Directors”).
| | | | | | | | | | | |
| Name | Age | Position | Independent |
| Russell Stidolph (2) (3) | 47 | Independent Chair; Director | ☑ |
| Jeff Bornstein (1) (2) | 57 | Director | ☑ |
| Claude Demby (1) (3) | 58 | Director | ☑ |
| Alex Dimitrief (1) (3) | 64 | Director | ☑ |
| Joe Mastrangelo | 54 | Chief Executive Officer and Director | |
| Marian “Mimi” Walters (2) (3) | 60 | Director | ☑ |
| Audrey Zibelman (1) (2) | 65 | Director | ☑ |
(1) Member of the Audit Committee
(2) Member of the Leadership Development & Compensation Committee
(3) Member of the Nominating and Corporate Governance Committee
Alex Dimitrief, 64, has served as a director since the closing of the Business Combination in 2020. Mr. Dimitrief is an experienced director, C-suite leader and general counsel who has steered varied energy-related and other global businesses through a wide range of complex commercial, legal and organizational challenges. He has previously served as a director of both public and non-public companies including The We Company, Synchrony Financial (NYSE: SF) and GE Capital Bank and presently serves as a director of SmileDirectClub (Nasdaq: SDC) and sits on the Advisory Board of Cresset Capital Management. Since November 2022, Mr. Dimitrief has been serving as Senior Vice President and General Counsel of Sotera Health Co. (SHC: NASDAQ). Previously, as President and Chief Executive Officer of General Electric’s Global Growth Organization, Mr. Dimitrief was responsible for driving GE’s growth in more than 180 countries. Under Mr. Dimitrief’s watch in 2018, GE achieved $76 billion in international orders and secured billions in financing for many of GE’s emerging market customers. As GE’s General Counsel from 2015-2018, Mr. Dimitrief served as the principal executive advisor to GE’s board and led a global team responsible for GE’s legal matters, compliance, SEC reporting, government affairs and environmental safety programs. In previous roles at GE, Mr. Dimitrief was a leader of the transformation of GE Capital (including the IPO/split-off of Synchrony Financial) and led joint venture negotiations for GE Energy in China and Russia. In announcing Mr. Dimitrief’s retirement from GE in January 2019, Chief Executive Officer Larry Culp described Mr. Dimitrief as “one of the most respected leaders at GE” who “effectively represented GE before governments, regulators and customers throughout the world and is widely recognized as a compelling champion of integrity, transparency and the rule of law.” In 2007, Mr. Dimitrief came to GE after 20 years as a senior partner at Kirkland & Ellis LLP, where he “first chaired” and regularly advised boards about securities, restructuring, intellectual property, product liability, environmental, governance and commercial disputes. Mr. Dimitrief earned his B.A. from Yale College and his J.D. from Harvard Law School. Mr. Dimitrief’s qualifications to serve on our board of directors include: his lengthy executive and board experiences, as well as his expertise in managing risk, legal compliance, governance and other functions at mature companies with large workforces.
Joe Mastrangelo, 54, has served as a director and the Chief Executive Officer since the closing of the Business Combination in 2020. He joined EES LLC as a Board advisor in March 2018 and assumed the role of Chief Executive Officer from August 2019 until the closing of the Business Combination. Before coming to Eos, Mr. Mastrangelo was president and chief executive officer of Gas Power Systems since September 2015. As an energy industry leader for the past two decades, Mr. Mastrangelo has extensive experience leading diverse teams to develop and deploy commercial scale projects around the world. Mr. Mastrangelo has broad operating experience across the energy value chain including serving as Chief Executive Officer of GE’s Power Conversion business, applying science and systems of power conversion to increase the efficiency of the world’s energy infrastructure. Mr. Mastrangelo spent ten years with GE Oil & Gas, in leadership roles in finance, quality, and commercial operations, culminating in being named a GE Corporate Officer in 2008. Joe began his career with GE in the company’s Financial Management Program and then joined GE’s Corporate Audit Staff. Originally from New York, Mr. Mastrangelo earned a Bachelor of Science in Finance from Clarkson University and an Associate of Science, Business Administration and Management from Westchester Community College. Mr. Mastrangelo’s qualifications to serve on our Board include: his extensive experience in operations management at executive level positions, as well as his educational background in finance and business.
Marian "Mimi" Walters, 60, has served as a director since the closing of the Business Combination in 2020. Ms. Walters has been serving as a director for B. Riley Financial, Inc. (NASDAQ: RILY) since July 2019 and has been Chief Commercial Officer for Leading Edge Power Solutions, LLC since November 2019. From 2015 to 2019, she served as a Member of the U.S. House of Representatives (the “House”) from California’s 45th District where she worked on key legislation, business and policy initiatives related to energy, technology, environmental and healthcare. Ms. Walters was a member of House Leadership and served on the influential Energy and Commerce Committee. She was a member of the Communications and Technology, Digital Commerce and Consumer Protection, and Oversight and Investigations subcommittees. Prior to her election to Congress, Ms. Walters was a member of the California State Senate, from 2008 to 2014, where she served on the Banking and Financial Institutions Committee and was Vice Chair of the Appropriations Committee. She previously served in the California State Assembly and was mayor and council member for the City of Laguna Niguel. Prior to her career in public service, Ms. Walters was an investment professional at Drexel Burnham Lambert and Kidder, Peabody & Co. She earned a B.A. in Political Science from the University of California, Los Angeles. Ms. Walters’ qualifications to serve on our board of directors include: her experience with the alternative energy industry, policy and government affairs and her background in investment banking.
Audrey Zibelman, 65, has served as a director since the closing of the Business Combination in 2020. Ms. Zibelman most recently served as Vice President at X, the Alphabet Moonshot Factory, from January 2021 to October of 2022, before transitioning to an advisor role. Ms. Zibelman has been serving as a director for AltEnergy Acquisition Corp. (NASDAQ: AEAE) since August 2021. Previously, Ms. Zibelman was the Managing Director and Chief Executive Officer of the Australian Energy Market Operator (“AEMO”), responsible for overseeing AEMO’s strategy, operations and administrative functions. In addition to taking on the role as Chief Executive Officer of AEMO, Ms. Zibelman also served on the CSIRO Energy Advisory Committee, the Melbourne Energy Institute’s Advisory Board, and as a Director of the Melbourne Recital Centre. Ms. Zibelman is also on the board of the Advanced Energy Economy Institute. Ms. Zibelman has extensive experience in the public, private and not-for-profit energy and electricity sectors in the United States. Prior to joining AEMO in March 2017, her roles included Chair of the New York State Public Service Commission (“NYPSC”), from August 2013 to March 2018, Executive Vice President and Chief Operating Officer of system operator PJM from January 2008 to February 2013, executive roles with Xcel Energy, from 1992 to 2004, one of the United States largest integrated gas and electricity utilities and served on a number of energy industry advisory groups and boards. During her tenure at the NYPSC, Ms. Zibelman led the design and implementation of extensive regulatory and retail market changes to modernize and transform the state’s electricity industry under New York Governor Andrew M. Cuomo’s ‘Reforming the Energy Vision’ plan. A recognized national and international expert in energy policy, markets and Smart Grid innovation, Ms. Zibelman is a Founder and past President and CEO of Viridity Energy, Inc., which she formed after more than 25 years of electric utility industry leadership experience in both the public and private sectors. Previously, Ms. Zibelman was the Executive Vice President and Chief Executive Officer of GO15 member organization, PJM, a regional transmission organization responsible for operating the power grid and wholesale power market which serves fourteen states across the eastern United States. Ms. Zibelman also held legal and executive positions at Xcel Energy, served as General Counsel to the New Hampshire Public Utilities Commission, and was Special Assistant Attorney General in the Minnesota Attorney General’s Office. During her career, Ms. Zibelman has served on numerous industry-related and non-profit boards, including, but not limited to the Midwest and Mid-Atlantic Reliability Councils. Ms. Zibelman’s board experience also includes Advisor to Secretary of Energy for the U.S. Department of Energy and Advisory Council, New York State Energy Research and Development Authority, the New York State Planning Board and the New York State Emergency Planning Council. Ms. Zibelman received her B.A. from Penn State University, her Executive MBA from University of Minnesota — Carlson School of Management and her J.D. from Hamline University of Law. Ms. Zibelman’s qualifications to serve on our Board include: her extensive management experience within the energy industry, and her background in energy regulation, policy and government affairs and advising energy companies and public utilities.
CORPORATE GOVERNANCE
Board Composition
In accordance with the terms of the Director Nomination Agreement, the Board of the Company presently comprises seven directors.
Our Charter provides the number of directors, which is fixed from time to time by a resolution of our Board. Our Board is divided into three classes with only one class of directors being elected in each year and each class serving a three-year term, as follows:
•Our Class I directors, consisting of Marian “Mimi" Walters and Audrey Zibelman, will expire at the Company’s annual meeting of stockholders in 2024;
•Our Class II directors, consisting of Joe Mastrangelo and Alex Dimitrief, will expire at the Company's annual meeting of stockholders in 2025;
•Our Class III directors, consisting of Russell Stidolph, Claude Demby, and Jeff Bornstein, are nominated for re-election at this Annual Meeting.
The directors hold their office for a term of three years or until their respective successors are elected and qualified, subject to such director’s earlier death, resignation, disqualification or removal. In accordance with the Second Amended and Restated Bylaws of the Company, the Board will also be responsible for filling vacancies or newly-created directorships on the Board that may occur between annual meetings of stockholders.
Continuously Improving Our Board and Director Nomination Considerations
As the Company evolves, so will our Board. The Company and its Board are committed to continuing to develop a Board comprising experienced and qualified directors with integrity and expertise who can serve as effective stewards for an increasingly diverse base of stockholders and other stakeholders and institute robust governance principles.
To this end, our Board has instituted a process designed to regularly review the mix of skills and experience of our current directors and those it expects would be desirable in the future, including industry experience; public company experience; operational, manufacturing and supply chain expertise, especially in high-technology start-ups; finance and accounting, including capital markets expertise; cognitive diversity, both in terms of demographics and personal and professional experience; enterprise risk management; regulation and government affairs; talent development; environmental, social and governance ("ESG") and sustainability; and growth, with a focus on leading businesses through periods of significant growth and transformation and exposure to various domestic and international markets. The Board also assesses its own performance and the performance of its committees.
We view continuous self-improvement of our corporate governance processes as an imperative for the Nominating and Corporate Governance Committee and our Board. We have retained Heidrick & Struggles to provide consulting and assistance in support of the Company’s Board composition and effectiveness planning. We selected Heidrick & Struggles based on its record as a preeminent firm in working with boards on succession planning, board effectiveness and culture shaping.
Directors are expected to possess certain personal traits and, in fulfilling its responsibility to identify qualified candidates for membership on the Board, the Nominating and Corporate Governance Committee will examine each director nominee on a case-by-case basis regardless of who recommended the nominee (including with respect to stockholder recommendations) and take into account all factors it considers appropriate, including those described above as well as, enhanced independence, financial literacy and financial expertise, diversity of background and perspective, including, but not limited to, with respect to age, gender, race, demographics, and any other relevant qualifications, attributes or skills.
Our directors self-identify as set forth in the table below.
| | | | | | | | | | | | | | | | | | | | | | | |
| Board Composition |
| Total Number of Directors | 7 |
| Director Name | Claude Demby | Alex Dimitrief | Joe Mastrangelo | Jeff
Bornstein | Russell Stidolph | Marian “Mimi” Walters | Audrey Zibelman |
| Gender Identification |
| Male | ü | ü | ü | ü | ü | | |
| Female | | | | | | ü | ü |
| Race/Ethnicity |
| African American or Black | ü | | | | | | |
| White | | ü | ü | ü | ü | ü | ü |
Independence of the Board of Directors
Nasdaq rules require that a majority of our Board be independent. Consistent with its charter, the Nominating and Corporate Governance Committee has reviewed the relationships between directors, the Company and members of management and recommended to the Board whether each director qualifies as “independent” under the Board’s definition of “independence” and the applicable rules of Nasdaq and the Company’s Corporate Governance Guidelines. Our Board has determined that six of the seven directors, Claude Demby, Alex Dimitrief, Audrey Zibelman, Marian “Mimi” Walters, Jeff Bornstein and Russell Stidolph, are “independent directors” as defined in the rules of Nasdaq and applicable SEC rules.
Board Leadership Structure
Mr. Stidolph serves as the Chair of the Board and is an independent member of the Board. The Independent Directors meet in executive session without non-Independent Directors or management present no less than twice per year. Each executive session of the Independent Directors is presided over by the Chair of the Board.
Our Board believes that, at this time, the foregoing structure separating the Chair of the Board and CEO roles achieves an appropriate balance between the effective development of key strategic and operational objectives by the CEO, and independent oversight of management’s execution of such objectives. Our Board also believes that this structure improves its risk oversight function. Our Board also periodically evaluates our leadership structure to determine if it remains in our best interests based on circumstances existing at the time. If the Chair of the Board is a member of management or does not otherwise qualify as independent, the Independent Directors may elect a Lead Director.
Committees of the Board of Directors
Our Board has three fully independent standing committees: the Audit Committee, the Leadership Development & Compensation Committee and the Nominating and Corporate Governance Committee. Each of the committees reports to the Board as they deem appropriate and as the Board may request.
Audit Committee
The Company’s Audit Committee oversees the Company’s corporate accounting and financial reporting process and the Company’s compliance with legal and regulatory requirements. Among other matters, the Audit Committee:
•appoints our independent registered public accounting firm;
•evaluates the independent registered public accounting firm’s qualifications, independence and performance;
•determines the engagement of the independent registered public accounting firm;
•reviews and approves the scope of the annual audit and the audit fee;
•discusses with management and the independent registered public accounting firm the results of the annual audit and the review of the Company’s quarterly financial statements;
•approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services;
•monitors the rotation of the lead audit partner of the independent registered public accounting firm on the Company’s engagement team in accordance with requirements established by the SEC;
•is responsible for reviewing our financial statements and our management’s discussion and analysis of financial condition and results of operations to be included in our annual and quarterly reports to be filed with the SEC;
•reviews our critical accounting policies and practices; and
•reviews the audit committee charter and the committee’s performance at least annually.
The members of the Audit Committee are Jeff Bornstein, Claude Demby, Alex Dimitrief and Audrey Zibelman, with Jeff Bornstein serving as the chair of the committee. Under the rules of the SEC, members of the Audit Committee must also meet heightened independence standards. All of the members of the Audit Committee are independent directors as defined under the applicable rules and regulations of the SEC and Nasdaq with respect to Audit Committee membership. Jeff Bornstein qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K.
Leadership Development & Compensation Committee
Our Leadership Development & Compensation Committee (the "Compensation Committee") reviews and recommends policies relating to compensation and benefits of our officers and employees. Among other matters, the Compensation Committee:
•establishes, reviews and approves corporate goals and objectives of the Company's management compensation programs, its basic compensation policies and annual and long-term performance goals and objectives;
•reviews the Company’s employee compensation policies and practices;
•reviews and approves any employment, compensation, benefit or severance agreement with any executive officer;
•evaluates the performance of executive officers against corporate goals and objectives and recommends to our Board the compensation of these officers based on such evaluations;
•reviews, approves and recommends to the Board the adoption of any equity-based compensation plan for employees of or consultants to the Company and any modification of any such plan; and
•reviews and evaluates, at least annually, the directors' compensation and makes recommendations thereon to the Board.
Pursuant to the Compensation Committee’s charter, the Compensation Committee may, by resolution approved by a majority of the Compensation Committee members, form and delegate any of its responsibilities to a subcommittee so long as such subcommittee is solely comprised of one or more members of the Committee and such delegation is not otherwise inconsistent with law and applicable rules and regulations of the SEC and Nasdaq. The Compensation Committee may also, in certain instances by resolution approved by a majority of the Compensation Committee members, delegate to management the administration of the Company’s incentive compensation and equity-based compensation plans, to the extent permitted by law and as may be permitted by such plans and subject to such rules, policies and guidelines (including limits on the aggregate awards that may be made pursuant to such delegation) as the Compensation Committee shall approve.
The Compensation Committee consults with members of our management team, including our CEO, when making compensation decisions. While the Compensation Committee considers our CEO’s recommendations, the Compensation Committee ultimately uses its own business judgment and experience in approving, or making recommendations to the Board, where applicable, regarding individual compensation elements and the amount of each element for our NEOs. Our CEO recuses himself from all determinations regarding his own compensation. The members of our Company’s Compensation Committee are Russell Stidolph, Audrey Zibelman, Marian “Mimi” Walters and Jeff Bornstein, with Russell Stidolph serving as the chair of the committee.
Our Board has determined that each member of the Compensation Committee meets the independence requirements under the applicable rules and regulations of the SEC and the applicable listing standards of Nasdaq, and each is a “non-employee director” as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee is responsible for making recommendations to our Board regarding candidates for directorships and the size and composition of our Board. In addition, the Nominating and Corporate Governance Committee is responsible for overseeing our corporate governance policies and reporting and making recommendations to our Board concerning governance matters. This includes oversight of ESG matters.
The members of the Company’s Nominating and Corporate Governance Committee are Alex Dimitrief, Claude Demby, Russell Stidolph and Marian “Mimi” Walters, with Alex Dimitrief serving as the chair of the committee. Our Board has determined that each member of the Nominating and Corporate Governance Committee meets the independence requirements under the applicable rules and regulations of the SEC and the applicable listing standards of Nasdaq.
Code of Business Conduct and Ethics
Our Board of Directors has adopted a Code of Business Conduct and Ethics (the “Code”) that applies to all officers, directors and employees. The Company intends to disclose any amendments to or waivers of certain provisions of the Code on its website at https://investors.eose.com within the time period required by the SEC and the Nasdaq.
Copies of our Code, along with our Corporate Governance Guidelines and the charter of each of our Audit, Compensation and Nominating and Corporate Governance Committees are available on our website at investors.eose.com. Information on or accessible through our website is not part of, or incorporated by reference into, this Proxy Statement. In addition, a copy of the Code will be provided, without charge upon request from us.
Hedging and Pledging Policy
Our Insider Trading Policy prohibits employees and directors from engaging in any hedging transactions or from pledging Company securities in any circumstance, including by purchasing Company securities on margin or holding Company securities in a margin account.
Role of Compensation Consultant
The Compensation Committee has engaged Mercer to provide the services of executive compensation consulting and to assist it on matters relating to our executive compensation program pursuant to its authority under the Compensation Committee charter. During 2022, Mercer provided benchmarking studies to the Compensation Committee, as well as information on corporate governance, regulatory issues, and developments regarding executive compensation. When requested by the Compensation Committee, Mercer consultants attend certain meetings of the Compensation Committee.
The Compensation Committee has evaluated Mercer’s independence by considering the requirements adopted by Nasdaq and the SEC and has determined that no conflict of interest exists. The Compensation Committee is directly responsible for the appointment, compensation and oversight of the work performed by any such advisor and the sole authority to approve all such advisors’ fees. Mercer has not provided any other services to us and has received no compensation other than with respect to the services described above.
Meetings of the Board, Board and Committee Member Attendance and Annual Meeting Attendance
Our Board met thirteen times during the fiscal year ended December 31, 2022. The Audit Committee met eight times, the Compensation Committee met five times and the Nominating and Corporate Governance Committee met six times. During fiscal year ended December 31, 2022, there was 95% attendance of the meetings of the Board and the committees of the Board. We encourage and expect all of our directors and nominees for director to attend our annual meeting of stockholders. All but one of the directors then in service attended the 2022 annual stockholders meeting.
Stockholder Communications with the Board
Should stockholders or other interested parties wish to communicate with the Board, non-management directors or independent directors as a group or any specified individual directors, such correspondence should be sent to the attention of our Secretary at 3920 Park Avenue, Edison, NJ 08820. Our Secretary will forward correspondence relating to a director’s duties or responsibilities to the specified recipient. Correspondence that is unrelated to a director’s duties will be handled at the Secretary’s discretion. Stockholders may also submit recommendations of director candidates by following the same procedures.
Role of the Board in Risk Oversight
Our Board oversees our risk management. Our Board, directly and through the Audit Committee carries out this oversight role by reviewing the Company’s policies and practices with respect to risk assessment and risk management, and by discussing with management the risks inherent in the operation of our business. Our Compensation Committee reviews risks arising out of the Company’s compensation policies and practices, which are monitored and mitigated on an ongoing basis. Any necessary adjustments are addressed in the Company’s risk profile.
Board Oversight of Material Environmental and Social Risk
Eos takes into account considerations that affect all of our key stakeholders, including our stockholders, customers, employees, communities, regulators and suppliers. Our Board oversees the Company's overall social responsibility strategy and supports the implementation of the Company's ESG strategy. The Board continues to monitor and evaluate the impact of the Company’s ESG efforts and strives for improvement and growth of the Company's social responsibility benchmarks.
DIRECTOR COMPENSATION TABLE
The following table sets forth information concerning the compensation earned by each of our non-employee directors during the fiscal year ended December 31, 2022. Mr. Mastrangelo does not earn any additional compensation for service on our Board.
| | | | | | | | | | | | | | | | | |
| Name and Principal Position | Fees Earned or Paid in Cash ($) | Stock Awards(1) ($) | Option Awards(2) ($) | All Other Compensation ($) | Total ($) |
| Daniel Shribman(3) | $ | 18,750 | | $ | 75,000 | | $ | 75,085 | | $ | — | | $ | 168,835 | |
| Russell Stidolph | 25,000 | | 169,050 | | 75,085 | | — | 269,135 | |
| Alex Dimitrief | 25,000 | | 122,025 | | 75,085 | | — | 222,110 | |
| Audrey Zibelman | 25,000 | | 75,000 | | 75,085 | | — | 175,085 | |
| Marian "Mimi" Walters | 25,000 | | 75,000 | | 75,085 | | — | 175,085 | |
| Claude Demby | 25,000 | | 75,000 | | 75,085 | | — | | 175,085 | |
| Jeff Bornstein(4) | 6,250 | | 109,936 | | 75,107 | | — | 191,293 | |
(1) Represents the grant date fair value of restricted stock unit awards, computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. For a discussion of the valuation methodology used, see Note 18, “Stock-Based Compensation” of the notes to our consolidated financial statements included in the Form 10-K. These amounts do not necessarily correspond to the actual value that may be realized from the stock awards by the non-employee directors. The aggregate number of stock awards (in the form of restricted stock units) outstanding for our non-employee directors as of December 31, 2022 was: Mr. Stidolph: 108,559, Mr. Dimitrief: 86,059, Ms. Zibelman: 63,559, Ms. Walters: 63,559, Mr. Demby: 63,559, and Mr. Bornstein: 52,601.
(2) Represents the grant date fair value of option awards, computed in accordance with FASB ASC Topic 718. Grant date fair value is calculated based on the Black-Scholes option pricing model. For information regarding the assumptions used in determining the grant date fair value, see Note 18, “Stock-Based Compensation” of the notes to our consolidated financial statements included in the Form 10-K. These amounts do not necessarily correspond to the actual value that may be realized from the option awards by the named executive officers. The aggregate number of option awards outstanding for our non-employee directors as of December 31, 2022 was: Mr. Stidolph: 145,018, Mr. Dimitrief: 145,018, Ms. Zibelman: 145,018, Ms. Walters: 145,018, Mr. Demby: 145,018, and Mr. Bornstein: 80,116.
(3) Effective on September 2, 2022, Mr. Shribman stepped down from the Board. Upon his resignation, Mr. Shribman forfeited his restricted stock units and stock options that were unvested as of such date. In accordance with the terms of his stock option awards, Mr. Shribman remains eligible to exercise his outstanding and vested options until September 3, 2023.
(4) Mr. Bornstein was appointed to the Board effective September 7, 2022.
Director Compensation
On December 8, 2020, our compensation committee approved our Non-Employee Director Compensation Policy (the “Director Compensation Policy”). Under the Director Compensation Policy, each non-employee director is eligible to receive (i) an annual cash retainer equal to $25,000, payable in equal quarterly installments in arrears, and (ii) an annual equity-based retainer (the “Equity Retainer”) with a grant date fair value of $150,000, payable 50% in restricted stock units and 50% in stock options. The Equity Retainers vest, subject to continued service, on the earlier of (i) the one-year anniversary of the grant date and (ii) immediately prior to the date of the next annual stockholders meeting of the Company following the grant date (with accelerated vesting upon a change in control). In addition, all members of our Board will be reimbursed for their costs and expenses in attending Board meetings.
In addition to the Equity Retainer, the chair of the Nominating and Corporate Governance Committee received a special grant in September 2022, of 22,500 restricted stock units (“RSUs”), and the chair of the board and chair of the Compensation Committee, received a special grant in September 2022, of 45,000 RSUs. In connection with his appointment as the chair of the Audit Committee, Mr. Bornstein received a grant of restricted stock units, valued at $35,000. Each of the immediately aforementioned grants vest, subject to continued service, on the earlier of (i) the one-year anniversary of the grant date and (ii) immediately prior to the date of the next annual stockholders meeting of the Company following the grant date (with accelerated vesting upon a change in control).
On September 7, 2022, the Board approved certain amendments to the Director Compensation Policy, which provide for additional equity compensation, in the form of stock options, to be paid to any chairperson of the Board or one of its committees (the “Chairperson Grants”). The chairperson of the Board or the Audit Committee are eligible to receive a Chairperson Grant valued at $50,000 and the chairperson of the compensation committee or the nominating committee are eligible to receive a Chairperson Grant valued at $25,000. The Chairperson Grants will be effective beginning with the service year beginning at the Annual Meeting.
The Equity Retainer for 2022 was granted to our non-employee directors on May 19, 2022. In the future, Equity Retainers and Chairperson Grants will generally be granted on the second trading day following each annual meeting of our stockholders. Any individual that becomes a non-employee director for the first time other than by election or appointment at an annual meeting of our stockholders will be granted an Equity Retainer in connection with his or her appointment and will be eligible to receive an Equity Retainer with the next annual stockholders meeting so long as such annual stockholders meeting is more than four calendar months from the date such individual becomes a non-employee director. The Equity Retainer and Chairperson Grants will be granted pursuant to our 2020 Plan.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of our Board has selected Deloitte (as defined below), as our independent registered public accounting firm for the fiscal year ending December 31, 2023, and is seeking ratification of such selection by our stockholders at the Annual Meeting. “Deloitte” shall mean (i) Deloitte & Touche LLP, and the other subsidiaries of its parent company, Deloitte LLP, a U.S. member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”); and (ii) any of the other member firms of DTTL and their affiliates that, in case of both (i) and (ii) of this sentence, provide professional services to the Company. A representative of Deloitte is expected to be present at the Annual Meeting to make a statement and be available to respond to questions.
Neither our Second Amended and Restated Bylaws nor other governing documents or applicable law require stockholder ratification of the selection of Deloitte as our independent registered public accounting firm. Still, the Audit Committee is submitting the selection of Deloitte to our stockholders for ratification as a matter of good corporate practice. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain Deloitte. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of the Company and our stockholders.
Principal Accountant Fees and Services
The following table provides information regarding the fees incurred to Deloitte during the fiscal year ended December 31, 2022 and the fiscal year ended December 31, 2021. All of the services of Deloitte for 2021 and 2022 described below were pre-approved by the Audit Committee.
| | | | | | | | | | | |
| Fiscal Year Ended December 31, |
| 2022 | | 2021 |
| Audit Fees (1) | $ | 1,922,919 | | | $ | 1,977,358 | |
| Tax Fees | — | | | — | |
| Audit-Related Fees | — | | | — | |
| All Other Fees | — | | | — | |
| Total Fees | $ | 1,922,919 | | | $ | 1,977,358 | |
(1) Audit fees for fiscal years ended December 31, 2022 and December 31, 2021 consisted of fees billed for professional services rendered for the audit of our consolidated financial statements, review of the financial statements included in the Company’s Form 10-Q filings, and services in connection with regulatory filings.
Pre-Approval Policies and Procedures
The Audit Committee is responsible for appointing, setting compensation and overseeing the work of the independent auditors. In recognition of this responsibility, the Audit Committee is exclusively authorized and directed to consider and, in its discretion, approve in advance any services proposed to be carried out for the Company by the independent auditor or by any other firm proposed to be engaged by the Company as its independent auditor. As permitted by applicable law, the Audit Committee delegates to its committee chair the authority to grant pre-approvals of permissible services and fees. All such pre-approvals are disclosed to the full Audit Committee on a regular basis, generally quarterly. In connection with approval of any permissible tax services and services related to internal control over financial reporting, the Audit Committee discusses with the independent auditor the potential effects of such services on the independence of the auditor.
THE BOARD RECOMMENDS A VOTE FOR RATIFICATION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The material in this report is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by reference into any filing of Eos under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
The primary purpose of the Audit Committee is to oversee our financial reporting processes on behalf of our Board. The Audit Committee’s functions are more fully described in its charter, which is available on our website at https://investors.eose.com (but which is not hereby incorporated by reference). Management is responsible for the preparation, presentation, and integrity of the Company’s financial statements, for the appropriateness of the accounting principles and reporting policies that are used by the Company, and for establishing and maintaining effective internal control over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
The Audit Committee has discussed with Deloitte, the Company’s independent registered public accounting firm, the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) and the SEC. In addition, the Audit Committee has received from Deloitte the written disclosures and the letter required by the applicable requirements of the PCAOB regarding Deloitte’s communications with the Audit Committee concerning independence, and has discussed with Deloitte their independence. Finally, the Audit Committee discussed with Deloitte, with and without management present, the scope and results of Deloitte’s audit of the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
Based on these reviews and discussions, the Audit Committee has recommended to our Board that such audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC. The Audit Committee also has selected Deloitte as our independent registered public accounting firm for year ended December 31, 2023 and is seeking ratification of such selection by the stockholders.
Audit Committee
Jeff Bornstein
Claude Demby
Alex Dimitrief
Audrey Zibelman
EXECUTIVE OFFICERS
The following table sets forth the name, age as of March 1, 2023 and position of the individuals who currently serve as the executive officers of the Company (with the exception of Mr. Mastrangelo, which is set forth above under "Directors"). The following also includes certain information regarding our officers’ individual experience, qualifications, attributes and skills. Our officers are appointed by the Board and serve at the discretion of the Board, rather than for specific terms of office. Our Board is authorized to appoint persons to the offices set forth in our Third Amended and Restated Certificate of Incorporation and our Second Amended and Restated Bylaws as it deems appropriate.
| | | | | | | | | | | | | | |
| Name | | Age | | Position |
| Joe Mastrangelo | | 54 | | Chief Executive Officer |
| Nathan Kroeker | | 49 | | Chief Financial Officer |
| Melissa Berube | | 42 | | General Counsel, Chief Compliance Officer and Corporate Secretary |
Nathan Kroeker, 49, joined Eos as Chief Financial Officer in January 2023. In this position, Mr. Kroeker is responsible for the overall financial strategy and direction at Eos, overseeing all financial functions, he guides the controller, treasury, shareholder relations, accounting, tax, financial planning and internal audit functions to support Eos’s aggressive growth strategy and meet its clients’ and investors’ expectations. Prior to joining Eos, Mr. Kroeker spent ten years with Spark Energy, a retail energy services company, serving as Chief Financial Officer and then as Chief Executive Officer. As Spark Energy’s Chief Executive Officer, he led the company through its initial public offering and subsequent mergers and acquisitions transactions. From 2009 to 2010, Mr. Kroeker served as Senior VP, Head of Energy Finance for Macquarie Bank, and from 2004 to 2009 worked for Direct Energy, a provider of home and business energy services, ultimately becoming VP of Finance. Mr. Kroeker began his career in public accounting with Coopers & Lybrand and Arthur Andersen, before transitioning into a transaction advisory role with Ernst & Young. Mr. Kroeker holds a Bachelor of Commerce in Accounting from the University of Manitoba, and is a Certified Public Accountant.
Melissa Berube, 42, joined Eos as General Counsel and Corporate Secretary in June 2021. In February 2022, Ms. Berube was appointed Chief Compliance Officer in addition to her existing titles and, in connection with that appointment and the expansion of the General Counsel role, was appointed as an executive officer of Eos. Prior to joining Eos, Ms. Berube served as General Counsel and Senior Vice President of Legal & People of Erickson Incorporated, a global aerial services provider and OEM aerospace manufacturer, guiding Erickson through its successful Chapter 11 reorganization, restructure and post-emergence. Ms. Berube served as General Counsel and Vice President of Erickson between 2017 and 2019 and held various other in-house legal positions at Erickson between 2013 and 2017. Before she joined Erickson, Ms. Berube was an associate with the law firm of Schwabe, Williamson & Wyatt in Portland, Oregon. Ms. Berube received her law degree from the University of Washington and earned a Bachelor of Arts degree in History from the University of Portland. She is a member of the Hispanic National Bar Association.
EXECUTIVE COMPENSATION
We have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined under the Securities Act, which require compensation disclosure for (i) all individuals who served as our principal executive officer or in a similar capacity during fiscal years ended December 31, 2021 and December 31, 2022, (ii) our two most highly compensated executive officers other than our principal executive officer who were serving as executive officers as of the fiscal year ended December 31, 2022, and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to clause (ii), but for the fact that the individual was not serving as an executive officer as of the fiscal year ended December 31, 2022. We refer to these executive officers collectively as the named executive officers (“NEOs”). This section should be read in conjunction with our financial statements and related notes appearing in our annual report on Form 10-K for fiscal year ended December 31, 2022, filed with the SEC on February 28, 2023 (“Form 10-K”), along with the section of this proxy entitled “Certain Relationships and Related Party Transactions.” Compensation information included in the following section is presented in actual dollar amounts. For fiscal year ended December 31, 2022, the NEOs were:
•Joe Mastrangelo, Chief Executive Officer
•Randall Gonzales, former Chief Financial Officer
•Melissa Berube, General Counsel, Chief Compliance Officer and Corporate Secretary
Summary Compensation Table
The following table presents summary information regarding the total compensation paid to, earned by and awarded to each of our NEOs for the fiscal year ended December 31, 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards(1) ($) | Option Awards(2) ($) | Non-Equity Incentive Plan and Compensation ($) | All Other Compensation
(3) ($) | Total ($) |
| Joe Mastrangelo, Chief Executive Officer | 2022 | 648,929 | | — | | — | | 298,568 | | 162,500 | | 125,302 | | 1,235,299 | |
| 2021 | 611,538 | | — | | 15,945,000 | | — | | — | | 122,134 | | 16,678,672 | |
| Randall Gonzales(4), Chief Financial Officer | 2022 | 452,992 | | — | | 2,000,002 | | 238,056 | | 56,373 | | — | | 2,747,423 | |
| Melissa Berube, General Counsel, Chief Compliance Officer and Corp. Secretary | 2022 | 332,723 | | — | | 259,500 | | 158,704 | | 41,683 | | — | | 792,610 | |
(1) Represents the grant date fair value of restricted stock unit awards, computed in accordance with FASB ASC Topic 718. For a discussion of the valuation methodology used, see Note 18, “Stock-Based Compensation” of the notes to Eos Energy Enterprises, Inc. consolidated financial statements included in our Form 10-K. These amounts do not necessarily correspond to the actual value that may be realized from the stock awards by the NEOs.
(2) Represents the grant date fair value of option awards, computed in accordance with FASB ASC Topic 718. Grant date fair value is calculated based on the Black-Scholes option pricing model. For information regarding the assumptions used in determining the grant date fair value, see Note 18, “Stock-Based Compensation” of the notes to our consolidated financial statements included in our Form 10-K. These amounts do not necessarily correspond to the actual value that may be realized from the option awards by the NEOs.
(3) Amounts in this column reflect for Mr. Mastrangelo (i) for fiscal 2022, $6,120 in a car allowance, $54,750 in residential expenses and $64,432 in travel expense reimbursement, and (ii) for fiscal 2021, $54,751 in residential expenses and $5,820 in car allowance. In addition, amounts in this column for Mr. Mastrangelo in 2021 reflect $61,563 of tax gross-up, paid to him after the Company under withheld taxes Mr. Mastrangelo owed upon the vesting of certain RSUs, which were eligible to vest in the event the Company’s stock price achieved a dollar threshold following our IPO.
(4) Mr. Gonzales was appointed Chief Financial Officer on January 11, 2022. Mr. Gonzales resigned from his position effective January 23, 2023.
Narrative Disclosure to the Summary Compensation Table
Employment Agreements
Employment Agreement with Mr. Mastrangelo
Effective as of February 24, 2021, the Company entered into an Employment Agreement with Mr. Mastrangelo, which replaced and terminated Mr. Mastrangelo’s June 22, 2020 employment agreement.
Mr. Mastrangelo's employment agreement contains the following material compensation terms:
•An annual base salary of $650,000 per year based on full-time employment;
•An annual performance-based incentive bonus with an annual target payout of 100% of base salary, payable in cash; and
•Participation in the Company’s health insurance and other employee benefits the Company maintains; provided, that if Mr. Mastrangelo elects not to participate in the Company’s medical and other health benefit plans, the Company will pay for Mr. Mastrangelo and his family’s current medical and other health benefit plans in Italy, in an amount not to exceed a cumulative maximum of $17,000 per calendar year.
Pursuant to the terms of his employment agreement, if Mr. Mastrangelo is terminated without “cause” or resigns for “good reason” he will be entitled to (i) continued payment of his annual base salary for twenty-four months, (ii) a pro-rated annual bonus for the year of termination, if the applicable performance targets are achieved, and (iii) full vesting of any then-unvested equity awards, in each case, subject to his execution and non-revocation of a release of claims against the Company and continued compliance with certain restrictive covenants.
Pursuant to the terms of his employment agreement Mr. Mastrangelo is subject to certain restrictive covenants, including perpetual confidentiality obligation, a 12-month post-termination non-compete, a 12-month post-termination non-solicit covering our employees and business relationships, invention assignment provisions and a mutual non-disparagement obligation.
Agreements with Mr. Gonzales
Effective as of December 13, 2021, the Company entered into an employment agreement with Mr. Gonzales which contained the following material compensation terms:
•An annual base salary of $465,000 per year;
•An annual performance-based incentive bonus with an annual target payout of 50% of base salary, payable in cash;
•Participation in the Company’s health insurance and other employee benefits the Company maintains;
•Reimbursement of reasonable legal expenses incurred in connection with the negotiation of Mr. Gonzales' employment agreement; and
•A grant of restricted stock units with a grant date value of $2,000,000.00, vesting in equal amounts annually over three years, and fully vesting upon a change in control. This grant was made on January 11, 2022.
Pursuant to the terms of his employment agreement, had Mr. Gonzales been terminated without “cause” or resigned for “good reason” he would have been entitled to (i) continued payment of his annual base salary for twenty-four months, (ii) payment of the excess of the COBRA monthly premiums over the amount he paid for like coverage under the Company health, dental, and vision plans for the duration of COBRA coverage period for himself and his dependents (but not longer than eighteen months), (iii) a pro-rated annual bonus for the year of termination, if the applicable performance targets were achieved, and (iv) full vesting of any then-unvested equity awards, in each case, subject to his execution and non-revocation of a release of claims against the Company and continued compliance with certain restrictive covenants. Pursuant to the terms of his employment agreement, Mr. Gonzales remains subject to certain restrictive covenants, including perpetual confidentiality obligations, a 12-month post-termination non-compete, a 12-month post-termination non-solicit covering our employees and business relationships, invention assignment provisions and a mutual non-disparagement obligation.
In connection with his resignation, Mr. Gonzales entered into a separation agreement with the Company dated January 20, 2023, which provides that, subject to his execution and non-revocation of a release of claims and his agreement to cooperate with the Company’s executive management team through July 31, 2023 in connection with the transition of projects and matters with which he has familiarity: (i) the vesting of 104,493 of his unvested restricted stock units accelerated, (ii) his previously granted performance options were amended to allow for the unvested performance options to remain outstanding subject to the achievement of the existing performance goals and the vested performance options (whether vesting before or after the Separation Date) to remain outstanding until the earlier of Mr. Gonzales exercising the options or the expiration of the options on June 16, 2032, (iii) Mr. Gonzales will receive a cash bonus for 2022 in proportion and to the extent one is paid to our executive officers, and (iv) the Company will pay Mr. Gonzales’ COBRA continuation coverage for six months following the Separation Date. Mr. Gonzales also agreed that he will continue to be subject to the restrictive covenants set forth in his employment agreement with the Company.
Agreements with Ms. Berube
Effective as of July 29, 2022, the Company entered into an employment agreement with Ms. Berube, which replaced and superseded her prior offer letter, and which set forth the terms and conditions of her employment. Ms. Berube’s employment agreement contains the following material compensation terms:
•An annual base salary of $334,750 per year based on full-time employment;
•An annual performance-based incentive bonus with an annual target payout of 50% of base salary, payable in cash;
•Participation in the Company’s health insurance and other employee benefits the Company maintains; and
•Amendment of the terms of the Ms. Berube’s outstanding equity awards to clarify that her equity grants will fully vest upon a change in control.
Pursuant to the terms of the Berube Agreement, if Ms. Berube is terminated without “cause” or resigns for “good reason” she will be entitled to (i) continued payment of her annual base salary for twelve months, (ii) a pro-rated annual bonus for the year of termination, if the applicable performance targets are achieved, and (iii) full vesting of any then-unvested equity awards, in each case, subject to her execution and non-revocation of a release of claims against the Company and continued compliance with certain restrictive covenants. Pursuant to her employment agreement, Ms. Berube is subject to certain restrictive covenants, including perpetual confidentiality obligations, a 12-month post-termination non-solicit covering our employees and business relationships, invention assignment provisions and a mutual non-disparagement obligation.
Annual Bonus Plan
We maintain a cash-based annual bonus program for executives, including the NEOs, in which the NEOs are eligible to receive bonuses based on performance goals established in 2022. Such awards are designed to incentivize the NEOs with a variable level of compensation that is based on performance measures established by the Compensation Committee and tied to pre-defined business and personal goals and objectives.
Each NEO’s target annual bonus opportunity was approved by the Compensation Committee and is reflected as a percentage of the NEO’s base salary. In 2022, Mr. Mastrangelo’s target was 100% of his base salary and Mr. Gonzales’ and Ms. Berube’s targets were 50% of their respective base salaries.
In 2022, the Compensation Committee established five performance metrics for the 2022 bonus as follows:
| | | | | | | | | | | | | | |
| Performance Metrics | Weighting | Threshold (1) | Target (1) | Stretch (1) |
| Booked Orders | 25% | $300M | $400M | $500M |
| Revenue | 25% | $35M | $50M | $65M |
| Cost Reduction per KWh vs 2021 | 20% | (44)% | (49)% | (54)% |
| Factory Capacity | 15% | 600MWh | 800MWh | 1GWh |
| Eos Z3 Battery Production | 15% | 1 test container manufactured | 3 battery systems manufactured | 3 battery systems manufactured with 2 commissioned |
(1) Interpolation is used to determine the performance award when the Company's performance is between the target, threshold and stretch amounts.
The Company earned a 17.3% payout for the Booked Orders target and a 7.7% payout for the Factory Capacity target; achieving a 25% total performance award. Based on the level of achievement of the financial and performance targets, the Compensation Committee awarded bonuses as follows: $162,500 for Mr. Mastrangelo, $56,373 for Mr. Gonzales and $41,683 for Ms. Berube.
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information concerning outstanding equity awards for our NEOs as of the end of our fiscal year ended December 31, 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | Stock Awards |
| Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Number of Securities Underlying Unexercised Unearned Options (#) | Option
Exercise
Price ($) | Option
Expiration
Date | Number of
shares
or units of
stock
that have not vested (#) | Market value
of shares of
units of stock
that have not vested ($) (1) |
| Joe Mastrangelo | 10/23/2020 (2) | 456,493 | | 235,163 | | — | | $ | 8.67 | | 6/30/2025 | — | | — | |
| 10/23/2020 (3) | 345,828 | | — | | — | | $ | 8.67 | | 10/23/2030 | — | | — | |
| 2/26/2021 (4) | — | | — | | — | | — | | — | | 500,000 | | $ | 740,000 | |
| 6/16/2022 (5) | 200,000 | | — | | — | | $ | 1.34 | | 6/16/2032 | — | | — | |
| Randall Gonzales | 1/11/2022 (6) | — | | — | | — | | — | | — | | 313,480 | | $ | 463,950 | |
| 6/16/2022 (7) | 150,000 | — | | 150,000 | $ | 1.34 | | 6/16/2032 | — | — |
| Melissa Berube | 7/28/2021 (8) | — | | — | | — | | — | | — | | 50,000 | | $ | 74,000 | |
| 2/9/2022 (9) | — | | — | | — | | — | | — | | 75,000 | | $ | 111,000 | |
| 6/16/2022 (10) | 100,000 | | — | | 100,000 | | $ | 1.34 | | 6/16/2032 | — | | — | |
(1) The market value is calculated by multiplying the closing price of the Company's common stock on December 30, 2022, which was $1.48, by the number of restricted stock units that had not vested.
(2) The 235,163 unexcercisable shares will fully vest on June 22, 2023, subject to continued service through the vesting date.
(3) 345,828 of the shares of common stock subject to this option vested upon the Board's determination that the Company had successfully closed an equity financing transaction prior to June 22, 2023 in connection with the merger agreement with BMRG.
(4) The RSUs vest in three equal installments on each of January 3, 2022, January 2, 2023 and January 1, 2024, subject to continued service through each vesting date.
(5) The stock options vest in two equal installments based on the achievement of certain performance conditions during specified time periods (each, a "Milestone Event"), with the full vesting of the applicable tranche of stock options to occur 60 days after the achievement of the applicable Milestone Event. The first of the Milestone Events was achieved on July 29, 2022 and the stock options with respect to 200,000 shares of common stock became fully vested and exercisable on the 60th day following the date of the achievement of the Milestone Event, subject to Mr. Mastrangelo''s continued employment with the issuer through such date. The remaining 200,000 stock options pertaining to the second of the Milestone Events were forfeited on December 30, 2022.
(6) The RSUs were originally scheduled to vest in three equal installments on each of January 11, 2023, January 11, 2024 and January 11, 2025. In connection with Mr. Gonzales' resignation effective January 23, 2023, 104,493 RSUs were accelerated and the remaining 104,493 RSUs were forfeited.
(7) The stock options vest in two equal installments based on the achievement of a Milestone Event, with the full vesting of the applicable tranche of stock options to occur 60 days after the achievement of the applicable Milestone Event. The first of the Milestone Events was achieved on July 29, 2022 and the stock options with respect to 150,000 shares of common stock became fully vested and exercisable on the 60th day following the date of the achievement of the Milestone Event, subject to Mr. Gonzales' continued employment with the issuer through such date. In connection with Mr. Gonzales' resignation, his previously granted performance options were amended to allow for the unvested performance options to remain outstanding subject to the achievement of the existing performance goals and the vested performance options to remain outstanding until the earlier of Mr. Gonzales exercising the options or the expiration of the options on June 16, 2032.
(8) The RSUs vest in three equal installments on each of June 15, 2022, June 15, 2023 and June 15, 2024, subject to continued service through each vesting date.
(9) The RSUs vest in three equal installments on each of February 9, 2023, February 9, 2024 and February 9, 2025, subject to continued service through each vesting date.
(10) The stock options vest in two equal installments based on the achievement of a Milestone Event, with the full vesting of the applicable tranche of stock options to occur 60 days after the achievement of the applicable Milestone Event. The first of the Milestone Events was achieved on July 29, 2022 and the stock options with respect to 100,000 shares of common stock became fully vested and exercisable on the 60th day following the date of the achievement of the Milestone Event, subject to Ms. Berube's continued employment with the issuer through such date. The second of the Milestone Events is expected to be met on or before June 30, 2023.
Other Compensation Plans
Eos Energy Enterprises, Inc. 2020 Incentive Plan
The Eos Energy Enterprises, Inc. 2020 Incentive Plan (the “2020 Plan”) was approved by our stockholders and became effective on November 16, 2020. The 2020 Plan was further amended, and such amendment was approved by our stockholders, effective May 17, 2022. As described in more detail under Proposal 7, we are submitting an amendment to the 2020 Plan for shareholder approval at the Annual Meeting to provide for the addition of 8,000,000 shares of our common stock to the number of shares available for issuance under the 2020 Plan. The terms of the 2020 Plan are described in more detail under Proposal 7.
Health and Retirement Benefits
We provide medical, dental, vision, life insurance and disability benefits to all eligible employees. The NEOs are eligible to participate in these benefits on the same basis as all other employees. In addition, we maintain a tax-qualified defined contribution plan (the “401(k) Plan”), under which eligible employees of Eos, including our named executive officers, may defer a portion of their annual compensation on a pre-tax basis. We do not provide a pension plan for employees and none of our named executive officers participates in a nonqualified deferred compensation plan.
Clawback
The Compensation Committee is reviewing the final rule issued by the SEC and the proposed rule issued by Nasdaq implementing the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act relating to recoupment of incentive-based compensation and will adopt a clawback policy in accordance with the final rules when Nasdaq adopts its final listing standards.
Termination and Change in Control Benefits
Our NEOs are entitled to severance benefits under their respective employment agreements, as described under “-Employment Agreements,” above.
Pay Versus Performance
The following table sets forth the compensation for our Chief Executive Officer and the average compensation for our other NEOs, both as reported in the Summary Compensation Table and with certain adjustments to reflect the “compensation actually paid” to such individuals, as defined under SEC rules, for each of 2022 and 2021. The table also provides information on our cumulative total shareholder return (“TSR”) and Net Income.
| | | | | | | | | | | | | | | | | | | | |
| Year | Summary Compensation Table Total for PEO(1) | Compensation Actually Paid to PEO(2) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers(1) | Average Compensation Actually Paid to Non-PEO Named Executive Officers(2) | Value of Initial Fixed $100 Investment Based On Total Shareholder Return(3) | Net Income (Loss) (in Thousands)(4) |
| 2022 | $ | 1,235,299 | | $ | (3,054,439) | | $ | 1,770,017 | | $ | 490,324 | | $ | 6.62 | | $ | (229,813) | |
| 2021 | $ | 16,678,672 | | $ | 2,432,410 | | $ | 3,177,554 | | $ | 1,770,916 | | $ | 33.65 | | $ | (124,216) | |
(1) Compensation for our PEO, Joe Mastrangelo, reflects the amounts reported in the “Summary Compensation Table” for the respective years. Average compensation for non-PEOs includes the following NEOs: (i) in 2022, Randall Gonzales and Melissa Berube, and (ii) in 2021, Sagar Kurada and Jody Markopoulos.
(2) Compensation “actually paid” for the PEO and average compensation “actually paid” for our non-PEOs in 2022 and 2021 reflects the respective amounts set forth in columns (b) and (d), adjusted as follows in the table below, as determined in accordance with SEC rules. These dollar amounts do not reflect the actual amount of compensation earned by or paid to the PEO and our other NEOs during the applicable year.
(3) Total Shareholder Return is cumulative for the measurement periods beginning on December 31, 2020 and ending on December 31 of each of 2022 and 2021, respectively, calculated in accordance with Item 201(e) of Regulation S-K.
(4) Reflects “Net Income” in the Company’s Consolidated Statements of Income included in the Company’s Annual Reports on Form 10-K for each of the years ended December 31, 2022 and 2021.
| | | | | | | | | | | | | | |
| PEO 2022 | PEO 2021 | Non-PEOs 2022 | Non-PEOs 2021 |
| Summary Compensation Table Total | $ | 1,235,299 | | $ | 16,678,672 | | $ | 1,770,017 | | $ | 3,177,554 | |
Less Stock Award and Option Award Value Reported in Summary Compensation Table for the Covered Year | (298,568) | | (15,945,000) | | (1,328,131) | | (2,837,250) | |
Plus Fair Value for Unvested Awards Granted in the Covered Year | — | | 5,640,000 | | 393,438 | | 940,000 | |
Change in Fair Value of Outstanding Unvested Awards from Prior Years | (3,605,415) | | (2,833,150) | | (302,000) | | — | |
Plus Fair Value for Vested Awards Granted in the Covered Year | 168,400 | | — | | 105,250 | | 508,413 | |
Change in Fair Value of Awards from Prior Years that Vested in the Covered Year | (554,155) | | (1,108,112) | | (148,250) | | (17,801) | |
Less Fair Value of Awards Forfeited during the Covered Year | — | | — | | — | | — | |
| Compensation Actually Paid | $ | (3,054,439) | | $ | 2,432,410 | | $ | 490,324 | | $ | 1,770,916 | |
Note: Fair values set forth in the table above are computed in accordance with ASC 718 as of the end of the respective fiscal year, other than fair values of awards that vest in the covered year, which are valued as of the applicable vesting date.
Relationship Between Compensation Actually Paid and Cumulative TSR
The amount of compensation actually paid to the PEO and the average amount of compensation actually paid to the Non-PEO NEOs have generally aligned with the Company’s cumulative TSR over the two-year period presented in the table. From January 1, 2021 to December 31, 2022, cumulative TSR decreased by approximately 93%. For the two-years presented, the decline in both compensation actually paid and cumulative TSR are primarily driven by the decline in the Company's stock price from $22.35 as of December 31, 2020, $7.52 as of December 31, 2021, to $1.48 as of December 31, 2022. Stock price is a large driver in the value of the equity incentive awards, which is a major component of compensation actually paid to the PEO and the average compensation actually paid to the Non-PEO NEOs.
Equity Compensation Plans
The following table summarizes our equity compensation plan information as of December 31, 2022:
| | | | | | | | | | | |
| Plan Category | Number of Securities to Be Issued Upon Exercise of Outstanding Options, Warrants, Rights and Restricted Stock Units
(a) | Weighted-average Exercise Price of Outstanding Options, Warrants and Rights
(b) | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a))
(c) |
| Equity Compensation Plans Approved by Security Holders | 7,340,702 | | $ | 4.37 | | 994,108 | |
| Equity Compensation Plans Not Approved by Security Holders | — | — | | — |
| Total | 7,340,702 | | $ | 4.37 | | 994,108 | |
Total shares outstanding as of December 31, 2022 was 82,653,781 shares of common stock of the Company.
PROPOSAL NO. 3
ADVISORY VOTE TO APPROVE OUR NAMED EXECUTIVE OFFICER COMPENSATION
In accordance with the requirements of Section 14A of the Securities Exchange Act of 1934 (the “Exchange Act”) and the related rules of the SEC, our Board is submitting a proposal providing our stockholders the opportunity to cast a non-binding advisory vote on the executive compensation paid to the Company’s executive officers named in this Proxy Statement (“named executive officers” or “NEOs”).
This advisory vote on named executive officer compensation is non-binding on the Board, will not overrule any decision by the Board and does not compel the Board to take any action. However, the Board and the Compensation Committee may consider the outcome of the vote when considering future executive compensation decisions. Specifically, to the extent there is any significant vote against the named executive officer compensation as disclosed in this Proxy Statement, the Board will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
Our Board and the Compensation Committee believe that the Company’s executive compensation programs and policies and the compensation decisions described in this Proxy Statement (i) support the Company’s business objectives, (ii) link the interests of the executive officers and stockholders, (iii) align NEO pay with individual and the Company’s performance, without encouraging excessive risk-taking that could have a material adverse effect on the Company, (iv) provide NEOs with a competitive level of compensation and (v) promote retention of the NEOs and other senior leaders.
For the reasons discussed above (and further amplified in the compensation disclosures made in this Proxy Statement), the Board recommends that stockholders vote in favor of the following resolution:
RESOLVED, that the compensation paid to the company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, compensation tables and narrative disclosure is hereby APPROVED.
THE BOARD RECOMMENDS A VOTE FOR THE ADVISORY VOTE TO APPROVE OUR NAMED EXECUTIVE OFFICER COMPENSATION.
PROPOSAL NO. 4
APPROVAL OF GRANT TO THE BOARD OF DIRECTORS THE DISCRETIONARY AUTHORITY TO EFFECT A REVERSE STOCK SPLIT TO THE COMPANY'S COMMON STOCK
We are seeking stockholder approval to grant the Board discretionary authority to amend the Company's certificate of incorporation to effect a reverse stock split of the issued and outstanding shares of our common stock, par value $0.0001 per share, at a ratio in the range of one-for-two (1:2) to one-for-twelve (1:12) of our common stock, with the exact ratio to be determined at the discretion of our Board, and effected at such time and date, if at all, as determined by the Board (the “Reverse Stock Split Proposal”).
The amendment will not change the number of authorized shares of common stock, Preferred Stock, or the relative voting power of our stockholders, subject to certain immaterial adjustments that may result from the treatment of fractional shares as described below under “—Procedures for Effecting Reverse Stock Split.” Because the number of authorized shares will not be reduced, the number of authorized but unissued shares of our common stock will materially increase and will be available for reissuance by the Company. The reverse stock split, if effected, would affect all of our holders of common stock uniformly.
The Board unanimously approved, subject to stockholder approval, this Reverse Stock Split Proposal, on March 13, 2023.
Even if the stockholders approve the Reverse Stock Split Proposal, we reserve the right not to effect any reverse stock split if the Board does not deem it to be in the best interests of our stockholders. The Board believes that granting this discretion provides the Board with maximum flexibility to act in the best interests of our stockholders. If this Reverse Stock Split Proposal is approved by the stockholders, the Board will have the authority, in its sole discretion, without further action by the stockholders, to effect a reverse stock split.
The Board's decision as to whether and when to effect the reverse stock split will be based on a number of factors, including prevailing market conditions, existing and expected trading prices for our common stock, actual or forecasted results of operations, and the likely effect of such results on the market price of our common stock.
Following a reverse stock split, the number of our outstanding shares of common stock will be significantly reduced. If effected, a reverse stock split will also affect (i) our outstanding stock options and shares of common stock issued under the Company's Amended and Restated 2020 Incentive Plan (the “Incentive Plan”), as well as (ii) the number of shares of common stock issuable upon conversion of (a) our outstanding 5%/6% convertible senior PIK toggle notes due 2026 to Wood River Capital, LLC, a wholly-owned, indirect subsidiary of Koch Industries, Inc., and (b) our 26.5% convertible senior PIK notes due 2026 issued to Great American Insurance Company, Ardsley Partners Renewable Energy, LP, CCI SPV III, LP, Denman Street LLC, John B. Berding Irrevocable Children’s Trust, John B. Berding, and AE Convert, LLC (collectively, the “Convertible Notes”). If we effect the Reverse Stock Split Proposal, the number of shares of common stock deliverable upon exercise, conversion or grant of such stock options and Convertible Notes will be adjusted to reflect the reverse stock split and any adjustments will be made to the exercise price or the conversion rate, as applicable, to reflect the reverse stock split in each case in accordance with the terms of such stock options and Convertible Notes.
The reverse stock split is not being proposed in response to any effort of which we are aware to accumulate our shares of common stock or obtain control of the Company, nor is it a plan by management to recommend a series of similar actions to our Board or our stockholders.
There are certain risks associated with a reverse stock split, and we cannot accurately predict or assure the reverse stock split will produce or maintain the desired results (for more information on the risks see the section below entitled “Certain Risks Associated with a Reverse Stock Split”). However, our Board believes that the benefits to the Company and our stockholders outweigh the risks and recommends that you vote in favor of granting the Board the discretionary authority to effect a reverse stock split.
Reasons for the Reverse Stock Split
The primary purpose for effecting the reverse stock split, should the Board choose to effect one, would be to increase the per share price of our common stock. Our Board believes that, should the appropriate circumstances arise, effecting the reverse stock split would, among other things, help us to:
•Continue to ensure we meet certain continued listing requirements of the Nasdaq Stock Exchange;
•Improve the perception of our common stock as an investment security; and
•Appeal to a broader range of investors to generate greater investor interest in the Company.
Improve the Perception of our common stock as an Investment Security - We believe that the overall economic environment in which we and other renewable energy and energy storage companies are currently operating has been a significant contributing factor in the decline in the price of our common stock. Our Board unanimously approved the discretionary authority to effect a reverse stock split, subject to stockholder approval, as one potential means of increasing the share price of our common stock to improve the perception of our common stock as a viable investment security. Lower-priced stocks have a perception in the investment community as being risky and speculative, which may negatively impact not only the price of our common stock, but also our market liquidity.
Appeal to a Broader Range of Investors to Generate Greater Investor Interest in the Company - An increase in our stock price may make our common stock more attractive to investors. Brokerage firms may be reluctant to recommend lower-priced securities to their clients. Many institutional investors have policies prohibiting them from holding lower-priced stocks in their portfolios, which reduces the number of potential purchasers of our common stock. Investment funds may also be reluctant to invest in lower-priced stocks. Investors may also be dissuaded from purchasing lower-priced stocks because the brokerage commissions, as a percentage of the total transaction, tend to be higher for such stocks. Moreover, the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower-priced stocks. Giving the Board the ability to effect a reverse stock split, and thereby increase the price of our common stock, would give the Board the ability to address these issues if it is deemed necessary.
Certain Risks Associated with a Reverse Stock Split
Even if a reverse stock split is effected, some or all of the expected benefits discussed above may not be realized or maintained. The market price of our common stock will continue to be based, in part, on our performance, market conditions and other factors unrelated to the number of shares outstanding. There can be no assurance that the total market capitalization of our common stock after the implementation of the reverse stock split will be equal to or greater than the total market capitalization before the reverse stock split or that the per-share market price of our common stock following the reverse stock split will increase in proportion to the reduction in the number of shares of our common stock outstanding in connection with the reverse stock split. Furthermore, the implementation of a reverse stock split does not have an effect on the actual or intrinsic value of our business or a stockholder’s proportional ownership in our company (subject to the treatment of fractional shares). However, should the overall value of our common stock decline after the proposed reverse stock split, then the actual or intrinsic value of the shares of our common stock held by you will also proportionately decrease as a result of the overall decline in value.
The reverse stock split will reduce the number of outstanding shares of our common stock without reducing the number of shares of available but unissued common stock, which will also have the effect of increasing the number of authorized but unissued shares. The issuance of additional shares of our common stock may have a dilutive effect on the ownership of existing stockholders. In addition, if we effect the reverse stock split, the resulting per-share stock price may nevertheless fail to attract a broader range of investors or may not satisfy the investing guidelines of such investors and, consequently, the trading liquidity of our common stock may not improve.
Even though a potential reverse stock split would result in an increased proportion of unissued authorized shares to issued shares, which could, under certain circumstances, have an anti-takeover effect (for example, by permitting issuances that would dilute the stock ownership of a person seeking to effect a change in the composition of the Board or contemplating a tender offer or other transaction for the combination of us with another company), the Reverse Stock Split Proposal is not being proposed in response to any effort of which we are aware to accumulate shares of our common stock or obtain control of us, nor is it part of a plan by management to recommend a series of similar amendments to our Board and our stockholders.
Principal Effects of a Reverse Stock Split
If our stockholders approve this Reverse Stock Split Proposal and our Board elects to effect a reverse stock split, our issued and outstanding shares of common stock would decrease. The reverse stock split would be effected simultaneously for all of our common stock, and the exchange ratio would be the same for all shares of common stock, except for immaterial adjustments that may result from the treatment of fractional shares as described below under “—Procedures for Effecting Reverse Stock Split.” The reverse stock split would affect all of our stockholders uniformly and would not affect any stockholder's percentage ownership interests in the Company, voting rights or other rights that accompany the shares of our common stock, except for immaterial adjustments that may result from the treatment of fractional shares as described below under "—Procedures for Effecting Reverse Stock Split." common stock issued pursuant to the reverse stock split would remain fully paid and non-assessable. The reverse stock split would not affect our securities law reporting and disclosure obligations, and we would continue to be subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have no current plans to take the Company private. Accordingly, a reverse stock split is not related to a strategy to do so.
Upon the reverse stock split, we intend to treat common stock held by stockholders in “street name,” through a bank, broker or other nominee, in the same manner as stockholders whose shares are registered in their own names. Banks, brokers or other nominees will be instructed to effect the reverse stock split for their customers holding common stock in “street name.” However, these banks, brokers or other nominees may have different procedures than registered stockholders for processing the reverse stock split. If you hold shares of common stock with a bank, broker or other nominee and have any questions in this regard, you are encouraged to contact your bank, broker or other nominee.
Registered holders of common stock who hold some or all of their shares electronically in book-entry form with our transfer agent, Continental Stock Transfer & Trust Company, LLC, do not need to take any action to receive post-reverse stock split shares. If a stockholder is entitled to post-reverse stock split shares, a transaction statement will automatically be sent to the stockholder’s address of record indicating the number of shares (including fractional shares) of common stock held following the reverse stock split.
In addition to the change in the number of shares of common stock outstanding, a reverse stock split would have the following effects:
Increase the Per Share Price of Our Common Stock - By effectively condensing a number of pre-split shares into one share of common stock, the per share price of a post-split share is generally greater than the per share price of a pre-split share. The amount of the initial increase in per share price and the duration of such increase, however, is uncertain. If appropriate circumstances exist, our Board may utilize the reverse stock split as part of its plan to maintain the required minimum per share price of the common stock under the Nasdaq listing standards.
Increase in the Number of Shares of Common Stock Available for Future Issuance - By reducing the number of shares outstanding without reducing the number of shares of available but unissued common stock, a reverse stock split will also increase the number of authorized but unissued shares. Our Board believes the increase is appropriate for use to fund the future operations of the Company.
The following table contains illustrative information relating to our common stock, based on share information as of December 31, 2022, without giving effect to the treatment of fractional shares:
| | | | | | | | | | | |
| Before Reverse Stock Split | Reverse Stock Split Ratio of 1-for-2 | Reverse Stock Split Ratio of 1-for-12 |
| Number of Shares of Common Stock Issued and Outstanding | 82,653,781 | | 41,326,891 | | 6,887,815 | |
| Number of Shares of Common Stock Reserved for Issuance Pursuant to Outstanding Options and RSUs | 7,340,702 | | 3,670,351 | | 611,725 | |
| Weighted Average Exercise Price of Outstanding Options | $ | 4.37 | | $ | 8.74 | | $ | 52.44 | |
Although a reverse stock split would not have any dilutive effect on our stockholders, a reverse stock split without a reduction in the number of shares authorized for issuance would reduce the proportion of shares owned by our stockholders relative to the number of shares authorized for issuance, giving our Board an effective increase in the authorized shares available for future issuance for corporate needs such as equity financing, retirement of outstanding indebtedness, stock splits and stock dividends, employee benefit plans, or other corporate purposes as may be deemed by the Board to be in the best interests of the Company and its stockholders. Our Board from time to time may deem it to be in the best interests of the Company and our stockholders to enter into transactions and other ventures that may include the issuance of shares of our common stock. If our Board authorizes the issuance of additional shares subsequent to the reverse stock split described above, the dilution to the ownership interest of our existing stockholders may be greater than would occur had the reverse stock split not been effected. Many stock issuances not involving equity compensation do not require stockholder approval, and our Board generally seeks approval of our stockholders in connection with a proposed issuance only if required at that time with the ability to issue additional shares of stock without further vote of the stockholders of the Company, except as provided under Delaware corporate law or under the rules of any national securities exchange on which shares of stock of the Company are then listed.
Require Adjustment to Currently Outstanding Securities Exercisable or Convertible into Shares of our Common Stock - A reverse stock split would effect a reduction in the number of shares of common stock issuable upon the exercise or conversion of our outstanding stock options, warrants and Convertible Notes in proportion to the reverse stock split ratio. Additionally, the exercise price of outstanding options, warrants and conversion price of our Convertible Notes would increase, likewise in proportion to the reverse stock split ratio.
Require Adjustment to the Number of Shares of Common Stock Available for Future Issuance Under our 2020 Incentive Plan - In connection with any reverse stock split, our Board would also make a corresponding reduction in the number of shares available for future issuance under the foregoing plan so as to avoid the effect of increasing the number of authorized but unissued shares available for future issuance under such plans.
In addition, a reverse stock split may result in some stockholders owning “odd lots” of less than 100 shares of common stock, which may be more difficult to sell and may cause those holders to incur greater brokerage commissions and other costs upon sale.
Our directors and executive officers have no substantial interests, directly or indirectly, in the matters set forth in the Reverse Stock Split Proposal, except to the extent of their ownership in shares of our common stock and securities exercisable for our common stock, which shares and securities would be subject to the same proportionate adjustment in accordance with the terms of the reverse stock split as all other outstanding shares of our common stock and securities exercisable for our common stock.
Procedure for Effecting Reverse Stock Split
The exact ratio of the reverse stock split, within the approved range, would be determined by our Board and publicly announced by us prior to the effective time of the reverse stock split. Upon approval of a reverse stock split and at such time as our Board determines is the appropriate effective time to effect the reverse stock split, we would file a certificate of amendment to our certificate of incorporation with the Secretary of the State of Delaware. The certificate of amendment would add a new provision providing that holders of our common stock immediately prior to the filing of the amendment will receive one share of common stock for each number of shares as determined by the Board. A copy of the proposed amendment is attached to this proxy statement as Appendix A and is considered a part of this proxy statement. Upon the filing of the certificate of amendment, and without any further action on the part of the Company or our stockholders, the issued shares of common stock held by stockholders of record as of the effective date of the reverse stock split would be converted into a lesser number of shares of common stock calculated in accordance with the reverse stock split ratio of not less than one-for-two (1:2) and not more than one-for-twelve (1:12), as determined by our Board and set forth in the certificate of amendment. As soon as practicable after the effective date of the reverse stock split, stockholders would be notified that the reverse stock split had been effected.
No fractional shares will be issued in connection with a reverse stock split. Instead, we will issue one full share of post-reverse stock split common stock to any stockholder who would have been entitled to receive a fractional share as a result of the reverse stock split. Each stockholder will hold the same percentage of the outstanding common stock immediately following the reverse stock split as that stockholder did immediately prior to the reverse stock split, except for any minor adjustment due to the additional whole shares that will be issued as a result of the treatment of fractional shares.
The par value of our common stock would remain unchanged at $0.0001 per share, if a reverse stock split is effected.
The Company’s stockholders’ equity in its consolidated balance sheet would not change in total. However, the Company’s stated capital (i.e., $0.0001 par value times the number of shares issued and outstanding), would be proportionately reduced based on the reduction in shares of common stock outstanding. Additional paid in capital would be increased by an equal amount, which would result in no overall change to the balance of stockholders’ equity.
Additionally, net income or loss per share for all periods would increase proportionately as a result of a reverse stock split since there would be a lower number of shares outstanding. We do not anticipate that any other material accounting consequences would arise as a result of a reverse stock split.
Under Delaware law, our stockholders will not be entitled to appraisal rights with respect to the reverse stock split amendment.
Certain U.S. Federal Income Tax Consequences of a Reverse Stock Split
The following is a discussion of certain material U.S. federal income tax consequences of a reverse stock split to U.S. holders of our common stock. This discussion is included for general information purposes only and does not purport to address all aspects of U.S. federal income tax law that may be relevant to stockholders in light of their particular circumstances. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), and current Treasury Regulations, administrative rulings and court decisions, all of which are subject to change, possibly on a retroactive basis. Any such change could affect the continuing validity of this discussion.
This discussion does not address the tax consequences to U.S. holders that are subject to special tax rules, such as financial institutions, regulated investment companies, partnerships, dealers or traders in securities or currencies that use a mark-to-market method of accounting, tax-exempt entities, persons holding shares as part of a straddle, hedge, conversion transaction or other integrated investment, persons subject to alternative minimum taxes or the unearned income Medicare tax and persons whose functional currency is not the U.S. dollar. In addition, this discussion does not address stockholders that are not U.S. holders (as defined below). This summary also assumes that the U.S. holder held and will hold the pre-reverse stock split common stock, and will hold the post-reverse stock split common stock, as a “capital asset” as defined in Section 1221 of the Code. All stockholders are urged to consult with their own tax advisors with respect to the U.S. federal tax consequences, as well as any state, local or non-U.S. tax consequences, of a reverse stock split.
As used herein, the term “U.S. holder” means a holder that, for U.S. federal income tax purposes, is a beneficial owner of our common stock and is:
•a citizen or individual resident of the United States;
•a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia; or
•an estate or trust the income of which is subject to U.S. federal income tax regardless of its source.
In general, a reverse stock split should be treated as a tax-free recapitalization and no gain or loss should be recognized by a U.S. holder upon the exchange of pre-reverse stock split common stock for post-reverse stock split common stock. The aggregate tax basis of the post-reverse stock split common stock should be the same as the aggregate tax basis of the pre-reverse stock split common stock exchanged in the reverse stock split. A U.S. holder’s holding period in the post-reverse stock split common stock should include the period during which the U.S. holder held the pre-reverse stock split common stock exchanged in the reverse stock split.
As noted above, we will not issue fractional shares of common stock in connection with a reverse stock split. Instead, U.S. holders who would be entitled to receive fractional shares of common stock because they hold a number of shares not evenly divisible by the reverse stock split ratio will automatically be entitled to receive an additional fraction of a Common Share to round up to the next whole share of post-reverse stock split common stock. The U.S. federal income tax consequences of the receipt of such an additional fraction of a share of common stock are not clear. It is possible that U.S. holders whose fractional shares are rounded up to the nearest whole share may recognize income or gain for U.S. federal income tax purposes. U.S. holders whose fractional shares are rounded up to the nearest whole share should consult their tax advisors.
The tax treatment of a U.S. holder may vary depending upon the particular facts and circumstances of such stockholder. Each U.S. holder is urged to consult with its own tax advisor with respect to the tax consequences of a reverse stock split.
Reservation of Right to Abandon Reverse Stock Split
We reserve the right to abandon a reverse stock split without further action by our stockholders at any time before the effectiveness of the filing with the Secretary of the State of Delaware of the certificate of amendment to our certificate of incorporation, even if the authority to effect a reverse stock split has been approved by our stockholders at the Annual Meeting. By voting in favor of a reverse stock split, you are expressly also authorizing the Board to delay, not to proceed with, and abandon, a reverse stock split if it should so decide, in its sole discretion, that such action is in the best interests of the stockholders.
Required Vote and Voting Recommendation
The approval of this Reverse Stock Split Proposal, including the reverse stock split Amendment, requires the affirmative vote of the holders of at least 66 2/3% of the voting power of all outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote against.
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 4 TO GRANT THE BOARD THE DISCRETIONARY AUTHORITY TO EFFECT A REVERSE STOCK SPLIT.
PROPOSAL NO. 5
AMEND OUR CERTIFICATE OF INCORPORATION TO UPDATE EXCULPATION PROVISION
As part of its continuing review of the elements of our corporate governance standards and practices, the Nominating and Corporate Governance Committee concluded that the current exculpation and indemnification provisions in Article VIII of our Third Amended and Restated Certificate of Incorporation should be updated to, among other things, reflect recent developments in applicable laws. Recent legislation has been enacted in Delaware that enables a Delaware corporation to include in its certificate of incorporation a provision exculpating certain officers from monetary liability for breach of the duty of care in certain conditions. Such a provision cannot exculpate such officers from liability for breach of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, or with respect to any transaction in which the officer derived an improper personal benefit. Nor can such a provision exculpate such officers from liability for claims brought by or in the right of the corporation, such as derivative claims.
Taking into account the narrow class and type of claims that such officers would be exculpated from liability for, and the benefits that the Nominating and Corporate Governance Committee believes would accrue to the Company from providing such exculpation, the Nominating and Corporate Governance Committee recommended to the Board an amendment to the Third Amended and Restated Certificate of Incorporation to provide such exculpation to the fullest extent permitted by law.
EFFECT OF THE AMENDMENT
Consistent with the exculpation presently provided to our directors, the amendment would provide exculpation to officers of the Company “to the fullest extent permitted by law.” Once effective, this provision would exculpate such officers from monetary liability for breach of the duty of care in any direct claim. This provision would not exculpate such officers from liability for breaches of the duty of loyalty, acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, or any transaction in which the officer derived an improper personal benefit. Nor would this provision exculpate such officers from liability for claims brought by or in the right of the Company, such as derivative claims.
In addition, Article VIII will continue to provide that, to the fullest extent permitted by law, the Company is authorized to provide indemnification of, and advancement of expenses to, directors, officers, employees and agents (and any other persons to which Delaware law permits the Company to provide indemnification) through bylaw provisions, agreements with such persons, votes of stockholders or disinterested directors or otherwise.
LANGUAGE OF PROPOSED AMENDMENT
The proposed amendment to Article VIII of our Third Amended and Restated Certificate of Incorporation, is set forth in Appendix B to this Proxy Statement. This summary is qualified in its entirety by reference to Appendix B.
REQUIRED VOTE AND VOTING RECOMMENDATION
The approval of this proposed amendment to Article VIII of our Third Amended and Restated Certificate of Incorporation requires the affirmative vote of the holders of at least 66 2⁄3% of the voting power of all outstanding shares of capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class. Abstentions and broker non-votes will have the same effect as a vote against
THE BOARD RECOMMENDS A VOTE FOR THE EXCULPATION AMENDMENT.
PROPOSAL NO. 6
APPROVAL, IN ACCORDANCE WITH NASDAQ MARKETPLACE RULE 5635(D), OF THE SEPA MATTERS
Background
Original SEPA
As previously disclosed, on April 28, 2022, we entered into a Standby Equity Purchase Agreement (the “Original SEPA”) with YA II PN, Ltd. (“Yorkville”). Pursuant to the Original SEPA, the Company had the right, but not the obligation, to sell to Yorkville up to $200,000,000 of its shares of common stock (the “SEPA Shares”), par value $0.0001 per share, at the Company’s request any time during the commitment period commencing on April 28, 2022 and terminating on the earliest of (i) the first day of the month following the 24-month anniversary of the SEPA and (ii) the date on which Yorkville has made payment of any advances requested pursuant to the SEPA for shares of the Company’s common stock equal to the commitment amount of $200,000,000. Each sale the Company requested under the Original SEPA (each, an “Advance”) would be for a number of shares of common stock with an aggregate value of up to $20,000,000. The shares would be purchased at 97.0% of the Market Price (as defined below) and would be subject to certain limitations, including that Yorkville could not purchase any shares that would result in it owning more than 9.99% of the Company’s outstanding common stock at the time of an Advance or 19.99% of the Company’s outstanding common stock as of the date of the Original SEPA (the “Original Exchange Cap”). “Market Price” was defined in the Original SEPA as the average of the VWAPs (as defined below) during each of the three consecutive trading days commencing on the trading day following the Company’s submission of an Advance notice to Yorkville. “VWAP” was defined in the Original SEPA to mean, for any trading day, the daily volume weighted average price of the Company’s common stock for such date on The Nasdaq Capital Market as reported by Bloomberg L.P. during regular trading hours.
Amendment No. 1 to the SEPA
On June 13, 2022, the Company and Yorkville amended the Original SEPA pursuant to Amendment No. 1 thereto (“Amendment No. 1”), to revise the definition of “Commitment Amount” to clarify that the Original Exchange Cap will not apply if the average price of all applicable sales of common stock under the Original SEPA (including the Commitment Fee Shares (as defined in the Original SEPA) in the number of shares sold for these purposes) equals or exceeds $2.15 per share (which represents the lower of (i) the Nasdaq Official Closing Price on the Trading Day (each as defined in the Original SEPA) immediately preceding the date of Amendment No. 1 to the Original SEPA; or (ii) the average Nasdaq Official Closing Price for the five Trading Days immediately preceding the date of Amendment No. 1 to the Original SEPA).
At the Company’s Special Meeting of Stockholders held on June 28, 2022, the Company’s stockholders approved, in accordance with Nasdaq Marketplace Rule 5635(d), the issuance of our common stock to Yorkville in excess of the Original Exchange Cap.
Amendment No. 2 to the SEPA
On November 14, 2022, the Company and Yorkville entered into Amendment No. 2 to the Original SEPA (“Amendment No. 2”), to decrease the commitment amount under the SEPA from $200,000,000 to $125,000,000.
Amendment No. 3 to the SEPA
On December 29, 2022, the Company and Yorkville entered into Amendment No 3. (“Amendment No. 3”) to the Original SEPA, to (i) decrease the commitment amount under the SEPA from $125,000,000 to $75,000,000; and (ii) reinstitute the Exchange Cap (as defined in the Original SEPA), which amounts to 19.99% of the outstanding shares of common stock immediately prior to entering into Amendment No. 3 and applies to all subsequent issuances of common stock under the SEPA, together with any issuances of convertible promissory notes issued by the Company to Yorkville as a pre-advance loan pursuant to Section 2.05 of the SEPA. Under Amendment No. 3, the Exchange Cap did not apply (a) if the Company’s stockholders have approved issuances in excess of the Exchange Cap or (b) to sales of shares of common stock under the SEPA at a price that equals or exceeds $1.08 per share (which represents the lower of (x) the Nasdaq Official Closing Price on the Trading Day immediately preceding the date of the Amendment No. 3; and (y) the average Nasdaq Official Closing Price for the five Trading Days immediately preceding the date of Amendment No. 3); provided that, in the case of clause (b), the average price of all applicable sales of shares of common stock under the SEPA after the date of Amendment No. 3 thereto equals or exceeds $1.08 per share.
As of the date of Amendment No. 3, there were 82,587,573 shares of common stock issued and outstanding. Accordingly, the Exchange Cap is 16,509,255 shares.
Amendment No. 4 to the SEPA
On March 17, 2023, the Company and Yorkville entered into Amendment No 4. (“Amendment No. 4”) to the Original SEPA (the Original SEPA, as amended by Amendment No.1, Amendment No. 2, Amendment No. 3 and Amendment No. 4, the “SEPA”), to clarify that the Exchange Cap does not apply (a) if the Company’s stockholders have approved issuances in excess of the Exchange Cap or (b) to sales of shares of common stock under the SEPA at a price that equals or exceeds $1.88 per share (which represents the lower of (x) the Nasdaq Official Closing Price on the Trading Day (each as defined in the SEPA) immediately preceding the date of the Amendment No. 4; and (y) the average Nasdaq Official Closing Price for the five Trading Days immediately preceding the date of the Amendment No. 4); provided that, in the case of clause (b), the average price of all applicable sales of shares of common stock under the SEPA after December 29, 2022 equals or exceeds $1.88 per share.
As of the date of Amendment No. 4, there were 89,538,715 shares of common stock issued and outstanding.
December 29, 2022 Yorkville Note Issuance
On December 29, 2022, we issued and sold a convertible promissory note with an aggregate principal amount of $2.0 million (the “December Promissory Note”) in a private placement to Yorkville under a supplemental agreement to the SEPA dated as of December 29, 2022 (the “Second Supplemental Agreement”). The December Promissory Note had a maturity date of June 29, 2023 (the “December Note Maturity Date”) and was issued with a 2% original issue discount. The December Promissory Note was convertible into shares of the Company’s common stock at a conversion price equal to the lower of $1.1779 and 96.5% of the lowest daily VWAP of the Company’s common stock during the seven consecutive trading days immediately preceding the conversion date (the “December Note Conversion Price”) any time prior to the December Note Maturity Date, subject to the terms and conditions of the December Promissory Note. The December Note Conversion Price could not be less than $0.35 per share (the “Floor Price”). If the VWAP of the Company’s common stock was less than the Floor Price for five consecutive trading days, subject to certain limitations, the Company agreed to make weekly payments on the December Promissory Note. At any time that there was an outstanding balance owed under the December Promissory Note, Yorkville could, pursuant to the terms of the Second Supplemental Agreement, require the Company to deliver an advance under the SEPA for the issuance and sale of common stock at the December Note Conversion Price in order to offset the amounts owed by the Company to Yorkville under the December Promissory Note. In addition, while there was an outstanding balance owed under the December Promissory Note, Yorkville could use any advance requested by the Company pursuant to the SEPA to offset the amounts owed by the Company to Yorkville under the December Promissory Note.
In December 2022 and January 2023, Yorkville required the Company to deliver advances under the SEPA for the issuance and sale of 982,510, 488,663 and 482,429 shares of common stock at an aggregate amount of $1,000,000, $500,000 and $500,000, respectively, in order to offset all of the amounts owed by the Company to Yorkville under the December Promissory Note. As of January 10, 2023, there were no amounts outstanding under the December Promissory Note.
February 1, 2023 Yorkville Note Issuance
On February 1, 2023, we issued and sold a convertible promissory note with an aggregate principal amount of $5.0 million (the “February Promissory Note”) in a private placement to Yorkville under the Second Supplemental Agreement. The February Promissory Note had a maturity date of June 29, 2023 (the “February Note Maturity Date”) and was issued with a 2% original issue discount. Interest would accrue on the outstanding principal balance of the February Promissory Note, beginning on the 29th day following the date of issuance, at an annual rate equal to 5.0% unless and until there was an event of default, upon the occurrence of which, interest would accrue at a rate of 15% per year until collected in full. The February Promissory Note was convertible into shares of the Company’s common stock at a conversion price equal to the lower of $1.4883 and 96.5% of the lowest daily VWAP of the Company’s common stock during the seven consecutive trading days immediately preceding the conversion date (the “February Note Conversion Price”) any time prior to the February Note Maturity Date, subject to the terms and conditions of the February Promissory Note. The February Note Conversion Price could not be less than the Floor Price. If the VWAP of the Company’s common stock was less than the Floor Price for five consecutive trading days, subject to certain limitations, the Company would have been required to make weekly payments on the February Promissory Note. At any time that there was an outstanding balance owed under the February Promissory Note, Yorkville could, pursuant to the terms of the Second Supplemental Agreement, require the Company to deliver an advance notice under the SEPA for the issuance and sale of common stock at the February Note Conversion Price in order to offset the amounts owed by the Company to Yorkville under the February Promissory Note. In addition, while there was an outstanding balance owed under the February Promissory Note, Yorkville could use any advance requested by the Company pursuant to the SEPA to offset the amounts owed by the Company to Yorkville under the February Promissory Note.
In February 2023, Yorkville required the Company to deliver advance notices under the SEPA for the issuance and sale of 1,981,453 and 1,898,353 shares of common stock for an aggregate of $2,500,000 and $2,500,000, respectively, in order to offset all of the amounts owed by the Company to Yorkville under the February Promissory Note. As of February 28, 2023, there were no amounts outstanding under the February Promissory Note.
March 8, 2023 Advance Notice
On March 8, 2023, we delivered an Advance (the “March Advance”) to Yorkville requiring Yorkville to purchase 683,908shares of common stock of the Company in accordance with the pricing terms set forth in the SEPA.
March 17, 2023 Yorkville Note Issuance
On March 17, 2023, we issued and sold a convertible promissory note with an aggregate principal amount of $15.0 million (the “March Promissory Note”) in a private placement to Yorkville under a supplemental agreement to the SEPA dated as of March 17, 2023 (the “Third Supplemental Agreement”). The March Promissory Note has a maturity date of August 17, 2023 (the “March Note Maturity Date”) and was issued with a 2% original issue discount. Interest will accrue on the outstanding principal balance of the March Promissory Note, beginning on the 29th day following the date of issuance, at an annual rate equal to 5.0% unless and until there is an event of default, upon the occurrence of which, interest will accrue at a rate of 15% per year until collected in full. The March Promissory Note is convertible into shares of the Company’s common stock at a conversion price equal to the lower of $1.9368 and 92.5% of the lowest daily VWAP of the Company’s common stock during the seven consecutive trading days immediately preceding the conversion date (the “March Note Conversion Price”) any time prior to the March Note Maturity Date, subject to the terms and conditions of the March Promissory Note. The March Note Conversion Price shall not be less than the Floor Price. If the VWAP of the Company’s common stock is less than the Floor Price for five consecutive trading days, subject to certain limitations, the Company will be required to make weekly payments on the March Promissory Note. At any time that there is an outstanding balance owed under the March Promissory Note, Yorkville can, pursuant to the terms of the Third Supplemental Agreement, require the Company to deliver an advance notice under the SEPA for the issuance and sale of common stock at the March Note Conversion Price in order to offset the amounts owed by the Company to Yorkville under the March Promissory Note. In addition, while there is an outstanding balance owed under the March Promissory Note, Yorkville shall use any advance requested by the Company pursuant to the SEPA to offset the amounts owed by the Company to Yorkville under the March Promissory Note.
Pursuant to the SEPA, we will use the proceeds from the sale of SEPA Shares for working capital and other general corporate purposes or, if different, in a manner consistent with the application thereof described in the registration statement pursuant to which such shares are registered with the SEC. There are no other restrictions in the SEPA on future financing transactions, provided such use of proceeds also does not violate the laws and regulations set forth by the U.S. Office of Foreign Assets Control.
From December 29, 2022, the date of Amendment No. 3, through the close of business on the record date, we offered and sold to Yorkville an aggregate of 7,747,238 shares of our common stock, which shares were counted against the Exchange Cap and are not entitled to vote on Proposal No. 6 in accordance with Nasdaq Marketplace Rule 5635(d) as described in the Proxy Statement.
Reasons for Seeking Stockholder Approval
Our common stock is currently listed on The Nasdaq Capital Market and, as such, we are subject to Nasdaq Marketplace Rules (the “Nasdaq Rules”). Nasdaq Listing Rule 5635(d) requires us to obtain stockholder approval prior to the sale, issuance or potential issuance of common stock (or securities convertible into or exercisable for common stock) in connection with a transaction other than a public offering at a price less than the “Minimum Price” which either alone or together with sales by officers, directors or substantial stockholders of the company equals 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance. For Nasdaq purposes, “Minimum Price” means a price that is the lower of: (i) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement; or (ii) the average Nasdaq Official Closing Price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding agreement. Stockholder approval of this proposal will constitute stockholder approval for purposes of Nasdaq Listing Rule 5635(d). Our Board has determined that the SEPA and our ability to issue the SEPA Shares thereunder in excess of the Exchange Cap, or pursuant to the terms of the SEPA for any amounts remaining for issuance under the SEPA under the Exchange Cap, are in the best interests of us and our stockholders because the right to sell the SEPA Shares to Yorkville provides us with a reliable source of capital for working capital and general corporate purposes.
We cannot predict the Market Price (as defined above) of our common stock at any future date, and therefore cannot predict the number of SEPA Shares to be issued under the SEPA or whether the Market Price for any Advance will be greater than the Minimum Price (as defined above) under the Nasdaq Rules. Under certain circumstances, it is possible that we may need to issue shares of common stock to Yorkville in excess of the Exchange Cap, and at a price that is less than the Minimum Price, which would require stockholder approval pursuant to Nasdaq Listing Rule 5635(d).
Therefore, we are seeking stockholder approval under this Proposal No. 6 of (i) the issuance of shares of common stock in excess of the Exchange Cap, if necessary, to Yorkville under the terms of the SEPA, (ii) the issuance of the December Promissory Note and the offset of amounts due thereunder at the December Note Conversion Price, (iii) the issuance of the February Promissory Note and the offset of amounts owed by the Company to Yorkville under the February Promissory Note at the February Note Conversion Price, (iv) the issuance of the March Promissory Note and the potential offset of amounts owed by the Company to Yorkville under the March Promissory Note at the March Note Conversion Price and (v) the issuance of common stock to Yorkville pursuant to the terms of the SEPA for amounts remaining for issuance under the SEPA under the Exchange Cap following the offset of the December Promissory Note and the February Promissory Note, including issuances pursuant to the March Advance and any future Advances (collectively, the “SEPA Matters”). The failure of the Company’s stockholders to approve this Proposal No. 6 will, among other things, make it impossible for the Company to sell, at less than the Minimum Price, shares of common stock to Yorkville in excess of the Exchange Cap. However, it would be possible to sell shares to Yorkville in excess of the Exchange Cap if the sale of shares covered by any Advance is equal to or greater than the Minimum Price for such Advance; provided that the average price of all applicable shares of common stock under the SEPA after the date of Amendment No. 3 thereto exceeds the Minimum Price.
Consequences of Non-Approval
As previously disclosed, as of December 31, 2022, the Company concluded that there was substantial doubt about its ability to continue to operate as a going concern for the 12 months following the issuance of its consolidated financial statements. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to access additional sources of capital, including, but not limited to, equity and/or debt financings, licensing revenue, and government loans or grants. If the Company is unable to raise additional capital, the Company may have to significantly delay, scale back or discontinue the development or commercialization of its product. Accordingly, our Board believes that providing the Company the flexibility to issue shares of common stock pursuant to the SEPA is advisable and in the best interests of the Company and our stockholders.
Effect on Current Stockholders
The issuance of shares of common stock under the SEPA as described above, including any shares that may be issued in excess of the Exchange Cap (including any such shares issued below the Minimum Price that are the subject of this Proposal No. 6), would result in an increase in the number of shares of common stock outstanding, and our stockholders will incur dilution of their percentage ownership. Because the number of SEPA Shares that may be issued to Yorkville pursuant to the SEPA is determined based on the Market Price at the time of issuance, the exact magnitude of the dilutive effect cannot be conclusively determined. However, the dilutive effect may be material to our current stockholders.
Required Vote
Approval of Proposal No. 6 requires the affirmative vote of a majority of the total votes cast on the proposal. Abstentions and broker non-votes are not considered votes cast for the foregoing purpose, and will have no effect on the outcome of vote for this proposal.
The 7,747,238 shares of the Company’s common stock offered and sold to Yorkville under the SEPA from December 29, 2022, the date of Amendment No. 3, through the close of business on the record date, are not entitled to vote on Proposal No. 6 in accordance with Nasdaq Marketplace Rule 5635(d) as described in the Proxy Statement.
THE BOARD RECOMMENDS A VOTE
FOR APPROVAL, IN ACCORDANCE WITH NASDAQ MARKETPLACE RULE 5635(D), OF THE ISSUANCESEPA MATTERS PROPOSAL
PROPOSAL NO. 7
APPROVAL OF OUR COMMON STOCKAMENDMENTS TO YORKVILLE IN EXCESSTHE EOS ENERGY ENTERPRISES, INC.
AMENDED AND RESTATED 2020 INCENTIVE PLAN
We are asking our stockholders to approve an amendment to the Eos Energy Enterprises, Inc. Amended and Restated 2020 Incentive Plan, as amended on May 17, 2022 (the “2020 Plan”) in order to (i) increase the number of shares reserved for issuance under the 2020 Plan by 8,000,000 shares, and (ii) increase the limit on the number of shares that may be issued through the exercise of incentive stock options by 8,000,000 shares.The approval of this amendment to the 2020 Plan will be effective on May 16, 2023, the date of our Annual Meeting (“Effective Date”), if approved by our shareholders.
The 2020 Plan was approved by our stockholders and became effective on November 16, 2020. At our 2022 annual meeting of stockholders, our shareholders approved an initial amendment to the 2020 Plan to (i) increase the number of shares reserved for issuance under the 2020 Plan by 2,000,000 shares, (ii) increase the limit on the number of shares that may be issued through the exercise of incentive stock options by 2,000,000 shares, (iii) remove the automatic increase to the share pool on the first day of each year and (iv) remove certain share recycling provisions.
The 2020 Plan provides for the grant of equity-based awards to our employees, consultants, service providers and non-employee directors and provides a means to attract and retain employees and non-employee directors and to help promote a pay-for-performance linkage for such persons. In addition, the 2020 Plan provides a means whereby certain of our directors, officers, employees, consultants and advisors can acquire and maintain an equity interest in the Company, or be paid incentive compensation, which may be measured by reference to the value of our common stock, thereby strengthening their commitment to the welfare of Eos and aligning their interests with those of our stockholders.
The 2020 Plan has a remaining balance of 994,108 shares available for the issuance of new awards as of January 1, 2023, which reflects the remaining balance of the shares originally reserved for issuance under the 2020 Plan, plus the shares added to the share pool automatically pursuant to the terms of the 2020 Plan on January 1, 2021 and 2022, plus the shares added to the share pool on May 17, 2022.
Currently, the 2020 Plan is the only plan under which we can grant equity-based awards. Given the decreasing number of shares that are available for issuance under the 2020 Plan, the Board is requesting stockholders approve an increase to the number of shares available for issuance under the 2020 Plan in order to ensure the Company is able to continue to provide equity-based and incentive-based awards to attract, motivate and retain high qualify employees and directors. If the additional share reserve is approved by stockholders, based on historic grant practices, the Company anticipates that the requested share authorization under the 2020 Plan will last until December 31, 2023.
Our Board is submitting the following amendments, which were approved by the Board on March 13, 2023 for approval by our stockholders:
•Increase the shares reserved for issuance under the 2020 Plan by 8,000,000 shares.
•Increase the limit on the number of shares that may be issued through the exercise of an incentive stock option by 8,000,000 shares.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE
FOR THE APPROVAL OF THE EXCHANGE CAP OFPROPOSED AMENDMENTS TO THE STANDBY EQUITY PURCHASE AGREEMENT DATED APRIL 28,2020 PLAN.
Reasons the Board Recommends Voting For Approval of the Amendments to the 2020 Plan
Our Board believes that encouraging our employees and non-employee directors to own shares of our common stock fosters broad alignment between the interests of our employees and directors and the interests of our stockholders. We believe the proposed amendments to the 2020 Plan, including the increase to the maximum number of shares available for awards thereunder, is necessary to ensure that we have adequate capacity to continue to attract and retain talented employees and non-employee directors. We believe that this number represents a reasonable amount of potential equity dilution and allows the Company to continue to award equity incentives, which are an important component of our overall compensation program.
Compensation and Governance Best Practices
The 2020 Plan currently includes certain compensation and governance best practices, with some of the key features as follows:
•No Evergreen. The number of shares available for issuance under the 2020 Plan is fixed and can only be increased with stockholder approval.
•Prohibition on Liberal Share Recycling. Shares tendered by a participant, withheld by the Company to satisfy any tax withholding or which are not issued in connection with the settlement of a stock-settled SAR do not become available for issuance as future awards under the 2020 Plan.
•Prohibition on Repricing. The 2020 Plan expressly prohibits the “repricing” of stock options or SARs without stockholder approval.
•Prohibition on Paying Dividends or Dividend Equivalents on Unvested Awards. Dividends or dividend equivalents credited or payable in connection with an award under the 2020 Plan that is not yet vested will be subject to the same restrictions and risk of forfeiture as the underlying award and will not be paid until the underlying award vests;
•Limit on Non-Employee Director Compensation. The 2020 Plan contains an annual limit on total compensation paid and granted to each non-employee director.
•Stock Options and SARs Granted at No Less than Fair Market Value. The exercise price for stock options and SARs granted under the 2020 Plan must equal or exceed the underlying stock's fair market value as of the grant date, subject to a limited exception for awards that are assumed or substituted in corporate transactions.
•No Change in Control / 280G Tax Gross-Ups. The 2020 Plan does not provide for any excise tax gross-up payments, including with respect to Section 280G and 4999 of the Internal Revenue Code, and, as a general business matter, the Company does not provide such benefits.
•Transfer Restrictions. The 2020 Plan contains robust restrictions on the transfer of awards granted under the 2020 Plan.
•Fixed Term. The 2020 Plan has a fixed, ten-year term.
Matters Considered by the Board With Respect to the Number of Shares to be Added to the Shares Available for Issuance under the 2020 Plan
Our Board is proposing an additional 8,000,000 shares be reserved for issuance of equity-based awards under the 2020 Plan. We believe the current number of shares available for grant under the 2020 Plan is insufficient and will harm our ability to attract and retain qualified employees and directors. Further, we believe that the additional shares, under these circumstances, represents a reasonable amount of potential equity dilution and allows the Company to recruit, motivate, and retain talented employees and directors who will help us achieve our business goals, including creating long-term value for our stockholders.
When considering the number of additional shares proposed to be made available for grant under the 2020 Plan, the Compensation Committee reviewed, among other things, the potential dilution to our shareholders.
The following table sets forth certain information about the equity awards that are outstanding under the 2020 Plan as of January 1, 2023:
| | | | | |
| Total number of shares that would be authorized for issuance upon stockholder approval of the amendments to the 2020 Plan (1) | 17,035,887 | |
| Number of shares relating to outstanding stock options under the 2020 Plan | 4,344,812 | |
| Number of shares relating to outstanding full-value awards under the 2020 Plan | 2,995,890 | |
| Weighted average remaining term of outstanding stock options under the 2020 Plan | 7.7 |
| Number of shares remaining for issuance under the 2020 Plan upon shareholder approval of the amendments to the 2020 Plan | 8,994,108 | |
(1) Reflects the sum of (i) the 6,000,000 shares originally reserved for issuance under the 2020 Plan, (ii) the shares automatically added to the share reserve on January 1, 2021 and 2022 BY AND BETWEEN THE COMPANY AND YORKVILLEand (iii) the additional 2,000,000 shares added to the share pool pursuant to the amendments to the 2020 Plan approved by shareholders on May 17, 2022, and (iv) the additional 8,000,000 shares to be added to the share pool pursuant to the proposed amendments to the 2020 Plan.
Description of the 2020 Plan
The key features of the 2020 Plan are described below, but are qualified in their entirety by reference to the full text of the second amendment of the 2020 Plan included as Appendix C to this Proxy Statement. Appendix D to this Proxy Statement contains a full draft of the 2020 Plan as a blackline showing the proposed amendments thereto.
Administration. The 2020 Plan is administered by a committee appointed by our Board, or if no such committee has been appointed, by our Board (the “Committee”). The Committee will, subject to the terms and conditions of the 2020 Plan, have the authority to, among other actions, designate participants in the 2020 Plan, determine the type of awards to be granted to a participant and the terms of conditions of such awards, determine the terms of settlement or exercise of awards, reconcile any inconsistency and correct any defect in the 2020 Plan or an award agreement, accelerate the vesting or exercisability of an award and make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the 2020 Plan.
Eligibility. Those eligible to participate in the 2020 Plan consist of employees, directors and consultants of the Company or one of its affiliates (provided that such person is eligible to be offered securities registrable on Form S-8 under the Securities Act of 1933), as well as prospective employees, directors, officers, consultants or advisors who have accepted offers of employment or consultancy from the Company or its affiliates (and would satisfy the eligibility criteria once he or she begins employment with or begins providing services to the Company or its affiliates.
While all employees are eligible to receive awards under the 2020 Plan, the Committee currently expects that approximately 321 employees participate in the 2020 Plan. In addition, all non-employee directors, of whom there are 6, also participate in the 2020 Plan. The basis for participation in the 2020 Plan is the Committee’s (or its authorized delegate’s) decision, in its sole discretion, that an award to an eligible participant will further the 2020 Plan’s purposes of providing a means through which the Company and its affiliates may attract and retain key personnel and to providing a means whereby certain directors, officers, employees, consultants and advisors (and certain prospective directors, officers, employees, consultants, and advisors) of the Company and its affiliates can acquire and maintain an equity interest in the Company, or be paid incentive compensation, which may be measured by reference to the value of shares of common stock, thereby strengthening their commitment to the welfare of the Company and its affiliates and aligning their interests with those of the Company’s stockholders. In exercising its discretion, the Committee (or its delegate) will consider the recommendations of management and the purposes of the 2020 Plan.
Shares Reserve; Adjustments. The maximum number of shares of our common stock available for issuance under the 2020 Plan will be 17,035,887 shares. Shares of common stock underlying awards that are forfeited, canceled, expire unexercised, or are settled in cash shall be available again for issuance under the 2020 Plan. However, shares of common stock underling an Award shall not again be available for issuance under the Plan if such shares are (i) tendered or withheld in payment of the exercise price of a stock option or other award, (ii) delivered to or withheld by the Company to satisfy any tax withholding liabilities arising from an award, or (iii) covered by a stock-settled SAR and were not issued upon the settlement of the SAR. The maximum number of shares of our common stock available for issuance upon exercise of incentive stock options granted under the 2020 Plan will be 16,000,000shares.
Non-Employee Director Limits. Under the 2020 Plan, the maximum number of shares of our common stock that may be granted during a single fiscal year to any non-employee director, taken together with any cash fees paid during the fiscal year, in respect to the director’s service as a member of our Board during such year, shall not exceed $500,000 in total value. The independent directors may make exception to this limit for a non-executive chair of the Board, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation.
Available Awards. The 2020 Plan permits the grant of incentive stock options to employees and/or nonstatutory stock options to all eligible participants, as well as, SARs, restricted stock, restricted stock units (“RSUs”), performance awards, other cash-based awards and other stock-based awards to all eligible participants.
Dividends and Dividend Equivalents. No adjustment may be made in the shares of common stock issuable or taken into account under an award on account of cash dividends made prior to settlement of such award. The Committee may grant Dividend Equivalents based on the dividends declared on shares of common stock subject to any award (other than stock options or SARs), provided that any such dividend equivalents will not be payable unless and until the award becomes payable, and shall be subject to forfeiture to the same extent as the underlying award.
No Repricing. The Committee may not, without stockholder consent, reduce the exercise price of outstanding stock options of SARs or cancel any outstanding stock options or SARs with an exercise price below the fair market value of our common stock and replace it with a new award or cash or take any other action considered a “repricing” for purposes of the stockholder approval rules of the applicable securities exchange.
Change in Control. Upon a change in control (as defined in the 2020 Plan) and certain other corporate events, the Committee will make adjustments it may deem necessary or appropriate and equitable, subject to the requirements of Sections 409A, 421 and 422 of the Internal Revenue Code, including (i) adjusting the number of shares which may be delivered upon settlement of an award and the terms of any outstanding awards, (ii) providing for the substitution or assumption of awards, (iii) accelerating the vesting of awards, (iv) deeming any performance measures satisfied at target, maximum or actual performance, (v) providing for a period of time during which stock options and SARs will remain exerciseable or (vi) canceling any awards in exchange for cash or other securities or property, or a combination thereof
Termination of Employment. The treatment of awards upon a participant’s termination of employment is generally set forth in the applicable award agreement. Unless otherwise provided in such an award agreement, any unvested restricted stock or RSUs will be forfeited upon the participant’s termination of employment.
Clawback; Anti-Hedging and Pledging. All awards (including on a retroactive basis) granted under the 2020 Plan are subject to the terms of any Company forfeiture, incentive compensation recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of Applicable Laws, as well as any other policy of the Company that may apply to the Awards, such as anti-hedging or pledging policies, as they may be in effect from time to time.
Plan Amendment or Suspension. Our Board has the authority to amend, suspend or terminate the 2020 Plan, provided that no such action may be taken without stockholder approval if the approval is necessary to comply with a tax or regulatory requirement or other applicable law for which the Committee deems it necessary or desirable to comply. No amendment may adversely and materially affect a participant’s rights under any award without such participant’s consent.
Term of the Plan. No awards may be granted under the 2020 Plan after our Board terminates the plan or after ten years from the effective date.
Federal Income Tax Consequences
The following discussion summarizes certain material federal income tax consequences of the issuance and receipt of awards under the 2020 Plan under the law as in effect on the date of this proxy statement. This summary does not purport to cover all federal employment tax or other federal tax consequences that may be associated with the 2020 Plan, nor does it cover state, local, or non-U.S. taxes.
•Incentive Stock Options (ISOs). An optionee generally realizes no taxable income upon the grant or exercise of an ISO. However, the exercise of an ISO may result in an alternative minimum tax liability to the employee. With some exceptions, a disposition of shares purchased under an ISO within two years from the date of grant or within one year after exercise produces ordinary income to the optionee equal to the value of the shares at the time of exercise less the exercise price. The same amount is deductible by the Company as compensation, provided that the Company reports the income to the optionee. Any additional gain recognized in the disposition is treated as a capital gain for which the Company is not entitled to a deduction. However, if the optionee exercises an ISO and satisfies the holding period requirements, the Company may not deduct any amount in connection with the ISO. If a sale or disposition of shares acquired with the ISO occurs after the holding period, the employee will recognize long-term capital gain or loss at the time of sale equal to the difference between proceeds realized and the exercise price paid. In general, an ISO that is exercised by the optionee more than three months after termination of employment is treated as an NQSO. ISOs are also treated as NQSOs to the extent that they first become exercisable by an individual in any calendar year for shares having a fair market value (determined as of the date of grant) in excess of $100,000.
•Non-Qualified Stock Options (NQSOs). An optionee generally has no taxable income at the time of grant of an NQSO but realizes income in connection with exercise of the option in an amount equal to the excess (at the time of exercise) of the fair market value of shares acquired upon exercise over the exercise price. The same amount is deductible by the Company as compensation, provided that, in the case of an employee option, the Company reports the income to the employee. Upon a subsequent sale or exchange of the shares, any recognized gain or loss after the date of exercise is treated as capital gain or loss for which the Company is not entitled to a deduction.
•SARs. Generally, the recipient of a stand-alone SAR will not recognize taxable income at the time the SAR is granted. If a participant receives the appreciation inherent in the SAR in cash, the cash will be taxed as ordinary income to the participant at the time it is received. If a participant receives the appreciation inherent in the SAR in shares, the spread between the then-current market value and the base price will be taxed as ordinary income to the participant at the time it is received. In general, there will be no federal income tax deduction allowed to the Company upon the grant or termination of SARs. However, upon the settlement of a SAR, the Company will be entitled to a deduction equal to the amount of ordinary income the recipient is required to recognize as a result of the settlement.
•Restricted Stock. The recipient of restricted stock will not recognize any taxable income for federal income tax purposes in the year of the award, provided that the shares are subject to restrictions (that is, they are nontransferable and subject to a substantial risk of forfeiture). However, the recipient may elect under Section 83(b) of the IRC to recognize compensation income in the year of the award in an amount equal to the fair market value of the shares on the date of the award (less the purchase price, if any, paid for such shares), determined without regard to the restrictions. If a Section 83(b) election is made, the capital gain/loss holding period for such shares commences on the date of the award. Any further change in the value of the shares will be taxed as a capital gain or loss only if and when the shares are disposed of by the recipient. If the recipient does not make a Section 83(b) election, the fair market value of the shares on the date the restrictions lapse will be treated as compensation income to the recipient and will be taxable in the year the restrictions lapse, and the capital gain/ loss holding period for such shares will also commence on such date.
•RSUs. No income generally will be recognized upon the award of RSUs. The recipient of a RSU award generally will be subject to tax at ordinary income rates on the market price of unrestricted shares on the date that such shares are transferred to the participant under the award (reduced by any amount paid, if any, by the participant for such restricted stock units), and the capital gain/loss holding period for such shares will also commence on such date.
New Plan Benefits
The benefits that will be awarded or paid under the 2020 Plan are not currently determinable. Any future awards granted to eligible participants under the 2020 Plan will be made at the discretion of the Committee, the Board, or under delegated authority, and no such determination as to future awards or who might receive them has been made.
Existing Plan Benefits
The following tables summarizes the grants made to our named executive officers, all current executive officers as a group, all current non-executive directors as a group, each nominee for election as a director and all non-executive employees as a group, from the inception of the 2020 Plan through December 31, 2022. The closing price per share of our common stock on was $1.48 as of December 30, 2022.
| | | | | | | | |
| Name | Number of Stock Options Granted Since Adoption of the 2020 Plan | Number of RSUs Granted Since Adoption of the 2020 Plan |
| Joe Mastrangelo | 1,437,484 | 750,000 |
Randall Gonzales(a) | 300,000 | 313,480 |
| Melissa Berube | 200,000 | 150,000 |
| Current Executive Officers as a Group (3) | 1,937,484 | 1,213,480 |
| Current Non-Employee Directors as a Group, excluding the three director nominees below (3) | 527,093 | 240,057 |
| Russell Stidolph | 473,613 | 117,519 |
| Jeff Bornstein | 93,085 | 52,601 |
| Claude Demby | 158,795 | 68,955 |
Non-Executive Officer Employees as a Group (b) | 1,154,742 | 1,303,278 |
(a)Mr. Gonzales is no longer an employee of the Company as of January 23, 2023. In connection with his departure, Mr. Gonzales forfeited 104,493 RSUs.
(b)Represents total stock options and RSUs granted since the adoption of the 2020 Plan to all employees (current and former) who received awards under the 2020 Plan, other than current executive officers.
Registration with the SEC
If our stockholders approve the amendment to the 2020 Plan, we will file with the SEC a registration statement on Form S-8, as soon as reasonably practicable after the approval, to register the additional shares available for issuance under the 2020 Plan.
PROPOSAL NO. 2CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
APPROVAL OF AN AMENDMENT TO OUR THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK FROM 200,000,000 TO 300,000,000 (THE “AUTHORIZED SHARES AMENDMENT”)Unless otherwise stated or unless the context otherwise requires, the terms “Company,” “we,” “us,” “our,” and “Eos” refer to Eos Energy Enterprises, Inc., a Delaware corporation, and the term “BMRG” refers to the Company prior to the consummation of the business combination.
The following is a summary of transactions since January 1, 2022 to which we and BMRG have been a participant, in which:
After careful consideration, i.the Board has adopted, declared advisableamount involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years; and directed
ii.any of our directors, executive officers, or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest, other than compensation and other arrangements that there be submittedare described in the section titled “Executive Compensation” or that were approved by our compensation committee.
B Riley Principal Merger Corp. II
B. Riley Financial is the ultimate parent company of B. Riley Securities, Inc. ("BRFBR"), the Sponsor and B. Riley Principal Investments, LLC ("BRPI"). Daniel Shribman, who was BMRG’s Chief Executive Officer and Chief Financial Officer prior to the stockholders atbusiness combination, is the Special MeetingPresident of BRPI and the Chief Investment Officer of B. Riley Financial. Bryant Riley, a proposed amendmentmember of BMRG’s board of directors prior to the business combination, is the Chairman and Co-Chief Executive Officer of B. Riley Financial. Kenneth Young, a member of BMRG’s board of directors prior to the business combination, is the President of B. Riley Financial and the Chief Executive Officer of BRPI.
BMRG Registration Rights Agreement
The holders of the Company’s Third Amendedfounder shares, private placement shares, private placement warrants, and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to increase the number of shares of authorized common stock from 200,000,000 to 300,000,000.
Background
Article IV of the Certificate of Incorporation currently authorizes the Company to issue up to 200,000,000 shares of common stock underlying the private placement warrants have rights to require us to maintain an effective registration statement with respect to such securities. These holders are also entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders have “piggy-back” registration rights to include their securities in other registration statements filed by us. Notwithstanding the foregoing, the Sponsor may not exercise its demand and 1,000,000“piggyback” registration rights after five (5) and seven (7) years, respectively, after the effective date of IPO registration statement and may not exercise its demand rights on more than one occasion.
Eos Registration Rights Agreement
In connection with the Closing, we entered into a registration rights agreement with certain of our security holders, which requires us to maintain an effective registration statement registering the resale of their shares of preferred stockcommon stock. Such security holders also have certain “piggyback” registration rights and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. We will bear the expenses incurred in connection with the filing of any such registration statements.
Director Nomination Agreement
In connection with the Closing, we entered into the Director Nomination Agreement with the Sponsor and certain Eos equity holders (the “Sellers”), pursuant to which the Sponsor and the Sellers have the right to designate members to be appointed or nominated for election to the Board of the Company, par value $0.0001 per share (“preferred stock”). Assubject to terms and conditions set forth therein.
Merger Consideration
Subject to certain downward adjustments and the other terms and conditions set forth in the Merger Agreement, at Closing the EES LLC security holders received total aggregate consideration of May 25, 2022, approximately 58,503,55429,644,680 shares of common stock were issued, including zero held as treasury shares, with warrants outstanding to purchase up to an aggregate of 7,326,654 shares of common stock, options and restricted stock units outstanding to acquire up to an aggregate of 5,099,774 shares of common stock, approximately 3,536,607 shares of common stock reserved for possible future issuance pursuant to the remaining authorized and unissued stock awards under the Amended and Restated 2020 Incentive Plan and a maximum of 6,516,359 shares of common stock issuable upon conversion of the Company’s outstanding 5%/6% Convertible Senior PIK Toggle Notes due 2026. As a result, approximately 119,017,052 authorized shares remain available for issuance for future purposes. The adoption of the proposed Authorized Shares Amendment would provide for an additional 100,000,000 authorized shares of common stock for future issuance, which would bring the aggregate total of authorized shares of common stock to 300,000,000.
The Authorized Shares Amendment amends and restates Section 4.1(b) of Article IV of the Certificate of Incorporation in its entirety to read as follows:
The total number of shares of all classes of capital stock, each with a par value of $0.0001 per share, which the Corporation is authorized to issue is 301,000,000 shares, consisting of (a) 300,000,000 shares of common stock (the “Common Stock”) and (b) 1,000,000 shares of preferred stock (the “Preferred Stock”).
Reasons for Seeking Stockholder Approval
As of May 25, 2022, the Company had approximately 60% of the authorized shares of common stock unissued and unreserved for issuance. The additional shares may be used for various purposes without further stockholder approval (except as required by law or Nasdaq rules). These purposes may include: (i) raising capital, if the Company has an appropriate opportunity, through offerings of common stock or securities that are convertible into common stock, including sales of common stock pursuant to the SEPA described above in Proposal No. 1; (ii) exchanging common stock or securities that are convertible into common stock for other outstanding securities; (iii) providing equity incentives to employees, officers, directors, customers, consultants, or advisors; (iv) expanding the Company’s business through the acquisition of other businesses or assets; (v) stock splits, dividends, and similar transactions; (vi) debt or equity restructuring or refinancing transactions; and (vii) other corporate purposes.stock.
The Board has not proposed the increase in the number of authorized shares of common stock with the intent of preventing or discouraging any actual or threatened tender offers or takeover attempts of the Company and the Board is not currently aware of any attempt or plan to acquire control of the Company. Rather, the Authorized Shares Amendment has been prompted by business and financial considerations, as set out above, and it is the intended purpose of the Authorized Shares Amendment to provide greater flexibility to the Board in considering and planning for our potential future corporate needs.
Rights of Additional Authorized Shares
TheEES LLC security holders also received an additional authorized shares contemplated by the Authorized Shares Amendment would be a part of the existing class of our common stock and, if issued, would have the same rights and privileges as the1,994,171 shares of our common stock presently issuedupon the achievement of certain earnout targets pursuant to the terms of the Merger Agreement.
Acquisition of Hi-Power
On April 8, 2021, the Company entered into a unit purchase agreement (the “Purchase Agreement”) with Holtec Power, Inc. (“Holtec”), in accordance with the terms and outstanding. Holdersconditions of shareswhich the Company purchased from Holtec the remaining 51% percent interest in HI-POWER, LLC (“Hi-Power”) that was not already owned by the Company. The Purchase Agreement provides that the Company will pay an aggregate purchase price of our$25 million for 51% interest in Hi-Power, pursuant to the following schedule: $5 million each of May 31, 2021, May 31, 2022, May 31, 2023, May 31, 2024, and May 31, 2025, evidenced by a secured promissory note secured by the assets of the Company. The Purchase Agreement also requires that the Company pay to Holtec, on the closing of the Transactions, an amount in cash equal to $10.3 million. Payments to Holtec under this Purchase Agreement totaled $35.3 million. During the year ended December 31, 2021, $30.4 million was charged to loss on pre-existing agreement. During the third quarter of 2022, the Company repaid all outstanding amounts under the Purchase Agreement.
Settlement Agreement
As disclosed at the time of the Merger Agreement, prior to the execution and delivery of the Merger Agreement, certain unitholders of EES LLC (“Hellman parties”) asserted claims (“Threatened Claims”) against another director and affiliated investors, including AltEnergy Storage VI, LLC (the "Securityholder Representative"), questioning the dilutive effect of certain historical security issuance on the former EES common stock (solelyunitholders.
Under the Merger Agreement, the Securityholder Representative had the obligation and duty to vigorously defend against the Threatened Claims, and the Company had the obligation to advance or cause to be advanced to the Securityholder Representative up to $5,000,000 of defense costs, subject to a deductible of $2,000,000 (the "Deductible"), in their capacity as holdersconnection with the investigation, defense, or settlement of sharesany Threatened Claims. The Deductible was to be borne by the company, and any additional amounts advanced were reimbursable by the former unitholders of our common stock) have no preemptive rights or rightsEES.
On December 1, 2021, a Settlement Agreement was entered into between Hellman Parties and the Securityholder Representative pursuant to convert their shareswhich, 300,000 Eos Shares (“Settlement Shares”) would be transferred to the Hellman parties from the EES unitholders at the time of our common stock into any other securities. Accordingly, shouldmerger.
On December 28, 2021, the independent members of the Board elect to issue additional sharesapproved a contribution of our common stock, existing holders$1,200,000 towards the Settlement.Such determination was based on the independent members of shares of our common stockthe Board’s business judgment that, among other reasons, such a contribution (i) would ensure that the Company would not have to spend the entire $2,000,000 Deductible towards the costs of defense of any preferential rightslitigation, (ii) would avoid the additional cost, distraction, uncertainty, and overhang of litigation relating to purchase the shares.Mergers, (iii) would benefit the Company’s future relationships with its long-term investors, and (iv) would generate future goodwill with such investors during an important growth stage of the Company. As the Company’s contribution benefits certain Eos stockholders at the time of the Merger Agreement, including AltEnergy LLC and B. Riley Financial Inc., who are considered as related parties owning more than 5% of the equity interest in the Company, this transaction is considered a related party transaction. On December 29, 2021, an amendment to the Settlement Agreement between the Hellman Parties and the Securityholder Representative was entered into, pursuant to which, $1,200,000 of the value represented by the Settlement Shares was to be paid in cash, representing the equivalent of 140,023 of the Settlement Shares.
EffectThe Company accrued $1,200,000 in accounts payable and accrued expenses - related party on Current StockholdersDecember 31, 2021, which has been paid on January 4, 2022. The remaining 159,977 in Settlement Shares were transferred to the Hellman parties from the former EES unitholders, on a pro rata basis, on December 29, 2021.
Issuance and Sale of common stock or securities convertible26.5% Convertible Senior PIK Notes due 2026
On January 18, 2023, the Company entered into our common stock could havean investment agreement (the “Investment Agreement”) with Great American Insurance Company, Ardsley Partners Renewable Energy, LP, CCI SPV III, LP, Denman Street LLC, John B. Berding Irrevocable Children’s Trust, John B. Berding, and AE Convert, LLC, a dilutive effect on the earnings per share, book value per share, voting power and percentage interest of holdings of current stockholders. In addition, the availability of additional shares of our common stock for issuance could, under certain circumstances, discourage or make more difficult efforts to obtain controlDelaware limited liability company managed by Russell Stidolph, a director of the Company under a possible take-over scenario.relating to the issuance and sale to the Purchasers of $13,750,000 in aggregate principal amount of the Company’s 26.5% Convertible Senior PIK Notes due 2026 (the “Notes”). The Board is not aware of any attempt, or contemplated attempt, to acquire controlreviewed and approved the issuance of the Company. This proposal is not being presentedNotes to AE Convert, LLC in accordance with the intent that itCompany's related person transaction policy. The Notes are governed by a form of indenture (the “Indenture”) incorporated by reference into the Notes. The Notes will bear interest at a rate of 26.5% per annum, which interest shall be used to prevent or discourage any acquisition attempt, but nothing would prevententirely paid-in-kind. All interest payments on the Board from taking any appropriate actions not inconsistent with its fiduciary duties. The Authorized Shares Amendment does not affectNotes shall be made through an increase in the number of shares or rights of preferred stock authorized.
Effectivenessprincipal amount of the Amendment
If this proposaloutstanding Notes or through the issuance of additional Notes (such interest is approvedreferred to herein as “PIK Interest”). Interest on the Notes is payable semi-annually in arrears on June 30 and December 30, commencing on June 30, 2023. It is expected that the Notes will mature on June 30, 2026, subject to earlier conversion, redemption or repurchase. The Notes are convertible at the option of the holder at any time until the business day prior to the maturity date, including in connection with a redemption by the Company’s stockholders, the Authorized Shares AmendmentCompany. The Notes will become effective upon the filingbe convertible into shares of a Certificate of Amendment to the Certificate of Incorporation with the Delaware Secretary of State, which the Company intends to do promptly following the Annual Meeting. If the proposal is not approved by the Company’s stockholders, the Authorized Shares Amendment will not be implemented andcommon stock, par value $0.0001 per share, based on an initial conversion rate of 598.824 shares of the Company’s capitalization will remain as it is currently.
Required Vote
Approval of Proposal No. 2 requires the affirmative votecommon stock per $1,000 principal amount of the holdersNotes (which is equal to an initial conversion price of at least 662⁄3%approximately $1.67 per share), in each case subject to customary anti-dilution and other adjustments (as described in the Indenture).
Policies and Procedures for Related Person Transactions
Our Board adopted a written related person transaction policy that sets forth the following policies and procedures for the review and approval or ratification of outstanding sharesrelated person transactions.
A “Related Person Transaction” is a transaction, arrangement or relationship in which we or any of our common stock assubsidiaries was, is or will be a participant, the amount of the Record Date to approve the amendment to the Certificate of Incorporation to increase the authorized shares of common stock. Abstentionswhich involved exceeds $120,000, and “broker non-votes”, ifin which any related person had, has or will have the effect of votes “AGAINST” the proposal.
THE BOARD OF DIRECTORS RECOMMENDSa direct or indirect material interest. A VOTE“Related Person” means:
FOR◦ APPROVAL OF AN AMENDMENT TO OUR THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK FROM 200,000,000 TO 300,000,000.any person who is, or at any time during the applicable period was, one of our officers or one of our directors;
◦any person who is known to be the beneficial owner of more than 5% of our voting stock;
◦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, daughter-in-law, brother-in-law or sister-in-law of a director, officer or a beneficial owner of more than 5% of our voting stock, and any person (other than a tenant or employee) sharing the household of such director, officer or beneficial owner of more than 5% of our voting stock; and
◦any firm, corporation or other entity in which any of the foregoing persons is a partner or principal or in a similar position or in which such person has a 10% or greater beneficial ownership interest.
Pursuant to our related person transaction policy, the Chief Financial Officer of the Company is responsible for collecting information regarding Related Person Transactions, determining whether a transaction, arrangement or relationship meets the definition of Related Person Transaction, and preparing information regarding Related Person Transactions for presentation to the Nominating and Corporate Governance Committee. Directors and officers are expected to promptly notify the Chief Financial Officer or the Chair of the Nominating and Corporate Governance Committee of any potential or existing Related Person Transactions of which they are aware.
We have policies and procedures designed to minimize potential conflicts of interest arising from any dealings we may have with our affiliates and to provide appropriate procedures for the disclosure of any real or potential conflicts of interest that may exist from time to time.
PROPOSAL NO. 3
APPROVAL OF AN ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF THE EXCHANGE CAP PROPOSAL AND/OR THE AUTHORIZED SHARES AMENDMENT
At the Special Meeting, if necessary, stockholders will vote on this Proposal No. 3. If this Proposal No. 3 is adopted, the Board will have the discretion to adjourn the Special Meeting to a later date or dates to permit further solicitation of proxies in the event that there are not sufficient votes at the time of the Special Meeting to approve Proposal No. 1 and/or Proposal No. 2. It is possible for us to obtain sufficient votes to approve this Proposal No. 3 but not receive sufficient votes to approve Proposal No. 1 and/or Proposal No. 2. In such a situation, the Company could adjourn the Special Meeting for any number of days or hours as permitted under applicable law and attempt to solicit additional votes in favor of Proposal No. 1 and/or Proposal No. 2.
This Proposal No. 3 will only be presented at the Special Meeting if there are not sufficient votes represented in person or by proxy for Proposal No. 1 and/or Proposal No. 2.
Required Vote
The approval of Proposal No. 3 requires the affirmative vote of a majority of the votes cast on the proposal. Abstentions and “broker non-votes,” if any, will have no effect on the outcome of this vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF AN ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF THE EXCHANGE CAP PROPOSAL AND/OR THE AUTHORIZED SHARES AMENDMENT.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information relating to the beneficial ownership of our common stock as of May 4, 2022,March 1, 2023 by:
•each person, or group of affiliated persons, known by us to beneficially own more than 5% of our outstanding shares of our common stock;
•each of our directors, nominees and named executive officers; and
•all directors and executive officers as a group.
A person is a “beneficial owner” of a security if that person has or shares voting or investment power over the security or if that person has the right to acquire sole or shared voting or investment power over the security within 60 days. Unless otherwise noted, these persons, to our knowledge, have sole voting and investment power over the shares listed. In computing the number of shares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of common stock subject to options, warrants and restricted stock units held by that person that are currently exercisable or exercisable within 60 days of May 4, 2022March 1, 2023.
TheUnless stated otherwise, the percentage of shares beneficially owned is computed on the basis of 54,445,72588,854,807 shares of our common stock outstanding and 7,326,654 warrants, each exercisable for one common stock share, outstanding as of May 4, 2022. Unless otherwise indicated below, the address for each beneficial owner listed is c/o 3920 Park Avenue, Edison, New Jersey 08820.March 1, 2023.
| | | | | | | | | | | |
| Shares of Common Stock Beneficially Owned |
| Name of beneficial owner | | Number of Securities Beneficially Owned | Percentage |
| 5% Stockholder | | | |
| B. Riley Financial, Inc. (5) | | 5,696,547 | 9.2% |
| Wood River Capital, LLC (6) | | 7,537,361 | 12.2% |
| Directors and Executive Officers | | | |
| Joe Mastrangelo (1) (2) | | 842,801 | 1.4% |
| Randall Gonzales (1) (2) | | 43,700 | * |
| Sagar Kurada (1) (2) | | 153,396 | * |
| Jody Markopoulos | | 41,666 | * |
| Claude Demby (1) (2) | | 18,596 | * |
| Russell Stidolph (2) (3) (4) | | 2,885,146 | 4.7% |
| Daniel Shribman (1) (2) | | 1,043,498 | 1.7% |
| Alex Dimitrief (1) (2) | | 70,465 | * |
| Audrey Zibelman (1) (2) | | 27,483 | * |
| Marian “Mimi” Walters (1) (2) | | 32,433 | * |
| All directors, nominees and executive officers as a group (10 individuals) | | 4,991,772 | 8.1% |
| | | | | | | | | | | |
| Shares of Common Stock Beneficially Owned |
| Name of beneficial owner | | Number of Securities Beneficially Owned | Percentage |
| 5% Stockholder | | | |
| Wood River Capital, LLC (4) | | 7,996,591 | 8.48 | % |
| YA II PN, Ltd. (5) | | 9,568,780 | 9.99 | % |
| Point72 Asset Management, L.P. (6) | | 5,535,030 | 6.23 | % |
| Directors and Executive Officers | | | |
| Joe Mastrangelo (1) (2) | | 1,525,421 | 1.72 | % |
| Randall Gonzales (1) (2) | | 417,143 | * |
| Melissa Berube (1) (2) | | 131,524 | * |
| Nathan Kroeker (1) | | — | | * |
| Russell Stidolph (2) (3) | | 4,355,051 | 4.84 | % |
| Daniel Shribman (1) (2) | | 74,365 | * |
| Alex Dimitrief (1) (2) | | 80,082 | * |
| Audrey Zibelman (1) (2) | | 37,100 | * |
| Marian "Mimi" Walters (1) (2) | | 42,050 | * |
| Claude Demby (1) (2) | | 32,373 | * |
| Jeff Bornstein (1) (2) (7) | | 182,666 | * |
| All directors, director nominees and executive officers as a group (9 individuals) | | 6,386,267 | 7.09 | % |
—————
*Less than 1%.
(1) The business address of each of these entities or individuals is c/o 3920 Park Avenue Edison, New Jersey 08820.
(2) Includes shares of common stock underlying restricted stock units.
(3) Represents (i) 222,914328,595 shares of common stock issuable upon exercise of vested options held by Mr. Stidolph, (ii)5,198 160,310 shares of common stock directly owned by Mr. Stidolph, and (iii) 2,653,272 shares of common stock in which Mr. StidolophStidolph has a pecuniary interest in that are held directly by AltEnergy LLC, or AltEnergy, AltEnergy Storage LLC, or AltEnergy I, AltEnergy Storage II LLC, or AltEnergy II, AltEnergy Storage V LLC, or AltEnergy V, AltEnergy VI LLC, or AltEnergy VI, AltEnergy Storage Bridge LLC, or Bridge, AltEnergy Transmission LLC, or Transmission, AltEnergy Storage Bridge Phase II LLC, or Bridge II (collectively, the “AltEnergy Shares”). and (iv) 1,212,874 shares of common stock issuable upon conversion of the outstanding 26.5% Convertible Senior PIK Notes due 2026 held by AE Convert, LLC. Mr. Stidolph disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein. Mr. Stidolph is the managing director of AltEnergy, the managing member of each of AltEnergy I, AltEnergy II, AltEnergy VI, AltEnergy V, Bridge, Transmission and Bridge II, and has voting and dispositive power with respect to the AltEnergy Shares. Mr. Stidolph disclaims beneficial ownershipis a manager of these shares, exceptAE Convert, LLC, and has voting and dispositive power with respect to the extentsecurities owned by AE Convert, LLC. The percentage of his pecuniary interest therein.shares beneficially owned by Mr. Stidolph is computed on the basis of 88,854,807 shares of our common stock outstanding as of March 1, 2023 and 1,212,874 shares of common stock issuable upon conversion of the outstanding 26.5% Convertible Senior PIK Notes due 2026 held by AE Convert, LLC. The address of Mr. Stidolph and each of the above referenced entities is 137 Rowayton Avenue, Rowayton, CT 06853.
(4) Represents securities held directly by AltEnergy LLC, or AltEnergy, AltEnergy Storage LC, or AltEnergy I, AltEnergy Storage II LLC, or AltEnergy II, AltEnergy Storage V LLC, or AltEnergy V, AltEnergy VI LLC, or AltEnergy VI, AltEnergy Storage Bridge LLC, or Bridge, AltEnergy Transmission LLC, or Transmission, AltEnergy Storage Bridge Phase II, or Bridge II. Mr. Stidolph is the managing director of AltEnergy, the managing member of each of AltEnergy I, AltEnergy II, AltEnergy VI, AltEnergy V, Bridge, Transmission and Bridge II, and has voting and dispositive power with respect to the AltEnergy Shares. Mr. Stidolph disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein.
(5) The information in the table above is based solely on information contained in this stockholder’s Schedule 13G under the Exchange Act filed by such stockholder with the SEC. The amount includes (i) shares of common stock held by BRF Investment LLC ("BRFI"), (ii) shares of common stock owned by Bryant Riley and (iii) shares of common stock underlying warrants held by Bryant Riley. Bryant Riley is the Chairman and Co-Chief Executive Officer of B. Riley Financial, Inc. and has voting and dispositive power over the securities held by BRF. The address for this stockholder is 11100 Santa Monica Blvd, Suite 800, Los Angeles, CA 90025.
(6) The information in the table above is based solely on information contained in this stockholder’s Schedule 13G under the Exchange Act filed by such stockholder with the SEC. Represents (i) 2,538,261 shares of common stock held by Wood River Capital, LLC (“Wood River”) and (ii) 5,145,0005,458,300 shares of common stock issuable upon conversion of the outstanding 5%/6% Convertible Senior PIK Toggle Notes due 2026 held by Wood River. Wood River is beneficially owned by SCC Holdings, LLC (“SCC”), SCC is beneficially owned by KIM, LLC (“KIM”), KIM is beneficially owned by Koch Investment Group, LLC (“KIG”), KIG is beneficially owned by Koch Investment Group Holdings, LLC (“KIGH”), and KIGH is beneficially owned by Koch Industries, Inc. (“Koch Industries”), in each case by means of ownership of all voting equity instruments. The percentage of shares beneficially owned by Wood River is computed on the basis of 88,854,807 shares of our common stock outstanding as of March 1, 2023 and 5,458,300 shares of common stock issuable upon conversion of the outstanding 5%/6% Convertible Senior PIK Toggle Notes held by Wood River. The address for this stockholder is 4111 E. 37th Street North, Wichita, KS 67220.
(5) Represents (i) 2,640,000 shares of common stock held directly by YA II PN, Ltd. and (ii) 6,928,780 shares of common stock deemed to be beneficially owned under the 9.99% ownership cap. The percentage of shares beneficially owned by YA II PN, Ltd is computed on the basis of 88,854,807 shares of our common stock outstanding as of March 1, 2023 and 6,928,780 shares of our common stock from the deemed beneficial ownership by YA II PN, Ltd, as of March 1, 2023. The address for this stockholder is 1012 Springfield Ave. Mountainside, NJ 07092.
(6) The information in the table above is based solely on information contained in this stockholder’s Schedule 13G under the Exchange Act filed by such stockholder with the SEC on February 14, 2023. Point72 Asset Management, L.P. (“Point72 Asset Management”) maintains investment and voting power with respect to the securities held by Point72 Associates, LLC, an investment fund it manages (“Point72 Associates”). Point72 Capital Advisors, Inc. is the general partner of Point72 Asset Management. Steven A. Cohen controls each of Point72 Asset Management, Point72 Capital Advisors, Inc. Point72 Asset Management, Point72 Capital Advisors Inc. and Mr. Cohen own directly no shares of common stock. This statement should not be construed as an admission that any of the foregoing persons or any reporting person is the beneficial owner of the shares listed herein. The address for this stockholder is 72 Cummings Point Road, Stamford, CT 06902.
(7) The number of securities beneficially owned by Jeff Bornstein has been adjusted by 862 shares of common stock from what was previously reported for his holdings.
DELINQUENT SECTION 16(A) REPORTS
Section 16(a) of Contentsthe Exchange Act requires the Company’s directors and executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Such officers, directors and greater than 10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.
To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with during fiscal year ended December 31, 2022, except for the following: a late Form 4 for Melissa Berube related to the grant of RSUs (see Form 4 filed on February 17, 2022).
ADDITIONAL INFORMATION
Householding of Proxy Materials
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.
Brokers with account holders who are Eos stockholders may be “householding” our proxy materials. A single proxy statement may be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker that it will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you notify your broker or the Company that you no longer wish to participate in “householding.”
If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, you may (1) notify your broker or (2) direct your written request to our Investor Relations Department at 3920 Park Avenue, Edison, New Jersey 08820, 765-201-0591312-445-2870 or email ir@eose.com. Stockholders who currently receive multiple copies of this Proxy Statement at their address and would like to request “householding” of their communications should contact their broker. In addition, the Company will promptly deliver, upon written request to the address above, a separate copy of the Form 10-K, Proxy Statement and Proxy Card or Notice of Internet Availability of Proxy Material to a stockholder at a shared address to which a single copy of the documents was delivered.
Note About Our Website
Web links to our website throughout this document are provided for convenience only. Please note that information on or accessible through our website is not part of, or incorporated by reference into, this Proxy Statement.
Other Matters
As of the date of this Proxy Statement, the Board does not intend to present any matters other than those described herein at the SpecialAnnual Meeting and is unaware of any matters to be presented by other parties. If other matters are properly brought before the SpecialAnnual Meeting for action by the stockholders, proxies will be voted in accordance with the recommendation of the Board or, in the absence of such a recommendation, in the discretion of the proxy holder.
We have filed our Annual Report on Form 10-K for thefiscal year ended December 31, 2021 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 with the SEC. These documents areIt is available free of charge at the SEC’s web site at www.sec.gov. Upon written request by a Eos stockholder, we will mail without charge a copy of our Annual Report on Form 10-K, and our Quarterly Report on Form 10-Q, including the financial statements and financial statement schedules, but excluding exhibits to the Annual Report on Form 10-K and Quarterly Report on Form 10-Q.10-K. Exhibits to the Annual Report on Form 10-K and Quarterly Report on Form 10-Q are available upon payment of a reasonable fee, which is limited to our expenses in furnishing the requested exhibit. All requests should be directed our Investor Relations departmentdepartment at 3920 Park Avenue, Edison, New Jersey 08820, 765-201-0591312-445-2870 or email ir@eose.com.
INFORMATION ABOUT THE PROXY PROCESS AND VOTING
Why am I receiving these materials?
The Board is providingWe have made a Notice of Internet Availability that contains instructions on accessing this Proxy Statement and Proxy Card available to you or have delivered printed proxy materials to you in connection withbecause the Board’s solicitation of proxies for useBoard is soliciting your proxy to vote at the Company’s SpecialAnnual Meeting, to be held on June 28, 2022, at 10:00 a.m. Eastern Time, andincluding at any adjournmentadjournments or postponement thereof, forpostponements of the purpose of considering and acting upon the matters set forth in this proxy statement. These proxy materials are being distributed to you beginning on May 27, 2022. As a stockholder, youAnnual Meeting. You are invited to attend the virtual SpecialAnnual Meeting and are requested to vote on the proposals described in this Proxy Statement. However, you do not need to attend the virtual Annual Meeting to vote your shares. Instead, you may simply complete, sign and return the Proxy Card, or follow the instructions below to submit your proxy statement.on the internet.
The Notice of Internet Availability or the printed proxy materials are being sent to our stockholders on or about March 27, 2023.
Who can vote at the SpecialAnnual Meeting?
The outstanding voting securities of Eos are shares of common stock, $0.0001 par value per share. There were 58,503,55490,788,131 shares of common stock outstanding as of May 25, 2022.March 22, 2023. Only stockholders of record at the close of business on the Record Date will be entitled to vote at the SpecialAnnual Meeting.
Stockholder of Record: Shares Registered in Your Name
If you are a stockholder of record as of May 25, 2022,March 22, 2023, you may vote online during the virtual SpecialAnnual Meeting. Alternatively, you may vote by proxy by using the accompanying Proxy Card, over the internet or by telephone.internet. Whether or not you plan to attend online the virtual SpecialAnnual Meeting, we encourage you to vote by proxy ahead of the SpecialAnnual Meeting to ensure your vote is counted. Even if you have submitted a proxy before the SpecialAnnual Meeting, you may still attend the SpecialAnnual Meeting and vote. In such case, your previously submitted proxy will be disregarded.
•◦To vote using the Proxy Card, simply complete, sign and date the accompanying Proxy Card and return it promptly in the envelope provided. If you return your signed Proxy Card to us before the SpecialAnnual Meeting, we will vote your shares in accordance with the Proxy Card.
•◦To vote by proxy over the internet before the SpecialAnnual Meeting, follow the instructions as directed on the enclosed Proxy Card.proxy card or on the Notice of Internet Availability.
•◦To vote by telephone, you may vote by proxy by calling the toll-freetoll free number found on the enclosed Proxy Card.proxy card or on the Notice of Internet Availability.
•◦To vote at the virtual Special Meeting,Annual meeting, you will need the 16-digit control number included on your Proxy Card.proxy card or voting instruction form. The meeting webcast will begin promptly at 10:00 a.m., Eastern time. We encourage you to access the meeting prior to the start time. Online log-incheck-in will begin at 9:45 a.m. Eastern time, and you should allow ample time for the log-in process.check-in procedures. If you encounter any difficulties accessing the virtual meeting during the log-incheck-in or meeting time, please call the technical support number that will be posted on the virtual SpecialAnnual Meeting login page for assistance.
Beneficial Owner: Shares Registered in the Name of a Broker, Bank or Other Agent
If, on the Record Date, your shares were held in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the SpecialAnnual Meeting. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account.
If you are a beneficial owner as described above, you should have received a Proxy Card and voting instruction forminstructions with these proxy materials from the brokerage firm, bank, dealer or other similar organization that holds your shares. Followshares, rather than from us. Simply complete and mail the instructions they provideProxy Card to ensure that your vote is counted. To vote online at the virtual Annual Meeting, you must obtain a valid proxy from your broker, bank, dealer or other agent and follow the accompanying instructions included with these proxy materials.
We provide internet proxy voting to allow you to vote your shares online before the SpecialAnnual Meeting, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies.
What is the required vote to approve the proposals discussed in this Proxy Statement?
Approval
•With respect to Proposal No. 1, directors are elected by a plurality of the Exchange Capvotes cast. “Withhold” votes have no effect. There is no ability to “abstain.” Broker non-votes will have no effect on the outcome of the vote.
•With respect to Proposal and the Adjournment Proposal will requireNo. 2, the affirmative vote of the majority of the total votes cast is required for approval. Abstentions will have no effect on such proposal. Approvalthe outcome of the Authorized Shares Amendmentvote. In addition, because this is a routine item, there will requirenot be any broker non-votes.
•With respect to Proposal No. 3, the affirmative vote of the majority of votes cast is required for approval. Abstentions and broker non-votes will have no effect on the outcome of the vote. We note that this is an advisory vote and is not binding on the Company, the Board or the Leadership Development & Compensation Committee.
•With respect to Proposals No. 4 and No. 5, the affirmative vote of the holders of at least 662⁄3% 2/3% of the voting power of all outstanding shares of our common stock.capital stock of the Company entitled to vote generally in the election of directors, voting together as a single class is required for approval. Abstentions and “brokerbroker non-votes” if any, will have the same effect as a vote against.
•With respect to Proposals No. 6 and No. 7, the affirmative vote of the majority of votes cast is required for approval. Abstentions and broker non-votes will have no effect on the outcome of the Exchange Cap Proposal or the Adjournment Proposal. Abstentions and “broker non-votes” will have the effect of votes “AGAINST” the Authorized Shares Amendment.
vote.
What are “broker non-votes”?
If your shares are held by your broker as your nominee (that is, in “street name”), you will need to instruct your broker to vote your shares. If you do not give instructions to your broker, your broker can vote your shares with respect to “routine” items, but not with respect to “non-routine” items. Only Proposal No. 2, the ratification of the appointment of Deloitte as our independent registered public accounting firm for the fiscal year ending December 31, 2023, is considered “routine” under applicable rules.
If a broker, bank, custodian, nominee or other record holder of common stock indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular proposal, then those shares will be treated as “broker non-votes” with respect to that proposal. Broker non-votes may affect the result of a Proposal, as stated above in “What is the required vote to approve the proposals discussed in this Proxy Statement?”
How many votes do I have?
On each matter to be voted upon, you have one vote for each share of common stock you own as of the Record Date.
What if I return a Proxy Card but do not make specific choices?
If we receive a signed and dated Proxy Card and the Proxy Card does not specify how your shares are to be voted, your shares will be voted “For” the election of each of the three nominees for director, “For” the ratification of the appointment of Deloitte as our independent registered public accounting firm, “For” the approval of the non-binding advisory resolution to approve the compensation of our named executive officers, “For” the Reverse Stock Split Proposal, “For” the Exculpation Amendment, “For” the SEPA Matters Proposal, and “For” an amendment to our Amended and Restated 2020 Incentive Plan. If any other matter is properly presented at the Annual Meeting, your proxy (one of the individuals named on your Proxy Card) will vote your shares in his or her discretion.
What does it mean if I receive more than one set of materials?
If you receive more than one set of materials, your shares are registered in more than one name or are registered in different accounts. In order to vote all the shares you own, you must either sign and return all of the Proxy Cards or follow the instructions for any alternative voting procedure on each of the Proxy Cards.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote at the SpecialAnnual Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of three ways:
•◦You may submit another properly completed proxy with a later date.
•◦You may send a written notice that you are revoking your proxy to our Investor Relations Department at 3920 Park Avenue, Edison, New Jersey 08820, 765-201-0591312-445-2870 or email ir@eose.com.
•◦You may attend the virtual SpecialAnnual Meeting through online presence and vote online. Simply attending the SpecialAnnual Meeting will not, by itself, revoke your prior proxy.
If your shares are held by your broker, bank or other agent, you should follow the instructions provided by them.
When are stockholder proposals due for next year’s Annual Meeting?
If you wish to submit a stockholder proposal pursuant to Rule 14a-8 of the Securities Exchange Act to be considered for inclusion in next year’s proxy materials, your proposal must be submitted in writing by December 1, 2022November 28, 2023 to Eos Energy Enterprises Inc., c/o Laura Ellis, 3920 Park Avenue, Edison, New Jersey 08820, or email at ir@eose.com.
Pursuant to our bylaws,Second Amended and Restated Bylaws, in order for a stockholder to present a proposal at the annual meeting, other than 14a-8 proposals to be included in the Proxy Statement as described above, or to nominate a director, you must give timely notice thereof in writing to the Secretary at Eos Energy Enterprises Inc., 3920 Park Avenue, Edison, New Jersey 08820, which must be received between January 17, 20232024 and February 16, 2023;2024; provided that if the date of the 20232024 annual meeting is more than 30 days before or more than 60 days after May 17, 2023,16, 2024, notice must be received no earlier than 120 days prior to such annual meeting and no later than the later of the 90th day prior to the annual meeting date or the 10th day following the day on which public announcement of the 20232024 annual meeting date is first made by the Company. You are also advised to review our bylaws,Second Amended and Restated Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations.
In addition to satisfying the foregoing requirements, including the timing and other requirements, under the Company’s Second Amended and Restated Bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees for the 2024 Annual Meeting of Stockholders must also provide notice to our Secretary that sets forth all information required by Rule 14a-19 under the Exchange Act, and such notice must be received no later than March 17, 2024. A shareholder seeking to utilize the universal proxy rules must comply with those rules and must also comply with the Company’s Second Amended and Restated Bylaws, including the obligation to provide timely notice as described above.
What is the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. The presence, in person or represented by proxy, at the Special Meeting ofA quorum will be present if the holders of shares of outstanding common stock representing a majority of thein voting power of all outstandingthe shares of common stock entitled to vote at the Special Meeting will be required to establish a quorum at the Special Meeting. Abstentionsissued and “broker non-votes” will be treated as shares presentoutstanding and entitled to vote for quorum purposes.are present online at the virtual Annual Meeting represented by proxy. Your shares will be counted towards the quorum only if you submit a valid proxy or vote at the SpecialAnnual Meeting. If there is no quorum, either the chair of the SpecialAnnual Meeting or a majority in voting power of the stockholders entitled to vote at the SpecialAnnual Meeting, present online or represented by proxy, may adjourn the SpecialAnnual Meeting to another time or place.
How can I find out the results of the voting at the SpecialAnnual Meeting?
Voting results will be announced by the filing of a Current Report on Form 8-K within four business days after the SpecialAnnual Meeting.
Who can help answer my questions?
If you have questions about this Proxy Statement or if you need additional copies of the proxy materials, you should contact our Investor Relations department at 765-201-0591312-445-2870 or ir@eose.com.
To obtain timely delivery, our stockholders must request the materials on or before April 29, 2023 to facilitate timely delivery.
Who will solicit and pay the cost of soliciting proxies?
Eos will pay the cost of soliciting proxies for the specialgeneral meeting. Eos will reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of ordinary shares for their expenses in forwarding soliciting materials to beneficial owners of ordinary shares and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, mail, on the Internet or at the SpecialAnnual Meeting. They will not be paid any additional amounts for soliciting proxies. In addition, we have retained Morrow Sodali to act as a proxy solicitor in conjunction with the SpecialAnnual Meeting. We have agreed to pay that firm $12,500, andplus reasonable out-of-pocket expenses, for proxy solicitation services.
How do I attend the SpecialAnnual Meeting?
TheIn light of on-going developments related to coronavirus (COVID-19) and after careful consideration, our Board of Directors has determined to hold the Special Meeting virtuallya virtual-only annual meeting in order to facilitate stockholder attendance and participation by stockholders from all locations at no cost. We believe this is the right choice for the Company at this time, as it enables engagement with our stockholders, regardless of size, resources, or physical location while safeguardingprotect the health and safety of our stockholders, Boardmanagement, directors and management. We are committed to ensuring that stockholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting.our community.
You may attend the SpecialAnnual Meeting live via the Internet at www.virtualshareholdermeeting.com/EOSE2022.EOSE2023. Stockholders will need the 16-digit control number provided on their Proxy Card,proxy card, voting instruction form or notice. We suggest you log in at least 15 minutes before the start of the meeting.
Can I ask questions at the SpecialAnnual Meeting?
Stockholders as of our record date will have an opportunity to submit questions live via the Internet during the meeting.
| | | | | |
How to Participate in the SpecialAnnual Meeting | Online: 1. Visit www.virtualshareholdermeeting.com/EOSE2022SM;EOSE2023; and
|
| 2. Enter the 16 digit control number included on your Notice Regarding the Availability of Proxy Materials (“Notice”), on your Proxy Card (if you received a printed copy of the proxy materials), or on the instructions that accompanied your proxy materials. |
You may begin to log into the meeting platform beginning at 9:45 a.m. Eastern Time on June 28, 2022.May 16, 2023. The meeting will begin promptly at 10:00 a.m. Eastern Time. |
Appendix A
Standby Equity Purchase Agreement
dated April 28, 2022,
by and between the Company
and YA II PN, Ltd.
THIS STANDBY EQUITY PURCHASE AGREEMENT (this “Agreement”) dated as of April 28, 2022 is made by and between YA II PN, LTD., a Cayman Islands exempt limited partnership (the “Investor”), and EOS ENERGY ENTERPRISES, INC.,a company incorporated under the laws of the State of Delaware (the “Company”).
WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company shall have the right to issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase from the Company, up to $200 million of the Company’s shares of common stock, par value $0.0001 per share (the “Common Shares”); and
WHEREAS, the Common Shares are listed for trading on the Nasdaq Capital Market under the symbol “EOSE;” and
WHEREAS, the offer and sale of the Common Shares issuable hereunder will be registered on the Company’s registration statement on Form S-3 (file No. 333-263298) under Section 5 under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”).
NOW, THEREFORE, the parties hereto agree as follows:
Article I.Certain Definitions
Section 1.01“Additional Shares” shall have the meaning set forth in Section 2.01(d)(ii).
Section 1.02“Adjusted Advance Amount” shall have the meaning set forth in Section 2.01(d)(i).
Section 1.03“Advance Date” shall mean the 1st Trading Day after expiration of the applicable Pricing Period for each Advance.
Section 1.04“Advance Notice” shall mean a written notice in the form of Exhibit A attached hereto to the Investor executed by an officer of the Company and setting forth the amount of an Advance that the Company desires to issue and sell to the Investor.
Section 1.05“Advance Notice Date” shall mean each date the Company delivers (in accordance with Section 2.01(b) of this Agreement) to the Investor an Advance Notice, subject to the terms of this Agreement.
Section 1.06“Advances” shall mean any issuance and sale from the Company to the Investor pursuant to Article II hereof.
Section 1.07“Affiliate” shall have the meaning set forth in Section 3.07.
Section 1.08“Agreement” shall have the meaning set forth in the preamble of this Agreement.
Section 1.09“Applicable Laws” shall mean all applicable laws, statutes, rules, regulations, orders, executive orders, directives, policies, guidelines and codes having the force of law, whether local, national, or international, as amended from time to time, including without limitation (i) all applicable laws that relate to money laundering, terrorist financing, financial record keeping and reporting, (ii) all applicable laws that relate to anti-bribery, anti-
corruption, books and records and internal controls, including the United States Foreign Corrupt Practices Act of 1977, and (iii) any Sanctions laws.
Section 1.10“Base Prospectus” shall mean the Company’s prospectus dated April 25, 2022 accompanying the Registration Statement.
Section 1.11“Basket” shall have the meaning set forth in Section 5.04.
Section 1.12“Black Out Period” shall have the meaning set forth in Section 6.02
Section 1.13“Closing” shall have meaning set forth in Section 2.02.
Section 1.14“Commitment Amount” shall mean $200,000,000 of Common Shares, provided that, the Company shall not effect any sales under this Agreement and the Investor shall not have the obligation to purchase Common Shares under this Agreement to the extent (but only to the extent) that after giving effect to such purchase and sale the aggregate number of Common Shares issued under this Agreement would exceed 19.99% of the outstanding Common Shares as of the date of this Agreement (the “Exchange Cap”); provided further that, the Exchange Cap will not apply (a) if the Company’s stockholders have approved issuances in excess of the Exchange Cap in accordance with the rules of the Principal Market or (b) as to any Advance, if the Purchase Price of Shares in respect of such Advance equals or exceeds $2.15 per share (which represents the lower of (i) the Nasdaq Official Closing Price on the Trading Day immediately preceding the date of this Agreement; or (ii) the average Nasdaq Official Closing Price for the five Trading Days immediately preceding the date of this Agreement).
Section 1.01“Commitment Fee Shares” shall have the meaning set forth in Section 13.04.
Section 1.02“Commitment Period” shall mean the period commencing on the date hereof and expiring upon the date of termination of this Agreement in accordance with Section 11.02.
Section 1.03“Common Shares” shall have the meaning set forth in the recitals of this Agreement.
Section 1.04“Company” shall have the meaning set forth in the preamble of this Agreement.
Section 1.05“Company Indemnitees” shall have the meaning set forth in Section 5.02.
Section 1.06“Condition Satisfaction Date” shall have the meaning set forth in Section 7.01.
Section 1.07“Environmental Laws” shall have the meaning set forth in Section 4.08.
Section 1.08“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.09“Hazardous Materials” shall have the meaning set forth in Section 4.08.
Section 1.10“Indemnified Liabilities” shall have the meaning set forth in Section 5.01.
Section 1.11“Initial Registration Statement” shall have the meaning set forth in Section 6.01.
Section 1.12“Investor” shall have the meaning set forth in the preamble of this Agreement.
Section 1.13“Investor Indemnitees” shall have the meaning set forth in Section 5.01.
Section 1.14“Market Price” shall mean the average of the VWAPs during each Trading Day of the relevant Pricing Period.
Section 1.15“Material Adverse Effect” shall mean any event, occurrence or condition that has had or would reasonably be expected to have (i) a material adverse effect on the legality, validity or enforceability of this Agreement or the transactions contemplated herein, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under this Agreement.
Section 1.16“Material Outside Event” shall have the meaning set forth in Section 6.08.
Section 1.17“Maximum Advance Amount” in respect of each Advance Notice means $20,000,000.
Section 1.18“Minimum Acceptable Price” or “MAP” shall mean the minimum price notified by the Company to the Investor in each Advance Notice, if applicable.
Section 1.19“Nasdaq Official Closing Price” means the closing price of a Common Share as reported on the “Historical NOCP” section of the web site Nasdaq.com for the ticker symbol “EOSE.”
Section 1.20“OFAC” shall mean the U.S. Department of Treasury’s Office of Foreign Asset Control.
Section 1.21“Ownership Limitation” shall have the meaning set forth in Section 2.01I(i).
Section 1.22“Person” shall mean an individual, a corporation, a partnership, a limited liability company, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
Section 1.23“Plan of Distribution” shall mean the section of a Registration Statement disclosing the plan of distribution of the Shares.
Section 1.24“Pricing Period” shall mean the three (3) consecutive Trading Days commencing on the Advance Notice Date.
Section 1.25“Principal Market” shall mean the Nasdaq Capital Market.
Section 1.26“Promissory Note” shall have the meaning set forth in Section 2.05(b).
Section 1.27“Prospectus” means any prospectus (including, without limitation, all amendments and supplements thereto) used in connection with a Registration Statement.
Section 1.28“Prospectus Supplement” shall mean any prospectus supplement to a Prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act, including, without limitation, any Prospectus Supplement to be filed in accordance with Section 6.01 hereof.
Section 1.29“Purchase Price” shall mean the price per Share obtained by multiplying the Market Price by 97% in respect of any Shares purchased hereunder.
Section 1.30[Reserved]
Section 1.31“Registration Limitation” shall have the meaning set forth in Section 2.01(c)(ii).
Section 1.32“Registration Statement” shall mean the Initial Registration Statement or another registration statement on a form promulgated by the SEC for which the Company then qualifies for the registration of the offer and sale of the Shares to be offered and sold by the Company to the Investor and the resale of such Shares by the Investor, as the same may be amended and supplemented from time to time and including any information deemed to be a part thereof pursuant to Rule 430B under the Securities Act and any successor registration statement filed by
the Company with the SEC under the Securities Act on a form promulgated by the SEC for which the Company then qualifies and which form shall be available for the registration of the transactions contemplated hereunder.APPENDIX A
Section 1.33
“
EOS ENERGY ENTERPRISES, INC.
Regulation D
” shall mean
CERTIFICATE OF AMENDMENT TO THE
[__] AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Pursuant to the provisions of Regulation D promulgated under the Securities Act.
Section 1.34“Request” shall have the meaning set forth in Section 2.05(a).
Section 1.35“Sanctions” means any sanctions administered or enforced by OFAC, the U.S. State Department, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority.
Section 1.36“Sanctions Programs” means any OFAC economic sanction program (including, without limitation, programs related to Crimea, Cuba, Iran, North Korea, Sudan and Syria).
Section 1.37“SEC” shall mean the U.S. Securities and Exchange Commission.
Section 1.38“SEC Documents” shall have the meaning set forth in Section 4.05.
Section 1.39“Securities Act” shall have the meaning set forth in the recitals of this Agreement.
Section 1.40“Settlement Document” shall have the meaning set forth in Section 2.02(a).
Section 1.41“Shares” shall mean the Common Shares to be issued from time to time hereunder pursuant to an Advance.
Section 1.42“Subsidiaries” shall have the meaning set forth in Section 4.01.
Section 1.43“Trading Day” shall mean any day during which the Principal Market shall be open for business.
Section 1.44“Transaction Documents” shall have the meaning set forth in Section 4.02.
Section 1.45“VWAP” means, for any Trading Day, the daily volume weighted average price§ 242 of the Common Shares for such Trading Day on the Principal Market during regular trading hours as reported by Bloomberg L.P.
Article II.Advances
Section 2.01 Advances; Mechanics. Subject to the terms and conditions of this Agreement (including, without limitation, the provisions of Article VII hereof), the Company, at its sole and exclusive option, may issue and sell to the Investor, and the Investor shall purchase from the Company, Common Shares on the following terms:
(a)Advance Notice. At any time during the Commitment Period the Company may require the Investor to purchase Shares by delivering an Advance Notice to the Investor, subject to the conditions set forth in Section 7.01, and in accordance with the following provisions:
(i)The Company shall, in its sole discretion, select the amountGeneral Corporation Law of the Advance, not to exceed the Maximum Advance Amount, it desires to issue and sell to the Investor in each Advance Notice and the time it desires to deliver each Advance Notice.
(ii)There shall be no mandatory minimum Advances and no non-usages fee for not utilizing the Commitment Amount or any part thereof.
(b)DateState of Delivery of Advance Notice. Advance Notices shall be delivered in accordance with the instructions set forth on the bottom of Exhibit A. An Advance Notice shall be deemed delivered on (i) the day it is received by the Investor if such notice is received by email on or before 8:30 a.m. Eastern Time inDelaware
accordance with the instructions set forth on the bottom of FIRSTExhibit A, or (ii) the immediately succeeding day if it is received by email after 8:30 a.m. Eastern Time, in each case in accordance with the instructions set forth on the bottom of Exhibit A.
(c)Advance Limitations. Regardless: The present name of the amount of an Advance requested by the Company in the Advance Notice, the final number of Shares to be issued and sold pursuant to an Advance Notice shall be reduced in accordance with each of the following limitations:
(i)Ownership Limitation; Commitment Amount. At the request of the Company, the Investor will inform the Company of the amount of shares the Investor currently beneficially owns. In no event shall the number of Common Shares issuable to the Investor pursuant to an Advance cause the aggregate number of Common Shares beneficially owned (as calculated pursuant to Section 13(d) of the Exchange Act) by the Investor and its Affiliates ascorporation is Eos Energy Enterprises, Inc., a result of previous issuances and sales of Common Shares to Investor under this Agreement to exceed 9.99% of the then outstanding Common SharesDelaware corporation (the “Ownership LimitationCorporation”). In connection with each Advance Notice delivered by the Company, any portionThe original certificate of incorporation of the Advance that would (i) causeCorporation was filed with the Investor to exceedSecretary of State of the Ownership Limitation or (ii) causeState of Delaware on June 3, 2019 (the “Original Certificate”). An Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate”) was filed with the aggregate numberSecretary of Shares issuedState of the State of Delaware on February 4, 2020. A Second Amended and soldRestated Certificate of Incorporation (the “Second Amended and Restated Certificate”) was filed with the Secretary of State of the State of Delaware on May 19, 2020. A Third Amended and Restated Certificate of Incorporation (the “Third Amended and Restated Certificate”) was filed with the Secretary of State of the State of Delaware on November 16, 2020. A certificate of amendment to the Investor hereunder to exceedThird Amended and Restated Certificate was filed with the Commitment Amount shall automatically be withdrawn with no further action required by the Company, and such Advance Notice shall be deemed automatically modified to reduce the amountSecretary of State of the Advance requested by an amount equal to such withdrawn portion; provided that in the eventState of any such automatic withdrawal and automatic modification, the Investor will promptly notify the Company of such event.Delaware on June 28, 2022.
(ii)Registration and Exchange Limitation. In no event shall an Advance exceed the amount registered under the Registration Statement then in effect (the “Registration Limitation”) or the Exchange Cap, to the extent applicable. In connection with each Advance Notice, any portion of an Advance that would exceed the Registration Limitation or the Exchange Cap shall automatically be withdrawn with no further action required by the Company and such Advance Notice shall be deemed automatically modified to reduce the aggregate amount of the requested Advance by an amount equal to such withdrawn portion in respect of each Advance Notice; provided that in the event of any such automatic withdrawal and automatic modification, Investor will promptly notify the Company of such event.
(d)Minimum Acceptable Price.
(i)With respect to each Advance Notice, the Company may notify the Investor of the MAP with respect to such Advance by indicating a MAP on such Advance Notice. If no MAP is specified in an Advance Notice, then no MAP shall be in effect in connection with such Advance. Each Trading Day during a Pricing Period for which (A) with respect to each Advance Notice with a MAP, the VWAP of the Common Shares is below the MAP in effect with respect to such Advance Notice, or (B) there is no VWAP (each such day, an “Excluded Day”), shall result in an automatic reduction to the amount of the Advance set forth in such Advance Notice by one-third (the resulting amount of each Advance being the “Adjusted Advance Amount”), and each Excluded Day shall be excluded from the Pricing Period for purposes of determining the Market Price.
(ii)The total Shares in respect of each Advance (after reductions have been made to arrive at the Adjusted Advance Amount) shall be automatically increased by such number of Common Shares (the “Additional Shares”) equal to the number of Common Shares sold by the Investor on such Excluded Day, if any, and the price paid per share for each Additional Share shall be equal to the MAP in effect with respect to such Advance Notice
(without any further discount), provided that this increase shall not cause the total Advance to exceed the amount set forth in the original Advance Notice or any limitations set forth inSECOND: Section 2.01(c).
(e)Notwithstanding any other provision in this Agreement, the Company and the Investor acknowledge and agree that upon the Investor’s receipt4.1(b) of a valid Advance Notice the parties shall be deemed to have entered into an unconditional contract binding on both parties for the purchase and sale of Shares pursuant to such Advance Notice in accordance with the terms of this Agreement and (i) subject to Applicable Law and (ii) subject to Section 3.08 (Trading Activities), the Investor may sell Common Shares during the Pricing Period.
Section 2.02 Closings. The closing of each Advance and each sale and purchase of Shares related to each Advance (each, a “Closing”) shall take place as soon as practicable on or after each Advance Date in accordance with the procedures set forth below. The parties acknowledge that the Purchase Price is not known at the time the Advance Notice is delivered (at which time the Investor is irrevocably bound) but shall be determined on each Closing based on the daily pricesArticle IV of the Common Shares that are the inputsCompany’s [__] Amended and Restated Certificate is hereby amended to the determination of the Purchase Price as set forth further below. In connection with each Closing, the Company and the Investor shall fulfill each ofread in its obligationsentirety as set forth below:
(b) The total number of shares of all classes of capital stock, each with a par value of $0.0001 per share, which the Corporation is authorized to issue is 301,000,000 shares, consisting of (a) 300,000,000 shares of common stock (the “On each Advance Date,Common Stock”) and (b) 1,000,000 shares of preferred stock (the “Preferred Stock”).
Effective at 5:00 p.m. Eastern Time on ____________, 20__, the Investor shall deliverdate of filing with the Secretary of State of the State of Delaware (such time, on such date, the “Effective Time”) of this [__] Certificate of Amendment to the Company a written document, in the form attached hereto as Exhibit B (each a “Settlement Document”), setting forth the final numberCertificate of Shares to be purchased by the Investor (taking into account any adjustments pursuant to Section 2.01), the Market Price, the Purchase Price, the aggregate proceeds to be paid by the Investor to the Company, and a report by Bloomberg, L.P. indicating the VWAP for eachIncorporation of the Trading Days during the Pricing Period (or, if not reported on Bloomberg, L.P., another reporting service reasonably agreed to by the parties), in each case in accordance with the terms and conditions of this Agreement.
(b)Promptly after receiptCorporation, every [__] shares of the Settlement Document with respect to each Advance (and, in any event, not later than one Trading Day after such receipt), the Company will, or will cause its transfer agent to, electronically transfer such number of Shares to be purchased by the Investor (as set forth in the Settlement Document) by crediting the Investor’s account or its designee’s account at the Depository Trust Company through its Deposit Withdrawal at Custodian System or by such other means of delivery as may be mutually agreed upon by the parties hereto, and transmit notification to the Investor that such share transfer has been requested. Promptly upon receipt of such notification, the Investor shall pay to the Company the aggregate purchase price of the Shares (as set forth in the Settlement Document) in cash in immediately available funds to an account designated by the Company in writing and transmit notification to the Company that such funds transfer has been requested. No fractional shares shall beCorporation’s issued and any fractional amounts shall be rounded to the next higher whole number of shares. To facilitate the transfer of theoutstanding Common Shares by the Investor, the Common Shares will not bear any restrictive legends so long as there is an effective Registration Statement covering such Common Shares (it being understoodStock, par value $0.0001 per share, that are issued and agreed by the Investor that notwithstanding the lack of restrictive legends, the Investor may only sell such Common Shares in compliance with the requirements of the Securities Act (including any applicable prospectus delivery requirements) or pursuant to an available exemption).
(c)On oroutstanding immediately prior to the Advance Date, each of the CompanyEffective Time (“Old Common Stock”) shall, automatically and the Investor shall deliver to the other all documents, instruments and writings expressly required to be delivered by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein.
(d)Notwithstanding anything to the contrary in this Agreement, if onwithout any day during the Pricing Period (i) the Company notifies Investor that a Material Outside Event has occurred, or (ii) the Company notifies the Investor of a Black Out Period, the parties agree that the pending Advance shall end and the final number of Shares to be purchased by the Investor at the Closing for such Advance shall be equal to the number of Common Shares sold by the Investor during the applicable Pricing Period prior to the notification from the Company of a Material Outside Event or Black Out Period.
Section 2.03 Hardship.
(a)In the event the Investor sells Common Shares after receipt of an Advance Notice and the Company fails to perform its obligations as mandated in Section 2.02, the Company agrees that in addition to and in no way limiting the rights and obligations set forth in Article V hereto and in addition to any other remedy to which the Investor is entitled at law or in equity, including, without limitation, specific performance, it will hold the Investor harmless against any loss, claim, damage, or expense (including reasonable legal fees and expenses), as incurred, arising out of or in connection with such default by the Company and acknowledges that irreparable damage may occur in the event of any such default. It is accordingly agreed that the Investor shall be entitled to an injunction or injunctions to prevent such breaches of this Agreement and to specifically enforce (subject to the Securities Act and other rules of the Principal Market), without the posting of a bond or other security, the terms and provisions of this Agreement.
(b)In the event the Company provides an Advance Notice and the Investor fails to perform its obligations as mandated in Section 2.02, the Investor agrees that in addition to and in no way limiting the rights and obligations set forth in Article V hereto and in addition to any other remedy to which the Company is entitled at law or in equity, including, without limitation, specific performance, it will hold the Company harmless against any loss, claim, damage, or expense (including reasonable legal fees and expenses), as incurred, arising out of or in connection with such default by the Investor and acknowledges that irreparable damage may occur in the event of any such default. It is accordingly agreed that the Company shall be entitled to an injunction or injunctions to prevent such breaches of this Agreement and to specifically enforce (subject to the Securities Act and other rules of the Principal Market), without the posting of a bond or other security, the terms and provisions of this Agreement.
Section 2.04 Completion of Resale Pursuant to the Registration Statement. The Company will be under no further obligation to maintain the effectiveness of the Registration Statement after the earlier to occur of (a) the date on which the Investor has purchased the full Commitment Amount and has completed the subsequent resale of the full Commitment Amount pursuant to the Registration Statement (Investor agrees to notify the Company when all subsequent resales are completed), (b) the 180th day following the date on which the Investor has purchased the full Commitment Amount, or (c) the 180th day following the termination of this Agreement in accordance with its terms.
Section 2.05 Pre-Advance Loans. Subject to the mutual consent of the parties, from time to time, the Company may request, and the Investor shall provide, pre-advance loans from the Investor in the aggregate principal amount not to exceed $50,000,000 per loan, pursuant to a promissory note in the form attached hereto as Exhibit C, on terms and conditions to be agreed by the parties.
Article III.Representations and Warranties of Investor
Investor hereby represents and warrants to, and agrees with, the Company that the following are true and correct as of the date hereof and as of each Advance Notice Date and each Advance Date:
Section 3.01 Organization and Authorization. The Investor is duly organized, validly existing and in good standing under the laws of the Cayman Islands and has all requisite power and authority to execute, deliver and perform this Agreement, including all transactions contemplated hereby. The decision to invest and the execution and delivery of this Agreement by the Investor, the performance by the Investor of its obligations hereunder and the consummation by the Investor of the transactions contemplated hereby have been duly authorized and require no other proceedingsaction on the part of the Investor. The undersigned has the right, power and authority to execute and deliver this Agreement and all other instruments on behalf of the Investor or its shareholders. This Agreement has been duly executed and delivered by the Investor and, assuming the execution and delivery hereof and acceptance thereof by the Company, will constitute the legal, valid and binding obligations of the Investor, enforceable against the Investor in accordance with its terms.
Section 3.02 Evaluation of Risks. The Investor has such knowledge and experience in financial, tax and business matters as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in the Common Shares of the Company and of protecting its interests in connection with the transactions contemplated hereby. The Investor acknowledges and agrees that its investment in the Company involves a high degree of risk, and that the Investor may lose all or a part of its investment.
Section 3.03 No Legal, Investment or Tax Advice from the Company. The Investor acknowledges that it had the opportunity to review this Agreement and the transactions contemplated by this Agreement with its own legal counsel and investment and tax advisors. The Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of the Company’s representatives or agents for legal, tax, investment or other advice with respect to the Investor’s acquisition of Common Shares hereunder, the transactions contemplated by this AgreementCorporation or the laws of any jurisdiction, and the Investor acknowledges that the Investor may lose all or a part of its investment.
Section 3.04 Investment Purpose. The Investor is acquiring the Common Shares for its own account, for investment purposes and not with a view towards, or for resale in connection with, the public sale or distributionholder thereof, in violation of the Securities Act or any applicable state securities laws; provided, however, that by making the representations herein, the Investor does not agree, or make any representation or warranty, to hold any of the Shares for any minimum or other specific term and reserves the right to dispose of the Shares at any time in accordance with, or pursuant to, a registration statement filed pursuant to this Agreement or an applicable exemption under the Securities Act. The Investor does not presently have any agreement or understanding, directly or indirectly, with any Person to sell or distribute any of the Shares. The Investor is acquiring the Shares hereunder in the ordinary course of its business. The Investor acknowledges that it will be disclosed as an “underwriter” and a “selling stockholder” in each Registration Statement and in any prospectus contained therein to the extent required by applicable law and to the extent the prospectus is related to the resale of the Shares. In addition, the Investor is acquiring the Commitment Fee Shares for its own account and not with a view towards the public sale or distribution thereof. The Investor understands that the Commitment Fee Shares have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available.
Section 3.05 Accredited Investor. The Investor is an “Accredited Investor” as that term is defined in Rule 501(a)(3) of Regulation D.
Section 3.06 Information. The Investor and its advisors (and its counsel), if any, have been furnished with all materials relating to the business, finances and operations of the Company and information the Investor deemed material to making an informed investment decision. The Investor and its advisors (and its counsel), if any, have been afforded the opportunity to ask questions of the Company and its management and have received answers to such questions. Neither such inquiries nor any other due diligence investigations conducted by such Investor or its advisors (and its counsel), if any, or its representatives shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained in this Agreement. The Investor acknowledges and agrees that the Company has not made to the Investor, and the Investor acknowledges and agrees it has not relied upon, any representations and warranties of the Company, its employees or any third party other than the representations and warranties of the Company contained in this Agreement. The Investor understands that its investment involves a high degree of risk. The Investor has sought such accounting, legal and tax advice, as it has considered necessary to make an informed investment decision with respect to the transactions contemplated hereby.
Section 3.07 Not an Affiliate. The Investor is not an officer, director or a person that directly, or indirectly throughcombined into one or more intermediaries, controls or is controlled by, or is under common control with the Company or any “affiliate” of the Company (as that term is defined in Rule 405 promulgated under the Securities Act).
Section 3.08 Trading Activities. The Investor’s trading activities with respect to the Common Shares shall be in compliance with all applicable federal and state securities laws, rules and regulations and the rules and regulations of the Principal Market. Neither the Investor nor its affiliates has any open short position in the Common Shares, nor has the Investor entered into any hedging transaction that establishes a net short position with respect to the
Common Shares, and the Investor agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales or hedging transactions with respect to the Common Shares; provided that the Company acknowledges and agrees that upon receipt of an Advance Notice the Investor has the right to sell (a) the Shares to be(1) validly issued, to the Investor pursuant to the Advance Notice prior to receiving such Shares, or (b) other Common Shares sold by the Company to Investor pursuant to this Agreement and which the Company has continuously held as a long position.
Section 3.09 Free Writing Prospectus. The Investor shall not take any action that would result in the Investor or the Company being required to file with the SEC pursuant to Rule 433(d) under the Securities Act a free writing prospectus.
Article IV.Representations and Warranties of the Company
Except as set forth in the SEC Documents, or in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or warranty otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules or in another Section of the Disclosure Schedules, to the extent that it is reasonably apparent on the face of such disclosure that such disclosure is applicable to such Section, the Company represents and warrants to the Investor that, as of the date hereof, each Advance Notice Date and each Advance Date (other than representations and warranties which address matters only as of a certain date, which shall be true and correct as written as of such certain date), that:
Section 4.01 Organization and Qualification. Each of the Company and its Subsidiaries (as defined below) is an entity duly organized and validly existing under the laws of its state of organization or incorporation, and has the requisite power and authority to own its properties and to carry on its business as now being conducted. Each of the Company and its Subsidiaries is duly qualified to do business and is in good standing (to the extent applicable) in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect. “Subsidiaries” means any Person (as defined below) in which the Company, directly or indirectly, (x) owns a majority of the outstanding capital stock or holds a majority equity or similar interest of such Person or (y) controls or operates all or substantially all of the business, operations or administration of such Person, and each of the foregoing, is individually referred to herein as a “Subsidiary.”
Section 4.02 Authorization, Enforcement, Compliance with Other Instruments. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to issue the Shares in accordance with the terms hereof and thereof. The execution and delivery by the Company of this Agreement and the other Transaction Documents, and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Common Shares) have been or (with respect to consummation) will be duly authorized by the Company’s board of directors and no further consent or authorization will be required by the Company, its board of directors or its shareholders. This Agreement and the other Transaction Documents to which it is a party have been (or, when executed and delivered, will be) duly executed and delivered by the Company and, assuming the execution and delivery thereof and acceptance by the Investor, constitute (or, when duly executed and delivered, will be) the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or other laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law. “Transaction Documents” means, collectively, this Agreement and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the transactions contemplated hereby and thereby, as may be amended from time to time.
Section 4.03 Authorization of the Shares. The Shares to be issued under this Agreement have been, or with respect to Shares to be purchased by the Investor pursuant to an Advance Notice, will be, when issued and delivered pursuant to the terms approved by the board of directors of the Company or a duly authorized committee thereof, or a duly authorized executive committee, against payment therefor as provided herein, duly and validly authorized and issued and fully paid and nonassessable, free and clear of any pledge, lien, encumbrance, security interest or other
claim, including any statutory or contractual preemptive rights, resale rights, rights of first refusal or other similar rights, and will be registered pursuant to Section 12non-assessable share of the Exchange Act. The Shares, when issued, will conform to the description thereof set forth in or incorporated into the Prospectus.
Section 4.04 No Conflict. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of theCorporation’s Common Shares) will not (i) result in a violation of the articles of incorporation or other organizational documents of the Company or its Subsidiaries (with respect to consummation, as the same may be amended prior to the date on which any of the transactions contemplated hereby are consummated), (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or its Subsidiaries or by which any property or asset of the Company or its Subsidiaries is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations that would not reasonably be expected to have a Material Adverse Effect.
Section 4.05 SEC Documents. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the Exchange Act for the two years preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (all of the foregoing filed within two years preceding the date hereof or amended after the date hereof, or filed after the date hereof, and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein, and all registration statements filed by the Company under the Securities Act, being hereinafter referred to as the “SEC Documents”). The Company has made available to the Investor through the SEC’s website at http://www.sec.gov, true and complete copies of the SEC Documents.
Section 4.06 Financial Statements. The consolidated financial statements of the Company included or incorporated by reference in SEC Documents, together with the related notes and schedules, present fairly, in all material respects, the consolidated financial position of the Company and the Subsidiaries as of the dates indicated and the consolidated results of operations, cash flows and changes in stockholders’ equity of the Company for the periods specified and have been prepared in compliance with the requirements of the Securities Act and Exchange Act and in conformity with generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis (except for (i) such adjustments to accounting standards and practices as are noted therein, (ii) in the case of unaudited interim financial statements, to the extent such financial statements may not include footnotes required by GAAP or may be condensed or summary statements and (iii) such adjustments which will not be material, either individually or in the aggregate) during the periods involved; the other financial and statistical data with respect to the Company and the Subsidiaries (as defined below) contained or incorporated by reference in the SEC Documents are accurately and fairly presented and prepared on a basis consistent with the financial statements and books and records of the Company; there are no financial statements (historical or pro forma) that are required to be included or incorporated by reference in the SEC Documents that are not included or incorporated by reference as required; the Company and the Subsidiaries (as defined below) do not have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not described in the SEC Documents (excluding the exhibits thereto); and all disclosures contained or incorporated by reference in the SEC Documents regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the SEC) comply in all material respects with Regulation G of the Exchange Act and Item 10 of Regulation S-K under the Securities Act, to the extent applicable. The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the SEC Documents fairly presents the information called for in all material respects and has been prepared in accordance with the SEC’s rules and guidelines applicable thereto.
Section 4.07 Registration Statement and Prospectus. The Company and the transactions contemplated by this Agreement meet the requirements for and comply with the conditions for the use of Form S-3 under the Securities Act. Each of the Registration Statement and any post-effective amendment thereto has been declared effective by the SEC under the Securities Act. No stop order suspending the effectiveness of the Registration Statement, or any post-effective amendment thereto has been issued under the Securities Act, no order preventing or suspending the use of
any base prospectus, the Prospectus Supplement, the Prospectus has been issued and no proceedings for any of those purposes or pursuant to Section 8A of the Securities Act have been instituted or are pending or, to the knowledge of the Company, are threatened by the SEC. Copies of each Registration Statement, any Prospectus, and any such amendments or supplements and all documents incorporated by reference therein that were filed with the SEC on or prior to the date of this Agreement have been delivered, or are available through EDGAR, to the Investor and its counsel. The Company has not distributed and, prior to the later to occur of each Settlement Date and completion of the distribution of the Shares, will not distribute any offering material in connection with the offering or sale of the Shares other than a Registration Statement and the Prospectus.
Section 4.08 No Misstatement or Omission. Each Registration Statement, when it became or becomes effective, and any Prospectus, on the date of such Prospectus or amendment or supplement, conformed and will conform in all material respects with the requirements of the Securities Act. At each Advance Date, the Registration Statement, and the Prospectus, as of such date, will conform in all material respects with the requirements of the Securities Act. Each Registration Statement, when it became or becomes effective, did not, and will not, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Each Prospectus did not, or will not, include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The documents incorporated by reference in a Prospectus or any Prospectus Supplement did not, and any further documents filed and incorporated by reference therein will not, when filed with the SEC, contain an untrue statement of a material fact or omit to state a material fact required to be stated in such document or necessary to make the statements in such document, in light of the circumstances under which they were made, not misleading. The foregoing shall not apply to statements in, or omissions from, any such document made in reliance upon, and in conformity with, information furnished to the Company by the Investor specifically for use in the preparation thereof.
Section 4.09 Conformity with Securities Act and Exchange Act. Each Registration Statement, each Prospectus, or any amendment or supplement thereto, and the documents incorporated by reference in each Registration Statement, Prospectus or any amendment or supplement thereto, when such documents were or are filed with the SEC under the Securities Act or the Exchange Act or became or become effective under the Securities Act, as the case may be, conformed or will conform in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable.
Section 4.10 Equity Capitalization. As of the date hereof, the authorized capital of the Company consists of 200,000,000 shares of common stock,Stock, par value $0.0001 per share, and 1,000,000 shares of preferred stock, par value $0.0001 per share. As of the date hereof, the Company had 53,980,608 shares of common stock outstanding and no shares of preferred stock outstanding. The Common Shares are registered pursuant to Section 12(b) of the Exchange Act and is currently listed on the Principal Market under the trading symbol “EOSE.” The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Shares under the Exchange Act, delisting the Common Shares from the Principal Market, nor has the Company received any notification that the SEC or the Principal Market is contemplating terminating such registration or listing. To the Company’s knowledge, it is in compliance with all applicable listing requirements of the Principal Market.
Section 4.11 Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights, if any, necessary to conduct their respective businesses as now conducted, except as would not cause a Material Adverse Effect. The Company and its Subsidiaries have not received written notice of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, or trade secrets, except as would not cause a Material Adverse Effect. To the knowledge of the Company, there is no claim, action or proceeding being made or brought against, orsubject to the Company’s knowledge, being threatened against the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement, excepttreatment of fractional interests as would not cause a Material Adverse Effect.
Section 4.12 Employee Relations. Neither the Company nor any of its Subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened, in each case which is reasonably likely to cause a Material Adverse Effect.
Section 4.13 Environmental Laws. The Company and its Subsidiaries (i) have not received written notice alleging any failure to comply in all material respects with all Environmental Laws (as defined below), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) have not received written notice alleging any failure to comply with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means all applicable federal, state and local laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”described below (the “Reverse Stock Split”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.
Section 4.14 Title. Except as would not cause a Material Adverse Effect, the Company (or its Subsidiaries) has indefeasible fee simple or leasehold title to its properties and material assets owned by it, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest other than such as are not material to the business of the Company. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.
Section 4.15 Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.
Section 4.16 Regulatory Permits. Except as would not cause a Material Adverse Effect, the Company and its Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to own their respective businesses, and neither the Company nor any such Subsidiary has received any written notice of proceedings relating to the revocation or modification of any such certificate, authorization or permits.
Section 4.17 Internal Accounting Controls. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
Section 4.18 Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company, the Common Shares or any of the Company’s Subsidiaries, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect.
Section 4.19 Subsidiaries. Except as disclosed in the SEC Documents, the Company does not presently have any Subsidiaries.
Section 4.20 Tax Status. Except as would not have a Material Adverse Effect, each of the Company and its Subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. Except as would not have a Material Adverse Effect, Company has not received written notification any unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company and its Subsidiaries know of no basis for any such claim where failure to pay would cause a Material Adverse Effect.
Section 4.21 Certain Transactions. Except as not required to be disclosed pursuant to Applicable Law (including, for the avoidance of doubt, not yet required to be disclosed at the relevant time), none of the officers or directors of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer or director, or to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer or director has a substantial interest or is an officer, director, trustee or partner.
Section 4.22 Rights of First Refusal. The Company is not obligated to offer the Common Shares offered hereunder on a right of first refusal basis to any third parties including, but not limited to, current or former shareholders of the Company, underwriters, brokers, agents or other third parties.
Section 4.23 Dilution. The Company is aware and acknowledges that issuance of Common Shares hereunder could cause dilution to existing shareholders and could significantly increase the outstanding number of Common Shares.
Section 4.24 Acknowledgment Regarding Investor’s Purchase of Shares. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length investor with respect to this Agreement and the transactions contemplated hereunder. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereunder and any advice given by the Investor or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereunder is merely incidental to the Investor’s purchase of the Shares hereunder. The Company is aware and acknowledges that it shall not be able to request Advances under this Agreement if the Registration Statement is not effective or if any issuances of Common Shares pursuant to any Advances would violate any rules of the Principal Market. The Company acknowledged and agrees that it is capable of evaluating and understanding, and understands and accepts, the terms, risks and conditions of the transactions contemplated by this Agreement.
Section 4.25 Relationship of the Parties. Neither the Company, nor any of its subsidiaries, affiliates, nor any person acting on its or their behalf is a client or customer of the Investor or any of its affiliates and neither the Investor nor any of its affiliates has provided, or will provide, any services to the Company or any of its affiliates, its subsidiaries, or any person acting on its or their behalf. The Investor’s relationship to Company is solely as investor as provided for in the Transaction Documents.
Section 4.26 Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Registration Statement or a Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
Section 4.27 Compliance with Laws. Except as would not have a Material Adverse Effect, the Company and each of its Subsidiaries are in compliance with Applicable Laws; the Company has not received a notice of non-
compliance by any director, officer or employee of the Company or any Subsidiary, or any agent, affiliate or other person acting on behalf of the Company or any Subsidiary has not complied with Applicable Laws, and is not aware of any pending change or contemplated change to any applicable law or regulation or governmental position; in each case that would have a Material Adverse Effect.
Section 4.28 Sanctions Matters. Neither the Company, nor any Subsidiary of the Company, nor, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company or any Subsidiary of the Company, is a Person that is, or is owned or controlled by a Person that is:
(a)on the list of Specially Designated Nationals and Blocked Persons maintained by OFAC from time to time;
(b)the subject of any Sanctions; or
(c)has a place of business in, or is operating, organized, resident or doing business in a country or territory that is, or whose government is, the subject of Sanctions Programs (including without limitation Crimea, Cuba, Iran, North Korea, Sudan and Syria).
Section 4.29 General Solicitation. Neither the Company nor any other person acting on its behalf has solicited offers to buy, or offer or sell, the Commitment Fee Shares (as defined below) by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act), or in any manner involving a public offering within the meaning of Section 4(a)(2) of the Act.
Article V. Indemnification
The Investor and the Company represent to the other the following with respect to itself:
Section 5.01 Indemnification by the Company. In consideration of the Investor’s execution and delivery of this Agreement, and in addition to all of the Company’s other obligations under this Agreement, the Companyfractional share shall defend, protect, indemnify and hold harmless the Investor and its investment manager, Yorkville Advisors Global, LP, and each of their respective officers, directors, partners, employees and agents (including, without limitation, those retainedbe issued in connection with the transactions contemplated by this Agreement)Reverse Stock Split. The Corporation shall issue and each person who controls the Investor within the meaningdeliver one full share of Section 15 of the Securities Actpost-Reverse Stock Split Common Stock or Section 20 of the Exchange Act (collectively, the “Investor Indemnitees”) from and againstPreferred Stock to any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and reasonable and documented expenses in connection therewith (irrespective of whether any such Investor Indemnitee is a partystockholder (other than with respect to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurredshares held by the Investor IndemniteesCorporation as treasury stock) who would have been entitled to receive a fractional share of Common Stock or any of themPreferred Stock, respectively, as a result of the Reverse Stock Split, in lieu of receiving such fractional share. The Reverse Stock Split shall occur whether or arising out of, or relating to (a)not any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement for the registration of the Shares as originally filed or in any amendment thereof, or in any related prospectus, or in any amendment thereof or supplement thereto, or arise out of orcertificates representing such shares are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such casesurrendered to the extent that any such loss, claim, damageCorporation or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance uponits transfer agent.
THIRD: The foregoing amendment has been duly proposed and in conformity with written information furnished to the Company by or on behalf of the Investor specifically for inclusion therein; (b) any material misrepresentation or breach of any material representation or material warranty madedeclared advisable by the Company in this Agreement or any other certificate, instrument or document contemplated hereby or thereby; or (c) any material breachCorporation’s Board of any material covenant, material agreement or material obligation of the Company contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby. To the extent that the foregoing undertakingDirectors and adopted by the Company may be unenforceable under Applicable Law, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under Applicable Law.
Section 5.02 Indemnification by the Investor. In consideration of the Company’s execution and delivery of this Agreement, and in addition to all of the Investor’s other obligations under this Agreement, the Investor shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors, shareholders, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) and each person who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “Company Indemnitees”) from and against any and all Indemnified Liabilities incurred by the Company Indemnitees or any of them as a result of, or arising out of, or relating to (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement for the registration of the Shares as originally filed or in any amendment thereof, or in any related prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Investor will only be liable for written information relating to the Investor furnished to the Company by or on behalf of the Investor specifically for inclusion in the documents referred to in the foregoing indemnity, and will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Investor by or on behalf of the Company specifically for inclusion therein; (b) any misrepresentation or breach of any representation or warranty made by the Investor in this Agreement or any instrument or document contemplated hereby or thereby executed by the Investor; or (c) any breach of any covenant, agreement or obligation of the Investor(s) contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby executed by the Investor. To the extent that the foregoing undertaking by the Investor may be unenforceable under Applicable Law, the Investor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under Applicable Law.
Section 5.03 Notice of Claim. Promptly after receipt by an Investor Indemnitee or Company Indemnitee of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Investor Indemnitee or Company Indemnitee, as applicable, shall, if a claim for an Indemnified Liability in respect thereof is to be made against any indemnifying party under this Article V, deliver to the indemnifying party a written notice of the commencement thereof; but the failure to so notify the indemnifying party will not relieve it of liability under this Article V except to the extent the indemnifying party is prejudiced by such failure. The indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually reasonably satisfactory to the indemnifying party and the Investor Indemnitee or Company Indemnitee, as the case may be; provided, however, that an Investor Indemnitee or Company Indemnitee shall have the right to retain its own counsel with the actual and reasonable third party fees and expenses of not more than one counsel for such Investor Indemnitee or Company Indemnitee to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Investor Indemnitee or Company Indemnitee and the indemnifying party would be inappropriate due to actual or potential differing interests between such Investor Indemnitee or Company Indemnitee and any other party represented by such counsel in such proceeding. The Investor Indemnitee or Company Indemnitee shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Investor Indemnitee or Company Indemnitee which relates to such action or claim. The indemnifying party shall keep the Investor Indemnitee or Company Indemnitee reasonably apprised as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Investor Indemnitee or Company Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Investor Indemnitee or Company Indemnitee of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Investor Indemnitee or Company Indemnitee with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The indemnification required by this Article V shall be made by
periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received and payment therefor is due.
Section 5.04 Remedies. The remedies provided for in this Article V are not exclusive and shall not limit any right or remedy which may be available to any indemnified person at law or equity. The obligations of the parties to indemnify or make contribution under this Article V shall survive expiration or termination of this Agreement for a period of three years. Notwithstanding anything to the contrary under this Agreement or Applicable Law, no party shall be entitled to any indemnification pursuant to this Article V (other than claims for any damages resulting from fraud) until the aggregate amount of all such damages that would otherwise be indemnifiable to such party equals or exceeds $50,000 (the “Basket”), at which time such party shall be entitled to indemnification for the full amount of all damages (including all damages incurred prior to exceeding the Basket).
Section 5.05 Limitation of liability. Notwithstanding the foregoing, no party shall be entitled to recover from the other party for punitive, indirect, incidental or consequential damages.
Article VI.
Covenants of the Company
Section 6.01 Registration Statement.
(a)The Registration Statement. The Company has filed,Corporation’s stockholders in accordance with the provisions of the Securities ActSections 222 and the rules and regulations thereunder, with the SEC a shelf registration statement on Form S-3 (File Number 333-263298) (the “Initial Registration Statement”) including a base prospectus, with respect to the issuance and sale of securities by the Company, including Common Shares, which contains, among other things a Plan of Distribution section disclosing the methods by which the Company may sell the Common Shares. The Initial Registration Statement was declared effective on April 25, 2022 and remains in effect on the date hereof. Except where the context otherwise requires, the Initial Registration Statement, as amended when it became effective, including all documents filed as part thereof or incorporated by reference therein, and including any information contained in a Prospectus subsequently filed with the SEC pursuant to Rule 424(b) under the Securities Act or deemed to be a part242 of the Initial Registration Statement pursuant to Rule 430B of the Securities Act, is herein called the “Registration Statement.”
(b)Initial Disclosure. Promptly after the date hereof (and prior to the Company delivering an Advance Notice to the Investor hereunder), the Company shall file with the SEC a report on Form 8-K or such other appropriate form as determined by counsel to the Company, relating to the transactions contemplated by this Agreement and a preliminary Prospectus Supplement pursuant to Rule 424(b) of the Securities Act disclosing all information relating to the transaction contemplated hereby required to be disclosed therein and an updated Plan of Distribution, including, without limitation, the name of the Investor, the number of Shares being offered hereunder, the terms of the offering, the purchase price of the Shares, and other material terms of the offering, and any other information or disclosure necessary to register the transactions contemplated herein (collectively, the “Initial Disclosure”) and shall provide the Investor with 24 hours to review the Initial Disclosure prior to its filing. Promptly, and in any event no later than two days after each Advance Date, the Company shall file with the SEC a Prospectus Supplement pursuant to Rule 424(b) of the Securities Act disclosing all information relating to the particular Advance to be disclosed therein, including, without limitation, the number of Shares offered and the purchase price of the Shares, and other material terms of the particular offering, and any other information or disclosure necessary to register the Shares issued pursuant to such Advance.
(c)Maintaining a Registration Statement. The Company shall use commercially reasonable efforts to maintain the effectiveness of any Registration Statement with respect to the Shares at all times during the Commitment Period, provided, however, that the Company shall be under no further obligation to maintain the effectiveness of the Registration Statement to the extent permitted pursuant to Section 2.04. Notwithstanding anything to the contrary contained in this Agreement, the Company shall ensure that, when filed, each Registration Statement (including, without limitation, all amendments and supplements
thereto) and the prospectus (including, without limitation, all amendments and supplements thereto) used in connection with such Registration Statement shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein (in the case of prospectuses, in the light of the circumstances in which they were made) not misleading. During the Commitment Period, the Company shall notify the Investor promptly if (i) the Registration Statement shall cease to be effective under the Securities Act, (ii) the Common Shares shall cease to be authorized for listing on the Principal Market, (iii) the Common Shares cease to be registered under Section 12(b) or Section 12(g) of the Exchange Act or (iv) the Company fails to file in a timely manner all reports and other documents required of it as a reporting company under the Exchange Act.
(d)Filing Procedures. Not less than one business day prior to the filing of a Registration Statement and not less than one business day prior to the filing of any related amendments and supplements to any Registration Statement (except for any amendments or supplements caused by the filing of any annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any similar or successor reports), the Company shall furnish to the Investor copies of all such documents proposed to be filed, which documents (other than those filed pursuant to Rule 424 promulgated under the Securities Act) will be subject to the reasonable and prompt review of the Investor (in each of which cases, if such document contains material non-public information as consented to by the Investor pursuant to Section 6.13, the information provided to Investor will be kept strictly confidential until filed and treated as subject to Section 6.08). The Investor shall furnish comments on a Registration Statement and any related amendment and supplement to a Registration Statement to the Company within 24 hours of the receipt thereof. If the Investor fails to provide comments to the Company within such 24-hour period, then the Registration Statement, related amendment or related supplement, as applicable, shall be deemed accepted by the Investor in the form originally delivered by the Company to the Investor.
(e)Delivery of Final Documents. The Company shall furnish to the Investor without charge, (i) at least one copy of each Registration Statement as declared effective by the SEC and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, all exhibits and each preliminary prospectus, (ii) at the request of the Investor, at least one copy of the final prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as the Investor may reasonably request) and (iii) such other documents as the Investor may reasonably request from time to time in order to facilitate the disposition of the Common Shares owned by the Investor pursuant to a Registration Statement. Filing of the forgoing with the SEC via its EDGAR system shall satisfy the requirements of this section.
(f)Amendments and Other Filings. The Company shall (i) prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the related prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during the Commitment Period.
(g)Blue-Sky. The Company shall use its commercially reasonable efforts to, if required by ApplicableGeneral Corporation Law (i) register and qualify the Common Shares covered by a Registration Statement under such other securities or “blue sky” laws of such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Commitment Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Commitment Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Common Shares for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (w) make any change to its Articles of Incorporation or Bylaws, (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 6.01(f), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. The Company shall promptly notify the Investor of the receipt by the Company of any
notification with respect to the suspension of the registration or qualification of any of the Common Shares for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
Section 6.02 Suspension of Registration Statement.
(a)Establishment of a Black Out Period. During the Commitment Period, the Company from time to time may suspend the use of the Registration Statement by written notice to the Investor in the event that the Company determines in its sole discretion in good faith that such suspension is necessary to (A) delay the disclosure of material nonpublic information concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company or (B) amend or supplement the Registration Statement or prospectus so that such Registration Statement or prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (a “Black Out Period”).
(b)No Sales by Investor During the Black Out Period. During such Black Out Period, the Investor agrees not to sell any Common Shares of the Company.
(c)Limitations on the Black Out Period. The Company shall not impose any Black Out Period that is longer than 60 days or in a manner that is more restrictive (including, without limitation, as to duration) than the comparable restrictions that the Company may impose on transfers of the Company’s equity securities by its directors and senior executive officers. In addition, the Company shall not deliver any Advance Notice during any Black Out Period. If the public announcement of such material, nonpublic information is made during a Black Out Period, the Black Out Period shall terminate immediately after such announcement, and the Company shall immediately notify the Investor of the termination of the Black Out Period.
Section 6.03 Listing of Common Shares. As of each Advance Date, the Shares to be sold by the Company from time to time hereunder will have been registered under Section 12(b) of the Exchange Act and approved for listing on the Principal Market, subject to official notice of issuance.
Section 6.04 Opinion of Counsel. Prior to the date of the delivery by the Company of the first Advance Notice, the Investor shall have received an opinion letter from counsel to the Company in form and substance reasonably satisfactory to the Investor.
Section 6.05 Exchange Act Registration. The Company will file in a timely manner all reports and other documents required of it as a reporting company under the Exchange Act and will not take any action or file any document (whether or not permitted by Exchange Act or the rules thereunder) to terminate or suspend its reporting and filing obligations under the Exchange Act.
Section 6.06 Transfer Agent Instructions. For any time while there is a Registration Statement in effect for this transaction, the Company shall (if required by the transfer agent for the Common Shares) cause legal counsel for the Company to deliver to the transfer agent for the Common Shares (with a copy to the Investor) instructions to issue Common Shares to the Investor free of restrictive legends upon each Advance if the delivery of such instructions are consistent with Applicable Law.
Section 6.07 Corporate Existence. The Company will use commercially reasonable efforts to preserve and continue the corporate existence of the Company during the Commitment Period.
Section 6.08 Notice of Certain Events Affecting Registration; Suspension of Right to Make an Advance. The Company will promptly notify the Investor, and confirm in writing, upon its becoming aware of the occurrence of any of the following events in respect of a Registration Statement or related prospectus relating to an offering of Common Shares (in each of which cases the information provided to Investor will be kept strictly confidential): (i) except for requests made in connection with SEC investigations disclosed in SEC Documents, receipt of any request
for additional information by the SEC or any other Federal or state governmental authority during the period of effectiveness of the Registration Statement or any request for amendments or supplements to the Registration Statement or related prospectus; (ii) the issuance by the SEC or any other Federal governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Common Shares for sale in any jurisdiction or the initiation or written threat of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in the Registration Statement or related prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or of the necessity to amend the Registration Statement or supplement a related prospectus to comply with the Securities Act or any other law; and (v) the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate; and the Company will promptly make available to the Investor any such supplement or amendment to the related prospectus. The Company shall not deliver to the Investor any Advance Notice, and the Company shall not sell any Shares pursuant to any pending Advance Notice (other than as required pursuant to Section 2.02(d)), during the continuation of any of the foregoing events (each of the events described in the immediately preceding clauses (i) through (v), inclusive, a “Material Outside Event”).
Section 6.09 Consolidation. If an Advance Notice has been delivered to the Investor, then the Company shall not effect any consolidation of the Company with or into, or a transfer of all or substantially all the assets of the Company to another entity before the transaction contemplated in such Advance Notice has been closed in accordance with Section 2.02 hereof, and all Shares in connection with such Advance have been received by the Investor.
Section 6.10 Market Activities. The Company will not, directly or indirectly, take any action designed to cause or result in, or that constitutes or might reasonably be expected to constitute, the stabilization or manipulation of the price of any security of the Company under Regulation M of the Exchange Act.
Section 6.11 Expenses. The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, will pay all expenses incident to the performance of its obligations hereunder, including but not limited to (i) the preparation, printing and filing of the Registration Statement and each amendment and supplement thereto, of each prospectus and of each amendment and supplement thereto; (ii) the preparation, issuance and delivery of any Shares issued pursuant to this Agreement, (iii) all reasonable fees and disbursements of the Company’s counsel, accountants and other advisors (but not, for the avoidance doubt, the fees and disbursements of Investor’s counsel, accountants and other advisors), (iv) the qualification of the Shares under securities laws in accordance with the provisions of this Agreement, including filing fees in connection therewith, (v) the printing and delivery of copies of any prospectus and any amendments or supplements thereto, (vi) the fees and expenses incurred in connection with the listing or qualification of the Shares for trading on the Principal Market, or (vii) filing fees of the SEC and the Principal Market.
Section 6.12 Current Report. On or before 9:30 a.m., New York time, on the second business day after the date of this Agreement, the Company shall file a current report on Form 8-K describing all the material terms of the transactions contemplated by the Transaction Documents in the form required by the 1934 Act and attaching all the material Transaction Documents (including, without limitation, this Agreement (and all schedules to this Agreement) (including all attachments, the “Current Report”). The Company shall not, and the Company shall cause each of its Subsidiaries and each of its and their respective officers, directors, employees and agents not to, provide the Investor with any material, non-public information regarding the Company or any of its Subsidiaries without the express prior written consent of the Investor (which may be granted or withheld in the Investor’s sole discretion and if granted must include an agreement to keep such information confidential until publicly disclosed); it being understood that the mere notification of Investor required pursuant to Section 6.08(iv) hereof shall not in and of
itself be deemed to be material non-public information. Notwithstanding anything contained in this Agreement to the contrary, the Company expressly agrees that it shall publicly disclose, no later than four (4) Business Days following the date hereof, but in any event prior to delivering the first Advance Notice hereunder, any information communicated to the Investor by or, to the knowledge of the Company, on behalf of the Company in connection with the transactions contemplated herein, which, following the date hereof would, if not so disclosed, constitute material, non-public information regarding the Company or its Subsidiaries.
Section 6.13 Advance Notice Limitation. The Company shall not deliver an Advance Notice if a shareholder meeting or corporate action date, or the record date for any shareholder meeting or any corporate action, would fall during the period beginning two Trading Days prior to the date of delivery of such Advance Notice and ending two Trading Days following the Closing of such Advance.
Section 6.14 Use of Proceeds. The Company will use the proceeds from the sale of the Common Shares hereunder for working capital and other general corporate purposes or, if different, in a manner consistent with the application thereof described in the Registration Statement. Neither the Company nor any Subsidiary will, directly or indirectly, use the proceeds of the transactions contemplated herein, or lend, contribute, facilitate or otherwise make available such proceeds to any Person (i) to fund, either directly or indirectly, any activities or business of or with any Person that is identified on the list of Specially Designated Nationals and Blocker Persons maintained by OFAC, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions or Sanctions Programs, or (ii) in any other manner that will result in a violation of Sanctions or Applicable Laws.
Section 6.15 Compliance with Laws. The Company shall comply in all material respects with all Applicable Laws.
Article VII.
Conditions for Delivery of Advance Notice
Section 7.01 Conditions Precedent to the Right of the Company to Deliver an Advance Notice. The right of the Company to deliver an Advance Notice and the obligations of the Investor hereunder with respect to an Advance is subject to the satisfaction by the Company, on each Advance Notice Date (a “Condition Satisfaction Date”), of each of the following conditions:
(a)Accuracy of the Company’s Representations and Warranties. The representations and warranties of the Company in this Agreement shall be true and correct in all material respects.
(b)Registration of the Common Shares with the SEC. There is an effective Registration Statement pursuant to which the Investor is permitted to utilize the prospectus thereunder to resell all of the Common Shares issuable pursuant to such Advance Notice. The Company shall have filed with the SEC in a timely manner all reports, notices and other documents required under the Exchange Act and applicable SEC regulations during the twelve-month period immediately preceding the applicable Condition Satisfaction Date.
(c)Authority. The Company shall have obtained all permits and qualifications required by any applicable state for the offer and sale of all the Common Shares issuable pursuant to such Advance Notice or shall have the availability of exemptions therefrom. The sale and issuance of such Common Shares shall be legally permitted by all laws and regulations to which the Company is subject.
(d)No Material Outside Event. No Material Outside Event shall have occurred and be continuing.
(e)Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior the applicable Condition Satisfaction Date (for the avoidance of doubt, other than in respect of the Company’s obligation pursuant to Clause 2.02 herein, if the Company shall have performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement at the time of the applicable Condition Satisfaction Date, but did not comply with any timing requirement set forth herein, then this condition shall be deemed satisfied unless the Investor is material prejudiced by the failure of the Company to comply with any such timing requirement).
(f)No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits or directly, materially and adversely affects any of the transactions contemplated by this Agreement.
(g)No Suspension of Trading in or Delisting of Common Shares. The Common Shares are quoted for trading on the Principal Market and all the Shares issuable pursuant to such Advance Notice will be listed or quoted for trading on the Principal Market. The issuance of Common Shares with respect to the applicable Advance Notice will not violate the shareholder approval requirements of the Principal Market. The Company shall not have received any written notice that is then still pending threatening the continued quotation of the Common Shares on the Principal Market.
(h)Authorized. There shall be a sufficient number of authorized but unissued and otherwise unreserved Common Shares for the issuance of all of the Shares issuable pursuant to such Advance Notice.
(i)Executed Advance Notice. The representations contained in the applicable Advance Notice shall be true and correct in all material respects as of the applicable Condition Satisfaction Date.
(j)Consecutive Advance Notices. Except with respect to the first Advance Notice, the Company shall have delivered all Shares relating to all prior Advances, and, unless waived by the Investor, at least 5 Trading Days shall have elapsed from the immediately preceding Advance Date.
Article VIII.
Non-Disclosure of Non-Public Information
The Company covenants and agrees that, other than as expressly required by Section 6.08 hereof, or, with the Investor’s consent pursuant to Section 6.01(c) and Section 6.13, it shall refrain from disclosing, and shall cause its officers, directors, employees and agents to refrain from disclosing, any material non-public information (as determined under the Securities Act, the Exchange Act, or the rules and regulations of the SEC) to the Investor without also disseminating such information to the public, unless prior to disclosure of such information the Company identifies such information as being material non-public information and provides the Investor with the opportunity to accept or refuse to accept such material non-public information for review. Unless specifically agreed to in writing, in no event shall the Investor have a duty of confidentiality, or be deemed to have agreed to maintain information in confidence, with respect to the delivery of any Advance Notices.
Article IX.
Non-Exclusive Agreement
Notwithstanding anything contained herein, this Agreement and the rights awarded to the Investor hereunder are non-exclusive, and the Company may, at any time throughout the term of this Agreement and thereafter, issue and allot, or undertake to issue and allot, any shares and/or securities and/or convertible notes, bonds, debentures, options to acquire shares or other securities and/or other facilities which may be converted into or replaced by Common Shares or other securities of the Company, and to extend, renew and/or recycle any bonds and/or debentures, and/or grant any rights with respect to its existing and/or future share capital.
Article X.
Choice of Law/Jurisdiction
This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without regard to the principles of conflict of laws. The parties further agree that any action between them shall be heard in New York County, New York, and expressly consent to the jurisdiction and venue of the Supreme Court of New York, sitting in New York County, New York and the United States District Court of the Southern District of New York, sitting in New York, New York, for the adjudication of any civil action asserted pursuant to this Agreement.
Article XI.Assignment; TerminationDelaware.
Section 11.01 Assignment. Neither this Agreement nor any rights or obligations of the parties hereto may be assigned to any other Person.
Section 11.02 FOURTHTermination.
(a)Unless earlier terminated as provided hereunder, this Agreement: This Certificate of Amendment shall terminate automatically on the earliest of (i) the first day of the month next following the 24-month anniversary of the date hereof or (ii) the date on which the Investor shall have made payment of Advances pursuant to this Agreement for Common Shares equal to the Commitment Amount.
(b)The Company may terminate this Agreement effective upon five Trading Days’ prior written notice to the Investor; provided that (i) there are no outstanding Advance Notices, the Common Shares under which have yet to be issued, (ii) there are no outstanding Pre-Advance Loans which have not be fully repaid, and (iii) the Company has paid all amounts owed to the Investor pursuant to this Agreement. This Agreement may be terminated at any time by the mutual written consent of the parties,become effective as of upon the datefiling of such mutual written consent unless otherwise provided in such written consent.this Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware.
(c)
* * * * *
IN WITNESS WHEREOFNothing in, the Corporation has caused this Section 11.02 shallCertificate of Amendment to be deemed to release the Company or the Investor from any liability for any breach under this Agreement, or to impair the rightssigned by an authorized officer of the Company and the Investor to compel specific performance by the other partyCorporation this day of its obligations under this Agreement. The indemnification provisions contained in Article V shall survive termination hereunder., 20 .
Article XII.Notices
Other than with respect to Advance Notices, which must be in writing and will be deemed delivered on the day set forth in Section 2.01(b), any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile or e-mail if sent on a Trading Day, or, if not sent on a Trading Day, on the immediately following Trading Day; (iii) 5 days after being sent by U.S. certified mail, return receipt requested, (iv) 1 day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications (except for Advance Notices which shall be delivered in accordance with Exhibit A hereof) shall be:
| | | | | |
If to the Company, to: | EOS ENERGY ENTERPRISES, INC.
3920 Park Avenue
Edison, New Jersey 08820
|
| Attention: Melissa Berube |
| Telephone: [***] |
| Email: [***] |
With a copy to (which shall not
constitute notice or delivery of process) to:
| |
| DAVIS POLK & WARDWELL LLP
450 Lexington Avenue
New York, NY 10017
Attention: Michael Kaplan or Roshni Banker Cariello
Telephone: [***] or [***]
Email: [***] or [***]
|
| |
If to the Investor(s): | YA II PN, Ltd. |
| 1012 Springfield Avenue |
| Mountainside, NJ 07092 |
| Attention: Mark Angelo |
| Portfolio Manager |
| Telephone: [***] |
| Email: [***] |
| |
With a Copy (which shall not
constitute notice or delivery of process) to:
| Troy Rillo, Esq.
1012 Springfield Avenue
Mountainside, NJ 07092
|
| Telephone: [***] |
| Email: [***] |
| |
| |
Either may change its information contained in this Article XII by delivering notice to the other party as set forth herein.
Article XIII.Miscellaneous
Section 13.01 Counterparts. This Agreement may be executed in identical counterparts, both which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. Facsimile or other electronically scanned and delivered signatures, including by e-mail attachment, shall be deemed originals for all purposes of this Agreement.
Section 13.02 Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Investor, the Company, their respective affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement contains the entire understanding of the parties with respect to the matters covered herein and, except as specifically set forth herein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the parties to this Agreement.
Section 13.03 Reporting Entity for the Common Shares. The reporting entity relied upon for the determination of the trading price or trading volume of the Common Shares on any given Trading Day for the purposes of this
Agreement shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of the Investor and the Company shall be required to employ any other reporting entity.
Section 13.04 Commitment Fee, Due Diligence and Structuring Fee. Each of the parties shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such party) in connection with this Agreement and the transactions contemplated hereby, except that the Company shall pay to YA Global II SPV, LLC, a subsidiary of the Investor, a structuring and due diligence fee in the amount of $10,000, which the Investor acknowledges has been received prior to the date hereof. On the date hereof, the Company will issue to the Investor an aggregate of 465,117 Common Shares (the “Commitment Fee Shares”) as a commitment fee (for the avoidance of doubt, the Commitment Fee Shares will be issued as “restricted shares” as that term is defined in Rule 144 of the Securities Act).
Section 13.05 Brokerage. Each of the parties hereto represents that it has had no dealings in connection with this transaction with any finder or broker who will demand payment of any fee or commission from the other party. The Company on the one hand, and the Investor, on the other hand, agree to indemnify the other against and hold the other harmless from any and all liabilities to any person claiming brokerage commissions or finder’s fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have caused this Standby Equity Purchase Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above.
| | | | | | | | | | | | | | | | | | | | | |
| COMPANY: |
| EOS ENERGY ENTERPRISES, INC. |
| |
| By: /s/ Randall Gonzales |
| Name: Randall Gonzales |
| Title: Chief Financial Officer |
| |
| |
| Name: | Melissa Berube |
| |
| Title: | INVESTOR: |
| YA II PN, Ltd. |
| |
| By: Yorkville Advisors Global, LP |
| Its: Investment Manager |
|
By: Yorkville Advisors Global II, LLC
Its: General Partner
|
| By: /s/ Matt Beckman
|
| Name: Matt Beckman |
| Title: Member |
| Authorized Officer |
APPENDIX B
EOS ENERGY ENTERPRISES, INC.
CERTIFICATE OF AMENDMENT TO THE
THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
Pursuant to the provisions of § 242 of the General Corporation Law of the State of Delaware
FIRST: The present name of the corporation is Eos Energy Enterprises, Inc., a Delaware corporation (the “Corporation”). The original certificate of incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on June 3, 2019 (the “Original Certificate”). An Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate”) was filed with the Secretary of State of the State of Delaware on February 4, 2020. A Second Amended and Restated Certificate of Incorporation (the “Second Amended and Restated Certificate”) was filed with the Secretary of State of the State of Delaware on May 19, 2020. A Third Amended and Restated Certificate of Incorporation (the “Third Amended and Restated Certificate”) was filed with the Secretary of State of the State of Delaware on November 16, 2020. A certificate of amendment to the Third Amended and Restated Certificate was filed with the Secretary of State of the State of Delaware on June 28, 2022.
SECOND: Section 8.1 of Article VIII of the Company’s Third Amended and Restated Certificate is hereby amended to read in its entirety as set forth below:
Section 8.1 Limitation of Personal Liability. To the full extent permitted by the DGCL and any other applicable law currently or hereafter in effect, a director or officer of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer. Any amendment, modification or repeal of the foregoing sentence shall not adversely affect any right or protection of a director or officer of the Corporation hereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal.
THIRD: The foregoing amendment has been duly proposed and declared advisable by the Corporation’s Board of Directors and adopted by the Corporation’s stockholders in accordance with the provisions of Sections 222 and 242 of the General Corporation Law of the State of Delaware.
FOURTH: This Certificate of Amendment shall become effective as of upon the filing of this Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware.
* * * * *
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by an authorized officer of the Corporation this day of , 20 .
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | |
| By: | |
| | Name: | Melissa Berube |
| | Title: | Authorized Officer |
APPENDIX C
SECOND AMENDMENT TO THE
EOS ENERGY ENTERPRISES, INC.
AMENDED AND RESTATED
2020 INCENTIVE PLAN
This Second Amendment (the “Amendment”) to the Eos Energy Enterprises, Inc. Amended and Restated 2020 Incentive Plan (as amended or restated from time to time, the “Plan”) is approved and adopted to be effective as of _______________, 2023, (the “Effective Date”).
RECITALS
A. The stockholders of Eos Enterprises, Inc., a Delaware corporation (the “Company”) approved the Amendment effective as of _____________, 2023.
B. The Company now desires to amend the Plan in accordance with the terms and conditions of this Amendment.
AMENDMENT
NOW THEREFORE, effective as of the Effective Date, Sections 5(b) and Section 7(a) of the Plan are hereby deleted in their entirety and restated as follows:
5. Grant of Awards; Shares Subject to the Plan; Limitations.
(b) Subject to Section 12 of the Plan and this Section 5, Awards granted under the Plan shall be subject to the following limitations: (i) the Committee is authorized to deliver under the Plan an aggregate of 17,035,887 Common Stock; provided, that the maximum number of Common Stock that may be granted under the Plan during any single fiscal year to any Participant who is a non-employee director, when taken together with any cash fees paid to such non-employee director during such year in respect of his service as a non-employee director (including service as a member or chair of any committee of the Board), shall not exceed $500,000 in total value (calculating the value of any such Awards based on the Fair Market Value on the Date of Grant of such Awards for financial reporting purposes); provided that the non-employee directors who are considered independent (under the rules of The Nasdaq Capital Market or other securities exchange on which the Common Stock is traded) may make exceptions to this limit for a non-executive chair of the Board, if any, in which case the non-employee director receiving such additional compensation may not participate in the decision to award such compensation.
7. Options.
(a) Generally. Each Option granted under the Plan shall be evidenced by an Award Agreement (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)). Each Option so granted shall be subject to the conditions set forth in this Section 7 and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable Award Agreement expressly states that the Option is intended to be an Incentive Stock Option. Subject to Section 12, the maximum aggregate number of Common Stock that may be issued through the exercise of Incentive Stock Options granted under the Plan is 16,000,000 Common Stock. Incentive Stock Options shall be granted only to Eligible Persons who are employees of the Company and its Affiliates, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the stockholder of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code; provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall
be subject to and comply with such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan.
IN WITNESS WHEREOF, the Company has executed this Amendment to the Plan as of _________, 2023.
EOS ENERGY ENTERPRISES, INC.
/s/Melissa Berube
Melissa Berube
General Counsel and Corporate Secretary
APPENDIX D
EOS ENERGY ENTERPRISES, INC.
AMENDED AND RESTATED
2020 INCENTIVE PLAN
1.Establishment of the Plan; Effective Date; Duration.
(a)Establishment of the Plan; Effective Date. Eos Energy Enterprises, Inc. (f/k/a B. Riley Principal Merger Corp. II), a Delaware corporation (the “Company”), hereby establishes this incentive compensation plan to be known as the “Eos Energy Enterprises, Inc. Amended and Restated 2020 Incentive Plan”, as amended from time to time (the “Plan”). The Plan permits the grant of Incentive Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Other Stock-Based Awards, Other Cash-Based Awards and Dividend Equivalents. If the Plan is not so approved by the stockholders of the Company, then the Plan will be null and void in its entirety. The Plan shall remain in effect as provided in Section 1(b) of the Plan. Capitalized but undefined terms shall have the meaning set forth in Section 3 of the Plan.
(b)Duration of the Plan. The Plan shall commence on the Effective Date and shall remain in effect, subject to the right of the Board to amend or terminate the Plan at any time pursuant to Section 13. However, in no event may an Award be granted under the Plan on or after ten years from the Effective Date.
2.Purpose. The purpose of the Plan is to provide a means through which the Company and its Affiliates may attract and retain key personnel and to provide a means whereby certain directors, officers, employees, consultants and advisors (and certain prospective directors, officers, employees, consultants, and advisors) of the Company and its Affiliates can acquire and maintain an equity interest in the Company, or be paid incentive compensation, which may be measured by reference to the value of Common Stock, thereby strengthening their commitment to the welfare of the Company and its Affiliates and aligning their interests with those of the Company’s stockholders.
3.Definitions. Certain terms used herein have the definitions given to them in the first instance in which they are used. In addition, for purposes of the Plan, the following terms are defined as set forth below:
(a)“Affiliate” means (i) any person or entity that directly or indirectly controls, is controlled by or is under common control with the Company and/or (ii) to the extent provided by the Committee, any person or entity in which the Company has a significant interest. The term “control” (including, with correlative meaning, the terms “controlled by” and “under common control with”), as applied to any person or entity, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person or entity, whether through the ownership of voting or other securities, by contract or otherwise.
(b)“Applicable Laws” means the requirements relating to the administration of equity incentive plans under U.S. federal and state securities, tax and other applicable laws, rules and regulations, the applicable rules of any stock exchange or quotation system on which the Common Stock are listed or quoted, and the applicable laws and rules of any foreign country or other jurisdiction where Awards are granted, as are in effect from time to time.
(c)“Award” means, individually or collectively, any Incentive Stock Option, Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Other Stock-Based Awards, Other Cash-Based Awards, and/or Dividend Equivalents, granted under the Plan.
EXHIBIT A
ADVANCE NOTICE(d)“Award Agreement” means a written agreement between a Participant and the Company which sets out the terms of the grant of an Award.
(e)“Board” means the Board of Directors of the Company.
(f)“Cause” means, in the case of a particular Award, unless the applicable Award Agreement states otherwise, (i) the Company or an Affiliate having “cause” to terminate a Participant’s employment or service, as defined in any employment or consulting or similar agreement between the Participant and the Company or an Affiliate in effect at the time of such termination, or (ii) in the absence of any such employment or consulting or similar agreement (or the absence of any definition of “Cause” contained therein), a Participant’s (A) conviction of, or the entry of a plea of guilty or no contest to, a felony or any other crime that causes the Company or its Affiliates public disgrace or disrepute, or materially and adversely affects the Company’s or its Affiliates’ operations or financial performance or the relationship the Company has with its customers; (B) gross negligence or willful misconduct with respect to the Company or any of its Affiliates, including, without limitation, fraud, embezzlement, theft or proven dishonesty in the course of his employment or other service to the Company or an Affiliate; (C) alcohol abuse or use of controlled substances other than in accordance with a physician’s prescription; (D) refusal to perform any lawful, material obligation or fulfill any duty (other than any duty or obligation of the type described in clause (F) below) to the Company or its Affiliates (other than due to a disability, as determined by the Committee), which refusal, if curable, is not cured within 15 days after delivery of written notice thereof; (E) material breach of any agreement with or duty owed to the Company or any of its Affiliates, which breach, if curable, is not cured within 15 days after the delivery of written notice thereof; or (F) any breach of any obligation or duty to the Company or any of its Affiliates (whether arising by statute, common law or agreement) relating to confidentiality, noncompetition, nonsolicitation and/or proprietary rights.
(g)“Change in Control” shall, in the case of a particular Award, unless the applicable Award Agreement states otherwise or contains a different definition of “Change in Control,” be deemed to occur upon any of the following events:
(i) any “person” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than (A) the Company or any of its Affiliates, (B) any trustee or other fiduciary holding securities under any employee benefit plan of the Company or any of its Affiliates, (C) an underwriter temporarily holding securities pursuant to an offering of such securities, or (D) an entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, by way of merger, consolidation, recapitalization, reorganization or otherwise, of fifty percent (50%) or more of the total voting power of the then outstanding voting securities of the Company;
(ii) the cessation of control (by virtue of their not constituting a majority of directors) of the Board by the individuals (the “Continuing Directors”) who (x) were directors on the Effective Date or (y) become directors after Effective Date and whose election or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then in office who were directors on the Effective Date or whose election or nomination for election was previously so approved;
(iii) the consummation of a merger or consolidation of the Company with any other company, other than a merger or consolidation which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation;
(iv) the consummation of a plan of complete liquidation of the Company or the sale or disposition by the Company of all or substantially all the Company’s assets; or
(v) any other event specified as a “Change in Control” in an applicable Award Agreement.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or any portion of an Award) that provides for the deferral of compensation that is subject to Section 409A of the Code, to the extent required to avoid the imposition of additional taxes under Section 409A of the Code, the transaction or event described in subsection (i), (ii), (iii), (iv), or (v) with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).
(h)“Claim” means any claim, liability or obligation of any nature, arising out of or relating to the Plan or an alleged breach of the Plan or an Award Agreement.
(i)“Code” means the Internal Revenue Code of 1986, as amended, and any successor thereto. Reference in the Plan to any section of the Code shall be deemed to include any regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, regulations or guidance.
(j)“Committee” means a committee of at least two people as the Board may appoint to administer the Plan or, if no such committee has been appointed by the Board, the Board.
(k)“Common Stock” means the Class A common stock of the Company, par value $0.0001 per share.
(l)“Company” means Eos Energy Enterprises, Inc. (f/k/a B. Riley Principal Merger Corp. II), a Delaware corporation.
(m)“Date of Grant” means the date on which the granting of an Award is authorized, or such other date as may be specified in such authorization or applicable Award Agreement.
(n)“Dividend Equivalent” means a right awarded under Section 11 to receive the equivalent value (in cash or Common Stock) of ordinary dividends that would otherwise be paid on the Common Stock subject to an Award that is a full-value award but that have not been issued or delivered.
(o)“Effective Date” means November 16, 2020.
(p)“Eligible Director” means a person who is a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act.
(q)“Eligible Person” with respect to an Award denominated in Common Stock, means any (i) individual employed by the Company or an Affiliate; (ii) director of the Company or an Affiliate; (iii) consultant or advisor to the Company or an Affiliate; provided, that, if the Securities Act applies, such persons must be eligible to be offered securities registrable on Form S-8 under the Securities Act; or (iv) prospective employees, directors, officers, consultants or advisors who have accepted offers of employment or consultancy from the Company or its Affiliates (and would satisfy the provisions of clauses (i) through (iii) above once he or she begins employment with or begins providing services to the Company or its Affiliates, provided, that, the Date of Grant of any Award to such
individual shall not be prior to the date he begins employment with or begins providing services to the Company or its Affiliates).
(r)“Exchange Act” means the U.S. Securities Exchange Act of 1934, as it may be amended from time to time, including the rules and regulations promulgated thereunder and successor provisions and rules and regulations thereto.
(s)“Exercise Price” has the meaning given such term in Section 7(b) of the Plan.
(t)“Fair Market Value” means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock are listed on any established stock exchange or a national market system, the closing sales price for such shares (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(ii) If the Common Stock are regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Common Share will be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in The Wall Street Journal or such other source as the Committee deems reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the Committee (acting on the advice of an Independent Third Party, should the Committee elect in its sole discretion to utilize an Independent Third Party for this purpose).
(iv) Notwithstanding the foregoing, the determination of Fair Market Value in all cases shall be in accordance with the requirements set forth under Section 409A of the Code to the extent necessary for an Award to comply with, or be exempt from, Section 409A of the Code.
(u)“Immediate Family Members” shall have the meaning set forth in Section 14(b)(ii).
(v)“Incentive Stock Option” means an Option that is designated by the Committee as an incentive stock option as described in Section 422 of the Code and otherwise meets the requirements set forth in the Plan for incentive stock options.
(w)“Indemnifiable Person” shall have the meaning set forth in Section 4(e) of the Plan.
(x)“Independent Third Party” means an individual or entity independent of the Company having experience in providing investment banking or similar appraisal or valuation services and with expertise generally in the valuation of securities or other property for purposes of this Plan. The Committee may utilize one or more Independent Third Parties.
(y)“Mature Shares” means Common Stock owned by a Participant that are not subject to any pledge or security interest and that have been either previously acquired by the Participant on the open market or meet such other requirements, if any, as the Committee may determine are necessary in order to avoid an accounting earnings charge on account of the use of such shares to pay the Exercise Price or satisfy a tax or deduction obligation of the Participant.
(z)“Nonqualified Stock Option” means an Option that is not designated by the Committee as an Incentive Stock Option.
(aa)
“
Option
” means an Award granted under Section 7 of the Plan.
(ab)“Option Period” has the meaning given such term in Section 7(c) of the Plan.
(ac)
EXHIBIT B
FORM OF SETTLEMENT DOCUMENT
“Other Cash-Based Award” means a cash Award granted to a Participant under Section 10 of the Plan, including cash awarded as a bonus or upon the attainment of performance goals or otherwise as permitted under the Plan.
(ad)“Other Stock-Based Award” means an equity-based or equity-related Award, other than an Option, SAR, Restricted Stock, Restricted Stock Unit or Dividend Equivalent, granted in accordance with the terms and conditions set forth under Section 10 of the Plan (including upon the attainment of any performance goals or otherwise as permitted under the Plan).
(ae)“Participant” means an Eligible Person who has been selected by the Committee to participate in the Plan and to receive an Award pursuant to Section 6 of the Plan.
(af) “Permitted Transferee” shall have the meaning set forth in Section 14(b)(ii) of the Plan.
(ag)“Person” means any individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.
(ah)“Plan” means this Eos Energy Enterprises, Inc. Amended and Restated 2020 Incentive Plan, as amended from time to time.
(ai)“Restricted Period” means the period of time determined by the Committee during which an Award is subject to restrictions or, as applicable, the period of time within which performance is measured for purposes of determining whether an Award has been earned.
(aj)“Restricted Stock Unit” means an unfunded and unsecured promise to deliver Common Stock, cash, other securities or other property, subject to certain performance or time-based restrictions (including, without limitation, a requirement that the Participant remain continuously employed, provide continuous services for a specified period of time, or attain specified performance objectives), granted under Section 9 of the Plan.
(ak)“Restricted Stock” means Common Stock, subject to certain specified performance or time-based restrictions (including, without limitation, a requirement that the Participant remain continuously employed, provide continuous services for a specified period of time, or attain specified performance objectives), granted under Section 9 of the Plan.
(al) “SAR Period” has the meaning given such term in Section 8(c) of the Plan.
(am)“Securities Act” means the Securities Act of 1933, as amended, and any successor thereto. Reference in the Plan to any section of the Securities Act shall be deemed to include any rules, regulations or other interpretative guidance under such section, and any amendments or successor provisions to such section, rules, regulations or guidance.
(an)“Stock Appreciation Right” or “SAR” means an Award granted under Section 8 of the Plan.
(ao)
“
Strike Price
” means, except as otherwise provided by the Committee in the case of Substitute Awards, (i) in the case of a SAR granted in tandem with an Option, the Exercise Price of the related Option, or (ii) in the case of a SAR granted independent of an Option, the Fair Market Value on the Date of Grant.
(ap)“Subsidiary” means, with respect to any specified Person:
(i) any corporation, association or other business entity of which more than 50% of the total voting power of shares (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and
(ii) any partnership (or any comparable foreign entity (A) the sole general partner (or functional equivalent thereof) or the managing general partner of which is such Person or Subsidiary of such Person or (B) the only general partners (or functional equivalents thereof) of which are that Person or one or more Subsidiaries of that Person (or any combination thereof).
(aq)“Substitute Award” has the meaning given such term in Section 5(e).
4.Administration.
(a)The Committee shall administer the Plan. To the extent required to comply with the provisions of Rule 16b-3 promulgated under the Exchange Act (if the Board is not acting as the Committee under the Plan), it is intended that each member of the Committee shall, at the time he takes any action with respect to an Award under the Plan, be an Eligible Director. However, the fact that a Committee member shall fail to qualify as an Eligible Director shall not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.
(b)Subject to the provisions of the Plan and Applicable Law, the Committee shall have the sole and plenary authority, in addition to other express powers and authorizations conferred on the Committee by the Plan, to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to a Participant; (iii) determine the number of Common Stock to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; (iv) determine the terms and conditions of any Award (including any performance goals, criteria, and/or periods applicable to Awards); (v) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Common Stock, other securities, other Awards or other property, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances the delivery of cash, Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant or of the Committee; (vii) interpret, administer, reconcile any inconsistency in, correct any defect in and/or supply any omission in the Plan and any instrument or agreement relating to, or Award granted under, the Plan, including any changes required to comply with Applicable Laws; (viii) establish, amend, suspend, or waive any rules and regulations and appoint such agents as the Committee shall deem appropriate for the proper administration of the Plan; (ix) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, Awards; (x) modify any performance goals, criteria and/or periods; and (y) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan, in each case, to the extent consistent with the terms of the Plan.
(c)The Committee may delegate to one or more officers of the Company or any Affiliate the authority to act on behalf of the Committee with respect to any matter, right, obligation, or election that is the responsibility of or that is allocated to the Committee herein, and that may be so delegated as a matter of law, except for grants of Awards to persons subject to Section 16 of the Exchange Act.
(d)Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award or any documents evidencing Awards granted pursuant to the Plan shall be within the sole discretion of the Committee, may be made at any time and shall be final,
EXHIBIT C
FORM OF PROMISSORY NOTEconclusive and binding upon all persons or entities, including, without limitation, the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, and any stockholder of the Company.
(e)No member of the Board, the Committee, delegate of the Committee or any employee or agent of the Company (each such person, an “Indemnifiable Person”) shall be liable for any action taken or omitted to be taken or any determination made in good faith with respect to the Plan or any Award hereunder. Each Indemnifiable Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense (including attorneys’ fees) that may be imposed upon or incurred by such Indemnifiable Person in connection with or resulting from any action, suit or proceeding to which such Indemnifiable Person may be a party or in which such Indemnifiable Person may be involved by reason of any action taken or omitted to be taken under the Plan or any Award Agreement and against and from any and all amounts paid by such Indemnifiable Person with the Company’s approval, in settlement thereof, or paid by such Indemnifiable Person in satisfaction of any judgment in any such action, suit or proceeding against such Indemnifiable Person, provided that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to an Indemnifiable Person to the extent that a final judgment or other final adjudication (in either case not subject to further appeal) binding upon such Indemnifiable Person determines that the acts or omissions of such Indemnifiable Person giving rise to the indemnification claim resulted from such Indemnifiable Person’s bad faith, fraud or willful criminal act or omission or that such right of indemnification is otherwise prohibited by law or by the Company’s Articles of Incorporation or Bylaws. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such Indemnifiable Persons may be entitled under the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such Indemnifiable Persons or hold them harmless.
(f)Notwithstanding anything to the contrary contained in the Plan, the Board may, in its sole discretion, at any time and from time to time, grant Awards and administer the Plan with respect to such Awards. In any such case, the Board shall have all the authority granted to the Committee under the Plan.
5.Grant of Awards; Shares Subject to the Plan; Limitations.
(a)The Committee may, from time to time, grant Awards to one or more Eligible Persons.
(b)Subject to Section 12 of the Plan and this Section 5, Awards granted under the Plan shall be subject to the following limitations: (i) the Committee is authorized to deliver under the Plan an aggregate of 9,035,887 17,035,887 Common Stock; provided, that that the maximum number of Common Stock that may be granted under the Plan during any single fiscal year to any Participant who is a non-employee director, when taken together with any cash fees paid to such non-employee director during such year in respect of his service as a non-employee director (including service as a member or chair of any committee of the Board), shall not exceed $500,000 in total value (calculating the value of any such Awards based on the Fair Market Value on the Date of Grant of such Awards for financial reporting purposes); provided that the non-employee directors who are considered independent (under the rules of The Nasdaq Capital Market or other securities exchange on which the Common Stock is traded) may make exceptions to this limit for a non-executive chair of the Board, if any, in which case the non-employee director receiving such additional compensation may not participate in the decision to award such compensation.
(c)Common Stock underlying Awards under this Plan that are forfeited, canceled, expire unexercised, or are settled in cash shall be available again for issuance as Awards under the Plan. Notwithstanding the foregoing,
Common Stock underly an Award shall not again be available for issuance under the Plan if such Common Stock are (i) Common Stock tendered or withheld in payment of the exercise price of an Option or other Award, (ii) Common Stock delivered to or withheld by the Company to satisfy any tax withholding liabilities arising from an Award, or (iii) Common Stock covered by a stock-settled Stock Appreciation Right that were not issued upon the settlement of the Stock Appreciation Right.
(d)Common Stock delivered by the Company in settlement of Awards may be authorized and unissued shares, shares held in the treasury of the Company, shares purchased on the open market or by private purchase, or a combination of the foregoing.
(e)Awards may, in the sole discretion of the Committee, be granted under the Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by the Company or with which the Company combines (“Substitute Awards”). The number of Common Stock underlying any Substitute Awards shall not be counted against the aggregate number of Common Stock available for Awards under the Plan.
(f)Without limiting the generality of the foregoing, in connection with the closing (the “Closing”) of the transactions contemplated by that certain Agreement and Plan of Merger, dated September 7, 2020, by and among the Company, Eos Energy Storage LLC, and the other parties thereto, (x) the board of directors of Eos Energy Storage LLC agreed to assign, and the board of directors of Eos Energy Enterprises Intermediate Holdings LLC (f/k/a New Eos Energy LLC) (“Intermediate”) agreed to assume, the Eos Energy Storage LLC 2012 Equity Incentive Plan (as amended from time to time, the “2012 Plan”), and (y) the board of directors of Intermediate determined to “freeze” the 2012 Plan such that no new awards may be granted under the 2012 Plan. Following such assignment and assumption, (i) the sole member of Intermediate agreed to assign, and the Board agreed to assume, the 2012 Plan, (ii) the Board agreed to amend the 2012 Plan to, among other things, reduce the number of shares available for issuance under the 2012 Plan to 280,403 shares, and (iii) the Board determined to “freeze” the 2012 Plan such that no new awards may be granted under the 2012 Plan. In connection therewith, any shares to be issued under the 2012 Plan in excess of 280,403 shares with respect to awards previously issued under the 2012 Plan prior to the “freeze” of the 2012 Plan shall instead be issued out of the shares reserved for issuance under Section 5(b) of this Plan. Additionally, in the event that any shares with respect to awards previously issued under the 2012 Plan prior to the “freeze” of the 2012 Plan are never issued due to settlement in cash rather than in shares, or due to an award’s forfeiture, cancellation, expiration, or net settlement through the issuance of shares, such shares (A) will no longer be available for future awards under the 2012 Plan, and (B) will instead be added to the shares reserved for issuance under Section 5(b) of this Plan for future awards in accordance with this Plan, as determined by the Committee in its sole discretion. As a result of the foregoing, the issuance of shares under this Plan and under the 2012 Plan will be no greater, in the aggregate, than previously disclosed in the documentation publicly filed by the Company in connection with the Closing.
6.Eligibility. Participation shall be limited to Eligible Persons who have entered into an Award Agreement or who have received written notification from the Committee, or from a person designated by the Committee, that they have been selected to participate in the Plan.
7.Options.
(a)
Generally
. Each Option granted under the Plan shall be evidenced by an Award Agreement (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)). Each Option so granted shall be subject to the conditions set forth in this Section 7 and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. All Options granted under the Plan shall be Nonqualified Stock Options unless the applicable
Award Agreement expressly states that the Option is intended to be an Incentive Stock Option. Subject to Section 12, the maximum aggregate number of Common Stock that may be issued through the exercise of Incentive Stock Options granted under the Plan is 8,000,00016,000,000 Common Stock. Incentive Stock Options shall be granted only to Eligible Persons who are employees of the Company and its Affiliates, and no Incentive Stock Option shall be granted to any Eligible Person who is ineligible to receive an Incentive Stock Option under the Code. No Option shall be treated as an Incentive Stock Option unless the Plan has been approved by the stockholder of the Company in a manner intended to comply with the stockholder approval requirements of Section 422(b)(1) of the Code; provided that any Option intended to be an Incentive Stock Option shall not fail to be effective solely on account of a failure to obtain such approval, but rather such Option shall be treated as a Nonqualified Stock Option unless and until such approval is obtained. In the case of an Incentive Stock Option, the terms and conditions of such grant shall be subject to and comply with such rules as may be prescribed by Section 422 of the Code. If for any reason an Option intended to be an Incentive Stock Option (or any portion thereof) shall not qualify as an Incentive Stock Option, then, to the extent of such nonqualification, such Option or portion thereof shall be regarded as a Nonqualified Stock Option appropriately granted under the Plan.
(b)Exercise Price. Except with respect to Substitute Awards, the exercise price (“Exercise Price”) per Common Share for each Option shall not be less than 100% of the Fair Market Value of such share determined as of the Date of Grant; provided, however, that in the case of an Incentive Stock Option granted to an employee who, at the time of the grant of such Option, owns shares representing more than 10% of the total combined voting power of all classes of shares of the Company or any related corporation (as determined in accordance with Treasury Regulation Section 1.422-2(f)), the Exercise Price per share shall not be less than 110% of the Fair Market Value per share on the Date of Grant and provided further, that, notwithstanding any provision herein to the contrary, the Exercise Price shall not be less than the par value per Common Share.
(c)Vesting and Expiration. Options shall vest and become exercisable in such manner and on such date or dates determined by the Committee (including, if applicable, the attainment of any performance goals, as determined by the Committee in the applicable Award Agreement) and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the “Option Period”); provided, however, that the Option Period shall not exceed five years from the Date of Grant in the case of an Incentive Stock Option granted to a Participant who on the Date of Grant owns shares representing more than 10% of the total combined voting power of all classes of shares of the Company or any related corporation (as determined in accordance with Treasury Regulation Section 1.422- 2(f)); provided, further, that notwithstanding any vesting dates set by the Committee, the Committee may, in its sole discretion, accelerate the exercisability of any Option, which acceleration shall not affect the terms and conditions of such Option other than with respect to exercisability. In the event of any termination of employment or service with the Company or its Affiliates thereof of a Participant who has been granted one or more Options, the Options shall be exercisable at the time or times and subject to the terms and conditions set forth in the Award Agreement. If the Option would expire at a time when the exercise of the Option would violate applicable securities laws, the expiration date applicable to the Option will be automatically extended to a date that is 30 calendar days following the date such exercise would no longer violate applicable securities laws (so long as such extension shall not violate Section 409A of the Code); provided, that in no event shall such expiration date be extended beyond the expiration of the Option Period.
(d)Method of Exercise and Form of Payment. No Common Stock shall be delivered pursuant to any exercise of an Option until payment in full of the Exercise Price therefor is received by the Company and the Participant has paid to the Company an amount equal to any taxes required to be withheld or paid upon exercise of such Option. Options that have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Option, accompanied by payment of the Exercise Price. The Exercise Price shall be payable (i) in cash, check, cash equivalent and/or Common Stock valued at the Fair Market Value at the time the Option is exercised (including, pursuant to procedures approved by the Committee, by means of attestation of ownership of a sufficient number of Common Stock in lieu of actual delivery of such shares to the Company); provided, that, such Common Stock are not subject to any pledge or other security interest and are Mature Shares; and (ii) by such other method as the Committee may permit in accordance with Applicable Law, in its sole discretion, including without limitation: (A) in other property having a Fair Market Value on the date of exercise equal to the Exercise Price, (B) if there is a public market for the Common Stock at such time, by means of
Schedule I
(Holder Account Information)a broker-assisted “cashless exercise” pursuant to which the Company is delivered a copy of irrevocable instructions to a stockbroker to sell the Common Stock otherwise deliverable upon the exercise of the Option and to deliver promptly to the Company an amount equal to the Exercise Price, or (C) by a “net exercise” method whereby the Company withholds from the delivery of the Common Stock for which the Option was exercised that number of Common Stock having a Fair Market Value equal to the aggregate Exercise Price for the Common Stock for which the Option was exercised. No fractional Common Stock shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Common Stock, or whether such fractional Common Stock or any rights thereto shall be canceled, terminated or otherwise eliminated.
(e)Notification upon Disqualifying Disposition of an Incentive Stock Option. Each Participant awarded an Incentive Stock Option under the Plan shall notify the Company in writing immediately after the date he makes a disqualifying disposition of any Common Stock acquired pursuant to the exercise of such Incentive Stock Option. A disqualifying disposition is any disposition (including, without limitation, any sale) of such Common Stock before the later of (i) two years after the Date of Grant of the Incentive Stock Option or (ii) one year after the date of exercise of the Incentive Stock Option. The Company may, if determined by the Committee and in accordance with procedures established by the Committee, retain possession of any Common Stock acquired pursuant to the exercise of an Incentive Stock Option as agent for the applicable Participant until the end of the period described in the preceding sentence.
(f)Compliance With Laws, etc. Notwithstanding the foregoing, in no event shall a Participant be permitted to exercise an Option in a manner that the Committee determines would violate the SarbanesOxley Act of 2002, if applicable; any other Applicable Law; the applicable rules and regulations of the Securities and Exchange Commission; or the applicable rules and regulations of any securities exchange or inter-dealer quotation system on which the securities of the Company are listed or traded.
8.Stock Appreciation Rights.
(a)Generally. Each SAR granted under the Plan shall be evidenced by an Award Agreement (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)). Each SAR so granted shall be subject to the conditions set forth in this Section 8 and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement. Any Option granted under the Plan may include tandem SARs. The Committee also may award SARs to Eligible Persons independent of any Option.
(b)Strike Price. The Strike Price per Common Share for each SAR shall not be less than 100% of the Fair Market Value of such share determined as of the Date of Grant.
(c)
Vesting and Expiration
. A SAR granted in connection with an Option shall become exercisable and shall expire according to the same vesting schedule and expiration provisions as the corresponding Option. A SAR granted independent of an Option shall vest and become exercisable and shall expire in such manner and on such date or dates determined by the Committee (including, if applicable, the attainment of any performance goals, as shall be determined by the Committee in the applicable Award Agreement) and shall expire after such period, not to exceed ten years, as may be determined by the Committee (the “
SAR Period
”);
provided
,
howeve
r
, that notwithstanding any vesting dates set by the Committee, the Committee may, in its sole discretion, accelerate the exercisability of any SAR, which acceleration shall not affect the terms and conditions of such SAR other than with respect to exercisability. In the event of any termination of employment or service with the Company and its Affiliates thereof of a Participant who has been granted one of more SARs, the SARs shall be exercisable at the time or times and subject to the terms and conditions as set forth in the Award Agreement (or in the underlying Option Award Agreement, as may be applicable). If the SAR would expire at a time when the exercise of the SAR would violate applicable securities laws, the expiration date applicable to the SAR will be automatically extended to a date
that is 30 calendar days following the date such exercise would no longer violate applicable securities laws (so long as such extension shall not violate Section 409A of the Code); provided, that, in no event shall such expiration date be extended beyond the expiration of the SAR Period.
(d)Method of Exercise. SARs that have become exercisable may be exercised by delivery of written or electronic notice of exercise to the Company in accordance with the terms of the Award, specifying the number of SARs to be exercised and the date on which such SARs were awarded.
(e)Payment. Upon the exercise of a SAR, the Company shall pay to the Participant an amount equal to the number of shares subject to the SAR that are being exercised, multiplied by the excess, if any, of the Fair Market Value of one Common Share on the exercise date over the Strike Price, less an amount equal to any taxes required to be withheld or paid. The Company shall pay such amount in cash, in Common Stock having a Fair Market Value equal to such amount, or any combination thereof, as determined by the Committee. No fractional Common Stock shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Common Stock, or whether such fractional Common Stock or any rights thereto shall be canceled, terminated or otherwise eliminated.
9.Restricted Stock and Restricted Stock Units.
(a)Generally. Each grant of Restricted Stock and Restricted Stock Units shall be evidenced by an Award Agreement (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)). Each such grant shall be subject to the conditions set forth in this Section 9 and to such other conditions not inconsistent with the Plan as may be reflected in the applicable Award Agreement (including the performance goals, if any, upon whose attainment the Restricted Period shall lapse in part or full).
(b)Restricted Accounts; Escrow or Similar Arrangement. Upon the grant of Restricted Stock, a book entry in a restricted account shall be established in the Participant’s name at the Company’s transfer agent and, if the Committee determines that the Restricted Stock shall be held by the Company or in escrow rather than held in such restricted account pending the release of the applicable restrictions, the Committee may require the Participant to additionally execute and deliver to the Company (i) an escrow agreement satisfactory to the Committee, if applicable, and (ii) the appropriate stock power (endorsed in blank) with respect to the Restricted Stock covered by such agreement. If a Participant shall fail to execute an agreement evidencing an Award of Restricted Stock and, if applicable, an escrow agreement and blank stock power within the amount of time specified by the Committee, the Award shall be null and void. Subject to the restrictions set forth in this Section 9 and the applicable Award Agreement, the Participant generally shall have the rights and privileges of a stockholder as to such Restricted Stock, including, without limitation, the right to vote such Restricted Stock and the right to receive dividends, if applicable. To the extent shares of Restricted Stock are forfeited, any share certificates issued to the Participant evidencing such shares shall be returned to the Company, and all rights of the Participant to such shares and as a stockholder with respect thereto shall terminate without further obligation on the part of the Company.
(c)Vesting. Unless otherwise provided by the Committee in an Award Agreement the unvested portion of Restricted Stock and Restricted Stock Units shall terminate and be forfeited upon termination of employment or service of the Participant granted the applicable Award.
(d)Delivery of Restricted Stock and Settlement of Restricted Stock Units.
(i) Upon the expiration of the Restricted Period with respect to any shares of Restricted Stock, the restrictions set forth in the applicable Award Agreement shall be of no further force or effect with respect to such shares, except as set forth in the applicable Award Agreement. If an escrow arrangement is used,
Exhibit Aupon such expiration, the Company shall deliver to the Participant, or his beneficiary, without charge, the share certificate evidencing the shares of Restricted Stock that have not then been forfeited and with respect to which the Restricted Period has expired (rounded down to the nearest full share) or shall register such shares in the Participants name without any such restrictions. Dividends, if any, that may have been withheld by the Committee and attributable to any particular share of Restricted Stock shall be distributed to the Participant in cash or, at the sole discretion of the Committee, in Common Stock having a Fair Market Value equal to the amount of such dividends, upon the release of restrictions on such share and, if such share is forfeited, the Participant shall have no right to such dividends (except as otherwise set forth by the Committee in the applicable Award Agreement).
(ii) Unless otherwise provided by the Committee in an Award Agreement, upon the expiration of the Restricted Period with respect to any outstanding Restricted Stock Units, the Company shall deliver to the Participant, or his beneficiary, without charge, one Common Share for each such outstanding Restricted Stock Unit;
Closing Statement
provided, however, that the Committee may, in its sole discretion, elect to (A) pay cash or part cash and part Common Share in lieu of delivering only Common Stock in respect of such Restricted Stock Units or (B) defer the delivery of Common Stock (or cash or part Common Stock and part cash, as the case may be) beyond the expiration of the Restricted Period if such delivery would result in a violation of Applicable Law until such time as is no longer the case. If a cash payment is made in lieu of delivering Common Stock, the amount of such payment shall be equal to the Fair Market Value of the Common Stock as of the date on which the Restricted Period lapsed with respect to such Restricted Stock Units, less an amount equal to any taxes required to be withheld or paid.
10.Other Stock-Based Awards and Other Cash-Based Awards.
(a)Other Stock-Based Awards. The Committee may grant types of equity-based or equityrelated Awards not otherwise described by the terms of the Plan (including the grant or offer for sale of unrestricted Common Stock), in such amounts and subject to such terms and conditions, as the Committee shall determine (including, if applicable, the attainment of any performance goals, as set forth in the applicable Award Agreement). Such Other Stock-Based Awards may involve the transfer of actual Common Stock to Participants, or payment in cash or otherwise of amounts based on the value of Common Stock. The terms and conditions of such Awards shall be consistent with the Plan and set forth in the Award Agreement and need not be uniform among all such Awards or all Participants receiving such Awards.
(b)Other Cash-Based Awards. The Committee may grant a Participant a cash Award not otherwise described by the terms of the Plan, including cash awarded as a bonus or upon the attainment of performance goals or otherwise as permitted under the Plan.
(c)Value of Awards. Each Other Stock-Based Award shall be expressed in terms of Common Stock or units based on Common Stock, as determined by the Committee, and each Other Cash-Based Awards shall be expressed in terms of cash, as determined by the Committee. The Committee may establish performance goals in its discretion and any such performance goals shall be set forth in the applicable Award Agreement. If the Committee exercises its discretion to establish performance goals, the number and/or value of Other Stock-Based Awards or Other Cash-Based Awards that will be paid out to the Participant will depend on the extent to which such performance goals are met.
(d)
Payment of Awards
. Payment, if any, with respect to an Other Stock-Based Award or Other Cash-Based Award shall be made in accordance with the terms of the Award, as set forth in the Award Agreement, in cash, Common Stock or a combination of cash and Common Stock, as the Committee determines.
(e)Vesting. The Committee shall determine the extent to which the Participant shall have the right to receive Other Stock-Based Awards or Other Cash-Based Awards following the Participant’s termination of employment or service (including by reason of such Participant’s death, disability (as determined by the Committee), or termination without Cause). Such provisions shall be determined in the sole discretion of the Committee and will be included in the applicable Award Agreement but need not be uniform among all Other Stock-Based Awards or Other Cash-Based Awards issued pursuant to the Plan and may reflect distinctions based on the reasons for the termination of employment or service.
11.Dividend Equivalents. No adjustment shall be made in the Common Stock issuable or taken into account under Awards on account of cash dividends that may be paid or other rights that may be issued to the holders of Common Stock prior to issuance of such Common Stock under such Award. The Committee may grant Dividend Equivalents based on the dividends declared on Common Stock that are subject to any Award (other than an Option or Stock Appreciation Right). Any Award of Dividend Equivalents may be credited as of the dividend payment dates, during the period between the Date of Grant of the Award and the date the Award becomes payable or terminates or expires, as determined by the Committee; however, Dividend Equivalents shall not be payable unless and until the Award becomes payable, and shall be subject to forfeiture to the same extent as the underlying Award. Dividend Equivalents may be subject to any additional limitations and/or restrictions determined by the Committee. Dividend Equivalents shall be payable in cash, Common Stock or converted to full-value Awards, calculated based on such formula, as may be determined by the Committee.
12.
DISCLOSURE SCHEDULE
Changes in Capital Structure and Similar Events. In the event of (a) any dividend (other than ordinary cash dividends) or other distribution (whether in the form of cash, Common Stock, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, amalgamation, consolidation, spin-off, split-up, split-off, combination, repurchase or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to acquire Common Stock or other securities of the Company, or other similar corporate transaction or event (including, without limitation, a Change in Control) that affects the Common Stock, or (b) unusual or infrequently occurring events (including, without limitation, a Change in Control) affecting the Company, any Affiliate, or the financial statements of the Company or any Affiliate, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange or inter-dealer quotation system, accounting principles or law, such that in either case an adjustment is determined by the Committee in its sole discretion to be necessary or appropriate, then the Committee shall make any such adjustments in such manner as it may deem equitable, subject to the requirements of Code Sections 409A, 421, and 422, if applicable, including without limitation any or all of the following:
(a)adjusting any or all of (i) the number of Common Stock or other securities of the Company (or number and kind of other securities or other property) that may be delivered in respect of Awards or with respect to which Awards may be granted under the Plan (including, without limitation, adjusting any or all of the limitations under Section 5 of the Plan) and (ii) the terms of any outstanding Award, including, without limitation, (A) the number of Common Stock or other securities of the Company (or number and kind of other securities or other property) subject to outstanding Awards or to which outstanding Awards relate, (B) the Exercise Price or Strike Price with respect to any Award or (C) any applicable performance measures;
(b)providing for a substitution or assumption of Awards in a manner that substantially preserves the applicable terms of such Awards;
(c)
accelerating the exercisability or vesting of, lapse of restrictions on, or termination of, Awards or providing for a period of time for exercise prior to the occurrence of such event;
(d)modifying the terms of Awards to add events, conditions or circumstances (including termination of employment within a specified period after a Change in Control) upon which the exercisability or vesting of or lapse of restrictions thereon will accelerate;
(e)deeming any performance measures satisfied at target, maximum or actual performance through closing or such other level determined by the Committee in its sole discretion, or providing for the performance measures to continue (as is or as adjusted by the Committee) after closing;
(f)providing that for a period prior to the Change in Control determined by the Committee in its sole discretion, any Options or SARs that would not otherwise become exercisable prior to the Change in Control will be exercisable as to all Common Stock subject thereto (but any such exercise will be contingent upon and subject to the occurrence of the Change in Control and if the Change in Control does not take place after giving such notice for any reason whatsoever, the exercise will be null and void) and that any Options or SARs not exercised prior to the consummation of the Change in Control will terminate and be of no further force and effect as of the consummation of the Change in Control; and
(g)canceling any one or more outstanding Awards and causing to be paid to the holders thereof, in cash, Common Stock, other securities or other property, or any combination thereof, the value of such Awards, if any, as determined by the Committee (which if applicable may be based upon the price per Common Share received or to be received by other stockholders of the Company in such event), including without limitation, in the case of an outstanding Option or SAR, a cash payment in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the Common Stock subject to such Option or SAR over the aggregate Exercise Price or Strike Price of such Option or SAR, respectively (it being understood that, in such event, any Option or SAR having a per share Exercise Price or Strike Price equal to, or in excess of, the Fair Market Value of a Common Share subject thereto may be canceled and terminated without any payment or consideration therefor); provided, however, that in the case of any “equity restructuring” (within the meaning of the Financial Accounting Standards Board Accounting Standards Codification Topic 718), the Committee shall make an equitable or proportionate adjustment to outstanding Awards to reflect such equity restructuring. The Company shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be final, conclusive and binding for all purposes.
13.Amendments and Termination.
(a)Amendment and Termination of the Plan. The Board may amend, alter, suspend, discontinue, or terminate the Plan or any portion thereof at any time; provided that (i) no amendment to Section 13(b) (to the extent required by the proviso in such Section 13(b)) shall be made without stockholder approval and (ii) no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement applicable to the Plan (including, without limitation, as necessary to comply with any rules or requirements of any securities exchange or inter-dealer quotation system on which the Common Stock may be listed or quoted); provided, further, that any such amendment, alteration, suspension, discontinuance or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary.
(b)Amendment of Award Agreements. The Committee may, to the extent consistent with the terms of any applicable Award Agreement, waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted or the associated Award Agreement, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant with respect to any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, unless the Committee determines, in its sole discretion, that the amendment is necessary for the Award to comply with Code Section 409A; provided, further, that without stockholder approval, except as otherwise permitted under Section 12 of the Plan, (i) no amendment or modification may reduce the Exercise Price of any Option or the Strike Price of any SAR, (ii) the Committee may not cancel any outstanding Option or SAR where the Fair Market Value of the
Common Stock underlying such Option or SAR is less than its Exercise Price and replace it with a new Option or SAR, another Award or cash and (iii) the Committee may not take any other action that is considered a “repricing” for purposes of the stockholder approval rules of the applicable securities exchange or inter-dealer quotation system on which the Common Stock are listed or quoted.
14.General.
(a)Award Agreements. Each Award under the Plan shall be evidenced by an Award Agreement, which shall be delivered to the Participant (whether in paper or electronic medium (including email or the posting on a web site maintained by the Company or a third party under contract with the Company)) and shall specify the terms and conditions of the Award and any rules applicable thereto, including, without limitation, the effect on such Award of the death, disability or termination of employment or service of a Participant, or of such other events as may be determined by the Committee. Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award to a Participant need not be identical, and the Committee need not treat Participants or Awards (or portions thereof) uniformly.
(b)Nontransferability.
(i) Each Award shall be exercisable only by a Participant during the Participant’s lifetime, or, if permissible under Applicable Law, by the Participant’s legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or an Affiliate; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.
(ii) Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards (other than Incentive Stock Options) to be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award Agreement to preserve the purposes of the Plan, to: (A) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 under the Securities Act (collectively, the “Immediate Family Members”); (B) a trust solely for the benefit of the Participant and his Immediate Family Members; (C) a partnership or limited liability company whose only partners or stockholders are the Participant and his Immediate Family Members; or (D) any other transferee as may be approved either (I) by the Board or the Committee in its sole discretion, or (II) as provided in the applicable Award Agreement (each transferee described in clauses (A), (B), (C) and (D) above is hereinafter referred to as, a “Permitted Transferee”); provided that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer would comply with the requirements of the Plan.
(iii) The terms of any Award transferred in accordance with the immediately preceding sentence shall apply to the Permitted Transferee and any reference in the Plan, or in any applicable Award Agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that (A) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (B) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the Common Stock to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award Agreement, that such a registration statement is necessary or appropriate; (C) the Committee or the Company shall not be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise; and (D) the consequences of the termination of the Participant’s employment by, or services to, the Company or an Affiliate under the terms of the Plan and the applicable Award Agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted
Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award Agreement.
(c)Tax Withholding and Deductions.
(i) A Participant shall be required to pay to the Company or any Affiliate, and the Company or any Affiliate shall have the right and is hereby authorized to deduct and withhold, from any cash, Common Stock, other securities or other property deliverable under any Award or from any compensation or other amounts owing to a Participant, the amount (in cash, Common Stock, other securities or other property) of any required taxes (up to the maximum statutory rate under Applicable Law as in effect from time to time as determined by the Committee) and deduction in respect of an Award, its grant, vesting or exercise, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Committee or the Company to satisfy all obligations for the payment of such taxes.
(ii) Without limiting the generality of clause (i) above, the Committee may, in its sole discretion, permit a Participant to satisfy, in whole or in part, the foregoing tax and deduction liability by (A) the delivery of Common Stock (which are not subject to any pledge or other security interest and are Mature Shares, except as otherwise determined by the Committee) owned by the Participant having a Fair Market Value equal to such liability or (B) having the Company withhold from the number of Common Stock otherwise issuable or deliverable pursuant to the exercise or settlement of the Award a number of shares with a Fair Market Value equal to such liability.
(d)No Claim to Awards; No Rights to Continued Employment; Waiver. No employee of the Company or an Affiliate, or other person, shall have any Claim or right to be granted an Award under the Plan or, having been selected for the grant of an Award, to be selected for a grant of any other Award. A Participant’s sole remedy for any Claim related to the Plan or any Award shall be against the Company, and no Participant shall have any Claim or right of any nature against any Subsidiary or Affiliate of the Company or any stockholder or existing or former director, officer or employee of the Company or any Subsidiary of the Company. There is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards and the Committee’s determinations and interpretations with respect thereto need not be the same with respect to each Participant and may be made selectively among Participants, whether or not such Participants are similarly situated. Neither the Plan nor any action taken hereunder shall be construed as giving any Participant any right to be retained in the employ or service of the Company or an Affiliate, nor shall it be construed as giving any Participant any rights to continued service on the Board. The Company or any of its Affiliates may at any time dismiss a Participant from employment or discontinue any consulting relationship, free from any liability or any Claim under the Plan, unless otherwise expressly provided in the Plan or any Award Agreement. By accepting an Award under the Plan, a Participant shall thereby be deemed to have waived any Claim to continued exercise or vesting of an Award or to damages or severance entitlement related to non-continuation of the Award beyond the period provided under the Plan or any Award Agreement, notwithstanding any provision to the contrary in any written employment contract or other agreement between the Company and its Affiliates and the Participant, whether any such agreement is executed before, on or after the Date of Grant.
(e)International Participants. With respect to Participants who reside or work outside of the United States of America, the Committee may in its sole discretion amend the terms of the Plan or outstanding Awards with respect to such Participants in order to conform such terms with the requirements of local law or to obtain more favorable tax or other treatment for a Participant, the Company or its Affiliates.
(f)Designation and Change of Beneficiary. Each Participant may file with the Committee a written designation of one or more persons as the beneficiary(ies) who shall be entitled to receive the amounts payable with respect to an Award, if any, due under the Plan upon his death. A Participant may, from time to time, revoke or change his beneficiary designation without the consent of any prior beneficiary by filing a new designation with the
Committee. The last such designation received by the Committee shall be controlling; provided, however, that no designation, or change or revocation thereof, shall be effective unless received by the Committee prior to the Participant’s death, and in no event shall it be effective as of a date prior to such receipt. If no beneficiary designation is filed by a Participant, the beneficiary shall be deemed to be his spouse or, if the Participant is unmarried at the time of death, his estate.
(g)Termination of Employment/Service. Unless determined otherwise by the Committee at any time following such event: (i) neither a temporary absence from employment or service due to illness, vacation or leave of absence nor a transfer from employment or service with the Company to employment or service with an Affiliate (or vice-versa) shall be considered a termination of employment or service with the Company or an Affiliate; and (ii) if a Participant’s employment with the Company and its Affiliates terminates, but such Participant continues to provide services to the Company and its Affiliates in a non-employee capacity (or vice-versa), such change in status shall not be considered a termination of employment with the Company or an Affiliate.
(h)No Rights as a Stockholder. Except as otherwise specifically provided in the Plan or any Award Agreement, no person shall be entitled to the privileges of ownership in respect of Common Stock or other securities that are subject to Awards hereunder until such shares have been issued or delivered to that person.
(i)Government and Other Regulations.
(i) The obligation of the Company to settle Awards in Common Stock or other consideration shall be subject to all Applicable Laws, rules, and regulations, and to such approvals by governmental agencies as may be required. Notwithstanding any terms or conditions of any Award to the contrary, the Company shall be under no obligation to offer to sell or to sell, and shall be prohibited from offering to sell or selling, any Common Stock or other securities pursuant to an Award unless such shares have been properly registered for sale pursuant to the Securities Act with the Securities and Exchange Commission or unless the Company has received an opinion of counsel, satisfactory to the Company, that such shares may be offered or sold without such registration pursuant to an available exemption therefrom and the terms and conditions of such exemption have been fully complied with. The Company shall be under no obligation to register for sale under the Securities Act any of the Common Stock or other securities to be offered or sold under the Plan. The Committee shall have the authority to provide that all certificates for Common Stock or other securities of the Company or any Affiliate delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan, the applicable Award Agreement, the federal securities laws, or the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or interdealer quotation system upon which such shares or other securities are then listed or quoted and any other applicable federal, state, local or non-U.S. laws, and, without limiting the generality of Section 9 of the Plan, the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. Notwithstanding any provision in the Plan to the contrary, the Committee reserves the right to add any additional terms or provisions to any Award granted under the Plan that it in its sole discretion deems necessary or advisable in order that such Award complies with the legal requirements of any governmental entity to whose jurisdiction the Award is subject.
(ii) The Committee may cancel an Award or any portion thereof if the Committee determines, in its sole discretion, that legal or contractual restrictions and/or blockage and/or other market considerations would make the Company’s acquisition of Common Stock from the public markets, the Company’s issuance of Common Stock or other securities to the Participant, the Participant’s acquisition of Common Stock or other securities from the Company and/or the Participant’s sale of Common Stock to the public markets, illegal, impracticable or inadvisable. If the Committee determines to cancel all or any portion of an Award denominated in Common Stock in accordance with the foregoing, the Company shall pay to the
Participant an amount equal to the excess of (A) the aggregate Fair Market Value of the Common Stock subject to such Award or portion thereof that is canceled (determined as of the applicable exercise date, or the date that the shares would have been vested or delivered, as applicable), over (B) the aggregate Exercise Price or Strike Price (in the case of an Option or SAR, respectively) or any amount payable as a condition of delivery of Common Stock (in the case of any other Award). Such amount shall be delivered to the Participant as soon as practicable following the cancellation of such Award or portion thereof.
(j)Payments to Persons Other Than Participants. If the Committee shall find that any person to whom any amount is payable under the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then any payment due to such person or his estate (unless a prior Claim therefor has been made by a duly appointed legal representative) may, if the Committee so directs the Company, be paid to his or her spouse, child, relative, an institution maintaining or having custody of such person, or any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Committee and the Company therefor.
(k)Nonexclusivity of the Plan. Neither the adoption of this Plan by the Board nor the submission of this Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options or other equity-based awards otherwise than under this Plan, and such arrangements may be either applicable generally or only in specific cases.
(l)No Trust or Fund Created. The Plan is intended to constitute an “unfunded” plan for incentive compensation. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate, on the one hand, and a Participant or other person or entity, on the other hand. No provision of the Plan or any Award shall require the Company, for the purpose of satisfying any obligations under the Plan, to purchase assets or place any assets in a trust or other entity to which contributions are made or otherwise to segregate any assets, nor shall the Company maintain separate bank accounts, books, records or other evidence of the existence of a segregated or separately maintained or administered fund for such purposes. Participants shall have no rights under the Plan other than as unsecured general creditors of the Company, except that insofar as they may have become entitled to payment of additional compensation by performance of services, they shall have the same rights as other employees or service providers under general law.
(m)Reliance on Reports. Each member of the Committee and each member of the Board shall be fully justified in acting or failing to act, as the case may be, and shall not be liable for having so acted or failed to act in good faith, in reliance upon any report made by the independent public accountant of the Company and its Affiliates and/or any other information furnished in connection with the Plan by any agent of or service provider to the Company or the Committee or the Board, other than himself.
(n)Relationship to Other Benefits. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan.
(o)Governing Law. The Plan shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws provisions thereof.
(p)Severability. If any provision of the Plan or any Award or Award Agreement is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any person or entity or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be
construed or deemed amended to conform to the Applicable Laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be construed or deemed stricken as to such jurisdiction, person or entity or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
(q)Obligations Binding on Successors. The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, amalgamation, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.
(r)Code Section 409A.
(i) Notwithstanding any provision of this Plan to the contrary, all Awards made under this Plan are intended to be exempt from or, in the alternative, comply with Code Section 409A and the authoritative guidance thereunder, including the exceptions for stock rights and short-term deferrals. The Plan shall be construed and interpreted in accordance with such intent. Each payment under an Award shall be treated as a separate payment for purposes of Code Section 409A.
(ii) If a Participant is a “specified employee” (as such term is defined for purposes of Code Section 409A) at the time of his termination of service, no amount that is nonqualified deferred compensation subject to Code Section 409A and that becomes payable by reason of such termination of service shall be paid to the Participant (or in the event of the Participant’s death, the Participant’s representative or estate) before the earlier of (x) the first business day after the date that is six months following the date of the Participant’s termination of service, and (y) within 30 days following the date of the Participant’s death. For purposes of Code Section 409A, a termination of service shall be deemed to occur only if it is a “separation from service” within the meaning of Code Section 409A, and references in the Plan and any Award Agreement to “termination of service” or similar terms shall mean a “separation from service.” If any Award is or becomes subject to Code Section 409A, unless the applicable Award Agreement provides otherwise, such Award shall be payable upon the Participant’s “separation from service” within the meaning of Code Section 409A. If any Award is or becomes subject to Code Section 409A and if payment of such Award would be accelerated or otherwise triggered under a Change in Control, then the definition of Change in Control shall be deemed modified, only to the extent necessary to avoid the imposition of any additional tax under Code Section 409A, to mean a “change in control event” as such term is defined for purposes of Code Section 409A.
(iii) Any adjustments made pursuant to Section 13 to Awards that are subject to Code Section 409A shall be made in compliance with the requirements of Code Section 409A, and any adjustments made pursuant to Section 13 to Awards that are not subject to Code Section 409A shall be made in such a manner as to ensure that after such adjustment, the Awards either (x) continue not to be subject to Code Section 409A or (y) comply with the requirements of Code Section 409A.
(s)Notification of Election Under Code Section 83(b). If any Participant, in connection with the acquisition of Common Stock under an Award, makes the election permitted under Code Section 83(b), if applicable, the Participant shall notify the Company of the election within ten days of filing notice of the election with the Internal Revenue Service.
(t)Expenses; Gender; Titles and Headings; Interpretation. The expenses of administering the Plan shall be borne by the Company and its Affiliates. Masculine pronouns and other words of masculine gender shall refer to both men and women. The titles and headings of the sections in the Plan are for convenience of reference
only, and in the event of any conflict, the text of the Plan, rather than such titles or headings shall control. Unless the context of the Plan otherwise requires, words using the singular or plural number also include the plural or singular number, respectively; derivative forms of defined terms will have correlative meanings; the terms “hereof,” “herein” and “hereunder” and derivative or similar words refer to this entire Plan; the term “Section” refers to the specified Section of this Plan and references to “paragraphs” or “clauses” shall be to separate paragraphs or clauses of the Section or subsection in which the reference occurs; the words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation”; and the word “or” shall be disjunctive but not exclusive
(u)Other Agreements. Notwithstanding the above, the Committee may require, as a condition to the grant of and/or the receipt of Common Stock or other securities under an Award, that the Participant execute lock-up, stockholder or other agreements, as it may determine in its sole and absolute discretion.
(v)Payments. Participants shall be required to pay, to the extent required by Applicable Law, any amounts required to receive Common Stock or other securities under any Award made under the Plan.
(w)Clawback; Erroneously Awarded Compensation. All Awards (including on a retroactive basis) granted under the Plan are subject to the terms of any Company forfeiture, incentive compensation recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of Applicable Laws, as well as any other policy of the Company that may apply to the Awards, such as anti-hedging or pledging policies, as they may be in effect from time to time. In particular, these policies and/or provisions shall include, without limitation, (i) any Company policy established to comply with Applicable Laws (including, without limitation, Section 304 of the Sarbanes-Oxley Act and Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act), and/or (ii) the rules and regulations of the applicable securities exchange or inter-dealer quotation system on which the Common Stock or other securities are listed or quoted, and these requirements shall be deemed incorporated by reference into all outstanding Award Agreements.
(x)No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan. The Committee shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of fractional shares or whether fractional shares or any rights thereto shall be forfeited, rounded, or otherwise eliminated.
(y)Paperless Administration. If the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Participant may be permitted through the use of such an automated system.
(z)Data Privacy. As a condition for receiving any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this Section 14(z) by and among the Company and its Subsidiaries and Affiliates exclusively for implementing, administering and managing the Participant’s participation in the Plan. The Company and its Subsidiaries and Affiliates may hold certain personal information about a Participant, including the Participant’s name, address and telephone number; birthdate; social security, insurance number or other identification number; salary; nationality; job title(s); any Common Stock held in the Company or its Subsidiaries and Affiliates; and Award details, to implement, manage and administer the Plan and Awards (the “Data”). The Company and its Subsidiaries and Affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a Participant’s participation in the Plan, and the Company and its Subsidiaries and Affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management. These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws and protections than the recipients’ country. By accepting an Award, each Participant authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the Participant’s participation in the Plan, including any required Data transfer to a broker or other third
party with whom the Company or the Participant may elect to deposit any Common Stock. The Data related to a Participant will be held only as long as necessary to implement, administer, and manage the Participant’s participation in the Plan. A Participant may, at any time, view the Data that the Company holds regarding the Participant, request additional information about the storage and processing of the Data regarding the Participant, recommend any necessary corrections to the Data regarding the Participant or refuse or withdraw the consents in this Section 14(z) in writing, without cost, by contacting the local human resources representative. The Company may cancel Participant’s ability to participate in the Plan and, in the Committee’s discretion, the Participant may forfeit any outstanding Awards if the Participant refuses or withdraws the consents in this Section 14(z).
(aa)Broker-Assisted Sales. In the event of a broker-assisted sale of Common Stock in connection with the payment of amounts owed by a Participant under or with respect to the Plan or Awards: (a) any Common Stock to be sold through the broker-assisted sale will be sold on the day the payment first becomes due, or as soon thereafter as practicable; (b) the Common Stock may be sold as part of a block trade with other Participants in the Plan in which all participants receive an average price; (c) the applicable Participant will be responsible for all broker’s fees and other costs of sale, and by accepting an Award, each Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (d) to the extent the Company or its designee receives proceeds of the sale that exceed the amount owed, the Company will pay the excess in cash to the applicable Participant as soon as reasonably practicable; (e) the Company and its designees are under no obligation to arrange for the sale at any particular price; and (f) if the proceeds of the sale are insufficient to satisfy the Participant’s applicable obligation, the Participant may be required to pay immediately upon demand to the Company or its designee an amount in cash sufficient to satisfy any remaining portion of the Participant’s obligation.
