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
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Filed by the Registrant: ☒x
| Filed by a Party other than the Registrant: o ☐ |
Check the appropriate box:
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x☒ | Preliminary Proxy Statement |
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o☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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o☐ | Definitive Proxy Statement |
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o☐ | Definitive Additional Materials |
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o☐ | Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12 |
CTI BioPharma Corp.
(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):
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o☐ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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| (1) | Title of each class of securities to which transaction applies: |
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| (2) | Aggregate number of securities to which transaction applies: |
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| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
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| (4) | Proposed maximum aggregate value of transaction: |
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o☐ | Fee paid previously with preliminary materials. |
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o☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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| (1) | Amount Previously Paid: |
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| (2) | Form, Schedule or Registration Statement No.: |
CTI BIOPHARMA CORP.
3101 Western Avenue, Suite 800
Seattle, Washington 98121
Notice of SpecialAnnual Meeting of ShareholdersStockholders to the Stockholders of CTI BioPharma Corp.:
January 24, 2018to be held at 10:00 a.m. (Pacific time) on Thursday, May 16, 2019
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS |
Location:
Company’s Principal Executive Offices
3101 Western Avenue, Suite 800
Seattle, Washington 98121, U.S.A.
| | Date: January 24, 2018
Time: 10:00 a.m. Pacific Time
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The Notice of Meeting and Proxy Statement are available free of charge at http://www.ctibiopharma.com.
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CTI BioPharma Corp., a Delaware corporation, will hold its 2019 annual meeting of stockholders on Thursday, May 16, 2019 at 10:00 a.m. (Pacific time). The meeting will be a completely virtual meeting of stockholders. You can attend the meeting by visiting www.virtualshareholdermeeting.com/CTIC2019 where you will be able to listen to the meeting live, submit questions and vote online. Because the meeting is completely virtual and being conducted via the internet, stockholders will not be able to attend the meeting in person.
Items of Business:
We are holding the meeting for the following purposes, as more fully described in the accompanying proxy statement:
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| (1) | To elect as directors the six nominees named in the proxy statement to serve until the 2020 annual meeting of stockholders or until their successors are duly qualified and elected; |
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| (2) | To approve an amendment to our certificate of incorporation to increase the total number of authorized shares from 101,533,333 to 131,533,333 and to increase the total number of authorized shares of our common stock from 101,500,000 to 131,500,000; |
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| (3) | To approve an increase of 2,000,000 shares reserved for issuance pursuant to our Amended and Restated 2017 Equity Incentive Plan; |
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| (4) | To ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019; |
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| (5) | To approve, by non-binding advisory vote, the compensation of our named executive officers; |
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| (6) | To approve the reincorporationadjournment of the Company frommeeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the Statetime of Washingtonthe meeting to adopt any of the State of Delaware by merging the Company with and into a newly formed, wholly owned subsidiary;foregoing proposals; and |
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(2)(7) | To transact such other business as may properly come before the Special Meetingmeeting and all adjournments and postponements thereof. |
Record Date:
CloseOur board of directors has fixed the close of business on December 5, 2017.March 22, 2019 as the record date for the meeting. Only stockholders of record on March 22, 2019 are entitled to notice of and to vote at the meeting. Further information regarding voting rights and the matters to be voted upon is presented in the accompanying proxy statement.
On or about April , 2019 we expect to mail to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our proxy statement and annual report. The Notice provides instructions on how to vote via the Internet, telephone or by mail (if you receive printed proxy materials) and includes instructions on how to receive a paper copy of our proxy materials. The accompanying proxy statement and our annual report can be accessed directly at the following Internet address: www.proxyvote.com. All you have to do is enter the control number located on your Notice or proxy card.
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Special Meeting2019 annual meeting of Shareholders,stockholders, we urge you to please cast your vote as soon as possible using one of the methods described in the accompanying Proxy Statement.proxy statement.
By Order of the Board of Directors
Adam R. Craig
Chief Executive Officer
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By Order of the Board of Directors |
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Adam R. Craig |
Chief Executive Officer |
Seattle, Washington
April , 2017
TABLE OF CONTENTS2019
CTI BIOPHARMA CORP.
3101 Western Avenue, Suite 800
Seattle, Washington 98121 U.S.A.
PROXY STATEMENT
PROXY SUMMARY
This summary highlights information described in more detail elsewhere in this Proxy Statement.proxy statement. It does not contain all of the information that you should consider, and you should read the entire Proxy Statementproxy statement carefully before voting. Page references are provided to help you find further information.
The Special Meeting of Shareholders (the “Special Meeting”) of CTI BioPharma Corp. will hold its 2019 annual meeting of stockholders (the “Company”, “our”, “us”, or “we”“Annual Meeting”) virtually on Thursday, May 16, 2019 at 10:00 a.m. (Pacific time). You can attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/CTIC2019, where you will be held atable to listen to the following timemeeting live, submit questions and location:vote online. Because the Annual Meeting is completely virtual and being conducted via the internet, stockholders will not be able to attend the meeting in person.
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Date and Time: | | January 24, 2018
10:00 a.m. Pacific Time
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Location: | | Company’s Principal Executive Offices
3101 Western Avenue, Suite 800
Seattle, Washington 98121, U.S.A.
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DeliveryThe information provided below is for your convenience only and is merely a summary of Proxy Materials (see page 9)the information contained in this proxy statement. You should read this entire proxy statement carefully. Information contained on, or that can be accessed through, our website is not intended to be incorporated by reference into this proxy statement and references to our website address in this proxy statement are inactive textual references only.
On or about December 8, 2017,April , 2019 we expect to mail to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our proxy materials for the Special Meeting, including this Proxy Statement, are being made available to shareholders entitledstatement and annual report. The Notice provides instructions on how to vote via the Internet, telephone or by mail (if you receive printed proxy materials) and includes instructions on how to receive a paper copy of our proxy materials. The accompanying proxy statement and our annual report can be accessed directly at the Special Meeting. We are utilizingfollowing Internet address: www.proxyvote.com. All you have to do is enter the United States (the “U.S.”) Securities and Exchange Commission (the “SEC”) rules that allow issuers to furnishcontrol number located on your Notice or proxy materials to their shareholders on the Internet.card.
Eligibility to Vote (see page -1-
You may vote if you were a shareholder of record at the close of business on December 5, 2017.
How to Cast Your Vote (see page 4)
For non-Italian Shareholders
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| • | Log on to www.proxyvote.com and follow the instructions, using the Control Number shown on the Notice of Internet Availability of Proxy Materials (or paper proxy or voting instruction card if you receive one), until 11:59 p.m. Eastern Time on January 23, 2018;
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| • | If you receive a proxy card, call the telephone number and follow the instructions shown on the proxy or voting instruction card, using the Control Number shown on the card, until 11:59 p.m. Eastern Time on January 23, 2018; |
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| • | If you receive a proxy or voting instruction card, mark, sign and date the card and promptly return it in the prepaid envelope so that it is received prior to the adjournment of the Special Meeting on January 24, 2018; or |
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| • | In person, if you are a shareholder of record, by voting your shares at the Special Meeting. If your shares are held in the name of a broker, nominee or other intermediary, you must obtain a proxy, executed in your favor, to bring to the meeting. |
For Italian Shareholders
If you are an Italian shareholder (as such term is defined on page 5 below), please refer to the section entitled “General Information Concerning the Special Meeting - Important Information for our Shareholders in Italy” for information pertaining to applicable voting procedures starting on page 5.
Summary of Voting Matters
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| | | Board Vote Recommendation | | Page Reference |
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Approval of proposal to reincorporate the Company from the State of Washington to the State of Delaware by merger. |
FOR | | |
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Approval of adjournment of the Special Meeting, if necessary or appropriate. |
FOR | | |
Your Vote Matters! (see page 7)
It is very important that you cast your vote and play a part in the future of the Company. Under the applicable rules of the New York Stock Exchange (the “NYSE”), if you hold your shares through a broker, bank or other nominee, they cannot vote on your behalf on the foregoing Proposal 1 at the Special Meeting because they are considered non-routine matters. Thus, it is important that you cast your vote on these and all proposals to make sure your voice is heard. |
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| | | Board Vote Recommendation | Page Reference |
| 1. | Election of the six nominees named in this proxy statement to our board of directors, to serve until the 2020 annual meeting of stockholders or until their successors are duly qualified and elected. | FOR ALL Nominees | 8 |
| 2. | Approval of an amendment to our certificate of incorporation to increase the total number of authorized shares from 101,533,333 to 131,533,333 and to increase the total number of authorized shares of our common stock from 101,500,000 to 131,500,000. | FOR | 19 |
| 3. | Approve an increase of 2,000,000 shares reserved for issuance pursuant to our Amended and Restated 2017 Equity Incentive Plan. | FOR | 21 |
| 4. | Ratification of selection of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019. | FOR | 30 |
| 5. | Approval, by non-binding advisory vote, of the compensation of our named executive officers. | FOR | 34 |
| 6. | Approval of adjournment of the Annual Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Annual Meeting. | FOR | 52 |
GENERAL INFORMATION CONCERNING THE SPECIALANNUAL MEETING
SpecialAnnual Meeting Agenda
This Proxy Statementproxy statement and the accompanying form of proxy card are furnished in connection with the solicitation of proxies by the Boardour board of Directors (the "Board")directors for use at our SpecialAnnual Meeting.
At the SpecialAnnual Meeting, shareholdersstockholders will be asked to:
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(1)1. | elect as directors the six nominees named in this proxy statement to serve until the 2020 annual meeting of stockholders or until their successors are duly qualified and elected; |
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| 2. | approve an amendment to our certificate of incorporation to increase the total number of authorized shares from 101,533,333 to 131,533,333 and to increase the total number of authorized shares of our common stock from 101,500,000 to 131,500,000; |
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| 3. | approve an increase of 2,000,000 shares reserved for issuance pursuant to our Amended and Restated 2017 Equity Incentive Plan; |
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| 4. | ratify the selection of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019; |
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| 5. | approve, by non-binding advisory vote, the compensation of our named executive officers; |
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| 6. | approve the reincorporationadjournment of the Company fromAnnual Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the Statetime of Washingtonthe Annual Meeting to adopt any of the State of Delaware by merging the Company into a newly formed, wholly-owned Delaware subsidiary (“Proposal 1”);foregoing proposals; and |
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(2)7. | transact such other business as may properly come before the SpecialAnnual Meeting and all adjournments and postponements thereof (“Proposal 2”).thereof. |
Delivery of Proxy Materials
On or about April , 2017,2019, proxy materials for the SpecialAnnual Meeting, including this Proxy Statement,proxy statement, are being made available to shareholdersstockholders entitled to vote at the SpecialAnnual Meeting. We are utilizingusing the SEC rules promulgated by the Securities and Exchange Commission (the “SEC”) that allow issuers to furnish proxy materials to their shareholdersstockholders on the Internet. We believe these rules allow us to provide you with the information you need while lowering the costs of delivery and reducing the environmental impact of the SpecialAnnual Meeting. Pursuant to such rules, we are mailing to many of our shareholdersstockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a paper copy of this Proxy Statement.proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Annual Report”). The Notice contains instructions on how to access those documents and vote online. The Notice also contains instructions on how each of those shareholdersstockholders can receive a paper copy of the proxy materials, including this Proxy Statementproxy statement, the 2018 Annual Report, and a form of proxy card or voting instruction card. Shareholders (other than Italian shareholders)Stockholders who do not receive a Notice, such as shareholdersstockholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the proxy materials by mail. In the case of Italian shareholders, such shareholders will be able to obtain a copy of the proxy materials in the manner outlined on page 5 under the heading “Important Information for our Shareholders in Italy - Availability of Meeting Materials.”
Solicitation of Proxies
This solicitation is made on behalf of the Board.our board of directors. All expenses in connection with the solicitation of proxies will be borne by us. In addition to solicitation by mail, our officers, directors or other regular employees may solicit proxies by telephone, facsimile, electronic communication or in person. These individuals will not receive any additional compensation for these services.
Record Date, Eligibility to Vote, Voting Rights and Outstanding Shares
Only shareholdersHolders of record on our shareholder books atcommon stock as of the close of business on December 5, 2017 (the “Record Date”)March 22, 2019, the record date for the Annual Meeting, will be entitled to notice of, and to vote at, the SpecialAnnual Meeting. Each holder of record of our common stock, no par value $0.001 per share, (the "Common Stock"),
outstanding on the Record Daterecord date will be entitled to one vote per share on all matters to be voted upon at the SpecialAnnual Meeting. As of the close of business on the Record Date,record date, there were 57,979,325 shares of Common Stock issued and outstanding, shares of the Company's Series N-3 Preferred Stock issued and outstanding, and no other shares of any other class of the Company's capitalour common stock issued and outstanding. Holders of our Series N-3 Preferred Stock are not entitled to voting rights with respect to their Series N-3 Preferred Stock.
Dissenters Rights or Appraisal Rights
Pursuant to applicable Washington law, there are no dissenters or appraisal rights relating to the matters to be acted upon at the Special Meeting.
Quorum, Abstentions, Required Vote and Broker Non-Votes
Overview
All votes will be tabulated by the inspector of election appointed for the SpecialAnnual Meeting, who will separately tabulate affirmative and negative votes, abstentions, withheld votes, and broker non-votes. Abstentions represent a shareholder’sstockholder’s affirmative choice to decline to vote on a proposal. Properly executed proxy cards that are marked “abstain” or “withhold all” on any proposal, as applicable, will be treated as abstentions for that proposal.
Broker non-votes occur when a broker holding shares for a beneficial owner does not vote on a particular matter because such broker does not have discretionary authority to vote on that matter and has not received voting instructions from the beneficial owner. Brokers typically do not have discretionary authority to vote on non-routine matters. Under the applicable rules, of the NYSE (the “NYSE Rules”), brokers have discretionary authority to vote on routine matters when they have not received timely voting instructions from the beneficial owner. The routine versus non-routine matters to be voted upon at the SpecialAnnual Meeting are discussed in greater detail below.
Quorum
A quorum of shareholdersstockholders must be established at the SpecialAnnual Meeting in order to transact business at the SpecialAnnual Meeting. Under the Washington BusinessGeneral Corporation Act, a quorum may be established in oneLaw of two ways:
•Pursuantthe State of Delaware and pursuant to the first quorum standard,our bylaws and certificate of incorporation, the presence in person by telephone or by proxy of the holders of at least one-third of the shares outstanding and entitled to vote at the Special Meeting constitutes a quorum (“Quorum Standard 1”). Therefore, we will need at least shares of our Common Stock present in person, by telephone or by proxy at the Special Meeting for a quorum to be established pursuant to Quorum Standard 1.
•Alternatively, we may establish a quorum under a second quorum standard, which requires that a majority of the shares outstanding and entitled to vote at the Special Meeting, other than shares held of record by Depository Trust Company (“DTC”), and credited to the account of stock depositories located in a member state of the European Union (the “E.U.”), must be present in person, by telephone or by proxy at the Special Meeting, provided the number of votes comprising such majority equals or exceeds one-sixth of the shares outstanding and entitled to vote at the Special Meeting (“Quorum Standard 2”). As of the close of business on the Record Date, there were shares of our Common Stock issued and outstanding other than shares held of record by DTC and credited to the account of stock depositories located in a member state of the E.U. Accordingly, of the shares of our Common Stock, other than shares held of record by DTC and credited to the account of stock depositories located in a member state of the E.U., must be present in person, by telephone or by proxy at the Special Meeting for a quorum to be established pursuant to Quorum Standard 2. All shares of our Common Stock are eligible to vote for the Proposals. Under Quorum Standard 2, certain shares are not counted for quorum purposes. However, even if a quorum is established under Quorum Standard 2, all shares are eligible to vote and all such votes will be counted.
While our Amended and Restated Bylaws (the “Bylaws”) provide that a quorum shall consist of shareholders representing, either in person or by proxy, one-third of the votes entitled to be cast on the matter by each voting group at the SpecialAnnual Meeting applicable Washington law expressly provides that Quorum Standard 2 shall also apply.
In the absence ofconstitutes a quorum, the Chairman of the Special Meeting may adjourn the Special Meeting.
Abstentions
quorum. Abstentions of shares credited to the account of stock depositories located in a member state of the E.U. (including shares that are held through Monte Titoli, S.p.A., the Italian central clearing agency (“Monte Titoli”)) will not be counted in determining whether a quorum is present for purposes of establishing Quorum Standard 2. In all other circumstances, abstentionsand broker non-votes will be counted in determining whether a quorum is present.
In the absence of a quorum, the chairman of the Annual Meeting may adjourn the Annual Meeting.
Vote Required and Effect of Abstentions and Broker Non-Votes on Vote
UnderExcept in the alternative voting standard applicable tocase of the Company under the Washington Business Corporation Act, Proposal 1 requires the affirmative voteelection of a majority of votes actually cast by shareholders entitled to vote ondirectors and the proposal atto approve the Special Meeting, in person or by proxy, provided that the affirmative votes equal or exceed fifteen percentamendment to our certificate of incorporation, adoption of the votes within the voting group. Proposal 2proposals requires the affirmative vote of the holders of a majority of the shares of our Common Stock voting on this Proposal 2 in person, by telephone or by proxycommon stock represented at the Special Meeting.
Proposal 1 is consideredAnnual Meeting and voting affirmatively or negatively on such matter. This means that, of the shares represented at the Annual Meeting and entitled to vote, a majority of them must be voted “for” the proposal for it to be a non-routine matter under the NYSE Rules, and, as a result, if you do not instruct your broker, bank or other nominee on how to vote the shares in your account for Proposal 1, brokers will not be permitted to exercise their voting authority and uninstructed shares will constitute broker non-votes. However, broker non-votes for Proposal 1approved. Abstentions will have no effect on the outcome of suchthe proposals because approval is based on the number of affirmative or negative votes actually cast. Proposal 2 is considered to on such matter.
The election of directors requires a plurality vote of the shares of common stock voted at the meeting. “Plurality” means that the individuals who receive the largest number of votes cast “for” are elected as directors. As a result, any shares not voted “for” a particular nominee (whether as a result of an abstention or a broker non-vote) will not be a routine matter undercounted in such nominee’s favor and will have no effect on the NYSE Rules and, accordingly, if yououtcome of the election. We do not instruct your broker, bank or other nomineehave cumulative voting rights for the election of directors. Additional information on how tothe vote required for each proposal and the effect of uninstructed shares and abstentions on each proposal is set forth in your account for Proposal 2, brokers will be permitted to exercise their discretionary authority to vote for such proposals.the table below:
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| Proposal | | Vote Required | | Broker Non-Votes Allowed | | Abstentions | | You May Vote |
Proposal 1 – Election of Directors | | Plurality of Votes Present and Entitled to Vote | | No | | No Effect | | FOR or AGAINST |
Proposal 2 – Approval of Amendment to Certificate of Incorporation | | Majority of Outstanding Shares | | No | | No Effect | | FOR, AGAINST, or ABSTAIN |
Proposal 3 – Approval of Increase of Shares Reserved for Issuance Pursuant to the Amended and Restated 2017 Equity Incentive Plan | | Majority of Votes Present and Cast Affirmatively or Negatively | | No | | No Effect | | FOR, AGAINST, or ABSTAIN |
Proposal 4 – Ratification of Ernst & Young as Auditor | | Majority of Votes Present and Cast Affirmatively or Negatively | | Yes | | No Effect | | FOR, AGAINST or ABSTAIN |
Proposal 5 – Advisory Vote on Executive Compensation | | Majority of Votes Present and Cast Affirmatively or Negatively | | No | | No Effect | | FOR, AGAINST or ABSTAIN |
Proposal 6 – Adjournment and Solicitation of Additional Proxies | | Majority of Votes Present and Cast Affirmatively or Negatively | | Yes | | No Effect | | FOR, AGAINST or ABSTAIN |
Methods of Voting (other than for shareholders in Italy, which are discussed below)
Beneficial Shareholders
Stockholders
If you own shares through a broker, bank or other holder of record, you will need to instruct the holder of record how to vote your shares. In order to provide voting instructions to the holder of record of your shares, please refer to the materials forwarded by your broker, bank or other holder of record. You may not vote your shares in person at the SpecialAnnual Meeting unless you obtain a “legal proxy” from the bank, broker or other holder of record that holds your shares, giving you the right to vote the shares at the SpecialAnnual Meeting.
Registered Stockholders
Registered Shareholders
If you own shares that are registered in your name, you may vote by proxy before the SpecialAnnual Meeting by internet at www.proxyvote.com,, by calling 1-800-690-6903 or by signing and returning your proxy card. To vote by internet or telephone, you will need your 16-digit voting control number, which can be found on your proxy card or Notice. If you return a signed proxy card but do not provide voting instructions for some or all of the matters to be voted on, your shares will be voted on all uninstructed matters in accordance with the recommendations of the Board.our board of directors. You may also vote your shares in personthrough attendance at the Special Meeting. If you choose to do so, you can vote using the ballot that will be provided at the Special Meeting.
Important Information for our Shareholders in Italy
Voting Methods
Our Italian shareholders whose shares are held directlyAnnual Meeting by a U.S. brokerage account in that shareholder’s name or who are registered directly with us as a record holder (i.e., you hold your shares in registered form)visiting www.virtualshareholdermeeting.com/CTIC2019, where stockholders may vote viaand submit questions during the internetmeeting (have your Notice or phone methods described above. Persons holding shares of our Common Stock through Monte Titoli (which shareholders are referred to in this Proxy Statement as our shareholders in Italy or our Italian shareholders) are not able to vote via the internet or phone methods described above and must instead vote in the manner described below.
If you hold shares of our Common Stock as a result of our 2004 merger with Novuspharma S.p.A. or if you acquired shares of our Common Stock through an account with an Italian bank on the Mercato Telematico Azionario stock market in Italy, you most likely hold these shares indirectly through the facilities of Monte Titoli, and through the banks and brokers participating in the Monte Titoli system (unless you or your broker has taken action to remove your shares from the Monte Titoli system and requested to have shares registered in your name). Monte Titoli, in turn, indirectly holds these shares of our Common Stock through the participants in the U.S. clearing agency, DTC. Pursuant to U.S. law, voting power over these shares will be transferred from DTC through DTC participants and European intermediaries to Monte Titoli. Monte Titoli has agreed with us that it will re-transfer its voting power over such shares to the persons holding certifications of participation (each, a “Certification”) in the Italian Central Depository System issued pursuant to Italian law (Section 21 (and the following sections) of the Regulation enacted by the Bank of Italy and the Commissione Nazionale per le Società e la Borsa (“CONSOB”) on February 22, 2008).
Italian shareholders who have requested and received a Certification may vote in the following manner:
In person. You may attend the Special Meeting and vote in person. To do so, please present your Certification at the door, together with proof of your identity.
By mail or facsimile. An Italian proxy card accompanies this Proxy Statement. You may also print an Italian proxy card from our website at http://www.ctibiopharma.com. You may use such proxy card to vote by mail or facsimile. Please mark your votes on the Italian proxy card and return it and your Certification by mail to the address shown on the card or by facsimile to the facsimile number shown on the card by the deadline shown on the card. Your name as you write it on your Italian proxy card must exactly match your name as printed on your Certification. Italian privacy law prevents us from learning in advance the names of the persons holding Certifications. Thus, you must include your Certification (or a complete copy) in the same envelope as your Italian proxy card in order for your vote to be counted (that is, in order to prove to our inspector of election that you have the right to vote).
By proxy. You may name another person as a substitute proxy by any means permitted by Washington law and our Bylaws. That substitute proxy may then attend the Special Meeting, provided that he or she provides your Certification or a complete copy thereof, together with your written authorization naming such person as your proxy, to our inspector of election at the Special Meeting in order to verify the authenticity of your proxy designation.
For future meetings, an Italian shareholder may also vote via Internet or by phone if the shares owned by such Italian shareholder are either (i) registered directly with us in that shareholder’s name as record holder or (ii) transferred to and held by a U.S. brokerage account in that shareholder’s name. If you are an Italian shareholder and wish to use this method of voting for future meetings, then, prior to the record date for such future meeting, you will need to do one of the following:
Register as a Direct Record Holder: Contact your bank for more information on the procedures required for direct registration of your shares in your name, which would include, among other things, the submission of a registration request (together with a Certification) to our transfer agent, the removal of your shares from Monte Titoli’s account and the transfer of such shares to the U.S. directly in your name. Please note that registration in our shareholder books may require you to take additional steps if andhand when you decide to dispose of your shares.
Transfer Shares to a U.S. Brokerage Account: Contact your bank and informvisit the bank that you would like to transfer your shares to a U.S. brokerage account (to be held in your name and for your account)website). Your bank can explain the procedure and costs associated with that transfer. Please note that you will be required by your bank to bear the costs relating to such a transfer, including those debited or claimed by the U.S. broker-dealer for the management of the account in the U.S.
Once your shares are registered on our records in your name or held by a U.S. broker-dealer in your name, you will receive the Special Meeting documentation for any future meetings (including the Proxy Statement) at your address, together with a security code and instructions on how to vote your shares through the relevant website or by calling the telephone number provided in connection with that meeting.
Availability of Meeting Materials
Copies of this Proxy Statement may be obtained by our Italian shareholders from any of the following places:
the office of the Company's Italian legal counsel, Legance Studio Legale Associato (contact person: Mr. Giorgio Vanzanelli), at Via Dante 7, 20123 Milan, Italy;
the office of any of the depository banks having our shares in their accounts, subject to their availability to provide a copy of the Proxy Statement and/or the proxy card;
the SEC website at http://www.sec.gov; or
our website at http://www.ctibiopharma.com.
This Proxy Statement will be available for our Italian shareholders at least twenty days before the Special Meeting date of January 24, 2018. If you hold shares of our Common Stock in Italy through Monte Titoli, your broker is required by Italian law, upon your request, to provide you with a Certification in the Italian Central Depository System. All of our shareholders, including our Italian shareholders, are cordially invited to attend the Special Meeting.
Importance of Your Vote
In the past, a significant percentage of our shares were held by persons in Italy. If our Italian shareholders do not take the time to vote, we may not be able to obtain a quorum, in which case we would be unable to conduct any business at the Special Meeting and will not be able to obtain approval of the Proposals. Your vote is important. Please obtain a Certification and an Italian proxy card and vote today.
Deadline to Vote Shares
If you are a shareholderstockholder of record who holds shares in record name, your proxy must be received by telephone or the internet by 11:59 p.m. Eastern Time(Eastern time) on January 23, 2018May 15, 2019 in order for your shares to be voted at the SpecialAnnual Meeting. You also have the option of completing, signing, dating and returning the proxy card enclosed with the Proxy Statement so that it is received prior to the adjournment of the SpecialAnnual Meeting on January 24, 2018May 16, 2019 in order for your shares to be voted at the SpecialAnnual Meeting. If you hold your shares through a broker, bank or other nominee (e.g., as a beneficial owner), please comply with the deadlines included in the voting instruction card provided by the bank, broker or other nominee that holds your shares.
Virtually Attending the Annual Meeting
If you are an Italian shareholder who has requested-5-
You will be able to attend the Annual Meeting online, submit your questions during the meeting and received a Certification, and you are not intending to vote in person, then, in order for your vote to be countedshares electronically at the Specialmeeting by visiting www.virtualshareholdermeeting.com/CTIC2019. Because the Annual Meeting is completely virtual and being conducted via the internet, stockholders will not be able to attend the meeting in person. However, stockholders will be afforded the same rights and opportunities to participate as they would at an in-person meeting. To participate in the Annual Meeting, you will need the control number included on your Certification and ItalianNotice or proxy card must be returned by mailcard. The Annual Meeting webcast will begin promptly at 10:00 a.m. (Pacific time). We encourage you to access the address shown on the card or by facsimile to the facsimile number shown thereonmeeting prior to the adjournmentstart time. Online check-in will begin at 9:50 a.m. (Pacific time), and you should allow ample time for the check-in procedures.
You may submit questions at the Annual Meeting through any of the Special Meeting.following methods:
Prior to the Annual Meeting, by logging on to www.proxyvote.com using the control number included on your Notice or proxy card or accessing the site via their email, clicking the “Submit a Question for Management” field on the right-hand side of the page, and selecting the “Submit Question” button. A pop-up window will appear where you may type your question in the text box, optionally select a topic from the drop-down box and fill in their details. Once done, click “Submit” to submit your question, after which a confirmation message will be displayed.
By live text during the Annual Meeting, by accessing www.virtualshareholdermeeting.com/CTIC2019 using the control number included on your Notice or proxy card. You can then submit a live text question by typing in the “Ask a Question” box.
By telephone during the Annual Meeting, by calling the number listed on www.virtualshareholdermeeting.com/CTIC2019. You will be connected to an operator who will ask which meeting you would like to join. Please tell the operator that you would like to join the Annual Meeting of CTI BioPharma Corp. and be ready to provide the control number included on your Notice or proxy card upon request. If your control number is valid, you will placed in a queue to ask a question at the appropriate time during the meeting, when you will be able to ask your question over the phone and hear the response. You may remain on the line after asking your question if you choose.
Instructions on how to attend and participate virtually, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/CTIC2019. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted at www.virtualshareholdermeeting.com/CTIC2019.
Revocability of Proxies
You may change your vote or revoke your proxy at any time before your proxy is voted at the SpecialAnnual Meeting. Any shareholderstockholder of record executing a proxy has the power to revoke it at any time prior to the voting thereof on any matter by delivering written notice of revocation of your proxy to our Chief Executive Officer, Adam R. Craig,Secretary, David H. Kirske, at our principal executive offices, or by executing and delivering another proxy dated as of a later date or by attending and voting, in person atvirtually via the SpecialInternet, during the Annual Meeting. However, your attendance during the Annual Meeting will not automatically revoke your proxy unless you specifically so request. For shares held through a broker, bank or other nominee, you may change your vote by submitting new voting instructions to your broker, bank or other nominee, or by obtaining a legal proxy from your broker, bank or other nominee giving you the right to vote your shares at the SpecialAnnual Meeting.
Attendance at the SpecialAnnual Meeting will not, by itself, revoke a proxy. For our Italian shareholders, any written notice of revocation or another proxy, in either case dated as of a later date, must alsoA stockholder’s last vote is the vote that will be accompanied by another Certification.
counted.
Absence of Specific Voting Instruction; Additional Matters That May Come Before SpecialAnnual Meeting
If a quorum is established at the SpecialAnnual Meeting, all shares of our Common Stockcommon stock represented by properly executed proxies that are not revoked will be voted in accordance with the instructions, if any, given therein.in those proxies. Proxy cards that are signed and returned without specifying a vote or an abstention on any proposal specified thereinin the proxy card will be voted according to the recommendations of the Boardour board of directors on such proposals, which recommendations are in favor of each of the Proposals,proposals, and will be voted, in the proxies’proxy holders’ discretion, upon such other matter or matters that may properly come before the SpecialAnnual Meeting and any such postponements or adjournments thereof. As of the date of this Proxy Statement,proxy statement, we know of no business other than the Proposalsproposals that will be presented for action at the SpecialAnnual Meeting. All proxy cards, whether received prior to or after the original date of the SpecialAnnual Meeting, will be valid as to any postponements or adjournments of the SpecialAnnual Meeting.
Voting Agreement
AtStockholder Proposals and Recommendations
Stockholders may present proper proposals for inclusion in our proxy statement and for consideration at the next annual meeting of stockholders by submitting their proposals in writing to our corporate secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy statement for our 2020 annual meeting of stockholders, our corporate secretary must receive the written proposal at our principal executive offices not later than , 2019. In addition, stockholder proposals must comply with the requirements of Rule 14a-8 regarding the inclusion of stockholder proposals in company-sponsored proxy materials. Proposals should be addressed to:
CTI BioPharma Corp.
Attention: Corporate Secretary
3101 Western Avenue, Suite 800
Seattle, Washington 98121
You may propose director candidates for consideration by our nominating and corporate governance committee. Any such recommendations should include the nominee’s name and qualifications for membership on our board of directors and should be directed to our corporate secretary at the address set forth above. For additional information regarding stockholder recommendations for director candidates, see “Board of Directors and Corporate Governance — Stockholder Recommendations.”
In addition, our bylaws permit stockholders to nominate directors for election at an annual meeting of stockholders. To nominate a director, the stockholder must provide the information required by our bylaws. In addition, the stockholder must give timely notice to our Corporate Secretary in accordance with our bylaws, which, in general, require that the notice be received by our Corporate Secretary within the time period described under “Board of Directors and Corporate Governance — Nomination of Director Candidates and Proposals Not Intended for Inclusion in Proxy Materials.”
PROPOSAL 1: ELECTION OF DIRECTORS
Summary
Our board of directors currently comprises six members. Five of our directors are independent within the meaning of the independent director guidelines of The Nasdaq Stock Market (“Nasdaq”). Our certificate of incorporation and bylaws provide that the number of our directors shall be between five and twelve persons and will be fixed by resolution of our board of directors.
Our board of directors has, upon the recommendation of the nominating and governance committee, nominated each of Dr. Craig, Dr. Fischer, Mr. Metzger, Dr. Parkinson, Mr. Perry, and Dr. Tuckson to one-year terms of office that would expire at the 2020 annual meeting of stockholders. Each of the nominees is an incumbent director recommended for re-election by the nominating and governance committee.
Each nominee has consented to being named in this proxy statement and has agreed to serve if elected. If any nominee is unable to serve or, for good cause, will not serve as a director at the time of the Annual Meeting, the persons named as proxies may vote for a substitute nominee designated by our existing board of directors to fill the vacancy or for the balance of the nominees, leaving a vacancy, unless our board of directors chooses to reduce the number of directors serving on our board of directors. As of the date of this proxy statement, we have no reason to believe that any of the nominees will be unable or unwilling to stand as a nominee or to serve as a director if elected.
Nominees for Director
The table below provides the names and certain other biographical information for each of the nominees for election as a director as of March 22, 2019.
|
| | | |
| Name | Age | Position | Director Since |
| Adam R. Craig, M.D., Ph.D. | 53 | Director, Chief Executive Officer, President, Interim Chief Medical Officer | 2017 |
Laurent Fischer, M.D.(1)(2)(3) | 55 | Chairman of the Board | 2017 |
Michael A. Metzger(1)(2) | 48 | Director | 2017 |
David Parkinson, M.D.(2) | 68 | Director | 2017 |
Matthew D. Perry(2) | 46 | Director | 2016 |
Reed V. Tuckson, M.D., F.A.C.P.(1)(3) | 68 | Director | 2011 |
(1) Member of the audit committee.
(2) Member of the compensation committee.
(3) Member of the nominating and governance committee.
Adam R. Craig, M.D., Ph.D., has served as one of our directors and as our President and Chief Executive Officer since March 2017. Dr. Craig worked as an independent consultant providing strategic and operational advice and support to CTI BioPharma and other hematology/oncology biotechnology companies since 2016. Prior to consulting, Dr. Craig was Chief Medical Officer and Executive Vice President of Development of Sunesis Pharmaceuticals from 2012 to 2016. From 2008 to 2012, Dr Craig was Chief Medical Officer and Senior Vice President of Chemgenex Pharmaceuticals Ltd, a biotechnology company which was acquired by Cephalon/Teva Pharmaceuticals in 2011. Dr. Craig is a Member of the Royal College of Physicians (U.K.) and undertook Post-Graduate Training in Pediatrics and Pediatric Oncology. Dr. Craig earned his Bachelor’s and Medical degrees from Charing Cross and Westminster Medical School, University of London, and holds a Ph.D. in Molecular Oncology from Leeds University in the U.K. and an MBA from the Open Business School, in the U.K. Dr. Craig has served as a Product Development Reviewer for the Cancer Prevention Research Institute of Texas.
Dr. Craig’s experience as an executive in the pharmaceutical industry, knowledge of biopharmaceuticals, and leadership role within our organization were the primary qualifications that have led the board of directors to conclude that he should serve on our board of directors.
Laurent Fischer, M.D., has been one of our directors since July 2017. Dr. Fischer was appointed Senior Vice President, Head of the Liver Therapeutic Area at Allergan following the acquisition of Tobira Therapeutics, where he served as Chief Executive Officer. Dr. Fischer has served as a Senior Advisor on the Frazier Healthcare Partners’ Life Sciences team since March 2017. He was previously chairman and CEO of Jennerex, Inc., a company with a first-in-class oncolytic immunotherapy for Liver Cancer acquired for $150 million by Sillajen. He was co-founder, president and CEO of Ocera Therapeutics and held senior positions at DuPont-Merck, DuPont Pharmaceuticals, and Hoffmann-La Roche in liver disease, virology and oncology. Dr. Fischer received his undergraduate degree from the University of Geneva and his medical degree from the Geneva Medical School, Switzerland.
Dr. Fischer’s experience as an executive in the pharmaceutical industry, knowledge of biopharmaceuticals, and his service as the chairman of the board of directors were the primary qualifications that have led the board of directors to conclude that he should serve on our board of directors.
Michael A. Metzger has been one of our directors since January 2017. Mr. Metzger is currently president and chief operating officer of Syndax Pharmaceuticals, Inc., an immuno-oncology biopharmaceutical company. Mr. Metzger served as president and chief executive officer of Regado Biosciences, Inc. from 2013 to 2015, where he oversaw the company’s successful merger with Tobira Therapeutics, Inc. in 2015 and acted as an advisor to Tobira during its subsequent sale to Allergan in 2016. Previously, Mr. Metzger served as executive vice president and chief operating officer at Mersana Therapeutics, a biotechnology company developing novel immunoconjugate therapies for cancer, from 2011 to 2013 and in senior business development positions including leading mergers and acquisitions at Forest Laboratories, Inc. from 2006 to 2011. Mr. Metzger served as vice president corporate development at Onconova Therapeutics, Inc., from 2001 until 2006, and was a managing director at MESA Partners, Inc., a venture capital firm, from 1997 to 2001. Mr. Metzger holds a B.A. from George Washington University and an M.B.A. in Finance from the New York University Stern School of Business.
Mr. Metzger’s business and management experience in the biopharmaceutical industry were the primary qualifications that have led the board of directors to conclude that he should serve on our board of directors.
David R. Parkinson, M.D., has been one of our directors since June 2017. Dr. Parkinson has served as President and Chief Executive Officer of Essa Pharmaceuticals, Inc. since 2016, and as a member of the board of directors of Essa Pharmaceuticals, Inc. since 2015. Dr. Parkinson has served as a venture partner at New Enterprise Associates (NEA), Inc. since 2012 and in 2016 moved to the role of venture advisor to NEA. From 2007 until 2012, Dr. Parkinson served as President and CEO of Nodality, a biotechnology company focused on the biological characterization of signaling pathways in patients with malignancy to enable more effective therapeutics development and clinical decision-making. Dr. Parkinson has previously led oncology clinical development activities at Novartis (1997-2003), Amgen (2003-2006) and Biogen Idec (2006-2007). He worked at the National Cancer Institute from 1990 to 1997, serving as Chief of the Investigational Drug Branch, and then as Acting Associate Director of the Cancer Therapy Evaluation Program (CTEP). Dr. Parkinson is a past Chairman of the Food & Drug Administration (FDA) Biologics Advisory Committee, has also served on the FDA’s Science Board, and is a recipient of the FDA’s Cody Medal. Dr. Parkinson received his medical degree from the University of Toronto, has held academic positions both at Tufts and at the University of Texas MD Anderson Cancer Center, and has authored over 100 peer-reviewed publications.
Dr. Parkinson’s business and management experience in the biopharmaceutical and healthcare industry, as well as his experience at the FDA, were the primary qualifications that have led the board of directors to conclude that he should serve on our board of directors.
Matthew D. Perry has been one of our directors since January 2016. Mr. Perry is the President of BVF Partners L.P. and portfolio manager for the underlying funds managed by the firm. BVF Partners L.P. is a private investment partnership that has focused on small-cap, value oriented investment opportunities for more than 20 years. Mr. Perry joined BVF Partners L.P. in December 1996 and has been a successful lead investor in dozens of transactions and has positively influenced corporate direction for numerous biotechnology companies during the course of his career. Mr. Perry is also a co-founder and director of Nordic Biotech Advisors ApS, a venture capital
firm based in Copenhagen, Denmark. In February 2017, Mr. Perry was appointed to the Board of Directors of Xoma Corporation. He holds a B.S. from the Biology Department at the College of William and Mary.
Mr. Perry’s management consulting experience and his experience investing in biotechnology companies were the primary qualifications that have led the board of directors to conclude that he should serve on our board of directors.
Reed V. Tuckson, M.D., F.A.C.P., has been one of our directors since September 2011. Dr. Tuckson serves as the Managing Director of Tuckson Health Connections, a private consulting company. From December 2006 to March 2014, Dr. Tuckson served as the Executive Vice President and Chief of Medical Affairs of UnitedHealth Group and, from November 2000 to December 2006, he served as Senior Vice President of Clinical Affairs of UnitedHealth Group. Dr. Tuckson also served as Senior Vice President, Professional Standards, for the American Medical Association, President of the Charles R. Drew University of Medicine and Science in Los Angeles, Senior Vice President for Programs of the March of Dimes Birth Defects Foundation and Commissioner of Public Health for the District of Columbia. He currently serves on the board of directors of the Alliance for Health Policy, Project Sunshine, LifePoint Health, InformGenomics, and on the Advisory Board of the National Institute of Health Clinical Center and on several committees of the National Academy of Medicine. Dr. Tuckson received his B.S. in zoology from Howard University and his M.D. from the Georgetown University School of Medicine, and he completed the Hospital of the University of Pennsylvania’s General Internal Medicine Residency and Fellowship programs.
Dr. Tuckson’s experience as a healthcare executive and consultant across health and medical care sectors were the primary qualifications that have led the board of directors to conclude that he should serve on our board of directors.
THE BOARD RECOMMENDS
A VOTE “FOR ALL” OF THE NOMINEES NAMED ABOVE.
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Attributes and Independence
We believe that our board of directors as a whole should encompass a range of talent, skill, diversity and expertise enabling it to provide sound guidance with respect to our operations and interests. In addition to considering a candidate’s background and accomplishments, candidates are reviewed in the context of the current composition of our board of directors and the evolving needs of our business. In addition, all directors should possess the qualifications set forth in our corporate governance guidelines, which are available on our website at http://www.ctibiopharma.com.
Our policy is that a majority of our directors must qualify as “independent” under the Nasdaq Rules and other standards agreed to in the settlement for certain derivative stockholder actions. We, our board of directors and the nominating and governance committee are involved in the process of determining the independence of acting directors and director nominees. We solicit relevant information from directors and director nominees via a questionnaire, which covers material relationships, compensatory arrangements, employment and any affiliation with us. In addition to reviewing information provided in the questionnaire, we ask our executive officers on an annual basis regarding their awareness of any existing or currently proposed transactions, arrangements or understandings involving us in which any director or director nominee has or will have a direct or indirect material interest. We share our findings with the nominating and governance committee and our board of directors regarding the Nasdaq and SEC independence requirements and any information regarding the director or director nominee that suggests that such individual is not independent. Our board of directors considers all relevant issues, including consideration of any transactions, relationships or arrangements that are not required to be disclosed under Item 404(a) of Regulation S-K, prior to making a determination with respect to the independence of each director. With respect to the independence of Mr. Perry, the board of directors considered Mr. Perry’s position as President of BVF, our largest stockholder, which is discussed under “Certain Transactions with Related Persons.”
Based on the review described above, our board of directors affirmatively determined that:
Five of our six directors are independent, and all members of the audit committee, compensation committee and nominating and governance committee are independent, under the applicable Nasdaq standards and, in the case of the audit committee and the compensation committee, the applicable SEC standards.
All of the non-management directors are independent under the Nasdaq standards. The independent directors are: Drs. Fischer, Parkinson and Tuckson and Messrs. Metzger and Perry.
Dr. Craig is not independent by virtue of his position as our President and Chief Executive Officer.
Other than as described under “Certain Transactions with Related Persons”, in 2018, there were no transactions, relationships or arrangements not disclosed as related person transactions that were considered by our board of directors in determining that the applicable independence standards were met by each of the directors.
Leadership Structure
Our board of directors has a formal policy that the positions of Chief Executive Officer and Chairman of the Board shall continue to be held by separate individuals. Dr. Fischer has served as the Chairman of the Board since September 2017. Because Dr. Fischer meets the independence standards of Nasdaq, he also presides over separate meetings for the independent directors. Our board of directors regularly provides such independent directors separate meeting time. This structure ensures a greater role for the independent directors in our oversight and active participation of the independent directors in setting agendas and establishing the board of directors’ priorities and procedures. Further, this structure permits the Chief Executive Officer to focus on the management of our day-to-day operations, while the Chairman of the Board presides at all meetings of the board of directors at which he is present; calls and supervises preparation of the agenda for and presides over separate sessions of the independent directors; acts as a liaison between the independent directors and our management; and performs such other powers and duties as may from time to time be assigned to him by the board of directors or as may be prescribed by our bylaws.
Board and Committee Meetings
Our board of directors held 14 meetings during the year ended December 31, 2018. All directors who served during 2018 attended at least 75% of the total number of meetings of the board of directors and of all committees of the board of directors on which each director served that year. Independent directors meet in regularly scheduled sessions without management. Our policy is to encourage attendance at the Annual Meeting. One of our directors in office at the time of our merger with Novuspharma, S.p.A., we entered into2018 Annual Meeting attended such meeting in person.
Our board of directors has an agreement with Monte Titoliaudit committee, a compensation committee, and a nominating and governance committee, each of which has the composition and responsibilities described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors.
Audit Committee
Our board of directors has a separately-designated standing audit committee. The audit committee has responsibility for assisting the board of directors in order to ensure that persons receiving beneficial interests in sharesoverseeing our accounting and financial reporting processes and audits of our Common Stock as a resultfinancial statements. The audit committee assists the board of directors in oversight and monitoring of (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the qualifications, independence and performance of the merger or subsequently acquiring sharesindependent registered public accounting firm and (iv) our internal controls over financial reporting and systems of disclosure controls and procedures. The audit committee has a written charter, which is available on our website at http://investors.ctibiopharma.com. The composition of the audit committee, the attributes of audit committee members and the responsibilities of the audit committee as reflected in its charter adopted by our board of directors are intended to be in accordance with SEC rules and Nasdaq Rules with regard to corporate audit committees.
The audit committee held six meetings during the year ended December 31, 2018. The audit committee currently consists of three non-employee directors: Mr. Metzger (Chairperson) and Drs. Fischer and Tuckson.
The board of directors has determined that each of the current members of the audit committee meets the requirements of “independence” as set forth in Section 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the rules and regulations promulgated by the SEC and the Nasdaq Rules. Additionally, the board of directors has determined that Mr. Metzger qualifies as an “audit committee financial expert” as defined under the rules and regulations of the SEC and that he has accounting and related financial management expertise within the meaning of the Nasdaq Rules.
Compensation Committee
The Compensation Committee has responsibility for:
carrying out the responsibilities of the board of directors relating to compensation of our Common Stock through an accountChief Executive Officer, all other officers with an Italian bank on the Mercato Telematico Azionario stock market in Italy would be able to vote those shares. Monte Titoli agreed that each time it is designated as proxy by DTC, Monte Titoli will execute a further omnibus proxy transferring its voting powertitle of Executive Vice President and above and any other employee to the persons who hold Certifications issued pursuantextent required under applicable law or Nasdaq Stock Market Rules;
carrying out any other board responsibilities relating to Italian law (Section 21 (and the following sections) of the Regulation enacted by the Bank of Italyour overall compensation and CONSOB on February 22, 2008).
benefit structure, policies and programs;
PROPOSAL 1:
APPROVAL OF DELAWARE REINCORPORATIONadministering our equity compensation plans; and
Summaryreviewing and approving our compensation disclosures included in our annual report and proxy statement.
The Board has unanimously approvedcompensation committee charter authorizes the compensation committee to delegate any of its responsibilities to a subcommittee as and recommendswhen it deems appropriate, solely to the Company’s shareholdersextent permitted by applicable law and the applicable rules of Nasdaq.
The compensation committee held three meetings during the year ended December 31, 2018. The compensation committee currently consists of four non-employee directors: Dr. David Parkinson (Chairperson), Dr. Fischer, Mr. Perry, and Mr. Metzger, each of whom meets the requirements of independence as set forth in the rules and regulations promulgated by the SEC and the Nasdaq Rules. The compensation committee has a written charter, which is available on our website at http://investors.ctibiopharma.com.
Nominating and Governance Committee
The nominating and governance committee is responsible for establishing standards and processes so that the board of directors can be properly constituted to meet its fiduciary obligations to us and our stockholders and so that we have and follow appropriate governance standards. The nominating and governance committee is responsible for reviewing with the board of directors, on an annual basis, the desired director qualifications, expertise, characteristics and other factors for potential consideration, which review includes consideration of diversity, skills and experience. The nominating and governance committee is responsible for conducting searches for potential directors with corresponding attributes and evaluating and proposing nominees for election to the board of directors. Our Corporate Governance Guidelines set forth the qualifications that should be met by director nominees, which include, but are not limited to, the following: (i) a background that demonstrates an understanding of the business, financial affairs and complexities of our business, as well as general health care, science and technology matters, (ii) fundamental qualities such as intelligence, honesty, perceptiveness, good judgment, maturity, high ethics and standards, integrity, fairness and responsibility, (iii) a genuine interest in our business and recognition that each director is accountable to all stockholders, (iv) a willingness to invest significant time in reviewing detailed and technical background information in preparation for board meetings, (v) experience in a senior position in a complex organization, (vi) no legal impediment that would interfere with the duty of loyalty to us and our stockholders, (vii) the ability and willingness to spend the time required to function effectively as a director in our industry, which requires ad-hoc board of directors and committee meetings, (viii) be compatible and able to work well with the other directors, management and legal counsel, and (ix) possesses independent opinions and a willingness to state them in a constructive manner. Each of the nominees for election as a director at the Annual Meeting holds or has held senior executive positions in, and/or has experience serving on the boards of directors and board committees of, large, complex organizations and has operating experience that meets this objective. In these positions, they have also gained experience in core management skills, such as strategic and financial planning, public company financial reporting, corporate governance, risk management and leadership development.
The nominating and governance committee also believes that each of the nominees and current directors has other key attributes that are important to an effective board: integrity and demonstrated high ethical standards; sound judgment; analytical skills; the ability to engage management and each other in a constructive and collaborative fashion; diversity of origin, background, experience and thought; and the commitment to devote significant time and energy to service on the board of directors and its committees.
The nominating and governance committee ensures that nominations to the board of directors are made such that the board of directors is properly constituted in terms of overall composition and governance. Although we do not have a policy regarding diversity, the nominating and governance committee seeks a broad range of perspectives and considers both the personal characteristics (gender, ethnicity and age) and experience (industry, profession and public service) of directors and prospective nominees to the board of directors.
The nominating and governance committee is responsible for recommending director nominees to the board of directors for its consideration, while the board of directors is ultimately responsible for determining the director slate for election by stockholders and for filling any vacancies on the board of directors in accordance with the bylaws. All of the director nominees named in this proxy statement satisfied the board of directors’ criteria for membership and were recommended to the board of directors by the nominating and governance committee for election by stockholders at the Annual Meeting.
The nominating and governance committee held one meeting during the year ended December 31, 2018. The nominating and governance committee currently consists of two non-employee directors: Dr. Tuckson (Chairperson) and Dr. Fischer, each of whom meet the independence requirements as set forth in the rules and regulations promulgated by the SEC and the Nasdaq Rules. The nominating and governance committee has a written charter, which is available on our website at http://investors.ctibiopharma.com.
Annual Board and Committee Performance Evaluations
The nominating and governance committee is responsible for developing policies and procedures for the board of directors performance evaluation process, and for overseeing such policies and procedures. The nominating and governance committee’s current practice is to conduct a performance evaluation of the board of directors and each of its committees on an annual basis.
Risk Oversight
Companies face a variety of risks, including credit risk, liquidity risk and operational risk. Our board of directors believes an effective risk management system will (i) timely identify the material risks that we face, (ii) communicate necessary information with respect to material risks to senior executives and, as appropriate, to the board of directors or relevant committee, (iii) implement appropriate and responsive risk management strategies consistent with our risk profile and (iv) integrate risk management into our decision-making.
Our board of directors takes the lead in overseeing risk management, and the audit committee makes periodic reports to the board of directors regarding briefings provided by management and advisers, as well as the audit committee’s own analysis and conclusions regarding the adequacy of our risk management processes. Material risks are identified and prioritized by management, and each prioritized risk is referred to a committee or the full board of directors for oversight. For example, management refers strategic risks to the full board of directors, while financial risks are referred to the audit committee. Our board of directors regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each, and annually reviews our risk management program as a whole. Also, the compensation committee reviews our compensation programs to help ensure that they do not encourage excessive risk-taking.
In addition to the formal compliance program, the board of directors encourages management to promote a corporate culture that incorporates risk management into our corporate strategy and day-to-day business operations. The board of directors also continually works, with the input of our executive officers, to assess and analyze the most likely areas of future risk for us.
Our board of directors believes that the processes it has established for overseeing risk would be effective under a variety of leadership frameworks and therefore do not materially affect its choice of leadership structure as described under “Leadership Structure” above.
Code of Ethics
We have adopted a code of ethics for our senior executive and financial officers (including our principal executive officer and principal financial officer), as well as a code of business conduct and ethics applicable to all officers, directors and employees.
Both codes of ethics are available on our website at http://investors.ctibiopharma.com. Stockholders may request a free copy of the codes of ethics by contacting us at (206) 282-7100 or at CTI BioPharma Corp., Attention: Investor Relations, 3101 Western Avenue, Suite 800, Seattle, Washington 98121. Any amendments to, or waivers from, our code of ethics for our directors and executive officers will be posted on our website at http://investors.ctibiopharma.com to the extent required by applicable SEC and Nasdaq rules.
Corporate Governance Guidelines
We have adopted Corporate Governance Guidelines, which are available on our website at http://investors.ctibiopharma.com. Stockholders may request a free copy of the Corporate Governance Guidelines at the address and phone number set forth above.
Nomination of Director Candidates and Proposals Not Intended for Inclusion in Proxy Materials
If you intend to nominate an individual for election to our board of directors at our 2020 Annual Meeting or wish to present a proposal at the 2020 Annual Meeting but do not intend for such proposal to be included in the proxy statement for such meeting, our bylaws require that, among other things, stockholders give written notice of the nomination or proposal to our Secretary at our principal executive offices no less than the close of business on February 16, 2020 (the 90th day prior to the first anniversary of the Annual Meeting) and no more than the close of business on January 17, 2020 (the 120th day prior to the first anniversary of the Annual Meeting). Notwithstanding the foregoing, if we change the Company’s statedate of incorporationthe 2020 Annual Meeting to a date that is more than 30 days before or after the date one year from the Statedate of Washingtonthe Annual Meeting, written notice by a stockholder must be received by later than the close of business on the tenth day following the date on which the public announcement is first made of the date of the 2020 Annual Meeting. Stockholder proposals not intended to the State of Delaware. For the reasons described below, the Board believes that changing the Company's state of incorporation to Delaware isbe included in the best interestsproxy statement or nominations for director candidates that do not meet the notice requirements set forth above and further described in Sections 2.13 and 2.14 of Article II of our bylaws will not be acted upon at the 2020 Annual Meeting.
As set forth in our bylaws, each notice of a director nomination should contain the following information: (i) the name and address of the Companystockholder who intends to make the nomination and its shareholders. If the Company’s shareholders approve this proposal, the reincorporation would be accomplished by the merger of the Company with and intoperson or persons to be nominated; (ii) a wholly owned subsidiary, as described below. Approvalrepresentation that the stockholder is a holder of this Proposal 1 requires a majorityrecord of votes actually cast by our shareholdersstock entitled to vote on the proposal at the Special Meeting,such meeting and intends to appear in person or by proxy providedat the meeting to nominate the person or persons specified in the notice; (iii) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (iv) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had the nominee been nominated or intended to be nominated by our board of directors; and (v) the consent of each nominee to serve as a director if so elected. The Chairman of the meeting may in his discretion determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedures, and if so determined, he will so declare to the meeting and the defective nomination will be disregarded.
As set forth in our bylaws, each notice of a stockholder proposal (whether or not to be included in the proxy statement) should contain the following information: (i) the address of the stockholder who intends to make the proposal(s); (ii) a representation that the affirmative votes equalstockholder is a holder of record of our stock entitled to vote at such meeting and intends to appear in person or exceed fifteen percentby proxy at the meeting to vote for the proposal(s); and (iii) such other information regarding each proposal as would be required to be included in a proxy statement filed pursuant to the proxy rules of the votes withinSEC. The Chairman of the voting group.meeting may in his discretion determine and declare to the meeting that a proposal was not made in accordance with the foregoing procedures, and if so determined, he shall so declare to the meeting and the defective proposal will be disregarded.
Stockholder Recommendations
A stockholder may recommend a director to the nominating and governance committee by delivering a written notice to our Secretary at our principal executive offices and including in the notice the items required by Section 2.13 of Article II of our bylaws as well as (i) a comprehensive written resume of the nominee’s business experience and background, and (ii) the consent of the director candidate to serve as a member of the board of directors if elected. Properly communicated stockholder recommendations will be considered in the same manner as recommendations received from other sources and using the same criteria as used for any other director candidate. See “Nominating and Governance Committee” above for additional information.
Communicating Concerns to Directors
Stockholders who wish to communicate with our directors to report complaints or concerns related to accounting, internal accounting controls or auditing may do so using the audit committee procedures for the receipt of such communication. The procedures allow submitting the complaint or concern either online or telephonically, with a more detailed description of the procedures set forth in our Whistleblower Policy, which is contained in our Code of Business Conduct and Ethics available on our website at http:// investors.ctibiopharma.com.
Stockholders and other interested parties may communicate with the board of directors and the Chairman on other matters by writing to Dr. Fischer, c/o CTI BioPharma Corp., Legal Department, 3101 Western Avenue, Suite 800, Seattle, Washington 98121. The Legal Department will perform a legal review in the normal discharge of duties to ensure that communications forwarded to Dr. Fischer are appropriate. Items that are unrelated to the duties and responsibilities of the board of directors such as mass mailings, junk mail, personal employee complaints not related to accounting, internal controls, auditing or officer conduct (which are reviewed and forwarded by the Legal Department), inquiries regarding clinical trials or our operations generally, job inquiries, surveys, business solicitations or advertisements will not be forwarded to Dr. Fischer. In addition, material that is threatening or similarly unsuitable will not be forwarded to Dr. Fischer. Any communication that is relevant to the conduct of our business and is not forwarded will be retained for one year and made available to Dr. Fischer and any other independent director upon request. The independent directors have granted the Legal Department discretion to decide what correspondence shall be forwarded to Dr. Fischer and what shall be shared with our management, with specific instructions that any personal employee complaints of the nature addressed under our Whistleblower Policy be forwarded as set forth therein. If items are forwarded to Dr. Fischer, he will decide in his own discretion whether to circulate them to other members of the board of directors.
Non-Employee Director Compensation Table - 2018
The Reincorporation
The reincorporation of the Company from the State of Washington to the State of Delaware, if approved, will be effected in accordance with that certain Agreement and Plan of Merger (the “Merger Agreement”), dated as of , 2017 by and between the Company and CTI BioPharma Corp., a Delaware corporation and a direct wholly owned subsidiary of the Company (“Newco”), a copy of which is attached as Appendix A to this Proxy Statement. Pursuant to the Merger Agreement, subject to the conditions set out therein, at the effective time, the Company will merge with and into Newco, with the Company ceasing to exist and Newco being the surviving corporation of such merger (the “Merger”). The consummation of the transactions contemplated by the Merger Agreement, including the Merger and the reincorporation, is conditioned upon the approval by the shareholders of this Proposal 1. For morefollowing table presents information regarding the processcompensation earned for 2018 by whichmembers of our board of directors who are not also our employees. The compensation paid to Dr. Craig for his services as an employee in 2018 is presented in the reincorporation is expected to be consummated, see “The Reincorporation Process” below.
On , 2017, the Board (i) determined that the Merger“Summary Compensation Table” and the reincorporation are advisable and in the best interests of the Company and its shareholders, (ii) approved and declared advisable the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger and the reincorporation and (iii) submittedrelated explanatory tables below. Dr. Craig is not entitled to the Company’s shareholders the Merger Agreement and the principal terms of the reincorporationreceive additional compensation for their consideration and approval. The Board believes that shareholder approval of the reincorporation provides the following advantages to the Company:
Delaware corporate law is highly developed and predictable;
the Company will have access to Delaware’s specialized courts for corporate law;
the Company’s ability to raise outside capital may be improved;
the reincorporation may reduce legal fees and administrative burdens;
the Company may find it easier to recruit future Board members and other leaders; and
the reincorporation will not impact the Company’s daily business operations, listing on the NASDAQ or require relocation of offices.his service as a director.
Highly Developed and Predictable Corporate Law |
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| Name | Fees Earned or Paid in Cash ($)(1) | Option Awards ($)(2)(3) | All Other Compensation ($) | Total ($) |
| Laurent Fischer, M.D. | 84,000 | 192,096 | — | 276,096 |
| Michael A. Metzger | 53,375 | 192,096 | — | 245,471 |
| David Parkinson, M.D. | 53,250 | 192,096 | — | 245,346 |
| Matthew D. Perry | 47,000 | 192,096 | — | 239,096 |
| Frederick W. Telling, Ph.D. | 68,000 | 270,432(4) | 716(5) | 339,148 |
| Reed V. Tuckson, M.D. | 60,500 | 192,096 | — | 252,596 |
| Richard L. Love | 31,750 | — | 3,083(6) | 34,833 |
The Board believes Delaware has one of the most modern statutory corporation laws, which is revised regularly to meet changing legal and business needs of corporations. The Delaware legislature is responsive to developments in modern corporate law and Delaware has proven sensitive to changing needs of corporations and their shareholders. The Delaware Secretary of State is particularly flexible and responsive in its administration of the filings required for mergers, acquisitions and other corporate transactions. Delaware has become a preferred domicile for many major U.S. corporations and the Delaware General Corporations Law (the “DGCL”) and administrative practices have become comparatively well-known and widely understood. As a result of these factors, it is anticipated that the DGCL will provide greater efficiency, predictability and flexibility in our legal affairs than is presently available under the Revised Code of Washington (“RCW”).
Access to Specialized Courts
Delaware has a specialized Court of Chancery that is widely recognized as the nation’s preeminent forum for the resolution of disputes involving corporate internal affairs and related business matters. As the leading state of incorporation for both private and public companies, Delaware has developed a vast body of corporate law that helps to promote greater consistency and predictability in judicial rulings. In addition, Court of Chancery actions and appeals from Court of Chancery rulings proceed expeditiously. In contrast, Washington does not have a similar specialized court established to hear only corporate law cases. Rather, disputes involving questions of Washington corporate law are either heard by the Washington Superior Court, the general trial court in Washington that hears all types of cases, or, if federal jurisdiction exists, a federal district court.
Improved Ability to Raise Capital
In the opinion of the Board, underwriters and other members of the financial services industry may be more willing and better able to assist in capital-raising programs for corporations having the greater flexibility afforded by the DGCL. The familiarity with Delaware law is an additional benefit for underwriters and the financial services industry.
In addition, our Board believes that we will improve our ability to raise capital by simplifying the capital raising process and reducing the associated legal and administrative costs of being listed on the Borsa Italiana exchange. Delisting from the Borsa Italiana exchange will generally eliminate certain costs, legal fees, administrative burdens, limitations and time delays required under Italian law which could adversely affect our ability to raise capital.
Opportunity to Reduce Legal Fees and Administrative Burden
The Company regularly looks for ways to reduce administrative burden and reduce costs. The Board expects the familiarity and proliferation of Delaware law to assist in the reduction of administrative burden. The Company also retains separate counsel in Washington to advise on Washington corporate law matters. The reincorporation of the Company will eliminate the need for such advice. Additionally, as a consequence of the delisting of the Company’s shares from the Borsa Italiana, we will not generally need to retain separate counsel in Italy to advise on Italian corporate and securities law matters and therefore will reduce our legal fees. We believe this will further reduce our legal and other administrative costs that result from being listed on multiple exchanges.
Easier Recruitment of Future Board Members and Other Leaders
The Company competes for talented individuals to serve on our management team and on our Board. The Board believes that the better understood and comparatively stable corporate environment afforded by Delaware will enable the Company to compete more effectively with other public and private companies, many of which are incorporated in Delaware, in the recruitment, from time to time, of talented and experienced directors and officers.
Additionally, the parameters of director and officer liability are more extensively addressed in Delaware court decisions and are therefore better defined and better understood than under the RCW. The Board believes that reincorporation in Delaware will enhance the Company’s ability to recruit and retain directors and officers in the future, while providing appropriate protection for shareholders from possible abuses by directors and officers.
In this regard, it should be noted that directors’ personal liability is not, and cannot be, eliminated under the DGCL for intentional misconduct, bad faith conduct or any transaction from which the director derives an improper personal benefit.
No Impact on Business Locations
The reincorporation will not result in the Company moving headquarters from Washington and will not require relocating the physical location of any of its offices due solely to the reincorporation.
Effect of the Reincorporation on Listing and Trading in Italy
The consummation of the reincorporation will trigger the delisting of the Common Stock from the Borsa Italiana. Delisting from the Borsa Italiana may make it more difficult or expensive for Italian shareholders to buy and sell our shares. If Italian shareholders choose to no longer hold our Common Stock as a result of delisting and there is not corresponding demand from other holders of our Common Stock, the market price and liquidity of our Common Stock could be adversely affected. If the Company is reincorporated in Delaware and delisted in Italy, Italian shareholders will be able to sell their shares of Newco common stock freely on Nasdaq, where the common stock of Newco will be listed as from the Effective Date of the Merger. There is currently an active trading market for the Company’s shares on Nasdaq. Italian shareholders can sell their shares on Nasdaq by contacting any broker or dealer who is appropriately licensed and qualified to sell securities listed and traded on Nasdaq. The Company is not making any recommendation whether or not any shareholder should buy, sell or hold your shares of Newco common stock. In addition, the Company advises that, if you would like to sell your shares, you should contact your financial advisor or other tax or accounting advisors in order to determine the tax and other economic effect of selling your shares.
The Reincorporation Process
If the Company’s shareholders approve this Proposal 1, the Company will merge into Newco. The address and phone number of Newco’s principal office will be the same as those of the Company. Prior to the Merger, other than matters incidental to its formation, Newco will have no material assets or liabilities and will not have carried on any business. After the Merger, the Company will cease to exist, and Newco will be the surviving corporation. Following the Merger, Newco will succeed to all of the Company’s operations, own all of the Company’s assets and assume all of the Company’s obligations, and we do not expect any change to financial presentation.
When the Merger becomes effective, each outstanding share of Common Stock and preferred stock will automatically convert into one share of the substantially similar common stock or preferred stock, as applicable, of Newco. At the same time, each outstanding option, right or warrant to acquire shares of Common Stock will be converted into an option, right or warrant to acquire an equal number of shares of Newco common stock under the same terms and conditions as the original options, rights or warrants. All of our employee benefit and compensation plans immediately prior to the Merger will be continued by Newco, and each outstanding equity award and notional share unit relating to shares of Common Stock will be converted into an equity award or notional share unit, as applicable, relating to an equivalent number of shares of Newco’s common stock on the same terms and subject to the same conditions. The registration statements of the Company on file with the SEC immediately prior to the Merger will be assumed by Newco.
Furthermore, when the Merger becomes effective, Newco will be governed by the Certificate of Incorporation of Newco (the “Delaware Charter”) in substantially the form attached to this Proxy Statement as Appendix B and by the Bylaws of Newco (the “Delaware Bylaws”) in substantially the form attached to this Proxy Statement as Appendix C. The surviving entity will be governed by the DGCL instead of the RCW. The Company’s current Washington Charter and Washington Bylaws will not be applicable to Newco upon completion of the Merger, and will cease to have any force or effect following the reincorporation. The reincorporation, following which the Company will cease to exist and Newco will be the surviving entity, will trigger an automatic delisting of our Common Stock from the Borsa Italiana exchange on the effective date of the merger. However, if this Proposal 1 is not approved, the Company will not reincorporate in Delaware and its Common Stock will remain listed on the Borsa Italiana exchange.
Effect on Capital Stock
The Washington Charter currently authorizes the Company to issue (i) up to 81,500,000 shares of its Common Stock, no par value and (ii) up to 33,333 shares of preferred stock, no par value per share. The Delaware Charter will authorize the same number of shares of the common stock and each class of preferred stock, except that all subseries of Series N Preferred Stock will be eliminated and reclassified as Series N Preferred Stock and the number of authorized Series N Preferred Stock shall be reduced to 575. In addition, each share of Newco common stock and preferred stock will have a par value of $0.001 per share. The Delaware Charter will also provide that the Board may authorize the issuance from time to time of shares of preferred stock in one or more series, and may specify the number of shares to
be included in each such series and to fix the designations, powers, rights and preferences of the shares of each such series, and the qualifications, limitations and restrictions thereof, pursuant to the Delaware Charter and Delaware law. As of November 6, 2017, the following shares of preferred stock were issued and outstanding: 575 shares of the Company’s Series N-3 Preferred Stock. Each share of preferred stock outstanding immediately prior to the effective time of the Merger will automatically be converted into one share of preferred stock of Newco, provided that the par value of such preferred stock will be increased to $0.001 per share.
Effective Time
If this Proposal 1 is approved, the reincorporation and the delisting will become effective upon the filing of, or at the later date and time specified in (as applicable), each of the Articles of Merger to be filed with the Secretary of State of Washington in accordance with the RCW and the Certificate of Merger to be filed with the Secretary of State of Delaware in accordance with the DGCL. If the reincorporation is approved, it is anticipated that the Board will cause the reincorporation to be effected as promptly as reasonably possible following such approval. However, the reincorporation may be delayed or terminated and abandoned by action of the Board at any time prior to the effective time, whether before or after the approval by the Company’s shareholders, if the Board determines for any reason, in its sole judgment and discretion, that the consummation of the reincorporation should be delayed or would be inadvisable or not in the best interests of the Company and its shareholders, as the case may be.
Regulatory Approval
To the Company’s knowledge, the only required regulatory or governmental approvals or filings necessary in connection with the consummation of the reincorporation will be the filing of the Articles of Merger with the Secretary of State of Washington, the filing of the Certificate of Merger with the Secretary of State of Delaware and filings with the SEC under the Exchange Act.
Comparison of Shareholder Rights Before and After the Reincorporation
Because of differences between the RCW and the DGCL, as well as differences between the Company’s charter and bylaws before and after the reincorporation, the reincorporation will effect some changes in the rights of the Company’s shareholders. Summarized below are the most significant differences between the rights of the shareholders of the Company before and after the reincorporation, as a result of the differences among the RCW and the DGCL, the Washington Charter and the Delaware Charter, and the Washington Bylaws and the Delaware Bylaws. The reincorporation will not result in a significant difference in the nature and scope of the business enterprise of the Company, or a significant change in the shareholders’ rights in the business enterprise of the Company.
The summary below is not intended to be relied upon as an exhaustive list of all differences or a complete description of the differences between the DGCL and the Delaware Charter and the Delaware Bylaws, on the one hand, and the RCW and the Washington Charter and Washington Bylaws, on the other hand. The summary below is qualified in its entirety by reference to the RCW, the Washington Charter, the Washington Bylaws, the DGCL, the Delaware Charter and the Delaware Bylaws.
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Provision(1) | Washington | DelawareThe amounts reported in the “Fees Earned or Paid in Cash” column reflect the amounts earned with respect to fiscal year 2018 for the director’s retainer and fees for chairing and/or serving on applicable board committees. |
Authorized Capital Stock
(2)
| AsThe amounts reported in the “Option Awards” column of the table above reflect the grant date hereof, the Company’s authorized capital stock consists of (i) 81,500,000 authorized shares of Common Stock, no parfair value and (ii) 33,333 authorized shares of preferred stock, no par value, consisting of 25,333 shares of Series N Preferred Stock and 8,000 shares of Series ZZ Preferred Stock. The holders of Common Stock are entitled to one vote for each share on all matters voted on by alldetermined in accordance with FASB ASC Topic 718 of the shareholders, andoption awards granted to our non-employee directors during fiscal year 2018. These amounts do not have any cumulative voting, conversion, redemption or preemptive rights.
The holdersnecessarily correspond to the actual cash value that will be recognized by the directors pursuant to the awards. For a discussion of the Common Stock are entitledassumptions and methodologies used to such distributionscalculate the amounts reported, please see the discussion of equity awards contained in Note 12 (Share-Based Compensation) to our Consolidated Financial Statements for the fiscal year ended December 31, 2018, included in our Annual Report on Form 10-K filed with the SEC on March 13, 2019.
On May 17, 2018, each of our non-employee directors then in office was granted an annual award of 60,000 stock options with a per-share exercise price of $4.61, the closing price of our common shares as may be authorized from time to timereported by Nasdaq on the Board, provided that the Company is able to pay its debts in the usual course of business and the Company’s assets are not less than the sum of its total liabilities plus the amount which would be needed to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
The Series ZZ Preferred Stock and Series N Preferred Stock (which is subdivided into Series N-1, N-2 and N-3 Preferred Stock), have the voting, dividend, liquidation, distribution preference, redemption and conversion rights set forth in the Washington Charter and Bylaws.
| Upon consummationdate of the Merger, Newco’s authorized capital stock will consistgrant, and a grant-date fair value of (i) 81,500,000 authorized shares of common stock, par value $0.001 per share and (ii) 33,333 authorized shares of preferred stock, par value $0.001 per share.$192,096.
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(3)
Under the Delaware Charter and bylaws the holders of Newco common stock will be entitled to the same rights under the Washington Charter and Bylaws.
Under the Delaware Charter and Bylaws, the Series ZZ Preferred Stock and the Series N Preferred Stock will be entitled to the same rights under the Washington Charter and Bylaws, except (i) all subseries of the Series N Preferred Stock shall be eliminated and reclassified as Series N Preferred Stock (ii) the Series N Preferred Stock shall be entitled to the same rights as the Company’s previous Series N-3 Preferred Stock and (iii)
| The following table presents the number of authorized Series N Preferred Stock shall be reducedoutstanding and unexercised option awards and the number of shares subject to 575 shares.
unvested stock awards held by each of our non-employee directors as of December 31, 2018. |
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Director | Number of Directors; Election; Removal; Filling VacanciesShares Subject to Outstanding Options as of December 31, 2018 | Number of Unvested Restricted Shares/Units as of December 31, 2018 |
| Laurent Fischer, M.D. | 110,000 | — |
| Michael A. Metzger | 110,000 | — |
| David Parkinson, M.D. | 110,000 | — |
| Matthew D. Perry | 110,000 | — |
| Frederick W. Telling, Ph.D. | 190,300 | — |
| Reed V. Tuckson, M.D. | 130,220 | — |
| Richard L. Love | 50,000 | — |
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| In accordance with the Director Compensation Policy, non-employee director option grants and restricted stock awards, to the extent then outstanding and unvested, become fully vested in the event of a change in control (as such term is defined in the equity incentive plan or award agreement applicable to that grant) that occurs while such non-employee director is a member of the board. |
(4) | The Washington Charter provides that the numberDr. Telling resigned as a member of directors shall be not less than five and not more than twelve persons. The directors are elected by the Company’s shareholders annually for terms of one year and hold their positions until their successors are elected and qualified, or until their earlier death, resignation or removal. The RCW permits a corporation to classify itsour board of directors so that less than all ofeffective December 13, 2018. In connection with Dr. Telling’s resignation, on September 18, 2018, the directors are elected each year to overlapping terms. The Washington Charter and Bylaws do not provide for a classified board of directors aftergranted Dr. Telling a stock option to purchase 60,000 shares under our 2017 Equity Incentive Plan, with an exercise price equal to $1.88, the calendar year 2016. Each newly elected director currently serves for a termclosing price of one year.
Under the RCW, shareholders may remove one or more directors with or without cause unless the articles of incorporation provide that directors may be removed only for cause. The Washington Bylaws provide that any director may be removed, with or without cause, from office at any time, at a special shareholder meeting called for that purpose, and onlyour common shares as reported by the affirmative vote of the holders of a majority of the votes entitled to be cast thereon. The Washington Bylaws provide that a vacancyNasdaq on the Board, whether createddate of grant.
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(5) | Represents the retirement gift given in recognition of Dr. Telling’s service on our board of directors. Dr. Telling resigned as a resultmember of death, resignation or otherwise, may be filled by the affirmative vote of a majority of the remaining directors of the Board in office, though less than a quorum of the Board. Any directorship to be filled by reason of an increase in the number of directors may be filled by the Board for a term continuing only until the next election of directors by the shareholders and until his or her successor is elected and qualified. | The Delaware Charter and Delaware Bylaws will provide that the maximum number of directors will be not less than five and not more than twelve persons. Delaware law permits corporations to classify theirour board of directors soeffective December 13, 2018.
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(6) | Represents the retirement gift given in recognition of Mr. Love’s service on our board of directors. Mr. Love did not seek re-election at the 2018 annual meeting of directors and ceased to be a member of our board on May 16, 2018. |
Non-Employee Director Compensation Overview
Equity Grants
Under our Director Compensation Policy, as amended effective March 13, 2019, our non-employee directors are entitled to the following equity awards: (i) any new non-employee director will receive a stock option for 120,000 shares in connection with joining the board of directors, which will be scheduled to vest ratably over thirty-six months beginning on the grant date and (ii) in connection with each annual meeting of stockholders, each continuing non-employee director will be entitled to receive a stock option for 60,000 shares, which will be scheduled to vest on the date that is 12 months after the date of grant of the award or, if earlier, immediately prior to the first annual meeting of our stockholders at which one or more members of the board are to be elected and that occurs in the calendar year after the calendar year in which the award was granted. Each option will have an exercise price that is not less than the closing price of our common stock on the date of grant of the award. Each option has a maximum term of 10 years (subject to earlier termination as provided in the applicable option agreement) and is subject to accelerated vesting in connection with a change in control as noted above.
In lieu of the annual option grants provided for by our Director Compensation Policy, on March 13, 2019, our board of directors approved grants of options to purchase 120,000 shares of our common stock to each of our non-employee directors, which grants will become effective on the date of our 2019 annual meeting of stockholders and have an exercise price equal to the closing price of our common stock on the date of our 2019 annual meeting of stockholders. These options will vest in accordance with the vesting terms applicable to other annual option grants made pursuant to our Director Compensation Policy.
Prior to the amendment of our Director Compensation Policy on March 13, 2019, our board of directors had the discretion to determine the size of any initial or annual stock option award to our non-employee directors.
As provided in the 2017 plan, the maximum grant date fair value for awards granted to a non-employee director under the 2017 Plan during any one calendar year is $375,000, except that this limit is $475,000 as to a non-employee director who is serving as the Chairman of the Board at the time the applicable grant is made.
Cash Compensation
Under the Director Compensation Policy, non-employee directors are also entitled to cash compensation in the form of annual retainers for service on the board and additional annual retainers for serving on and chairing certain committees. Non-employee directors who both serve on and chair a committee are entitled to both the retainer for service as a member of that committee as well as the additional retainer for service as the chairperson of that committee. The table below sets forth the amount of the board and committee retainers in effect for 2018.
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| Annual Cash Retainer ($) |
Board Member, other than allChairman of the Board | 40,000 |
| Chairman of the Board | 75,000 |
| Audit Committee Chairperson | 15,000 |
| Non-Chairperosn Audit Committee Members | 9,000 |
| Compensation Committee Chairperson | 12,500 |
| Non-Chairperson Compensation Committee Member | 7,000 |
| Nominating and Governance Committee Chairperson | 7,500 |
| Non-Chairperson Nominating and Governance Committee Member | 4,000 |
On March 13, 2019, our board of directors increased the annual retainer for service on the board to $45,000 per year and the annual retainer for chairing the board of directors to $80,000 per year.
All non-employee directors are also reimbursed for their reasonable expenses incurred in attending board meetings and committee meetings, as well as other board-related travel expenses.
Board Discussion of Non-Employee Director Compensation Philosophy
Our board’s non-employee director compensation philosophy is that our compensation arrangements for our directors should reasonably compensate the non-employee directors for their services and should further align the interests of the non-employee directors with the interests of our stockholders. Consistent with that philosophy, the board of directors has structured the cash and equity award components of the Director Compensation Policy to provide a total compensation opportunity for the non-employee directors that the board believes is reasonable. The board also believes that that it is reasonable, and consistent with peer company practices, to structure the Director Compensation Policy with two key compensation components - the equity grant component discussed above and the cash compensation component discussed above - as awards with a value linked to the price of our common stock further align the interests of non-employee directors with the interests of our stockholders; but the board believes that it is appropriate, and consistent with peer company practices, to not structure the entire compensation opportunity to be dependent upon stock price and thus to include the cash compensation component. The board believes that differences in compensation levels under the Director Compensation Policy for the Chairman of the Board, and for non-employee directors serving on particular committees or as the chairperson of a Board committee, are appropriate based on the board’s assessment of the extent of additional services currently required of the non-employee directors that hold those positions and consistent with peer company practices.
The compensation committee retained Radford as an independent compensation consultant in June 2018 to perform a comprehensive review of our Director Compensation Policy and to advise the board of directors as to our compensation program for, and material decisions regarding the compensation of, its non-employee directors.
PROPOSAL 2:
APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES
Our board of directors is asking our stockholders to approve an amendment to our certificate of incorporation to (a) increase the total number of authorized shares from 101,533,333 to 131,533,333 and (b) increase the total number of authorized shares of common stock from 101,500,000 to 131,500,000. The authorized number of shares of preferred stock would remain unchanged by the proposed amendment.
Our board of directors believes it is in our and our stockholders’ best interests to increase the number of authorized shares of common stock in order to provide flexibility to issue additional shares of common stock in the future in connection with one or more of the following:
financing transactions, such as public or private offerings of common stock or derivative securities;
our equity incentive plans and employee stock purchase plan;
debt, warrant or other equity restructuring or refinancing transactions, such as debt or warrant exchanges or offerings of new convertible debt or modifications to existing securities, or as payments of interest on debt securities;
acquisitions, strategic partnerships, collaborations, joint ventures, restructurings, divestitures, business combinations and strategic investments;
corporate transactions, such as stock splits or stock dividends; and
other corporate purposes that have not yet been identified.
As of the date of this proxy statement, our board of directors has no commitments, arrangements or understandings, written or oral, relating to the issuance of any newly authorized shares of common stock. Our common stock is all of a single class, with equal voting, distribution, liquidation and other rights, and each additional authorized share of common stock would have rights identical to our currently authorized and outstanding shares of common stock. The proposed amendment would not affect the rights of the holders of currently outstanding common stock, except to the extent additional shares are actually issued, which may have certain effects, including the dilution of our current stockholders’ earnings per share, voting power and proportionate ownership of our outstanding equity.
The proposed amendment could have the effect of making it more difficult for a third party to acquire control of our company. For example, without further stockholder approval, our board of directors could approve the issuance and sale of certain of the additional authorized shares of common stock in a private transaction to purchasers who would oppose a takeover attempt or other change in control. While the issuance of shares in certain instances may have the effect of forestalling a hostile takeover, as of the date of this proxy statement, our board of directors does not intend or view the increase in authorized common stock as an antitakeover measure, nor are we aware of any proposed or contemplated transaction of this nature.
As of March 14, 2019, there were 57,979,325 shares of common stock issued and outstanding, 9,209,682 shares of common stock were reserved for issuance under our equity compensation plans, 1,120,000 shares were subject to an outstanding option granted to Dr. Craig in March 2017 as an inducement to his joining us, 513,496 shares of common stock were reserved for issuance upon exercise of outstanding warrants, 178,376 shares of common stock were reserved for issuance under our employee stock purchase plan, one share of common stock was reserved for issuance upon exercise of outstanding restricted share rights and 8,383,333 shares of common stock were reserved for issuance upon conversion of outstanding convertible preferred stock. As a result, currently, there are only approximately 24,115,787 shares of authorized common stock available for future issuance under our existing certificate of incorporation for other corporate purposes.
The form of the proposed amendment to our certificate of incorporation to effect the increase in the total number of authorized shares and total number of authorized shares of common stock is attached as Appendix A to this proxy statement. If the amendment is approved by the requisite vote of our stockholders, we intend to file a certificate of amendment with the Secretary of State of the State of Delaware as soon as reasonably practicable after the Annual Meeting. The amendment will become effective immediately upon filing with the Secretary of State of the State of Delaware and, thereafter, the additional authorized shares of common stock would become
issuable upon the approval of our board of directors at such times, in such amounts, and upon such terms as the board of directors may determine, without the need for further stockholder approval, unless otherwise required by applicable law or listing requirements.
If this proposal is adopted, following the filing of the Amendment with the Secretary of State of the State of Delaware, Stockholder approval of the amendment will not, by itself, cause any change in our capital accounts. However, any future issuance of additional shares of common stock authorized pursuant to this proposal would ultimately result in dilution of existing stockholders’ equity interests.
Our board of directors reserves the right, notwithstanding stockholder approval and without further action by our stockholders, not to proceed with the filing of the certificate of amendment with the Secretary of State of the State of Delaware.
THE BOARD UNANIMOUSLY RECOMMENDSA VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION.
PROPOSAL 3: APPROVAL OF AN INCREASE TO THE SHARES RESERVED FORISSUANCE
PURSUANT TO OUR AMENDED AND RESTATED 2017 EQUITY INCENTIVE PLAN
Summary
Our board of directors is asking you to approve an amendment to our Amended and Restated 2017 Equity Incentive Plan (the “2017 Plan”) to increase the number of shares reserved for issuance thereunder. If stockholders approve this proposal, the number of shares of our common stock that may be delivered pursuant to awards granted under the 2017 Plan will be increased by an additional 2,000,000 shares. There would be a corresponding increase in the number of shares that may be delivered pursuant to incentive stock options granted under the 2017 Plan (for clarity, such shares also count against, and are not in addition to, the aggregate share limit for the 2017 Plan).
On March 13, 2019, our board of directors approved the proposed increase to the shares issuable pursuant to our 2017 Plan subject to stockholder approval.
We also maintain the CTI BioPharma Corp. 2015 Equity Incentive Plan, as amended (the “2015 Plan”), and the CTI BioPharma Corp. 2007 Equity Incentive Plan, as amended (the “2007 Plan” and together with the 2017 Plan and the 2015 Plan, the “Plans”). However, no new awards may be granted under the 2015 Plan or the 2007 Plan. As of March 14, 2019, (i) a total of 8,103,454 shares of our common stock were then subject to outstanding options granted under the Plans, and 1,300,000 options are contingent upon stockholder approval of this proposal as discussed below under “Specific Benefits under the 2017 Plan”), (ii) 6,285 shares of our common stock were then subject to unvested restricted stock awards and unvested restricted stock unit awards granted under the Plans, (iii) no shares were available for new award grants under the 2015 Plan or the 2007 Plan and (iv) 778,105 shares were available for new award grants under the 2017 Plan (without taking into account the 2,000,000 shares that would be added to the 2017 Plan if stockholders approve this proposal, the 600,000 shares subject to options to be granted to our outside directors on the date of the Annual Meeting or the 1,300,000 shares subject to options that are contingent on stockholder approval of this proposal). In addition to the outstanding awards under the Plans described above, 1,120,000 shares were subject to an outstanding option granted to Dr. Craig in March 2017 as an inducement to his joining us that was not under any of the Plans.
If stockholders approve this proposal, we currently expect the number of additional shares being requested for approval will be sufficient to meet our expected needs through the third quarter of 2019. If stockholders do not approve this proposal, we will continue to have the authority to grant awards under the 2017 Plan, but the proposed 2,000,000 share increase in the 2017 Plan share limit will not be effective and will limit our ability to provide retention incentives to our executives, other employees and service providers. Equity awards are a significant component of total compensation for our executive officers, other employees and service providers and are vital to our ability to attract and retain outstanding and highly skilled individuals in the extremely competitive labor markets in which we must compete. If we were to grant fewer equity awards to these individuals, we believe that we would nonetheless need to provide compensation in other forms (such as cash) to provide a total compensation package that is competitive with other companies. We strongly believe that the approval of this proposal is instrumental to our continued success.
Please see the discussion below under “Specific Benefits under the 2017 Plan” and “Aggregate Past Grants Under the 2017 Plan” for detailed information on certain awards grants made by us that are contingent on stockholder approval of this 2017 Plan proposal and past award grants under the Plans.
Award Burn Rate
The following table presents information regarding our net burn rate for the past three complete fiscal years, with average annual net burn rate over such three years being 5.8%. For this purpose, the “net burn rate” for any one particular fiscal year means the total number of shares of our common stock issuable upon exercise or payment, as the case may be, of the equity-based awards granted by us in that fiscal year, less the total number of such shares canceled, terminated or forfeited in the fiscal year without the awards having become vested or paid, as the case may be, divided by our weighted average number of basic shares of common stock issued and outstanding during that particular fiscal year.
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| | 2018 | 2017 | 2016 | | |
| Options granted | 3,099,904(1) | 4,450,350 | 1,511,299 | | |
| Restricted stock/stock unit awards granted | 0 | 22,021 | 457,036 | | |
| Less: shares subject to canceled, terminated or forfeited awards | (2,551,900) | (627,339) | (360,434) | | |
| Net shares granted | 548,004 | 3,845,032 | 1,607,901 | | |
| Weighted average basic common shares outstanding | 56,072,898 | 36,445,397 | 27,947,894 | | |
Net burn rate (2)(3) | 1.0% | 10.6% | 5.8% | | |
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| | (1) | This figure includes a total of 734,000 performance-based stock options to certain of our officers and employees in September 2018. All such performance-based stock options were cancelled by our compensation committee on February 19, 2019.
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| | (2) | Net burn rate is equal to (x) divided by (y), where (x) is equal to the sum of total options granted during the fiscal year, plus the total restricted stock/stock unit awards granted during the fiscal year, minus the total number of shares subject to stock options, restricted stock and restricted stock unit awards canceled, terminated or forfeited during the fiscal year without the awards having become vested or paid, as the case may be, and where (y) is equal to our weighted average basic common shares outstanding for each respective year. |
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| | (3) | For the three-year period ended December 31, 2018, our average annual net burn rate using the methodology described in note (2) above was 5.8%. |
We currently expect that the additional shares requested for the 2017 Plan under this proposal (taking into account the stock options that have been granted that are conditional on stockholder approval of this proposal, as discussed above) would provide us with flexibility to continue to grant equity-based awards into the third quarter of 2019, assuming a level of grants consistent with the number of equity-based awards granted during 2018 and usual levels of shares becoming available for new awards as a result of forfeitures of outstanding awards throughout the projected period. However, this is only an estimate, in our management’s judgment, based on current circumstances. Additionally, we do not currently anticipate granting, in the short-term, any additional equity awards under the 2017 Plan other than the grants to Dr. Craig and our non-employee directors as described above. The total number of shares that are awarded under the 2017 Plan in any one year or from year-to-year may change based on any number of variables, including, without limitation, the value of our common stock (since higher stock prices generally require that fewer shares be issued to produce awards of the same grant date fair value), changes in competitors’ compensation practices or changes in compensation practices in the market generally, changes in the number of our employees, changes in the number of our directors and officers, acquisition activity and the potential need to grant awards to new employees in connection with acquisitions, the need to attract, retain and incentivize key talent, the type of awards we grant, the extent to which any applicable performance-based vesting requirements are satisfied, and how we choose to balance total compensation between cash and equity-based awards. The type and terms of awards granted may also change in any one year or from year-to-year based on any number of variables, including, without limitation, changes in competitors’ compensation practices or changes in compensation practices generally, and the need to attract, retain and incentivize key talent.
Dilution
The following table shows the total number of shares of our common stock that were (i) subject to unvested restricted stock and restricted stock unit awards granted under the Plans, (ii) subject to outstanding stock options granted under the Plans, and (iii) available for new award grants under the 2017 Plan, in each case, as of each of December 31, 2018 and March 14, 2019. In this Proposal 3, the number of shares of our common stock subject to awards granted during any particular period or outstanding on any particular date is presented based on the actual number of shares of our common stock covered by those awards.
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| | December 31, 2018 | March 14, 2019 |
| Shares subject to unvested restricted stock and restricted stock unit awards | 13,035 | 6,285 |
Shares subject to outstanding stock options (1) | 7,219,292 | 9,223,454(2) |
| Shares available for new award grants | 2,775,517 | 778,105(3) |
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(1) | Our outstanding options generally may not be transferred to third parties for value and do not include dividend equivalent rights. |
(2) | This excludes the 1,300,000 shares subject to options that are elected each yearcontingent on stockholder approval of this proposal. |
(3) | This does not take into account the 2,000,000 shares that would be added to overlapping terms. The Delaware Charter will not provide for a classified board.
Each director will serve for a term endingthe 2017 Plan if stockholders approve this proposal, the 600,000 shares subject to options to be granted to our outside directors on the date of the subsequent annual meeting followingAnnual Meeting or the annual meeting1,300,000 shares subject to options that are contingent on stockholder approval of this proposal.
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To help assess the potential dilutive impact of this proposal, the number of shares of our common stock outstanding as at the end of each of the last three fiscal years is as follows: 28,228,602 shares outstanding at the end of fiscal year 2016; 42,969,494 shares outstanding at the end of fiscal year 2017; and 57,986,075 shares outstanding at the end of fiscal year 2018. The number of shares of our common stock outstanding as of March 14, 2019 was 57,979,325. For these purposes, outstanding shares include unvested restricted shares of our common stock awarded and outstanding as of the applicable date.
The closing market price of our common stock on The Nasdaq Capital Market on March 22, 2019 was $0.96.
Our board of directors believes that approval of the proposed increase to the shares reserved for issuance pursuant to our 2017 Plan will promote our interests and those of our stockholders and will help us continue to be able to attract, motivate, retain and reward persons important to our success. All members of our board of directors and all of our executive officers are eligible for awards under the 2017 Plan and thus have a personal interest in the approval of the proposed amendment and restatement of the 2017 Plan.
THE BOARD RECOMMENDS A VOTE “FOR” THE INCREASE TO THE SHARES RESERVED FOR
ISSUANCE PURSUANT TO OUR AMENDED AND RESTATED 2017 EQUITY INCENTIVE PLAN.
Summary Description of the 2017 Plan
The principal terms of the 2017 Plan are summarized below. The following summary is qualified in its entirety by the full text of the 2017 Plan, which appears as Appendix B to this proxy statement and reflects the impact of the proposed increase in the shares reserved for issuance pursuant to the 2017 Plan in Section 4.2 thereof.
Purpose
The purpose of the 2017 Plan is to promote our success and the interests of our stockholders by providing an additional means for us to attract, motivate, retain and reward selected employees, directors, officers and other eligible persons through the grant of awards. Equity-based awards are also intended to further align the interests of award recipients and our stockholders.
Administration
Our board or one or more committees appointed by our board administers the 2017 Plan. The board has delegated general administrative authority for the 2017 Plan to the compensation committee, except for authority with respect to awards granted or to be granted to our non-employee directors. The board has retained sole authority under the 2017 Plan with respect to non-employee directors’ awards, although the compensation committee has authority under its charter to make recommendations to the board concerning such awards. (For purposes of this proposal, we refer to the appropriate body acting as the administrator of the 2017 Plan, be it our board of directors, a committee within its delegated authority or an officer within his or her delegated authority, as the “Administrator.”)
The Administrator has broad authority under the 2017 Plan including, without limitation, the authority:
to select eligible participants and determine the type(s) of award(s) that they are to receive;
to grant awards and determine the terms and conditions of awards, including but not limited to the price (if any) to be paid for the shares or the award and the number of shares (if a securities-based award) to be offered or awarded;
to determine any applicable vesting and exercise conditions for awards, or determine that no delayed vesting or exercise is required, to determine the circumstances in which any performance-based goals (or the applicable measure of performance) will be adjusted and the nature and impact of any such adjustment, to establish the events (if any) on which exercisability or vesting may accelerate (including retirement and other specified terminations of employment or service, or other circumstances), and to accelerate or extend the vesting or exercisability or extend the term of any or all outstanding awards;
to cancel, modify or waive our rights with respect to, or modify, discontinue, suspend or terminate any or all outstanding awards, subject to any required consents;
subject to the other provisions of the 2017 Plan, to make certain adjustments to an outstanding award and to authorize the conversion, succession or substitution of an award;
to determine the method of payment of the purchase price (if any) for any award or shares of our common stock, as well as any tax-related items with respect to the award, which may be in the form of cash, check, or electronic funds transfer, by the delivery of already-owned shares of our common stock or by a reduction of the number of shares deliverable pursuant to the award, by services rendered by the recipient of the award, by notice and third party payment or cashless exercise on such terms as the Administrator may authorize, or any other lawful consideration as determined by the Administrator;
to modify the terms and conditions of any award, establish sub-plans and agreements and determine different terms and conditions that the Administrator deems necessary or advisable to comply with laws in the countries where we or one of our subsidiaries operates or where one or more eligible participants reside or provide services;
to approve the forms of any award agreements used under the 2017 Plan; and
to construe and interpret the 2017 Plan, make rules for the administration of the 2017 Plan and make all other determinations under the 2017 Plan or any award agreement.
No Repricing
In no case (except due to an adjustment to reflect a stock split or other event referred to under “Adjustments” below, or any repricing that may be approved by stockholders) will the Administrator (i) amend an outstanding stock option or stock appreciation right
to reduce the exercise price or base price of the award, (ii) cancel, exchange or surrender an outstanding stock option or stock appreciation right in exchange for cash or other awards for the purpose of repricing the award or (iii) cancel, exchange or surrender an outstanding stock option or stock appreciation right in exchange for an option or stock appreciation right with an exercise or base price that is less than the exercise or base price of the original award.
Eligibility
Persons eligible to receive awards under the 2017 Plan include our officers or employees, directors and certain consultants and advisers to us or any of our subsidiaries. As of March 14, 2019, approximately 28 of our officers and employees (including all of our named executive officers currently employed by us), each of our five non-employee directors and approximately 36 other individuals who provide services to us as consultants or advisers, were considered eligible under the 2017 Plan. While consultants and advisers are generally considered eligible under the 2017 Plan to preserve our flexibility, over the last five years we have only granted equity awards under the Plans to seven individuals who, at the time of grant of the awards, were neither employed by us, nor members of our board.
Authorized Shares; Limits on Awards
The maximum number of shares of our common stock that may be issued or transferred pursuant to awards under the 2017 Plan currently equals the sum of: (i) 5,300,000 shares plus (ii) the number of any shares subject to stock options or restricted stock or restricted stock unit awards granted under the 2007 Plan or the 2015 Plan and outstanding as of the date of the 2018 Annual Meeting that expire, or for any reason are cancelled, terminated or forfeited or otherwise reacquired, after the date of the 2018 Annual Meeting (other than shares withheld for the payment of any applicable exercise price or tax withholding) without being exercised or vested, as applicable. If stockholders approve this 2017 Plan proposal, the number of shares referred to in clause (i) above will increase to 7,300,000 shares.
The maximum grant date fair value for awards granted to a non-employee director under the 2017 Plan during any one calendar year is $375,000, except that this limit is $475,000 as to a non-employee director who is serving as the Chairman of the Board at the time the applicable grant is made. For purposes of this limit, the “grant date fair value” of an award means the value of the award on the date of grant of the award determined using the equity award valuation principles applied in our financial reporting. This limit does not apply to, and will be determined without taking into account, any award granted to an individual who, on the grant date of the award, is one of our officers or employees. This limit applies on an individual basis and not on an aggregate basis to all non-employee directors as a group.
Except as described in the next sentence, shares that are subject to or underlie awards that expire or for any reason are canceled or terminated, are forfeited, fail to vest or for any other reason are not paid or delivered under the 2017 Plan will again be available for subsequent awards under the 2017 Plan. Notwithstanding the foregoing, shares that are exchanged by a participant or withheld by us to pay the exercise or purchase price of an award granted under the 2017 Plan, as well as any shares exchanged or withheld to satisfy the tax withholding obligations related to any award granted under the 2017 Plan, will not be available for subsequent awards under the 2017 Plan. To the extent that an award is settled in cash or a form other than shares, the shares that would have been delivered had there been no such cash or other settlement will not be counted against the shares available for issuance under the 2017 Plan. If shares are delivered in respect of a dividend equivalent right, the actual number of shares delivered with respect to the award shall be counted against the share limit of the 2017 Plan. (For purposes of clarity, if 1,000 dividend equivalent rights are granted and outstanding when we pay a dividend, and 50 shares are delivered in payment of those rights with respect to that dividend, 50 shares shall be counted against the share limit of the plan.) To the extent that shares are delivered pursuant to the exercise of a stock appreciation right or stock option, the number of underlying shares as to which the exercise related shall be counted against the applicable share limits, as opposed to only counting the shares actually issued. (For purposes of clarity, if a stock appreciation right relates to 100,000 shares and is exercised at a time when the payment due to the participant is 15,000 shares, 100,000 shares shall be charged against the applicable share limits with respect to such exercise.) In addition, the 2017 Plan generally provides that shares issued in connection with awards that are granted by or become obligations of ours through the assumption of awards (or in substitution for awards) in connection with an acquisition of another company will not count against the shares available for issuance under the 2017 Plan. The 2017 Plan does not permit us to increase the applicable share limits of the 2017 Plan by repurchasing shares of common stock on the market (by using cash received through the exercise of stock options or otherwise).
Types of Awards
The 2017 Plan authorizes stock options, stock appreciation rights and other forms of awards granted or denominated in our common stock or units of our common stock, as well as cash bonus awards. The 2017 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Any award may be structured to be paid or settled in cash.
A stock option is the right to purchase shares of our common stock at a future date at a specified price per share (the “exercise price”). The per share exercise price of an option generally may not be less than the fair market value of a share of our common stock on the date of grant. The maximum term of an option is ten years from the date of grant. An option may either be an incentive stock option or a non-qualified stock option. Incentive stock option benefits are taxed differently from non-qualified stock options, as described under “U.S. Federal Income Tax Consequences of Awards under the 2017 Plan” below. Incentive stock options are also subject to more restrictive terms and are limited in amount by the Internal Revenue Code and the 2017 Plan. Incentive stock options may only be granted to employees.
A stock appreciation right is the right to receive payment of an amount equal to the excess of the fair market value of share of our common stock on the date of exercise of the stock appreciation right over the base price of the stock appreciation right. The base price will be established by the Administrator at the time of grant of the stock appreciation right and generally may not be less than the fair market value of a share of our common stock on the date of grant. Stock appreciation rights may be granted in connection with other awards or independently. The maximum term of a stock appreciation right is ten years from the date of grant. Options and stock appreciation rights may be fully vested at grant or may be subject to time- and/or performance-based vesting requirements.
The other types of awards that may be granted under the 2017 Plan include, without limitation, stock awards, restricted stock, restricted stock units or phantom stock (which are contractual rights to receive shares of stock, or cash based on the fair market value of a share of stock), dividend equivalents that represent the right to receive a payment based on the dividends paid on a share of stock over a stated period of time, or similar rights to purchase or acquire shares and cash awards. Any awards under the 2017 Plan may be fully-vested at grant or may be subject to time- and/or performance-based vesting requirements.
Dividend Equivalents; Deferrals
The Administrator may provide for the deferred payment of awards, and may determine the other terms applicable to deferrals. The Administrator may provide that awards under the 2017 Plan (other than options or stock appreciation rights), and/or deferrals, earn dividends or dividend equivalents based on the amount of dividends paid on outstanding shares of common stock, provided that as to any dividend equivalent rights granted in connection with an award granted under the 2017 Plan that is subject to performance-based vesting requirements, no dividend equivalent payment will be made unless the related performance-based vesting conditions of the award are satisfied (or, in the case of a restricted stock or similar award where the dividend must be paid as a matter of law, the dividend payment will be subject to forfeiture or repayment, as the case may be, if the related performance-based vesting conditions are not satisfied).
Assumption and Termination of Awards
If we dissolve or undergo certain corporate transactions such as a merger, business combination, or other reorganization, or a sale of substantially all of our assets, awards then-outstanding under the 2017 Plan will not automatically become fully vested pursuant to the provisions of the 2017 Plan so long as such awards are assumed, substituted for or otherwise continued. However, except as described below, if awards then-outstanding under the 2017 Plan are to be terminated in such circumstances (without being assumed or substituted for), such awards would generally become fully vested. The Administrator also has the discretion to establish and provide for alternative change in control provisions in a particular award agreement with respect to awards granted under the 2017 Plan. For example, the Administrator could provide in such an award agreement for the automatic acceleration of vesting or payment of an award in connection with a corporate event or a termination of the award recipient's employment.
Transfer Restrictions
Subject to certain exceptions contained in the 2017 Plan, awards under the 2017 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution and are generally exercisable, during the recipient’s lifetime, only by the recipient. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the recipient or the recipient’s beneficiary or legal representative. The Administrator has discretion, however, to establish written conditions and procedures for the transfer of awards to other persons or entities, provided that such transfers comply with applicable securities and exchange control laws and are not made for value (other than nominal consideration, settlement of marital property rights, or for interests in an entity in which more than 50% of the voting securities are held by the award recipient or by the recipient’s family members).
Adjustments
As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2017 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other similar events that change the number or kind of shares outstanding and extraordinary dividends or distributions of property to the stockholders.
No Limit on Other Authority
The 2017 Plan does not limit the authority of the board or any committee to grant awards or authorize any other compensation, with or without reference to our common stock, under any other plan or authority.
Termination of or Changes to the 2017 Plan
The board of directors may amend or terminate the 2017 Plan at any time and in any manner. Stockholder approval for an amendment will be required only to the extent then required by applicable law or deemed necessary or advisable by the board. Unless terminated earlier by the board and subject to any extension that may be approved by stockholders, the authority to grant new awards under the 2017 Plan will terminate on March 12, 2027, subject to any extension that may be approved by our stockholders. Outstanding awards, as well as the Administrator’s authority with respect thereto, generally will continue following the expiration or termination of the plan. Generally speaking, outstanding awards may be amended by the Administrator (except for a repricing), but the consent of the award holder is required if the amendment (or any plan amendment) materially and adversely affects the holder.
U.S. Federal Income Tax Consequences of Awards under the 2017 Plan
The U.S. federal income tax consequences of the 2017 Plan under current federal law, which is subject to change, are summarized in the following discussion of the general tax principles applicable to the 2017 Plan. This summary is not intended to be exhaustive and, among other considerations, does not describe the deferred compensation provisions of Section 409A of the Internal Revenue Code to the extent an award is subject to and does not satisfy those rules, nor does it describe state, local or international tax consequences.
With respect to non-qualified stock options, we are generally entitled to deduct and the participant recognizes taxable income in an amount equal to the difference between the option exercise price and the fair market value of the shares at the time of exercise. With respect to incentive stock options, we are generally not entitled to a deduction (unless the employee sells the underlying shares upon exercise before the tax holding period) nor does the participant recognize income at the time of exercise, although the participant may be subject to the U.S. federal alternative minimum tax. Upon the sale or exchange of the shares more than two years after grant of an incentive stock option and one year after exercising an incentive stock option, any gain or loss will be treated as long-term capital gain or loss. If these holding periods are not satisfied, the optionee will recognize ordinary income and we will be entitled to a deduction at the time of sale or exchange equal to the difference between the exercise price and the lower of (i) the fair market value of the shares at the date of the option exercise, or (ii) the sale price of the shares. A different rule for measuring ordinary income upon such a premature disposition may apply if the optionee is also an officer or director of the Company. Any gain or loss recognized on such a premature disposition of the shares in excess of the amount treated as ordinary income will be characterized as long-term or short-term capital gain or loss, depending on the holding period.
The current U.S. federal income tax consequences of other awards authorized under the 2017 Plan generally follow certain basic patterns: nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid (if any) only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); bonuses, stock appreciation rights, cash and stock-based performance awards, dividend equivalents, restricted stock units and other types of awards are generally subject to tax at the time of payment; and compensation otherwise effectively deferred is taxed when paid. In each of the foregoing cases, we will generally have a corresponding deduction at the time the participant recognizes income.
If an award is accelerated under the 2017 Plan in connection with a “change in control” (as this term is used under the Internal Revenue Code), we may not be permitted to deduct the portion of the compensation attributable to the acceleration (“parachute payments”) if it exceeds certain threshold limits under the Internal Revenue Code (and certain related excise taxes may be triggered).
U.S. federal income tax law generally prohibits a publicly-held company from deducting compensation paid to certain current or former officers that qualify as “covered employees” within the meaning of Section 162(m) of the Internal Revenue Code that exceeds $1 million during the tax year. Certain awards granted before November 2, 2017 that were based upon attaining pre-established performance measures that were set by the compensation committee under a plan approved by our stockholders and designed to satisfy the requirements of the “performance-based” compensation exception under Section 162(m) of the Internal Revenue Code (such awards, the “performance-based awards”) pursuant to a written binding contract that was in effect on November 2, 2017, may qualify for an exception to the $1 million deductibility limit. However, that exception was eliminated (except as to certain past grants pursuant to the contracts, as noted above) by the Tax Cuts and Jobs Act of 2017, and so the deductibility for any future awards under the 2017 Plan is subject to the $1 million annual limit.
Specific Benefits under the 2017 Plan
The Administrator has approved certain awards under the 2017 Plan that are contingent on stockholder approval of this proposal. These grants are set forth in the following table. If stockholders do not approve this proposal, these grants will not be effective and will not be able to grant the equity incentives we believe are necessary to provide retention incentives.
2017 Equity Incentive Plan
Awards Subject to Stockholder Approval of 2017 Plan Proposal
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| Name and Position | Number of Shares Underlying Stock Options(1) |
| Named Executive Officers | |
Adam R. Craig, M.D. President, Chief Executive Officer and Interim Chief Medical Officer | 1,300,000 |
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(1) | If this proposal is approved, the options to be granted to Dr. Craig will become effective and have an exercise price equal to the closing price per share of our common stock as reported on Nasdaq on the date on which approval of this proposal is obtained. One-third of the shares underlying the option will vest on February 19, 2020, and one-third of the shares underlying the option will vest annually thereafter, such director was elected.
Underthat all of the DGCL, stockholders may remove oneshares subject to the option will be vested and exercisable on February 19, 2022, subject to Dr. Craig continuing to be a service provider through each such date. Except for the grant described in the table above, we have not approved any awards that are conditioned upon stockholder approval of this proposal, and we are not currently considering any specific award grants under the 2017 Plan, except for the grants to our non-employee directors described above under “Board of Directors and Corporate Governance—Non-Employee Director Compensation Overview—Equity Grants”, which grants will occur on the date of the 2019 Annual Meeting whether or more directors with or without cause. The Delaware Bylaws provide that any director maynot this proposal is approved. Future grants under the 2017 Plan will be removed, with or without cause, from office at any time, at a special shareholder meeting called for that purpose, and onlydetermined by the affirmative vote of the holders of a majority of the votes entitledAdministrator and may vary from year to be cast thereon. The Delaware Bylaws provide that a vacancy on the board of directors, whether created as a result of death, resignation or otherwise, may be filledyear and from participant to participant and are not determinable at this time.
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If the proposed amendments to the 2017 Plan had been in effect in fiscal year 2018, we expect that our award grants for fiscal year 2018 would not have been substantially different from those actually made in that year. For information regarding stock-based awards granted to our named executive officers during fiscal year 2018, see “Executive Compensation”.
Aggregate Past Grants Under the 2017 Plan
As of March 14, 2019, awards covering 8,758,904 shares of our common stock have historically been granted under the 2017 Plan. The following table shows information regarding the distribution of awards covering such shares as of March 14, 2019 among the persons and groups identified below.
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| STOCK OPTIONS |
| Name and Position | Number of Shares Subject to Past Option Grants | Number of
Shares Acquired On Exercise | Number of Shares Underlying Options as of
March 14, 2019(1) |
| Named Executive Officers: | | | Exercisable | Unexercisable |
Adam R. Craig, M.D. President, Chief Executive Officer and Interim Chief Medical Officer | 1,525,000 | — | 308,334 | 1,216,666 |
David H. Kirske Executive Vice President, Chief Financial Officer | 1,048,396(2) | — | 157,800 | 765,596 |
Bruce J. Seeley Executive Vice President, Chief Operating Officer | 1,009,906(2) | — | 161,638 | 723,268 |
Jack W. Singer, M.D. Former Executive Vice President, Chief Scientific Officer, Interim Chief Medical Officer and Global Head of Translational Medicine | 209,433 | — | — | — |
| Total for All Named Executive Officers as a Group (4 persons): | 3,792,735(3) | — | 627,772 | 2,705,530 |
| Laurent Fischer, M.D. | 110,000 | — | 50,000 | 60,000 |
| Michael A. Metzger | 60,000 | — | - | 60,000 |
| David Parkinson, M.D. | 110,000 | — | 50,000 | 60,000 |
| Matthew D. Perry | 60,000 | — | - | 60,000 |
| Reed V. Tuckson, M.D. | 60,000 | — | - | 60,000 |
Total for all Current Non-Executive Directors as a Group (5 persons): | 400,000 | — | 100,000 | 300,000 |
| Each other person who has received 5% or more of the options, warrants or rights under the 2017 Plan | — | — | — | — |
| All others, including any current officers who are not executive officers or directors, as a group | 4,566,169(4) | 5,000 | 545,511 | 2,966,203 |
| Total | 8,758,904(5) | 5,000 | 1,273,283 | 5,971,733 |
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(1) | Figures in these columns exclude certain shares subject to performance based stock options cancelled by the affirmative votecompensation committee effective February 19, 2019. |
(2) | Includes 125,000 shares subject to performance-based stock options cancelled by the compensation committee effective February 19, 2019. |
(3) | Includes 250,000 shares subject to performance-based stock options cancelled by the compensation committee effective February 19, 2019. |
(4) | Includes 353,500 shares subject to performance-based stock options cancelled by the compensation committee effective February 19, 2019. |
(5) | Includes 603,500 shares subject to certain performance-based stock options cancelled by the compensation committee effective February 19, 2019. |
PROPOSAL 4:
RATIFICATION OF THE SELECTION INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Summary
Ernst & Young LLP served as our independent registered public accounting firm for the completion of our audit for the year ended December 31, 2018. The audit committee has approved the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2019, and our board of directors has further directed that we submit the selection of independent registered public accounting firm for 2019 for ratification by the stockholders at the Annual Meeting.
Representatives of Ernst & Young LLP will have an opportunity to make a statement if they so desire at the Annual Meeting and are expected to be available to respond to appropriate questions.
Although ratification is not required by our bylaws or otherwise, we are submitting the selection to our stockholders for ratification as a matter of good corporate practice and because we value our stockholders’ views. If stockholders fail to ratify the selection, the audit committee will reconsider whether or not to retain that firm. 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 the audit committee feels that such a change would be in our and our stockholders’ best interests.
Change in Independent Registered Public Accounting Firm
As previously disclosed, on July 13, 2018, the audit committee approved the dismissal of Marcum LLP, as our independent registered public accounting firm effective upon the filing of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018 (the “Quarterly Report”). The Quarterly Report was filed on August 2, 2018 and the effective date of Marcum LLP’s dismissal was also August 2, 2018. Ernst & Young LLP’s engagement as our independent registered public accounting firm was effective August 2, 2018.
Information about Marcum LLP
The reports of Marcum LLP on our financial statements for the past two fiscal years did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles, except that the report of Marcum LLP dated March 2, 2017, relating to our consolidated balance sheets as of December 31, 2016 and 2015 and the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows and the related financial statement schedule for each of the three years in the period ended December 31, 2016, included an explanatory paragraph as to the uncertainty of our ability to continue as a going concern. The audit reports of Marcum LLP on our effectiveness of internal control over financial reporting for the past two fiscal years did not contain any adverse opinion or disclaimer of opinion.
In connection with the audits of our financial statements for each of the two fiscal years ended December 31, 2017 and 2016, and in the subsequent interim period through August 2, 2018, there were no disagreements with Marcum LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which, if not resolved to the satisfaction of Marcum LLP, would have caused Marcum LLP to make reference to the matter in its reports for such years. There were no “reportable events” as that term is described in Item 304(a)(1)(v) of Regulation S-K.
We provided Marcum LLP with a copy of a Current Report on Form 8-K (the “Form 8-K”), which was filed with the SEC on August 3, 2018, and requested that Marcum LLP furnish us with a letter addressed to the SEC stating whether Marcum LLP agreed with the disclosures in the Form 8-K or, if not, stating the respects in which it did not agree. We received the requested letter from Marcum LLP and a copy of the letter, dated August 2, 2018, was filed as Exhibit 16.1 to the Form 8-K and such letter is incorporated by reference herein.
Information about Ernst & Young LLP
During the years ended December 31, 2017 and 2016, and through August 2, 2018, neither we nor anyone acting on our behalf consulted with Ernst & Young LLP regarding either: (i) the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report was provided to our nor oral advice was provided that Ernst & Young LLP concluded was an important factor considered by us in reaching a decision as to the accounting, auditing or financial reporting issue or (ii) any matter that was either the subject of a disagreement (as that term is described in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as that term is described in Item 304(a)(1)(v) of Regulation S-K).
Independent Registered Public Accounting Firm’s Fees and Services
The table below provides the aggregate fees billed for professional services rendered by our independent registered public accounting firms as of and for the fiscal years ended December 31, 2018 and 2017. Fees for fiscal year 2018 include fees billed or reasonably expected to be billed by Ernst & Young LLP. Fees for fiscal year 2017 include fees billed by Marcum LLP.
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| Services Rendered | 2018 | 2017 |
Audit Fees (1) | $845,000 | $558,000 |
Audit-Related Fees (2) | — | — |
Tax Fees (3) | — | — |
All Other Fees (4) | $1,960 | — |
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(1) | Audit Fees. This category includes fees for professional services provided in conjunction with the audit of our financial statements and with the audit of management’s assessment of internal control over financial reporting and the effectiveness of internal control over financial reporting, review of our quarterly financial statements, assistance and review of documents filed with the SEC, consents and comfort letters and attestation services provided in connection with statutory and other regulatory filings and engagements. |
(2) | Audit-Related Fees. This category pertains to fees for assurance and related professional services associated with due diligence related to mergers and acquisitions, consultation on accounting standards or transactions, consultation on internal control reviews and assistance with internal control reporting requirements, services related to the audit of employee benefit plans and other attestation services not required by statute or regulation. |
(3) | Tax Fees. This category pertains to fees for professional services provided related to tax compliance, tax planning and tax advice. |
(4) | Other Fees. All other fees relate to a majoritysubscription for accounting-related research software. |
Pre-Approval Policy
Pursuant to the charter for the audit committee, the audit committee pre-approves all auditing services and permissible non-audit services to be performed by our independent registered public accounting firm and the associated fees. The audit committee can delegate this responsibility to one or more of its members, provided that such pre-approval decision is presented to the full audit committee and its next scheduled meeting. All services performed and related fees billed by Marcum LLP and Ernst & Young LLP during the fiscal years presented above were approved by the audit committee. Of the total aggregate fees in 2018, less than 0.3% were approved by the audit committee pursuant to the de minimis exception provided by Section (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
THE BOARD RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
REPORT OF THE AUDIT COMMITTEE
The audit committee reviews and monitors the financial reporting process of CTI BioPharma Corp. (the “Company”) on behalf of the board of directors and reviews the Company’s system of internal controls. We act only in an oversight capacity, however, and it is management that has the primary responsibility for the financial statements, establishing and maintaining adequate internal controls, and the reporting process. Ernst & Young LLP is responsible for expressing opinions on the conformity of the Company’s financial statements with generally accepted accounting principles, on management’s assessment of the effectiveness of the Company’s internal control over financial reporting, and on the effectiveness of the Company’s internal control over financial reporting. Each member of the audit committee is an independent director as determined by the board of directors, based on the Nasdaq Rules and the SEC’s independence requirements for members of audit committees. In addition, the board of directors has determined that Michael A. Metzger is an “audit committee financial expert,” as defined by SEC rules.
We operate under a written charter, a copy of which is available on the Company’s website at http://www.ctibiopharma.com. As more fully described in our charter, the purpose of the audit committee is to assist the board of directors in its oversight and monitoring of the Company’s financial statements, internal controls and audit matters. We meet each quarter with Ernst & Young LLP and management to review the Company’s interim financial results before the publication of the Company’s quarterly reports. Management’s and Ernst & Young LLP’s presentations to and discussions with the audit committee cover various topics and events that may have significant financial impact and/or are the subject of discussions between management and the independent registered public accounting firm. In accordance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), we are directly responsible for the appointment, compensation, retention, oversight and, when appropriate, replacement of our independent registered public accounting firm, including the audit fee negotiations associated with the retention of the firm. We also lead the selection of the lead audit partner, working with Ernst & Young LLP with input from management.
In accordance with existing audit committee policy and the requirements of the Sarbanes-Oxley Act, all services to be provided by Ernst & Young LLP are subject to pre-approval by the audit committee or one of its members to whom such authority may from time to time be delegated. This includes audit services, audit-related services, tax services and other services. Such pre-approval relates to a particular category or group of services and is subject to a specific budget. The Sarbanes-Oxley Act prohibits an issuer from obtaining certain non-audit services from its auditing firm so as to avoid certain potential conflicts of interest; we have not in recent years obtained any of these services from Ernst & Young LLP, and we are able to obtain such services from other service providers at competitive rates.
In addition, we recommend the ratification of the appointment of the independent registered public accounting firm and review their proposed audit scope, approach and independence. Ernst & Young LLP has served as our independent registered public accounting firm since August 2, 2018. In determining whether to reappoint Ernst & Young LLP, we took into consideration a number of factors, including the length of time the firm has been engaged and the knowledge the firm has of our operations, accounting policies and practices and internal control over financial reporting, the quality of our ongoing discussions with Ernst & Young LLP and an assessment of the professional qualifications and past performance of the lead audit partner and Ernst & Young LLP. In order to assure continuing auditor independence, we also periodically consider whether there should be a regular rotation of our independent registered public accounting firm. We discussed with Ernst & Young LLP other matters required to be discussed by Auditing Standard No. 16, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board. In addition, we have received from, and discussed with, Ernst & Young LLP their annual written report on their independence from us and our management, as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence and discussed with the auditor whether the provision of any non-audit services provided to the Company by them during 2018 were compatible with the auditor’s independence. Following this evaluation, we concluded that the selection of Ernst & Young LLP as the independent registered public accounting firm is in the best interest of the Company and its stockholders.
We are not professional accountants or auditors and our duties are not intended to duplicate or to certify the activities of management or the independent registered public accounting firm. It is not the audit committee’s duty to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. Consequently, the audit committee is not providing any professional certification as to the work of the independent registered public accounting firm or any expert assurance as to the financial statements.
We have reviewed and discussed the Company’s audited financial statements with management and Ernst & Young LLP. Management has represented to the Audit Committee that the financial statements were prepared in accordance with generally accepted accounting principles.
Based upon the review and discussions described in this report, we recommended to the board of directors that the audited consolidated financial statements be included in the 2018 Annual Report for filing with the SEC.
Respectfully submitted by the audit committee:
Michael A. Metzger, Chairman
Laurent Fischer, M.D.
Reed V. Tuckson, M.D.
PROPOSAL 5:
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Summary
We are providing our stockholders with the opportunity to cast a non-binding advisory vote on the compensation of our named executive officers as disclosed pursuant to the SEC’s executive compensation disclosure rules and set forth in this proxy statement (including in the compensation tables and narratives accompanying those tables”). As a smaller reporting company, we are electing to comply with scaled back disclosure requirements applicable to smaller reporting companies pursuant to Regulation S-K.
As described more fully under “Executive Compensation”, the objectives of our executive compensation program are to allow us to recruit and retain the most qualified personnel, to create a direct relationship between executive compensation and performance and to create proper incentives to enhance our value and reward superior performance.
In furtherance of these objectives, our executive compensation program includes a number of features intended to reflect best practices in the market and help ensure that the program reinforces stockholder interests by directly linking the compensation we pay our executives to our performance. These features are described in more detail in under “Executive Compensation” and include the following:
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| • | We generally structure the total annual compensation opportunity for each of our named executive officers so that the remaining directorsgreatest emphasis is on “at-risk” pay (annual cash incentive compensation opportunity and grant of equity incentive compensation), with the boardgreatest portion of directors in office, though less than a quorum of the board of directors. Any directorship to be filled by reason of an increase“at-risk” pay generally being in the numberform of directors may be filledstock options with a value directly dependent on stock price appreciation. |
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| • | Executives’ bonuses under our annual incentive program are determined by our compensation committee based on our achievement of operational goals established in advance by the board or compensation committee (with executives other than Dr. Craig potentially being subject to a limited individual performance component). |
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| • | We make equity award grants to our named executive officers in the form of stock options, which we believe further align executives’ interests with those of stockholders (as stock options will have value only if our stock price increases after the grant date) and also provide an additional retention incentive as the options generally vest over a multi-year period. |
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| • | We generally do not provide material perquisites to our named executive officers. |
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| • | We have adopted a Stock Ownership Policy and a Policy Regarding the Recoupment of Certain Compensation Payments (compensation “clawback” policy), as well as revisions to our Insider Trading Policy to prohibit certain hedging and pledging transactions in our securities by our directors and officers, all as discussed in more detail below. |
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| • | Our named executive officers are not entitled to gross-up payments for a term continuing only untilany “parachute payment” taxes under Sections 280G and 4999 of the next election of directorsInternal Revenue Code, nor are they entitled to any severance or other benefits that are triggered solely by the shareholders and until his or her successor is elected and qualified.
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Cumulative Voting for Directors
| Under Washington law, unless the articlesoccurrence of incorporation provide otherwise, shareholders are entitled to use cumulative votinga change in the election of directors. | Delaware law permits cumulative voting if provided in the certificate of incorporation.
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In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, our board of directors requests your advisory vote on the following resolution at the Annual Meeting:
RESOLVED, that the compensation paid to our named executive officers, as disclosed in this proxy statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved.
This vote is an advisory vote only and is not binding on us, our board of directors or the compensation committee, and will not be construed as overruling a decision by, or creating or implying any additional fiduciary duty for, the board or the compensation committee. However, the compensation committee, which is responsible for designing and administering our executive compensation program, values the opinions expressed by stockholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for named executive officers.
Our current policy is to provide stockholders with an opportunity to approve the compensation of our named executive officers every year at the annual meeting of stockholders. It is expected that the next such vote will be held at the 2020 annual meeting of stockholders.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to our executive officers as of March 14, 2019:
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Business Combinations; Interested Transactions
Name | Washington law imposes restrictions on certain transactions between a Washington publicly-traded corporationAge
| Position |
| Adam R. Craig, M.D., Ph.D. | 53 | President, Chief Executive Officer and certain significant shareholders. Chapter 23B.19 of the RCW prohibits a “target corporation,” with certain exceptions, from engaging in certain “significant business transactions” with an “acquiring person” who acquires 10% or more of the total number of votes entitled to be cast by the outstanding voting shares of a target corporation for a period of five years after such acquisition, unless the transaction or acquisition of shares is approved by a majority of the members of the target corporation’s board of directors prior to the date of the acquisition or, at or subsequent to the date of the acquisition, the transaction is approved by a majority of the members of the target corporation’s board of directorsInterim Chief Medical Officer |
| David H. Kirske | 64 | Executive Vice President, Chief Financial Officer and approved at a shareholders’ meeting by the vote of at least two-thirds of the votes entitled to be cast by the outstanding voting shares of the target corporation, excluding shares owned or controlled by the acquiring person. The prohibited transactions include, among others, a merger or consolidation with, disposition of assets to, or issuance or redemption of stock to or from, the acquiring person, termination of 5% or more of the employees of the target corporation as a result of the acquiring person’s acquisition of 10% or more of the shares, or allowing the acquiring person to receive any disproportionate benefit as a shareholder. After the five-year period during which significant business transactions are prohibited, certain significant business transactions may occur if certain “fair price” criteria or shareholder approval requirements are met. Target corporations include all publicly-traded corporations incorporated under Washington law, as well as publicly traded foreign corporations that meet certain requirements.
In contrast to the comparable provisions under Delaware law, a Washington publicly-traded corporation is not permitted to exclude itself from these restrictions through a statement to that effect in its charter documents.
Secretary |
| Bruce J. Seeley | Section 203 of the DGCL provides that, subject to certain exceptions specified therein, a corporation shall not engage in any business combination with any “interested shareholder” for a three-year period following the date that such shareholder becomes an interested shareholder unless (i) prior to such date, the board of directors of the corporation approved either the business combination or the transaction which resulted in the shareholder becoming an interested shareholder, (ii) upon consummation of the transaction which resulted in the shareholder becoming an interested shareholder, the interested shareholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding shares held by directors who are also officers54
| Executive Vice President and employee stock purchase plans in which employee participants do not have the right to determine confidentially whether plan shares will be tendered in a tender or exchange offer) or (iii) on or subsequent to such date, the business combination is approved by the board of directors of the corporation and by the affirmative vote at an annual or special meeting, and not by written consent, of at least 66 2/3% of the outstanding voting stock which is not owned by the interested shareholder. Except as specified in Section 203 of the DGCL, an interested shareholder is defined to include (a) any person that is the owner of 15% or more of the outstanding voting stock of the corporation or is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation, at any time within three years immediately prior to the relevant date, and (b) the affiliates and associates of any such person.
Under certain circumstances, Section 203 of the DGCL may make it more difficult for a person who would be an “interested shareholder” to effect various business combinations with a corporation for a three-year period, although the corporation’s certificate of incorporation or shareholders may elect to exclude a corporation from the restrictions imposed thereunder. The Delaware Charter does not exclude Newco from the restrictions imposed under Section 203 of the DGCL.
Chief Operating Officer |
For biographical information concerning Adam R. Craig, M.D., Ph.D., who is one of our directors as well as one of our executive officers, please see the section of this proxy statement titled “Proposal 1: Election of Directors”.
David H. Kirske assumed his role as our Executive Vice President, Chief Financial Officer in September 2017. Prior to this, he served as our Principal Financial and Accounting Officer since August 2017. Mr. Kirske leads our finance, accounting and investor relations teams. Prior to his appointment, Mr. Kirske had been an independent chief financial officer (CFO) consultant since January 2013. As a consultant, he provided financial management services to public and emerging growth private companies primarily in the biotechnology industry, as well as in technology and manufacturing.
Mr. Kirske’s financial management experience includes overseeing finance, accounting, operations, and capitalization, in both debt and equity. Prior to his time as a consultant, Mr. Kirske served as Vice President and CFO of Helix BioMedix where he managed all financial and administrative activities. Previously, he was the Treasurer and Corporate Controller for F-5 Networks and Redhook Brewery where he managed both corporate and international entities, as well as being part of the management teams that led and executed each company’s successful initial public offerings. Earlier in his career, he held a controllership position at Cray Computer. Mr. Kirske holds a B.A. in Business Administration from the University of Puget Sound.
Bruce J. Seeley assumed his role as our as Executive Vice President and Chief Operating Officer in September 2017. He joined us in July 2015 as Executive Vice President and Chief Commercial Officer. Mr. Seeley previously served as Senior Vice President and General Manager, Diagnostics at NanoString Technologies, Inc. from May 2012 to March 2015. From October 2009 to March 2012, Mr. Seeley was Executive Vice President, Commercial, at Seattle Genetics, Inc. Prior to that, from August 2004 to October 2009, Mr. Seeley served in various commercial roles at Genentech, Inc. (now a member of the Roche Group). From 1996 to 2004, Mr. Seeley held various roles at Aventis Pharmaceuticals Inc. (now a part of Sanofi) in global and U.S. marketing, sales and new product commercialization and licensing. Prior to that, from 1991 to 1996, he served in sales at Bristol-Myers Squibb Company. Mr. Seeley received a B.A. in Sociology from the University of California at Los Angeles.
EXECUTIVE COMPENSATION
Executive Summary
This section describes the 2018 compensation we paid to our 2018 named executive officers who are listed in the “Summary Compensation Table –2017 and 2018” below.
Compensation Philosophy and Structure; Emphasis on Pay-for-Performance
We believe that compensation of our named executive officers should encourage creation of stockholder value and achievement of strategic corporate objectives. Our intent is to align the interests of our stockholders and management by integrating compensation with our short-term and long-term corporate strategic and financial objectives. In order to attract and retain the most qualified personnel, we offer a total compensation package that we believe is competitive with those offered by similar companies in the pharmaceutical industries, taking into account relative company size, performance and, to a limited degree, geographic location as well as individual responsibilities and performance.
Our executive compensation program emphasizes “pay for performance” by aligning the compensation of our named executive officers with stockholders’ interests. To create this alignment, a significant portion of compensation is “at risk.” In this proxy statement, we refer to compensation as being “at risk” if it is subject to performance-based vesting criteria and/or time-based vesting criteria (whereby the awards will generally be forfeited unless the executive remains employed by us for the designated period of time), and/or the value of the award is based on our stock price. In general, the portion of compensation guaranteed and not at risk for any fiscal year represents only a fraction of the total potential compensation.
Approximately 81% of Dr. Craig’s target total direct compensation for 2018 is “at-risk” as described above. For these purposes, “target total direct compensation” refers to Dr. Craig’s base salary, target bonus opportunity and equity-based awards granted during the fiscal year (valued using the grant date fair value of the award as determined for accounting purposes).
2018 Named Executive Officer Pay Mix
The primary elements of our executive compensation program include base salaries, annual cash incentives and equity incentives. In 2018, we also granted special incentives to certain of our named executive officers that were designed to provide incentives towards achievement of specific goals. See “Special Incentives” section below.
Consistent with our performance-based compensation philosophy, we generally balance the total annual compensation opportunity for each of our named executive officers so that the greatest emphasis is on “at-risk” pay (annual cash incentive compensation opportunity and grant of equity incentive compensation), with the greatest portion of “at-risk” pay generally being in the form of equity incentive compensation that has a value derived from our stock price and also has either a significant performance-based vesting component or a value directly dependent on stock price appreciation.
We also provide the named executive officers with benefits that are available to most of our other employees in the U.S., including a 401(k) plan, employee stock purchase plan, health and welfare programs and group life insurance and also with certain severance protections. In general, these benefits are intended to attract and retain highly qualified executives.
Compensation Process; Compensation Consultant
Our compensation committee generally does not set compensation levels benchmarked relative to any specific level or percentile against any peer group data. In general, the compensation committee’s executive compensation determinations are subjective and the result of the compensation committee’s business judgment, which is informed by the experiences of the members of the compensation committee, and the analysis and input from executive compensation consultants it retains from time to time, as well as the compensation committee’s assessment of overall compensation trends and trends specific to our industry.
Differences in compensation levels for our named executive officers are driven by the compensation committee’s assessment, in its judgment, of each executive’s overall responsibilities and contributions, experience and performance history and/or potential for
future responsibility and promotion and awareness of compensation differentials for similar positions based on the compensation committee’s business experience and input from Radford, the compensation committee’s compensation consultant, based on its competitive compensation analysis. The compensation committee also considers the recommendations of our Chief Executive Officer with respect to the compensation for each executive other than himself. Our compensation committee does not assign a specific weight to these factors and none of these factors by itself will compel a particular compensation decision. The compensation committee has final authority to determine the compensation of our named executive officers.
The compensation committee also has sole authority to hire, retain and terminate the services of an independent compensation consultant to assist in its decision-making process. In June 2018, the compensation committee engaged Radford to provide consulting services with regard to the compensation of our executive officers and directors and to perform a comprehensive review of our compensation arrangements for our executive officers and directors. Other than its engagement by the compensation committee, Radford provides no other services to us or any of our subsidiaries. The compensation committee has assessed the independence of Radford and concluded that its engagement of Radford does not raise any conflict of interest with us or any of our directors or executive officers.
In July 2017, the compensation committee, with input from Frederic W. Cook & Co., Inc. (“FW Cook”), determined that the peer group of companies used to assess our executive compensation program should consist primarily of U.S.-based drug development and pharmaceutical companies that, at the time the compensation committee considered the peer group, had been publicly traded for at least two years, were in the pre-commercial stage of their development and generally had a market capitalization between $50 million and $500 million.
FW Cook provided data on the executive and director compensation practices of these peer companies, provided advice on the changes to our executive and director compensation programs discussed in this proxy statement, and provided advice during 2017 with respect to Dr. Craig’s employment agreement and the compensation arrangements for Mr. Kirske and Mr. Seeley.
Base Salaries
The compensation committee establishes base salary levels for the named executive officers in its judgment, taking into account its general assessment of each executive’s overall responsibilities and contributions and the executive’s performance history and/or potential for future responsibility and promotion. In 2018, the compensation committee made a market competitive increase to the base salary for Dr. Craig of less than 3% following its review of data provided by Radford for chief executive officers at comparable positions with the peer companies identified above as well as his responsibilities and tenure with us. No changes were made to the base salaries for Mr. Kirske and Mr. Seeley, which were established as part of their appointments in September 2017, or to Dr. Singer’s base salary.
The 2018 annual base salaries paid to our named executive officers are set forth in the “Summary Compensation Table – 2017 and 2018” below.
Annual Cash Incentive Compensation
Composition of the Award
Annual cash incentives for our named executive officers are designed to reward performance for achieving key corporate goals, which we believe when they are established will help to increase stockholder value. In general, the annual incentive awards for the named executive officers are subject to achievement of performance objectives established by the compensation committee for the fiscal year and, for executives other than Dr. Craig, an evaluation by the compensation committee of the contributions made by an individual executive during the course of the year. Although we have adopted the framework for our annual incentive program described below, the compensation committee retains discretion under the program to take into account developments in our business and changes in our strategic priorities that occur during the year in determining the amounts to be awarded to our executives.
Size of the Award Opportunity
Dr. Craig’s employment agreement provides that his target annual bonus will be 55% of his base salary. In connection with his appointment as our Chief Business Officer in September 2017, Mr. Seeley’s target bonus was increased to 40% of his base salary. In connection with his appointment as our Chief Financial Officer in September 2017, the compensation committee approved a target bonus for Mr. Kirske of 35% of the base salary he actually received for his services during 2018. The determination of these target bonus levels was inherently subjective, determined by the compensation committee in its discretion taking into account its general assessment of each executive’s overall responsibilities and contributions and the executive’s performance history and/or potential for future responsibility and promotion, the compensation committee’s assessment of the potential value of the award and its judgment as to the reasonableness of the compensation opportunities provided for the executive’s particular position. The compensation committee believes that each named executive officer’s bonus opportunities were appropriate taking into account the performance that would be required to earn these amounts.
2018 Cash Incentive Performance Objectives
The compensation committee approved seven key developmental and strategic milestones as the performance metrics under the 2018 annual incentive plan, all of which achieved in full or overachievement. Based on the performance results for each component, the compensation committee determined that each of Dr. Craig, Mr. Seeley, and Mr. Kirske would be awarded 100% of his target bonus under the plan for 2018. The actual amounts paid to each named executive officer for are set forth in the “Non-Equity Incentive Compensation” column of the “Summary Compensation Table – 2017 and 2018.”
Equity Incentive Compensation
The compensation committee awards equity incentive compensation to our executive officers to further align their interests with those of our stockholders, to provide a retention incentive over the applicable vesting period, and, in the case of equity awards with performance-based vesting requirements, to provide additional incentives to our executive officers to achieve specified corporate goals and strategic objectives. Our current practice is to grant equity awards to our executives in the form of stock options. Because stock options have value only if the price of our shares increases over the vesting period of the option, we believe these awards are performance-based, further link executives’ interests to those of our stockholders, and are consistent with common equity award grant practices for the peer companies.
2018 Annual Equity Grants
On May 16, 2018, we approved annual stock options to Dr. Craig, Mr. Kirske, Mr. Seeley, and Dr. Singer following stockholder approval of our amended and restated Stock Plan. The material terms of these grants are described in the “Outstanding Equity Awards at Fiscal 2018 Year-End” table. The compensation committee determined that these grants were appropriate to provide additional retention incentives to these executives and other employees during a period of transition for us.
The levels for the equity awards we grant to our named executive officers are inherently subjective, determined by the compensation committee in its discretion taking into account its general assessment of each executive’s overall responsibilities and contributions and the executive’s performance history and/or potential for future responsibility and promotion, the compensation committee’s assessment of the potential value of the award and its judgment as to the reasonableness of the compensation opportunities provided for the executive’s particular position. The compensation committee believes that each named executive officer’s level of equity awards granted for 2018 was appropriate taking into account the applicable vesting requirements and the incentives created by the awards.
Perquisites and Other Benefits
We maintain executive health programs for the benefit of the named executive officers, and these executives are also entitled to participate in our benefit programs that are available to all of our employees, including our 401(k) and employee stock purchase plan. We generally do not provide material perquisites to our executives.
Special Incentives
On September 18, 2018, our board of directors , upon recommendation from the compensation committee, approved cash incentives for Dr. Craig (55% of his annual base salary), Mr. Seeley (20% of his annual base salary), and Mr. Kirske (17.5% of his annual base salary) and granted stock options to Dr. Craig (600,000), Mr. Seeley (125,000) and Mr. Kirske (125,000). The cash incentives and the stock options granted to Messrs. Seeley and Kirske were eligible to vest (and in the case of the cash award, were payable) only upon the compensation committee’s certification of the European Medicines Agency approval of the Marketing Authorization Application for pacritinib (the “MAA Award Vesting Criteria”), assuming that such approval occurs no later than September 30, 2019 and the named executive officer remains employed with us through such time. Dr. Craig’s option vests in six equal semi-annual installments over a three-year period commencing on September 18, 2018 subject to continued employment with us through the applicable vesting dates, such that the option will be fully vested on September 18, 2021. These awards were designed to provide additional retention incentives and motivate and reward them for achievement of a key business milestone. In February 2019, the compensation committee determined that the MAA Award Vesting Criteria had not and, based on existing business conditions, could not be satisfied and the compensation committee cancelled the awards. The material terms of these grants are described in the “Outstanding Equity Awards at Fiscal 2018 Year-End” table.
No Tax Gross-Ups for “Parachute Payments”
Our executive compensation agreements do not provide any executive a right to be reimbursed for any excise taxes imposed on his termination benefits and any other payments under Sections 280G and 4999 of the Internal Revenue Code (generally referred to as “parachute payments”).
Compensation Clawback Policy
We have implemented a Policy Regarding the Recoupment of Certain Compensation Payments (a compensation “clawback” policy) under which we may require reimbursement or cancellation of any cash bonus or incentive payment to an officer or employee where the amount of any such cash payment was determined based on the achievement of financial results that were subsequently the subject of an accounting restatement due to material noncompliance with any financial reporting requirement under the securities laws and a lesser payment would have been made to the individual based upon the restated financial results.
Anti-Hedging Policy
To help ensure that directors and officers do not engage in transactions that would allow them to gain from declines in the price of our securities, we adopted an amendment to our Insider Trading Policy in December 2015 that restricts our directors and officers from engaging in any hedging or monetization transaction that might allow them to gain from or offset any decrease in the market value of our securities.
Anti-Pledging Policy
To help ensure that the directors and officers maintain sufficient control over the timing of their transactions in our securities, we adopted an amendment to our Insider Trading Policy in December 2015 that prohibits our directors and officers from margining any of our securities in a margin account or otherwise pledging any of our securities as collateral for a loan.
Stock Ownership Policy
We believe that members of the board of directors and our executive officers should hold our stock to further align their interests with the interests of our stockholders. Accordingly, we have adopted a Stock Ownership Policy applicable to members of the board and all of our executive officers. Under the Stock Ownership Policy, our Chief Executive Officer should own our common stock with a fair market value of at least six times his annual base salary, each of our executive officers should own our common stock with a fair market value of at least one times his annual base salary, and each non-employee member of the board of directors should own our common stock with a fair market value of at least five times the base annual cash retainer then in effect under our Director Compensation Policy. Shares taken into account under the policy include shares beneficially owned by the individual, including shares held in trust for the
benefit of the individual or his family members, and shares subject to equity awards held by the individual (other than shares subject to stock option grants and shares subject to awards with unsatisfied performance-based vesting requirements). An individual covered by the guidelines is expected to satisfy the applicable level of ownership by the later of December 31, 2020 or five years after he or she first becomes subject to the policy, need not satisfy any increased level of ownership resulting from a change in position or compensation until five years after the change, and need not satisfy any shortfall caused by a decline in stock price earlier than two years after the change in stock price. If an individual covered by the guidelines does not satisfy the applicable level of ownership within the applicable time described above, the individual will be expected to hold toward satisfying the policy one-half of the net shares (after reducing the original number of shares for the exercise or purchase price of the award and the estimated tax liability resulting from the exercise, vesting, and payment of the award) acquired upon exercise or payment of an equity award that is exercised or paid after that time.
Summary Compensation Table - 2017 and 2018
The following table sets forth information concerning compensation for fiscal years 2017 and 2018 for services rendered by our named executive officers.
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| Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Non-Equity Incentive Plan Compensation ($)(2) | Option Awards ($)(3) | All Other Compensation ($)(4) | Total ($) |
Adam R. Craig, M.D. President, Chief Executive Officer and Interim Chief Medical Officer | 2018 | 563,750 | — | 311,575 | 2,149,080 | 8,250 | 3,032,655 |
| 2017 | 433,653 | 80,000 | 302,500 | 4,453,440 | 298,396 | 5,567,989 |
David H. Kirske Executive Vice President, Chief Financial Officer | 2018 | 350,000 | — | 122,500 | 402,980 | 8,250 | 883,730 |
| 2017 | 122,776 | — | 42,971 | 740,708 | 51,538 | 957,993 |
Bruce J. Seeley Executive Vice President, Chief Operating Officer | 2018 | 410,000 | — | 164,000 | 551,082 | 8,250 | 1,133,332 |
| 2017 | 384,827 | — | 125,439 | 938,978 | 8,100 | 1,457,344 |
Jack W. Singer(5) Former Executive Vice President, Chief Scientific Officer, Interim Chief Medical Officer and Global Head of Translational Medicine | 2018 | 269,744 | — | — | 271,514 | 793,369 | 1,334,627 |
| 2017 | 400,000 | — | 120,000 | 427,618 | 33,600 | 981,218 |
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(1) | This column includes a signing bonus awarded to Dr. Craig under his new employment agreement entered into during 2017. |
(2) | This column reflects amounts awarded to our named executive officers under our annual bonus program. For more information, see “—Annual Cash Incentive Compensation.” |
(3) | The amounts reported in the “Option Awards” column reflect the grant date fair value, computed in accordance with FASB ASC Topic 718, of the option awards granted to our named executive officers during the applicable fiscal year, and, with respect to each fiscal year in which an option award was modified, the incremental fair value of the modified award computed in accordance with FASB ASC Topic 718. In the case of awards with performance-based vesting conditions other than market (stock price) based vesting conditions, grant date fair values (and incremental fair values, as the case may be) are calculated for this purpose based upon the outcome (as of the grant date, or, if modified, as of the modification date) of the performance- based condition.
These amounts in the “Option Awards” column do not necessarily correspond to the actual cash value that will be recognized by the named executive officers pursuant to these awards. For a discussion of the assumptions and methodologies used to calculate the amounts reported, please see the discussion of equity awards contained in Note 12 (Share-Based Compensation) to our Consolidated Financial Statements for the fiscal year ended December 31, 2018, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, filed with the SEC on March 13, 2019.
Even though the option awards granted to the named executive officers in 2017 and 2018 have value for purposes of and as disclosed in the “Summary Compensation Table” above in accordance with applicable SEC rules, these options will have value for the award recipient only if the price of our common shares appreciates above the respective exercise price. |
(4) | The following table provides detail on the amounts reported in the “All Other Compensation” column of the table above for each named executive officer: |
| | Name | Executive Health Benefits ($) | Life Insurance Premiums ($) | 401(k) Match ($) | Severance Payments ($) | Total ($) |
| | Adam R. Craig, M.D. | — | — | 8,250 | | | 8,250 |
| | David H. Kirske | — | — | 8,250 | | | 8,250 |
| | Jack W. Singer, M.D. | 19,125 | — | 8,092 | 766,152 | (a) | 793,369 |
| | Bruce J. Seeley | — | — | 8,250 | — | | 8,250 |
(a) | This amount includes $46,152 in paid out vacation at the time of Dr. Singer’s resignation, as well as $720,000 in severance cash payments payable at a rate of $40,000 per month for eighteen months following September 4, 2018. |
(5) | All compensation reflected in this table for Dr. Singer was paid in connection with his service as one of our officers and not in connection with his service as a director. Dr. Singer resigned as a director effective June 2, 2017 and resigned as an officer effective September 4, 2018. |
The foregoing “Summary Compensation Table” should be read in conjunction with the tables and narrative descriptions that follow. The “Outstanding Equity Awards at Fiscal 2018 Year-End” table provides further information on the named executive officers’ potential realizable value with respect to their equity awards. The “Potential Payments upon Termination or Change in Control” section provides information on the benefits the named executive officers may be entitled to receive in connection with certain terminations of their employment and/or a change in control and includes a description of the severance and other benefits provided to Dr. Singer in connection with his resignation during the year.
Description of Employment Agreements-Cash Compensation
In February 2017, we entered into an employment agreement with Dr. Craig in connection with his hiring as President and Chief Executive Officer. The employment agreement has a five-year term, with automatic one-year renewals unless either party gives notice that the term will not be extended. The agreement provides for Dr. Craig to receive an initial annual base salary of $550,000 and to have a target annual bonus level of 55% of base salary, both of which may be increased but not decreased in the compensation committee’s sole discretion. In February 2019, our compensation committee approved an increase in base salary and bonus opportunity for Dr. Craig, to $600,000 and 60% of his base salary, respectively. Dr. Craig will be eligible to participate in our employee benefit plans and will accrue four weeks paid time off per year. In joining us, Dr. Craig agreed to relocate to the Seattle, Washington area no later than September 1, 2017 (and Dr. Craig did in fact relocate to Seattle prior to that date). The agreement provides that prior to his relocation, we will pay him $7,000 per month to assist with the cost of temporary living in Seattle and travel between his personal residence and Seattle and will pay for or provide him with temporary housing to cost not more than $5,500 per month. The agreement also provides for Dr. Craig to receive a signing bonus of $80,000 in connection with his commencement of employment and $120,000 to assist with the relocation of his personal residence to Seattle, each of which was subject to repayment to us if his employment was terminated prior to March 20, 2018 (or, in the case of the relocation payment, prior to the first anniversary of his relocation to Seattle), other than a termination by us without “Cause,” by him for “Good Reason,” or due to his death or “Disability” (as such terms are defined in the agreement). In October 2018, following approval by the compensation committee of our board of directors, we and Dr. Craig entered into an amendment to Dr. Craig’s
employment agreement. Pursuant to the amendment, if Dr. Craig’s employment terminates before the end of a fiscal year, Dr. Craig is eligible for a prorated portion of his annual incentive bonus corresponding to such fiscal year. Such incentive bonus, if any, will be paid at such time we pay bonuses to other executives.
In connection with his appointment as our principal financial and accounting officer, we entered into an offer letter with Mr. Kirske in July 2017. The letter provided that his employment with us would be on a temporary basis (for six months as noted above, subject to extension in six-month increments) and on a part-time basis (for 30 hours per week). The letter provided for Mr. Kirske to receive base salary at an annual rate of $185,000 and to be eligible for a short-term discretionary bonus at a target of 24% of his base salary, as well as being eligible to participate in our standard employee benefit programs. In September 2017, Mr. Kirske was appointed as our Chief Financial Officer and commenced full-time employment, with his annual base salary level being increased to $350,000 and his target annual bonus being set at 35% of his base salary. In February 2019, our compensation committee approved an increase in base salary and bonus opportunity for Mr. Kirske, to $360,500 and 40% of his base salary, respectively.
In July 2015, we entered into an offer letter with Mr. Seeley. The letter does not have a specified term and provides for Mr. Seeley to receive an initial annualized base salary of $375,000. Mr. Seeley is eligible to receive an annual discretionary bonus, with a target bonus of 30% of base salary and a maximum bonus of 75% of base salary, and to participate in our benefit programs. In September 2017, Mr. Seeley’s annual base salary level was increased to $410,000 in connection with his appointment as our Chief Operating Officer, and his target annual bonus was increased to 40% of base salary, effective for 2018. In February 2019, our compensation committee approved an increase in base salary for Mr. Seeley, to $422,300.
Provisions of the foregoing agreements relating to equity incentive awards, as well as post-termination and change in control benefits provided under Dr. Craig’s employment agreements and severance agreements we have entered into with our other current executive officers, are discussed below under the applicable sections of this proxy statement.
Outstanding Equity Awards at Fiscal 2018 Year-End
The following table presents information regarding the outstanding equity awards held by each of our named executive officers as of December 31, 2018, including the vesting dates for the portions of these awards that had not vested as of that date.
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Name/Award Type(1) | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date |
| Adam R. Craig | | | | | | |
Option (2) | 3/20/2017 | 600,000 | 600,000 | — | 4.24 | 3/20/2027 |
Option (3) | 9/29/2017 | 150,000 | 300,000 | — | 3.19 | 9/29/2027 |
Option (4) | 5/16/2018 | 79,167 | 395,833 | — | 4.14 | 5/16/2028 |
Option (5) | 9/18/2018 | — | 600,000 | — | 1.88 | 9/18/2028 |
| David H. Kirske | | | | | | |
Option (6) | 8/31/2017 | 25,000 | - | — | 3.25 | 8/31/2027 |
Option (3) | 9/29/2017 | 105,000 | 210,000 | — | 3.19 | 9/29/2027 |
Option (4) | 5/16/2018 | 13,900 | 69,496 | — | 4.14 | 5/16/2028 |
Option (9) | 9/18/2018 | — | — | 125,000 | 1.88 | 9/18/2028 |
| Bruce J. Seeley | | | | | | |
Option (7) | 12/23/2015 | 82,500 | 27,500 | — | 12.40 | 12/23/2025 |
Option (8) | 3/1/2017 | 30,000 | 30,000 | — | 4.33 | 3/1/2027 |
Option (3) | 9/29/2017 | 116,668 | 233,332 | — | 3.19 | 9/29/2027 |
Option (4) | 5/16/2018 | 22,485 | 112,421 | — | 4.14 | 5/16/2028 |
Option (9) | 9/18/2018 | — | — | 125,000 | 1.88 | 9/18/2028 |
| Jack W. Singer, M.D. | | | | | | |
Aequus Option (10) | 12/13/2016 | 300,000 | — | — | 0.20 | 12/13/2026 |
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(1) | Unless otherwise noted, all information in this table pertains to equity-based securities issued by us. |
Limitation of Liability of Directors
(2)
| The RCW permits a corporation to includeThese options vest in its articles of incorporation provisions that eliminate or limit the personal liability of a director to the corporation or its shareholders for monetary damages for conduct as a director, provided that such provisions may not eliminate or limit the liability of a director for acts or omissions that involve (i) intentional misconduct by the director or a knowing violation of law by a director, (ii) liability for unlawful distributions or (iii) any transaction from which the director will personally receive a benefit in money, property or services to which the director is not legally entitled. The exclusions from a director’s limitation of liability are narrower and more specific under Washington law than under the comparable provisions of Delaware law,six semi-annual installments, with the result thatfirst such vesting on September 20, 2017 and the scopesixth and final such installment vesting on March 20, 2020.
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(3) | These options vest in six semi-annual installments, with the first such vesting on March 29, 2018 and the sixth and final such installment vesting on September 29, 2020. |
(4) | These options vest in six semi-annual installments, with the first such vesting on September 9, 2018 and the sixth and final such installment vesting on March 9, 2021. |
(5) | These options vest in six semi-annual installments, with the first such vesting on March 18, 2019 and the sixth and final such installment vesting on September 18, 2021. |
(6) | This option vests in twelve monthly installments, with the first such installment vesting on September 30, 2017 and the final such installment vesting on August 31, 2018. |
(7) | These options vest in eight semi-annual installments, with the first such installment vesting on June 23, 2016 and the eighth and final such installment vesting on December 23, 2019. |
(8) | These options vest in six semi-annual installments, with the first such vesting on September 1, 2017 and the sixth and final such installment vesting on March 1, 2020. |
(9) | These options vest 100% upon the compensation committee’s certification of the release of liability may be broader under Washington law.
The Washington Charter provides that a directorEuropean Medicines Agency approval of the Company shall haveMarketing Authorization Application for pacritinib, if such approval occurs no personal liability tolater than September 30, 2019. In February 2019, the Company or its shareholders for monetary damages for breach of conduct as a director; provided that a director will remain liable for acts or omissions that involve intentional misconduct by a director or a knowing violation of law by a director, for voting or assenting to an unlawful distribution, or for any transaction from which the director will personally receive a benefit in money, property, or services to which the director is not legally entitled. This provision does not affect the availability of equitable remedies such as an injunction based upon a director’s breach of the duty of care.
| The DGCL permits a corporation to include a provision in its certificate of incorporation eliminating or limiting the personal liability of a director to the corporation or its shareholders for damages for certain breaches of the director’s fiduciary duty. However, no such provision may eliminate or limit the liability of a director: (i) for any breach of the director’s duty of loyalty to the corporation or its shareholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) for declaration of unlawful dividends or illegal redemptions or stock repurchases; or (iv) for any transaction from which the director derived an improper personal benefit.
The Delaware Charter will provide that, to the fullest extent permitted by the DGCL, a director of Newco shall have no personal liability to Newco or its stockholders for monetary damages for breach of fiduciary duty as a director; provided that a director will remain liable: (i) for any breach of the director's duty of loyalty to Newco or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to the provisions of Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit.
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Indemnification of Officers and Directors
| Both the RCW and the DGCL permit a corporation to indemnify officers, directors, employees and agents for actions taken in good faith and in a manner they reasonably believed to be in, or not opposed to, the best interests of the corporation, and with respect to any criminal action, which they had no reasonable cause to believe was unlawful. Both states’ laws provide that a corporation may advance expenses of defense in certain circumstances, and both states permit a corporation to purchase and maintain liability insurance for its directors and officers.
The RCW provides that a corporation may not indemnify a director in connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation or in connection with any other proceeding charging improper personal benefit to the director in which the director was adjudged liable on the basis that personal benefit was improperly received by the director.
The RCW also provides that, unless a corporation’s articles of incorporation provide otherwise, (i) indemnification is mandatory if the director is wholly successful on the merits or otherwise in such a proceeding, and permits a director to apply for court-ordered indemnification and (ii) an officer of the corporation who is not a director is entitled to mandatory indemnification and is entitled to apply for court-ordered indemnification to the same extent as a director. The Washington Charter does not limit these statutory rights to mandatory indemnification. The Washington Bylaws generally provide that the Company shall indemnify any person who was or is a party to any proceeding, whether or not brought by or in the right of the Company, by reason of the fact that he or she is or was a director or officer of the Company, against all reasonable expenses incurred by the director in connection with the proceeding, and that reasonable expenses incurred by such director in defending a proceeding shall be paid by the Company in advance of the final disposition of such proceeding upon receipt of a written affirmation of the director’s good faith belief that the director met the requisite standard of conduct and a written undertaking to repay the advance if it is ultimatelycompensation committee determined that the director didforegoing vesting criteria had not meet the standard of conduct. The indemnification and, advancement of expenses provided in the Washington Bylaws is not exclusive of any other rights to which such person may be entitled as a matter of law or by contract or by vote of the Board or the shareholders or otherwise. The Washington Bylaws also provide that the Company may purchase and maintain insurancebased on behalf of an individual who is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee, or agent of another entity, against liability asserted against or incurred by the individual in that capacity or arising from the individual’s status as a director, officer, employee or agent.
| The DGCL provides that indemnification mayexisting business conditions, could not be made for any matter as to which a person has been adjudged by a court of competent jurisdiction to be liable tosatisfied and the corporation, unless and only tocompensation committee cancelled the extent a court determines that the person is entitled to indemnity for such expenses as the court deems proper.
The Delaware Bylaws and Charter generally provide that Newco shall indemnify any person who was or is a party to any proceeding, whether or not brought by or in the right of Newco, by reason of the fact that he or she is or was a director or officer of Newco or held a position at another entity at the request of Newco, against all reasonable expenses incurred by the director in connection with the proceeding, and that reasonable expenses incurred by such indemnitee in defending a proceeding shall be paid by Newco in advance of the final disposition of such proceeding upon receipt of a written affirmation of the indemnitee’s good faith belief that the indemnitee met the requisite standard of conduct and a written undertaking to repay the advance if it is ultimately determined that the director did not meet the standard of conduct. The indemnification and advancement of expenses provided in the Delaware Bylaws is not exclusive of any other rights to which such person may be entitled as a matter of law or by contract or by vote of the board of directors or the shareholders or otherwise. The Delaware Bylaws also provide that Newco may purchase and maintain insurance on behalf of an individual who is or was a director, officer, employee or agent of Newco, or is or was serving at the request of Newco as a director, officer, employee, or agent of another entity, against liability asserted against or incurred by the individual in that capacity or arising from the individual’s status as a director, officer, employee or agent.
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Special Meetings of Shareholders
| Under the RCW, a corporation must hold a special meeting of shareholders upon request by the board of directors or by such persons authorized to do so by the articles of incorporation or bylaws. A corporation must also hold a special meeting of shareholders if the holders of at least ten percent of all votes entitled to be cast at a special meeting deliver to the corporation a demand for a special meeting. However, a corporation that is a public company may in its articles of incorporation limit or deny the right of shareholders to call a special meeting. The Washington Charter does not limit or deny the right of shareholders to call a special meeting.
The Washington Bylaws provide that special meetings of shareholders may be called by the President, the Board or by holders of at least ten percent of all the votes entitled to be cast on any issue proposed to be considered at such special meeting.
| Under the DGCL, a special meeting of shareholders may be called by the corporation’s board of directors or by such persons as may be authorized by the corporation’s certificate of incorporation or bylaws. The Delaware Bylaws provide that a special meeting may be called at any time by the Newco President, the Newco board of directors or by holders of at least ten percent of all the votes entitled to be cast on any issue proposed to be considered at such special meeting.
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Amendment or Repeal of the Certificate of Incorporation
| Under the RCW, a board of directors may amend the corporation’s articles of incorporation without shareholder approval (i) to change any provisions with respect to the par value of any class of shares, if the corporation has only one class of shares outstanding, (ii) to delete the names and addresses of the initial directors, (iii) to delete the name and address of the initial registered agent or registered office, (iv) if the corporation has only one class of shares outstanding, solely to effect a forward or reverse stock split, or change the number of authorized shares of that class in proportion to such forward or reverse split or (v) to change the corporate name. Other amendments to the articles of incorporation must be approved, in the case of a public company, by a majority of the votes entitled to be cast on the proposed amendment, provided that the articles of incorporation may require a greater vote. The Washington Charter provides that the Company reserves the right to amend, alter or repeal any provision contained in the Washington Charter in any manner currently or hereafter prescribed by law, and that all rights and powers conferred upon shareholders and directors in the charter are subject to this reserved power. | Under the DGCL, unless the certificate of incorporation otherwise provides, amendments to the certificate of incorporation generally require the approval of the holders of a majority of the outstanding stock entitled to vote thereon, and if the amendment would increase or decrease the number of authorized shares of any class or series or the par value of such shares, or would adversely affect the rights, powers or preferences of such class or series, a majority of the outstanding stock of such class or series also would have to approve the amendment. The Delaware Charter provides that Newco reserves the right to amend, alter or repeal any provision contained in the Delaware Charter in any manner currently or hereafter prescribed by law, and that all rights and powers conferred upon shareholders and directors in the charter are subject to this reserved power.
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Amendment to Bylaws
| The RCW provides that the board of directors may amend or repeal the corporation’s bylaws, or adopt new bylaws, unless (i) the articles of incorporation reserve this power exclusively to the shareholders or (ii) the shareholders, in amending, repealing or adopting a particular bylaw, provide expressly that the board of directors may not amend or repeal that bylaw. The shareholders may also amend or repeal the corporation’s bylaws, or adopt new bylaws, even though the bylaws may also be amended or repealed by the board of directors.
The Washington Bylaws provide that the Board has the power to adopt, amend or repeal the bylaws of the Company, provided that any such adopted bylaws, or amendment or repeal of bylaws, may be subsequently changed or repealed by the holders of a majority of the stock entitled to vote at a shareholder meeting. The Washington Bylaws further provide that such bylaws may be amended or repealed by the shareholders of the Company.
| Under the DGCL, the power to adopt, amend or repeal bylaws rests generally with the stockholders, although directors may amend the bylaws of a corporation if such right is expressly conferred upon the directors in its certificate of incorporation. The Delaware Bylaws provide that the Board has the power to adopt, amend or repeal the bylaws of Newco, provided that any such adopted bylaws, or amendment or repeal of bylaws, may be subsequently changed or repealed by the holders of a majority of the stock entitled to vote at a shareholder meeting. The Delaware Bylaws and Charter further provide that such bylaws may be amended or repealed by the shareholders of Newco.
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Merger with Subsidiary
| The RCW provides that, if the parent corporation owns at least 90% of the outstanding shares of each class of capital stock of a subsidiary, the parent corporation may merge such subsidiary into itself without approval of the shareholders of the parent or subsidiary, or merge itself into the subsidiary without approval of the shareholders of the subsidiary. A merger of a parent corporation into a subsidiary will be governed by RCW 23B.11 applicable to mergers generally. The shareholders of the parent corporation are required to approve the plan to merge the parent into the subsidiary. | The DGCL provides that a parent corporation may merge into a subsidiary and a subsidiary may merge into its parent, without shareholder approval, where such parent corporation owns at least 90% of the outstanding shares of each class of capital stock of its subsidiary.
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Committees of the Board
| The RCW also provides that the board of directors may delegate certain of its duties to one or more committees elected by a majority of the board of directors. Under the RCW, each committee may exercise such powers of the board of directors as are specified by the board of directors; however, a committee may not (i) authorize or approve a distribution except in accordance with a general formula or method prescribed by the board of directors, (ii) approve or propose to shareholders any action that the RCW requires be approved by shareholders, (iii) fill vacancies on the board of directors or on any of its committees, (iv) amend the articles of incorporation, (v) adopt, amend or repeal bylaws, (vi) approve a plan of merger not requiring shareholder approval or (vii) approve the issuance or sale of shares or determine the designation and relative rights, preferences and limitations of a class or series of shares except within limits specifically prescribed by the board. | The DGCL provides that the board of directors may delegate certain of its duties to one or more committees elected by a majority of the board of directors. A Delaware corporation can delegate to a committee of the board of directors, among other things, the responsibility of nominating candidates for election to the office of director, to fill vacancies on the board of directors, to reduce earned or capital surplus, and to authorize the acquisition of the corporation’s own stock. Moreover, if the corporation’s certificate of incorporation or bylaws, or the resolution of the board of directors creating the committee so permits, a committee of the board of directors may declare dividends and authorize the issuance of stock.
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Mergers, Acquisitions and Transactions with Controlling Shareholder
| Under the RCW, a merger, share exchange, consolidation, sale of substantially all of a corporation’s assets other than in the regular course of business, or dissolution of a public corporation must be approved by the affirmative vote of a majority of directors when a quorum is present, and by two-thirds of all votes entitled to be cast by each voting group entitled to vote as a separate group, unless a higher or lower proportion is specified in the articles of incorporation. The Washington Charter reduces this requirement to a simple majority of votes entitled to be cast by a voting group.
The RCW also provides that certain mergers need not be approved by the shareholders of the surviving corporation if (i) the articles of incorporation will not change in the merger, except for specified permitted amendments; (ii) no change occurs in the number, designations, preferences, limitations and relative rights of shares held by those shareholders who were shareholders prior to the merger; (iii) the number of voting shares outstanding immediately after the merger, plus the voting shares issuable as a result of the merger, will not exceed the authorized voting shares specified in the surviving corporation’s articles of incorporation immediately prior to the merger; and (iv) the number of participating shares outstanding immediately after the merger, plus the number of participating shares issuable as a result of the merger, will not exceed the authorized participating shares specified in the corporation’s articles of incorporation immediately prior to the merger. Please refer to the voting standard applicable to the Merger under the heading “Vote Required and Effect of Abstentions and Broker Non-Votes on Vote”.(10)
| Under the DGCL, a merger, consolidation, sale of all or substantially all of a corporation’s assets other than in the regular course of business or dissolution of a corporation must be approved by a majority of the outstandingThis option (which covers shares entitled to vote. No vote of shareholders of a constituent corporation surviving a merger, however, is required (unless the corporation provides otherwise in its certificate of incorporation) if (i) the merger agreement does not amend the certificate of incorporation of the surviving corporation; (ii) each share of stock of the surviving corporation outstanding before the merger is an identical outstanding or treasury share after the merger; and (iii) the number of shares to be issued by the surviving corporation in the merger does not exceed twenty (20%) of the shares outstanding immediately prior to the merger. The certificate of incorporation of Newco does not make any provision with respect to such mergers.
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Class Voting
| Under the RCW, a corporation’s articles of incorporation may authorize one or more classes or series of shares that have special, conditional or limited voting rights, including the right to vote on certain matters as a group. Additionally, under the RCW, classes or series of shares have, by default application, special voting rights with respect to certain corporate matters, such as certain amendments to the articles of incorporation and mergers and share exchanges. Under the RCW, a corporation’s articles of incorporation may expressly limit the rights of holders of a class or series to vote as a group with respect to certain amendments to the articles of incorporation and as to mergers and share exchanges, even though they may adversely affect the rights of holders of that class or series. The Washington Charter provides that the holders of all capital stock of the Company shall vote together as one class on all matters submitted to a vote of the shareholders, except that the holders of Series ZZ Preferred Stock shall have the exclusive right, voting separately as a single class, to elect two directors of the Company whenever dividends payable on any shares of Series ZZ Preferred Stock shall be in arrears in an amount equal to at least six full quarter dividends. | The DGCL requires voting by separate classes only with respect to amendments to the certificate of incorporation that adversely affect the holders of those classes or that increase or decrease the aggregate number of authorized shares or the par value of the shares of any of those classes. The Delaware Charter provides that, except as otherwise provided by law or by resolution providing for the issue of any series of preferred stock, the holders of the outstanding shares of Newco common stock shall have exclusive voting rights, except (i) holders of common stock shall not be entitled to vote on any proposed amendment to the certificate of incorporation that relates solely to the terms of one or more outstanding series of preferred stock if the holders of such affected series are entitled to vote separately or togetherAequus, our majority-owned subsidiary, as a classdescribed above) vests in four semi-annual installments, with the holders of one or more otherfirst such series pursuant toinstallment vesting on April 26, 2017 and the Delaware Charter and (ii) Series ZZ Preferred Stock holders shall have the exclusive right, voting separately as a single class, to elect two directors of Newco whenever dividends payablefinal such installment vesting on any shares of Series ZZ Preferred Stock shall be in arrears in an amount equal to at least six full quarter dividends. |
Preemptive Rights
| Under Washington law, a shareholder has preemptive rights unless such rights are specifically denied in the articles of incorporation. The Washington Charter states that shareholders do not have any preemptive rights to acquire additional shares issued by the Company. | Under Delaware law, a shareholder does not have preemptive rights unless such rights are specifically granted in the certificate of incorporation. The Delaware Charter states that shareholders do not have any preemptive rights to acquire additional shares issued by Newco.October 26, 2018. |
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Transactions with Officers and Directors | The RCW sets forth a safe harbor for transactions between a corporation and one or more of its directors. A conflicting interest transaction may not be enjoined, set aside or give rise to damages if, after disclosure of the material facts of such conflicting interest transaction (i) it is approved by a majority of the qualified directors on the board of directors or an authorized committee, but in either case by no fewer than two qualified directors; or (ii) it is approved by a majority of all qualified shares; otherwise, there must be a showing that at the time of commitment, the transaction was fair to the corporation. For purposes of this provision, “qualified director” is one who does not have (a) a conflicting interest respecting the transaction; or (b) a familial, financial, professional or employment relationship with a non-qualified director which relationship would reasonably be expected to exert an influence on the qualified director’s judgment when voting on the transaction. “Qualified shares” are defined generally as shares other than those beneficially owned, or the voting of which is controlled, by a director who has a conflicting interest respecting the transaction. | The DGCL provides that contracts or transactions between a corporation and one or more of its officers or directors or an entity in which they have an interest is not void or voidable solely because of such interest or the participation of the director or officer in a meeting of the board of directors or a committee which authorizes the contract or transaction if (i) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board of directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of disinterested directors, even though the disinterested directors are less than a quorum; (ii) the material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (iii) the contract or transaction is fair as to the corporation as of the time it is authorized, approved or ratified by the board of directors, a committee thereof or the shareholders. |
Stock Redemptions and Repurchases
| Under the RCW, a corporation may repurchase or redeem its own shares provided that no repurchase or redemption may be made if, after giving effect to the repurchase or redemption (i) the corporation would not be able to pay its liabilities as they become due or (ii) the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the repurchase or redemption, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those whose shares are being repurchased or redeemed. | Under the DGCL, a Delaware corporation may purchase or redeem its own shares of capital stock, except when the capital of the corporation is impaired or when such purchase or redemption would cause any impairment of the capital of the corporation.
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Proxies
| Under the RCW, a proxy executed by a shareholder will remain valid for 11 months unless a longer period is expressly provided in the appointment, or unless it is revoked by such shareholder. A proxy will be irrevocable by the shareholder granting it if it includes a statement as to its irrevocable nature, and is coupled with an interest. | Under the DGCL, a proxy executed by a shareholder will remain valid for a period of three years unless the proxy provides for a longer period.
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Consideration for Stock
| Under the RCW, a corporation may issue its capital stock in return for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed, or other securities of the corporation.
| Under the DGCL, a corporation may accept as consideration for its stock a combination of cash, property or benefit to the corporation. Shares of stock without par value may be issued for such consideration as is determined from time to time by the board of directors, or by the stockholders if the certificate of incorporation so provides. |
Shareholders Rights to Examine Books and Records
| The RCW provides that upon five business days’ notice to the corporation a shareholder is entitled to inspect and copy, during regular business hours at the corporation’s principal office, the corporation’s articles of incorporation, bylaws, minutes of all shareholders’ meetings for the past three years, certain financial statements for the past three years, communications to shareholders within the past three years, list of the names and business addresses of the current directors and officers and the corporation’s most recent annual report delivered to the secretary of state. Upon five business days’ notice, so long as the shareholder’s demand is made in good faith and for a proper purpose, the shareholder describes with reasonable particularity the shareholder’s purpose and the records the shareholder desires to inspect, and the records are directly connected with the shareholder’s purpose, a shareholder may inspect and copy excerpts from minutes of any meeting of the board of directors or other records of actions of the board of directors, accounting records of the corporation and the record of shareholders. | The DGCL provides that any shareholder of record may demand to examine the corporation’s books and records for any proper purpose. If management of the corporation refuses, the shareholder can compel release of the books by court order.
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Potential Payments upon Termination or Change in Control
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Appraisal and Dissenters’ Rights
| Under the DGCL and the RCW, shareholders have appraisal or dissenter’s rights, respectively, in the event of certain corporate actions such as a merger, though the availability of dissenter’s rights under the RCW occurs in more circumstances than under the DGCL. The merger necessary to effect the reincorporation described in this proxy does not itself give rise to dissenter’s rights. These rights include the right to dissent from voting to approve such corporate action, and demand fair value for the shares of the dissenting shareholder. If a proposed corporate action creating dissenters’ rights is submitted to a vote at a shareholders meeting, a shareholder who wishes to assert dissenters’ rights must (i) deliver to the corporation, before the vote is taken, written notice of his intent to demand payment for his shares if the proposed action is effected and (ii) not vote his shares in favor of the proposed action. If fair value is unsettled, the DGCL and the RCW provide various procedures for the dissenter and the corporation to arrive at a fair value, which may ultimately be resolved by petition to the Court of Chancery or to a superior court of the county in Washington where a corporation’s principal office or registered office is located, respectively.
| Delaware law provides an exception to a stockholder’s appraisal rights commonly known as the “market-out” exception. In accordance with this exception, appraisal rights will not be available if stockholders hold stock of a corporation that is either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders. There is no similar exception under Washington law. After the Merger, Newco’s stock will continue to be traded on the NASDAQ, and therefore the market-out exception will apply to Newco’s common stock immediately after the Merger. Holders of common stock will not have appraisal rights under Delaware law while the market-out exception is applicable, except in circumstances where such holders would receive consideration in a transaction other than (a) stock of the surviving corporation, (b) stock of any other corporation that is or will be listed on a national securities exchange or held by more than 2,000 stockholders, (c) cash in lieu of fractional shares or (d) any combination of the foregoing.
Also, Delaware appraisal rights procedures impose a heavier cost and burden on the dissenting stockholder while Washington puts the burden on the corporation. The RCW requires a corporation to pay dissenting shareholders the amount the corporation estimates to be the fair value of their shares, plus interest, generally within 30 days following the effective date of the corporate action, whereas under the DGCL, absent a settlement, shareholders exercising their appraisal rights will not receive any money for their shares until the entire proceeding concludes. Under certain circumstances, this difference with respect to timing of payment to shareholders exercising dissenter’s rights may make it more difficult for a person to exercise such rights.
This discussion of appraisal or dissenter’s rights is qualified in its entirety by reference to the DGCL and the RCW, which provide more specific provisions and requirements for dissenting shareholders.
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Dividends
| The RCW provides that shares may be issued pro rata and without consideration to the corporation’s shareholders as a share dividend. The board of directors may authorize other distributions to its shareholders provided that no distribution may be made if, after giving it effect (i) the corporation would not be able to pay its liabilities as they become due in the usual course of business or (ii) the corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution. | The DGCL provides that the corporation may pay dividends out of surplus, out of the corporation’s net profits for the preceding fiscal year, or both, provided that there remains in the stated capital account an amount equal to the par value represented by all shares of the corporation’s stock having a distribution preference.
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Corporate Action Without a Shareholder Meeting
| If the corporation is a public company, the RCW only permits action to be taken by shareholders without holding an actual meeting if the action is taken unanimously by all shareholders entitled to vote on the action. The Washington Bylaws provide that any action required or which may be taken at a meeting of shareholders of the Company may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action.
| The DGCL permits corporate action without a meeting of shareholders upon the written consent of the holders of that number of shares necessary to authorize the proposed corporate action being taken, unless the certificate of incorporation or articles of incorporation expressly provide otherwise. In the event such proposed corporate action is taken without a meeting by less than the unanimous written consent of shareholders, the DGCL requires that prompt notice of the taking of such action be sent to those shareholders who have not consented in writing.
The Delaware Bylaws and Charter provide that any action required or which may be taken at a meeting of shareholders of Newco may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action.
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Securities Act Consequences
The shares of Newco common stock to be issued in exchange for shares of our Common Stock are not being registered under the Securities Act of 1933, as amended (the “Securities Act”). In that respect, Newco is relying on Rule 145(a)(2) under the Securities Act, which provides that a merger that has as its sole purpose a change in a corporation’s domicile does not involve the sale of securities for purposes of the Securities Act. After the Merger, Newco will be a publicly held company, and it will file with the SEC and provide to its stockholders the same type of information that we have previously filed and provided. Shareholders, whose shares of our Common Stock or preferred stock are freely tradable before the reincorporation merger, will continue to have freely tradable shares of Newco common stock or preferred stock. Shareholders holding restricted shares of Newco common stock will be subject to the same restrictions on transfer as those to which their present shares of our Common Stock are subject. In summary, Newco and its shareholders will be in the same respective positions under the federal securities laws after the Merger as the Company and our shareholders prior to the Merger. For purposes of computing compliance with the holding period requirement of Rule 144 under the Securities Act, shareholders will be deemed to have acquired their shares of Newco common stock or preferred stock on the date they acquired such shares of the Company.
Material U.S. Federal Income Tax Consequences of the Reincorporation MergerTermination Benefits
The following describes the termination benefits that may become payable to the named executive officers in connection with a termination of their employment. Each named executive officer’s right to receive termination benefits is conditioned upon his executing a discussionrelease of claims in our favor and complying with certain restrictive covenants. None of the material U.S. federal incomenamed executive officers is entitled to any tax consequencesgross-up payments from us. The following section also describes the severance benefits that became payable to U.S. holdersDr. Singer in connection
with his resignation as our Executive Vice President, Chief Scientific Officer, Interim Chief Medical Officer and Global Head of Translational Medicine in September 2018.
Named Executive Officers’ Termination Benefits
Under Dr. Craig’s employment agreement with us described above, if his employment is terminated by us without Cause, due to his death or Disability, by him for Good Reason (as such terms are defined in the agreement) or we choose not to renew Dr. Craig’s employment, he will be entitled to receive, subject to providing a release of claims and abiding by certain restrictive covenants set forth in the agreement, (i) an amount equal to one and one-half times the sum of his annual base salary at the rate then in effect and his target incentive bonus amount for the year in which his termination occurs, such amount to be payable in six equal monthly installments (or to be paid in a lump sum if such termination occurs on or within two years after a change in control), (ii) reimbursement for COBRA premiums for up to eighteen months, (iii) reimbursement for life insurance premiums for eighteen months (to the extent life insurance coverage was in effect and paid for by us at the time of his termination), and (iv) payment of the prorated portion of his incentive bonus due to him for the fiscal year during which his employment was terminated.
We have entered into severance agreements with Mr. Kirske and Mr. Seeley. These severance agreements provide that, if the executive is discharged from employment by us without cause (as defined below)in the agreement) or resigns for good reason (as defined in the agreement), he will receive the following termination benefits:
cash severance equal to a specified number of months of his base salary (18 months for Mr. Seeley and 12 months for Mr. Kirske), to be paid in monthly installments over the applicable period;
additional cash severance equal to the greater of the Merger, butaverage of his three prior years’ bonuses or a specified percentage of the executive’s base salary (30% for Mr. Seeley and 35% for Mr. Kirske);
reimbursement for up to the eighteen months (or twelve months for Mr. Kirske) for COBRA premiums to continue his medical coverage and that of his eligible dependents;
continued payment for up to eighteen months (or twelve months for Mr. Kirske) of premiums to maintain life insurance paid for by us at the time of his termination; and
accelerated vesting of all of his then-outstanding and unvested stock-based compensation (with outstanding and vested stock options remaining exercisable for three months following the termination date).
Change in Control Benefits
In the event of a change in control, in accordance with our equity incentive plans, all of the outstanding equity-based awards (including the awards held by the named executive officers) generally would also vest on a change in control if the awards were to be terminated in connection with the change in control (i.e., accelerated vesting would not be required if the compensation committee provided for the assumption, substitution or other continuation of the award following the transaction). If the awards did not become fully vested on the change in control transaction, they would generally become fully vested/exercisable if the award holder’s employment was terminated by the successor (other than for misconduct) within twelve months following the change in control (subject to any additional vesting protections provided for pursuant to the executive’s employment or severance agreement).
Separation Agreement with Dr. Singer
Dr. Singer resigned as our Executive Vice President, Chief Scientific Officer, Interim Chief Medical Officer and Global Head of Translational Medicine, effective September 4, 2018. In connection with his resignation, we entered into a Separation and Release Agreement with Dr. Singer that provides for him to receive cash severance payments totaling $720,000, paid over 18 months, and payment of his health and life insurance premiums for up to 18 months following his resignation. All of Dr. Singer’s outstanding stock options granted by us became fully vested and exercisable immediately upon Dr. Singer’s resignation, subject to the expiration date of the option. The agreement also includes a general release of claims by Dr. Singer in our favor and certain customary confidentiality, non-solicit and non-disparagement provisions. Following the cessation of his employment, Dr. Singer will provide consulting services to the Company
for up to one year to assist with the transition of his responsibilities. During the term of the consultancy, Dr. Singer receives customary cash compensation.
CERTAIN TRANSACTIONS WITH RELATED PERSONS
Aequus
We have a majority ownership interest in Aequus. In May 2007, we entered into a license agreement with Aequus whereby Aequus gained rights to our Genetic Polymer technology. We also entered into an agreement to fund Aequus in exchange for a convertible promissory note.
In March 2017, we and Aequus entered into a License and Promissory Note Termination Agreement and a Note Cancellation Agreement, pursuant to which (1) all of the then-outstanding principal, plus all accrued and unpaid interest, approximately $13.7 million in total, was cancelled and terminated, (2) our license agreement with Aequus was terminated, (3) all obligations to Aequus were terminated with the exception of providing additional funding of up to $347,500 to Aequus, and (4) Aequus agreed to pay us a) 20% of milestone and similar payments, up to a maximum amount of $20.0 million, and b) royalties, on a product-by-product and county-by country basis, of 5% of net sales of certain ACTH Products being developed by Aequus. The additional funding of $347,500 had been provided in full as of September 30, 2017. Royalties from Aequus are payable until the later of (1) expiration of the last to expire valid patent claim that claims the ACTH Product, or (2) ten years from the first commercial sale of the applicable ACTH Product. We have the right to terminate the License and Promissory Note Termination Agreement and require Aequus to assign all ACTH Product related assets to us if Aequus does not purportfile an Investigational New Drug Application for an ACTH Product with the FDA by September 6, 2019.
Jack W. Singer, M.D., our former Executive Vice President, Chief Scientific Officer, Interim Chief Medical Officer, and Global Head of Translational Medicine, and Frederick W. Telling, Ph.D., a former member of our board of directors, are minority shareholders of Aequus, owning approximately 4.3% and 3.8% of the equity in Aequus as of December 31, 2018, respectively. Dr. Telling is the Chairman of Aequus’ board of directors. Dr. Singer and Richard Love, a former member of our board of directors, are also members of Aequus’ board of directors.
BVF Partners L.P.
In September 2015, we entered into a subscription agreement with BVF pursuant to which we issued 1.0 million shares of our common stock. In addition, we completed underwritten public offerings of 55,000 shares of our Series N-2 Preferred Stock, no par value per share in December 2015 and 22,500 shares of our Series N-3 Preferred Stock, no par value per share in June 2017. BVF purchased 30,000 shares of our Series N-2 Preferred Stock and 6,750 shares of our Series N-3 Preferred Stock in such offerings. BVF converted 30,000 shares of our Series N-2 Preferred Stock and 6,175 shares of our Series N-3 Preferred Stock into approximately 2.7 million shares and 4.1 million shares of our common stock, respectively.
In connection with the Series N-2 Preferred Stock offering, we entered into a letter agreement with BVF, or the First Letter Agreement, pursuant to which we granted BVF a one-time right, subject to certain conditions, to nominate not more than two individuals to serve as members of our board of directors, subject to the consent of the board of directors, which is not to be a complete analysisunreasonably withheld and which consent shall be deemed automatically given with respect to the two individuals specified in the First Letter Agreement. One of all potential tax effects. The effects of other U.S. federal tax laws, such nominees (the “Independent Nominee”) must (1) qualify as estatean “independent” director as defined under the applicable rules and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the Code, the U.S. Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncementsregulations of the IRS, in each case in effectSEC and the Nasdaq, and (2) must not be considered an “affiliate” of BVF as such term is defined by Rule 12b-2 of the date hereof. These authorities may changeSecurities Exchange Act of 1934, as amended, or bethe Exchange Act. We have agreed, for the period described in this paragraph and subject to differing interpretations. Anya limited exception, to include the nominated directors in the slate of nominees for election to the board of directors at each annual or special meeting at which directors are to be elected, recommend that stockholders vote in favor of the election of such change or differing interpretation may be applied retroactivelynominees and support such nominees for election in a manner that could adversely affect a U.S. holderno less favorable than how we support our own nominees. This obligation will terminate with respect to: (1) the Independent Nominee, and such Independent Nominee must tender his or her resignation to the board of directors, if requested, promptly upon BVF ceasing to beneficially own at least 11% of our Common Stock, preferredissued and outstanding common stock or options, rights or warrants. The Company does not intend to request a ruling from the IRS orvoting power (determined on an opinion of counsel asas-converted basis that gives effect to the U.S. federal income tax consequencesconversion of all outstanding preferred stock), and (2) each of the Merger.Independent Nominee and the other individual nominated by BVF,
This discussion is limited
and each such nominee shall tender his or her resignation to U.S. holders that holdthe board of directors promptly upon the earlier to occur of (a) BVF and its affiliates ceasing to beneficially own at least 5% of our Common Stock, preferredissued and outstanding common stock or options, rights or warrants as a “capital asset” withinvoting power (determined on an as-converted basis that gives effect to the meaningconversion of Section 1221all outstanding preferred stock), (b) BVF ceasing to beneficially own at least 50% of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a U.S. holder’s particular circumstances. In addition, it does not address consequences relevant to U.S. holders subject to special rules, including, without limitation:
U.S. expatriates and former citizens or long-term residentsshares of the United States;common stock beneficially owned by BVF immediately after consummation of the Series N-2 Preferred Stock offering (on an as-converted basis), (c) the continuation of such nomination right would cause any violation of the applicable listing rules of Nasdaq, (d) such time as BVF informs us in writing that it wishes to terminate the foregoing nomination right, or (e) any breach of the Letter Agreement by BVF.
persons subject to
In connection with the alternative minimum tax;
persons who are not U.S. holders
persons holding our Commonoffering of Series N-3 Preferred Stock, preferred stockwe entered into a letter agreement with BVF, or options, rights or warrants as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;
banks, insurance companies,the Second Letter Agreement, and other financial institutions;
brokers, dealers or traders in securities;
“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;
partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);
tax-exempt organizations or governmental organizations;
persons who hold or receive our Common Stock, preferred stock or options, rights or warrants pursuant to the exerciseFirst Letter Agreement and the Second Letter Agreement, we agreed to, upon BVF’s election and subject to any board and committee approvals, exchange shares of common stock purchased by BVF directly from us or underlying convertible preferred stock purchased by BVF directly from us, including the shares of common stock underlying the Series N-3 Preferred Stock, into shares of a convertible non-voting preferred stock with substantially similar terms as the Series N-3 Preferred Stock, including a conversion “blocker” initially set at 9.99% of our common stock. Such right would terminate if at any employeetime BVF’s beneficial ownership of our common stock option or otherwise as compensation; and
tax-qualified retirement plans.falls below 5% (determined on a fully diluted basis).
IfIn February 2018, in connection with our concurrent public offering of common stock, BVF purchased 6.3 million shares of our common stock. In addition, BVF exchanged 8.0 million shares of our common stock owned by BVF and 575 shares of our Series N Preferred Stock owned by BVF for 12,575 shares of our Series O Preferred Stock, pursuant to the letter agreements discussed above as well as an entity treated as a partnership for U.S. federal income tax purposes holds our Common Stock, preferred stock or options, rights or warrants, the tax treatment of a partneradditional exchange agreement executed in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our Common Stock, preferred stock or options, rights or warrants and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. YOU SHOULD CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES OF THE MERGER ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION.February 2018.
For purposes of this discussion, a “U.S. holder” is a beneficial owner of our Common Stock, preferred stock or options, rights or warrants who is, for U.S. federal income tax purposes (1) an individual who is a citizen or resident of the United States, (2) a corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia, (3) an estate, the income of which is subject to U.S. federal income tax regardless of its source, or (4) a trust that (A) is subject to the primary supervision of a U.S. court and the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (B) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes.
The Company believes that the Merger constitutes a tax-free “reorganization” within the meaning of Section 368(a)(1)(F) of the Code. Assuming that the Merger will be treated for U.S. federal income tax purposes as a reorganization:
U.S. holders of Common Stock, preferred stock or options, rights or warrants will not recognize any gain or lossPrimarily as a result of the consummationthese transactions, BVF beneficially owned approximately 23.1% and 20.0% of the Merger;
the aggregate tax basis of shares of Newcoour outstanding common stock preferred stock or options, rights or warrants received inas of December 31, 2018 and 2017, respectively. Matthew D. Perry, a member of our board of directors, is the Merger will be equal toPresident of BVF and portfolio manager for the aggregate tax basis ofunderlying funds managed by the shares of Common Stock, preferred stock or options, rights or warrants converted therefor;
the holding period of the shares of Newco common stock, preferred stock or options, rights or warrants received in the Merger will include the holding period of the shares of Common Stock, preferred stock or options, rights or warrants converted therefor; and
neither the Company nor Newco will recognize gain or loss as a result of the Merger.firm.
No ruling will be sought from the IRS with respect to the U.S. federal income tax consequences of the Merger, and no assurance can be given that the U.S. federal income tax consequences described above will not be challenged by the IRS or, if challenged, will be upheld by a court. Accordingly, U.S. holders are urged to consult their tax advisors regarding the tax consequences of the Merger.-48-
The Board unanimously recommends that you vote FOR approval of the reincorporation of the Company from the State of Washington to the State of Delaware.
PROPOSAL 2:
APPROVAL OF THE ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY OR
APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES
Summary
If there are insufficient votes at the time of the Special Meeting to adopt Proposal 1, the Board may in its discretion seek to, if necessary or appropriate, adjourn the Special Meeting to solicit additional proxies. In that event, you will be asked to vote only upon this Proposal 2 and not on any other proposals. In this Proposal 2, we are asking the shareholders to authorize the holder of any proxy solicited by the Board to vote in favor of adjourning the Special Meeting. Approval of the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies, requires the affirmative vote of the holders of a majority of the shares of our Common Stock voting on this Proposal 2 in person, by telephone or by proxy at the Special Meeting. If this Proposal 2 is approved, the Board may in its discretion, if necessary or appropriate, adjourn the Special Meeting to use the additional time to solicit additional proxies in favor of Proposal 1.
If it is necessary or appropriate to adjourn the Special Meeting, no notice of the adjourned meeting is required to be given to shareholders, other than an announcement at the Special Meeting of the time and place to which the Special Meeting is adjourned (including publication of a notice of the adjourned meeting in an Italian newspaper), unless the Board fixes a new record date, which it must do if the Special Meeting is adjourned to a date more than 120 days after the date fixed for the adjourned meeting. If the Board determines it is necessary or appropriate to adjourn the Special Meeting and the record date for the Special Meeting is changed because (i) the meeting is adjourned to a date more than 120 days after the date fixed for the adjourned meeting and/or (ii) the Board elects to change the record date, a notice of the adjourned meeting will be given to all shareholders pursuant to applicable U.S. and Italian law. At the adjourned meeting, we may transact any business which might have been transacted at the original meeting.
Vote Required and Board Recommendation
Approval of the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies, requires the affirmative vote of the holders of a majority of the shares of our Common Stock voting on this Proposal 2 in person, by telephone or by proxy at the Special Meeting. Abstentions and any broker non-votes will not be counted in the vote required to approve adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies. If you do not instruct your broker on how to vote the shares in your account for this Proposal 2, brokers will be permitted to exercise their discretionary authority to vote for such proposal.
The Board unanimously recommends that you vote FOR the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies.
OTHER INFORMATION
Security Ownership of Certain Beneficial Owners and Management
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides certain information regarding beneficial ownership of our Common Stockcommon stock by each shareholderstockholder known by us to be the beneficial owner of more than 5% of the outstanding shares of our Common Stockcommon stock as of November 6, 2017,March 14, 2019, except as otherwise noted in the footnotes to the table. The table also provides certain information as of November 6, 2017March 14, 2019 regarding beneficial ownership of our Common Stockcommon stock and that of Aequus by (i) each of our directors, (ii) each named executive officer and (iii) all directors and executive officers as a group:
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| | CTI BioPharma Corp. Common Stock | | Aequus Biopharma, Inc. Common Stock |
| Name and Address of Beneficial Owner | | Number of Shares Beneficially Owned(1) | | Shares Subject to Convertible Securities(2) | | Percentage Ownership(1) | | Number of Shares Beneficially Owned(1) | | Shares Subject to Convertible Securities(2) | | Percentage Ownership(1) |
| 5% or More Shareholders: | | | | | | | | | | | | | |
| BVF Partners L.P.(3) | | 8,979,690 | | | 383,333 | | 20.90% | | — | | — | | — |
| OrbiMed Private Investments VI, LP(4) | | 5,000,000 | | | — | | 11.64% | | — | | — | | — |
| Stonepine Capital, L.P.(5) | | 2,307,446 | | | — | | 5.37% | | — | | — | | — |
Directors and named executive
officers of the Company:(6) | | | | | | | | | | | | | |
| Adam R. Craig, M.D., Ph.D.** | | 200,000 | | | 200,000 | | * | | — | | — | | — |
| Laurent Fischer, M.D.** | | — | | | — | | — | | — | | — | | — |
| David H. Kirske | | 8,333 | | | 8,333 | | * | | — | | — | | — |
| Richard L. Love** | | 144,030 | | | 70,312 | | * | | — | | — | | — |
| Michael A. Metzger** | | — | | | — | | — | | — | | — | | — |
| David Parkinson, M.D.** | | — | | | — | | — | | — | | — | | — |
| Matthew D. Perry** | | 43,139 | | | — | | * | | — | | — | | — |
| Bruce J. Seeley | | 96,000 | (7) | | 65,000 | | * | | — | | — | | — |
| Jack W. Singer, M.D. | | 224,415 | | | 125,010 | | * | | 1,150,000 | | 150,000 | | 4.90% |
| Frederick W. Telling, Ph.D.** | | 99,186 | | | 20,312 | | * | | 1,050,000 | | 150,000 | | 4.48% |
| Reed V. Tuckson, M.D.** | | 112,644 | | | 20,220 | | * | | — | | — | | — |
All directors and executive officers,
as a group (11 persons) | | 927,747 | (8) | | 509,187 | | 2.16% | | 2,200,000 | | 300,000 | | 9.38% |
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| Name and Address of Beneficial Owner | CTI BioPharma Corp. Common Stock | Aequus Biopharma, Inc. Common Stock |
Number of Shares Beneficially Owned(1) | Shares Subject to Convertible Securities(2) | Percentage Ownership(1) | Number of Shares Beneficially Owned(1) | Shares Subject to Convertible Securities(2) | Percentage Ownership(1) |
| 5% or More Stockholders: | | | | | | |
BVF Partners L.P.(3) | 15,313,023 | 8,383,333 | 23.1% | — | — | — |
Stonepine Capital, L.P.(4) | 5,726,579 | — | 9.9% | — | — | — |
OrbiMed Private Investments VI, LP(5) | 5,000,000 | — | 8.6% | — | — | — |
Growth Equity Opportunities Fund V LLC(6) | 3,750,000 | — | 6.5% | — | — | — |
Directors and current named executive officers:(7) | | | | | | |
| Adam R. Craig, M.D., Ph.D. | 1,283,334 | 1,283,334 | 2.2% | — | — | — |
| Laurent Fischer, M.D. | 50,000 | 50,000 | * | — | — | — |
| David H. Kirske | 210,300 | 210,300 | * | — | — | — |
| Michael A. Metzger | 70,121 | 50,000 | * | — | — | — |
| David Parkinson, M.D. | 50,000 | 50,000 | * | — | — | — |
| Matthew D. Perry | 93,139 | 50,000 | * | — | — | — |
| Bruce J. Seeley | 374,471 | 342,471 | * | — | — | — |
| Jack W. Singer, M.D. | 99,405 | — | * | 1,150,000 | 150,000 | 4.9% |
| Reed V. Tuckson, M.D. | 162,644 | 70,220 | * | — | — | — |
| All current directors and executive officers, as a group (8 persons) | 2,294,009 | 2,106,325 | 3.9% | — | — | — |
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** | Denotes director of the Company or nominee. |
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(1) | Beneficial ownership generally includes voting or investment power with respect to securities, and percentage ownership is calculated based on 42,970,37757,979,325 shares of our Common Stockcommon stock outstanding as of November 6, 2017March 14, 2019 and 23,450,000 shares of Aequus’ common stock outstanding as of November 6, 2017.February 20, 2018. This table is based upon information supplied by officers, directors and other investors including, as to our Common Stock,common stock, information from Schedules 13D, 13G and 13F and Forms 3 and 4 filed with the SEC. Shares of common stock subject to options, warrants or other securities convertible into common stock that are currently exercisable or convertible, or exercisable or convertible within sixty days of November 6, 2017March 14, 2019 are deemed outstanding for computing the percentage of the person holding the option, warrant or convertible security but are not deemed outstanding for computing the percentage of any other person. Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of stock beneficially owned. |
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(2) | Shares subject to convertible securities included in this column reflect any options, warrants and convertible preferred stock held by the holder exercisable or convertible within sixty days after November 6, 2017.March 14, 2019. These shares are also included in the column titled “Number of Shares Beneficially Owned.” |
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(3) | Beneficial ownership is as of November 6, 2017March 14, 2019 and is based on information contained in the Schedule 13D/A filed with the SEC on June 14, 2017February 12, 2018 by BVF Partners L.P. The Schedule 13D/A states that BVF Partners L.P., including certain of its affiliates, beneficially owns 8,596,3576,929,690 shares of our Common Stock, with shared voting and dispositive power over all such shares. The address of BVF Partners L.P. is 1 Sansome Street, 30th 30th Floor, San Francisco, California 94104. The number of shares subject to convertible securities is based on 57512,575 shares of our Series N-3O Preferred Stock held by BVF Partners L.P. and certain of its affiliates, convertible into an aggregate of 383,3338,383,333 shares of Common Stock. |
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(4) | Beneficial ownership is as of November 6, 2017March 14, 2019 and is based on information contained in the Schedule 13G/A filed with the SEC on February 13, 2019 by Stonepine Capital, L.P. The Schedule 13G/A states that Stonepine Capital, L.P., including certain of its affiliates, beneficially owns 5,726,579 shares of our common stock, with shared voting and dispositive power over all such shares. The address of Stonepine Capital, L.P. is 919 NW Bond Street, Suite 204, Bend, Oregon 97703. |
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(5) | Beneficial ownership is as of March 14, 2019 and is based on information contained in the Schedule 13G filed with the SEC on June 15, 2017. The Schedule 13G states that OrbiMed Capital GP VI LLC (“GP VI”) is the sole general partner of OrbiMed Private Investments VI, LP, which holds 5,000,000 shares of our Common Stock. The Schedule 13G also states that each of GP VI, OrbiMed Advisors LLC and Samuel D. Isalyhas haveIsaly has shared voting and dispositive power over 5,000,000 shares of our Common Stock. The address of OrbiMed Private Investments VI, LP is 601 Lexington Avenue, 54th54th Floor, New York, NY 10022. |
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(5)(6) | Beneficial ownership is as of November 6, 2017March 14, 2019 and is based on information contained in the Schedule 13G13D filed with the SEC on June 22, 2017.February 20, 2018 by Growth Equity Opportunities Fund V, LLC. The Schedule 13G13D states that eachGrowth Equity Opportunities Fund V, LLC. including certain of Stonepine Capital Management, LLC, Stonepine Capital L.P., Jon M. Plexico, and Timothy P. Lynchits affiliates, beneficially own 2,307,446owns 3,750,000 shares of our Common Stock, with soleshared voting and dispositive power over all such shares. The address of Stonepine Capital L.P.Growth Equity Opportunities Fund V, LLC is 919 NW Bond Street,1954 Greenspring Drive, Suite 204, Bend, OR 97703. The Schedule 13G also states that Stonepine Capital, L.P. holds our Common Stock for the benefit of its investors and has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, our Common Stock.600, Timonium, MD 21093. |
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(6)(7) | The address of our current directors and executive officers listed is 3101 Western Avenue, Suite 800, Seattle, Washington 98121, U.S.A.98121. |
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information about our common stock that may be issued upon the exercise of options, warrants and rights and upon the vesting of restricted stock unit awards under all of our existing equity compensation plans as of December 31, 2018, with such plans being the 2017 Plan, the 2015 Plan, the 2007 Equity Incentive Plan, as amended (the “2007 Plan”), and the 2007 Employee Stock Purchase Plan, as amended (the “ESPP”).
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| Plan Category | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | (b) Weighted Average Exercise Price of Outstanding Options, Warrants, and Rights | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) |
| Plans Approved by Stockholders | 6,099,292 (1) | $4.05 | 2,953,893(2) |
| Plan Not Approved by Stockholders | 1,120,000 (3) | $4.24 | — |
| Totals | 7,219,292 | $4.08 | 2,953,893 |
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(7)(1) | Number6,099,292 of these shares beneficially owned includes 10,000were subject to stock options then outstanding under the 2007 Plan, the 2015 Plan or the 2017 Plan, and none of these shares held by Mr. Seeleywere subject to restricted stock units outstanding under the 2007 Plan, the 2015 Plan or the 2017 Plan. The weighted-average exercise price presented in column (b) of unvestedthe table above does not take restricted stock unit awards into account. |
(2) | Of these shares, 2,775,517shares were available for issuance under the 2017 Plan, and 178,376 shares were available for issuance under the ESPP. No new awards may be granted under the 2007 Plan or the 2015 Plan. The shares available under the 2017 Plan may be used for any type of award authorized under the 2017 Plan including stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units and other awards payable in shares of our common stock. |
(3) | |
(8) | NumberThis row reflects a stock option granted to Dr. Craig as an inducement to his joining the company in accordance with Nasdaq Listing Rule 5635(c)(4) and not under any of shares beneficially owned includes 10,000 sharesour stock incentive plans. This option was granted on March 20, 2017 and has a maximum term of unvested restricted10 years (subject to earlier termination in connection with a termination of Dr. Craig’s employment or a change in control). The option is scheduled to vest in six semi-annual installments as measured from the grant date and is subject to accelerated vesting if Dr. Craig’s employment terminates in certain circumstances as provided in his employment agreement described above. The option is administered by our compensation committee and is otherwise generally subject to the terms and conditions applicable to stock for all directors and executive officers as a group.options granted to employees under our stock incentive plans. |
PROPOSAL 6:
APPROVAL OF THE ADJOURNMENT OF THE ANNUAL MEETING,
IF NECESSARY OR APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES
Summary
We may ask our stockholders to vote on a proposal to adjourn the Annual Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Annual Meeting to adopt any of Proposals 1, 2, 3, 4 or 5. In that event, you will be asked to vote only upon this proposal and not on any other matter. This proposal asks the stockholders to authorize the holder of any proxy solicited by the board of directors to vote in favor of adjourning the Annual Meeting. If this proposal is approved, our board of directors may in its discretion, if necessary or appropriate, adjourn the Annual Meeting to use the additional time to solicit additional proxies in favor of any of Proposals 1, 2, 3, 4 or 5. Even if there are a sufficient number of votes at the time of the Annual Meeting to adopt one or more of the proposals, the board may in its discretion seek to, if necessary or appropriate, adjourn the Annual Meeting to solicit additional proxies for any of the proposals for which there are insufficient votes, and the board may do so without adopting any of the proposals for which there are sufficient votes at the time of the Annual Meeting.
If the Annual Meeting is adjourned, notice will be given to our stockholders, if at all, in accordance with our bylaws, the General Corporation Law of the State of Delaware and applicable SEC regulations. At the adjourned meeting, we may transact any business which might have been transacted at the original meeting.
THE BOARD RECOMMENDS A VOTE “FOR”
THE ADJOURNMENT OF THE ANNUAL MEETING, IF NECESSARY OR APPROPRIATE, TO SOLICIT ADDITIONAL PROXIES.
OTHER INFORMATION
Beneficial Ownership Reporting Compliance under Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act (“Section 16(a)”) requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC reports of ownership and reports of changes in ownership of common stock and our other equity securities. Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on review of this information or written representations from reporting persons that no other reports were required, we believe that, during the 2018 fiscal year, all Section 16(a) filing requirements applicable to our executive officers, directors and any greater than 10% beneficial owners were timely met.
Other Business
As of the date of this proxy statement, we know of no other business that will be presented for action at the Annual Meeting.
Delivery of Documents to ShareholdersStockholders Sharing an Address
We have adopted a procedure called “householding,” which the SEC has approved. Under this procedure, shareholdersstockholders of record who have the same address and last name will receive only one copy of our proxy materials unless we receive contrary instructions from one or more of such shareholders.stockholders. Upon oral or written request, we will deliver promptly a separate copy of the proxy materials to a shareholderstockholder at a shared address to which a single copy of proxy materials was delivered. If you are a shareholderstockholder of record at a shared address to which we delivered a single copy of the proxy materials and you desire to receive a separate copy of the proxy materials for the SpecialAnnual Meeting or for our future meetings, or if you are a shareholderstockholder at a shared address to which we delivered multiple copies of the proxy materials and you desire to receive one copy in the future, please submit your request to the Householding Department of Broadridge Financial Solutions, Inc. at 51 Mercedes Way, Edgewood, New York 11717 U.S.A. or at 1-800-542-1061. If you are a beneficial shareholder,stockholder, please contact your bank, broker, trustee or other nominee directly if you have questions, require additional copies of the proxy materials, wish to receive multiple reports by revoking your consent to householding or wish to request single copies of the proxy materials in the future.
Where You Can Find Additional Information
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any document that we file at the Public Reference Room of the SEC at 100 F Street, N.E., Washington,
D.C. 20549, U.S.A. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, theThe SEC maintains a website at http://www.sec.gov, from which interested persons can electronically access our SEC filings.
Any person, including any beneficial owner, to whom this Proxy Statementproxy statement is delivered may request copies of reports, proxy statements or other information concerning us (including the documents incorporated by reference herein) without charge, by written or telephonic request directed to our Secretary at 3101 Western Avenue, Suite 800, Seattle, Washington 98121, U.S.A.98121. We undertake to provide required copies by first class mail or other equally prompt means within one business day of receipt of such request. If you would like to request documents, please do so by January 10, 2017May 2, 2019 in order to receive them before the SpecialAnnual Meeting.
By Order of the Board of Directors
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By Order of the Board of Directors |
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Adam R. Craig |
Chief Executive Officer |
Chief Executive Officer
Seattle, Washington
April , 2019
Seattle, Washington
APPENDIX A
AGREEMENT AND PLANCERTIFICATE OF MERGER
AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
CTI BIOPHARMA CORP.
This AGREEMENT AND PLAN OF MERGER (this Agreement), dated as of , 2017, is entered into by and between CTI BioPharma Corp.(the “Corporation”), a Delaware corporation (the Delaware Corporation), and CTI BioPharma Corp., a Washington corporation (the Washington Corporation).
WHEREAS, the Washington Corporation is a corporation duly organized and existing under the lawsand by virtue of the State of Washington and is authorized to issue (i) Eighty One Million Five Hundred Thousand (81,500,000) shares of common stock, $0.001 par value per share (the WashingtonGeneral Corporation Common Stock),and (ii) Thirty-Three Thousand Three Hundred Thirty-Three (33,333) shares of preferred stock, $0.001 par value per share (the Washington Corporation Preferred Stock); and
WHEREAS, the Delaware Corporation is a corporation duly organized and existing under the lawsLaw of the State of Delaware is a wholly owned subsidiary(the “DGCL”), does hereby certify that:
1. The name of the Washington Corporation and is authorized to issue (i) Eighty One Million Five Hundred Thousand (81,500,000) sharesCTI BioPharma Corp. The date of common stock, no par value per share (the Delaware Corporation Common Stock) of which one hundred (100) shares are issued to the Washington Corporation and outstanding asfiling of the date hereof,and (ii) Thirty-Three Thousand Three Hundred Thirty-Three (33,333) shares of preferred stock, no par value per share (the Delaware Corporation Preferred Stock); and
WHEREAS, the Board of Directors of each of the Delaware Corporation and the Washington Corporation have approved and adopted this Agreement and the transactions contemplated by this Agreement, in each case after making a determination that this Agreement and such transactions are advisable and fair to, and in the best interests of, such corporation and its stockholders; and
WHEREAS, pursuant to the transactions contemplated by this Agreement and on the terms and subject to the conditions set forth herein, the Washington Corporation, in accordance with the Delaware General Corporation Law (DGCL), will merge with and into the Delaware Corporation, with the Delaware Corporation as the surviving corporation in the merger (the Merger); and
WHEREAS, the Board of Directors of the Washington Corporation will furnish a proxy statement (the Proxy Statement) in connection with the solicitation of proxies to be voted at a special meeting of the Washington Corporation’s stockholders on January 24, 2018 at 10 a.m. Pacific Time, held at 3101 Western Avenue, Suite 800, Seattle, WA 98121, or any adjournment or postponement thereof (the Special Meeting); and
WHEREAS, for US federal income tax purposes, the parties intend that the Merger qualify as a tax-free reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the mutual covenants, terms and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1.Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with 252 of the DGCL and Section 23B.11.070 of the Washington Business Corporation Act (the Act), the Washington Corporation shall be merged with and into the Delaware Corporation at the Effective Time (as hereinafter defined). Following the Effective Time, the separate corporate existence of the Washington Corporation shall cease, and the Delaware Corporation shall continue as the surviving corporation and shall continue to be governed by the laws of the State of Delaware. The effects and consequences of the Merger shall be as set forth in this Agreement and the DGCL.
2.Condition; Effective Time.
(a)Pursuant to the Revised Code of Washington, Section 23B.17.015, the obligations of the parties to effect the Merger and to otherwise consummate the transactions contemplated by this Agreement are subject to the Washington Corporation having obtained the approval of this Agreement by the affirmative vote of a majority of votes actually cast by the Washington Corporation stockholders entitled to vote on the Merger at the Special Meeting, in person or by proxy, provided that the affirmative votes equal or exceed fifteen percent of votes within the voting group (the Required Approval).
(b)Subject to the provisions of this Agreement, the Merger shall be effective upon the filing of a certificate of merger (the original Certificate of Merger) complying with 252(c) of the DGCLIncorporation with the Secretary of State of the State of Delaware with respect to the Merger and the filingwas December 14, 2017.
2. This Certificate of the articles of merger (the Articles of Merger) with the Secretary of State of the State of Washington, which filings shall be made as soon as practicable after the Required Approval has been obtained (the Effective Time).
(c)The Merger shall have the effects set forth in the DGCL, including without limitation, Section 259 of the DGCL. Without limiting the generality of the foregoing, from the Effective Time: (i) all the properties, rights, privileges, immunities, powers and franchises of the Washington Corporation shall vest in the Delaware Corporation, and (ii) all debts, liabilities, obligations and duties of the Washington Corporation shall become the debts, liabilities, obligations and duties of the Delaware Corporation.
3.Organizational Documents. The bylaws of the Delaware Corporation in effect at the Effective Time shall be the bylaws of the Delaware Corporation until thereafter amended as provided therein or by the DGCL, and the certificate of incorporation of the Delaware Corporation in effect at the Effective Time, as amended pursuantAmendment to the Certificate of Merger, shall beIncorporation was duly authorized and adopted by the certificateCorporation’s Board of incorporationDirectors and stockholders in accordance with Section 242 of the Delaware Corporation until thereafter amended as provided therein or byDGCL and amends the DGCL.
4.Directors and Officers. The directors and officersprovisions of the Washington Corporation immediately priorCorporation’s Certificate of Incorporation.
3. The amendment to the Effective Time shall be the directors and officers, respectively,existing Certificate of Incorporation being effected hereby is to delete Section 4.1 of Article IV of the Delaware Corporation fromCertificate of Incorporation in its entirety and afterto substitute in its place the Effective Time and shall hold office until the earlier of their respective death, resignation or removal or their respective successors are duly elected or appointed and qualified in the manner provided for in the certificate of incorporation and bylaws of the Delaware Corporation or as otherwise provided by the DGCL.following:
5.Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of the Delaware Corporation or the Washington Corporation or the holders of shares of capital stock of the Washington Corporation: |
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(a) | each share of Washington Corporation Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and non-assessable share of Delaware Corporation Common Stock, and all such shares of Washington Corporation Common Stock shall automatically be cancelled and retired and shall cease to exist; |
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(b) | each share of Washington Corporation Preferred Stock issued and outstanding immediately prior to the Effective Time shall be converted into one validly issued, fully paid and non-assessable share of Delaware Corporation Preferred Stock, and all such shares of Washington Corporation Preferred Stock shall automatically be cancelled and retired and shall cease to exist; “provided that, from and after the Effective Time, the holders of Delaware Corporation Preferred Stock shall have the right to convert such shares of Delaware Corporation Preferred Stock into validly issued, fully paid and non-assessable shares of Delaware Corporation Common Stock, in accordance with and to the extent set forth in the Certificate of Designations of the Delaware Corporation’s Series N Preferred Stock in the Delaware Corporation’s Certificate of Incorporation; and
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(c) | each share of capital stock of the Delaware Corporation issued and outstanding immediately prior to the Effective Time shall automatically be cancelled and cease to be outstanding following the consummation of the Merger. |
6.Warrants of the Washington CorporationClasses. At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each outstanding warrant (the Warrants or Warrant) which prior to that
time represented a Warrant of the Washington Corporation shall cease to exist and shall be deemed for all purposes to evidence ownership of and to represent a Warrant of the Delaware Corporation and shall be so registered on the books and records of the Delaware Corporation or its transfer agent.
7.Equity-Based Awards of the Washington Corporation. At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, the Delaware Corporation will assume and continue any and all of the Washington Corporation’s employee benefit plans and stock incentive plans in effect at the Effective Time, including the Washington Corporation’s 2017 Equity Incentive Plan, 2015 Equity Incentive Plan and 2007 Equity Incentive Plan (the “Stock Plans”) and any and all stock options, restricted stock and restricted stock unit awards, and other equity-based awards that are then outstanding under any of the Stock Plans (the “Outstanding Awards”). At the Effective Time, by virtue of the Merger and without any action on the part of the holders thereof, each Outstanding Award will automatically be converted into an award covering an equal number of shares of Delaware Corporation Common Stock (with, in the case of options and similar awards, the same per-share exercise price that applied to the Outstanding Award prior to the Effective Time). The Delaware Corporation shall continue to reserve that number of shares of Delaware Corporation Common Stock with respect to each such Outstanding Award as was reserved by the Washington Corporation prior to the Effective Time with no other changes in the terms and conditions of such Outstanding Awards, and each Outstanding Award of the Washington Corporation shall be converted into an Outstanding Award of the Delaware Corporation and shall be so registered on the books and records of the Delaware Corporation or its transfer agent. On and after the Effective Time, all awards previously issued under or that may be issued in the future under any of the Stock Plans will be deemed to be issued by or may be issued by the Delaware Corporation. In addition, at the Effective Time, the Washington Corporation’s 2007 Employee Stock Purchase Plan (the “ESPP”) shall be assumed by the Delaware Corporation, and any Offering Period (as defined in the ESPP) then in progress shall continue in effect in accordance with its terms, except that the purchase rights under the ESPP will be exercised at the end of the Offering Period for shares of Delaware Corporation Common Stock rather than shares of Washington Corporation Common Stock.
8.Stock Certificates.
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(a) | After the Effective Time, each holder of a certificate representing shares of Washington Corporation Common Stock may, at such stockholder’s option, surrender the same for cancellation to the transfer agent of the Delaware Corporation (the Agent), and each such holder shall be entitled to receive in exchange therefor a certificate or certificates representing the number of shares of Delaware Corporation Common Stock into which the shares formerly represented by the surrendered certificate were converted as herein provided. Until so surrendered, each certificate representing shares of Washington Corporation Common Stock outstanding immediately prior to the Effective Time shall be deemed for all purposes, from and after the Effective Time, to represent the number of shares of Delaware Corporation Common Stock into which such shares of Washington Corporation Common Stock were converted in the Merger.
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(b) | After the Effective Time, each holder of a certificate representing shares of Washington Corporation Preferred Stock may, at such stockholder’s option, surrender the same for cancellation to the Agent, and each such holder shall be entitled to receive in exchange therefor a certificate or certificates representing the number of shares of Delaware Corporation Preferred Stock into which the shares formerly represented by the surrendered certificate were converted as herein provided. Until so surrendered, each certificate representing shares of Washington Corporation Preferred Stock outstanding immediately prior to the Effective Time shall be deemed for all purposes, from and after the Effective Time, to represent the number of shares of Delaware Corporation Preferred Stock into which such shares of Washington Corporation Preferred Stock were converted in the Merger. |
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(c) | The registered owner on the books and records of the Delaware Corporation of any shares of stock represented by a certificate of Washington Corporation Common Stock or Washington Corporation Preferred Stock shall, until such certificate shall have been surrendered for transfer or conversion or otherwise accounted for to the Delaware Corporation or the Agent, have and be entitled to exercise any voting and other rights (including the right to receive dividends and other distributions) with |
respect to the shares of Delaware Corporation Common Stock or Delaware Corporation Preferred Stock, as applicable, represented by such certificate as provided in this Section 8.
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(d) | Each certificate representing shares of Delaware Corporation Common Stock or shares of Delaware Corporation Preferred Stock so issued in the Merger shall bear the same legends, if any, with respect to the restrictions on transferability as the certificate of Washington Corporation Common Stock or Washington Corporation Preferred Stock, as applicable, so converted and given in exchange therefor, unless otherwise determined by the Board of Directors of the Delaware Corporation in compliance with applicable laws. |
9.Consents and Filings; Reasonable Best Efforts
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(a) | The Washington Corporation shall (i) file the Proxy Statement with the United States Securities and Exchange Commission; (ii) duly give notice of, convene and hold the Special Meeting for the purpose of obtaining the Required Approval; and (iii) through its Board of Directors, recommend to its stockholders that they vote in favor of the adoption of this Agreement. |
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(b) | The Washington Corporation and the Delaware Corporation each will use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, including to effect all necessary notifications and filings. |
10.Entire Agreement. This Agreement together with the Certificate of Merger constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous understandings, representations and warranties, and agreements, both written and oral, with respect to such subject matter.
11.Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.
12.No Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement.
13.Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
14.Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. Except as otherwise set forth in this Agreement, no failure to exercise, or delay in exercising, any rights, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
15.Termination, Abandonment or Deferral. At any time before the Effective Time, this Agreement may be terminated and the Merger may be abandoned by the Board of Directors of either the Washington Corporation or the Delaware Corporation or both, notwithstanding the approval of this Agreement by the stockholders of the Washington Corporation or the Delaware Corporation or the prior filing of this Agreement with the Secretary of State of the State of Delaware, or the consummation of the Merger may be deferred for a reasonable period of time if, in the opinion of the Washington Corporation and the Delaware Corporation, such action would be in the best interest of such corporations. In the event of termination of this Merger Agreement, this Merger Agreement shall become void and of no effect and there shall be no liability on the part of either corporation or its Board of Directors or stockholders with respect thereto, except that the Washington Corporation shall pay all expenses incurred in connection with the Merger or in respect of this Merger Agreement or relating thereto.
16.Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
17.Governing Law. This Agreement and all actions (whether based on contract, tort or otherwise) arising out of or relating to this Agreement or the actions of the Washington Corporation or the Delaware Corporation in the negotiation, administration, performance and enforcement thereof shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under any applicable principles of conflicts of laws thereof.
18.Jurisdiction. In any action between the parties arising out of or relating to this Agreement or any of the transactions contemplated hereby, each of the parties (i) irrevocably and unconditionally consents and submits to the exclusive jurisdiction and venue of the Court of Chancery of the State of Delaware in and for New Castle County, Delaware or any federal court sitting in the State of Delaware; (ii) agrees that it will not attempt to deny or defeat such jurisdiction by motion or other request for leave from such court; and (iii) agrees that it will not bring any such action in any court other than the Court of Chancery for the State of Delaware in and for New Castle County, Delaware, or any federal court sitting in the State of Delaware and appellate courts thereof.
19.WAIVER OF JURY TRIAL. EACH OF THE WASHINGTON CORPORATION AND THE DELAWARE CORPORATION WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS.
20.Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, email, portable data format (PDF) or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
CTI BIOPHARMA CORP.,
a Washington corporation
By_____________________
Name:
Title:
CTI BIOPHARMA CORP.,
a Delaware corporation
By_____________________
Name:
Title:
APPENDIX B
DELAWARE CHARTER
CERTIFICATE OF INCORPORATION
OF
CTI BIOPHARMA CORP.
The undersigned, for the purpose of organizing a corporation under the General Corporation Law of the State of Delaware, certifies:
ARTICLE I
NAME
The name of the corporation (the Corporation) is CTI BioPharma Corp.
ARTICLE II
REGISTERED AGENT
The address of the Corporation’s registered office in the State of Delaware is Corporation Service Company, 251 Little Falls Drive, in the City of Wilmington, County of New Castle, Delaware 19808. The name of its registered agent at such address is Corporation Service Company.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware or any applicable successor act thereto (as the same now exists or may hereafter be amended, the DGCL).
ARTICLE IV
AUTHORIZED CAPITAL STOCK
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4.1 | Classes. The total number of shares of capital stock which the Corporation shall have authority to issue is Eighty One Hundred Thirty-One Million, Five Hundred Thirty-Three Thousand, Three Hundred Thirty-Three (81,533,333)(131,533,333), including Eighty One Hundred Thirty-One Million, Five Hundred Thousand (81,500,000)(131,500,000) shares of common stock, par value $0.001 per share (the Common Stock)Stock), and Thirty-Three Thousand Three Hundred Thirty-Three (33,333) shares of preferred stock, par value $0.001 per share (the Preferred Stock)Stock), of which 57512,575 shall initially be designated as the Series NO Preferred Stock (the Series NO Preferred Stock)Stock), and 10,00015,000 shall initially be designated as the Series ZZ Junior Participating Cumulative Preferred Stock (the Series ZZ Preferred Stock)Stock). Subject to the rights of the holdersholder of any series of Preferred Stock, the number of authorized shares of any of the Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL, and no vote of the holders of any of the Common Stock or Preferred Stock voting separately as a class shall be required therefor.”
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4. The Certificate of Amendment to the Certificate of Incorporation was approved by the Board of Directors at a meeting thereof duly called and held on March 13, 2019 and by the stockholders of the Corporation at a meeting thereof duly called and held on ___________, 2019.
5. This Certificate of Amendment to the Certificate of Incorporation shall be effective immediately upon filing by the Secretary of State of the State of Delaware.
IN WITNESS WHEREOF, CTI BioPharma Corp. has caused this Certificate of Amendment to the Certificate of Incorporation to be signed by its Chief Executive Officer as of the ____ day of _______________, 2019.
CTI BIOPHARMA CORP.
a Delaware corporation
By: /s/ Adam R. Craig
Adam R. Craig
President and Chief Executive Officer
APPENDIX B
AMENDED AND RESTATED 2017 EQUITY INCENTIVE PLAN
CTI BIOPHARMA CORP.
1. PURPOSE OF PLAN
The purpose of this CTI BioPharma Corp. 2017 Equity Incentive Plan (this “Plan”) of CTI BioPharma Corp., a Delaware corporation (the “Corporation”), is to promote the success of the Corporation by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons and to enhance the alignment of the interests of the selected participants with the interests of the Corporation’s stockholders.
2. ELIGIBILITY
The Administrator (as such term is defined in Section 3.1) may grant awards under this Plan only to those persons that the Administrator determines to be Eligible Persons. An “Eligible Person” is any person who is either: (a) an officer (whether or not a director) or employee of the Corporation or one of its Subsidiaries; (b) a director of the Corporation or one of its Subsidiaries; or (c) an individual consultant or advisor who renders or has rendered bona fide services (other than services in connection with the offering or sale of securities of the Corporation or one of its Subsidiaries in a capital-raising transaction or as a market maker or promoter of securities of the Corporation or one of its Subsidiaries) to the Corporation or one of its Subsidiaries and who is selected to participate in this Plan by the Administrator; provided, however, that a person who is otherwise an Eligible Person under clause (c) above may participate in this Plan only if such participation would not adversely affect either the Corporation’s eligibility to use Form S-8 to register under the Securities Act of 1933, as amended (the “Securities Act”), the offering and sale of shares issuable under this Plan by the Corporation or the Corporation’s compliance with any other applicable laws. An Eligible Person who has been granted an award (a “participant”) may, if otherwise eligible, be granted additional awards if the Administrator shall so determine. As used herein, “Subsidiary” means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Corporation; and “Board” means the Board of Directors of the Corporation.
3. PLAN ADMINISTRATION
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3.1 | The Administrator. This Plan shall be administered by and all awards under this Plan shall be authorized by the Administrator. The “Administrator” means the Board or one or more committees (or sub-committees, as the case may be) appointed by the Board or another committee (within its delegated authority) to administer all or certain aspects of this Plan. Any such committee shall be comprised solely of one or more directors or such number of directors as may be required under applicable law. A committee may delegate some or all of its authority to another committee so constituted. The Board or a committee comprised solely of directors may also delegate, to the extent permitted by Section 157(c) of the Delaware General Corporation Law and any other applicable law, to one or more officers of the Corporation, its authority under this Plan. The Board or another committee (within its delegated authority) may delegate different levels of authority to different committees or persons with administrative and grant authority under this Plan. Unless otherwise provided in the Bylaws of the Corporation or the applicable charter of any Administrator: (a) a majority of the members of the acting Administrator shall constitute a quorum, and (b) the vote of a majority of the members present assuming the presence of a quorum or the unanimous written consent of the members of the Administrator shall constitute action by the acting Administrator. |
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4.2.3.2 | Common StockPowers of the Administrator. The termsSubject to the express provisions of this Plan, the Common Stock are as follows:Administrator is authorized and empowered to do all things necessary or desirable in connection with the authorization of awards and the administration of this Plan (in the case of a committee or delegation to one or more officers, within any express limits on the authority delegated to that committee or person(s)), including, without limitation, the authority to:
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| (a) | determine eligibility and, from among those persons determined to be eligible, determine the particular Eligible Persons who will receive an award under this Plan; |
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(a)(b) | Ranking. The voting, dividendgrant awards to Eligible Persons, determine the price (if any) at which securities will be offered or awarded and liquidation rightsthe number of securities to be offered or awarded to any of such persons (in the holderscase of securities-based awards), determine the Common Stock are subject toother specific terms and qualified byconditions of awards consistent with the rightsexpress limits of this Plan, establish the holdersinstallment(s) (if any) in which such awards shall become exercisable or shall vest (which may include, without limitation, performance and/or time-based schedules), or determine that no delayed exercisability or vesting is required, establish any applicable performance-based exercisability or vesting requirements, determine the circumstances in which any performance-based goals (or the applicable measure of performance) will be adjusted and the Preferred Stocknature and impact of any series assuch adjustment, determine the extent (if any) to which any applicable exercise and vesting requirements have been satisfied, establish the events (if any) on which exercisability or vesting may be designated byaccelerate (which may include, without limitation, retirement and other specified terminations of employment or services, or other circumstances), and establish the Boardevents (if any) of Directors of the Corporation (the Board) upon any issuance of any series of Preferred Stock.
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(b) | Voting. Except as otherwise provided by lawtermination, expiration or this Certificate of Incorporation (as defined below), the holders of outstanding shares of Common Stock shall have the exclusive right to vote for the election and removal of directors and for all other purposes. Except as otherwise required by law or this Certificate of Incorporation, each share of Common Stock shall entitle the holder thereof to one (1) vote, in person or by proxy, on each matter submitted to a vote of stockholders of the Corporation. Notwithstanding any other provision of this Certificate of Incorporation (as amended from time to time, including the terms of any certificate of designations for any series of Preferred Stock, this Certificate of Incorporation) to the contrary, the holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holdersreversion of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation or the DGCL.
awards; |
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| (c) | Dividends. Subjectapprove the forms of any award agreements (which need not be identical either as to the rightstype of the holders of Preferred Stock, holders of shares of Common Stock shall be entitled to receive such dividends and distributions and other distributions in cash, stockaward or property of the Corporation when, as and if declared thereon by the Board from time to time out of assets or funds of the Corporation legally available therefor.
among participants); |
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| (d) | Liquidation. Subjectconstrue and interpret this Plan, any sub-plan and any agreements defining the rights and obligations of the Corporation, its Subsidiaries, and participants under this Plan, make any and all determinations under this Plan and any such agreements, further define the terms used in this Plan, and prescribe, amend and rescind rules and regulations relating to the administration of this Plan, any sub-plan or the awards granted under this Plan;
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| (e) | cancel, modify, or waive the Corporation’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consent under Section 8.6.5; |
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| (f) | accelerate, waive or extend the vesting or exercisability, or modify or extend the term of, any or all such outstanding awards (in the holderscase of Preferred Stock,options or stock appreciation rights, within the maximum ten-year term of such awards) in such circumstances as the Administrator may deem appropriate (including, without limitation, in connection with a retirement or other termination of employment or services, or other circumstances) subject to any required consent under Section 8.6.5; |
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| (g) | adjust the number of shares of Common Stock subject to any award, adjust the price of any or all outstanding awards or otherwise waive or change previously imposed terms and conditions, in such circumstances as the Administrator may deem appropriate, in each case subject to Sections 4 and 8.6 (and subject to the no repricing provision below); |
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| (h) | determine the date of grant of an award, which may be a designated date after but not before the date of the Administrator’s action to approve the award (unless otherwise designated by the Administrator, the date of grant of an award shall be the date upon which the Administrator took the action approving the award); |
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| (i) | determine whether, and the extent to which, adjustments are required pursuant to Section 7.1 hereof and take any other actions contemplated by Section 7.2 in connection with the occurrence of an event of the type described in Section 7; |
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| (j) | acquire or settle (subject to Sections 7 and 8.6) rights under awards in cash, stock of equivalent value, or other consideration (subject to the no repricing provision below); and |
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| (k) | determine the fair market value of the Common Stock or awards under this Plan from time to time and/or the manner in which such value will be determined. |
Notwithstanding the foregoing and except for an adjustment pursuant to Section 7.1 or a repricing approved by stockholders, in no case may the Administrator (1) amend an outstanding stock option or SAR to reduce the exercise price or base price of the award, (2) cancel, exchange, or surrender an outstanding stock option or SAR in exchange for cash or other awards for the purpose of repricing the award, or (3) cancel, exchange, or surrender an outstanding stock option or SAR in exchange for an option or SAR with an exercise or base price that is less than the exercise or base price of the original award.
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3.3 | Binding Determinations. Any determination or other action taken by, or inaction of, the Corporation, any Subsidiary or the Administrator relating or pursuant to this Plan (or any award made under this Plan) and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. Neither the Board nor any other Administrator, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan (or any award made under this Plan), and all such persons shall be entitled to receiveindemnification and reimbursement by the assetsCorporation in respect of any claim, loss, damage or expense (including, without limitation, attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and fundsofficers liability insurance coverage that may be in effect from time to time. Neither the Board nor any other Administrator, nor any member thereof or person acting at the direction thereof, nor the Corporation or any of its Subsidiaries, shall be liable for any damages of a participant should an option intended as an ISO (as defined below) fail to meet the requirements of the Corporation available for distribution in the eventInternal Revenue Code of any liquidation, dissolution or winding up of the affairs of the Corporation, whether voluntary or involuntary. A liquidation, dissolution or winding up of the affairs of the Corporation,1986, as such terms are used in this Section (d)amended (the “Code”), shall not be deemedapplicable to be occasioned by or to include any consolidation or merger of the Corporation with or intoISOs, should any other personaward(s) fail to qualify for any intended tax treatment, should any award grant or other action with respect thereto not satisfy Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, or otherwise for any tax or other liability imposed on a sale, lease, exchange or conveyance of all or a part of its assets.participant with respect to an award. |
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4.33.4 | Preferred StockReliance on Experts. SharesIn making any determination or in taking or not taking any action under this Plan, the Administrator may obtain and may rely upon the advice of Preferred Stock mayexperts, including employees and professional advisors to the Corporation. No director, officer or agent of the Corporation or any of its Subsidiaries shall be issued from time to timeliable for any such action or determination taken or made or omitted in one or more series.good faith.
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(a)3.5 | General.Delegation. The Board is hereby authorizedAdministrator may delegate ministerial, non-discretionary functions to provide by resolutionindividuals who are officers or resolutions from time to time for the issuance, outemployees of the unissued shares of Preferred Stock, of one or more series of Preferred Stock, without stockholder approval, by filing a certificate pursuant to the applicable law of the State of Delaware, setting forth such resolution and, with respect to each such series, establishing the number of shares to be included in such series, and fixing the voting powers, full or limited, or no voting power of the shares of such series, and the designation, preferences and relative, participating, optional or other special rights, if any, of the shares of each such series and any qualifications, limitations or restrictions thereof including, without limitation, the dividend rate (and whether dividends are cumulative), conversion rights, if any, voting rights, rights and terms of redemption (including sinking fund provisions, if any), redemption price and liquidation preferences of any wholly unissued series of Preferred Stock and the number of shares constituting any such series and the designation thereof,Corporation or any of them;its Subsidiaries or to third parties.
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4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN; SHARE LIMITS
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4.1 | Shares Available. Subject to the provisions of Section 7.1, the capital stock that may be delivered under this Plan shall be shares of the Corporation’s authorized but unissued Common Stock and any shares of its Common Stock held as treasury shares. For purposes of this Plan, “Common Stock” shall mean the common stock of the Corporation and such other securities or property as may become the subject of awards under this Plan, or may become subject to increase or decrease thesuch awards, pursuant to an adjustment made under Section 7.1. |
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4.2 | Share Limits. The maximum number of shares of any series subsequentCommon Stock that may be delivered pursuant to awards granted to Eligible Persons under this Plan (the “Share Limit”) is equal to the issuesum of the following: |
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| (1) | 7,300,000 shares of Common Stock, plus |
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| (2) | the number of any shares subject to stock options granted under the Corporation’s 2015 Equity Incentive Plan, as amended (the “2015 Plan”), or the Corporation’s 2007 Equity Incentive Plan, as amended (the “2007 Plan”) and outstanding on the date of stockholder approval of this Plan (the “Stockholder Approval Date”) which expire, or for any reason are cancelled or terminated, after the Stockholder Approval Date without being exercised, plus; |
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| (3) | the number of any shares subject to restricted stock or restricted stock unit awards granted under the 2015 Plan or the 2007 Plan that series, but not beloware outstanding and unvested on the Stockholder Approval Date that are forfeited, terminated, cancelled or otherwise reacquired by the Corporation without having become vested. |
provided that in no event shall the Share Limit exceed 11,202,207 shares (which is the sum of the 7,300,000 shares set forth above, plus the aggregate number of shares subject to stock options and unvested restricted stock and restricted stock unit awards previously granted and outstanding under the 2015 Plan and the 2007 Plan as of the Effective Date).
The following limits also apply with respect to awards granted under this Plan:
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| (a) | The maximum number of shares of such series then outstanding.. The powers, designation, preferences and relative, participating, optional and other special rights of each series of PreferredCommon Stock and the qualifications, limitations and restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. Except as provided by the terms of any Preferred Stock, shares of Preferred Stockthat may be redeemed, purchased or acquired by the Corporation and may be reissued exceptdelivered pursuant to options qualified as otherwise provided by law.incentive stock options granted under this Plan is 7,300,000 shares. |
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| (b) | Series N Preferred StockAwards that are granted under this Plan during any one calendar year to any person who, on the grant date of the award, is a non-employee director are subject to the limits of this Section 4.2(b). The Series N Preferredmaximum number of shares of Common Stock shall have: (i)subject to those awards that are granted under this Plan during any one calendar year to an individual who, on the designation as indicated opposite “DESIGNATION” below, (ii)grant date of the award, is a non-employee director is the number of shares that produce a grant date fair value for the award that, when combined with the grant date fair value of any other awards granted under this Plan during that same calendar year to that individual in his or her capacity as indicated opposite “NUMBER OF SHARES” below,
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(i) | a non-employee director, is $375,000; provided that this limit is $475,000 as to a non-employee director who is serving as the Stated Value (as definedChairman of the Board. For purposes of this Section 4.2(b), a “non-employee director” is an individual who, on the grant date of the award, is a member of the Board who is not then an officer or employee of the Corporation or one of its Subsidiaries. For purposes of this Section 4.2(b), “grant date fair value” means the value of the award as of the date of grant of the award and as determined using the equity award valuation principles applied in Exhibit A-1 hereto)the Corporation’s financial reporting. The limits of this Section 4.2(b) do not apply to, and shall be determined without taking into account, any award granted to an individual who, on the grant date of the award, is an officer or employee of the Corporation or one of its Subsidiaries. The limits of this Section 4.2(b) apply on an individual basis and not on an aggregate basis to all non-employee directors as indicated opposite “STATED VALUE” below, (iv) the Original Issue Date (as defined in Exhibit A-1 hereto) as indicated opposite “ORIGINAL ISSUE DATE” below, (v) the Conversion Price (as defined in Exhibit A-1 hereto) as indicated opposite “CONVERSION PRICE” below, and (vi) the Beneficial Ownership a group. |
Limitation Percentage (as defined in Exhibit A-1 hereto)Each of the foregoing numerical limits is subject to adjustment as indicated opposite “BENEFICIAL OWNERSHIP LIMITATION PERCENTAGE” below:contemplated by Section 4.3, Section 7.1, and Section 8.10.
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DESIGNATION:4.3 | Series N PreferredAwards Settled in Cash, Reissue of Awards and Shares. Except as provided in the next sentence, shares that are subject to or underlie awards granted under this Plan which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under this Plan shall again be available for subsequent awards under this Plan. Shares that are exchanged by a participant or withheld by the Corporation as full or partial payment in connection with any award under this Plan, as well as any shares exchanged by a participant or withheld by the Corporation or one of its Subsidiaries to satisfy the tax-related items withholding obligations related to any award, shall not be available for subsequent awards under this Plan. To the extent that an award granted under this Plan is settled in cash or a form other than shares of Common Stock, the shares that would have been delivered had there been no such cash or other settlement shall not be counted against the shares available for issuance under this Plan. If shares of Common Stock are delivered in respect of a dividend equivalent right granted under this Plan, the number of shares delivered with respect to the award shall be counted against the Share Limit. (For purposes of clarity, if 1,000 dividend equivalent rights are granted and outstanding when the Corporation pays a dividend, and 50 shares are delivered in payment of those rights with respect to that dividend, 50 shares shall be counted against the Share Limit). To the extent that shares of Common Stock are delivered pursuant to the exercise of a stock appreciation right or stock option granted under this Plan, the number of underlying shares as to which the exercise related shall be counted against the applicable share limits under Section 4.2, as opposed to only counting the shares issued. (For purposes of clarity, if a stock appreciation right relates to 100,000 shares and is exercised at a time when |
the payment due to the participant is 15,000 shares, 100,000 shares shall be charged against the applicable share limits under Section 4.2 with respect to such exercise.) Refer to Section 8.10 for application of the foregoing share limits with respect to assumed awards.
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NUMBER OF SHARES:4.4 | 575No Fractional Shares; Minimum Issue. Unless otherwise expressly provided by the Administrator, no fractional shares shall be delivered under this Plan. The Administrator may pay cash in lieu of any fractional shares in settlements of awards under this Plan. The Administrator may from time to time impose a limit (of not greater than 100 shares) on the minimum number of shares that may be purchased or exercised as to awards (or any particular type of award) granted under this Plan unless (as to any particular award) the total number purchased or exercised is the total number at the time available for purchase or exercise under the award. |
5. AWARDS
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STATED VALUE:5.1 | $2,000 per share |
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ORIGINAL ISSUE DATE: | June 8, 2017 |
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BENEFICIAL OWNERSHIP | 19.99%Type and Form of Awards. The Administrator shall determine the type or types of award(s) to be made to each selected Eligible Person. Awards may be granted singly, in combination or in tandem. Awards also may be made in combination or in tandem with, in replacement of, as alternatives to, or as the payment form for grants or rights under any other employee or compensation plan of the Corporation or one of its Subsidiaries. The types of awards that may be granted under this Plan are: |
LIMITATION
PERCENTAGE:
Notwithstanding anything5.1.1Stock Options. A stock option is the grant of a right to the contrary set forth in this Certificate of Incorporation, any outstanding shares of Series N Preferred Stock that are not converted pursuant to an automatic conversion pursuant to Section 6(b)(i) of Exhibit A-1 hereto shall automatically convert into thatpurchase a specified number of shares of Common Stock during a specified period as determined by dividing the Stated ValueAdministrator. An option may be intended as an incentive stock option within the meaning of sharesSection 422 of the Series N Preferred Stock by the Conversion Price for the Series N Preferred Stock only on the date on which the conversion of such shares of the Series N Preferred Stock would no longer result in beneficial ownership of more than the Beneficial Ownership Limitation Percentage of the Common Stock by the particular Holder and its affiliates.
Except to the extent expressly provided otherwise herein, such Series N Preferred Stock shall have such powers, terms, conditions, designations, preferences and privileges, relative, participating, optional and other special rights, and qualifications, limitations and restrictions thereof ascribed to the Series N Preferred Stock as set forth in Code (an “Exhibit A-1ISO hereto, which is incorporated herein by reference and constitutes part of this Certificate of Incorporation.
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(c) | Series ZZ Junior Participating Cumulative Preferred Stock. The Corporation has designated a series of preferred stock of the Corporation as the “Series ZZ Junior Participating Cumulative Preferred Stock” (the Series ZZ Preferred Stock), which series shall have such rights, voting and other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations and restrictions thereof, of the shares of such series as set forth in Exhibit A-2 hereto, which is incorporated herein by reference and constitutes part of this Certificate of Incorporation.
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ARTICLE V
DIRECTORS
This Article FIFTH is inserted for the management of the business and for the conduct of the affairs of the Corporation.
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5.1. | General. The business and affairs of the Corporation shall be managed by or under the direction of the Board, except as otherwise provided by law.
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5.2. | Number of Directors; Election of Directors. The total number of directors constituting the Board of Directors of the Corporation shall be fixed in the manner set forth in the bylaws. Directors shall be elected annually for terms of one year, and until their successors are elected and qualified, subject to their earlier death, resignation or removal from the Board of Directors. Unless and except to the extent that the Bylaws shall so require, the election of directors of the Corporation need not be by written ballot. No cumulative voting for directors shall be permitted.
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5.3. | The Board of Directors shall have the power to adopt, amend or repeal the Bylaws of the Corporation. |
ARTICLE VI
PREEMPTIVE RIGHTS
Stockholders of the Corporation have no preemptive rights to acquire additional shares issued by the Corporation.
ARTICLE VII
SHAREHOLDER MEETING QUORUM
A quorum for any shareholder meeting shall be the holders of shares constituting at least one-third (1/3) of the votes entitled”) or a nonqualified stock option (an option not intended to be cast.
ARTICLE VIII
LIMITATION ON LIABILITY OF DIRECTORS
Toan ISO). The award agreement evidencing the fullest extent permitted by the DGCL as it now exists and as it may hereafter be amended, no director of the Corporation shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that nothing contained in this Article shall eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to the provisions of Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. No repeal or modification of this Article shall apply to or have any adverse effect on any right or protection of, or any limitation of the liability of, a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.
ARTICLE IX
INDEMNIFICATION
The Corporation may indemnify, and advance expenses to, to the fullest extent permitted by law, any person who was or is a party to or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that the person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise.
ARTICLE X
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by law, and all rights and powers conferred herein on stockholders and directors are subject to this reserved power.
ARTICLE XI
FORUM AND VENUE
Unless the Corporation consents in writing to the selectiongrant of an alternative forum (an Alternative Forum Consent), the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim for or based on a breach of a fiduciary duty owed by any current or former director, officer, employee, agent or stockholder of the Corporation to the Corporation or to its stockholders, including any claim alleging the aiding and abetting of such a breach of fiduciary duty, (iii) any action asserting a claim against the Corporation or any current or former director or officer or other employee of the Corporation arising pursuant to any provision of the DGCL or this Certificate of Incorporation or the Bylaws, (iv) any action asserting a claim related to or involving the Corporation that is governed by the internal affairs doctrine, or (v) any action asserting an “internal
corporate claim” as that term is defined in Section 115 of the DGCL shall be the Court of Chancery located within the State of Delaware (or,option will indicate if the Court of Chancery does not have jurisdiction, the federal court for the District of Delaware). The existence ofoption is intended as an Alternative Forum Consent as to one action or claim shall not act as a waiver of the Corporation’s ongoing consent right as set forth above in this Article XI with respect to any other action or claim. Any person or entity that acquires any interest in any security of the CorporationISO; otherwise it will be deemed to have noticebe a nonqualified stock option. The maximum term of and consented to the provisions of this Article.
ARTICLE XII
Any action required to be taken at any annualeach option (ISO or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of the stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, only if a consent or consents in writing, setting forth the action so taken,nonqualified) shall be signed by the holders of all the outstanding shares of stock of the Corporation entitled to vote thereon andten (10) years. The per share exercise price for each option shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.
ARTICLE XIII
The name and mailing address of the Corporation’s Sole Incorporator is:
Name: Adam R. Craig
Address: 3101 Western Avenue, Suite 800
Seattle, WA 98121, U.S.A.
IN WITNESS WHEREOF, the undersigned has signed this Certificate of Incorporation this day of , 2017.
_________________________
Adam R. Craig, Incorporator
EXHIBIT A-1
CTI BIOPHARMA CORP.
SERIES N PREFERRED STOCK
Section 1. Designation and Amount. There shall be a series of preferred stock that shall be designated as “Series N Preferred Stock” and the number of shares initially constituting such series shall be 575. The number of shares of Series N Preferred Stock may be increased or decreased by resolution of the Board of Directors; provided, however, that no decrease shall reduce the number of shares of Series N Preferred Stock to a numbernot less than the number100% of shares of Series N Preferred Stock then outstanding.
Section 2. Definitions. For the purposes hereof, the following terms shall have the following meanings:
“Affiliate” means any person or entity controlling, controlled by or under common control with a Holder.
“Alternate Consideration” has the meaning set forth in Section 7(d).
“Business Day” means any day except Saturday, Sunday, any day which shall be a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“Change of Control Transaction” means the occurrence after the Original Issue Date, any of (i) an acquisition by an individual, legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Corporation, by contract or otherwise) of in excess of 33% of the voting securities of the Corporation (other than by means of conversion of shares of Series N Preferred Stock), or (ii) the Corporation merges into or consolidates with any other person, or any person merges into or consolidates with the Corporation and, after giving effect to such transaction, the stockholders of the Corporation immediately before such transaction own less than 66% of the aggregate voting power of the Corporation or the successor entity of such transaction, or (iii) the Corporation sells or transfers all or substantially all of its assets to another person and the stockholders of the Corporation immediately before such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately after the transaction, or
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(a) | a replacement at one time or within a one-year period of more than one-half of the members of the Board which is not approved by a majority of those individuals who are members of the Board on the Original Issue Date (or by those individuals who are serving as members of the Board on any date whose nomination to the Board was approved by a majority of the members of the Board who are members on the Original Issue Date), or |
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(b) | the execution by the Corporation of an agreement to which the Corporation is a party or by which it is bound, providing for any of the events set forth in clauses (i) through (iv) herein. |
“Common Stock” means the Corporation’s common stock, par value $0.001 per share, and stock of any other class of securities into which such securities may hereafter be reclassified or changed into.
“Common Stock Equivalents” means any securities which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock; provided, however, that Common Stock Equivalents shall not include any debt securities of the Corporation.
“Conversion Amount” means the sum of the Stated Value at issue.
“Conversion Date” has the meaning set forth in Section 6(a).
“Conversion Price” has the meaning set forth in Section 6(c).
“Conversion Shares” means collectively, the shares of Common Stock issuable upon conversion of the shares of Series N Preferred Stock in accordance with the terms hereof.
“Exchange Act” means the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.
“Fundamental Transaction” means, at any time while shares of the Series N Preferred Stock is outstanding, (i) the Corporation effects any merger or consolidation of the Corporation with or into another person in which the Corporation is not the surviving person, (ii) the Corporation effects any sale of all or substantially all of its assets in one transaction or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Corporation or another person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange a material portion of the Corporation’s shares for other securities, cash or property, or (iv) the Corporation effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property; provided, however, that for the purposes of clause (ii) above, a “Fundamental Transaction” shall not include the Corporation entering into a license or other agreement that licenses any intellectual property to an unaffiliated and unrelated person so long as the Corporation and its subsidiaries continue to have bona fide, substantial and continuing business operations and activities after such license or other agreement is entered into; provided, further, however, that a “Fundamental Transaction” shall not include a reverse stock split with respect to the Common Stock.
“Holder” means a holder of shares of Series N Preferred Stock.
“Junior Securities” means (i) the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior to or
pari passu with the Series N Preferred Stock as to dividend rights or liquidation preference and (ii) the Series ZZ Junior Participating Cumulative Preferred Stock of the Corporation.
“Liquidation” has the meaning set forth in Section 5.
“Notice of Conversion” has the meaning set forth in Section 6(a).
“Non-Senior Securities” means (i) the Common Stock and all other Common Stock Equivalents of the Corporation other than those securities which are explicitly senior to the Series N Preferred Stock as to dividend rights or liquidation preference and (ii) the Series ZZ Junior Participating Cumulative Preferred Stock of the Corporation.
“Original Issue Date” shall be as set forth in the Certificate of Incorporation.
“Series N Preferred Stock” shall mean collectively, all issued and outstanding shares of Series N Preferred Stock. The Series N Preferred Stock shall have no par value.
“Stated Value” shall be as set forth in the Certificate of Incorporation, as the same may be increased pursuant to Section 3(a).
“Trading Day” means a day on which the New York Stock Exchange is open for business.
“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: The NYSE Amex, The NASDAQ Capital Market, The NASDAQ Global Market, The NASDAQ Global Select Market, the New York Stock Exchange or the Mercato Telematico Azionario (MTA) organized and managed by Borsa Italiana S.p.A.
“Transfer” has the meaning set forth in Section 9.
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (i) if the Common Stock is then listed or quoted on a U.S. national securities exchange, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the U.S. national securities exchange on which the Common Stock is then listed or quoted for trading as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)); (ii) if the Common Stock is then listed or traded on the OTC Bulletin Board and the OTC Bulletin Board is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (iii) if the Common Stock is not then quoted for trading on a national securities exchange or the OTC Bulletin Board and if prices for the Common Stock are then reported in the “Pink Sheets” published by Pink OTC Markets, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (iv) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by a majority in intereston the date of grant of the Holders and reasonably acceptableoption. When an option is exercised, the exercise price for the shares to the Corporation, the fees and expenses of whichbe purchased shall be paid in full in cash or such other method permitted by the Corporation.Administrator consistent with Section 5.4.
5.1.2Additional Rules Applicable to ISOs. To the extent that the aggregate fair market value (determined at the time of grant of the applicable option) of stock with respect to which ISOs first become exercisable by a participant in any calendar year exceeds $100,000, taking into account both Common Stock subject to ISOs under this Plan and stock subject to ISOs under all other plans of the Corporation or one of its Subsidiaries (or any parent or predecessor corporation to the extent required by and within the meaning of Section 3. Dividends.422 of the Code and the regulations promulgated thereunder), such options shall be treated as nonqualified stock options. In reducing the number of options treated as ISOs to meet the $100,000 limit, the most recently granted options shall be reduced first. To the extent a reduction of simultaneously granted options is necessary to meet the $100,000 limit, the Administrator may, in the manner and to the extent permitted by law, designate which shares of Common Stock are to be treated as shares acquired pursuant to the exercise of an ISO. ISOs may only be granted to employees of the Corporation or one of its subsidiaries (for this purpose, the term “subsidiary” is used as defined in Section 424(f) of the Code, which generally requires an unbroken chain of ownership of at least 50% of the total combined voting power of all classes of stock of each subsidiary in the chain beginning with the Corporation and ending with the subsidiary in question). No ISO may be granted to any person who, at the time the option is granted, owns (or is deemed to own under Section 424(d) of the Code) shares of outstanding Common Stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation, unless the exercise price of such option is at least 110% of the fair market value of the stock subject to the option and such option by its terms is not exercisable after the expiration of five years from the date such option is granted. If an otherwise-intended ISO fails to meet the applicable requirements of Section 422 of the Code, the option shall be a nonqualified stock option.
5.1.3Stock Appreciation Rights. A stock appreciation right or “SAR” is a right to receive a payment, in cash and/or Common Stock, equal to the excess of the fair market value of a specified number of shares of Common
Stock on the date the SAR is exercised over the “base price” of the award, which base price shall be set forth in the applicable award agreement and shall be not less than 100% of the fair market value of a share of Common Stock on the date of grant of the SAR. The maximum term of a SAR shall be ten (10) years.
5.1.4Other Awards; Dividend Equivalent Rights. The other types of awards that may be granted under this Plan include: (a) stock bonuses, restricted stock, performance stock, stock units, restricted stock units, deferred shares, phantom stock or similar rights to purchase or acquire shares, whether at a fixed or variable price (or no price) or fixed or variable ratio related to the Common Stock, and any of which may (but need not) be fully vested at grant or vest upon the passage of time, the occurrence of one or more events, the satisfaction of performance criteria or other conditions, or any combination thereof; or (b) cash awards. The types of cash awards that may be granted under this Plan include the opportunity to receive a payment for the achievement of one or more goals established by the Administrator, on such terms as the Administrator may provide, as well as discretionary cash awards. Dividend equivalent rights may be granted as a separate award or in connection with another award under this Plan; provided, however, that dividend equivalent rights may not be granted as to a stock option or SAR granted under this Plan. In addition, any dividends and/or dividend equivalents as to the portion of an award that is subject to unsatisfied vesting requirements will be subject to termination and forfeiture to the same extent as the corresponding portion of the award to which they relate if the applicable vesting requirements are not satisfied.
5.1.5Certain Performance-Based Awards. Any Qualified Performance-Based Award or Qualifying Option or SAR (as such terms were defined in Section 5.2 of the prior version of this Plan) granted under this Plan prior to November 2, 2017 shall continue to be governed by the terms of this Plan in effect at the time of grant of such award.
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(a)5.2 | Dividends. HoldersAward Agreements. Each award shall be entitled to receive, andevidenced by a written or electronic award agreement or notice in a form approved by the Corporation shall pay, dividends on outstanding shares of Series N Preferred Stock equal (on an as-if-converted- to-Common-Stock basis) toAdministrator (an “award agreement”), and, in each case and if required by the sameAdministrator, executed or otherwise electronically accepted by the recipient of the award in such form and manner as dividends (other than dividendsthe Administrator may require. |
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5.3 | Deferrals and Settlements. Payment of awards may be in the form of cash, Common Stock) actuallyStock, other awards or combinations thereof as the Administrator shall determine, and with such restrictions (if any) as it may impose. The Administrator may also require or permit participants to elect to defer the issuance of shares or the settlement of awards in cash under such rules and procedures as it may establish under this Plan. The Administrator may also provide that deferred settlements include the payment or crediting of interest or other earnings on the deferral amounts, or the payment or crediting of dividend equivalents where the deferred amounts are denominated in shares. |
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5.4 | Consideration for Common Stock or Awards. The purchase price (if any) for any award granted under this Plan or the Common Stock to be delivered pursuant to an award, as applicable, may be paid by means of any lawful consideration as determined by the Administrator, including, without limitation, one or a combination of the following methods: |
services rendered by the recipient of such award;
cash, check payable to the order of the Corporation, or electronic funds transfer;
notice and third party payment in such manner as may be authorized by the Administrator;
the delivery of previously owned shares of Common Stock;
by a reduction in the number of shares otherwise deliverable pursuant to the award; or
subject to such procedures as the Administrator may adopt, pursuant to a “cashless exercise” with a third party who provides financing for the purposes of (or who otherwise facilitates) the purchase or exercise of awards.
In no event shall any shares newly-issued by the Corporation be issued for less than the minimum lawful consideration for such shares or for consideration other than consideration permitted by applicable state law. Shares of Common Stock used to satisfy the exercise price of an option shall be valued at their fair market value. The Corporation will not be obligated to deliver any shares unless and until it receives full payment of the exercise or
purchase price therefor and any related withholding obligations under Section 8.5 and any other conditions to exercise or purchase have been satisfied. Unless otherwise expressly provided in the applicable award agreement, the Administrator may at any time eliminate or limit a participant’s ability to pay any purchase or exercise price of any award or shares by any method other than cash payment to the Corporation.
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5.5 | Definition of Fair Market Value. For purposes of this Plan, “fair market value” shall mean, unless otherwise determined or provided by the Administrator in the circumstances, the closing price (in regular trading) for a share of Common Stock on sharesthe NASDAQ Stock Market (the “Market”) for the date in question or, if no sales of Common Stock were reported on the Market on that date, the closing price (in regular trading) for a share of Common Stock on the Market for the next preceding day on which sales of Common Stock were reported on the Market. The Administrator may, however, provide with respect to one or more awards that the fair market value shall equal the closing price (in regular trading) for a share of Common Stock on the Market on the last trading day preceding the date in question or the average of the high and low trading prices of a share of Common Stock on the Market for the date in question or the most recent trading day. If the Common Stock is no longer listed or is no longer actively traded on the Market as of the applicable date, the fair market value of the Common Stock shall be the value as reasonably determined by the Administrator for purposes of the award in the circumstances. The Administrator also may adopt a different methodology for determining fair market value with respect to one or more awards if a different methodology is necessary or advisable to secure any intended favorable tax, legal or other Non- Senior Securities when, astreatment for the particular award(s) (for example, and if such dividends (other than dividendswithout limitation, the Administrator may provide that fair market value for purposes of one or more awards will be based on an average of closing prices (or the average of high and low daily trading prices) for a specified period preceding the relevant date). |
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| 5.6 | Transfer Restrictions. |
5.6.1Limitations on Exercise and Transfer. Unless otherwise expressly provided in (or pursuant to) this Section 5.6 or required by applicable law: (a) all awards are non-transferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; (b) awards shall be exercised only by the participant; and (c) amounts payable or shares issuable pursuant to any award shall be delivered only to (or for the account of) the participant.
5.6.2Exceptions. The Administrator may permit awards to be exercised by and paid to, or otherwise transferred to, other persons or entities pursuant to such conditions and procedures, including limitations on subsequent transfers, as the Administrator may, in its sole discretion, establish in writing. Any permitted transfer shall be subject to compliance with applicable federal, state and foreign securities and exchange control laws and shall not be for value (other than nominal consideration, settlement of marital property rights, or for interests in an entity in which more than 50% of the voting interests are held by the Eligible Person or by the Eligible Person’s family members).
5.6.3Further Exceptions to Limits on Transfer. The exercise and transfer restrictions in Section 5.6.1 shall not apply to:
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(a) | transfers to the Corporation (for example, in connection with the form of Common Stock) are paid on sharesexpiration or termination of the Common Stock or other Non-Senior Securities. Other than as set forth in the previous sentence, no other dividends shall be paid on any shares of Series N Preferred Stock; and the Corporation shall pay no dividends (other than dividends in the form of Common Stock) on shares of the Common Stock or other Non-Senior Securities unless it simultaneously complies with the previous sentence. All declared but unpaid dividends on shares of Series N Preferred Stock, shall increase the Stated Value of Series N Preferred Stock then outstanding, but when such dividends are actually paid, any such increase in the Stated Value shall be rescinded.award), |
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| (b) | So long as any sharesthe designation of Series N Preferred Stock remain outstanding, neithera beneficiary to receive benefits in the Corporation nor any subsidiary thereof shall redeem, purchaseevent of the participant’s death or, otherwise acquire directlyif the participant has died, transfers to or indirectly any material amountexercise by the participant’s beneficiary, or, in the absence of Non-Senior Securities except as expressly permitteda validly designated beneficiary, transfers by Section 8(b). |
Section 4. Voting Rights. Except as otherwise expressly provided herein or as otherwise required by law, Holders of shares of the Series N Preferred Stock shall have no voting rights.
Section 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a Liquidation), the Holders shall be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal to the Stated Value for each outstanding share of Series N Preferred Stock, plus any declaredwill or the laws of descent and unpaid dividends and any other payments that may be due thereon, before any distribution, or payment shall be made to the holders of any Junior Securities, and if the assets of the Corporation shall be insufficient to pay in full such amounts, then the entire assets to be distributed to the Holders shall be ratably distributed among the Holders and the holders of all securities which are pari passu with the Series N Preferred Stock as to liquidation in accordance with the respective amounts that would be payable on all such securities if all amounts payable thereon were paid in full. A Fundamental Transaction or Change of Control Transaction shall not be deemed a Liquidation unless the Corporation expressly declares that such Fundamental Transaction or Change of Control Transaction shall be treated as if it were a Liquidation. The Corporation shall mail written notice of any such Liquidation, not less than 25 days before the payment date stated therein, to each Holder.
Section 6. Conversion and Exchange Rights.
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(a) | Conversions at Option of Holder. |
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(i)(c) | With respectsubject to shares of Series N Preferred Stock, each share shall be convertible at any time and from timeapplicable limitations on ISOs, transfers to time from and after the Original Issue Date, at the option of the Holder thereof, into that number of shares of Common Stock determined by dividing the Stated Value of such sharea family member (or former family member) pursuant to a domestic relations order if received by the Conversion |
Price. The shares of Series N Preferred Stock shall initially be issued and maintained in the form of securities held in book-entry form and (A) if the initial issuance of such shares is settled through The Depository Trust Company or its nominee (DTC) or another established clearing corporation performing similar functions, then DTC or such other clearing corporation shall be the sole registered holder of the shares of Series N Preferred Stock and (B) if the initial issuance of such shares is not settled through DTC or such other clearing corporation, then the Holder shall be the sole registered holder of such shares. For so long as a Holder’s interest in the shares of Series N Preferred Stock is a beneficial interest in certificate(s) representing the shares of Series N Preferred Stock held in book-entry form through DTC, the Holder must comply with DTC’s (or another established clearing corporation performing similar functions) procedures to effect conversions. For so long as a Holder’s interest in the shares of Series N Preferred Stock is a beneficial interest in certificate(s) representing the shares of Series N Preferred Stock held in book-entry form through the records of the Corporation’s designated conversion agent, the Holder must comply with the designated conversion agent’s procedures to effect conversions. Holders shall effect conversions by providing the Corporation or its designated conversion agent with the form of conversion notice attached hereto as Annex A (a Notice of Conversion), which may be delivered before the date of conversion. Each Notice of Conversion shall specify the number of shares of Series N Preferred Stock to be converted, the number of shares of Series N Preferred Stock owned before the conversion at issue, the number of shares of Series N Preferred Stock owned subsequent to the conversion at issue and the date on which such conversion is to be effected, which date must be on or after the Original Issue Date and may not be before the date the applicable Holder delivers such Notice of Conversion to the Corporation in accordance with Section 10(a) (such date, the Conversion Date); provided, however, that in the case of an automatic conversion pursuant to Section 6(b)(i), the “Conversion Date” shall be the first to occur of the dates set forth in clauses (A) through (C) of Section 6(b)(i); and provided, further, however, that in the case of an automatic conversion pursuant to Section 6(b)(ii), the “Conversion Date” shall be the first to occur of the dates set forth in clauses (A) and (B) of Section 6(b)(ii). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion to the Corporation is deemed delivered hereunder (or the first date thereafter that conversion is permitted pursuant to this Section 6(a), Section 6(b)(i) or Section 6(b)(ii), as applicable). The calculations and entries set forth in the Notice of Conversion shall control in the absence of manifest or mathematical error. To effect conversions of shares of Series N Preferred Stock, a Holder shall be required to (and by delivering a Notice of Conversion shall thereby be deemed to agree to) forthwith surrender the certificate(s) representing such shares of Series N Preferred Stock to the Corporation or its designated conversion agent, electronically through DTC, another established clearing corporation performing similar functions or the records of the Corporation or a designated agent of the (A) Corporation (or, if the shares of Series N Preferred Stock are held in certificated form by the Holder surrender the certificate(s) representing such shares to the Corporation or its designated conversion agent). Notwithstanding anything to the contrary set forth herein, upon conversion of shares of Series N Preferred Stock in accordance with the terms hereof and the Certificate of Designations, if a Holder holds its shares of Series N Preferred Stock in certificate form, no Holder thereof shall be required to physically surrender the certificate representing such Holder’s shares of Series N Preferred Stock to the Corporation unless (A) the full or remaining number of shares of Series N Preferred Stock represented by such certificate are being converted or (B) such Holder has provided the Corporation with prior written notice (which notice may be included in a Notice of Conversion) requesting reissuance of a certificate representing the remaining shares of Series N Preferred Stock upon physical surrender of any certificate representing the shares of Series N Preferred Stock being converted. Each Holder and the Corporation shall maintain records showing the number of shares of Series N Preferred Stock so converted by such Holder and the dates of such conversions or shall use such other method, reasonably satisfactory to such Holder and the Corporation, so as not to require physical surrender of the certificate representing the shares of Series N Preferred Stock upon each such conversion. In the event of any dispute or discrepancy, such records of the Corporation establishing the number of shares of Series N Preferred Stock to which the record holder is entitled shall be controlling and determinative in the absence of manifest error.
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(ii) | Notwithstanding the foregoing, no shares of the Series N Preferred Stock shall be convertible by a Holder to the extent (but only to the extent) that such conversion would result in such Holder and its affiliates beneficially owning more than 19.99% of the Common Stock or such lower percentage set forth in the Certificate of Designations for the Series N Preferred Stock (the Beneficial Ownership Limitation Percentage), to be issued in respect of Series N Preferred Stock (the Beneficial Ownership Limitation). To the extent the Beneficial Ownership Limitation applies, the determination of whether the shares of Series N Preferred Stock held by such Holder shall be convertible (vis-à-vis other convertible, exercisable or exchangeable securities owned by such Holder) shall, subject to such Beneficial Ownership Limitation, be determined on the basis of the first submission to the Corporation for conversion, exercise or exchange (as the case may be). No prior inability of a Holder to convert shares of Series N Preferred Stock pursuant to this paragraph shall have any effect on the applicability of the provisions of this paragraph with respect to any subsequent determination of convertibility or issuance (as the case may be). For purposes of this paragraph, beneficial ownership and all determinations and calculations (including, without limitation, with respect to calculations of percentage ownership) shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder; provided, however, that in effecting any conversion, the Corporation shall be entitled to assume that no Holder, together with its affiliates, beneficially owns more than the Beneficial Ownership Limitation Percentage unless written notice specifying the number of shares of Common Stock beneficially held by such Holder and its affiliates is sent to the Corporation by the Holder within the three Business Day period before the date of the automatic conversion. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this paragraph to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such Beneficial Ownership Limitation. The limitations contained in this paragraph shall apply to a successor Holder. The holders of Common Stock shall be third party beneficiaries of this paragraph and the Corporation may not waive this paragraph without the consent of holders of a majority of its Common Stock. For any reason at any time, upon the written or oral request of a Holder, the Corporation shall within two Business Days confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding, including by virtue of any prior conversion or exercise of convertible or exercisable securities into Common Stock.
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(i) | Except to the extent limited by the Beneficial Ownership Limitation, each outstanding share of Series N Preferred Stock shall automatically convert into that number of shares of Common Stock determined by dividing the Stated Value of such share by the Conversion Price (A) on the 30th day after the Original Issue Date, (B) on the date on which 5,000 or less shares of Series N Preferred Stock remain outstanding, or (C) immediately upon the adoption by the Board of a resolution that it intends to adopt an amendment to the Certificate of Incorporation without stockholder approval to effect a reverse stock split of the outstanding Common Stock and the number of authorized shares of Common Stock in the same proportions in order to achieve compliance with the listing rules of The NASDAQ Capital Market or for other good-faith business reasons. |
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(ii) | Notwithstanding the Beneficial Ownership Limitation, any outstanding shares of Series N Preferred Stock that are not converted pursuant to an automatic conversion pursuant to Section 6(b)(i) above shall automatically convert into that number of shares of Common Stock determined by dividing the Stated Value of such share by the Conversion Price on the earlier of (A) the date on which the conversion of Series N Preferred Stock would no longer result in beneficial ownership of more than the Beneficial Ownership Limitation Percentage of the Common Stock by the particular Holder and its affiliates and (B) the 91st day after the Original Issue Date. |
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(iii) | Upon a Conversion Date, a Holder shall be required to forthwith surrender any certificate(s) representing such shares of Series N Preferred Stock to the Corporation electronically through DTC, another established clearing corporation performing similar functions or the records of the Corporation or a |
designated agent of the Corporation (or, if the shares of Series N Preferred Stock are held in certificated form by the Holder surrender the certificate(s) representing such shares of Series N Preferred Stock to the Corporation) within two Trading Days of the date established for such conversion and set forth in a written notice from the Corporation; provided, however, that the failure by a Holder to surrender the certificate(s) representing such converted shares of Series N Preferred Stock shall not prevent the Corporation from delivering the shares of Common Stock issuable upon automatic conversion thereof and, upon receipt of such consideration by such Holder, the shares of Series N Preferred Stock shall be converted for all purposes hereunder.
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(c) | Conversion Price. The conversion price for any shares of Series N Preferred Stock shall be as set forth in the Certificate of Incorporation (the Conversion Price).
Administrator, |
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| (d) | Mechanicsif the participant has suffered a disability, permitted transfers or exercises on behalf of Conversion.the participant by his or her legal representative, or |
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| (e) | the authorization by the Administrator of “cashless exercise” procedures with third parties who provide financing for the purpose of (or who otherwise facilitate) the exercise of awards consistent with applicable laws and any limitations imposed by the Administrator. |
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(i)5.7 | DeliveryInternational Awards. Notwithstanding any provision of Certificate upon Conversion. Not later than three Trading Days after each Conversion Date, whether pursuantthis Plan to Section 6(a) or (b),the contrary, to comply with the laws in the countries where the Corporation or one of its Subsidiaries operates or has Eligible Persons, the Administrator, in its sole discretion, shall deliver,have the power and authority to (a) modify the terms and conditions of any Award granted to Eligible Persons in light of the laws of jurisdictions where the Eligible Persons work or cause to be delivered,reside; (b) establish sub-plans and agreements and determine the exercise or purchase price, methods of exercise and other terms and procedures and rules, to the converting Holder a certificateextend such actions may be necessary or certificates, whichadvisable, including the adoption or rules, procedures, sub-plans and agreements applicable to Subsidiaries in particular jurisdictions; provided, however, that no such sub-plans or agreements and/or modifications shall be free of restrictive legends and issuer- imposed trading restrictions (providedincrease the Share Limit or otherwise require stockholder approval; (c) take any action, before or after an award is made, that a registration statement covering resalesit deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals. Without limiting the generality of the Conversion Sharesforegoing, the Administrator is thenspecifically authorized to adopt rules, procedures and sub-plans with provisions that limit or modify rights on eligibility to receive an award under this Plan or on termination of active service; available methods of exercise or settlement of an award, payment of tax-related items, the shifting of employer tax liability to the participant, the withholding procedures and handling of any share certificates or other indicia of ownership which may vary with local requirements. The Administrator may also adopt sub-plans to this Plan intended to allow the Corporation to grant tax-qualified awards in effect), representinga particular jurisdiction. Notwithstanding the number offoregoing, the Corporation’s obligation to issue any shares of Common Stock being acquired upon the conversionor make any other payment in respect of shares of Series N Preferred Stock. The Corporation shall use its best efforts to, if the Holder is not an affiliate of the Corporation, deliver any certificate(s) of the Conversion Shares required to be delivered by the Corporationaward granted under this Plan is subject to compliance with all applicable laws as provided in Section 6 electronically through DTC or another established clearing corporation performing similar functions (provided that a registration statement covering resales of the Conversion Shares is then in effect). If, in the case of any Notice of Conversion, such certificate(s) are not delivered to or as directed by the applicable Holder by the seventh Trading Day after the Conversion Date, then (without limiting the Holder’s other rights and remedies hereunder for the Corporation’s failure to comply with its obligations under the preceding portion8.1 of this paragraph) the applicable Holder shall be entitled to elect to rescind such Conversion Notice by written notice to the Corporation at any time on or before its receipt of such certificate(s), in which event the Corporation shall promptly return to such Holder any original Series N Preferred Stock certificate tendered for conversion delivered to the Corporation and such Holder shall promptly return any Common Stock certificates representing the shares of Series N Preferred Stock tendered for conversion to the Corporation. |
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(ii) | Obligation Absolute. The Corporation’s obligation to issue and deliver the Conversion Shares upon conversion of shares of Series N Preferred Stock in accordance with the terms hereof is absolute and unconditional, irrespective of any action or inaction by a Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by such Holder or any other person of any obligation to the Corporation or any violation or alleged violation of law by such Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Corporation to such Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery shall not operate as a waiver by the Corporation of any such action that the Corporation may have against such Holder. In the event a Holder shall elect to convert any or all of the Stated Value of Series N Preferred Stock, the Corporation may not refuse conversion based on any claim that such Holder or anyone associated or affiliated with such Holder has been engaged in any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and/or enjoining conversion of all or part of the Series N Preferred Stock of such Holder shall have been sought and obtained. In the absence of such an injunction, the Corporation shall issue Conversion Shares upon a properly noticed conversion. Nothing herein shall limit a Holder’s right to pursue actual damages for the Corporation’s failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any suchPlan. |
rights shall not prohibit a Holder from seeking to enforce damages pursuant to any other section hereof or under applicable law.6. EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE ON AWARDS
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(iii)6.1 | Reservation of Shares Issuable upon Conversion.General. The Corporation covenants that it will at all times use reasonable best efforts to reserve and keep available out of its authorized and unissued shares of Common Stock, forAdministrator shall establish the sole purpose of issuance upon conversion of any outstanding shares of Series N Preferred Stock, as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holders of the Series N Preferred Stock, not less than such aggregate number of shares of the Common Stock as shall be issuable (taking into account the adjustments and restrictions of Section 7) upon the conversion of all outstanding shares of Series N Preferred Stock. The Corporation covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable. |
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(iv) | Fractional Shares. Upon a conversion of Series N Preferred Stock hereunder, the Corporation shall not be required to issue fractions of shares of Common Stock, but in lieu thereof each Holder who would otherwise have been entitled to a fractioneffect (if any) of a sharetermination of Common Stockemployment or service on the rights and benefits under each award under this Plan and in so doing may make distinctions based upon, conversioninter alia, the cause of termination and type of award. If the Series N Preferred Stock shall be paid cash equal to such fraction times the Conversion Price. |
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(v) | Transfer Taxes. The issuance of certificates for shares of the Common Stock issued upon conversion of shares of Series N Preferred Stock shall be made without charge to any Holder for any documentary stamp, issuance or similar taxes that may be payable in respect of the issue or delivery of such certificates, provided that the Corporation shallparticipant is not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of the shares of Series N Preferred Stock so converted and the Corporation shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfactionan employee of the Corporation that such tax has been paid. |
Section 7. Certain Adjustments.
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(a) | Stock Dividends and Stock Splits. If the Corporation, at any time while anyor one of its Subsidiaries, is not a member of the Series N Preferred Stock is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or anyBoard, and provides other Common Stock Equivalents (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Corporation upon conversion of such shares of Series N Preferred Stock); (B) subdivides outstanding shares of Common Stock into a larger number of shares; (C) combines (including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares; or (D) issues, in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Corporation, then the Conversion Price of such Series N Preferred Stock shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event and any other adjustments to the Holders’ conversion rights necessary to reflect such event shall be made. Any adjustment made pursuant to this Section 7(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. |
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(b) | Subsequent Rights Offerings. If the Corporation, at any time while any Series N Preferred Stock is outstanding, shall issue rights, options or warrants to all holders of Common Stock (and not proportionately to the Holders) entitling them to subscribe for or purchase shares of Common Stock at a price per share that is lower than the VWAP on the record date for such issuance, and does not offer the same rights to the Holders, then the Conversion Price of Series N Preferred Stock shall be adjusted to reflect such rights, options or warrants offering by multiplying the Conversion Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding before the record date for such issuance plus the number of shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered (assuming delivery to the Corporation in full of all consideration payable upon exercise of such rights, options |
or warrants) would purchase at such VWAP on the record date for such issuance and the denominator of which shall be the number of shares of the Common Stock outstanding on such record date plus the aggregate number of additional shares of Common Stock offered for subscription or purchase. Such adjustment shall be made whenever such rights, options or warrants are issued, and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights, options or warrants.
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(c) | Pro Rata Distributions. If the Corporation, at any time while any Series N Preferred Stock is outstanding, distributes (other than as a dividend) to all holders of Common Stock (and not proportionately to the Holders) evidences of its indebtedness or assets or rights or warrants to subscribe for or purchase any security (other than Common Stock, which shall be subject to Section 7(b)), then in each such case the Conversion Price of Series N Preferred Stock shall be adjusted by multiplying the Conversion Price in effect immediately before the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then fair market value at such record date of the portion of such assets, evidence of indebtedness or rights or warrants so distributed applicable to one outstanding share of the Common Stock as determined by the Board in good faith. In either case the adjustments shall be described in a statement delivered to the Holders describing the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. For avoidance of doubt, distributions that are dividends shall be subject to Section 3(a) and not subject to this Section 7(c). |
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(d) | Fundamental Transaction. If, at any time while any Series N Preferred Stock is outstanding, a Fundamental Transaction occurs, then, upon any subsequent conversion of Series N Preferred Stock, the Holders shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately before the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately before such Fundamental Transaction, the holder of one share of Common Stock (the Alternate Consideration); and the Holders shall no longer have the right to receive Conversion Shares per se upon such conversion. For purposes of any such conversion, the determination of the Conversion Price of the Series N Preferred Stock shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Corporation shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holders shall be given the same choice as to the Alternate Consideration it receives upon any conversion of Series N Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successorservices to the Corporation or surviving entity in such Fundamental Transactionone of its Subsidiaries, the Administrator shall adopt articlesbe the sole judge for purposes of incorporationthis Plan (unless a contract or an amendmentthe award otherwise provides) of whether the participant continues to its articles of incorporation with the same terms and conditions and issuerender services to the Holders new preferred stock consistent withCorporation or one of its Subsidiaries and the foregoing provisions and evidencing the Holders’ rightdate, if any, upon which such services shall be deemed to convert such preferred stock into Alternate Consideration. Unless the Corporation elects to treat such Fundamental Transaction as a Liquidation, the terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 7(d) and ensuring that the Series N Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.have terminated.
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(e)6.2 | Calculations. All calculations under this Section 7 shall be made toEvents Not Deemed Terminations of Service. Unless the nearest centexpress policy of the Corporation or one of its Subsidiaries, or the nearest 1/100th of a share,Administrator, otherwise provides, or except as otherwise required by applicable law, the employment relationship shall not be considered terminated in the case of (a) sick leave, (b) military leave, or (c) any other leave of absence authorized by the Corporation or one of its Subsidiaries, or the Administrator; provided that, unless reemployment upon the expiration of such leave is guaranteed by contract or law or the Administrator otherwise provides, such leave is for a period of not more than three months. In the case of any employee of the Corporation or one of its Subsidiaries on an approved leave of absence, continued vesting of the award while on leave from the employ of the Corporation or one of its Subsidiaries may be.be suspended until the employee returns to service, unless the Administrator otherwise provides or applicable law otherwise requires. In no event shall an award be exercised after any applicable maximum term of the award. |
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(f)6.3 | NoticeEffect of Change of Subsidiary Status. For purposes of this Plan and any award, if an entity ceases to be a Subsidiary of the Corporation a termination of employment or service shall be deemed to have occurred with respect to each Eligible Person in respect of such Subsidiary who does not continue as an Eligible Person in respect of the Corporation or another Subsidiary that continues as such after giving effect to the Holders. |
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(i) | Adjustmenttransaction or other event giving rise to Conversion Price. Whenever the Conversion Price of any Series N Preferred Stockchange in status unless the Subsidiary that is adjusted pursuant to any provision of this Section 7, the Corporation shall promptly deliver to eachsold, spun-off or otherwise divested (or its successor or a |
Holder a notice setting forth
direct or indirect parent of such Subsidiary or successor) assumes the Conversion Price afterEligible Person’s award(s) in connection with such adjustment and setting forth a brief statement of the facts requiring such adjustment.transaction.
7. ADJUSTMENTS; ACCELERATION
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(ii)7.1 | NoticeAdjustments. Subject to Allow Conversion by Holder. If (A)Section 7.2, upon (or, as may be necessary to effect the Corporation shall declareadjustment, immediately prior to): any reclassification, recapitalization, stock split (including a dividend (orstock split in the form of a stock dividend) or reverse stock split; any merger, combination, consolidation, conversion or other reorganization; any spin-off, split-up, or similar extraordinary dividend distribution in whatever form) on the Common Stock, (B) the Corporation shall declare a special nonrecurring cash dividend on or a redemptionrespect of the Common Stock; or any exchange of Common Stock (C)or other securities of the Corporation, shall authorize the granting to all holdersor any similar, unusual or extraordinary corporate transaction in respect of the Common StockStock; then the Administrator shall equitably and proportionately adjust (1) the number and type of rights or warrants to subscribe for or purchase any shares of capital stockCommon Stock (or other securities) that thereafter may be made the subject of awards (including the specific share limits, maximums and numbers of shares set forth elsewhere in this Plan), (2) the number, amount and type of shares of Common Stock (or other securities or property) subject to any outstanding awards, (3) the grant, purchase, or exercise price (which term includes the base price of any classSAR or similar right) of any rights, (D)outstanding awards, and/or (4) the approvalsecurities, cash or other property deliverable upon exercise or payment of any stockholdersoutstanding awards, in each case to the extent necessary to preserve (but not increase) the level of incentives intended by this Plan and the Corporation shall bethen-outstanding awards. |
Without limiting the generality of Section 3.3, any good faith determination by the Administrator as to whether an adjustment is required in the circumstances pursuant to this Section 7.1, and the extent and nature of any such adjustment, shall be conclusive and binding on all persons.
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7.2 | Corporate Transactions - Assumption and Termination of Awards. Upon any event in connection with any reclassification of the Common Stock, any consolidation or merger to which the Corporation isdoes not survive, or does not survive as a party, anypublic company in respect of its Common Stock (including, without limitation, a dissolution, merger, combination, consolidation, conversion, exchange of securities, or other reorganization, or a sale or transfer of all or substantially all of the business, stock or assets of the Corporation, in any case in connection with which the Corporation does not survive or does not survive as a public company in respect of its Common Stock), then the Administrator may make provision for a cash payment in settlement of, or for the termination, assumption, substitution or exchange of any compulsory share exchange wherebyor all outstanding awards or the Common Stock is converted into othercash, securities cash or property deliverable to the holder of any or (E)all outstanding awards, based upon, to the Corporation shall authorizeextent relevant under the voluntarycircumstances, the distribution or involuntary dissolution, liquidation or winding up of the affairs of the Corporation, then, in each case, the Corporation shall causeconsideration payable to be filed at each office or agency maintained for the purpose of conversion of Series N Preferred Stock, and shall cause to be delivered to each Holder at its last address as it shall appear upon the stock books of the Corporation, at least 20 calendar days before the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock upon or in respect of recordsuch event. Upon the occurrence of any event described in the preceding sentence in connection with which the Administrator has made provision for the award to be entitled to such dividend, distributions, redemption, rightsterminated (and the Administrator has not made a provision for the substitution, assumption, exchange or warrants are to be determinedother continuation or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holderssettlement of the Common Stock of recordaward): (1) unless otherwise provided in the applicable award agreement, each then-outstanding option and SAR shall be entitled to exchange theirbecome fully vested, all shares of restricted stock then outstanding shall fully vest free of restrictions, and each other award granted under this Plan that is then outstanding shall become payable to the Common Stock for securities, cashholder of such award (with any performance goals applicable to the award in each case being deemed met, unless otherwise provided in the award agreement, at the “target” performance level); and (2) each award (including any award or other property deliverableportion thereof that, by its terms, does not accelerate and vest in the circumstances) shall terminate upon such reclassification, consolidation, merger, sale, transfer or share exchange,the related event; provided that the failureholder of an option or SAR shall be given reasonable advance notice of the impending termination and a reasonable opportunity to deliver such noticeexercise his or her outstanding vested options and SARs (after giving effect to any defect therein oraccelerated vesting required in the delivery thereofcircumstances) in accordance with their terms before the termination of such awards (except that in no case shall not affect the validitymore than ten days’ notice of the corporate actionimpending termination be required toand any acceleration of vesting and any exercise of any portion of an award that is so accelerated may be specified in such notice. Tomade contingent upon the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Corporation or any of its subsidiaries, the Corporation shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder is entitled to convert the Stated Value of its Series N Preferred Stock during the 20-day period commencing on the date of such notice through the effective dateactual occurrence of the event triggering such notice.event). |
Without limiting the preceding paragraph, in connection with any event referred to in the preceding paragraph or any change in control event defined in any applicable award agreement, the Administrator may, in its discretion, provide for the accelerated vesting of any award or awards as and to the extent determined by the Administrator in the circumstances.
For purposes of this Section 8. Negative Covenants. As long7.2, an award shall be deemed to have been “assumed” if (without limiting other circumstances in which an award is assumed) the award continues after an event referred to above in this Section 7.2, and/or is assumed and continued by the surviving entity following such event (including, without limitation, an entity that, as at least 20%a result of such event, owns the Corporation or all or substantially all of the aggregate numberCorporation’s assets directly or through one or more subsidiaries (a “Parent”)), and confers the right to purchase or receive, as applicable and subject to vesting and the other terms and conditions of originally issuedthe award, for each share of Common Stock subject to the award immediately prior to the event, the consideration (whether cash, shares, or other securities or property) received in the event by the stockholders of Series N Preferred Stock are outstanding (as appropriately adjusted for share splits and similar transactions), the Corporation shall not, withoutfor each share of Common Stock sold or exchanged in such event (or the Corporation obtaining the affirmative written consent of Holders ofconsideration received by a majority of the thenstockholders participating in such event if the stockholders were offered a choice of consideration); provided, however, that if the consideration offered for a share of Common Stock in the event is not solely the ordinary common stock of a successor corporation or a Parent, the Administrator may provide for the consideration to be received upon exercise or payment of the award, for each share subject to the award, to be solely ordinary common stock of the successor corporation or a Parent equal in fair market value to the per share consideration received by the stockholders participating in the event.
The Administrator may adopt such valuation methodologies for outstanding sharesawards as it deems reasonable in the event of Series N Preferred Stock:a cash or property settlement and, in the case of options, SARs or similar rights, but without limitation on other methodologies, may base such settlement solely upon the excess if any of the per share amount payable upon or in respect of such event over the exercise or base price of the award. In the case of an option, SAR or similar right as to which the per share amount payable upon or in respect of such event is less than or equal to the exercise or base price of the award, the Administrator may terminate such award in connection with an event referred to in this Section 7.2 without any payment in respect of such award.
In any of the events referred to in this Section 7.2, the Administrator may take such action contemplated by this Section 7.2 prior to such event (as opposed to on the occurrence of such event) to the extent that the Administrator deems the action necessary to permit the participant to realize the benefits intended to be conveyed with respect to the underlying shares. Without limiting the generality of the foregoing, the Administrator may deem an acceleration and/or termination to occur immediately prior to the applicable event and, in such circumstances, will reinstate the original terms of the award if an event giving rise to an acceleration and/or termination does not occur.
Without limiting the generality of Section 3.3, any good faith determination by the Administrator pursuant to its authority under this Section 7.2 shall be conclusive and binding on all persons.
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(a)7.3 | amend this CertificateOther Acceleration Rules. The Administrator may override the provisions of Incorporation, its bylawsSection 7.2 by express provision in the award agreement and may accord any Eligible Person a right to refuse any acceleration, whether pursuant to the award agreement or other charter documents sootherwise, in such circumstances as to materially, specifically and adversely affect any rightsthe Administrator may approve. The portion of any HolderISO accelerated in connection with respectan event referred to in Section 7.2 (or such other circumstances as may trigger accelerated vesting of the award) shall remain exercisable as an ISO only to the Series N Preferred Stock; |
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(b) | repay, repurchase or offer to repay, repurchase or otherwise acquire any material amount of its Junior Securities (other than securities described in clause (ii)extent the applicable $100,000 limitation on ISOs is not exceeded. To the extent exceeded, the accelerated portion of the definition of “Junior Securities”); provided, however, that this restrictionoption shall not apply tobe exercisable as a nonqualified stock option under the repurchase of up to 5,750,000 shares of Common Stock in any 12-month period (subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the Original Issue Date) from employees, officers, directors, consultants or other persons performing services for the Corporation or any subsidiary pursuant to agreements approved by a majority of the Board or under which the Corporation has the option to repurchase such shares at cost or upon the occurrence of certain events, such as termination of employment; |
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(c) | authorize or create any class or series of stock ranking senior to the Series N Preferred Stock as to dividend rights or liquidation preference; or |
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(d) | enter into any agreement or understanding with respect to any of the foregoing. Notwithstanding the foregoing, this Section 8 shall not prohibit the issuance of additional series of preferred stock that do not rank senior to the Series N Preferred Stock as to dividend rights or liquidation preference.Code. |
Section 9. Transferability. The Series N Preferred Stock may only be sold, transferred, assigned, pledged or otherwise disposed of (any of the foregoing, a Transfer) in accordance with U.S. state and federal securities laws. The Corporation shall keep at its principal office, or at the offices of the transfer agent, a register of the Series N Preferred Stock. In connection with any such permitted Transfer, upon the surrender of any certificate representing Series N Preferred Stock at such place, the Corporation, at the request of the record Holder of such certificate, shall execute and deliver (at the Corporation’s expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of shares represented by the surrendered certificate; provided that the Corporation shall not be required to pay any tax that may be payable in respect of any such Transfer involved in the issuance and delivery of any such new certificate in a name other than that of Holder and the Corporation shall not be required to issue or deliver such new certificate(s) unless or until the person or persons requesting the issuance thereof shall have paid to the Corporation the amount of such tax or shall have established to the satisfaction of the Corporation that such tax has been paid. Each such new certificate shall be registered in such name and shall represent such number of shares as is requested by the Holder of the surrendered certificate and shall be substantially identical in form to the surrendered certificate.
Section 10. Miscellaneous.8. OTHER PROVISIONS
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(a)8.1 | Notices. AnyCompliance with Laws. This Plan, the granting and vesting of awards under this Plan, the offer, issuance and delivery of shares of Common Stock, and/or the payment of money under this Plan or under awards are subject to compliance with all noticesapplicable federal, state, local and foreign laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or other communications or deliveries to be provided bygovernmental authority as may, in the Holders hereunder, including, without limitation, any Noticeopinion of Conversion, shall be in writing and delivered personally, by facsimile or by email, or sent by a nationally recognized overnight courier service, addressed tocounsel for the Corporation, at ________,be necessary or such other street address, facsimile number or email address as the Corporation may specify for such purposes by notice to the Holders deliveredadvisable in accordance withconnection therewith. The person acquiring any securities under this Section 10(a). Any and all notices or other communications or deliveries to be provided by the Corporation hereunder shall be in writing and delivered personally, by facsimile, by email or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile number, email address or street address of such Holder appearing on the books of the Corporation, orPlan will, if no such facsimile number, email address or street address appears on the books of the Corporation, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or email to the facsimile number or email address specified in this Section 10(a) before 5:30 p.m. (New York City time) on any date, (ii) the date immediately following the date of transmission, if such notice or communication is delivered via facsimile or email to the facsimile number or email address specified in this Section 10(a) between 5:30 p.m. and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of dispatch, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. |
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(b) | Lost or Mutilated Series N Preferred Stock Certificate. If a Holder’s Series N Preferred Stock certificate shall be mutilated, lost, stolen or destroyed, the Corporation shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated certificate, or in lieu of or in substitution for a lost, stolen or destroyed certificate, a new certificate for the shares of Series N Preferred Stock so mutilated, lost, stolen or destroyed, but only upon receipt of evidence of such loss, theft or destruction of such certificate, and of the ownership thereof reasonably satisfactory to the Corporation. |
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(c) | Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this instrument shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware, without regard to the principles of conflict of laws thereof. |
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(d) | Waiver. Any waiverrequested by the Corporation or a Holderone of a breach of any provision of this instrument shall not operate as or be construedits Subsidiaries, provide such assurances and representations to be a waiver of any other breach of such provision or of any breach of any other provision of this instrument or a waiver by any other Holders. The failure of the Corporation or a Holder to insist upon strict adherence to any termone of this instrument on one or more occasions shall not be considered a waiver or deprive that party (or any other Holder) of the right thereafter to insist upon strict adherence to that term or any other term of this instrument. Any waiver by the Corporation or a Holder must be in writing. |
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(e) | Severability. If any provision of this Series N Certificate of Designations or Certificate of Designations is invalid, illegal or unenforceable, the balance of hereof or thereof shall remain in effect, and if any provisionits Subsidiaries as |
is inapplicable
the Administrator may deem necessary or desirable to any person or circumstance, it shall nevertheless remainassure compliance with all applicable to all other personslegal and circumstances.accounting requirements.
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(f)8.2 | Next Business Day. WheneverNo Rights to Award. No person shall have any paymentclaim or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day. |
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(g) | Headings. The headings contained herein are for convenience only, do not constitute a part of this Series N Certificate of Designations and shall not be deemed to limit or affect any of the provisions hereof. |
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(h) | Status of Converted or Redeemed Series N Preferred Stock. If any shares of Series N Preferred Stock are converted, redeemed or reacquired by the Corporation, such shares shall resume the status of authorized but unissued shares of Series N Preferred Stock. |
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(i) | Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided herein shall be cumulative and in addition to all other remedies available hereunder, at law or in equity (including a decree of specific performance and/or other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy. Nothing herein shall limit a Holder’s right to pursue actual damages for any failure by the Corporation to comply with the terms hereof. The Corporation covenants to each Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amountsrights to be received by a Holder and shall not, exceptgranted an award (or additional awards, as expressly provided herein, bethe case may be) under this Plan, subject to any express contractual rights (set forth in a document other obligation of the Corporation (or the performance thereof). The Corporation acknowledges that a breach by it of its obligations hereunder will cause irreparable harmthan this Plan) to the Holders and that the remedy at law for any such breach may be inadequate. The Corporation therefore agrees that, in the event of any such breach or threatened breach, the Holders shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. |
ANNEX A
NOTICE OF CONVERSION
(TO BE EXECUTED BY THE HOLDER IN ORDER TO CONVERT SHARES
OF SERIES N PREFERRED STOCK)
The undersigned hereby elects to convert the number of shares of Series N Preferred Stock, par value $0.001 per share (the Preferred Stock), of CTI BioPharma Corp. (the Corporation), indicated below into shares of common stock, par value $0.001 per share (the Common Stock), of the Corporation, according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as may be reasonably required by the Corporation. No fee will be charged to the Holders for any conversion of Preferred Stock, except for any such transfer taxes.
Conversion calculations:
Investor Account Name:
Investor Contact Name:
Account Number (if delivered prior to settlement date, to be completed by initial purchaser):
Date to Effect Conversion:
Number of shares of Series N Preferred Stock owned before
Conversion:
Number of shares of Series N Preferred Stock to be Converted:
Stated Value of shares of Series N Preferred Stock to be Converted:
Number of shares of Common Stock to be Issued:
Applicable Conversion Price:
Fixed conversion price 3.00 per share
DWAC Instructions (required only if delivered subsequent to the settlement date):
PREFERRED Conversion
Computershare DTCC no:
COMMON Shares CUSIP
Broker/DTCC no:
Broker Contact Name and Phone Number:
By:
Name:
Title:
Exhibit A-2
CTI BIOPHARMA CORP.
SERIES ZZ JUNIOR PARTICIPATING CUMULATIVE PREFERRED STOCK
Section 1. Designation and Amount. There shall be a series of preferred stock that shall be designated as “Series ZZ Junior Participating Cumulative Preferred Stock” (the Series ZZ Preferred Stock), and the number of shares initially constituting such series shall be 10,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, however, that no decrease shall reduce the number of shares of Series ZZ Preferred Stock to a number less than the number of shares then outstanding plus the number of shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding securities issued by the Corporation convertible into Series ZZ Preferred Stock.
Section 2. Dividends and Distributions.
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(i) | Subject to the rights of the holders of any shares of any class or series of preferred stock (or any similar stock) ranking prior and superior to the Series ZZ Preferred Stock with respect to dividends, the holders of shares of Series ZZ Preferred Stock, in preference to the holders of shares of common stock and of any other class or series of stock ranking junior to the Series ZZ Preferred Stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a Quarterly Dividend Payment Date), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series ZZ Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provisions for adjustment hereinafter set forth, 10,000 times the aggregate per share amount of all cash dividends, and 10,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of common stock or a subdivision of the outstanding shares of common stock (by reclassification or otherwise), declared on the common stock since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series ZZ Preferred Stock. The multiple of cash and non-cash dividends declared on the common stock to which holders of the Series ZZ Preferred Stock are entitled, which shall be 10,000 initially but which shall be adjusted from time to time as hereinafter provided, is hereinafter referred to as the “Dividend Multiple.” In the event the Corporation shall at any time after January 7, 2010 (the Rights Declaration Date).contrary.
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(ii)8.3 | declareNo Employment/Service Contract. Nothing contained in this Plan (or in any other documents under this Plan or payin any dividend on common stock payableaward) shall confer upon any Eligible Person or other participant any right to continue in shares of common stock,the employ or (ii) effect a subdivision or combination or consolidationother service of the outstanding sharesCorporation or one of common stock (by reclassificationits Subsidiaries, constitute any contract or otherwise than by paymentagreement of a dividendemployment or other service or affect an employee’s status as an employee at will, nor shall interfere in shares of common stock) into a greater or lesser number of shares of common stock, then in each such caseany way with the Dividend Multiple thereafter applicable to the determinationright of the amountCorporation or one of dividends which holdersits Subsidiaries to change a person’s compensation or other benefits, or to terminate his or her employment or other service, with or without cause. Nothing in this Section 8.3, however, is intended to adversely affect any express independent right of shares of Series ZZ Preferred Stock shall be entitled to receive shall be the Dividend Multiple applicable immediately prior to such event multiplied byperson under a fraction, the numerator of which is the number of shares of common stock outstanding immediately after such event and the denominator of which is the number of shares of common stock that were outstanding immediately prior to such event.separate employment or service contract other than an award agreement. |
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(iii)8.4 | Notwithstanding anything else contained inPlan Not Funded. Awards payable under this paragraph (a), the CorporationPlan shall out of funds legally available for that purpose, declare a dividend or distribution on the Series ZZ Preferred Stock as provided in this paragraph (a) immediately after it declares a dividend or distribution on the common stock (other than a dividendbe payable in shares or from the general assets of common stock) and the Corporation, and no special or separate reserve, fund or deposit shall paybe made to assure payment of such distributionawards. No participant, beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock, except as expressly otherwise provided) of the Series ZZ Preferred Stock beforeCorporation or one of its Subsidiaries by reason of any award hereunder. Neither the dividendprovisions of this Plan (or of any related documents), nor the creation or distribution declared onadoption of this Plan, nor any action taken pursuant to the common stock is paidprovisions of this Plan shall create, or set apart; providedbe construed to create, a trust of any kind or a fiduciary relationship between the Corporation or one of its Subsidiaries and any participant, beneficiary or other person. To the extent that ina participant, beneficiary or other person acquires a right to receive payment pursuant to any award hereunder, such right shall be no greater than the event no dividend or distribution shall have been declared onright of any unsecured general creditor of the common stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series ZZ Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.Corporation. |
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(b)8.5 | Dividends shall begin to accrue and be cumulative on outstanding sharesTax Withholding. Upon any exercise, vesting, or payment of Series ZZ Preferred Stock fromany award, or upon the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series ZZ Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holdersdisposition of shares of Series ZZ PreferredCommon Stock entitledacquired pursuant to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in eitherthe exercise of which events such dividends shall beginan ISO prior to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid onsatisfaction of the sharesholding period requirements of Series ZZ Preferred Stock in an amount less thanSection 422 of the total amount of such dividends atCode, or upon any other tax withholding event with respect to any award, arrangements satisfactory to the time accrued and payable on such sharesCorporation shall be allocated pro rata on a share-by-share basis among all such shares atmade to provide for any taxes the time outstanding. The BoardCorporation or any of Directors may fix in accordance with applicable law a record date for the determination of holders of shares of Series ZZ Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than such number of days prior to the date fixed for the payment thereof asits Subsidiaries may be allowed by applicable law.required or permitted to withhold with respect to such award event or payment. Such arrangements may include (but are not limited to) any one of (or a combination of) the following: |
Section 3. Voting Rights. In addition to any other voting rights required by law, the holders of shares of Series ZZ Preferred Stock shall have the following voting rights:
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| (a) | Subject to the provision for adjustment hereinafter set forth, each shareThe Corporation or one of Series ZZ Preferred Stock shall entitle the holder thereof to 10,000 votes on all matters submitted to a vote of the stockholders of the Corporation. The number of votes which a holder of a share of Series ZZ Preferred Stock is entitled to cast, which shall initially be 10,000 but which may be adjusted from time to time as hereinafter provided, is hereinafter referred to as the “Vote Multiple.” In the event the Corporation shall at any time after the Rights Declaration Date (i) declare or pay any dividend on common stock payable in shares of common stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of common stock (by reclassification or otherwise than by payment of a dividend in shares of common stock) into a greater or lesser number of shares of common stock, then in each such case the Vote Multiple thereafter applicable to the determination of the number of votes per share to which holders of shares of Series ZZ Preferred Stock shall be entitled shall be the Vote Multiple immediately prior to such event multiplied by a fraction, the numerator of which is the number of shares of common stock outstanding immediately after such event and the denominator of which is the number of shares of common stock that were outstanding immediately prior to such event. |
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(b) | Except as otherwise provided herein or by law, the holders of shares of Series ZZ Preferred Stock and the holders of shares of common stock and the holders of shares of any other capital stock of this Corporation having general voting rights, shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. |
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(i) | Whenever, at any time or times, dividends payable on any shares of Series ZZ Preferred Stock shall be in arrears in an amount equal to at least six (6) full quarter dividends (whether or not declared and whether or not consecutive), the holders of record of the outstanding shares of Series ZZ Preferred Stockits Subsidiaries shall have the exclusive right voting separatelyto require the participant (or the participant’s personal representative or beneficiary, as a single class,the case may be) to elect two (2) directorspay or provide for payment of the Corporation at a special meetingamount of stockholders ofany taxes which the Corporation or at the Corporation’s next annual meetingone of stockholders, and at each subsequent annual meeting of stockholders, as provided below. |
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(ii) | Upon the vesting of such right of the holders of shares of Series ZZ Preferred Stock, the maximum authorized number of members of the Board of Directors shall automatically be increased by two (2) and the two (2) vacancies so created shall be filled by vote of the holders of the outstanding shares of Series ZZ Preferred Stock as hereinafter set forth. A special meeting of the stockholders of the Corporation then entitled to vote shall be called by the President, the Board of Directors or, if requested in writing, by the holders of at least 10% of the shares of Series ZZ Preferred Stock then outstanding. At such special meeting, or, if no such special meeting shall have been called, then at the next annual meeting of stockholders of the Corporation, the holders of the shares of Series ZZ Preferred Stock shall elect, voting as above provided, two (2) directors of the Corporation to fill the aforesaid vacancies created by the automatic increase in the number of members of the Board of Directors. At any and all such meetings for such election, the holders of a majority of the outstanding |
shares of Series ZZ Preferred Stock shall be necessary to constitute a quorum for such election, whether present in person or proxy, and such two (2) directors shall be elected by the vote of at least a majority of the shares of Series ZZ Preferred Stock held by such stockholders present or represented at the meeting, the holders of Series ZZ Preferred Stock being entitled to cast a number of votes per share of Series ZZ Preferred Stock as is specified in paragraph (a) of this Section 3. Each such additional director shall serve until the next annual meeting of stockholders for the election of directors, or until his successor shall be elected and shall qualify, or until his right to hold such office terminates pursuant to the provisions of this Section 3(c). Any director elected by holders of shares of Series ZZ Preferred Stock pursuant to this Section 3(c) may be removed at any annual or special meeting, by vote of a majority of the stockholders voting as a class who elected such director, with or without cause. In case any vacancy shall occur among the directors elected by the holders of shares of Series ZZ Preferred Stock pursuant to this Section 3(c), such vacancy may be filled by the remaining director so elected, or his successor then in office, and the director so elected to fill such vacancy shall serve until the next meeting of stockholders for the election of directors.
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(iii) | The right of the holders of shares of Series ZZ Preferred Stock, voting separately as a class, to elect two (2) members of the Board of Directors of the Corporation as aforesaid shall continue until, and only until, such time as all arrears in dividends (whether or not declared) on the Series ZZ Preferred Stock shall have been paid or declared and set apart for payment, at which time such right shall terminate, except as herein or by law expressly provided subject to revesting in the event of each and every subsequent default of the character above-mentioned. Upon any termination of the right of the holders of the Series ZZ Preferred Stock as a class to vote for directors as herein provided, the term of office of all directors then in office elected by the holders of shares of Series ZZ Preferred Stock pursuant to this Section 3(c) shall terminate immediately. Whenever the term of office of the directors elected by the holders of shares of Series ZZ Preferred Stock pursuant to this Section 3(c) shall terminate and the special voting powers vested in the holders of the Series ZZ Preferred Stock pursuant to this Section 3(c) shall have expired, the maximum number of members of this Board of Directors of the Corporation shall be such number asits Subsidiaries may be provided for in the Bylaws of the Corporation, irrespective of any increase made pursuantrequired or permitted to the provisions of this Section 3(c). The voting rights granted by this Section 3(c) shall be in additionwithhold with respect to any other voting rights granted to the holders of the Series ZZ Preferred Stock in this Section 3. |
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(d) | Except as otherwise required by applicable lawsuch award event or as set forth herein, holders of Series ZZ Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of common stock as set forth herein) for taking any corporate action. |
Section 4. Certain Restrictions.
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(a) | Whenever dividends or distributions payable on the Series ZZ Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series ZZ Preferred Stock outstanding shall have been paid in full, the Corporation shall not: |
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(i) | declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series ZZ Preferred Stock; |
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(ii) | declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series ZZ Preferred Stock, except dividends paid ratably on the Series ZZ Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; |
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(iii) | except as permitted in subsection 4(a)(iv) below, redeem, purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series ZZ Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation |
ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series ZZ Preferred Stock; or
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(iv) | purchase or otherwise acquire for consideration any shares of Series ZZ Preferred Stock, or any shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series ZZ Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective Series ZZnd classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.payment. |
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| (b) | The Corporation or one of its Subsidiaries shall have the right to deduct from any amount otherwise payable in cash (whether related to the award or otherwise) to the participant (or the participant’s personal representative or beneficiary, as the case may be) the amount of any taxes which the Corporation or one of its Subsidiaries may be required or permitted to withhold with respect to such award event or payment. |
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| (c) | In any case where a tax is required to be withheld in connection with the delivery of shares of Common Stock under this Plan, the Administrator may in its sole discretion (subject to Section 8.1) require or grant (either at the time of the award or thereafter) to the participant the right to elect, pursuant to such rules and subject to such conditions as the Administrator may establish, that the Corporation reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares, valued in a consistent manner at their fair market value or at the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy any applicable withholding obligation on exercise, vesting or payment. |
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| 8.6 | Effective Date, Termination and Suspension, Amendments. |
8.6.1Effective Date. This Plan is effective as of March 13, 2017, the date of its approval by the Board (the “Effective Date”). This Plan shall be submitted for and subject to stockholder approval no later than twelve months after the Effective Date. Unless earlier terminated by the Board and subject to any extension that may be approved by stockholders, this Plan shall terminate at the close of business on the day before the tenth anniversary of the Effective Date. After the termination of this Plan either upon such stated termination date or its earlier termination by the Board, no additional awards may be granted under this Plan, but previously granted awards (and the authority of the Administrator with respect thereto, including the authority to amend such awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of this Plan.
8.6.2Board Authorization. The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part. No awards may be granted during any period that the Board suspends this Plan.
8.6.3Stockholder Approval. To the extent then required by applicable law or deemed necessary or advisable by the Board, any amendment to this Plan shall be subject to stockholder approval.
8.6.4Amendments to Awards. Without limiting any other express authority of the Administrator under (but subject to) the express limits of this Plan, the Administrator by agreement or resolution may waive conditions of or limitations on awards to participants that the Administrator in the prior exercise of its discretion has imposed, without the consent of a participant, and (subject to the requirements of Sections 3.2 and 8.6.5) may make other changes to the terms and conditions of awards. Any amendment or other action that would constitute a repricing of an award is subject to no-repricing provisions in Section 3.2.
8.6.5Limitations on Amendments to Plan and Awards. No amendment, suspension or termination of this Plan or amendment of any outstanding award agreement shall, without written consent of the participant, affect in any manner materially adverse to the participant any rights or benefits of the participant or obligations of the Corporation under any award granted under this Plan prior to the effective date of such change. Changes, settlements and other actions contemplated by Section 7 shall not be deemed to constitute changes or amendments for purposes of this Section 8.6.
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8.7 | Privileges of Stock Ownership. Except as otherwise expressly authorized by the Administrator, a participant shall not permitbe entitled to any subsidiaryprivilege of stock ownership as to any shares of Common Stock not actually delivered to and held of record by the participant. Except as expressly required by Section 7.1 or otherwise expressly provided by the Administrator, no adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of delivery. |
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| 8.8 | Governing Law; Construction; Severability. |
8.8.1Choice of Law. This Plan, the awards, all documents evidencing awards and all other related documents shall be governed by, and construed in accordance with the laws of the State of Delaware, notwithstanding any Delaware or other conflict of law provision to the contrary.
8.8.2 Severability. If a court of competent jurisdiction holds any provision invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.
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8.9 | Captions. Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof. |
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8.10 | Stock-Based Awards in Substitution for Stock Options or Awards Granted by Other Corporation. Awards may be granted to Eligible Persons in substitution for or in connection with an assumption of employee stock options, SARs, restricted stock or other stock-based awards granted by other entities to persons who are or who will become Eligible Persons in respect of the Corporation or one of its Subsidiaries, in connection with a distribution, merger or other reorganization by or with the granting entity or an affiliated entity, or the acquisition by the Corporation or one of its Subsidiaries, directly or indirectly, of all or a substantial part of the stock or assets of the employing entity. The awards so granted need not comply with other specific terms of this Plan, provided the awards reflect adjustments giving effect to purchasethe assumption or substitution consistent with any conversion applicable to the common stock (or the securities otherwise acquiresubject to the award) in the transaction and any change in the issuer of the security. Any shares that are delivered and any awards that are granted by, or become obligations of, the Corporation, as a result of the assumption by the Corporation of, or in substitution for, considerationoutstanding awards previously granted or assumed by an acquired company (or previously granted or assumed by a predecessor employer (or direct or indirect parent thereof) in the case of persons that become employed by the Corporation or one of its Subsidiaries in connection with a business or asset acquisition or similar transaction) shall not be counted against the Share Limit or other limits on the number of shares available for issuance under this Plan. |
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8.11 | Non-Exclusivity of Plan. Nothing in this Plan shall limit or be deemed to limit the authority of the Board or the Administrator to grant awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority. |
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8.12 | No Corporate Action Restriction. The existence of this Plan, the award agreements and the awards granted hereunder shall not limit, affect or restrict in any way the right or power of the Corporation or any Subsidiary (or any of their respective stockholders, boards of directors or committees thereof (or any subcommittees), as the case may be) to make or authorize: (a) any adjustment, recapitalization, reorganization or other change in the capital structure or business of the Corporation or any Subsidiary, (b) any merger, amalgamation, consolidation or change in the ownership of the Corporation or any Subsidiary, (c) any issue of bonds, debentures, capital, preferred or prior preference stock ahead of or affecting the capital stock (or the rights thereof) of the Corporation or any Subsidiary, (d) any dissolution or liquidation of the Corporation or any Subsidiary, (e) any sale or transfer of all or any part of the assets or business of the Corporation or any Subsidiary, (f) any other award, grant, or payment of incentives or other compensation under any other plan or authority (or any other action with respect to any benefit, incentive or compensation), or (g) any other corporate act or proceeding by the Corporation or any Subsidiary. No participant, beneficiary or any other person shall have any claim under any award or award agreement against any member of the Board or the Administrator, or the Corporation or any employees, officers or agents of the Corporation or any Subsidiary, as a result of any such action. Awards need not be structured so as to be deductible for tax purposes. |
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8.13 | Other Company Benefit and Compensation Programs. Payments and other benefits received by a participant under an award made pursuant to this Plan shall not be deemed a part of a participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Corporation or any Subsidiary, except where the Administrator expressly otherwise provides or authorizes in writing. Awards under this Plan may be made in addition to, in combination with, as alternatives to or in payment of grants, awards or commitments under any other plans, arrangements or authority of the Corporation or its Subsidiaries. |
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8.14 | Clawback Policy. The awards granted under this Plan are subject to the terms of the Corporation’s recoupment, clawback or similar policy as it may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of awards or any shares of stockCommon Stock or other cash or property received with respect to the awards (including any value received from a disposition of the Corporation unlessshares acquired upon payment of the Corporation could, under subsection (a) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.awards). |
Section 5. Reacquired Shares. Any shares of Series ZZ Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired promptly after the acquisition thereof. All such shares shall upon their retirement become authorized but unissued shares of preferred stock and may be reissued as part of a new series of preferred stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the Corporation (voluntary or otherwise), no distribution shall be made (x) to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series ZZ Preferred Stock unless, prior thereto, the holders of shares of Series ZZ Preferred Stock shall have received an amount (the Series ZZ Liquidation Preference) equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment, plus an amount equal to the greater of (1) $10,000.00 per share or (2) an aggregate amount per share, subject to the provision for adjustment hereinafter set forth, equal to 10,000 times the aggregate amount of all cash or other property to be distributed per share to holders of common stock upon such liquidation, dissolution or winding up of the Corporation, or (y) to the holders of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series ZZ Preferred Stock, except distributions made ratably on the Series ZZ Preferred Stock and all other such parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution or winding up. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare or pay any dividend on common stock payable in shares of common stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of common stock (by reclassification or otherwise than by payment of a dividend in shares of common stock) into a greater or lesser number of shares of common stock, then in each such case the aggregate amount per share to which holders of shares of Series ZZ Preferred Stock were entitled immediately prior to such event under clause (x) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of common stock outstanding immediately after such event and the denominator of which is the number of shares of common stock that were outstanding immediately prior to such event.
In the event, however, that there are not sufficient assets available to permit payment in full of the Series ZZ Liquidation Preference and the liquidation preferences of all other classes and series of stock of the Corporation, if any, that rank on a parity with the Series ZZ Preferred Stock in respect thereof, then the assets available for such distribution shall be distributed ratably to the holders of the Series ZZ Preferred Stock and the holders of such parity shares in proportion to their respective liquidation preferences.
Neither the consolidation of nor merging of the Corporation with or into any other corporation or corporations, nor the sale or other transfer of all or substantially all of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 6.
Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the outstanding shares of common stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Series ZZ Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter
set forth) equal to 10,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of common stock is changed or exchanged, plus accrued and unpaid dividends, if any, payable with respect to the Series ZZ Preferred Stock. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare or pay any dividend on common stock payable in shares of common stock, or (ii) effect a subdivision or combination or consolidation of the outstanding shares of common stock (by reclassification or otherwise than by payment of a dividend in shares of common stock) into a greater or lesser number of shares of common stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series ZZ Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of common stock outstanding immediately after such event and the denominator of which is the number of shares of common stock that were outstanding immediately prior to such event.
Section 8. Redemption. The shares of Series ZZ Preferred Stock shall not be redeemable; provided, however, that the foregoing shall not limit the ability of the Corporation to purchase or otherwise deal in such shares to the extent otherwise permitted hereby and by law.
Section 9. Ranking. Unless otherwise expressly provided in the Certificate of Incorporation or a Certificate of Designation, Preferences or Rights relating to any other series of preferred stock of the Corporation, the Series ZZ Preferred Stock shall rank junior to every other series of the Corporation’s preferred stock previously or hereafter authorized, as to the payment of dividends and the distribution of assets on liquidation, dissolution or winding up and shall rank senior to the common stock.
Section 10. Fractional Shares. Series ZZ Preferred Stock may be issued in whole shares or in any fraction of a share that is one ten-thousandth (1/10,000th) of a share or any integral multiple of such fraction, which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series ZZ Preferred Stock. In lieu of fractional shares, the Corporation may elect to make a cash payment as provided in the Rights Agreement, as amended, for fractions of a share other than one ten-thousandth (1/10,000th) of a share or any integral multiple thereof.
Section 11. Amendment. At any time any shares of Series ZZ Preferred Stock are outstanding, the Certificate of Incorporation and the foregoing Sections 1 through 10, inclusive, and this Section 11 of the Series ZZ Certificate of Designation shall not be amended in any manner, including by merger, consolidation or otherwise, which would materially alter or change the powers, preferences or special rights of the Series ZZ Preferred Stock so as to affect them adversely without the affirmative vote of the holders of two-thirds or more of the outstanding shares of Series ZZ Preferred Stock, voting separately as a class.
Appendix C
BYLAWS
OF
CTI BIOPHARMA CORP.
a Delaware corporation
ARTICLE I
REGISTERED OFFICE
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1.1 | Delaware Office. The Corporation shall have and maintain a registered office in the State of Delaware as required by law. The name and address of its registered agent in the State of Delaware is set forth in the Certificate of Incorporation of the Corporation (the Certificate of Incorporation).
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1.2 | Other Offices. The Corporation may have such other offices, either within or without the State of Delaware, as the Board of Directors of the Corporation (the Board of Directors) may designate or as the business of the Corporation may from time to time require.
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ARTICLE II
STOCKHOLDER MEETINGS
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2.1 | Meeting Place. All meetings of the stockholders shall be held, pursuant to proper notice as set forth in Section 2.4 of this Article II, at the principal executive office of the Corporation, or at such other place as shall be determined from time to time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meeting may be held solely by means of remote communication, as authorized by Section 211(a) of the General Corporation Law of the State of Delaware (the DGCL).
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2.2 | Annual Meeting. The annual meeting of the stockholders shall be held on such date and at such time as shall be fixed by resolution of the Board of Directors, at the principal office of the Corporation, or such other place as fixed by the Board of Directors, for the purpose of electing directors and transacting such other business as may properly come before that meeting; provided, however, that the Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211 of the DGCL.
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2.3 | Special Meetings. Special meetings of the stockholders for any purpose may be called at any time by the President, the Board of Directors or the holders of at least ten percent of all the votes entitled to be cast on any issue proposed to be considered at such special meeting. Special meetings of the stockholders shall be held at the Corporation’s principal executive office or at such other place as shall be identified in the notice of such meeting. Only business within the purpose or purposes described in the meeting notice may be conducted at a special stockholders’ meeting.
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2.4 | Notice of Meetings. Except as otherwise provided by applicable law or the Certificate of Incorporation, whenever stockholders are required or permitted to take any action at a meeting, notice in writing or by electronic transmission of each stockholders’ meeting stating the date, time, place, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, for a special meeting, the purpose(s) for which the meeting is called, shall be given
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by the Corporation not less than ten nor more than sixty days prior to the date of the meeting, to each stockholder of record pursuant to Article VII of these Bylaws. Except as otherwise provided by applicable law or the Certificate of Incorporation, the Corporation is required to give notice only to stockholders entitled to vote at the meeting.
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2.5 | If mailed, notice shall be deemed given when deposited in the mail, postage prepaid, directed to the stockholder at such stockholder's address as it appears on the records of the Corporation. Any previously scheduled meeting of the stockholders may be postponed by resolution of the Board of Directors, except that a meeting requested by the holders of record of shares of stock pursuant to Section 2.3 of these Bylaws may be postponed only by the holders of record that requested the meeting. |
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2.6 | The Board of Directors or the chairperson at any meeting shall have the power to adjourn a meeting of stockholders. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time, place (if any) thereof and the means of remote communications (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 30 days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix a new record date for determining stockholders entitled to notice of such adjournment meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting. |
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2.7 | Fixing of Record Date. In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.
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The record date for determining the stockholders entitled to consent to corporate action in writing without a meeting shall not be more than 10 days after the date upon which the resolution fixing the record date is adopted by the Board of Directors. If no such record date is fixed by the Board of Directors, the record date shall be determined as follows:
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(a) | if no prior action by the Board of Directors is required under the DGCL, the record date shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation; and |
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(b) | if prior action by the Board of Directors is required under the DGCL, the record date shall be the close of business on the day on which the Board of Directors adopts a resolution taking such prior action. |
The record date for determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, shall be not more than 60 nor
less than 10 days prior to such action. If no such record date is fixed by the Board of Directors, the record date for determining the stockholders for any such purpose shall be the close of business on the day on which the Board of Directors adopts the resolution relating to such purpose.
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2.8 | Stockholders’ List. The Corporation shall prepare, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting at least ten (10) days prior to the meeting (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of meeting or (ii) during ordinary business hours at the principal place of business of the Corporation. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 2.8 or to vote in person or by proxy at any meeting of stockholders.
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2.9 | Quorum and Adjourned Meetings. Except as otherwise provided in the Certificate of Incorporation or otherwise provided by law, a quorum at any annual or special meeting of stockholders shall consist of stockholders representing, either in person or by proxy, one-third of the votes entitled to be cast on the matter. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. The chairman of the meeting may adjourn the meeting from time to time, whether or not there is such a quorum. No notice of the time and place of adjourned meetings need be given except as provided in the last paragraph of Section 2.6 of these Bylaws.
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2.10 | Voting. Except as otherwise provided in the Certificate of Incorporation or by law, each outstanding share, regardless of class, is entitled to one vote on each matter voted on at a stockholders’ meeting.
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If a quorum exists, then, other than in the election of directors, action on a matter is approved by the vote of the holders of shares of stock having a majority in voting power of the votes cast by the holders of all shares of stock present or represented at the meeting and voting affirmatively or negatively on such matter.
Unless otherwise provided in the Certificate of Incorporation, in any election of directors the candidates elected are those receiving the largest numbers of votes cast by the shares entitled to vote in the election, up to the number of directors to be elected by such shares.
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2.11 | Proxies. A stockholder may vote either in person or by granting a proxy in accordance with applicable law. An appointment of a proxy is valid for three years unless a longer period is expressly provided in the appointment form.
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2.12 | Stockholder Action by Written Consent. Except as otherwise provided by the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of the stockholders of the Corporation, may be taken without a meeting, without prior notice and without a vote, only if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of all the outstanding shares of stock of the Corporation entitled to vote thereon and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded.
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2.13 Stockholder Nomination of Director Candidates.
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(a) | Subject to the rights of holders of any class or series of stock having a preference over the Corporation’s common stock as to dividends or upon liquidation, if any, nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder who is a stockholder of record of the Corporation at the time the notice provided for in this Section 2.13 is delivered to the Corporation and who is entitled to vote in the election of directors generally at the applicable meeting of stockholders. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if written notice of such stockholder’s intent to make such nomination or nominations has been received by the Corporation, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than (i) with respect to the election to be held at an annual meeting of stockholders, not less than ninety days nor more than one hundred twenty days prior to the date one year from the date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty days before or after the date one year from the date of the immediately preceding annual meeting of stockholders, or no annual meeting was held in the immediately preceding year, notice by the stockholder in order to be timely must be so received no later than the close of business on the tenth day following the day on which the public announcement is first made of the date of the annual meeting; and (ii) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the tenth day following the date on which the public announcement is first made of the date of the special meeting. Each such notice shall be in writing and shall set forth: (A) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (B) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (C) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (D) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated or intended to be nominated, by the Board of Directors; and (E) the consent of each nominee to serve as a director of the Corporation if so elected. This Section 2.13 of this Article II shall be the exclusive means for a stockholder to submit nominations of persons for election to the Board of Directors. The Chairperson of the meeting may in his or her discretion determine and declare to the meeting that a nomination was not made in accordance with the foregoing procedures, and if he or she should so determine, he or she shall so declare to the meeting and the defective nomination shall be disregarded. |
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(b) | Notwithstanding anything to the contrary in these Bylaws, unless otherwise required by law, (i) no person shall be eligible for election as a director of the Corporation pursuant to a stockholder nomination unless nominated in accordance with the procedures (including providing the required information) set forth in this Section 2.13 of this Article II, whether such proposed nominee is to be included in the Corporation’s proxy statement or presented to stockholders by means of an independently financed proxy solicitation and (ii) if the stockholder (or a qualified representative) giving the notice does not appear at the meeting to present the nomination, such nomination may be disregarded, irrespective of whether proxies concerning such nomination have been received by the Corporation. |
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2.14 | Stockholder Proposals.
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(a) | Any stockholder who is a stockholder of record of the Corporation at the time the notice provided for in this Section 2.14 is delivered to the Corporation and who is entitled to vote at a meeting of stockholders may make any proposal at such meeting of stockholders and the same may be discussed and considered only if written notice of such stockholder’s intent to make such proposal(s) has been received by the Corporation, either by personal delivery or by United States mail, postage prepaid, |
to the Secretary of the Corporation (i) for purposes of an annual meeting, not less than ninety days nor more than one hundred twenty days prior to the date one year from the date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty days before or after the date one year from the date of the immediately preceding annual meeting of stockholders, or no annual meeting was held in the immediately preceding year, notice by the stockholder in order to be timely must be so received no later than the close of business on the tenth day following the day on which the public announcement is first made of the date of the annual meeting; and (ii) for purposes of a special meeting, not less than ninety days nor more than one hundred twenty days prior to the date of such special meeting of stockholders; provided, however, that if the first public announcement of the date of such special meeting is less than one hundred days prior to the date of such special meeting, notice by the stockholder in order to be timely must be so received no less than the tenth day following the day on which public announcement is first made of the date of the special meeting. In no event shall any adjournment or postponement of a special meeting or a public announcement thereof commence a new time period (or extend any time period) for the giving of a stockholder’s notice. Each such notice shall be in writing and shall set forth: (i) the address of the stockholder who intends to make the proposal(s); (ii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to vote for the proposal(s); and (iii) such other information regarding each proposal as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission. The Chairperson of the meeting may in his discretion determine and declare to the meeting that a proposal was not made in accordance with the foregoing procedures, and if he should so determine, he shall so declare to the meeting and the defective proposal shall be disregarded.
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(b) | Notwithstanding anything to the contrary in these Bylaws: (i) no business shall be conducted at any meeting of stockholders except in accordance with the procedures set forth in this Section 2.14 of this Article II (other than the nomination of a person for election as a director, which is governed by Section 2.13 of this Article II and any business brought by the Board of Directors), and (ii) unless otherwise required by law, if a stockholder intending to propose business at a meeting of stockholders does not comply with the procedures (including providing the required information) set forth in this Section 2.14 of this Article II or if such stockholder (or a qualified representative) does not appear at the meeting to present the proposed business, such business shall not be transacted, irrespective of whether proxies concerning such nomination have been received by the Corporation. |
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(c) | Without limiting the foregoing provisions of this Section 2.14 of this Article II (and with respect to the nomination of a person for election as a director, Section 2.13 of this Article II), a stockholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations thereunder with respect to the matters set forth in this Section 2.14 of this Article II; provided, however, that any references in these Bylaws to the Exchange Act or such rules and regulations are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 2.14, and compliance with this Section 2.14 of this Article II shall be the exclusive means for a stockholder to make nominations or submit other business. Nothing in these Bylaws shall be deemed to affect any rights (i) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act or (ii) of the Corporation to omit a proposal from the Corporation’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act, or (iii) of the holders of any series of Preferred Stock, if any, to the extent provided for under law, the Certificate of Incorporation or these Bylaws.
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ARTICLE III
SHARES OF STOCK
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3.1 | Issuance of Shares. Shares of capital stock of the Corporation shall be issued in the manner and for such considered as may be provided by applicable law.
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3.2 | Certificated Shares.Certificates of stock, if any, shall be issued in numerical order, and each stockholder holding shares represented by certificates shall be entitled to a certificate signed in a manner that complies with Section 158 of the DGCL. If an officer who has signed, or whose facsimile signature has been placed upon, such certificate ceases to be such officer before the certificate is issued, it may be issued by the Corporation with the same effect as if the person were an officer on the date of issue.
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If the shares are subject to transfer or other restrictions under applicable securities laws or contracts with the Corporation, the share certificates shall include a complete description of, or a reference to, the existence and general nature of such restrictions on the face or back of the certificate.
Subject to the Certificate of Incorporation, the Corporation may issue a new certificate of stock or uncertificated shares in place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner's legal representative to give the Corporation an affidavit of loss and a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
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3.3 | Uncertificated Shares. The Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation.
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(a) | Transfers of stock shall be made only upon the stock transfer records of the Corporation, which records shall be kept at the registered office of the Corporation or at its principal place of business, or at the office of its transfer agent or registrar. The Board of Directors may, by resolution, open a share register in any state of the United States, and may employ an agent or agents to keep such register and to record transfers of shares therein. |
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(b) | Shares of certificated stock shall be transferred by delivery of the certificates therefor, accompanied either by an assignment in writing on the back of the certificate or an assignment separate from certificate, or by a written power of attorney to sell, assign and transfer the same, signed by the holder of said certificate. No shares of certificated stock shall be transferred on the records of the Corporation until the outstanding certificates therefor (or, in the case of a certificate alleged to have been lost, stolen or destroyed, any required affidavit of loss and bond) have been surrendered to the Corporation or to its transfer agent or registrar. |
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(c) | Shares of uncertificated stock shall be transferred upon receipt by the Corporation of a written request for transfer signed by the stockholder. Within a reasonable time after the transfer of shares without certificates, the Corporation shall provide the new stockholder a complete written statement of the information required on certificates as provided in Section 3.2 of this Article III. |
ARTICLE IV
BOARD OF DIRECTORS
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4.1 | Powers. The management of all the affairs, property and interests of the Corporation shall be vested in a Board of Directors. In addition to the powers and authorities expressly conferred upon it by these Bylaws and
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by the Certificate of Incorporation, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts as are not prohibited by statute or by the Certificate of Incorporation or by these Bylaws or as directed or required to be exercised or done by the stockholders.
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4.2 | Number, Term. The Board of Directors shall consist of not less than five and not more than twelve persons as fixed from time to time by resolution of the Board of Directors. Following the date hereof, Directors shall be elected annually for terms of one year, and until their successors are elected and qualified, subject to their earlier death, resignation or removal from the Board of Directors. Directors may serve for any number of consecutive terms. Unless a Director dies, resigns or is removed, he or she shall hold office for the term elected and until his or her successor is elected and qualified.
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4.3 | Change of Number. Unless otherwise provided by the Certificate of Incorporation, the total number of directors constituting the Board of Directors may at any time be increased or decreased by the Board of Directors; provided, that no decrease in the number of directors shall have the effect of shortening the term of any incumbent director.
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4.4 | Chairperson of the Board of Directors. The Chairperson of the Board of Directors shall be a director and shall perform such duties as shall be assigned to him or her by the Board of Directors and in any employment agreement approved by the Board of Directors. The Chairperson shall preside at all meetings of the Board of Directors at which he or she is present. The Chairperson may sign deeds, mortgages, bonds, contracts, and other instruments, if such powers have been expressly delegated by the Board of Directors to the Chairperson, unless required by law to be signed by some other officer or in some other manner.
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4.5 | Vacancies. All vacancies in the Board of Directors, whether caused by resignation, death or otherwise, may be filled by the affirmative vote of a majority of the remaining directors in office though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall hold office until the next stockholders’ meeting at which directors are elected and until his or her successor is elected and qualified. Any directorship to be filled by reason of an increase in the number of directors may be filled by the Board of Directors for a term of office continuing only until the next election of directors by the stockholders and until his or her successor is elected and qualified.
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4.6 | Resignation. A director may resign at any time by delivering written notice to the Board of Directors, the Chairperson of the Board of Directors, the President or the Secretary. A resignation is effective when the notice is delivered unless the notice specifies a later effective date.
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4.7 | Removal of Directors. Unless otherwise provided by the Certificate of Incorporation or applicable law, at a special meeting of stockholders called expressly for that purpose, the entire Board of Directors, or any member thereof, may be removed from office at any time, but only by the affirmative vote of the holders of a majority in voting power of the outstanding shares entitled to vote thereon.
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4.8 | Regular Meetings. Regular meetings of the Board of Directors or any committee may be held without notice at the principal place of business of the Corporation or at such other place or places, within or without the State of Delaware, as the Board of Directors or such committee, as the case may be, may from time to time designate. An annual meeting of the Board of Directors may be held without notice immediately after adjournment of the annual meeting of stockholders at the same place at which such stockholders’ meeting was held.
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(a) | Special meetings of the Board of Directors may be called at any time by the Chairperson, the Chief Executive Officer or by a majority of the members of the Board of Directors, to be held at the principal place of business of the Corporation or at such other place as the Board of Directors or the person or persons calling such meeting may designate. |
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(b) | Special meetings of any committee of the Board of Directors may be called at any time by such person or persons and with such notice as shall be specified for such committee by the Board of Directors, or in the absence of such specification, in the manner and with the notice required for special meetings of the Board of Directors. |
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4.10 | Notice of Meeting. Notice of the place, day, and time of any meeting of the Board of Directors for which notice is required shall be given, at least two days prior to the day on which the meeting is to be held, in any manner permitted by law, including orally. Notice shall be deemed to have been given as set forth in Article VII of these Bylaws. Such notice need not specify the business to be transacted at, or the purpose of, the meeting.
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4.11 | Waiver of Notice. A director may waive any notice required by law, by the Certificate of Incorporation or by these Bylaws before or after the time stated for the meeting, and such waiver shall be equivalent to the giving of such notice. Such waiver must be delivered by the director entitled to such notice and delivered to the Corporation for inclusion in the minutes or filing with the corporate records, which waiver shall be set forth either (a) in an executed record or (b) if the Corporation has designated an address, location, or system to which the waiver may be electronically transmitted and the waiver has been electronically transmitted to the designated address, location, or system, in an executed electronically transmitted record. A director’s attendance at or participation in a meeting shall constitute a waiver of any required notice to the director of the meeting unless the director, at the beginning of the meeting or promptly upon the director’s arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.
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4.12 | Quorum. A majority of the full Board of Directors shall be necessary at all meetings to constitute a quorum for the transaction of business. If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the Board of Directors.
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4.13 | Action by Directors Without a Meeting.
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(a) | Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at a meeting of the Board of Directors, or of a committee thereof, may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of the Board of Directors, or committee. |
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(b) | Action taken under this Section 4.14 of this Article IV is effective when the last director signs the consent, unless the consent specifies a later effective date. |
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4.14 | Participation. Any or all directors may participate in a regular or special meeting of the Board of Directors (or of a committee thereof) by, or may conduct the meeting through the use of, any means of communication by which all directors participating can hear each other during the meeting, and participation by such means shall constitute presence in person at such meeting.
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(a) | The Board of Directors, by resolution adopted by a majority of the full Board of Directors, designate one or more committees of directors. Each committee must have one or more members. |
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(b) | Any such committee may fix its rules of procedure and fix the time and place, whether within or without the State of Delaware, of its meetings and specify what notice thereof, if any, shall be given, unless the Board of Directors shall otherwise by resolution provide. The Board of Directors shall have the power to change the members of any such committee at any time, to fill vacancies therein and to discharge any such committee, either with or without cause, at any time. |
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(c) | Any such committee, unless otherwise provided in the resolution of the Board of Directors, or in these Bylaws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority denied it by Section 141 of the DGCL. |
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(d) | Each committee shall keep regular minutes of its meetings and make such reports as the Board of Directors may from time to time request. |
ARTICLE V
OFFICERS
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5.1 | Designations. The officers of the Corporation shall be a Chief Executive Officer, a President, a Secretary and, at the discretion of the Board of Directors, a Treasurer, one or more Assistant Secretaries and/or Assistant Treasurers, and such other officers as may be deemed necessary. The officers of the Corporation that may from time to time be appointed by the Chief Executive Officer shall be the Vice Presidents and such additional officers and assistant officers of the Corporation as he may determine. Any two or more offices may be held by the same individual. The Board of Directors, in its discretion, may elect a person from among its members to serve as Chairperson of the Board of Directors, who, when present, shall preside at all meetings of the Board of Directors, and who shall have such other powers as the Board of Directors may determine.
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5.2 | Appointment of Officers. The Board of Directors shall appoint the officers of the Corporation subject to the rights, if any, of an officer under any contract of employment.
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5.3 | Powers and Duties. If the Board of Directors appoints persons to fill the following positions, such officers shall have the power and duties set forth below:
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(a) | The Chief Executive Officer. The Chief Executive Officer, subject to the direction and control of the Board of Directors, shall have general control and management of the business affairs and policies of the Corporation. The Chief Executive Officer shall act as liaison from and as spokesman for the Board of Directors. The Chief Executive Officer shall participate in long-range planning for the Corporation and shall be available to the other officers of the Corporation for consultation. The Chief Executive Officer shall possess power to sign all certificates, contracts and other instruments of the Corporation. Unless a Chairperson of the Board of Directors has been appointed and is present, the Chief Executive Officer shall preside at all meetings of the stockholders and of the Board of Directors. The Chief Executive Officer shall perform all such other duties as are incident to the office of Chief Executive Officer or are properly required by the Board of Directors. |
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(b) | The President. The President shall report to the Chief Executive Officer. In the absence of the Chief Executive Officer or his inability to act, the President, if any, shall perform all duties of the Chief Executive Officer and when so acting shall have all the power of, and be subject to all restrictions upon, the Chief Executive Officer; provided that no such President shall assume the authority to preside as Chairperson of meetings of the Board of Directors unless such President is a member of the Board of Directors. In general, the President shall have such powers and discharge such duties as are incident to the office of President and such duties as may be assigned from time to time by the Board of Directors. |
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(c) | Vice Presidents. Each Vice President shall have such powers and discharge such duties as may be assigned from time to time by the Board of Directors or the Chief Executive Officer, as applicable. During the absence or disability of the Chief Executive Officer and the President, and if no Chairperson of the Board of Directors is appointed, the Executive or Senior Vice Presidents, if any, and the Vice Presidents, if any, in the order designated by the Board of Directors, shall exercise all the functions of the President. |
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(d) | The Secretary. The Secretary shall issue notices for all meetings, except for notices for special meetings of the stockholders and special meetings of the directors which are called by the requisite percentage of stockholders or number of directors, shall have charge of the seal and the Corporation’s books, and shall make such reports and perform such other duties as are incident to the office of Secretary, or are properly required of him or her by the Board of Directors. The Secretary (or his or her designee) shall keep minutes of all meetings of the Board of Directors and stockholders. The Secretary shall keep a register of the post office address of each stockholder and director and attest certificates for shares of the Corporation, and shall maintain a stock ledger of the Corporation. |
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(e) | The Treasurer. The Treasurer shall have the custody of all moneys and securities of the Corporation and shall keep regular books of account. The Treasurer shall disburse the funds of the Corporation |
in payment of the just demands against the Corporation or as may be ordered by the Board of Directors, taking proper vouchers or receipts for such disbursements, and shall render to the Board of Directors from time to time as may be required an account of all transactions as Treasurer and of the financial condition of the Corporation. The Treasurer shall perform such other duties incident to his or her office or that are properly required of him or her by the Board of Directors.
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5.4 | Delegation. In the case of absence or inability to act of any officer of the Corporation and of any person herein authorized to act in such officer’s place, the Board of Directors (or, if such officer is one that has been appointed by the Chief Executive Officer, the Chief Executive Officer) may from time to time delegate the powers or duties of such officer to any other officer or other person whom it may in its sole discretion select.
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5.6 | Vacancies. Vacancies in any office arising from any cause may be filled by the Board of Directors at any regular or special meeting of the Board of Directors.
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5.7 | Resignation. An officer may resign at any time by delivering notice to the Corporation. Such notice shall be effective when delivered unless the notice specifies a later effective date. Unless otherwise specified therein, acceptance of such resignation by the Corporation shall not be necessary to make it effective. Any such resignation shall not affect the Corporation’s contract rights, if any, with the officer.
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5.8 | Removal. Any officer elected or appointed by the Board of Directors may be removed at any time, with or without cause, by the affirmative vote of a majority of the whole Board of Directors, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. An officer empowered to appoint another officer or assistant officer also has the power with or without cause to remove any officer he or she would have the power to appoint whenever in his or her judgment the best interests of the Corporation would be served thereby.
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5.9 | Salaries and Contract Rights. The salaries, if any, of the officers appointed by the Board of Directors shall be fixed from time to time by the Board of Directors or an applicable committee thereof. The appointment of an officer shall not of itself create contract rights.
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5.10 | Bonds. The Board of Directors may, by resolution, require any and all of the officers to give bonds to the Corporation, with sufficient surety or sureties, conditioned for the faithful performance of the duties of their respective offices, and to comply with such other conditions as may from time to time be required by the Board of Directors.
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ARTICLE VI
DISTRIBUTIONS AND FINANCE
Dividends upon the capital stock of the Corporation may be declared by the Board of Directors at any regular or special meeting or by written consent, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation.
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6.2 | Depositories. The monies of the Corporation shall be deposited in the name of the Corporation in such bank or banks or trust company or trust companies as the Board of Directors shall designate, and shall be drawn out only by check or other order for payment of money signed by such persons and in such manner as may be determined by resolution of the Board of Directors.
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ARTICLE VII
NOTICES
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7.1 | Written Notice. Written notice may be transmitted by mail, private carrier, or personal delivery; or telephone, wire, or wireless equipment that transmits a facsimile of the notice and provides the transmitter with an electronically generated receipt. Written notice to a director or the Corporation is effective upon receipt by
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the director or the Corporation. Written notice to a stockholder is effective the earlier of (a) when mailed, if mailed with first class postage prepaid, correctly addressed to the stockholder at the stockholder’s address as it appears on the current record of stockholders of the Corporation and (b) when dispatched by telegraph or facsimile equipment or, if prepaid, by air courier.
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7.2 | Notice by Electronic Transmission. Notices to directors and stockholders from the Corporation may be in an electronic transmission given in accordance with applicable law.
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7.3 | Oral Notice. Any oral notice given to a director by personal communication over the telephone or otherwise may be communicated either to the director or to a person at the office of the director who, the person giving the notice has reason to believe, will promptly communicate it to the director.
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ARTICLE VIII
SEAL
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8.1 | The Corporation may adopt a corporate seal which seal shall be in such form and bear such inscription as may be adopted by resolution of the Board of Directors. |
ARTICLE IX
INDEMNIFICATION OF OFFICERS,
DIRECTORS, EMPLOYEES AND AGENTS
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9.1 | Right to Indemnification. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative and whether or not brought by or in the right of the Corporation (a Proceeding) by reason of the fact that such person, or any other person for whom such person is the legal representative, is or was a director or officer of the Corporation, or while a director or officer of the Corporation is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or non-profit entity, including service with respect to employee benefit plans (an Indemnitee), against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such Indemnitee if such Indemnitee acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any Proceeding, had no reasonable cause to believe that the Indemnitee's conduct was unlawful. The indemnification provided in this Section 9.1 and the advancement of expenses provided in Section 9.2 of these Bylaws shall, unless otherwise provided when authorized or ratified by the Board of Directors, continue as to an Indemnitee who has ceased to be a director, officer, employee or agent as aforesaid and shall inure to the benefit of the heirs, executors and administrators of such Indemnitee. Any indemnification under this Section 9.1 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that the indemnification of the Indemnitee is proper in the circumstances because such Indemnitee has met the applicable standard of conduct set forth in this Section. Such determination shall be made, with respect to an Indemnitee who is a director or officer at the time of such determination, (1) by majority vote of the directors who are not party to such Proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.
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9.2 | Advancement of Expenses. The Corporation shall pay the expenses (including attorneys' fees) incurred by an Indemnitee in defending any Proceeding referred to in Section 9.1 of these Bylaws in advance of its final disposition; provided that the payment of expenses incurred by an Indemnitee in advance of the final disposition of such Proceeding shall be made only upon receipt of (i) a written affirmation of the Indemnitee’s good faith belief that the Indemnitee met the requisite standard of conduct and (ii) an undertaking by the Indemnitee to
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repay all amounts advanced if it should ultimately be determined that the Indemnitee is not entitled to be indemnified under this Article or otherwise.
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9.3 | Claims. If a claim for indemnification or advancement of expenses under this Article is not paid in full within sixty (60) days after a written claim therefore by the Indemnitee has been received by the Corporation, the Indemnitee may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of such claim. In any such action the Corporation shall have the burden of proving that the Indemnitee was not entitled to the requested indemnification or advancement of expenses.
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9.4 | Good Faith Defined. For purposes of any determination under Section 9.1, a person shall be deemed to have acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe such person's conduct was unlawful, if such person's action is based on good faith reliance on the records or books of account of the Corporation or another enterprise, or on information supplied to such person by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise.
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9.5 | Indemnification of Employees and Agents. The Corporation may indemnify employees and agents of the Corporation pursuant to this Article IX to the same extent as an Indemnitee.
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9.6 | Non-exclusivity of Rights. The right to indemnification under this Article IX for directors, officers, employees and agents shall not be exclusive of any other right which any person may have, or hereafter acquire, under any statute, provision of the Certificate of Incorporation, these Bylaws, other agreement, vote of stockholders or disinterested directors, insurance policy, principles of common law or equity, or otherwise.
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9.7 | Other Indemnification. The Corporation's obligation, if any, to indemnify any Indemnitee who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such Indemnitee may collect as indemnification from such other corporation, partnership, joint venture, trust, enterprise or non-profit entity.
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9.8 | Amendment or Repeal; Survival. Any repeal or modification of the foregoing provisions of this Article shall not adversely affect any right or protection hereunder of any Indemnitee in respect of any act or omission occurring prior to the time of such repeal or modification. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article IX shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the heirs, executors and administrators of such a person.
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9.9 | Insurance. The Corporation may purchase and maintain insurance on behalf of an individual who is or was a director, officer, employee, or agent of the Corporation, or who, while a director, officer, employee, or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, against liability asserted against or incurred by the individual in that capacity or arising from the individual’s status as a director, officer, employee, or agent, whether or not the Corporation would have power to indemnify the individual against the same liability under this Article IX.
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9.10 | Indemnification as a Witness. This Article IX does not limit a Corporation’s power to pay or reimburse expenses incurred by a director in connection with the director’s appearance as a witness in a proceeding at a time when the director has not been made a named defendant or respondent to the proceeding.
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9.11 | Interpretation. The provisions contained in this Article IX shall be interpreted and applied to provide indemnification to directors, officers, employees and agents of the Corporation to the fullest extent allowed by applicable law, as such law may be amended, interpreted and applied from time to time. The obligations of the Corporation under this Article IX to indemnify, and advance expenses to, a person who is or was a director or officer of the Corporation shall be considered a contract between the Corporation and such person, and no modification or repeal of any provision of this Article IX shall affect, to the detriment of such person,
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such obligations of the Corporation in connection with a claim based on any act or failure to act occurring before such modification or repeal.
ARTICLE X
BOOKS AND RECORDS
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10.1 | The Corporation shall maintain appropriate accounting records and shall keep as permanent records minutes of all meetings of its stockholders and Board of Directors, a record of all actions taken by the stockholders or the Board of Directors without a meeting and a record of all actions taken by a committee of the Board of Directors. In addition, the Corporation shall keep at its registered office or principal place of business, or at the office of its transfer agent or registrar, a record of its stockholders, giving the names and addresses of all stockholders in alphabetical order by class of shares showing the number and class of the shares held by each. Any books, records and minutes may be in written form or any other form capable of being converted into written form within a reasonable time. |
ARTICLE XI
EXECUTION OF CORPORATION INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
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11.1 | Execution of Corporate Instruments.
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(a) | The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the Corporation any corporate instrument or document, or to sign on behalf of the Corporation the corporate name without limitation, or to enter into contracts on behalf of the Corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the Corporation. |
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(b) | All checks and drafts drawn on banks or other depositaries on funds to the credit of the Corporation or in special accounts of the Corporation shall be signed by such person or persons as the Board of Directors shall authorize to do so. |
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(c) | Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. |
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11.2 | Voting of Securities Owned by the Corporation. All stock, equity interests and other securities of other entities owned or held by the Corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized to do so by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairperson of the Board of Directors, the Chief Executive Officer, the President or any Vice President.
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ARTICLE XII
AMENDMENTS
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12.1 | By Stockholders. These Bylaws may be amended or repealed by the stockholders in accordance with the Certificate of Incorporation and applicable law.
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12.2 | By Directors. The Board of Directors shall have power to amend or repeal the Bylaws of, or adopt new Bylaws for, the Corporation.
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12.3 | Emergency Bylaws. The Board of Directors may adopt emergency Bylaws, subject to repeal or change by action of the stockholders, which shall be operative during any emergency in the conduct of the business of
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the Corporation resulting from an attack on the United States or on a locality in which the Corporation conducts its business or customarily holds meetings of its Board of Directors or its stockholders, or during any nuclear or atomic disaster, or during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors or a standing committee thereof cannot readily be convened for action.
Adopted Effective ____________________, 2017
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CTI BIOPHARMA CORP.
3101 WESTERN AVENUE, SUITE 800
SEATTLE, WA 98121
| VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form.
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ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.
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VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions.
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VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | |
M99711-P73126 | KEEP THIS PORTION FOR YOUR RECORDS |
| DETACH AND RETURN THIS PORTION ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. |
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CTI BIOPHARMA CORP. | | | | | | | | |
| The Board of Directors recommends you vote FOR the following proposals: | | | | For | Against | Abstain | |
1. | To approve the reincorporation of CTI Biopharma Corp. from the State of Washington to the State of Delaware by merging CTI Biopharma Corp. into a newly formed, wholly-owned subsidiary. | ¨ | ¨ | ¨ | |
2. | To approve the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt Proposal 1. | ¨ | ¨ | ¨ | |
| NOTE: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Special Meeting or any adjournments and postponements thereof.
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For address changes/comments, mark here.
(see reverse for instructions)
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| Please indicate if you plan to attend this meeting. | ¨
Yes
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No
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| Please sign exactly as your name(s) appear(s) on the stock certificate(s). When shares are held jointly, each person must sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. An authorized person should sign on behalf of corporations, partnerships and associations and give his or her title. | | | | | | |
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| Signature [PLEASE SIGN WITHIN BOX] | Date | | Signature (Joint Owners) | Date | |
Important Notice Regarding the Availability of Proxy Materials for the SpecialAnnual Meeting:
The Notice, and Proxy Statement and 2018 Annual Report are available at www.proxyvote.com.
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CTI BIOPHARMA CORP. |
Special Meeting of Shareholders |
January 24, 2018 10:00 AM Pacific Time |
The proxy is solicited by the Board of Directors |
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The undersigned shareholder(s), hereby revoking any proxy previously given, hereby appoint(s) Adam R. Craig, M.D., Ph.D., Laurent Fischer, M.D., Bruce J. Seeley, or any one of them, as proxies, each with full power of substitution, to represent and vote for, and on behalf of, the shareholder(s) the number of shares of Common Stock of CTI BioPharma Corp. that the shareholder(s) would be entitled to vote if personally present at the Special Meeting of Shareholders to be held on January 24, 2018, or at any adjournment or postponement thereof.
This proxy, when properly executed and returned, will be voted in the manner directed herein by the shareholder(s). IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1 and 2. Whether or not direction is made, each of the named proxies is authorized to vote this proxy in his discretion, upon such other matter or matters that may properly come before the meeting and any postponements or adjournments thereof.
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| Address Changes/Comments: _____________________________________________________________________ | |
| _____________________________________________________________________________________________ | |
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| (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) | |
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| To be signed on reverse side | |
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[ITALIAN PROXY CARD]
[ITALIAN PROXY CARD (English translation)]
CTI BioPharma Corp.
Special Meeting of the Shareholders
January 24, 2018
This Proxy is Solicited on Behalf of the Board of Directors
The shareholder(s) whose name(s) appear(s) on the enclosed certifications(s) of participation in the Central Depository System of Monte Titoli S.p.A., issued by authorized intermediaries pursuant to Section 21 (and the following sections) of the Regulation enacted by the Bank of Italy and CONSOB on February 22, 2008, hereby appoint(s) Adam R. Craig, M.D., Ph.D., Laurent Fischer, M.D., Bruce J. Seeley, or any one of them, as proxies, with full power of substitution, to represent and vote for, and on behalf of, the shareholder(s), the number of shares of Common Stock of CTI BioPharma Corp. that the shareholder(s) would be entitled to vote if personally present at the Special Meeting of Shareholders to be held on January 24, 2018, or at any adjournment or postponement thereof.
This proxy, when properly executed and submitted together with your certification issued by the authorized intermediaries pursuant to Section 21 (and the following sections) of the Regulation enacted by the Bank of Italy and CONSOB on February 22, 2008, will be voted in the manner directed herein by the shareholder(s).IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” PROPOSALS 1 and 2 and, in the proxies’ discretion, upon such other matter or matters that may properly come before the meeting and any postponement(s) or adjournment(s) thereof.
The shareholder(s) direct(s) that this proxy be voted as follows:
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
The Board of Directors recommends you vote FOR the following proposals:
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(1) | To approve the reincorporation of CTI Biopharma Corp. from the State of Washington to the State of Delaware by merging CTI Biopharma Corp. into a newly formed, wholly-owned subsidiary. | FOR
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| AGAINST
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| ABSTAIN
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(2) | To approve the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the Special Meeting to adopt Proposal 1. | FOR
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| AGAINST
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| ABSTAIN
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VOTING INSTRUCTIONS
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a. | Please sign and date this card in the space provided below. |
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b. | Please submit BOTH this signed proxy card AND the certification issued by the authorized intermediaries pursuant to Section 21 (and the following sections) of the Regulation enacted by the Bank of Italy and CONSOB on February 22, 2008 (or a complete copy) to the following address either by mail or by fax: |
CTI BioPharma Corp.
Attn: Corporate Secretary
3101 Western Ave., Suite 800
Seattle, WA 98121
FAX: +1 (206) 284-6206
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c. | You MUST include the certification issued by the authorized intermediaries pursuant to Section 21 (and the following sections) of the Regulation enacted by the Bank of Italy and CONSOB on February 22, 2008 (or a complete copy) together with this proxy card for your vote to be counted. |
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d. | Deadline: Your proxy card must be received at the above address (by mail or fax) prior to the adjournment of the Special Meeting on January 24, 2018. If you are depositing your vote in the mail after January 17, 2018, we recommend that you also submit the papers by fax to the above number.
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All other proxies heretofore given by the undersigned to vote shares of stock of CTI BioPharma Corp., which the undersigned would be entitled to vote if personally present at the Special Meeting or any adjournment or postponement thereof, are hereby expressly revoked.
Please sign exactly as your name(s) appear(s) on the stock certifications(s) issued by the authorized intermediaries pursuant to Section 21 (and the following sections) of the Regulation enacted by the Bank of Italy and CONSOB on February 22, 2008. When shares are held jointly, each person must sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. An authorized person should sign on behalf of corporations, partnerships and associations and give his or her title.
SIGNATURE (PLEASE SIGN WITHIN BOX) _________________________ DATE _____________
SIGNATURE (JOINT OWNERS) ____________________________________ DATE _____________
