CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS We are party to a Second Amended and Restated Stockholders Agreement with MidOcean
Partners III, L.P., MidOcean Partners III-A, L.P., and MidOcean Partners III-D, L.P. (collectively, “MidOcean Partners”) and certain of our other stockholders (the “Stockholders Agreement”), pursuant to which
certain ofMidOcean Partners and the
other stockholders party thereto
arewere entitled to
certain customary registration rights, including demand registration and piggyback registration rights.
As of July 27, 2017, the stockholders holding an aggregate of 9,805,238 shares, or 28.3%, of our common stock are entitled to registration rightsIn addition, pursuant to the Stockholders
Agreement.Demand Registrations
Under the Stockholders Agreement, holders of a majority of the shares subject to the agreement (the “Registrable Securities”) are able to require us to use our best efforts to file a registration statement under the Securities Act of 1933, as amended (the “Securities Act”) (“Demand Registration”), and we are required to notify the remaining holders of Registrable Securities in the event of such request (a “Demand Registration Request”). The holders of Registrable Securities can issue up to eight Demand Registration Requests. All eligible holders will be entitled to participate in any Demand Registration upon proper notice to us. We have certain limited rights to delay or postpone such registration.
Piggyback Registrations
Under the Stockholders Agreement, if at any time we propose or are required to register any of our equity securities under the Securities Act (other than a Demand Registration or certain excluded registrations), we will be required to notify each holder of Registrable Securities of its right to participate in such registration (a “Piggyback Registration”). We have the right to terminate or postpone any registration statement in which holders of Registrable Securities have elected to exercise Piggyback Registration rights.
Expenses of Registration
We are requiredagreed to bear the registration expenses (other than underwriting discounts) incident to any registrationregistrations in accordance with the Stockholders Agreement including the reasonable feesand agreed to indemnification provisions customary for agreements of counsel chosen by the holdersthis type. As of a majorityJune 2019, following an equity offering pursuant to which MidOcean Partners sold nearly all of the Registrable Securities included in the registration.
Indemnification
Underits remaining shares of our common stock, no party to the Stockholders Agreement we must, subject to certain limitations, indemnify each holder of Registrable Securities and its employees, partners, members, officers, directors and stockholders of each such holder; agents, representatives and advisors, including legal counsel and accountants for each such holder;has any underwriter (as defined in the Securities Act) for each such holder; and each person, if any, who controls such holder or underwriter within the meaning of the Securities Act or the Exchange Act, against all losses, claims, damages, liabilities and expenses in certain circumstances and to pay any expenses reasonably incurred in connection with investigating and defending such losses, claims, damages, liabilities and expenses, except insofar as the same arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any such holder expressly for us in connection with afurther registration effectedrights pursuant to the Stockholders Agreement.
Selldown Agreement
We are party to a selldown agreement with Freshpet Investors LLC (the “Selldown Agreement”) pursuant to which Freshpet Investors LLC agreed for a period
Raw Material Vendor
In September 2018, one of
18 months from the
completion of our IPO (the “Selldown Period”) not to offer, transfer, distribute, sell, contract to sell, pledge, grant any option to purchase, make any short
sale or otherwise dispose of any shares of our common stock, or any options or warrants to purchase any shares of our common stock, or any securities convertible into, exchangeable for or that represent the right to receive shares of our common stock (collectively, the “applicable securities”), whether ownedCompany’s raw material vendors, Florida Food Products, was purchased by Freshpet Investors LLCMidOcean Partners, at the time, one of our largest stockholders. Jonathan Marlow, who was at that time, a member of our board of directors, also serves on the board of directors of Florida Food Products. The purchase of the completionvendor by MidOcean Partners has had no impact on the cadence or amount of the offering or acquired by it thereafter. Notwithstandingraw materials that the above restriction, Freshpet Investors LLC may:
| (i)
| in any 90 day period (x) during the time beginning on the day that is 181 days following the completion of our IPO and ending on the day that is 12 months following the completion of our IPO, transfer up to 7.5% of the applicable securities held by it on the date of the agreement and (y) during the time beginning on the day that is 366 days following the completion of our IPO and ending at the conclusion of the Selldown Period transfer up to 10% of the applicable securities held by it on the date of the agreement, in each case as a distribution to its members, affiliates or any investment fund or other entity controlled or managed by it; or
|
| (ii)
| transfer its applicable securities pursuant to a bona fide third party tender offer, merger, consolidation or other similar transaction made to all holders of our common stock involving a change of control (as defined in the selldown agreement) of us following the completion of our IPO.
|
Company has purchased from the vendor. In connection with a secondary offering of our common stock completed in May 2015, we and Freshpet Investors LLC entered into a waiver to the selldown agreement, which permitted Freshpet Investors LLC to sell shares of our common stock in such secondary offering. Freshpet Investors LLC disposed ofJune 2019, MidOcean Partners sold nearly all of its holdings of common stock ofshares in the Company and is no longer considered a related party as a result. After MidOcean Partners acquired the vendor, the Company purchased approximately $1,505,960 and $650,000 of raw materials from the vendor in May 20162019 and thereafter dissolved.
2018, respectively. Jonathan Marlow resigned from our Board on September 26, 2019. The Company believes that all payments made to the vendor are at market value and thus at arm’s length.
Indemnification Agreements
We have entered into indemnification agreements with each of our directors and executive officers. Each indemnification agreement provides that, subject to limited exceptions, and among other things, we will indemnify the director or executive officer to the fullest extent permitted by law for claims arising in his or her capacity as our director or officer.
Procedures for Approval of Related Party Transactions
Our Board
of Directors has adopted a written related party transaction policy, which sets forth the policies and procedures for the review and approval or ratification of related party transactions. This policy is
administratedadministered by our Audit Committee. These policies provide that, in determining whether or not to recommend the initial approval or ratification of a related party transaction, the relevant facts and circumstances available shall be considered, including, among other factors it deems appropriate, whether the interested transaction is on terms no less favorable than terms generally available to an unaffiliated
third-partythird party under the same or similar circumstances and the extent of the related party’s interest in the transaction.
EXECUTIVE COMPENSATION
This section describes the material elements of compensation awarded to, earned by each of our named executive officers (the “NEOs”) in fiscal 2016. Our NEOs for 2016 are Richard Thompson, who served as our Chief Executive Officer through June 30, 2016, William B. Cyr, who has served as our Chief Executive Officer since September 2016, Scott Morris, who served as our President since March 2016 and Chief Operating Officer up to September 2016 and Richard Kassar, who served as our Chief Financial Officer during 2016. This section also provides qualitative information regarding the manner and context in which compensation is awarded to and earned by our executive officers and is intended to place in perspective the data presented in the tables and narrative that follow.
Compensation Philosophy and Objectives
Our compensation philosophy is to align executive compensation with the interests of our stockholders by basing certain compensation decisions on financial objectives that our Board of Directors believes are primary determinants of long-term stockholder value. An important goal of our executive compensation program is to ensure that we hire and retain talented and experienced executives who are motivated to achieve or exceed our short-term and long-term corporate goals. Our executive compensation programs are designed to reinforce a strong pay-for-performance orientation and to serve the following purposes:
to reward our NEOs for sustained financial and operating performance and leadership excellence;
to align their interests with those of our stockholders; and
35to encourage our NEOs to remain with us for the long-term.
Elements of Compensation
Base Salary
We pay our NEOs a base salary based on the experience, skills, knowledge and responsibilities required of each officer. We believe base salaries are an important element in our overall compensation program because base salaries provide a fixed element of compensation that reflects job responsibilities and value to us. In 2016, we paid annual base salaries of $450,000 to Mr. Thompson and $600,000 to Mr. Cyr, which were prorated for the months employed as Chief Executive Officer, and annual base salaries of $375,000 to Mr. Morris and $283,000 to Mr. Kassar. None of our NEOs is currently party to an employment agreement or other agreement or arrangement that provides for automatic or scheduled increases in base salary. Base salaries for our NEOs are determined by our full Compensation Committee at its sole discretion, and no NEO has the right to automatic or scheduled increases in base salary.
Annual Incentive Bonuses
The Board of Directors adopted an annual incentive plan, in which our NEOs were eligible to participate beginning in fiscal year 2016. The annual incentive plan is based on the Company’s operating performance, which includes Adjusted EBITDA and Net Sales. The performance-based bonuses, which are calculated as a percentage of base salary, are designed to motivate our employees to achieve annual goals based on our strategic, financial, and operating performance objectives. For 2016, the necessary performance bonus metrics were not met. Rather the Board of Directors relied on an annual assessment of the Company’s operating performance, including Adjusted EBITDA, as well as the performance of our executives during the preceding year to make annual incentive and bonus determinations. For 2016, the full Board of Directors determined to pay performance-based bonuses of $143,000 to Mr. Cyr, $111,000 to Mr. Morris, and $69,350 to Mr. Kassar.
TABLE OF CONTENTSLong-Term Equity Compensation
Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, or any formal equity ownership guidelines applicable to them, with the exception of Mr. Cyr’s employment contract requiring him to hold four times his salary by no later than the fifth anniversary of his employment commencement, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and our stockholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention because this feature incents our executive officers to remain in our employment during the vesting period. Accordingly, our Board of Directors periodically reviews the equity incentive compensation of our NEOs and from time to time may grant equity incentive awards to them in the form of stock options.
On December 2016, we entered into amendments to specific performance-based awards under the 2010 Stock Option Plan (the “2010 Plan”) with our employees, including certain of our NEOs, modifying the performance-based awards to time-based awards that vest over two years. These awards were originally included in the November 2014 modification from exit-event awards to performance-based awards. At the time of the December 2016 modification, the achievement of the performance-based awards’ vesting criteria was not considered probable.
In connection with our IPO, we adopted an equity incentive plan, our 2014 Omnibus Incentive Plan (the “2014 Plan”). In 2016, we granted our NEOs options to purchase shares of our common stock under the 2014 Plan, 50% of which become vested and exercisable in equal installments on each of the first three anniversaries of the date of grant and 50% of which become vested and exercisable based on the achievement of certain earnings targets during years 2016, 2017 and 2018, subject to the NEOs’ continued employment through the applicable vesting dates. We expect that future awards will be made under the 2014 Plan. For additional detail regarding the 2014 Plan, please see the “Stock Option and Other Compensation Plans” section below.
In connection with the hiring of our Chief Executive Officer, we granted Mr. Cyr, 500,000 time-vesting stock options and 500,000 performance-based stock options. Mr. Cyr’s sign-on equity awards were granted under the “inducement award” under the NASDAQ Marketplace Rules, but the award agreements provide for the awards to be governed as if issued under the 2014 Omnibus Plan. As of December 31, 2016, the awards granted were time-based (cliff vest over four years) and performance-based (vest when performance targets based on performance targets for fiscal year 2020 are met, as defined in the stock option grant agreement).
Additionally, to ensure that our NEO’s were aligned on long term performance metrics, we granted Mr. Morris and Mr. Kassar additional options to purchase shares of our common stock under the 2014 Plan, which become exercisable upon the achievement of performance-based metrics for 2020 which align with Mr. Cyr’s performance-based stock options.
Other Supplemental Benefits
Our NEOs are eligible for the following benefits on a similar basis as other eligible employees:
health, dental and vision insurance;
vacation, personal holidays and sick days;
life insurance and supplemental life insurance; and
short-term and long-term disability.
401(k) Retirement Plan
Additionally, we maintain a 401(k)-retirement savings plan (the “401(k) Plan”) that is intended to be a tax-qualified defined contribution plan under Section 401(k) of the Internal Revenue Code. In general, all our employees are eligible to participate, beginning on the first day of the month following commencement of their employment.
The 401(k) Plan includes a salary deferral arrangement pursuant to which a participant may elect to reduce his or her current compensation by up to the statutorily prescribed limit, equal to $18,000 in 2016, and have the amount of the reduction contributed to his or her 401(k) Plan. Currently, we match contributions made by participants in the 401(k) Plan up to 4% of the employee’s annual eligible earnings. We believe that providing a vehicle for tax-deferred retirement savings through our 401(k) Plan, and making matching contributions, adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our NEOs, in accordance with our compensation policies.
We do not maintain any pension plans or non-qualified deferred compensation plans for the benefit of our employees or other service providers.
Summary Compensation Table
The following table sets forth information regarding compensation awarded to, earned by or paid to our NEOs during 2014, 2015, and 2016.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and principal position | | Year | | Salary ($)(1) | | | Bonus ($)(2) | | | Option Awards ($)(3) | | | Non-Equity Incentive Plan Compensation ($)(4) | | | All Other Compensation ($)(5) | | | Total ($) | |
William B. Cyr (6) | | 2016 | | | 174,712 | | | | 143,012 | | | | 5,403,776 | | | | — | | | | 8,914 | | | | 5,730,416 | |
Chief Executive Officer | | | | | | | | | | | | | | | | | | | | | | | | | | |
Richard Thompson | | 2016 | | | 225,000 | | | | — | | | | — | | | | — | | | | 414,478 | | | | 639,478 | |
Chief Executive Officer | | 2015 | | | 467,308 | | | | — | | | | — | | | | — | | | | 14,055 | | | | 481,363 | |
| | 2014 | | | 405,231 | | | | 24,000 | | | | 2,561,289 | | | | 96,000 | | | | 15,313 | | | | 3,101,833 | |
Scott Morris | | 2016 | | | 439,768 | | | | 111,008 | | | | 770,052 | | | | — | | | | 30,629 | | | | 1,351,457 | |
President & Co-Founder | | 2015 | | | 350,000 | | | | — | | | | — | | | | — | | | | 29,764 | | | | 379,764 | |
| | 2014 | | | 329,225 | | | | 34,000 | | | | 588,548 | | | | 57,600 | | | | 30,785 | | | | 1,040,158 | |
Richard Kassar | | 2016 | | | 296,951 | | | | 69,353 | | | | 546,177 | | | | — | | | | 25,101 | | | | 937,583 | |
Chief Financial Officer | | 2015 | | | 285,577 | | | | — | | | | — | | | | — | | | | 24,478 | | | | 310,055 | |
| | 2014 | | | 252,469 | | | | 24,000 | | | | 443,549 | | | | 48,000 | | | | 25,257 | | | | 793,275 | |
(1)
| Salaries for fiscal years 2016, 2015, and 2014 do not reflect amounts deferred under the Company’s 401(k) Plan.
|
(2)
| The amounts in this column represent cash bonuses granted in connection with the completion of our IPO in 2014 and discretionary bonuses in 2016.
|
(3)
| The amounts in this column reflect the aggregate grant date fair value of each option award granted during fiscal year 2014 and the incremental fair value of the modifications to option awards granted on January 1, 2011 described above under the caption entitled “Long-Term Equity Compensation” and the table below entitled “Outstanding Option Awards at December 31, 2016.” The amounts shown were computed in accordance with FASB ASC Topic 718 and are based on the valuation assumptions described in Note 12 to our consolidated financial statements included in our 2016 10-K. Mr. Cyr’s granted options for 2016 were $5,403,776. These stock options were granted to Mr. Cyr as an inducement under the Nasdaq rules. Mr. Morris’s granted and modified option awards in 2016 were $1,025,462, and $(255,410), respectively, and Mr. Kassar’s granted and modified option awards in 2016 were $703,664 and $(157,487) respectively. Mr. Morris’ granted and modified option awards in 2014 were $325,728, and $262,820, respectively, and Mr. Kassar’s granted and modified option awards in 2014 were $275,618 and $167,932, respectively. In 2015, we did not grant any of our NEOs options to purchase shares of our common stock.
|
(4)
| The amounts reported in the “Non-Equity Incentive Plan Compensation” column represent awards of performance-based annual bonuses to our NEOs.
|
(5)
| The compensation included in the “All Other Compensation” column consists of the 401(k) company matching contributions made for each of our NEOs and premiums we paid with respect to each of our NEOs for (a) medical, dental and vision insurance, (b) personal accident insurance, (c) life insurance, (d) long-term
|
| disability insurance, (e) short-term disability insurance, and (f) fees related to an education assistance program. Additionally includes cost associated with Richard Thompson’s Separation and the consulting agreement; including severance payments, associated benefit plan participation and a monthly retainer fee.
|
(6)
| Mr. Cyr also serves as a member of our Board of Directors but does not receive any additional compensation for his service as a director.
|
Outstanding Option Awards at December 31, 2016
The following table sets forth information regarding outstanding stock options held by our NEOs as of December 31, 2016:
Name | | Number of Securities Underlying Unexercised Options Exercisable | | | Number of Securities Underlying Unexercised Options Unexercisable(1) | | | Equity incentive plan awards: number of securities underlying unexercised unearned options | | | Option Exercise Price (Per Share)($) | | | Option Expiration Date |
Richard Thompson | | | 44,046 | | | | 22,023 | | | | 66,068 | | (2) | | 15.00 | | | 11/06/2024 |
| | | 662,651 | | | | — | | | | 185,207 | | (2) | | 7.10 | | | 12/31/2020 |
William B. Cyr | | | | | | | 500,000 | | | | 500,000 | | (3) | | 10.23 | | | 09/05/2026 |
Scott Morris | | | — | | | | | | | | 133,000 | | (3) | | 8.90 | | | 09/26/2026 |
| | | — | | | | 42,624 | | | | 42,624 | | (2) | | 9.05 | | | 05/09/2026 |
| | | 17,041 | | | | 8,521 | | | | 25,562 | | (2) | | 15.00 | | | 11/06/2024 |
| | | 42,748 | | | | 57,434 | | | | | | | | 7.10 | | | 12/31/2020 |
Richard Kassar | | | — | | | | | | | | 79,800 | | (3) | | 8.90 | | | 09/26/2026 |
| | | — | | | | 35,292 | | | | 35,292 | | (2) | | 9.05 | | | 05/09/2026 |
| | | 14,420 | | | | 7,210 | | | | 21,629 | | (2) | | 15.00 | | | 11/06/2024 |
| | | 30,250 | | | | 35,414 | | | | | | | | 7.10 | | | 12/31/2020 |
(1)
| The unvested time based options vest annually in approximately equal amounts through 2017.
|
(2)
| The unvested performance options vest annually based on targets. For 2016, the performance-vesting targets were not met.
|
(3)
| The unvested performance options vest annually based on fiscal year 2020 targets.
|
Employment Agreements with Named Executive Officers
The Company has entered into employment agreements with each of Mr. Cyr, Mr. Morris and Mr. Kassar. The employment agreements provide for an initial term of one year and are subject to automatic one-year extensions beginning on the expiration of the initial term. The automatic extension of the employment agreements may be terminated with at least 90 days’ prior written notice from the executive or the Company stating the intent not to extend the employment term. Under the employment agreements, Mr. Cyr, Mr. Morris and Mr. Kassar are entitled to receive minimum annual base salaries of $600,000, $375,000 and $283,000, respectively, subject to annual review by the Company’s board of directors, and have the opportunity to participate in the Company’s equity incentive programs. Mr. Cyr, Mr. Morris and Mr. Kassar have the opportunity to earn an annual target bonus equal to at least 75%, 60% and 50%, respectively, of their base salary. Each executive is also entitled to participate in the Company’s employee and fringe benefit plans as may be in effect from time to time on the same basis as other employees of the Company generally.
Under the employment agreements, in the event of the executive’s termination of employment without “cause,” for “good reason” or due to “permanent disability” (each as defined in the employment agreements), the executive generally is entitled to receive, subject to the executive’s timely execution of a general release of claims: (i) any unpaid base salary and bonuses through the date of termination, (ii) an amount equal to the annual base salary, payable in equal monthly installments over the twelve-month period following such termination for Mr. Morris and Mr. Kassar, and an amount equal to the annual base salary and bonus over 18 eighteen-months for Mr. Cyr, and (iii) continued health and fringe benefits for a period of twelve months following such termination for Mr. Morris and Mr. Kassar, and over 18 eighteen-months for Mr. Cyr. In addition, in the event of the executive’s termination of employment without “cause” or with “good reason,” the executive generally is entitled to receive a pro-rated annual performance-based bonus for the year in which termination occurs, provided such termination occurs after June 30th of the applicable year.
The employment agreements contain a non-competition covenant that prohibits the executive from competing against the Company for a period of one year following termination of employment for Mr. Morris and Mr. Kassar,
and two years following termination of employment for Mr. Cyr. The new employment agreements also contain non-solicitation provisions that prohibit the executives from actively soliciting the Company’s employees, customers or suppliers during the period of employment and for a period of one year following termination of employment. The executives are also subject to perpetual confidentiality restrictions that protect the Company’s proprietary information, developments and other intellectual property.
Stock Option and Other Compensation Plans
2006 Stock Incentive Plan
The 2006 Stock Incentive Plan (the “2006 Plan”) was adopted by our Board of Directors and approved by our stockholders in October 2006. The 2006 Plan provided for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and other stock-based awards to our employees, officers, directors, consultants and advisors. As of December 31, 2016, there were options to purchase 82,839 shares of our common stock outstanding under the 2006 Plan, at a weighted average exercise price of $6.76 per share, and options to purchase 315,156 shares of our common stock had been exercised. The 2006 Plan was terminated in December 2010 and no awards have been granted under the 2006 Plan since such termination, however, any award outstanding under the 2006 Plan at the time of the termination will remain in effect until such award is exercised or has expired in accordance with its terms.
2010 Stock Option Plan
The 2010 Plan was adopted by our Board of Directors and approved by our stockholders in December 2010. The 2010 Plan provided for the grant of incentive stock options and non-statutory stock options to our employees, officers, directors, consultants and advisors. As of December 31, 2016, there were options to purchase 1,833,739 shares of our common stock outstanding under the 2010 Plan, at a weighted average exercise price of $7.10 per share, and options to purchase 109,554 shares of our common stock had been exercised. The 2010 Plan was terminated in March 2014 and no awards have been granted under the 2010 Plan since such termination, however, any award outstanding under the 2010 Plan at the time of the termination will remain in effect until such award is exercised or has expired in accordance with its terms.
2014 Omnibus Incentive Plan
The 2014 Plan was adopted by our Board of Directors and approved by our stockholders on October 2, 2014 in connection with our IPO. The 2014 Plan provides for grants of stock options, stock appreciation rights, restricted stock, other stock-based awards and other cash-based awards to our directors, officers, employees, consultants and advisors. The aggregate number of shares of common stock which may be issued or used for reference purposes under the 2014 Plan or with respect to which awards may be granted may not exceed 1,479,200 shares. As of December 31, 2016, there were options to purchase 1,326,783 shares of our common stock outstanding under the 2014 Plan, at a weighted average exercise price of $10.57 per share, and no options to purchase shares of our common stock had been exercised.
Limitations on Liability and Indemnification
Our amended and restated certificate of incorporation limits the personal liability of directors for breach of fiduciary duty to the maximum extent permitted by the Delaware General Corporate Law (the “DGCL”) and provides that no director will have personal liability to us or to our stockholders for monetary damages for breach of fiduciary duty or other duty as a director. However, these provisions do not eliminate or limit the liability of any of our directors:
for any breach of the director’s duty of loyalty to us or our stockholders;
| •
| for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
|
for voting for or assenting to unlawful payments of dividends, stock repurchases or other distributions; or
for any transaction from which the director derived an improper personal benefit.
Any amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to such amendment or repeal. If the DGCL is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the DGCL.
In addition, our amended and restated certificate of incorporation provides that we must indemnify our directors and officers and we must advance expenses, including attorneys’ fees, to our directors and officers in connection with legal proceedings, subject to very limited exceptions.
We maintain a general liability insurance policy that covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers. In addition, we have entered into indemnification agreements with our directors. These indemnification agreements may require us, among other things, to indemnify each such director for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by him in any action or proceeding arising out of his service as one of our directors.
Certain of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities incurred in their capacity as members of our Board of Directors.
Rule 10b5-1 Sales Plans
Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from the director or officer. It also is possible that the director or officer could amend or terminate the plan when not in possession of material, nonpublic information. In addition, our directors and executive officers may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information.
EQUITY COMPENSATION PLAN INFORMATION
The following table displays equity compensation plan information as of December 31, 2016. The Company does not maintain any equity incentive plans that have not been approved by shareholders.
| | | | | | | | | | | | |
Plan Category | | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | | | (b) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | | | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | |
Equity compensation plans approved by security holders | | | | | | | | | | | | |
2006 Plan | | | 82,839 | | | $ | 6.76 | | | | — | |
2010 Plan | | | 1,833,739 | | | | 7.10 | | | | — | |
2014 Plan | | | 1,326,783 | (1) | | | 10.57 | | | | 2,627,585 | |
Equity compensation plans not approved by security holders | | | — | | | | — | | | | — | |
Total | | | 3,243,361 | | | $ | 8.51 | | | | 2,627,585 | |
| (1)
| 834,203 shares granted includes 105,313 restricted stock units granted under 2014 plan.
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AUDIT COMMITTEE REPORT