Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Amendment No. 1)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed
by the Registrant ☑
Filed
by a Party other than the Registrant ☐
Check
the appropriate box:
☑ Preliminary Proxy Statement
☐ Confidential, For Use of the Commission Only (As
Permitted by Rule 14a-6(e)(2))
☐ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material under Rule 14a-12
Cellular Biomedicine Group, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
☑ No fee required
☐ Fee computed on table below per Exchange Act Rules
14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction
applies:
(2)
Aggregate number of securities to which transaction
applies:
(3) Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was
determined):
(4)
Proposed maximum aggregate value of transaction:
(5)
Total fee paid:
☐ Fee paid previously with preliminary
materials.
☐ Check box if any part of the fee is offset as
provided by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the form or
schedule and the date of its filing.
(1)
Amount Previously Paid:
(2)
Form, Schedule or Registration Statement No.:
(3)
Filing Party:
(4)
Date Filed:
19925 Stevens Creek Blvd., Suite 100
Cupertino, CA 95014
Dear
Stockholder:
You are
invited to attend the Annual Meeting of Stockholders (the
“Annual
Meeting”) of Cellular Biomedicine Group, Inc. (the
“Company”) on April 28,
2017, which will be held at our office at 19925 Stevens Creek
Blvd., Suite 100, Cupertino, California 95014 at 9:00 a.m. Pacific
Daylight Time. Enclosed with this letter are your Notice of Annual
Meeting of Stockholders, Proxy Statement and Proxy voting card. The
Proxy Statement included with this notice discusses each of our
proposals to be considered at the Annual Meeting. Please review our
annual report for the year ended December 31, 2016, which will be
on our website at http://www.cellbiomedgroup.com
(under “Investors
Relations”).
At this
year’s meeting, you will be asked to: (1) elect three (3)
“Class II” directors, each of whom will be elected for
a term of three years; (2) ratify the appointment of BDO China Shu
Lun Pan Certified Public Accountants LLP as our independent
registered public accounting firm for the fiscal year ending
December 31, 2017; (3) to approve an amendment to the
Company’s 2014 Stock Equity Incentive Plan to increase the
number of shares available for issuance thereunder by 1,000,000
shares; (4) conduct a non-binding advisory, vote on our executive
compensation; and (5) transact such other business as may properly
come before the Annual Meeting or any adjournments
thereof.
The
Board of Directors has fixed the close of business on March 10,
2017 as the record date for determining the stockholders entitled
to notice of and to vote at the Annual Meeting and any adjournment
and postponements thereof (the “Record
Date”).
The
Board of Directors believes that a favorable vote for each
candidate for a position on the Board of Directors and for all
matters described in Proposals 2 to 4 is in the best interest of
the Company and its stockholders and recommends a vote "FOR" all
candidates and all other matters. Accordingly, we urge you to
review the accompanying material carefully and to return the
enclosed Proxy promptly. On the following pages, we provide answers
to frequently asked questions about the Annual
Meeting.
You are
welcome to attend the Annual Meeting in person. Whether or not you
expect to attend the meeting, you are requested to read the
enclosed proxy statement and to sign, date and return the
accompanying proxy as soon as possible. This will assure your
representation and a quorum for the transaction of business at the
meeting.
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Sincerely,
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Terry
Belmont
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Chairman
of the Board of Directors
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Cupertino,
California
,
2017
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Meeting Date: April 28, 2017
To the
Stockholders of Cellular Biomedicine Group, Inc.:
The
2017 Annual Meeting of Stockholders will be held at our office at
19925 Stevens Creek Blvd., Suite 100, Cupertino, California 95014
at 9:00 a.m. Pacific Daylight Time. During the Annual Meeting,
stockholders will be asked to:
(1)
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Elect
three (3) “Class II” directors, each of whom will be
elected for a three year term, or until the election and
qualification of their successors;
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(2)
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Ratify
the appointment of BDO China Shu Lun Pan Certified Public
Accountants LLP as our independent registered public accounting
firm for the fiscal year ending December 31, 2017; and
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(3)
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Approve
an amendment to the Company’s 2014 Stock Equity Incentive
Plan to increase the number of shares available for issuance
thereunder by 1,000,000 shares;
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(4)
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Conduct
a non-binding advisory vote on executive compensation;
and
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(5)
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Transact
any other business properly brought before the Annual Meeting or
any adjournments thereof.
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The
Board of Directors has fixed the close of business on March 10,
2017, as the record date for determining the stockholders entitled
to notice of, and to vote at, the Annual Meeting or any
adjournments thereof. If you are a stockholder as of March 10,
2017, you may vote at the meeting. The date of disseminating this
Notice of Meeting and Proxy Statement is on or about March 17,
2017.
For a
period of 10 days prior to the Annual Meeting, a stockholders list
will be kept at our office and shall be available for inspection by
stockholders during usual business hours. A stockholders list will
also be available for inspection at the Annual
Meeting.
You are
cordially invited to attend the meeting in person. Whether or not
you expect to attend the meeting, you are requested to read the
enclosed proxy statement and to sign, date and return the
accompanying proxy as soon as possible. This will assure your
representation and a quorum for the transaction of business at the
meeting. If you attend the meeting in person, the proxy will not be
used if you so request by revoking it as described in the proxy
statement.
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By
order of our Board of Directors
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Bizuo
(Tony) Liu
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Chief
Executive Officer and Chief Financial Officer
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IMPORTANT NOTICE REGARDING THE INTERNET AVAILABILITY OF PROXY
MATERIALS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
APRIL 28, 2017:
This communication presents only an overview of the more complete
proxy materials that are available to you on the Internet. We
encourage you to access and review all of the important information
contained in the proxy materials before voting.
The Notice, Proxy Statement, and 2016 Annual Report (including the
Annual Report on Form 10-K for the fiscal year ended December 31,
2016) will be available at https://www.iproxydirect.com/CBMG. If
you want to receive a paper or e-mail copy of these documents, you
must request one. There is no charge to you for requesting a copy.
Please make your request for a copy as instructed below on or
before April 18, 2017 to facilitate timely delivery.
To request by phone: 1-866-752-VOTE(8683)
To request by e-mail: proxy@iproxydirect.com
To request on the Internet:
https://www.iproxydirect.com/CBMG
If you
have any questions about accessing materials or voting, please call
Issuer Direct at 919-481-4000 ext 120 or 117.
TABLE OF CONTENTS
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Page No.
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The Proxy Procedure
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Questions and Answers About the Meeting
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1
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Governance of the Company
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4
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Proposal 1 - Election of Directors
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18
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Proposal 2 - Ratification of Appointment of Independent Registered
Public Accountant
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21
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Proposal
3- Approval of An Amendment To the Company’s 2014 Stock
Equity Incentive Plan
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22
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Proposal
4- Non-Binding Advisory Vote on Executive Compensation
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26
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Executive Compensation and Related Information
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27
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Security Ownership of Certain Beneficial Owners and
Management
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36
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Certain Relationships and Related Transactions
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38
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Requirements for Advance Notification of Nominations and
Stockholder Proposals
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39
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Other Matters
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39
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THE PROXY PROCEDURE
In lieu
of a paper copy of the proxy materials, on or about , 2017, we will
first disseminate to our shareholders of record and beneficial
owners of shares of common stock of Cellular Biomedicine Group,
Inc. (which may be referred to in this Proxy Statement as
“we,”
“us,”
“CBMG,”
or the “Company”) a Notice of
Internet Availability of Proxy Materials (the “Notice”)
in connection with the solicitation of proxies by our board of
directors (“Board”) for our annual
meeting of stockholders to be held on April 28, 2017, at 9:00 a.m.
PDT at our office at 19925 Stevens Creek Blvd., Suite 100,
Cupertino, California 95014 (referred to as the “Annual Meeting”).
Shareholders who received the notice will have the ability to
access this Proxy Statement and the accompanying proxy card over
the Internet and to request a paper copy of the proxy materials by
internet, email, or telephone. Our Board encourages you to read
this document thoroughly and to take this opportunity to vote on
the matters to be decided at the Annual Meeting. Instructions on
how to access the proxy materials over the Internet or to request a
paper copy may be found in the Notice. In addition, shareholders
may request to receive proxy materials in printed form by mail or
electronically on an ongoing basis. A shareholder’s election
to receive proxy materials by mail or electronically by email will
remain in effect until the shareholder terminates such
election.
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QUESTIONS AND ANSWERS ABOUT THE MEETING
What am I voting on?
At this
year’s meeting, you will be asked to:
(1)
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Elect
three (3) “Class II” directors, each of whom will be
elected for a term of three years, or until the election and
qualification of their successors;
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(2)
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Ratify
the appointment of BDO China Shu Lun Pan Certified Public
Accountants LLP as our independent registered public accounting
firm for the fiscal year ending December 31, 2017;
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(3)
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Approve
amendment to the Company’s 2014 Stock Incentive Plan to
increase the number of shares available for issuance thereunder by
1,000,000 shares;
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(4)
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Conduct
a non-binding advisory vote on our executive compensation;
and
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(5)
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Transact
any other business properly brought before the Annual Meeting or
any adjournments thereof.
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Who is entitled to vote at the Annual Meeting, and how many votes
do they have?
Stockholders
of record at the close of business on March 10, 2017 (the
“Record
Date”) may vote at the Annual Meeting. Pursuant to the
rights of our stockholders contained in our charter documents each
share of our common stock has one vote. There
were shares of common stock
outstanding on March 10, 2017. From April 18, 2017 through April
27, 2017, you may inspect a list of stockholders eligible to vote.
If you would like to inspect the list, please call Andrew Chan, our
Secretary, at (408) 973-7884 to arrange a visit to our offices. In
addition, the list of stockholders will be available for viewing by
stockholders at the Annual Meeting.
How do I vote?
You may
vote over the Internet, by telephone, by mail or in person at the
Annual Meeting. Please be aware that if you vote by telephone or
over the Internet, you may incur costs such as telephone and
Internet access charges for which you will be
responsible.
Vote by Internet. You can vote via the Internet at
www.iproxydirect.com/CBMG. You will need to use the control number
appearing on your proxy card to vote via the Internet. You can use
the Internet to transmit your voting instructions up until 11:59
p.m. Eastern Time on April 27, 2017. Internet voting is available
24 hours a day. If you vote via the Internet, you do not need to
vote by telephone or return a proxy card.
Vote by Telephone. You can vote by telephone by calling the
toll-free telephone number 1-866-752-VOTE (8683). You will need to
use the control number appearing on your proxy card to vote by
telephone. You may transmit your voting instructions from any
touch-tone telephone up until 11:59 p.m. Eastern Time on April 27,
2017. Telephone voting is available 24 hours a day. If you vote by
telephone, you do not need to vote over the Internet or return a
proxy card.
Vote by Mail. If you received a printed proxy card, you can
vote by marking, dating and signing it, and returning it in the
postage-paid envelope provided to Cellular Biomedicine Group, Inc.,
c/o Issuer Direct, 500 Perimeter Park Drive, Suite D, Morrisville,
NC 27560. Please promptly mail your proxy card to ensure that it is
received prior to the closing of the polls at the Annual
Meeting.
Vote in Person at the Meeting. If you attend the Annual
Meeting and plan to vote in person, we will provide you with a
ballot at the Annual Meeting. If your shares are registered
directly in your name, you are considered the stockholder of record
and you have the right to vote in person at the Annual Meeting. If
your shares are held in the name of your broker or other nominee,
you are considered the beneficial owner of shares held in street
name. As a beneficial owner, if you wish to vote at the Annual
Meeting, you will need to bring to the Annual Meeting a legal proxy
from your broker or other nominee authorizing you to vote those
shares.
If you
vote by any of the methods discussed above, you will be designating
Tony Liu, our Chief Executive Officer and Chief Financial Officer,
as your proxy, and he will vote your shares on your behalf as you
indicate.
Submitting
a proxy will not affect your right to attend the Annual Meeting and
vote in person.
If your
shares are held in the name of a bank, broker or other nominee, you
will receive separate voting instructions from your bank, broker or
other nominee describing how to vote your shares. The availability
of Internet voting will depend on the voting process of your bank,
broker or other nominee. Please check with your bank, broker or
other nominee and follow the voting instructions it
provides.
Can I receive future materials via the internet?
If you
vote by internet, simply follow the prompts for enrolling in
electronic proxy delivery service. This will reduce the
Company’s printing and postage costs in the future, as well
as the number of paper documents you will receive.
What is a proxy?
A proxy
is a person you appoint to vote on your behalf. By using the
methods discussed above, you will be appointing Tony Liu, our Chief
Executive Officer and Chief Financial Officer, as your proxy. He
will vote on your behalf, and will have the authority to appoint a
substitute to act as proxy. If you are unable to attend the Annual
Meeting, please vote by proxy so that your shares of common stock
may be voted.
How will my proxy vote my shares?
If you
are a stockholder of record, your proxy will vote according to your
instructions. If you choose to vote by mail and complete and return
the enclosed proxy card but do not indicate your vote, your proxy
will vote “FOR” the election of the nominated slate of
Class II directors (see Proposal 1); and “FOR” the
ratification of BDO China Shu Lun Pan Certified Public Accountants
LLP (“BDO China”) as our independent registered public
accounting firm for the fiscal year ending December 31, 2017 (see
Proposal 2). We do not intend to bring any other matter for a vote
at the Annual Meeting, and we do not know of anyone else who
intends to do so. Your proxies are authorized to vote on your
behalf, however, using their best judgment, on any other business
that properly comes before the Annual Meeting.
If your
shares are held in the name of a bank, broker or other nominee, you
will receive separate voting instructions from your bank, broker or
other nominee describing how to vote your shares. The availability
of Internet voting will depend on the voting process of your bank,
broker or other nominee. Please check with your bank, broker or
other nominee and follow the voting instructions your bank, broker
or other nominee provides.
You
should instruct your bank, broker or other nominee how to vote your
shares. If you do not give voting instructions to the bank, broker
or other nominee, the bank, broker or other nominee will determine
if it has the discretionary authority to vote on the particular
matter. Under applicable rules, brokers have the discretion to vote
on routine matters, such as the ratification of the selection of
accounting firms, but do not have discretion to vote on non-routine
matters. Under the regulations applicable to New York Stock
Exchange member brokerage firms (many of whom are the record
holders of shares of our common stock), the uncontested election of
directors is no longer considered a routine matter. Matters related
to executive compensation are also not considered routine. As a
result, if you are a beneficial owner and hold your shares in
street name, but do not give your broker or other nominee
instructions on how to vote your shares with respect to these
matters, votes may not be cast on your behalf. If your bank, broker
or other nominee indicates on its proxy card that it does not have
discretionary authority to vote on a particular proposal, your
shares will be considered to be “broker non-votes” with
regard to that matter. Broker non-votes will be counted as present
for purposes of determining whether enough votes are present to
hold our Annual Meeting, but a broker non-vote will not otherwise
affect the outcome of a vote on a proposal that requires a majority
of the votes cast. With respect to a proposal that requires a
favorable vote of a majority of the outstanding shares, a broker
non-vote has the same effect as a vote against the
proposal.
How do I change my vote?
If you
are a stockholder of record, you may revoke your proxy at any time
before your shares are voted at the Annual Meeting by:
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Notifying our
corporate Secretary Andrew Chan, in writing at 19925 Stevens Creek
Blvd., Suite 100, Cupertino, California 95014, that you are
revoking your proxy;
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Submitting a proxy
at a later date via the Internet, or by signing and delivering a
proxy card relating to the same shares and bearing a later date
than the date of the previous proxy prior to the vote at the Annual
Meeting, in which case your later-submitted proxy will be recorded
and your earlier proxy revoked; or
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Attending and
voting by ballot at the Annual Meeting.
If your
shares are held in the name of a bank, broker or other nominee, you
should check with your bank, broker or other nominee and follow the
voting instructions provided.
What constitutes a quorum?
The
holders of a majority of the Company’s eligible votes as of
the record date, either present or represented by proxy, constitute
a quorum. A quorum is necessary in order to conduct the Annual
Meeting. If you choose to have your shares represented by proxy at
the Annual Meeting, you will be considered part of the quorum. Both
abstentions and broker non-votes are counted as present for the
purpose of determining the presence of a quorum. If a quorum is not
present at the Annual Meeting, the stockholders present in person
or by proxy may adjourn the meeting to a later date. If an
adjournment is for more than 30 days or a new record date is fixed
for the adjourned meeting, we will provide notice of the adjourned
meeting to each stockholder of record entitled to vote at the
meeting.
What vote is required to approve each proposal?
Election of Directors. For Proposal 1, the election of
directors, the nominees will be elected by a plurality of the votes
of the shares of common stock present in person or represented by
proxy and entitled to vote at the Annual Meeting. You may choose to
vote, or withhold your vote, separately for each nominee. A
properly executed proxy or voting instructions marked
“WITHHOLD” with respect to the election of one or more
directors will not be voted with respect to the director or
directors indicated, although it will be counted for the purposes
of determining whether there is a quorum.
Ratification of the Appointment of Independent Registered Public
Accounting Firm. For Proposal 2, the affirmative vote of the
holders of shares of common stock entitled to vote must exceed the
votes cast against the proposal, in order for the proposal to be
approved.
Amendment to the Company’s 2014 Stock Incentive Plan.
For Proposal 3, the affirmative vote of the holders of shares of
common stock entitled to vote must exceed the votes cast against
the proposal, in order for the proposal to be
approved.
Non-Binding Advisory Vote to Approve Executive
Compensation. For Proposal 4, the compensation
awarded to our named executive officers requires the affirmative
vote of a majority of the votes cast at the Annual Meeting by the
holders of shares of common stock entitled to vote.
Other Proposals. Any other proposal that might properly come
before the meeting will require the affirmative vote of the holders
of shares of common stock entitled to vote to exceed the votes cast
against the proposal for the proposal to be approved, except when a
different vote is required by law, our certificate of incorporation
or our Bylaws. On any such proposal, abstentions will be counted as
present and entitled to vote on that matter for purposes of
establishing a quorum, but will not be counted for purposes of
determining the number of votes cast.
Abstentions
and broker non-votes with respect to any matter will be counted as
present and entitled to vote on that matter for purposes of
establishing a quorum, but will not be counted for purposes of
determining the number of votes cast. Accordingly, abstentions and
broker non-votes will have no effect on the outcome of voting with
respect to any of the Proposals.
What percentage of our common stock do our directors and officers
own?
As of
February 8, 2017, our current directors and executive officers
beneficially owned approximately 8.1% of our common stock
outstanding. See the discussion under the heading “Security
Ownership of Certain Beneficial Owners and Management” on
page 35 for more details.
Who is soliciting proxies, how are they being solicited, and who
pays the cost?
We, on
behalf of our Board, through our directors, officers, and
employees, are soliciting proxies primarily by mail. Further,
proxies may also be solicited in person, by telephone, or
facsimile. We will pay the cost of soliciting proxies. We will also
reimburse stockbrokers and other custodians, nominees, and
fiduciaries for their reasonable out-of-pocket expenses for
forwarding proxy and solicitation materials to the owners of our
common stock.
Who is our Independent Registered Public Accounting Firm, and will
they be represented at the Annual Meeting?
BDO USA
LLP (“BDO USA”) served as the independent registered
public accounting firm auditing and reporting on our financial
statements for the fiscal year ended December 31, 2014 and BDO
China served as the independent registered public accounting firm
auditing and reporting on our financial statements for the fiscal
years ended December 31, 2015 and 2016. BDO China has been
appointed by our Board to serve as our independent registered
public accounting firm for the fiscal year ended December 31, 2017.
We expect that representatives of BDO China will not be present at
the Annual Meeting.
What are the recommendations of our Board?
The
recommendations of our Board are set forth together with the
description of each proposal of this Proxy Statement. In summary,
the Board recommends a vote:
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FOR the election of the three nominated Class II directors (see
Proposal 1);
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FOR the ratification of BDO China Shu Lun Pan Certified Public
Accountants LLP as our independent registered public accounting
firm for the fiscal year ending December 31, 2017 (see Proposal
2);
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FOR an amendment to the Company’s 2014 Stock Equity Incentive
Plan (see Proposal 3); and
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FOR the advisory resolution on executive compensation (see Proposal
4).
With
respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board or, if no
recommendation is given, in their own discretion.
If you
sign and return your proxy card but do not specify how you want to
vote your shares, the persons named as proxy holders on the proxy
card will vote in accordance with the recommendations of the
Board.
GOVERNANCE OF THE COMPANY
Our
business, property and affairs are managed by, or under the
direction of, our Board, in accordance with the Delaware General
Corporation Laws and our Bylaws. Members of the Board are kept
informed of our business through discussions with the Chief
Executive Officer and other key members of management, by reviewing
materials provided to them by management, and by participating in
meetings of the Board and its committees comprised of certain
directors (“Committees”).
Stockholders
may communicate with the members of the Board, either individually
or collectively, or with any independent directors as a group by
writing to the Board at 19925 Stevens Creek Blvd., Suite 100,
Cupertino, California, 95014. These communications will be reviewed
by the office of the corporate Secretary who, depending on the
subject matter, will (a) forward the communication to the director
or directors to whom it is addressed or who is responsible for the
topic matter, (b) attempt to address the inquiry directly (for
example, where it is a request for publicly available information
or a stock related matter that does not require the attention of a
director), or (c) not forward the communication if it is primarily
commercial in nature or if it relates to an improper or irrelevant
topic. At each meeting of the Board, the corporate Secretary
presents a summary of communications received and will make those
communications available to any director upon request.
Independence of Directors
In
determining the independence of our directors, the Board applied
the definition of “independent director” provided under
the listing rules of The NASDAQ Stock Market LLC
(“NASDAQ”). Pursuant to
these rules, the Board concluded its annual review of director
independence in September 2016. After considering all relevant
facts and circumstances, the Board affirmatively determined that
Messrs. Terry Belmont, Nadir Patel and Hansheng Zhou, each of whom
are now serving on the Board and are continuing to serve their
terms, are independent within the definition of independence under
the NASDAQ rules. Tony Liu and Wen Tao (Steve) Liu are not
independent directors. Additionally, Gang Ji and Chun Kwok Alan Au,
two of the directors nominated for election as a Class II director,
have been determined to meet the definition of independence under
the NASDAQ rules. If the two director candidates nominated for
Class II director positions, namely Gang Ji and Chun Kwok Alan Au,
are elected at the Annual Meeting, and assuming our other directors
remain in office, our Board will consist of a majority of five
independent directors out of a total of seven directors on our
Board.
Board Meetings; Annual Meeting Attendance
Our
Board of Directors held four formal meetings and five actions for
unanimous written consent during the most recently completed fiscal
year. Each of the members of our Board of Directors was present at
all of the Board of Directors meetings held. Other proceedings of
the Board of Directors were conducted by resolutions consented to
in writing by all the directors and filed with the minutes of the
proceedings of the directors. Such resolutions consented to in
writing by the directors entitled to vote on that resolution at a
meeting of the directors are, according to the corporate laws of
the State of Delaware and our bylaws, as valid and effective as if
they had been passed at a meeting of the directors duly called and
held.
We
currently do not have a policy regarding the attendance of board
members at the annual meeting of stockholders.
Board Committees
On
February 20, 2013, the Board authorized formation of an audit
committee, compensation committee and nominating committee and on
March 12, 2013 adopted charters. Our independent directors have
been appointed to these committees as follows:
Name
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Audit
Committee
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Compensation
Committee
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Nominating &
Corporate Governance Committee
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Nadir
Patel
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Chair
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X
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Terry
A. Belmont
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X
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Chair
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X
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Gang
Ji
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X
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Chun
Kwok Alan Au
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X
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Chair
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Hansheng
Zhou
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X
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Audit Committee
The
Audit Committee consists of Chun Kwok Alan Au, Terry Belmont and
Nadir Patel (serving as Chairman), each of whom are
“independent” as defined under section 5605 (a)(2) of
the NASDAQ Listing Rules. In addition, the Board has
determined that each member of the Audit Committee qualifies as an
“audit committee financial expert” as defined in the
rules of the Securities and Exchange Commission
(SEC). The Audit Committee operates pursuant to a
charter, which can be viewed on our website at www.cellbiomedgroup.com (under
“Investor
Relations”). The Audit Committee is
expected to convene regular meetings following the Annual
Meeting. The role of the Audit Committee is
to:
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oversee management’s preparation of our financial statements
and management’s conduct of the accounting and financial
reporting processes;
●
oversee management’s maintenance of internal controls and
procedures for financial reporting;
●
oversee our compliance with applicable legal and regulatory
requirements, including without limitation, those requirements
relating to financial controls and reporting;
●
oversee the independent auditor’s qualifications and
independence;
●
oversee the performance of the independent auditors, including the
annual independent audit of our financial statements;
●
discharge such duties and responsibilities as may be required of
the Audit Committee by the provisions of applicable law, rule or
regulation.
Compensation Committee
The
Compensation Committee consists of Terry Belmont (serving as
Chairman), Hansheng Zhou and Gang Ji, each of whom is
“independent” as defined in section 5605(a)(2) of the
NASDAQ Listing Rules. The Compensation Committee is
expected to convene regular meetings after the Annual
Meeting. The role of the Compensation Committee is
to:
●
develop and recommend to the Board the annual compensation (base
salary, bonus, stock options and other benefits) for our
President/Chief Executive Officer;
●
review, approve and recommend to the Board the annual compensation
(base salary, bonus and other benefits) for all of our
executives;
●
review, approve and recommend to the Board the aggregate number of
equity awards to be granted to employees below the executive
level;
●
ensure that a significant portion of executive compensation is
reasonably related to the long-term interest of our stockholders;
and
●
prepare certain portions of our annual Proxy Statement, including
an annual report on executive compensation.
A copy
of the charter of the Compensation Committee is available on our
website at www.cellbiomedgroup.com (under
“Investor
Relations”).
The
Compensation Committee may form and delegate a subcommittee
consisting of one or more members to perform the functions of the
Compensation Committee. The Compensation Committee may
engage outside advisers, including outside auditors, attorneys and
consultants, as it deems necessary to discharge its
responsibilities. The Compensation Committee has sole
authority to retain and terminate any compensation expert or
consultant to be used to provide advice on compensation levels or
assist in the evaluation of director, President/Chief Executive
Officer or senior executive compensation, including sole authority
to approve the fees of any expert or consultant and other retention
terms. In addition, the Compensation Committee
considers, but is not bound by, the recommendations of our Chief
Executive Officer or President with respect to the compensation
packages of our other executive
officers.
Nominating and Corporate Governance Committee
The
Nominating and Corporate Governance Committee, or the
“Governance Committee”, consists of Alan Au (serving as
Chairman), Nadir Patel and Terry Belmont and Mr. Au acting as
Chairman, each of whom is “independent” as defined in
section 5605(a)(2) of the NASDAQ Listing Rules. The Governance
Committee is expected to convene regular meetings following the
Annual Meeting. The role of the Governance Committee is
to:
●
evaluate from time to time the appropriate size (number of members)
of the Board and recommend any increase or decrease;
●
determine the desired skills and attributes of members of the Board
and its committees, taking into account the needs of the business
and listing standards;
●
establish criteria for prospective members, conduct candidate
searches, interview prospective candidates, and oversee programs to
introduce the candidate to us, our management, and
operations;
●
review planning for succession to the position of Chairman of the
Board and Chief Executive Officer and other senior management
positions;
●
annually recommend to the Board persons to be nominated for
election as directors and appointment as members of
committees;
●
adopt or develop for Board consideration corporate governance
principles and policies; and review and report to the Board on the
effectiveness of corporate governance procedures and the Board as a
governing body, including conducting an annual self-assessment of
the Board and its standing committees.
●
periodically review and report to the Board on the effectiveness of
corporate governance procedures and the Board as a governing body,
including conducting an annual self-assessment of the Board and its
standing committees.
A copy
of the charter of the Governance Committee is available on our
website at www.cellbiomedgroup.com (under
“Investor
Relations”).
Policy with Regard to Stockholder Recommendations
The
Governance Committee does not presently have a policy with regard
to consideration of any director candidates recommended by our
stockholders. No stockholder (other than members of the Governance
Committee) has recommended a candidate to date.
Director Qualifications and Diversity
The
Board seeks independent directors who represent a diversity of
backgrounds and experiences that will enhance the quality of the
Board’s deliberations and decisions. Candidates should have
substantial experience with one or more publicly traded companies
or should have achieved a high level of distinction in their chosen
fields. The Board is particularly interested in maintaining a mix
that includes individuals who are active or retired executive
officers and senior executives, particularly those with experience
in biomedicine, medical and drug regulation in China, intellectual
property, early-stage companies, research and development,
strategic planning, business development, compensation, finance,
accounting and banking.
In
evaluating nominations to the Board of Directors, the Governance
Committee also looks for certain personal attributes, such as
integrity, ability and willingness to apply sound and independent
business judgment, comprehensive understanding of a
director’s role in corporate governance, availability for
meetings and consultation on Company matters, and the willingness
to assume and carry out fiduciary responsibilities. The Governance
Committee took these specifications into account in formulating and
re-nominating its present Board members.
The
current director candidates, Tony Liu, Alan Au and Gang Ji, were
recommended by management and nominated by the full board of
directors.
Code of Business Conduct and Ethics
We have
adopted a code of ethics, which applies to all our directors,
officers and employees and comprises written standards that are
reasonably designed to deter wrongdoing and to promote the behavior
described in Item 406 of Regulation S-K promulgated by the SEC. A
copy of our “Code of Business Conduct and Ethics” is
available on our website at www.cellbiomedgroup.com (under
“Investor
Relations/Corporate Governance”). In the event that we
make any amendments to, or grant any waivers of, a provision of our
Code of Business Conduct and Ethics for Officers, Directors and
Employees that applies to the principal executive officer,
principal financial officer or principal accounting officer that
requires disclosure under applicable SEC rules, we intend to
disclose such amendment or waiver and the reasons therefor in a
Form 8-K or in our next periodic report.
Conflicts of Interest
Members
of our management are associated with other firms involved in a
range of business activities. Consequently, there are potential
inherent conflicts of interest in their acting as officers and
directors of our company. Although the officers and directors are
engaged in other business activities, we anticipate they will
devote an important amount of time to our affairs.
Our
officers and directors are now and may in the future become
shareholders, officers or directors of other companies, which may
be formed for the purpose of engaging in business activities
similar to ours. Accordingly, additional direct conflicts of
interest may arise in the future with respect to such individuals
acting on behalf of us or other entities. Moreover, additional
conflicts of interest may arise with respect to opportunities which
come to the attention of such individuals in the performance of
their duties or otherwise. Currently, we do not have a right of
first refusal pertaining to opportunities that come to their
attention and may relate to our business operations.
Our officers and directors are, so long as they are our officers or
directors, subject to the restriction that all opportunities
contemplated by our plan of operation which come to their
attention, either in the performance of their duties or in any
other manner, will be considered opportunities of, and be made
available to us and the companies that they are affiliated with on
an equal basis. A breach of this requirement will be a breach of
the fiduciary duties of the officer or director. If we or the
companies with which the officers and directors are affiliated both
desire to take advantage of an opportunity, then said officers and
directors would abstain from negotiating and voting upon the
opportunity. However, all directors may still individually take
advantage of opportunities if we should decline to do so. Except as
set forth above, we have not adopted any other conflict of interest
policy with respect to such transactions.
Review, Approval or Ratification of Transactions with Related
Persons
The Board of Directors reviews issues involving potential conflicts
of interest, and reviews and approves all related party
transactions, including those required to be disclosed as a
“related party” transaction under applicable federal
securities laws. The Board has not adopted any specific procedures
for conducting reviews of potential conflicts of interest and
considers each transaction in light of the specific facts and
circumstances presented. However, to the extent a potential related
party transaction is presented to the Board, the Company expects
that the Board would become fully informed regarding the potential
transaction and the interests of the related party, and would have
the opportunity to deliberate outside of the presence of the
related party. The Company expects that the Board would only
approve a related party transaction that was in the best interests
of, and fair to, the Company, and further would seek to ensure that
any completed related party transaction was on terms no less
favorable to the Company than could be obtained in a transaction
with an unaffiliated third party.
Board Leadership Structure and Risk Oversight
The
Chairman of the Board, who is a different individual from the Chief
Executive Officer, presides at all meetings of the Board. The
Chairman is appointed on an annual basis by majority vote of the
directors, excluding the vote of the appointee.
Enterprise
risks are identified and prioritized by management and each
prioritized risk is assigned to a Board committee or the full Board
for oversight as follows:
Full Board - Risks and exposures associated with strategic,
financial and execution risks and other current matters that may
present material risk to our operations, plans, prospects or
reputation.
Audit Committee - Risks and exposures associated with
financial matters, particularly financial reporting, tax,
accounting, disclosure, internal control over financial reporting,
financial policies, investment guidelines and credit and liquidity
matters.
Nominating and Corporate Governance Committee - Risks and
exposures relating to corporate governance and management and
director succession planning.
Compensation Committee - Risks and exposures associated with
leadership assessment, and compensation programs and arrangements,
including incentive plans.
Compliance with Section 16(a) of the Exchange Act
Section
16(a) of the Securities and Exchange Act of 1934, as amended (the
“Exchange
Act”) requires the Company’s directors and
executive officers, and persons who beneficially own more than ten
percent of a registered class of our equity securities, to file
with the SEC initial reports of beneficial ownership and reports of
changes in beneficial ownership of our common stock. The rules
promulgated by the SEC under Section 16(a) of the Exchange Act
require those persons to furnish us with copies of all reports
filed with the Commission pursuant to Section 16(a). The
information in this section is based solely upon a review of Forms
3, Forms 4, and Forms 5 received by us.
We
believe that all of the Company's executive officers, directors and
10% stockholders have timely complied with their filing
requirements during the year ended December 31, 2016, except that
Wei Cao inadvertently reported late one acquisition and one
disposition of common stock transpired in 2016 and Terry Belmont
inadvertently reported late his Form 5 in 2016.
REPORT OF THE AUDIT COMMITTEE
The
following Report of the Audit Committee shall not be deemed
incorporated by reference into any of our filings under the
Securities Act of 1933, as amended, or the Exchange Act, except to
the extent we specifically incorporate it by reference
therein.
The
Audit Committee of the Board has:
●
reviewed and discussed the Company’s audited financial
statements for the year ended December 31, 2016 with
management;
●
discussed with the Company’s independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61,
as amended (AICPA, Professional Standards, Vol. 1 AU section 380),
as adopted by the Public Company Accounting Oversight Board in Rule
3200T; and
●
received the written disclosures and letter from the independent
auditors required by the applicable requirements of the Public
Accounting Oversight Board regarding the independent auditors
communications with the Audit Committee concerning independence,
and has discussed with BDO China matters relating to its
independence.
In
reliance on the review and discussions referred to above, the Audit
Committee recommended to the Board that the financial statements
audited by BDO China for the fiscal year ended December 31, 2016 be
included in its Annual Report on Form 10-K for such fiscal
year.
The
Audit Committee and the Board have also, respectively, recommended
and approved the selection of the Company’s current
independent auditor, which approval is subject to ratification by
the Company’s stockholders.
Submitted
by:
The
Audit Committee of the Board of Directors
Nadir
Patel, Chairman
Chun
Kwok Alan Au
Terry
Belmont
REPORT OF THE COMPENSATION COMMITTEE
The
following Report of the Compensation Committee shall not be deemed
incorporated by reference into any of our filings under the
Securities Act of 1933, as amended, or the Exchange Act, except to
the extent we specifically incorporate it by reference
therein.
Our
Compensation Committee has reviewed and discussed with management
the Compensation Discussion and Analysis (“CD&A”)
for the fiscal year ended December 31, 2016 included in this proxy
statement. Based on that review and discussion, the Compensation
Committee has recommended to the Board that the CD&A be
included in the proxy statement.
Submitted
by:
The
Compensation Committee of the Board of Directors
/s/
Terry Belmont, Chairman
/s/
Gang Ji
/s/
Hansheng Zhou
COMPENSATION DISCUSSION AND ANALYSIS
2016 Named Executive Officers
Wen Tao
(Steve) Liu - Executive Chairman of the Board (term as
Chairman expired in February 2016)
Wei
(William) Cao - Chief Executive Officer (resigned as
Chief Executive Officer effective February 2016)
Bizuo
(Tony) Liu - Chief Executive Officer (since February
2016), Acting Chief Financial Officer (since February 2016), and
Secretary (until September 2016)
Richard
Wang – Chief Operating Officer (from May 2015 to February
2017)
Yihong
Yao – Chief Scientific Officer (since August
2015)
Andrew
Chan – Secretary (since September 2016) and Senior Vice
President
This
section explains how the Compensation Committee of the Board of
Directors oversees our executive compensation programs and
discusses the compensation earned by CBMG’s named executive
officers, also referenced to herein as our listed officers. For
additional information about compensation to our named officers and
directors, see "Executive Compensation and Related Information"
beginning on page 26 of this proxy statement.
Executive Summary
2016
was a critical year for CBMG, reflected in our prioritization of
our cancer therapeutic technologies and a focus of our efforts on
developing CAR-T clinical trials.
For
fiscal year ended December 31, 2016, we achieved net revenue of
$0.6 million, down 75% from 2015, operating loss of $28.4 million,
down 36% from 2015, and diluted loss per share of $2.09, down 17%
from 2015. This drop mainly resulted from (i) the
re-prioritization and focusing our efforts on developing CAR-T
clinical trials instead of cell therapy technology services and
(ii) impairment of certain legacy investments. Total Shareholder
Return (“TSR”) is a measure of the performance of the
Company’s stock over time. It combines stock price
appreciation and dividends paid, if any, to show the total return
to the shareholder expressed as an annualized
percentage. The Company’s TSR was 153.1% for 2014,
66.5% for 2015 and -39%% for 2016. The Nasdaq Healthcare Index was
28.5%, 6.9% and -16.9%, and Russell 3000 Index was 12.6%, 0.48% and
12.74%. The five-year cumulative TSR is 262% for the Company, 228%
for the Nasdaq Healthcare Index and 198% for the Russell 3000
Index. Because our Stock and Option grants and awards are based on
the grant date and cannot be accrued in accordance with U.S. GAAP,
the earned awards are reported in arrears.
We used
the Black Scholes model for our stock options grant
valuation. Specifically we used the following
assumptions in our modeling for the 2016 issued
options:
●
Expected volatility – 88.44% to 90.03%; and
●
Risk-free rate of return – 1.07% to 2.17% ; and
●
Dividend yield –zero; and
●
Time to exercise – six years.
In
addition, we did not consider non-transferability but used a 11%
risk of forfeiture for employees, advisors and Directors and
Officers.
Because
the majority of our executive compensation is tied to performance
and TSR, our Chief Executive Officer, Chief Operating Officer and
Chief Scientific Officer saw a decrease in their total compensation
in 2016 as compared to 2015. The decrease is mainly a result
of reduced number of option awards. In 2016 we started granting
restricted stock units ("RSUs") to some of our listed officers,
which better align their compensation with the long-term interests
of CBMG stockholders by focusing our executive officers on
TSR. We believe the compensation structure, including
the grant of restricted stock awards to certain listed officers in
2016, is commensurate with industry standards, namely for
executives in the highly in-demand immune cell therapy industry and
executives with substantial experience at larger pharmaceutical
companies in the industry. However, attracted by a potentially
large cancer immune cell therapy market in China, recently some
U.S. companies have been making inroads in China. Specifically,
these U.S. companies are establishing their foothold in
geographical areas close to our China operations. The presence of
these companies in China have created a new risk on talent
retention that we are seeking to address through the addition of a
long-term incentive plan for officers beginning in
2017.
Stockholder Engagement and “Say on Pay”
Vote
At our
annual meeting of stockholders in 2014, our shareholders approved
by advisory vote the Company’s compensation to its executives
and determined to conduct advisory votes every three
years. As such, we plan to next provide
shareholders with a non-binding advisory vote on executive
compensation at our 2017 annual meeting of
stockholder. The Compensation Committee plans to take
into consideration the percentage of votes cast “For”
our advisory “say on pay” proposal. The Board believes
that “say on pay” “For” results can be an
affirmation of the structural soundness of our executive
compensation programs, which will include our long-term incentive
plan for business continuity and talent retention.
2016 Compensation of Our Listed Officers
Performance and Incentive Pay for 2016
CBMG
has a long-standing commitment to pay-for-performance that we
implement by providing the majority of compensation through
arrangements that are designed to hold our executive officers
accountable for business results and reward them for strong
corporate performance and creation of value for our stockholders.
Our executive compensation programs are periodically adjusted over
time so that they support our business goals and promote long-term
growth of the company.
As
illustrated below, approximately 71% of targeted total direct
compensation in 2016 for Mr. Liu, our Chief Executive Officer, was
performance-based, consisting of approximately 71% equity, and 0%
annual incentive cash bonus. Only 27% of his compensation, in the
form of base salary, was fixed, ensuring a strong link between his
targeted total direct compensation and the company result. The
remaining 2% of other compensation is healthcare insurance premium
expense.
Note:
2016 Officers Compensation data is prepared on the below basis: (i)
Salary, bonus and all other compensation is on a cash basis. and
(ii) For stock and option awards, the illustrated amount is the
grant date fair value calculated according to U.S. GAAP without
amortizing over the vesting periods. Under this method, the
compensation cannot be accrued due to the Company's inability to
ascertain the stock option exercise price and grant date, and the
amount of cash bonus that the Compensation Committee may grant to
each officer as of the fiscal year end.
The
majority of executive compensation for our listed officers is
delivered through programs that link pay realized by executive
officers with both operational results and with TSR. As noted
below, equity-based compensation comprises a significant portion of
each listed officer’s compensation package and consists of
variable performance-based stock options and RSUs, which we believe
aligns compensation with the long-term interests of CBMG’s
stockholders by focusing our listed officers on TSR. As a result,
total compensation for each listed officer varies with both
individual performance and CBMG’s performance in achieving
financial and non- financial objectives established by our
Compensation Committee.
The
following chart shows the allocation of the listed officers’
total direct compensation paid or granted for 2016, reflecting the
extent to which their total direct compensation consists of
performance-based compensation.
2016
Total Direct Compensation Chart
2016 Cash Compensation
As
reflected in the table below and commensurate with the
industry’s practice , Mr. Steve Liu’s salary was
reduced to reflect reduced responsibilities. Mr. Tony Liu and Mr.
Andrew Chan’s salary were increased to reflect increased
responsibilities.
Mr.
Richard Wang and Mr. Yihong Yao joined the Company in May 2015 and
August 2015, respectively, and their increase in salary below
reflects their full year work period in 2016.
2016 Incentive Compensation Payouts
Based
in part on the significant achievement in the closing in the first
half of 2016 of a $43 million funding at a premium to market share
price, the Chief Executive Officer received a performance cash
bonus paid out in 2016. And because of the biotech segment’s
major setback in the stock market TSR was not weighed as heavily
when determining the level of management’s incentive Stock
Option Awards.
In
addition, we strive to be competitive with other similarly situated
companies in our industry. The process of developing
biopharmaceutical products and bringing those products to market is
a long-term proposition and outcomes may not be measurable for
several years. Therefore, in order to build long-term value for us
and our stockholders, and in order to achieve our business
objectives, we believe that we must compensate our officers and
employees in a competitive and fair manner that reflects our
current activities but also reflects contributions to building
long-term value. On January 20 and 21, 2017, the Compensation
Committee reviewed the 2016 annual performance results evaluated
how each listed officer met his performance targets in 2016 and
determined the final performance-based payouts as
follows:
Note 1:
These non-qualified options with exercise price of $12.55 were all
granted on January 21, 2017 and vested immediately on the grant
date.
Note 2:
These non-qualified options with exercise price of $12.55 were all
granted on January 20, 2017 and vested immediately on the grant
date.
The
table below summarizes the 2016 performance criteria which the
Compensation Committee used to evaluate the listed officers’
performance and determine their performance-based
payouts.
Category
|
|
2016
Goals
|
Financials
|
|
Financing;
Growth in Top Line and Gross Margin, management of approved budget,
and maintenance of ample working capital
|
Corporate Development
|
|
Develop
strategic partnership and acquisition of complementary
technologies
|
Product Development
|
|
Manage
Clinical Trials execution
|
2016
Officers Compensation data is prepared on the below basis: (i)
Salary, bonus and all other compensation is on a cash basis; and
(ii) For stock and option awards, the illustrated amount is the
grant date fair value calculated according to U.S. GAAP without
amortizing over the vesting periods. Under this method, the
compensation cannot be accrued due to the Company's inability to
ascertain the stock option exercise price and grant date, and the
amount of cash bonus that the Compensation Committee may grant to
each officer as of the fiscal year end. For purpose of clarity and
in order to reflect the Compensation Committee’s late January
2017 decision as to 2016 performance, we are providing a pro-forma
2016 Officers Compensation to indicate all compensation that has
been earned and accrued by each listed officer in
2016.
Note 1:
Approved by Compensation Committee in January 2017 as earned 2016
performance award. included in 2016 year end general
accruals.
Note 2:
Approved by Compensation Committee in January 2017 recorded as 2017
option expenses.
Note 3:
Predominantly health insurance expenses.
Note 4:
It represents 30,000 nonqualified options with exercise price of
$12.55 were all granted on January 21, 2017 and vested immediately
on the grant date.
Note 5:
It represents 15,000 nonqualified options with exercise price of
$12.55 were all granted on January 20, 2017 and vested immediately
on the grant date.
Changes to Compensation Program
2016
was a forgettable year for biopharmaceutical companies with key
indices trailing the S&P500. By most accounts it was a very bad
year for biopharmaceutical stocks. Fueled by various drug pricing
controversies and other setbacks, the biopharmaceutical segment
experienced substantial downward stock price volatility in the
capital markets. Generalist participation in the
segment was essentially non-existent. In addition, attracted by a
potentially large cancer immune cell therapy market in China, U.S.
biopharmaceutical companies started to make inroads in China,
establishing their foothold in geographical areas close to our
China operations. We have spent many years recruiting talent and
training our people. Our employees are highly coveted and have
cultivated valuable relationships with the cell therapy clinical
partners. However, cell therapy is a relatively new science, the
talent pool is limited and there is a dearth of trained specialists
in this discipline. Against this backdrop, the Compensation
Committee conducted a review of our compensation program in late
January 2017. The Committee reviewed its compensation structure and
its individual components to ensure we provide a competitive
executive compensation scheme commensurate to retain and attract
talented leaders to bolster our continued journey to advance our
clinical trials and to bring our cell therapies to
commercialization. The Committee established a long-term
incentive plan (“LTIP”) that will take effect in 2017
to mitigate increased talent retention risk. We believe the new
addition of the long-term incentive plan is necessary to attract
and retain key personnel. One of the elements in the long-term
incentive is tied to long-term stock price performance. We believe
that upon diligent execution and product commercialization the
fundamentals will speak for itself and the stock price will
eventually reflect our value. Thus the 2017 LTIP not only seeks to
encourage talent retention, it is also aligned with
stockholders’ best interests.
Elements of Our Compensation Program and Why We Chose
Each
Main Compensation Components
Our
company-wide compensation program, including for our key
executives, is broken down into three main components: base salary,
performance cash bonuses and potential long-term compensation in
the form of stock options or restricted stock units
(“RSUs”). We believe these three components constitute
the minimum essential elements of a competitive compensation
package in our industry. In January 2017, as part of an effort to
boost talent retention, we also created an LTIP for our named
executives and selected senior officers, which compensates such
employees with performance-based RSUs as well as time-based RSUs
and stock options.
Salary
Base
salary is used to recognize the experience, skills, knowledge and
responsibilities required of our executives as well as recognizing
the competitive nature of the biopharmaceutical industry. This is
determined partially by evaluating our peer companies as well as
the degree of responsibility and experience levels of our
executives and their overall contributions to our company. Base
salary is one component of the compensation package for our key
executives; the other components being cash bonuses, annual equity
grants, a long-term incentive plan and our benefit programs. Base
salary is determined in advance whereas the other components of
compensation are awarded in varying degrees following an assessment
of the performance of the executive. This variegated approach to
compensation reflects the philosophy of our board of directors and
its Compensation Committee to emphasize and reward, on an annual
basis, performance levels achieved by our executives.
Performance Cash Bonus Plan
We have
a performance cash bonus plan under which bonuses are paid to our
executives based on achievement of our performance goals and
objectives established by the Compensation Committee and/or our
Board as well as on individual performance. The bonus program is
discretionary and is intended to: (i) strengthen the
connection between individual compensation and the Company’s
corporate achievements; (ii) encourage teamwork among all
disciplines within our company; (iii) reinforce our
pay-for-performance philosophy by awarding higher bonuses to higher
performing employees; and (iv) help ensure that our cash
compensation is competitive. The Compensation Committee and our
Board also has the discretion, after consulting with our CEO, to
not pay cash bonuses in order that we may conserve cash and support
ongoing development programs and commercialization efforts.
Regardless of our cash position, we consistently grant annual
merit-based stock options to continue incentivizing both our senior
management and our employees.
Based
on their employment agreements, each executive is assigned a target
payout under the performance cash bonus plan, expressed as a
percentage of base salary for the year. Actual payouts under the
performance cash bonus plan are based on an assessment of both
individual and corporate achievements, each of which is separately
weighted as a component of such officer’s target payout. For
executive officers, the corporate goals receive the highest
weighting in order to ensure that the bonus system for our
management team is closely tied to our corporate performance. Each
such employee also has specific individual goals and objectives as
well that are tied to the overall corporate goals the performance
of which is evaluated by the Compensation Committee and the
Board.
Equity Incentive Compensation
We view
long-term compensation, currently in the form of stock options and
RSUs, as a tool to align the interests of our executives and
employees generally with the creation of stockholder value, to
motivate our employees to achieve and exceed corporate and
individual objectives and to encourage them to remain employed by
us. While cash compensation is a significant component of
employees’ overall compensation, the Compensation Committee
and our Board, together with our CEO, believe that the driving
force of any employee working in a small biotechnology company
should be strong equity participation. We believe that this not
only creates the potential for substantial longer-term corporate
value but also motivates employees and fosters loyalty and
commitment with appropriate personal compensation. The Compensation
Committee believes that stock options and RSUs equity grants
constitute a significant retention incentive and a tool to foster
continuity of management, an important factor in business
continuity in a company with rich talents in a rapidly growing
industry in China.
Long Term Incentive Plan (LTIP)
In
January 2017, in anticipation of the commencement of substantial
clinical trials initiation towards product commercialization and to
mitigate risk of talent retention, the Compensation Committee
approved our LTIP. The LTIP is designed as an attractive incentive
for our senior management to focus on creating shareholder value
for us by advancing the clinical trials towards product
commercialization.
The
LTIP is a four-year long-term incentive award comprised of the
following grants from the 2014 Equity Incentive Plan:
1) Stock Price Sensitive Performance RSU
awards (“Performance RSUs”) to be vested and delivered
in 2021; and
2) Time Sensitive RSUs and Stock
Options, which vest monthly over a period of 48
months.
The
total number of Performance RSUs currently contemplated to be
issuable under the LTIP is 534,000. The Performance RSUs under the
LTIP will not vest upon granting, but instead are subject to
potential vesting in 2021 depending on the achievement of certain
stock price performance by us. Performance RSUs will be valued on
the date of issuance and will vest and be delivered in
2021.
The
total number of time sensitive RSUs currently contemplated to be
issuable under the LTIP is 267,000. The total number of time
sensitive stock options covered by the LTIP is 266,000. Both the
time sensitive RSUs and Stock Options are subject to monthly
vesting over a 4 year term.
Other Compensation
In
addition to the main components of compensation outlined above, the
LTIP will also provide for contractual severance and/or change in
control benefits to the executives and certain key members of
management pursuant to which the vesting of any RSUs or options
awarded under the LTIP will accelerate upon the occurence of
certain triggering events. The change in control benefits for all
applicable persons will have a “double trigger.” A
double-trigger means that the executive officers will receive the
change in control benefits described in the agreements only if
there is both (1) a Change in Control of our company (as
defined in the agreements) and (2) a termination by us of the
applicable person’s employment “without cause” or
a resignation by the applicable persons for “good
reason” (as defined in the agreements) within a specified
time period following the Change in Control. We believe this double
trigger requirement creates the potential to maximize stockholder
value because it prevents an unintended windfall to management as
no benefits are triggered solely in the event of a Change in
Control while providing appropriate incentives to act in
furtherance of a change in control that may be in the best
interests of the stockholders. We believe these severance/change in
control benefits are important elements of our compensation program
that assist us in retaining talented individuals at the executive
and senior managerial levels and that these arrangements help to
promote stability and continuity of our executives and senior
management team. We also believe that the interests of our
stockholders will be best served if the interests of these members
of our management are aligned with theirs. Furthermore, we believe
that providing change in control benefits lessens or eliminates any
potential reluctance of members of our management to pursue
potential change in control transactions that may be in the best
interests of the stockholders. Finally, we believe that it is
important to provide severance benefits to members of our
management, to promote stability, business continuity and to focus
on the job at hand.
We do
not have deferred compensation plans, pension arrangements or
post-retirement health coverage for our executive officers or
employees. All of our employees not specifically under contract are
“at-will” employees, which mean that their employment
can be terminated at any time for any reason by either us or the
employee. Our key executives (as well as certain of our senior
managers) have employment agreements that provide lump sum
compensation in the event of their termination without cause or,
under certain circumstances, upon a Change of Control.
Determination of Compensation Amounts
A
number of factors impact the determination of compensation amounts
for our executives, including the individual’s role in our
company and individual performance, length of service with us,
competition for talent, individual compensation package,
assessments of internal pay equity and industry data. Stock price
performance has generally not been a significant factor in
determining annual compensation because the price of our common
stock is subject to a variety of factors outside of our
control.
Utilizing
publicly available information, our Compensation Committee
establishes a list of peer companies to best assure ourselves that
we are compensating our executives on a fair and reasonable basis.
We also utilize Hewitt-prepared data for below-executive level
personnel, which data focuses on similarly sized life science
companies in China. The availability of peer data is used by the
Compensation Committee strictly as a guide in determining
compensation levels with regard to salaries, cash bonuses and
performance related annual equity grants to all employees. However,
the availability of this data does not imply that the Compensation
Committee is under any obligation to follow peer companies in
compensation matters.
PROPOSAL 1 — ELECTION OF DIRECTORS
Nominees for Election
The
Board determined it was in the best interest of the Company to
authorize the nomination of Tony Liu, Chun Kwook Alan Au and Gang
Ji for a new Class II term. Accordingly, the Board has authorized
the nomination of these three nominees to serve as a Class II
director, and Class II has three director positions up for election
at the Annual Meeting.
Subsequent
to stockholder approval of this proposal, the Board will have a
total of seven members, divided into three classes as
follows:
Class
|
|
Term
|
|
Directors
|
|
|
|
|
|
Class
I
|
|
Initial
term ends on the date of the Annual Meeting of Stockholders in
2016. Class I directors serve for a term of three years, and are
elected by the stockholders at the beginning of each term. The next
full 3-year term for Class I directors extends from the date of the
2016 annual meeting to the date of the 2019 annual
meeting.
|
|
1.
Terry A. Belmont
2.
Hansheng Zhou, Ph.D
|
|
|
|
|
|
Class
II
|
|
Initial
term ends on the date of the Annual Meeting of Stockholders in
2017. Class II directors serve for a term of three years, and are
elected by the stockholders at the beginning of each term. The next
full 3-year term for Class II directors extends from the date of
this year’s Annual Meeting of stockholders in 2017 to the
date of the 2020 annual meeting.
|
|
3. Chun
Kwok Alan Au
4. Gang
Ji
5.
Bizuo (Tony) Liu
|
|
|
|
|
|
Class
III
|
|
Initial
term ends on the date of the Annual Meeting of Stockholders in
2018. Class III directors serve for a term of three years, and are
elected by the stockholders at the beginning of each term. The next
full 3-year term for Class III directors extends from the date of
the 2018 annual meeting to the date of the 2021 annual
meeting.
|
|
6. Wen
Tao (Steve) Liu
7.
Nadir Patel
|
Our
Board has nominated three Class II director candidates for election
at the Annual Meeting, who are the same individuals listed above in
position numbers 3, 4, and 5. Each nominee has agreed, if elected,
to serve a three-year term or until the election and qualification
of his successor. If any nominee is unable to stand for election,
which circumstance we do not anticipate, the Board may provide for
a lesser number of directors or designate a substitute. In the
latter event, shares represented by proxies may be voted for a
substitute nominee.
If a
quorum is present at the Annual Meeting, then nominees will be
elected by a plurality of the votes of the shares of common stock
present in person or represented by proxy and entitled to vote at
the meeting. There is no cumulative voting in the election of
directors.
The
following biographical information is furnished as to each nominee
for election as a Class II director:
Bizuo (Tony) Liu, Chief Executive Officer and Chief Financial
Officer
Tony
Liu has served as the Company’s Chief Executive Officer since
February 2016 and Chief Financial Officer since January 2014. He
has also served as Director of the Company from February 2013 to
January 2014. Since January 2013, Mr. Liu has served as the
Corporate Vice President at Alibaba Group, handling Alibaba’s
overseas investments. Since joining Alibaba in 2009, Mr.
Liu has severed in various positions including Corporate Vice
President at B2B corporate investment, corporate finance, and
General Manager for a global ecommerce platform. From
July 2011 to December 2012, he served as CFO for HiChina, a
subsidiary of Alibaba, an internet infrastructure service
provider. Prior to joining Alibaba, Mr. Liu spent 19
years at Microsoft Corporation where he served a variety of finance
leadership roles. He was the General Manager at Corporate Strategy
looking after Microsoft China investment strategy and Microsoft
corporate strategic planning process. Mr. Liu was a
leader in Microsoft corporate finance organization during the 1990s
as Corporate Accounting Director. Mr. Liu earned a B.S.
degree in Physics from Suzhou University, Suzhou, China and has
completed MBA/MIS course work at Seattle Pacific University. Mr.
Liu obtained his Washington State CPA certificate in
1992.
In
considering Mr. Liu’s eligibility to serve on the Board, the
Board considered Mr. Liu’s leadership, extensive accounting
and financial control background, as well as multinational
corporate executive management experience in diverse
industries.
Chun Kwok Alan Au - Director
Alan
was served as a member of our Board since November 2014. He also
serves as the Chair of Compensation Committee and a member of the
Nomination Committee.
Alan
has over 15 years of experience across healthcare investment
banking, private equity and venture capital investments in
Asia/China, and started his advisory roles with healthcare players
since early 2013. He is now Partner at GT Healthcare Group, a
private equity fund focusing on cross border healthcare
investments, and Partner of TUS-Lifetree Capital Partners, focusing
on Chinese healthcare private equity investments. Alan is also an
Adviser to Simcere Pharmaceutical Group, a leading pharma company
in China, and also a member of the Board, Audit
Committee and Compensation Committee of China Nepstar Chain
Drugstore Ltd. (NYSE: NPD). Besides, he also serves as a panel
member for the Entrepreneur Support Scheme (ESS Program) of the
Innovation and Technology Fund of the Hong Kong SAR
Government.
From
2013 to 2015, Alan was Venture Partner of Ally Bridge Group, a
cross border biotech investment fund focusing on bringing cutting
edge technologies from the US into China. Alan was Head of Asia
Healthcare Investment Banking of Deutsche Bank Group, advising
healthcare IPOs and M&A in the region. Prior to that, he was
Executive Director at JAFCO Asia Investment Group, responsible for
healthcare investments in China from 2008 to 2010, and Investment
Director at Morningside Group, responsible for healthcare
investments in Asia from 2000 to 2005. From 1995 to 1999, Mr. Au
worked at KPMG and KPMG Corporate Finance Ltd., responsible for
regional M&A transactions and financial advisory
services.
Alan is
a Certified Public Accountant in the U.S. and holds the Chartered
Financial Analyst (CFA) designation. He is an associate member of
the Hong Kong Institute of Financial Analysts and member of the
American Institute of Certified Public Accountants. Alan received
his Bachelor's degree in Psychology from the Chinese University of
Hong Kong, and a Master's degree in Management from Columbia
Business School in New York. In considering Mr. Au’s
eligibility to serve on the Board, the Board considered Mr. Au's
investment banking and capital market experience, as well as
healthcare and pharmaceutical industry specific
expertise.
Gang Ji – Director
Mr. Ji
has sixteen years of experience in finance and investment. He has
been serving as Vice President of Ant Financial since January 2016
responsible for global strategic investments of Ant Financial.
Before joining Ant Financial, he served Alibaba Group as Vice
President responsible for strategic investment for seven years.
Prior to joining Alibaba, Mr. Ji worked for several venture capital
funds and also served as an auditor of KPMG. He currently serves as
a director of Asia Game Technology Ltd., a company listed on the
Hong Kong Stock Exchange (HKEX: 8279) as well as several private
technology companies. Mr. Ji holds a bachelor’s degree in
international business management from University of International
Business and Economics (Beijing). He currently serves on the
Company’s Compensation Committee. In considering Mr.
Ji’s eligibility to serve on the Board, the Board considered
Mr. Ji’s board experience, leadership, extensive accounting
and financial control background, venture capital tenure as well as
multinational corporate executive management experience in a highly
regulated industry.
Compensation of Directors
The
Company has determined that the annual cash compensation (prorated
daily) to be paid to each director shall consist of $36,000 for
each director. In addition, each independent director of the Board
is eligible to receive a non-qualified option grant under the
Company’s stock incentive plan, under which such
director’s initial option grant shall be for a number of
shares of common stock as set forth in the Independent Director
Agreement for each such director and shall include such other terms
to be determined by the Board and or its Compensation
Committee.
Non-Executive Director Agreement
The
Company has and will continue to enter into agreements with
independent non-executive directors. Effective January 2016,
directors are paid based on three components from the September
2015 Compensation Committee’s engagement with Deloitte
Consulting LLP (“Deloitte Consulting”) to review the
competitiveness of the Company’s non-employee director
compensation program. The three components are: (i) $36,000 per
year (prorated daily based on a 360 day year for any portion of the
year if he serves for less than a full term) for services as a
director, and (ii) $40,000 if such director serves as a member of a
committee, and (iii) $110,000 if such director serves as a
chairperson of a committee. Thirty percent (30%) of the
Director’s total compensation will be cash compensation and
70% will be in non-qualified stock options. Such options shall vest
on the anniversary date of the director’s appointment to the
committee or to his position as committee chair, or on the next
annual meeting date as the case may be. Deloitte Consulting was
solely engaged to review the competitiveness of the Company’s
non-employee director compensation program. It determined different
components of the director compensation based on custom industry
peer group data and the National Association of Corporate
Directors’ (NACD”) 2014-2015 Director Compensation
Report. Director compensation data from the industry peer group was
used as the predominant source to understand the competitiveness of
the Company’s director compensation program, while
information from the NACD survey provided a supplemental market
reference. Deloitte Consulting’s analysis of director
compensation included these components of pay: annual retainer,
board and committee meeting fees, additional committee retainers
(including both chair and member retainers), total cash
compensation (the sum of annual cash retainer and meeting fees),
annual equity awards and total compensation (the sum of total cash
compensation and annual equity awards). The Company plans to review
the director’s compensation program again in
2017.
2016 DIRECTOR COMPENSATION TABLE
Note 1: Salary disclosed above is on cash basis. As of
December 31, 2016, there was director fee of $3,082 due to Mr. Gang
Ji.
Note 2: The expense related to those
option awards were amortized over the service period in accordance
with U.S. GAAP.
Note 3: On November 11, 2016, the
Company entered into a consulting agreement with Guotong Xu for his
stem cell advisory work on Scientific Advisory Board. It includes
cash compensation of $5,700 in 2016 and option awards of $71,760,
which will be amortized over the service period according to U.S.
GAAP.
On
December 9, 2016, the Company entered into consulting agreement
with David Bolocan for his advisory work on statistical analysis
and advice on strategic development based on his experience working
for multinationals. It includes cash compensation of $5,700 in 2016
and option awards of $36,055, which will be amortized over the
service period according to U.S. GAAP.
Risk Management in Compensation Policies and
Procedures
Due to
the Company's lack of cash flow, it has historically compensated
its officers predominantly in stock and with a smaller cash salary.
By compensating these officers predominantly in stock, we believe
they have a greater incentive to take steps to increase the value
of the Company's stock than they would if compensated in cash. As
the Company's value is largely based on the value of the equity it
receives from its stockholders, paying the officers using Company
stock may incentivize them to take additional risks in an attempt
to increase the value of the Company's stock.
Vote and Recommendation
The
affirmative vote of the holders of a plurality of the shares of
common stock present in person or represented by proxy and entitled
to vote on the nominees will be required to approve each nominee.
This means that the three nominees with the greatest number votes
for election will be elected.
Our Board recommends a vote “FOR” each of the
nominees.
PROPOSAL 2 – RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee of the Board has appointed BDO China as our
independent registered public accounting firm to audit our
financial statements for the fiscal year ending December 31, 2017.
BDO China has also served as our independent registered public
accounting firm for the fiscal years ended December 31, 2016 and
December 31, 2015.
Stockholder
ratification of the selection of BDO China as our independent
registered public accounting firm is not required by our Bylaws or
the Delaware General Corporation Law. The Board seeks such
ratification as a matter of good corporate practice. Should the
stockholders fail to ratify the selection of BDO China as our
independent registered public accounting firm, the Audit Committee
will reconsider whether to retain that firm for fiscal year 2017.
In making its recommendation to the Board that stockholders ratify
the appointment of BDO China as our independent registered public
accounting firm for the fiscal year ending December 31, 2017, the
Audit Committee considered whether BDO China’s provision of
non-audit services is compatible with maintaining the independence
of our independent registered public accounting firm.
Audit Fees
The
Company paid or accrued the following fees in each of the prior
three fiscal years to its accountants, including to its principal
accountants, BDO China and BDO USA:
Audit
fees include fees for the audit of our annual financial statements,
reviews of our quarterly financial statements, and related consents
for documents filed with the SEC. All other fees include fees for
auditing of listing agreement clients as required by the SEC for
listing.
The
Audit Committee is required to review and approve in advance the
retention of the independent auditors for the performance of all
audit and lawfully permitted non-audit services (if any) and the
fees for such services. The Audit Committee may delegate to one or
more of its members the authority to grant pre-approvals for the
performance of non-audit services, and any such Audit Committee
member who pre-approves a non-audit service must report the
pre-approval to the full Audit Committee at its next scheduled
meeting. All of the services provided by our independent registered
public accountants described above were approved by our Audit
Committee.
Our
principal accountants did not engage any other persons or firms
other than the principal accountant’s full-time, permanent
employees.
The
Board has received and reviewed the written disclosures and the
letter from the independent registered public accounting firm
required by Public Company Accounting Oversight Board
(“PCAOB”), and has discussed with its auditors its
independence from the Company. The Board has considered whether the
provision of services other than audit services is compatible with
maintaining auditor independence.
Auditor Representatives at Annual Meeting
We
expect that representatives of BDO China will not be present at the
Annual Meeting.
Vote Required and Recommendation
The
affirmative vote of the holders of shares of common stock entitled
to vote must exceed the votes cast against this proposal for the
proposal to be approved.
The Board recommends that stockholders vote “FOR”
ratification of the appointment of BDO China Shu Lun Pan Certified
Public Accountants LLP as
our independent registered public accounting firm for the fiscal
year ending December 31, 2017 as described in this Proposal
2.
PROPOSAL 3 – AMENDMENT TO THE COMPANY’S 2014 STOCK
INCENTIVE PLAN
Background
Our
2014 Stock Equity Incentive Plan (the “Plan”) allows us to grant
equity awards (including stock options, stock appreciate right,
restricted stock, restricted stock units, stock bonus award and
performance bonus awards) to our employees, officers and
directors.
We
believe our success is due to our highly talented employee base and
that future success depends on the ability to attract and retain
high caliber personnel for our clinical trials and other aspects of
our operations The ability to grant equity awards is a necessary
and powerful recruiting and retention tool for us to obtain the
quality personnel we need to move our business
forward.
Summary of the Proposal
Our
Board of Directors approved an amendment to the Plan on January 21,
2017, subject to approval by our stockholders at the Annual
Meeting. We are seeking stockholder approval of an amendment to the
Plan that increases the maximum number of shares that will be made
available for issuance thereunder by 1,000,000 shares.
The Importance of the Proposed Increase in Shares
We
believe the ability to grant competitive equity awards is a
necessary and powerful recruiting and retention tool for us to
obtain the quality personnel we need to move our business forward.
If we are unable to offer competitive equity packages to retain and
hire employees, this could significantly hamper our plans for
growth and adversely affect our ability to operate our business. In
addition, if we are unable to grant competitive equity awards, we
may be required to offer additional cash-based incentives to
replace equity as a means of competing for talent. We believe that
increasing the number of shares under the Plan is necessary for us
to continue to offer a competitive equity incentive program. Based
upon recent requirements, we believe that the addition of 1,000,000
shares to the maximum number of shares that may be sold under the
Plan will provide us with enough shares to continue to offer
competitive equity compensation through 2018.
Share Information
As of
March 3, 2017, the 2014 Stock Incentive Plan had 810,071 shares
subject to currently outstanding equity awards including 154,307
shares subject to outstanding restricted stock units and
performance share awards and 655,764 outstanding options with a
weighted average remaining term of 1.08 years and a weighted
average exercise price of $19.84 and 384,979 shares available for
future issuance.2
Description of the Plan
The
following summary describes the material features of the
Plan. The summary, however, does not purport to be a
complete description of all the provisions of the Plan. Capitalized
terms used but not defined in this proposal shall have the same
meaning ascribed to them in the Plan. A copy of the Plan, including
the proposed amendments, is attached hereto as Annex A. The following
description is qualified in its entirety by reference to the
Plan.
Administration. Our Compensation Committee will administer
the Plan. The Committee will have the authority to determine the
terms and conditions of any agreements evidencing any Awards
granted under the Plan and to adopt, alter and repeal rules,
guidelines and practices relating to the Plan. Our Compensation
Committee will have full discretion to administer and interpret the
Plan and to adopt such rules, regulations and procedures as it
deems necessary or advisable and to determine, among other things,
the time or times at which the awards may be exercised and whether
and under what circumstances an award may be
exercised.
Eligibility. Employees, directors, officers, advisors or
consultants of the company or its affiliates are eligible to
participate in the Plan. Our Compensation Committee has the sole
and complete authority to determine who will be granted an award
under the Plan, however, it may delegate such authority to one or
more officers of the company under the circumstances set forth in
the Plan.
Number of Shares Authorized. The Plan initially provides for
an aggregate of 1,200,000 shares of common stock to be available
for awards. If this Proposal 3 is approved, the number of shares
issuable will be increased to 2,200,000 shares. Additionally,
commencing on the first business day in 2015 and on the first
business day of each calendar year thereafter while the Plan is in
effect, the maximum aggregate number of Common Shares available for
issuance under this Plan shall be increased such that, as of such
first business day, the maximum aggregate number of Common Shares
available for issuance under this Plan shall be equal to One
Hundred One Percent (101%)2 of
the maximum aggregate number of Common Shares available for
issuance in the prior year. If an award is forfeited or if any
option terminates, expires or lapses without being exercised, the
common shares subject to such award will again be made available
for future grant. Shares that are used to pay the exercise price of
an option or that are withheld to satisfy the Participant’s
tax withholding obligation will not be available for re-grant under
the Plan.
Each
Common Share subject to an Option or a Stock Appreciation Right
will reduce the number of shares of common stock available for
issuance by one share, and each Common Share underlying an Award of
Restricted Stock, Restricted Stock Units, Stock Bonus Awards and
Performance Compensation Awards will reduce the number of shares of
common stock available for issuance by one share.
If
there is any change in our corporate capitalization, the
Compensation Committee in its sole discretion may make
substitutions or adjustments to the number of shares reserved for
issuance under our Plan, the number of shares covered by awards
then outstanding under our Plan, the limitations on awards under
our Plan, the exercise price of outstanding options and such other
equitable substitution or adjustments as it may determine
appropriate.
The
Plan has a term of ten years and no further awards may be granted
under the Plan after that date.
Awards Available for Grant. Our Compensation Committee may
grant awards of Non-Qualified Stock Options, Incentive (qualified)
Stock Options, Stock Appreciation Rights, Restricted Stock Awards,
Restricted Stock Units, Stock Bonus Awards, Performance
Compensation Awards (including cash bonus awards) or any
combination of the foregoing.
Options. Our Compensation Committee will be authorized to
grant Options to purchase shares of common stock that are either
“qualified,” meaning they are intended to satisfy the
requirements of Code Section 422 for incentive stock options,
or “non-qualified,” meaning they are not intended to
satisfy the requirements of Section 422 of the Code. Options
granted under the Plan will be subject to the terms and conditions
established by our Compensation Committee. Under the terms of the
Plan, unless our Compensation Committee determines otherwise in the
case of an Option substituted for another Option in connection with
a corporate transaction, the exercise price of the Options will not
be less than the fair market value (as determined under the Plan)
of our common shares at the time of grant. Options granted under
the Plan will be subject to such terms, including the exercise
price and the conditions and timing of exercise, as may be
determined by our Compensation Committee and specified in the
applicable award agreement. The maximum term of an option granted
under the Plan will be ten years from the date of grant (or five
years in the case of a qualified option granted to a 10%
stockholder). Payment in respect of the exercise of an option may
be made in cash or by check, by surrender of unrestricted shares
(at their fair market value on the date of exercise) that have been
held by the participant for any period deemed necessary by our
accountants to avoid an additional compensation charge or have been
purchased on the open market, or our Compensation Committee may, in
its discretion and to the extent permitted by law, allow such
payment to be made through a broker-assisted cashless exercise
mechanism, a net exercise method, or by such other method as our
Compensation Committee may determine to be
appropriate.
Stock Appreciation Rights. Our Compensation Committee will
be authorized to award Stock Appreciation Rights (or SARs) under
the Plan. SARs will be subject to the terms and conditions
established by our Compensation Committee. An SAR is a contractual
right that allows a participant to receive, either in the form of
cash, shares or any combination of cash and shares, the
appreciation, if any, in the value of a share over a certain period
of time. An Option granted under the Plan may include SARs and SARs
may also be awarded to a participant independent of the grant of an
Option. SARs granted in connection with an Option shall be subject
to terms similar to the Option corresponding to such SARs. SARs
shall be subject to terms established by our Compensation Committee
and reflected in the award agreement.
Restricted Stock. Our Compensation Committee will be
authorized to award Restricted Stock under the Plan. Unless
otherwise provided by our Compensation Committee and specified in
an award agreement, restrictions on Restricted Stock will lapse
after three years of service with the company. Our Compensation
Committee will determine the terms of such Restricted Stock awards.
Restricted Stock are shares of common stock that generally are
non-transferable and subject to other restrictions determined by
our Compensation Committee for a specified period. Unless our
Compensation Committee determines otherwise or specifies otherwise
in an award agreement, if the participant terminates employment or
services during the restricted period, then any unvested restricted
stock is forfeited.
Restricted Stock Unit Awards. Our Compensation Committee
will be authorized to award Restricted Stock Unit awards. Unless
otherwise provided by our Compensation Committee and specified in
an award agreement, Restricted Stock Units will vest after three
years of service with the company. Our Compensation Committee will
determine the terms of such Restricted Stock Units. Unless our
Compensation Committee determines otherwise or specifies otherwise
in an award agreement, if the participant terminates employment or
services during the period of time over which all or a portion of
the units are to be earned, then any unvested units will be
forfeited. At the election of our Compensation Committee, the
participant will receive a number of shares of common stock equal
to the number of units earned or an amount in cash equal to the
fair market value of that number of shares at the expiration of the
period over which the units are to be earned or at a later date
selected by our Compensation Committee.
Stock Bonus Awards. Our Compensation Committee will be
authorized to grant awards of unrestricted shares of common stock
or other awards denominated in shares of common stock, either alone
or in tandem with other awards, under such terms and conditions as
our Compensation Committee may determine.
Performance Compensation Awards. Our Compensation Committee
will be authorized to grant any award under the Plan in the form of
a Performance Compensation Award by conditioning the vesting of the
award on the attainment of specific levels of performance of the
Company and/or one or more Affiliates, divisions or operational
units, or any combination thereof, as determined by the
Committee.
Transferability. Each award may be exercised during the
participant’s lifetime only by the participant or, if
permissible under applicable law, by the participant’s
guardian or legal representative and may not be otherwise
transferred or encumbered by a participant other than by will or by
the laws of descent and distribution. Our Compensation Committee,
however, may permit awards (other than incentive stock options) to
be transferred to family members, a trust for the benefit of such
family members, a partnership or limited liability company whose
partners or stockholders are the participant and his or her family
members or anyone else approved by it.
Amendment. The Plan will have a term of ten years. Our board
of directors may amend, suspend or terminate the Plan at any time;
however, shareholder approval to amend the Plan may be necessary if
the law so requires. No amendment, suspension or termination will
impair the rights of any participant or recipient of any award
without the consent of the participant or recipient.
Change in Control. Except to the extent otherwise provided
in an Award agreement, in the event of a Change in Control, all
outstanding options and equity awards (other than performance
compensation awards) issued under the Plan will become fully vested
and performance compensation awards will vest, as determined by our
Compensation Committee, based on the level of attainment of the
specified performance goals. In general, our Compensation Committee
may, in its discretion, cancel outstanding awards and pay the value
of such awards to the participants in connection with a Change in
Control. Our Compensation Committee can also provide otherwise in
an award agreement under the Plan.
U.S. Federal Income Tax Consequences
The
following is a general summary of the material U.S. federal income
tax consequences of the grant and exercise and vesting of awards
under the Plan and the disposition of shares acquired pursuant to
the exercise of such awards and is intended to reflect the current
provisions of the Code and the regulations thereunder. This summary
is not intended to be a complete statement of applicable law, nor
does it address foreign, state, local and payroll tax
considerations. Moreover, the U.S. federal income tax consequences
to any particular participant may differ from those described
herein by reason of, among other things, the particular
circumstances of such participant.
Options. There are a number of requirements that must be met
for a particular option to be treated as a qualified option. One
such requirement is that shares of common stock acquired through
the exercise of a qualified option cannot be disposed of before the
later of (i) two years from the date of grant of the option,
or (ii) one year from the date of exercise. Holders of
qualified options will generally incur no federal income tax
liability at the time of grant or upon exercise of those options.
However, the spread at exercise will be an “item of tax
preference,” which may give rise to “alternative
minimum tax” liability for the taxable year in which the
exercise occurs. If the holder does not dispose of the shares
before the later of two years following the date of grant and one
year following the date of exercise, the difference between the
exercise price and the amount realized upon disposition of the
shares will constitute long-term capital gain or loss, as the case
may be. Assuming both holding periods are satisfied, no deduction
will be allowed to the company for federal income tax purposes in
connection with the grant or exercise of the qualified option. If,
within two years following the date of grant or within one year
following the date of exercise, the holder of shares acquired
through the exercise of a qualified option disposes of those
shares, the participant will generally realize taxable compensation
at the time of such disposition equal to the difference between the
exercise price and the lesser of the fair market value of the share
on the date of exercise or the amount realized on the subsequent
disposition of the shares, and that amount will generally be
deductible by the company for federal income tax purposes, subject
to the possible limitations on deductibility under Sections 280G
and 162(m) of the Code for compensation paid to executives
designated in those Sections. Finally, if an otherwise qualified
option becomes first exercisable in any one year for shares having
an aggregate value in excess of $100,000 (based on the grant date
value), the portion of the qualified option in respect of those
excess shares will be treated as a non-qualified stock option for
federal income tax purposes.
No
income will be realized by a participant upon grant of a
non-qualified stock option. Upon the exercise of a non-qualified
stock option, the participant will recognize ordinary compensation
income in an amount equal to the excess, if any, of the fair market
value of the underlying exercised shares over the option exercise
price paid at the time of exercise. The company will be able to
deduct this same amount for U.S. federal income tax purposes, but
such deduction may be limited under Sections 280G and 162(m) of the
Code for compensation paid to certain executives designated in
those Sections.
Restricted Stock. A participant will not be subject to tax
upon the grant of an award of restricted stock unless the
participant otherwise elects to be taxed at the time of grant
pursuant to Section 83(b) of the Code. On the date an award of
restricted stock becomes transferable or is no longer subject to a
substantial risk of forfeiture, the participant will recognize
taxable compensation equal to the difference between the fair
market value of the shares on that date over the amount the
participant paid for such shares, if any, unless the participant
made an election under Section 83(b) of the Code to be taxed
at the time of grant. If the participant made an election under
Section 83(b), the participant will recognize taxable
compensation at the time of grant equal to the difference between
the fair market value of the shares on the date of grant over the
amount the participant paid for such shares, if any. (Special rules
apply to the receipt and disposition of restricted shares received
by officers and directors who are subject to Section 16(b) of
the Securities Exchange Act of 1934 (the “Exchange
Act”)). The company will be able to deduct, at the same time
as it is recognized by the participant, the amount of taxable
compensation to the participant for U.S. federal income tax
purposes, but such deduction may be limited under Sections 280G and
162(m) of the Code for compensation paid to certain executives
designated in those Sections.
Restricted Stock Units. A participant will not be subject to
tax upon the grant of a restricted stock unit award. Rather, upon
the delivery of shares or cash pursuant to a restricted stock unit
award, the participant will have taxable compensation equal to the
fair market value of the number of shares (or the amount of cash)
the participant actually receives with respect to the award. The
company will be able to deduct the amount of taxable compensation
to the participant for U.S. federal income tax purposes, but the
deduction may be limited under Sections 280G and 162(m) of the Code
for compensation paid to certain executives designated in those
Sections.
SARs. No income will be realized by a participant upon grant
of an SAR. Upon the exercise of an SAR, the participant will
recognize ordinary compensation income in an amount equal to the
fair market value of the payment received in respect of the SAR.
The company will be able to deduct this same amount for U.S.
federal income tax purposes, but such deduction may be limited
under Sections 280G and 162(m) of the Code for compensation paid to
certain executives designated in those Sections.
Stock Bonus Awards. A participant will have taxable
compensation equal to the difference between the fair market value
of the shares on the date the shares of common stock subject to the
award are transferred to the participant over the amount the
participant paid for such shares, if any. The company will be able
to deduct, at the same time as it is recognized by the participant,
the amount of taxable compensation to the participant for U.S.
federal income tax purposes, but such deduction may be limited
under Sections 280G and 162(m) of the Code for compensation paid to
certain executives designated in those Sections.
Section 162(m). In general, Section 162(m) of the
Code denies a publicly held corporation a deduction for U.S.
federal income tax purposes for compensation in excess of
$1,000,000 per year per person to its principal executive officer
and the three other officers (other than the principal executive
officer and principal financial officer) whose compensation is
disclosed in its proxy statement as a result of their total
compensation, subject to certain exceptions. The Plan is intended
to satisfy an exception with respect to grants of options to
covered employees. In addition, the Plan is designed to permit
certain awards of restricted stock, restricted stock units, cash
bonus awards and other awards to be awarded as performance
compensation awards intended to qualify under the
“performance-based compensation” exception to
Section 162(m) of the Code.
THE
FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL
INCOME TAXATION UPON PARTICIPANTS AND THE COMPANY UNDER THE PLAN.
IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF THE EMPLOYEE’S DEATH OR THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN
WHICH THE EMPLOYEE MAY RESIDE.
Plan Benefits
Future
grants under the Plan will be made at the discretion of the
Compensation Committee and, accordingly, are not yet determinable.
In addition, the value of the awards granted under the Plan will
depend on a number of factors, including the fair market value of
our shares of Common Stock on future dates, the exercise decisions
made by the participants and/or the extent to which any applicable
performance goals necessary for vesting or payment are achieved.
Consequently, it is not possible to determine the benefits that
might be received by participants receiving discretionary grants
under, or having their annual bonus paid pursuant to, the
Plan.
Required Vote
Approval
of the Amendment to the Plan will require the affirmative vote of
the holders of a majority of the shares of the Company’s
common stock represented in person or by proxy and entitled to vote
at the Meeting. Assuming the presence of a quorum of more than 50%
of the shares of our common stock, the failure to vote will have no
effect on the outcome of the vote.
Interests of Directors and Officers
Our
directors may grant awards under the Plan to themselves as well as
our officers, in addition to granting awards to our other
employees.
The Board recommends that stockholders vote “FOR” the
approval of Amendment to the Cellular Biomedicine Group, Inc. 2014
Stock Incentive Plan as described in this Proposal
3.
PROPOSAL 4 - ADVISORY VOTE ON EXECUTIVE COMPENSATION
The SEC
has adopted final rules requiring public companies to provide
stockholders with periodic advisory (non-binding votes) on
executive compensation, also referred to as "say-on-pay" proposals.
We are presenting the following proposal, which gives you as a
stockholder the opportunity to endorse or not endorse the
compensation paid to our Principal Executive Officer, Principal
Financial Officer and three other most highly compensated executive
officers (collectively, the "Named Executive Officers"), as
disclosed in this Proxy Statement pursuant to Item 402 of
Regulation S-K (including the Compensation Discussion and Analysis,
compensation tables and accompanying narrative
discussion).
"RESOLVED, that the compensation paid to the Company's Named
Executive Officers, as disclosed pursuant to Item 402 of Regulation
S-K, compensation tables and narrative discussion is hereby
APPROVED."
Pursuant
to the Exchange Act and the rules promulgated thereunder, this vote
will not be binding on the Board or the Compensation Committee and
may not be construed as overruling a decision by the Board or the
Compensation Committee, creating or implying any change to the
fiduciary duties of the Board or the Compensation Committee or any
additional fiduciary duty by the Board or the Compensation
Committee or restricting or limiting the ability of stockholders to
make proposals for inclusion in proxy materials related to
executive compensation. The Board and the Compensation
Committee, however, may in their discretion take into account the
outcome of the vote when considering future executive compensation
arrangements.
Required Vote
In
voting to approve the above resolution, stockholders may vote for
the resolution, against the resolution or abstain from
voting. This matter will be decided by the affirmative
vote of a majority of the votes cast at the
Meeting. Abstentions and broker non-votes will have no
direct effect on the outcome of this proposal.
The Board recommends that stockholders vote "FOR" the approval of
the compensation of the Company’s named executive officers as
disclosed in this proxy statement.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Executive Officers and Directors
Set
forth below is information regarding the Company's current
directors and executive officers as of the date of this Proxy
Statement. The executive officers serve at the pleasure of the
Board of Directors.
Effective
February 3, 2017, Richard Wang resigned as the Company’s
Chief Operating Officer. As a result, although he is not listed as
a current officer below, as a “named executive officer”
(as such term is defined in Item 402 of Regulation S-K promulgated
under the Exchange Act, the terms of his compensation is disclosed
herein.
Name
|
|
Age
|
|
Position
|
|
Term
|
Wen Tao
(Steve) Liu
|
|
61
|
|
Director
|
|
Class
III
|
Hansheng
Zhou (2)
|
|
53
|
|
Independent
Director
|
|
Class
I
|
Tony
(Bizuo) Liu
|
|
52
|
|
Chief
Executive Officer and Chief Financial Officer
|
|
Class
II
|
Alan Au
(1)(3)
|
|
44
|
|
Independent
Director
|
|
Class
II
|
Gang Ji
(2)
|
|
42
|
|
Independent
Director
|
|
Class
II
|
Terry
A. Belmont (1)(2)(3)
|
|
71
|
|
Chairman
of the Board and Independent Director
|
|
Class
I
|
Nadir
Patel (1)(3)
|
|
46
|
|
Independent
Director
|
|
Class III
|
Yihong
Yao
|
|
49
|
|
Chief
Scientific Officer
|
|
N/A
|
Andrew
Chan
|
|
59
|
|
Secretary
and Senior Vice President
|
|
N/A
|
(1)
|
Member
of Audit Committee
|
(2)
|
Member
of Compensation Committee
|
(3)
|
Member
of Nominating and Corporate Governance Committee
|
There
are no family relationships between any of our directors or
executive officers. There is no arrangement or understanding
between any of the directors or officers of the Company and any
other person pursuant to which any director or officer was or is to
be selected as a director or officer, and there is no arrangement,
plan or understanding as to whether non-management stockholders
will exercise their voting rights to continue to elect the current
directors to the Company’s Board. Save from Wuhan
Dangdai’s Board observer seat agreement as a condition of
their $43.3 million investment in the Company, there are no
arrangements, agreements or understandings between non-management
stockholders that may directly or indirectly participate in or
influence the management of the Company’s affairs. There are
no agreements or understandings for any officer or director to
resign at the request of another person, and none of the officers
or directors are acting on behalf of, or will act at the direction
of, any other person.
The
following is a brief description of the business experience during
the past five years of our executive officers and directors as of
the date of this Proxy Statement who are not up for election at
this Annual Meeting:
Wen Tao (Steve) Liu, Director
Dr. Liu
has over 30 years of professional career encompassing biomedicine,
clean energy and semiconductor industries. He has led
multi-national businesses as well as entrepreneurial companies,
with a proven track record of delivering financial results and
shareholder value. He served on board of directors of various
public and private companies in the United States, China, Hong
Kong, Canada, and Australia. Dr. Liu previously served
as Chairman and CEO of Cellular Biomedicine Group Inc.. In
October 2013 he transitioned to the role of Executive Chairman
of the Board and, in February 2016, to the role of director and
strategic advisor to CBMG’s management. Prior to CBMG, Dr.
Liu served as President and CEO of Seeo Inc. from July 2010 to Feb
2012, and as director to Aug 2015 where he led a team of scientists
and entrepreneurs for the development of solid-state lithium ion
battery for electric vehicles and smart grid applications. Under
his leadership, Seeo received multiple funding from Department of
Energy and venture capital firms. Seeo was elected to Global
Cleantech 100 and top Energy Technology Startups in 2011. Before
that, Mr. Liu worked 25 years in semiconductor industry. From 2003
to 2009, he was President and CEO of Shanghai Huahong NEC
Electronics Company (now HHGRACE), for which he received the White
Magnolia Award from Shanghai Government for his contribution to
international collaboration and economic development of the city.
From 1989 to 2002, he was Vice President and GM of Peregrine
Semiconductor, Vice President and GM of Integrated Device
Technology, Vice President and General Manager of Quality
Semiconductor and Managing Director of Quality Semiconductor
Australia. Mr. Liu served Cypress Semiconductor in various
engineering capacity from 1984 to 1989. Mr. Liu earned a
Bachelor’s degree in Chemistry from Nanjing University,
Nanjing China. He holds a Doctorate in Physical Chemistry from
Rensselaer Polytechnic Institute, Troy New York. . In
considering Dr. Liu’s eligibility to serve on the Board, the
Board considered Dr. Liu’s board experience as well as his
prior experience as a leader and executive officer.
Hangsheng Zhou – Director
Dr.
Zhou is a well-respected and seasoned executive with over 28 years
of experience in the science and technology industries in China. He
currently serves as Chief Executive Officer and Chairman of Wuhan
Dangdai Science & Technology Industries Group Co., Ltd.
(“Wuhan Dangdai”), a China based privately held
conglomerate with a substantial medical and pharmaceutical
portfolio in China. Dr. Zhou previously served as Chief Financial
Officer and Managing Director of Wuhan Humanwell Healthcare Group
Co., Ltd. He holds a bachelor’s degree in Cell Biology and
masters in Animal Biology from Wuhan University and has also earned
his PhD degree in Applied Chemistry from Beijing Institute of
Technology. Dr. Zhou is a member of the Company’s
Compensation Committee. In considering Dr. Zhou’s eligibility
to serve on the Board, the Board considered his leadership
experience in managing both large pharmaceutical company in China
and multinationals in substantially similar industry.
Terry A. Belmont – Chairman of the Board and
Director
Mr.
Belmont has been serving CBMG as an Independent Director since
December 2013 and as Vice Chairman of the Board from March 2015 to
January 2016, when he was elected to serve as Chairman of the
Board. He currently serves as a member of the Audit Committee and
Chair of the Compensation Committee.
Mr.
Belmont has over 20 years of experience in leading major academic
and non-academic medical centers and healthcare entities with
multi-campus responsibility. Since 2009, Mr. Belmont has overseen
UC Irvine Medical Center, the main campus of UC Irvine Health, in
Orange, Calif., and its licensed ambulatory facilities in Orange,
Irvine, Costa Mesa, Anaheim and Santa Ana. Since his arrival in
2009, Belmont has led several expansion and renovation projects. He
helped open the state-of the-art UC Irvine Douglas Hospital and led
the development of a patient-centered healing garden and a 7-story
clinical laboratory building. Mr. Belmont launched a 10-year
facility master planning project for facility development at UC
Irvine Medical Center and clinics throughout Orange County. Prior
to joining UC Irvine Medical Center, Mr. Belmont served as CEO of
Long Beach Memorial Medical Center and Miller Children’s
Hospital from 2006-2009. He has also served as president and chief
executive officer in several entities, including St. Joseph
Hospital of Orange, Pacific Health Resources, California Hospital
Medical Center and HealthForward.
Mr.
Belmont’s substantial community involvement includes board
positions with the Orange County World Affairs Council, Southern
California College of Optometry, American Heart Association and
Children’s Fund. He serves on the Board of Trustees of the
University of Redlands. Mr. Belmont received his master’s in
public health with a major in hospital administration from UC
Berkeley, and a bachelor’s in business from the University of
Redlands. In considering Mr. Belmont's eligibility to serve on the
Board, the Board considered Mr. Belmont's business acumen in
the healthcare industry.
Nadir Patel – Director
Mr.
Patel is a senior Canadian diplomat currently serving in India. He
previously held the position of Chief Financial Officer for
Canada’s Department of Foreign Affairs, Trade and
Development, which included the responsibilities of strategic
planning, corporate finance and operations, risk management and
performance. Mr. Patel has previously served as Canada’s
Consul General in Shanghai, promoting trade and investment between
Canada and China, as well as Canada’s Chief
Air Negotiator where he negotiated bilateral treaties on
behalf of the Canadian government. Mr. Patel also served
on the Board of Governors of the International Development Research
Centre (and on its Audit and Finance Committee), as well as the
Advisory Board of Wilfrid Laurier University’s School of
Business and Economics. He has a Master of Business Administration
(MBA) from New York University’s Stern School of Business,
the London School of Economics and Political Science, and the HEC
Paris School of Management. In considering Mr.
Patel’s eligibility to serve on the Board, the Board
considered his financial expertise, international experience, and
knowledge of corporate governance practices through his past
participation on public sector boards. Mr. Patel serves as Chair of
the Audit Committee and as a member of the Nominating and
Governance Committee for CBMG.
Yihong Yao – Chief Scientific Officer
Mr. Yao
has been Chief Scientific Officer since August 2015. Mr. Yao brings
nearly twenty years of experience in the life sciences industry and
academia with strong expertise in clinical biomarker discovery and
development, strategy and personalized medicine. From 2005 until
his appointment as Chief Scientific Officer, Mr. Yao served in
various senior scientific positions at MedImmune, including most
recently as director and head of pharmacogenomics and
bioinformatics in the department of Translational Sciences from
2011 to July 2015. From 2001 to 2005, Mr. Yao served as Senior
Scientist, Translational Science at Abbott Bioresearch Center. He
holds a bachelor’s degree in Biochemistry from Fudan
University, Shanghai, China, a master’s degree in
Bioinformatics from Boston University, and a PhD in Molecular
Biology and Biochemistry from the University of Kansas, and he was
a postdoctoral fellow at Johns Hopkins University School of
Medicine.
Andrew Chan – Secretary and Senior Vice
President
Mr.
Chan served as Senior Vice President of Corporate Business
Development since January 2014, and was appointed Secretary in
September 2016. He previously served as Secretary and Chief
Financial Officer from February 2011 to January 2014. From 2003
until 2011, Mr. Chan was with Jazz Semiconductor and held various
management roles focusing on business operations, business and
corporate development. Prior to 2003, Mr. Chan was Vice President
of Business Operations and Supply Chain Management for Mindspeed
Technologies. In 2000, Mr. Chan served as Vice President of Supply
Chain Management at Conexant Systems. Mindspeed and Jazz were
spin-offs of Conexant. Previously, Mr. Chan’s focus was in
aviation and aerospace services. He served in diverse technical and
operations management roles at Eastern Airlines, Continental
Express and at Allied Signal (now called Honeywell) as Sr. Director
of Strategic Business Development. Mr. Chan earned a B.S. degree in
Management from Embry Riddle Aeronautical University and an MBA
with specialization in Computer System Management and Operations
Research from Nova University. He also holds a Jurisprudence
Doctorate (J.D.) degree from South Texas College of
Law.
Summary Compensation Table
The
following table sets forth for the years ended December 31, 2016,
2015, and 2014 compensation awarded to, paid to, or earned by
the following officers and directors: Steve Liu (our former
President and Chairman of the Board), William Cao (our former CEO),
Bizuo (Tony) Liu (our current CEO and CFO), Andrew Chan (our former
CFO, Senior Vice President, Corporate Business Development and
Secretary), Richard L Wang (our former COO) and Yihong Yao (our
CSO).
Name and Principal Position
|
Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wen
Tao (Steve) Liu, Director, Former President and Chairman of the
Board (1)
|
2016
|
15,341
|
-
|
-
|
-
|
-
|
-
|
68,274
|
83,615
|
2015
|
150,000
|
-
|
-
|
697,860
|
-
|
-
|
-
|
847,860
|
2014
|
200,004
|
-
|
37,727
|
-
|
-
|
-
|
-
|
237,731
|
Wei
(William) Cao, Former Director, Former Chief Executive Officer
(1)
|
2016
|
24,834
|
-
|
-
|
-
|
-
|
-
|
75,000
|
99,834
|
2015
|
247,717
|
-
|
-
|
4,723,010
|
-
|
-
|
-
|
4,970,727
|
2014
|
225,000
|
-
|
-
|
-
|
-
|
-
|
-
|
225,000
|
Bizuo
(Tony) Liu, Chief Executive Officer, Chief Financial Officer and
Director (2)
|
2016
|
240,000
|
-
|
-
|
637,240
|
-
|
-
|
23,017
|
900,257
|
2015
|
226,750
|
-
|
-
|
3,507,780
|
-
|
-
|
-
|
3,734,530
|
2014
|
155,491
|
-
|
-
|
1,141,712
|
-
|
-
|
-
|
1,297,203
|
Andrew
Chan, Senior Vice President, Corporate Business Development,
Company Secretary (2)
|
2016
|
242,584
|
80,000
|
-
|
206,700
|
-
|
-
|
26,015
|
555,299
|
2015
|
228,338
|
61,217
|
-
|
-
|
-
|
-
|
-
|
289,555
|
2014
|
220,006
|
-
|
46,200
|
209,625
|
-
|
-
|
-
|
475,831
|
Richard
L. Wang, Chief Operating Officer (2)
|
2016
|
225,000
|
41,664
|
-
|
137,800
|
-
|
-
|
14,126
|
418,590
|
2015
|
128,461
|
-
|
590,800
|
659,100
|
-
|
-
|
-
|
1,378,361
|
2014
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Yihong
Yao, Chief Scientific Officer (2)
|
2016
|
250,000
|
30,648
|
-
|
137,800
|
-
|
-
|
23,985
|
442,433
|
2015
|
116,045
|
-
|
613,865
|
490,000
|
-
|
-
|
-
|
1,219,910
|
2014
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(1) In
January 2016, the Company mutually agreed with each of William Cao
and Steve Liu not to renew their employment agreements at the end
of their respective terms. The Company then entered into consulting
agreements with William Cao and Steve Liu, respectively, which
became effective as of February 7, 2016. Consulting fees paid
pursuant to these agreements were illustrated as all other
compensation in above table. Details of the consulting agreement
could be referred to the F-7 NOTE 16 – COMMITMENTS AND
CONTINGENCIES in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2016.
(2) All
other compensation of these officers represents health insurance
expenses.
(3)
Salary, bonus and all other compensation illustrated above is on a
cash basis. Pursuant to the Compensation Committee’s January
20, 2017 meeting and the Board’s Executive Session on January
21, 2017 the Board has granted the following compensation and
awards for 2016.
Note 1: These
non-qualified options with exercise price of $12.55 were all
granted on January 21, 2017 and vested immediately on the grant
date.
Note 2: These
non-qualified options with exercise price of $12.55 were all
granted on January 20, 2017 and vested immediately on the grant
date.
The
following table sets forth information concerning outstanding stock
options for each named executive officer and director as of
December 31, 2016.
(1)
Represents an option to purchase up to 146,667 shares that were
issued on 2/20/2013 with a monthly vesting schedule over a 36 month
period, an exercise price of $3.00 and an expiration date will be
May 6, 2017 or 3 months after his board role ends, whichever is
later.
(2)
Represents an option to purchase up to 22,444 shares that were
issued on 2/11/2015 vesting at monthly rate until February 6, 2017,
an exercise price of $15.53 and an expiration date will be May 6,
2017 or 3 months after his board role ends, whichever is
later.
(3)
Represents an option to purchase up to 46,667 shares that were
issued on 2/20/2013 with a monthly vesting schedule over a 36-month
period, an exercise price of $3.00 and an expiration date of
2/20/2023, within which 7,787shares has been exercised in 2015 and
2016.
(4)
Represents an option to purchase up to 47,000 shares that were
issued on 5/16/2014 with a monthly vesting schedule over a 31-month
period, an exercise price of $5.61 and an expiration date of
5/16/2024, within which 9,096 shares has been exercised in 2015 and
2016.
(5)
Represents an Incentive Stock Option (ISO) to purchase up to 4,500
shares that were issued on 4/8/2016, with full vesting at the one
year anniversary of the grant date, an exercise price of $18.61 and
an expiration date of 4/8/2026.
(6)
Represents an option to purchase up to 10,500 shares that were
issued on 4/8/2016, with 4,500 shares vesting on February 7, 2018
and 6,000 shares vesting on February 7, 2019, an exercise price of
$18.61 and an expiration date of 4/8/2026.
(7)
Represents an option to purchase up to 255,000 shares that were
issued on 1/3/2014 with a monthly vesting schedule over a 36-month
period, an exercise price of $5 and an expiration date of
1/3/2024.
(8)
Represents an option to purchase up to 5,300 shares that were
issued on 3/5/2013 with a monthly vesting schedule over a 36-month
period, an exercise price of $7.23 and an expiration date of
3/5/2023.
(9)
Represents an option to purchase up to 15,000 shares that were
issued on 2/11/2015 vesting 1/3 on 7/23/2015 and each anniversary,
an exercise price of $20.63 and an expiration date of
7/23/2021.
(10)
Represents an option to purchase up to 15,000 shares that were
issued on 2/11/2015 vesting 1/3 on 8/14/2015 and each anniversary,
an exercise price of $20.63 and an expiration date of
8/14/2021.
(11)
Represents an option to purchase up to 97,800 shares that were
issued on 2/11/2015 vesting 1/3 on 12/31/2015 and each anniversary,
an exercise price of $15.53 and an expiration date of
12/31/2021.
(12)
Represents an option to purchase up to 8,000 shares that were
issued on 2/11/2015 vesting 1/3 on 12/31/2015 and each anniversary,
an exercise price of $15.53 and an expiration date of
12/31/2021.
(13)
Represents an option to purchase up to 30,000 shares that were
issued on 4/6/2015, with full vesting of 30%, 30% and 40% at each
year anniversary of the grant date for 3 years, an exercise price
of $35.53 and an expiration date of 4/6/2025.
(14)
Represents an option to purchase up to 13,000 shares that were
issued on 1/23/2016, with full vesting of 30%, 30% and 40% at each
year anniversary of the grant date for 3 years, an exercise price
of $40 and an expiration date of 1/23/2026.
(15)
Represents an option to purchase up to 40,000 shares that were
issued on 4/11/2016, with full vesting of 30%, 30% and 40% at each
year anniversary of the grant date for 3 years, an exercise price
of $20 and an expiration date of 4/11/2026.
(16)
Represents an option to purchase up to 40,000 shares that to be
issued on 3/7/2017, with full vesting of 30%, 30% and 40% at each
year anniversary of the grant date for 3 years, an exercise price
of $20 and an expiration date of 3/7/2027.
(17)
Represents an option to purchase up to 40,000 shares that to be
issued on 3/7/2018, with full vesting of 30%, 30% and 40% at each
year anniversary of the grant date for 3 years, an exercise price
of $20 and an expiration date of 3/7/2028.
(18)
Represents an option to purchase up to 4,000 shares that were
issued on 12/9/2014, with full vesting at the one year anniversary
of the grant date, an exercise price of $12.94 and an expiration
date of 12/9/2024.
(19)
Represents an option to purchase up to 3,000 shares issued on
11/7/2014 with full vesting at the one year anniversary of the
grant date, an exercise price of $15.62 and an expiration date of
11/7/2024.
(20)
Represents an option to purchase up to 8,761 shares issued on
2/9/2016 with full vesting on November 8, 2016, an exercise price
of $20 and an expiration date of 2/9/2023.
(21)
Represents an option to purchase up to 11,895 shares issued on
12/28/2016 with full vesting on June 2, 2017, an exercise price of
$13.35 and an expiration date of 12/28/2026.
(22)
Represents an option to purchase up to 3,620 shares that were
issued on 12/9/2016, with full vesting at the one year anniversary
of the grant date, an exercise price of $13.4 and an expiration
date of 12/9/2026.
(23)
Represents an option to purchase up to 5,000 shares that were
issued on 1/3/2014, with full vesting at the one year anniversary
of the grant date, an exercise price of $5 and an expiration date
of 1/3/2024.
(24)
Represents an option to purchase up to 2,000 shares that were
issued on 11/7/2014, with full vesting at the one year anniversary
of the grant date, an exercise price of $15.62 and an expiration
date of 11/7/2024.
(25)
Represents an option to purchase up to 5,000 shares that were
issued on 1/3/2015, with full vesting at the one year anniversary
of the grant date, an exercise price of $13.79 and an expiration
date of 1/3/2025.
(26)
Represents an option to purchase up to 5,946 shares that were
issued on 2/9/2016, with full vesting on November 8, 2016, an
exercise price of $20 and an expiration date of
2/9/2023.
(27)
Represents an option to purchase up to 9,789 shares issued on
12/28/2016 with full vesting on June 2, 2017, an exercise price of
$13.35 and an expiration date of 12/28/2026.
(28)
Represents an option to purchase up to 4,000 shares that were
issued on 11/7/2014, with full vesting at the one year anniversary
of the grant date, an exercise price of $15.62 and an expiration
date of 11/7/2024.
(29)
Represents an option to purchase up to 5,056 shares that were
issued on 2/9/2016, with full vesting on November 8, 2016, an
exercise price of $20 and an expiration date of
2/9/2023.
(30)
Represents an option to purchase up to 2,060 shares that were
issued on 3/25/2016, with full vesting on November 6, 2016, an
exercise price of $20 and an expiration date of
3/25/2023.
(31)
Represents an option to purchase up to 9,789 shares issued on
12/28/2016 with full vesting on June 2, 2017, an exercise price of
$13.35 and an expiration date of 12/28/2026.
(32)
Represents an option to purchase up to 2,000 shares that were
issued on 11/7/2014, with full vesting at the one year anniversary
of the grant date, an exercise price of $15.62 and an expiration
date of 11/7/2024.
(33)
Represents an option to purchase up to 3,313 shares that were
issued on 2/9/2016, with full vesting on November 8, 2016, an
exercise price of $20 and an expiration date of
2/9/2023.
(34)
Represents an option to purchase up to 6,626 shares that were
issued on 11/11/2016, with vesting of 50% at each year anniversary
of the grant date for 2 years, an exercise price of $14.7 and an
expiration date of 11/11/2026.
(35)
Represents an option to purchase up to 30,000 shares that were
issued on 5/18/2015, with full vesting of 30%, 30% and 40% at each
year anniversary of the grant date for 3 years, an exercise price
of $29.54 and an expiration date of 5/18/2025.
(36)
Represents a right to obtain restricted stock up to 20,000 shares
that were issued on 5/18/2015, with full vesting of 30%, 30% and
40% at each year anniversary of the grant date for 3
years.
(37)
Represents an option to purchase up to 10,000 shares that were
issued on 4/8/2016, with full vesting of 30%, 30% and 40% at each
year anniversary of the grant date for 3 years, an exercise price
of $18.61and an expiration date of 4/8/2026.
(38)
Represents an option to purchase up to 25,000 shares that were
issued on 8/4/2015, with full vesting of 30%, 30% and 40% at each
year anniversary of the grant date for 3 years, an exercise price
of $26.53 and an expiration date of 8/4/2025.
(39)
Represents a right to obtain restricted stock up to 25,000 shares
that were issued on 8/4/2015, with full vesting of 30%, 30% and 40%
at each year anniversary of the grant date for 3
years.
(40)
Represents an option to purchase up to 10,000 shares that were
issued on 4/8/2016, with full vesting of 30%, 30% and 40% at each
year anniversary of the grant date for 3 years, an exercise price
of $18.61and an expiration date of 4/8/2026.
(41)
Represents an option to purchase up to 5,300 shares that were
issued on 7/8/2016, with full vesting at the one year anniversary
of the grant date, an exercise price of $16 and an expiration date
of 7/8/2026.
(42)
Represents an option to purchase up to 3,620 shares that were
issued on 11/11/2016, with full vesting on June 2, 2017, an
exercise price of $14.7 and an expiration date of
11/11/2026.
Option Exercises and Stock Vested during the Year-End December 31,
2016
Executive Employment Agreements
At the
closing of the merger with Cellular Biomedicine Group Ltd., a
British Virgin Islands company (“CBMG BVI”), the
Company entered into executive employment agreements with each of
Wen Tao (Steve) Liu, Wei (William) Cao and Andrew Chan (the
“New Officers”) dated February 6, 2013 (each an
“Employment Agreement,” collectively, the
“Employment Agreements”). As of August 30, 2013, the
Employment Agreements were amended to revise the salaries of the
New Officers to: Wen Tao (Steve) Liu: $225,000; Wei (William) Cao:
$200,000; and Andrew Chan: $200,000. On September 29, 2013, in
connection with their change in positions, the Board further
adjusted the salaries of Mr. Liu and Mr. Cao to $200,000 and
$225,000, respectively. The New Officers are also eligible to
participate in the Company’s Amended and Restated 2011
Incentive Stock Option Plan (the “Plan”) and receive an
option grant thereunder for the purchase of common stock of the
Company at the discretion of the board of directors of the Company
(the “Board”). The term of the New Officers’
employment agreements are effective as of February 6, 2013 and
continue for three years thereafter. After the three year term, if
the New Officers continued to be employed, they would be employed
on an at-will basis and their agreements would automatically renew
for successive one year terms, until and unless their employment is
terminated.
If
during the initial three year period following February 6, 2013,
the New Officers were terminated for any reason other than death,
disability, Cause (as defined in their Employment Agreements) or
for no good reason, the Company would be obligated to: (i) pay a
severance amount equal to one times the New Officer’s base
salary; (ii) accelerate and vest in full the New Officer’s
stock options; (iii) subject to the New Officer’s election to
receive COBRA, pay for the executive’s COBRA premiums during
the twelve month period commencing with continuation coverage for
the month in which the date of termination occurs.
If any
New Officer’s employment was terminated by the Company, upon
or within two years following the date of a Change in Control (as
defined in the Employment Agreement), the Company would (i) pay the
New Officer a severance amount equal to two times the New
Officer’s base salary; (ii) accelerate and vest the New
Officer’s stock options effective immediately upon the date
of termination within the two year period following the occurrence
of a Change in Control; and (iii) subject to the New
Officer’s election to receive COBRA, pay for the New
Officer’s COBRA premiums during the twelve month period
commencing with continuation coverage for the month in which the
date of termination occurs.
In
connection with Tony Liu’s appointment as Chief Financial
Officer in January 2014, the Company entered into an employment
agreement with Mr. Liu on substantially the same terms as the New
Officer Employment Agreements, except that Mr. Liu was entitled to
receive an annual base salary of $210,000.
In May
2015, the Company appointed Richard L. Wang as its Chief Operation
Officer. In connection with Mr. Wang’s appointment, the
Company entered into an agreement with Mr. Wang, pursuant to which
Mr. Wang was entitled to receive an annual base salary of $210,000.
The term of the agreement was effective as of May 18, 2015 for a
period of three years, with a probation period from May 18, 2015 to
November 18, 2015.
If any
of the following conditions were to have occurred, the Company was
entitled to terminate the agreement but must provide a 60-day
advance written notice, and provide a severance payment equal to
one month of Mr. Wang’s salary: (1) if Mr. Wang was unable to
perform his obligations under the agreement in full, or perform
other obligations designated by the Company, (2) Mr. Wang could not
adequately perform his obligations under the agreement, and could
not do so after training or adjustment in obligations, and (3) the
agreement could not be carried out due to changes in circumstances,
and that the Company and Mr. Wang could not agree on modifications
to the agreement.
Additionally,
pursuant to a preliminary offer letter dated April 20, 2015, on May
18, 2015 the Company issued to Mr. Wang 20,000 restricted stock
units (“RSUs”) and 30,000 options
(“Options”) to purchase common stock. The RSUs and
Options vest over a period of three years in three equal annual
installments, with the first set of securities to vest on May 18,
2016. Both the RSUs and Options were issued pursuant to the
Company’s 2014 Stock Incentive Plan. Pursuant to the offer
letter, Mr. Wang was entitled to receive a cash performance bonus
of up to 30% of his base salary, based on the results of an annual
performance review.
On
February 3, 2017, Richard Wang notified the Company of his decision
to resign as Chief Operating Officer of the Company. Mr.
Wang’s resignation as Chief Operating Officer became
effective on the same day. For the period beginning February
3, 2017 through February 27, 2017, Mr. Wang will serve in a
transitional role to assist with the Company’s ongoing
clinical trial programs and other aspects of the Company’s
operations. During this period he will continue to receive a
pro-rated salary based on the compensation terms of his prior
employment agreement. Effective February
27, 2017, Mr. Wang executed a Separation Agreement and General
Release memorializing the terms of his transition, providing for,
among other terms, a general release of all claims against the
Company and a two-year non-solicitation period.
In
August 2015, the Company appointed Yihong Yao, Ph.D, B.S. as the
Company’s Chief Scientific Officer. In connection with Mr.
Yao’s appointment, the Company entered into an agreement with
Mr. Yao, pursuant to which Mr. Yao was entitled to receive an
annual base salary of $250,000. Additionally, Mr. Yao was entitled
to receive 25,000 restricted stock units (“RSUs”) and
25,000 options (“Options”) to purchase common stock.
The RSUs and Options vest over a period of three years, with the
first set of securities to vest on May 18, 2016, with 30% to vest
in the first installment, 30% to vest in the second installment and
40% to vest in the final installment. The Options were issued
pursuant to the Company’s 2014 Stock Incentive
Plan.
The
term of the agreement was effective as of August 4, 2015 for a
period of three years, with a six-month probation period. After the
initial probation period, either party may terminate the agreement
with at least 3 months’ prior written notice, except that the
Company may terminate for cause upon three days written notice and
a minimum 14 day cure period.
In
January 2016, the Company and Mr. Wen Tao (Steve) Liu mutually
agreed not to renew his employment agreement. The Company entered
into a consulting agreement with Steve (Wen Tao) Liu, which became
effective as of February 7, 2016 and terminate on February 7, 2018,
pursuant to which Steve Liu will advise the Chief Executive Officer
on strategic opportunities, advise the Company on Chinese hospitals
management and provide other consulting services and advice as
reasonably requested by the Company from time to
time. The Company agreed to: (i) pay cash compensation
of $3,666 per month; (ii) reimburse the actual travel and other
out-of-pocket expenses incurred solely in connection with services
performed pursuant to the Company’s request; and (iii) pay
premiums changed to continue medical coverage pursuant to the
Company’s existing employee health plan. Provided
Steve Liu is ineligible to receive, or the Company is not able to
provide, continuation coverage under the Company’s existing
employee health plan, the Company shall pay cash payment equal to
$1,667 for each month during the period and aggregate cash payment
should not exceed $20,000; (iv) the terms of stock options shall be
amended as additional consideration for the services rendered as
follows: 1) all options will expire on May 6, 2017 or 3 months
after Steve Liu ceases to serve on the Board, whichever is later;
2) Any unvested portion of the non-qualified stock option issued in
2013with a strike price of $3.00 will continue to vest at a monthly
rate until fully vested; and 3) Any unvested portion of the
non-qualified stock option issued in 2015 with a strike price of
$15.53 will continue to vest at a monthly rate until fully
vested.
In
January 2016, Mr. Wei (William) Cao notified the Company of his
decision to resign from his position as Chief Executive Officer of
the Company, effective February 6, 2016. In connection therewith,
the Company and Mr. Cao mutually agreed that Mr. Cao's employment
agreement, dated February 6, 2013, as amended, will not be renewed.
The Company entered into a consulting agreement with Wei Cao,
which became effective as of February 7, 2016 and terminate on
February 7, 2018, pursuant to which Wei Cao will advise the Chief
Executive Officer on M&A and other strategic opportunities,
participate in the Company’s internal scientific review and
actively work with the Company’s Scientific Advisory Board
and provide other consulting services etc. The Company agreed to:
(i) pay cash compensation of $12,500 per month for an average of 10
hours of service per week; (ii) reimburse the actual travel and
other out-of-pocket expenses incurred solely in connection with
services performed pursuant to the Company’s request. Prior
to August 7, 2016, such expenses may include up to RMB10,000 per
month for car and driver expenses incurred in Shanghai; (iii) pay
premiums changed to continue medical coverage pursuant to the
Company’s existing employee health plan during the 12-month
period following February 7, 2016. Provided Wei Cao is ineligible
to receive, or the Company is not able to provide, continuation
coverage under the Company’s existing employee health plan,
the Company shall pay cash payment equal to $1,667 for each month
during the period and aggregate cash payment should not exceed
$20,000; (iv) the terms of stock options shall be amended as
additional consideration for the services rendered as follows: 1)
Any unvested portion of the Non-Qualified stock option with
anexercise price of $15.53 issued dated December 31, 2014 will vest
until February 4, 2017 at the existing monthly rate. The options
will have an expiration date of August 6, 2017. After February 4,
2017 vesting will continue monthly for up to another 6 months as
long as this agreement is effective. However, after the termination
of this agreement, all vesting will cease. Notwithstanding the
above, if Wei Cao ceases to serve as a director of the Company
prior to February 6, 2017, he will be deemed to have forfeited such
options and any unvested options will vest and expire pursuant to
the terms of the above-referenced stock option award agreement;
2)Any unvested portion of the non-qualified stock option issued
dated February 20, 2013 shall immediately vest infull on February
6, 2016 and expire on February 6, 2017; 3)Options granted in
September 2013 shall cease vesting February 6, 2016 and shall
expire February 6, 2017; 4)Any other options held will cease to
vest on February 6, 2016 and will expire on February 7, 2016. On
May 25, 2016 Wei Cao notified the Company of his intention to
terminate the Service Agreement on August 7, 2016.
In
February 2016, the Board elected Bizuo (Tony) Liu to serve as Chief
Executive Officer of the Company, effective February 7, 2016. In
connection with Mr. Liu’s appointment, the Company entered
into an employment agreement with Mr. Liu on April 11, 2016, the
terms of which were effective retroactive to February 7, 2016.
Pursuant to the agreement, Mr. Liu was entitled to receive an
annual base salary of $240,000 and, commencing with the end of the
calendar year during his first year of employment, was eligible for
an annual cash bonus. Such annual salary and bonus eligibility will
be reviewed annually by the Board and the Compensation Committee
and may be changed in the sole direction of the Board and the
Compensation Committee. In addition, Mr. Liu was entitled to
receive 120, 000 options under the Company’s 2014 Equity
Incentive Plan.
The
term of the agreement was effective as of February 7, 2016 for a
period of one year (the “Initial Term”) which would be
renewed automatically for another one year term (the “First
Renewal Term”) unless the Company provided Mr. Liu with 90
days’ notice of non-renewal prior to the expiration of the
Initial Term. After the First Renewal Term, the Agreement would be
renewed automatically for another one year term unless the Company
provided Mr. Liu with 90 days’ notice of non-renewal prior to
the expiration of the First Renewal Term, provided that in no event
would the agreement remain in effect past February 6,
2019.
The
agreement could not be terminated by either party during the
Initial Term except upon Mr. Liu’s death, disability or for
cause. "Cause," as defined in the agreement, includes, but is not
limited to: (1) conviction for or pleading of felony, (2)
misappropriation of company assets, (3) willful violation of
company policy or a directive of the Board and (4) failure to
perform duties. The Company may terminate for cause with a 3-day
advance written notice. Upon termination by the Company for cause,
the Company will have no obligation to provide Mr. Liu with any
form of severance or any other benefits, except as may be required
by COBRA. If Mr. Liu’s employment is terminated by the
Company for reasons other than his death, disability or for cause
after February 6, 2017, the Company will pay Mr. Liu severance in
the amount equal to his base salary and, subject to Mr. Liu’s
election to receive COBRA, his COBRA premiums during the twelve
month period commencing with continuation coverage following the
month in which the date of termination occurs.
On
January 20, 2017, the Compensation Committee met and deliberated a
new retention plan with long-term incentives as recommended by the
CEO for eight key management executives. Besides Mr. Tony Liu, Mr.
Yihong Yao and Mr. Andrew Chan, the retention plan also
included five management executives in the LTIP. On January 21,
2017, the Board ratified the Compensation Committee’s
recommendation to implement the retention plan, pursuant to which
the Company will enter into a new four-year employment agreement
with each of the eight key management executives. It was
approved that the new agreement terms would include customary
change of control provisions and a four-year long-term incentive
award under the 2014 Incentive Plan, comprised of:
1.Stock
Price Sensitive Performance RSU awards (“Performance
RSUs”) to be vested and delivered in 2021; and
2.Time
Sensitive RSUs and Stock Options, which vest monthly vesting over
48 months.
At the
January 20, 2017 meeting and as ratified by the Board on January
21, 2017, the Compensation Committee determined that Mr. Tony Liu
would receive an annual base salary of $300,000 and would be
granted 240,000 shares of Performance RSUs and 120,000 shares in
each of the Time Sensitive RSUs and Stock Options.
On the
recommendation of the CEO, and as approved by the Compensation
Committee, it was determined that Mr. Yihong Yao would be granted
27,000 shares of Performance RSUs and 26,500 shares in each of the
Time Sensitive RSUs and Stock Options and Mr. Andrew Chan
would receive an annual base salary of $240,000 and will be granted
24,000 shares of Performance RSUs and 23,000 shares in each of the
Time Sensitive RSUs and Stock Options.
On
March 3, 2017, the Company amended and restated its existing
employment agreements (each, a “2017 Employment
Agreement”) with each of Tony Liu, Andrew Chan and Yihong
Yao. In addition to the compensation terms ratified by the Board or
Compensation Committee and discussed above, the 2017 Employment
Agreements amended certain terms of each officer’s prior
employment agreement, including but not limited to the duration of
such officer’s employment, and the conditions of such
officer’s termination, non-competition and non-solicitation
provisions. Each 2017 Employment Agreement has a term of four years
starting from the agreement date (“Initial Employment
Term”). At the end of the Initial Employment Term and on each
succeeding anniversary of the 2017 agreement date, and subject to
earlier termination set forth under the agreement, the term of each
2017 Employment Agreement will be automatically extended by an
additional twelve months (each, a “Renewed Term”),
unless either party provides the other party with notice of
non-renewal prior to the end of the Initial Employment Term or any
Renewal Term, as applicable.
In
addition to termination upon non-renewal, each officer may
terminate the agreement for good reason. Good reason, as defined in
each 2017 Employment Agreement, includes a material deduction in
base salary and relocation of an executive’s principal office
by more than 50 miles. In addition, pursuant to Mr. Liu and Mr.
Chan’s 2017 Employment Agreements, good reason includes a
material adverse change in title, duties or responsibilities. Each
officer is required to provide 30 days’ written notice in
advance in the event of his voluntary termination. In addition, the
Company may terminate the agreement for cause. Cause, as defined in
each 2017 Employment Agreement, includes: (i) material and
intentional breach of the agreement, (ii) willful and continued
failure to substantially perform duties, (iii) intentional
misconduct, (iv) conviction or indictment for felonies, (v)
intentional or knowing violation of antifraud provisions of
securities laws, (vii) current use or abuse of illegal substance
that affects performance, and (viii) knowing and material
violations of the Company’s code of ethics.
Pursuant
to the 2017 Employment Agreements, upon the officer’s
voluntary termination without good reason, termination by the
Company for cause or non-renewal, such officer will not be entitled
to a base salary or any right to participate in benefit plans after
such termination. If the employment is terminated by the officer
for good reason or by the Company without cause, the officer will
be entitled to certain amount of cash salary, bonus as well as
health insurance coverage for 12 months after such termination,
subject to certain conditions and forfeiture.
Each
2017 Employment Agreement includes a non-solicitation and a
non-competition provision that will apply during each
officer’s employment and for a period of two years following
termination.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table lists ownership of our common stock as of February
28, 2017, unless indicated otherwise. The information includes
beneficial ownership by (i) holders of more than 5% of parent
Common Stock, (ii) each of our directors and executive officers and
(iii) all of our directors and executive officers as a group.
Except as noted below, to our knowledge, each person named in the
table has sole voting and investment power with respect to all
shares of the Company’s Common Stock beneficially owned by
them. Except as otherwise indicated below, the address for each
listed beneficial owner is c/o Cellular Biomedicine Group, Inc.,
19925 Stevens Creek Blvd., Suite 100, Cupertino, California,
95014.
*
Less than 1%
(1)
|
Total shares owned by Wen Tao (Steve) Liu includes (i) 213,076
shares of common stock; (ii)146,667 options issued under 2011 Plan
vested as of February 28, 2017; (iii) 22,444 options issued under
2014 Plan vested as of February 28, 2017.
|
|
|
(2)
|
Total shares owned by Bizuo (Tony) Liu includes (i) 100,000 shares
of common stock; (ii) 35,300 options issued under 2011 Plan vested
as of February 28, 2017; (iii)255,000 options issued under 2013
Plan vested as of February 28, 2017; (iv) 129,434 options issued
under 2014 Plan vested/to be vested within 60 days as of February
28, 2017; (v) 5,000 shares of common stock to be vested within 60
days as of February 28, 2017.
|
|
|
(3)
|
Total shares owned by Andrew Chan includes (i) 145,757 shares of
common stock; (ii) 53,880 options issued under 2011 Plan vested as
of February 28, 2017; (iii) 37,904 options issued under 2013 Plan
vested as of February 28, 2017; (iv) 5,458 options issued under
2014 Plan vested/to be vested within 60 days as of February 28,
2017; (v) 958 shares of common stock to be vested within 60 days as
of February 28, 2017.
|
|
|
(4)
|
Total shares owned by Yihong Yao includes (i) 8,000 shares of
common stock; (ii) 11,604 options issued under 2014 Plan vested/to
be vested within 60 days as of February 28, 2017; (v) 1,104 shares
of common stock to be vested within 60 days as of February 28,
2017.
|
|
|
(5)
|
Total shares owned by Richard L. Wang includes (i) 6,000 shares of
common stock; (ii) 9,000 options issued under 2014 Plan vested as
of February 28, 2017.
|
|
|
(6)
|
Total shares owned by Terry A. Belmont includes (i) 7,000 options
issued under 2013 Plan vested as of February 28, 2017; (ii) 8,761
options issued under 2014 Plan vested as of February 28,
2017.
|
|
|
(7)
|
Total shares owned by Nadir Patel includes (i) 12,000 options
issued under 2013 Plan vested as of February 28, 2017; (ii) 5,946
options issued under 2014 Plan vested as of February 28,
2017.
|
|
|
(8)
|
Total shares owned by Chun Kwok Alan Au includes (i) 4,000 options
issued under 2013 Plan vested as of February 28, 2017; (ii) 7,116
options issued under 2014 Plan vested as of February 28,
2017.
|
|
|
(9)
|
Represents 2,270,000 shares held by Dangdai International Group
Co., Limited. Wuhan Dangdai Technology & Industries Group Inc.
has voting and dispositive power over the shares of Dangdai
International Group Co., Limited in Hong Kong. Wuhan Dangdai
Technology & Industries Group Inc. is controlled by Hansheng
Zhou, Xiaodong Zhang, Luming Ai, Xuehai Wang, Lei Yu, Xiaoling Du
and Haichun Chen. Such individuals share voting and dispositive
power over the shares held by Dangdai International Group Co.,
Limited.
|
|
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(10)
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Based on information available as of June 30, 2016, 1,036,040
shares are held by Mission Right Limited. Mission Right Limited is
50% owned by Yusen Holdings Limited and 50% by Zeacome Investment
Limited. Chan Boon Ho Peter controls Yusen Holdings. Zeacome
Investment Limited is owned by Perfect Touch Technology Inc., which
is owned by CST Mining Group Limited. CST Mining Group Limited is a
public company listed on the Hong Kong Stock Exchange under the
ticker code “985.” Accordingly, Chan Boon Ho Peter and
CST Mining Group Limited beneficially own the shares held by
Mission Right Limited.
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Change of Control
The
Company knows of no arrangements resulting in a change in control
of the Company. No officer, director, promoter, or affiliate of the
Company has, or proposes to have, any direct or indirect material
interest in any asset proposed to be acquired by the Company
through security holdings, contracts, options, or
otherwise.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As
previously disclosed in the Company’s Current Reports on Form
8-K on April 20 and July 14, 2016, Wuhan Dangdai, through its
wholly owned subsidiary Dangdai International Group Co., invested
$43.1 million in the Company (the “Financing”). Dangdai
International Group Co. has been a major shareholder of the Company
since February 2016 in connection with the first closing of the
Financing. Dr. Hansheng Zhou, one of the Company’s directors,
currently serves as Chief Executive Officer and Chairman of Wuhan
Dangdai.
As of
December 31, 2016 and 2015 the accrued compensation liability to
the directors and officers was $3,082 and $19,214,
respectively.
As of
December 31, 2016, accrued expenses includes director fees of
$3,082 due to independent director Mr. Gang Ji.
The
Company lent petty cash to Tony (Bizuo) Liu and Yihong Yao, its
current CFO and CSO, for business travel purpose respectively. As
of December 31, 2015, other receivables due from Tony (Bizuo) Liu
and Yihong Yao were $2,120 and $17,094, respectively. As of
December 31, 2016 there are no receivables due from Tony (Bizuo)
Liu and Yihong Yao.
Except
as disclosed herein, there have been no transactions or proposed
transactions in which the amount involved exceeds $120,000 since
January 1, 2016 or are currently being proposed in which any of our
directors, executive officers or beneficial holders of more than 5%
of the outstanding shares of common stock, or any of their
respective relatives, spouses, associates or affiliates, has had or
will have any direct or material indirect interest.
Review, Approval or Ratification of Transactions with Related
Persons
The Company’s Board of Directors reviews issues involving
potential conflicts of interest, and reviews and approves all
related party transactions, including those required to be
disclosed as a “related party” transaction under
applicable federal securities laws. The Board has not adopted any
specific procedures for conducting reviews of potential conflicts
of interest and considers each transaction in light of the specific
facts and circumstances presented. However, to the extent a
potential related party transaction is presented to the Board, the
Company expects that the Board would become fully informed
regarding the potential transaction and the interests of the
related party, and would have the opportunity to deliberate outside
of the presence of the related party. The Company expects that the
Board would only approve a related party transaction that was in
the best interests of, and fair to, the Company, and further would
seek to ensure that any completed related party transaction was on
terms no less favorable to the Company than could be obtained in a
transaction with an unaffiliated third party.
Director Independence
In
determining the independence of our directors, the Board applied
the definition of “independent director” provided under
the listing rules of The NASDAQ Stock Market LLC
(“NASDAQ”). Pursuant to these rules, and after
considering all relevant facts and circumstances, the Board
affirmatively determined that Messrs. Nadir Patel, Hansheng Zhou
and Terry Belmont, each of whom are now serving on the Board, are
each independent within the definition of independence under the
NASDAQ rules. The Board also affirmatively determined that Chun
Kwok, Alan Au and Gang Ji, each a Class II director nominee, is
independent within the definition of independence under the NASDAQ
rules. Tony Liu, a Class II director nominee, and Wen Tao (Steve)
Liu are not independent directors.
REQUIREMENTS FOR ADVANCE NOTIFICATION OF NOMINATIONS
AND STOCKHOLDER PROPOSALS
Stockholder
proposals for director nominations and for other matters submitted
pursuant to Rule 14a-8 promulgated under the Exchange Act for
inclusion in our Proxy Statement and form of proxy for our 2017
Annual Meeting must have been received by us no later than January
28, 2017 and March 10, 2017, respectively, and must comply with the
requirements of the proxy rules promulgated by the SEC. We
presently intend to schedule our next annual meeting in April,
2018, subject to change without further announcement except as
required by proxy rules. Stockholder proposals should be addressed
to our corporate Secretary at 19925 Stevens Creek Blvd., Suite 100,
Cupertino, California, 95014.
Recommendations
from stockholders which are received after the applicable deadline
likely will not be considered timely for consideration by our
Nominating and Corporate Governance Committee for next year’s
annual meeting.
OTHER MATTERS
The
Board does not intend to bring any other matters before the Annual
Meeting and has no reason to believe any other matters will be
presented. If other matters properly do come before the Annual
Meeting, however, it is the intention of the persons named as proxy
agents in the enclosed proxy card to vote on such matters as
recommended by the Board, of if no recommendation is given, in
their own discretion.
The
Company will send instructions to stockholders entitled to notice
of the Annual Meeting regarding how to access this Proxy Statement
and the Company's Annual Report on Form 10-K for the year ended
December 31, 2016. The Annual Report includes the financial
statements and management’s discussion and analysis of
financial condition and results of operations. The costs of
preparing, assembling, mailing and soliciting the proxies will be
borne by us. Proxies may be solicited, without extra compensation,
by our officers and employees by mail, telephone, facsimile,
personal interviews and other methods of
communication.
If you
and other residents at your mailing address own shares in street
name, your broker or bank may have sent you a notice that your
household will receive only one copy of proxy materials for each
company in which you hold shares through that broker or bank. This
practice of sending only one copy of proxy materials is known as
householding. If you did not respond that you did not want to
participate in householding, you were deemed to have consented to
the process. If the foregoing procedures apply to you, your broker
has sent one copy of our Proxy Statement to your address. If you
want to receive separate copies of the proxy materials in the
future, or you are receiving multiple copies and would like to
receive only one copy per household, you should contact your
stockbroker, bank or other nominee record holder, or you may
contact us at the address or telephone number below. In any event,
if you did not receive an individual copy of this Proxy Statement,
we will send a copy to you if you address your written request to,
or call, Tony Liu, Chief Executive Officer and Chief Financial
Officer of Cellular Biomedicine Group, Inc., 19925 Stevens Creek
Blvd., Suite 100, Cupertino, California, 95014, telephone number
(408) 973-7884.
Copies
of the documents referred to above that appear on our website are
also available upon request by any stockholder addressed to our
corporate Secretary, Cellular Biomedicine Group, Inc., 19925
Stevens Creek Blvd., Suite 100, Cupertino, California,
95014.
CELLULAR BIOMEDICINE GROUP, INC.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby appoint(s) Tony Liu with the power of
substitution and resubstitution to vote any and all shares of
capital stock of Cellular Biomedicine Group, Inc. (the "Company")
which the undersigned would be entitled to vote as fully as the
undersigned could do if personally present at the Annual Meeting of
the Company, to be held on April 28, 2017, at 9:00 A.M. Pacific
Daylight Time, and at any adjournments thereof, hereby revoking any
prior proxies to vote said stock, upon the following items more
fully described in the notice of any proxy statement for the Annual
Meeting (receipt of which is hereby acknowledged):
Proposal No. 1 ELECTION OF DIRECTORS
Nominees:
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For
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Withhold
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Bizuo
(Tony) Liu
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[_]
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[_]
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Chun
Kwok Alan Au
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[_]
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[_]
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Gang
Ji
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[_]
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[_]
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Proposal No. 2
To
ratify the appointment of BDO China Shu Lun Pan Certified Public
Accountants LLP as the Company’s independent registered
public accounting firm for the fiscal year ending December 31,
2017
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For
[_]
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Against
[_]
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Abstain
[_]
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Proposal No. 3
To
amend the Company’s 2014 Stock Equity Incentive Plan to
increase the number of the maximum number of shares available
for issuance thereunder.
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For
[_]
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Against
[_]
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Abstain
[_]
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Proposal No. 4
To
approve, by a non-binding vote, the Company's executive
compensation
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For
[_]
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Against
[_]
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Abstain
[_]
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THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE; UNLESS OTHERWISE
INDICATED, THIS PROXY WILL BE VOTED FOR EACH OF THE NOMINEES ON
PROPOSAL NUMBER 1, FOR APPROVAL ON PROPOSALS NUMBER 2 AND 3, AND
"FOR" ADVISORY VOTES ON EXECUTIVE COMPENSATION .
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the
meeting.
Please mark, sign, date and return this Proxy promptly using the
accompanying postage pre-paid envelope. THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS OF CELLULAR BIOMEDICINE GROUP,
INC.
________________________________________
Date:______________________________
Signature
_____________________________________
Signature if jointly owned
______________________________________________________
Print name (Entity's name, officer's name and title if
applicable)
Please sign exactly as the name appears on your stock certificate.
When shares of capital stock are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee,
guardian, or corporate officer, please include full title as such.
If the shares of capital stock are owned by a corporation, sign in
the full corporate name by an authorized officer. If the shares of
capital stock are owned by a partnership, sign in the name of the
partnership by an authorized officer.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE
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