Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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:
1345 Avenue of the Americas, Floor 15
New York, New York
Dear
Stockholders:
You are
invited to attend the Annual Meeting of Stockholders (the
“Annual
Meeting”) of Cellular Biomedicine Group, Inc. (the
“Company”) on April 26,
2019, which will be held at our office at 1345 Avenue of the
Americas, 15th Floor, New York,
New York, 10105 at 9:00 a.m. Eastern Standard 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
fiscal year ended December 31, 2018, which will be on our website
at http://www.cellbiomedgroup.com
(under “Investor
Relations”) and at
https://www.iproxydirect.com/CBMG.
At this
year’s meeting, you will be asked to: (1) elect two (2)
“Class I” 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, 2019; (3) approve the Company’s 2019 Equity
Incentive Plan with 1,500,000 shares initially available for
issuance and (4) 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 8, 2019
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, for the
ratification of BDO China Shu Lun Pan Certified Public Accounts
LLP, and for the approval of the Company’s 2019 Equity
Incentive Plan 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.
Sincerely,
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/s/
Terry Belmont
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Terry
Belmont
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Chairman
of the Board of Directors
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New
York, New York
March
15, 2019
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Meeting Date: April 26, 2019
To the
Stockholders of Cellular Biomedicine Group,
Inc.:
The
2019 Annual Meeting of Stockholders will be held at our office at
1345 Avenue of the Americas, 15th Floor, New York,
New York, 10105 at 9:00 a.m. Eastern Standard Time. During the
Annual Meeting, stockholders will be asked to:
(1)
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Elect
two (2) “Class I” 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, 2019;
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(3)
Approve the Company’s 2019 Equity Incentive Plan with
1,500,000 shares initially available for issuance; and
(4)
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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 8,
2019, 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 8, 2019,
you may vote at the meeting. The date of disseminating this Notice
of Meeting and Proxy Statement is on or about March 15,
2019.
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.
By
order of our Board of Directors
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/s/
Bizuo (Tony) Liu
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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 STOCKHOLDERS TO BE HELD ON
APRIL 26, 2019:
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 the Annual Report on Form 10-K for
the fiscal year ended December 31, 2018 are 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 16, 2019 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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27
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Proposal
2 - Ratification of Appointment of Independent Registered Public
Accountant
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31
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Proposal
3 - Approval of the Company’s 2019 Equity Incentive
Plan
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33
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Executive Compensation and Related Information
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38
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Security Ownership of Certain Beneficial Owners and
Management
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49
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Certain Relationships and Related Transactions
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51
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Requirements for Advance Notification of Nominations and
Stockholder Proposals
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51
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Other Matters
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51
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THE PROXY PROCEDURE
In lieu
of a paper copy of the proxy materials, on or about March 15, 2019,
we will first disseminate to our stockholders 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 26, 2019, at 9:00 a.m.
EST at our office at 1345 Avenue of the Americas, 15th Floor, New York,
New York, 10105 (referred to as the “Annual Meeting”).
Stockholders 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, stockholders
may request to receive proxy materials in printed form by mail or
electronically on an ongoing basis. A stockholder’s election
to receive proxy materials by mail or electronically by email will
remain in effect until the stockholder 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
two (2) “Class I” 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, 2019;
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(3)
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Approve
the Company’s 2019 Equity Incentive Plan with 1,500,000
shares initially available for issuance; and
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(4)
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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 8, 2019 (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 18,089,504
shares of common stock outstanding on March 8, 2019. From March 15,
2019 through April 26, 2019, 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 (347) 905-5663 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 25, 2019. 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 25,
2019. 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 I directors (see Proposal 1); “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, 2019 (see
Proposal 2) and “FOR” the approval of the
Company’s 2019 Equity Incentive Plan (See Proposal 3). 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 1345 Avenue of
the Americas, Floor l5, New York, New York, 10105, 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.
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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 represented in person or by proxy
and entitled to vote must exceed the votes cast against the
proposal, in order for the proposal to be approved.
Approval of the Company’s 2019 Equity Incentive Plan.
For Proposal 3, the affirmative vote of the holders of shares of
common stock represented in person or by proxy and entitled to vote
must exceed the votes cast against the proposal, in order for the
proposal to be approved.
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
March 8, 2019, our current directors and executive officers
beneficially owned approximately 9.1% of our common stock
outstanding. See the discussion under the heading “Security
Ownership of Certain Beneficial Owners and Management” on
page 49 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
China has served as the independent registered public accounting
firm auditing and reporting on our financial statements for the
fiscal years ended December 31, 2016, 2017 and 2018. BDO China has
been appointed by our Board to serve as our independent registered
public accounting firm for the fiscal year ending December 31,
2019. 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 two nominated Class I 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, 2019 (see
Proposal 2); and
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FOR the
approval of the Company’s 2019 Equity Incentive Plan (see
Proposal 3).
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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 1345 Avenue of the Americas, 15th Floor, New York,
New York, 10105. 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 January 2019. After considering all relevant facts
and circumstances, the Board affirmatively determined that Messrs.
Nadir Patel, Bosun S. Hau, Chun Kwok Alan Au, Gang Ji, and Wen Tao
(Steve) Liu 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 is not
independent director. Additionally, Terry Belmont and Hansheng
Zhou, two of the directors nominated for election as a Class I
director, have been determined to meet the definition of
independence under the NASDAQ rules. If two of the candidates
nominated for Class I director positions, namely Terry Belmont and
Hansheng Zhou, are elected at the Annual Meeting, and assuming our
other directors remain in office, our Board will consist of a
majority of seven independent directors out of a total of eight
directors on our Board.
Board Meetings; Annual Meeting Attendance
Our
Board of Directors held five formal meetings and four 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. All our seven 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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Terry
A. Belmont
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X
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X
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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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Chair
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Bosun
S. Hau
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X
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X
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Wen Tao
Steve Liu
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;
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oversee
management’s maintenance of internal controls and procedures
for financial reporting;
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oversee
our compliance with applicable legal and regulatory requirements,
including without limitation, those requirements relating to
financial controls and reporting;
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●
|
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 Hansheng Zhou (serving as
Chairman), Terry Belmont, Gang Ji and Bosun Hau, 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, Terry Belmont and Bosun Hau, 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 Class I director candidates, Terry Belmont and Hansheng
Zhou, were recommended by management and the Governance Committee
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
stockholders, 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 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, 2018, except that
our executives are liable for any and all taxes, including
withholding taxes, arising out of their 2017 Initial LTIP Target
Award grant or the issuance of the Common Stock on vesting and
delivery of the RSUs, and the Company is authorized to deduct the
amount of tax withholding from the amount payable to the Executives
upon settlement of the RSUs. In February 2019, Mr. Tony Liu, Mr.
Yihong Yao and Mr. Andrew Chan submitted their Form 5 reporting
their tax withholding dispositions of the Company’s
securities in 2018.
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, 2018 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 auditor 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, 2018 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
/s/
Nadir Patel, Chairman
/s/
Chun Kwok Alan Au
/s/
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, 2018 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 this proxy statement.
Submitted
by:
The
Compensation Committee of the Board of Directors
/s/ Hansheng
Zhou, Chairman
/s/
Gang Ji
/s/
Terry Belmont
/s/
Bosun S. Hau
COMPENSATION DISCUSSION AND ANALYSIS
2018 Named Executive Officers
Bizuo
(Tony) Liu – Chief Executive Officer and Chief Financial
Officer
Yihong
Yao – Chief Scientific Officer
Andrew
Chan – Chief Legal Officer (General Counsel), Corporate
Development and Secretary
Helen
Zhang – Chief Production Officer
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,
see "Executive Compensation" in this proxy statement.
Executive Summary
BUSINESS PERFORMANCE AND PAY
We are a key player in the field of cell therapy in China, seeking
to transform the lives of patients suffering from incapacitating
diseases by developing potentially life-altering treatments. We
believe that our Cell therapies have the potential to provide
long-lasting effects, significantly and positively changing the
lives of patients with diseases where no, or only palliative,
therapies exist.
As described below, we delivered a year of extraordinary
performance in 2018, as we made significant progress towards our
clinical development and business goals, among many other
accomplishments and milestones, which impacted executive
compensation. We believe the compensation paid to our named
executive officers for 2018 appropriately reflects and rewards
their contribution to our performance. Following are the 2018
achievements of management
(“Achievements”):
●
Collaboration with
Novartis on cancer therapeutic technologies and a focus of our
efforts on commercialization of Kymriah® (tisagenlecleucel),
the first cell therapy approved by The U.S. Food and Drug
Administration, in China. Ushering in a new approach to the
treatment of cancer and other serious and life-threatening
diseases, the FDA approved Kymriah® for certain pediatric and
young adult patients with a form of acute lymphoblastic leukemia
(ALL);
●
Novartis licensed
certain intellectual property from us for their non-exclusive use
worldwide.
●
Sold 458,257 shares
of the Company’s common stock to Novartis at a market premium
purchase price of $27.43 per share;
●
Completed a $30.6
million equity financing with Sailings Capital;
●
Obtained a
36–month exclusive option with Augusta University to
negotiate a royalty-bearing, exclusive license to the patent rights
owned by the Augusta University relating to an invention to
identify novel alpha fetoprotein (“AFP”) specific TCR
for a hepatocellular carcinoma (“HCC”) immunotherapy.
Subsequently in February 2019 we exercised our exclusive right to
license the technology from Augusta University to further our
development;
●
After China
codified the regulatory pathway in December 2017, we submitted an
IND using the Allojoin™ Phase I 48-week data in China and
received unprecedented approval from NMPA to advance our allogeneic
KOA clinical trial to Phase II;
●
The NMPA CDE posted
on its website acceptance of the IND application for CAR-T cancer
therapies in treating patients with NHL and ALL submitted by our
wholly-owned subsidiaries;
●
Expanded our
research and development center in Gaithersburg,
Maryland;
●
Improved our
research and development capabilities and assembled a wide range of
cell therapies in 2018 beyond CD19 readying for clinical studies:
CD22 for CD19 relapsed ALL, CD20 for CD19 relapsed DLBCL, NKG2D for
AML, BCMA for MM, AFP for Liver Cancer;
●
Obtained a
non-exclusive tumor infiltrating lymphocytes license from National
Cancer Institute for the worldwide development, manufacture and
commercialization of certain autologous, tumor-reactive lymphocyte
adoptive cell therapy products, for the treatment of non-small cell
lung, stomach, esophagus, colorectal, and head and neck cancer(s)
in humans;
●
Increased
shareholder value through a continued stock repurchase
program;
●
Improved our
communications and investors relation;
●
Continued expansion
of key talent and capabilities.
In
2018, we focused on our research and development while assembling
and advancing our drug development pipeline. We significantly
increased our investment in research, product development,
manufacturing capabilities, quality controls system, and clinical
activities in 2018. These efforts contributed to an operating
loss of $40.5 million in 2018, or $12.9 million higher than 2017,
and diluted loss per share of $2.20, an increase of $0.42 per
share, or 24% from 2017. 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 -39.0% for 2016, -14.1% for 2017, and 57.0%
for 2018. The Nasdaq Healthcare Index was -16.9%, 21.3% and -4.2%
and Russell 3000 Index was 10.4%, 18.9% and -7.0%. The five-year
cumulative TSR is 246.3% for the Company, 32.6% for the Nasdaq
Healthcare Index and 32.8% 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. For our stock performance graph of years
2013 to 2018 and related discussions, please refer to Item 5-
Market for Registrant’s Common Stock, Related Stockholder
Matters and Issuer Purchases of Equity Securities of our Annual
Report on Form 10-K for the fiscal year ended December 31, 2018, a
copy of which is included on the proxy materials for the Annual
Meeting and available at https://www.iproxydirect.com/CBMG.
We used
the Black Scholes model for our stock options grant
valuation. Specifically we used the following
assumptions in our modeling for the 2018 issued
options:
●
|
Expected
volatility – 65.15% to 206.42%;
|
●
|
Risk-free
rate of return – 2.33% to 3.11%;
|
●
|
Dividend
yield –zero; and
|
●
|
Time to
exercise – six years.
|
In
addition, we did not consider non-transferability but used an 11%
risk of forfeiture for employees, advisors and Directors and
Officers.
Because
the majority of our executive compensation is tied to achievement
of the 2018 goals, performance objectives and TSR, our Chief
Executive Officer, Chief Scientific Officer, Chief Legal Officer
and Chief Production Officer saw an increase in their total
compensation in 2018 as compared to 2017. In 2017 we initiated the
Long Term Incentive Plan (“LTIP”) and granted
restricted stock units ("RSUs") to 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 the listed officers in 2018, 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, some U.S. companies have made inroads
in China. Specifically, these U.S. companies had established their
foothold in geographical areas close to our China operations. The
presence of these companies in China created a talent retention
risk that we addressed through the addition of the LTIP for our
officers in 2017.
For purposes of determining compensation for 2019, our Compensation
Committee examined our 2018 TSR, our strategic deal with Novartis,
the peer group’s performance, the advancement of our clinical
programs, the significant talent recruitment achievement to help
grow our Company, and the prudent talent retention effort while
substantially improving employee morale in 2018.
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. We also
provided our shareholder with a nonbinding advisory vote on
executive compensation at our 2017 annual meeting of stockholders.
We plan to next provide stockholders with a nonbinding advisory
vote on executive compensation at our 2020 annual meeting of
stockholders. 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 include our long-term incentive plan
for business continuity and talent retention.
2018 Compensation of Our Named Executive Officers
PERFORMANCE AND INCENTIVE PAY FOR 2018
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.
The goal of our Compensation Committee is to ensure that our
compensation programs are aligned with the interests of our
stockholders and our business goals, while ensuring that the total
compensation paid to each of our executive officers is fair,
reasonable and competitive. We target our executives’ overall
total compensation to be within a competitive range of the market
median of similar companies in terms of industry, number of
employees, lifecycle, prevalence of programs and value provided,
where quantifiable. The overall objectives of our executive
compensation program are as follows (“Overall
Objectives”):
●
attract, motivate and retain superior
talented and dedicated named executive
officers;
●
correlate
discretionary annual cash bonuses to the achievement of operational
and financial objectives; and
●
provide
our named executive officers with appropriate long-term incentives
that directly correlate to the enhancement of stockholder value, as
well as facilitate executive retention.
Key elements of our compensation programs include the
following:
Element
|
Purpose
|
Features
|
Base salary
|
To
attract and retain highly skilled executives.
|
Fixed component of pay to provide financial stability, based on
responsibilities, experience, individual contributions and peer
company data, at levels that we believe are competitive with base
salaries of executive officers in other comparable publicly-held
biopharmaceutical companies
|
Discretionary year-end annual cash bonus
|
To
promote and reward the achievement of key short-term strategic and
business goals of ours as well as individual performance; to
motivate and attract executives.
|
Variable component of pay based on quantitative and qualitative
annual Company and individual goals.
|
Long-term equity
incentive
compensation
|
To align the named executive officer’s long-term interests
with those of our stockholders, with the ultimate objective of
affording our named executive officers an appropriate incentive to
help us to improve stockholder value.
|
Typically, subject to multi-year vesting based on continued service
primarily in the form of stock options and restricted stock units,
the value of which depends on the performance of our common stock,
in order to align executive interests with those of our
stockholders over the long-term.
|
Our Compensation Committee evaluates both employee performance and
compensation to maintain our company’s ability to attract and
retain highly-qualified executives in key positions and to assure
that compensation provided to our named executive officers remains
competitive when compared to the compensation paid to similarly
situated executives of companies that we consider comparable to our
company.
In addition to our direct compensation elements, the following
compensation program features are designed to align our executive
officers with stockholder interests and market best
practices:
What We Do
|
What We Don’t Do
|
Maintain commitment to pay-for-performance philosophy.
|
Executives
are prohibited from hedging or pledging our stock.
|
Set
challenging short- and long-term incentive award
goals.
|
Allow repricing of stock options without shareholder
approval.
|
Maintain an industry-specific peer group for benchmarking
compensation.
|
Provide excessive perquisites.
|
Target compensation based on market norms.
|
Offer
gross-ups of related excise taxes.
|
Offer
market-competitive benefits for named executive officers that are
consistent with the rest of our employees.
|
Provide
supplemental executive retirement plans.
|
Do not
guarantee annual bonus or guarantee salary increases.
|
|
Consult with an advisor on compensation levels and
practices.
|
|
Maintain
an independent Compensation Committee.
|
|
Maintain significant stock ownership guidelines for our
non-employee directors and executive officers.
|
|
Compensation benchmarking
In designing our executive compensation program, our Compensation
Committee works directly with management and considers publicly
available compensation data (public proxy and compensation survey
data) for comparable life sciences companies to help guide its
executive compensation decisions. Further, in 2018, our
Compensation Committee reviewed AON Hewitt’s industry report
on executive compensation. Our Compensation Committee took into
consideration certain market data therein, and derived its own
decisions on executive compensation for 2018. Going forward, our
Compensation Committee intends to engage an independent
compensation consultant to provide strategic guidance on our
directors and executive compensation programs and to conduct
competitive benchmarking based on relevant market
data.
In evaluating the total compensation of our named executive
officers, our Compensation Committee establishes a primary peer
group and a secondary peer group of life sciences companies that is
selected considering the following criteria:
●
companies
with a number of employees, market capitalization and stage of
development comparable to us;
●
companies
in the same industry with us;
●
companies
against which we compete for executive talent; and
●
public
companies for which compensation data are available.
For the purpose of considering 2018 compensation benchmarking
decisions, the Compensation Committee examined our existing peer
groups in light of the following factors:
●
our
business development in 2018, which is anticipated to continue in
2019;
●
comparison
of our officers’ equity ownership percentage against the
primary peer group;
●
the
stage of development of our product, product candidates and
clinical programs; and
●
changes
in our market capitalization.
The chart below lists the companies in the primary and secondary
peer groups. References in this Compensation Discussion and
Analysis to peer companies are comprised of both the primary and
the secondary peer group companies.
|
|
|
|
|
|
|
Primary Peer
Group
|
|
Secondary Peer Group
|
BeiGene
(Beijing) Co., Ltd.
|
|
Allergan
Information Consulting (Shanghai) Co., Ltd.
|
BGI
TechSolutions Co.,Ltd.
|
|
Astrazeneca
Pharmaceutical Development Center, China
|
China
Novartis Institutes for BioMedical Research Co., Ltd.
|
|
Beijing
Novartis Pharmaceuticals Co., Ltd.
|
Fosun
Kite Biotechnology Co., Ltd.
|
|
Eli
Lilly Trading (Shanghai) Co., Ltd
|
Hutchison
MediPharma Co., Ltd.
|
|
Johnson
& Johnson Pharmaceutical Research & Development.
LLC.
|
Innovent
Biologics (Suzhou) Co. Ltd.
|
|
Pfizer
(China) Research and Development Co., Ltd.
|
JW
Therapeutics (Shanghai) Co., Ltd.
|
|
Roche
R&D Center (China) Ltd.-Research
|
Nanjing
Legend Biotech Co., Ltd.
|
|
Sanofi
China R&D Center
|
Wuxi
AppTec Co., Ltd.
|
|
Shanghai
Boehringer-ingelheim Pharmaceutical Co., Ltd.
|
Other performance factors we consider when determining the
compensation of our named executive officers include:
●
achievement of
Chinese commercialization readiness goals with respect to
Kymriah®;
●
key research and
development achievements, including advances in our clinical
product candidates;
●
initiation and
progress of clinical trials and achievement of regulatory
milestones;
●
expansion of
manufacturing and operational capabilities;
●
establishment/maintenance
of key strategic relationships and new business initiatives,
including financings;
●
development of
organizational capabilities and managing our growth;
and
●
continued expansion
of operations.
The
Compensation Committee’s executive compensation
determinations are subjective and the result of the Compensation
Committee’s business judgment, which is informed by the
experience of the members of the Compensation Committee. The
Compensation Committee reviews compensation practices and program
design at peer companies to inform its decision-making process so
it can set total compensation levels that it believes are
commensurate with our relative size, scope, and performance. The
Compensation Committee, however, does not set compensation
components to meet specific benchmarks as compared to peer
companies, such as targeting salaries at a specific market
percentile.
Executive compensation evaluation process
Our Compensation Committee intends that if we achieve our corporate
goals and an executive performs at the level expected, the
executive should have the opportunity to receive compensation that
is competitive with industry norms. In order to accomplish its
objectives consistent with its philosophy for executive
compensation, the Compensation Committee typically takes the
following actions annually:
●
reviews Chief
Executive Officer performance;
●
seeks input from
our Chief Executive Officer on the performance of the Named
Executive Officers;
●
reviews all
components of executive officer compensation, including base
salary, cash bonus targets and awards, equity compensation and the
estimated payout obligations under severance and change in control
scenarios;
●
holds executive
sessions without management present; and
●
reviews information
regarding the performance and executive compensation of other
companies.
In
assessing each named executive officer’s individual
performance, the Compensation Committee further agreed that in 2018
the following Named Executive Officers have achieved:
Mr.
Liu, CEO & CFO:
●
Achievements
substantially exceeded all of the 2018 Overall Objectives comprised
of the Company’s operational and strategic
goals;
●
Act as industry
thought leader, strong advocate for digital platform through
partnership with well-established industry leaders;
●
demonstrated
exemplary leadership in support of expanding organizational
capabilities;
●
advanced the
scale-up of an efficient global, fully-integrated organization;
and
●
fostered an
engaging culture that embodies our mission, vision and shared
values.
Mr.
Yao, CSO:
●
continued to build
organizational capabilities;
●
advanced our
product and technology portfolio; and
●
continued to
progress pre-clinical and emerging programs.
Mr.
Chan, CLO, Corporate Development & Secretary:
●
expanded
organizational capabilities;
●
negotiated
partnership with Novartis Pharma AG to commercialize Kymriah®
in China;
●
led Novartis
Alliance Management and integration process;
●
successfully
oversaw internal and external financial management and SEC
compliance;
●
led legal team and
internal resources to support commercial organization;
●
executed two rounds
of equity financing with approximately $70.6 million in aggregate
net proceeds;
●
executed the U.S.
NCI license for the worldwide development, manufacture and
commercialization of autologous, tumor-reactive lymphocyte (TIL)
adoptive cell therapy products; and
●
identified,
monitored and managed enterprise-level risks to the
Company.
Mrs. Li
(Helen) Zhang, CPO:
●
enabled partnership
with Novartis Pharma AG to commercialize Kymriah® in
China;
●
continued to build
organizational capabilities;
●
advanced our
product and technology manufacturing capabilities; and
●
continued to
institutionalize pre-clinical and emerging programs CMC
capabilities.
As
illustrated below, approximately 68% of targeted total direct
compensation in 2018 for Mr. Liu, our Chief Executive Officer, was
performance-based, consisting of approximately 53% equity, and 14%
annual incentive cash bonus. Only 32% 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.
Note:
2018 Officers Compensation data is prepared on the below basis: (i)
Salary and bonus is on a cash basis. and (ii) For restricted 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.
Mr. Liu’s Long-Term Equity Award
Mr. Liu
last received an equity award of 120,000 RSUs in March 3, 2017 (the
“2017 RSU Award”) to begin vesting on February 27,
2021. The 2017 RSU Award is at risk through a performance condition
based on our stock performance. The performance condition requires
CBMG Common Stock’s 20-day Volume Weighted Average Price
(VWAP) at closing between February 27, 2017 and February 27, 2021
to achieve certain stock price milestones in order for 100% of the
performance-based RSUs to vest. Relative VWAP percentile levels are
set forth below.
|
|
|
VWAP
|
|
Performance-Based
RSUs Vesting
|
|
|
<$30/share
|
|
0%
|
>/=$30/share
|
|
50%
|
>/=$40/share
|
|
100%
|
>/=$50/share
|
|
150%
|
>/=$60/share
|
|
200%
|
For the
four-year performance period from February 27, 2017 to February 27,
2021, 240,000 (200% of the 2017 RSU Awards) performance-based RSUs
were subject to the above performance condition.
The
following chart shows the allocation of the listed officers’
total direct compensation paid or granted for 2018, reflecting the
extent to which their total direct compensation consists of
performance-based compensation.
Note:
Li (Helen) Zhang is not an officer for Section 16 purposes although
her 2018 compensation is one of the three most highly compensated
executives (other than CEO and CFO).
Other Named Executive Officers’ Long-Term Equity
Awards
The
majority of executive compensation for our named executive officers
other than our CEO is delivered through programs that link pay
realized by executive officers with both operational results and
with financial achievements. 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 nonfinancial objectives established by our
Compensation Committee.
On
March 3, 2017, we also granted long-term equity awards to
Mr. Chan, Mr. Yao, and Mr. Zhang consisting of
performance -based RSUs (the “2017 Other RSU Awards”).
The performance-based 2017 Other RSU Awards granted to
Mr. Chan, Mr. Yao, and Mr. Zhang has a four-year
performance period from February 27, 2017 to February 27,
2021.
Between
zero and 200% of the target number of RSUs for the 2017 Other RSU
Award will commence to vest on February 27, 2021, subject to
continued service through that date, depending on the performance
condition, which requires CBMG Common Stock’s 20-day VWAP at
closing between February 27, 2017 and February 27, 2021 to achieve
certain stock price milestones in order for 100% of the
performance-based RSUs to vest. Relative VWAP percentile levels are
set forth below.
|
|
|
VWAP
|
|
Performance-BasedRSUs
Vesting
|
|
|
<$30/share
|
|
0%
|
>/=$30/share
|
|
50%
|
>/=$40/share
|
|
100%
|
>/=$50/share
|
|
150%
|
>/=$60/share
|
|
200%
|
For the
four-year performance period from February 27, 2017 to February 27,
2021, 48,000 performance-based RSUs for Mr. Chan, 54,000
performance-based RSUs for Mr. Yao, and 62,000 performance-based
RSUs for Ms. Zhang were subject to the above performance condition,
each representing 200% of their respective 2017 Other RSU
Awards.
2018 Cash Compensation
We
provide our named executive officers with base salary to compensate
them for services rendered during the year. Generally, the base
salaries reflect the experience, skills, knowledge and
responsibilities required of each executive officer, and reflect
our executive officers’ overall performance and contributions
to our business.
During
its review of base salaries for executives, the Compensation
Committee primarily considers:
●
the negotiated
terms of each named executive officer’s employment
agreement;
●
an internal review
of the named executive officer’s compensation, both
individually and relative to other named executive officers;
and
●
base salaries paid
by comparable companies in the biopharmaceutical industry that have
a similar business and financial profile.
Salary
levels are considered annually as part of the company’s
performance review process. Merit-based increases to salaries are
based on management’s assessment of the individual’s
performance, the recommendations made by the Chief Executive
Officer to the Compensation Committee, and the comparative
compensation at peer companies.
As
reflected in the table below and commensurate with the
industry’s practice, Mr. Tony Liu, Mr. Yihong Yao and Mr.
Andrew Chan’s salary were increased to reflect increased
responsibilities.
|
|
|
|
Tony
Liu
|
367,500
|
350,000
|
5.0%
|
Yihong
Yao
|
278,100
|
270,000
|
3.0%
|
Andrew
Chan
|
290,000
|
280,000
|
3.6%
|
Helen
Zhang
|
262,500
|
250,000
|
5.0%
|
On
January 16, 2019 and February 14, 2019, the Compensation Committee
reviewed peer companies’ compensation and incentive
information, competitive landscape of the cell therapy industry as
well as major aspects of the management’s achievements in
2018, including launch of the GMP facility, significant strategic
partnerships, achievements in clinical trials and addition of key
talents. Based on review of such factors, the Compensation
Committee approved salary increases of the three executive officers
as listed in the above table.
2018 Incentive Compensation Payouts
We
provide an opportunity for each of our named executive officers to
receive an annual cash incentive bonus based on the satisfaction of
individual and company objectives established by our Board of
Directors. For any given year, these objectives may include
individualized goals or company-wide goals that relate to
operational, strategic or financial factors such as progress in
developing our product candidates, achieving certain manufacturing,
intellectual property, clinical and regulatory objectives, and
raising certain levels of capital.
Historically,
at its annual year-end meeting to consider named executive officer
compensation, the Compensation Committee, in consultation with
management, has established corporate goals for the upcoming fiscal
year for purposes of, among other things, making its
recommendations regarding its discretionary annual bonus awards and
stock option grants for the upcoming year to our named executive
officers and all employees.
The
employment agreements of the named executive officers and certain
of our other executives entitle the named executive officers and
those other individuals to an annual target end-of-year cash bonus,
at the discretion of the Chief Executive Officer and/or the
Compensation Committee, upon the achievement of certain goals or
milestones.
The
Compensation Committee evaluates the achievement level of
individual and corporate objectives as it relates to annual cash
bonuses for named executive officers and makes it views known to
the full Board of Directors as part of its final compensation
deliberations. The Compensation Committee also considers the
bonuses paid by comparable companies. The Compensation Committee,
or where appropriate, our Board of Directors may approve bonuses
based on the foregoing determinations or, after considering market
conditions, our financial position or other factors, may, in its
sole discretion, determine not to award any bonuses or to award
larger or smaller bonuses.
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 16, 2019 and February 14, 2019, the Compensation Committee
reviewed the 2018 annual performance results evaluated how each
listed officer met his/her respective performance targets in 2018
and determined the final performance-based payouts as
follows:
|
|
Cash bonus for 2018
($)
|
|
|
|
|
|
Bizuo (Tony) Liu
|
|
|
280,000
|
|
|
|
|
|
|
Andrew Chan
|
|
|
168,000
|
|
|
|
|
|
|
Yihong Yao
|
|
|
72,900
|
|
|
|
|
|
|
Li (Helen) Zhang
|
|
|
137,500
|
|
The
table below summarizes the 2018 performance goals criteria which
the Compensation Committee uses to evaluate the listed
officers’ performance and determine their incentive
compensation payouts.
Category
|
|
2018
Goals
|
Financials
|
|
Financing;
progress in clinical trials development, talents acquisition,
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
|
Manufacturing Development
|
|
Build
out CMC capabilities
|
Based
on the 2018 significant achievements comprised of $70 million
raised in equity, execution of license and collaboration agreement
with Novartis, China NMPA IND application for the allogeneic KOA
clinical trial, addition of key talents, expansion of our
cross-border development effort and establishment of the new
Maryland facility, as well as build out of the world class GMP
facility in Shanghai, the Chief Executive Officer received a
performance cash bonus of $280,000 for 2018.
2018
Officers Compensation data is prepared on the following basis: (i)
salary, bonus and all other compensation is on a cash basis. and
(ii) for stock and option awards, the illustrated amount is the
grant date fair value calculated according to U.S. GAAP without
amortizing over the vesting periods. Under this method, the
compensation cannot be accrued due to the Company's inability to
ascertain the stock option exercise price and grant date, and the
amount of cash bonus that the Compensation Committee may grant to
each officer as of the fiscal year end. For purpose of clarity and
in order to reflect the Compensation Committee’s 2019
decision as to 2018 performance, we are providing a pro-forma 2018
Officers Compensation to indicate all compensation that has been
earned and accrued by each listed officer in 2018.
|
|
|
|
All other compensation ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bizuo
(Tony) Liu
|
337,201
|
280,000
|
559,071
|
-
|
1,176,272
|
|
|
|
|
|
|
Andrew
Chan
|
278,602
|
168,000
|
107,106
|
12,319
|
566,027
|
|
|
|
|
|
|
Yihong
Yao
|
269,475
|
72,900
|
123,442
|
10,678
|
476,495
|
|
|
|
|
|
|
Li
(Helen) Zhang
|
245,349
|
137,500
|
163,024
|
-
|
545,873
|
Note 1:
Approved by Compensation Committee in January 16, 2019 and February
14, 2019 as earned 2018 performance award. included in 2018 year
end general accruals.
Note 2:
All these are restricted common stock under long-term incentive
plan approved by Compensation Committee in 2017, which include cash
payout of surrendered restricted stock for individual income tax
payment purpose.
Note 3:
All other compensation represents the qualified
employer-sponsored retirement plan matching
contribution.
Changes to Compensation Program
We
believe that 2018 was an outstanding year for us. We have
significantly improved our manufacturing capabilities and quality
system. We executed the collaboration with Novartis on the
commercial manufacturing plan on CAR-T cell therapy Kymriah®
in China. We have amassed significant talent recruitment and
achieved talent retention in a fiercely competitive China market
and made substantial progress in clinical, manufacturing, strategic
alliance and funding milestones. With respect to the 2018
compensation decisions, our Compensation Committee and our
Compensation Committee focused on ensuring that a significant
portion of the total compensation awarded to the executive officers
were linked to meeting our long-term strategic plan and to create
long-term stockholder value. We further aligned our
executives’ interests with those of our stockholders through
the LTIP that we implemented in early 2017. The majority of our
2018 compensation to the executive officers was in the form of
equity incentive awards. We believe that equity awards incentivize
our executive officers to create long-term stockholder value.
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 2018. 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 LTIP that took
effect in 2017 to mitigate increased talent retention risk. We
believe that the new addition of the long-term incentive plan has
helped 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. The 2017 LTIP has not only encouraged
talent retention, it has further aligned our executive officers
with stockholders’ best interests. Hence the
Compensation Committee decided in January 16, 2019 and February 14,
2019 that effective January 31, 2019: (a) Mr. Andrew Chan will be
granted an additional 20,000 time vesting RSUs to append his 2017
LTIP award; and (b) commensurate with the AON Hewitt’s
industry report’s recommendation the Compensation Committee
made adjustment to the four Named Executive Officers’ annual
salary as follow:
●
Mr. Liu from
$350,000 to $367,500
●
Mr. Yao from
$270,000 to $278,100
●
Mr. Chan from
$280,000 to $290,000
●
Mrs. Zhang from
$250,000 to $262,500
Elements of Our Compensation Program and Why We Chose
Each
Main Compensation Components
Our
companywide 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 RSUs. We believe these three components constitute
the minimum essential elements of a competitive compensation
package in our industry. In January 2017, in 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 leadership, experience, skills,
knowledge, execution, and responsibilities required of our
executives as well as recognizing the fiercely 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 vision, execution and 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. Additionally,
equity awards provide an important retention tool for all
employees, as the awards generally are subject to vesting over an
extended period of time based on continued service with us. 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)
The market for qualified, talented executives in our industry is
highly competitive. Accordingly, we believe equity compensation is
a crucial component of our competitive executive compensation
package and, as such, makes up a substantial part of our total
executive compensation package.
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 to:
●
serve as an
attractive incentive for our senior management to focus on creating
shareholder value for us by advancing the clinical trials towards
product commercialization;
●
reflect long-term
stockholder value creation over a sustained period;
●
align financial
interests of employees with stockholders;
●
recognize current
performance as well as the expectation of future
contributions;
●
provide meaningful
awards to support and encourage stock ownership; and
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 568,000. 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 283,500. The total number of time
sensitive stock options covered by the LTIP is 282,500. 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 also provides contractual severance and/or change in control
benefits to the executives and certain key members of management.
The change in control benefits for all applicable persons has 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 AON Hewitt-prepared data for non-executive
employees, 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.
Pay Ratio Disclosure
In
August 2015 pursuant to a mandate of the Dodd-Frank Wall Street
Reform and Consumer Protection Act (the “Dodd – Frank Act”),
the SEC adopted a rule requiring annual disclosure of the ratio of
the median employee’s annual total compensation to the total
annual compensation of the principal executive officer
(‟PEO”). The
Company’s PEO is Mr. Liu. The purpose of the new required
disclosure is to provide a measure of the equitability of pay
within the organization.
We
identified the median employee by examining the 2018 total cash
compensation for all individuals, excluding our CEO, who were
employed by us as of December 31, 2018. We included all employees,
whether employed on a full-time, part-time, or seasonal basis. In
terms of geographic locations, 180 of our 193 employees are based
in China while the rest are based in the United
States.
The
following assumptions, adjustments, or estimates applied to our
analysis of total compensation: share based compensation has been
taken into consideration of total annual compensation, which is
calculated based on the grant date fair value calculated according
to U.S. GAAP without amortizing over the vesting periods.
Additionally, we annualized the compensation for all full-time and
temporary employees as of December 31, 2018. We believe that the
use of cash and equity compensation for all employees is a
consistently applied compensation measure because annual equity
awards to employees are a key component of our compensation program
and approximately 30% of our current employees receive annual
equity awards as part of their compensation. After identifying the
median employee based on total cash and equity compensation, we
calculated annual total compensation of such employee. The medical
benefits and other social funds borne by the Company was included
in the total compensation. The Company also launched a 401(k) Plan
in 2018.
As
illustrated in the table below, our 2018 PEO to median employee pay
ratio is 28:1.
Median Employee total annual
compensation
|
$37,410
|
Mr. Liu (‟PEO”) total
annual compensation
|
$1,046,272
|
Ratio of PEO to
Median Employee Compensation
|
28:1
|
Compensation risk assessment
We believe that our executive compensation program does not
encourage excessive or unnecessary risk taking. This is primarily
due to the fact that our compensation programs are designed to
encourage our executive officers and other employees to remain
focused on both short-term and long-term strategic goals, in
particular in connection with our pay-for-performance compensation
philosophy. As a result, we do not believe that our compensation
programs are reasonably likely to have a material adverse effect on
us.
Compensation of Directors
Prior
to the February 2013 merger with acquire Cellular Biomedicine Group
Ltd. (the “Merger”), by which the
Company acquired its primary biomedicine business, the Company
compensated directors through options to purchase common stock as
consideration for their joining our Board and/or providing
continued services as a director. Directors were not provided with
cash compensation, although the Company would reimburse their
expenses.
After
the Merger, the Company determined that the annual cash
compensation (prorated daily) to be paid to each director shall
consist of $30,000 for each independent director and $20,000 for
each non-independent director. In addition, each independent
director of the Board is eligible to receive a non-qualified option
grant under the 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.
On
September 19, 2015, the Company held a Board meeting and approved
new director compensation plan. The director compensation
adjustment was made as a result of a compensation review undertaken
by a professional, independent firm which included a comparison
with industry peers. The Committee determined that annual cash
compensation (prorated daily based on a 360 day year for any
portion of the year if such director serves for less than a full
term) to be paid to each non-independent director shall consist of
: (i) $36,000 per year for services as a director, plus (ii) either
(x) $40,000 for each committee on which such director serves, or
(y) $110,000 for each committee on which such director serves as
chairperson (or, if such director is the chairman of the full
board, for such chair position). Such compensation shall be paid,
at each director’s election, in either (a) thirty percent
(30%) in cash and seventy percent (70%) in non-qualified stock
options, or (b) fifty percent (50%) in cash and fifty percent (50%)
in non-qualified stock options. On January 16, 2019, the
Compensation Committee reviewed our compensation of the Directors
and decided that there will be no change to the current
compensation structure.
Accordingly,
compensation for independent non-executive directors in calendar
year 2018, as expressed on an annualized basis (reflecting
adjustments during the year due to changes in committee
composition), was as follows:
Note 1: These non-qualified options with exercise price of $19.71
were all granted on May 18, 2018 and will be fully vested on April
26, 2019.
PROPOSAL 1 — ELECTION OF DIRECTORS
Our
Board consists of a highly qualified, diverse group of leaders in
their respective fields. Most of our directors have senior
leadership experience at major domestic and multinational
companies. In these positions, they have gained significant and
diverse management experience, including strategic and financial
planning, public company financial reporting, compliance, risk
management, and leadership development. They also have experience
serving as executive officers, or on boards of directors and board
committees of other public companies, and have an understanding of
corporate governance practices and trends.
The
Board believe the skills, qualities, attributes, and experience of
our directors provide us with business acumen and a diverse range
of perspectives to engage each other and management to effectively
address our evolving needs and represent the best interests of our
shareholders.
The
Board considers candidates for director who are recommended by its
members, by other Board members, by shareholders, and by
management. In evaluating potential nominees to the Board, it
considers, among other things: independence; character; ability to
exercise sound judgment; diversity; age; demonstrated leadership;
and relevant skills and experience, including financial literacy,
antitrust compliance, and other experience in the context of the
needs of the Board.
Nominees for Election
The
Board determined it was in the best interest of the Company to
authorize the nomination of Terry Belmont and Hansheng Zhou for a
new Class I term. Accordingly, the Board has authorized the
nomination of these two nominees to serve as Class I directors, and
Class I has two director positions up for election at the Annual
Meeting.
Subsequent
to stockholder approval of this proposal, the Board will have a
total of eight members, divided into three classes as
follows:
Class
|
|
Term
|
|
Directors
|
|
|
|
|
|
Class
I
|
|
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 2019 annual
meeting to the date of the 2022 annual meeting.
|
|
1.
Terry A. Belmont
2.
Hansheng Zhou, Ph.D.
|
|
|
|
|
|
Class
II
|
|
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 the
2017 annual meeting to the date of the 2020 annual
meeting.
|
|
3. Chun
Kwok Alan Au
4. Gang
Ji
5.
Bizuo (Tony) Liu
|
|
|
|
|
|
Class
III
|
|
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 this
2018 Annual Meeting to the date of the 2021 annual
meeting.
|
|
6. Wen
Tao (Steve) Liu
7.
Nadir Patel
8.
Bosun S. Hau
|
Our
Board has nominated two Class I director candidates for election at
the Annual Meeting, who are the same individuals listed above in
position numbers 1 and 2. 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 I director:
Terry A. Belmont –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 also serves as a member of the Audit Committee and the
Compensation Committee.
Mr.
Belmont has over 30 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, California, and its licensed ambulatory facilities in
Orange, Irvine, Costa Mesa, Anaheim and Santa Ana. Since his
arrival in 2009, Mr. 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 to 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.
Hangsheng Zhou – Director
Dr.
Zhou has been a director of the Company since July 2016. 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
industries.
Compensation of Directors
The
Company annually reviews the total compensation of our directors
and each element of our director compensation program. As part of
this process, the Company evaluates market data provided by its
independent compensation consulting firm. 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 (each prorated
daily based on a 360 day year for any portion of the year if he
serves for less than a full term) are: (i) $36,000 per year for
services as a director, plus (ii) $40,000 for each committee on
which such director serves, and/or (iii) $110,000 for each
committee for which such director serves as chairperson (or if such
director is chair of the full board, for such chair position). Such
compensation shall be paid, at each director’s election, in
either (x) thirty percent (30%) cash and seventy percent (70%) in
non-qualified stock options, or (y) fifty percent (50%) in cash and
fifty percent (50%) 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 reviewed the
director’s compensation program again in January 2018 and
determined that no changes should be made.
Consulting Agreement with Wen Tao (Steve) Liu
The
Company entered into a consulting agreement with Wen Tao (Steve)
Liu, which was effective as of February 7, 2016 and was to
terminate on February 7, 2018, pursuant to which Steve Liu will
advise the Chief Executive Officer on strategic opportunities,
advise the Company on Chinese hospital 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 2013 with 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.
On
January 28, 2018, the Compensation Committee approved the renewal
of Steve Liu’s agreement for another two-year term, increased
the cash compensation from $3,666 per month to $5,333 per month,
and increased the continuation coverage under the Company’s
existing employee health plan from $20,000 to $36,000. The Board
has decided that Mr. Liu met the independence director requirement
and Mr. Liu will continue to serve on the Board.
The
following table sets forth compensation actually paid to directors
as of December 31, 2018:
2018 DIRECTOR COMPENSATION TABLE
* Non-independent director
Note 1: Salary disclosed above is on
cash basis.
Note 2: Option awards is the grant date
fair value calculated according to U.S. GAAP without amortizing
over the vesting periods.
Note 3: In January 2016, the Company and Steve Liu mutually
agreed not to renew his employment agreement at the end of their
respective terms. The Company then entered into a consulting
agreement with Steve Liu, which became effective as of February 7,
2016. These consultation fees are included as all other
compensation in above table. Details of the consulting agreement
could be referred to in the section entitled
“—Consulting Agreement with Wen Tao (Steve) Liu”
above. On January 28, 2018, the Board’s Compensation
Committee resolved to increase the consulting fee to $5,333 per
month and annual medical coverage to be raised to
$36,000.
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, 2019.
BDO China has also served as our independent registered public
accounting firm for the fiscal years ended December 31, 2018, 2017
and December 31, 2016.
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 2019.
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, 2019, 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 two
fiscal years to its accountants, including to its principal
accountants, BDO China:
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, 2019 as described in this Proposal
2.
PROPOSAL 3 – APPROVAL OF THE COMPANY’S 2019 EQUITY
INCENTIVE PLAN
Background
Our
2019 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 the creation of the Plan on March 14,
2019, subject to approval by our stockholders at the Annual
Meeting. We are seeking stockholder approval of the Plan with
1,500,000 shares as the maximum number of shares that will
initially be made available for issuance under the Plan subject to
adjustment as described herein.
The Importance of the Proposed 2019 Equity Incentive
Plan
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
creating an Equity Incentive Plan with 1,500,000 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 1,500,000 shares may be sold under the Plan will
provide us with enough shares to continue to offer competitive
equity compensation through 2021.
Share Information
As of
February 28, 2019, our previous Stock Incentive Plans had an
aggregate of 2,592,030 shares subject to currently outstanding
equity awards including (i) vested and exercisable options of
1,378,296 shares with a weighted average exercise price of
$11.51; (ii) 430,097 unvested options with a weighted average
remaining term of 1.6 years and a weighted average exercise price
of $15.37; (iii) 215,637 shares of outstanding restricted stock
units with a weighted average remaining term of 1.25 years;
(iv) potential maximum 568,000 shares of performance share
awards with a weighted average remaining term of 2.03 years.
As of February 28, 2019, 267,776 shares are available for future
issuance in the Stock Incentive Plans.
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. If this Proposal 3 is
approved, the number of shares initially issuable will be 1,500,000
shares. Additionally, commencing on the first business day in 2020
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%) 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.
Vesting. Unless otherwise provided by
our Compensation Commitee and specified in an award agreement,
Options, Stock Appreciation Rights. Restricted Stock and Restricted
Stock units granted under the plan will vest over a period of four
years, and vest or lapse with respect to one-fourth of such awards
on the first anniversary of the date of the grant with the
remaining three-fourths to vest in six equal installments on each
of the successive six-month anniversaries of the date of
grant.
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 Section 422 of the Internal Revenue Code of 1986,
as amended (the “Code”) 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. 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.
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. Upon vesting of
Restricted Stock Units, the participant will be entitled to
beneficial ownership of a number of shares of common stock equal to
the number of units earned.
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, stockholder 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. In the event of a Change in Control (as
defined in the plan) the terms of vesting, expiration, and the
ability of an affected participant of the plan to participate in
such Change in Control transaction with respect to all outstanding
options and equity awards issued under the Plan will be governed by
the terms and conditions of such participant's employment
agreement, subject to any modification the compensation committee
deems appropriate in its sole discretion. 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, principal
financial 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
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 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 the Cellular Biomedicine Group, Inc. 2019 Equity
Incentive Plan as described in this Proposal 3.
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.
On June
26, 2017, Meng Xia was appointed as the Company’s Chief
Operating Officer but transitioned to the role of Head of Early
Diagnosis and Intervention on February 6, 2018. As a result,
although she is not listed as a current officer below, Ms. Xia is
listed as “named executive officers” (as such term is
defined in Item 402 of Regulation SK promulgated under the Exchange
Act) and the terms of their compensation is disclosed
herein.
On
February 5, 2018, the Company closed a private placement of
approximately $30.6 million. Pursuant to the securities purchase
agreement for this private placement, the investors have the right
to nominate one director to the board of directors of the Company
to stand for election at the 2018 Annual Meeting of Stockholders.
Effective as of the closing of above private placement, Bosun S.
Hau was appointed as a nonexecutive Class III director of the
Company pursuant to the Company’s agreement with investors in
connection with the private placement consummated in February
2018.
The
directors are divided into three classes and serve three year
terms, as follows:
Name
|
|
Age
|
|
Position
|
|
Term
|
Wen Tao (Steve) Liu
|
|
63
|
|
Independent Director
|
|
Class III
|
Hansheng Zhou (2)
|
|
55
|
|
Independent Director
|
|
Class I
|
Tony (Bizuo) Liu
|
|
54
|
|
Chief Executive Officer and Chief Financial Officer
|
|
Class II
|
Chun Kwok Alan Au (1)(3)
|
|
46
|
|
Independent Director
|
|
Class II
|
Gang Ji (2)
|
|
44
|
|
Independent Director
|
|
Class II
|
Terry A. Belmont (1)(2)(3)
|
|
72
|
|
Chairman of the Board and Independent Director
|
|
Class I
|
Nadir Patel (1)(3)
|
|
48
|
|
Independent Director
|
|
Class III
|
Bosun S. Hau (2)(3)
|
|
40
|
|
Independent Director
|
|
Class III
|
Yihong Yao
|
|
51
|
|
Chief Scientific Officer
|
|
N/A
|
Andrew Chan
|
|
61
|
|
Chief Legal Officer (General Counsel), Corporate Development and
Secretary
|
|
N/A
|
Li (Helen) Zhang
|
|
61
|
|
Chief Production Officer
|
|
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. Except for the board
observer seat granted to Wuhan Dangdai as a condition of its $43.3
million investment in the Company and the nomination of Bosun S.
Hau as a Class III director at the 2018 Annual Meeting, 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:
Bizuo (Tony) Liu, Chief Executive Officer, Chief Financial Officer
and Director
Tony
Liu has served as the Company’s Chief Executive Officer since
February 2016 and Chief Financial Officer and Secretary 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
currently serves as a member of the Audit Committee and Chair of
the Nomination Committee.
Alan
has over 15 years of experience across healthcare investment
banking, private equity and venture capital investments in
Asia/China. He is Founder/Managing Partner at GT Healthcare Group,
a private equity fund focusing on cross border healthcare
investments.
Alan is
an Adviser to Simcere Pharmaceutical Group, a leading
pharmaceutical company in China (previously listed on NYSE:SCR,
privatized in Dec 2013, when Alan was Chairman of the Special
Committee on the Board of Directors). He was also a member of the
Board, Audit Committee and Compensation Committee of China Nepstar
Chain Drugstore Ltd. (NYSE: NPD, privatized in Sep 2016) from 2013
to 2016. Alan 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 since 2014.
Before
that, Alan was Head of Asia Healthcare Investment Banking of
Deutsche Bank Group, advising healthcare IPOs and M&A in the
region between 2011 and 2012. 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 his
expertise in healthcare investment and his financial
acumen.
Gang Ji – Director
Mr. Ji
has been a director of the Company since October 2016. Mr. Ji has
sixteen years of experience in finance and investment. He has been
serving as Vice President and Head of Strategic Investment 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.
Wen Tao (Steve) Liu, Director
Wen Tao
(Steve) Liu has been a director of the Company since October 2013.
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.
Nadir Patel – Director
Mr.
Patel has served as an independent director of the Company since
July 2014. 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 education and 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.
Bosun S. Hau– Director
Mr. Hau
has been a director of the Company since February 2018. Mr. Hau has
nearly 15 years of healthcare industry experience, primarily as an
investor in both private and publicly-listed companies. Since
October 2015, Mr. Hau has served as a Managing Director and Partner
of Sailing Capital. From August 2009 to October 2015, Mr. Hau
served as a Partner of MVM Life Science Partners. From July 2004 to
August 2007, Mr. Hau served as an equity research analyst covering
the medical device and pharmaceutical industries for JP Morgan
Securities, Inc. and Prudential Securities, Inc. Since 2009, Mr.
Hau has served as a member of the board of directors of several
private biotechnology, specialty pharmaceutical and medical device
companies. Mr. Hau received a B.S. in Molecular and Cellular
Biology, a B.S.H.S. in Physiological Sciences and a B.A. in
Psychology from the University of Arizona, an M.Sc. in
Biotechnology from Johns Hopkins University and an M.B.A in Finance
and Health Management from the Wharton School at the University of
Pennsylvania. The Company believes Mr. Hau’s extensive
experience in the venture capital/private equity and financial
services industries qualifies him to serve on our Board. In
considering Mr. Hau’s eligibility to serve on the Board, the
Board considered Mr. Hau’s extensive biomedicine and
pharmaceutical background as well as venture capital tenure in the
industry. Mr. Hau was nominated by Sailing Capital Overseas
Investment Ltd. in accordance with the terms of the private
placement consummated in February 2018.
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 –Chief Legal Officer (General Counsel), Corporate
Development & Secretary
Mr.
Chan served as Senior Vice President of Corporate Business
Development since January 2014, and was appointed Secretary and
General Counsel in September 2016 and February 2018, respectively.
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.
Conexant began as a division of Rockwell International, before
being spun off as a public company. 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.
Li (Helen) Zhang, Chief Production Officer
Ms. Zhang has been serving as our Chief Production Officer since
February 2018. She has been serving as director of Technology and
Manufacturingof the Company since March 2011 and also served as the
Senior Vice President of Technology and Manufacturing of the
Company from March 2013 to January 2018. She has over 27 years of
experience in Cell & Gene Therapy. Beginning in 1998, Dr. Zhang
worked for 13 years as a Staff Scientist and Associate Director of
Production and Process Development for the Harvard Gene Therapy
Initiative at Harvard Medical School. She was a Max Delbruck
Research Fellow at the National Research Center for Molecular
Medicine in Berlin, Germany and served as a Research Associate in
Robert Russell Teaching Hospital of Humboldt University in Berlin,
Germany from 1992 to 1998. Dr. Zhang holds a Bachelor’s
degree in Medicine from Nantong Medical School in Nantong,
China.
Summary Compensation Table
The
following table sets forth for the years ended December 31, 2018,
2017, and 2016 compensation awarded to, paid to, or earned by,
Bizuo (Tony) Liu (our current CEO and CFO), Andrew Chan (our CLO,
Corporate Business Development and Secretary), Yihong Yao (our CSO)
and Li (Helen) Zhang (our CPO).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
Name
and Principal Position
|
|
|
|
|
|
|
|
|
|
Bizuo (Tony) Liu, Chief
Executive Officer, Chief Financial Officer and
Director
|
2018
|
337,201
|
150,000
|
559,071
|
-
|
-
|
-
|
-
|
1,046,272
|
|
2017
|
300,000
|
100,000
|
238,750
|
1,384,800
|
-
|
-
|
27,513
|
2,051,063
|
|
2016
|
240,000
|
-
|
-
|
637,240
|
-
|
-
|
23,017
|
900,257
|
Andrew Chan, Chief
Legal Officer (General Counsel), Corporate Development and
Secretary
|
2018
|
278,602
|
115,000
|
107,106
|
-
|
-
|
-
|
12,319
|
513,027
|
|
2017
|
259,796
|
80,000
|
45,745
|
351,630
|
-
|
-
|
38,028
|
775,199
|
|
2016
|
242,584
|
80,000
|
-
|
206,700
|
-
|
-
|
26,015
|
555,299
|
Yihong Yao, Chief
Scientific Officer
|
2018
|
269,475
|
78,600
|
123,442
|
-
|
-
|
-
|
10,678
|
482,195
|
|
2017
|
259,375
|
75,000
|
52,716
|
244,065
|
-
|
-
|
25,225
|
656,381
|
|
2016
|
250,000
|
30,648
|
-
|
137,800
|
-
|
-
|
23,985
|
442,433
|
Li (Helen) Zhang, Chief
Production Officer
|
2018
|
245,349
|
39,118
|
163,024
|
-
|
-
|
-
|
-
|
447,491
|
|
2017
|
145,709
|
43,713
|
69,620
|
313,921
|
-
|
-
|
-
|
572,963
|
|
2016
|
124,055
|
37,217
|
-
|
137,800
|
-
|
-
|
-
|
299,072
|
(1)
|
All
other compensation all represents 401(k) Plan
costs.
|
(2)
|
Stock
awards is comprised of fair value of the delivered stock and cash
payout of surrendered restricted stock for individual income tax
payment purpose.
|
|
|
(3)
|
Option
awards is the grant date fair value calculated according to U.S.
GAAP without amortizing over the vesting periods.
|
|
|
(4)
|
Salary,
bonus and all other compensation included above are on a cash
basis.
|
The
following table sets forth information concerning outstanding stock
options for each named executive officer and director as of
December 31, 2018.
(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 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 7,787 shares has been exercised in 2015 and
2016.
|
(3)
|
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.
|
(4)
|
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.
|
(5)
|
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.
|
(6)
|
Represents
an option to purchase up to 15,000 shares that were issued on
1/20/2017, with an exercise price of $12.55 and an expiration date
of 1/20/2027, which were all vested and became exercisable on
1/20/2017.
|
(7)
|
Represents
an option to purchase up to 23,000 shares that were issued on
3/3/2017 with a monthly vesting schedule over a 48-month period, an
exercise price of $12.4 and an expiration date of
3/3/2027.
|
(8)
|
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.
|
(9)
|
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.
|
(10)
|
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.
|
(11)
|
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.
|
(12)
|
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.
|
(13)
|
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.
|
(14)
|
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.
|
(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 February 6, 2016 for 3 years, an exercise price of
$20 and an expiration date of 4/11/2026.
|
(16)
|
Represents
an option to purchase up to 30,000 shares that were issued on
1/21/2017, with an exercise price of $12.55 and an expiration date
of 1/20/2027, which were all vested and became exercisable on
1/21/2017.
|
(17)
|
Represents
an option to purchase up to 120,000 shares that were issued on
3/3/2017 with a monthly vesting schedule over a 48-month period, an
exercise price of $12.4 and an expiration date of
3/3/2027.
|
(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 11/8/2016, 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 6/2/2017, an exercise price of $13.35 and an
expiration date of 12/28/2026.
|
(22)
|
Represents
an option to purchase up to 14,648 shares issued on 4/28/2017 with
full vesting on 4/28/2018, an exercise price of $10.8 and an
expiration date of 4/28/2027.
|
(23)
|
Represents
an option to purchase up to 8,765 shares issued on 5/18/2018 with
full vesting on 4/26/2019, an exercise price of $19.71 and an
expiration date of 5/18/2028.
|
(24)
|
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.
|
(25)
|
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.
|
(26)
|
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.
|
(27)
|
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.
|
(28)
|
Represents
an option to purchase up to 6,992 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.
|
(29)
|
Represents
an option to purchase up to 8,611 shares issued on 4/28/2017 with
full vesting on 4/28/2018, an exercise price of $10.8 and an
expiration date of 4/28/2027.
|
(30)
|
Represents
an option to purchase up to 5,152 shares issued on 5/18/2018 with
full vesting on 4/26/2019, an exercise price of $19.71 and an
expiration date of 5/18/2028.
|
(31)
|
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.
|
(32)
|
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.
|
(33)
|
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.
|
(34)
|
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.
|
(35)
|
Represents
an option to purchase up to 12,056 shares issued on 4/28/2017 with
full vesting on 4/28/2018, an exercise price of $10.8 and an
expiration date of 4/28/2027.
|
(36)
|
Represents
an option to purchase up to 7,213 shares issued on 5/18/2018 with
full vesting on 4/26/2019, an exercise price of $19.71 and an
expiration date of 5/18/2028.
|
(37)
|
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.
|
(38)
|
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
$18.61 and an expiration date of 4/8/2026.
|
(39)
|
Represents
an option to purchase up to 26,500 shares that were issued on
3/3/2017 with a monthly vesting schedule over a 48-month period, an
exercise price of $12.4 and an expiration date of
3/3/2027.
|
(40)
|
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.
|
(41)
|
Represents
an option to purchase up to 12,056 shares issued on 4/28/2017 with
full vesting on 4/28/2018, an exercise price of $10.8 and an
expiration date of 4/28/2027.
|
(42)
|
Represents
an option to purchase up to 7,213 shares issued on 5/18/2018 with
full vesting on 4/26/2019, an exercise price of $19.71 and an
expiration date of 5/18/2028.
|
(43)
|
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.
|
(44)
|
Represents
an option to purchase up to 4,926 shares issued on 4/28/2017 with
full vesting on 4/28/2018, an exercise price of $10.8 and an
expiration date of 4/28/2027.
|
(45)
|
Represents
an option to purchase up to 2,947 shares issued on 5/18/2018 with
full vesting on 4/26/2019, an exercise price of $19.71 and an
expiration date of 5/18/2028.
|
(46)
|
Pursuant
to the long-term incentive plan, Mr. Bizuo (Tony) Liu has a right
to obtain restricted stock up to 120,000 shares that were issued
from 3/27/2017 with a monthly vesting schedule over a 48-month
period till 2/27/2021. As of 12/31/2018, there is 65,000 shares of
restricted stock to be vested. In addition, Mr. Bizuo (Tony) Liu is
also eligible for a stock price sensitive restricted stock awards
when the Company’s common stock’s 20-day volume
weighted average price (VWAP) is over $30 per share at closing
between 2/27/2017 and 2/27/2021. This restricted stock rewards is
in linear 1% incremental, earned and upon award trigger in
accordance with the common stock price target. The eligible common
stock shares could vary from 60,000 shares to 240,000 shares when
the Company’s VWAP during the period varies from $30 to $60
per share. The stock price sensitive restricted stock awards will
be delivered on 2/27/2021.
|
(47)
|
Pursuant
to the long-term incentive plan, Mr. Andrew Chan has a right to
obtain restricted stock up to 23,000 shares that were issued from
3/27/2017 with a monthly vesting schedule over a 48-month period
till 2/27/2021. As of 12/31/2018, there is 12,462 shares of
restricted stock to be vested. In addition, Mr. Andrew Chan is also
eligible for a stock price sensitive restricted stock awards when
the Company’s common stock’s 20-day volume weighted
average price (VWAP) is over $30 per share at closing between
2/27/2017 and 2/27/2021. This restricted stock rewards is in linear
1% incremental, earned and upon award trigger in accordance with
the common stock price target. The eligible common stock shares
could vary from 12,000 shares to 48,000 shares when the
Company’s VWAP during the period varies from $30 to $60 per
share. The stock price sensitive restricted stock awards will be
delivered on 2/27/2021.
|
(48)
|
Pursuant
to the long-term incentive plan, Mr. Yihong Yao has a right to
obtain restricted stock up to 26,500 shares that were issued from
3/27/2017 with a monthly vesting schedule over a 48-month period
till 2/27/2021. As of 12/31/2018, there is 14,356 shares of
restricted stock to be vested. In addition, Mr. Yihong Yao is also
eligible for a stock price sensitive restricted stock awards when
the Company’s common stock’s 20-day volume weighted
average price (VWAP) is over $30 per share at closing between
2/27/2017 and 2/27/2021. This restricted stock rewards is in linear
1% incremental, earned and upon award trigger in accordance with
the common stock price target. The eligible common stock shares
could vary from 13,500 shares to 54,000 shares when the
Company’s VWAP during the period varies from $30 to $60 per
share. The stock price sensitive restricted stock awards will be
delivered on 2/27/2021.
|
(49)
|
Pursuant
to the long-term incentive plan, Ms. Li (Helen) Zhang has a right
to obtain restricted stock up to 34,000 shares that were issued
from 3/27/2017 with a monthly vesting schedule over a 48-month
period till 2/27/2021. As of 12/31/2018, there is 18,962 shares of
restricted stock to be vested. In addition, Mr. Yihong Yao is also
eligible for a stock price sensitive restricted stock awards when
the Company’s common stock’s 20-day volume weighted
average price (VWAP) is over $30 per share at closing between
2/27/2017 and 2/27/2021. This restricted stock rewards is in linear
1% incremental, earned and upon award trigger in accordance with
the common stock price target. The eligible common stock shares
could vary from 31,000 shares to 62,000 shares when the
Company’s VWAP during the period varies from $30 to $60 per
share. The stock price sensitive restricted stock awards will be
delivered on 2/27/2021.
|
(50)
|
Represents
an option to purchase up to 12,000 shares that were issued on
3/11/2013, with full vesting of 30%, 30% and 40% at each year
anniversary of the grant date for 3 years, an exercise price of
$5.2 and an expiration date of 3/11/2023.
|
(51)
|
Represents
an option to purchase up to 20,000 shares that were issued on
3/17/2014, with full vesting of 30%, 30% and 40% at each year
anniversary of the grant date for 3 years, an exercise price of
$5.19 and an expiration date of 3/17/2024.
|
(52)
|
Represents
an option to purchase up to 15,500 shares that were issued on
1/2/2015, with full vesting of 30%, 30% and 40% at each year
anniversary of the grant date for 3 years, an exercise price of
$13.79 and an expiration date of 1/2/2025.
|
(53)
|
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
$18.61 and an expiration date of 4/8/2026.
|
(54)
|
Represents
an option to purchase up to 34,000 shares that were issued on
3/3/2017 with a monthly vesting schedule over a 48-month period, an
exercise price of $12.4 and an expiration date of
3/3/2027.
|
(55)
|
Represents
an option to purchase up to 200 shares that were issued on
5/14/2017, with full vesting of 30%, 30% and 40% at each year
anniversary of the grant date for 3 years, an exercise price of
$5.3 and an expiration date of 5/14/2027.
|
Option Exercises and Stock Vested during the Year Ended December 31,
2018
Note:
Stock awards in above table includes all the entitled restricted
stock rewards under long-term incentive plan and doesn’t
exclude the withheld restricted stock for individual income tax
payment purpose.
Compensation Committee Interlocks and Insider
Participation
None of
the members of the Compensation Committee is or has been an
executive officer of the Company, nor did they have any
relationships requiring disclosure by the Company under Item 404 of
Regulation S-K. None of the Company’s executive officers
served as a director or a member of a compensation committee (or
other committee serving an equivalent function) of any other
entity, an executive officer of any other entity, an executive
officer of which served as a director of the Company or member of
the Compensation Committee during 2018.
Executive Employment Agreements
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, Mr. Andrew Chan and Mrs. Helen Zhang, the retention
plan also included four 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 receive an
annual base salary of $262,500 and will 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.
On June
22, 2017, the Board approved the appointment of Dr. Xia Meng as the
Company’s Chief Operating Officer. In connection
with Ms. Meng’s appointment, the Company entered into an
agreement with Ms. Meng, pursuant to which Ms. Meng will receive an
annual base salary of approximately $175,487. The term of the
agreement is effective as of June 22, 2017 for a period of four
years. Additionally, on June 22, 2017 Ms. Meng was
granted 27,000 shares of Performance RSUs and 26,500 shares in each
of the Time Sensitive RSUs and Stock Options. The strike
price related to above option was $8.30 and its expiration date is
June 22, 2027. Except for her change in title, Mr. Xia’s
employment agreement remains in effect following her transition
from COO to Head of Early Diagnosis and Intervention on February 6,
2018.
On
January 28, 2018, the Compensation Committee approved and
determined that Mr. Tony Liu would receive an annual base salary of
$350,000. On the recommendation of the CEO, and as approved by the
Compensation Committee on January 28, 2018, it was determined that
Mr. Yihong Yao would receive an annual base salary of $270,000
and Mr. Andrew Chan would be promoted to Chief Legal Officer,
Secretary & SVP-Corporate Development and receive an annual
base salary of $280,000.
On January 16, 2019 and February 14, 2019, the Compensation
Committee reviewed the 2018 annual performance results and
evaluated how each Named Executive Officer met his/her respective
performance targets in 2018. Upon such review and evaluation, the
Compensation Committee determined to increase Mr. Liu’s
salary from $350,000 to $367,500, Mr. Yao’s salary from
$270,000 to $278,100, Mr. Chan’s salary from $280,000 to
$290,000 and Ms. Zhang’s salary from $250,000 to $262,500.
Mr. Chan was also granted an additional 20,000 time vesting RSUs to
append his 2017 LTIP award.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table lists ownership of our common stock as of March 11,
2019, 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.,
1345 Avenue of the Americas, Floor 15, New York, New York,
10105.
Name
and Address of Beneficial Owner
|
Shares of Common Stock
Beneficially Owned
|
|
|
|
|
Named Executive Officers and Directors
|
|
|
|
|
Wen
Tao (Steve) Liu (1)
|
359,743
|
1.9%
|
Director
|
|
|
|
|
|
Bizuo
(Tony) Liu (2)
|
760,617
|
4%
|
Director, Chief Executive Officer and Chief Financial
Officer
|
|
|
|
|
Andrew
Chan (3)
|
284,324
|
1.5%
|
Chief
Legal Officer (General Counsel), Corporate Development and
Secretary
|
|
|
|
Yihong
Yao
|
92,202
|
*
|
Chief
Scientific Officer (4)
|
|
|
|
|
|
Li
(Helen) Zhang
|
88,746
|
*
|
Chief Production Officer (5)
|
|
|
|
|
Bosun
S. Hau (6)
|
6,188
|
*
|
Independent
Director
|
|
|
|
|
|
Terry
A. Belmont (7)
|
51,069
|
*
|
Independent Director, Chairman of the Board
|
|
|
|
|
Nadir
Patel (8)
|
38,701
|
*
|
|
|
|
Chun
Kwok Alan Au (9)
|
40,174
|
*
|
Independent
Director
|
|
|
|
|
|
Hansheng
Zhou (10)
|
24,569
|
*
|
Independent
Director
|
|
|
|
|
|
Gang
Ji (11)
|
11,493
|
*
|
Independent
Director
|
|
|
|
|
|
|
|
|
All Officers and Directors as a Group
|
1,757,826
|
9.1%
|
|
|
|
5% or more Stockholders
|
|
|
|
|
|
Dangdai
International Group Co Ltd. (12)
|
2,270,000
|
11.8%
|
|
|
|
Sailing
Capital Overseas Investments Ltd. (13)
|
1,719,324
|
8.9%
|
|
|
|
Novartis
Pharma AG (14)
|
1,458,257
|
7.6%
|
|
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Mission
Right Limited (15)
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1,036,040
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5.4%
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* Less
than 1%
(1)
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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 March 11, 2019.
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(2)
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Total shares owned by Bizuo (Tony) Liu includes (i) 194,517 shares
of common stock; (ii) 35,300 options issued under 2011 Plan vested
as of March 11, 2019; (iii) 255,000 options issued under 2013 Plan
vested as of March 11, 2019; (iv) 270,800 options issued under the
Company’s 2014 Stock Incentive Plan (the “2014
Plan”) vested/to be vested within 60 days as of March 11,
2019; (v) 5,000 shares of common stock to be vested within 60 days
as of March 11, 2019.
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(3)
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Total shares owned by Andrew Chan includes (i) 164,128 shares of
common stock; (ii) 53,880 options issued under 2011 Plan vested as
of March 11, 2019; (iii) 37,904 options issued under 2013 Plan
vested as of March 11, 2019; (iv) 27,454 options issued under 2014
Plan vested/to be vested within 60 days as of March 11, 2019; (v)
958 shares of common stock to be vested within 60 days as of March
11, 2019.
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(4)
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Total shares owned by Yihong Yao includes (i) 41,746 shares of
common stock; (ii) 49,352 options issued under 2014 Plan vested/to
be vested within 60 days as of March 11, 2019; (iii) 1,104 shares
of common stock to be vested within 60 days as of March 11,
2019.
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(5)
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Total shares owned by Li (Helen) Zhang includes (i) 11,320 shares
of common stock; (ii) 32,000 options issued under 2013 Plan vested
as of March 11, 2019; (iii) 43,968 options issued under 2014 Plan
vested/to be vested within 60 days as of March 11, 2019; (iv) 1,458
shares of common stock to be vested within 60 days as of March 11,
2019.
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(6)
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Total shares owned by Bosun S. Hau includes (i) 1,404 shares of
common stock; (ii) 4,784 options issued under 2014 Plan to be
vested within 60 days as of March 11, 2019.
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(7)
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Total shares owned by Terry A. Belmont includes (i) 7,000 options
issued under 2013 Plan vested as of March 11, 2019; (ii) 44,069
options issued under 2014 Plan vested/to be vested within 60 days
as of March 11, 2019.
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(8)
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Total shares owned by Nadir Patel includes (i) 12,000 options
issued under 2013 Plan vested as of March 11, 2019; (ii) 26,701
options issued under 2014 Plan vested/to be vested within 60 days
as of March 11, 2019.
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(9)
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Total shares owned by Chun Kwok Alan Au includes (i) 4,000 options
issued under 2013 Plan vested as of March 11, 2019; (ii) 36,174
options issued under 2014 Plan vested/to be vested within 60 days
as of March 11, 2019.
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(10)
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Total shares owned by Hansheng Zhou includes 24,569 options issued
under 2014 Plan vested/to be vested within 60 days as of March 11,
2019.
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(11)
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Total shares owned by Gang Ji includes 11,493 options issued under
2014 Plan vested/to be vested within 60 days as of March 11,
2019.
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(12)
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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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(13)
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Total shares owned by Sailing Capital Overseas Investments Ltd.
include 1,404,494 shares owned by Wealth Map Holdings Limited,
308,426 shares owned by Earls Mill Limited, 5,000 shares owned by
Rui Zhang and 1,404 shares owned by Bosun S. Hau (currently a Class
III director). Sailing Capital Overseas Investments Fund, L.P. is
the sole shareholder of Wealth Map. James Xiao Dong Liu is the sole
director of Earls Mill and the Chairman of Sailing Capital. The
investment committee of Sailing Capital Overseas Investments Fund,
L.P. has decision making power over voting and disposition of the
CBMG securities owned by Wealth Map Holdings Limited. James Xiao
Dong Liu, as the sole director of Earls Mill Limited, has voting
and dispositive power over the CBMG securities owned by Earls Mill
Limited. Bosun Hau and Rui Zhang each has voting and dispositive
power over the CBMG securities owned by such individual
stockholder.
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(14)
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Represents 1,077,253 shares held by Novartis Pharma
AG.
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(15)
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Based on information available as of February 7, 2018, 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 January 31 and February 5, 2018, Sailing Capital Overseas
Investment Ltd. and its affiliates (collectively
“Sailing”),
invested $30.6 million in the Company (the “Sailing Financing”).
Sailing has been a major shareholder of the Company since February
2018 in connection with the closing of the Sailing Financing. Bosun
Hau was nominated as a Class III director of the Company pursuant
to the Securities Purchase Agreement by and among the Company and
Sailing.
Except
as disclosed herein, there have been no transactions or proposed
transactions in which the amount involved exceeds $120,000 since
January 1, 2018 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 NASDAQ. Pursuant to these rules, and after
considering all relevant facts and circumstances, the Board
affirmatively determined that Messrs. Terry A. Belmont, Nadir
Patel, Chun Kwok Alan Au, Hansheng Zhou, Gang Ji, Wentao Steve Liu
and Bosun S. Hau, each of whom are now serving on the Board, are
each independent within the definition of independence under the
Nasdaq rules. Bizuo (Tony) Liu is not an independent
director.
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 and our
Amended and Restated bylaws for inclusion in our Proxy Statement
and form of proxy for our next Annual Meeting must have been
received by us no later than November 15, 2019 (assuming we have
our next Annual Meeting on April 26, 2020) and December 16,
2019, 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 1345
Avenue of the Americas, Floor 15, New York, New York,
10105.
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, 2018. 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., 1345 Avenue of the
Americas, Floor 15, New York, New York, 10105, telephone number
(347) 905 - 5663.
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., 1345 Avenue
of the Americas, Floor l5, New York, New York, 10105.
CELLULAR BIOMEDICINE GROUP, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS – APRIL 26, 2018 AT 9:00 AM
EST
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CONTROL ID:
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REQUEST ID:
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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 26, 2019, at 9:00 A.M. Eastern
Standard 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):
This proxy, when properly executed, will be voted in the manner
directed herein. If no such direction is made, this
proxy will be voted in accordance with the Board of Directors
recommendations.
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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VOTING INSTRUCTIONS
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If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
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MAIL:
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Please
mark, sign, date, and return this Proxy Card promptly using the
enclosed envelope.
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FAX:
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Complete
the reverse portion of this Proxy Card and Fax to 202-521-3464.
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INTERNET:
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https://www.iproxydirect.com/CBMG
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PHONE:
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1-866-752-VOTE(8683)
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ANNUAL MEETING OF THE STOCKHOLDERS OF
CELLULAR
BIOMEDICINE GROUP, INC.
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PLEASE
COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE: ☒
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PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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Proposal 1
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FOR
ALL
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AGAINST
ALL
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FOR ALL
EXCEPT
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Election
of Directors
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☐
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☐
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Terry
Belmont
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☐
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CONTROL
ID:
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Hansheng
Zhou
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☐
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REQUEST
ID:
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Proposal 2
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FOR
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AGAINST
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ABSTAIN
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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,
2019.
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☐
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Proposal 3
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FOR
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AGAINST
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ABSTAIN
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To approve the Cellular Biomedicine Group, Inc. 2019 Equity
Incentive Plan.
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☐
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☐
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☐
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MARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING:
☐
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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 AND FOR APPROVAL ON PROPOSALS NUMBER 2 AND
3.
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.
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MARK
HERE FOR ADDRESS CHANGE ☐ New Address (if
applicable):
____________________________
____________________________
____________________________
IMPORTANT: Please sign exactly as your
name or names appear on this Proxy. When shares are held jointly,
each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by
duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized
person.
Dated:
________________________, 2019
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(Print
Name of Stockholder and/or Joint Tenant)
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(Signature
of Stockholder)
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(Second
Signature if held jointly)
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Annex A
CELLULAR BIOMEDICINE GROUP, INC.
2019 EQUITY INCENTIVE PLAN
1. Purpose. The purpose of the Cellular
Biomedicine Group, Inc. 2019 Equity Incentive Plan is to provide a
means through which the Company and its Affiliates may attract and
retain key personnel and to provide a means whereby directors,
officers, managers, employees, consultants and advisors of the
Company and its Affiliates can acquire and maintain an equity
interest in the Company, or be paid incentive compensation, which
may (but need not) be measured by reference to the value of Common
Shares, thereby strengthening their commitment to the welfare of
the Company and its Affiliates and aligning their interests with
those of the Company’s stockholders.
2. Definitions. The following definitions
shall be applicable throughout this Plan:
(a) “Affiliate”
means (i) any person or entity that directly or indirectly
controls, is controlled by or is under common control with the
Company and/or (ii) to the extent provided by the Committee, any
person or entity in which the Company has a significant interest as
determined by the Committee in its discretion. The term
“control” (including, with correlative meaning, the
terms “controlled by” and “under common control
with”), as applied to any person or entity, means the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such person or
entity, whether through the ownership of voting or other
securities, by contract or otherwise.
(b) “Award”
means, individually or collectively, any Incentive Stock Option,
Nonqualified Stock Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Stock Bonus Award or Performance
Compensation Award granted under this Plan.
(c) “Award
Agreement” means an agreement made and delivered in
accordance with Section 15(a) of this Plan evidencing the grant of
an Award hereunder.
(d) “Board”
means the Board of Directors of the Company.
(e) “Business
Day” means any day other than a Saturday, a Sunday or a
day on which banking institutions in New York City are authorized
or obligated by federal law or executive order to be
closed.
(f) “Cause” means,
in the case of a particular Award, unless the applicable Award
Agreement states otherwise, (i) the Company or an Affiliate having
“cause” to terminate a Participant’s employment
or service, as defined in any employment or consulting agreement or
similar document or policy between the Participant and the Company
or an Affiliate in effect at the time of such termination or (ii)
in the absence of any such employment or consulting agreement,
document or policy (or the absence of any definition of
“Cause” contained therein), (A) a continuing material
breach or material default (including, without limitation, any
material dereliction of duty) by Participant of any agreement
between the Participant and the Company, except for any such breach
or default which is caused by the physical disability of the
Participant (as determined by a neutral physician), or a continuing
failure by the Participant to follow the direction of a duly
authorized representative of the Company; (B) gross negligence,
willful misfeasance or breach of fiduciary duty to the Company or
Affiliate of the Company by the Participant; (C) the commission by
the Participant of an act of fraud, embezzlement or any felony or
other crime of dishonesty in connection with the
Participant’s duties to the Company or Affiliate of the
Company; or (D) conviction of the Participant of a felony or any
other crime that would materially and adversely affect: (i) the
business reputation of the Company or Affiliate of the Company or
(ii) the performance of
the Participant’s duties to the Company or an Affiliate of
the Company. Any determination of whether Cause exists shall be
made by the Committee in its sole discretion.
(g) “Change
in Control” shall, in the case of a particular Award,
unless the applicable Award Agreement states otherwise or contains
a different definition of “Change in Control,” be
deemed to occur upon:
(i) A
tender offer (or series of related offers) shall be made and
consummated for the ownership of 50% or more of the outstanding
voting securities of the Company, unless as a result of such tender
offer more than 50% of the outstanding voting securities of the
surviving or resulting corporation or entity shall be owned in the
aggregate by (A) the shareholders of the Company (as of the time
immediately prior to the commencement of such offer), or (B) any
employee benefit plan of the Company or its Subsidiaries, and their
Affiliates;
(ii) The
Company shall be merged or consolidated with another corporation,
unless as a result of such merger or consolidation more than 50% of
the outstanding voting securities of the surviving or resulting
corporation or entity shall be owned in the aggregate by (A) the
shareholders of the Company (as of the time immediately prior to
such transaction); provided, that a merger or consolidation of the
Company with another company which is controlled by persons owning
more than 50% of the outstanding voting securities of the Company
shall constitute a Change in Control unless the Committee, in its
discretion, determine otherwise, or (B) any employee benefit plan
of the Company or its Subsidiaries, and their
Affiliates;
(iii) The
Company shall sell substantially all of its assets to another
entity that is not wholly owned by the Company, unless as a result
of such sale more than 50% of such assets shall be owned in the
aggregate by (A) the shareholders of the Company (as of the time
immediately prior to such transaction), or (B) any employee benefit
plan of the Company or its Subsidiaries, and their
Affiliates;
(iv) APerson
(as defined below) shall acquire 50% or more of the outstanding
voting securities of the Company (whether directly, indirectly,
beneficially or of record), unless as a result of such acquisition
more than 50% of the outstanding voting securities of the surviving
or resulting corporation or entity shall be owned in the aggregate
by (A) the shareholders of the Company (as of the time immediately
prior to the first acquisition of such securities by such Person),
or (B) any employee benefit plan of the Company or its
Subsidiaries, and their Affiliates; or
(v) The
individuals who, as of the date hereof, constitute the members of
the Board (the “Current Board Members”) cease, by
reason of a financing, merger, combination, acquisition, takeover
or other non-ordinary course transaction affecting the Company, to
constitute at least a majority of the members of the Board unless
such change is approved by the Current Board Members.
For
purposes of this Section 2(g), ownership of voting securities shall
take into account and shall include ownership as determined by
applying the provisions of Rule 13d-3(d)(I)(i) (as in effect on the
date hereof) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”). In addition, for such purposes,
“Person” shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d)
and 14(d) thereof; however, a Person shall not include (A) the
Company or any of its Subsidiaries; (B) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its Subsidiaries; (C) an underwriter temporarily
holding securities pursuant to an offering of such securities; or
(D) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportion as
their ownership of stock of the Company.
(h) “Code”
means the Internal Revenue Code of 1986, as amended, and any
successor thereto. References in this Plan to any section of the
Code shall be deemed to include any regulations or other
interpretative guidance issued by any governmental authority under
such section, and any amendments or successor provisions to such
section, regulations or guidance.
(i) “Committee”
means a committee of at least two people as the Board may appoint
to administer this Plan or, if no such committee has been appointed
by the Board, the Board. Unless altered by an action of the Board,
the Committee shall be the Compensation Committee of the
Board.
(j) “Common
Shares” means the common stock, par value $0.001 per
share, of the Company (and any stock or other securities into which
such common shares may be converted or into which they may be
exchanged).
(k) “Company”
means Cellular Biomedicine Group, Inc., a Delaware corporation,
together with its successors and assigns.
(l) “Current Board
Members” has the meaning given such term in the
definition of “Change in Control.”
(m) “Date of
Grant” means the date on which the granting of an
Award is authorized, or such other date as may be specified in such
authorization.
(n) “Disability”
means a “permanent and total” disability incurred by a
Participant while in the employ or service of the Company or an
Affiliate. For this purpose, a permanent and total disability shall
mean that the Participant is unable to engage in any substantial
gainful activity by reason of any medically determinable physical
or mental impairment that can be expected to result in death or can
be expected to last for a continuous period of not less than twelve
(12) months. The determination of whether a Participant has
incurred a permanent and total disability shall be made by a
physician designated by the Committee, whose determination shall be
final and binding.
(o) “Effective
Date” means the date as of which this Plan is adopted
by the Board, subject to Section 3 of this Plan.
(p) “Eligible
Director” means a person who is a “non-employee
director” within the meaning of Rule 16b-3 under the Exchange
Act.
(q) “Eligible
Person” means any (i) individual employed by the
Company or an Affiliate;provided,
however,
that no such employee covered by a collective bargaining agreement
shall be an Eligible Person unless and to the extent that such
eligibility is set forth in such collective bargaining agreement or
in an agreement or instrument relating thereto; (ii) director of
the Company or an Affiliate; or (iii) consultant or advisor to the
Company or an Affiliate, provided that if the Securities Act
applies such persons must be eligible to be offered securities
registrable on Form S-8 under the Securities Act.
(r) “Exchange
Act” has the meaning given such term in the definition
of “Change in Control,” and any reference in this Plan
to any section of (or rule promulgated under) the Exchange Act
shall be deemed to include any rules, regulations or other
interpretative guidance issued by any governmental authority under
such section or rule, and any amendments or successor provisions to
such section, rules, regulations or guidance.
(s) “Exercise
Price” has the meaning given such term in Section 7(b)
of this Plan.
(t) “Fair Market
Value”, unless otherwise provided by the Committee in
accordance with all applicable laws, rules regulations and
standards, means, on a given date, (i) if the Common Shares are
listed on a national securities exchange, the closing sales price
on the principal exchange of the Common Shares on such date or, in
the absence of reported sales on such date, the closing sales price
on the immediately preceding date on which sales were reported, or
(ii) if the Common Shares are not listed on a national securities
exchange, the mean between the bid and offered prices as quoted by
any nationally recognized interdealer quotation system for such
date, provided that if the Common Shares are not quoted on an
interdealer quotation system or it is determined that the fair
market value is not properly reflected by such quotations, Fair
Market Value will be determined by such other method as the
Committee determines in good faith to be reasonable and in
compliance with Code Section 409A, if applicable.
(u) “Immediate Family
Members” shall have the meaning set forth in Section
15(b) of this Plan.
(v) “Incentive Stock
Option” means an Option that is designated by the
Committee as an incentive stock option as described in Section 422
of the Code and otherwise meets the requirements set forth in this
Plan.
(w) “Indemnifiable
Person” shall have the meaning set forth in Section
4(e) of this Plan.
(x) “Negative
Discretion” shall mean the discretion authorized by
this Plan to be applied by the Committee to eliminate or reduce the
size of a Performance Compensation Award consistent with Section
162(m) of the Code.
(y) “Nonqualified Stock
Option” means an Option that is not designated by the
Committee as an Incentive Stock Option.
(z) “Option”
means an Award granted under Section 7 of this Plan.
(aa) “Option
Period” has the meaning given such term in Section
7(c) of this Plan.
(bb) “Participant”
means an Eligible Person who has been selected by the Committee to
participate in this Plan and to receive an Award pursuant to
Section 6 of this Plan.
(cc) “Performance
Compensation Award” shall mean any Award designated by
the Committee as a Performance Compensation Award pursuant to
Section 11 of this Plan.
(dd) “Performance
Criteria” shall mean the criterion or criteria that
the Committee shall select for purposes of establishing the
Performance Goal(s) for a Performance Period with respect to any
Performance Compensation Award under this Plan.
(ee) “Performance
Formula” shall mean, for a Performance Period, the one
or more objective formulae applied against the relevant Performance
Goal to determine, with regard to the Performance Compensation
Award of a particular Participant, whether all, some portion but
less than all, or none of the Performance Compensation Award has
been earned for the Performance Period.
(ff) “Performance
Goals” shall mean, for a Performance Period, the one
or more goals established by the Committee for the Performance
Period based upon the Performance Criteria.
(gg) “Performance
Period” shall mean the one or more periods of time, as
the Committee may select, over which the attainment of one or more
Performance Goals will be measured for the purpose of determining a
Participant’s right to, and the payment of, a Performance
Compensation Award.
(hh) “Permitted
Transferee” shall have the meaning set forth in
Section 15(b) of this Plan.
(ii) “Person”
has the meaning given such term in the definition of “Change
in Control.”
(jj) “Plan”
means this Cellular Biomedicine Group, Inc. 2019 Equity Incentive
Plan, as amended from time to time.
(kk) “PRC
Participant” means any Participant granted a
Restricted Stock Unit or an Option with respect to the Company who
was a resident or citizen of the People’s Republic of China
at any period of time during which such Participant held such
Restricted Stock Unit or Option.
(ll) “Retirement”
means the fulfillment of each of the following conditions: (i) the
Participant is in good standing with the Company and/or an
Affiliate of the Company as determined by the Committee; (ii) the
voluntary termination by a Participant of such Participant’s
employment or service to the Company and/or an Affiliate and (iii)
that at the time of such voluntary termination, the sum of: (A) the
Participant’s age (calculated to the nearest month, with any
resulting fraction of a year being calculated as the number of
months in the year divided by 12) and (B) the Participant’s
years of employment or service with the Company (calculated to the
nearest month, with any resulting fraction of a year being
calculated as the number of months in the year divided by 12)
equals at least 62 (provided that, in any case, the foregoing shall
only be applicable if, at the time of such Retirement, the
Participant shall be at least 55 years of age and shall have been
employed by or served with the Company for no less than five
years).
(mm) “Restricted
Period” means the period of time determined by the
Committee during which an Award is subject to restrictions or, as
applicable, the period of time within which performance is measured
for purposes of determining whether an Award has been
earned.
(nn) “Restricted
Stock Unit” means an unfunded and unsecured promise to
deliver Common Shares, cash, other securities or other property,
subject to certain restrictions (including, without limitation, a
requirement that the Participant remain continuously employed or
provide continuous services for a specified period of time),
granted under Section 9 of this Plan.
(oo) “Restricted
Stock” means Common Shares, subject to certain
specified restrictions (including, without limitation, a
requirement that the Participant remain continuously employed or
provide continuous services for a specified period of time),
granted under Section 9 of this Plan.
(pp) “SAR
Period” has the meaning given such term in Section
8(c) of this Plan.
(qq) “Securities
Act” means the Securities Act of 1933, as amended, and
any successor thereto. Reference in this Plan to any section of the
Securities Act shall be deemed to include any rules, regulations or
other official interpretative guidance issued by any governmental
authority under such section, and any amendments or successor
provisions to such section, rules, regulations or
guidance.
(rr) “Stock
Appreciation Right” or “SAR”
means an Award granted under Section 8 of this Plan which meets all
of the requirements of Section 1.409A-1(b)(5)(i)(B) of the Treasury
Regulations.
(ss) “Stock
Bonus Award” means an Award granted under Section 10
of this Plan.
(tt) “Strike
Price” means, except as otherwise provided by the
Committee in the case of Substitute Awards, (i) in the case of a
SAR granted in tandem with an Option, the Exercise Price of the
related Option, or (ii) in the case of a SAR granted independent of
an Option, the Fair Market Value of Common Shares on the Date of
Grant.
(uu) “Subsidiary”
means, with respect to any specified Person:
(i) any corporation,
association or other business entity of which more than 50% of the
total voting power of shares of voting securities (without regard
to the occurrence of any contingency and after giving effect to any
voting agreement or stockholders’ agreement that effectively
transfers voting power) is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person (or a combination thereof);
and
(ii) any
partnership or limited liability company (or any comparable foreign
entity) (a) the sole general partner or managing member (or
functional equivalent thereof) or the managing general partner of
which is such Person or Subsidiary of such Person or (b) the only
general partners or managing members (or functional equivalents
thereof) of which are that Person or one or more Subsidiaries of
that Person (or any combination thereof).
(vv) “Substitute
Award” has the meaning given such term in Section
5(f).
(ww) “Treasury
Regulations” means any regulations, whether proposed,
temporary or final, promulgated by the U.S. Department of Treasury
under the Code, and any successor provisions.
3. Effective Date; Duration. The Plan
shall be effective as of the Effective Date, but no Award shall be
exercised or paid (or, in the case of a stock Award, shall be
granted unless contingent on stockholder approval) unless and until
this Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months after the date
this Plan is adopted by the Board. The expiration date of this
Plan, on and after which date no Awards may be granted hereunder,
shall be the tenth anniversary of the date on which the Plan was
approved by the stockholders of the Company; provided,
however,
that such expiration shall not affect Awards then outstanding, and
the terms and conditions of this Plan shall continue to apply to
such Awards.
4. Administration.
(a) The Committee shall
administer this Plan. To the extent required to comply with the
provisions of Rule 16b-3 promulgated under the Exchange Act (if the
Board is not acting as the Committee under this Plan), it is
intended that each member of the Committee shall, at the time he
takes any action with respect to an Award under this Plan, be an
Eligible Director. However, the fact that a Committee member shall
fail to qualify as an Eligible Director shall not invalidate any
Award granted by the Committee that is otherwise validly granted
under this Plan. The acts of a majority of the members present at
any meeting at which a quorum is present or acts approved in
writing by a majority of the Committee shall be deemed the acts of
the Committee. Whether a quorum is present shall be determined
based on the Committee’s charter as approved by the
Board.
(b) Subject to the
provisions of this Plan and applicable law, the Committee shall
have the sole and plenary authority, in addition to other express
powers and authorizations conferred on the Committee by this Plan
and its charter, to: (i) designate Participants; (ii) determine the
type or types of Awards to be granted to a Participant; (iii)
determine the number of Common Shares to be covered by, or with
respect to which payments, rights, or other matters are to be
calculated in connection with, Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and
under what circumstances Awards may be settled or exercised in
cash, Common Shares, other securities, other Awards or other
property, or canceled, forfeited, or suspended, and the method or
methods by which Awards may be settled, exercised, canceled,
forfeited, or suspended; (vi) determine whether, to what extent,
and under what circumstances the delivery of cash, Common Shares,
other securities, other Awards or other property and other amounts
payable with respect to an Award shall be made; (vii) interpret,
administer, reconcile any inconsistency in, settle any controversy
regarding, correct any defect in and/or complete any omission in
this Plan and any instrument or agreement relating to, or Award
granted under, this Plan; (viii) establish, amend, suspend, or
waive any rules and regulations and appoint such agents as the
Committee shall deem appropriate for the proper administration of
this Plan; (ix) accelerate the vesting or exercisability of,
payment for or lapse of restrictions on, Awards, whether or not in
connection with a Change in Control;and (x) make any other
determination and take any other action that the Committee deems
necessary or desirable for the administration of this
Plan.
(c) The Committee may,
by resolution, expressly delegate to a special committee,
consisting of one or more Persons who may but need not be officers
or directors of the Company, the authority, within specified
parameters as to the number and types of Awards, to (i) designate
officers and/or employees of the Company or any of its Affiliates
to be recipients of Awards under this Plan, and (ii) to determine
the number of such Awards to be received by any such Participants;
provided, however, that such delegation of duties and
responsibilities may not be made with respect to grants of Awards
to persons (i) subject to Section 16 of the Exchange Act or (ii)
who are, or who are reasonably expected to be, “covered
employees” for purposes of Section 162(m) of the Code. The
acts of such delegates shall be treated as acts of the Committee,
and such delegates shall report regularly to the Board and the
Committee regarding the delegated duties and responsibilities and
any Awards granted.
(d) Unless otherwise
expressly provided in this Plan, all designations, determinations,
interpretations, and other decisions under or with respect to this
Plan or any Award or any documents evidencing Awards granted
pursuant to this Plan shall be within the sole discretion of the
Committee, may be made at any time and shall be final, conclusive
and binding upon all persons or entities, including, without
limitation, the Company, any Affiliate, any Participant, any holder
or beneficiary of any Award, and any stockholder of the
Company.
(e) No member of the
Board, the Committee, delegate of the Committee or any employee,
advisor or agent of the Company or the Board or the Committee (each
such person, an “Indemnifiable
Person”) shall be liable for any action taken or
omitted to be taken or any determination made in good faith with
respect to this Plan or any Award hereunder. Each Indemnifiable
Person shall be indemnified and held harmless by the Company
against and from (and the Company shall pay or reimburse on demand
for) any loss, cost, liability, or expense (including court costs
and attorneys’ fees) that may be imposed upon or incurred by
such Indemnifiable Person in connection with or resulting from any
action, suit or proceeding to which such Indemnifiable Person may
be a party or in which such Indemnifiable Person may be involved by
reason of any action taken or omitted to be taken under this Plan
or any Award Agreement and against and from any and all amounts
paid by such Indemnifiable Person with the Company’s
approval, in settlement thereof, or paid by such Indemnifiable
Person in satisfaction of any judgment in any such action, suit or
proceeding against such Indemnifiable Person, provided, that the Company
shall have the right, at its own expense, to assume and defend any
such action, suit or proceeding and once the Company gives notice
of its intent to assume the defense, the Company shall have sole
control over such defense with counsel of the Company’s
choice. The foregoing right of indemnification shall not be
available to an Indemnifiable Person to the extent that a final
judgment or other final adjudication (in either case not subject to
further appeal) binding upon such Indemnifiable Person determines
that the acts or omissions of such Indemnifiable Person giving rise
to the indemnification claim resulted from such Indemnifiable
Person’s bad faith, fraud or willful criminal act or omission
or that such right of indemnification is otherwise prohibited by
law or by the Company’s Certificate of Incorporation or
Bylaws. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which any such
Indemnifiable Person may be entitled under the Company’s
Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any other power that the Company may have to
indemnify such Indemnifiable Persons or hold them
harmless.
(f) Notwithstanding
anything to the contrary contained in this Plan, the Board may, in
its sole discretion, at any time and from time to time, grant
Awards and administer this Plan with respect to such Awards. In any
such case, the Board shall have all the authority granted to the
Committee under this Plan.
5. Grant of Awards; Shares Subject to this Plan;
Limitations.
(a) The Committee may,
from time to time, grant Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Units, Stock Bonus Awards and/or
Performance Compensation Awards to one or more Eligible
Persons.
(b) Subject to Sections
3, 11 and 12 of this Plan, the Committee is authorized to deliver
under this Plan an aggregate of One Million Five Hundred Thousand
(1,500,000) Common Shares. Additionally, commencing on the first business day
in 2020 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%) of
the maximum aggregate number of Common Shares available for
issuance in the prior year. Each Common Share subject to
an Option or a Stock Appreciation Right will reduce the number of
Common Shares 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 Common Shares available for issuance by one
share.
(c) Common Shares
underlying Awards under this Plan that are forfeited, cancelled,
expire unexercised, or are settled in cash shall be available again
for Awards under this Plan at the same ratio at which they were
previously granted. Notwithstanding the foregoing, the following
Common Shares shall not be available again for Awards under the
Plan: (i) shares tendered or held back upon the exercise of an
Option or settlement of an Award to cover the Exercise Price of an
Award; (ii) shares that are used or withheld to satisfy tax
withholding obligations of the Participant; and (iii) shares
subject to a Stock Appreciation Right that are not issued in
connection with the stock settlement of the SAR upon exercise
thereof.
(d) Awards that do not
entitle the holder thereof to receive or purchase Common Shares
shall not be counted against the aggregate number of Common Shares
available for Awards under the Plan.
(e) Common Shares
delivered by the Company in settlement of Awards may be authorized
and unissued shares, shares held in the treasury of the Company,
shares purchased on the open market or by private purchase, or any
combination of the foregoing.
(f) Subject to
compliance with Section 1.409A-3(f) of the Treasury Regulations,
Awards may, in the sole discretion of the Committee, be granted
under this Plan in assumption of, or in substitution for,
outstanding awards previously granted by an entity acquired by the
Company or with which the Company combines (“Substitute
Awards”). The number of Common Shares underlying any
Substitute Awards shall be counted against the aggregate number of
Common Shares available for Awards under this Plan; provided,
however that Common Shares issued under Substitute Awards granted
in substitution for awards previously granted by an entity that is
acquired by or merged with the Company or an Affiliate shall not be
counted against the aggregate number of Common Shares available for
Awards under the Plan.
(g) Subject to
compliance with Section 83 of the Code and applicable Treasury
Regulations, a Participant may file an election under Section 83(b)
of the Code with respect to grants of Restricted Stock or other
nonvested property interests for which such an election is
permitted under the Code; provided, however, that it shall be the
sole responsibility of such Participant to complete and file such
election in accordance with and in the manner provided by Treasury
Regulation Section 1.83-2.
6. Eligibility. Participation shall be
limited to Eligible Persons who have entered into an Award
Agreement or who have received written notification from the
Committee, or from a person designated by the Committee, that they
have been selected to participate in this Plan.
7. Options.
(a) Generally.
Each Option granted under this Plan shall be evidenced by an Award
Agreement (whether in paper or electronic medium (including email
or the posting on a web site maintained by the Company or a third
party under contract with the Company)). Each Option so granted
shall be subject to the conditions set forth in this Section 7, and
to such other conditions not inconsistent with this Plan as may be
reflected in the applicable Award Agreement. All Options granted
under this Plan shall be Nonqualified Stock Options unless the
applicable Award Agreement expressly states that the Option is
intended to be an Incentive Stock Option. Notwithstanding any
designation of an Option, to the extent that the aggregate Fair
Market Value of Common Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first
time by any Participant during any calendar year (under all plans
of the Company or any Subsidiary) exceeds $100,000, such excess
Options shall be treated as Nonqualified Stock Options. Incentive
Stock Options shall be granted only to Eligible Persons who are
employees of the Company and its Affiliates, and no Incentive Stock
Option shall be granted to any Eligible Person who is ineligible to
receive an Incentive Stock Option under the Code. No Option shall
be treated as an Incentive Stock Option unless this Plan has been
approved by the stockholders of the Company in a manner intended to
comply with the stockholder approval requirements of Section
422(b)(1) of the Code, provided that any Option intended to be an
Incentive Stock Option shall not fail to be effective solely on
account of a failure to obtain such approval, but rather such
Option shall be treated as a Nonqualified Stock Option unless and
until such approval is obtained. In the case of an Incentive Stock
Option, the terms and conditions of such grant shall be subject to
and comply with such rules as may be prescribed by Section 422 of
the Code. If for any reason an Option intended to be an Incentive
Stock Option (or any portion thereof) shall not qualify as an
Incentive Stock Option, then, to the extent of such
nonqualification, such Option or portion thereof shall be regarded
as a Nonqualified Stock Option appropriately granted under this
Plan.
(b) Exercise
Price. The exercise price (“Exercise
Price”) per Common Share for each Option shall not be
less than 100% of the Fair Market Value of such share determined as
of the Date of Grant;provided,
however, that in the case of an Incentive Stock Option
granted to an employee who, at the time of the grant of such
Option, owns shares representing more than 10% of the voting power
of all classes of shares of the Company or any Affiliate, the
Exercise Price per share shall not be less than 110% of the Fair
Market Value per share on the Date of Grant;and, provided further, that
notwithstanding any provision herein to the contrary, the Exercise
Price shall not be less than the par value per Common
Share.
(c) Vesting and
Expiration. Options shall vest and become exercisable in
such manner and on such date or dates determined by the Committee
and as set forth in the applicable Award Agreement, and shall
expire after such period, not to exceed ten (10) years from the
Date of Grant, as may be determined by the Committee (the
“Option
Period”);provided,
however,
that the Option Period shall not exceed five (5) years from the
Date of Grant in the case of an Incentive Stock Option granted to a
Participant who on the Date of Grant owns shares representing more
than 10% of the voting power of all classes of shares of the
Company or any Affiliate;and, provided,
further,
that notwithstanding any vesting dates set by the Committee, the
Committee may, in its sole discretion, accelerate the
exercisability of any Option, which acceleration shall not affect
the terms and conditions of such Option other than with respect to
exercisability. Unless otherwise provided by the Committee in an
Award Agreement:
(i) an Option shall
vest over a period of four years and become exercisable with
respect to one-fourth of the Common Shares subject to such Option
on the first anniversary of the Date of Grant, with the remaining
three-fourths of the Common Shares subject to such Option to vest
in six equal installments on each of the successive six-month
anniversaries of the Date of Grant;provided, however, that the Committee
may designate a purchase price below Fair Market Value on the date
of grant if the Option is granted in substitution for a stock
option previously granted by an entity that is acquired by or
merged with the Company or an Affiliate;
(ii) the
unvested portion of an Option shall expire upon termination of
employment or service of the Participant granted the Option, and
the vested portion of such Option shall remain exercisable
for:
(A) one year following
termination of employment or service by reason of such
Participant’s death or Disability (with the determination of
Disability to be made by the Committee on a case by case basis),
but not later than the expiration of the Option
Period;
(B) for directors,
officers and employees of the Company only, for ninety (90)
calendar days following termination of employment or service by
reason of such Participant’s Retirement;
(C) ninety (90)
calendar days following termination of employment or service for
any reason other than such Participant’s death, Disability or
Retirement, and other than such Participant’s termination of
employment or service for Cause, but not later than the expiration
of the Option Period; and
(iii) both
the unvested and the vested portion of an Option shall immediately
expire upon the termination of the Participant’s employment
or service by the Company for Cause.
Additionally,
with respect to a PRC Participant, any Common Shares received upon
the PRC Participant’s exercise of the vested portion of an
Option, which exercise is made within the time frames specified in
Section 7(c)(ii), must be sold within six (6) months following the
termination of such PRC Participant’s employment or service
with the Company. Notwithstanding the foregoing provisions of
Section 7(c) and consistent with the requirements of applicable
law, the Committee, in its sole discretion, may extend the
post-termination of employment period during which a Participant
may exercise vested Options.
(d) Method of Exercise
and Form of Payment. No Common Shares shall be delivered
pursuant to the exercise of an Option until payment in full of the
Exercise Price therefor is received by the Company and the
Participant has paid to the Company an amount equal to any
applicable federal, state, local and/or foreign income and
employment taxes withheld. Options that have become exercisable may
be exercised by delivery of written or electronic notice of
exercise to the Company in accordance with the terms of the Award
Agreement accompanied by payment of the Exercise Price. The
Exercise Price shall be payable (i) in cash, check (subject to
collection), cash equivalent and/or vested Common Shares valued at
the Fair Market Value at the time the Option is exercised
(including, pursuant to procedures approved by the Committee, by
means of attestation of ownership of a sufficient number of Common
Shares in lieu of actual delivery of such shares to the
Company);provided,
however, that such Common Shares are not subject to any
pledge or other security interest and; (ii) by such other method as
the Committee may permit in accordance with applicable law, in its
sole discretion, including without limitation: (A) in other
property having a fair market value (as determined by the Committee
in its discretion) on the date of exercise equal to the Exercise
Price or (B) if there is a public market for the Common Shares at
such time, by means of a broker-assisted “cashless
exercise” pursuant to which the Company is delivered a copy
of irrevocable instructions to a stockbroker to sell the Common
Shares otherwise deliverable upon the exercise of the Option and to
deliver promptly to the Company an amount equal to the Exercise
Price or (C) by a “net exercise” method whereby the
Company withholds from the delivery of the Common Shares for which
the Option was exercised that number of Common Shares having a Fair
Market Value equal to the aggregate Exercise Price for the Common
Shares for which the Option was exercised. Any fractional Common
Shares shall be settled in cash.
(e) Notification upon
Disqualifying Disposition of an Incentive Stock Option. Each
Participant awarded an Incentive Stock Option under this Plan shall
notify the Company in writing immediately after the date he makes a
disqualifying disposition of any Common Shares acquired pursuant to
the exercise of such Incentive Stock Option. A disqualifying
disposition is any disposition (including, without limitation, any
sale) of such Common Shares before the later of (A) two years after
the Date of Grant of the Incentive Stock Option or (B) one year
after the date of exercise of the Incentive Stock Option. The
Company may, if determined by the Committee and in accordance with
procedures established by the Committee, retain possession of any
Common Shares acquired pursuant to the exercise of an Incentive
Stock Option as agent for the applicable Participant until the end
of the period described in the preceding sentence.
(f) Compliance with
Laws, etc. Notwithstanding the foregoing, in no event shall
a Participant be permitted to exercise an Option in a manner that
the Committee determines would violate the Sarbanes-Oxley Act of
2002, if applicable, or any other applicable law or the applicable
rules and regulations of the Securities and Exchange Commission or
the applicable rules and regulations of any securities exchange or
inter-dealer quotation system on which the securities of the
Company are listed or traded.
8. Stock Appreciation Rights.
(a) Generally.
Each SAR granted under this Plan shall be evidenced by an Award
Agreement (whether in paper or electronic medium (including email
or the posting on a web site maintained by the Company or a third
party under contract with the Company)). Each SAR so granted shall
be subject to the conditions set forth in this Section 8, and to
such other conditions not inconsistent with this Plan as may be
reflected in the applicable Award Agreement. Any Option granted
under this Plan may include tandem SARs (i.e., SARs granted in
conjunction with an Award of Options under this Plan). The
Committee also may award SARs to Eligible Persons independent of
any Option.
(b) Exercise
Price. The Exercise Price per Common Share for each Option
granted in connection with a SAR shall not be less than 100% of the
Fair Market Value of such share determined as of the Date of
Grant;provided, however, that the Committee may designate a
purchase price below Fair Market Value on the date of grant if the
SAR is granted in substitution for an appreciation right previously
granted by an entity that is acquired by or merged with the Company
or an Affiliate.
(c) Vesting and
Expiration. A SAR granted in connection with an Option shall
become exercisable and shall expire according to the same vesting
schedule and expiration provisions as the corresponding Option. A
SAR granted independent of an Option shall vest and become
exercisable and shall expire in such manner and on such date or
dates determined by the Committee and shall expire after such
period, not to exceed ten years, as may be determined by the
Committee (the “SAR
Period”);provided,
however, that notwithstanding any vesting dates set by the
Committee, the Committee may, in its sole discretion, accelerate
the exercisability of any SAR, which acceleration shall not affect
the terms and conditions of such SAR other than with respect to
exercisability. Unless otherwise provided by the Committee in an
Award Agreement:
(i) a SAR shall vest
over a period of four years and become exercisable with respect to
one-fourth of the Common Shares subject to such SAR on the first
anniversary of the Date of Grant, with the remaining three-fourths
of the Common Shares subject to such SAR to vest in six equal
installments on each of the successive six-month anniversaries of
the Date of Grant;
(ii) the
unvested portion of a SAR shall expire upon termination of
employment or service of the Participant granted the SAR, and the
vested portion of such SAR shall remain exercisable
for:
(A) one year following
termination of employment or service by reason of such
Participant’s death or Disability (with the determination of
Disability to be made by the Committee on a case by case basis),
but not later than the expiration of the SAR Period;
(B) for directors,
officers and employees of the Company only, for the remainder of
the SAR Period following termination of employment or service by
reason of such Participant’s Retirement;
(C) 90 calendar days
following termination of employment or service for any reason other
than such Participant’s death, Disability or Retirement, and
other than such Participant’s termination of employment or
service for Cause, but not later than the expiration of the SAR
Period; and
(iii) both
the unvested and the vested portion of a SAR shall expire
immediately upon the termination of the Participant’s
employment or service by the Company for Cause.
(d) Method of
Exercise. SARs that have become exercisable may be exercised
by delivery of written or electronic notice of exercise to the
Company in accordance with the terms of the Award, specifying the
number of SARs to be exercised and the date on which such SARs were
awarded. Notwithstanding the foregoing, if on the last day of the
Option Period (or in the case of a SAR independent of an Option,
the SAR Period), the Fair Market Value exceeds the Strike Price,
the Participant has not exercised the SAR or the corresponding
Option (if applicable), and neither the SAR nor the corresponding
Option (if applicable) has expired, such SAR shall be deemed to
have been exercised by the Participant on such last day and the
Company shall make the appropriate payment therefor.
(e) Payment.
Upon the exercise of a SAR, the Company shall pay to the
Participant an amount equal to the number of Common Shares subject
to the SAR that are being exercised multiplied by the excess, if
any, of the Fair Market Value of one Common Share on the exercise
date over the Strike Price, less an amount equal to any applicable
federal, state, local and non-U.S. income and employment taxes
withheld. The Company shall pay such amount in cash, in Common
Shares valued at Fair Market Value, or any combination thereof, as
determined by the Committee. Any fractional Common Share shall be
settled in cash.
9. Restricted Stock and Restricted Stock
Units.
(a) Generally.
Each grant of Restricted Stock and Restricted Stock Units shall be
evidenced by an Award Agreement (whether in paper or electronic
medium (including email or the posting on a web site maintained by
the Company or a third party under contract with the Company)).
Each such grant shall be subject to the conditions set forth in
this Section 9, and to such other conditions not inconsistent with
this Plan as may be reflected in the applicable Award Agreement.
Restricted Stock and Restricted Stock Units shall be subject to
such restrictions on transferability and other restrictions as the
Committee may impose (including, for example, limitations on the
right to vote Restricted Stock or the right to receive dividends on
the Restricted Stock). These restrictions may lapse separately or
in combination at such times, under such circumstances, in such
installments, upon the satisfaction of Performance Goals or
otherwise, as the Committee determines at the time of the grant of
an Award or thereafter. Except as otherwise provided in an Award
Agreement, a Participant shall have none of the rights of a
stockholder with respect to Restricted Stock Units until such time
as Common Shares are paid in settlement of such
Awards.
(b) Restricted
Accounts; Escrow or Similar Arrangement. Unless otherwise
determined by the Committee, upon the grant of Restricted Stock, a
book entry in a restricted account shall be established in the
Participant’s name at the Company’s transfer agent and,
if the Committee determines that the Restricted Stock shall be held
by the Company or in escrow rather than held in such restricted
account pending the release of the applicable restrictions, the
Committee may require the Participant to additionally execute and
deliver to the Company (i) an escrow agreement satisfactory to the
Committee, if applicable, and (ii) the appropriate share power
(endorsed in blank) with respect to the Restricted Stock covered by
such agreement. If a Participant shall fail to execute an agreement
evidencing an Award of Restricted Stock and, if applicable, an
escrow agreement and blank share power within the amount of time
specified by the Committee, the Award shall be null and void
ab initio. Subject to the
restrictions set forth in this Section 9 and the applicable Award
Agreement, the Participant generally shall have the rights and
privileges of a stockholder as to such Restricted Stock, including
without limitation the right to vote such Restricted Stock and the
right to receive dividends, if applicable. To the extent shares of
Restricted Stock are forfeited, any share certificates issued to
the Participant evidencing such shares shall be returned to the
Company, and all rights of the Participant to such shares and as a
stockholder with respect thereto shall terminate without further
obligation on the part of the Company.
(c) Vesting;
Acceleration of Lapse of Restrictions. Unless otherwise
provided by the Committee in an Award Agreement: (i) the Restricted
Period shall lapse with respect to to one-fourth of the Restricted
Stock and/or Restricted Stock Units on the first anniversary of the
Date of Grant, with the remaining three-fourths of the Restricted
Stock and/or Restricted Stock Units to vest in six equal
installments on each of the successive six-month anniversaries of
the Date of Grant; and (ii) the unvested portion of Restricted
Stock and Restricted Stock Units shall terminate and be forfeited
upon the termination of employment or service of the Participant
granted the applicable Award.
(d) Delivery of
Restricted Stock and Settlement of Restricted Stock Units.
(i) Upon the expiration of the Restricted Period with respect to
any shares of Restricted Stock, the restrictions set forth in the
applicable Award Agreement shall be of no further force or effect
with respect to such shares, except as set forth in the applicable
Award Agreement. If an escrow arrangement is used, upon such
expiration, the Company shall deliver to the Participant, or his
beneficiary, without charge, the share certificate evidencing the
shares of Restricted Stock that have not then been forfeited and
with respect to which the Restricted Period has expired (rounded
down to the nearest full share). Dividends, if any, that may have
been withheld by the Committee and attributable to any particular
share of Restricted Stock shall be distributed to the Participant
in cash or, at the sole discretion of the Committee, in shares of
Common Stock having a Fair Market Value equal to the amount of such
dividends, upon the release of restrictions on such shares of
Restricted Stock and, if such shares of Restricted Stock are
forfeited, the Participant shall have no right to such dividends
(except as otherwise set forth by the Committee in the applicable
Award Agreement).
(i) Unless otherwise
provided by the Committee in an Award Agreement, upon the
expiration of the Restricted Period with respect to the outstanding
Restricted Stock Units held by any Participant, and no later than
the 75th
day of the calendar year following the calendar year in which such
expiration occurs, the Company shall deliver a copy of irrevocable
instructions to a stockbroker or other third party agent to (A)
sell a sufficient number of Common Shares on behalf of such
Participant, in order to fully satisfy the Company’s tax
withholding obligations with respect to such Restricted Stock
Units, and (B) hold the remainder of the Participant’s Common
Shares with respect to such Restricted Stock Units in an individual
account with such stockbroker or other third party agent on behalf
of, and for the benefit of, such Participant. Notwithstanding
anything contained herein to the contrary, the Committee in an
Award Agreement may, in a manner consistent with the applicable
requirements of Section 409A of the Code, enable a Participant to
elect to defer the date on which settlement of the Restricted Stock
Units shall occur.
10. Stock Bonus Awards. The Committee may
issue unrestricted Common Shares, or other Awards denominated in
Common Shares, under this Plan to Eligible Persons, either alone or
in tandem with other awards, in such amounts as the Committee shall
from time to time in its sole discretion determine. Each Stock
Bonus Award granted under this Plan shall be evidenced by an Award
Agreement (whether in paper or electronic medium (including email
or the posting on a web site maintained by the Company or a third
party under contract with the Company)). Each Stock Bonus Award so
granted shall be subject to such conditions not inconsistent with
this Plan as may be reflected in the applicable Award
Agreement.
11. Performance Compensation
Awards.
(a) Discretion of
Committee with Respect to Performance Compensation Awards.
With regard to a particular Performance Period, the Committee shall
have sole discretion to select the length of such Performance
Period, the type(s) of Performance Compensation Awards to be
issued, the Performance Criteria that will be used to establish the
Performance Goal(s), the kind(s) and/or level(s) of the Performance
Goals(s) that is (are) to apply and the Performance Formula. Within
the first 90 calendar days of a Performance Period, the Committee
shall, with regard to the Performance Compensation Awards to be
issued for such Performance Period, exercise its discretion with
respect to each of the matters enumerated in the immediately
preceding sentence and record the same in writing.
(b) Performance
Criteria. The Performance Criteria that will be used to
establish the Performance Goal(s) shall be based on the attainment
of specific levels of performance of the Company and/or one or more
Affiliates, divisions or operational units, including, but not
limited to, criteria based on one or more of the following business
criteria: (i) revenue; (ii) sales; (iii) profit (net profit, gross
profit, operating profit, economic profit, profit margins or other
corporate profit measures); (iv) earnings (EBIT, EBITDA, earnings
per share, or other corporate earnings measures); (v) net income
(before or after taxes, operating income or other income measures);
(vi) cash (cash flow, cash generation or other cash measures);
(vii) stock price or performance; (viii) total stockholder return
(stock price appreciation plus reinvested dividends divided by
beginning share price); (ix) economic value added; (x)
return measures (including, but not
limited to, return on assets, capital, equity, investments or
sales, and cash flow return on assets, capital, equity, or sales);
(xi) market share; (xii) improvements in capital structure;
(xiii) expenses (expense management, expense ratio, expense
efficiency ratios or other expense measures); (xiv) business
expansion or consolidation (acquisitions and divestitures); (xv)
internal rate of return or increase in
net present value; (xvi) working capital targets relating to
inventory and/or accounts receivable; (xvii) inventory
management; (xviii) service or product delivery or quality; (xix)
customer satisfaction; (xx) employee retention; (xxi) safety
standards; (xxii) productivity measures; (xxiii) cost reduction
measures; and/or (xxiv) strategic plan development and
implementation. Any one or more of the Performance Criteria adopted
by the Committee may be used on an absolute or relative basis to
measure the performance of the Company and/or one or more
Affiliates as a whole or any business unit(s) of the Company and/or
one or more Affiliates or any combination thereof, as the Committee
may deem appropriate, or any of the above Performance Criteria may
be compared to the performance of a selected group of comparison
companies, or a published or special index that the Committee, in
its sole discretion, deems appropriate, or as compared to various
stock market indices. The Committee also has the authority to
provide for accelerated vesting of any Award based on the
achievement of Performance Goals pursuant to the Performance
Criteria specified in this paragraph.
(c) Modification of
Performance Goal(s). In the event that applicable tax and/or
securities laws change to permit Committee discretion to alter the
governing Performance Criteria without obtaining stockholder
approval of such alterations, the Committee shall have sole
discretion to make such alterations without obtaining stockholder
approval. For purposes of clarity and without limiting the
Committee’s authority set forth above, at the time it
establishes Performance Criteria to be used with any Performance
Compensation Award, the Committee may specify one or more events
requiring an adjustment to the calculation of the Performance Goal,
including but not limited to: (i) asset write-downs; (ii)
litigation or claim judgments or settlements; (iii) the effect of
changes in tax laws, accounting principles, or other laws or
regulatory rules affecting reported results; (iv) any
reorganization and restructuring programs; (v) acquisitions or
divestitures; (vi) any other specific items that are unusual in
nature or infrequently occurring, or objectively determinable
category thereof; (viii) foreign exchange gains and losses; and
(ix) a change in the Company’s fiscal year. The Committee may
reserve discretion to make or not make one or more adjustments as
specified in a Performance Compensation Award, but only to the
extent that such discretion is Negative Discretion.
(d) Payment of
Performance Compensation Awards.
(i) Condition to
Receipt of Payment. Unless otherwise provided in the
applicable Award Agreement, a Participant must be employed by, or
in service to, the Company on the last day of a Performance Period
to be eligible for payment in respect of a Performance Compensation
Award for such Performance Period.
(ii) Limitation.
A Participant shall be eligible to receive payment in respect of a
Performance Compensation Award only to the extent that: (A) the
Performance Goals for such period are achieved; and (B) all or some
of the portion of such Participant’s Performance Compensation
Award has been earned for the Performance Period based on the
application of the Performance Formula to such achieved Performance
Goals.
(iii) Certification.
Following the completion of a Performance Period, the Committee
shall review and certify in writing whether, and to what extent,
the Performance Goals for the Performance Period have been achieved
and, if so, calculate and certify in writing that amount of the
Performance Compensation Awards earned for the period based upon
the Performance Formula. The Committee shall then determine the
amount of each Participant’s Performance Compensation Award
actually payable for the Performance Period and, in so doing, may
apply Negative Discretion.
(iv) Use
of Negative Discretion. In determining the actual amount of
an individual Participant’s Performance Compensation Award
for a Performance Period, the Committee may reduce or eliminate the
amount of the Performance Compensation Award earned under the
Performance Formula in the Performance Period through the use of
Negative Discretion if, in its sole judgment, such reduction or
elimination is appropriate. The Committee shall not have the
discretion, except as is otherwise provided in this Plan, to (A)
grant or provide payment in respect of Performance Compensation
Awards for a Performance Period if the Performance Goals for such
Performance Period have not been attained; or (B) increase a
Performance Compensation Award above the applicable limitations set
forth in Section 5 of this Plan.
(e) Timing of Award
Payments. Performance Compensation Awards granted for a
Performance Period shall be paid to Participants as soon as
administratively practicable following completion of the
certifications required by this Section 11, but in no event later
than two-and-one-half months following the end of the fiscal year
during which the Performance Period is completed in order to comply
with the short-term deferral rules under Section 1.409A-1(b)(4) of
the Treasury Regulations. Notwithstanding the foregoing, payment of
a Performance Compensation Award may be delayed, as permitted by
Section 1.409A-2(b)(7)(i) of the Treasury Regulations, to the
extent that the Company reasonably anticipates that if such payment
were made as scheduled, the Company’s tax deduction with
respect to such payment would not be permitted due to the
application of Section 162(m) of the Code.
12. Changes in Capital Structure and Similar
Events. In the event of (a) any dividend or other
distribution (whether in the form of cash, Common Shares, other
securities or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, amalgamation,
consolidation, split-up, split-off, combination, repurchase or
exchange of Common Shares or other securities of the Company,
issuance of warrants or other rights to acquire Common Shares or
other securities of the Company, or other similar corporate
transaction or event (including, without limitation, a Change in
Control) that affects the Common Shares, or (b) unusual or
nonrecurring events (including, without limitation, a Change in
Control) affecting the Company, any Affiliate, or the financial
statements of the Company or any Affiliate, or changes in
applicable rules, rulings, regulations or other requirements of any
governmental body or securities exchange or inter-dealer quotation
system, accounting principles or law, such that in either case an
adjustment is determined by the Committee in its sole discretion to
be necessary or appropriate in order to prevent dilution or
enlargement of rights, then the Committee shall make any such
adjustments that are equitable, including without limitation any or
all of the following:
(i) adjusting any or
all of (A) the number of Common Shares or other securities of the
Company (or number and kind of other securities or other property)
that may be delivered in respect of Awards or with respect to which
Awards may be granted under this Plan (including, without
limitation, adjusting any or all of the limitations under Section 5
of this Plan) and (B) the terms of any outstanding Award,
including, without limitation, (1) the number of Common Shares or
other securities of the Company (or number and kind of other
securities or other property) subject to outstanding Awards or to
which outstanding Awards relate, (2) the Exercise Price or Strike
Price with respect to any Award or (3) any applicable performance
measures (including, without limitation, Performance Criteria and
Performance Goals);
(ii) subject
to the requirements of Section 409A of the Code, providing for a
substitution or assumption of Awards, accelerating the
exercisability of, lapse of restrictions on, or termination of,
Awards or providing for a period of time for exercise prior to the
occurrence of such event; and
(iii) subject
to the requirements of Section 409A of the Code, canceling any one
or more outstanding Awards and causing to be paid to the holders
thereof, in cash, Common Shares, other securities or other
property, or any combination thereof, the value of such Awards, if
any, as determined by the Committee (which if applicable may be
based upon the price per Common Share received or to be received by
other stockholders of the Company in such event), including without
limitation, in the case of an outstanding Option or SAR, a cash
payment in an amount equal to the excess, if any, of the Fair
Market Value (as of a date specified by the Committee) of the
Common Shares subject to such Option or SAR over the aggregate
Exercise Price or Strike Price of such Option or SAR, respectively
(it being understood that, in such event, any Option or SAR having
a per share Exercise Price or Strike Price equal to, or in excess
of, the Fair Market Value of a Common Share subject thereto may be
canceled and terminated without any payment or consideration
therefor);provided,
however,
that in the case of any “equity restructuring” (within
the meaning of the Financial Accounting Standards Board Statement
of Financial Accounting Standards No. 123 (revised 2004) or ASC
Topic 718, or any successor thereto), the Committee shall make an
equitable or proportionate adjustment to outstanding Awards to
reflect such equity restructuring. Any adjustment in Incentive
Stock Options under this Section 12 (other than any cancellation of
Incentive Stock Options) shall be made only to the extent not
constituting a “modification” within the meaning of
Section 424(h)(3) of the Code, and any adjustments under this
Section 12 shall be made in a manner that does not adversely affect
the exemption provided pursuant to Rule 16b-3 under the Exchange
Act. The Company shall give each Participant notice of an
adjustment hereunder and, upon notice, such adjustment shall be
conclusive and binding for all purposes.
13. Effect
of Change in Control. Notwithstanding any provision of this Plan to
the contrary, in the event of a Change in Control, the terms of
vesting, expiration, and the ability of an affected Participant to
participate in a Change in Control transaction with respect to all
or any portion of a particular outstanding Award or Awards then
held by such Participant shall be governed by the terms and
conditions of such Participant’s employment agreement and the
applicable Award Agreement, which terms shall be subject to
modification as the Committee in its sole discretion shall deem
appropriate. For the avoidance of doubt, any actions to be taken
with respect to all or any portion of a particular outstanding
Award or Awards in connection with a Change in Control transaction
shall be subject to Committee approval.
14. Amendments and
Termination.
(a) Amendment
and Termination of this Plan. The Board may amend, alter,
suspend, discontinue, or terminate this Plan or any portion thereof
at any time;provided,
that (i) no amendment to the definition of Eligible Person in
Section 2(q), Section 5(b), Section 11(b) or Section 14(b) (to the
extent required by the proviso in such Section 14(b)) shall be made
without stockholder approval and (ii) no such amendment,
alteration, suspension, discontinuation or termination shall be
made without stockholder approval if such approval is necessary to
comply with any tax or regulatory requirement applicable to this
Plan (including, without limitation, as necessary to comply with
any rules or requirements of any national securities exchange or
inter-dealer quotation system on which the Common Shares may be
listed or quoted or to prevent the Company from being denied a tax
deduction under Section 162(m) of the Code);and, provided,
further,
that any such amendment, alteration, suspension, discontinuance or
termination that would materially and adversely affect the rights
of any Participant or any holder or beneficiary of any Award
theretofore granted shall not to that extent be effective without
the prior written consent of the affected Participant, holder or
beneficiary.
(b) Amendment
of Award Agreements. The Committee may, to the extent
consistent with the terms of any applicable Award Agreement, waive
any conditions or rights under, amend any terms of, or alter,
suspend, discontinue, cancel or terminate, any Award theretofore
granted or the associated Award Agreement, prospectively or
retroactively;provided,
however,
that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would materially
and adversely affect the rights of any Participant with respect to
any Award theretofore granted shall not to that extent be effective
without the consent of the affected Participant; and, provided , further
, that without stockholder approval,
except as otherwise permitted under Section 12 of this Plan,
(i) no amendment or modification may reduce the Exercise Price
of any Option or the Strike Price of any SAR, (ii) the
Committee may not cancel any outstanding Option or SAR and replace
it with a new Option or SAR, another Award or cash or take any
action that would have the effect of treating such Award as a new
Award for tax or accounting purposes and (iii) the Committee
may not take any other action that is considered a
“repricing” for purposes of the stockholder approval
rules of the applicable securities exchange or inter-dealer
quotation system on which the Common Shares are listed or
quoted.
15. General.
(a) Award
Agreements. Each Award under this Plan shall be evidenced by
an Award Agreement, which shall be delivered to the Participant
(whether in paper or electronic medium (including email or the
posting on a web site maintained by the Company or a third party
under contract with the Company)) and shall specify the terms and
conditions of the Award and any rules applicable thereto, including
without limitation, the effect on such Award of the death,
Disability or termination of employment or service of a
Participant, or of such other events as may be determined by the
Committee. The Company’s failure to specify any term of any
Award in any particular Award Agreement shall not invalidate such
term, provided such terms was duly adopted by the Board or the
Committee.
(a) Nontransferability;
Trading Restrictions.
(i) Each Award shall be
exercisable only by a Participant during the Participant’s
lifetime, or, if permissible under applicable law, by the
Participant’s legal guardian or representative. No Award may
be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by a Participant other than by will or by
the laws of descent and distribution and any such purported
assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company or
an Affiliate; provided that the designation of a beneficiary shall
not constitute an assignment, alienation, pledge, attachment, sale,
transfer or encumbrance.
(ii) Notwithstanding
the foregoing, the Committee may, in its sole discretion, permit
Awards (other than Incentive Stock Options) to be transferred by a
Participant, with or without consideration, subject to such rules
as the Committee may adopt consistent with any applicable Award
Agreement to preserve the purposes of this Plan, to: (A) any person
who is a “family member” of the Participant, as such
term is used in the instructions to Form S-8 under the Securities
Act (collectively, the “Immediate Family
Members”); (B) a trust solely for the benefit of the
Participant and his or her Immediate Family Members; or (C) a
partnership or limited liability company whose only partners or
stockholders are the Participant and his or her Immediate Family
Members; or (D) any other transferee as may be approved either (I)
by the Board or the Committee in its sole discretion, or (II) as
provided in the applicable Award Agreement (each transferee
described in clauses (A), (B), (C) and (D) above is hereinafter
referred to as a “Permitted
Transferee”);provided, that the Participant
gives the Committee advance written notice describing the terms and
conditions of the proposed transfer and the Committee notifies the
Participant in writing that such a transfer would comply with the
requirements of this Plan.
(iii) The
terms of any Award transferred in accordance with subparagraph (ii)
above shall apply to the Permitted Transferee and any reference in
this Plan, or in any applicable Award Agreement, to a Participant
shall be deemed to refer to the Permitted Transferee, except that
(A) Permitted Transferees shall not be entitled to transfer any
Award, other than by will or the laws of descent and distribution;
(B) Permitted Transferees shall not be entitled to exercise any
transferred Option unless there shall be in effect a registration
statement on an appropriate form covering the Common Shares to be
acquired pursuant to the exercise of such Option if the Committee
determines, consistent with any applicable Award Agreement, that
such a registration statement is necessary or appropriate; (C) the
Committee or the Company shall not be required to provide any
notice to a Permitted Transferee, whether or not such notice is or
would otherwise have been required to be given to the Participant
under this Plan or otherwise; and (D) the consequences of the
termination of the Participant’s employment by, or services
to, the Company or an Affiliate under the terms of this Plan and
the applicable Award Agreement shall continue to be applied with
respect to the Participant, including, without limitation, that an
Option shall be exercisable by the Permitted Transferee only to the
extent, and for the periods, specified in this Plan and the
applicable Award Agreement.
(iv) The
Committee shall have the right, either on an Award-by-Award basis
or as a matter of policy for all Awards or one or more classes of
Awards, to condition the delivery of vested Common Shares received
in connection with such Award on the Participant’s agreement
to such restrictions as the Committee may determine.
(b) Tax
Withholding.
(i) A Participant shall
be required to pay to the Company or any Affiliate, or the Company
or any Affiliate shall have the right and is hereby authorized to
withhold, from any cash, Common Shares, other securities or other
property deliverable under any Award or from any compensation or
other amounts owing to a Participant, the amount (in cash, Common
Shares, other securities or other property) of any required
withholding taxes in respect of an Award, its exercise, or any
payment or transfer under an Award or under this Plan and to take
such other action as may be necessary in the opinion of the
Committee or the Company to satisfy all obligations for the payment
of such withholding and taxes. In addition, the Committee, in its
discretion, may make arrangements with a stockbroker or other third
party agent for the Participant to facilitate the payment of
applicable income and self-employment taxes.
(ii) Without
limiting the generality of clause (i) above, the Committee may, in
its sole discretion, permit a Participant to satisfy, in whole or
in part, the foregoing withholding liability by (A) the delivery of
Common Shares (which are not subject to any pledge or other
security interest) owned by the Participant having a fair market
value equal to such withholding liability or (B) having the Company
withhold from the number of Common Shares otherwise issuable or
deliverable pursuant to the exercise or settlement of the Award a
number of shares with a fair market value equal to such withholding
liability (but no more than the maximum individual statutory rate
for the applicable tax jurisdiction).
(c) No Claim to
Awards; No Rights to Continued Employment; Waiver. No
employee of the Company or an Affiliate, or other person, shall
have any claim or right to be granted an Award under this Plan or,
having been selected for the grant of an Award, to be selected for
a grant of any other Award. There is no obligation for uniformity
of treatment of Participants or holders or beneficiaries of Awards.
The terms and conditions of Awards and the Committee’s
determinations and interpretations with respect thereto need not be
the same with respect to each Participant and may be made
selectively among Participants, whether or not such Participants
are similarly situated. Neither this Plan nor any action taken
hereunder shall be construed as giving any Participant any right to
be retained in the employ or service of the Company or an
Affiliate, nor shall it be construed as giving any Participant any
rights to continued service on the Board. The Company or any of its
Affiliates may at any time dismiss a Participant from employment or
discontinue any consulting relationship, free from any liability or
any claim under this Plan, unless otherwise expressly provided in
this Plan or any Award Agreement. By accepting an Award under this
Plan, a Participant shall thereby be deemed to have waived any
claim to continued exercise or vesting of an Award or to damages or
severance entitlement related to non-continuation of the Award
beyond the period provided under this Plan or any Award Agreement,
notwithstanding any provision to the contrary in any written
employment contract or other agreement between the Company and its
Affiliates and the Participant, whether any such agreement is
executed before, on or after the Date of Grant.
(d) International
Participants. With respect to Participants who reside or
work outside of the United States of America and who are not (and
who are not expected to be) “covered employees” within
the meaning of Section 162(m) of the Code, the Committee may in its
sole discretion amend the terms of this Plan or outstanding Awards
(or establish a sub-plan) with respect to such Participants in
order to conform such terms with the requirements of local law or
to obtain more favorable tax or other treatment for such
Participants, the Company or its Affiliates.
(e) Designation and
Change of Beneficiary. Unless otherwise provided by the
Committee in an Award Agreement, each Participant may file with the
Committee a written designation of one or more persons as the
beneficiary(ies) who shall be entitled to receive the amounts
payable with respect to an Award, if any, due under this Plan upon
his or her death. A Participant may, from time to time, revoke or
change his or her beneficiary designation without the consent of
any prior beneficiary by filing a new designation with the
Committee. The last such designation filed with the Committee shall
be controlling;provided,
however,
that no designation, or change or revocation thereof, shall be
effective unless received by the Committee prior to the
Participant’s death, and in no event shall it be effective as
of a date prior to such receipt. If no beneficiary designation is
filed by a Participant, the beneficiary shall be deemed to be his
or her spouse or, if the Participant is unmarried at the time of
death, his or her estate. Upon the occurrence of a
Participant’s divorce (as evidenced by a final order or
decree of divorce), any spousal designation previously given by
such Participant shall automatically terminate.
(f) Termination of
Employment/Service. Unless determined otherwise by the
Committee at any point following such event: (i) neither a
temporary absence from employment or service due to illness,
vacation or leave of absence nor a transfer from employment or
service with the Company to employment or service with an Affiliate
(or vice-versa) shall be considered a termination of employment or
service with the Company or an Affiliate; and (ii) if a
Participant’s employment with the Company and its Affiliates
terminates, but such Participant continues to provide services to
the Company and its Affiliates in a non-employee capacity (or
vice-versa), such change in status shall not be considered a
termination of employment with the Company or an Affiliate for
purposes of this Plan unless the Committee, in its discretion,
determines otherwise.
(g) No Rights as a
Stockholder. Except as otherwise specifically provided in
this Plan or any Award Agreement, no person shall be entitled to
the privileges of ownership in respect of Common Shares that are
subject to Awards hereunder until such shares have been issued or
delivered to that person.
(h) Government and
Other Regulations.
(i) The obligation of
the Company to settle Awards in Common Shares or other
consideration shall be subject to all applicable laws, rules, and
regulations, and to such approvals by governmental agencies as may
be required. Notwithstanding any terms or conditions of any Award
to the contrary, the Company shall be under no obligation to offer
to sell or to sell, and shall be prohibited from offering to sell
or selling, any Common Shares pursuant to an Award unless such
shares have been properly registered for sale pursuant to the
Securities Act with the Securities and Exchange Commission or
unless the Company has received an opinion of counsel, satisfactory
to the Company, that such shares may be offered or sold without
such registration pursuant to an available exemption therefrom and
the terms and conditions of such exemption have been fully complied
with. The Company shall be under no obligation to register for sale
under the Securities Act any of the Common Shares to be offered or
sold under this Plan. The Committee shall have the authority to
provide that all certificates for Common Shares or other securities
of the Company or any Affiliate delivered under this Plan shall be
subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under this Plan, the applicable Award
Agreement, the federal securities laws, or the rules, regulations
and other requirements of the Securities and Exchange Commission,
any securities exchange or inter-dealer quotation system upon which
such shares or other securities are then listed or quoted and any
other applicable federal, state, local or non-U.S. laws, and,
without limiting the generality of Section 9 of this Plan, the
Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
Notwithstanding any provision in this Plan to the contrary, the
Committee reserves the right to add any additional terms or
provisions to any Award granted under this Plan that it in its sole
discretion deems necessary or advisable in order that such Award
complies with the legal requirements of any governmental entity to
whose jurisdiction the Award is subject.
(ii) The
Committee may cancel an Award or any portion thereof if it
determines, in its sole discretion, that legal or contractual
restrictions and/or blockage and/or other market considerations
would make the Company’s acquisition of Common Shares from
the public markets, the Company’s issuance of Common Shares
to the Participant, the Participant’s acquisition of Common
Shares from the Company and/or the Participant’s sale of
Common Shares to the public markets, illegal, impracticable or
inadvisable. If the Committee determines to cancel all or any
portion of an Award in accordance with the foregoing, unless doing
so would violate Section 409A of the Code, the Company shall pay to
the Participant an amount equal to the excess of (A) the aggregate
Fair Market Value of the Common Shares subject to such Award or
portion thereof canceled (determined as of the applicable exercise
date, or the date that the shares would have been vested or
delivered, as applicable), over (B) the aggregate Exercise Price or
Strike Price (in the case of an Option or SAR, respectively) or any
amount payable as a condition of delivery of Common Shares (in the
case of any other Award). Such amount shall be delivered to the
Participant as soon as practicable following the cancellation of
such Award or portion thereof. The Committee shall have the
discretion to consider and take action to mitigate the tax
consequence to the Participant in cancelling an Award in accordance
with this clause.
(i) Payments to
Persons Other Than Participants. If the Committee shall find
that any person to whom any amount is payable under this Plan is
unable to care for his affairs because of illness or accident, or
is a minor, or has died, then any payment due to such person or his
estate (unless a prior claim therefor has been made by a duly
appointed legal representative) may, if the Committee so directs
the Company, be paid to his spouse, child, relative, an institution
maintaining or having custody of such person, or any other person
deemed by the Committee to be a proper recipient on behalf of such
person otherwise entitled to payment. Any such payment shall be a
complete discharge of the liability of the Committee and the
Company therefor.
(j) Nonexclusivity of
this Plan. Neither the adoption of this Plan by the Board
nor the submission of this Plan to the stockholders of the Company
for approval shall be construed as creating any limitations on the
power of the Board to adopt such other incentive arrangements as it
may deem desirable, including, without limitation, the granting of
stock options or other equity-based awards otherwise than under
this Plan, and such arrangements may be either applicable generally
or only in specific cases.
(k) No Trust or Fund
Created. Neither this Plan nor any Award shall create or be
construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate, on the
one hand, and a Participant or other person or entity, on the other
hand. No provision of this Plan or any Award shall require the
Company, for the purpose of satisfying any obligations under this
Plan, to purchase assets or place any assets in a trust or other
entity to which contributions are made or otherwise to segregate
any assets, nor shall the Company maintain separate bank accounts,
books, records or other evidence of the existence of a segregated
or separately maintained or administered fund for such purposes.
Participants shall have no rights under this Plan other than as
general unsecured creditors of the Company, except that insofar as
they may have become entitled to payment of additional compensation
by performance of services, they shall have the same rights as
other employees under general law.
(l) Reliance on
Reports. Each member of the Committee and each member of the
Board shall be fully justified in acting or failing to act, as the
case may be, and shall not be liable for having so acted or failed
to act in good faith, in reliance upon any report made by the
independent public accountant of the Company and/or its Affiliates
and/or any other information furnished in connection with this Plan
by any agent of the Company or the Committee or the Board, other
than himself.
(m) Relationship to
Other Benefits. No payment under this Plan shall be taken
into account in determining any benefits under any pension,
retirement, profit sharing, group insurance or other benefit plan
of the Company except as otherwise specifically provided in such
other plan.
(n) Governing
Law. The Plan shall be governed by and construed in
accordance with the internal laws of the State of Delaware, without
giving effect to the conflict of laws provisions.
(o) Severability.
If any provision of this Plan or any Award or Award Agreement is or
becomes or is deemed to be invalid, illegal, or unenforceable in
any jurisdiction or as to any person or entity or Award, or would
disqualify this Plan or any Award under any law deemed applicable
by the Committee, such provision shall be construed or deemed
amended to conform to the applicable laws in the manner that most
closely reflects the original intent of the Award or the Plan, or
if it cannot be construed or deemed amended without, in the
determination of the Committee, materially altering the intent of
this Plan or the Award, such provision shall be construed or deemed
stricken as to such jurisdiction, person or entity or Award and the
remainder of this Plan and any such Award shall remain in full
force and effect.
(p) Obligations
Binding on Successors. The obligations of the Company under
this Plan shall be binding upon any successor corporation or
organization resulting from the merger, amalgamation, consolidation
or other reorganization of the Company, or upon any successor
corporation or organization succeeding to substantially all of the
assets and business of the Company.
(q) Expenses; Gender;
Titles and Headings. The expenses of administering this Plan
shall be borne by the Company and its Affiliates. Masculine
pronouns and other words of masculine gender shall refer to both
men and women. The titles and headings of the sections in this Plan
are for convenience of reference only, and in the event of any
conflict, the text of this Plan, rather than such titles or
headings shall control.
(r) Other
Agreements. Notwithstanding the above, the Committee may
require, as a condition to the grant of and/or the receipt of
Common Shares under an Award, that the Participant execute lock-up,
stockholder or other agreements, as it may determine in its sole
and absolute discretion.
(s) Section
409A. The Plan and
all Awards granted hereunder are intended to comply with, or
otherwise be exempt from, the requirements of Section 409A of the
Code. The Plan and all Awards granted under this Plan shall be
administered, interpreted, and construed in a manner consistent
with Section 409A of the Code to the extent necessary to avoid the
imposition of additional taxes under Section 409A(a)(1)(B) of the
Code. Notwithstanding anything in this Plan to the contrary, in no
event shall the Committee exercise its discretion to accelerate the
payment or settlement of an Award where such payment or settlement
constitutes deferred compensation within the meaning of Section
409A of the Code unless, and solely to the extent that, such
accelerated payment or settlement is permissible under Section
1.409A-3(j)(4) of the Treasury Regulations. If a Participant is a
“specified employee” (within the meaning of Section
1.409A-1(i) of the Treasury Regulations) at any time during the
twelve (12)-month period ending on the date of his termination of
employment, and any Award hereunder subject to the requirements of
Section 409A of the Code is to be satisfied on account of the
Participant’s termination of employment, satisfaction of such
Award shall be suspended until the date that is six (6) months
after the date of such termination of employment.
(t) Payments.
Participants shall be required to pay, to the extent required by
applicable law, any amounts required to receive Common Shares under
any Award made under this Plan.
As adopted by the Board of Directors of Cellular Biomedicine Group,
Inc. on __________________, 2019.
As approved by the shareholders of Cellular Biomedicine Group, Inc.
on __________________, 2019.