The Board unanimously recommends that stockholders vote FOR the election of each of the ninefive Director nominees named in this proxy statement.
The Board reviews the independence of each Director at least annually. During these reviews, the Board will consider transactions and relationships between each Director (and his or her immediate family and affiliates) and the Company and our management to determine whether any such transactions or relationships are inconsistent with a determination that the Director was independent. The Board conducted its annual review of Director independence to determine if any transactions or relationships exist that would disqualify any of the individuals who serve as a Director under the rules of theThe NASDAQ Capital Market, or NASDAQ, or require disclosure under Securities and Exchange Commission, or SEC, rules. Based upon the foregoing review, the Board determined that the following individuals arewho served as Directors during fiscal year 2021 were independent under the rules of the NASDAQ: Ms. Kalin, Dr. Kola, Mr. Randall, Mr. Shah, Ms. Wasman and Mr. Wyszomierski. The Board also determined that Dr. Lee E. Babiss,Mr. Camardo, who served as a Director during 2020 until November 12, 2020, was independent under the rules of the NASDAQ. Currently, one member of management who also serves on the Board, Dr. Harrington, is our Executive Vice President and Chief Scientific Officer. Dr. Kagimoto is Chairman, Chief Executive Officer, and President of Healios; the Company and Healios are parties to a licensing arrangement pursuant to which Athersys has received, and may continue to receive, significant payments. Dr. Harrington and Dr. Kagimoto areis not considered independent under the independence rules of the NASDAQ. Mr. Traub is the Managing Member of Delta Value Advisors LLC, which currently provides consulting services to Healios. Mr. Traub is the Healios nominee under the terms of the Investor Rights Agreement. At this time, the Board has determined that Mr. Traub is not an independent Director under the NASDAQ rules due to his consulting relationship with Healios.
Our Board’s tenure, diversity and independence provide a balance of new perspectives, innovation and Company-specific knowledge needed to function effectively. Currently, Directors having a tenure of less than 5 years represent 56%60% of the members of the Board. Our Board is 33%currently 20% diverse by ethnicity and 22%20% diverse by gender, and 67%60% of our current Directors are independent.
Although the Company does not have a policy with respect to attendance by the Directors at the Annual Meeting, Directors are encouraged to attend. The Company held an annual meeting of stockholders last year, which was attended by all then-current Directors.
The Board has three standing committees: the Audit Committee, the Compensation Committee and the Nominations, Governance and Corporate GovernanceCompliance Committee. All members of these committees are independent directors. The Board has adopted a written charter for each of these committees. From time to time, the Board also conducts business through other duly appointed committees, such as the Pricing Committee. In February 2021, the Board formed an ad hoc CEO Search Committee to conduct and lead a search for one or more candidates to serve as Chief Executive Officer, and this committee will identify and evaluate the candidates for recommendation to the Board. The charters for the three standing committees, as well as our Directors'Directors’ Code of Conduct and our Code of Business Conduct and Ethics for Employees and Officers, are posted and available under the Investor
page on our website at www.athersys.com. Stockholders may request copies of these corporate governance documents, free of charge, by writing to Athersys, Inc., 3201 Carnegie Avenue, Cleveland, Ohio 44115, Attention: Corporate Secretary.
The Audit Committee is responsible for overseeing the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company. The Audit Committee is also directly responsible for the appointment, compensation, retention and oversight of the work of the Company’s independent auditors, including the resolution of any disagreements between management and the auditors regarding financial reporting. The Audit Committee oversees policies with respect to risk assessment and risk management regarding the Company’s financial and accounting systems and accounting policies, including related regulatory compliance, information security and technology (including cybersecurity). Additionally, the Audit Committee approves all related-party transactions that are required to be disclosed pursuant to Item 404 of Regulation S-K. The current members of the Audit Committee are Dr. Kola, Ms. Wasman and Mr. Wyszomierski. Ms. Kalin, Mr. Randall and Mr. Shah and Mr. Wyszomierski.previously served on the Audit Committee until they resigned from the Board. The Board has determined that each of Mr. Randall and Mr. Wyszomierski is an “audit committee financial expert,” as defined in Item 407(d)(5)(ii) of Regulation S-K. The Audit Committee held five meetings during fiscal year 2020.2021.
The Compensation Committee is responsible for, among other things, annually reviewing and approving, or recommending to the Board for approval, the salaries and other compensation, including stock incentives, of our executive officers, including our Chief Executive Officer. The Compensation Committee is also responsible for reviewing and recommending to the Board, with guidance from independent compensation consultants, as appropriate, the compensation of our non-employee Directors, engaging and determining the fees of compensation consultants, if any, and overseeing regulatory compliance with respect to compensation matters. The Compensation Committee reviews, or recommends to the Board for approval, corporate goals and objectives relevant to the compensation of the executive officers and evaluates the performance of the executive officers in light of those corporate goals and objectives. The Compensation Committee also considers the duties and responsibilities of the executive officers and approves, or recommends to the Board for approval, the compensation levels for those executive officers based on those evaluations and any other factors as it deems appropriate. In determining or recommending, as applicable, incentive compensation, the Compensation Committee also considers the Company’s performance and relative stockholder return, the value of similar awards to executive officers of comparable companies, and the awards given to the Company’s executive officers in past years. The Compensation Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of the Compensation Committee. For more information regarding the role of our Chief Executive Officer and compensation consultants in determining or recommending executive and director compensation, please see “Executive Compensation – Role of the Chief Executive Officer” and “Role of the Independent Compensation Consultant” below. During 2020, the members of the Compensation Committee were Dr. Babiss, Dr. Kola, Mr. Randall and Mr.Wyszomierski. The current members of the Compensation Committee are Dr. Kola, Ms. Wasman and Mr. Wyszomierski. Ms. Kalin Dr. Kola,and Mr. Randall and Ms.Wasman.previously served on the Compensation Committee until they resigned from the Board. The Compensation Committee held fourtwelve meetings during fiscal year 2020.2021.
or more of the members of the Board to possess. In recommending candidates, the Nominations, Governance and Corporate GovernanceCompliance Committee considers such factors as it deems appropriate, consistent with criteria approved by the Board. These factors may include judgment, skill, diversity, integrity, experience with businesses and other organizations of comparable size, experience in corporate governance, experience in business and human resource management, the interplay of the candidate’s experience with the experience of other members of the Board and the extent to which the candidate would be a desirable addition to the Board and any committees of the Board. The Nominations, Governance and Corporate GovernanceCompliance Committee considers the breadth and diversity of experience brought by the various nominees for Director in functional areas including pharmaceutical, capital markets, biotechnology, commercialization, clinical and financial.finance. The Nominations, Governance and Corporate GovernanceCompliance Committee recommends candidates to the Board based on these factors and also considers possible conflicts of interest when making its recommendations to the Board.
The Board oversees the risk management of the Company. The full Board of Directors, as supplemented by the appropriate boardBoard committee in the case of risks that are overseen by a particular committee, reviews information provided by management in order for the Board to
oversee its risk identification, risk management and risk mitigation strategies. The Board committees assist the full Board’s oversight of our material risks by focusing on risks related to the particular area of concentration of the relevant committee. For example, our Compensation Committee oversees risks related to our executive compensation plans and arrangements, and our Audit Committee oversees the financial reporting and control risks,risks. Our Nominations, Governance and our Nominations and Corporate GovernanceCompliance Committee oversees risks associated with the independence of the Board and potential conflicts of interest.interest and oversight of management’s identification of non-financial risks relating to the Company and compliance. Each committee reports on these discussions of the applicable relevant risks to the full Board during the committee reports portion of each Board meeting, as appropriate. The full Board incorporates the insight provided by these reports into its overall risk management analysis. We believe that the Board leadership structure complements our risk management structure because it allows our independent directors, through independent committees, to exercise effective oversight of the actions of management in identifying risks and implementing effective risk management policies and controls.
We give careful attention to related person transactions because they may present the potential for conflicts of interest. We refer to “related person transactions” as those transactions, arrangements, or relationships in which:
To identify related person transactions in advance, we rely on information supplied by our executive officers, Directors and certain significant stockholders. We maintain a comprehensive written policy for the review, approval or ratification of related person transactions, and our Audit Committee reviews all related person transactions identified by us. The Audit Committee approves or ratifies only those related person transactions that are determined by it to be, under all of the circumstances, in the best interest of the Company and its stockholders. Other than our arrangement with Healios as described below, no related person transactions occurred in fiscal 2020year 2021 that required a review by the Audit Committee.
Since 2016, we have had a collaboration with Healios to develop and commercialize MultiStem for the treatment of certain indications in Japan pursuant to the terms of a license agreement. In 2018, the collaboration was significantly expanded to include, among other things, an exclusive license to our technology for the development and commercialization of additional indications, for which we received additional license fees. Also in connection with that expansion, Healios purchased 12,000,000 shares of our Common Stock in 2018 for $21.1 million and thereby became an owner of greater than 5% of our outstanding Common Stock. Healios also received a warrant to purchase shares ("Warrant Shares") of Common Stock as part of this transaction, and in March 2020, Healios exercised the warrant in full for 4,000,000 Warrant Shares for which we received proceeds of approximately $7.0 million. We provide manufacturing and related services to Healios under our collaboration agreements, and such services are ongoing. In 2020, we received payments from Healios of approximately $2.3 million, primarily related to product supply revenues under our collaboration agreement.
On February 16, 2021, we, Healios and Dr. Kagimoto entered into the Cooperation Agreement. The Cooperation Agreement providesprovided for the parties’ cooperation on certain commercial matters, including a commitment to work in good faith to finalize negotiations with a spirit of cooperation and transparency as quickly as possible on all aspects of their supply, manufacturing, information provision and regulatory support
relationship. The Cooperation Agreement also providesprovided for, among related matters, the dismissal with prejudice of the complaint filed by Dr. Kagimoto against us seeking the inspection of our books and records in the Court of Chancery of Delaware on November 21, 2020, (the “220 Litigation”).or the 220 Litigation. Pursuant to the terms of the Cooperation Agreement, the Company agreed to reimbursereimbursed Healios and Dr. Kagimoto up to 35% of theirfor reasonable documented out-of-pocket fees and expenses, (includingincluding legal expenses)expenses, incurred in connection with the Section 220 Litigation, upwhich were not to a maximum ofexceed $500,000 in the aggregate, and $500,000 was paid in April 2021.
16
PROPOSAL TWO
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS FOR
THE FISCAL YEAR ENDING DECEMBER 31, 20212022
The Audit Committee of the Board has appointed Ernst & Young LLP as the independent auditors of the Company to examine the financial statements of the Company and its subsidiaries for the fiscal year ending December 31, 2021.2022. During fiscal year 2020,2021, Ernst & Young LLP examined the financial statements of the Company and its subsidiaries, including those set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.2021.
Although stockholder approval of this appointment is not required by law or binding on the Audit Committee, the Board believes that stockholders should be given the opportunity to express their views on this matter. If the stockholders do not ratify the appointment of Ernst & Young LLP as the Company’s independent auditors, the Audit Committee will consider this vote in determining whether or not to continue the engagement of Ernst & Young LLP.
It is expected that representatives of Ernst & Young LLP will attend the Annual Meeting, with the opportunity to make a statement if so desired and will be available to answer appropriate questions.
Required VoteREQUIRED VOTE
The affirmative vote of the holders of a majority of the votes cast for or against, in person or by proxy and entitled to vote, is necessary for the ratification of the appointment of Ernst & Young LLP as independent auditors for the fiscal year ending December 31, 2021.2022. Under the Company’s bylaws, abstentions will have no effect on this proposal. As this proposal is considered to be a routine matter, we do not expect broker non-votes on this proposal. As an advisory vote, the ratification of the appointment of Ernst & Young LLP as independent auditors for the fiscal year ending December 31, 20212022 is not binding on the Company.
The Board unanimously recommends that stockholders vote FOR the ratification of the appointment of Ernst & Young LLP as independent auditors for the fiscal year ending December 31, 2021.
2022.
Audit Committee Pre-Approval Policy and Principal Accountant Fees and Services
AUDIT COMMITTEE PRE-APPROVAL POLICY AND PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Audit Committee has adopted a formal policy on auditor independence requiring the pre-approval by the Audit Committee of all professional services rendered by the Company’s independent auditor prior to the commencement of the specified services. Additionally, the Audit Committee is directly involved in the selection of Ernst & Young LLP’s lead engagement partner, which occurs every five years. The year ended December 31,
2020 was the final rotationyear for the lead engagement partner and a new lead engagement partner rotation will beginbegan in 2021.
For the fiscal year ended December 31, 2020,2021, 100% of the services described below were pre-approved by the Audit Committee in accordance with the Company’s formal policy on auditor independence.
Audit FeesFees. . Fees paid to Ernst & Young LLP for the audit of the annual consolidated financial statements included in the Company’s Annual Reports on Form 10-K, for the reviews of the consolidated financial statements included in the Company’s Forms 10-Q and for services related to registration statements were $661,000 for the fiscal year ended December 31, 2021 and $904,500 for the fiscal year ended December 31, 2020 and $861,950 for the fiscal year ended December 31, 2019.2020.
Audit-Related Fees. There were no fees paid to Ernst & Young LLP for audit-related services in 20202021 or 2019.2020.
Tax FeesFees. . Fees paid to Ernst & Young LLP associated with tax compliance and tax consultation were $41,000$72,000 and $60,506$41,000 for the fiscal years ended December 31, 20202021 and 2019,2020, respectively.
All Other FeesFees. . There were no other fees paid to Ernst & Young LLP in 20202021 or 2019.2020.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board is composed of at least three Directors who are independent and operates under a written Audit Committee charter adopted and approved by the Board. The Audit Committee annually selects the Company’s independent auditors. The written charter of the Audit Committee is posted and available under the Investor page under “Corporate Governance” on our website at www.athersys.com.
Management is responsible for the Company’s internal controls and financial reporting process. Ernst & Young LLP, the Company’s independent auditor, is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards and issuing a report thereon. The Audit Committee’s responsibility is to provide oversight to these processes.
In fulfilling its oversight responsibility, the Audit Committee relies on the accuracy of financial and other information, opinions, reports and statements provided to the Audit Committee. Accordingly, the Audit Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Nor does the Audit Committee’s oversight assure that the audit of the Company’s financial statements has been carried out in accordance with generally accepted auditing standards or the audited financial statements are presented in accordance with generally accepted accounting principles.
The Audit Committee has reviewed and discussed with the Company’s management and Ernst & Young LLP the audited financial statements of the Company for the year ended December 31, 2020.2021. The Audit Committee has also discussed with Ernst & Young LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC.
The Audit Committee has also received and reviewed the written disclosures and the letter from Ernst & Young LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Ernst & Young LLP’s communications with the Audit Committee concerning independence and has discussed with Ernst & Young LLP such independent auditors’ independence. The Audit Committee has also considered whether Ernst & Young LLP’s provision of services to the Company beyond those rendered in connection with their audit and review of the Company’s financial statements is compatible with maintaining their independence.
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.2021.
Audit Committee
Board of Directors
Lorin J. Randall
Katherine Kalin
Baiju R. Shah
Jack L. Wyszomierski
PROPOSAL THREE
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE COMPANY’S CERTIFICATE OF INCORPORATIONATHERSYS, INC. 2019 EQUITY AND INCENTIVE COMPENSATION PLAN
TO INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCKGENERAL
InOn April 2021,21, 2022, upon recommendation by the Compensation Committee, the Board approved and adopted, subject to receiving the approval of the holders of a majorityCompany’s stockholders at the Annual Meeting, the amendment and restatement of the outstandingAthersys, Inc. 2019 Equity and Incentive Compensation Plan. In this proposal, we refer to the original Athersys, Inc. 2019 Equity and Incentive Compensation Plan as the “2019 Plan,” and we refer to the amended and restated Athersys, Inc. 2019 Equity and Incentive Compensation Plan as the “Amended 2019 Plan.”
The Company’s stockholders previously approved the 2019 Plan, which affords the Compensation Committee the ability to design compensatory awards that are responsive to the Company’s needs and includes authorization for a variety of awards designed to advance the interests and long-term success of the Company by encouraging stock ownership among officers and other employees of the Company and its subsidiaries, certain consultants and other service providers to the Company and its subsidiaries, and non-employee directors of the Company. You are being asked to approve the Amended 2019 Plan.
Stockholder approval of the Amended 2019 Plan would primarily make available for awards under the Amended 2019 Plan an additional 21,000,000 shares of common stock, par value $0.001 per share, of the Company (“Common Stock”), as described below and in the Amended 2019 Plan, with such amount subject to adjustment, including under the share counting rules.
The Board recommends that you vote to approve the Amended 2019 Plan. If the Amended 2019 Plan is approved by stockholders at the Annual Meeting, it will be effective as of the day of the Annual Meeting, and future grants will be made on or after such date under the Amended 2019 Plan. If the Amended 2019 Plan is not approved by our stockholders, then it will not become effective, no awards will be granted under the Amended 2019 Plan, and the 2019 Plan will continue in accordance with its terms as previously approved by our stockholders. The Company has also granted certain awards as “inducement” awards outside of its stockholder-approved plans pursuant to The Nasdaq Stock Market Listing Rules (“Inducement Awards”), as further described below.
The actual text of the Amended 2019 Plan is attached to this proxy statement as Appendix A. The following description of the Amended 2019 Plan is only a summary of its principal terms and provisions and is qualified by reference to the actual text as set forth in Appendix A.
WHY WE BELIEVE YOU SHOULD VOTE FOR THIS PROPOSAL
The Amended 2019 Plan continues to authorize the Compensation Committee to provide cash awards and equity-based compensation in the form of stock options, stock
appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance shares, performance units, dividend equivalents, and certain other awards, including those denominated or payable in, or otherwise based on, Common Stock, for the purpose of providing our non-employee directors and officers and other employees of the Company and its subsidiaries, and certain consultants and other service providers of the Company and its subsidiaries, incentives and rewards for service and/or performance. Some of the key features of the Amended 2019 Plan that reflect our commitment to effective management of equity and incentive compensation are set forth below.
We believe our future success continues to depend in part on our ability to attract, motivate and retain high quality employees and directors and that the ability to provide equity-based and incentive-based awards under the Amended 2019 Plan is critical to achieving this success. We would be at a severe competitive disadvantage if we could not use stock-based awards to recruit and compensate our employees and directors. The use of Common Stock as part of our compensation program is also important because equity-based awards continue to be an essential component of our compensation program for key employees, as they help link compensation with long-term stockholder value creation and reward participants based on service and/or performance.
In 2019, Company stockholders approved 15,000,000 shares of Common Stock an amendment to our Certificate of Incorporation to increasebe used for awards under the total number of shares of authorized Common Stock from 300,000,000 to 600,000,000 shares.2019 Plan. As of April 8, 2021,1, 2022, 3,640,308 shares of Common Stock remained available for issuance under the 2019 Plan. If the Amended 2019 Plan is not approved, we may be compelled to increase significantly the cash component of our employee and director compensation, which approach may not necessarily align employee and director compensation interests with the investment interests of our stockholders. Replacing equity awards with cash also would increase cash compensation expense and use cash that could be better utilized.
The following includes aggregated information regarding our view of the overhang and dilution associated with the predecessor Athersys, Inc. Amended and Restated 2007 Long-Term Incentive Plan, including as further described below,amended or amended and restated (the “2007 Plan”) and the Company has2019 Plan, and the potential dilution associated with the Amended 2019 Plan. This information is as of April 1, 2022. In addition, as of April 1, 2022, 11,000,000 shares were subject to outstanding Inducement Awards, including 10,000,000 shares subject to a non-qualified stock option Inducement Award granted to Mr. Camardo as of February 14, 2022. As of that date, there were approximately 53.6 million249,792,791 shares of Common Stock outstanding.
COMMON STOCK SUBJECT TO OUTSTANDING AWARDS AND AVAILABLE FOR FUTURE AWARDS:
•Total shares of Common Stock subject to outstanding awards (stock options and RSUs, inclusive of outstanding Inducement Awards): 34,343,351 shares (approximately 13.8% of our outstanding Common Stock); and
•Total shares of Common Stock available for issuance, of which 35.0 millionfuture awards under the 2019 Plan: 3,640,308 shares of Common Stock are reserved for issuance under a shelf registration statement that became effective in June 2020, and 9.9 million shares of Common Stock are reserved for issuance pursuant to our Common Stock Purchase Agreement with Aspire Capital Fund, LLC, referred to as our Equity Purchase Agreement. The proposed amendment is incorporated into “Section 1. Authorization of Shares”(approximately 1.5% of our Certificate of Incorporation, a copy of which is set forth on Appendix A to this proxy statement and marked to showoutstanding Common Stock) (no further grants may be made under the proposed changes to2007 Plan after the existing “Section 1. Authorization of Shares”effectiveness of the Certificate of Incorporation.2019 Plan).
The terms of the newly authorized shares of Common Stock will be identical to those of the currently outstanding shares of Common Stock. The authorization of
PROPOSED COMMON STOCK AVAILABLE FOR AWARDS UNDER THE AMENDED 2019 PLAN:
•21,000,000 additional shares of Common Stock will not alter(approximately 8.4% of our outstanding Common Stock, which percentage reflects the current numbersimple dilution of issued shares. However, when anyour stockholders that would occur if the Amended 2019 Plan is approved), subject to adjustment, including under the share counting rules of the newly authorizedAmended 2019 Plan.
The total shares of Common Stock are issued in a future transaction, it will reduce the current stockholders’ percentage ownership interest in the totalsubject to outstanding shares of Common Stock since holders of Common Stock have no preemptive rights to purchase or subscribe for any unissued stock of the Company. Depending upon the circumstances under which newly authorized shares of Common Stock are issued, stockholders may experience a reduction in stockholders’ equity per share and voting power. The relative rights and limitations of the shares of Common Stock will remain unchanged.
Purpose for Increase and Effects of Increase on Authorized Common Stock
The Company currently has 300,000,000 authorized shares of Common Stock. Asawards as described above as of April 8, 2021, there were 217,611,507 shares of Common Stock issued and outstanding and 53,591,8031, 2022 (34,343,351 shares), plus the shares of Common Stock available for issuance; and included infuture awards under the 53,591,803 shares, there are 35,000,0002019 Plan (3,640,308 shares), plus the proposed additional shares of Common Stock registered and available for issuancefuture awards under the Amended 2019 Plan (21,000,000 shares), represent a total overhang of 58,983,659 shares (inclusive of outstanding inducement awards) (23.6%) on a fully-diluted basis regarding the Amended 2019 Plan.
Based on the closing price on The Nasdaq Capital Market for our shelf registration statement and 9,850,000Common Stock on June 9, 2022 of $0.37 per share, the aggregate market value as of June 9, 2022 of the additional 21,000,000 shares of Common Stock registeredrequested under the Amended 2019 Plan was $7,770,000.
In fiscal years 2019, 2020, and 2021, we granted Inducement Awards plus awards (stock options and RSUs) under the 2007 Plan and the 2019 Plan covering 4,752,758 shares, 6,766,839 shares and 7,494,603 shares, respectively. Based on our basic weighted average Common Stock outstanding for those three fiscal years of 151,696,447, 187,471,996 and 224,274,108, respectively, for the three-fiscal-year period 2019-2021, our average burn rate, not taking into account forfeitures, was 3.2% (our individual years’ burn rates were 3.1% for fiscal 2019, 3.6% for fiscal 2020 and 3.3% for fiscal year 2021).
In determining the number of shares to request for approval under the Amended 2019 Plan, our management team worked with the Compensation Committee to evaluate a resale shelf registration statementnumber of factors, including our recent share usage and reservedcriteria expected to be utilized by institutional proxy advisory firms in evaluating our proposal for issuancethe Amended 2019 Plan.
If the Amended 2019 Plan is approved, we intend to utilize the shares authorized under the Amended 2019 Plan to continue our Equity Purchase Agreement.practice of incentivizing key individuals through equity grants. We docurrently anticipate that the new shares requested in connection with the approval of the Amended 2019 Plan will last for about twoyears, based on our historic grant rates, new hiring and the approximate current share price, but could last for a different period of time if actual practice does not expectmatch recent rates or our share price changes materially. As noted below, our Compensation Committee retains full discretion under the Amended 2019 Plan to determine the number and amount of awards to be granted under the 2019 Plan, subject to the terms of the 2019 Plan. Future benefits that may be received by participants under the Amended 2019 Plan are not determinable at this time.
PLAN DESIGN SUPPORTS SOUND GOVERNANCE PRACTICES
The Amended 2019 Plan includes key provisions or facilitates awards designed to protect stockholder interests and promote sound compensation governance and best practices, including but not limited to the following:
•limited share recycling provisions;
•no repricing stock options without stockholder approval;
•no “evergreen” renewal feature;
•grants to non-employee directors are subject to compensation limitations; and
•no current dividends or dividend equivalents are paid on RSUs.
We believe that we have demonstrated a commitment to sound equity compensation practices in recent years. We recognize that equity compensation awards dilute stockholders’ equity, so we have carefully managed our equity incentive compensation. Our equity compensation practices are intended to be competitive and consistent with market practices, and we believe our historical share usage has been responsible and mindful of stockholder interests, as described above.
In evaluating this proposal, stockholders should consider all of the information in this proposal and this proxy statement.
MATERIAL CHANGES FROM THE 2019 PLAN
The Amended 2019 Plan (1) increases the number of shares of Common Stock outstanding toavailable for awards under the 2019 Plan by 21,000,000 shares, (2) correspondingly increases the limit on shares that may be materially differentissued or transferred upon the exercise of incentive stock options granted under the 2019 Plan, during its duration (as described below) by 21,000,000 shares, (3) revises the default definition of “change in control” under the 2019 Plan, (4) amends the limit on the Record Date.amount of compensation a non-employee director may be awarded each year under the 2019 Plan, and (5) extends the term of the 2019 Plan until the tenth anniversary of the date of stockholder approval of the Amended 2019 Plan. The Company hadAmended 2019 Plan also makes certain other conforming, clarifying or non-substantive changes to the following reservedterms of the 2019 Plan to implement the Amended 2019 Plan.
We are not seeking to make any other material changes to the terms of the 2019 Plan.
OTHER AMENDED 2019 PLAN HIGHLIGHTS
Reasonable Amended 2019 Plan Limits. Generally, awards under the Amended 2019 Plan are limited to 39,463,737 shares ofCommon Stock (18,463,737 of which were originally approved by stockholders at the 2019 annual meeting of stockholders, and 21,000,000 of which are newly provided for under the Amended 2019 Plan), plus the shares that are subject to awards granted under the 2007 Plan or the 2019 Plan that are added (or added back, as applicable) pursuant to the share counting rules in the Amended 2019 Plan. These shares may be shares of original issuance or treasury shares, or a combination of the two.
The Amended 2019 Plan also provides that, subject as applicable to adjustment and the applicable Common Stock counting provisions as described in the Amended 2019 Plan:
•the aggregate number of shares of Common Stock actually issued or transferred upon the exercise of Incentive Stock Options (as defined below) will not exceed 36,000,000shares ofCommon Stock; and
•no non-employee director will be granted, in any one calendar year, compensation for such service having an aggregate maximum value (measured at the date of grant and calculating the value of any awards based on the grant date fair value for financial reporting purposes) in excess of $750,000.
Limited Share Recycling Provisions. Subject to certain exceptions described in the Amended 2019 Plan, if any award granted under the 2019 Plan or the Amended 2019 Plan (in whole or in part) is canceled or forfeited, expires, is settled for cash, or is unearned, the Common Stock subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, again be available under the Amended 2019 Plan. Additionally, if after the effective date of the Amended 2019 Plan, any Common Stock subject to an award granted under the 2007 Plan is forfeited, or an award granted under the 2007 Plan (in whole or in part) is cancelled or forfeited, expires, is settled for cash, or is unearned, the Common Stock subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, be available for awards under the Amended 2019 Plan. The following Common Stock will not be added (or added back, as applicable) to the aggregate share limit under the Amended 2019 Plan: (1) Common Stock withheld by us, tendered or otherwise used in payment of March 31, 2021 in connection with its stock-based compensation plans: outstanding stock-based awards to acquire 21,788,078the exercise price of a stock option, and (2) Common Stock reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of stock options. Further, shares of Common Stock subject to share-settled SARs that are not actually issued upon the exercise thereof, will not be added (or added back, as applicable) to the aggregate number of shares available under the Amended 2019 Plan. In addition, Common Stock withheld by us, tendered or otherwise used to satisfy tax withholding will not be added (or added back, as applicable) to the aggregate share limit under the Amended 2019 Plan. If a participant elects to give up the right to receive compensation in exchange for Common Stock based on fair market value, such Common Stock will not count against the aggregate number of shares available under the Amended 2019 Plan.
No Repricing Without Stockholder Approval. Outside of certain corporate transactions or adjustment events described in the Amended 2019 Plan or in connection with a “change in control,” the exercise or base price of stock options and 7,008,612 sharesSARs cannot be reduced, and “underwater” stock options or SARs cannot be cancelled in exchange for cash or replaced with other awards with a lower exercise or base price, as applicable, without stockholder approval under the Amended 2019 Plan.
Change in Control Definition. The Amended 2019 Plan includes a non-liberal definition of “change in control,” which is described below.
Exercise or Base Price Limitation.The Amended 2019 Plan also provides that, except with respect to certain converted, assumed or substituted awards as described in the Amended 2019 Plan, no stock options or SARs will be granted with an exercise or base price that is less than the fair market value of a share of Common Stock available for new awards. Based on the numberdate of outstanding and reserved sharesgrant.
No Minimum Vesting Periods. The Amended 2019 Plan does not provide for any minimum vesting periods.
SUMMARY OF OTHER MATERIAL TERMS OF THE AMENDED 2019 PLAN
Administration: The Amended 2019 Plan will generally be administered by the Compensation Committee (or its successor), or any other committee of Common Stock, the Company has 8,741,803 shares of Common stock available for issuance.
Board designated by the Board to administer the Amended 2019 Plan. References to the “Committee” in this proposal generally refer to the Compensation Committee or such other committee designated by the Board, or the Board, as applicable. The increase in our total authorized stock will provide us with greater flexibility with respect to our capital acquisition strategies, including potential equity financings, stock-based collaborative transactions and employee stock-based awards as we advance toward potential commercialization of our product candidates.
The increase in the number of authorized but unissued shares of Common Stock will enable the Company to issue sharesCommittee may from time to time delegate all or any part of its authority under the Amended 2019 Plan to a subcommittee. Any interpretation, construction and determination by the Committee of any provision of the Amended 2019 Plan, or of any agreement, notification or document evidencing the grant of awards under the Amended 2019 Plan, will be final and conclusive. To the extent permitted by applicable law, the Committee may delegate to one or more of its members or to one or more officers, or to one or more agents or advisors of the Company, such administrative duties or powers as it deems advisable. In addition, the Committee may by resolution, subject to certain restrictions set forth in the Amended 2019 Plan, authorize one or more officers of the Company to (1) designate employees to be requiredrecipients of awards under the Amended 2019 Plan, and (2) determine the size of such awards. However, the Committee may not delegate such responsibilities to officers for proper business purposes,awards granted to non-employee directors, certain officers or certain owners who are subject to the reporting requirements of Section 16 of the Securities Exchange Act of 1934, as amended. The Committee resolution providing for such as raising additional capital for ongoing operations, business and asset acquisitions, stock splits and dividends, present and future employee benefit programs, inducement awards for key hires, and other corporate purposes without requiring further stockholder approval.Having a substantialauthorization shall set forth the total number of authorized but unissued shares of Common Stock that are not reserved for specific purposes will allow us to take prompt action with respect to corporate opportunities that develop, without the delay and expense of convening a meeting of stockholders or obtaining the written consent of stockholders for the purpose of approving an increase in our capitalization.It is not the present intention of our Board to seek stockholder approval prior to any issuance of shares of Common Stock that would becomesuch officer(s) may grant, and such officer(s) will report periodically to the Committee regarding the nature and scope of the awards granted pursuant to the authority delegated. The Committee is authorized to take appropriate action under the Amended 2019 Plan subject to the express limitations contained in the Amended 2019 Plan.
Eligibility: Any person who is selected by the amendment unless otherwise requiredCommittee to receive benefits under the Amended 2019 Plan and who is at that time an officer or other employee of the Company or any of its subsidiaries (including a person who has agreed to commence serving in such capacity within 90 days of the date of grant) is eligible to participate in the Amended 2019 Plan. In addition, certain persons (including consultants) who provide services to the Company or any of its subsidiaries that are equivalent to those typically provided by law or regulation.
Whilean employee (provided that such persons satisfy the BoardForm S-8 definition of “employee”), and non-employee directors of the Company, may entertainalso be selected by the Committee to participate in the Amended 2019 Plan. As of June 16, 2022, there were approximately 106 employees, four non-employee Directors of the Company and seek future financing and collaborative opportunities, there are no definitive transactions contemplated at this time, andconsultants eligible to participate in the amendment to our CertificateAmended 2019 Plan. The basis for participation in the Amended 2019 Plan by eligible persons is the selection of Incorporation was not proposed withsuch persons for participation by the intent that additional shares be utilizedCommittee (or its proper delegate) in any specific financing transaction, business development collaboration, or business or asset acquisition.its discretion.
The increaseShares Available for Awards under the Amended 2019 Plan: Subject to adjustment as described in the authorizedAmended 2019 Plan and the Amended 2019 Plan share counting rules, the number of shares of Common Stock couldavailable under the Amended 2019 Plan for awards of:
•stock options or SARs;
•restricted stock;
•RSUs;
•performance shares or performance units;
•other stock-based awards under the Amended 2019 Plan; or
•dividend equivalents paid with respect to awards under the Amended 2019 Plan;
will not exceed, in the aggregate, 39,463,737 shares of Common Stock plus any shares of Common Stock that become available under the Amended 2019 Plan as a result of forfeiture, cancellation, expiration, cash settlement or less-than-maximum earning of 2019 Plan or Amended 2019 Plan awards (or, as described, 2007 Plan awards).
Share Counting: Generally, the aggregate number of shares of Common Stock available under the Amended 2019 Plan will be reduced by one share of Common Stock for every one share of Common Stock subject to an award granted under the Amended 2019 Plan. Additionally, if after the effective date of the Amended 2019 Plan, any Common Stock subject to an award granted under the 2007 Plan is forfeited, or an award granted under the 2007 Plan (in whole or in part) is cancelled or forfeited, expires, is settled for cash, or is unearned, the Common Stock subject to such award will, to the extent of such cancellation, forfeiture, expiration, cash settlement, or unearned amount, be available for awards under the Amended 2019 Plan.
Types of Awards Under the 2019 Plan: Pursuant to the Amended 2019 Plan, the Company may grant cash awards and stock options (including stock options intended to be “incentive stock options” as defined in Section 422 of the Internal Revenue Code of 1986 (the “Code”) (“Incentive Stock Options”)), SARs, restricted stock, RSUs, performance shares, performance units, and certain other awards based on or related to our Common Stock.
Generally, each grant of an award under the Amended 2019 Plan will be evidenced by an award agreement, certificate, resolution or other type or form of writing or other evidence approved by the Committee (an “Evidence of Award”), which will contain such terms and conditions as the Committee may determine, consistent with the Amended 2019 Plan. A brief description of the types of awards which may be granted under the Amended 2019 Plan is set forth below.
Stock Options: A stock option is a right to purchase Common Stock upon exercise of the stock option. Stock options granted to an employee under the Amended 2019 Plan may consist of either an Incentive Stock Option, a non-qualified stock option that is not intended to be an “incentive stock option” under Section 422 of the Code, or a combination of both. Incentive Stock Options may only be granted to employees of the Company or certain of our related corporations. Except with respect to awards issued in substitution for, in conversion of, or in connection with an assumption of stock options held by awardees of an entity
engaging in a corporate acquisition or merger with us or any of our subsidiaries, stock options must have other effectsan exercise price per share that is not less than the fair market value of a share of Common Stock on the stockholders, dependingdate of grant. The term of a stock option may not extend more than 10 years from the date of grant. The Committee may provide in an Evidence of Award for the automatic exercise of a stock option.
Each grant of a stock option will specify the applicable terms of the stock option, including the number of shares of Common Stock subject to the stock option and the required period or periods of the participant’s continuous service, if any, before any stock option or portion of a stock option will vest. Stock options may provide for continued vesting or the earlier vesting of the stock options, including in the event of retirement, death, disability or termination of employment or service of the participant or in the event of a change in control.
Any grant of stock options may specify management objectives regarding the vesting of the stock options. Each grant will specify whether the consideration to be paid in satisfaction of the exercise price will be payable: (1) in cash, by check acceptable to the Company, or by wire transfer of immediately available funds; (2) by the actual or constructive transfer to the Company of Common Stock owned by the participant with a value at the time of exercise that is equal to the total exercise price; (3) subject to any conditions or limitations established by the Committee, by a net exercise arrangement pursuant to which the Company will withhold Common Stock otherwise issuable upon exercise of a stock option; (4) by a combination of the foregoing methods; or (5) by such other methods as may be approved by the Committee. To the extent permitted by law, any grant may provide for deferred payment of the exercise price from the proceeds of a sale through a bank or broker of some or all of the shares to which the exercise relates. Stock options granted under the Amended 2019 Plan may not provide for dividends or dividend equivalents.
SARs:The Committee may, from time to time and upon such terms and conditions as it may determine, authorize the granting of SARs. A SAR is a right to receive from us an amount equal to 100%, or such lesser percentage as the Committee may determine, of the spread between the base price and the value of a share of our Common Stock on the date of exercise.
Each grant of SARs will specify the period or periods of continuous service, if any, by the participant with the Company or any subsidiary that is necessary before the SARs or installments of such SARs will vest. SARs may provide for continued vesting or earlier vesting, including in the case of retirement, death, disability or termination of employment or service of the participant or in the event of a change in control. Any grant of SARs may specify management objectives regarding the vesting of such SARs. A SAR may be paid in cash, Common Stock or any combination of the two.
Except with respect to awards issued in substitution for, in conversion of, or in connection with an assumption of SARs held by awardees of an entity engaging in a corporate acquisition or merger with us or any of our subsidiaries, the base price of a SAR may not be less than the fair market value of a share of Common Stock on the date of grant. The term of a SAR may not extend more than 10 years from the date of grant. The
Committee may provide in an Evidence of Award for the automatic exercise of a SAR. SARs granted under the Amended 2019 Plan may not provide for dividends or dividend equivalents.
Restricted Stock: Restricted stock constitutes an immediate transfer of the ownership of Common Stock to the participant in consideration of the performance of services, entitling such participant to voting and other ownership rights (subject in particular to certain dividend provisions in the Amended 2019 Plan), subject to the substantial risk of forfeiture and restrictions on transfer determined by the Committee for a period of time determined by the Committee or until certain management objectives specified by the Committee are achieved. Each such grant or sale of restricted stock may be made without additional consideration or in consideration of a payment by the participant that is less than the fair market value per share of Common Stock on the date of grant.
Any grant of restricted stock may specify management objectives regarding the vesting of the restricted stock. Any grant of restricted stock may require that any and all dividends or distributions paid on restricted stock that remains subject to a substantial risk of forfeiture be automatically deferred and/or reinvested in additional restricted stock, which will be subject to the same restrictions as the underlying restricted stock, but any such dividends or other distributions on restricted stock must be deferred until, and paid contingent upon, the naturevesting of such restricted stock. Restricted stock may provide for continued vesting or the earlier vesting of such restricted stock, including in the event of retirement, death, disability or termination of employment or service of the participant or in the event of a change in control. Each grant of restricted stock will be evidenced by an Evidence of Award. Each Evidence of Award will be subject to the Amended 2019 Plan and circumstanceswill contain such terms and provisions, consistent with the Amended 2019 Plan, as the Committee may approve.
RSUs: RSUs awarded under the Amended 2019 Plan constitute an agreement by the Company to deliver Common Stock, cash, or a combination of the two, to the participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions (which may include achievement regarding management objectives) during the restriction period as the Committee may specify. Each grant or sale of RSUs may be made without additional consideration or in consideration of a payment by the participant that is less than the fair market value of a share of our Common Stock on the date of grant.
RSUs may provide for continued vesting or the earlier lapse or other modification of the restriction period, including in the event of retirement, death, disability or termination of employment or service of the participant or in the event of a change in control. During the restriction period applicable to RSUs, the participant will have no right to transfer any rights under the award and will have no rights of ownership in the Common Stock deliverable upon payment of the RSUs and no right to vote them. Rights to dividend equivalents may be extended to and made part of any future issuancesRSU award at the discretion of authorized but unissued shares. and on the terms determined by the Committee, on a deferred and contingent basis, based upon the vesting of such RSUs. Each grant or sale of RSUs will specify the time and manner of payment of the RSUs that have been earned. A RSU may be paid in cash, Common Stock or any combination of the two.
Performance Shares, Performance Units and Cash Incentive Awards: Performance shares, performance units and cash incentive awards may also be granted to participants under the Amended 2019 Plan. A performance share is a bookkeeping entry that records the equivalent of one share of Common Stock, and a performance unit is a bookkeeping entry that records a unit equivalent to $1.00 or such other value as determined by the Committee. Each grant will specify the number or amount of performance shares or performance units, or the amount payable with respect to a cash incentive award being awarded, which number or amount may be subject to adjustment to reflect changes in compensation or other factors.
Each grant of a cash incentive award, performance shares or performance units will specify management objectives regarding the earning of the award. Each grant will specify the time and manner of payment of performance shares, performance units or a cash incentive award that have been earned.
Any grant of performance shares or performance units may provide for the payment of dividend equivalents in cash or in additional Common Stock, which dividend equivalents will be subject to deferral and payment on a contingent basis based on the participant’s earning and vesting of the performance shares or performance units, as applicable, with respect to which such dividend equivalents are paid.
The increase could haveperformance period with respect to each grant of performance shares or performance units or cash incentive award will be a period of time determined by the Committee and within which the management objectives relating to such award are to be achieved. The performance period may be subject to continued vesting or earlier lapse or modification, including in the event of retirement, death, disability or termination of employment or service of the participant or in the event of a change in control.
Non-Employee Directors: If a non-employee director subsequently becomes an anti-takeover effect,employee of the Company or a specified subsidiary while remaining a member of the Board, any award held under the Amended 2019 Plan by such individual at the time of such commencement of employment will not be affected thereby. Non-employee directors may be awarded, or may be permitted to elect to receive, pursuant to procedures established by the Committee, all or any portion of their annual retainer, meeting fees or other fees in Common Stock, restricted stock, RSUs or other awards under the Amended 2019 Plan in lieu of cash.
Other Awards: Subject to applicable law and applicable share limits under the Amended 2019 Plan, the Committee may authorize the grant to any participant of shares of Common Stock or such other awards (“Other Awards”) that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Common Stock or factors that may influence the value of such Common Stock, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Common Stock, purchase rights for Common Stock, awards with value and payment contingent upon performance of the Company or specified subsidiaries, affiliates or other business units or any other factors designated by the Committee, and awards valued by reference to the book value of the Common Stock or the value of securities of, or the performance of the subsidiaries, affiliates or other business units of the
Company. The Committee will determine the terms and conditions of any such awards. Common Stock delivered under such an award in the nature of a purchase right granted under the Amended 2019 Plan will be purchased for such consideration, paid for at such time, by such methods, and in such forms, including, without limitation, Common Stock, other awards, notes or other property, as the Committee determines.
In addition, the Committee may grant cash awards as an element of or supplement to any other awards granted under the Amended 2019 Plan. The Committee may also authorize the grant of Common Stock as a bonus, or may authorize the grant of Other Awards in lieu of obligations of the Company or a subsidiary to pay cash or deliver other property under the Amended 2019 Plan or under other plans or compensatory arrangements, subject to terms determined by the Committee in a manner that complies with Section 409A of the Code.
Other Awards may provide for the earning or vesting of, or earlier elimination of restrictions applicable to, such award, including in the event of the retirement, death, disability or termination of employment or service of the participant or in the event of a change in control. The Committee may provide for the payment of dividends or dividend equivalents on Other Awards on a deferred and contingent basis, in cash or in additional shares couldCommon Stock, based upon the earning and vesting of such awards.
Change in Control: The Amended 2019 Plan includes a definition of “change in control.” In general, except as may be issued (withinotherwise prescribed by the limits imposed by applicable law)Committee in one or more transactions that could makean Evidence of Award, a change in control shall be deemed to have occurred upon the occurrence of any of the following events (subject to certain exceptions and limitations and as further described in the Amended 2019 Plan): (1) any individual, entity or takeovergroup is or becomes the beneficial owner of more than 50% of the combined voting power of the then-outstanding voting stock of the Company more difficult.(subject to certain exceptions); (2) a consummation of a reorganization, merger or consolidation, or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of the stock or assets of another corporation or other transaction, as described in the Amended 2019 Plan (subject to certain exceptions); or (3) approval by the stockholders of the Company of a complete liquidation or dissolution of the Company (subject to certain exceptions).
For example, additionalManagement Objectives: The Amended 2019 Plan generally provides that any of the awards set forth above may be granted subject to the achievement of specified management objectives. Management objectives are defined as the measurable performance objective or objectives established pursuant to the Amended 2019 Plan for participants who have received grants of performance shares, couldperformance units or cash incentive awards or, when so determined by the Committee, stock options, SARs, restricted stock, RSUs, dividend equivalents or Other Awards.
Additionally, if the Committee determines that a change in the business, operations, corporate structure or capital structure of the Company, or the manner in which it conducts its business, or other events or circumstances render the management objectives unsuitable, the Committee may in its discretion modify such management objectives or the goals or actual levels of achievement regarding the management objectives, in whole or in part, as the Committee deems appropriate and equitable.
Transferability of Awards: Except as otherwise provided by the Committee, and subject to the terms of the Amended 2019 Plan with respect to Section 409A of the Code, no stock option, SAR, restricted stock, RSU, performance share, performance unit, cash incentive award, Other Award or dividend equivalents paid with respect to awards made under the Amended 2019 Plan will be transferrable by a participant except by will or the laws of descent and distribution. In no event will any such award granted under the Amended 2019 Plan be transferred for value. Except as otherwise determined by the Committee, stock options and SARs will be exercisable during the participant’s lifetime only by him or her or, in the event of the participant’s legal incapacity to do so, by his or her guardian or legal representative acting on behalf of the participant in a fiduciary capacity under state law or court supervision.
The Committee may specify on the grant date that all or part of the Common Stock that is subject to awards under the Amended 2019 Plan will be subject to further restrictions on transfer.
Adjustments: The Committee will make or provide for such adjustments in: (1) the number of and kind of shares of Common Stock covered by outstanding stock options, SARs, restricted stock, RSUs, performance shares and performance units granted under the Amended 2019 Plan; (2) if applicable, the number of and kind of shares of Common Stock covered by Other Awards granted pursuant to the Amended 2019 Plan; (3) the exercise price or base price provided in outstanding stock options and SARs, respectively; (4) cash incentive awards; and (5) other award terms, as the Committee in its sole discretion, exercised in good faith determines to be equitably required in order to prevent dilution or enlargement of the rights of participants that otherwise would result from (a) any extraordinary cash dividend, stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company; (b) any merger, consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities; or (c) any other corporate transaction or event having an effect similar to any of the foregoing.
In the event of any such transaction or event, or in the event of a change in control of the Company, the Committee may provide in substitution for any or all outstanding awards under the Amended 2019 Plan such alternative consideration (including cash), if any, as it may in good faith determine to be equitable under the circumstances and will require in connection therewith the surrender of all awards so replaced in a manner that complies with Section 409A of the Code. In addition, for each stock option or SAR with an exercise price or base price, respectively, greater than the consideration offered in connection with any such transaction or event or change in control of the Company, the Committee may in its discretion elect to cancel such stock option or SAR without any payment to the person holding such stock option or SAR. The Committee will make or provide for such adjustments to the numbers of shares of Common Stock available under the Amended 2019 Plan and the limits of the Amended 2019 Plan as the Committee in its sole discretion may in good faith determine to be appropriate to reflect such transaction or event. However, any adjustment to the limit on the number of shares of Common Stock that may be issued upon exercise of Incentive Stock Options will be made only if and to the
extent such adjustment would not cause any stock option intended to qualify as an Incentive Stock Option to fail to so qualify.
Prohibition on Repricing: Except in connection with certain corporate transactions or changes in the capital structure of the Company or in connection with a change in control, the terms of outstanding awards may not be amended to (1) reduce the exercise price or base price of outstanding stock options or SARs, respectively, or (2) cancel outstanding “underwater” stock options or SARs (including following a participant’s voluntary surrender of “underwater” stock options or SARs) in exchange for cash, other awards or stock options or SARs with an exercise price or base price, as applicable, that is less than the exercise price or base price of the original stock options or SARs, as applicable, without stockholder approval. The Amended 2019 Plan specifically provides that this provision is intended to prohibit the repricing of “underwater” stock options and SARs and that it may not be amended without approval by our stockholders.
Detrimental Activity and Recapture: Any Evidence of Award may reference a clawback policy of the Company or provide for the cancellation or forfeiture of an award or forfeiture and repayment to us of any gain related to an award, or other provisions intended to have a similar effect, upon such terms and conditions as may be determined by the Committee from time to time, if any participant, either during employment or other service with us or a subsidiary or within a specified period after such employment or service, engages in any detrimental activity, as described in the applicable Evidence of Award or such clawback policy. In addition, any Evidence of Award or such clawback policy may provide for cancellation or forfeiture of an award or the forfeiture and repayment of any Common Stock issued under and/or any other benefit related to an award, or other provisions intended to have a similar effect, including upon such terms and conditions as may be required by the Committee or under Section 10D of the Securities Exchange Act of 1934 and any applicable rules and regulations promulgated by the Securities and Exchange Commission or any national securities exchange or national securities association on which the Common Stock may be traded.
Grants to Non-U.S. Based Participants: In order to facilitate the making of any grant or combination of grants under the Amended 2019 Plan, the Committee may provide for such special terms for awards to participants who are foreign nationals, who are employed by the Company soor any of its subsidiaries outside of the United States of America or who provide services to the Company or any of its subsidiaries under an agreement with a foreign nation or agency, as the Committee may consider necessary or appropriate to diluteaccommodate differences in local law, tax policy or custom. The Committee may approve such supplements to, or amendments, restatements or alternative versions of, the Amended 2019 Plan (including sub-plans) (to be considered part of the Amended 2019 Plan) as it may consider necessary or appropriate for such purposes, provided that no such special terms, supplements, amendments or restatements will include any provisions that are inconsistent with the terms of the Amended 2019 Plan as then in effect unless the Amended 2019 Plan could have been amended to eliminate such inconsistency without further approval by our stockholders.
Withholding: To the extent the Company is required to withhold federal, state, local or foreign taxes or other amounts in connection with any payment made or benefit realized
by a participant or other person under the Amended 2019 Plan, and the amounts available to us for such withholding are insufficient, it will be a condition to the receipt of such payment or the realization of such benefit that the participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes or other amounts required to be withheld, which arrangements, in the discretion of the Committee, may include relinquishment of a portion of such benefit. If a participant’s benefit is to be received in the form of Common Stock, and such participant fails to make arrangements for the payment of taxes or other amounts, then, unless otherwise determined by the Committee, we will withhold Common Stock having a value equal to the amount required to be withheld. When a participant is required to pay the Company an amount required to be withheld under applicable income, employment, tax or other laws, the participant may elect, unless otherwise determined by the Committee, to satisfy the obligation, in whole or in part, by having withheld, from the shares required to be delivered to the participant, Common Stock having a value equal to the amount required to be withheld or by delivering to us other Common Stock held by such participant. The Common Stock used for tax or other withholding will be valued at an amount equal to the fair market value of such Common Stock on the date the benefit is to be included in the participant’s income. In no event will the fair market value of the Common Stock to be withheld and delivered pursuant to the Amended 2019 Plan exceed the minimum amount required to be withheld, unless (1) an additional amount can be withheld and not result in adverse accounting consequences, and (2) such additional withholding amount is authorized by the Committee. Participants will also make such arrangements as the Company may require for the payment of any withholding tax or other obligation that may arise in connection with the disposition of Common Stock acquired upon the exercise of stock ownershipoptions.
No Right to Continued Employment: The Amended 2019 Plan does not confer upon any participant any right with respect to continuance of employment or votingservice with the Company or any of its subsidiaries.
Effective Date of the Amended 2019 Plan: The 2019 Plan became effective on June 12, 2019. The Amended 2019 Plan will become effective on the date it is approved by the Company’s stockholders.
Amendment and Termination of the Amended 2019 Plan: The Board generally may amend the Amended 2019 Plan from time to time in whole or in part. However, if any amendment, for purposes of applicable stock exchange rules (and except as permitted under the adjustment provisions of the Amended 2019 Plan) (1) would materially increase the benefits accruing to participants under the Amended 2019 Plan, (2) would materially increase the number of securities which may be issued under the Amended 2019 Plan, (3) would materially modify the requirements for participation in the Amended 2019 Plan, or (4) must otherwise be approved by our stockholders in order to comply with applicable law or the rules of The NASDAQ Stock Market, or, if the Common Stock is not traded on The NASDAQ Stock Market, the principal national securities exchange upon which the Common Stock is traded or quoted, all as determined by the Board, then such amendment will be subject to stockholder approval and will not be effective unless and until such approval has been obtained.
Further, subject to the Amended 2019 Plan’s prohibition on repricing, the Committee generally may amend the terms of any award prospectively or retroactively. Except in the case of certain adjustments permitted under the Amended 2019 Plan, no such amendment may be made that would materially impair the rights of persons seeking to obtain controlany participant without his or her consent. If permitted by Section 409A of the Company.Code and subject to certain other limitations set forth in the Amended 2019 Plan, including in the case of termination of employment or service, or in the case of unforeseeable emergency or other circumstances or in the event of a change in control, the Committee may provide for continued vesting or accelerate the vesting of certain awards granted under the Amended 2019 Plan or waive any other limitation or requirement under any such award.
The Board may, in its discretion, terminate the Amended 2019 Plan at any time. Termination of the Amended 2019 Plan will not affect the rights of participants or their successors under any awards outstanding and not exercised in full on the date of termination. No grant will be made under the Amended 2019 Plan on or after the tenth anniversary of the date stockholders approve the Amended 2019 Plan, but all grants made prior to such date will continue in effect thereafter subject to their terms and the terms of the Amended 2019 Plan.
Allowances for Conversion Awards and Assumed Plans. Common Stock issued or transferred under awards granted under the Amended 2019 Plan in substitution for or conversion of, or in connection with an assumption of, stock options, SARs, restricted stock, RSUs, or other stock or stock-based awards held by awardees of an entity engaging in a corporate acquisition or merger transaction with us or any of our subsidiaries will not count against (or be added to) the aggregate share limit or other Amended 2019 Plan limits described above. Additionally, shares available under certain plans that we or our subsidiaries may assume in connection with corporate transactions from another entity may be available for certain awards under the Amended 2019 Plan, under circumstances further described in the Amended 2019 Plan, but will not count against the aggregate share limit or other Amended 2019 Plan limits described above.
Similarly,U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the Federal income tax consequences of certain transactions under the Amended 2019 Plan based on Federal income tax laws in effect. This summary, which is presented for the information of stockholders considering how to vote on this proposal and not for Amended 2019 Plan participants, is not intended to be complete and does not describe Federal taxes other than income taxes (such as Medicare and Social Security taxes), or state, local or foreign tax consequences.
TAX CONSEQUENCES TO PARTICIPANTS
Restricted Stock. The recipient of restricted stock generally will be subject to tax at ordinary income rates on the fair market value of the restricted stock (reduced by any amount paid by the recipient for such restricted stock) at such time as the restricted stock is no longer subject to forfeiture or restrictions on transfer for purposes of Section 83 of the Code (“Restrictions”). However, a recipient who so elects under Section 83(b) of the Code within 30 days of the date of transfer of the shares will have taxable ordinary income on the date of transfer of the shares equal to the excess of the fair market value of such shares
(determined without regard to the Restrictions) over the purchase price, if any, of such restricted stock. If a Section 83(b) election has not been made, any dividends received with respect to restricted stock that is subject to the Restrictions generally will be treated as compensation that is taxable as ordinary income to the recipient.
Performance Shares, Performance Units and Cash Incentive Awards. No income generally will be recognized upon the grant of performance shares, performance units or cash incentive awards. Upon payment in respect of the earn-out of performance shares, performance units or cash incentive awards, the recipient generally will be required to include as taxable ordinary income in the year of receipt an amount equal to the amount of cash received and the fair market value of any unrestricted Common Stock received.
Nonqualified Stock Options.In general:
•no income will be recognized by an optionee at the time a non-qualified stock option is granted;
•at the time of exercise of a non-qualified stock option, ordinary income will be recognized by the optionee in an amount equal to the difference between the option price paid for the shares and the fair market value of the shares, if unrestricted, on the date of exercise; and
•at the time of sale of shares acquired pursuant to the exercise of a non-qualified stock option, appreciation (or depreciation) in value of the shares after the date of exercise will be treated as either short-term or long-term capital gain (or loss) depending on how long the shares have been held.
Incentive Stock Options.No income generally will be recognized by an optionee upon the grant or exercise an Incentive Stock Option. If Common Stock is issued to the optionee pursuant to the exercise of an Incentive Stock Option, and if no disqualifying disposition of such shares is made by such optionee within two years after the date of grant or within one year after the transfer of such shares to the optionee, then upon sale of such shares, any amount realized in excess of the option price will be taxed to the optionee as a long-term capital gain and any loss sustained will be a long-term capital loss.
If Common Stock acquired upon the exercise of an Incentive Stock Option is disposed of prior to the expiration of either holding period described above, the optionee generally will recognize ordinary income in the year of disposition in an amount equal to the excess (if any) of the fair market value of such shares at the time of exercise (or, if less, the amount realized on the disposition of such shares if a sale or exchange) over the exercise price paid for such shares. Any further gain (or loss) realized by the participant generally will be taxed as short-term or long-term capital gain (or loss) depending on the holding period.
SARs. No income will be recognized by a participant in connection with the grant of a SAR. When the SAR is exercised, the participant normally will be required to include as taxable ordinary income in the year of exercise an amount equal to the amount of cash received and the fair market value of any unrestricted Common Stock received on the exercise.
RSUs.No income generally will be recognized upon the award of RSUs. The recipient of an RSU award generally will be subject to tax at ordinary income rates on the fair market value of unrestricted Common Stock on the date that such shares are transferred to the participant under the award (reduced by any amount paid by the participant for such RSUs), and the capital gains/loss holding period for such shares will also commence on such date.
Tax Consequences to the Company and its Subsidiaries
To the extent that a participant recognizes ordinary income in the circumstances described above, the Company or the subsidiary for which the participant performs services will be entitled to a corresponding deduction, provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code and is not disallowed by the $1 million limitation on certain executive compensation under Section 162(m) of the Code.
New Plan Benefits
It is not possible to determine the specific amounts and types of awards that may be awarded in the future under the Amended 2019 Plan because the grant and actual settlement of awards under the Amended 2019 Plan are subject to the discretion of the plan administrator.
Awards Granted to Certain Persons
The table below shows the number of awards granted under the 2019 Plan to the named executive officers and the other individuals and groups indicated below since its inception through May 30, 2022.
ATHERSYS, INC. 2019 EQUITY AND INCENTIVE COMPENSATION PLAN
| | | | | | | | |
Name and Position | Number of Shares of Common Stock Subject to RSUs Granted | Number of Shares of Common Stock Subject to Stock Options Granted |
Named Executive Officers: | | |
Gil Van Bokkelen, Former Chief Executive Officer | 494,341 | 1,112,280 |
William (BJ) Lehmann, Former President and Chief Operating Officer | 397,178 | 1,393,648 |
John Harrington, Chief Scientific Officer and Executive Vice President | 397,178 | 1,643,648 |
Ivor Macleod, Chief Financial Officer | 133,333 | 550,000 |
Laura Campbell, Former Senior Vice President of Finance | 175,008 | 493,776 |
All current executive officers, as a group* | 1,115,689 | 3,885,296 |
All current non-employee directors as a group | — | 1,200,000 |
Each nominee for election as a director** | — | 750,000 |
Each associate of any of the foregoing | N/A | N/A |
Each other person who received at least 5% of all awards | N/A | N/A |
All employees, including all current officers who are not executive officers, as a group | 2,373,182 | 7,239,512 |
* Awards granted to Dr. Van Bokkelen and Ms. Campbell are not included in the awards to all current executive officers as a group as their employment with the Company terminated in February 2021 and July 2021, respectively. Mr. Lehmann’s employment terminated without cause on May 31, 2022, and the employment of Dr. Harrington and Mr. Macleod is expected to terminate on June 30, 2022.
** Awards to each nominee for election as a director (250,000 options for Dr. Kola, 200,000 options for Mr. Traub, 150,000 options for Ms. Wasman and 150,000 options for Mr. Wyszomierski) does not include any awards granted to Mr. Daniel A. Camardo because no awards have been granted to him under the 2019 Plan.
REGISTRATION WITH THE SEC
We intend to file a Registration Statement on Form S-8 relating to the issuance of additional shares to certain persons allied with the Company’s management could have the effect of making it more difficult to remove the Company’s current management by diluting the stock ownership or voting rights of persons seeking to cause such removal.
Required Vote
The approval of this Proposal Three requires the affirmative vote of the majority of the shares of Common Stock outstandingunder the Amended 2019 Plan with the Securities and entitledExchange Commission pursuant to vote on such proposal at the Annual Meeting.Abstentions will haveSecurities Act of 1933, as amended, as soon as practicable after approval of the effect of votes “against” the proposal.Amended 2019 Plan by our stockholders.
The Board unanimously recommends that youstockholders vote FOR Proposal Three to approve the amendment toand restatement of the Company’s Certificate of Incorporation to increase the number of shares of authorized Common Stock.Athersys, Inc. 2019 Equity and Incentive Compensation Plan.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information regarding the Company’s equity compensation plans as of December 31, 2021, unless otherwise indicated.
| | | | | | | | | | | | | | | | | | | | |
Plan Category | | Number of securities to be issued upon exercise of outstanding awards | | Weighted- average exercise price of outstanding awards | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| | (a) (1) | | (b) (2) | | (c) (1) |
Equity compensation plans approved by security holders | | 23,207,614 | | $ 1.77 | | 3,176,331 |
Equity compensation plans not approved by security holders (3) | | 1,820,478 | | $ 1.38 | | — |
Total | | 25,028,092 | | | | 3,176,331 |
(1) Included in column (a) and (c) are both stock option and RSU awards under our equity compensation plans.
(2) Reflects the weighted-average exercise price of outstanding stock options only, as opposed to RSUs that do not have an exercise price. The weighted average exercise price of all outstanding stock option awards under our plans is $1.94 and the weighted average remaining term is 5.47 years.
(3) 820,478 of the shares of Common Stock included in this plan category are issuable pursuant to outstanding awards under the Athersys, Inc. Equity Incentive Compensation Plan. This plan expired on June 8, 2017; therefore, no new awards can be issued under this plan. The remaining 1,000,000 shares reflect non-qualified stock option Inducement Awards. For the first award, 600,000 shares may be purchased at an exercise price of $1.36 per share (vesting generally occurs with respect to 150,000 shares on January 31, 2021 and with respect to the remaining 450,000 shares in substantially equal installments on each of the 12 quarterly anniversaries of January 31, 2021, subject to certain acceleration and continued exercisability events as described in the award agreement for the award). For the second award, 400,000 shares may be purchased at an exercise price of $1.18 per share (vesting generally occurs with respect to 100,000 shares on March 16, 2021 and with respect to the remaining 300,000 shares in substantially equal installments on each of the 12 quarterly anniversaries of March 16, 2021, subject to certain acceleration and continued exercisability events as described in the award agreement for the award). The term of each option award is generally 10 years. See Note H to the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2021 for more information.
PROPOSAL FOUR
APPROVAL OF AN AMENDMENT TO THE COMPANY’S CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT OF THE COMPANY’S COMMON STOCK
GENERAL
The Board has approved and recommended that our stockholders approve an amendment to the Company’s Certificate of Incorporation (the “Charter”) to effect a reverse stock split of the Company’s Common Stock (the “Reverse Stock Split”) at a ratio within a range of 1:15 to 1:30 (the “Ratio Range”). On June 15, 2022, the Board adopted a resolution approving the Reverse Stock Split and directing that it be submitted to the Company’s stockholders for approval. If this proposal is approved, the Board, or an authorized committee of the Board, in its sole discretion, will have the authority to decide, within 12 months from the Annual Meeting, whether to implement the Reverse Stock Split and the exact ratio of the split within the Ratio Range, if it is to be implemented. If the Board or an authorized committee of the Board decides to implement the Reverse Stock Split, then it will become effective upon the filing of the amendment to the Charter with the Secretary of State of the State of Delaware (the “Effective Date”). If the Reverse Stock Split is implemented, then the number of issued and outstanding shares of Common Stock or shares of Common Stock held by the Company as treasury stock would be reduced in accordance with the exchange ratio selected by the Board, or an authorized committee of the Board, within the Ratio Range. The total number of authorized shares of Common Stock, however, would remain unchanged at its current total of 600,000,000. The form of certificate of amendment to the Charter to effect the Reverse Stock Split is attached as Appendix B to this proxy statement.
The Board, in its sole discretion, may elect not to implement the Reverse Stock Split. However, the Board believes that having the time-limited authority to take such an action is an important proactive step to maintain and build stockholder value.
PURPOSE AND BACKGROUND OF THE REVERSE SPLIT
The Board’s primary objectives in proposing the Reverse Stock Split are to raise the per share trading price of the Common Stock and to increase the number of shares of authorized but unissued Common Stock. The Board believes that the Reverse Stock Split would, among other things, (a) better enable the Company to maintain the listing of its Common Stock on NASDAQ, (b) facilitate higher levels of institutional stock ownership, where investment policies generally prohibit investments in lower-priced securities, and (c) better enable the Company to restructure itself and to raise funds to finance its planned operations.
The Company’s Common Stock has traded on NASDAQ since June 12, 2007. On March 18, 2022, the Company received a written notice (the “Notice”) from the Listing Qualifications Department of NASDAQ that the Company is not in compliance with the requirement to maintain a minimum closing bid price of $1.00 per share of Common Stock, as set forth in NASDAQ Listing Rule 5550(a)(2) (the “Bid Price Requirement”), because the
closing bid price of the Common Stock was below $1.00 per share for 30 consecutive business days. The Notice provided that, in accordance with NASDAQ Listing Rule 5810(c)(3)(A), the Company has a period of 180 calendar days from the date of the Notice, or until September 14, 2022, to regain compliance with the Bid Price Requirement. During this period, the Common Stock will continue to trade on NASDAQ. If at any time before September 14, 2022 the bid price of the Common Stock closes at or above $1.00 per share for a minimum of ten consecutive trading days, NASDAQ will provide written notification that the Company has achieved compliance with the Bid Price Requirement and the matter will be closed.
The closing sale price of our Common Stock on June 15, 2022 was $0.37 per share. The Board has considered the potential harm to the Company of a delisting from NASDAQ and believes that the Reverse Stock Split would help the Company regain compliance with the Bid Price Requirement. The Board does not believe that having the Common Stock delisted from NASDAQ is desirable because, among other things, it could reduce the liquidity of the Common Stock, and under our equity purchase agreements (the “Purchase Agreements”) with Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire”), we would be in default if our Common Stock is delisted from NASDAQ, which could suspend our rights to sell Common Stock to Aspire under the Purchase Agreements. Although the Board believes that implementing the Reverse Stock Split likely will lead to compliance with NASDAQ rules, there can be no assurance that the closing share price after implementation of the Reverse Stock Split will succeed in restoring such compliance.
The Board further believes that an increased stock price may encourage investor interest and improve the marketability of the Common Stock to a broader range of investors, and thus potentially improve liquidity. Because of the trading volatility often associated with low-priced stocks, many brokerage firms and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. The Board believes that the anticipated higher market price resulting from a reverse stock split would enable institutional investors and brokerage firms with policies and practices such as those described above to invest in the Common Stock.
Furthermore, the Board believes that the Reverse Stock Split would facilitate the Company’s efforts to raise capital to fund its planned operations. As previously disclosed in the Company’s periodic reports filed with the SEC, the Company plans to raise additional capital through sales of the Common Stock through equity issuances. The Reverse Stock Split would reduce the number of shares of Common Stock outstanding without reducing the total number of authorized shares of Common Stock. As a result, the Company would have a larger number of authorized but unissued shares from which to issue additional shares of Common Stock, or securities convertible into or exercisable for shares of Common Stock, in equity financing transactions.
The purpose of seeking stockholder approval of exchange ratios within the Ratio Range (rather than a fixed exchange ratio) is to provide the Company with the flexibility to achieve the desired results of the Reverse Stock Split. If the stockholders approve this proposal, then the Board or an authorized committee of the Board, in its sole discretion, would effect the Reverse Stock Split only upon the determination by the Board or an
authorized committee of the Board that a reverse split would be in the best interests of the Company at that time. If the Board, or an authorized committee of the Board, were to effect the Reverse Stock Split, then the Board would set the timing for such a split and select the specific ratio within the Ratio Range. No further action on the part of stockholders would be required to either implement or abandon the Reverse Stock Split. If the stockholders approve the proposal, and the Board or an authorized committee of the Board determines to effect the Reverse Stock Split, we would communicate to the public, prior to the Effective Date, additional details regarding the Reverse Stock Split, including the specific ratio within the Ratio Range selected by the Board or an authorized committee of the Board. If the Board or an authorized committee of the Board does not implement the Reverse Stock Split within 12 months from the Annual Meeting, then the authority granted in this proposal to implement the Reverse Stock Split automatically will terminate. The Board reserves its right to elect not to proceed with the Reverse Stock Split if it determines, in its sole discretion, that this proposal is no longer in the best interests of the Company.
MATERIAL EFFECTS OF PROPOSED REVERSE STOCK SPLIT
The Board believes that the Reverse Stock Split will increase the price level of the Common Stock in order to, among other things, ensure continued compliance with NASDAQ’s minimum per share listing requirements and generate interest in the Company among investors, and in particular institutional investors that have investment policies that prohibit investment in lower-priced securities. The Board cannot predict, however, the effect of the Reverse Stock Split upon the market price for the Common Stock, and the history of similar reverse stock splits for companies in like circumstances is varied. The market price per share of Common Stock after the Reverse Stock Split may not rise in proportion to the reduction in the number of shares of Common Stock outstanding resulting from the Reverse Stock Split, which would reduce the market capitalization of the Company. The market price per post-reverse split share may not remain in excess of the $1.00 minimum per share price as required by NASDAQ, or the Company may not otherwise meet the additional requirements for continued listing on NASDAQ. The market price of the Common Stock may also be based on our performance and other factors, the effect of which the Board cannot predict.
The Reverse Stock Split will affect all stockholders of the Company uniformly and will not affect any stockholder’s percentage ownership interests or proportionate voting power, except to the extent that the Reverse Stock Split results in any stockholders owning a fractional share. In lieu of issuing fractional shares, for each share of Common Stock held by a stockholder immediately prior to the Effective Date and not converted into a full share of Common Stock in the Reverse Stock Split, the holder (other than with respect to shares of Common Stock held by the Company as treasury stock) otherwise entitled to such fraction will be entitled to receive a sum in cash (without interest) equal to, as the Company may determine, either (a) the holder’s proportionate interest in the proceeds, net of selling costs not paid and satisfied by the Company, from the aggregation and sale of the fractional shares by the transfer agent for the Common Stock or (b) the closing price of the Common Stock on The Nasdaq Stock Market LLC (or the principal market upon which the Common Stock is trading) on the trading day immediately prior to the Effective Date, as adjusted by
the specific ratio chosen by the Board within the Ratio Range, multiplied by the applicable fraction of a share of Common Stock.
The principal effect of the Reverse Stock Split will be that the number of shares of Common Stock issued and outstanding will be reduced depending on the exact split ratio chosen by the Board or an authorized committee of the Board within the Ratio Range. In addition, all outstanding options, warrants (including warrants issued to Healios to purchase up to a total of 10,000,000 shares of Common Stock) and restricted stock units (collectively, the “Outstanding Equity Rights”) entitling the holders thereof to acquire, through purchase, exchange or otherwise, shares of Common Stock will enable such holders to acquire upon exercise of their respective Outstanding Equity Rights that number of shares of Common Stock, as adjusted based on the exact split ratio, which such holders would have been able to purchase upon exercise or conversion, as and to the extent applicable, of their respective Outstanding Equity Rights immediately preceding the Reverse Stock Split, at an exercise price or conversion rate, as and to the extent applicable, equal to the exercise price or conversion rate, as applicable, specified before the Reverse Stock Split, as adjusted by the exact split ratio, resulting in the same aggregate price being required to be paid upon exercise or conversion thereof immediately preceding the Reverse Stock Split. Furthermore, the number of shares reserved for issuance pursuant to the Company’s equity and incentive compensation plans will be reduced to the number of shares currently included in such plans as modified based on the exact split ratio.
The Reverse Stock Split may result in some stockholders owning “odd lots” of less than 100 shares of Common Stock. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots may be higher than the costs of transactions in “round lots” of even multiples of 100 shares.
The Reverse Stock Split will not affect the par value of the Common Stock. As a result, on the Effective Date, the present value of the stated capital on the Company’s balance sheet attributable to the Common Stock will be reduced based on the applicable ratio within the Ratio Range, and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. The per share net income or loss and net book value of the Common Stock will be retroactively increased for each period because there will be fewer shares of Common Stock outstanding.
The Reverse Stock Split will not change the terms of the Common Stock. After the Reverse Stock Split, the shares of Common Stock will have the same voting rights and rights to dividends and distributions and will be identical in all other respects to the Common Stock now authorized. Each stockholder’s percentage ownership of the Company based on holdings of Common Stock will not be altered except for the effect of eliminating fractional shares. The Common Stock issued pursuant to the Reverse Stock Split will remain fully paid and non-assessable. The Reverse Stock Split is not intended as, and will not have the effect of, a “going private transaction” covered by Rule 13e-3 under the Securities Exchange Act of 1934. Following the Reverse Stock Split, the Company will continue to be subject to the periodic reporting requirements of the Securities Exchange Act of 1934.
Because the Company will not reduce the number of authorized shares of Common Stock, the overall effect of the Reverse Stock Split will be an increase in authorized but
unissued shares of Common Stock. These authorized shares of Common Stock may be issued at the Board’s discretion, subject to applicable limitations. Any future issuances of shares of Common Stock will have the effect of diluting the percentage of stock ownership and voting rights of the present holders of Common Stock.
Release No. 34-15230 of the staff of the SEC requires disclosure and discussion of the effects of any action, including the proposed Charter amendment authorizing the Reverse Stock Split, that may be used as an anti-takeover mechanism. Because the proposed Charter amendment provides that the number of authorized shares of Common Stock remains at 600,000,000, the amendment that is filed with the Secretary of State of the State of Delaware, if any such amendment is filed, will result in a relative increase in the number of authorized but unissued shares of the Company’s Common Stock in relation to the number of outstanding shares of our Common Stock after the Reverse Stock Split and could, under certain circumstances, have an anti-takeover effect, although this is not the purpose or intent of the Board. The primary purpose of the proposed Reverse Stock Split is to provide the Board with a mechanism to raise the per share trading price of the Company’s Common Stock in order to improve liquidity and help ensure that the price per share of the Company’s Common Stock remains above the minimum amount required to maintain the Company’s listing on NASDAQ. However, a relative increase in the number of the Company’s authorized shares of Common Stock could enable the Board to render more difficult or discourage an attempt by a party attempting to obtain control of the Company by tender offer or other means. The issuance of Common Stock in a public or private sale, merger or similar transaction would increase the number of outstanding shares of Common Stock entitled to vote, increase the number of votes required to approve a change of control of the Company and dilute the interest of a party attempting to obtain control of the Company. Any such issuance could deprive stockholders of benefits that could result from an attempt to obtain control of the Company, such as the realization of a premium over market price that such an attempt could cause. Moreover, the issuance of Common Stock to persons friendly to the Board could make it more difficult to remove incumbent officers and directors from office even if such change were favorable to stockholders generally. The Company has no present intent to use the relative increase in the number of authorized shares of Common Stock for anti-takeover purposes, and the proposed amendment to the Charter is not part of a plan by the Board to adopt any anti-takeover provisions. However, if the proposed amendment is approved by the stockholders, then a greater number of shares of the Company’s Common Stock would be available for such purpose than currently is available. The Company is not aware of any pending or threatened efforts to obtain control of the Company, and the Board has no present intent to authorize the issuance of additional shares of Common Stock to discourage such efforts if they were to arise.
PROCEDURE FOR EFFECTING REVERSE SPLIT AND EXCHANGE OF STOCK CERTIFICATES
If the Reverse Stock Split is approved by the Company’s stockholders, and the Board or an authorized committee of the Board determines it is in the best interests of the Company to effect the split, then the Reverse Stock Split would become effective at such time as the certificate of amendment to the Charter, the form of which is attached as
Appendix B to this proxy statement, is filed with the Secretary of State of the State of Delaware.
As soon as practicable after the Effective Date, stockholders will be notified that the Reverse Stock Split has been effected. Computershare, Inc., the Company’s transfer agent, will act as exchange agent for purposes of implementing the exchange of stock certificates. Holders of pre-Reverse Stock Split shares will be asked to surrender to the exchange agent certificates representing pre-Reverse Stock Split shares in exchange for certificates representing post-Reverse Stock Split shares in accordance with the procedures to be set forth in a letter of transmittal that will be delivered to the Company’s stockholders. No new certificates will be issued to a stockholder until the stockholder has surrendered to the exchange agent his, her or its outstanding certificate(s) together with the properly completed and executed letter of transmittal. STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATES AND SHOULD NOT SUBMIT ANY CERTIFICATES UNTIL REQUESTED TO DO SO. Stockholders whose shares are held by their stockbroker do not need to submit old share certificates for exchange. These shares will automatically reflect the new quantity of shares based on the Reverse Stock Split. Beginning on the Effective Date, each certificate representing pre-Reverse Stock Split shares will be deemed for all corporate purposes to evidence ownership of post-Reverse Stock Split shares. YOU SHOULD NOT SEND YOUR CERTIFICATES NOW. YOU SHOULD SEND THEM ONLY AFTER YOU RECEIVE A NOTICE FOR SURRENDER FROM THE TRANSFER AGENT.
Unclaimed certificates for the post-Reverse Stock Split shares may be tendered to state authorities by the transfer agent under applicable unclaimed property or “escheat” laws, in which case the stockholder would need to obtain the post-Reverse Stock Split shares from the relevant state authority.
Certain registered holders of our Common Stock may hold some or all of their respective shares electronically in book-entry form with the transfer agent. These stockholders do not have stock certificates evidencing their ownership of the Common Stock. They are, however, provided with a periodic statement reflecting the number of shares of Common Stock registered in their accounts. Stockholders who hold shares electronically in book-entry form with the transfer agent will not need to take action to receive whole shares of post-Reverse Stock Split Common Stock, because the exchange will be automatic. The effect of the Reverse Stock Split on the number of shares of Common Stock held by shareholders electronically in book-entry form will be reflected in subsequent periodic statements.
FRACTIONAL SHARES
The Company will not issue fractional certificates for post-Reverse Stock Split shares in connection with the Reverse Stock Split. In lieu of issuing fractional shares, for each share of Common Stock held by a stockholder immediately prior to the Effective Date and not converted into a full share of Common Stock in the Reverse Stock Split, the holder (other than with respect to shares of Common Stock held by the Company as treasury stock) otherwise entitled to such fraction will be entitled to receive a sum in cash (without interest) equal to, as the Company may determine, either (a) the holder’s proportionate interest in the proceeds, net of selling costs not paid and satisfied by the Company, from
the aggregation and sale of the fractional shares by the transfer agent for the Common Stock or (b) the closing price of the Common Stock on The Nasdaq Stock Market LLC (or the principal market upon which the Common Stock is trading) on the trading day immediately prior to the Effective Date, as adjusted by the specific ratio chosen by the Board within the Ratio Range, multiplied by the applicable fraction of a share of Common Stock.
CRITERIA TO BE USED FOR DECISION TO APPLY THE REVERSE STOCK SPLIT
If the stockholders approve the Reverse Stock Split, then the Board or an authorized committee of the Board will be authorized to proceed with the Reverse Stock Split within the time period indicated. In determining whether to proceed with the Reverse Stock Split and setting the exact split ratio within the Ratio Range, if any, the Board or an authorized committee of the Board will consider a number of factors, including market conditions, existing and expected trading prices of the Common Stock, the NASDAQ listing requirements, the Company’s additional funding requirements and the amount of the Company’s authorized but unissued Common Stock.
NO DISSENTER’S RIGHTS
Under the General Corporation Law of the State of Delaware, stockholders will not be entitled to dissenter’s rights with respect to the proposed amendment to the Charter to effect the Reverse Stock Split, and the Company does not intend to independently provide stockholders with any such right.
CERTAIN MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following description of certain material U.S. federal income tax considerations regarding the Reverse Stock Split is based on the Code, applicable Treasury Regulations promulgated thereunder, judicial authority, and current administrative rulings and interpretations as in effect on the date of this proxy statement. These authorities are subject to change, including possibly with retroactive effect, which could alter the U.S. federal income tax consequences described below. We have not sought and will not seek an opinion of counsel or a ruling from the Internal Revenue Service (the “IRS”) regarding the U.S. federal income tax consequences of the Reverse Stock Split.
This discussion is intended to provide only a general summary to stockholders who hold their shares of Common Stock as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment) and does not discuss the tax consequences of any other transaction that may occur before, after, or at the same time as the Reverse Stock Split. This discussion does not address other federal taxes (such as the alternative minimum tax, gift or estate taxes, or the Medicare surtax on net investment income) or tax considerations under state, local or foreign laws. This discussion does not address every aspect of U.S. federal income taxation that may be relevant to stockholders in light of their particular circumstances or to persons who are otherwise subject to special tax treatment, including, without limitation: (a) partnerships, subchapter S corporations, trusts or other pass-through entities or investors therein; (b) brokers or dealers in securities; (c) traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; (d) banks or other financial institutions; (e) insurance companies; (f) mutual funds; (g) tax exempt organizations or pension funds; (h) “controlled
foreign corporations” or “passive foreign investment companies”, as defined in the Code, or U.S. expatriates; (i) U.S. holders (as defined below) whose functional currency is not the U.S. dollar; (j) real estate investment trusts; (k) regulated investment companies; (l) grantor trusts; (m) stockholders who actually or constructively own 10 percent or more of our voting stock; (n) persons who hold our Common Stock as part of a hedging, straddle, conversion or other risk reduction transaction; or (o) persons who acquired our Common Stock through the exercise of employee stock options or otherwise as compensation.
If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of our Common Stock, the U.S. federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships that hold our Common Stock, and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal income tax consequences of the Reverse Stock Split.
Tax Consequences to U.S. Holders and Non-U.S. Holders on the Exchange of Common Stock Pursuant to the Reverse Stock Split
A “U.S. holder” is a beneficial owner of our Common Stock that is, for U.S. federal income tax purposes: (a) an individual citizen or resident of the United States; (b) a corporation created or organized in or under the laws of the United States any state thereof or the District of Columbia (or entity treated as such for U.S. federal income tax purposes); (c) an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or (d) a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) it has a valid election in effect under applicable Treasury Regulations to be treated as a United States person. A “non-U.S. holder” is a beneficial owner of our Common Stock that is neither a U.S. holder nor an entity or arrangement treated as a partnership for U.S. federal income tax purposes.
The Reverse Stock Split is intended to be treated as a recapitalization for U.S. federal income tax purposes. A U.S. holder or non-U.S. holder generally will not recognize gain or loss on the Reverse Stock Split, except in respect of cash, if any, received in lieu of a fractional share interest as discussed below. In general, the aggregate tax basis of the post-Reverse Stock Split shares received will be equal to the aggregate tax basis of the pre-Reverse Stock Split shares exchanged therefor (excluding any portion of the holder’s basis allocated to fractional shares), and the holding period of the post-Reverse Stock Split shares received will include the holding period of the pre-Reverse Stock Split shares exchanged.
Tax Consequences to U.S. Holders on the Receipt of Cash in Lieu of Fractional Shares
A U.S. holder who receives cash in lieu of a fractional share of new Common Stock generally will recognize taxable gain or loss equal to the difference, if any, between the amount of cash received and the portion of the stockholder’s aggregate adjusted tax basis in the shares of old Common Stock allocated to the fractional share. If the shares of old Common Stock allocated to the fractional shares were held by the stockholder as capital assets, the gain or loss resulting from the payment of cash in lieu of the issuance of a
fractional share will be taxed as capital gain or loss. Such capital gain or loss will be short term if the pre-Reverse Stock Split shares were held for one year or less and long term if held for more than one year.
In certain circumstances, cash received by a U.S. holder in lieu of fractional shares could be treated as a dividend for U.S. federal income tax purposes instead of capital gain. We recommend that U.S. holders of our Common Stock consult their own tax advisors to determine the extent to which their fractional share redemption could be treated as a dividend.
Tax Consequences to Non-U.S. Holders on the Receipt of Cash in Lieu of Fractional Shares
A non-U.S. holder generally will not be subject to U.S. federal income tax with respect to any gain recognized as a result of cash received in lieu of a fractional share in connection with the Reverse Stock Split; provided, however, that gain will be subject to tax if (a) the gain is effectively connected with a trade or business of the non-U.S. holder in the U.S., and, where a tax treaty applies, is attributable to a U.S. permanent establishment or fixed base of the non-U.S. holder, (b) the gain is recognized by an individual non-U.S. holder who is present in the United States for 183 or more days in the taxable year of the Reverse Stock Split and certain other conditions are met, or (c) the Company is or has been a “U.S. real property holding corporation” for U.S. federal income tax purposes at any time within the shorter of (i) the five-year period preceding the Reverse Stock Split and (ii) the non-U.S. holder’s holding period for our Common Stock, unless our Common Stock is regularly traded on an established securities market and the non-U.S. holder does not actually or constructively hold more than 5% of such regularly traded common stock at any time within the shorter of the five-year period preceding the Reverse Stock Split and the non-U.S. holder’s holding period for our Common Stock. The Company believes that it is not currently, and was not at any time during the five-year period preceding the Reverse Stock Split, a “U.S. real property holding company.”
Gain described in clause (a) or (c) above will be subject to U.S. federal income tax on a net income basis at regular graduated U.S. federal income tax rates generally in the same manner as if such holder were a resident of the United States. A non-U.S. holder that is a corporation also may be subject to an additional branch profits tax equal to 30% (or such lower rate specified by an applicable income tax treaty) of a portion of its effectively connected earnings and profits for the taxable year. Non-U.S. holders should consult any applicable income tax treaties that may provide for different rules. Additionally, if the circumstances described in clause (c) above exist, the Company may withhold an amount equal to 15% of the cash paid in lieu of a fractional share in connection with the Reverse Stock Split.
Gain described in clause (b) above will be subject to U.S. federal income tax at a flat 30% rate (or such lower rate specified by an applicable income tax treaty) but may be offset by U.S. source capital losses (even though the individual is not considered a resident of the United States), provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses. Non-U.S. holders should consult any applicable income tax treaties that may provide for different rules.
As discussed above under “Tax Consequences to U.S. Holders on the Receipt of Cash in Lieu of Fractional Shares,” under certain circumstances the cash received by a non-U.S. holder in lieu of fractional shares could be treated as a dividend for U.S. federal income tax purposes (which could be subject to U.S. federal withholding tax) instead of capital gain. Non-U.S. holders of our Common Stock should consult their own tax advisors to determine the extent to which their fractional share redemption could be treated as a dividend.
Information Reporting and Backup Withholding
A payment of cash in lieu of fractional shares within the United States or conducted through certain U.S. related financial intermediaries is subject to both backup withholding and information reporting unless the beneficial owner certifies under penalties of perjury that he or she is not a United States person (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person) or is otherwise exempt from backup withholding. Backup withholding is not an additional tax. Information reported to the IRS also may be made available under a specific treaty or agreement with the tax authorities in the country in which the non-U.S. holder resides or is established.
Backup withholding, currently at a 24% rate, generally will not apply to (a) each U.S. holder who provides us or our paying agent with a properly completed IRS Form W-9 establishing an exemption from backup withholding and (b) each non-U.S. holder who provides us or our paying agent the required certification as to its non-U.S. status such as by providing a valid IRS Form W-8BEN, IRS Form W-8BEN-E, or IRS Form W-8ECI (or other applicable form or successor form), or certain other requirements are met. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a U.S. holder’s or non-U.S. holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS.
FATCA
The Foreign Account Tax Compliance Act provisions of the Hiring Incentives to Restore Employment Act (Sections 1471 to 1474 of the Code) commonly referred to as “FATCA,” and the Treasury regulations and administrative guidance thereunder, generally impose a U.S. federal withholding tax of 30% on certain types of payments, including payments of U.S.- source dividends and payments of gross proceeds from the sale or other disposition of shares made to (i) “foreign financial institutions” unless they agree to collect and disclose to the IRS information regarding their direct and indirect U.S. account holders, and (ii) certain non-financial foreign entities unless they certify certain information regarding their direct and indirect U.S. owners. Additionally, in order to be treated as FATCA compliant, a non-U.S. holder must provide certain documentation (usually an IRS Form W-8BEN or W-8BEN-E) containing information about its identity, its FATCA status and, if required, its direct and indirect U.S. owners. Proposed Treasury regulations have been issued that would eliminate withholding on payments of gross proceeds (but not on payments of dividends). Pursuant to the preamble to the proposed Treasury regulations, we and any withholding agent may (but are not required to) rely on this proposed change to FATCA withholding until the final regulations are issued or the proposed regulations are withdrawn. Foreign financial institutions located in jurisdictions that have an
intergovernmental agreement with the United States governing FATCA may be subject to different rules.
We will not pay any additional amounts to non-U.S. holders in respect of any amounts withheld including any amounts withheld pursuant to FATCA. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. Non-U.S. holders are urged to consult with their own tax advisors regarding the effect, if any, of the FATCA provisions to them based on their particular circumstances.
THE PRECEDING DISCUSSION OF UNITED STATES FEDERAL TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR UNITED STATES FEDERAL, STATE AND LOCAL AND NON-U.S. TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT AND OWNERSHIP OF OUR COMMON STOCK.
REQUIRED VOTE
The approval of this Proposal Four requires the affirmative vote of a majority of the shares of Common Stock outstanding and entitled to vote on such proposal at the Annual Meeting. Abstentions will have the effect of votes “against” the proposal.
The Board unanimously recommends that stockholders vote FOR Proposal Four to approve an amendment to the Company’s Certificate of Incorporation to effect a reverse stock split of the Company’s Common Stock.
PROPOSAL FIVE
APPROVAL, ON AN ADVISORY BASIS, OF NAMED EXECUTIVE OFFICER COMPENSATION
In this Proposal Four,Five, as required pursuant to Section 14A of the Securities Exchange Act of 1934, (the “Exchange Act”)or the Exchange Act, and Rule 14a-21(a) promulgated thereunder, we are providing our stockholders the opportunity to cast an advisory (nonbinding) vote on the compensation paid to the Company’s named executive officers, as disclosed in “Executive Compensation - Compensation Discussion and Analysis” and in the related tabular and narrative disclosure below, pursuant to the compensation rules of the SEC. While this vote is advisory, and not binding on the Company, the Board values the opinions of our stockholders andstockholders; the Compensation Committee will review the result of the vote and expects to take it into consideration when making future decisions regarding executive compensation. This advisory (nonbinding) vote is currently conducted every year. We expect to hold our next advisory vote at our 20222023 annual meeting of stockholders.
We are asking our stockholders to indicate their support for the compensation of our named executive officers as described in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the executive compensation program and practices described in this proxy statement. Please read the Compensation Discussion and Analysis and the executive compensation tables and narrative disclosure for a detailed explanation of our executive compensation program and practices. Accordingly, we are asking our stockholders to vote “FOR” the following resolution:
“RESOLVED, that the stockholders approve, on an advisory basis, the Company’s named executive officer compensation, as disclosed in the Compensation Discussion and Analysis and the tabular disclosure regarding named executive officer compensation (together with the accompanying narrative disclosure) pursuant to Item 402 of Regulation S-K in thisthe proxy statement.statement for the Annual Meeting.”
Required VoteREQUIRED VOTE
The approval of this Proposal FourFive requires the affirmative vote of thea majority of the votes cast for or against, in person or by proxy and entitled to vote, on such proposal at the Annual Meeting. Under the Company'sCompany’s bylaws, abstentions and broker non-votes will have no effect on this proposal.
The Board unanimously recommends that you vote FOR Proposal Four,Five, the approval, on an advisory basis, of named executive officer compensation.
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Executive Summary
This section discusses the principles underlying our executive compensation policies and decisions and the most important factors relevant to an analysis of these policies and decisions.policies. It provides qualitative information regarding the manner and context in which compensation was awarded to and earned by our named executive officers for 2020, which were2021, who were: Dr. Gil Van Bokkelen, our former Chief Executive Officer,Officer; Mr. William (BJ) Lehmann, Jr., currentlyour former President and Chief Operating Officer (who also served as our Interim Chief Executive Officer in 2021, and our President and Chief Operating Officer in 2020,2021); Dr. John Harrington, our Executive Vice President and Chief Scientific Officer,Officer; Mr. Ivor Macleod, our Chief Financial Officer,Officer; and Ms. Laura Campbell, our former Senior Vice President of Finance, andthrough July 21, 2021 (at which time she retired from Athersys). This section also places in perspective the data presented in the compensation tables and narratives that follow.
As of January 1, 2020, Ms. Campbell was serving as our Senior Vice President of Finance, principal accounting officer and principal financial officer. On January 31, 2020, Mr. Macleod joined the Company as our Chief Financial Officer. Ms. Campbell continued to serve as our principal financial officer until we filed our annual report on Form 10-K for the year ended December 31, 2019, at which point Mr. Macleod became our principal financial officer, and Ms. Campbell continued to serve as principal accounting officer. In February 2021, Dr. Van Bokkelen resignedceased serving as Chairman and Chief Executive Officer and Mr. Lehmann was appointed as our Interim Chief Executive Officer. Also in February 2021, the Board formed a CEO Search Committee to conduct and lead a search for one or more candidates to serveMr. Daniel Camardo was appointed as our Chief Executive Officer and a Director on February 14, 2022, and, on June 17, 2022, Maia Hansen was appointed to serve as our Chief Operating Officer, and therefore they are not covered by this committeediscussion and analysis.
On May 31, 2022, in connection with our corporate restructuring plan, Mr. Lehmann’s employment terminated without cause and he ceased serving as President and Chief Operating Officer. Dr. Harrington will identifycease serving as Executive Vice President and evaluate the candidates for recommendationChief Scientific Officer, and Mr. Macleod will cease serving as Chief Financial Officer, in each case, effective as of June 30, 2022, in connection with our corporate restructuring plan when their employment is terminated without cause. The cessation of employment by Mr. Lehmann, Dr. Harrington, and Mr. Macleod will be referred to the Board.
We are a biotechnology company that is focused primarily in the fieldremainder of regenerative medicine. We are committed tothis proxy statement as the discovery and development of best-in-class therapies designed to extend and enhance the quality of human life and have established a portfolio of therapeutic product development programs to address significant unmet medical needs in multiple disease areas. Our MultiStem cell therapy, a patented and proprietary allogeneic stem cell product candidate, is our lead platform product in late-stage clinical development. Our most advanced therapeutic program is focused on the treatment of ischemic stroke, which is currently being evaluated in a potential registrational trial in Japan, and a pivotal Phase 3 clinical trial ongoing in North America under a Special Protocol Assessment, or SPA, and planned for Europe and a few other markets. All of our current clinical development programs are focused on treating critical care and other conditions where current standard of care is limited or inadequate for many patients. These represent major areas of clinical need, as well as substantial commercial opportunities.
We did not make any adjustments to any of our compensation programs as a result of the COVID-19 pandemic and did not require any work stoppages. Beginning in March 2020, we took reasonable and practical steps to comply with government policies and recommendations regarding COVID-19 and to ensure a safe working environment for our employees. The steps taken include: mandatory face coverings at all locations, remote working arrangements for those employees with job responsibilities that can be performed offsite, limiting in-person meetings and travel, and providing technical capabilities for virtual meetings. During this time and currently ongoing, we are utilizing technology for virtual employee communications, scheduled team meetings and monthly corporate meetings to ensure our employees remain engaged and connected to each other.“Executive Transition.”
As further discussed in this section, our compensation and benefit programs help us attract, retain and motivate individuals who willare expected to maximize our business results by working to meet or exceed established company orand individual objectives. In addition, we reward our executive officers for meeting certain developmental milestones, such as completing advancements in product candidate development, strategic partnerships, operational capabilities and other financial transactions that add to our capital resources or create value for our stockholders.
The following are key highlights of our 20202021 compensation and benefit determinations:
•modestly increased the base salaries of our named executive officers;
•appointed Mr. Macleod as our Chief Financial Officer, effective January 31, 2020;
•paid below-target cash incentive compensation based on performance against preset objectives to our named executive officers;
•amendedentered into retention agreements with our named executive officers, other than Dr. Van Bokkelen, which agreements provide for a cash retention award and a
stock optionsoption award, with vesting in each case tied to recognize significant tenure in employees’ post-employment exercise periods;a continued service requirement; and
•granted stock options and restricted stock unit, or RSU, awards to our named executive officers under our annual equity compensation program.
In addition, on December 3, 2021, we entered into updated employment agreements with each of Mr. Lehmann, Mr. Macleod and Dr. Harrington, which agreements became effective on December 31, 2021. These agreements were intended to modernize and update the officers’ prior employment agreements to reflect current market practices by superseding and replacing such prior employment agreements. However, the officers’ annual base salary rates and annual cash incentive compensation program participation levels remained unchanged from the 2021 levels.
The following discussion and analysis of our named executive officer compensation and benefit programs for 20202021 should be read together with the compensation tables and related disclosures that follow this section. This discussion includes forward-
lookingforward-looking statements based on our current plans, considerations, expectations and determinations about our compensation program. Actual compensation decisions that we may make for 20212022 and beyond may differ materially from our recent past.
Compensation Objectives and Philosophy
Our executive compensation programs are designed to:
•help recruit, retain and motivate executives and employees that can help usour experienced executive team to drive performance to achieve our core business goals;
•provide incentives to promote and reward superior performance throughout the organization, which we refer to as Pay for Performance;
•facilitate stock ownership and retention by our executives; and
•promote alignment between executives and the long-term interests of stockholders.
The Compensation Committee seeks to achieve these objectives by:
•establishing a compensation program that is market competitive and internally fair; and
•linking individual and corporate performance with certain elements of compensation through the use of equity grants, cash performance compensation or other means of compensation the value of which is substantially tied to the achievement of our corporate goals; and
•when appropriate, given the nature of our business, rewarding our executive officers for both Company and individual achievements with one-time performance awards.goals.
At the 20202021 Annual Meeting of Stockholders, over 85%approximately 58% of the votes cast on our advisory vote to approve named executive officer compensation were voted in favor of the approval of our named executive officer compensation. OurAccordingly, our Compensation Committee believes that the stockholder vote reinforces the objectives and philosophy of our executive compensation programs. Accordingly, we did not make any changeshas been considering certain improvements to our executive compensation decisions or policies as a direct resultprogram; in March 2022, it was decided that the named executive officer annual incentive payouts under the annual cash incentive plan of the 2020 stockholder vote.Company for 2022 would be solely based on the achievement of corporate goals.
Components of Compensation
Our executive compensation program includes the following primary elements:
•base salary;
•cash incentive compensation;
•long-term equity incentive plan awards; and
•retirement, and health and other insurance benefits.
Our Compensation Committee has not adopted any formal or informal policies or guidelines for allocating compensation between long-term and currently paid-out compensation, between cash and non-cash compensation or among different forms of non-cash compensation. We generally consider competitive practices, relative management level and operating responsibilities of each executive officer when determining the compensation elements to reward his or her ability to impact short-term and long-term results.
Role of the Chief Executive Officer
Historically, our former Chief Executive Officer, has takenDr. Van Bokkelen, took the lead in providing our Board of Directors with recommendations regarding our executive compensation. For 2020,In 2021, the Compensation Committee consideredreviewed and approved the 2021 compensation for our named executive officers, after reviewing recommendations from our formerDr. Van Bokkelen. Mr. Lehmann, as Interim Chief Executive Officer, made recommendations to the Compensation Committee regarding the compensationachievement of individual goals for Mr. Macleod and performance of our executive officers (other than himself) in relation to Company-specific corporate goals that were established by the Compensation Committee.Mr. Harrington. The achievement of corporate goals impacted potential cash incentive compensation payments and to a lesser extent,base salary increases. The Compensation Committee considered the recommendations made by our former Chief Executive Officer because of his knowledge of both the business and the performance of the other executive officers. The Compensation Committee was not bound by the input it received from our former Chief Executive Officer. Instead, the Compensation Committee exercised independent discretion when making the executive compensation decisions.decisions throughout the review of the proposed compensation recommendations. We describe and discuss the particular compensation decisions made by the Compensation Committee regarding the 20202021 compensation of our named executive officers below under “Elements of Executive Compensation.”
Role of the Independent Compensation Consultant
From time to time, theThe Compensation Committee has directly engagedengages and retainedretains the services of an independent compensation consultant, Arnosti Consulting, Inc., or Arnosti. During 2020,2021, at the request of the Compensation Committee, Arnosti assisted the Compensation Committee in evaluating the compensation arrangements for the named executive officers and the Board (including the design and negotiation of Directors,the new employment agreements with certain of the named executive officers), as well as in the preparation and analysis of comparative compensation data.
The Company pays the cost for Arnosti’s services. However, the Compensation Committee retains the sole authority to engage, direct or terminate Arnosti’s services. In 2020,2021, the Compensation Committee considered and assessed Arnosti'sArnosti’s independence, plus all relevant factors, including but not limited to, those set forth in Rule 10C-1(b)(4)(i) through (vi) under the Exchange Act, that could give rise to a potential conflict of interest with respect to Arnosti’s work. Based on this review, we are not aware of any conflict of interest that has been raised by the work performed by Arnosti.
Elements of Executive Compensation
In General. The executive team’s performance for overall compensation evaluation purposes is measured effectively on a "look back"“look back” basis considering predefined corporate goals and objectives, which include metrics of key programmatic achievements (for example, clinical, regulatory, manufacturing, process development and core capability advancement), business development objectives, and operational and financial performance (for example, capital acquisition and management), among others. Each executive’s performance is evaluated based on the Company’s performance as a whole which evaluation is then combined with anand through the evaluation of individual performance against goals and objectives relevant to his or her area of responsibility.
In general, we use comparative pay data as a market check on our proposed compensation decisions, but do not mandate target ranges for our named executive officers'officers’ salaries (or any other compensation elements) as compared to peers. The reason for this is because weWe recognize that over-reliance on external comparisons can be of concern. As a result, we use external comparisons as a point of reference in our compensation-setting process, and we are mindful of the value and limitations of comparative data.
Our peer group for 2021 consists of twenty-onetwenty companies with a similar stage of development. These companies are Abeona Therapeutics, Inc., Agenus, Inc., Akebia Therapeutics, Inc., AnaptysbioAnaptysBio Inc., Ardelyx, Inc., AVEO Pharmaceuticals, Inc., Calithera Biosciences, Inc., Chimerix Inc., Concert Pharmaceuticals, Inc., Corbus Pharmaceuticals Holdings, Inc., Cytokinetics,Eiger Biopharmaceuticals, Inc., Epyzime,Epizyme, Inc., Five Prime Therapeutics, Inc., Geron Corp, Idera Pharmaceuticals, Inc., Immune Design Corp., Infinity Pharmaceuticals, Inc., MacroGenics,Rhythm Pharmaceuticals, Inc., Sesen Bio, Inc., Syndax Pharmaceuticals, Inc., Tyme Technologies, Inc., Verastem Inc., Veru Inc., and Ziopharm Oncology, Inc.
The changes to our peer group from 20192020 consist of the following: we added AnaptysbioEiger Biopharmaceuticals, Inc., Rhythm Pharmaceuticals, Inc., Sesen Bio, Inc., Tyme Technologies, Inc., and Corbus Pharmaceuticals Holdings Inc;Veru Inc.; and we removed ChemoCentryxAgenus, Inc., InovioCytokinetics, Inc., Five Prime Therapeutics, Inc., Idera Pharmaceuticals, Inc., Immune Design Corp., and TG TherapeuticsMacroGenics, Inc. These changes were based upon a revised analysis prepared by our compensation consultant,Arnosti, and we believe that the revised peer group better reflects companies in our industry at a similar stage of development.
20202021 Base Salary. We pay base salaries to provide executive officers with a competitive level of financial security.compensation for performing the core responsibilities of their roles. We establish base salaries for our executives based on the scope of their responsibilities, taking generally into consideration competitive market compensation paid by other companies for similar positions and peer group pay information, as described above. Base salaries are generally reviewed annually, with adjustments based specifically on the individual’s responsibilities, performance and experience during the year. This review generally occurs each year following an annual review of individual performance.responsibilities.
For 2020, the Compensation Committee approved an increase in base salary of 2.10% as compared to 2019 for our former Chief Executive Officer, an adjustment that was based on both performance and consideration of comparative compensation data from the peer companies listed above that was provided to the Compensation Committee by Arnosti. Also, theThe Compensation Committee approved increases forin the base salary of each of the other named executive officers’ salaryofficers, other than Dr. Van Bokkelen, for 20202021 as compared to 20192020 based primarily on Company and individual performance for the year ended December 31, 2019.2020. The increases, effective as of January 1, 2022, were as follows: Mr. Lehmann – 2.10%;2.0% from $444,594; Dr. Harrington – 2.10%;2.5% from $442,231; Mr. Macleod – 3.0% from $410,000; and Ms. Campbell – 2.10%.2.5% from $305,279. During 2021, Mr. Lehmann received a supplemental base salary of $10,000 per month while serving as our Interim Chief Executive Officer. For
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The salarymore information, for our named executive officers is summarized below:
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2019 Salary ($) | | | | 2020 Salary ($) | | 2019 to 2020 % Increase | | | |
Dr. Van Bokkelen | | 567,875 | | | | | 579,800 | | | 2.10 | % | | | |
Mr. Lehmann | | 435,450 | | | | | 444,594 | | | 2.10 | % | | | |
Dr. Harrington | | 433,135 | | | | | 442,231 | | | 2.10 | % | | | |
Mr. Macleod | | — | | | | | 410,000 | | | — | % | | | |
Ms. Campbell | | 299,000 | | | | | 305,279 | | | 2.10 | % | | | |
refer to the disclosure under “Employment Agreements and Arrangements.”20202021 Cash Incentive Compensation. Given the nature of our business, when When appropriate, we reward our named executive officers with performance-related cash compensation. We utilize annual incentive compensation to reward officers and other employees for achieving, on a discretionary "look back"“look back” basis, corporate objectives and for meeting individual annual performance objectives. These objectives relate generally to strategic factors, including advancement of our product candidates, manufacturing and process development activities, establishment and maintenance of key strategic relationships, and financial factors, including raising capital and cash management. As described above, target bonuses are generally compared to our peer companies for overall reasonableness.
The Compensation Committee approved a cash incentive compensation program for the year ended December 31, 20202021 for our named executive officers.officers other than Dr. Van Bokkelen. Under the 20202021 incentive program, each participant was eligible to earn a target incentive compensation payment of a specified percentage of the named executive officer’s base salary rate during the award term, weighted on the achievement of specific corporate goals, with the remainder based on individual/functional performance, as set forth in the following table. The weighting on corporate versus individual/functional performance is related tobased on the relative impact on overall corporate goals and the emphasis and incentives toward departmental performance.
| | | | | | Weighted On | | Weighting |
| | | Target Amount (as a percentage of 2020 base salary rate) | | Corporate Goals | | Individual/Functional Performance | | Target Amount (as a percentage of 2021 base salary rate) | | Corporate Goals | | Individual/Functional Performance |
Dr. Van Bokkelen | | 60 | % | | 100 | % | | — | % | |
Mr. Lehmann | Mr. Lehmann | | 45 | % | | 80 | % | | 20 | % | Mr. Lehmann | | 60% | | 100% | | —% |
Dr. Harrington | Dr. Harrington | | 45 | % | | 80 | % | | 20 | % | Dr. Harrington | | 45% | | 80% | | 20% |
Mr. Macleod | Mr. Macleod | | 40 | % | | 80 | % | | 20 | % | Mr. Macleod | | 40% | | 80% | | 20% |
Ms. Campbell | Ms. Campbell | | 35 | % | | 60 | % | | 40 | % | Ms. Campbell | | 35% | | 60% | | 40% |
The evaluation of goal achievement is at the discretion of the Compensation Committee or the Board of Directors based on input from the Chief Executive Officer (with respect to the named executive officers other than the Chief Executive Officer). The material 20202021 corporate goals consisted of programadvancing the Company’s clinical programs for MultiStem and collaboration goals, including new business development, advancement of MultiStem clinical development, advancement of manufacturing process development initiatives, executing against the established operating plan and cash managementcapital acquisition objectives. Individual/functional goals were based on the named executive officer'sofficer’s scope of responsibility and are closely related to the corporate goals. Attainment of individual/functional goals was evaluated as part of the annual performance appraisal process.
We do not disclose the specific corporate or individual/functional goals for our 20202021 incentive compensation program. While the overall amount of incentive compensation is linked to predetermined metrics, the Compensation Committee or the Board has the discretion to adjust any amount ultimately paid under our annual incentive program after good faith consideration of executive officer performance, overall companyCompany performance, market conditions and cash availability. We also do not have a formally adopted plan document for the 20202021 incentive program, although the Compensation Committee approved
the specific corporate goals, target compensation levels and weightings between corporate and individual/functional performance. As a result, we view any payments under our annual cash incentive program as discretionary bonuses as opposed to typical non-equity incentive plan compensation.
As demonstrated in the following table, the Board, based on the recommendation of the Compensation Committee, agreeddetermined that each of the named executive officers listed below would be entitled to a payment under the 20202021 cash incentive program as a result of individual performance and the achievement of operational and strategic goals in 2020,2021, as described above. Ms. Campbell did not receive a 2021 bonus payment due to her mid-year retirement. The resulting payments of incentive compensation based on a percentage of such officers' 2020officers’ 2021 base salaries were as follows:
| | | Target Amount (as a percentage of 2020 base salary rate) | | Actual Amount (as a percentage of 2020 base salary rate) | | Cash Incentive Compensation Paid ($) | | Target Amount (as a percentage of 2021 base salary rate) | | Actual Amount (as a percentage of 2021 base salary rate) | | Cash Incentive Compensation Paid ($) |
Dr. Van Bokkelen | 60 | % | | 19 | % | | $107,843 | |
Mr. Lehmann | Mr. Lehmann | 45 | % | | 16 | % | | $69,623 | Mr. Lehmann | 60% | | 36% | | $201,055 |
Dr. Harrington | Dr. Harrington | 45 | % | | 16 | % | | $69,253 | Dr. Harrington | 45% | | 30% | | $134,626 |
Mr. Macleod | Mr. Macleod | 40 | % | | 15 | % | | $60,352 | Mr. Macleod | 40% | | 25% | | $104,730 |
Ms. Campbell | 35 | % | | 14 | % | | $41,243 | |
2019 Long-Term Incentive Program. Our equity compensation plan authorizes us to grant, among other types of awards, options, restricted stock and RSUs to our employees, Directors and consultants. We believe that we encourage superior long-term performance by our executive officers and employees through encouraging them to own, and assisting them with the acquisition of, our Common Stock. Our equity compensation plans provideplan provides our employees, including named executive officers, with incentives to help align their interests with the interests of our stockholders. We believe that the use of Common Stock and stock-based awards offers the best approach to achieving our objective of fostering a culture of ownership,aligning management and stockholder interests, which we believe motivates our named executive officers to create and enhance stockholder value.
The following table reflects the number of shares of Athersys Common Stock owned by our named executive officers as of December 31, 2020:
| | | | | |
| Shares of Common Stock Owned |
Dr. Van Bokkelen | 1,260,897 | |
Mr. Lehmann | 223,413 | |
Dr. Harrington | 513,134 | |
Mr. Macleod | — | |
Ms. Campbell | 273,210 | |
In 2020,2021, we awarded RSUs and stock options to our employees, including the named executive officers. We expect to continue to use equity-based awards as a long-term incentive vehicle because we believe:
•equity-based awards align the interests of our executives with those of our stockholders, support a Pay For Performance culture, foster an employee stock ownership culture and focus the management team on increasing value for our stockholders;
•equity-based awards have the potential to increase in value based on our performance and the growth of our stock price;
•equity-based awards help to provide a balance to the overall executive compensation program because, while base salary and our discretionary incentive compensation program focus on short-term performance, equity-based awards that vest over time reward increases in stockholder value over the longer-term; and
•the vesting period of equity-based awards encourages executive retention and efforts to preserve stockholder value.
In 2020,2021, we granted, in the aggregate, stock options to purchase 1,923,0002,500,000 shares of our Common Stock and 587,999399,999 RSUs to our named executive officers. Equity awards are tied to factors such as performance, peer and market analysis and the total equity ownership level of each named executive officer and further enhance the retention and long-term stock ownership features of our equity incentive program. In subjectively determining the number of stock-based awards to be granted to named executive officers, we review annually our named executive officers’ equity ownership positions, and we take into account the individual’s scope of responsibility, ability to affect results and stockholder value, anticipated future contributions to increases in stockholder value and the value of equity-based awards in relation to other elements of the individual named executive officer’s total compensation;compensation, with an emphasis on scope of responsibility, results and stockholder value. We also review competitive compensation data as described above, an assessment of individual performance, a review of each named executive officer’s existing long-term incentives, retention considerations and a subjective determination of the individual’s potential to positively impact future stockholder value. AnnualThe form and amount of our annual equity-based awards are compared to our peer companies for reasonableness. Equity-based awards are granted from time to time by the Compensation Committee or the Board, of Directors, with input from independent compensation consultants,Arnosti, as appropriate. Typically, our annual awards vest quarterly over a four-year period.
In June 2020,On February 26, 2021, we modified ourentered into retention agreements with each of Mr. Lehmann, Dr. Harrington, Mr. Macleod and Ms. Campbell. The retention agreements were entered into in connection with a leadership transition at the Company to maintain continuity during the search for a new Chief Executive Officer and to ensure we were retaining critical executives during a period of uncertainty for the Company. Additionally, we entered into the retention agreements to account for additional responsibilities taken on by these executives during this time of Company transition. Each retention agreement provides for a cash retention award (discussed further below) and a stock option awards foraward (referred to as the then-current employeesretention stock options). The retention stock options were granted on March 1, 2021 at an exercise price of $2.17 per share. Each retention stock option vested as to one-third on May 1, 2022, and directors by providing an extensionthe remaining two-thirds are scheduled to vest on May 1, 2023, subject to the period of time during which vested stock options can be exercised, first, for employees, following an employee’s voluntary termination of employment or the involuntary termination of the employee’s employment by the
Company without cause, and second, for directors, following a director’s death or voluntary termination ofapplicable officer’s continued service with the Company in each case following significant tenure withthrough the Company. Upon modification, based on tenure, employees have post-employment exercise periods from three months up to a maximumapplicable vesting date. Vesting of three years, and directors have post-employment exercise periods from eighteen months up to thirty months maximum. The modification was applied to all nonqualified stock option awards outstanding on the modification date of June 3, 2020 and to those incentiveretention stock options held by individuals who acceptedwas (or would be) accelerated upon termination of employment without cause. The retention stock options are set forth in the modification, which occurred over the periodtable below. Ms. Campbell forfeited both her retention stock options and her cash retention award as a result of June 8, 2020 through June 18, 2020. Also, the modified terms were incorporated into the forms of awards for future nonqualified stock option and incentive stock option grants subsequent to the modification date. The modification event is referred to further herein as the June 2020 Option Modification.her mid-year retirement.
The stock option (other than retention stock options) and RSU awards set forth in the table below for Dr. Van Bokkelen, Mr. Lehmann, Dr. Harrington and Ms. CampbellMr. Macleod were granted in June 20202021 as part of our program for annual equity-based awards and such awards vest quarterly over a four-year period. Mr. Macleod was grantedperiod (the stock options have an exercise price of $1.63 per share).
| | | | | | | | | | | | | | | | | |
| Retention Stock Options | | Annual Award – Stock Options | | Annual Award – Restricted Stock Units |
Mr. Lehmann | 500,000 | | 300,000 | | 133,333 |
Dr. Harrington | 750,000 | | 300,000 | | 133,333 |
Mr. Macleod | 250,000 | | 300,000 | | 133,333 |
Ms. Campbell | 100,000 | | — | | — |
In addition, in connection with Dr. Van Bokkelen’s termination of service in February 2021, the Board determined to accelerate the vesting of his then-unvested stock option award on January 31, 2020options as an inducement to his acceptance of employment withthe date the customary release of claims that Dr. Van Bokkelen executed in favor of the Company and as an inducement award, theits affiliates became irrevocable. These accelerated stock option was not granted under our 2019 long-term incentive plan.awards will remain exercisable until the earlier of their original termination date or February 15, 2024. Mr. Lehmann, Dr. Harrington, and Mr. Macleod’s inducement award generally vestsretention stock options will become fully vested upon each such named executive officer’s termination of employment in connection with respect to 25%the Executive Transition.
2021 Cash Retention Awards. As part of the stock options onretention agreements entered into with each of Mr. Lehmann, Dr. Harrington, Mr. Macleod and Ms. Campbell, the first anniversaryparticipating named executive officers each received a cash retention award opportunity in the following amounts: Mr. Lehmann, $286,743; Dr. Harrington, $503,287; Mr. Macleod, $211,150; and Ms. Campbell, $156,456. Vesting of the grant date,cash retention award required continued service by the named executive officer through May 1, 2022, except in the case of Dr. Harrington whose award instead vests as follows: $50,000 after 30 days; $45,329 on September 1, 2021; $45,329 on January 1, 2022; $135,986 on May 1, 2022; and with respect$226,643 on July 1, 2023. Vesting of the retention awards accelerated upon a termination without cause of the applicable named executive officer’s employment, subject to the remaindernamed executive officer’s execution and non-revocation of a release of claims in the Company’s favor. As a result of her mid-year retirement, Ms. Campbell forfeited her cash retention award. The remaining unvested portion of Dr. Harrington’s cash retention award will become fully vested upon his termination of employment in equal quarterly installments duringconnection with the three years following such anniversary.
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| | Stock Options | | Restricted Stock Units |
Dr. Van Bokkelen | | 525,000 | | | 233,333 | |
Mr. Lehmann | | 300,000 | | | 133,333 | |
Dr. Harrington | | 300,000 | | | 133,333 | |
Mr. Macleod | | 600,000 | | | — | |
Ms. Campbell | | 198,000 | | | 88,000 | |
Executive Transition.20202021 Retirement and Insurance BenefitsBenefits.. Consistent with our compensation philosophy, we maintain benefits for our named executive officers and our employees, including medical, dental, vision, life and disability insurance coverage and the ability to contribute to a 401(k) retirement plan, which includes a Company contribution. The named executive officers and other employees have the ability to participate in these benefits at generally the same levels. We make employer contributions to our 401(k) retirement plan based on a defined formula. We provide such retirement and health insurance benefits to our employees to attract and retain qualified personnel.
During 2020,2021, Dr. Van Bokkelen, Mr. Lehmann, Dr. Harrington, Mr. Macleod and Ms. Campbell also received Company-paid premiums for life insurance benefits in the amounts of $2.0 million for Dr. Van Bokkelen, Mr. Lehmann and Dr. Harrington;Harrington, and $1.0 million for Dr. Van Bokkelen, Mr. Macleod and Ms. Campbell. These additional life insurance policies were provided to these officers due to their extensive travel requirements and/or contributions to the Company.
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Relocation-Related Benefits. Pursuant to Mr. Macleod’s employment agreement, we agreed to reimburse him for all relocation-related expenses incurred by him in connection with his relocation to the Cleveland, Ohio area (up to $50,000) if he relocated by September 30, 2020. We also agreed to reimburse him for reasonable expenses relating to his commute to the Cleveland, Ohio area (including airfare, hotel and/or housing in the Cleveland, Ohio area and local transportation) that were incurred prior to July 31, 2020, up to an aggregate maximum amount of $50,000. Actual amounts paid to Mr. Macleod under these arrangements are included below in the 2020 Summary Compensation Table.
Severance Arrangements
See the disclosure under “Potential Payments Upon Termination or Change of Control” for more information about severance arrangements with our named executive officers, as well as the severance compensation and benefits actually provided to Dr. Van Bokkelen in connection with his separationtermination of employment in February 2021. We provide such severance arrangements in order to assurehelp ensure that our executives will focus on the best interests of the business at all times, without undue concern for their own financial security.
Employment Agreements and Arrangements
We believe that entering into employment agreements with each of our named executive officers was necessary for us to attract and retain talented and experienced individuals for our senior level positions. In this way, the employment agreements help us meet the initial objective of our compensation program. Each agreement contains terms and arrangements that we agreed to through arms-length negotiation with our named executive officers. We view these employment agreements as reflecting the minimum level of compensation that our named executive officers require to remain employed with us, and thus the bedrock of our compensation program for our named executive officers. In 2020, we entered into such an employment agreement with Mr. Macleod in connection with his appointment as our Chief Financial Officer, which employment agreement governs certain of the terms of his 2020 compensation. For more details of our employment agreements and arrangements effective in 2020 with our named executive officers, see the disclosure titled “Employment Agreements and Arrangements" under "Grants of Plan-Based Awards for 2020.”
Clawback Policy
Effective in April 2021, our Board of Directors adopted a clawback policy that permits us to recoup incentive compensation paid to our current or former “officers” (for purposes of Section 16 of the Exchange Act) in certain circumstances. Under this policy, if the Company is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under U.S. federal securities laws, the Board may reasonably, and in good faith, determine that any culpable individual who received incentive-based compensation will be subject to reasonable efforts to recover all excessive incentive-based compensation. The Board of Directors may also direct Athersys to use prompt and reasonable efforts to equitably adjust the amount of unpaid but notionally earned performance-based awards (plus any amount attributable to such awards). This policy allows for recovery for up to three fiscal years prior to (and including) the year in which the Board of Directors determines a triggering event has occurred. Recovery under the clawback policy is in addition to (but not duplicative of) any recoupment required or permitted by law, including The Sarbanes-Oxley Act of 2002.
General Tax Deductibility of Executive Compensation
Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), there is a limitation on tax deductions of any publicly-held corporation for individual compensation to certain current and former executive officers of such corporation such that only the first $1.0 million payable to each such executive is deductible by the Company in any taxable year. The Compensation Committee believes that the tax deduction limitation should not be permitted to compromise the Company’s ability to design and maintain executive compensation arrangements that will attract and retain the executive talent to compete successfully. Accordingly, achieving the desired flexibility in the design and delivery of compensation may result in compensation that in certain cases is not deductible for federal income tax purposes.
2020 Summary Compensation Table
The following table and narrative set forth certain information with respect to the compensation for the fiscal years ended December 31, 2020, 2019 and 2018 of our named executive officers.
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Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards (1) ($) | | Option Awards (1) ($) | | All Other Compensation (2) ($) | | Total (3) ($) |
Gil Van Bokkelen, Former Chief Executive Officer (4) | | 2020 | | 579,800 | | | 107,843 | | | 669,666 | | | 1,474,947 | | | 33,695 | | | 2,865,951 | |
| 2019 | | 567,875 | | | — | | | 404,562 | | | 590,216 | | | 34,000 | | | 1,596,653 | |
| | 2018 | | 550,000 | | | 267,300 | | | 340,956 | | | 522,446 | | | 20,920 | | | 1,701,622 | |
William (BJ) Lehmann, Interim Chief Executive Officer, President and Chief Operating Officer | | 2020 | | 444,594 | | | 69,623 | | | 382,666 | | | 745,110 | | | 19,385 | | | 1,661,378 | |
| 2019 | | 435,450 | | | — | | | 202,294 | | | 295,116 | | | 16,500 | | | 949,360 | |
| | 2018 | | 421,750 | | | 142,000 | | | 223,146 | | | 342,936 | | | 9,823 | | | 1,139,655 | |
John Harrington, Chief Scientific Officer and Executive Vice President (4) | | 2020 | | 442,231 | | | 69,253 | | | 382,666 | | | 891,989 | | | 23,373 | | | 1,809,512 | |
| 2019 | | 433,135 | | | — | | | 202,294 | | | 295,116 | | | 20,700 | | | 951,245 | |
| | 2018 | | 419,500 | | | 141,200 | | | 218,295 | | | 335,475 | | | 13,325 | | | 1,127,795 | |
Ivor Macleod, Chief Financial Officer | | 2020 | | 377,410 | | | 60,352 | | | — | | | 520,800 | | | 115,108 | | | 1,073,670 | |
Laura Campbell, Senior Vice President of Finance | | 2020 | | 305,279 | | | 41,243 | | | 252,560 | | | 636,282 | | | 24,837 | | | 1,260,201 | |
| 2019 | | 299,000 | | | — | | | 134,862 | | | 196,755 | | | 22,670 | | | 653,287 | |
| | 2018 | | 287,500 | | | 81,100 | | | 116,424 | | | 178,920 | | | 13,709 | | | 677,653 | |
(1)The dollar amounts for stock awards and option awards represent a valuation of the award on the grant date that vests over time and do not represent cash proceeds. The grant date fair values of RSUs and stock option awards are calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC 718. Assumptions used in the calculation of these amounts are included in Note B to the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2020. Included in this amount for 2020 was the incremental fair value to the applicable employee on the modification date for modified awards that were included in the June 2020 Option Modification. This incremental fair value in 2020 was $532,572 for Dr. Van Bokkelen, $206,610 for Mr. Lehmann, $353,489 for Dr. Harrington and $280,872 for Ms. Campbell. There was no incremental fair value associated with Mr. Macleod’s modification.
(2)“All Other Compensation” includes payments for 401(k) matching contributions from the Company, premiums for additional life insurance policies, contributions to health savings accounts (if applicable) and premiums for long-term disability plans for each named executive officer. Amounts other than perquisites and personal benefits over $10,000 include 401(k) matching contributions for Dr. Van Bokkelen, Dr. Harrington, Mr. Macleod and Ms. Campbell in the amounts of $12,200, $11,600, $12,200 and $12,198, respectively. For Mr. Macleod, this column also includes (a) $45,567 in reimbursements to Mr. Macleod for expenses related to his commute to the Cleveland, Ohio area (including airfare, hotel and housing, and local transportation), and (b) $50,000 in reimbursements for relocation-related expenses incurred by Mr. Macleod in connection with his relocation to the Cleveland, Ohio area.
(3)The cash payments (salary and bonus) in the above table represent less than half of the 2020 "Total" compensation column (range is 24% to 41%), with the bulk of the remainder being the value ascribed to equity-based compensation. We believe that the equity-based compensation we provide to our named executive officers helps align their interests with the interests of our stockholders.
(4)Dr. Van Bokkelen and Dr. Harrington also served as our Directors for 2020, 2019 and 2018 and did not receive any compensation for service as Directors.
Grants of Plan-Based Awards for 2020
The following table sets forth plan-based equity awards granted to our named executive officers during 2020 under our equity compensation plans.
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Name | Grant Date | Board Action Date | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/sh) | Grant Date Fair Value of Stock and Option Awards ($) (3) |
Gil Van Bokkelen | June 18, 2020 (1) | June 18, 2020 | 233,333 | | — | | — | | 669,666 | |
June 18, 2020 (2) | June 18, 2020 | — | | 525,000 | | 2.87 | 942,375 | |
June 3, 2020 (5) | June 3, 2020 | — | | (5) | | (5) | | 532,572 | |
William (BJ) Lehmann | June 18, 2020 (1) | June 18, 2020 | 133,333 | | — | | — | | 382,666 | |
June 18, 2020 (2) | June 18, 2020 | — | | 300,000 | | 2.87 | 538,500 | |
June 3 - June 8, 2020 (5) | June 3, 2020 | — | | (5) | | (5) | | 206,610 | |
John Harrington | June 18, 2020 (1) | June 18, 2020 | 133,333 | | — | | — | | 382,666 | |
June 18, 2020 (2) | June 18, 2020 | — | | 300,000 | | 2.87 | 538,500 | |
June 3 - June 11, 2020 (5) | June 3, 2020 | — | | (5) | | (5) | | 353,489 | |
Ivor Macleod | January 31, 2020 (4) | January 16, 2020 | — | | 600,000 | | 1.36 | 520,800 | |
Laura Campbell | June 18, 2020 (1) | June 18, 2020 | 88,000 | | — | | — | | 252,560 | |
June 18, 2020 (2) | June 18, 2020 | — | | 198,000 | | 2.87 | 355,410 | |
June 3 - June 8, 2020 (5) | June 3, 2020 | — | | (5) | | (5) | | 280,872 | |
(1)Restricted stock units granted under our 2019 Plan.
(2)Options granted under our 2019 Plan.
(3)The amounts in this column represent the grant date fair value of the RSUs and stock option awards calculated in accordance with ASC 718.
(4)Inducement stock option award granted upon Mr. Macleod’s commencement of employment with the Company. This award was granted pursuant to Rule 5635(c)(4) of the Nasdaq Stock Market Listing Rules as an inducement material to Mr. Macleod’s acceptance of employment with the Company, rather than under the 2019 Plan.
(5)Reflects the amount in 2020 of the incremental fair value to the applicable employee on the modification date for modified awards that were included in the June 2020 Option Modification. There was no incremental fair value associated with Mr. Macleod’s modification.
Employment Agreements and Arrangements
We believe that entering into employment agreements with each of our named executive officers is necessary for us to attract and retain talented and experienced individuals for our senior level positions. In this way, the employment agreements help us meet the initial objective of our compensation program. Each agreement contains terms and arrangements that we agreed to through arms-length negotiation with our named executive officers. We view these employment agreements as reflecting the minimum level of compensation that our named executive officers require to remain employed with us, and thus the bedrock of our compensation program for our named executive officers. For more details of our employment agreements and arrangements effective in 2021 with our named executive officers, including the revisions reflected in the new employment agreements entered into with some of our named executive officers in December 2021, see the disclosure titled “Employment Agreements and Arrangements” under “Grants of Plan-Based Awards for 2021.”
Stock Ownership Guidelines
Effective June 15, 2021, our Board adopted stock ownership guidelines that align the interests of the named executive officers and our non-employee Directors, together referred to as the “Covered Persons,” with the Company’s stockholders by helping to ensure that the named executive officers and non-employee Directors acquire, over time, a meaningful personal investment in the Common Stock for which they are making managerial and oversight decisions. Under the guidelines, each Covered Person is expected to hold a minimum targeted level of Common Stock ownership. Each non-employee Director and named executive officer is expected to achieve the number of shares of Common Stock valued at a multiple of such person’s annual cash retainer or annual base salary, as the case may be, in the amounts listed below:
| | | | | |
Position | Multiple of Annual Cash Retainer or Annual Base Salary |
Non-Employee Director | 3x |
Chief Executive Officer | 6x |
Other Named Executive Officers | 3x |
The stock ownership guidelines provide that each Covered Person has five years from adoption of the guidelines (or for new appointees, from becoming a member of the Board or election as an executive officer) to comply with the guidelines. The Compensation Committee will assess compliance with the stock ownership guidelines at the end of each calendar year based on the average closing price for the Common Stock as reported by
NASDAQ for the immediately preceding 60 days. The Board or the Compensation Committee interpret the terms of the guidelines and may waive the application of the guidelines in the event of a Covered Person’s financial hardship or other special circumstances.
Clawback Policy
Effective in April 2021, our Board adopted a clawback policy that permits us to recoup incentive compensation paid to our current or former “officers” (for purposes of Section 16 of the Exchange Act) in certain circumstances. Under this policy, if the Company is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under U.S. federal securities laws, the Board may reasonably, and in good faith, determine that any culpable individual who received incentive-based compensation will be subject to reasonable efforts to recover all excessive incentive-based compensation. The Board may also direct the Company to use prompt and reasonable efforts to equitably adjust the amount of unpaid but notionally earned performance-based awards (plus any amount attributable to such awards). This policy allows for recovery for up to three fiscal years prior to (and including) the year in which the Board determines a triggering event has occurred. Recovery under the clawback policy is in addition to (but not duplicative of) any recoupment required or permitted by law, including the Sarbanes-Oxley Act of 2002.
General Tax Deductibility of Executive Compensation
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, there is a limitation on tax deductions of any publicly-held corporation for individual compensation to certain current and former executive officers of such corporation such that only the first $1.0 million payable to each such executive is deductible by the Company in any taxable year. The Compensation Committee believes that the tax deduction limitation should not be permitted to compromise the Company’s ability to design and maintain executive compensation arrangements that will attract and retain the executive talent to compete successfully. Accordingly, achieving the desired flexibility in the design and delivery of compensation may result in compensation that in certain cases is not deductible for federal income tax purposes.
2021 SUMMARY COMPENSATION TABLE
The following table and narrative set forth certain information with respect to the compensation for the fiscal years ended December 31, 2021, 2020 and 2019 of our named executive officers, as applicable. Mr. Camardo and Ms. Hansen are not listed in the 2021 Summary Compensation Table as they did not join the Company until 2022. Mr. Lehmann’s employment terminated without cause on May 31, 2022, and the employment of Dr. Harrington and Mr. Macleod is expected to terminate on June 30, 2022.
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Name and Principal Position | | Year | | Salary ($) | | Bonus ($) | | Stock Awards (1) ($) | | Option Awards (1) ($) | | All Other Compensation (2) ($) | | Total (3) ($) |
Gil Van Bokkelen, Former Chief Executive Officer (4) | | 2021 | | 72,847 | | — | | — | | 9,169 | | 797,252 | | 879,268 |
| 2020 | | 579,800 | | 107,843 | | 669,666 | | 1,474,947 | | 33,695 | | 2,865,951 |
| 2019 | | 567,875 | | — | | 404,562 | | 590,216 | | 34,000 | | 1,596,653 |
William (BJ) Lehmann, Former President and Chief Operating Officer (5) | | 2021 | | 553,486 | | 201,055 | | 217,333 | | 991,500 | | 19,883 | | 1,983,257 |
| 2020 | | 444,594 | | 69,623 | | 382,666 | | 745,110 | | 19,385 | | 1,661,378 |
| 2019 | | 435,450 | | — | | 202,294 | | 295,116 | | 16,500 | | 949,360 |
John Harrington, Chief Scientific Officer and Executive Vice President (4)(6) | | 2021 | | 453,287 | | 229,955 | | 217,333 | | 1,332,750 | | 23,428 | | 2,256,753 |
| 2020 | | 442,231 | | 69,253 | | 382,666 | | 891,989 | | 23,373 | | 1,809,512 |
| 2019 | | 433,135 | | — | | 202,294 | | 295,116 | | 20,700 | | 951,245 |
Ivor Macleod, Chief Financial Officer | | 2021 | | 422,300 | | 104,730 | | 217,333 | | 650,250 | | 22,835 | | 1,417,448 |
| 2020 | | 377,410 | | 60,352 | | — | | 520,800 | | 115,108 | | 1,073,670 |
Laura Campbell, Former Senior Vice President of Finance | | 2021 | | 174,508 | | — | | — | | 136,500 | | 43,294 | | 354,302 |
| 2020 | | 305,279 | | 41,243 | | 252,560 | | 636,282 | | 24,837 | | 1,260,201 |
| 2019 | | 299,000 | | — | | 134,862 | | 196,755 | | 22,670 | | 653,287 |
(1) The dollar amounts for 2021 for stock awards and option awards represent a valuation of the award on the grant date that vests over time and do not represent cash proceeds. The grant date fair values of RSUs and stock option awards are calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or ASC 718. Assumptions used in the calculation of these amounts are included in Note C to the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2021. The option awards include the valuation of both annual stock option awards and retention stock options. The valuation of the retention stock options for Mr. Lehmann, Dr. Harrington, Mr. Macleod and Ms. Campbell were $682,500, $1,023,750, $341,250 and $136,500, respectively. Included in this amount for 2021, for Dr. Van Bokkelen, is the incremental fair value for stock option awards modified upon cessation of service.
(2) “All Other Compensation” includes for 2021 payments for 401(k) matching contributions from the Company, premiums for additional life insurance policies, contributions to health savings accounts (if applicable), and premiums for long-term disability plans for each named executive officer. Amounts other than perquisites and personal benefits over $10,000 for 2021 include 401(k) matching contributions for Dr. Harrington, Mr. Macleod and Ms. Campbell in the amounts of $11,600, $12,200 and $12,200, respectively. For Dr. Van Bokkelen, “All Other Compensation” for 2021 also includes payments and benefits provided in connection with his separation agreement consisting of $530,393 in cash severance, a lump sum payment of $187,371 in lieu of notice of termination and certain foregone benefits and $70,351 for accrued vacation and reimbursement of legal fees. For Ms. Campbell, “All Other
Compensation” for 2021 also includes $22,965 of consulting fees for services performed after her retirement from the Company.
(3) The total cash payments for all named executive officers (salary, bonus and other compensation (if applicable)) in the above table for 2021 represent less than half of the 2021 “Total” compensation column, although on an individual basis, for Dr. Van Bokkelen and Ms. Campbell this amount is approximately 100% and 61%, respectively, with the bulk of the remainder being the value ascribed to equity-based compensation. We believe that the equity-based compensation we provide to our named executive officers helps align their interests with the interests of our stockholders.
(4) Dr. Van Bokkelen, up until the time of his termination in February 2021, and Dr. Harrington also served as our Directors in 2021, 2020 and 2019 and did not receive any compensation for service as Directors.
(5) Mr. Lehmann’s salary for 2021 includes a supplemental base salary of $10,000 per month while he served as Interim Chief Executive Officer.
(6) The amount in the “Bonus” column for Dr. Harrington for 2021 includes the 2021 cash incentive program payment as well as a portion of his retention bonus equal to $95,329, which vested in and was paid in two installments in 2021.
GRANTS OF PLAN-BASED AWARDS FOR 2021
The following table sets forth plan-based equity awards granted to our named executive officers during 2021 under our equity compensation plans.
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Name | Grant Date | Board Action Date | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/sh) | Grant Date Fair Value of Stock and Option Awards ($) (4) |
Gil Van Bokkelen | February 15, 2021 (1) | February 15, 2021 | — | — | — | 9,169 |
William (BJ) Lehmann | June 11, 2021 (2) | June 11, 2021 | 133,333 | — | — | 217,333 |
June 11, 2021 (3) | June 11, 2021 | — | 300,000 | 1.63 | 309,000 |
March 1, 2021 (5) | February 26, 2021 | — | 500,000 | 2.17 | 682,500 |
John Harrington | June 11, 2021 (2) | June 11, 2021 | 133,333 | — | — | 217,333 |
June 11, 2021 (3) | June 11, 2021 | — | 300,000 | 1.63 | 309,000 |
March 1, 2021 (5) | February 26, 2021 | — | 750,000 | 2.17 | 1,023,750 |
Ivor Macleod | June 11, 2021 (2) | June 11, 2021 | 133,333 | — | — | 217,333 |
June 11, 2021 (3) | June 11, 2021 | — | 300,000 | 1.63 | 309,000 |
March 1, 2021 (5) | February 26, 2021 | — | 250,000 | 2.17 | 341,250 |
Laura Campbell | March 1, 2021 (5) | February 26, 2021 | — | 100,000 | 2.17 | 136,500 |
(1) Reflects the amount in 2021 of the incremental fair value to Dr. Van Bokkelen on the modification date for stock option awards modified upon his cessation of service on February 15, 2021.
(2) RSUs granted under our 2019 Plan.
(3) Options granted under our 2019 Plan.
(4) The amounts in this column represent the grant date fair value of the RSUs and stock option awards calculated in accordance with ASC 718.
(5) Retention stock options granted under our 2019 Plan. Ms. Campbell forfeited her retention stock options due to her mid-year retirement in 2021.
EMPLOYMENT AGREEMENTS AND ARRANGEMENTS
Dr. Gil Van Bokkelen.In 1998, we entered into a one-year employment agreement with Dr. Gil Van Bokkelen to serve as President and Chief Executive Officer. The agreement automatically renewed for subsequent one-year terms on April 1 of each year unless either party gave notice of termination at least thirty days before the end of any term, and terminated in February 2021 upon Dr. Van Bokkelen’s resignation.cessation of service. Under the terms of the agreement, Dr. Van Bokkelen was entitled to a base salary and an annual discretionary incentive compensation payment. His base salary for 2020 was $579,800 and his target annual incentive compensation payment was 60% of his base salary. Dr. Van Bokkelen was also entitled to life insurance coverage for the benefit of his family in the amount of at least $1.0 million, which during 2020 was $2.0 million. Dr. Van Bokkelen also entered into a non-competition and confidentiality agreement with us under which, during his employment and for a period of 18 months thereafter, he is restricted from, among other things, competing with us. In connection with Dr. Van Bokkelen’s departuretermination of employment from the Company in February 2021, we entered into a separation letter with Dr. Van Bokkelen
memorializing his actual severance compensation and benefits, which separation letter is also described below under “Potential Payments Upon Termination or Change of Control.”
William (BJ) Lehmann, JrJr.. In 2004, Effective December 31, 2021, we entered into a four-year employmentnew agreement with Mr. Lehmann to serve as Executive Viceour President of Corporate Development and Finance. The agreement automatically renews for subsequent one-year terms on January 1 of each year unless either party gives notice of termination at least thirty days before the end of any term. The agreement was amended in 2014 to modify the duration of his severance arrangement, with no change to the events triggering such severance.Chief Operating Officer. Under the terms of the agreement, during his employment, Mr. Lehmann iswas entitled to a base salary of $453,486 and iswas eligible to receive a discretionary incentive compensation payment. His base salary is $444,594 for 2020 and his target discretionary annual incentive compensation payment for 2020 isat 45% of his base salary. Mr. Lehmann was eligible to participate in the Company’s annual stock-based award program as determined annually at the discretion of the Board or the Compensation Committee. For more information about severance arrangements under the agreement, see the disclosure under “Potential Payments Upon Termination or Change of Control.” Mr. Lehmann has also entered into ais subject to customary restrictive covenants, including non-competition and confidentiality agreement with us under which,non-solicitation obligations that remain in effect both during histhe employment term and for a periodtwelve months following termination of 12 months thereafter, he is restricted from, amongemployment, as well as other things, competing with us.customary restrictive covenants that remain in effect indefinitely, such as confidentiality provisions.
On February 26, 2021, Mr. Lehmann entered into a retention agreement (“Retention Agreement”) to serve as Interim Chief Executive Officer (“Interim CEO”) of the Company. The Retention Agreement provides for a cash retention award and a stock option award, with vesting in each case generally tied to a continued service requirement. Also, the Retention Agreement providesCompany, which provided that he will receive a supplemental base salary of $10,000 per month while serving as Interim CEOChief Executive Officer and his target discretionary annual incentive will increase to 60% of the actual base salary he earnsearned during 2021. Under the terms of the retention agreement, Mr. Lehmann was awarded a cash retention bonus opportunity (“Retention Bonus”) in the amount of $286,743 and a special stock option grant on March 1, 2021, with respect to 500,000 shares of Common stock of the Company.Stock. The Retention Bonusretention bonus and one thirdone-third of the stock options will generally vestvested on May 1, 2022 and the remaining stock options willwere generally scheduled to vest on May 1, 2023, subject to his continued employment with the Company (and subject(subject to earlier vesting on a termination of employment without “cause”). The unvested portion of Mr. Lehmann’s retention stock options became fully vested in 2022 upon his termination of employment in connection with the Executive Transition.
Dr. John J. HarringtonHarrington. . In 1998,Effective December 31, 2021, we entered into a one-year employmentnew agreement with Dr. John J. Harrington to serve as our Executive Vice President and Chief Scientific Officer. The agreement automatically renews for subsequent one-year terms on April 1 of each year unless either party gives notice of termination at least thirty days before the end of any term. Under the terms of the agreement, during his employment, Dr. Harrington is entitled to a base salary of $453,287 and a discretionary incentive compensation payment. His base salary for 2020 is $442,231 and his targeteligible to receive a discretionary annual incentive compensation payment isat 45% of his base salary.salary with no minimum payment guaranteed. Dr. Harrington is also entitledeligible to life insurance coverage for the benefit of his familyparticipate in the amountCompany’s annual stock-based award program as determined annually at the discretion of at least $1.0 million which is currently $2.0 million.the Board or the Compensation Committee. For more information about severance arrangements under the agreement, see the disclosure under “Potential Payments Upon Termination or Change of Control.” Dr. Harrington has also entered into ais subject to customary restrictive covenants, including non-competition and confidentiality agreement with us under which,non-solicitation obligations that remain in effect both during histhe employment term and for a periodtwelve months following termination of 18 months thereafter, he is restricted from, amongemployment, as well as other things, competing with us.customary restrictive covenants that remain in effect indefinitely, such as confidentiality provisions.
On February 26, 2021, Dr. Harrington entered into a Retention Agreement. The Retention Agreement provides for a cash retention award and a stock option award, with vesting in each case generally tied to a continued service requirement.agreement. Under the terms of the retention agreement, Dr. Harrington was awarded a Retention Bonuscash retention bonus opportunity in the amount of $503,287 and on March 1, 2021, he was awarded a special
stock option grant with respect to 750,000 shares of Common Stock of the Company.Stock. The Retention Bonus willretention bonus generally vestvests in five installments with $50,000 vesting on March 28, 2021, $45,329 vesting on each of September 1, 2021 and January 1, 2022, $135,986 vesting on May 1, 2022, and $226,643 vesting on July 1, 2023, subject to his continued employment (and subject to earlier vesting on a termination of employment without “cause”). One-thirdOne third of the stock options will generally vestvested on May 1, 2022 and the remaining stock options willare generally scheduled to vest on May 1, 2023, subject to his continued employment with the Company (and subject(subject to earlier vesting on a termination of employment without “cause”). The unvested portions of Dr. Harrington’s retention stock options and cash retention bonus are expected to become fully vested upon his termination of employment in connection with the Executive Transition.
Ivor Macleod. In 2020,Effective December 31, 2021, we entered into a one-year employmentnew agreement with Mr. Macleod to serve as our Chief Financial Officer. The agreement automatically renews for subsequent one-year terms on January 31 of each year unless either party gives notice of termination at least thirty days before the end of any terms. Under the terms of the agreement, during his employment, Mr. Macleod is entitled to a base salary of $422,300 and is eligible to receive a discretionary incentive compensation payment beginning in 2020 and equity awards under the Company’s equity compensation plans beginning in 2021. His base salary is $410,000 for 2020 and his target annual incentive compensation payment for 2020 isat 40% of his base salary.salary with no minimum payment guaranteed. Mr. Macleod is also entitledeligible to life insurance coverage for the benefit of his familyparticipate in the amount of $1.0 million. Mr. Macleod received a one-time grant of a stock option to purchase 600,000 sharesCompany’s annual stock-based award program as determined annually at the discretion of the Company’s Common Stock on January 31, 2020 in connection withBoard or the commencement of his employment as Chief Financial Officer. Such stock option is generally subject to periodic vesting and continued employment, with 150,000 shares becoming exercisable on the first anniversary of the grant date, and the remainder becoming exercisable quarterly in equal installments over the remaining three years. We also agreed to reimburse him for all relocation-related expenses incurred by him in connection with his relocation to the Cleveland, Ohio area (up to $50,000) if he relocated by September 30, 2020. Further, we agreed to reimburse him for reasonable expenses relating to his commute to the Cleveland, Ohio area (including airfare, hotel and/or housing in the Cleveland, Ohio area and local transportation) that were incurred prior to July 31, 2020, up to an aggregate maximum amount of $50,000. Actual amounts paid to Mr. Macleod under these reimbursement arrangements are disclosed above in the 2020 Summary Compensation Table.Committee. For more information about severance arrangements under the agreement, see the disclosure under “Potential
Payments Upon Termination or Change of Control.” Mr. Macleod is also has also entered into asubject to customary restrictive covenants, including non-competition and confidentiality agreement with us under which,non-solicitation obligations that remain in effect both during histhe employment term and for a periodtwelve months following termination of 12 months thereafter, he is restricted from, amongemployment, as well as other things, competing with us.customary restrictive covenants that remain in effect indefinitely, such as confidentiality provisions.
On February 26, 2021, Mr. Macleod entered into a Retention Agreement. The Retention Agreement provides forretention agreement. Under the terms of the retention agreement, Mr. Macleod was awarded a cash retention award and a stock option award, with vesting in each case generally tied to a continued service requirement. He was awarded a Retention Bonusbonus opportunity in the amount of $211,150 and on March 1, 2021, he was awarded a special stock option grant with respect to 250,000 shares of Common Stock of the Company.Stock. The Retention Bonusretention bonus and one thirdone-third of the stock options will generally vestvested on May 1, 2022 and the remaining stock options willare generally scheduled to vest on May 1, 2023, subject to his continued employment with the Company (and subject(subject to earlier vesting in the case of a termination of employment without “cause”). The unvested portion of Mr. Macleod’s retention stock options is expected to become fully vested upon his termination of employment in connection with the Executive Transition.
Laura K. CampbellCampbell.. In 1998, we entered into a two-year employment agreement with Laura K.Ms. Campbell to serve as Controller. The agreement automatically renewsrenewed for subsequent one-year terms on May 22 of each year unless either party givesgave notice of termination at least thirty days before the end of any term.term, and terminated in July 2021 upon Ms. Campbell’s retirement. Under the terms of the agreement, Ms. Campbell iswas entitled to a base salary and is eligible to receive aan annual discretionary incentive compensation payment. Her baseIn connection with Ms. Campbell’s retirement in July 2021, she was paid all accrued salary is $305,279 for 2020 and her target annual incentive compensation payment for 2020 is 35%unpaid benefits at the time of her base salary. For more information about severance arrangements under the agreement, see the disclosure under “Potential Payments Upon Termination or Change of Control.”retirement.
On February 26, 2021, Ms. Campbell entered into a Retention Agreement. The Retention Agreement provides forretention agreement. Under the terms of the retention agreement, Ms. Campbell was awarded a cash retention award and a stock option award, with vesting in each case generally tied to a continued service requirement. She was awarded a Retention Bonusbonus
opportunity in the amount of $156,456 and on March 1, 2021, she was awarded a special stock option grant with respect to 100,000 shares of Common Stock of the Company.Stock. The Retention Bonusretention bonus and one-third of the stock options will generally vest on May 1, 2022 and the remaining stock options will generally vest on May 1, 2023, subject to her continued employment with the Company (and subject to earlier vestingwere forfeited upon Ms. Campbell’s retirement in the case of a termination of employment without “cause”).July 2021.
Equity Compensation Plans
We have an equity incentive plan (the “2019 Plan”)2019 Plan) that authorized an aggregate initial pool of approximately 18,500,000 shares of Common Stock for awards to employees, directors and consultants, of which 9,066,4323,176,331 shares remained available for future issuance at December 31, 2020.2021. The equity incentive plan2019 Plan authorizes the issuance of equity-based compensation in the form of stock options, stock appreciation rights, restricted stock, RSUs, performance shares and units, and other stock-based awards, which are used to attract and retain qualified employees, Directors and consultants. Equity awards are granted from time to time under the guidance and approval of the Compensation Committee or the Board. Typically, our new hire and annual awards to employees vest over a four-year period.
401(k) Plan
We have a tax-qualified employee savings and retirement plan, also known as a 401(k) plan, that covers all of our employees. Under our 401(k) plan, eligible employees may elect to reduce their current compensation by up to the statutorily prescribed annual limit, which was $19,500 in 20202021 plus $6,500 for participants age 50 or older, and have the amount of the reduced compensation contributed to the 401(k) plan. The trustees of the 401(k) plan, at the direction of each participant, invest the assets of the 401(k) plan in designated investment options. We may make matching or profit-sharing contributions to the 401(k) plan in amounts to be determined by the Board. We made matching contributions to the 401(k) plan during fiscal 2020year 2021 at a maximum rate of 100% of the first $3,000 of participant contributions, plus 40% of participant contributions in excess of $3,000 per participant, which amounted to approximately $468,000$572,000 in 2020.2021. The 401(k) plan is intended to qualify under Section 401 of the Code, so that contributions to the 401(k) plan and income earned on the 401(k) plan contributions are not taxable until withdrawn, and so that any contributions we make will be deductible when made.
OUTSTANDING EQUITY AWARDS AT 2021 FISCAL YEAR-END
Outstanding Equity Awards at 2020 Fiscal Year-End
The following table sets forth outstanding equity awards held by our named executive officers at December 31, 2020.2021. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Option Awards | | Stock Awards | |
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#) | | Market Value of Shares or Units of Stock That Have Not Vested ($) | |
Gil Van Bokkelen (1) | 525,000 | — | 2.87 | | February 15, 2024 | (2) | — | | — | |
| 587,280 | — | 1.55 | | February 15, 2024 | (2) | — | | — | |
| 350,400 | — | 2.31 | | February 15, 2024 | (2) | — | | — | |
| 500,000 | — | 1.46 | | February 15, 2024 | (2) | — | | — | |
| 500,000 | — | 2.19 | | February 15, 2024 | (2) | — | | — | |
| 180,752 | — | 1.28 | | February 15, 2024 | (2) | — | | — | |
| 207,680 | — | 1.65 | | February 15, 2024 | (2) | — | | — | |
| 185,000 | — | 1.71 | | June 18, 2023 | (2) | — | | — | |
William (BJ) Lehmann | 37,500 | 262,500 | 1.63 | | June 11, 2031 | (2) | 116,667 | (5) | 105,000 | (8) |
| — | 500,000 | 2.17 | | March 1, 2031 | (3) | — | | — | |
| 112,500 | 187,500 | 2.87 | | June 18, 2030 | (2) | 83,334 | (6) | 75,001 | (8) |
| 183,530 | 110,118 | 1.55 | | June 12, 2029 | (2) | 48,942 | (7) | 44,048 | (8) |
| 230,004 | — | 2.31 | | June 18, 2028 | (2) | — | | — | |
| 361,200 | — | 1.46 | | June 7, 2027 | (2) | — | | — | |
| 361,200 | — | 2.19 | | June 20, 2026 | (2) | — | | — | |
| 107,680 | — | 1.28 | | June 24, 2025 | (2) | — | | — | |
| 121,152 | — | 1.65 | | June 17, 2024 | (2) | — | | — | |
| 115,000 | — | 1.71 | | June 18, 2023 | (2) | — | | — | |
John Harrington | 37,500 | 262,500 | 1.63 | | June 11, 2031 | (2) | 116,667 | (5) | 105,000 | (8) |
| — | 750,000 | 2.17 | | March 1, 2031 | (3) | — | | — | |
| 112,500 | 187,500 | 2.87 | | June 18, 2030 | (2) | 83,334 | (6) | 75,001 | (8) |
| 183,530 | 110,118 | 1.55 | | June 12, 2029 | (2) | 48,942 | (7) | 44,048 | (8) |
| 225,000 | — | 2.31 | | June 18, 2028 | (2) | — | | — | |
| 348,608 | — | 1.46 | | June 7, 2027 | (2) | — | | — | |
| 348,608 | — | 2.19 | | June 20, 2026 | (2) | — | | — | |
| 117,680 | — | 1.28 | | June 24, 2025 | (2) | — | | — | |
| 121,152 | — | 1.65 | | June 17, 2024 | (2) | — | | — | |
| 100,000 | — | 1.71 | | June 18, 2023 | (2) | — | | — | |
Ivor Macleod | 37,500 | 262,500 | 1.63 | | June 11, 2031 | (2) | 116,667 | (5) | 105,000 | (8) |
| — | 250,000 | 2.17 | | March 1, 2031 | (3) | — | | — | |
| 262,500 | 337,500 | 1.36 | | January 31, 2030 | (4) | — | | — | |
Laura Campbell | 49,500 | — | 2.87 | | July 21, 2023 | (2) | — | | — | |
| 97,888 | — | 1.55 | | July 21, 2023 | (2) | — | | — | |
| 120,000 | — | 2.31 | | July 21, 2023 | (2) | — | | — | |
| 194,000 | — | 1.46 | | July 21, 2023 | (2) | — | | — | |
| 158,208 | — | 2.19 | | July 21, 2023 | (2) | — | | — | |
| 50,000 | — | 1.84 | | July 21, 2023 | (2) | — | | — | |
| 100,384 | — | 1.28 | | July 21, 2023 | (2) | — | | — | |
| 103,840 | — | 1.65 | | July 21, 2023 | (2) | — | | — | |
| 60,000 | — | 1.71 | | June 18, 2023 | (2) | — | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | | | Stock Awards | | |
Name | | Number of Securities Underlying Unexercised Options (#) Exercisable | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | | | Number of Shares or Units of Stock That Have Not Vested (#) | | | | Market Value of Shares or Units of Stock That Have Not Vested ($) | | |
Gil Van Bokkelen (8) | | 65,625 | | | 459,375 | | | 2.87 | | | June 18, 2030 | | (1) | | 28,126 | | | (3) | | 49,221 | | | (7) |
| | 220,230 | | | 367,050 | | | 1.55 | | | June 12, 2029 | | (1) | | 24,600 | | | (4) | | 43,050 | | | (7) |
| | 292,000 | | | 58,400 | | | 2.31 | | | June 18, 2028 | | (1) | | 163,130 | | | (5) | | 285,478 | | | (7) |
| | 437,500 | | | 62,500 | | | 1.46 | | | June 7, 2027 | | (1) | | 204,167 | | | (6) | | 357,292 | | | (7) |
| | 500,000 | | | — | | | 2.19 | | | June 20, 2026 | | (1) | | — | | | | | — | | | |
| | 180,752 | | | — | | | 1.28 | | | June 24, 2025 | | (1) | | — | | | | | — | | | |
| | 207,680 | | | — | | | 1.65 | | | June 17, 2024 | | (1) | | — | | | | | — | | | |
| | 185,000 | | | — | | | 1.71 | | | June 18, 2023 | | (1) | | — | | | | | — | | | |
William (BJ) Lehmann | | 37,500 | | | 262,500 | | | 2.87 | | | June 18, 2030 | | (1) | | 19,350 | | | (3) | | 33,863 | | | (7) |
| | 110,118 | | | 183,530 | | | 1.55 | | | June 12, 2029 | | (1) | | 16,100 | | | (4) | | 28,175 | | | (7) |
| | 191,670 | | | 38,334 | | | 2.31 | | | June 18, 2028 | | (1) | | 81,570 | | | (5) | | 142,748 | | | (7) |
| | 316,050 | | | 45,150 | | | 1.46 | | | June 7, 2027 | | (1) | | 116,667 | | | (6) | | 204,167 | | | (7) |
| | 361,200 | | | — | | | 2.19 | | | June 20, 2026 | | (1) | | — | | | | | — | | | |
| | 117,680 | | | — | | | 1.28 | | | June 24, 2025 | | (1) | | — | | | | | — | | | |
| | 121,152 | | | — | | | 1.65 | | | June 17, 2024 | | (1) | | — | | | | | — | | | |
| | 115,000 | | | — | | | 1.71 | | | June 18, 2023 | | (1) | | — | | | | | — | | | |
John Harrington | | 37,500 | | | 262,500 | | | 2.87 | | | June 18, 2030 | | (1) | | 18,674 | | | (3) | | 32,680 | | | (7) |
| | 110,118 | | | 183,530 | | | 1.55 | | | June 12, 2029 | | (1) | | 15,750 | | | (4) | | 27,563 | | | (7) |
| | 187,500 | | | 37,500 | | | 2.31 | | | June 18, 2028 | | (1) | | 81,570 | | | (5) | | 142,748 | | | (7) |
| | 305,032 | | | 43,576 | | | 1.46 | | | June 7, 2027 | | (1) | | 116,667 | | | (6) | | 204,167 | | | (7) |
| | 348,608 | | | — | | | 2.19 | | | June 20, 2026 | | (1) | | — | | | | | — | | | |
| | 117,680 | | | — | | | 1.28 | | | June 24, 2025 | | (1) | | — | | | | | — | | | |
| | 121,152 | | | — | | | 1.65 | | | June 17, 2024 | | (1) | | — | | | | | — | | | |
| | 100,000 | | | — | | | 1.71 | | | June 18, 2023 | | (1) | | — | | | | | — | | | |
Ivor Macleod | | — | | | 600,000 | | | 1.36 | | | January 31, 2030 | | (2) | | — | | | | | — | | | |
Laura Campbell | | 24,750 | | | 173,250 | | | 2.87 | | | June 18, 2030 | | (1) | | 10,250 | | | (3) | | 17,938 | | | (7) |
| | 73,416 | | | 122,360 | | | 1.55 | | | June 12, 2029 | | (1) | | 8,400 | | | (4) | | 14,700 | | | (7) |
| | 100,000 | | | 20,000 | | | 2.31 | | | June 18, 2028 | | (1) | | 54,380 | | | (5) | | 95,165 | | | (7) |
| | 169,750 | | | 24,250 | | | 1.46 | | | June 7, 2027 | | (1) | | 77,000 | | | (6) | | 134,750 | | | (7) |
| | 158,208 | | | — | | | 2.19 | | | June 20, 2026 | | (1) | | — | | | | | — | | | |
| | 50,000 | | | — | | | 1.84 | | | March 7, 2026 | | (1) | | — | | | | | — | | | |
| | 100,384 | | | — | | | 1.28 | | | June 24, 2025 | | (1) | | — | | | | | — | | | |
| | 103,840 | | | — | | | 1.65 | | | June 17, 2024 | | (1) | | — | | | | | — | | | |
| | 60,000 | | | — | | | 1.71 | | | June 18, 2023 | | (1) | | — | | | | | — | | | |
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(1) Upon termination of employment, Dr. Van Bokkelen entered into a separation agreement, which provided for accelerated vesting of his outstanding stock options, with stock options remaining exercisable until the earlier of February 15, 2024 or the expiration of the original term of the stock option.
(2) Options have a ten-year term and generally vest ratably over four years following the grant date (which grant date is 10 years prior to the applicable expiration date provided in the table) on a quarterly basis, except for awardsbasis.
(3) One-third of the retention stock options granted pursuant to the retention agreements vested on May 1, 2022, and the remaining stock options are scheduled to vest on May 1, 2023, subject to the applicable named executive officer’s continued employment with the Company (and subject to earlier vesting in 2018 which generally vest ratably over three years following the grant date oncase of a quarterly basis.termination of employment without “cause” as defined in the applicable retention agreement).
(2)(4) Inducement award has a ten-year term, and options with respect to 150,000 shares vested on January 31, 2021 and the remainder of the option vests quarterly over the following three years in equal installments.
(3)(5) The stock awards reflected in this column consist of RSUs granted on June 7, 2017,11, 2021, which generally vest over four years on a quarterly basis.
(4)(6) The stock awards reflected in this column consist of RSUs granted on June 18, 2018,2020, which generally vest over threefour years on a quarterly basis.
(5)(7) The stock awards reflected in this column consist of RSUs granted on June 12, 2019, which generally vest over four years on a quarterly basis.
(6)The stock awards reflected in this column consist of RSUs granted on June 18, 2020, which generally vest over four years on a quarterly basis.
(7)(8) Value is based on the closing price of our Common Stock of $1.75$0.90 on December 31, 2020,2021, as reported on NASDAQ.
(8)Upon resignation, Dr. Van Bokkelen entered into a separation agreement, which provided for accelerated vesting of his outstanding RSUs and stock options, with stock options remaining exercisable until the earlier of the third anniversary of termination of employment or the expiration of the original term of the stock option.2021 OPTION EXERCISES AND STOCK VESTED
2020 Option Exercises and Stock Vested
The following table provides information on all option awards exercised by, and stock awards vested andfor (and the value realized upon exercise or vesting, as applicable, byapplicable), the named executive officers during fiscal 2020. year 2021.
| | | | Stock Awards | | Option Awards | Stock Awards |
Name | Name | | Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting (1) ($) | Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise (1)($) | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting (2)($) |
Gil Van Bokkelen | Gil Van Bokkelen | | 227,996 | | | 480,978 | | Gil Van Bokkelen | | 420,023 | 915,650 |
William (BJ) Lehmann | William (BJ) Lehmann | | 139,544 | | | 294,679 | | William (BJ) Lehmann | 10,000 | — | 118,077 | 181,067 |
John Harrington | John Harrington | | 136,816 | | | 288,862 | | John Harrington | | 117,051 | 179,271 |
Ivor Macleod | Ivor Macleod | | — | | | — | | Ivor Macleod | | 16,666 | 20,582 |
Laura Campbell | Laura Campbell | | 78,526 | | | 165,463 | | Laura Campbell | | 62,402 | 70,920 |
In the event that an executive officer’s employment is terminated for cause or as a result of death, we would be obligated to pay full base salary and other benefits, including any unpaid expense reimbursements, through the date of termination, and would have no further obligations to the executive officer (other than with respect to equity award vesting as described above). In the event that an executive officer is unable to perform duties as a result of a disability, in addition to the equity award vesting described above, we would be obligated to pay full base salary and other benefits until employment is terminated and for a period of twelve months from the date of such termination.terminated.
The table below reflects the amount of compensation payable to each named executive officer (other than Dr. Van Bokkelen who was terminated in February 2021 and Ms. Campbell who retired in July 2021) in the event of a change in control and/or termination of such executive’s employment in the circumstances described, pursuant to such executive’s employment agreement and the terms of outstanding equity awards. The amounts shown assume that such termination and/or change in control was effective as of December 31, 20202021 and thus includes amounts earned through such time and are estimates of the
amounts that would be paid out to executives upon such a termination of employment orand change in control. We also provide information followingcontrol, or termination of employment, as the table regarding the actual separation benefits that Dr. Van Bokkelen received in connection with his departure from the Company in February 2021.case may be.