UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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 Pursuant to § 240.14a–12
AXOGEN, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other thanOther Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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☐Fee computed on table below per Exchange Act Rules 14a–6(i)(1) and 0–11.
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13631 Progress Blvd.
Suite 400
Alachua, FL 32615
Dear Shareholder:
You are cordially invited to attend our 20162018 Annual Meeting of Shareholders (the “Meeting”) of AxoGen, Inc. (the “Company” or “AxoGen”) which will be held at the Hyatt Regency Orlando International Airport, 9300 Jeff Fuqua Blvd., Orlando, Florida, USA, 32827 in the Orly room beginning at 4:00 p.m. Eastern Time on Thursday,Monday, May 26, 2016.14, 2018.
This booklet contains your official notice of our 2016 Annualthe Meeting of Shareholders and a Proxy Statement that includes information about the matters to be acted upon at the Meeting. In addition to voting on the matters described in this Proxy Statement, we will use the Meeting as an opportunity to review our operations.
I sincerely hope that you will be able to attend the Meeting. Whether or not you plan to attend, your vote is important, and we urge you to complete and return the enclosed proxy in the accompanying envelope.
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| Sincerely, |
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| Karen Zaderej |
| Chief Executive Officer, President and Director |
April 11, 2016
March 30, 2018
2016
2018 ANNUAL MEETING OF SHAREHOLDERS
13631 Progress Blvd.
Suite 400
Alachua, FL 32615
NOTICE OF 20162018 ANNUAL MEETING OF SHAREHOLDERS
You are cordially invited to attend our 20162018 Annual Meeting of Shareholders (the “Meeting”) of AxoGen, Inc. (the “Company”, “AxoGen”, “we” or “our”) which will be held on Thursday,Monday, May 26, 201614, 2018 at 4:00 p.m. Eastern Time, at the Hyatt Regency Orlando International Airport, 9300 Jeff Fuqua Blvd., Orlando, Florida, USA, 32827 in the Orly room for the following purposes:
1. | To elect seven members to our board of directors (the “Board of Directors”) to hold office for the ensuing year and until their successors are elected and qualified; |
2. | To approve |
3. | To ratify the selection of |
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| To consider and act upon any other matters that may properly come before the Meeting or any adjournment or postponement thereof. |
Only holders of record of our common stock at the close of business on April 1, 2016March 20, 2018 will be entitled to receive notice of and to vote at the Meeting. Our shareholders are not entitled to any appraisal or dissenters’ rights with respect to the matters to be acted upon at the Meeting.
You may vote your shares by telephone (1–800–690–6903) or internet (www.proxyvote.com) no later than 11:59 p.m. Eastern Time on Wednesday,Friday, May 25, 201611, 2018 (as directed on the enclosed proxy card) or vote by completing, signing and promptly returning the enclosed proxy card by mail. If you choose to submit your proxy by mail, we have enclosed an envelope for your use, which is prepaid if mailed in the United States. If you cannot attend the Meeting in person, you may attend the Meeting, submit questions and vote online until voting is closed at www.virtualshareholdermeeting16.www.virtualshareholdermeeting.com/axogen18. If you are attending the Meeting in person and your shares are registered in your name, you may also vote at the meeting until voting is closed.
Your vote is important. Whether or not you plan to attend the Meeting, we urge you to complete and return the enclosed proxy in the accompanying envelope, vote online, or vote by telephone.
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| Karen Zaderej |
| Chief Executive Officer, President and Director |
April 11, 2016March 30, 2018
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ii
AxoGen, Inc.
13631 Progress Blvd.
Suite 400
Alachua, FL 32615
Proxy StatementPROXY STATEMENT
2016 annual meeting of shareholders2018 ANNUAL MEETING OF SHAREHOLDERS
to be held on May 26, 2016TO BE HELD ON MAY 14, 2018
The board of directors (the “Board of Directors”) of AxoGen, Inc. (the “Company”, “AxoGen”, “we” or “our”) is soliciting proxies for use at our 20162018 Annual Meeting of Shareholders (the “Meeting”) to be held on Thursday,Monday, May 26, 201614, 2018 at 4:00 p.m. Eastern time at the Hyatt Regency Orlando International Airport, 9300 Jeff Fuqua Blvd., Orlando, Florida, USA, 32827 in the Orly room and at any adjournment or postponement thereof. This Proxy Statement and the enclosed proxy card are first being mailed to shareholders on or about April 11, 2016.March 30, 2018.
Our Board of Directors has set Friday, April 1, 2016Tuesday, March 20, 2018 as the record date for the Meeting. Each shareholder of record at the close of business on Friday, April 1, 2016Tuesday, March 20, 2018 will be entitled to vote at the Meeting. As of the record date, 30,035,57634,560,243 shares of our common stock were issued and outstanding and, therefore, eligible to vote at the Meeting. Holders of our common stock are entitled to one vote per share. Therefore, a total of 30,035,57634,560,243 votes are entitled to be cast at the Meeting. There is no cumulative voting in the election of directors.
Shareholders who sign and return a proxy may revoke it at any time before it is voted at the Meeting by giving written notice to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717, Re: AxoGen, Inc., by submitting a duly executed proxy with a later date or by attending the Meeting in person or by internet and withdrawing your proxy. If your shares are held in the name of a bank or brokerage firm, you must obtain a proxy, executed in your favor, from the bank or broker, to be able to vote at the Meeting.
Expenses in connection with this solicitation of proxies will be paid by us. Proxies are being solicited primarily by mail. In addition, our officers and directors, who will receive no extra compensation for their services, may solicit proxies by telephone or personally. We also will request that brokers or other nominees who hold shares of our common stock in their names for the benefit of others forward proxy materials to, and obtain voting instructions from, the beneficial owners of such stock at our expense.
Proxies that are completed, signed and returned to us prior to the Meeting will be voted as specified. If no direction is given, the proxy will be voted FOR the election of the nominees for director named in this Proxy Statement, FOR the amendment and restatement of the AxoGen, Inc. 2010 Stock Incentive Plan (as amendedCompany’s Amended and restated on September 27, 2011Restated Articles of Incorporation (“Articles of Incorporation”) and May 13, 2014), FOR the ratification of the appointment of Lurie,Deloitte & Touche LLP (“Lurie”Deloitte”) as our independent registered public accounting firm for the year ending December 31, 2016, FOR the advisory approval of the compensation of the Company’s named executive officers as disclosed in this Proxy Statement, and FOR “EVERY 3 YEARS” as the preferred frequency of non-binding advisory votes to approve the compensation of the Company’s named executive officers and in accordance with the judgment of the persons named in the proxy as to any other matters that properly come before the Meeting.2018.
If a shareholder affirmatively abstains from voting as to any matter (or indicates a “withhold vote for” as to directors), then the shares held by such shareholder shall be deemed present at our Meeting for purposes of determining a quorum and for purposes of calculating the vote with respect to such matter, but shall not be deemed to have been voted in favor of such matter. Votes withheld from one or more director nominees will have no effect on the election of any director from whom votes are withheld.
Pursuant to New York Stock Exchange (NYSE) Rule 452 and corresponding Listed Company Manual Section 402.08, discretionary voting by brokers of shares held by their customers in "street name" is prohibited. If ayou do not give instructions to your bank or broker returns a “non–vote” proxy, indicating a lackwithin ten days of authoritythe Meeting, it may vote on matters that the NYSE determines to be "routine," but will not be permitted to vote on such matter, then theyour shares covered by such non–vote shall be deemed present at the Meeting for purposes of determining a quorum but shall not be deemed to be represented at the Meeting for purposes of calculating the vote with respect to such matters. A broker has discretionary authority"non-routine" items. Under the NYSE rules, the amendment and restatement of our Articles of Incorporation to vote onincrease the number of authorized shares of common stock and change our registered office and ratification of the appointment of Lurie as our independent registered public accounting firm even ifare routine matters, while the election of our directors is a non-routine matter. When a bank or broker doeshas not receive votingreceived instructions from the shareholder. A broker does not have discretionary authoritybeneficial owners, or persons entitled to vote, and the bank or broker cannot vote on a particular matter because it is not routine, then there is a "broker non-vote" on that matter. Broker non-votes will be counted in determining whether there is
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a quorum for the other proposals without specific voting instruction from the shareholder. IfAnnual Meeting. As a result, if you hold shares in a brokerage account and wish to vote those shares on these proposals, thenwe strongly encourage you should instruct the broker howto submit your voting instructions and exercise your right to vote the shares using the voting instructions provided.
1as a shareholder.
Directors are elected by a plurality vote of the votes cast by the shareholders entitled to vote at the Meeting. A plurality vote means that the directors who receive the most votes in an election, though not necessarily a majority, will be elected. If you affirmatively abstain from voting, it will have no impact on the outcome of the vote for the proposal. Similarly, broker non-votes will have no impact on the outcome of the vote for the proposal.
The affirmative vote of a majority of the outstanding shares of AxoGenour common stock entitled to vote and present in person or by proxy at the Meeting will be required to approve the amendment and restatement of the 2010 Plan.Articles of Incorporation. If you “Abstain”affirmatively abstain from voting, it will have the same effect as an “Against” vote. Brokera vote “AGAINST” this proposal. Because this proposal is a “routine” matter, broker non-votes will have no effect.not occur with respect to this proposal.
ToThe affirmative vote of a majority of the outstanding shares of our common stock entitled to vote and present in person or by proxy at the Meeting will be approved,required to approve the ratification of the appointment of LurieDeloitte as our independent registered public accounting firm must receive “For” votes fromfor the holders of a majority of the shares either present in person or represented by proxy at the Meeting and entitled to vote on such proposal.fiscal year ending December 31, 2018. If you “Abstain”affirmatively abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have no effect.
The non-binding advisory approval of the compensation of our named executive officers will be considered to be approved if it receives “FOR” votes from the holders of a majority of the shares either present in person or represented by proxy and entitled to vote. If you “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have no effect.
For the non-binding advisory vote on the frequency of shareholder advisory votes on executive compensation, the frequency receiving the highest number of votes from the holders of shares either present in person or represented by proxy and entitled to vote will be considered the frequency preferred by the shareholders. Abstentions and“AGAINST” this proposal. Because this proposal is a routine matter, broker non-votes will have no effect. Becausenot occur with respect to this vote is non-binding, our Board of Directors may determine the frequency of future advisory votes on executive compensation in its discretion.proposal.
Our shareholders are not entitled to any appraisal or dissenters’ rights with respect to the matters to be acted upon at the Meeting.
Important Notice Regarding the Availability of Proxy Materials for the
Shareholder Meeting to Be Held on May 26, 2016:14, 2018:
This Proxy Statement, the accompanying Notice of Annual Meeting and proxy card are available on our website at http://www.axogeninc.com/proxy-statement.html, and our Annual Report on Form 10–K is available on our website at http://www.axogeninc.com/financial-information.html.financial-information.html.
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PROPOSAL 1 – ELECTION OF DIRECTORS
At the Meeting, shareholders will vote on the election of seven director nominees: Karen Zaderej, Gregory G. Freitag, Jamie M. Grooms, Dr. Mark Gold, Guido J. Neels, Joseph MandatoRobert Rudelius and Robert J. RudeliusAmy Wendell for a one-year term. Our Board of Directors has nominated each of these individuals to serve a one-year term commencing at the Meeting and until each director’s successor is duly elected and qualified. All nominees are currently members of our Board of Directors and were elected by our shareholders at our 20152017 Annual Meeting of Shareholders. In the event that any nominee becomes unable or unwilling to serve as a director for any reason, the persons named in the enclosed proxy will vote for a substitute nominee in accordance with their best judgment. Our Board of Directors has no reason to believe that any nominee will be unable or unwilling to serve as a director if elected.
Biographical information for each director nominee is included below. Included at the end of each director’s biography is a description of the particular experience, qualifications, attributes or skills that led our Board of Directors to conclude that each of these director nominees should serve as a member of our Board of Directors.
Karen Zaderej, President, Chief Executive Officer and Director (Age 54)56)
Ms. Zaderej has served as AxoGen’s President, Chief Executive Officer (“CEO”) and a member of itsour Board of Directors since September 2011. She has served as the CEO of AxoGen Corporation, a wholly owned subsidiary of the Company (“AC”), and a member of AC’s board of directors since May 2010. Ms. Zaderej joined AC in May 2006 and served as Vice President of Marketing and Sales from May 2006 to October 2007 and as Chief Operating Officer (“COO”) from October 2007 to May 2010. From October 2004 to May 2006, Ms. Zaderej worked for Zaderej Medical Consulting, a consulting firm she founded, which assisted medical device companies in building and executing successful commercialization plans. From 1987 to 2004, Ms. Zaderej worked at Ethicon, Inc., a Johnson & Johnson company, where she held senior positions in marketing, business development, research & development, and manufacturing. Ms. Zaderej is a Director of SEBio, a non-profit supporting the life science industry in the southeastern United States. Ms. Zaderej has aan MBA from the Kellogg Graduate School of Business and a BS in Chemical Engineering from Purdue University. Ms. Zaderej’s qualifications to serve on our Board of Directors include her leadership and depth of knowledge of AxoGen, her extensive experience in the medical device industry, and her financial and management expertise.
Gregory G. Freitag, JD, CPA, General Counsel, SVP Business Development and Director (Age 54)56)
Mr. Freitag, J.D.,JD, CPA, was appointed Chief Financial Officer (“CFO”) in August 2015 and served through February 2016 when his replacement was hired. He has been AxoGen’s General Counsel and a member of itsour Board of Directors since September 2011, SVPhas been AxoGen’s Senior Vice President Business Development since May 2014, and was AxoGen’s CFOChief Financial Officer (“CFO”) from September 2011 to May 2014.2014 and August 2015 to March 2016. From June 2010 through September 2011, Mr. Freitag was the CEO, CFO and a board member of LecTec Corporation, an intellectual property licensing and holding company that merged with AxoGen in September 2011. From May 2009 to the present, Mr. Freitag has been a principal of FreiMc, LLC, a healthcare and life science consulting and advisory firm he founded that provides strategic guidance and business development advisory services. Prior to founding FreiMc, LLC, Mr. Freitag was a Director of Business Development at Pfizer Health Solutions, a former subsidiary of Pfizer, Inc., from January 2006 to May 2009. From July 2005 to January 2006, Mr. Freitag worked for Guidant Corporation in their business development group. Prior to Guidant Corporation, Mr. Freitag was the CEO of HTS Biosystems, a biotechnology tools start-up company, from March 2000 until its sale in early 2005. Mr. Freitag was the COO, CFO and General Counsel of Quantech, Ltd., a public point of care diagnostic company, from December 1995 to March 2000. Prior to that time, Mr. Freitag practiced corporate law in Minneapolis, Minnesota. Mr. Freitag is also a director of the Foundation Board of HealthEast Care System, a health care system in Minnesota, and PDS Biotechnology Corporation, a private, clinical stage Biopharmaceutical Company developing immunotherapies for cancer and other disease areas such as infectious disease. Mr. Freitag holds a JD from the University of Chicago and a BA Economics & Business and Law & Society from Macalester College, Minnesota. Mr. Freitag’s qualifications to serve on our Board of Directors include his proven leadership and experience as a senior level executive, his particular knowledge of public companies, including reporting, compliance and financial markets related thereto, his finance management and legal expertise and over 20 years of experience in the life sciences.sciences sector.
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Jamie M. Grooms, Chairman and Director (Age 56)58)
Mr. Grooms has served as Chairman of the Company’sour Board of Directors since September 30, 2011 and AC’s board of directors since 2002. Mr. Grooms is a co-founder of AC and from 2002 to May 2010 served as AC’s CEO. Since leaving AC in May 2010, Mr. Grooms has provided consulting services to start-up companies and serves on the board of directors of several companies. From 1998 to 2002, Mr. Grooms served as the founding CEO and Chairman of the Board of Regeneration Technologies, Inc. a publicly-traded company involved in processing human tissue for allogenic grafts used in orthopedic, oral maxillofacial, urinary and cardiovascular surgeries. Mr. Grooms has extensive experience in all areas of operations of the allograft business and has worked at the Virginia Tissue Bank (now LifeNet Health), Osteotech, Inc., and CryoLife, Inc. in various positions of leadership. In addition, Mr. Grooms has served as Director of the University of Florida Tissue Bank from 1992 to 1995. Mr. Grooms holds a Bachelor’s degree in biology from Old Dominion University. Mr. Grooms’ qualifications to serve on our Board of Directors include his extensive experience and leadership in the allograft business, his depth of knowledge of AxoGen and AC and his expertise in management and technology.
Mark Gold, M.D., Director (Age 67)69)
Dr. Gold has served as a member of the Company’sour Board of Directors since September 30, 2011 and AC’s board of directors since July 2007. From 19911990 until his retirement in June 2014, Dr. Gold was a professorProfessor at the University of Florida College of Medicine’s McKnight Brain Institute and was recognized as a Distinguished Professor and Eminent Scholar and was Chairman of the Department of Psychiatry. He has also been recognized as the 17th University of Florida Distinguished Alumni Professor. Dr. Gold taught neuroanatomy and medical neuroscience for four decades and has been a pioneer in translational neuroscience research. He has been a consultant and senior advisor to banks and private equity and venture capital firms on medical devices, pharmaceuticals and health care services throughout his career. Dr. Gold was also a FounderFounding Director of the Somerset Valley Bank and served on its board of directorsSomerset Valley Financial (Nasdaq: SVBF) from its formation, through its initial public offering,1991 to its acquisition by1999 which was sold to Fulton Financial Corporation, a publicly-traded financial holding company, in 2015. Dr. Gold has consulted for many major global pharmaceutical companies as well as firms such as the Carlyle Group, Metalmark, Norwest Venture Partners and Cressey & Company. Dr. Gold has authored hundreds of peer reviewed scientific research articles, chapters, and abstracts on a wide variety of research subjects and has been interviewed for comment by the Wall Street Journal, CNN and other major business and national publications concerned with the strengths and limitations of new medical technologies and treatments.Corporation. Dr. Gold is a directorDirector of The Magstim Company Ltd., a United Kingdom based global leader in brain stimulation, nerve modulation, and intraoperative nerve monitoring and Viewray, a public commercial stage MR-Guided Radiotherapy company specializing in Cancer treatment. Dr. Gold is also Chairman of the Scientific Advisory Board of RiverMendHealth. Dr. Gold’s qualifications to serve on our Board of Directors include his expertise in medical neuroscience and medical technology, in-depth knowledge of the pharmaceutical industry, and extensive experience in business and management.
Guido J. Neels, Director (Age 67)69)
Mr. Neels has served as a member of the Company’sour Board of Directors since August 2015. He has been an operating partner of EW Healthcare Partners L.P., formerly named Essex Woodlands Fund IX, L.P. (“EW”) since February 2013. Mr. Neels joined ESSEXEW as a Partner in August 2006, was promoted to Managing Director in 2008 and served in that position until being appointed to Operating Partner. From May 2004 until retiring in November 2005, Mr. Neels served as COO of Guidant Corporation (“Guidant”), a world leader in the development of cardiovascular medical products, where he was responsible for the global operations of Guidant’s four operating units – Cardiac Rhythm Management, Vascular Intervention, Cardiac Surgery, and Endovascular Solutions. From December 2002 to May 2004, Mr. Neels was Group Chairman, Office of the President at Guidant, responsible for worldwide sales operations, corporate communications, corporate marketing, investor relations and government relations. From January 2000 to December 2002, Mr. Neels was President of Guidant for Europe, Middle East, Africa and Canada. Mr. Neels previously served as Vice President of Global Marketing for Vascular Intervention and as Managing Director for German and Central European operations. From 1982 to 1994, until Guidant was spun off as an independent public company from Eli Lilly and Co., Mr. Neels held general management, sales and marketing positions at Eli Lilly in the United States and Europe. From 1972 to 1980, he held positions in information technology, finance and manufacturing at Raychem Corporation in Belgium and the United States. Mr. Neels currently serves as the Chairman of the board of directors for Oraya Therapeutics and serves on the board of directors forof certain portfolio companies of EW, including Entellus Medical, Endologix and Bioventus. In addition, to these Essex Woodlands portfolio company boards on which he serves, Mr. Neels also serves on the board of directors for Arsenal Medical, 480 Medical (which was spun out of Arsenal Medical), EndGenitor Technologies, and Christel House International (a not-for-profit organization). Mr. Neels’ qualifications to serve on our Board of Directors
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include his extensive leadership experience in the medical device and biotechnology industries and his expertise in the commercialization of medical devices, corporate governance and the financial markets.
Joseph Mandato, Director (Age 72)
Mr. Mandato has served as a member
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Robert J. Rudelius, Director (Age 60)62)
Mr. Rudelius has served as a member of our Board of Directors since September 2010. Since 2001, Mr. Rudelius has been the Managing Director and CEO of Noble Ventures, LLC, a company he founded that provides advisory and consulting services to early-stage companies in the information technology, medical technology and loyalty marketing fields. From April 1999 through May 2001, when it was acquired by StarNet L.P., Mr. Rudelius was the founder and CEO of Media DVX, Inc., a start-up business that provided a satellite-based, IP-multicasting alternative to transmitting television commercials via analog videotapes to television stations, networks and cable television operators throughout North America. From April 1998 to April 1999, Mr. Rudelius was the President and COO of Control Data Systems, Inc., during which time Mr. Rudelius reorganized and repositioned the software company as a professional services company, which resulted in the successful sale of the company to British Telecom. From October 1995 through April 1998, Mr. Rudelius was the founding Managing Partner of AT&T Solution’s Media, Entertainment & Communications industry group. From January 1990 through September 1995, Mr. Rudelius was a partner in McKinsey & Company’s Information, Technology and Systems practice, during which time he headed the practice in Japan and the United Kingdom. Mr. Rudelius began his career at Arthur Andersen & Co. where he was a leader of the firm'sfirm’s financial accounting systems consulting practice. Mr. Rudelius’ qualifications to serve on our Board of Directors include his extensive executive leadership and financial experience, particularly in connection with rapid growth technology businesses, and his experience as a director of publicly traded companies.
Amy Wendell, Director (Age 57)
Ms. Wendell has served as a member of our Board of Directors since September 2016. She has been a senior advisor for the healthcare investment banking practice of Perella Weinberg Partners (“PWP”) since January 2016. Her scope of responsibilities involves providing guidance and advice with respect to mergers and acquisitions and divestitures for clients, and assisting PWP in connection with firm-level transactions. Since 2015, Ms. Wendell has also been a senior advisor for McKinsey and Company’s (“McKinsey”) strategy and corporate finance practice and also serves as a member of McKinsey’s transactions advisory board to help define trends in mergers and acquisitions, as well as help shape McKinsey’s knowledge agenda. From 1986 until January 2015, Ms. Wendell held various roles of increasing responsibility at Covidien plc (“Covidien”) (including its predecessors, Tyco Healthcare and Kendall Healthcare Products), including in engineering, product management and business development. Most recently, from December 2006 until Covidien’s acquisition by Medtronic plc in January 2015, Ms. Wendell served as Covidien’s Senior Vice President of Strategy and Business Development, where she managed all business development, including acquisitions, equity investments, divestitures and licensing/distribution, and led Covidien’s strategy and portfolio management initiatives. Ms. Wendell is a member of the board of directors of Hologic, Inc. (Nasdaq: HOLX), a leading developer, manufacturer and supplier of premium diagnostic products, medical imaging systems and surgical products with a strong position in women’s health. She is also a director of Por Cristo, a non-profit charitable medical service organization involved in health care work for at-risk women and children in Latin America. Ms. Wendell holds a Bachelor of Science degree in mechanical engineering from Lawrence Institute of Technology (n/k/a Lawrence Technological University) and a Master of Science degree in biomedical engineering from the University of Illinois. Ms. Wendell’s qualifications to serve on our Board of Directors include her broad healthcare management and governance experience, her knowledge of healthcare policy and regulation, patient care delivery and financing, and her knowledge of clinical research and medical technology assessment.
Recommendation of our Board of Directors; Vote Required for Approval
Our Board of Directors recommends that you vote “FOR” the election of each of the seven director nominees. In accordance with Minnesota law, the nominees for election as directors at the Meeting will be elected by a plurality of the votes cast at the meeting. This means that since shareholders will be electing seven directors, the seven nominees receiving the highest number of votes will be elected. Abstentions and broker non-votes will have no effect.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our common stock as of April 1, 2016,March 20, 2018, by each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock, each of our directors, each of our executive officers named in the Summary Compensation Table in “Executive Compensation — Summary Compensation Table,” and all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the U.S. Securities and Exchange Commission (the “SEC”). Except as otherwise noted, each shareholder named in the table has sole voting and investment power for the shares shown as beneficially owned by them, and such shares are not subject to any pledge. Shares of common stock underlying options held by a person that are currently exercisable, or exercisable within 60 days of April 1, 2016March 20, 2018, are
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considered outstanding and to be beneficially owned by the person holding such option for purposes of computing such person’s percentage ownership, but are not considered outstanding for the purpose of computing the percentage ownership of any other person. Percentage of ownership is based on 30,035,57634,560,243 shares of common stock outstanding on April 1, 2016.March 20, 2018.
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| Number of Shares |
| Number of Shares |
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| Beneficially Owned | �� | Underlying Options |
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| (including shares |
| Currently Exercisable or |
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Name of Beneficial |
| reflected in the third |
| Exercisable within 60 days |
| Percent of Shares |
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Owner |
| column) |
| of April 1, 2016 |
| Outstanding (%) |
|
Entities associated with Essex Woodlands Fund (1) |
| 4,861,111 |
| - |
| 16.18 |
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Entities affiliated with Deerfield (2) |
| 3,381,439 |
| - |
| 11.26 |
|
Karen Zaderej |
| 575,203 |
| 343,056 |
| 1.89 |
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Jamie M. Grooms (3) |
| 534,029 |
| 182,612 |
| 1.77 |
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Mark Gold, M.D. (4) |
| 343,998 |
| 22,500 |
| 1.14 |
|
Guido J. Neels (1) |
| 4,874,236 |
| 13,125 |
| 16.22 |
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Joseph Mandato |
| 108,750 |
| 58,750 |
| * |
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Robert J. Rudelius |
| 102,023 |
| 78,750 |
| * |
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Gregory G. Freitag |
| 412,152 |
| 363,250 |
| 1.36 |
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Lee Robert Johnston, Jr. |
| - |
| - |
| - |
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Shawn McCarrey |
| 135,400 |
| 101,000 |
| * |
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All directors and executive officers as a group (15 persons) (1)(3)(4)(5) |
| 2,950,473 |
| 1,578,379 |
| 9.33 |
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|
|
|
|
|
|
|
| Number of Shares |
| Number of Shares |
|
|
|
|
| Beneficially Owned |
| Underlying Options |
|
|
|
|
| (including shares |
| Currently Exercisable or |
|
|
|
|
| reflected in the |
| Exercisable within 60 days |
| Percent of Shares |
|
Name of Beneficial Owner |
| third column)(1) |
| of March 20, 2018(1) |
| Outstanding (%) |
|
Entities associated with EW Healthcare Partners L.P. (2) |
| 3,711,111 |
| — |
| 10.74 |
|
Opaleye Management, Inc. |
| 1,970,000 |
|
|
| 5.70 |
|
Karen Zaderej |
| 789,078 |
| 546,931 |
| 2.25 |
|
Jamie M. Grooms |
| 201,932 |
| 195,733 |
| * |
|
Mark Gold, M.D. (3) |
| 371,498 |
| 11,250 |
| 1.07 |
|
Guido J. Neels (2) |
| 56,250 |
| 56,250 |
| * |
|
Amy Wendell |
| 48,958 |
| 35,625 |
| * |
|
Robert J. Rudelius |
| 125,666 |
| 86,250 |
| * |
|
Gregory Freitag |
| 459,262 |
| 326,500 |
| 1.32 |
|
Peter Mariani |
| 133,333 |
| 130,000 |
| * |
|
All directors and executive officers as a group (15 persons) (2)(3)(4) |
| 2,868,251 |
| 1,932,656 |
| 7.86 |
|
* Less than 1%.
(1) | Does not include shares of common stock underlying Restricted Stock Units or Performance Stock Units subject to vesting 60 days beyond March 20, 2018. |
(2) | This information is based solely on a review of a Form |
|
|
(3) |
|
| The shares of common stock for Dr. Gold include |
| Includes |
6
67,750, 90,750, 91,250 and 189,250, for Messrs. Gingrich, Friedman, DeVinney, Donovan, Hansen, Leach and McCarrey, respectively, exercisable within 60 days of March 20, 2018. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors and persons who beneficially own more than 10% of our common stock to file initial reports of ownership and reports of changes in ownership with the SEC.SEC. Such executive officers, directors and greater than 10% beneficial owners are required by the regulations of the SEC to furnish us with copies of all Section 16(a) reports they file. Based solely on a review of the copies of such reports furnished to us, and representations from our executive officers and directors, we believe that all Section 16(a) filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners during 20152017 have been satisfied.satisfied, except that (a) one report on Form 4 was inadvertently filed late on May 26, 2017 by Dr. Mark Gold, a director of the Company, reporting the exercise of a vested stock option on May 22, 2017; (b) one report on Form 4 was inadvertently filed late on June 5, 2017 by each of Dr. Mark Gold, Amy Wendell, Robert J. Rudelius and Jamie M. Grooms, directors of the Company, reporting the directors annual stock option grant on June 1, 2017; and (c) one report on Form 4 was inadvertently filed late on June 5, 2017 by Guido J. Neels, a director of the Company, reporting his director annual stock option grant on June 1, 2017.
Our Board of Directors currently consists of seven directors: Karen Zaderej, Gregory G. Freitag, Jamie M. Grooms, Dr. Mark Gold, Guido J. Neels, Joseph Mandato and Robert J. Rudelius.Rudelius and Amy Wendell.
In determining whether our directors and director nominees are independent, we use the definition of independence provided in Rule 5605(a)(2) of the NASDAQNasdaq Stock Market’s (“NASDAQ”Nasdaq”) Marketplace Rules. Under this definition of independence, Messrs. Grooms, Rudelius and Neels, MandatoMs. Wendell and Dr. Gold are independent. Mr. Freitag and Ms. Zaderej are not independent because they serve as executive officers of the Company. OurEach member of our Audit Committee, members and Compensation Committee membersand Governance and Nominating Committee also meetmeets the heightened independence standards under the applicable NASDAQNasdaq independence rules.
Our Board of Directors held seven meetings during 20152017 and, except for Jamie M. Grooms and Dr. Mark Gold who each missed one meeting, all directors attended all of such meetings. During the year, no incumbent director attended at least 85 percentfewer than 75% of the aggregate of all meetings of the Board of Directors held during the period in which such person served as a director and the total number of meetings held by our Board of Directors and all committees of our Board of Directorsthe committee on which such director served. The Board of Directors also took other actions through discussion and written consents.person served during the period. All of our then current directors were in attendance in person at our 20152017 Annual Meeting of Shareholders, except Joseph Mandato who joined by webcast.Shareholders. Members of our Board of Directors are encouraged, but not required, to attend each annual meeting of shareholders.
Our Board of Directors is responsible for overseeing the business, property and affairs of AxoGen. Members of our Board of Directors are kept informed of our business through discussions with our CEO and other officers, by reviewing materials provided to them and by participating in meetings of our Board of Directors and its committees.
Our Board of Directors is currently composed of: (i) Karen Zaderej, who also serves as our CEO and President, (ii) Gregory G. Freitag, who serves as our General Counsel and Senior Vice President of Business Development, (iii) Jamie M. Grooms, who serves as Chairman of our Board of Directors, and (iv) four other directors. Our Board of Directors does not have a policy regarding the separation of the roles of Chairman of our Board of Directors and CEO because our Board of Directors believes that the determination of whether to separate the roles depends largely upon the identity of the CEO and the members of our Board of Directors from time to time, that there is no single best organizational model that is the most effective in all circumstances and that the shareholders’ interests are best served by allowing our Board of Directors
7
to retain the flexibility to determine the optimal organizational structure for AxoGen at a given time.time. Currently, these roles are separate, although in years past they have been combined.combined and could again be combined in the future.
At this time, we believe that we like many U.S. companies, are currently best served by having different individuals serve as our CEO and Chairman of our Board of Directors. Our Board of Directors believes that, through this leadership structure, both Karen Zaderej and Jamie M. Grooms (our former CEO and current Chairman of our Board of Directors) are able to draw on their in-depth knowledge of the daily operations of AxoGen and its business and employment relationships to provide our Board of Directors with leadership in setting its agenda and properly focusing its discussions.
7
Risk Oversight by our Board of Directors
Our Board of Directors takes an active role in risk oversight related to AxoGen and primarily administers its role during Board of DirectorDirectors and Committeecommittee meetings. During regular meetings of our Board of Directors, members of our Board of Directors discuss the operating results for each fiscal quarter. These meetings allow the members of our Board of Directors to analyze any significant financial, operational, competitive, economic, regulatory and legal risks of our business model, as well as how effectively we implement our goals. During regular Audit Committee meetings, Audit Committee members discuss the financial results for the most recent fiscal quarter with our independent auditors and our CFO. Our Audit Committee also meets with, and provides guidance to, our independent auditors outside the presence of management and oversees and reviews with management the liquidity, capital needs and allocation of our capital, our funding needs and other finance matters. In addition, our Audit Committee reviews our legal and regulatory risks and our procedures regarding the receipt, retention and treatment of complaints regarding internal accounting, accounting controls or audit matters. These discussions and processes allow the members of our Audit Committee to analyze any significant risks that could materially impact the financial health of our business.
In furtherance of its risk oversight responsibilities, our Board of Directors has evaluated our overall compensation policies and practices for our employees to determine whether such policies and practices create incentives that could reasonably be expected to affect the risks faced by us and our management has further assessed whether any risks arising from these policies and practices are reasonably likely to have a material adverse effect on our company and has concluded that the risks arising from our policies and practices are not reasonably likely to have a material adverse effect on our company.the Company.
The standing committees of AxoGen’s Board of Directors include an Audit Committee, a Compensation Committee and a Governance and Nominating Committee. Messrs. Rudelius (Chairman), and Grooms and Dr. Gold are the members of the Audit Committee. Messrs. Neels (Chairman), and Rudelius, Ms. Wendell and Dr. Gold are members of the Compensation Committee. Dr. Gold (Chairman) and Messrs. Grooms Mandato and Neels and Ms. Wendell are members of the Governance and Nominating Committee. The Charters of each of the Audit Committee, the Compensation Committee, and the Governance and Nominating Committee can be found on our website under “Investors — Corporate Governance.” The information contained on our website, or on other websites linked to our website, is not part of this document. Reference herein to our website is an inactive text reference only.
Audit Committee
The Audit Committee was established in accordance with section 3(a)(58)(A) of the Exchange Act. The Audit Committee is responsible for review of audits, financial reporting and compliance, and accounting and internal controls policy.policies. For audit services, the Audit Committee is responsible for the engagement and compensation of the registered independent auditors,accounting firms, oversight of their activities and evaluation of their independence. The Audit Committee has instituted procedures for receiving reports of improper record keeping, accounting or disclosure. In the opinion of the AxoGen Board of Directors, each of the members of the Audit Committee has both business experience and an understanding of accounting principles generally accepted accounting principlesin the United States (“GAAP”) and financial statements enabling them to effectively discharge their responsibilities as members of the Audit Committee. Moreover, the AxoGen Board of Directors has determined that each of Messrs. Rudelius and Grooms and Dr. Gold is an “audit committee financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K promulgated by the SEC. Each of Messrs. Rudelius and Grooms and Dr. Gold is an independent director. Our Audit Committee held sixfive meetings during 2015.2017.
8
A current copy of the Company’s Audit Committee charter, which has been adopted by our Board of Directors, is available onlineposted on our website at http://ir.axogeninc.com/governance-docs.
Compensation Committee
Our Compensation Committee determines and periodically evaluates the various levels and methods of compensation for our directors, officers and employees, and is responsible for establishing executive compensation and administering AxoGen’sthe AxoGen, Inc. 2010 Incentive Compensation Plan.Stock Plan (the “2010 Plan”) and the AxoGen, Inc. 2017 Employee Stock Purchase Plan (the “2017 ESPP”). Our Compensation Committee held fiveseven meetings during 2015 and took other actions through discussion and written consents.2017.
8
Under its charter, our Compensation Committee’s duties and responsibilities include, without limitation: (i) periodically review our compensation philosophy and the design of our compensation programs; (ii) establish and oversee our compensation plans; (iii) recommend to our Board of Directors a compensation and benefit package for directors; (iv) at least annually, establish and review our CEO’s management objectives, conduct the CEO’s performance evaluation and communicate the outcomes to our Board of Directors; (v) review and approve payouts to participants as proposed by our CEO under our compensation plans; (vi) review and approve, for our CEO and our other executive officers and senior managers, when and if appropriate, employment agreements, severance agreements, change in control provisions/agreements and any severance or similar termination payments proposed to be made to any of our current or former executive officers; (vii) in consultation with senior management, oversee regulatory compliance with respect to compensation matters; and (viii) prepare the annual report on executive compensation required to be included in our annual proxy statement. Our executive officers do not play a formal role in determining theiror recommending the amount or form of director compensation.
The Compensation Committee may delegate its powers under the 2010 Plan to one or more directors (including a director who is also one of our officers) and may authorize one or more officers to grant awards under the 2010 Plan, except that the Compensation Committee may not delegate its powers to grant awards to executive officers or directors who are subject to Section 16 of the Exchange Act, or in a way that would violate Section 162(m) of the Internal Revenue Code (the “Code”). AxoGen’s Board of Directors may also exercise the powers of the Compensation Committee at any time, so long as its actions would not violate Section 162(m) of the Code. The Compensation Committee’s ability to delegate its powers is also limited by the rules of the Nasdaq Stock Market on which AxoGen’s shares of common stock are listed.
In September 2013 and in November 2015, May of 2016, our Compensation Committee engaged Setren, Smallberg & Associates, Inc.Radford, a subsidiary of Aon Hewitt Limited (“Setren”Radford”), a compensation consultant, for the purpose of advising upon executive and director compensation for 20142017 and 2016, respectively.2018. The Compensation Committee has reviewed the independence of Setren’sRadford’s advisory role relative to the six consultant independence factors adopted by the SEC to guide listed companies in determining the independence of their compensation consultants, legal counsel and other advisors. Following its review, the Compensation Committee concluded that Setren has noRadford did not have any conflicts of interest, and providesprovided the Compensation Committee with objective and independent executive compensation advisory services.
SetrenRadford was engaged to provide the AxoGen Compensation Committee with a thoroughan analysis of AxoGen’s executive officers, officers and Board of Director Compensationdirector compensation, focusing on all compensation components including base salary, bonus, equity, Board of Directordirector retainers and fees and committee fees. SetrenRadford conducted a thorough proxy review of AxoGen’s most relevant comparatorcomparative companies, and analyzed base salary, bonus, equity, retainers, and all other compensation components in relation to AxoGen’s peer group. In addition, as part of Setren’sRadford’s compensation analysis, itthey reviewed the equity holdings of executive officers, officers and the Board of Directors by reviewing a three-year actual and average Black Scholes equity analysis for each of the individuals within these groups to assess the relative value of the AxoGen equity granted and helddirectors in relation to itsAxoGen’s peer group.
As a result of Setren’sRadford’s analysis, the Compensation Committee suggested compensation of AxoGen executive officers, officers and Board of Directors,directors, which suggestions were adopted by the Compensation Committee and took effect for the fiscal year 2016.years 2017 and 2018.
The Company’s Chief Executive Officer is involved in the design and implementation of our executive compensation and is typically present at Compensation Committee meetings, except that the Chief Executive Officer is not present during any voting or deliberations on her equity compensation. In 2017, the Chief Executive Officer reviewed the analysis and
9
recommendations of Radford with the Compensation Committee and made recommendations regarding proposed salary, equity awards and bonus for our officers (other than herself). The Compensation Committee exercises its discretion in accepting, rejecting and/or modifying any such executive compensation recommendations and approves all compensation and equity awards.
A current copy of the Company’s Compensation Committee charter, which has been adopted by our Board of Directors, is available onlineposted on our website at http://ir.axogeninc.com/governance-docs.
Governance and Nominating Committee
The Governance and Nominating Committee is responsible for providing oversight in relation to the corporate governance of AxoGen and also identifies director nominees for election to fill vacancies on our Board of Directors. Nominees are approved by the AxoGen Board of Directors on recommendation of the Governance and Nominating Committee. In evaluating nominees, the Governance and Nominating Committee particularly seeks candidates of high ethical character with significant business experience at the senior management level who have the time and energy to attend to board responsibilities. Candidates should also satisfy such other particular requirements that the Governance and Nominating Committee may consider important to AxoGen’s business at the time. When a vacancy occurs on the AxoGen Board of Directors, the Governance and Nominating Committee will consider nominees from all sources, including shareholders, nominees recommended by other parties, and candidates known to the directors or AxoGen’s management. The best candidate from all evaluated will be recommended to the AxoGen Board of Directors to consider for nomination. Shareholders who wish to recommend candidates for consideration as nominees should on or before January 1 of each year furnish in writing detailed biographical information concerning the candidate to the Governance and Nominating Committee addressed to the Corporate Secretary of AxoGen at 13631 Progress Blvd., Suite 400, Alachua, FL 32615.
No material changes have been made to the procedures by which shareholders may recommend nominees to AxoGen’s Board of Directors.Our Governance and Nominating Committee held three meetings during 2015, and it informally discussed items as they may have occurred to determine if action was necessary.2017.
9
A current copy of the Company’s Governance and Nominating Committee charter, which has been adopted by our Board of Directors, is available onlineposted on our website at http://ir.axogeninc.com/governance-docs.
Director nominees are approved by our Board of Directors on recommendation of our Governance and Nominating Committee. In evaluating nominees, our Governance and Nominating Committee particularly seeks candidates of high ethical character with significant business experience at the senior management level who have the time and energy to attend to board responsibilities. Candidates should also satisfy such other particular requirements that our Governance and Nominating Committee may consider important to our business at the time. In accordance with our Governance and Nominating Committee charter and policies included therein, characteristics expected of all directors should include independence, integrity, high personal and professional ethics, sound business judgment, and the ability and willingness to commit sufficient time to our Board of Directors. In evaluating the suitability of individual directors, our Board of Directors takes into account many factors, including: (i) general understanding of marketing, finance, and other disciplines relevant to the success of a small publicly traded medical device company in today'stoday’s business environment; (ii) understanding of the Company'sCompany’s business and technology; (iii) educational and professional background; (iv) personal accomplishment; and (v) geographic, gender, age, and ethnic diversity. Our Board of Directors evaluates each individual in the context of our Board of Directors as a whole, with the objective of recommending a group that can best perpetuate the success of the Company'sCompany’s business and represent shareholder interests through the exercise of sound judgment, using its diversity of experience.
In addition, in accordance with our Governance and Nominating Committee charter and policies included therein, whenwhen a vacancy occurs on our Board of Directors, our Governance and Nominating Committee will consider nominees from all sources, including shareholders, nominees recommended by other parties, and candidates known to our directors or our management. The best candidate(s) from all evaluated will be recommended to our Board of Directors to consider for nomination.
Shareholders wishing to recommend a director nominee to our Governance and Nominating Committee may do so by sending to our Governance and Nominating Committee, on or before January 1 of each year, the following information: (i) name of the candidate and a brief biographical sketch and resume; (ii) contact information for the candidate and a
10
document evidencing the candidate’s willingness to serve as a director if elected; and (iii) a signed statement as to the submitting shareholder’s current status as a shareholder and the number of shares currently held. No candidates for director nominations were submitted to our Governance and Nominating Committee by any shareholder in connection with our 20162018 Annual Meeting of Shareholders. Such recommendation should be addressed to Governance and Nominating Committee, c/o General Counsel, AxoGen, Inc., 13631 Progress Blvd., Suite 400, Alachua, FL 32615.
Shareholder Communications with our Board of Directors
Shareholders may send written communications to the attention of our Board of Directors. Any shareholder desiring to communicate with our Board of Directors, or one or more of our directors, may send a letter addressed to: Board of Directors, c/o General Counsel, AxoGen, Inc., 13631 Progress Blvd., Suite 400, Alachua, FL 32615. Our General Counsel has been instructed by our Board of Directors to promptly forward all communications so received to our full Board of Directors or the individual members of our Board of Directors specifically addressed in the communication.
Compensation Committee Interlocks and Insider ParticipationCOMPENSATION OF DIRECTORS
None of our executive officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our Board of Directors or Compensation Committee.
Director Stock Ownership Guidelines
On December 29, 2016, our Board of Directors adopted the Non-Employee Director Equity Ownership Guidelines (the “Guidelines”) under which each non-employee director is required to own, within five years of joining the Board of Directors, a specified dollar value of AxoGen’s common stock, or common stock underlying vested stock options held by the non-employee director to the extent such options are "in-the-money". Value is to equal at least three times the director’s annual retainer, excluding any committee retainers or other fees the director may receive. As of January 1, 2018, the annual determination date under the Guidelines, all of AxoGen’s non-employee directors were in compliance with the Guidelines.
A current copy of the Company’s Non-Employee Director Equity Ownership Guidelines is posted on our website at http://ir.axogeninc.com/governance-docs.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that applies to our employees (including our principal executive officer, chief financial officer and other members of our finance and administration department) and our directors. Our Code of Business Conduct and Ethics is posted on our website at http://ir.axogeninc.com/governance-docs. In addition, we intend to post on our website all disclosures that are required by law or Nasdaq Stock Market listing standards concerning any amendments to, or waivers from, any provision of our Code of Business Conduct and Ethics.
Our Compensation Committee reviews and makes recommendations to our Board of Directors regarding compensation to be paid to our non–employee directors. Our Board of Directors established thatFor the fiscal year 2017 each non-employee director receivesreceived a quarterly cash retainer payment of $6,250,$7,500, with the Chairman of the Board of Directors receiving a quarterly cash retainer payment of $7,000,$11,250, for services to AxoGen starting in the first quarter after election, which cash payment iswas paid in advance each quarter. Non-employee directors are also paid $1,500 per in-person Board of Directors meeting if they attend in person and $750 for such in-person meeting if they participate by telephone. No additional compensation iswas provided for telephonic Boardattending meetings or actions taken pursuant to written minutes of action of our Board of Directors. Non-employee directors are paid $1,000 per committee meeting attended in-person if they attend in person and $500 for such in-person committee meeting if they participate by telephone. The Chairmanwho were members of the Audit,
10
Committee is provided an additional quarterly retainer of $750 and the Chairman of each of the Compensation and Governance and Nominating Committees isreceived a quarterly cash retainer payment of $1,875, $1,500 and $1,125, respectively, with the Chairman of each such committee receiving a quarterly cash retainer payment of $3,750, $3,000 and $2,250 respectively. No additional compensation was provided an additional quarterly retainerfor attending meetings or actions taken pursuant to written minutes of $500. The total Board of Directors and committee member fees may not exceed $2,500 per day.action. In addition, newly elected directors receivereceived a non-qualified stock option grant to purchase 25,000 shares of the Company’s common stock at an exercise price equal to the fair market value of our shares of common stock on the date of grant, which option vestswould vest in equal installments quarterly over two years. DuringBeginning June 1, 2017,
11
during each calendar year,approximate 12‑month period, all non-employee directors were to receive an annual non-qualified stock option grant to purchase 15,000 shares of the Company’s common stock at an exercise price equal to the fair market value of our shares of common stock on the date of grant, which options vested in equal installments every three months for the first nine months, with the final installment vesting on the date of the then current annual meeting. Such stock options were for a term of ten years.
Upon recommendation of the Compensation Committee, our Board of Directors established for 2018 that each non-employee director receive a quarterly cash retainer payment of $9,063, with the Chairman of the Board of Directors receiving an additional quarterly cash retainer payment of $3,750 for services to AxoGen starting in the earlier of the first quarter of 2018 or after election, which cash payment is paid in advance each quarter. The quarterly committee member retainers shall be $2,500 for the Audit Committee, $1,875 for the Compensation Committee and $1,250 for the Governance and Nominating Committee. The Chairman of the Audit Committee shall receive an additional quarterly retainer of $5,000, the Chairman of the Compensation Committee an additional quarterly retainer of $2,500, and the Chairman of the Governance and Nominating Committee an additional quarterly retainer of $2,500. In addition, newly elected directors will receive a non-qualified stock option grant to purchase shares of the Company’s common stock with an equity value of $275,000 based upon, and at an exercise price, equal to the fair market value of our shares of common stock on the date of grant, which option shall vest in equal installments quarterly over two years. Each calendar year the day after election or re-lection, all non-employee directors will receive an annual non-qualified stock option grant to purchase shares of common stock with an equity value of $120,000 based upon, and at an exercise price, equal to the fair market value of our shares of common stock on the date of grant, which options vested in equal installments quarterly over one year. Such stock options are for a term of seventen years. We also reimburse our directors for travel–travel related expenses.
The following table shows the compensation earned by all persons serving as members of our Board of Directors during fiscal year 2015.2017.
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
| Fees Earned |
| Stock |
|
|
|
|
|
|
| Fees Earned |
| Stock |
|
|
|
|
| ||
|
| or Paid in |
| Awards |
|
|
|
|
|
|
|
| or Paid in |
| Awards |
|
|
|
|
| |
Name |
| Cash ($) |
| ($)(1) |
| Option Awards($)(1) |
| Total ($) |
|
| Cash ($) |
| ($)(1) |
| Option Awards($)(1) |
| Total ($) |
| |||
Robert J. Rudelius |
|
| 40,250 |
| - |
|
| 67,969 |
|
| 108,219 |
|
| 58,000 |
| — |
| 64,749 |
| 122,749 |
|
Gregory G. Freitag |
|
| - |
| - |
|
| - |
|
| - |
| |||||||||
Gregory Freitag |
| — |
| — |
| — |
| — |
| ||||||||||||
Karen Zaderej |
|
| - |
| - |
|
| - |
|
| - |
|
| — |
| — |
| — |
| — |
|
Jamie M. Grooms |
|
| 38,750 |
| - |
|
| 67,969 |
|
| 106,719 |
|
| 58,500 |
| — |
| 64,749 |
| 123,249 |
|
Mark Gold, M.D. |
|
| 36,500 |
| - |
|
| 67,969 |
|
| 104,469 |
|
| 55,000 |
| — |
| 64,749 |
| 119,749 |
|
John Harper(2) |
|
| 39,000 |
| - |
|
| 30,722 |
|
| 69,722 |
| |||||||||
Amy Wendell |
| 40,500 |
| — |
| 64,749 |
| 105,249 |
| ||||||||||||
Guido J. Neels |
|
| 10,196 |
| - |
|
| 88,470 |
|
| 98,666 |
|
| 44,500 |
| — |
| 64,749 |
| 109,249 |
|
Joseph Mandato |
|
| - |
| - |
|
| 67,969 |
|
| 67,969 |
|
(1) | The amounts in this column are calculated based on the aggregate grant date fair value computed in accordance with Accounting Standards Codification (“ASC”) Topic 718 as of December 31, |
(2) | Mr. |
The following table sets forth the aggregate number of stock awards and the aggregate number of stock options held by each of our non-employee directors at December 31, 2015.2017.
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|
|
|
|
|
|
| Aggregate Number |
| Aggregate Number of Stock |
|
Name |
| of Stock Awards (#) |
| Options (#) |
|
Robert J. Rudelius |
|
|
|
| |
Jamie M. Grooms |
|
|
|
| |
Mark Gold, M.D. |
|
|
|
| |
Guido J. Neels |
|
|
|
| |
|
|
|
|
|
12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OneReview and Approval of our directors, Joseph Mandato, is a Managing Director of De Novo Ventures II, L.P. which is a shareholder of the Company. One of our directors, Guido J. Neels, is a manager of the General Partner of Essex Woodlands Fund IX, L.P. which is a greater than 15% shareholder of the Company’s common stock. Related Person Transactions
In accordance with our Audit Committee Charter, our Audit Committee reviews and approves (with the concurrence of a majority of the disinterested members of our Board of Directors) any related-party and affiliated-party transactions. Our Code of Business Conduct and Ethics generally addresses such situations as to conflicts of interest and is the starting basis for disclosure and review. The Code of Business Conduct and Ethics provides that a conflict situation can arise when an employee or officer takes actions or has interests that may make it difficult to perform his or her Company work objectively and effectively. Conflicts of interest may also arise when an employee or officer, or a member of his or her family, receives improper personal benefits as a result of his or her position in the Company. Loans to, or guarantees of obligations of, employees and officers and their family members by the Company may create conflicts of interest.
11
In addition, the Code of Business Conduct and Ethics provides that all related person transactions that meet the minimum threshold for disclosure in a proxy statement under the relevant SEC rules must be reported to and approved by the Audit Committee. Company officers and directors are required to bring promptly to the attention of our CFO or General Counsel any transaction or series of transactions that may result in a conflict of interest between that person and the Company. The Company CFO on a continuous basis, and annually, reviews with Company accounting personnel any situations that appear to have a conflict. Following any disclosure or discovery, our CFO or General Counsel will then review with the Chairman of our Audit Committee the relevant facts disclosed by the officer or director in question or the uncovered situation. After this review, the Chairman of the Audit Committee and the CFO or General Counsel determines whether the matter should be brought to the Audit Committee or the full Board of Directors for approval. In considering any such transaction, the Audit Committee or the Board of Directors, as the case may be, will consider various relevant factors, including, among others, the reasoning for the Company to engage in the transaction, whether the terms of the transaction are arm'sarm’s length and the overall fairness of the transaction to the Company. If a member of the Audit Committee or the Board of Directors is involved in the transaction, he or she will not participate in any of the discussions or decisions about the transaction. The transaction must be approved in advance whenever practicable, and if not practicable, must be ratified as promptly as practicable.
Since January 1, 2017, there were not any transactions, nor are there currently any proposed transactions, which in accordance with SEC rules would require disclosure in this Proxy Statement.
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) provides an overview of our executive compensation philosophy, the objectives of our executive compensation program and each compensation component that we provide. In addition, we explain how and why our Compensation Committee arrived at specific compensation policies and decisions involving our named executive officers for the fiscal year ended December 31, 2017. This CD&A is intended to be read in conjunction with the tables which immediately follow, which include historical context of pay.
In 2017, our named executive officers were:
Name | Position | |
Karen Zaderej | President and CEO | |
Gregory Freitag | General Counsel and SVP of Business Development | |
Peter Mariani | Chief Financial Officer | |
Jon Gingrich(1) | Chief Commercial Officer | |
Shawn McCarrey | SVP of Sales |
(1) Mr. Gingrich joined the Company on July 17, 2017.
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This Compensation Discussion and Analysis contains forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. The actual compensation programs that we adopt in the future may differ materially from currently planned programs as summarized in this discussion.
Executive Summary
AxoGen is a global leader in developing and marketing innovative surgical solutions for peripheral nerve injuries. We have had double revenue growth over the last six years while increasing our gross margin. Our efforts to increase market awareness, provide quality surgeon education programs, expand our commercial presence and effectiveness, and further develop clinical data are helping surgeons develop confidence in the adoption of the AxoGen platform for nerve repair. Some of our business highlights for the past year include:
· | 2017 revenue of $60.4 million, an increase of 47%, compared to $41.1 million for the prior year. |
· | Gross margin of 84.6% compared to 84.3% in 2016. |
· | Adjusted EBITDA loss of $3.8 million compared to adjusted EBITDA loss of $6.3 million in 2016. |
· | Increased total addressable market across all current applications to $2.2 billion. The increase is a result of expanded use in oral and maxillofacial surgery and the addition of breast reconstruction neurotization. |
· | Total clinical publications increased by nine to 53, including important data in the areas of mixed and motor, and long gap peripheral nerve repair, as well as oral and maxillofacial surgery. |
· | Completed 15 national education programs in 2017 and expect to conduct 18 programs in 2018. |
· | Total Shareholder Return (“TSR”) of over 214% in 2017. |
Significant Executive Compensation Actions of the Past Year
As our company has evolved with its rapid growth and clinical success, it has been imperative that the Compensation Committee continually evaluate and transform the executive compensation program to appropriately structure pay packages in light of company size, investor expectations, and industry standards. The Compensation Committee took the following actions in the past year as part of this process:
· | Increased base salaries to align with competitive market levels; |
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· | Increased equity award values to ensure that executives were participating in the success of the Company’s growth. These awards were granted as a combination of stock options, performance stock units and restricted stock units to further align the incentives of the executives and shareholders, retain key executives and reward performance. |
· | Improved the CD&A disclosure and overall transparency to meet investor expectations. |
What We Do
We believe that the design and structure of our pay program, and in particular our incentive plans, support our business strategy and organizational objectives while successfully aligning executive focus and interest with that of shareholders. All pay elements, and the safeguards and governance features of the program, have been carefully chosen and implemented to align with our pay philosophy and objectives.
Pay Elements
Our compensation program is designed to reward executives for achievement of our Company’s short-term and long-term strategic goals. In doing so, we have selected the following framework to achieve these objectives:
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Target Pay Mix
Consistent with our previously stated objectives, and our focus on pay and performance alignment, we heavily weight our executive pay mix on at-risk, incentive pay, as shown in the graphics below:
Compensation Governance
Our Compensation Committee is responsible for oversight of the Company’s compensation program and practices. A significant part of this responsibility is aligning management interests with the Company’s business strategies and goals, as well as the interest of our shareholders, while also mitigating excessive risk taking. To that end, the Company has committed to numerous governance practices and safeguards to ensure the compensation program does not misalign those interests.
What We Do | Pay-for-performance philosophy and culture |
Provide an appropriate mix of performance-based and time-vesting awards to executives | |
Engage an independent compensation consultant | |
Perform an annual risk assessment of the compensation programs | |
X No-hedging or pledging of our securities | |
X No backdating or repricing of stock option awards | |
X No resetting of financial targets for performance-based incentive awards | |
X No excessive perquisites |
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Executive Compensation Philosophy and Objectives
AxoGen’s compensation philosophy is designed to pay for performance and achieve the following principal objectives:
· | align our executive officers’ compensation with our business objectives and the interests of our shareholders; |
· | enable us to attract, motivate and retain the level of successful, qualified senior executive leadership talent necessary to achieve our long-term goals; and |
· | reward performance, company growth and advancement of our long-term strategic initiatives. |
We carefully construct pay packages to appropriately balance fixed and variable elements to achieve the aforementioned objectives.
Compensation-Setting Process
Role of the Compensation Committee
Our Compensation Committee is responsible for overseeing our executive compensation philosophy and our executive compensation program, determining and approving the compensation for our named executive officers, negotiating executive employment contracts, and helping to establish appropriate compensation for directors and other key employees. Our Compensation Committee regularly reports to our Board of Directors on its deliberations, but is ultimately responsible for compensation decisions, as described in the Compensation Committee’s Charter.
Our Compensation Committee reviews, on at least an annual basis, our executive compensation program, including our incentive compensation plans, to determine whether they are appropriate, properly coordinated, and achieve their intended purposes, and recommends to our Board of Directors any modifications or new plans or programs. It also reviews the compensation of our named executive officers and makes decisions about the various components that comprise their compensation packages.
Role of Management
The Company’s Chief Executive Officer, Chief Financial Officer and General Counsel are involved in the design and implementation of our executive compensation and are typically present at Compensation Committee meetings, except that they are not present during any voting or deliberations on their own equity compensation. In 2017, the Chief Executive Officer and Chief Financial Officer reviewed the analysis and recommendations of Radford with the Compensation Committee and made recommendations regarding proposed salary, equity awards and bonus for our officers (other than themselves). The Compensation Committee exercises its discretion in accepting, rejecting and/or modifying any such executive compensation recommendations and approves all compensation and equity awards.
Role of Consultants
In May of 2016, our Compensation Committee engaged Radford, and Aon company, to provide the Compensation Committee with a thorough analysis of our executive compensation, focusing on all compensation components. Radford, assisted the Compensation Committee in establishing an initial peer group in 2016 based upon comparable industry, market value, financial position and size. In 2017, the peer group was reviewed by the Company and Radford and revised based upon changes in the Company and those companies in the peer group. Radford conducted an indepth proxy review of our most relevant comparative companies, our peer group, and analyzed each of our compensation components in relation to our peer group. In addition, as part of Radford’s compensation analysis, Radford reviewed the equity holdings of our executive officers, including each of our named executive officers, in relation to each of the officers of our peer group.
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The Compensation Committee has reviewed its relationship with Radford in 2017, and determined that Radford’s work for the Compensation Committee did not raise any conflicts of interest. Radford’s work has conformed to the independence factors and guidance provided by the Dodd-Frank Act, the SEC and Nasdaq.
Use of Competitive Data
To assess the competitiveness of our executive compensation program and compensation levels, our Compensation Committee, with the assistance of Radford, examines the competitive compensation data for senior executives of our peer companies. To assess the competitiveness of our executive compensation program and compensation levels, our Compensation Committee, with the assistance of Radford, examines the competitive compensation data for senior executives of our peer companies.
The Committee uses competitive compensation data from the annual total compensation study of peer companies to inform its decisions about overall compensation opportunities and specific compensation elements and to ensure that executive pay levels are not at outlier levels. Additionally, the Committee uses multiple reference points when establishing targeted compensation levels. The Committee does not benchmark specific compensation elements or total compensation to any specific percentile relative to the peer companies or the broader U.S. market. Instead, the Committee applies judgment and discretion in establishing targeted pay levels, taking into account not only competitive market data, but also factors such as individual performance, scope of responsibility, critical needs and skill sets and leadership potential.
2017 Peer Group
In late 2016, Radford and the Compensation Committee developed a comparator peer group to be used for 2017 pay decisions and market comparisons. The framework developed for identifying those peers included four primary criteria:
· | Sector – Health Care Equipment & Supplies companies |
· | Market Capitalization – 1/3x to 4x AxoGen’s market capitalization |
· | Revenue – 1/3x to 3x AxoGen’s revenue |
· | Headcount – 1/3x to 3x AxoGen’s last fiscal year headcount |
Using these criteria, the following 15 companies were selected as our 2017 peer group:
Antares Pharma | GenMark Diagnostics | NanoString Technologies | ||
Athersys | Invuity | Second Sight Medical Products | ||
AtriCure | IRadimed Corporation | SurModics | ||
Cardiovascular Systems | LeMaitre Vascular | Tandem Diabetes Care | ||
Entellus Medical | Nanosphere | Vascular Solutions |
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2018 Peer Group
Given our extremely strong increase in market capitalization during 2017, it was critical that our Compensation Committee reevaluate the appropriateness of the inclusion of each company in our peer group. With the assistance of Radford, we determined to make the following adjustments for 2018:
· | Removed (8): Athersys, Invuity, IRadimed Corporation, LeMaitre Vascular, Nanosphere, Second Sight Medical Products, Tandem Diabetes Care, and Vascular Solutions. |
· | Added (8): CryoLife, Cutera, Glaukos, Intersect ENT, MiMedx, Osiris Therapeutics, STAAR Surgical and Tactile Systems Technology. |
Executive Compensation Program Components
The following describes each component of our executive compensation program, the rationale for each component and how compensation amounts and awards are determined for 2017 compensation.
Base Salary
Base salary represents the fixed portion of our named executive officers’ compensation, which we view as an important element to attract, retain and motivate highly talented executives.
In 2017, the Compensation Committee annually reviewed the base salaries of our executive team with input from our Chief Executive Officer and Chief Financial Officer (other than with respect to their own base salary). In addition to this input, for each executive the Compensation Committee considered:
· | The individual’s role and responsibilities; |
· | Individual contribution and performance of the past year; |
· | Overall experience and expertise; |
· | Prior base salary; |
· | Corporate performance; and |
· | Salaries for similar positions within our industry. |
In early 2017, the Compensation Committee particularly considered AxoGen’s increased market capitalization and overall strong business performance of the previous year. The Compensation Committee determined that it was important that base salaries were adjusted to reflect this Company growth and continue to be competitive in the marketplace.
Base salaries were adjusted as follows for our named executive officers in 2017:
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Executive |
| 2016 |
| 2017 |
| % Increase |
| ||
Karen Zaderej |
| $ | 405,000 |
| $ | 462,500 |
| 14.2 | % |
Gregory Freitag |
| $ | 180,000 |
| $ | 189,000 |
| 5.0 | % |
Peter Mariani |
| $ | 320,000 |
| $ | 336,000 |
| 5.0 | % |
Jon Gingrich(1) |
|
| — |
| $ | 141,538 |
| n/a |
|
Shawn McCarrey |
| $ | 200,000 |
| $ | 206,000 |
| 3.0 | % |
(1) | Mr. Gingrich joined the Company on July 17, 2017. His annual base salary rate was $320,000, as set in his employment agreement. |
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2018 Salary Adjustments
Upon review of corporate performance and our positive increased market capitalization in 2017, the Compensation Committee determined in early 2018 to adjust base salaries again to reflect the size and complexity of AxoGen and to stay competitive with similarly-sized peers. These adjustments were deemed important for retentive and motivational purposes. With the help of Radford, it was determined that the base salaries of our CEO and our General Counsel were both far below their peers. For 2018, base salaries were adjusted accordingly:
Executive | 2018 Base Salary | |||
Karen Zaderej | $ | 575,000 | ||
Gregory Freitag | $ | 259,600 | ||
Peter Mariani | $ | 361,200 | ||
Jon Gingrich | $ | 325,100 | ||
Shawn McCarrey | $ | 213,200 |
Annual Cash Incentives
Our annual cash incentives emphasize pay‑for‑performance and reward our NEOs for the achievement of specified annual corporate objectives.
2017 Annual Incentive Opportunities
In December 2016, our Compensation Committee approved, and our Board ratified, our performance-based bonus award plan for 2017 (the “2017 Bonus Award Plan”). Under this plan each named executive officer, except Shawn McCarrey, was eligible to receive an annual cash bonus based on the extent to which AxoGen achieved certain key objectives during the 2017 fiscal year relating to revenue, adjusted EBITDA and certain operational goals. Performance objectives were considered and weighted to align with those 2017 corporate objectives felt to be most important in driving success and value for AxoGen.
Each eligible NEO may earn a target incentive bonus annually, set as a percentage of base salary. The percentage for each executive was determined based upon role and responsibilities. Total bonus payouts are capped at 200% of target. Shawn McCarrey, Senior Vice President of Sales, was not included in the 2017 Bonus Award Plan. A specific bonus plan was established for Mr. McCarrey to align him specifically with increasing our revenue and expansion of our sales force. Based on meeting certain sales-related goals, Mr. McCarrey could receive commissions that are not related to his base salary nor capped.
2017 Performance and Earned Awards
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| Bonus Opportunity |
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| Achievement |
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Executive |
| 2017 |
| Target |
| Target |
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| Earned |
| 2017 |
| |||
Karen Zaderej |
| $ | 462,500 |
| 65 | % | $ | 300,625 |
|
| 110 | % | $ | 330,688 |
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Gregory Freitag |
| $ | 189,000 |
| 40 | % | $ | 75,600 |
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| 110 | % | $ | 83,160 |
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Peter Mariani |
| $ | 336,000 |
| 40 | % | $ | 134,400 |
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| 110 | % | $ | 147,840 |
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Jon Gingrich |
| $ | 141,538 |
| 40 | % | $ | 56,615 |
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| 110 | % | $ | 64,807 |
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Shawn McCarrey(1) |
| $ | 206,000 |
| 100 | % | $ | 206,000 |
|
| 109 | % |
| 224,068 |
|
(1) | Mr. McCarrey participates in a commission-based plan. |
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2018 Annual Incentives
For 2018, the Compensation Committee adjusted target bonus levels slightly for our executives. Ms. Zaderej and Messrs. Freitag, Mariani, and Gingrich will now be eligible for target bonuses (as a percentage of base salary) of 75%, 45%, 45%, and 45%, respectively. Mr. McCarrey, as Vice President of Sales, will continue to be eligible to participate in a commission-based plan.
Equity Compensation
We use equity awards to motivate and reward our named executive officers, to encourage long-term corporate performance based on the value of our common stock and to align the interests of our named executive officers with those of our shareholders. We firmly believe that a large percentage of an executive’s compensation package should be at-risk and performance-based. As such, we generally grant a mix of the following equity awards:
· | Performance share units – 2017 PSUs |
oExecutives may earn between 0% and 150% of the target number of units.
oVesting occurs based on 2019 Gross Revenue and the size of the increase over 2018 Gross Revenue
oOnce the number of PSUs has been determined, 33.33% will vest on each of February 15, 2020 and 2021 and 33.34% will vest on February 15, 2022, provided that the particular executive has been continuously employed through each vesting date
· | Restricted share units -2017 RSUs |
oVesting occurs over 4 years from the date of grant, with 50% vesting after 24 months and an additional 25% vesting on the third and fourth anniversaries of the grant date.
· | Stock options |
oAll shares underlying the options will be fully vested four years from the option grant date, with 50% of the aggregate shares vesting 24 months from the option grant date and an additional 12.5% of aggregate shares vesting every six months thereafter.
In determining the size of annual equity awards granted to our executives, our Compensation Committee considers recommendations developed by Radford, including information regarding comparative stock ownership of, and equity awards received by, executives at peer companies and in our industry. In addition, our Compensation Committee considers each executive’s individual performance and contribution, the amount of equity previously awarded to such executive and the future vesting of such awards, as well as our overall corporate performance and the potential for enhancing the creation of value for our stockholders.
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2017 Equity Grants
In December 2017, the Compensation Committee approved, and the Board of Directors ratified, our annual equity award grants to our named executive officers. These annual equity grants consisted of:
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Executive |
| PSUs |
| RSUs |
| Stock Options |
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Karen Zaderej |
| 58,000 |
| 12,500 |
| 75,000 |
| ||||||||
Gregory Freitag |
| 7,400 |
| 3,700 |
| 22,100 |
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Peter Mariani |
| 13,100 |
| 7,600 |
| 45,000 |
| ||||||||
Jon Gingrich(1) |
| 13,100 |
| 5,500 |
| 32,600 |
| ||||||||
Shawn McCarrey |
| 4,900 |
| 1,500 |
| 9,000 |
|
(1) | Mr. Gingrich also received a grant of 115,000 stock options on July 17, 2017, upon the commencement of his employment with the Company. These options vest as to 25% of the shares after one year and 12.5% every six months thereafter until fully vested. |
Our Compensation Committee strives to balance the various long-term incentive vehicles we employ to provide an appropriate balance of performance-based and time-vesting award. For example, our CEO’s equity awards are structured such that PSUs account for approximately 54% of her awards, as displayed below:
Additional Compensation Practices and Policies
Hedging and Pledging
All of our executive officers and members of our Board of Directors are prohibited from entering into hedging or pledging transactions in respect of our common stock or other securities issued by AxoGen.
Compensation Recovery Policy
We have not implemented a policy regarding retroactive adjustments to any cash or equity-based incentive compensation paid to our named executive officers and other employees where the payments were predicated upon the achievement of financial results that were subsequently the subject of a financial restatement.
Retirement and Other Benefits
Our named executive officers are eligible to participate in our tax-qualified Section 401(k) retirement savings plan on the same basis as our other employees. Employees are eligible to participate in the 401(k) plan immediately upon commencing employment, and enrollment is available any time during employment. Participating employees may make annual pretax contributions to their accounts up to a maximum amount as limited by law. The 401(k) plan requires us to
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make matching contributions of between 3% and 4% of the employee’s annual salary as long as the employee participates in the 401(k) plan. Both employee contributions and our contributions are fully vested at all times. In 2017, our matching contribution was 3% for the first 3% contributed and 1% for the next 2% contributed of each named executive officer’s annual base salary. We contributed, on an aggregate basis, approximately $34,000 in matching funds for our named executive officers during 2017.
Additional benefits received by our named executive officers include medical, dental, vision, short-term disability, long-term disability, life and accidental death and dismemberment insurance. These benefits are provided on substantially the same basis as to all of our full-time employees.
Historically, we have not provided perquisites or other personal benefits to our named executive officers. Currently, we do not view perquisites or other personal benefits as a component of our executive compensation program. Our future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by our Compensation Committee.
Post-Employment Compensation Arrangements
The employment agreements provide each of our named executive officers with certain protection in the event of his or her termination of employment under specified circumstances, including following a change of control of our Company. We believe that these protections serve our executive retention objectives by helping our named executive officers maintain continued focus and dedication to their responsibilities to maximize shareholder value, including in the event that there is a potential transaction that could involve a change of control of our Company. The terms of these agreements were determined after review by either our Board of Directors or our Compensation Committee of our retention goals for each named executive officer.
For a summary of the material terms and conditions of these severance and change in control arrangements, see the section entitled “Executive Compensation — Potential Payments Upon Termination or Change in Control.”
Tax and Accounting Considerations
Deductibility of Executive Compensation
Generally, Section 162(m) of the Internal Revenue Code disallows a tax deduction to any publicly-held corporation for any remuneration in excess of $1.0 million paid in any taxable year to its chief executive officer and each of its three next most highly-compensated named executive officers (other than its chief financial officer only for fiscal years prior to 2017). Remuneration in excess of $1.0 million may be deducted if, among other things, it qualifies as “performance-based compensation” within the meaning of the Internal Revenue Code. Additionally, under a Section 162(m) exception for private companies that subsequently become publicly held, any compensation paid pursuant to a compensation plan in existence before the effective date of the public offering of securities will not be subject to the $1.0 million limitation until the earliest of: (i) the expiration of the compensation plan, (ii) a material modification of the compensation plan (as determined under Section 162(m)), (iii) the issuance of all the employer stock and other compensation allocated under the compensation plan, or (iv) the first meeting of shareholders at which directors are elected after the close of the third calendar year following the year in which the public offering of securities occurred.
The 2017 tax reform legislation removed the “performance-based compensation” exception from Section 162(m), effective for taxable years beginning after December 31, 2017, such that compensation paid to our covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.
Despite the Compensation Committee’s efforts to structure certain annual cash incentives and performance-based equity awards in a manner intended to be exempt from Section 162(m) and therefore not subject to its deduction limits, because of ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued thereunder, including the uncertain scope of the transition relief under the legislation repealing Section 162(m)’s exemption from the deduction limit, no assurance can be given that compensation intended to satisfy the requirements for
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exemption from Section 162(m) in fact will. Further, the Compensation Committee reserves the right to modify compensation that was initially intended to be exempt from Section 162(m) if it determines that such modifications are consistent with our business needs.
Taxation of “Parachute” Payments and Deferred Compensation
Sections 280G and 4999 of the Internal Revenue Code provide that named executive officers and directors who hold significant equity interests and certain other service providers may be subject to an excise tax if they receive payments or benefits in connection with a change of control of our Company that exceed certain prescribed limits, and that we (or a successor) may forfeit a deduction on the amounts subject to this additional tax. Section 409A of the Internal Revenue Code imposes significant additional taxes in the event that an employee, including a named executive officer, director, or service provider receives “nonqualified deferred compensation” that does not satisfy the conditions of Section 409A.
We did not provide any named executive officer with a “gross-up” or other reimbursement payment for any tax liability that he or she might owe as a result of the application of Sections 280G, 4999 or 409A of the Internal Revenue Code during 2016. We have not agreed and are not otherwise obligated to provide any named executive officer with a “gross-up” or other reimbursement under Section 409A.
Accounting for Stock-Based Compensation
We follow the FASB ASC Topic 718 for our stock-based compensation awards. ASC 718 requires companies to calculate the grant date “fair value” of their stock-based awards using a variety of assumptions. This calculation is performed for accounting purposes and reported in the compensation tables that accompany this Compensation Discussion and Analysis, even though recipients may never realize any value from their awards. ASC 718 also requires companies to recognize the compensation cost of their stock-based awards in their statements of operations over the period that the recipient of the award is required to render service in exchange for the award.
The following table sets forth the cash and non–cash compensation for the fiscal years 2017, 2016 and 2015 for our Chief Executive Officer, our Chief Financial Officer, our General Counsel and 2014 for: (i) each individual serving as the Company’s CEO or acting in a similar capacity during any partSenior Vice President of such fiscal years; (ii) the other two most highly paid executive officers who were serving as executive officers during such periodsBusiness Development, our Chief Commercial Officer and our Senior Vice President of Sales (our “named executive officers”) and (iii) one individual for whom disclosure would have been provided in (ii) but for the fact that the individual was not serving as an executive officer at the end of the last completed fiscal year..
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| Stock |
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Name and Principal |
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| Awards($) |
| Option |
| All Other |
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Position |
| Year |
| Salary($) |
| Bonus($) |
| (1) |
| Awards($)(1) |
| Compensation($) |
| Total |
|
Karen Zaderej |
| 2015 |
| 353,750 |
| 157,282 | (3) | - |
| 521,463 |
| 8,180 | (2) | 1,040,675 |
|
President, CEO |
| 2014 |
| 324,036 |
| 149,249 | (3) | 30,063 |
| 258,027 |
| 7,782 | (2) | 769,157 |
|
Gregory G. Freitag(4) |
| 2015 |
| 218,895 |
| 84,145 | (3) | - |
| 173,300 |
| 6,472 | (5) | 482,812 |
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CFO, General Counsel and SVP of Business Development |
| 2014 |
| 208,208 |
| 118,637 | (3)(6) | 30,063 |
| 190,778 |
| 7,167 | (5) | 554,853 |
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Lee Robert Johnston, |
| 2015 |
| 489,227 |
| - |
| - |
| - |
| 5,512 | (8) | 494,739 |
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Jr.(7) CFO |
| 2014 |
| 163,942 |
| 56,925 | (3) | - |
| 327,755 |
| 5,180 | (8) | 553,802 |
|
Shawn McCarrey |
| 2015 |
| 200,000 |
| 174,289 | (9) | - |
| 214,264 |
| 15,107 | (10) | 603,660 |
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SVP Sales |
| 2014 |
| 200,000 |
| 184,264 | (9) | - |
| 79,258 |
| 14,720 | (10) | 478,242 |
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Name and Principal |
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| Option |
| All Other |
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Position |
| Year |
| Salary($) |
| Bonus($) |
| Stock Awards($)(1) |
| Awards($)(1) |
| Compensation($) |
| Total |
Karen Zaderej |
| 2017 |
| 462,500 |
| 330,688 | (2) | 1,903,500 | (3)(4) | 1,003,476 |
| 4,808 | (7) | 3,704,972 |
President, CEO |
| 2016 |
| 405,000 |
| 244,823 | (2) | 803,710 | (5)(6) | 940,655 |
| 11,249 | (7) | 2,405,437 |
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| 2015 |
| 353,750 |
| 157,282 | (2) | — |
| 521,463 |
| 8,180 | (7) | 1,040,675 |
Gregory Freitag(8) |
| 2017 |
| 189,000 |
| 83,160 | (2) | 299,700 | (3)(4) | 295,691 |
| 7,879 | (9) | 875,430 |
General Counsel and SVP of Business Development |
| 2016 |
| 228,914 |
| 66,960 | (2) | 93,975 | (5) | 282,736 |
| 10,380 | (9) | 682,965 |
|
| 2015 |
| 218,895 |
| 84,145 | (2) | — |
| 173,300 |
| 6,472 | (9) | 482,812 |
Peter Mariani, CFO(10) |
| 2017 |
| 336,000 |
| 147,840 | (2) | 558,900 | (3)(4) | 602,085 |
| 11,326 | (11) | 1,656,151 |
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| 2016 |
| 263,385 |
| 114,798 | (2) | 213,010 | (5) | 1,077,123 |
| 11,866 | (11) | 1,680,182 |
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| 2015 |
| — |
| — |
| — |
| —- |
| — |
| — |
Jon Gingrich, CCO(12) |
| 2017 |
| 141,538 |
| 89,807 | (2) | 704,400 | (3)(4)(5) | 1,399,872 |
| 5,147 | (13) | 2,340,764 |
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| 2016 |
| — |
| — |
| — |
| — |
| — |
| — |
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| 2015 |
| — |
| — |
| — |
| — |
| — |
| — |
Shawn McCarrey, SVP of Sales |
| 2017 |
| 206,000 |
| 224,068 | (14) | 243,550 | (3)(4)(5) | 120,417 |
| 15,213 | (16) | 809,248 |
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| 2016 |
| 200,000 |
| 238,592 | (14) | 127,985 | (15) | 224,523 |
| 16,736 | (16) | 807,836 |
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| 2015 |
| 200,000 |
| 184,289 |
| — |
| 104,530 |
| 14,736 | (16) | 508,555 |
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(1) | The amounts in this column are calculated based on the aggregate grant date fair value computed in accordance with ASC Topic 718 as of December 31 of the year indicated. For information regarding assumptions underlying the valuation of equity awards, see Note |
(2) |
|
| Provided pursuant to |
(3) | Includes 58,000, 7,400, 13,100, 13,100 and 4,900 performance stock units (the “2017 PSUs”) granted on December 18, 2017 to Ms. Zaderej and Messrs. Freitag, Mariani, Gingrich and McCarrey, respectively. Assuming that the highest level of performance conditions will be achieved, the 2017 PSUs granted to Ms. Zaderej and Messrs. Freitag, Mariani, Gingrich and McCarrey would have a value of $1,566,000, $199,800. $353,700, $353,700 and $132,300, respectively. The 2017 PSUs were in the form of performance-based restricted stock units and were granted pursuant to the 2010 Plan. Each 2017 PSU represents the Company’s commitment to issue one share of common stock (each, a “Share”) at a future date, subject to certain eligibility, performance, vesting and other conditions set forth in the 2010 Plan and the related Performance Stock Unit Award Agreements (the “2017 PSU Agreements”), the form of which was filed as Exhibit 10.26 in our Annual Report on Form 10 K for the fiscal year ended December 31, 2017 filed on February 28, 2018. For each of Ms. Zaderej and Messrs. Freitag, Mariani, Gingrich and McCarrey, by February 15, 2020 the Compensation Committee will review the Company’s gross revenue for the fiscal year ending December 31, 2019. Upon such review, and based upon revenue performance criteria in each 2017 PSU Agreement for the applicable officer, a determination of the number of Shares that may be issued pursuant to the 2017 PSU Agreements will be made, which amount could range between zero to 150% of the 2017 PSUs granted. Once the number of Shares has been determined, 33.33% will vest on each of February 15, 2020 and 2021 and 33.34% will vest on February 15, 2022, provided that the particular officer has been continuously employed through each vesting date as to the particular number of Shares vesting. In the event of a “Change in Control” (as defined in each 2017 PSU Agreement), all or a portion of the 2017 PSUs shall accelerate. |
(4) | Includes 12,500, 3,700, 7,600, 5,500 and 1,500 restricted stock units (the “2017 RSUs”) which were granted pursuant to the 2010 Plan to Ms. Zaderej and Messrs. Freitag, Mariani, Gingrich and McCarrey, respectively on December 18, 2017, respectively. The 2017 RSUs granted to Ms. Zaderej and Messrs. Freitag, Mariani, Gingrich and McCarrey have a value of $337,500, $99,900. $205,200, $148,500 and $40,500, respectively. All shares of AxoGen common stock underlying the 2017 RSUs will be fully vested on December 18, 2021 (4 years from the grant date) based upon a vesting schedule whereby 50% of the aggregate shares vest on December 18, 2019 (24 months from the grant date) and an additional 25% of the aggregate shares vest each 12 months thereafter. In the event of a “Change in Control” (as defined in the award agreement) of the Company, all of the 2017 RSUs shall accelerate and become fully vested. The form of the 2017 RSU was filed as Exhibit 10.28 in our Annual Report on Form 10 K for the fiscal year ended December 31, 2017 filed on February 28, 2018. |
(5) | Includes 49,800, 12,000 and 10,500 performance stock units (the “2016 PSUs”) granted to Ms. Zaderej and Messrs. Mariani and Freitag, respectively, on December 29, 2016 and 23,800 and 2,500 2016 PSU granted to Messrs. Gingrich and McCarrey, respectively, on July 17, 2017 and December 29, 2017, respectively. Assuming that the highest level of performance conditions will be achieved, the PSUs granted to Ms. Zaderej and Messrs. Mariani, Gingrich, Freitag and McCarrey would have a value of $668,565, $319,515, $303,300, $140,963 and $106,125, respectively. The 2016 PSU awards were in the form of performance-based restricted stock units and were granted pursuant to the 2010 Plan. Each 2016 PSU represents the Company’s commitment to issue a share at a future date, subject to certain eligibility, performance, vesting and other conditions set forth in the 2010 Plan and 2016 PSU agreements (the “2016 PSU Agreements”), the form of which was filed as Exhibit 10.23 in our Annual Report on Form 10 K for the fiscal year ended December 31, 2016 filed on March 1, 2017. For each of Ms. Zaderej and Messrs. Mariani, Gingrich, Freitag and McCarrey, by February 15, 2019 the Compensation Committee will review the Company’s gross revenue for the fiscal year ending December 31, 2018. Upon such review and based upon revenue performance criteria in each 2016 PSU Agreement for such officers, a determination of the number of Shares that may be issued pursuant to the 2016 PSU Agreements will be made, which amount could range between zero to 150% of the 2016 PSUs granted. Once the number of Shares has been determined, 33.33% will vest on each of |
25
February 15, 2019 and 2020 and 33.34% will vest on February 15, 2021, provided that the particular officer has been continuously employed through each vesting date as to the particular number of Shares vesting. In the event of a “Change in Control” (as defined in each 2016 PSU Agreement), all or a portion of the 2016 PSUs shall accelerate. |
(6) | Ms. Zaderej was provided on December 29, 2016 a retention stock unit award in the form of retention-based restricted stock units (the “Retention Units”) which were granted pursuant to the 2010 Plan. The award was for a total of 40,000 Retention Units, with each Retention Unit representing the Company’s commitment to issue one Share. The Retention Units granted to Ms. Zaderej have a value of $358,000. So long as Ms. Zaderej’s employment is continuous through January 1, 2020, all of the Retention Units will become vested and 40,000 Shares will be issued by the Company to Ms. Zaderej. In the event of a “Change in Control” (as defined in the award agreement) of the Company, all of the Retention Units shall accelerate and become fully vested. Ms. Zaderej’s award agreement was filed as Exhibit 10.24 in our Annual Report on Form 10‑K for the fiscal year ended December 31, 2016 filed on March 1, 2017. |
(7) | Includes life insurance premiums paid by AxoGen on behalf of Ms. Zaderej in 2017, 2016 and 2015 of $546, $1,352 and $624, respectively, and also includes amounts contributed by the Company to the 401K plan on her behalf for 2017, 2016 and 2015 of $4,262, $9,897 and $7,556, respectively. |
(8) | Mr. Freitag was |
12
| Includes life insurance premiums paid by AxoGen on behalf of Mr. Freitag in 2017, 2016 and 2015 of $319, $1,223 and $297, |
|
|
|
|
| Includes life insurance premiums paid by AxoGen on behalf of Mr. |
|
|
(13) | Includes life insurance premiums paid by AxoGen on behalf of Mr. Gingrich in 2017 of $224 and also includes amounts contributed by the Company to the Company’s 401K plan on his behalf for |
(14) | Bonus represents commissions earned pursuant to |
| Includes 28,600 performance stock units (the “McCarrey PSUs”) granted on December 29, 2016. The McCarrey PSUs were based upon meeting certain quarterly revenue targets in 2017. Two such targets were met and Mr. McCarrey earned 14,300 of the performance stock units and was granted 14,300 shares of Company common stock pursuant to the McCarrey PSU. The McCarrey PSU has now expired pursuant to its terms. |
(16) | Includes life insurance premiums paid by AxoGen on behalf of Mr. McCarrey in 2017, 2016 and 2015 of $346, $336 and $384, |
26
The following table provides information regarding plan-based awards granted to our named executive officers in 2017:
Name |
| Award Type |
| Grant Date |
| Estimated Future |
| Exercise or |
| Grant Date Fair |
| ||
Karen Zaderej |
| PSU |
| 12/18/2017 |
| 58,000 |
| $ | 27.00 |
| $ | 1,566,000 |
|
|
| RSU |
| 12/18/2017 |
| 12,500 |
| $ | 27.00 |
| $ | 337,500 |
|
|
| Stock Option |
| 12/18/2017 |
| 75,000 |
| $ | 27.00 |
| $ | 1,003,476 |
|
Gregory Freitag |
| PSU |
| 12/18/2017 |
| 7,400 |
| $ | 27.00 |
| $ | 199,800 |
|
|
| RSU |
| 12/18/2017 |
| 3,700 |
| $ | 27.00 |
| $ | 99,900 |
|
|
| Stock Option |
| 12/18/2017 |
| 22,100 |
| $ | 27.00 |
| $ | 295,691 |
|
Peter Mariani |
| PSU |
| 12/18/2017 |
| 13,100 |
| $ | 27.00 |
| $ | 353,700 |
|
|
| RSU |
| 12/18/2017 |
| 7,600 |
| $ | 27.00 |
| $ | 205,200 |
|
|
| Stock Option |
| 12/18/2017 |
| 45,000 |
| $ | 27.00 |
| $ | 602,085 |
|
Jon Gingrich |
| PSU |
| 12/18/2017 |
| 13,100 |
| $ | 27.00 |
| $ | 353,700 |
|
|
| RSU |
| 12/18/2017 |
| 5,500 |
| $ | 27.00 |
| $ | 148,500 |
|
|
| Stock Option |
| 7/17/2017 |
| 115,000 |
| $ | 16.85 |
| $ | 963,695 |
|
|
| PSU |
| 7/17/2017 |
| 12,000 |
| $ | 16.85 |
| $ | 202,200 |
|
|
| Stock Option |
| 12/18/2017 |
| 32,600 |
| $ | 27.00 |
| $ | 436,177 |
|
Shawn McCarrey |
| PSU |
| 12/18/2017 |
| 4,900 |
| $ | 27.00 |
| $ | 132,300 |
|
|
| RSU |
| 12/18/2017 |
| 1,500 |
| $ | 27.00 |
| $ | 40,500 |
|
|
| Stock Option |
| 12/18/2017 |
| 9,000 |
| $ | 27.00 |
| $ | 120,417 |
|
|
| PSU |
| 12/29/2017 |
| 2,500 |
| $ | 28.30 |
| $ | 70,750 |
|
27
Outstanding Equity Awards at 20152017 Fiscal Year–End
The following tables summarizessummarize the equity awards granted to our named executive officers that remain outstanding as of December 31, 2015.2017.
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Option Awards |
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| Equity Incentive |
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|
| Option Awards |
| Equity Incentive |
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|
|
| Number of |
| Number of |
| Plan Awards: |
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|
| Number of |
| Number of |
| Plan Awards: |
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| Securities |
| Securities |
| Number of |
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|
| Securities |
| Securities |
| Number of |
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|
|
| Underlying |
| Underlying |
| Securities |
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| Underlying |
| Underlying |
| Securities |
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|
| Unexercised |
| Unexercised |
| Underlying |
| Option |
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|
|
| Unexercised |
| Unexercised |
| Underlying |
| Option |
|
|
| |
|
| Option |
| Options (#) |
| Options (#) |
| Unexercised |
| Exercise |
| Option |
|
| Option |
| Options (#) |
| Options (#) |
| Unexercised |
| Exercise |
| Option |
| |
Name |
| Grant Date |
| Exercisable |
| Unexercisable |
| Unearned Options |
| Price ($) |
| Expiration Date |
|
| Grant Date |
| Exercisable |
| Unexercisable |
| Unearned Options (#) |
| Price ($) |
| Expiration Date |
| |
Karen Zaderej |
| 6/9/2010 |
| 18,056 | (1) | - |
| - |
|
| 0.27 |
| 6/9/2020 |
|
| 6/9/2010 |
| 18,056 | (1) | — |
| — |
| 0.27 |
| 6/9/2020 |
|
|
| 12/26/2011 |
| 275,000 | (2) | - |
|
|
|
| 2.74 |
| 12/26/2018 |
|
| 12/26/2011 |
| 275,000 | (2) | — |
|
|
| 2.74 |
| 12/26/2018 |
|
|
| 1/2/2014 |
| 15,500 | (3) | 15,500 | (3) |
|
|
| 4.81 |
| 1/2/2021 |
|
| 1/2/2014 |
| 27,125 | (3) | 3,875 | (3) |
|
| 4.81 |
| 1/2/2021 |
|
|
| 12/29/2014 |
| 15,500 | (4) | 46,500 | (4) |
|
|
| 3.67 |
| 12/29/2021 |
|
| 12/29/2014 |
| 46,500 | (4) | 15,500 | (4) |
|
| 3.67 |
| 12/29/2021 |
|
|
| 12/29/2014 |
| 19,000 | (5) | - |
|
|
|
| 3.67 |
| 12/29/2021 |
|
| 12/29/2014 |
| 19,000 | (5) | — |
|
|
| 3.67 |
| 12/29/2021 |
|
|
| 12/28/2015 |
| - |
| 210,000 | (6) |
|
|
| 5.09 |
| 12/29/2022 |
|
| 12/28/2015 |
| 105,000 | (6) | 105,000 | (6) |
|
| 5.09 |
| 12/28/2022 |
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|
|
|
|
|
|
|
|
|
|
|
| 12/29/2016 |
| 52,375 | (7) | 157,125 | (7) |
|
| 8.95 |
| 12/29/2026 |
|
Gregory G. Freitag |
| 6/1/2010 |
| 125,000 | (7) | - |
| - |
|
| 3.50 |
| 6/1/2020 |
| |||||||||||||
|
| 12/18/2017 |
| — |
| 75,000 | (8) |
|
| 27.00 |
| 12/18/2027 |
| ||||||||||||||
Gregory Freitag |
| 6/1/2010 |
| 125,000 | (9) | — |
| — |
| 3.50 |
| 6/1/2020 |
| ||||||||||||||
|
| 12/26/2011 |
| 92,000 | (2) |
|
|
|
|
| 2.74 |
| 12/26/2018 |
|
| 12/26/2011 |
| 36,000 | (2) | — |
|
|
| 2.74 |
| 12/26/2018 |
|
|
| 1/2/2014 |
| 7,500 | (3) | 7,500 | (3) |
|
|
| 4.81 |
| 1/2/2021 |
|
| 1/2/2014 |
| 13,125 | (3) | 1,875 | (3) |
|
| 4.81 |
| 1/2/2021 |
|
|
| 10/1/2014 |
| 16,000 | (8) | - |
|
|
|
| 2.46 |
| 10/1/2021 |
|
| 10/1/2014 |
| 16,000 | (10) | — |
|
|
| 2.46 |
| 10/1/2021 |
|
|
| 12/29/2014 |
| 6,750 | (4) | 20,250 | (4) |
|
|
| 3.67 |
| 12/29/2021 |
|
| 12/29/2014 |
| 20,250 | (4) | 6,750 | (4) |
|
| 3.67 |
| 12/29/2021 |
|
|
| 12/29/2014 |
| 33,000 | (5) | - |
|
|
|
| 3.67 |
| 12/29/2021 |
|
| 12/29/2014 |
| 33,000 | (5) | — |
|
|
| 3.67 |
| 12/29/2021 |
|
|
| 8/6/2015 |
| 83,000 | (9) |
|
|
|
|
| 3.38 |
| 8/7/2022 |
|
| 8/6/2015 |
| 83,000 | (11) | — |
|
|
| 3.38 |
| 8/6/2022 |
|
|
| 12/28/2015 |
| - |
| 9,000 | (6) |
|
|
| 5.09 |
| 12/29/2022 |
|
| 12/28/2015 |
| 4,500 | (6) | 4500 | (6) |
|
| 5.09 |
| 12/28/2022 |
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|
|
|
|
|
|
| 5/26/2016 |
| 2,250 | (12) | 3,750 | (12) |
|
| 5.45 |
| 5/26/2023 |
|
Lee Robert Johnston, Jr. |
| - |
| - |
| - |
| - |
|
| - |
| - |
| |||||||||||||
|
| 5/26/2016 |
| 15,000 | (13) | — |
|
|
| 5.45 |
| 5/26/2023 |
| ||||||||||||||
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| 12/29/2016 |
| 12,500 | (7) | 37,500 | (7) |
|
| 8.95 |
| 12/29/2026 |
| ||||||||||||||
|
| 12/18/2017 |
| — |
| 22,100 | (8) |
|
| 27.00 |
| 12/18/2027 |
| ||||||||||||||
Peter Mariani |
| 3/1/2016 |
| 76,875 | (14) | 128,125 | (14) | — |
| 5.04 |
| 3/1/2023 |
| ||||||||||||||
|
| 12/29/2016 |
| 12,500 | (7) | 97,500 | (7) |
|
| 8.95 |
| 12/29/2026 |
| ||||||||||||||
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| 12/18/2017 |
| — |
| 45,000 | (8) |
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| 27.00 |
| 12/18/2027 |
| ||||||||||||||
Jon Gingrich |
| 7/17/2017 |
| — |
| 115,000 | (15) |
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| 16.85 |
| 7/17/2027 |
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| 12/18/2017 |
| — |
| 32,600 | (8) |
|
| 27.00 |
| 12/18/2027 |
|
Shawn McCarrey |
| 3/1/2013 |
| 42,500 | (10) | 25,500 | (10) | - |
|
| 3.67 |
| 3/1/2020 |
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| 1/2/2014 |
| 1,875 | (3) | 3,125 | (3) |
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| 4.81 |
| 1/2/2021 |
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| 5/1/2014 |
| 11,250 | (11) | 18,750 | (11) |
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| 2.86 |
| 5/1/2021 |
|
| 3/1/2013 |
| 68,000 | (16) | — |
|
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| 3.67 |
| 3/1/2020 |
|
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| 12/29/2014 |
| 2,500 | (4) | 7,500 | (4) |
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| 3.67 |
| 12/29/2021 |
|
| 1/2/2014 |
| 4,375 | (3) | 625 | (3) |
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| 4.81 |
| 1/2/2021 |
|
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| 3/12/2015 |
| 30,000 | (12) | 90,000 | (12) |
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| 3.20 |
| 3/13/2022 |
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| 5/1/2014 |
| 26,250 | (17) | 3,750 | (17) |
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| 2.86 |
| 5/1/2021 |
|
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| 12/28/2015 |
| - |
| 20,000 | (6) |
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| 5.09 |
| 12/29/2022 |
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| 12/29/2014 |
| 7,500 | (4) | 2,500 | (4) |
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| 3.67 |
| 12/29/2021 |
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| 3/12/2015 |
| 60,000 | (18) | — |
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| 3.20 |
| 3/12/2022 |
| ||||||||||||||
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| 12/28/2015 |
| 10,000 | (6) | 10,000 | (6) |
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| 5.09 |
| 12/28/2022 |
| ||||||||||||||
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| 12/29/2016 |
| 12,500 | (7) | 37,500 | (7) |
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| 8.95 |
| 12/29/2026 |
| ||||||||||||||
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| 12/18/2017 |
| — |
| 9,000 | (8) |
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| 27.00 |
| 12/18/2027 |
|
(1) | On June 9, 2010, Ms. Zaderej |
13
the fair market value of AxoGen’s common stock on the date of grant. |
(2) | On December 26, 2011, Ms. Zaderej and |
28
Mr. Freitag has exercised 56,000 shares pursuant to his option. The options were granted under |
(3) | On January 2, 2014, Ms. Zaderej, Mr. Freitag and Mr. McCarrey |
(4) | On December 29, 2014, Ms. Zaderej |
(5) | On December 29, 2014, Ms. Zaderej and Mr. Freitag |
(6) | On December 28, 2015, Ms. Zaderej |
(7) | On December 29, 2016, Ms. Zaderej and Messrs. Freitag, Mariani and McCarrey were granted options to purchase 209,500, 50,000, 110,000 and 50,000 shares, respectively, of the Company’s common stock. All shares underlying the options will be fully vested on December 29, 2020 (four years from the option grant date) based upon a vesting schedule whereby 25% of the aggregate shares vest on December 29, |
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|
(8) |
|
(9) | On June 1, 2010, Mr. Freitag |
(10) | On October 1, 2014, Mr. |
14
|
(11) | On August 6, 2015, Mr. Freitag was granted an option to purchase 83,000 shares of the Company’s common stock which became fully vested and exercisable on December 31, 2015 pursuant to the vesting terms of the option. The option was granted under the 2010 Plan and the exercise price for the option is equal to the fair market value of the Company’s common stock on the date of grant. |
(12) | On May 26, 2016, Mr. Freitag was granted an option to purchase 6,000 shares of the Company’s common stock. All shares underlying the option will be fully vested on May 26, 2020 (four years from the option grant date) based upon a vesting schedule whereby 25% of the aggregate shares vest on May 26, 2017 (12 months from the option grant date) and an additional 12.5% of aggregate shares every six months thereafter. The option was granted under the 2010 Plan and the exercise price for the option is equal to the fair market value of the Company’s common stock on the date of grant. |
29
(13) | On May 26, 2016, Mr. Freitag was granted an option to purchase 15,000 shares of the Company’s common stock. All shares underlying the option vested as of December 26, 2016 (six months from the option grant date). The option was granted under the 2010 Plan and the exercise price for the option is equal to the fair market value of the Company’s common stock on the date of grant. |
(14) | On March 1, 2016, Mr. Mariani was granted an option to purchase 205,000 shares of the Company’s common stock in connection with his appointment as the Company’s Chief Financial Officer. All shares underlying the option will be fully vested on March 1, 2020 (four years from the option grant date) based upon a vesting schedule whereby 25% of the aggregate shares vest on March 1, 2017 (12 months from the option grant date) and an additional 12.5% of aggregate shares every six months thereafter. The option was granted under the 2010 Plan and the exercise price for the option is the fair market value of the Company’s common stock on the date of grant. |
(15) | On July 17, 2017, Mr. Gingrich was granted an option to purchase 115,000 shares of the Company’s common stock in connection with his appointment as Chief Commercial Officers. All shares of Common Stock underlying the employee stock option will be fully vested on July 17, 2021 (4 years from the option grant date) based upon a vesting schedule whereby 25% of the aggregate shares vest on July 17, 2018 (12 months from the option grant date) and an additional 12.5% of the aggregate shares vest each 6 months thereafter. The option was granted under the 2017 Plan and the exercise price for the option is the fair market value of the Company’s common stock on the date of grant. |
(16) | On March 1, 2013, Mr. McCarrey |
(17) | On May 1, 2014, Mr. McCarrey was granted an option to purchase 30,000 shares of the Company’s common stock. All shares |
| On March 12, 2015, Mr. McCarrey |
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|
Stock Awards |
| |||||||||
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| Equity Incentive |
| Equity Incentive |
| |
|
|
|
|
|
| Plan Awards: |
| Plan Awards: |
| |
|
|
|
| Market Value |
| Number of |
| Market or Payout |
| |
|
| Number of Shares |
| of Shares or |
| Unearned Shares, |
| Value of Unearned |
| |
|
| or Units of Stock |
| Units of Stock |
| Units or Other |
| Shares, Units or |
| |
|
| That Have Not |
| That Have Not |
| Rights That Have |
| Other Rights That |
| |
Name |
| Vested (#) |
| Vested ($) |
| Not Vested (#) |
| Have Not Vested ($) |
| |
Karen Zaderej |
| — |
| — |
| 49,800 | (1)(2) | $ | 2,707,210 |
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| 40,000 | (3) |
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| 12,500 | (4) |
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| 58,000 | (5)(6) |
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Gregory Freitag |
| — |
| — |
| 10,500 | (1)(2) | $ | 393,675 |
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| 3,700 | (4) |
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| 7,400 | (5)(6) |
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Peter Mariani |
| — |
| — |
| 23,800 | (1)(2) | $ | 771,910 |
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| 7,600 | (4) |
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| 13,100 | (5)(6) |
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Jon Gingrich |
| — |
| — |
| 5,500 | (4) | $ | 704,400 |
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| 12,000 | (1)(2)(7) |
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| 13,100 | (5)(6) |
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Shawn McCarrey |
| — |
| — |
| 1,500 | (4) | $ | 243,550 |
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| 4,900 | (5)(6) |
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| 2,500 | (1)(2)(7) |
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30
(1) | On December 29, 2016, the 2016 PSUs were granted to certain Company officers, including the Company’s named executive officers, except Messrs. Gingrich and McCarrey who received such 2016 PSU’s in 2017. The 2016 PSU awards were in the form of performance-based restricted stock units and were granted pursuant to the 2010 Plan. Each 2016 PSU represents the Company’s commitment to issue one Share at a future date, subject to certain eligibility, performance, vesting and other conditions set forth in the 2010 Plan and 2016 PSU Agreements. |
(2) | For each of Ms. Zaderej, Messrs. Mariani, Freitag, Gingrich and McCarrey, by February 15, 2019 the Compensation Committee will review the Company’s gross revenue for the fiscal year ending December 31, 2018. Upon such review, and based upon revenue performance criteria in each 2016 PSU Agreement for such officers, a determination of the number of Shares that may be issued pursuant to the 2016 PSU Agreements will be made, which amount could range between zero to 150% of the 2016 PSUs granted. Once the number of Shares has been determined, 33.33% will vest on each of February 15, 2019 and 2020 and 33.34% will vest on February 15, 2021, provided that the particular officer has been continuously employed through each vesting date as to the particular number of Shares vesting. In the event of a “Change in Control” (as defined in each 2016 PSU Agreement), all or a portion of the 2016 PSUs shall accelerate. |
(3) | Ms. Zaderej was provided on December 29, 2016 a retention stock unit award in the form of retention-based restricted stock units (the “Retention Units”) which were granted pursuant to the 2010 Plan. The award was for a total of 40,000 Retention Units, with each Retention Unit representing the Company’s commitment to issue one Share. So long as Ms. Zaderej’s employment is continuous through January 1, 2020, all of the Retention Units will become vested and 40,000 Shares will be issued by the Company to Ms. Zaderej. In the event of a “Change in Control” (as defined in the award agreement) of the Company, all of the Retention Units shall accelerate and become fully vested. |
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(4) | On December 18, 2017, the 2017 RSUs were granted to certain Company officers, including the Company’s named executive officers. The 2017 RSU awards were in the form of restricted stock units and were granted pursuant to the 2010 Plan. Each 2017 RSU represents the Company’s commitment to issue one Share at a future date, subject to certain eligibility, vesting and other conditions set forth in the 2010 Plan and 2017 RSU Agreements. All shares of AxoGen common stock underlying the 2017 RSUs will be fully vested on December 18, 2021 (4 years from the grant date) based upon a vesting schedule whereby 50% of the aggregate shares vest on December 18, 2019 (24 months from the grant date) and an additional 25% of the aggregate shares vest each 12 months thereafter. In the event of a “Change in Control” (as defined in the award agreement) of the Company, all of the 2017 RSUs shall accelerate and become fully vested. |
(5) | On December 18, 2017, the 2017 PSUs were granted to certain Company officers, including the Company’s named executive officers. The 2017 PSUs were in the form of performance-based restricted stock units and were granted pursuant to the 2010 Plan. Each 2017 PSU represents the Company’s commitment to issue one Share at a future date, subject to certain eligibility, performance, vesting and other conditions set forth in the 2010 Plan and 2017 PSU Agreements. |
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(7) | On July 17, 2017, 2016 PSUs were granted to Mr. Gingrich and on December 29, 2017, 2016 PSUs were granted to Mr. McCarrey. |
31
Option Exercises and Stock Vested
The following provides information regarding the exercise of stock options by our named executive officers, and vesting of stock awards held by our named executive officers, during 2017.
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| Stock Awards |
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| Value |
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| Value |
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| Realized on |
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| Vesting |
| on Vesting |
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Name |
| (#) |
| ($) |
| (#) |
| ($)(1 |
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Karen Zaderej |
| — |
| — |
| — |
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| — |
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Gregory Freitag |
| 33,000 |
| $ 81,530 |
| — |
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| — |
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Peter Mariani |
| — |
| — |
| — |
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| — |
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Jon Gingrich |
| — |
| — |
| — |
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| — |
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Shawn McCarrey |
| — |
| — |
| 4,767 |
| $ | 108,323 |
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at the vesting date, as reported on Nasdaq. |
Potential Payments Upon Termination or Change in Control
In this section, we described payments that may be made to our named executive officers upon several events of termination, including termination in connection with a change in control.
AC is a party to employment agreements with each of (i) Karen Zaderej, effective October 15, 2007 and as amended September 29, 2011, (ii) Gregory G. Freitag, effective October 1, 2011 and as amended May 11, 2014, August 6, 2015 and June 1, 2016, (iii) Peter Mariani, effective February 25, 2016, (iv) Jon Gingrich, effective July 17, 2017 and (v) Shawn McCarrey, effective February 25, 2013, and (iv) Lee Robert Johnston, Jr., effective May 12, 2014.2013. Ms. Zaderej’s employment agreement renews for a one year period on each anniversary of the effective date and provideprovides for severance benefits upon termination of the executive officer’sher employment: (i) by AxoGen for any reason other than “substantial cause”“Substantial Cause” (as defined below), permanent disability, or death; (ii) by the executive officerher due to AxoGen’s breach of the employment agreement and AxoGen’s failure to cure such breach within ten days following notice by the executive officerher of such breach; or (iii) by the executive officerher within the six months following a “change“Change in control”Control” (as defined below) of AxoGen.
Upon a termination of Ms. Zaderej’s employment for any of the reasons set forth above, Ms. Zaderej is entitled to base salary in an amount equal to the base salary that she would have been paid for the remainder of the then current employment period had the executive officer’sher employment not been terminated or the one-year non-competition period, whichever is longer. Ms. Zaderej is entitled to continued medical and dental benefits (in the form of a reimbursement for the COBRA premiums) and continued bonus payments to which the executive officershe would have been entitled for the remainder of the then current employment period had the executive officer’sher employment not been terminated.
15
Under their respective employment agreements, each of Messrs. Freitag, Mariani, Gingrich and McCarrey and Johnston’s employments are at will.employed by AC on an “at will” basis. In the event that the employment of Messrs. Freitag, McCarreyMariani, Gingrich or JohnstonMcCarrey is terminated by AC without substantial causeSubstantial Cause either prior to a change of controlChange in Control or within 180 days following a changeChange in control,Control, the terminated employee is entitled to a severance payment consisting of (i) twelve months of base salary and (ii) an amount equal to any bonuses paid during the twelve-month period prior to termination of employment. Messrs. Freitag, McCarrey,Mariani, Gingrich and JohnstonMcCarrey are also entitled to severance of twelve months of base salary if the terminated employee leaves AxoGen for “good reason”“Good Reason” (as defined below) within 90 days following a change of control.
In addition, Ms. Zaderej isChange in Control. Messrs. Mariani and Gingrich are also entitled to full vestinghave the Company pay the premiums for their COBRA (i) for the first twelve (12) months of her outstanding stock optionsthe COBRA continuation period, or (ii) until such time as they obtain new employment that were granted prior to a merger upon a change in control, regardlessprovides reasonable and comparable health care coverage (including without limitation, coverage of whether her employment terminates on or following the change in control. With respect todependents), whichever period is shorter.
32
For purposes of each of Ms. Zaderej’s and Messrs. Freitag’s, Mariani’s, Gingrich’s and McCarrey’s post-merger stock options, if a change in control of AxoGen occurs, such options shall automatically accelerate and become fully exercisable in the event that within twelve months following the change in control they are terminated without cause or leave for good reason.
For purposes of each executive officer’s employment agreements, “change“Change in control”Control” means the occurrence of any of the following events:
any person who holds less than 20% of the combined voting power of the securities of AC or AxoGen, becomes the beneficial owner, directly or indirectly, of securities of AC or AxoGen, representing 50% or more of the combined voting power of the securities of AC or AxoGen then outstanding;
during any period of 24 consecutive months, individuals who at the beginning of such period constitute all members of the AxoGen’s Board of Directors cease, for any reason, to constitute at least a majority of our Board of Directors, unless the election of each director who was not a director at the beginning of the period was either nominated for election by, or was approved by a vote of, at least two-thirds of the directors then still in office who were directors at the beginning of the period;
Except as it relates to Ms. Zaderej employment agreement, AC or AxoGen consolidates or merges with another company and AC or AxoGen is not the continuing or surviving corporation; provided, however, that any consolidation or merger whereby AxoGen continues as the majority holder of AC securities or a merger or consolidation of AC and AxoGen will not constitute a change in control;
shares of AC’s or AxoGen’s common stock are converted into cash, securities, or other property (other than by a merger set forth in (iii) above) in which the holders of the AC’s or AxoGen’s common stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation as immediately after the merger;
AC or AxoGen sells, leases, exchanges, or otherwise transfers all or substantially all of its assets (in one transaction or in a series of related transactions); or
· any person who holds less than 20% of the combined voting power of the securities of AC or AxoGen, becomes the beneficial owner, directly or indirectly, of securities of AC or AxoGen, representing 50% or more of the combined voting power of the securities of AC or AxoGen then outstanding; · during any period of 24 consecutive months, individuals who at the beginning of such period constitute all members of the Board of Directors cease, for any reason, to constitute at least a majority of our Board of Directors, unless the election of each director who was not a director at the beginning of the period was either nominated for election by, or was approved by a vote of, at least two-thirds of the directors then still in office who were directors at the beginning of the period; · AC or AxoGen consolidates or merges with another company and AC or AxoGen is not the continuing or surviving corporation; provided, however, that any consolidation or merger whereby AxoGen continues as the majority holder of AC securities or a merger or consolidation of AC and AxoGen will not constitute a Change in Control; · shares of AC’s or AxoGen’s common stock are converted into cash, securities, or other property (other than by a merger set forth above) in which the holders of the AC’s or AxoGen’s common stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation as immediately after the merger; · AC or AxoGen sells, leases, exchanges, or otherwise transfers all or substantially all of its assets (in one transaction or in a series of related transactions); or · the holders of AxoGen’s common stock approve a plan or proposal for the liquidation or dissolution of AC or AxoGen. For purposes of Ms. Zaderej’s and Messrs. Freitag’s, · commission of any act of fraud, theft, or embezzlement; · material breach of the employment agreement, provided that AC shall have first delivered to the executive officer written notice of the alleged breach, specifying the exact nature of the breach in detail, and provided, further, that the executive officer shall have failed to cure or substantially mitigate such breach within ten days after receiving such written notice; · commission or conviction of any felony, or of any misdemeanor involving moral turpitude, or entry of a plea of guilty or nolo contendere to any felony or misdemeanor; or · material failure to adhere to AC’s corporate codes, policies or procedures which have been adopted in good faith for a valid business purpose as in effect from time to time. For Ms. Zaderej’s and Messrs. Freitag’s and McCarrey’s employment agreements, For purposes of Mr. 33 For purposes of Messrs. Freitag’s, · a reduction by AC in the person’s base salary; or · the failure by AC to (A) continue in effect any material compensation or benefit plan, program, policy or practice in which the person was participating at the time of the Table of Benefits Upon Termination Events The following tables show potential payments to each of our named executive officers upon termination of employment, including without limitation in connection with a Change in Control, assuming a December 31, 2017 termination date. Amounts shown under Stock Options, Restricted Stock Units and Performance Stock Units reflect the value of the option, restricted stock unit or performance stock unit as to which vesting will be accelerated upon the occurrence of the termination event, and are equal to the product of the number of shares underlying each option multiplied by the difference between the exercise price of each option and the $28.30 per share closing price of our Common Stock on December 31, 2017 as reported on Nasdaq. Karen Zaderej Termination Termination Death or Severance $ 763,125 $ — — Health and Welfare Benefits $ — $ — — Stock Options $ 6,047,708 $ — — Restricted Stock Units $ 1,485,750 $ — — Performance Stock Units $ 3,050,740 $ — — Excise Tax and Gross-Ups $ — $ — — TOTAL $ 11,347,323 $ — — Gregory Freitag Payment Type Termination Termination Death or Severance $ 264,600 $ — — Health and $ — $ — — Stock Options $ 1,154,784 $ — — Restricted Stock Units $ 104,710 $ — — Performance Stock Units $ 506,570 $ — — Excise Tax and $ — $ — — TOTAL $ 2,030,664 $ — — Peter Mariani Payment Type Termination Termination Death or Severance $ 470,400 $ — — Health and Welfare Benefits $ 22,942 $ — — Stock Options $ 4,925,313 $ — — Restricted Stock Units $ 215,080 $ — — Performance Stock Units $ 1,044,270 $ — — Excise Tax and Gross-Ups $ — $ — — TOTAL $ 6,678,005 $ — — Jon Gingrich Payment Type Termination Termination Death or Severance $ 448,000 $ — — Health and Welfare Benefits $ 22,671 $ — — Stock Options $ 1,359,130 $ — — Restricted Stock Units $ 155,650 $ — — Performance Stock Units $ 710,330 $ — — Excise Tax and Gross-Ups $ — $ — — TOTAL $ 2,695,781 $ — — 35 Shawn McCarrey Payment Type Termination Termination Death or Severance $ 430,168 $ — — Health and Welfare Benefits $ — $ — — Stock Options $ 1,141,081 $ — — Restricted Stock Units $ 42,450 $ — — Performance Stock Units $ 209,420 $ — — Excise Tax and Gross-Ups $ — $ — — TOTAL $ 1,823,119 $ — — Officer Stock Ownership Guidelines On December 12, 2017, our Board of Directors adopted stock ownership guidelines for Company officers. Under these guidelines within the earliest of five years from: (i) joining the Company, (ii) promotion to an officer level or (iii) establishment of the guidelines, the Chief Executive Officer and each other officer must hold a dollar value of AxoGen’s common stock, or common stock underlying vested stock options held by such person to the extent such options are “in-the-money,” equal to three times base salary for the Chief Executive Officer and one times base salary for officers. Value is to equal at least three times the director’s annual retainer, excluding any committee retainers or other fees the director may receive. Say-on-Pay Vote At our Retirement and Other Benefits Additional benefits received by our named executive officers include medical, dental, vision, short-term disability, long term disability, and life and accidental death and dismemberment insurance. These benefits are provided on substantially the same basis as to all of our full-time employees. 36 Historically, we have not provided perquisites or other personal benefits to our named executive officers. Currently, we do not view perquisites or other personal benefits as a component of our executive compensation program. Our future practices with respect to perquisites or other personal benefits will be approved and subject to periodic review by our Compensation Committee. EQUITY COMPENSATION PLAN INFORMATION The following table summarizes, with respect to the Company’s equity compensation plans, the number of shares of the Company’s common stock to be issued upon exercise of outstanding options, warrants and other rights to acquire Number of Securities Remaining Available for Future Issuance Under Equity Number of Securities to be Weighted Average Compensation Plans Issued Upon Exercise of Exercise Price of (Excluding Securities Outstanding Options, Outstanding Options, Reflected in the Plan Category Warrants and Rights Warrants and Rights ($) First Column) Equity compensation plans approved by security holders (1) Equity compensation plans not approved by security holders — — — Total Number of Securities Remaining Available for Future Issuance Under Equity Number of Securities to be Weighted-Average Compensation Plans Issued Upon Exercise of Exercise Price of (Excluding Securities Outstanding Options, Outstanding Options, Reflected in the Plan Category Warrants and Rights Warrants and Rights ($) First Column) Equity compensation plans approved by security holders 5,021,275 8.93 1,349,425 Equity compensation plans not approved by security holders — — — Total 5,021,275 8.93 1,349,425 Pursuant to Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are required to disclose the ratio of our median employee’s annual total compensation to the annual total compensation of our principal executive officer. During fiscal 2017, the principal executive officer of AxoGen, Inc. was our President and Chief Executive Officer, Karen Zaderej. For 2017, the combined annual total compensation for Ms. Zaderej was $3,704,972, and for our median employee was $83,506, resulting in a pay ratio of approximately 45:1. We used information post fiscal year 2017 to identify the “median employee” so as not to estimate bonus or commission amounts. In accordance with Item 402(u) of Regulation S-K, we identified the median employee by using total compensation reflected in our payroll records reportable to the various taxing authorities, generally consisting of salary, wages, overtime, bonus, commissions, health and welfare benefits, and long-term incentive taxable compensation for those employees. In making these determinations, we annualized the compensation of all permanent employees who did not work for us for the entire fiscal year. We did not make any cost-of-living adjustments in identifying the median employee. This calculation was performed for all employees, excluding Ms. Zaderej, whether employed on a full-time, part-time, or seasonal basis. The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our internal records and the methodology described above. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. 37 The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Securities and Exchange Commission regulations. Based on its review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and, through incorporation by reference, in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017. Submitted by: March 13, 2018 Guido J. Neels (Chairman) Robert J. Rudelius Amy Wendell Dr. Mark Gold 38 The Audit Committee of our Board of Directors is composed of the following directors: Robert J. Rudelius, Jamie M. Grooms and Dr. Mark Gold, all of whom qualify as an “audit committee financial expert” under the definition promulgated by the Management is responsible for the Company’s internal controls and the financial reporting process. Lurie, LLP (“Lurie”), the Company’s independent registered public accounting firm through March 1, 2018, and Deloitte thereafter, is responsible for conducting an audit of our consolidated financial statements and internal controls in accordance with the standards established by the Public Accounting Oversight Board (“PCAOB”) and expressing an opinion on the consolidated financial statements and internal controls in accordance with GAAP. The Audit Committee’s responsibility is to monitor and oversee these processes. In this context, the Audit Committee 1. The Audit Committee has met and held discussions with management and Lurie. Management represented to the Audit Committee that the Company’s audited consolidated financial statements were prepared in accordance with GAAP, and the Audit Committee has reviewed and discussed the Company’s audited consolidated financial statements with management and Lurie. 2. The Audit Committee has discussed with Lurie matters required to be discussed by 3. The Audit Committee has received written disclosure and a letter from Lurie required by applicable requirements of the PCAOB regarding Lurie’s communications with the Audit Committee regarding Lurie’s independence and the Audit Committee has discussed with Lurie that firm’s independence. The Audit Committee also considered whether non–audit services provided by Lurie during the last fiscal year were compatible with maintaining Lurie’s independence. Based upon the review and discussion referred to in paragraphs 1 through 3 above, the Audit Committee recommended to our Board of Directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10–K for the fiscal year ended December 31, Members of the Audit Committee of the Board of Directors: Robert J. Rudelius, Chairman Dr. Mark Gold Jamie M. Grooms Lurie, our independent registered public accounting firm 2015 2014 2017 2016 Audit Fees(1) $ $ $ 224,200 $ 224,950 Audit–Related Fees -- -- — — Tax Fees(2) $ $ $ 29,800 $ 28,400 All Other Fees -- -- — — Total Fees $ $ $ 254,000 $ 253,350 (1) Lurie received these fees for the audit of our annual financial statements and internal controls, reviews of our financial statements included in our quarterly reports on Form (2) Tax fees include services for filing for tax incentives from government agencies, assistance for tax audits from taxing authorities, tax compliance and planning. Our Audit Committee reviews and pre-approves the performance of all audit and non-audit accounting services to be performed by our independent registered accounting firm, other than with respect to de minimis exceptions permitted under applicable rules and regulations. All audit and audit-related services provided by Lurie during Information Regarding Independent Registered Public Accounting Firm Lurie has served as the Company’s independent registered public accounting firm and shareholders have ratified their appointment each year of service. However, this year the Company decided to conduct a request for proposal (“RFP”) for the audit of the Company’s Financial Statements for the year ended December 31, 2018 to evaluate the services of larger firms compared to Lurie. Multiple auditing firms participated in the RFP process. After review of the final RFP candidates and Lurie, based on the proposal of Deloitte, and determining that the current size and expected growth of the Company can benefit from an auditing firm with a national and international presence, the Committee decided that Deloitte was the appropriate audit firm for the Company moving forward. On March 9, 2018, the Audit Committee took the required actions to dismiss Lurie as the Company’s independent registered public accounting firm and provided Lurie with notice of such dismissal. Subsequent to such dismissal the Company engaged Deloitte. Representatives of Deloitte will attend the Annual Meeting. They will have an opportunity to make a statement if they desire to do so, and they will be available to respond to appropriate questions.the holders of AxoGen’s common stock approve a plan or proposal for the liquidation or dissolution of AC or AxoGen.McCarrey’sMariani’s, Gingrich’s and Johnston’sMcCarrey’s employment agreements, “substantial cause”“Substantial Cause” means:commission of any act of fraud, theft, or embezzlement;material breach of the employment agreement, provided that AC shall have first delivered to the executive officer written notice of the alleged breach, specifying the exact nature of the breach in detail, and provided, further, that the executive officer shall have failed to cure or substantially mitigate such breach within ten days after receiving such written notice;commission or conviction of any felony, or of any misdemeanor involving moral turpitude, or entry of a plea of guilty or nolo contendere to any felony or misdemeanor; or16material failure to adhere to AC’s corporate codes, policies or procedures which have been adopted in good faith for a valid business purpose as in effect from time to time.“substantial cause”“Substantial Cause” also means the failure to meet reasonable performance standards as determined by AC, which for Mr. McCarrey includes the failure of gross revenue in a calendar quarter to exceed 80% of budgeted gross revenue.Johnston’sMariani’s, and Gingrich’s employment agreement, “substantial cause”“Substantial Cause” also includes histheir failure to perform substantiallymeet reasonable performance standards as determined by AC or the material dutiesCompany.Johnston’sMariani’s, Gingrich’s and McCarrey’sMcCarrey employment agreements, “good reason”“Good Reason” means the occurrence of any one or more of the following:the assignment of any duties inconsistent in any respect with such executive officer’s position (including status, offices, titles, and reporting requirements), authorities, duties, or other responsibilities as in effect immediately prior to a change of control or any other action by AxoGen which results in a diminishment in such position, authority, duties, or responsibilities, other than an insubstantial and inadvertent action which is remedied by AxoGen;a reduction by AC in the person's base salary; orthe failure by AC to (A) continue in effect any material compensation or benefit plan, program, policy or practice in which the person was participating at the time of the change of control of AxoGen or (B) provide the person with compensation and benefits at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each employee benefit plan, program, policy and practice as in effect immediately prior to the change in control (or as in effect following the Change in Control of the Company), if greater.For purposes of Mr. Johnston’s agreement, “good reason” also includes a requirement to perform a substantial portion of his duties at a facility that is more than 50 miles from the facility for which he performed a substantial portion of his duties immediately prior to the Change of Control.Mr. Johnston’s employment was terminated with AC effective August 6, 2015.On December 28, 2015, the Board of Directors of the Company approved recommendations of the Company’s Compensation Committee regarding certain Company compensation matters as follows:1.·2015 Merit Stock Option Awards were grantedthe assignment of any duties inconsistent in any respect with such executive officer’s position (including status, offices, titles, and reporting requirements), authorities, duties, or other responsibilities as in effect immediately prior to membersa change of control or any other action by AxoGen which results in a diminishment in such position, authority, duties, or responsibilities, other than an insubstantial and inadvertent action which is remedied by AxoGen;Company’s leadership team, includingchange of control of AxoGen or (B) provide the Karen Zaderej, CEOperson with compensation and President, Gregory G. Freitag, CFO, General Counselbenefits at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each employee benefit plan, program, policy and SVP Business Development and Shawn McCarrey, SVP Sales (“Executive Officers”). The Merit Stock Option Awards werepractice as in the form of incentive stock options, granted pursuanteffect immediately prior to the 2010 Plan. AllChange in Control (or as in effect following the Change in Control of the granted options have a seven-year term and an exercise price of $5.09 per share, which was the closing price of the common stock as reported on the NASDAQ Capital Market on December 28, 2015 (representing the fair market value of the common stock on the grant date)Company), and vest as to 25% of option shares one year after the grant and then as to 12.5% every six months thereafter until fully vested. The option is not exercisable until such time as the number of shares reserved for issuance under the 2010 Plan has been increased by an affirmative vote of the shareholders of AxoGen in an amount that exceeds the shares of Common Stock issuable upon exercise of the option and all other options containing this provision granted prior to such shareholder vote. In the event that an affirmative vote is not obtained from the shareholders of AxoGen to increase the number of shares reserved under issuance under the 2010 Plan, the option will be forfeited and deemed null and void.if greater.
following
Change in
Control; Without
Substantial Cause;
or Voluntarily
for Good
Reason
for Substantial Reason;
or Expiration of
Employment
Period
Permanent
Disability17342.The 2016 Bonus Award Plan was established
Without Substantial
Cause in connection with
Change in
Control;
or Voluntarily
for the Company’s leadership team, including the Executive Officers except Shaw McCarrey, based upon meeting certain established corporate key objectives (the “Key Objectives”)Good
Reason in connection
with Change in Control
for Substantial Reason or
Expiration of
EmploymentPeriod
Permanent
Disabilitya final determination by the Board of Directors, in its sole discretion, that any such bonus is appropriate based upon 2016 performance. The Key Objectives relate to: (1) revenue, gross profit margin, expense managementWelfare Benefitscertain operational goals, (2) have established thresholds and target levels; and (3) are weighted and measured separately in terms of actual level of attainment. The amount of any such bonus for a particular eligible officer is based upon an assigned percentage of such officer’s 2016 base salary. Mr. McCarry is not included in the 2016 Bonus Award Plan. He has a commission program whereby he receives, in addition to his base salary, a percentage of 2016 monthly U.S. and Canadian revenue and an additional amount based on a percentage of the difference between such monthly revenue compare to the same month in 2015.Gross-Ups
Without Substantial
Cause in connection with
Change in
Control;
or Voluntarily
for Good
Reason in connection
with Change in Control
for Substantial Reason or
Expiration of
Employment
Period
Permanent
Disability
Without Substantial
Cause in connection with
Change in
Control;
or Voluntarily
for Good
Reason in connection
with Change in Control
for Substantial Reason or
Expiration of
Employment
Period
Permanent
Disability
Without Substantial
Cause in connection with
Change in
Control;
or Voluntarily
for Good
Reason in connection
with Change in Control
for Substantial Reason or
Expiration of
Employment
Period
Permanent
Disability20132016 Annual Meeting of Shareholders, we asked our shareholders to vote to approve, on ana non-binding advisory basis, the 20132016 compensation paid to our named executive officers, commonly referred to as a say-on-pay vote. Our shareholders approved compensation to our named executive officers with over 95 percent of votes cast in favor of our say-on-pay resolution. The Compensation Committee believes this vote demonstrated our shareholders’ positive view of our executive compensation. The Compensation Committee intends to continue to consider the results of future say-on-pay votes. In addition, at the 20132016 Annual Meeting of Shareholders, our shareholders recommended, on an advisory basis, that the frequency of our future say-on-pay vote be once every three years. Based on this shareholder recommendation, we are conductingwill conduct our next say-on-pay vote at our 20162019 Annual Meeting of Shareholders.Pension BenefitsAxoGen adopted the AxoGen SIMPLE IRA plan in 2007. The AxoGenOur named executive officers are eligible to participate in our tax-qualified Section 401(k) retirement savings plan on the SIMPLE IRA plan. Eligibility is immediate upon employment, and enrollment is available any time during employment. Participating employees may make annual pretax contributions to their accounts up to a maximum amountsame basis as limited by law. The SIMPLE IRA plan requires AxoGen to make matching contributions of between 1% and 3% of the employee’s annual salary as long as the employee participates in the SIMPLE IRA plan. Additionally, the matching contribution has to be at least 3% for three of the first five years of the SIMPLE IRA. Both employee contributions and AxoGen contributions are fully vested at all times. In 2015 and 2014, AxoGen’s matching contribution was 3% of the AxoGen named executive officers’ annual base salary. AxoGen contributed approximately $25,000 and $32,000 in matching funds for the AxoGen named executive officers during 2015 and 2014, respectively.AxoGen terminated the SIMPLE IRA plan at the end of 2015 and established a 401(k) plan. Each of the AxoGen named executive officers participate in the 401(k) plan. our other employees. Employees are eligible to participate in the 401(k) plan immediately upon commencing employment, and enrollment is available any time during employment. Participating employees may make annual pretax contributions to their accounts up to a maximum amount as limited by law. The 401(k) plan requires AxoGen to make matching contributions of between 3% and 4% of the employee’s annual salary as long as the employee participates in the 401(k) plan. Both employee contributions and AxoGen contributions are fully vested at all times. In 2017, AxoGen’s matching contribution was 3% for the first 3% contributed and 1% for the next 2% contributed of each named executive officer’s annual base salary. AxoGen contributed, on an aggregate basis, approximately $34,000 in matching funds for the AxoGen’s named executive officers.18shares,common stock, the weighted-average exercise price of these outstanding options, warrants and rights and the number of shares of common stock remaining available for future issuance under the Company’s equity compensation plans as of December 31, 2015.2017.3,272,862 3.38 285,415 3,272,862 3.38 285,415 1.Excludes 478,500 shares pursuant to outstanding options that are not exercisable until, and are contingent upon, such time as the number of shares reserved for issuance under the 2010 Plan have been increased by an affirmative vote of the shareholders of the Company as set forth in Proposal 2 of this proxy.
The Compensation Committee of the Board of DirectorsSEC.SEC. Mr. Rudelius currently serves as the Chairman of the Audit Committee. The Audit Committee operates under a written charter adopted by our Board of Directors. The Audit Committee recommends to our Board of Directors, and submits for shareholder ratification, the appointment of our independent registered public accounting firm.hereby reporton February 28, 2018 reported as follows:PCAOB’s Auditing Standards No. 16 (CommunicationsAS 1301 (Communication with Audit Committees).20152017 filed with the SEC.1939IndependentINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMprovidesthrough March 9, 2018, provided audit services to us. The fee table below reports fees billed or to be billed to us for professional services provided to us during 20152017 and 20142016 by Lurie. Our Audit Committee has approved, pursuant to its pre–approval policies described below, all of the services listed below.114,500 109,000 24,150 23,000 138,650 132,000 10-Q10‑Q and other services related to registration statements on Form S-3S‑3 in 2015,2016 and 2017, a refinancing transaction in November 20142016, a public offering of Company Common Stock in November 2017 and certain current reports on Form 8-K8‑K for the fiscal years ended December 31, 20152017 and 2014.2016.20152017 and 20142016 were pre-approved by our Audit Committee, which concluded that the provision of such services by Lurie was compatible with the maintenance of that firm'sfirm’s independence in the conduct of its auditing functions.
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PROPOSAL 2 - APPROVAL OF AMENDMENT AND RESTATEMENT OF THE AXOGEN, INC. 2010 Stock incentive PlanAMENDED AND RESTATED ARTICLES OF INCORPORATION
The 2010 Plan was adopted byAt our Meeting, holders of our common stock, $0.01 par value per share, are being asked to approve the AxoGen Boardproposal that our Amended and Restated Articles of Directors on August 16, 2010Incorporation be amended and approved byrestated, in the AxoGen shareholders on September 22, 2010, with approvalform of certain amendmentsAppendix A hereto, to change the Company’s registered office of corporation in Minnesota to Corporation Service Company, 2345 Rice Street, Roseville, MN 55113 and restatements of the 2010 Plan by the AxoGen shareholders on September 27, 2011 and May 13, 2014.
On March 23, 2016, our Board of Directors unanimously approved an amendment and restatement of the 2010 Plan to (i) increase the maximum number ofauthorized shares of common stock that may be issued under the A&R 2010 Plan from 3,500,000 to 5,500,000, (ii) approve the award limits and other terms applicable to awards intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, (iii) extendCompany from 50,000,000 to 100,000,000 (the “Restatement”). On March 9, 2018, the duration of the plan to 2026; and (iv) make certain administrative changes. Our Board of Directors approvedof the increase inCompany adopted resolutions approving the numberRestatement and directed that the Restatement be submitted to a vote of shares reserved and available for issuance under the A&R 2010 Planshareholders at the 2018 Annual Meeting. If the shareholders approve the proposal, subject to shareholder approval and, accordingly, ourthe discretion of the Board of Directors, directed that the amendment and restatementCompany will file the Restatement with the Secretary of State of the 2010 Plan be submitted toState of Minnesota as soon as practicable. Upon the filing of the Restatement with the Secretary of State of the State of Minnesota, the following paragraphs will replace the existing provisions of Article 2 and Article 3 of our shareholders for approval at the Meeting.current Amended and Restated Articles of Incorporation:
‘‘ARTICLE 2. REGISTERED OFFICE
The 2010 Plan currently authorizes 3,500,000 shares asaddress of the maximumregistered office of the corporation in Minnesota is Corporation Service Company, 2345 Rice Street, Roseville, MN 55113.
ARTICLE 3. AUTHORIZED SHARES
The aggregate number of authorized shares that may be issued to employees, nonemployee directors, consultants and advisors of AxoGen and its subsidiaries who are participating in the 2010 Plan. If the shareholders do not approve this amendment and restatement of the 2010 Plan atcorporation is 100,000,000, $0.01 par value per share, which shall be divisible into the Meeting,classes and series, have the designations, voting rights, and other rights and preferences and be subject to the restrictions that the Board of Directors of the corporation may from time to time establish, fix, and determine consistent with Articles 4 and 5 hereof and as permitted by law. Unless otherwise designated by the Board of Directors, all issued shares shall be deemed Common Stock with equal rights and preferences.’’
The amendment to increaseArticle 2 will allow the maximum aggregate numberCompany to move its registered office to an address that provides a better capability to receive and process correspondence. With regard to the Article 3 amendment, the Company as of March 20, 2018 had 34,560,243 outstanding shares of common stock and stock options, PSUs and RSUs that may be issued underprovide, pursuant to vesting and other provisions of such agreements, for the A&R 2010 Plan from 3,500,000issuance of up to an additional 4,903,580 shares of Common Stock. The Board of Directors has approved the Article 3 amendment to 5,500,000 shares will not be effective and certain contingent grants as described below will be null and void.
As of March 23, 2016,ensure that the Company had 3,641,658has sufficient shares subjectavailable for general corporate purposes including, without limitation, acquisitions, establishing strategic partnerships, equity financings, providing equity incentives to outstanding awards, including 739,000employees, and payments of stock dividends, stock splits and other recapitalizations. From time to time the Company considers these types of transactions as market conditions or other opportunities arise. Except for the Company’s equity incentive plans for employees, the Company has no present arrangement, agreement, understanding or plan for the issuance of any additional shares exercisable under grantedof common stock options that are not exercisable until such time asproposed to be authorized by the numberRestatement.
Future issuances of common stock or securities convertible into common stock could have a dilutive effect on our earnings per share, book value per share and the voting power and interest of current shareholders. In addition, the availability of additional shares reservedof common stock for issuance could, under the 2010 Plan, as amended and restated, have been increased by an affirmative votecertain circumstances, discourage or make more difficult any efforts to obtain control of the shareholdersCompany. The Board of Directors is not aware of any attempt, or contemplated attempt, to acquire control of the Company, nor is this proposal being presented with the intent that it is used to prevent or discourage any acquisition attempt. However, nothing would prevent the Board of Directors from taking any such actions that it deems to be consistent with its fiduciary duties.
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the Company to increase the current reserve in the 2010 plan (the “Contingent Options”), Such 3,641,658 options, including Contingent Options, outstanding have a weighted average exercise price of $3.63 and a weighted average remaining term of 5.46 years. As of March 23, 2016, 1,977,912 fully vested, nonforfeitable shares have been issued under the 2010 Plan, which include 516,050 shares due to option exercises. As of March 23, 2016 the total shares that have been issued or that could potentially be issued as a result of grants of options under the 2010 Plan is 3,418,720, leaving 81,290 shares reserved and available for issuance out of the maximum of 3,500,000 shares currently authorized for issuance, excluding the 739,000 shares exercisable pursuant to the Contingent Options.
Our Board of Directors believes that the current number of shares that may be issued under the 2010 Plan is not sufficient in light of our compensation structure and strategy. No shares will remain available under our 2010 Plan after hiring new employees through third quarter of 20154. The Board believes that additional shares are necessary to meet the Company’s anticipated equity compensation needs for approximately the next two to three years. However, a change in business conditions, Company strategy, the growth of our businesses, organically and by acquisitions, or equity market performance, could alter this projection. This estimate is based on a forecast that takes into account our anticipated rate of growth in hiring, an estimated range of our stock price over time and our historical forfeiture rates. In determining the amount of the increase contemplated by the proposed amendment to the 2010 Plan, the Board has taken into consideration the fact that, as of March 23, 2016, there were approximately 32,983,078 shares of our common stock outstanding on a fully-diluted basis, and the Board believes that this fully-diluted number, rather than the number of our outstanding shares of the Company, is the relevant number in determining the appropriate number of shares available under the 2010 Plan. If the Board approves the A&R 2010 Plan, the number of shares available for issuance under the 2010 Plan would increase by 2,000,000 to 5,500,000 shares. The requested increase represents approximately 5.9%5 of the outstanding shares of common stock on a fully-diluted basis and the total number of shares available for issuance under the A&R 2010 Plan would represent approximately 16.3% of our common stock as calculated on a fully-diluted basis. Total potential dilution (as a percentage of shares of our common stock outstanding) associated with the 2,000,000 additional shares of our common stock to be authorized under the A&R 2010 Plan plus the 3,500,000 shares subject to outstanding awards under the 2010 Plan (as of March 23, 2016) is 15.7%.
Our historical burn rates have been 1.8% in 2013, 5.3% in 2014 and 3.3% in 2015, calculated by dividing the number of shares issuable pursuant to equity awards granted during the fiscal year by the weighted-average number of shares outstanding during the period. When the Board approved the 2010 Plan in 2014, we projected that the number of authorized shares under the 2010 Plan would meet our equity compensation needs for eighteen to twenty-four months. Further, we have had an unanticipated increase in our rate of growth in hiring due to the Company’s growth which required us to issue more awards than were contemplated by our equity compensation projections. The historical burn rate and the potential dilution described above may not be indicative of what the actual amounts are in the future. Without additional shares, we would be at a competitive disadvantage in seeking to retain and to recruit officers and other key employees and directors on whose efforts and skills our future success will depend.
Our Board of Directors has concluded that our ability to attract, retain and motivate top quality employees, non-employee directors, and consultants and advisors is important to our success and would be enhanced by our continued ability to make grants under the A&R 2010 Plan. In addition, our Board of Directors believes that our interests and the interests of our shareholders will be advanced if we can continue to offer our employees, non-employee directors and consultants and advisors the opportunity to acquire or increase their proprietary interests in us. Our Board of Directors believes that the increase in the maximum number of shares that may be issued under the A&R 2010 Plan from 3,500,000 to 5,500,000 shares will ensure that we continue to have a sufficient number of shares with which to achieve our compensation strategy.
Shareholder approval is being sought (i) in order to meet the NASDAQ listing requirements applicable to equity plans, (ii) to ensure that compensation attributable to grants under the A&R 2010 Plan qualify for an exemption from the $1 million deduction limit under Section 162(m) of the Code (see discussion of “Federal Income Tax Consequences” below), (iii) in order for incentive stock options to meet the requirements of the Internal Revenue Code (the “Code”), and (iv) to allow the options granted subject to an increase in the maximum number of shares (the Continent Options) issued under the 2010 Plan to become effective. Shareholder approval of this proposal will also constitute a reapproval of the 1,000,000 share limitation (which applies to all awards denominated in shares, options and SARs) and $1,000,000 limitation (which applies to awards denominated in cash) for purposes of Section 162(m) of the Code.
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The proposed A&R 2010 Plan is attached as Appendix A to this proxy statement. The material terms of the A&R 2010 Plan are summarized below. This summary is not intended to be a complete description of the A&R 2010 Plan and is qualified in its entirety by reference to the full text of the A&R 2010 Plan.
Material Features of the Amended and Restated 2010 Plan
Administration
The Compensation Committee of AxoGen’s Board of Directors (the “Compensation Committee”) administers the A&R 2010 Plan and has full power and authority to determine when and to whom awards will be granted, and the type, amount, form of payment and other terms and conditions of each award, consistent with the provisions of the A&R 2010 Plan. In addition, the Compensation Committee can specify whether, and under what circumstances, awards to be received under the A&R 2010 Plan or amounts payable under such awards may be deferred automatically or at the election of either the holder of the award or the Compensation Committee. Subject to the provisions of the A&R 2010 Plan, the Compensation Committee may amend or waive the terms and conditions, or accelerate the exercisability, of an outstanding award. The Compensation Committee has authority to interpret the A&R 2010 Plan and establish rules and regulations for the administration of the A&R 2010 Plan.
The Compensation Committee may delegate its powers under the A&R 2010 Plan to one or more directors (including a director who is also one of our officers) and may authorize one or more officers to grant awards under the A&R 2010 Plan, except that the Compensation Committee may not delegate its powers to grant awards to executive officers or directors who are subject to Section 16 of the Exchange Act, or in a way that would violate Section 162(m) of the Code. AxoGen’s Board of Directors may also exercise the powers of the Compensation Committee at any time, so long as its actions would not violate Section 162(m) of the Code. The Compensation Committee’s ability to delegate its powers is also limited by the rules of the NASDAQ Stock Market on which AxoGen’s shares of common stock are listed.
Eligible Participants
Any employee, officer, consultant, advisor or non-employee director providing services to AxoGen or any of its affiliates, and who is approved by the Compensation Committee, is eligible to receive an award under the A&R 2010 Plan, provided that, in the case of consultants and advisors, such services are not in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for AxoGen’s securities. As of April 1, 2016, approximately 124 employees and 5 non-employee directors are eligible to receive grants under the 2010 Plan.
Shares Available For Awards
The aggregate number of shares of AxoGen common stock that may be issued under all stock-based awards made under the 2010 Plan currently is 3,500,000 shares. If this Proposal 2 is approved by the AxoGen shareholders, the total number of shares authorized for issuance under the A&R 2010 Plan will be 5,500,000. In order to comply with Section 162(m) of the Code, the A&R 2010 Plan includes the following limits:
no person may be granted any share-based award including stock options or stock appreciation rights denominated in shares which in the aggregate are for more than 1,000,000 shares in any taxable year; and
no person may be granted Qualified Performance Awards denominated in cash greater than $1,000,000 in any taxable year.
The Compensation Committee will adjust the number of shares and share limits described above in the event of a stock dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares, issuance of warrants or other rights or other similar corporate transaction or event that affects shares of our common stock, in order to prevent dilution or enlargement of the benefits or potential benefits intended to be provided under the A&R 2010 Plan.
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Types of Awards and Terms and Conditions
The A&R 2010 Plan permits grants of:
Stock options (including both incentive and non-qualified stock options);
stock appreciation rights (“SARs”);
restricted stock and restricted stock units;
dividend equivalents;
performance awards of cash, stock or property;
stock awards; and
other stock-based awards.
Awards can be granted for no cash consideration or for any cash or other consideration as may be determined by the Compensation Committee or as required by applicable law. Awards may provide that upon the grant or exercise thereof, the holder will receive cash, shares of AxoGen common stock, other securities or property or any combination of these in a single payment, installments or on a deferred basis. The exercise price per share under any stock option and the grant price of any SAR may not be less than the fair market value of AxoGen common stock on the date of grant of such option or SAR except to satisfy legal requirements of foreign jurisdictions or if the award is in substitution for an award previously granted by an entity acquired by AxoGen. The fair market value for publicly traded shares is based on certain published market prices and is as determined by the Compensation Committee if the shares are not publicly traded. The term of awards may not be longer than ten years from the date of grant. Awards will be adjusted by the Compensation Committee in the event of a stock dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares, issuance of warrants or other rights or other similar corporate transaction or event that affects shares of AxoGen common stock in order to prevent dilution or enlargement of the benefits or potential benefits intended to be provided under the A&R 2010 Plan.
Stock Options. The holder of an option will be entitled to purchase a number of shares of AxoGen common stock at a specified exercise price during a specified time period, all as determined by the Compensation Committee. The option exercise price may be payable either in cash or, at the discretion of the Compensation Committee, in other securities or other property having a fair market value on the exercise date equal to the exercise price. The A&R 2010 Plan provides that the term of any option will be fixed by the Compensation Committee but will not be longer than ten years from the grant date of the option, with limitations on exercise price, term and the amount permitted in any calendar year for stock options so as to qualify as “Incentive Stock Options” under the Code.
Stock Appreciation Rights. The holder of a SAR is entitled to receive the excess of the fair market value (calculated as of the exercise date or, at the Compensation Committee’s discretion, as of any time during a specified period before or after the exercise date) of a specified number of shares of AxoGen common stock over the grant price of the SAR. SARs vest and become exercisable in accordance with a vesting schedule established by the Compensation Committee. The A&R 2010 Plan provides that the term of any SAR will be fixed by the Compensation Committee but will not be longer than ten years from the grant date of the SAR.
Restricted Stock and Restricted Stock Units. The holder of restricted stock will own shares of AxoGen common stock subject to restrictions imposed by the Compensation Committee (including, for example, restrictions on the right to vote the restricted shares or to receive any dividends with respect to the shares) for a specified time period determined by the Compensation Committee. The holder of restricted stock units will have the right, subject to any restrictions imposed by the Compensation Committee, to receive shares of AxoGen common stock, or a cash payment equal to the fair market value of those shares, at some future date determined by the Compensation Committee. If the participant’s employment or service as a director terminates during the vesting period for any reason, the restricted stock and restricted stock units will
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be forfeited, unless the Compensation Committee determines that it would be in AxoGen’s best interest to waive the remaining restrictions.
Dividend Equivalents. The holder of a dividend equivalent will be entitled to receive payments (in cash, shares of AxoGen common stock, other securities or other property) equivalent to the amount of cash dividends paid by AxoGen to its shareholders, with respect to the number of shares determined by the Compensation Committee. Dividend equivalents will be subject to other terms and conditions determined by the Compensation Committee. Dividend equivalents may not be granted in connection with a stock option or SAR.
Performance Awards. The Compensation Committee may grant performance awards under the A&R 2010 Plan. A performance award may be payable in cash or stock and will be conditioned solely upon the achievement of one or more objective performance goals established by the Compensation Committee in accordance with the A&R 2010 Plan. The Compensation Committee will determine the length of the performance period, establish the performance goals for the performance period and determine the amounts of the performance awards for each participant. Certain performance awards granted under the A&R 2010 Plan may be intended to qualify as “performance-based compensation” within the meaning of Section 162(m) of the Code (“Qualified Performance Awards”).
Performance goals must be based solely on one or more of the following business criteria, applied on a corporate, subsidiary, division, business unit, line of business or geographic regional basis: sales, revenue, costs, expenses, earnings (including one or more of net profit after tax, gross profit, operating profit, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization and net earnings), earnings per share, earnings per share from continuing operations, operating income, pre-tax income, net income, margins (including one or more of direct gross, gross, operating income, net income and pretax net income margins), returns (including one or more of return on actual or proforma assets, net assets, equity, investment, investment capital, capital and net capital employed), shareholder return (including total shareholder return relative to an index or peer group), stock price, economic value added, cash generation, cash flow, unit volume, working capital, market share, environmental health and safety goals, cost reductions and development and implementation of strategic plans, completion of key projects, management succession plans or diversity initiatives. Performance goals may be an absolute measure or a defined change (amount or percentage) in a measure. The measure of performance may be set by reference to an absolute standard or a comparison to specified companies or groups of companies, or other external measures. The Compensation Committee may provide that, in determining whether the performance goal has been achieved, the effect of certain events may be excluded. These events include, but are not limited to, any of the following: items of an unusual nature or of infrequency of occurrence as determined under generally accepted accounting principles, asset write-downs; litigation or claim judgments or settlements; changes in tax law, accounting principles or other such laws or provisions affecting reported results; severance, contract termination and other costs related to exiting certain business activities; and gains or losses from the disposition of businesses or assets or from the early extinguishment of debt.
Stock Awards. The Compensation Committee may grant unrestricted shares of AxoGen common stock, subject to terms and conditions determined by the Compensation Committee and the limitations in the A&R 2010 Plan.
Other Stock-Based Awards. The Compensation Committee is also authorized to grant other types of awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to AxoGen’s common stock, subject to terms and conditions determined by the Compensation Committee and the limitations in the A&R 2010 Plan.
Accounting for Awards
If an award entitles the holder to receive or purchase shares of AxoGen common stock, the shares covered by such award or to which the award relates will be counted against the aggregate number of shares available for awards under the A&R 2010 Plan. For SARs settled in shares upon exercise, the aggregate number of shares with respect to which the SAR is exercised, rather than the number of shares actually issued upon exercise, will be counted against the number of shares available for awards under the A&R 2010 Plan. Awards that do not entitle the holder to receive or purchase shares and awards that are settled in cash will not be counted against the aggregate number of shares available for awards under the A&R 2010 Plan.
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The A&R 2010 Plan provides that shares covered by an award made under the A&R 2010 Plan (or to which such an award relates) that are not purchased, that are forfeited or are reacquired by AxoGen (including shares of restricted stock, whether or not dividends have been paid on such shares), or that are subject to an award that otherwise terminates or is cancelled without delivery of such shares, shall be available for award again under the A&R 2010 Plan to the extent of any such forfeiture, reacquisition, termination or cancellation. Shares that are withheld in full or partial payment of the purchase or exercise price of any award or in connection with the satisfaction of tax obligations relating to an award will not be available again for grant awards under the A&R 2010 Plan. The A&R 2010 Plan also provides that if shares are repurchased in the open market with proceeds of the exercise price of options, such shares will also not be available again for issuance under the A&R 2010 Plan.
Duration, Termination and Amendment
Unless terminated by the Board of Directors, the A&R 2010 Plan will expire on March 22, 2026. No awards may be made after that date. However, unless otherwise expressly provided in an applicable award agreement, any award granted under the A&R 2010 Plan prior to expiration may extend beyond the expiration of the A&R 2010 Plan through the award’s normal expiration date. The AxoGen Board of Directors may amend, alter, suspend, discontinue or terminate the A&R 2010 Plan at any time, although shareholder approval must be obtained for any amendment to the A&R 2010 Plan that would: (i) increase the number of shares of AxoGen common stock available under the 2010 Plan, (ii) increase the award limits under the A&R 2010 Plan, (iii) permit awards of options or SARs at a price less than fair market value, (iv) permit repricing of options or SARs or (v) cause Section 162(m) of the Code to become unavailable with respect to the A&R 2010 Plan. Shareholder approval is also required for any action that requires shareholder approval under the rules and regulations of the SEC or any other securities exchange that are applicable to AxoGen.
Prohibition on Repricing Awards and Award Adjustments
No option or SAR may be amended to reduce its initial exercise or grant price, and no option or SAR may be cancelled and replaced with awards having a lower exercise or grant price. In addition, options and SARs may not be cancelled and replaced with cash or other awards having a lower exercise or grant price than the original option or SAR. However, the Compensation Committee may adjust the exercise or grant price of, and the number of shares subject to, any outstanding option or SAR in connection with a stock dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares, issuance of warrants or other rights or other similar corporate transaction or event that affects shares of AxoGen common stock, in order to prevent dilution or enlargement of the benefits, or potential benefits intended to be provided under the A&R 2010 Plan.
Transferability of Awards
Except in certain limited situations permitted under the A&R 2010 Plan, awards (other than stock awards) under the A&R 2010 Plan may only be transferred by will or by the laws of descent and distribution. Under no circumstances may outstanding awards (other than stock awards) be transferred for value.
Other Provisions
The Compensation Committee is permitted to make awards under the A&R 2010 Plan to employees of other corporations who become employees of AxoGen in connection with a merger, acquisition or other corporate transaction in substitution of awards issued to such employee by the other corporation. In addition, all awards issued under the A&R 2010 Plan are subject to any clawback or recoupment policies approved by the AxoGen Board of Directors, as such policy may be in effect from time to time.
Federal Tax Consequences of the Amended and Restated 2010 Plan
The following is a summary of the material federal income tax consequences of receiving awards under the A&R 2010 Plan and is based upon an analysis of the present provisions of the Code and the regulations promulgated thereunder, all of which are subject to change. An individual may also be subject to state and local taxes, the consequences of which are not discussed herein, in the jurisdiction in which he or she works and/or resides. This summary is for general information and does not constitute tax advice.
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Nonqualified Stock Options. An individual receiving nonqualified stock options should not recognize taxable income at the time of grant. An individual should generally recognize ordinary compensation income in an amount equal to the excess, if any, of the fair market value of the option shares on exercise of the nonqualified stock options over the exercise price thereof. In general, subject to the limitations set forth in Section 162(m) of the Code and discussed below, we will be entitled to deduct from our taxable income the amount that the individual is required to include in ordinary income at the time of such inclusion. Additional special rules apply if an individual exercises a nonqualified stock option by paying the exercise price, in whole or in part, by the transfer of shares of common stock to the Company.
Incentive Stock Options. An individual granted an incentive stock option will not generally recognize taxable income at the time of grant or, subject to certain conditions, at the time of exercise, although he or she may be subject to alternative minimum tax. If the individual holds the shares acquired upon exercise of an incentive stock option for at least two years after the grant date and for at least one year after the exercise date, upon disposition of the shares by the individual, the difference, if any, between the sale price of the shares and the exercise price of the option will be treated as long-term capital gain or loss. In general, if a disqualifying disposition should occur (i.e., the shares acquired upon exercise of the option are disposed of within the later of two years from the date of grant or one year from the date of exercise), an individual will generally recognize ordinary compensation income in the year of disposition in an amount equal to the excess, if any, of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on disposition), over the exercise price thereof. We are not entitled to any deduction on account of the grant of incentive stock options or the individual’s exercise of the option to acquire common stock. However, in the event of a subsequent disqualifying disposition of such shares of common stock acquired pursuant to the exercise of an incentive stock option under circumstances resulting in taxable compensation to the individual, subject to the limitations set forth in Section 162(m) of the Code and discussed below, in general, we should be entitled to a tax deduction equal to the amount treated as taxable compensation to the individual. Additional special rules apply if an individual exercises an incentive stock option by paying the exercise price, in whole or in part, by the transfer of shares of common stock to the Company.
Restricted Stock. A grantee will not be subject to tax upon the grant of an award of restricted stock unless the grantee 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 grantee will have taxable compensation equal to the difference between the fair market value of the shares on that date over the amount the grantee paid for such shares, if any, unless the grantee made an election under Section 83(b) of the Code to be taxed at the time of grant. If the grantee made an election under Section 83(b) of the Code, the grantee will have taxable compensation at the time of grant equal to the difference between the fair market value of the shares on the grant date over the amount the grantee 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). We will be able to deduct, at the same time as it is recognized by the grantee, the amount of taxable compensation to the grantee 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 grantee will not be subject to tax upon the grant of restricted stock units. Rather, upon the delivery of shares or cash pursuant to a restricted stock unit award, the grantee will have taxable compensation equal to the fair market value of the number of shares (or the amount of cash) the grantee actually receives with respect to the award. We will be able to deduct the amount of taxable compensation to the grantee 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.
SAR. No income will be realized by a grantee upon grant of a SAR. Upon the exercise of a SAR, the grantee will recognize ordinary compensation income in an amount equal to the fair market value of the payment received in respect of the SAR. We 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.
Performance Awards and Dividend Equivalents. A grantee will not be subject to tax upon the grant of a performance awards of dividend equivalents. Rather, upon the delivery of shares or cash pursuant to the award, the grantee will have taxable compensation equal to the fair market value of the number of shares (or the amount of cash) the grantee actually receives with respect to the award. We will be able to deduct the amount of taxable compensation to the grantee for U.S.
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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.
Section 162(m) Limitation. Subject to a limited number of exceptions, Section 162(m) of the Code denies a deduction to a publicly held corporation for payments of remuneration to certain employees to the extent the employee’s remuneration for the taxable year exceeds $1,000,000. This limit, however, does not apply to qualified performance based compensation under Section 162(m) of the Code. The A&R 2010 Plan is designed to meet the requirements of Section 162(m) of the Code; however, awards granted under the A&R 2010 Plan will be treated as qualified performance-based compensation under Section 162(m) of the Code only if the awards and the procedures associated with such awards comply with all other requirements of Section 162(m) of the Code. We cannot assure you that compensation attributable to awards granted under the A&R 2010 Plan will be treated as qualified performance-based compensation under Section 162(m) of the Code and thus be deductible to us.
Section 409A of the Code. An award may be subject to a 20% tax, in addition to ordinary income tax, at the time the award becomes vested, plus interest, if the grant constitutes deferred compensation under Section 409A of the Code and the requirements of Section 409A of the Code are not satisfied.
Section 280G of the Code. Under certain circumstances, the accelerated vesting or exercise of options or the accelerated lapse of restrictions with respect to other awards in connection with a change in control might be deemed an “excess parachute payment” for purposes of the golden parachute tax provisions of Section 280G of the Code. To the extent it is so considered, the grantee may be subject to a 20% excise tax and we may be denied a federal income tax deduction.
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Awards Granted
The following table sets forth, for each of the individuals and various groups indicated, the total number of shares of our common stock subject to awards that have been granted under the 2010 Plan as of April 1, 2016.
Awards Granted
AxoGen, Inc. 2010 Stock Incentive Plan
(as Amended and Restated)
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Future benefits under the A&R 2010 Plan are not currently determinable, except with respect to awards made on August 6, 2015, September 22, 2015, December 28, 2015, January 4, 2016, January 29, 2016, February 1, 2016, March 1, 2016 and March 14, 2016 that are contingent on shareholder approval of the proposed amendment and restatement of the Plan.
The following table lists the number of shares of options issued contingent on shareholder approval:
New Plan Benefits
AxoGen, Inc. 2010 Stock Incentive Plan(as Amended and Restated)
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Name and Position |
| Dollar |
| Number of Shares(2) |
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Karen Zaderej, CEO, President and Director |
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| 521,463 |
| 210,000 |
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Gregory G. Freitag, General Counsel and Director |
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| 173,300 |
| 92,000 |
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Executive Group (individuals) |
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| 726,058 |
| 286,500 |
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Non-Executive Director Group |
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| 186,237 |
| 75,000 |
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Non-Executive Officer Employee Group |
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| 182,616 |
| 75,500 |
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The last reported sale price of our common stock on April 1, 2016 was $5.39 per share.
Recommendation of our Board of Directors; Vote Required for Approval
The AxoGenOur Board of Directors recommends that you vote “FOR” the proposal to approve thisthe amendment and restatement of the 2010 Plan toAmended and Restated Articles of Incorporation of the Company to: (i) increase the number of shares of AxoGen common stock authorized for issuance under the plan from 3,500,00050,000,000 to 5,500,000,100,000,000 shares; and (ii) approveand change the award limits and other terms applicableCompany’s Registered Office to awards intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, (iii) extend the duration of the plan to 2026, and (iv) make certain administrative changes to the 2010 Plan.Corporation Service Company, 2345 Rice Street, Roseville, MN 55113.
The affirmative vote of a majority of the outstanding shares of AxoGen common stock entitled to vote and present in person or by proxy at the Meeting will be required to approve the A&R 2010 Plan.amendment and restatement of the Amended and Restated Articles of Incorporation of the Company. If you “Abstain” from voting, it will have the same effect as an “Against” vote. Brokera vote “AGAINST” this proposal. Because this proposal is a “routine” matter, broker non-votes will have no effect.not occur with respect to this proposal.
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PROPOSAL 3 – RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Our Board of Directors, based upon the recommendation of our Audit Committee, has appointed LurieDeloitte as our independent registered public accounting firm to examine our financial statements and internal controls for the current fiscal year ending December 31, 20162018 and to perform other appropriate accounting services. LurieDeloitte has no relationship with us other than that arising from their employment as our independent registered public accounting firm.
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While we are not required to do so, we are submitting the appointment of LurieDeloitte to serve as our independent registered public accounting firm for the fiscal year ending December 31, 20162018 for ratification in order to ascertain the views of our shareholders on this appointment. If the appointment is not ratified, our Audit Committee will reconsider its selection.
Representatives of LurieDeloitte will be present at ourthe Meeting, will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions from shareholders.
Recommendation of our Board of Directors; Vote Required for Approval
Our Board of Directors recommends that you vote “FOR” the ratification of Lurie,Deloitte & Touche LLP as our independent registered public accounting firm.firm for the fiscal year ending December 31, 2018. The affirmative vote of a majority of the shares of our common stock present in person or by proxy and entitled to vote at the Meeting is required to ratify the appointment of Lurie,Deloitte & Touche LLP as our independent registered public accounting firm. If you “Abstain”affirmatively abstain from voting, it will have the same effect as an “Against” vote. Broker non-votes will have no effect.
PROPOSAL 4 – NON-BINDING ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
We are providing our shareholders with an opportunity toa vote to approve, on an advisory, non-binding basis, the compensation of our named executive officers as disclosed in“AGAINST” this proxy statement. This proposal, which is often referred to as a “say-on-pay” proposal, is required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”).
Our executive compensation program is designed to attract, motivate, and retain our executive officers, who are critical to our success. As described in the tables included in the sections above entitled “Executive Compensation - Summary Compensation” and “Executive Compensation – Outstanding Equity Awards at 2015 Fiscal Year–End,” as well as our accompanying narrative disclosure to such tables and in “Executive Compensation – Employment Agreements,” and “Executive Compensation – Pension Benefits,” our executive compensation program contains elements of cash and equity-based compensation. We believe our program is designed to align the interests of our named executive officers with those of our shareholders and to reward our named executive officers for the achievement of our near-term and longer-term financial and strategic goals.
Recommendation of our Board of Directors; Vote Required for Approval
Our Board of Directors is asking our shareholders to approve a non-binding advisory vote on the following resolution:
RESOLVED, that the compensation paid to our named executive officers, as disclosed in our proxy statement for the 2016 Annual Meeting pursuant to the rules of the SEC, including the compensation tables and any other related disclosure, is hereby APPROVED.
Though this proposal calls for a non-binding advisory vote, our Board of Directors and Compensation Committee value the opinions of our shareholders and will consider the outcome of the vote when making future compensation decisions for our named executive officers. This proposal will be considered to be approved if it receives “FOR” votes from the holders of a majority of the shares either present in person or represented by proxy and entitled to vote. If you “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have no effect.
PROPOSAL 5 – NON-BINDING ADVISORY VOTE ON THE FREQUENCY OF FUTURE NAMED EXECUTIVE OFFICER COMPENSATION ADVISORY VOTES
In Proposal 4 above, we are providing our shareholders with an opportunity to vote to approve, on an advisory, non-binding basis, the compensation of our named executive officers. In this proposal, we are asking our shareholders to cast a non-binding advisory vote regarding the frequency of future “say-on-pay” votes. Shareholders may vote for a frequency of every one, two, or three years, or may abstain from voting. This proposal, which is often referred to as a “say-on-frequency” proposal, also is required by the Dodd-Frank Act.
proposal. Because this proposal calls foris a non-binding advisory vote, our Board of Directors and the Compensation Committee may determine to hold “say-on-pay” votes more or less frequently than the option selected by our shareholders (though no
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less frequently than once every three years). However, our Board of Directors and the Compensation Committee value the opinions of our shareholders and will consider the outcome of the vote when determining the frequency of future “say-on-pay” votes. In the future, we will provide a “say-on-frequency” vote at least once every six years as required by the Dodd-Frank Act.
Our Board of Directors believes that a say-on-pay vote every three years is most appropriate for a company such as AxoGen, as this will provide an effective way for us to periodically obtain shareholders’ opinions regarding executive compensation and allow adequate time for us to respond to shareholder feedback. We believe a three-year cycle will provide shareholders with time to evaluate the effects of our executive compensation strategies and their impact on our performance, financial, and business goals. By contrast, a more frequent vote might lead to a short-term perspective on executive compensation that is inconsistent with the longer term approach taken by our Compensation Committee and with which we currently view our business.
Before making its recommendation, our Board of Directors considered the arguments in favor of more frequent votes, including increased opportunities for shareholder input and the belief that annual votes might promote greater accountability on executive compensation. After considering the alternatives, our Board of Directors believes that, on balance, a three-year cycle is most appropriate for us. The Compensation Committee intends to periodically reassess this triennial approach and, if appropriate, may provide for a more frequent say-on-pay vote.
Recommendation of our Board of Directors; Vote Required for Approval
Our Board of Directors recommends that shareholders select “EVERY 3 YEARS” on the proposal recommending the frequency of advisory votes on named executive officer compensation. For this proposal, the frequency receiving the highest number of votes from the holders of shares either present in person or represented by proxy and entitled to vote will be considered the frequency preferred by the shareholders. Abstentions androutine matter, broker non-votes will have no effect. Becausenot occur with respect to this vote is non-binding, our Board of Directors may determine the frequency of future advisory votes on executive compensation in its sole discretion.proposal.
PROPOSALS FOR OUR 20172019 ANNUAL MEETING
Any proposal by a shareholder to be included in our proxy material and presented at our 20172019 Annual Meeting of Shareholders must be received at our principal executive offices, 13631 Progress Blvd., Suite 400, Alachua, FL 32615, Attention: Corporate Secretary, no later than December 12, 2016,November 30, 2018, and must comply in all material respects with applicable rules and regulations of the SEC relating to such inclusion.
In addition, in connection with any matter to be proposed by a shareholder to be considered at our 20172019 Annual Meeting of Shareholders, but not for inclusion in our proxy materials, Pursuantpursuant to Section 2.3 of our Amended and Restated Bylaws, a written notice of business that a shareholder wishes to present for consideration at our 20172018 Annual Meeting of Shareholders (other than(including nominees for election to our Board of Directors at our 2019 Annual Meeting of Shareholders, but excluding matters included in our proxy materials pursuant to the preceding paragraph) must be atdelivered to our principal executive offices, 13631 Progress Blvd., Suite 400, Alachua, FL 32615, Attention: Corporate Secretary no earlier than January 26, 201714, 2019 nor later than February 25, 2017.13, 2019. The notice must also meet other requirements specified in Section 2.3 and 2.4, as applicable, of our Amended and Restated Bylaws.
Our Annual Report on Form 10–K, including financial statements for the year ended December 31, 2015,2017, accompanies, or has been mailed to you immediately prior to, this Proxy Statement. Our 20152017 Annual Report on Form 10–K is also available on our website at www.Axogeninc.com/financial-information. If requested in writing by a person solicited by this Proxy Statement, we will provide you without charge a copy of our Annual Report on Form 10–K as filed with the SEC for our most recently completed fiscal year. Such request should be sent to our General Counsel at AxoGen, Inc., 13631 Progress Blvd., Suite 400, Alachua, FL 32615.
“HOUSEHOLDING” OF PROXY MATERIALS
The SEC rules allow a single copy of thethis Proxy Statement and 20152017 Annual Report on Form 10–K to be delivered to multiple shareholders sharing the same address in a manner provided by these rules unless contrary instructions have been
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received from such shareholders. This practice is referred to as “householding” and can result in significant savings of
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paper and mailing costs. Although we do not household for our registered shareholders, some brokers household AxoGen proxy statements and annual reports, delivering a single copy of each to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that they will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate copy of our proxy statement or annual report, or if you are receiving multiple copies of either document and wish to receive only one, please notify your broker. We will deliver promptly upon written or oral request a separate copy of our Proxy Statement, Notice of Internet Availability of Proxy Materials and/or our 20152017 Annual Report on Form 10–K, as applicable, to a shareholder at a shared address to which a single copy of either document was delivered. For copies of eitherany or bothall such documents, shareholders should write to or call our Corporate Secretary at AxoGen, Inc., 13631 Progress Blvd., Suite 400, Alachua, FL 32615, or (368) 462-6800,462‑6800, respectively.
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Our Board of Directors does not know of any other business to come before our 20162018 Annual Meeting of Shareholders. If any other matters are properly brought before the meeting, however, the persons named in the accompanying proxy will vote in accordance with their best judgment.
Your cooperation in giving this matter your immediate attention and in returning your proxy promptly will be appreciated.
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| By Order of the Board of Directors, |
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| Karen Zaderej |
| Chief Executive Officer, President and Director |
March 30, 2018 |
April 11, 2016
3245
AXOGEN, INC.
2010 STOCK INCENTIVE PLAN
Amended and Restated as of March 23, 2016
Section 1.Purpose.
The purpose of the Plan is to promote the interests of the Company and its shareholders by aiding the Company in attracting and retaining employees, officers, consultants, advisors and non–employee Directors capable of assuring the future success of the Company, to offer such persons incentives to put forth maximum efforts for the success of the Company’s business and to compensate such persons through various stock–based arrangements and provide them with opportunities for stock ownership in the Company, thereby aligning the interests of such persons with the Company’s shareholders.
Section 2.Definitions.
As used in the Plan, the following terms shall have the meanings set forth below:
(a)“Affiliate” shall mean (i) any entity that, directly or indirectly through one or more intermediaries, is controlled by the Company and (ii) any entity in which the Company has a significant equity interest, in each case as determined by the Committee.
(b)“Award” shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Dividend Equivalent, Performance Award, Stock Award or Other Stock–Based Award granted under the Plan.
(c)“Award Agreement” shall mean any written agreement, contract or other instrument or document evidencing an Award granted under the Plan. An Award Agreement may be in an electronic medium and need not be signed by a representative of the Company or the Participant. Each Award Agreement shall be subject to the applicable terms and conditions of the Plan and any other terms and conditions (not inconsistent with the Plan) determined by the Committee.
(d)“Board” shall mean the Board of Directors of the Company.
(e)“Change in Control” shall have the meaning ascribed to such term in any Award Agreement; provided, however, that no Award Agreement shall contain a definition of Change in Control that has the effect of accelerating the exercisability of any Award or the lapse of restrictions relating to any Award upon only the announcement or shareholder approval of (rather than consummation of) any reorganization, merger or consolidation of, or sale or other disposition of all or substantially all of the assets of, the Company.
(f)“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and any regulations promulgated thereunder.
(g)“Committee” shall mean the Compensation Committee of the Board or any successor committee of the Board designated by the Board to administer the Plan. The Committee shall be comprised of not less than such number of Directors as shall be required to permit Awards granted under the Plan to qualify under Rule 16b–3, and each member of the Committee shall be a “Non–Employee Director” within the meaning of Rule 16b–3 and an “outside director” within the meaning of Section 162(m). The Company expects to have the Plan administered in accordance with the requirements for the award of “qualified performance–based compensation” within the meaning of Section 162(m) of the Code.
(h)“Company” shall mean AxoGen, Inc., a Minnesota corporation, or any successor corporation.
(i)“Director” shall mean a member of the Board.
(j)“Dividend Equivalent” shall mean any right granted under Section 6(d) of the Plan.
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(k)“Eligible Person” shall mean any employee, officer, consultant, advisor or non–employee Director providing services to the Company or any Affiliate whom the Committee determines to be an Eligible Person, provided that, in the case of consultants and advisors, such services are not in connection with the offer or sale of securities in a capital–raising transaction and do not directly or indirectly promote or maintain a market for the Company’s securities. An Eligible Person must be a natural person.
(l)“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
(m)“Fair Market Value” of Shares is (i) if the Shares are publicly traded, then the Fair Market Value per Share shall be determined as follows: (A) if the principal trading market for the Shares is a national securities exchange, the last reported sale price during regular trading hours on the relevant date or (if there were no trades on that date) on the latest preceding date upon which a sale was reported, or (B) if the Shares are not principally traded on such exchange or market, the mean between the last reported “bid” and “asked” prices of Shares on the relevant date or (if there were no “bid” and “asked” prices reported on that date) on the latest preceding date upon which “bid” and “asked” prices were reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Committee determines, or (ii) if the Shares are not publicly traded or, if publicly traded, is not subject to reported transactions or “bid” or “asked” quotations as set forth above, the Fair Market Value per share shall be as determined by the Committee.
(n)“Incentive Stock Option” shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code or any successor provision.
(o)“Non–Qualified Stock Option” shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option.
(p)“Option” shall mean an Incentive Stock Option or a Non–Qualified Stock Option.
(q)“Other Stock–Based Award” shall mean any right granted under Section 6(g) of the Plan.
(r)“Participant” shall mean an Eligible Person designated to be granted an Award under the Plan.
(s)“Performance Award” shall mean any right granted under Section 6(e) of the Plan.
(t)“Performance Goal” shall mean one or more of the following performance goals, either individually, alternatively or in any combination, applied on a corporate, subsidiary, division, business unit, line of business or geographic region basis: sales, revenue, costs, expenses, earnings (including one or more of net profit after tax, gross profit, operating profit, earnings before interest and taxes, earnings before interest, taxes, depreciation and amortization and net earnings), earnings per share, earnings per share from continuing operations, operating income, pre–tax income, net income, margins (including one or more of direct gross, gross, operating income, net income and pretax net income margins), returns (including one or more of return on actual or proforma assets, net assets, equity, investment, investment capital, capital and net capital employed), shareholder return (including total shareholder return relative to an index or peer group), stock price, economic value added, cash generation, cash flow, unit volume, working capital, market share, environmental health and safety goals, cost reductions and development and implementation of strategic plans, completion of key projects, management succession plans or diversity initiatives. A Performance Goal may be an absolute measure or a defined change (amount or percentage) in a measure. A Performance Goal may reflect absolute entity or business unit performance or performance relative to the performance of a peer group of companies or other external measure. To the extent consistent with Section 162(m), the Committee may provide that, in determining whether the Performance Goal has been achieved, the effect of certain events may be excluded. These events include, but are not limited to, any of the following: items of an unusual nature or of infrequency of occurrence as determined under generally accepted accounting principles, asset write–downs, litigation or related judgments or settlements, changes in tax law, accounting principles or other such laws or provisions affecting reported results, severance, contract termination and other costs related to exiting certain business activities, and gains or losses from the disposition of businesses or assets or from the early extinguishment of debt.
(u)“Person” shall mean any individual or entity, including a corporation, partnership, limited liability company, association, joint venture or trust.
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(v)“Plan” shall mean this AxoGen, Inc. 2010 Stock Incentive Plan, as amended from time to time.
(w)“Qualified Performance Award” means a Performance Award that (i) is made to as officer of the Company who may be a “covered person” under Section 162(m), and (ii) is intended to be “qualified performance–based compensation” within the meaning of Section 162(m).
(x)“Restricted Stock” shall mean any Share granted under Section 6(c) of the Plan.
(y)“Restricted Stock Unit” shall mean any unit granted under Section 6(c) of the Plan evidencing the right to receive a Share (or a cash payment equal to the Fair Market Value of a Share) at some future date.
(z)“Rule 16b–3” shall mean Rule 16b–3 promulgated by the Securities and Exchange Commission under the Exchange Act or any successor rule or regulation.
(aa)“Section 162(m)” shall mean Section 162(m) of the Code and the applicable Treasury Regulations promulgated thereunder.
(bb)“Shares” shall mean shares of Common Stock, par value of $0.01 per share, of the Company or such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(c) of the Plan.
(cc)“Specified Employee” shall mean a “specified employee” as such term is defined in Section 409A(a)(2)(B) of the Code.
(dd)“Stock Appreciation Right” shall mean any right granted under Section 6(b) of the Plan.
(ee)“Stock Award” shall mean any Share granted under Section 6(f) of the Plan.
(ff)“2001 Plan” shall mean the LecTec Corporation 2001 Stock Option Plan, as amended from time to time.
Section 3.Administration.
(a)Power and Authority of the Committee. The Plan shall be administered by the Committee. Subject to the express provisions of the Plan and to applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or the method by which payments or other rights are to be calculated in connection with) each Award; (iv) determine the terms and conditions of any Award or Award Agreement; (v) amend the terms and conditions of any Award or Award Agreement; (vi) accelerate the exercisability of any Award or the lapse of restrictions relating to any Award; (vii) determine whether, to what extent and under what circumstances Awards may be exercised in cash, Shares, other securities, other Awards or other property, or cancelled, forfeited or suspended; (viii) determine whether, to what extent and under what circumstances cash, Shares, other securities, other Awards, other property and other amounts payable with respect to an Award under the Plan shall be deferred either automatically or at the election of the holder of the Award or the Committee; (ix) interpret and administer the Plan and any instrument or agreement, including any Award Agreement, relating to the Plan; (x) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (xi) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Award or Award Agreement shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive and binding upon any Participant, any holder or beneficiary of any Award or Award Agreement, and any employee of the Company or any Affiliate.
(b)Delegation. The Committee may delegate its powers and duties under the Plan to one or more Directors (including a Director who is also an officer of the Company) or a committee of Directors and may authorize one or more officers of the Company to grant Awards under the Plan, subject to such terms, conditions and limitations as the Committee may establish in its sole discretion; provided, however, that the Committee shall not delegate its powers and duties under the Plan (i) with regard to officers or directors of the Company or any Affiliate who are subject to Section 16 of the Exchange Act or (ii) in such a manner as would cause the Plan not to comply with the requirements of Section 162(m).
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Any delegation by the Committee pursuant to this Section 3(b) shall be subject to and limited by applicable law or regulation, including without limitation the rules and regulations of the NASDAQ Stock Market or such other securities exchange on which the Shares are listed.
(c)Power and Authority of the Board of Directors. Notwithstanding anything to the contrary contained herein, the Board may, at any time and from time to time, without any further action of the Committee, exercise the powers and duties of the Committee under the Plan, unless the exercise of such powers and duties by the Board would cause the Plan not to comply with the requirements of Section 162(m).
Section 4.Shares Available for Awards.
(a)Shares Available. Subject to adjustment as provided in Section 4(c) of the Plan, the total aggregate number of Shares that may be issued under all Awards under the Plan shall be 5,500,000. If any Shares covered by an Award or to which an Award relates are not purchased or are forfeited or are reacquired by the Company (including shares of Restricted Stock, whether or not dividends have been paid on such shares), or if an Award otherwise terminates or is cancelled without delivery of any Shares, then the number of Shares counted pursuant to Section 4(b) of the Plan against the aggregate number of Shares available under the Plan with respect to such Award, to the extent of any such forfeiture, reacquisition by the Company, termination or cancellation, shall again be available for granting Awards under the Plan. Shares that are withheld in full or partial payment to the Company of the purchase or exercise price relating to an Award or in connection with the satisfaction of tax obligations relating to an Award shall not be available for granting Awards under the Plan. For the avoidance of doubt, if Shares are repurchased on the open market with the proceeds of the exercise price of Options, such Shares may not again be made available for issuance under the Plan.
(b)Accounting for Awards. For purposes of this Section 4, if an Award entitles the holder thereof to receive or purchase Shares, the number of Shares covered by such Award or to which such Award relates shall be counted on the date of grant of such Award against the aggregate number of Shares available for Awards under the Plan. For Stock Appreciation Rights settled in Shares upon exercise, the aggregate number of Shares with respect to which the Stock Appreciation Right is exercised, rather than the number of Shares actually issued upon exercise, shall be counted against the number of Shares available for Awards under the Plan. Awards that do not entitle the holder thereof to receive or purchase Shares and Awards that are settled in cash shall not be counted against the aggregate number of Shares available for Awards under the Plan.
(c)Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split–up, spin–off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company or other similar corporate transaction or event affects the Shares such that an adjustment is necessary in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares (or other securities or other property) that thereafter may be made the subject of Awards, (ii) the number and type of Shares (or other securities or other property) subject to outstanding Awards, (iii) the purchase or exercise price with respect to any Awards and (iv) the limitations contained in Section 4(d) of the Plan.
(d)Section 162(m) Limitations for Qualified Performance Awards. In accordance with Section 162(m), there are limits on the Qualified Performance Awards that may be granted to an Eligible Person under the Plan in any taxable year. Qualified Performance Awards denominated in Shares are subject to the limit set forth in subsection (i) below, and Qualified Performance Awards denominated in cash are subject to the limit set forth in subsection (ii) below. In no case is a Qualified Performance Award subject to both of the limits set forth in subsections (i) and (ii) below.
(i)Limitation for Qualified Performance Awards Denominated in Shares. No Eligible Person may be granted any Options or Stock Appreciation Rights denominated in Shares for more than 1,000,000 Shares (subject to adjustment as provided for in Section 4(c) of the Plan) in the aggregate in any taxable year.
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(ii)Limitation for Qualified Performance Awards Denominated in Cash. No Eligible Person may be granted any Qualified Performance Award or Qualified Performance Awards denominated in cash with a value in excess of $1,000,000 (whether payable in cash, Shares or other property) in the aggregate in any taxable year.
Section 5.Eligibility.
Any Eligible Person shall be eligible to be designated a Participant. In determining which Eligible Persons shall receive an Award and the terms of any Award, the Committee may take into account the nature of the services rendered by the respective Eligible Persons, their present and potential contributions to the success of the Company or such other factors as the Committee, in its discretion, shall deem relevant. Notwithstanding the foregoing, an Incentive Stock Option may only be granted to full–time or part–time employees (which term as used herein includes, without limitation, officers and Directors who are also employees), and an Incentive Stock Option shall not be granted to an employee of an Affiliate unless such Affiliate is also a “subsidiary corporation” of the Company within the meaning of Section 424(f) of the Code or any successor provision.
Section 6.Awards.
(a)Options. The Committee is hereby authorized to grant Options to Eligible Persons with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:
(i)Exercise Price. The purchase price per Share purchasable under an Option shall be determined by the Committee and shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option; provided, however, that the Committee may designate a per share exercise price below Fair Market Value on the date of grant (A) to the extent necessary or appropriate, as determined by the Committee, to satisfy applicable legal or regulatory requirements of a foreign jurisdiction or (B) 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. Notwithstanding the foregoing, an Incentive Stock Option may not be granted to any employee of the Company or a subsidiary of the Company who, at the date of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary of the Company, unless the purchase price is not less than 110% of the Fair Market Value on the date of grant.
(ii)Option Term. The term of each Option shall be fixed by the Committee but shall not be longer than ten (10) years from the date of grant. However, an Incentive Stock Option that is granted to an employee of the Company or a subsidiary of the Company who, at the date of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, or any subsidiary of the Company, may not have a term that exceeds five (5) years from the date of grant.
(iii)Time and Method of Exercise. The Committee shall determine the time or times at which an Option may be exercised in whole or in part and the method or methods by which, and the form or forms (including, without limitation, cash, Shares, other securities, other Awards or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the applicable exercise price) in which, payment of the exercise price with respect thereto may be made or deemed to have been made.
(iv)Limits on Incentive Stock Options.
Each Incentive Stock Option shall provide that if the aggregate Fair Market Value on the date of grant with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year, under the Plan or any other stock option plan of the Company or a parent or subsidiary of the Company, exceeds $100,000, then the Option, as to the excess, shall be treated as a Nonqualified Stock Option.
(b)Stock Appreciation Rights. The Committee is hereby authorized to grant Stock Appreciation Rights to Eligible Persons subject to the terms of the Plan and any applicable Award Agreement. A Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive upon exercise thereof the excess of (i) the Fair Market Value of one Share on the date of exercise (or, if the Committee shall so determine, at any time during a specified
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period before or after the date of exercise) over (ii) the grant price of the Stock Appreciation Right as specified by the Committee, which price shall not be less than 100% of the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right; provided, however, that the Committee may designate a per share grant price below Fair Market Value on the date of grant (A) to the extent necessary or appropriate, as determined by the Committee, to satisfy applicable legal or regulatory requirements of a foreign jurisdiction or (B) if the Stock Appreciation Right is granted in substitution for a stock appreciation right previously granted by an entity that is acquired by or merged with the Company or an Affiliate. Subject to the terms of the Plan and any applicable Award Agreement, the grant price, methods of exercise, dates of exercise, methods of settlement and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee. The term of any Stock Appreciation Right will be fixed by the Committee but shall not be longer than ten (10) years from the date of grant. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate.
(c)Restricted Stock and Restricted Stock Units. The Committee is hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units to Eligible Persons with the following terms and conditions and with such additional terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine:
(i)Restrictions. Shares of Restricted Stock and Restricted Stock Units shall be subject to such restrictions as the Committee may impose (including, without limitation, any limitation on the right to vote a Share of Restricted Stock or the right to receive any dividend or other right or property with respect thereto), which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate.
(ii)Issuance and Delivery of Shares. Any Restricted Stock granted under the Plan shall be issued at the time such Awards are granted and may be evidenced in such manner as the Committee may deem appropriate, including book–entry registration or issuance of a stock certificate or certificates, which certificate or certificates shall be held by the Company. Such certificate or certificates shall be registered in the name of the Participant and shall bear an appropriate legend referring to the restrictions applicable to such Restricted Stock. Shares representing Restricted Stock that is no longer subject to restrictions shall be delivered to the Participant promptly after the applicable restrictions lapse or are waived. In the case of Restricted Stock Units, no Shares shall be issued at the time such Awards are granted. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units evidencing the right to receive Shares, such Shares shall be issued and delivered to the holder of the Restricted Stock Units, unless such issuance and delivery is otherwise deferred to a date authorized by the Committee.
(iii)Forfeiture. Except as otherwise determined by the Committee, upon a Participant’s termination of employment or resignation or removal as a Director (in either case, as determined under criteria established by the Committee) during the applicable restriction period, all Shares of Restricted Stock and all Restricted Stock Units held by the Participant at such time shall be forfeited and reacquired by the Company; provided, however, that the Committee may, when it finds that a waiver would be in the best interest of the Company, waive in whole or in part any or all remaining restrictions with respect to Shares of Restricted Stock or Restricted Stock Units.
(d)Dividend Equivalents. The Committee is hereby authorized to grant Dividend Equivalents to Eligible Persons under which the Participant shall be entitled to receive payments (in cash, Shares, other securities, other Awards or other property as determined in the discretion of the Committee) equivalent to the amount of cash dividends paid by the Company to holders of Shares with respect to a number of Shares determined by the Committee. Subject to the terms of the Plan and any applicable Award Agreement, such Dividend Equivalents may have such terms and conditions as the Committee shall determine, but in no event shall Dividend Equivalents be granted to a Participant in connection with the grant of an Option or Stock Appreciation Right.
(e)Performance Awards. The Committee is hereby authorized to grant Performance Awards to Eligible Persons subject to the terms of the Plan and any applicable Award Agreement. A Performance Award granted under the Plan (i) may be denominated or payable in cash, Shares (including, without limitation, Restricted Stock and Restricted Stock Units), other securities, other Awards or other property, and (ii) shall confer on the holder thereof the right to receive payments, in whole or in part, upon the achievement of one or more objective Performance Goals during such performance periods as the Committee shall establish. Subject to the terms of the Plan, the Performance Goals to be achieved during
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any performance period, the length of any performance period, the amount of any Performance Award granted, the amount of any payment to be made pursuant to any Performance Award and any other terms and conditions of any Performance Award shall be determined by the Committee. Qualified Performance Awards shall be conditioned, to the extent required by 162(m), solely on the achievement of one or more objective Performance Goals established by the Committee within the time prescribed by Section 162(m), and Qualified Performance Awards shall otherwise comply with the requirements of Section 162(m).
(f)Stock Awards. The Committee is hereby authorized to grant to Eligible Persons Shares without restrictions thereon, as deemed by the Committee to be consistent with the purpose of the Plan. Subject to the terms of the Plan and any applicable Award Agreement, such Stock Awards may have such terms and conditions as the Committee shall determine.
(g)Other Stock–Based Awards. The Committee is hereby authorized to grant to Eligible Persons such other Awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as are deemed by the Committee to be consistent with the purpose of the Plan. The Committee shall determine the terms and conditions of such Awards, subject to the terms of the Plan and the Award Agreement. Shares, or other securities delivered pursuant to a purchase right granted under this Section 6(g), shall be purchased for consideration having a value equal to at least 100% of the Fair Market Value of such Shares or other securities on the date the purchase right is granted. The consideration paid by the Participant may be paid by such method or methods and in such form or forms (including, without limitation, cash, Shares, other securities, other Awards or other property, or any combination thereof), as the Committee shall determine.
(h)General.
(i)Consideration for Awards. Awards may be granted for no cash consideration or for any cash or other consideration as may be determined by the Committee or required by applicable law.
(ii)Awards May Be Granted Separately or Together. Awards may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with or in substitution for any other Award or any award granted under any other plan of the Company or any Affiliate. Awards granted in addition to or in tandem with other Awards or in addition to or in tandem with awards granted under any other plan of the Company or any Affiliate may be granted either at the same time as or at a different time from the grant of such other Awards or awards.
(iii)Forms of Payment under Awards. Subject to the terms of the Plan and of any applicable Award Agreement, payments or transfers to be made by the Company or an Affiliate upon the grant, exercise or payment of an Award may be made in such form or forms as the Committee shall determine (including, without limitation, cash, Shares, other securities, other Awards or other property, or any combination thereof), and may be made in a single payment or transfer, in installments or on a deferred basis, in each case in accordance with rules and procedures established by the Committee. Such rules and procedures may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents with respect to installment or deferred payments.
(iv)Term of Awards. The term of each Award shall be for a period not longer than ten (10) years from the date of grant.
(v)Limits on Transfer of Awards. Except as otherwise provided in this Section 6(h)(v), no Award (other than a Stock Award) and no right under any such Award shall be transferable by a Participant other than by will or by the laws of descent and distribution. The Committee may establish procedures as it deems appropriate for a Participant to designate a Person or Persons, as beneficiary or beneficiaries, to exercise the rights of the Participant and receive any property distributable with respect to any Award in the event of the Participant’s death. The Committee, in its discretion and subject to such additional terms and conditions as it determines, may permit a Participant to transfer a Non–Qualified Stock Option to any “family member” (as such term is defined in the General Instructions to Form S–8 (or any successor to such Instructions or such Form) under the Securities Act of 1933, as amended) at any time that such Participant holds such Option, provided that such transfers may
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not be for value (i.e., the transferor may not receive any consideration therefor) and the family member may not make any subsequent transfers other than by will or by the laws of descent and distribution. Each Award under the Plan or right under any such Award shall be exercisable during the Participant’s lifetime only by the Participant (except as provided herein or in an Award Agreement or amendment thereto relating to a Non–Qualified Stock Option) or, if permissible under applicable law, by the Participant’s guardian or legal representative. No Award (other than a Stock Award) or right under any such Award may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate.
(vi)Restrictions; Securities Exchange Listing. All Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such restrictions as the Committee may deem advisable under the Plan, applicable federal or state securities laws and regulatory requirements, and the Committee may cause appropriate entries to be made or legends to be placed on the certificates for such Shares or other securities to reflect such restrictions. If the Shares or other securities are traded on a securities exchange, the Company shall not be required to deliver any Shares or other securities covered by an Award unless and until such Shares or other securities have been admitted for trading on such securities exchange.
(vii)Prohibition on Option and Stock Appreciation Right Repricing. Except as provided in Section 4(c) hereof, no Option may be amended to reduce its initial exercise price, and no Option shall be cancelled and replaced with cash, other Awards or an Option or Options having a lower exercise price than the original Option. In addition, except as provided in Section 4(c) hereof, no Stock Appreciation Right may be amended to reduce its initial grant price, and no Stock Appreciation Right shall be cancelled and replaced with cash, other Awards, or a Stock Appreciation Right or Stock Appreciation Rights having a lower grant price than the original Stock Appreciation Right.
(viii)Section 409A Provisions. Notwithstanding anything in the Plan or any Award Agreement to the contrary, to the extent that any amount or benefit that constitutes “deferred compensation” to a Participant under Section 409A of the Code and applicable guidance thereunder is otherwise payable or distributable to a Participant under the Plan or any Award Agreement solely by reason of the occurrence of a Change in Control or due to the Participant’s disability or “separation from service” (as such term is defined under Section 409A), such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance, unless the Committee determines in good faith that (i) the circumstances giving rise to such Change in Control, disability or separation from service meet the definition of a change in ownership or control, disability or separation from service, as the case may be, in Section 409A(a)(2)(A) of the Code and applicable proposed or final regulations, or (ii) the payment or distribution of such amount or benefit would be exempt from the application of Section 409A by reason of the short–term deferral exemption or otherwise. Any payment or distribution that otherwise would be made to a Participant who is a Specified Employee (as determined by the Committee in good faith) on account of separation from service may not be made before the date which is six months after the date of the Specified Employee’s separation from service (or, if earlier, upon the Specified Employee’s death), unless the payment or distribution is exempt from the application of Section 409A by reason of the short–term deferral exemption or otherwise.
Section 7.Amendment and Termination; Corrections.
(a)Amendments to the Plan. The Board may amend, alter, suspend, discontinue or terminate the Plan at any time; provided, however, that, notwithstanding any other provision of the Plan or any Award Agreement, prior approval of the shareholders of the Company shall be required for any amendment to the Plan that:
(i)requires shareholder approval under the rules or regulations of the Securities and Exchange Commission, the NASDAQ Stock Market or any securities exchange that are applicable to the Company;
(ii)increases the number of shares authorized under the Plan as specified in Section 4(a) of the Plan;
(iii)increases the number of shares or value subject to the limitations contained in Section 4(d) of the Plan;
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(iv)permits repricing of Options or Stock Appreciation Rights which is prohibited by Section 6(h)(vii) of the Plan;
(v)permits the award of Options or Stock Appreciation Rights at a price less than 100% of the Fair Market Value of a Share on the date of grant of such Option or Stock Appreciation Right, contrary to the provisions of Sections 6(a)(i) and 6(b)(ii) of the Plan; and
(vi)would cause Section 162(m) of the Code to become unavailable with respect to the Plan.
(b)Amendments to Awards. Subject to the provisions of the Plan, the Committee may waive any conditions of or rights of the Company under any outstanding Award, prospectively or retroactively. Except as otherwise provided in the Plan, the Committee may amend, alter, suspend, discontinue or terminate any outstanding Award, prospectively or retroactively, but no such action may adversely affect the rights of the holder of such Award without the consent of the Participant or holder or beneficiary thereof.
(c)Correction of Defects, Omissions and Inconsistencies. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and to the extent it shall deem desirable to implement or maintain the effectiveness of the Plan.
Section 8.Income Tax Withholding.
In order to comply with all applicable federal, state, local or foreign income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal, state, local or foreign payroll, withholding, income or other taxes, which are the sole and absolute responsibility of a Participant, are withheld or collected from such Participant. In order to assist a Participant in paying all or a portion of the applicable taxes to be withheld or collected upon exercise or receipt of (or the lapse of restrictions relating to) an Award, the Committee, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Participant to satisfy such tax obligation by (a) electing to have the Company withhold a portion of the Shares otherwise to be delivered upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes or (b) delivering to the Company Shares other than Shares issuable upon exercise or receipt of (or the lapse of restrictions relating to) such Award with a Fair Market Value equal to the amount of such taxes. The election, if any, must be made on or before the date that the amount of tax to be withheld is determined.
Section 9.General Provisions.
(a)Awards in Connection with Corporate Transactions and Otherwise. Nothing contained in this Plan shall be construed to (i) limit the right of the Committee to make Awards under this Plan in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including Awards to employees thereof who become employees of the Company, or for other proper corporate purposes, or (ii) limit the right of the Company to grant stock options or make other awards outside of this Plan. Without limiting the foregoing, the Committee may make an Award to an employee of another corporation who becomes an employee of the Company by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company in substitution for a grant made by such corporation. The terms and conditions of the substitute Awards may vary from the terms and conditions required by the Plan and from those of the substituted stock incentives. The Committee shall prescribe the provisions of the substitute Awards.
(b)No Rights to Awards. No Eligible Person, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Eligible Persons, Participants or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to any Participant or with respect to different Participants.
(c)Award Agreements. No Participant shall have rights under an Award granted to such Participant unless and until an Award Agreement is issued to, and accepted by, the Participant.
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(d)Clawback Policies. All Awards under the Plan are subject to the applicable provisions of the Company's clawback or recoupment policy approved by the Board, if any, as such policy may be in effect from time to time.
(e)No Rights of Shareholders. Except with respect to Restricted Stock and Stock Awards, neither a Participant nor the Participant’s legal representative shall be, or have any of the rights and privileges of, a shareholder of the Company with respect to any Shares issuable upon the exercise or payment of any Award, in whole or in part, unless and until the Shares have been issued.
(f)No Limit on Other Compensation Plans or Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation plans or arrangements, and such plans or arrangements may be either generally applicable or applicable only in specific cases.
(g)No Right to Employment or Directorship. The grant of an Award shall not be construed as giving a Participant the right to be retained as an employee of the Company or any Affiliate, or a Director to be retained as a Director, nor will it affect in any way the right of the Company or an Affiliate to terminate a Participant’s employment at any time, with or without cause. In addition, the Company or an Affiliate may at any time dismiss a Participant from employment free from any liability or any claim under the Plan or any Award, unless otherwise expressly provided in the Plan or in any Award Agreement.
(h)Governing Law. The internal law, and not the law of conflicts, of the State of Minnesota, shall govern all questions concerning the validity, construction and effect of the Plan or any Award, and any rules and regulations relating to the Plan or any Award.
(i)Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the purpose or intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction or Award, and the remainder of the Plan or any such Award shall remain in full force and effect.
(j)No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate.
(k)No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash shall be paid in lieu of any fractional Share or whether such fractional Share or any rights thereto shall be cancelled, terminated or otherwise eliminated.
(l)Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
Section 10.Effective Date of the Plan; Effect on 2001 Plan.
The Plan was first adopted by the Board on August 16, 2010 and previously amended and restated and approved by the shareholders as of September 27, 2011 and May 13, 2014; the Plan, as amended and restated herein, was adopted by the Board on March 23, 2016. The Plan as amended and restated herein shall be subject to approval by the shareholders of the Company at the meeting of shareholders of the Company to be held on May 26, 2016, and the amended and restated Plan shall be effective as of the date of such shareholder approval. On and after September 22, 2010, no awards shall be granted under the 2001 Plan, but all outstanding awards previously granted under the 2001 Plan shall remain outstanding in accordance with the terms thereof. All grants to non–employee Directors after September 22, 2010 shall be made solely under the Plan.
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Section 11.Term of the Plan.
The Plan shall terminate at midnight on March 22, 2026, unless terminated before then by the Board; provided, however, that no Qualified Performance Award may be granted under the Plan after the fifth year following the year in which the shareholders of the Company approved the Performance Goals, unless and until the Performance Goals are reapproved by the shareholders. Awards may be granted under the Plan until the earlier to occur of the date of termination of the Plan or the date on which all Shares available for Awards under the Plan have been purchased or acquired. As long as any Awards are outstanding under the Plan, the terms of the Plan shall govern such Awards.
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APPENDIX A *** Exercise Your Right to Vote *** Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 14, 2018. AXOGEN, INC. AXOGEN, INC. 13631 PROGRESS BLVD. SUITE 400 ALACHUA, FL 32615 You are receiving this communication because you hold shares in the company named above. This is not a ballot. You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see reverse side). We encourage you to access and review all of the important information contained in the proxy materials before voting. materials and voting instructions. 48 E35976-P01434 See the reverse side of this notice to obtain proxy Meeting Information Meeting Type:Annual Meeting For holders as of:March 20, 2018 Date: May 14, 2018 Time: 4:00 PM EDT Location: Hyatt Regency Orlando International Airport 9300 Jeff Fuqua Blvd. Orlando, FL 32827, USA |
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VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. AXOGEN, INC. 13631 PROGRESS BLVD. SUITE 400 ALACHUA, FL 32615 During The Meeting - Go to www.virtualshareholdermeeting.com/ |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com. |
*** Exercise Your Right to Vote *** Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May |
Before You Vote How to Access the Proxy Materials Have the information that is printed in the box marked by the arrow |
The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees: 01) 02) 03) 04) Gregory G. Freitag Mark Gold, M.D. Jamie M. Grooms Guido J. Neels 05) 06) 07) |