UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant ¨
Check the appropriate box:
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þ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
¨þ | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material under § 240.14a-12 |
Accelerate Diagnostics, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check theall boxes that apply):
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| þ | No fee required. |
| ¨ | Fee paid previously with preliminary materials. |
| ¨ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11. |
[PRELIMINARY COPY - SUBJECT TO COMPLETION]
ACCELERATE DIAGNOSTICS, INC.
3950 South Country Club Road, Suite 470
Tucson, Arizona 85714
(520) 365-3100
Notice of 20222023 Annual Meeting of Shareholders
Dear Accelerate Diagnostics Shareholders:
You are invited to attend Accelerate Diagnostics, Inc. 20222023 Annual Meeting of Stockholders (the “Annual Meeting”).
Date: May 12, 2022 (Thursday)19, 2023 (Friday)
Time: 10:30 a.m., Mountain Standard Time
Virtual
Location: You can attend the Annual Meeting online, including to vote and/or submit questions, at www.virtualshareholdermeeting.com/AXDX2022.AXDX2023. See page 1 of the accompanying proxy statement for additional information regarding participation in the virtual meeting.
Items of At the Annual Meeting, shareholders will be asked to vote:
Business:
1.to elect the following 119 persons to serve as directors of the Company until the 20232024 Annual Meeting of Shareholders and thereafteror until their successors have been duly elected and qualified: John Patience, Jack Phillips, Mark C. Miller, Jack Schuler, Matthew W. Strobeck Ph.D., Frank J.M. ten Brink, Charles Watts, M.D., Thomas D. Brown,Jenny Regan, Marran H. Ogilvie, Louise L. Francesconi, Hany Massarany, and Wayne Burris;
2.to approve an amendment to the Company’s Certificate of Incorporation to increase the total number of authorized shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), by 100,000,000250,000,000 shares, to a total of 200,000,000450,000,000 shares;
3.to approve an amendment to the Accelerate Diagnostics, Inc.Company’s 2022 Omnibus Equity Incentive Plan;Plan (the “2022 Incentive Plan”) to increase the total number of authorized shares of Common Stock available for grant thereunder by 16,000,000 shares;
4.to approve on an advisory basis,amendment to the compensationCompany’s Certificate of Incorporation to effect a reverse stock split of Common Stock at a reverse split ratio ranging from any whole number between and including 1-for-5 and 1-for-30, with the exact ratio within such range to be determined at the discretion of the Company’s named executive officers (“say-on-pay”Board of Directors (the “Board”), subject to the Board’s authority to abandon the amendment;
5.to approve the issuance of Common Stock in one or more non-public offerings at a price below the “minimum price” and in a number that will exceed 20% of the Company’s outstanding shares of Common Stock in accordance with Nasdaq Listing Rule 5635(d);
5.6.to ratify the selection of Ernst & Young LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2022;2023; and
6.7.to transact such other business as may properly come before the meeting or any continuation, postponement or adjournment thereof.
Record
Date: You are entitled to notice of the Annual Meeting and can participate and vote at the Annual Meeting if you were a shareholder of record as of the close of business on March 16, 2022.22, 2023.
Voting: Your vote is very important to us. Whether or not you plan to attend the virtual Annual Meeting, please ensure your shares are represented by voting promptly. For instructions on how to vote your shares, please refer to the instructions included with this proxy statement or on your proxy card or voting instruction form.
| | | | | |
| By order of the Board of Directors, |
| |
| /s/ Jack Phillips |
| Jack Phillips |
| President and Chief Executive Officer |
| | | | | | | | | | | | | | |
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON THURSDAY,FRIDAY, MAY 12, 2022:19, 2023:
The proxy statement for the Annual Meeting and the combined Annual Report to Shareholders and Annual Report on Form 10-K for the year ended December 31, 2021,2022 are available at www.proxyvote.com. |
TABLE OF CONTENTS
[PRELIMINARY COPY - SUBJECT TO COMPLETION]
ACCELERATE DIAGNOSTICS, INC.
3950 South Country Club Road, Suite 470
Tucson, Arizona 85714
(520) 365-3100
PROXY STATEMENT
Dated April [], 2022May 1, 2023
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 12, 202219, 2023
GENERAL
This proxy statement (“Proxy Statement”) is being furnished to the shareholders (the “Shareholders”) of Accelerate Diagnostics, Inc., a Delaware corporation (the “Company”), in connection with the solicitation of proxies by the Board of Directors of the Company (the “Board” or “Board of Directors”) from the Shareholders for use at the 20222023 Annual Meeting of Shareholders to be held at 10:30 a.m., Mountain Standard Time, on Thursday,Friday, May 12, 2022,19, 2023, and any continuations, postponements or adjournments thereof (the “Annual Meeting”). Because of the unprecedented COVID-19 pandemic, theThe Annual Meeting will be held virtually. To participate in the virtual meeting, click on wwW.virtualshareholdermeeting.com/AXDX2022. www.virtualshareholdermeeting.com/AXDX2023. This Proxy Statement and the accompanying Notice and proxy card are first being mailed to Shareholders on or about April [], 2022.May 1, 2023.
INFORMATION ABOUT THE ANNUAL MEETING
When and where is the Annual Meeting?
The Annual Meeting will be held at 10:30 a.m., Mountain Standard Time, on Thursday,Friday, May 12, 2022. Because of the ongoing COVID-19 pandemic, the19, 2023. The Annual Meeting will be held virtually. To participate in the virtual meeting, click on www.virtualshareholdermeeting.com/AXDX2022.www.virtualshareholdermeeting.com/AXDX2023.
Why did I receive these materials?
Our Board has provided these proxy materials to you, in connection with our Board’s solicitation of proxies for use at the Annual Meeting. As a Shareholder, you are invited to attend the Annual Meeting virtually and vote per the virtual meeting instructions or you may vote by proxy on the proposals described in this Proxy Statement.
What is included in the proxy materials?
The proxy materials include:
•this Proxy Statement;
•the proxy card or voting instruction form; and
•our Annual Report on Form 10-K for the year ended December 31, 20212022 (the "Annual Report"“Annual Report”).
What is being considered at the Annual Meeting?
At the Annual Meeting, our Shareholders will be acting on the following proposals:
1.to elect the following 119 persons to serve as directors of the Company until the 20222024 Annual Meeting of Shareholders and thereafteror until their successors have been duly elected and qualified: John Patience, Jack Phillips, Mark C. Miller, Jack Schuler, Matthew W. Strobeck, Ph.D., Frank J.M. ten Brink, Charles Watts, M.D., Thomas D. Brown,Jenny Regan, Marran H. Ogilvie, Louise L. Francesconi, Hany Massarany, and Wayne Burris;
2.to approve an amendment to the Company’s Certificate of Incorporation to increase the total number of authorized shares of the Company'sCompany’s common stock, par value $0.001 per share (“Common(the “Common Stock”), by 100,000,000250,000,000 shares, to a total of 200,000,000450,000,000 shares;
3.to approve an amendment to the Company’s Accelerate Diagnostics, Inc. 2022 Omnibus Equity Incentive Plan (the “2022 Incentive Plan”); to increase the total number of authorized shares of Common Stock available for grant thereunder by 16,000,000 shares;
4.to approve on an advisory basis,amendment to the compensationCompany’s Certificate of Incorporation to effect a reverse stock split of Common Stock at a reverse split ratio ranging from any whole number between and including 1-for-5 and 1-for-30, with the exact ratio within such range to be determined at the discretion of the Board, subject to the Board’s authority to abandon the amendment;
5.to approve the issuance of Common Stock in one or more non-public offerings at a price below the “minimum price” and in a number that will exceed 20% of the Company’s named executive officers (“say-on-pay”)outstanding shares of Common Stock in accordance with Nasdaq Listing Rule 5635(d);
5.6.to ratify the selection of Ernst & Young LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2022;2023; and
6.7.to transact such other business as may properly come before the meeting or any continuation, postponement or adjournment thereof.
In addition, our management will report on our progress and respond to your questions.
Who is entitled to vote at the Annual Meeting?
You may vote at the Annual Meeting if you owned shares of Common Stock as of the close of business on the record date, which was March 16, 202222, 2023 (the "Record Date"). You are entitled to one vote for each share of Common Stock that you held as of the record date.
How many shares are eligible to be voted at the Annual Meeting?
There were 69,661,265101,486,745 shares of Common Stock issued and outstanding as of the Record Date, each of which entitles the holder thereof to one vote at the Annual Meeting.
How do I vote?
You can vote in the following ways:
•by attending the virtual Annual Meeting and voting per the virtual meeting instructions;
•over the Internet or by telephone using the instructions on the enclosed proxy card;
•by completing, signing, dating and returning the enclosed proxy card (applicable only to Shareholders of record); or
•by following the instructions on the voting instruction form (applicable only to beneficial holders of shares of Common Stock held in “street name”).
What if I return my proxy card but do not include voting instructions?
Proxies that are signed and returned but do not include voting instructions will be voted in accordance with the Board’s recommendations, which are as follows:
•FOR the election of the 119 director nominees (Proposal 1);
•FOR the approval of the proposed amendment to the Company’s Certificate of Incorporation to increase the total number of authorized shares of Common Stock (Proposal 2);
•FOR the approval of the proposed amendment of the 2022 Incentive Plan to increase the total number of authorized shares available for grant thereunder (Proposal 3);
•FOR the approval of the proposed amendment to the Company’s Certificate of Incorporation to effect a reverse stock split of Common Stock (Proposal 4);
•FOR the say-on-pay resolution approving, on an advisory basis,approval of the compensationissuance of our named executive officersCommon Stock in one or more non-public offerings at a price below the “minimum price” and in a number that will exceed 20% of the Company's outstanding shares of Common Stock in accordance with Nasdaq Listing Rule 5635(d) (Proposal 4)5); and
•FOR the ratification of the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 20222023 (Proposal 5)6).
How do I vote if I hold shares registered in “street name”?
If, on the Record Date, your shares were not held in your name, but rather were held in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and the proxy materials were forwarded to you by that organization. The organization holding your account is considered to be the Shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares held in your account. You will receive a voting instruction form from your broker or other agent asking you how your shares should be voted. Please complete the form and return it as provided in the instructions.
You are also invited to attend the virtual Annual Meeting. However, since you are not the Shareholder of record, you may not vote your shares at the Annual Meeting unless you request and obtain a valid proxy from your broker or other agent. If you want to attend the virtual Annual Meeting, you must provide proof of beneficial ownership as of the Record Date, such as your voting instruction card with your control number provided by your broker or other agent, or other similar evidence of ownership. Whether or not you plan to attend the virtual Annual Meeting, we urge you to provide voting instructions to your broker or other agent in advance of the Annual Meeting to ensure your vote is counted. Your broker or other agent will furnish you with additional information regarding the submission of such voting instructions.
Will my shares be voted if I do not provide my proxy?
If you hold your shares directly in your own name, they will not be voted if you do not provide a proxy or attend the Annual Meeting and vote in accordance with the virtual meeting instructions.
If, however, you hold your shares in street name, your shares may be voted under certain circumstances. Brokers and other agents generally have the authority to vote customers’ un-voted shares on certain “routine” matters. The approval of the proposed amendment to the Company’s Certificate of Incorporation to effect a reverse stock split of Common Stock (Proposal 4) and the ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 20222023 (Proposal 5) is6) are the only proposalproposals at the Annual Meeting that we believe isare routine. Accordingly, brokers and other agents thatwho do not receive voting instructions from beneficial owners may vote on this proposalthese proposals in their discretion. A “broker non-vote” occurs when the broker or other agent is unable to vote on a proposal because the proposal is non-routine and the beneficial owner does not provide instructions.
Can I change my mind after I return my proxy?
Yes. You may change your vote or revoke your proxy at any time before your proxy is voted at the Annual Meeting. If you are a Shareholder of record, you can do this by giving written notice to the corporate secretary,Company’s Corporate Secretary, by submitting another proxy with a later date, or by attending the Annual Meeting and voting in accordance with the virtual meeting instructions. If you hold your shares in street name, you should consult with your broker or other agent regarding the procedures for changing your voting instructions.
How many votes must be present to hold the Annual Meeting?
Your shares are counted as present at the Annual Meeting if you attend the meeting and vote in accordance with the virtual meeting instructions or if you properly return a proxy by mail or the other methods described in these materials. In order for us to conduct business at the Annual Meeting, one thirdone-third (1/3) of the shares of Common Stock entitled to vote as of the Record Date must be present in person or by proxy at the Annual Meeting. This is referred to as a quorum. In order to ensure that there is a quorum, it may be necessary for certain directors, officers, regular
employees and other representatives of the Company to solicit proxies by telephone, facsimile or in person. These persons will receive no extra compensation for their services.
If a quorum is not present, then either the Chairman of the Annual Meeting or the Shareholders may adjourn the meeting until a later time. Abstentions and broker non-votes are counted as present or represented for purposes of determining the presence or absence of a quorum.
What vote is required to approve each item of business to be considered at the Annual Meeting?
The following table describes the voting requirement for each proposal (assuming a quorum is present):
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| Proposal 1: Election of Directors | Election of a director requires the affirmative vote of the holders of a plurality of the shares for which votes are cast. The 119 persons receiving the greatest number of votes will be elected as directors. Since only affirmative votes count for this purpose, a properly executed proxy marked “WITHHOLD AUTHORITY” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether there is a quorum. Broker non-votes will not be treated as votes cast, and therefore will have no effect on the outcome of the proposal. Shareholders may not cumulate votes in the election of directors. |
| Proposal 2: Amendment of Certificate of Incorporation to Increase Authorized Shares | Pursuant to applicable Delaware law, approval of the amendment of our Certificate of Incorporation to increase the total number of authorized shares of Common Stock requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock. Abstentions and broker non-votes will have the same effect as a vote cast against the proposal. |
Proposal 3: ApprovalAmendment of the 2022 Incentive Plan | The proposal will be approved if a majority of the votes cast are voted in favor of the proposal. Abstentions and broker non-votes will not be treated as votes cast for or against the proposal, and therefore will have no effect on the outcome of the proposal. |
Proposal 4: Say-on-pay resolution approving, on an advisory basis,Amendment of Certificate of Incorporation to Effect a Reverse Stock Split | Pursuant to applicable Delaware law, approval of the compensationamendment of our named executive officersCertificate of Incorporation to effect a reverse stock split of Common Stock requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock. Abstentions will have the same effect as a vote cast against the proposal. Brokers will have discretionary authority to vote on this proposal. Accordingly, no broker non-votes are expected for this proposal. |
| Proposal 5: Issuance of Common Stock in one or more non-public offerings at a price below the “minimum price” and in a number that will exceed 20% of the Company's outstanding shares of Common Stock in accordance with Nasdaq Listing Rule 5635(d) | The proposal will be approved if a majority of the votes cast are voted in favor of the proposal. Abstentions and broker non-votes will not be treated as votes cast for or against the proposal, and therefore will have no effect on the outcome of the proposal. |
Proposal 5:6: Ratification of Independent Registered Public Accounting Firm | The proposal will be approved if a majority of the votes cast are voted in favor of the proposal. Abstentions and broker non-votes will not be treated as votes cast for or against the proposal, and therefore will have no effect on the outcome of the proposal. Brokers will have discretionary authority to vote on this proposal. Accordingly, no broker non-votes are expected for this proposal. |
How will voting on any other business be conducted?
Although we do not know of any business to be conducted at the Annual Meeting other than the proposals described in this Proxy Statement, if any other business comes before the Annual Meeting, your signed proxy card gives authority to the proxy holder(s) to vote on those matters at their discretion.
Can I dissent or exercise rights of appraisal?
Under Delaware law, shareholders are not entitled to dissenters’ rights in connection with any of the proposals to be presented at the Annual Meeting or to demand appraisal of their shares as a result of the approval of any of the proposals.
Who will bear the costs of this solicitation?
We will bear the entire cost of solicitation of proxies, including the preparation, assembly, printing and mailing of the proxy materials. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of Common Stock beneficially owned by others to forward to the beneficial owners. We may reimburse persons representing beneficial owners of Common Stock for their costs of forwarding solicitation materials to the beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, facsimile or personal solicitation by our directors, officers or other regular employees. These persons will receive no extra compensation for their services.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors, Director Nominees and Executive Officers
The following table sets forth certain information with respect to the current directors, director nominees and executive officers of our Company:
| | | | | | | | |
| Name | Age as of Annual Meeting | Position |
| Thomas D. Brown | 7475 | Director |
| Wayne C. Burris | 6768 | Director and Nominee |
| Louise L. Francesconi | 6970 | Director and Nominee |
| Hany Massarany | 60 | Director |
Mark C. Miller | 66 | Director |
John Patience | 7461 | Chairman of the Board of Directors and Nominee |
| Marran H. Ogilvie | 54 | Nominee |
| John Patience | 75 | Director and Nominee |
| Jack Phillips | 5658 | President, Chief Executive Officer, Director and DirectorNominee |
| Jenny Regan | 61 | Nominee |
| Jack Schuler | 8182 | Director and Nominee |
| Matthew W. Strobeck, Ph.D. | 4950 | Director |
Frank J.M. ten Brink | 65 | Director and Nominee |
| Charles Watts, M.D. | 7980 | Director |
Steve ReichlingDavid Patience | 4337 | Chief Financial Officer |
Ron PriceLarry Mertz | 5861 | Chief CommercialTechnology Officer Americas |
Thomas D. Brown has served as a Director of the Company since March 14, 2017. Mr. Brown has more than 30 years’ experience in the clinical diagnostics industry. Beginning his career with the Abbott Laboratories Diagnostics Division (ADD) in 1974, Mr. Brown held numerous sales, marketing and general management positions of increasing responsibility. He served in various positions there including Divisional Vice President of Sales within the United States and Divisional Vice President and General Manager of the Western Hemisphere, and by 1993 he was Corporate Vice President of Worldwide Diagnostic Commercial Operations. He was named Senior Vice President before becoming President of the Diagnostic Division, the role he served until his retirement in 2002. Mr. Brown has previously served on the boards of Cepheid, Inc., Ventana Medical Systems, Inc., Quidel Corporation (NASDAQ: QDEL), and Stericycle, Inc. (NASDAQ: SRCL). He received a Bachelor of Arts degree from the State University of New York at Buffalo.
We believe that Mr. Brown is qualified to serve on our boardBoard of directorsDirectors because of his experience in leadership and management roles, and experience as a board member, in the healthcare industry.
Wayne C. Burris has served as a Director of the Company since February 2, 2022. Mr. Burris served as the Senior Vice President and Chief Financial Officer (CFO) at Roche Diagnostics Corporation from 1996 through his retirement in July 2019. He was a member of the Global Roche Diagnostics Finance Executive Committee where he was recognized as one of their top senior leaders. Before joining Roche Diagnostics, Mr. Burris was a senior manager for Price Waterhouse LLP. Mr. Burris currently serves as a directorpreviously served on the board of Orthofix Medical Inc. (NASDAQ: OFIX). Mr. Burris is a Certified Public Accountant and has a Bachelor of Science in Accounting and Finance from Butler University.
We believe that Mr. Burris is qualified to serve on our boardBoard of directorsDirectors because of his experience in leadership and management roles in the healthcare industry as well as his experience holding finance-related roles of increasing responsibility.
Louise L. Francesconi has served as a Director of the Company since December 2, 2019. Before retiring, Ms. Francesconi served as President of Raytheon Missile Systems, a defense electronics corporation, from 1997 to 2008. During her tenure at Raytheon, Ms. Francesconi was named three times by Fortune Magazine to its 50 Most Powerful Women in Business list. Ms. Francesconi currently serves as a director of US Energy Corporation (NASDAQ: USEG) and as Chairman of the Board of Trustees for Tucson Medical Center, a regional hospital. Ms.
Francesconi has previously served as a director of Stryker Corporation, a medical technology company. Ms. Francesconi received a B.S. degree in Economics from Scripps College and an M.B.A. from the University of California, Los Angeles.
We believe that Ms. Francesconi is qualified to serve on our boardBoard of directorsDirectors because of her experience in leadership and management roles, and experience as a board member in a variety of industries, including as a director in the healthcare industry.
Hany Massarany has served as a Director of the Company since May 20, 2020.2020 and Board Chairman since February 22, 2023. Mr. Massarany was President and Chief Executive Officer of GenMark Diagnostics, Inc. (NASDAQ: GNMK), a provider of multiplex molecular diagnostic solutions, from April 2011 to March 2020. From February 2009 to April 2011, Mr. Massarany served as President at Ventana and Head of Roche Tissue Diagnostics, a division of F. Hoffman-La Roche Ltd. focused on manufacturing instruments and reagents that automate tissue processing and slide staining diagnostics for cancer. From 1999 to 2009, Mr. Massarany held various global leadership positions with Ventana, including Chief Operating Officer, Executive Vice President, Worldwide Operations, Senior Vice President, Corporate Strategy and Development, and Vice President, North American Commercial Operations. Mr. Massarany also held executive management positions with Bayer Diagnostics and Chiron Diagnostics, working in both the Asia Pacific region and the United States. Mr. Massarany served on the board of directors of GenMark Diagnostics, Inc. from May 2011 to February 2020. Mr. Massarany currently serves as a director of Biodesix, Inc. (NASDAQ: BDSX), a medical diagnostics company. Mr. Massarany earned a B.S. in Microbiology and Immunology from Monash University in Australia and an M.B.A. from Melbourne University.
We believe that Mr. Massarany is qualified to serve on our boardBoard of directorsDirectors because of his experience in leadership and management roles, and experience as a board member, in the healthcare industry.
Mark C. MillerMarran H. Ogilvie is a director nominee not currently serving on our Board of Directors. Ms. Ogilvie has served as Senior Advisor to Garnett Station Partners, LLC, a Directorboutique private equity firm focusing on consumer facing industries, since June 2021. Additionally, Ms. Ogilvie currently serves on the board of directors of Four Corners Property Trust, Inc. (NYSE: FCPT), a real estate investment trust that invests in restaurant properties in the CompanyU.S., since November 5, 2013. Before retiring, Mr. Miller2015. Previously, Ms. Ogilvie served on the board of directors of GCP Applied Technologies Inc. (formerly NYSE: GCP) from 2019 until 2022 and Ferro Corporation (NYSE: FOE), a supplier of functional coatings and color solutions, from 2017 until 2022. She also previously served as Chief Executive Officer of Stericycle (NASDAQ: SRCL) from 1992an Advisor to 2012. Prior to joining Stericycle, Mr. Miller served as Vice Presidentthe Creditors Committee for the Pacific, Asia and AfricaLehman Brothers International (Europe) Administration (the “Creditors Committee”) from June 2010 until July 2018, which assisted the Administrators in finding solutions to the international division of Abbott Laboratories, a diversified health care company, which he joined in 1976 and where he held a number of management and marketing positions. Mr. Miller formerlysignificant issues affecting the estate. She also previously served as a directorRepresentative of Stericycle and Ventana Medical Systems, Inc.a Member of the Creditors Committee from January 2008 until June 2010. Ms. Ogilvie has also served on the board of directors of Evolution Petroleum Corporation (NYSE: EPM), a developer and supplierproducer of automated diagnostic systems. Heoil and gas reserves, from December 2017 until December 2020, Bemis Company, Inc. (formerly NYSE: BMS), a global manufacturer of flexible packaging products and pressure sensitive materials, from March 2018 until it was acquired in June 2019, Forest City Realty Trust, Inc. (formerly NYSE: FCEA), a real estate investment trust that was later acquired, from April 2018 to December 2018, LSB Industries, Inc. (NYSE: LXU), a chemical manufacturing company, from April 2015 to April 2018, Seventy Seven Energy Inc. (formerly NYSE: SSE), an oil field services company that was later acquired, from July 2014 to July 2016, The Korea Fund, Inc. (NYSE: KF), an investment company that invests in Korean public equities, from November 2012 to December 2017, ZAIS Financial Corp. (formerly NYSE: ZFC)(n/k/a Sutherland Asset Management Corp.), a real estate investment trust, from February 2013 to October 2016, and Southwest Bancorp, Inc. (formerly NASDAQ: OKSB), a regional commercial bank that was later acquired (“Southwest”), from January 2012 to April 2015. She also previously served as Southwest’s Advisor from September 2011 to January 2012. Prior to that, Ms. Ogilvie was a member of Ramius, LLC, an investment management firm, where she served in various capacities from 1994 to 2009 before the firm’s merger with Cowen Group, Inc. (“Cowen Group”), including as Chief Operating Officer from 2007 to 2009 and General Counsel and Chief Compliance Officer from 1997 to 2007. Following the merger in 2009, Ms. Ogilvie became Chief of Staff at Cowen Group until 2010. Ms. Ogilvie received a B.S.Bachelor’s degree in computer science from Purduethe University where he graduated Phi Beta Kappa.of Oklahoma and a Juris Doctorate from St. John’s University School of Law.
We believe that Mr. MillerMs. Ogilvie is qualified to serve on our boardBoard of directorsDirectors because of hisher substantial business experience in leadership and management roles, andfinancial background, coupled with her extensive experience serving as a board member, in the healthcare industry.director of public companies.
John Patience has served as a Director of the Company and board chairman since June 26, 2012. From June 2012 to February 2023, Mr. Patience served as the Board Chairman. Mr. Patience also serves as a director and chairman of the board of Biodesix, Inc. (NASDAQ: BDSX), another medical diagnostics company. Mr. Patience is a founding partner of Crabtree Partners, a private equity investment firm. Mr. Patience served as a director of Ventana Medical Systems, Inc. from 1989 and as Vice Chairman from 1999 until Ventana’s acquisition by Roche in 2008. Mr. Patience served as a director of Stericycle, Inc. (NASDAQ: SRCL) since its founding in 1989 until June of 2018. Mr. Patience was previously a partner of a venture capital investment firm that provided both Ventana and Stericycle with early stage funding. Mr. Patience also was previously a partner in the consulting firm of McKinsey & Co., Inc., specializing in health care. Mr. Patience holds a B.A. in Liberal Arts and an L.L.B. from the University of Sydney, Australia, and an M.B.A. from the University of Pennsylvania’s Wharton School of Business.
We believe that Mr. Patience is qualified to serve on our boardBoard of directorsDirectors because of his experience in leadership and management roles in the field of medicine, as well as his experience as a board member and investor in companies in the healthcare industry.
Jack Phillips has served as a Director of the Company and as the Company’s President and Chief Executive Officer since February 1, 2020. From August 2019 to January 2020, Mr. Phillips served as the Company’s Chief Operating Officer. Prior to joining the Company, Mr. Phillips served as President and Chief Executive Officer of Roche Diagnostics Corporation, a division of Roche Holding AG, a biotech company, from January 2010 through August 2019. As President and Chief Executive Officer of Roche Diagnostics Corporation, Mr. Phillips was accountable for commercial operations, performance and strategy of approximately 4,200 employees in the United States and Canada. He also served as a member of Roche’s global Diagnostics
Leadership Team. Prior to his role as President and Chief Executive Officer of Roche Diagnostics Corporation, Mr. Phillips held senior leadership roles at Ventana Medical Systems, a cancer diagnostic company and a member of the Roche Group, including Senior Vice President of Commercial Operations for North America and Japan from July 1999 to December 2009. Before joining Ventana Medical Systems, Mr. Phillips worked at Bayer Diagnostics and Motorola. Mr. Phillips holds a B.S. in marketing from Northern Kentucky University.
We believe that Mr. Phillips is qualified to serve on our boardBoard of directorsDirectors because of his experience in leadership and management roles at our Company, as well as his experience as a senior executive in the healthcare and medical device industries.
Jenny Regan is a director nominee not currently serving on our Board of Directors. Ms. Regan co-founded Key Tech, an end-to-end product development firm specializing in the design of complex automated devices and systems for medical applications, and served as its Chief Executive Officer from 1998 until her retirement in September 2022. Following her retirement, Ms. Regan continues to serve as a member of Key Tech’s Advisory Board. Ms. Regan has also served as a member of the Advisory Board to the Maryland Momentum Fund of the University System of Maryland since 2021 and as a member of the board of the University of Maryland Clark School of Engineering since 2013. Ms. Regan was previously the Co-Founder and President of Corey Regan Inc., a consulting firm in the nuclear power industry, and a project and client Manager at MPR Associates, an engineering consulting firm. Ms. Regan holds a B.S. in Physics from Georgetown University and a B.S. in Mechanical Engineering from The Catholic University of America.
We believe that Ms. Regan is qualified to serve on our Board of Directors because of her extensive leadership experience and technical background in the medical device, diagnostic and drug delivery industries.
Jack Schuler has served as a Director of the company since June 26, 2012. Mr. Schuler is a founding partner of Crabtree Partners, a private investment firm. Mr. Schuler served as a Director of Ventana Medical Systems, Inc. from 1991 and as Chairman of the Board from 1995 until Ventana’s acquisition by Roche in 2008. Mr. Schuler held various executive positions at Abbott Laboratories from December 1972 through August 1989, including President and Chief Operating Officer. Mr. Schuler previously served on the boards of Abbott Laboratories, Medtronic (Lead Director) and, Stericycle (Chairman), and Quidel Corp. He is currently a director of Biodesix, Inc. (NASDAQ:
(NASDAQ: BDSX). Mr. Schuler holds a B.S. in Mechanical Engineering from Tufts University and an M.B.A. from Stanford University.
We believe that Mr. Schuler is qualified to serve on our boardBoard of directorsDirectors because of his experience in leadership and management roles in the healthcare industry, as well as his experience as a board member in the healthcare and medical device industries.
Matthew W. Strobeck, Ph.D. has served as a Director of the Company since July 7, 2012. Dr. Strobeck is currently the Managing Partner of Birchview Capital. Dr. Strobeck was a Partner and Member of the Management Committee and Advisory Board of Westfield Capital Management from 2008 until 2011, having served as a member of the investment team, specializing in healthcare and life sciences, from May 2003 to June 2008. Dr. Strobeck currently serves on the boards of Quidel Corporation (NASDAQ: QDEL), a provider of rapid diagnostic testing solutions, Biodesix (NASDAQ: BDSX), a medical diagnostic company, and Monteris Medical, a medical device company. Dr. Strobeck received his B.S. from St. Lawrence University, a Ph.D. from the University of Cincinnati, a S.M. from the Harvard University/MIT Health Sciences Technology Program, and a S.M. from the MIT Sloan School of Management.
We believe that Mr. Strobeck is qualified to serve on our boardBoard of directorsDirectors because of his experience in leadership and management roles at medical technology companies, as well as his experience as a board member and investor in the medical technology industry.
Frank J.M. ten Brink has served as a Director of the Company since March 6, 2013. Mr. ten Brink served as an executive consultant to Stericycle, Inc. (NASDAQ: SRCL) until February 2021. Until October 2017 he was Senior Vice President of Mergers and Acquisitions at Stericycle where he also served as Executive Vice President, Chief Financial Officer and Chief Administrative Officer from June 1997 to August 2014. He has over 16 years of finance experience in high growth environments, mergers and acquisitions. Prior to joining Stericycle, he was Senior Vice President and Chief Financial Officer with Telular Corporation. Between 1991 and 1995, he was Vice President and Chief Financial Officer of Hexacomb Corporation. Mr. ten Brink studied International Business at the Netherlands School of Business and received an M.B.A. degree in Finance from the University of Oregon.
We believe that Mr. ten Brink is qualified to serve on our board of directors because of his experience in leadership and management roles in a variety of industries, as well as his experience holding finance-related roles of increasing responsibility.
Charles Watts, M.D. has served as a Director of the Company since November 14, 2017. Until his retirement, Dr. Watts served as Chief Medical Officer at Northwestern Memorial Hospital (NMH) and Associate Dean for Clinical Affairs at the Feinberg School of Medicine, Northwestern University from 2001 to 2011. Prior to his tenure at Northwestern, Dr. Watts served as Chief of Clinical Affairs and Associate Dean at the University of Michigan Medical Center. He has also served as Executive in Residence for the Health Management Academy, as an active faculty member of a nationally based Physician Leadership Program. Dr. Watts has served as a Director of Providence Health and Services (Seattle, Washington) from 2012 to 2016 where he chaired the Quality and Patient Safety Improvement Committee, and recently served as a Trustee of Swedish Health Services, Inc. until
June 2021. He currently serves as a Trustee on the Institute for Systems Biology Board (Seattle, Washington). He received his undergraduate and medical degrees from the University of Michigan.
We believe that Mr. Watts is qualified to serve on our boardBoard of directorsDirectors because of his experience in leadership and management roles in the field of medicine, as well as his experience as a board member in the healthcare industry.
Steve ReichlingDavid Patience has served as the Company’s Chief Financial Officer (“CFO”) since April 1, 2023. From February 2021 to March 2023, Mr. Patience served as the Company’s Senior Director, Business Development and Strategic Finance. From September 10, 2012.2017 to February 2021, Mr. Patience served as the Company’s Director, Head of Finance, Planning and Analysis. Prior to joining the Company, Mr. Reichling served as general managerPatience held positions with Morgan Stanley’s Investment Banking Division, Continental Advisors Equity Group, and various financial research roles with Nuveen Investments. Mr. Patience holds a Bachelor of Spring Bioscience Corp., a subsidiary of Roche Tissue Diagnostics. From January 2003 to December 2009, Mr. Reichling held various finance, accounting and operations leadership roles at Roche Tissue Diagnostics and Ventana Medical Systems, Inc., including director of finance and operations, manager of business development finance, and head of Internal Audit and Sarbanes Oxley Compliance. From 2002 to 2003, Mr. Reichling was an auditor at Ernst & Young LLP. Mr. Reichling received his B.S.Science in accounting and entrepreneurshipBusiness Administration from the University of Arizona.Colorado Leeds School of Business and an M.B.A. from the University of Chicago Booth School of Business.
Ron PriceLawrence Mertz, Ph.D. has served as the Company'sCompany’s Chief CommercialTechnology Officer Americas, since March 2020, and was previouslyJune 23, 2022. From May 2021 to June 2023, Dr. Mertz served as the Company’s Senior Vice President, Head of Commercial Operations, Americas since April 2015. Mr. PriceResearch and Development. Dr. Mertz has over 2030 years of commercial operations experience working in the diagnostics and a proven track recordlife science industries in various technical leadership roles and has led the successful ideation and development of leading salesnumerous IVD instrumented platforms and marketing teams to achieve double-digit revenue growthassays leveraging microbiological, genomic, molecular and strong bottom-line performance.immunochemical technologies. Prior to joining the Company, Mr. PriceDr. Mertz was Senior Vice President of Research and Development and Clinical Operations for Meridian Biosciences, Inc. (NASDAQ: VIVO) leading a team of more than 100 employees and supporting the portfolio strategy and development of four separate IVD platforms and assays. Dr. Mertz also served as the Vice President Commercial Operationsof Research and Development, Engineering for Roche PointProgenity, Inc. (NASDAQ: PROG) where he was responsible for research and development, product and software development supporting the development and implementation of Care managing all commercial responsibilities across three separate product lifecycles.human genome sequencing assays and clinical services for blood pre-natal testing and liquid biopsy. From 2006 to 2017, Dr. Mertz held multiple positions at Becton Dickenson, Inc. (NYSE: BDX) culminating in the Vice President of Research and Development for the Molecular Diagnostics division. In addition, Mr. Price held a number of sales, marketing,this role, he led more than 120 employees in the platform and leadership roles with Ventana Medical Systems from 2001 to 2012 following 5 years at Bayer Healthcare Diagnostics. Mr. Priceassay development focused on syndromic infectious
disease areas including gastrointestinal, respiratory, sexually transmitted disease, blood borne and blood sepsis. Dr. Mertz holds a B.S.Bachelor of Science in Clinical Laboratory Sciences, CytologyChemistry and a Ph.D in Biochemistry from the State University of Oklahoma.New York at Buffalo where he has been recognized as a distinguished alumnus.
There are no agreements or understandings for any of our executive officers or directors to resign at the request of another person and no officer or director is acting on behalf of nor will any of them act at the direction of any other person.
Directors are elected to serve until their successors are duly elected and qualified.
Pursuant to Mr. Phillips’ employment agreement entered into with the Company on January 31, 2020, so long as Mr. Phillips is employed as the Company’s Chief Executive Officer, the Company will use its reasonable efforts, subject to applicable law and the rules of NASDAQ and the Company’s Amended and Restated Bylaws, to cause Mr. Phillips to be nominated for election to the Board at the Company’s annual shareholder meeting.
Board Diversity
The tabletables below provides information relating to certain voluntary self-identified characteristics of our directors. Each of the categories listed in the table below has the meaning as set forth in NASDAQ Rule 5605(f).
| Board Diversity Matrix (As of March 16, 2022) | | Total Number of Directors | Total Number of Directors | 11 | Total Number of Directors | 11 |
| | Female | Male | Non-Binary | Did Not Disclose Gender | | Female | Male | Non-Binary | Did Not Disclose Gender |
Part I: Gender Identity | | Directors | Directors | 1 | 10 | 0 | 0 | Directors | 1 | 10 | 0 | 0 |
| Part II: Demographic Background | Part II: Demographic Background | | | Part II: Demographic Background | | |
| African American or Black | African American or Black | 0 | 1 | 0 | 0 | African American or Black | 0 | 1 | 0 | 0 |
| Alaskan Native or Native American | Alaskan Native or Native American | 0 | 0 | Alaskan Native or Native American | 0 | 0 |
| Asian | Asian | 0 | 0 | Asian | 0 | 0 |
| Hispanic or Latinx | Hispanic or Latinx | 0 | 0 | Hispanic or Latinx | 0 | 0 |
| Native Hawaiian or Pacific Islander | Native Hawaiian or Pacific Islander | 0 | 0 | Native Hawaiian or Pacific Islander | 0 | 0 |
| White | White | 1 | 9 | 0 | 0 | White | 1 | 9 | 0 | 0 |
| Two or More Races or Ethnicities | Two or More Races or Ethnicities | 0 | 0 | 0 | Two or More Races or Ethnicities | 0 | 0 | 0 |
| LGBTQ | 0 | |
| LGBTQ+ | | LGBTQ+ | 0 |
| Did Not Disclose Demographic Background | Did Not Disclose Demographic Background | 0 | Did Not Disclose Demographic Background | 0 |
| | | | | | | | | | | | | | |
| Board Diversity Matrix (As of March 22, 2023) |
| Total Number of Directors | 9 |
| Female | Male | Non-Binary | Did Not Disclose Gender |
| Part I: Gender Identity |
| Directors | 1 | 8 | 0 | 0 |
| Part II: Demographic Background | | | | |
| African American or Black | 0 | 1 | 0 | 0 |
| Alaskan Native or Native American | 0 | 0 | 0 | 0 |
| Asian | 0 | 0 | 0 | 0 |
| Hispanic or Latinx | 0 | 0 | 0 | 0 |
| Native Hawaiian or Pacific Islander | 0 | 0 | 0 | 0 |
| White | 1 | 7 | 0 | 0 |
| Two or More Races or Ethnicities | 0 | 0 | 0 | 0 |
| LGBTQ+ | 0 |
| Did Not Disclose Demographic Background | 0 |
Director Independence
The Board has affirmatively determined that directors Brown, Burris, Francesconi, Massarany, Miller, Patience, Schuler, Strobeck, ten Brink, and Watts (constituting a majority of the full Board) are “independent directors” under NASDAQ Listing Rule 5605(a)(2) and the related rules of the U.S. Securities and Exchange Commission (the “SEC”). Additionally, the Board has affirmatively determined that Mss. Ogilvie and Regan, both of whom are director nominees not currently serving on the Board, are also independent under such rules. In making this determination, our Board considered the current and prior relationships that each non-employee directorindividual has with the Company and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.individual. The Company’s independent directors conduct executive sessions at regularly scheduled meetings as required by NASDAQ Listing Rule 5605(b)(2).
Frank J.M. ten Brink and Mark C. Miller, both of whom retired from the Board in February 2023, were previously determined to be independent by the Board as well.
Family Relationships
There are no family relationships among anyEffective as of our directorsApril 1, 2023, David Patience, is employed as the Company’s CFO. David is the son of John Patience, who currently serves as a director and executive officers.is the former Chairman of the Board. This relationship was reviewed and approved by the Audit and Governance Committee.
Board Leadership Structure
The Board does not have an express policy regarding the separation of the roles of Chief Executive Officer (“CEO”) and Board Chairman, as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board. Currently, Jack Phillips serves as the Company’s President and CEO and John PatienceHany Massarany serves as the Chairman of the Board. The Board believes that its current leadership structure best serves the objectives of the Board’s oversight of management; the ability of the Board to carry out its roles and responsibilities on behalf of the shareholders; and the Company’s overall corporate governance. The Board also believes that the current separation of the Chairman and CEO roles allows the CEO to focus his time and energy on operating and managing the Company and leverages the experience and perspectives of the Chairman.
Board Oversight of Risk Management
The full Board has responsibility for general oversight of risks facing the Company. The Board is informed by senior management on areas of risk facing the Company and periodically conducts discussions regarding risk assessment and risk management. The Board believes that evaluating how the executive team manages the
various risks confronting the Company is one of its most important areas of oversight. While the Board has the ultimate oversight responsibility for the risk management process, various committees of the Board also have responsibility for risk management. For example, the Audit and Governance Committee reviews and assesses the Company’s processes to manage financial reporting risk and to manage investment, tax, and other financial risks; the Compensation Committee oversees risks, relating to the compensation and incentives provided to our executive officers; and the Nominating and Governance Committeealso oversees risks associated with our overall compliance and corporate governance practices, as well as the independence and composition of our Board.Board; and the Compensation and Nominating Committee oversees risks relating to the compensation and incentives provided to our executive officers. Finally, management periodically reports to the Board or relevant committee, which provides guidance on risk assessment and mitigation.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, requires the Company’s directors and executive officers, and persons who own more than 10% of a registered class of the Company’s equity securities, to file reports of securities ownership and changes in such ownership with the SEC.
Based solely upon a review of such forms filed electronically with the SEC or written representations that no Form 5s were required, the Company believes that all Section 16(a) filing requirements were timely met during the year ended December 31, 2021,2022, except for twoone Form 4s4 filed by Jack Phillips reporting three transactions; one Form 4 filed by Ron Price reporting two transactions; one Form 4 filed by Steven Reichling reporting two transactions; two Form 4s filed by Matthew Strobeck reporting two transactions;and two Form 4s filed by Jack Schuler reporting four transactions; one Form 4 filed by Thomas Brown reporting one transaction; one Form 4 filed by Mark Miller reporting one transaction; and one Form 4 filed by John Patience reporting one transaction.three transactions.
Code of Ethics
The Company has adopted a code of ethics for its principal executive officer and senior financial officers and a code of ethics and standards of conduct that is applicable to all directors, officers and employees, a copy of which is available online at https://ir.axdx.com/governance-documents.governance-documents. Shareholders may also request a free copy of these documents from: ACCELERATE DIAGNOSTICS, INC., 3950 South Country Club Road, Suite 470, Tucson, Arizona 85714, Attn: Corporate Secretary. The Company intends to satisfy the requirement under Item 5.05 of Form 8-K regarding disclosure of amendments to, or waivers from, provisions of such codes of ethics by posting such information on our website.
Director Meeting Attendance
During the year ended December 31, 2021,2022, the Board held sixseven meetings of the full Board,Board. The Board also took actionacted by written consent on sixfour occasions. During the year ended December 31, 2021,2022, each member of the Board attended at least 75% of the aggregate of all meetings of the Board and the meetings of the committees on which he or she served (during the periods for which he or she served).
The Company does not have a written policy requiring directors to attend the annual meeting,Annual Meeting of Shareholders, but attendance is encouraged. Last year, three of the directors attended our 20212022 Annual Meeting of Shareholders.
Board Committees
Our boardEffective as of directors hasNovember 2022, our Board of Directors established (1) an audit committee,Audit and Governance Committee and (2) a compensation committeeCompensation and Nominating Committee. Prior to November 2022, our Board of Directors had established (1) an Audit Committee; (2) a nominatingCompensation Committee and governance committee.(3) a Nominating and Governance Committee. Our board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committeeof the Board’s current committees are described below. Members serve on these committees until their resignation or until otherwise determined by our boardBoard of directors.Directors. The charter of each committee is available on our corporate website at https://ir.axdx.com/corporate-governance.
Committee Composition
The following table provides current membership for each committee of our boardBoard of directors:Directors:
| | | | | | | | | | | |
| Name: | Audit & Governance Committee | Compensation Committee | & Nominating and Governance CommitteeCommittee* |
| John Patience | | X | |
| Wayne C. Burris | X | Chair | |
| Thomas D. Brown | | Chair | X |
| Louise L. Francesconi | | X | Chair |
| Hany Massarany | | X | |
Mark C. Miller | X | | Chair |
| Jack Schuler | | | X |
| Matthew W. Strobeck Ph.D. | X | | |
Frank J.M. ten Brink | Chair | | |
| Charles Watts M.D. | | X | X |
*Following the Annual Meeting, Mss. Ogilvie and Regan are expected to replace Mr. Brown and Dr. Watts on the Compensation & Nominating Committee.
Audit and Governance Committee
The Board maintains a standing Audit and Governance Committee comprised of Messrs. ten BrinkBurris (Chairman), Burris, Miller and Massarany, Ms. Francesconi and Dr. Strobeck. Each member of the Audit and Governance Committee satisfies the applicable independence standards specified in the NASDAQ Listing Rules and the related rules of the SEC pertaining to audit committees and has been determined by the Board to be “financially literate” with accounting or related financial management experience. The Board has also determined that Messrs. ten Brink andMr. Burris areis an “audit committee financial experts”expert” as defined under SEC rules and regulations and qualify as financially sophisticated audit committee members as required under Rule 5605(c)(2)(A) of the NASDAQ Listing Rules. The prior Audit Committee met sixfour times during the year ended December 31, 2021.2022.
The Audit Committee'sand Governance Committee’s audit-related responsibilities include overseeing the qualifications, independence and performance of our independent registered public accounting firm; evaluating the Company’s accounting policies and system of internal controls; and reviewing significant financial transactions. In carrying out this purpose, the Audit and Governance Committee maintains and facilitates free and open communication between the Board, the independent registered public accounting firm, and our management.
The Audit and Governance Committee’s governance-related responsibilities also include overseeing the Company’s corporate governance policies, practices and procedures; assisting the Board in assessing director
independence; and reviewing the structure and composition of Board committees and recommending to the Board, if desirable, changes in their number, responsibilities and membership.
Compensation and Nominating Committee
The Board maintains a standing Compensation and Nominating Committee comprised of Messrs. Brown (Chairman), Massarany, and Patience, Ms. Francesconi (Chair), Mr. Brown and Dr. Watts. Each member of the Compensation and Nominating Committee satisfies the applicable independence standards specified in the NASDAQ Listing Rules and the related rules of the SEC pertaining to compensation committees. All members of the Compensation and Nominating Committee also qualify as non-employee directors under Exchange Act Rule 16b-3 and as outside directors under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). The prior Compensation Committee met five times and took action by written consent on four occasionsone occasion during the year ended December 31, 2021.2022.
The Compensation and Nominating Committee’s compensation-related responsibilities include reviewing the compensation arrangements for the Company’s executive officers, including the CEO; administering the Company’s equity compensation plans; and reviewing the compensation of the Board. In its discretion, the Compensation and Nominating Committee may delegate certain of its authority and responsibilities to one or more subcommittees comprised entirely of members of the Compensation and Nominating Committee.
11The Compensation and Nominating Committee’s nomination-related responsibilities also include determining the qualifications, qualities, skills, and other expertise required to be a director; recommending to the criteria to be considered in selecting director nominees; identifying and screening individuals qualified to become members of the Board; making recommendations to the Board regarding the selection and approval of director nominees.
Additional Information Regarding Prior Nominating and Governance Committee
ThePrior to November 2022, our Board maintainsof Directors had a standing Nominating and Governance Committee comprised of Messrs. Miller (Chairman), Schuler and Dr. Watts. Each member of the Nominating and Governance Committee satisfies the applicable independence standards specified in the NASDAQ Listing Rules. The Nominating and Governance Committee met three times during the year ended December 31, 2021.
The Nominating and Governance Committee’swho’s responsibilities includeincluded determining the qualifications, qualities, skills, and other expertise required to be a director; recommending to the criteria to be considered in selecting director nominees; identifying and screening individuals qualified to become members of the Board; making recommendations to the Board regarding the selection and approval of director nominees; overseeing the Company’s corporate governance policies, practices and procedures; assisting the Board in assessing director independence; and reviewing the structure and composition of Board committees and recommending to the Board, if desirable, changes in their number, responsibilities and membership.membership. The prior Nominating and Governance Committee met four times during the year ended December 31, 2022.
Director Nominations
The NominatingCompensation and GovernanceNominating Committee is responsible for identifying and screening potential candidates and recommending qualified candidates to the Board for nomination. The NominatingCompensation and GovernanceNominating Committee seeks to ensure that the Board is composed of members whose particular experience, qualifications, attributes and skills, when taken together, will allow the Board to satisfy its oversight obligations effectively. The NominatingCompensation and GovernanceNominating Committee typically solicits recommendations for nominees from the persons the committee believes are likely to be familiar with (i) the needs of the Company and (ii) qualified candidates. These persons may include members of the Board and management of the Company. The NominatingCompensation and GovernanceNominating Committee may also engage a professional search firm to assist in identifying qualified candidates. In selecting Board candidates, the NominatingCompensation and GovernanceNominating Committee’s goal is to identify persons who it believes have appropriate expertise and experience to contribute to the oversight of a company of the Company’s nature while also reviewing other appropriate factors, including those discussed below under “Qualifications of Director Nominees.”
The NominatingCompensation and GovernanceNominating Committee will consider director candidates recommended by shareholdersShareholders in the same manner in which it evaluates candidates it identified, if such recommendations are properly submitted to the Company pursuant to the Company's Amended and Restated Bylaws. The Company’s Amended and Restated Bylaws contains provisions relating to certain timing and information requirements for shareholder nominations for election to the Board brought before a meeting of the shareholders. See Section 2.12 of the Company’s Amended and Restated Bylaws and the section entitled “Shareholder Proposals and Director Nominations for the 20232024 Annual Meeting” in this Proxy Statement for additional information.
Pursuant to Mr. Phillips’ employment agreement entered into with the Company on January 31, 2020, so long as Mr. Phillips is employed as the Company’s Chief Executive Officer, the Company will use its reasonable efforts, subject to applicable law and the rules of NASDAQ and the Company’s Amended and Restated Bylaws, to cause Mr. Phillips to be nominated for election to the Board at the Company’s annual shareholder meeting.
Qualifications of Director Nominees
The Board and the NominatingCompensation and GovernanceNominating Committee believe that each of the persons nominated for election at the Annual Meeting have the experience, qualifications, attributes and skills that, when taken as a whole, will enable the Board to satisfy its oversight responsibilities effectively. The Board and the NominatingCompensation and GovernanceNominating Committee consider the following for each candidate, among other qualifications deemed appropriate, when evaluating the suitability of candidates for nomination as director: independence; integrity; personal and professional ethics; business judgment; ability and willingness to commit sufficient time to the Board; qualifications, attributes, skills and/or experience relevant to the Company’s business; educational and professional background; personal accomplishment; and national, gender, age, and ethnic diversity.
Shareholder Communications with the Board
Shareholders who wish to communicate with the Board of Directors or with a particular director may do so by sending a letter to the Corporate Secretary, 3950 South Country Club Road, Suite 470, Tucson, Arizona 85714. The Corporate Secretary will review all correspondence and regularly forward to the Board copies of all such correspondence that, in the opinion of the Corporate Secretary, deals with the functions of the Board or committees thereof or that the Corporate Secretary otherwise determines requires attention.
Hedging, Short Sales and Related Policies
Pursuant to the Company’s insider trading policy, all directors, officers and employees of the Company (collectively, “Team Members”), as well as their spouses, minor children, other persons living in their household and entities over which they exercise control, are prohibited from engaging in the following transactions in the Company’s securities unless advance unanimous approval is obtained from members of the compliance committee designated by the Board:
•Hedging. Team Members may not enter into hedging or monetization transactions or similar arrangements with respect to the Company’s securities.
•Short sales. Team Members may not sell the Company’s securities short;
•Options trading. Team Members may not buy or sell puts or calls or other derivative securities on the Company’s securities; and
•Trading on margin. Team Members may not hold the Company’s securities in a margin account or pledge the Company’s securities as collateral for a loan.
AUDIT AND GOVERNANCE COMMITTEE REPORT
The Audit and Governance Committee oversees the financial reporting process of our company on behalf of our Board. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit and Governance Committee reviewed and discussed the audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 20212022 with management, including a discussion of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements.
The Audit and Governance Committee has discussed with Ernst & Young, LLP (“Ernst & Young”), our independent registered public accounting firm that was responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles, its judgments about our accounting principles and the other matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC. The Audit and Governance Committee has received from Ernst & Young the written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit and Governance Committee concerning independence, and the Audit and Governance Committee has discussed with Ernst & Young their independence. The Audit and Governance Committee has considered the effect of non-audit fees on the independence of Ernst & Young and has concluded that such non-audit services are compatible with the independence of Ernst & Young.
The Audit and Governance Committee discussed with Ernst & Young the overall scope and plans for its audits. The Audit and Governance Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of its audits and quarterly reviews, its observations regarding our internal controls, and the overall quality of our financial reporting.
In reliance on the reviews and discussions referred to above, the Audit and Governance Committee recommended to the Board, and the Board has approved, that the audited financial statements for the year ended December 31, 2021,2022, be included in the Annual Report on Form 10-K for the year ended December 31, 20212022 for filing with the SEC.
This report has been furnished by the members of the Audit and Governance Committee.
| | | | | |
| THE AUDIT AND GOVERNANCE COMMITTEE |
| Frank J.M. ten Brink, Chairman |
| Wayne C. Burris, Chairman |
| Mark C. MillerLouise L. Francesconi |
| Hany Massarany |
| Matthew W. Strobeck, Ph.D. |
COMPENSATION OVERVIEW
The purpose of this Compensation Overview section is to provide material information about the Company’s compensation philosophy, objectives and other relevant policies and to explain and put into context the material elements of the disclosure that follows in this Proxy Statement with respect to the compensation of our named executive officers (“NEOs”). For the year ended December 31, 2021,2022, our NEOs were:
Jack Phillips, President and Chief Executive Officer (“CEO”)
Steve Reichling, former Chief Financial Officer (“CFO”)
Ron Price, Senior Vice President and Head of Commercial Operations, AmericasLarry Mertz, Chief Technology Officer (“CTO”)
References in this “Compensation Overview” section and the following “Executive Compensation” section to “Compensation and Nominating Committee” refer to the Company’s Compensation Committee prior to November 2022 and refer to the Company’s Compensation and Nominating Committee after November 2022. See “Directors, Executive Officers And Corporate Governance-Board Committees” for additional information.
Determining Executive Compensation
On an ongoing basis, the Compensation and Nominating Committee reviews the performance and compensation of our President and CEO and the Company’s other executive officers.
Our President and CEO provides input to the Compensation and Nominating Committee regarding the performance of the other NEOs and offers recommendations regarding their compensation packages in light of such performance. The Compensation and Nominating Committee is ultimately responsible, however, for determining the compensation of the NEOs, including our President and CEO.
Compensation Philosophy and Objectives
The Compensation and Nominating Committee and the Board believe that the Company’s executive compensation programs for its executive officers should reflect the Company’s performance and the value created for its shareholders. In addition, we believe our executive compensation programs should support the goals and values of the Company and should reward individual contributions to the Company’s success. Specifically, the Company’s executive compensation program is intended to, among other things:
•attract and retain the highest caliber executive officers;
•drive achievement of business strategies and goals;
•motivate performance in an entrepreneurial, incentive-driven culture;
•closely align the interests of executive officers with the interests of the Company’s shareholders;
•promote and maintain high ethical standards and business practices; and
•reward results and the creation of shareholder value.
Factors Considered in Determining Compensation; Elements of Compensation
The Compensation and Nominating Committee makes executive compensation decisions on the basis of total compensation, rather than on individual components of compensation. We attempt to create an integrated total compensation program structured to balance both short and long-term financial and strategic goals. Our compensation should be competitive enough to attract and retain the highest caliber executive officers. In this regard, we utilizehave historically utilized a combination of between two to three of the following types of compensation to compensate our executive officers:
•base salary;
•annual cash performance bonuses payable as equity awards; and
•long-term equity compensation, consisting of stock options, time-based restricted stock units ("RSUs"(“RSUs”), and performance stock units ("PSUs"(“PSUs”). RSUs and stock options are typically granted with a multiple year vesting schedule to promote long-term retention. PSUs may be tied to the achievement of a variety of performance
metrics, including long-term revenue targets. Each vested RSU and PSU will be settled in one share of Common Stock.
The Compensation Committee'sand Nominating Committee’s philosophy regarding the mix of the three components of compensation is that equity awards should be emphasized over base salaries. The Compensation and Nominating Committee believes this approach preserves the Company's cash and strongly aligns executive officer incentives with shareholder interests.
The Compensation and Nominating Committee periodically reviews each executive officer’s base salary and makes appropriate recommendations to the Board. Base salaries are based on the following factors:
•the Company’s performance for the prior fiscal years and subjective evaluation of each executive’s contribution to that performance;
•the performance of the particular executive in relation to established goals or strategic plans;
•competitive levels of compensation for executive positions based on information drawn from informal internal benchmark analysis of base salaries for executive officers at similarly sized, public medical technology companies and other relevant information; and
•our obligations under the applicable executive officer’s employment agreement or offer letter (if any).
Performance bonuses and equity compensation are awarded based upon the recommendation of the Compensation and Nominating Committee. These grants are made with a view to linking executives’ compensation to the long-term financial success of the Company and its shareholders.
Role of Say-On-Pay Votes
As selected by our Shareholders at the 2019 Annual Meeting of Shareholders and approved by our Board, an advisory vote to approve the compensation of our NEOs (say-on-pay proposal) is held every three years. At the 20192022 Annual Meeting of Shareholders more than 97.8%approximately 80.8% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. At the Annual Meeting, Shareholders will have an opportunity to vote on the say-on-pay proposal (Proposal 4). The Compensation and Nominating Committee carefully considers the level of voting support from our Shareholders on our say-on-pay vote and will continue to consider the outcome of votes on say-on-pay proposals when making future compensation decisions for our NEOs.
Other Compensation Policies and Considerations; Tax Issues and Risk Management
As part of its role, the Compensation and Nominating Committee reviews and considers the deductibility of executive compensation under the Code and, historically, the intention of the Committee has been to compensate our NEOs in a manner that maximizes the Company’s ability to deduct compensation for federal income tax purposes (although no assurances have ever been made nor can be made or given with respect to our ability to deduct any compensatory payment to any of our executives).
Section 162(m) of the Code, as in effect for tax years beginning prior to December 31, 2017, provided that we could not deduct compensation of more than $1,000,000 paid in any year to the executives designated as “covered employees” under Section 162(m) of the Code, unless the compensation in excess of $1,000,000 qualified as “performance-based compensation” under Section 162(m) of the Code. Although the Compensation and Nominating Committee historically considered the implications of Section 162(m) on its ability to deduct compensation, the Compensation and Nominating Committee has always retained the discretion to award compensation that is not “performance-based compensation” under Section 162(m) of the Code if it determined that providing such compensation was appropriate with respect to the achievement of our business objectives and in the best interests of the Company and its shareholders. The Tax Cuts and Jobs Act (the “Tax Act”), which was signed into law in December 2017, eliminated the exception for “performance-based compensation” with respect to 2018 and future years. As a result, we expect that, except to the extent that compensation is eligible for limited transition relief applicable to binding contracts in effect on November 2, 2017 and not materially modified thereafter, compensation that is paid or provided to our Section 162(m) “covered employees” that exceeds $1,000,000 per year will be nondeductible under Section 162(m).
The Compensation and Nominating Committee continues to monitor the impact that the repeal of the “performance-based compensation” exception to Section 162(m) will have on the Company’s compensation plans,
awards, and arrangements, including whether and to what extent our existing agreements and programs qualify for the transition relief described above.
Section 409A of the Code imposes an additional 20% federal income tax and penalties upon employees who receive “non-qualified deferred compensation” that does not comply with Section 409A. The Compensation
and Nominating Committee takes into account the impact of Section 409A in designing our executive compensation plans and programs that provide for “non-qualified deferred compensation” and, as a general rule, these plans and programs are designed either to comply with the requirements of Section 409A or to qualify for an applicable exception to Section 409A so as to avoid possible adverse tax consequences that may result from failure to comply with Section 409A. We cannot, however, guarantee that the compensation will comply with the requirements of Section 409A or an applicable exception thereto.
On an annual basis, the Compensation and Nominating Committee evaluates the Company’s compensation policies and practices for its employees, including the NEOs, to assess whether such policies and practices create risks that are reasonably likely to have a material adverse effect on the Company. Based on its evaluation, the Compensation and Nominating Committee has determined that the Company’s compensation policies and practices do not create such risks.
Stock Ownership Guidelines
In order to promote a meaningful, permanent level of ownership in the Company and alignment of interests of the Board and NEOs with shareholders, in February 2021 the Board adopted stock ownership guidelines (the "Stock“Stock Ownership Guidelines"Guidelines”) for Board members and NEOs. The Stock Ownership Guidelines identify the minimum level of stock ownership expected of Board members (3 x annual retainer), the CEO (5 x annual base salary), and other NEOs (3 x annual base salary). Individuals are expected to achieve their respective minimum ownership level within five years of becoming subject to the Stock Ownership Guidelines. The Stock Ownership Guidelines are available online at https://ir.axdx.com/governance-documents.
Nonqualified Executive Deferred Compensation Plan
Our NEOs and other executive officers are eligible to participate in the Accelerate Diagnostics, Inc. Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”), pursuant to which certain of our highly compensated employees are permitted to defer up to 70% of their annual base salary into such plan. The Deferred Compensation Plan was adopted effective January 1, 2020. We do not make any contributions to the Deferred Compensation Plan on behalf of any participant, including any NEO, so each participant is fully vested in his or her account balances at all times. Investment gains or losses credited to a participant's account in the Deferred Compensation Plan are based on investment elections made by the participant from prescribed mutual fund investment options. Each participant in the Deferred Compensation Plan makes his or her own individual investment elections and may change any such investment election during the annual enrollment window.
As of the date of this Proxy Statement, only Mr. Phillips has made deferred elections pursuant to the Deferred Compensation Plan whereby Mr. Phillips elected to defer 70% of his annual base salary for 2020, 2021 and 40% for 2022.
Hedging, Short Sales and Related Policies
See “Directors, Executive Officers and Corporate Governance-Hedging, Short Sales and Related Policies” for information regarding the Company’s policies relating to hedging, short sales and related matters.
2020 Salary Waiver and Nonqualified Stock Options Grant PlanLong-Term Incentive Program
In December 2019,February 2020, the Compensation and Nominating Committee approved the 2020 Salary Waiver and Nonqualified Stock Option Grant Plana long-term incentive program (the “2020 Sub-Plan”), which was established pursuant to the Accelerate Diagnostics, Inc. 2012 Omnibus Equity Incentive Plan (the “2012 Incentive Plan”LTI Program”). Pursuant to theThe 2020 Sub-Plan, eligible employees, including our executive officers, were permitted to irrevocably waive a portionLTI Program consisted of their base compensation (e.g. salary) scheduledone commercial annual goal to be paid to themachieved by the end of 2022. The Company made grants of PSUs in 2020 in exchange for a grant of nonqualified stock options, which were awarded January 1,March 2020 under the 2012 Incentive Plan. The maximum election possible was 50% of2020 LTI Program to certain employees, including the eligible employee’s base compensation. In accordance withNEOs. These PSUs were forfeited in 2022 due to the 2020 Sub-Plan, Mr. Phillips irrevocably waived $100,000 of his 2020 base compensation in exchange for 25,268 of such options, and Mr. Reichling irrevocably waived $50,000 of his 2020 base compensation in exchange for 12,634 of such options.performance goals not being achieved.
The number of nonqualified stock options awarded to each participant was determined by multiplying the amount of salary forfeited by four (4) and dividing such amount by the 30-day trailing average closing price of the Common Stock as of December 19, 2019, with such amount rounded to the nearest whole share. Subject to
continued full-time employment, the options vested and became exercisable in equal monthly installments, on the last day of each month, over 12 months, with the first installment vesting on January 31, 2020 and the last installment vesting on December 31, 2020. Upon termination of employment for any reason other than death or disability, the vested portion of the option, if any, may generally be exercised for 90 days following termination of employment. Upon termination of employment by reason of death or disability, the vested portion of the option, if any, may generally be exercised for 12 months following termination of employment.
The Compensation Committee decided not to adopt a salary waiver and equity plan for 2021 for various reasons including that the Company implemented temporary 20% salary reductions for Company management in 2020, including NEOs, because of the COVID-19 crisis and its impact on the operations on the Company.
2020 COVID-19 Salary Reduction
On June 29, 2020, the Compensation Committee approved temporary 20% salary reductions for Company management and other employees with a base salary over $100,000, including NEOs because of the ongoing COVID-19 crisis and its impact on the operations on the Company. Salary reductions took effect for the period from June 29, 2020 through December 16, 2020. To compensate impacted employees, the Compensation Committee approved awards of RSUs under the 2012 Incentive Plan. The number of RSUs for each award was calculated based on the individual’s aggregate salary reduction amount, divided by the average closing price of the Company’s common stock over the 30 trading days prior to the internal announcement of the salary reductions on June 19, 2020. The RSUs vested in full on December 16, 2020.
2020 Performance Incentive Program
In February 2020, the Compensation and Nominating Committee approved a 2020 performance incentive program (“2020(the “2020 Performance Program”). The 2020 Performance Program consisted of two commercial performance goals and one financial performance goal. Because the ongoing COVID-19 pandemic significantly limited the Company'sCompany’s ability throughout 2020 to sell and implement its products at hospitals that were focussedfocused on responding to the COVID-19 pandemic, the Compensation and Nominating Committee in September 2020 modified all three performance goals. In the first quarter of 2021, the Compensation and Nominating Committee determined that the Company had achieved a level of performance under the 2020 Performance Program of 115%. The Compensation and Nominating Committee elected to pay the 2020 Performance Program in restricted stock unitsRSUs, which were issued in lieu of cash.
2020 Long-Term Incentive Program
In February 2020, the Compensation Committee approved a long-term incentive program ("2020 LTI Program"). The 2020 LTI Program consisted of one commercial annual goal to be achieved by by the end of 2022. The Company made grants of PSUs in March 2020 under the 2020 LTI Program to certain employees, including the NEOs.
2020 Employee Equity Retention Program
In December 2020, the Compensation Committee approved an equity retention program ("2020 Retention Program") designed to retain employees given that many employees had little or no Company equity that was "in the money." The grants under the 2020 Retention Program were in the form of RSUs with monthly vesting over 12 months beginning January 2023. With the exception of Mr. Phillips, the named executive officers received grants under the 2020 Retention Program.The Compensation Committee further decided not to approve a separate 2021 long-term incentive program since it would be largely duplicative of the 2020 Retention Program.2021.
2021 Performance Incentive Program
In March 2021, the Compensation and Nominating Committee approved a long-termperformance incentive program ("2021(the “2021 Performance Program"Program”). The 2021 Performance Program consisted of two commercial and three research and development goals to be achieved during 2021. Because the COVID-19 pandemic continued to significantly limit the Company'sCompany’s ability throughout 2021 to sell and implement its products at hospitals that were focused on responding to the COVID-19 pandemic, the Compensation and Nominating Committee modified all three performance goals in September 2021. In the first quarter of 2022, the Compensation and Nominating Committee determined that the Company had achieved a level of performance under the 2021 Performance Program of 75%. The Compensation and Nominating Committee elected to pay the 2021 Performance Program in RSUs, which were issued in lieu of cash.2022.
2022 Performance Incentive Program
On February 2022, the Compensation and Nominating Committee approved a performance incentive program (the “2022 Performance Program”). The 2022 Performance Program consisted of two commercial and two product development goals to be achieved during 2022. In the first quarter of 2023, the Compensation and Nominating Committee determined that the Company had achieved a level of performance under the 2022 Performance Program of 40%. The Compensation and Nominating Committee elected to pay the 2022 Performance Program in RSUs, which were issued in 2023.
2022 Long-Term Incentive Program
In February 2022, the Compensation and Nominating Committee approved a long-term incentive program (the “2022 LTI Program”). The 2022 LTI Program consisted of RSUs with a three-year vesting period with 40% vesting on the second anniversary of the grant date and the remaining 60% vesting over the remaining vesting period ending on the third anniversary of the grant date.
CEO Retention Grants
Separately from the above programs, in order to properly incentivize and ensure the retention of Mr. Phillips, the Compensation and Nominating Committee made the following grants to Mr. Phillips:
•June 2020 - 93,530 PSUs tied to a commercial goal to be achieved by the end of 2022, and 124,320 RSUs with a three-year annual vesting period. The PSUs were forfeited in 2022 due to the performance goals not being achieved.
•May 2021 - 103,29951,650 PSUs based upon atied to one commercial goal and variousan additional 51,649 PSUs tied to one product development goals, andgoal. Mr. Phillips has until the end of 2023 to achieve these goals. Mr. Phillips was also awarded 206,597 RSUs towhich started vesting January 2023 and vest monthly starting in January 2023.monthly.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to our NEOs for services rendered in all capacities during the noted periods. The fiscal years ended December 31, 20202021 and December 31, 20212022 are indicated below by “2020”“2021” and “2021,“2022,” respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal
Position | Year | Salary
($) | | Bonus
($) | | Stock
Awards
($)(8) | | Option
Awards
($)(8) | | All Other
Compensation
($) | | Total
($) |
| Jack Phillips, President and CEO (1) | 2021 | 595,000 | | (2) | — | | | 2,186,207 | | (6) | — | | | 108,015 | | (9) | 2,889,222 | |
| 2020 | 554,923 | | (3)(4)(5) | — | | | 3,146,563 | | (7) | 105,963 | | | 65,039 | | (10) | 3,872,488 | |
| | | | | | | | | | | | |
| Steve Reichling, CFO | 2021 | 340,000 | | | — | | | 1,265,602 | | | — | | | — | | | 1,605,602 | |
| 2020 | 324,077 | | (11)(12) | — | | | 44,679 | | (13) | 326,000 | | | — | | | 694,756 | |
| | | | | | | | | | | | |
| Ron Price, Senior Vice President and Head of Commercial Operations, America | 2021 | 240,000 | | | — | | | 1,112,594 | | | — | | | — | | | 1,352,594 | |
| 2020 | 225,231 | | (14) | — | | | 36,986 | | (15) | 192,718 | | | — | | | 454,935 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal
Position | Year | Salary
($) | | Stock
Awards
($)(5) | | All Other
Compensation
($) | | Total
($) |
| Jack Phillips, President and CEO | 2022 | 595,000 | | (1) | 1,499,707 | | | — | | | 2,094,707 | |
| 2021 | 595,000 | | (2) | 2,186,207 | | (3) | 108,015 | | (4) | 2,889,222 | |
| | | | | | | | |
Steve Reichling, former CFO(6) | 2022 | 349,808 | | | 353,194 | | | — | | | 703,002 | |
| 2021 | 340,000 | |
| 1,265,602 | | | — | | | 1,605,602 | |
| | | | | | | | |
Larry Mertz, CTO(7) | 2022 | 329,231 | | | 137,343 | | | — | | | 466,574 | |
(1)The Board appointed Mr. Phillips asmade deferred elections pursuant to the Company’s President and CEO, effective February 1, 2020.Deferred Compensation Plan whereby Mr. Phillips had been serving aselected to defer 40% of his 2022 annual base salary in the Company’s Chief Operating Officer since August 2019 when he joinedamount of $238,000, which was included in the Company.Salary column. Unrealized investment loss credited to Mr. Phillips’ account in the Deferred Compensation Plan was $210,757 and is not included in the Salary column. Investment income credited to Mr. Phillips’ account in the Deferred Compensation Plan was $60,062 and is not included in the Salary column. See “Compensation Overview - Nonqualified Deferred Compensation Plan” for additional information.
(2)Mr. Phillips made deferred elections pursuant to the Deferred Compensation Plan whereby Mr. Phillips elected to defer 70% of his 2021 annual base salary in the amount of $416,500, which was included in the Salary column. Unrealized investment gains credited to Mr. Phillips’ account in the Deferred Compensation Plan was $38,080 and is not included in the Salary column. Investment income credited to Mr. Phillips’ account in the Deferred Compensation Plan was $28,986 and is not included in the Salary column. See “Compensation Overview - Nonqualified Deferred Compensation Plan” for additional information.
(3)In accordance with the 2020 Sub-Plan, Mr. Phillips irrevocably waived $100,000 of his 2020 salary in exchange for options to purchase 25,268 shares of Common Stock. The fair value of the options upon being granted was $205,963 of which the amount in excess of the $100,000 was $105,963 and is a component of the Option Awards column. See “Compensation Overview - 2020 Salary Waiver and Nonqualified Stock Options Grant Plan” and “2021 Outstanding Equity Awards at Fiscal Year-End” for additional information regarding such options.
(4)Mr. Phillips’ 2020 salary reflects a temporary reduction in the amount of $49,500 approved by the Compensation Committee because of the ongoing COVID-19 crisis. To compensate impacted employees, the Compensation Committee approved a grant of 5,363 shares RSUs to Mr. Phillips in June 2020. The fair value of the RSUs was $76,262 and is a component of the Stock Awards column. See “Compensation Overview - 2020 COVID-19 Salary Reduction” and “2021 Outstanding Equity Awards At Fiscal Year-End” for additional information regarding such RSUs.
(5)Mr. Phillips made deferred elections pursuant to the Deferred Compensation Plan whereby Mr. Phillips elected to defer 70% of his 2020 annual base salary in the amount of $305,119, which was included in the Salary column. Unrealized investment gains credited to Mr. Phillips’ account in the Deferred Compensation Plan was $40,185 and is not included in the Salary column. Investment income credited to Mr. Phillips’ account in the Deferred Compensation Plan was $11,405 and is not included in the Salary column. See “Compensation Overview - Nonqualified Deferred Compensation Plan” for additional information.
(6)During 2021, 103,299 PSUs were granted to Mr. Phillips, which are subject to performance conditions. On the grant date, the performance conditions were not deemed probable and, therefore, the grant date value of the PSUs is not included in the “Stock Awards” column. The grant date value of the PSUs assuming that the highest level of performance conditions will be achieved was $732,390 (target level of performance as there are no threshold or maximum payout amounts).
(7)(4)During 2020, 117,938 PSUs were granted to Mr. Phillips, which are subject to performance conditions. OnThe amounts reflect the grant dates, the performance conditions were not deemed probable and, therefore, the grant date values of the PSUs are not included in the “Stock Awards” column. The aggregate grant date value of housing and relocation expenses during the year.
PSUs assuming that the highest level of performance conditions will be achieved was $1.3 million (target level of performance as there are no threshold or maximum payout amounts).
(8)(5)The amount reflects the aggregate grant date fair value of RSU and option awardawards during each year calculated in accordance with ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 13 to the financial statements set forth in the Annual Report. See “Compensation Overview” and “20212022 Outstanding Equity Awards at Fiscal Year-End” for additional information regarding the rawardsawards granted in 2021.2021 and 2022.
(9)(6)The amounts reflectMr. Reichling resigned as CFO of the aggregate value of housing and relocation expenses during the year.Company, effective March 31, 2023.
(10)The amounts reflect the aggregate value of housing during the year.
(11)In accordance with the 2020 Sub-Plan, Mr. Reichling irrevocably waived $50,000 of his 2020 salary in exchange for options to purchase 12,634 shares of Common Stock. The fair value of the options upon being granted was $102,981 of which the amount in excess of the $50,000 was $52,981 and is a component of the Option Awards column. See “Compensation Overview - 2020 Salary Waiver and Nonqualified Stock Options Grant Plan” and “2021 Outstanding Equity Awards at Fiscal Year-End” for additional information regarding such options.
(12)(7)Mr. Reichling’s 2020 salary reflects a temporary reduction inMertz was appointed as the amount of $29,000 approved by the Compensation Committee because of the ongoing COVID-19 crisis. To compensate impacted employees, the Compensation Committee approved a grant of 3,142 RSUs to Mr. Reichling inCompany’s CTO, effective June 2020. The fair value of the RSUs was $44,679 and is a component of the Stock Awards column. See “Compensation Overview - 2020 COVID-19 Salary Reduction” and “2021 Outstanding Equity Awards at Fiscal Year-End” for additional information regarding such RSUs.
(13)During 2020 16,765 PSUs were granted to Mr. Reichling, which are subject to performance conditions. On the grant date, the performance conditions were not deemed probable and, therefore, the grant date value of the PSUs are not included in the “Stock Awards” column. The grant date value of the PSUs assuming that the highest level of performance conditions will be achieved was $99,416 (target level of performance as there are no threshold or maximum payout amounts).
(14)Mr. Price’s 2020 salary reflects a temporary reduction in the amount of $24,000 approved by the Compensation Committee because of the ongoing COVID-19 crisis. To compensate impacted employees, the Compensation Committee approved a grant of 2,601 RSUs to Mr. Price in June 2020. The fair value of the RSUs was $36,986 and is a component of the Stock Awards column. See “Compensation Overview - 2020 COVID-19 Salary Reduction" and “2021 Outstanding Equity Awards at Fiscal Year-End” for additional information regarding such RSUs.
(15)During 2020, 11,834 PSUs were granted to Mr. Price, which are subject to performance conditions. On the grant date, the performance conditions were not deemed probable and, therefore, the grant date value of the PSUs are not included in the “Stock Awards” column. The grant date value of the PSUs assuming that the highest level of performance conditions will be achieved was $70,176 (target level of performance as there are no threshold or maximum payout amounts).23, 2022.
20212022 Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information concerning outstanding equity awards held by the NEOs at December 31, 2021:2022:
| | | Option Awards | | Stock Awards | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of Securities Underlying Unexercised Options | | | | | Option Awards | | Stock Awards |
| Name | Name | Grant Date | Number of securities underlying unexercised options (#) exercisable
(#) | Number of securities underlying unexercised options (#) unexerciable | | Option
Exercise
Price
($) | Option
Expiration
Date | | Number of
Shares or
Units of
Stock
That
Have Not
Vested
(#) | | Market
Value
of Shares
or Units of
Stock That
Have Not
Vested
($) | Equity
Incentive
Plan
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#) | | Market Value
of Shares or
Units of
Stock That
Have Not
Vested
($) | Name | Grant Date | Number of securities underlying unexercised options (#) exercisable
(#) | Number of securities underlying unexercised options (#) unexerciable | | Option
Exercise
Price
($) | Option
Expiration
Date | | Number of
Shares or
Units of
Stock
That
Have Not
Vested
(#) | | Market
Value
of Shares
or Units of
Stock That
Have Not
Vested
($) | Equity
Incentive
Plan Awards:
Number of
Unearned Shares or
Units of
Stock That
Have Not
Vested
(#) | | Equity Incentive Plan Awards: Market Value
of Unearned Shares or
Units of
Stock That
Have Not
Vested
($) |
| Jack Phillips | 8/6/2019 | 583,295 | | 666,622 | | (1) | 17.00 | | 8/6/2029 | | — | | | — | | — | | | — | | |
| Jack Phillips | Jack Phillips | 1/1/2020 | 25,268 | | — | | | 16.90 | | 1/1/2030 | | — | | | — | | — | | | — | | Jack Phillips | 8/6/2019 | 833,278 | | 416,639 | | (1) | 17.00 | | 8/6/2029 | | — | | | — | | — | | | — | |
| Jack Phillips | Jack Phillips | 2/1/2020 | — | | — | | | — | | — | | | 40,000 | | (2) | 303,200 | | — | | | — | | Jack Phillips | 1/1/2020 | 25,268 | | — | | | 16.90 | | 1/1/2030 | | — | | | — | | — | | | — | |
| Jack Phillips | Jack Phillips | 3/24/2020 | — | | — | | | — | | — | | | — | | | — | | 24,408 | | (3) | 185,013 | | Jack Phillips | 2/1/2020 | — | | — | | | — | | — | | | 30,000 | | (2) | 21,300 | | — | | | — | |
| Jack Phillips | Jack Phillips | 6/22/2020 | — | | — | | | — | | — | | | 124,320 | | (4) | 942,346 | | — | | | — | | Jack Phillips | 6/22/2020 | — | | — | | | — | | — | | | 62,160 | | (3) | 44,134 | | — | | | — | |
| Jack Phillips | Jack Phillips | 6/22/2020 | — | | — | | | — | | — | | | — | | | — | | 93,530 | | (3) | 708,957 | | Jack Phillips | 5/20/2021 | — | | — | | | — | | — | | | 206,597 | | (4) | 146,684 | | — | | | — | |
| Jack Phillips | Jack Phillips | 5/20/2021 | — | | — | | | — | | — | | | 206,597 | | (5) | 1,566,005 | | — | | | — | | Jack Phillips | 5/20/2021 | — | | — | | | — | | — | | | — | | | — | | 103,299 | | (5) | 73,342 | |
| Jack Phillips | Jack Phillips | 5/20/2021 | — | | — | | | — | | — | | | — | | | — | | 103,299 | | (6) | 783,006 | | Jack Phillips | 4/4/2022 | — | | — | | | — | | — | | | 886,060 | | (6) | 630,523 | | — | | | — | |
| Steve Reichling | Steve Reichling | 9/10/2012 | 50,000 | | — | | | 2.98 | | 9/10/2022 | | — | | | — | | — | | | — | | Steve Reichling | 2/26/2014 | 16,161 | | — | | | 14.92 | | 2/26/2024 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 2/26/2014 | 16,161 | | — | | | 14.92 | | 2/26/2024 | | — | | | — | | — | | | — | | Steve Reichling | 4/2/2015 | 3,588 | | — | | | 22.92 | | 4/2/2025 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 4/2/2015 | 3,588 | | — | | | 22.92 | | 4/2/2025 | | — | | | — | | — | | | — | | Steve Reichling | 3/18/2016 | 3,296 | | — | | | 12.49 | | 3/18/2026 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 3/18/2016 | 3,296 | | — | | | 12.49 | | 3/18/2026 | | — | | | — | | — | | | — | | Steve Reichling | 3/18/2016 | 30,000 | | — | | | 12.49 | | 3/18/2026 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 3/18/2016 | 30,000 | | — | | | 12.49 | | 3/18/2026 | | — | | | — | | — | | | — | | Steve Reichling | 2/23/2017 | 7,836 | | — | | | 24.45 | | 2/23/2027 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 2/23/2017 | 7,836 | | — | | | 24.45 | | 2/23/2027 | | — | | | — | | — | | | — | | Steve Reichling | 2/23/2017 | 15,000 | | — | | | 24.45 | | 2/23/2027 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 2/23/2017 | 12,000 | | 3,000 | | (7) | 24.45 | | 2/23/2027 | | — | | | — | | — | | | — | | Steve Reichling | 8/17/2017 | 5,000 | | — | | | 22.40 | | 8/17/2027 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 8/17/2017 | 4,000 | | 1,000 | | (8) | 22.40 | | 8/17/2027 | | — | | | — | | — | | | — | | Steve Reichling | 3/7/2018 | 8,032 | | — | | | 25.95 | | 3/7/2028 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 3/7/2018 | 8,032 | | — | | | 25.95 | | 3/7/2028 | | — | | | — | | — | | | — | | Steve Reichling | 3/7/2018 | 16,000 | | 4,000 | | (7) | 25.95 | | 3/7/2028 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 3/7/2018 | 12,000 | | 8,000 | | (9) | 25.95 | | 3/7/2028 | | — | | | — | | — | | | — | | Steve Reichling | 1/1/2019 | 16,604 | | — | | | 11.50 | | 1/1/2029 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 1/1/2019 | 16,604 | | — | | | 11.50 | | 1/1/2029 | | — | | | — | | — | | | — | | Steve Reichling | 1/1/2019 | 44,873 | | 14,957 | | (8) | 11.50 | | 1/1/2029 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 1/1/2019 | 29,916 | | 29,914 | | (10) | 11.50 | | 1/1/2029 | | — | | | — | | — | | | — | | Steve Reichling | 1/1/2020 | 12,634 | | — | | | 16.90 | | 1/1/2030 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 1/1/2020 | 12,634 | | — | | | 16.90 | | 1/1/2030 | | — | | | — | | — | | | — | | Steve Reichling | 3/24/2020 | 20,118 | | — | | | 5.93 | | 3/24/2030 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 3/24/2020 | 20,118 | | — | | | 5.93 | | 3/24/2030 | | — | | | — | | — | | | — | | Steve Reichling | 3/24/2020 | 26,825 | | 40,236 | | (9) | 5.93 | | 3/24/2030 | | — | | | — | | — | | | — | |
| Steve Reichling | Steve Reichling | 3/24/2020 | 13,413 | | 53,648 | | (11) | 5.93 | | 3/24/2030 | | — | | | — | | — | | | — | | Steve Reichling | 3/13/2021 | — | | — | | | — | | — | | | 113,265 | | (4) | 80,418 | | — | | | — | |
| Steve Reichling | Steve Reichling | 3/24/2020 | — | | — | | | — | | — | | | — | | | — | | 16,765 | | (3) | 127,079 | | Steve Reichling | 4/4/2022 | — | | — | | | — | | — | | | 190,299 | | (6) | 135,112 | | — | | | — | |
| Steve Reichling | 3/13/2021 | — | | — | | | — | | — | | | 113,265 | | (5) | 858,549 | | — | | | — | | |
| Ron Price | 5/27/2015 | 100,000 | | — | | | 22.66 | | 5/27/2025 | | — | | | — | | — | | | — | | |
| Ron Price | 2/17/2016 | 2,749 | | — | | | 11.52 | | 2/17/2026 | | — | | | — | | — | | | — | | |
| Ron Price | 3/17/2016 | 30,000 | | — | | | 12.42 | | 3/17/2026 | | — | | | — | | — | | | — | | |
| Ron Price | 2/23/2017 | 20,000 | | 5,000 | | (7) | 24.45 | | 2/23/2027 | | — | | | — | | — | | | — | | |
| Ron Price | 2/23/2017 | 7,836 | | — | | | 24.45 | | 2/23/2027 | | — | | | — | | — | | | — | | |
| Ron Price | 3/7/2018 | 8,032 | | — | | | 25.95 | | 3/7/2028 | | — | | | — | | — | | | — | | |
| Ron Price | 1/1/2019 | 25,191 | | 25,191 | | (10) | 11.50 | | 1/1/2029 | | — | | | — | | — | | | — | | |
| Ron Price | 3/24/2020 | 14,201 | | — | | | 5.93 | | 3/24/2030 | | — | | | — | | — | | | — | | |
| Ron Price | 3/24/2020 | 9,468 | | 37,869 | | (11) | 5.93 | | 3/24/2030 | | — | | | — | | — | | | — | | |
| Ron Price | 3/24/2020 | — | | — | | | — | | — | | | — | | | — | | 11,834 | | (3) | 89,702 | | |
| Ron Price | 3/13/2021 | — | | — | | | — | | — | | | 104,338 | | (5) | 790,882 | | — | | | — | | |
| Larry Mertz | | Larry Mertz | 5/20/2021 | 33,334 | | 66,666 | | (10) | 7.09 | | 5/20/2031 | | — | | | — | | — | | | — | |
| Larry Mertz | | Larry Mertz | 5/20/2021 | — | | — | | | — | | — | | | 20,000 | | (11) | 14,200 | | — | | | — | |
| Larry Mertz | | Larry Mertz | 5/20/2021 | — | | — | | | — | | — | | | 5,671 | | (11) | 4,026 | | — | | | — | |
| Larry Mertz | | Larry Mertz | 4/4/2022 | — | | — | | | — | | — | | | 71,642 | | (6) | 50,866 | | — | | | — | |
(1)Option award vestsvested 40% on August 6, 2021, and the balance vests monthly in 36 equal installments beginning on September 6, 2021 and ending on August 6, 2024.
(2)RSUs vest in equal annual amounts on each anniversary of the grant date over five years, beginning on February 1, 2021 and ending on February 1, 2025.
(3)The number of PSUs is based upon achieving the target level of performance as there are no threshold or maximum payout amounts. PSUs will vest if the performance goals determined by the Company's Compensation Committee are achieved or exceeded on or before December 31, 2022. Any unachieved goals will result in the PSUs being forfeited. Each vested PSU will be settled in one share of the Company’s common stock. As of December 31, 2021, none of the PSUs were considered probable.
(4)RSUs vest in equal annual amounts on each anniversary of the grant date over three years, beginning on June 21,22, 2021 and ending on June 21,22, 2023.
(5)(4)RSUs vest in equal monthly amounts beginning January 13, 2023 and ending on December 13, 2023.
(6)(5)The number of PSUs is based upon achieving the target level of performance as there are no threshold or maximum payout amounts. PSUs will vest if the performance goals determined by the Company's Compensation and Nominating Committee are achieved or exceeded on or before December 31, 2023.Any2023. Any unachieved goals will result in the PSUs being forfeited. Each vested PSU will be settled in one share of the Company’s common stock. As of December 31, 2021,2022, none of the PSUs were considered probable.
(7)(6)Option awards vest in equal annual amountsRSU award vests 40% on each anniversary ofApril 4, 2024, and the grant date over five years, beginningbalance vests on February 23, 2018 and ending on February 23, 2022.April 4, 2025.
(8)Option award vests in equal annual amounts on each anniversary of the grant date over five years, beginning on August 17, 2018 and ending on August 17, 2022.
(9)(7)Option award vests in equal annual amounts on each anniversary of the grant date over five years, beginning on March 7, 2019 and ending on March 7, 2023.
(10)(8)Option awardsaward vests 50% on January 1, 2021; 25% on January 1, 2022; and 25% on January 1, 2023.
(11)(9)Option awards vestaward vests in equal annual amounts on each anniversary of the grant date over five years, beginning on March 24, 2021 and ending on March 24, 2025.
(10) Option award vests in equal annual amounts on each anniversary of the grant date over three years, beginning on May 20, 2022 and ending May 20, 2024.
(11) RSUs vest in equal annual amounts on each anniversary of the grant date over three years, beginning on May 20, 2022 and ending May 20, 2024.
Potential Payments Upon Termination or Change-in-Control
The Company has entered into salary continuation, severance or similar agreements or arrangements with Mr. Phillips. Under Mr. Phillips'Phillips’ current employment agreement (the “Phillips Employment Agreement”), all unvested equity awards accelerate upon the closing of a transaction resulting in a Change of Control (as defined in the Phillips Employment Agreement), notwithstanding anything in the 2012 Incentive PlanCompany’s incentive plans to the contrary. Pursuant to the Phillips Employment Agreement, if the Company terminates Mr. Phillips without Cause (as defined in the Phillips Employment Agreement) or Mr. Phillips terminates his employment for Good Reason (as defined in the Phillips Employment Agreement) prior to a Change of Control (as defined in the Phillips Employment Agreement), Mr. Phillips will receive a severance payment equal to the sum of: (i) 12 months of his then base salary and (ii) his average earned under the Company’s annual cash incentive program over the term of his employment, plus a pro-rated amount under the Company’s annual cash incentive program for the year in which termination occurs. In addition, if the Company terminates Mr. Phillips without Cause or Mr. Phillips terminates his employment for Good Reason during the 12-month period following a Change of Control, Mr. Phillips will receive a severance payment equal to the sum of: (i) 18 months of his then base salary and (ii) 18 times the monthly amount that is charged to COBRA qualified beneficiaries for the same medical coverage options elected by Mr. Phillips immediately prior to his last day of employment, plus a pro-rated amount under the Company’s annual cash incentive program for the year in which termination occurs.
Certain option awards previously granted to Mr. Reichling provided for accelerated vesting upon the occurrence of certain change of control and other events. However, all such option awards have already vested as of December 31, 2019.
Executive Arrangements
Phillips
On January 31, 2020, Mr. Phillips entered into the Phillips Employment Agreement with the Company in connection with his appointment as Chief Executive Officer and President of the Company, effective February 1, 2020. The Phillips Employment Agreement superseded and replaced Mr. Phillips’ prior employment agreement with the Company entered into on August 6, 2019 (the “Prior Phillips Employment Agreement”) relating to his employment as Chief Operating Officer of the Company. Unless terminated earlier in accordance with the terms of the Phillips Employment Agreement, Mr. Phillips’ employment as Chief Executive Officer and President of the Company was to continue until February 1, 2022 and automatically renews for additional one-year periods unless either the Company or Mr. Phillips provides notice prior to the end of the then-current term. Pursuant to the Phillips Employment Agreement, Mr. Phillips is entitled to an annual base salary of $595,000. Mr. Phillips was also granted 50,000 RSUs, under the 2012 Incentive Plan, which vest in equal annual amounts on each anniversary of the grant date over five years. Beginning January 1, 2020, Mr. Phillips is eligible to earn an annual cash bonus equal to 100% of Mr. Phillips'Phillips’ base salary as of the first day of the calendar year, with the opportunity to earn up to (but not exceed) 150% of Mr. Phillips'Phillips’ base salary as of the first day of the calendar year. Beginning January 1, 2021, Mr.
Phillips is also eligible to receive stock options, performance shares and other awards under the 2012 Incentive Plan;Company’s incentive plan; provided that, for the 2021 calendar year, Mr. Phillips was to receive an equity award grant equal to 400% of his then base salary consisting of an award mix of 50% non-qualified stock options and 50% performance shares. However, the Compensation and Nominating Committee and Mr. Phillips agreed instead for 2021 that Mr. Phillips would receive an award mix of one-third performance shares and two-thirds RSU’sRSUs. For information regarding potential payments to Mr. Phillips upon termination or change-in-control pursuant to the Phillips Employment Agreement, see "-“- Potential Payments Upon Termination or Change-in-Control.”
Pursuant to the Prior Phillips Employment Agreement, among other things, Mr. Phillips was paid an annual base salary of $495,000 for his role as Chief Operating Officer of the Company. Additionally, Mr. Phillips received a signing bonus of $100,000 and was entitled to reimbursement of up to $200,000 of expenses incurred in connection with his relocation and reimbursement for reasonable and customary temporary housing costs. Mr. Phillips was also granted an option to purchase 1,249,917 shares of the Company’s Common Stock at an exercise price equal to $17.00
$17.00 per share, which was equal to the closing price of the Company’s Common Stock on the date of grant. The option was issued pursuant to the 2012 Incentive Plan with the following vesting schedule: 40% vests on the second anniversary of the date of grant, and the remaining 60% vests in 36 equal monthly installments over the subsequent 36 months.
Reichling
Mr. Reichling was appointed as the Company’s Chief Financial Officer (“CFO”)CFO on August 10, 2012 and accepted an offer letter with the Company on August 10, 2012 (the “Reichling Offer Letter”). Pursuant to the Reichling Offer Letter, Mr. Reichling was granted an option to purchase 200,000 shares of the Company’s Common Stock at an exercise price equal to $2.98 per share, which was equal to the closing price of the Company’s Common Stock on the date of grant. The option award was issued pursuant to the Company’s 2004 Omnibus Stock Option Plan, as amended, and is fully vested. Mr. Reichling was also provided with a $70,000 budget to be used towards relocation and temporary living arrangements. In his capacity as CFO, Mr. Reichling’s annual base salary was increased to $340,000 beginning in 2019 following an internal assessment of CFO base salaries at similarly sized medical technology companies. Mr. Reichling iswas also eligible for annual cash performance bonuses (which may be paid as equity awards), as well as long-term incentive equity awards. On March 9, 2023, Mr. Reichling notified the Company of his decision to resign as CFO of the Company, effective March 31, 2023.
PriceMertz
Mr. PriceMertz was appointed as the Company’s Senior Vice President and Head of Commercial Operations, AmericasCTO on April 6, 2015.June 23, 2022. Mr. PriceMertz is paid a base salary of $240,000$336,192 per year. Mr. PriceMertz is entitled to participate in the Company’s annual incentive programs and the annual long-term incentive programs.
Pay Versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive “compensation actually paid” (“CAP”) and the Company’s financial performance:
| | | | | | | | | | | | | | | | | | | | |
| Year | Summary Compensation Table Total for PEO(1)(2) ($) | Compensation Actually Paid to PEO(3) ($) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers(1)(2) ($) | Average Compensation Actually Paid to Non-PEO Named Executive Officers(4) ($) | Value of Initial Fixed $100 Investment Based On Total Shareholder Return(5) ($) | Net Loss
($)
(in thousands) |
| 2022 | 2,094,707 | (1,645,887) | 516,482 | (167,649) | 9 | (62,493) |
| 2021 | 2,889,222 | 682,527 | 1,479,098 | 757,146 | 69 | (77,702) |
1.In both 2022 and 2021, Jack Phillips was the Principal Executive Officer (“PEO”) and the remaining NEOs consisted of Steven Reichling and Ron Price for 2021, and Steven Reichling and Larry Mertz for 2022.
2.Represents total compensation reported in the Summary Compensation Table, which includes the grant date fair value of stock awards calculated in accordance with ASC Topic 718.
3.In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to the PEO’s total compensation for each year to determine the CAP:
| | | | | | | | | | | | | | |
| Year | Reported
Summary Compensation Table Total for PEO ($) | Less: Reported Value of Equity Awards(i) ($) | Equity Award Adjustments(ii) ($) | Compensation Actually Paid to PEO ($) |
| 2022 | 2,094,707 | 1,499,707 | (2,240,887) | (1,645,887) |
| 2021 | 2,889,222 | 2,186,207 | (20,488) | 682,527 |
i.Represents the grant date fair value of equity awards reported in the “Stock Awards” column in the Summary Compensation Table for the applicable year.
ii.The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following: (a) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year; (b) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that
are outstanding and unvested as of the end of the applicable year; (c) for awards that are granted and vest in the same applicable year, the fair value as of the vesting date; (d) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value; (e) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year; and (f) the dollar value of any dividends or other earnings paid on stock or option awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year.
The amounts deducted or added in calculating the equity award adjustments are as follows, as described above in footnote (ii):
| | | | | | | | | | | | | | | | | | | | | | | |
| Year | Year End Fair Value of Equity Awards Granted in the Applicable Year and Unvested at Year End ($) | Year over Year Change in Fair Value of Outstanding and Unvested Equity Awards ($) | Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Applicable Year ($) | Year over Year Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Applicable Year ($) | Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Applicable Year ($) | Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation ($) | Total Equity Award Adjustments ($) |
| 2022 | 626,970 | (2,183,200) | — | (684,657) | — | — | (2,240,887) |
| 2021 | 1,078,436 | (977,956) | 0 | (120,968) | — | — | (20,488) |
4.In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to the average total compensation for the NEOs as a group (excluding our PEO) for each year to determine the average CAP to the NEOs as a group (excluding our PEO), using the same methodology described above in footnote (3):
| | | | | | | | | | | | | | |
| Year | Average Reported
Summary Compensation Table Total for Non-PEO NEOs ($) | Less: Average Reported Value of Equity Awards(i) ($) | Average Equity Award Adjustments(ii) ($) | Average Compensation Actually Paid to Non-PEO NEOs ($) |
| 2022 | 516,482 | 207,827 | (476,303) | (167,649) |
| 2021 | 1,479,098 | 1,189,098 | 467,146 | 757,146 |
iii.Represents the grant date fair value of equity awards reported in the “Stock Awards” in the Summary Compensation Table for the applicable year.
iv.The amounts deducted or added in calculating the equity award adjustments are provided below:
| | | | | | | | | | | | | | | | | | | | | | | |
| Year | Average Year End Fair Value of Equity Awards Granted in the Applicable Year and Unvested at Year End ($) | Year over Year Average Change in Fair Value of Outstanding and Unvested Equity Awards ($) | Average Fair Value as of Vesting Date of Equity Awards Granted and Vested in the Applicable Year ($) | Year over Year Average Change in Fair Value of Equity Awards Granted in Prior Years that Vested in the Applicable Year ($) | Average Fair Value at the End of the Prior Year of Equity Awards that Failed to Meet Vesting Conditions in the Applicable Year ($) | Average Value of Dividends or other Earnings Paid on Stock or Option Awards not Otherwise Reflected in Fair Value or Total Compensation ($) | Total Average Equity Award Adjustments ($) |
| 2022 | 61,643 | (490,896) | 20,374 | (67,424) | — | — | (476,303) |
| 2021 | 567,944 | (125,151) | — | 24,353 | — | — | 467,146 |
5.Cumulative total shareholder return (“TSR”) is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period. See additional inputs provided below.
Pay vs. Performance Narrative Disclosure
In accordance with Item 402(v) of Regulation S-K, we are providing the following descriptions of the relationships between information presented in the Pay Versus Performance table on CAP and each of TSR and net loss.
We do not utilize TSR or net loss in our compensation programs. However, we do utilize several other performance measures to align compensation with our performance. As described in more detail above, part of the compensation our NEOs are eligible to receive consists of annual and long-term bonuses that are designed to provide appropriate incentives to our NEOs to achieve defined annual corporate goals and to reward our executives for individual achievement towards these goals, subject to certain employment criteria. Additionally, we view RSUs as an integral part of our executive compensation program, as related to Company performance although not directly tied to TSR, because they provide value only if the market price of our Common Stock increases, and if the executive officer continues in our employment over the vesting period. These equity awards strongly align our executive officers’ interests with those of our Shareholders by providing a continuing financial incentive to maximize long-term value for our Shareholders and by encouraging our executive officers to continue in our employment for the long-term.
From 2021 to 2022, our CAP for Mr. Phillips and the NEOs as a group (excluding Mr. Phillips) decreased. These decreases were primarily in connection with the decrease in the Company’s stock price year over year, which is also generally reflected in the decrease in TSR during such periods.
With respect to net income (loss), we have not reached the stage of profitability and have received limited revenue from sales of our products. As a result, we do not believe there is any meaningful relationship between our net income (loss) and CAP to our NEOs during the periods presented.
Director Compensation
Directors who are also employees of the Company (including Mr. Phillips) do not receive any separate compensation in connection with their Board service, and we do not pay cash fees to any of our directors. Our non-employee directors generally receive a non-qualified initial stock option award upon joining the Board, which is calculated using a pre-determined formula and vests 20% per year over a five-year period, beginning on the first anniversary of the date of the director’s election to the Board. Non-employee directors also receive annual equity awards with a nominal value of $60,000. Beginning in 2021, non-employee directors had the option of receiving their annual compensation comprised of all nonqualified stock options, all RSUs, or half RSUs and half nonqualified stock options. Additionally, pursuant to the Director Equity Deferral Program adopted by the Board in April 2021, if a director elects to receive RSUs, the director may elect to defer the payment of 100% of the RSU award until the first to occur of: (a) the date on which the director ceases to be a member of the Board; (b) the date specified by the director in writing; or (c) the date of the closing of a transaction that results in a Change of Control (as defined in the 2012 Incentive Plan) as long as such Change of Control constitutes a “change in control event” as defined in Section 409A of the Code.. Options were valued at a four times multiple, and RSUs were valued at a one time multiple. All equity awards vest after 12 months, unless a non-employee director in good standing leaves prior to 12 months, in which case the vesting is pro-rated based on the number of months served following the date of grant. We compensate our non-employee directors solely with equity in keeping with our overall goal of preserving cash. In addition, we believe larger equity awards, rather than cash fees, align our director incentives with the interests of our shareholders. We reimburse non-employee directors for reasonable expenses related to their Board service.
In 2022, all non-employee directors received their annual compensation in the form of a RSU award. Additionally, pursuant to the Director Equity Deferral Program adopted by the Board, a director may elect to defer the payment of 100% of the RSU award until the first to occur of: (a) the date on which the director ceases to be a member of the Board; (b) the date specified by the director in writing; or (c) the date of the closing of a transaction that results in a Change of Control (as defined in the 2022 Incentive Plan) as long as such Change of Control constitutes a “change in control event” as defined in Section 409A of the Code.
The following table sets forth the compensation of our directors for serving as our directors for the year ended December 31, 2021:2022:
| | Name | Name | Option
Award (1)
($) | | Stock
Award (1)
($) | | Total
($) | Name | Stock
Awards (1)
($) | | Total
($) |
| Thomas D. Brown | Thomas D. Brown | 140,799 | | (2) | — | | | 140,799 | | Thomas D. Brown | 45,569 | | (2) | 45,569 | |
| Roland Diggelmann | — | | (3) | — | | | — | | |
| Wayne Burris | | Wayne Burris | 84,035 | | (3)(4) | 84,035 | |
| Louise L. Francesconi | Louise L. Francesconi | 140,799 | | (2) | — | | | 140,799 | | Louise L. Francesconi | 45,569 | | (5) | 45,569 | |
| Hany Massarany | Hany Massarany | 527,008 | | (4)(5) | — | | | 527,008 | | Hany Massarany | 45,569 | | (5) | 45,569 | |
Mark C. Miller | Mark C. Miller | 70,399 | | (6) | 31,168 | | (7) | 101,567 | | Mark C. Miller | 45,569 | | (2) | 45,569 | |
| John Patience | John Patience | 140,799 | | (2) | — | | | 140,799 | | John Patience | 45,569 | | (2) | 45,569 | |
| Jack Schuler | Jack Schuler | 140,799 | | (2) | — | | | 140,799 | | Jack Schuler | 45,569 | | (5) | 45,569 | |
| Matthew W. Strobeck, Ph.D. | Matthew W. Strobeck, Ph.D. | 140,799 | | (2) | — | | | 140,799 | | Matthew W. Strobeck, Ph.D. | 45,569 | | (2) | 45,569 | |
Frank J.M. ten Brink | Frank J.M. ten Brink | 140,799 | | (2) | — | | | 140,799 | | Frank J.M. ten Brink | 45,569 | | (5) | 45,569 | |
| Charles Watts, M.D. | Charles Watts, M.D. | 140,799 | | (2) | — | | | 140,799 | | Charles Watts, M.D. | 45,569 | | (5) | 45,569 | |
(1)The amount reflects the aggregate grant date fair value of optionRSU awards and RSUs calculated in accordance with ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 13 to the financial statements set forth in the Annual Report.
(2)Includes annual option award to purchase 35,168 shares of Common Stock granted on May 20, 2021 at an exercise price of $7.09 per share, which vests on May 20, 2022.
(3)Mr. Diggelmann retired as a member of the Board and did not seek re-election in 2021. Mr. Diggelmann did not receive any equity awards in 2021.
(4)Includes annual option to purchase 31,261 shares of Common Stock granted on May 20, 2021 at an exercise price of $7.09 per share, which vests on May 20, 2022.
(5)Includes option to purchase 93,783 shares of Common Stock granted May 20, 2021 at an exercise price of $7.09 per share which vests in equal annual amounts on each anniversary of the grant date over five years, beginning on May 20, 2022 and ending on May 20, 2026.
(6)Includes annual option award to purchase 17,584 shares of Common Stock granted on May 20, 2021 at an exercise price of $7.09 per share, which vests on May 20, 2022.
(7)Includes 4,39675,949 RSUs which vest on May 20, 2022. 31, 2023. Pursuant to the Company’s Director Equity Deferral Program described above, Mr. Millerrecipient elected to defer receipt of the RSUs to such time that is within 30 days following his departure from the Board.
(3)Includes new director grant of 41,958 RSUs which vest in equal annual installments on each anniversary of the grant date over five years, beginning on May 31, 2023 and ending on May 31, 2027.
(4)Includes 98,101 RSUs which vest on May 31, 2023. Pursuant to the Company’s Director Equity Deferral Program described above, recipient elected to defer receipt of the RSUs to such time that is within 30 days following departure from the Board.
(5)Includes 75,949 RSUs which vest on May 31, 2023.
(6)Mr. Miller retired from the Board on February 21, 2023.
(7)Mr. ten Brink retired from the Board on February 22, 2023.
As of December 31, 2021,2022, our non-employee directors held unvested RSUs and options to purchase the following number of shares of Common Stock:
| | Name | Name | Option
Awards | Stock
Awards | | Name | Option
Awards | Stock
Awards | |
| Thomas D. Brown | Thomas D. Brown | 117,596 | | | | Thomas D. Brown | 117,596 | | 75,949 | | * |
| Wayne Burris | | Wayne Burris | — | | 140,059 | | ** |
| Louise L. Francesconi | Louise L. Francesconi | 92,894 | | | | Louise L. Francesconi | 92,894 | | 75,949 | | |
| Hany Massarany | Hany Massarany | 125,044 | | | | Hany Massarany | 125,044 | | 75,949 | | |
| Mark C. Miller | Mark C. Miller | 179,474 | | 4,396 | | * | Mark C. Miller | 179,474 | | 80,345 | | * |
| John Patience | John Patience | 112,701 | | | | John Patience | 112,701 | | 75,949 | | * |
| Jack Schuler | Jack Schuler | 104,520 | | | | Jack Schuler | 104,520 | | 75,949 | | |
| Matthew W. Strobeck, Ph.D. | Matthew W. Strobeck, Ph.D. | 157,371 | | | | Matthew W. Strobeck, Ph.D. | 157,371 | | 75,949 | | * |
| Frank J.M. ten Brink | Frank J.M. ten Brink | 291,382 | | | | Frank J.M. ten Brink | 291,382 | | 75,949 | | |
| Charles Watts, M.D. | Charles Watts, M.D. | 104,365 | | | | Charles Watts, M.D. | 104,365 | | 75,949 | | |
* Pursuant to the Company’s Non-Employee Director Equity Deferral Program described above, Mr. Millergrantee elected to defer receipt of the RSUs to such time that is within 30 days following hisdeparture from the Board.
** Pursuant to the Company’s Director Equity Deferral Program described above, grantee elected to defer receipt of 98,101 of the RSUs to such time that is within 30 days following departure from the Board.
Equity Compensation Plan Information
The table set forth below presents the securities authorized for issuance with respect to compensation plans under which equity securities are authorized for issuance as of December 31, 2021:2022:
| Equity Compensation Plan | | Plan category | Plan category | Number of securities to be issued upon exercise of outstanding options and release of restricted stock units | | Weighted-average exercise price of outstanding options, warrants and rights(1) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the 1st column) | Plan category | Number of securities to be issued upon exercise of outstanding options and release of restricted stock units | | Weighted-average exercise price of outstanding options, warrants and rights(1) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the 1st column)(3) |
| Equity compensation plans approved by security holders | Equity compensation plans approved by security holders | 9,282,722 | | (2) | $ | 13.89 | | 3,617,783 | | Equity compensation plans approved by security holders | 9,764,081 | | (2) | $ | 14.60 | | 7,021,378 | |
| Equity compensation plans not approved by security holders | Equity compensation plans not approved by security holders | — | | | — | | ��� | | Equity compensation plans not approved by security holders | — | | | — | | — | |
| Total | Total | 9,282,722 | | | $ | 13.89 | | 3,617,783 | | Total | 9,764,081 | | | $ | 14.60 | | 7,021,378 | |
(1)Shares of common stockCommon Stock issuable upon vesting of RSUs and PSUs have been excluded from the calculation of the weighted average exercise price because they have no exercise price associated with them.price.
(2)Represents 7,192,5405,408,661 shares of common stockCommon Stock subject to outstanding stock options and 2,090,1824,355,420 shares of common stockCommon Stock that may be issued upon vesting of outstanding RSUs and PSUs (assuming the maximum performance level for PSUs).
(3)Includes 6,939,117 as part of the 2022 Incentive Plan and 82,261 as part of the Company’s Employee Stock Purchase Plan (ESPP). On February 21, 2023, the Company terminated the ESPP and retired available shares.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our Common Stock as of March 16, 202222, 2023 of (i) each NEO, each member of our Board and each director of the Company;nominee; (ii) all executive officers and directors as a group; and (iii) each person known to the Company to be the beneficial owner of more than 5% of our Common Stock. We deem shares of our Common Stock that may be acquired by an individual or group within 60 days of March 16, 2022,22, 2023, including pursuant to the exercise of options or warrants, orthe conversion of convertible securities or vesting of RSUs, to be outstanding for the purpose of computing the percentage ownership of such individual or group, but these shares are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. Percentage of ownership is based on 69,661,265101,486,745 shares of Common Stock outstanding on March 16, 2022.22, 2023.
The information as to beneficial ownership was either (i) furnished to us by or on behalf of the persons named or (ii) determined based on a review of the beneficial owners’ Schedules 13D/G and Section 16 filings with respect to our Common Stock. Unless otherwise indicated, the business address of each person listed is c/o Accelerate Diagnostics, Inc., 3950 South Country Club Road, Suite 470, Tucson, Arizona 85714.
| | | | | | | | |
| Name of Beneficial Owner | Amount of Beneficial Ownership | Percentage
of Class |
| Named Executive Officers and Directors: | | |
| Thomas D. Brown (1) | 128,969 | | * |
| Wayne C. Burris (2) | — | | * |
| Louise L. Francesconi (3) | 33,996 | | * |
| Hany Massarany (4) | 30,000 | | |
| Mark Miller (5) | 200,952 | | * |
| John Patience (6) | 6,887,697 | | 9.9 | % |
| Jack Phillips (7) | 836,108 | | * |
| Jack Schuler (8) | 18,861,374 | | 27.0 | % |
| Matthew W. Strobeck, Ph.D. (9) | 2,374,591 | | 3.4 | % |
| Frank J.M. ten Brink (10) | 266,014 | | * |
| Charles Watts, M.D. (11) | 63,244 | | * |
| Steve Reichling (12) | 309,639 | | * |
| Ron Price (13) | 259,469 | | * |
| All executive officers and directors as a group (13 persons) | 30,252,053 | | 42.2 | % |
| | | | | | | | |
| Name of Beneficial Owner | Amount of Beneficial Ownership | Percentage
of Class |
| Named Executive Officers and Directors: | | |
Thomas D. Brown(1) | 199,305 | | * |
Wayne C. Burris(2) | — | | * |
Louise L. Francesconi(3) | 77,074 | | * |
Hany Massarany(4) | 98,775 | | * |
Marran H. Ogilvie(5) | — | | * |
John Patience(6) | 6,922,865 | | 6.8 | % |
Jack Phillips(7) | 1,574,027 | | 1.5 | % |
Jenny Regan(8) | — | | * |
Jack Schuler(9) | 23,807,276 | | 22.4 | % |
Matthew W. Strobeck, Ph.D.(10) | 2,409,759 | | 2.4 | % |
Charles Watts, M.D.(11) | 104,365 | | * |
Steve Reichling(12) | 419,584 | | * |
Larry Mertz(13) | 595,842 | | * |
All executive officers and directors as a group (11 persons)(14) | 35,789,288 | | 33.0 | % |
*Represents less than 1% of our issued and outstanding Common Stock.
(1)Mr. Brown is a director of the Company.Company but will not be standing for re-election at the Annual Meeting. Amount includes 46,541 shares of Common Stock held directly and 82,428152,764 shares of Common Stock that are issuable to him upon exercise of options that are vested or vest within 60 days of March 16, 2022.22, 2023.
(2)Mr. Burris is a director of the Company.
(3)Ms. Francesconi is a director of the Company. Amount includes 33,99677,074 shares of Common Stock that are issuable to her upon exercise of options that are vested or vest within 60 days of March 16, 2022.22, 2023.
(4)Mr. Massarany is a directorthe Chairman of the Company.Board. Amount includes 30,000 shares of Common Stock held by the Massarany Family Trust dated November 15, 2012.
(5)Mr. Miller is a director of the Company. Amount includes 39,062 shares of Common Stock held directly2012 and 161,89068,775 shares of Common Stock that are issuable to him upon exercise of options or release of restricted stock units that are vested or vest within 60 days of March 16, 2022.22, 2023.
(5)Ms. Ogilvie is a director nominee not currently serving on the Board.
(6)Mr. Patience is the Chairmana director of the Board.Company. Amount includes 4,365,585 shares held by the John Patience Trust dated 7/23/1993, 2,140,462 shares held by Patience Enterprises LP, 39,411 shares held by the John Patience and 264,706 shares held by Ventana Charitable Foundation. Mr. Patience has sole voting and dispositive power with respect to the shares held by the John Patience Trust dated 7/23/1993, Patience Enterprises LP and the Ventana Charitable Foundation. Mr. Patience disclaims beneficial ownership of these securities except to the extent of his pecuniary interest therein. Amount also includes 77,533112,701 shares of Common Stock issuable to him upon exercise of options that are vested or vest within 60 days of March 16, 2022.22, 2023.
(7)Mr. Phillips is a director of the Company and is the Company’s President and CEO. Amount includes 123,385473,589 shares of Common Stock held directly and 712,7231,100,438 shares of Common Stock that are issuable to him upon exercise of options or release of restricted stock unitsRSUs that are vested or vest within 60 days of March 16, 2022.22, 2023. Amount does not include 55,586 shares of Common Stock held by the John J. Phillips Investment Irrevocable Trust, dated July 31, 2019, for which a third-party serves as the trustee. Mr. Phillips does not have voting or dispositive power with respect to the shares held by the trust.
(8)Ms. Regan is a director nominee not currently serving on the Board.
(9)Mr. Schuler is a director of the Company. Amount includes 18,737,047 shares held by the Jack W. Schuler Living Trust (Mr. Schuler has sole voting and dispositive power with respect to such shares in his capacity as trustee of the trust); and 54,975 shares held by Renate Schuler (the spouse of Jack Schuler). Mr. Schuler disclaims beneficial ownership of these securities except to the extent of his pecuniary interest therein. Amount also includes 69,352104,520 shares of Common Stock issuable to him upon exercise of options that are vested or vest within 60 days of March 16, 2022.22, 2023. Amount also includes 2,471,710 shares of Common Stock issuable to him upon exercise of the Schuler Warrant (as defined in this Proxy Statement) and 2,439,024 shares of Common Stock issuable to him within 60 days of March 22, 2023, upon the closing of the Private Placement (as defined in this Proxy Statement) pursuant to the current terms of the March 2022 Securities Purchase Agreement (as defined in this Proxy Statement). Amount does not include an aggregate of 3,964,843 shares of common stockCommon Stock issuable upon the conversion of 3,964,843 shares of Series A Preferred Stock held by three entities related to Mr. Schuler but that are not affiliates of his.
(9)(10)Dr. Strobeck is a director of the Company. Amount includes 2,025,650 shares of Common Stock held directly, 206,828 shares held by Birchview Fund, LLC and 20,000 shares held as an UGMA Custodian for minor children (Dr. Strobeck has sole voting and dispositive power with respect to such shares in his capacity as the Managing Partner of such entity). Amount also includes 122,203157,371 shares of Common Stock issuable to him upon exercise of options that are vested or vest within 60 days of March 16, 2022.22, 2023.
(10)(11)Mr. ten BrinkDr. Watts is a director of the Company.Company but will not be standing for re-election at the Annual Meeting. Amount includes 9,800 shares of Common Stock held directly and 256,214options to purchase 104,365 shares of Common Stock issuable to him upon exercise of options that are vested or vest within 60 days of March 16, 2022.
(11)Dr. Watts is a director of the Company. Amount includes options to purchase 63,244 shares of Common Stock issuable to him upon exercise of options that are vested or vest within 60 days of March 16, 2022.22, 2023.
(12)Mr. Reichling iswas serving as the Company’s Chief Financial Officer.CFO until April 1, 2023. Amount includes 34,672142,370 shares of Common Stock held directly and 274,697277,214 shares of Common Stock issuable to him upon exercise of options or the release of restricted stock unitsRSUs that are vested or vest within 60 days of March 16, 2022.22, 2023.
(13)Mr. PriceMertz is the Company’s Senior Vice President and Head of Commercial Operations, Americas.CTO. Amount includes 14,927516,339 shares of Common Stock held directly and 244,54279,503 shares of Common Stock issuable to him upon exercise of options or the release of restricted stock unitsRSUs that are vested or vest within 60 days of March 16, 2022.22, 2023.
(14)Represents shares beneficially owned by the Company’s current executive officers and directors.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees for Election at the 20222023 Annual Meeting of Shareholders
The Board has nominated directors Brown,John Patience, Jack Phillips, Jack Schuler, Matthew W. Strobeck, Ph.D., Jenny Regan, Marran H. Ogilvie, Louise L. Francesconi, Hany Massarany, and Wayne BurrisFrancesconi, Massarany, Miller, Patience, Phillips, Schuler, Strobeck, ten Brink and Watts for election as directors to serve until the next Annual Meeting of Shareholders and until their successors are duly elected and qualified. If elected, each of the directors will hold office as a director until our 20232024 Annual Meeting of Shareholders.Shareholders or until their successors have been duly elected and qualified.
If you sign your proxy or voting instruction card but do not give instructions with respect to the voting of directors, your shares will be voted for the nominees recommended by our Board. If you wish to give specific instructions with respect to the voting of directors, you may do so by indicating your instructions on your proxy or voting instruction card. The Board expects that the nominees will be available to serve as directors. If any nominee becomes unavailable, however, the proxy holders intend to vote for any nominee designated by the Board, unless the Board chooses to reduce the number of directors serving on the Board. If additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them in such a manner as to assure the election of directors Brown, Burris,John Patience, Jack Phillips, Jack Schuler, Matthew W. Strobeck, Ph.D., Jenny Regan, Marran H. Ogilvie, Louise L. Francesconi, Hany Massarany, Miller, Patience, Phillips, Schuler, Strobeck, ten Brink and Watts.Wayne Burris.
Vote Required and Board Recommendation
Election of a director requires the affirmative vote of the holders of a plurality of the shares for which votes are cast at a meeting at which a quorum is present. The 119 persons receiving the greatest number of votes will be elected as directors. Since only affirmative votes count for this purpose, a properly executed proxy marked “WITHHOLD AUTHORITY” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for purposes of determining whether there is a quorum. Broker non-votes will not be treated as votes cast, and therefore will have no effect on the outcome of the proposal. Shareholders may not cumulate votes in the election of directors.
The Board recommends that shareholders vote FOR the election of each of directors Brown,John Patience, Jack Phillips, Jack Schuler, Matthew W. Strobeck Ph.D., Jenny Regan, Marran H. Ogilvie, Louise L. Francesconi, Hany Massarany, and Wayne Burris Francesconi, Massarany, Miller, Patience, Phillips, Schuler, Strobeck, ten Brink and Watts as directors of the Company.
PROPOSAL NO. 2
AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED SHARES
The Company’sCompany’s current Certificate of Incorporation authorizes the issuance of 105,000,000205,000,000 shares of the Company’s capital stock, of which 100,000,000200,000,000 shares are designated as Common Stock and 5,000,000 shares are designated as preferred stock. On March 16, 2022,April 14, 2023, the Board adopted and approved an amendment to the Company’s Certificate of Incorporation (the “Charter Amendment”) to increase the total number of authorized shares of the Company’s capital stock to 205,000,000455,000,000 shares, of which 200,000,000450,000,000 shares are to be designated as Common Stock and 5,000,000 shares are to be designated as preferred stock, subject to Shareholder approval. The Board has declared the proposed Charter Amendment to be advisable and in the best interests of the Company and the Shareholders and has directed that the adoption and approval of the Charter Amendment be submitted to the Shareholders for their consideration at the Annual Meeting. The text of the proposed Charter Amendment is attached hereto as Appendix A.
This Proxy Statement also contains a proposal that would provide the Company with the ability to effect a reverse stock split. See “Proposal No. 4 - Amendment of the Certificate of Incorporation to Effect a Reverse Stock Split.” The amendment to effect a reverse stock split would, with respect to any increase in the number of authorized and unissued shares as described below, result in a relative increase in the number of authorized and unissued shares of Common Stock. For more information on the relative increase in the number of authorized shares of our Common Stock, see “Effect of the Amendment on the Number of Authorized Shares of our Common Stock” under “Proposal No. 4 - Amendment of the Certificate of Incorporation to Effect a Reverse Stock Split.”
Purpose and Background of the Proposed ShareCharter Amendment
As of March 16, 2022,22, 2023, there were approximately 69,661,265101,486,745 shares of Common Stock issued and outstanding, which does not include approximately: 6,850,9745,338,820 shares of Common Stock issuable upon the exercise of outstanding options to purchase Common Stock; 2,718,1823,673,314 shares of RSU awards which have not yet vested; 2,872,0425,540,362 shares of Common Stock reserved for future issuance under the 20122022 Incentive Plan; 305,557 shares of Common Stock reserved for future issuance under our 2016 Employee Stock Purchase Plan; 3,897,307 shares of Common Stock reserved for issuance upon conversion of the Company’s outstanding 2.50% Convertible Senior Notes due 2023 (the “Convertible Notes”) (based on $120.5 million aggregate principal amount of Convertible Notes outstanding as of March 16, 2022 and an initial conversion rate of 32.3428 shares of common stock per $1,000 principal amount of Convertible Notes); and 3,954,546 shares of Common Stock reserved for issuance upon conversion of the SeriesSeries A Preferred Stock.Stock; 2,471,710 shares of Common Stock issuable upon the exercise of the Schuler Warrant; and 2,439,024 shares of Common Stock reserved for the sale of shares pursuant to the March 2022 Securities Purchase Agreement (as defined in this Proxy Statement). Based upon our issued and reserved shares of Common Stock, there are approximately 9,740,12775,095,479 shares of Common Stock available for issuance in the future for other corporate purposes. If approved by the Shareholders, a total of 5,500,000an additional 16,000,000 shares of Common Stock will be reserved for grant under the 2022 Incentive Plan and no awards will be granted under the 2012 Incentive Plan or any other prior plan on or after the effective date of the 2022 Incentive Plan. See “Proposal No. 3 Approval– Amendment of the Accelerate Diagnostics, Inc. 2022 Omnibus Equity Incentive Plan” for additional information.
The purpose of the proposed Charter Amendment is to allow the Company to have a sufficient number of shares of authorized and unissued Common StockStock:
•in order to be able to restructure the Company’s outstanding 2.50% Convertible Senior Notes due 2023 (the “Old Convertible Notes”), including to be able to reserve for issuance shares of Common Stock that would be issuable upon conversion of a new series of convertible notes (the “New Convertible Notes”) that are proposed to be issued in connection with such restructuring along with the related transactions described below (the “Restructuring”); and
•for the issuance of additional shares of Common Stock for such other corporate purposes as may, from time to time, be considered advisable by the Board. Having suchBoard (“General Purposes Shares”).
The Old Convertible Notes became due on March 15, 2023. As of that date, there were approximately $57.3 million of Old Convertible Notes outstanding, inclusive of accrued and unpaid interest. The Company has not paid the principal or accrued but unpaid interest due to the holders of the Old Convertible Notes. The New Convertible Notes proposed to be issued to the holders of the Old Convertible Notes in satisfaction of claims thereunder and additional funding in the amount of $10.0 million, are expected to have a term of 3.5 years. The issuance of the New Convertible Notes is therefore expected to provide the Company with significantly more financial flexibility. The Company currently expects to issue up to approximately $67.3 million aggregate principal amount of New Convertible Notes plus additional New Convertible Notes in respect of interest accrued on the Old Convertible Notes from March 15, 2023. The New Convertible Notes, if issued, would be convertible into up to approximately
93.5 million shares of Common Stock without giving effect to interest accrued on the Old Convertible Notes since March 15, 2023 at a conversion price of approximately $0.72 per share, subject to adjustment, and would bear interest at a rate of 5% per annum, payable in kind. The interest on the New Convertible Notes would be convertible into up to approximately 18,000,000 shares of Common Stock if held to maturity. The conversion price is subject to adjustment based on the difference between the 31 to 90 day volume-weighted average price, subject to a cap of $0.83 per share. The foregoing amounts are based on the amount of principal and accrued but unpaid interest on the Old Convertible Notes as of March 15, 2023 and the final amounts will be adjusted based on interest accrued on the Old Convertible Notes after March 15, 2023.
The Company expects that the holders of the Old Convertible Notes will, as a condition to their participation in the restructuring of the Old Convertible Notes, require the Company to enter into various arrangements with the Jack W. Schuler Living Trust (the largest shareholder of the Company and an entity affiliated with Jack W. Schuler, a director of the Company, the “Schuler Trust”) and related parties (the “Schuler Related Parties”).These arrangements are expected to include the following transactions and agreements.
•The prepayment by the Company of a secured promissory note issued by it to the Schuler Trust in an aggregate principal amount of $35.9 million (inclusive of accrued interest). To effect this prepayment, in lieu of cash, the Company would deliver to the Schuler Trust approximately 34,000,000 shares of Common Stock valued at $1.06 per share in accordance with the terms of an amendment to the secured promissory note.
•The fulfillment by the Schuler Trust of its obligations to purchase shares of Common Stock from the Company pursuant to the March 2022 Securities Purchase Agreement entered into by the Schuler Trust with the Company. The March 2022 Securities Purchase Agreement is expected to be amended in connection with the restructuring of the Old Convertible Notes to provide a purchase price of $0.82 per share of Common Stock. Pursuant to the amended securities purchase agreement, the Company would issue approximately 5,000,000 shares of Common Stock to the Schuler Trust for proceeds of $4.1 million.
•The entry by the Schuler Trust into an additional securities purchase agreement with the Company pursuant to which the Schuler Trust, at the option of the Company, will be required to either purchase approximately 14,000,000 shares of Common Stock from the Company for aggregate proceeds of $10.0 million or to backstop a public offering by the Company of Common Stock at market prices for proceeds of $10.0 million. Pursuant to this securities purchase agreement, if other investors purchase the full $10.0 million in the public offering, the Schuler Trust will have the right, but not the obligation, to purchase up to $10.0 million of additional shares of Common Stock at the public offering price for the backstopped offering.
•The conversion of 3,954,546 shares of Series A Preferred Stock of the Company held by certain Schuler Related Parties into a like number of shares of Common Stock of the Company.
We refer to these transactions and agreements, together with the issuance of the New Convertible Notes as described in the preceding paragraph, as the “Restructuring Transactions.”
The exact terms of the restructuring of the Old Convertible Notes are subject to the negotiation of definitive documentation among the Company, the holders of the Old Convertible Notes, the Schuler Trust and the other Schuler Related Parties. The final terms of the proposed New Convertible Notes, including the number of shares to be issuable upon conversion thereof, and the final terms upon which the Schuler Secured Note is to be converted, the Schuler Trust’s purchase commitment pursuant to the existing March 2022 Securities Purchase Agreement is to be consummated and the terms of the additional securities purchase agreement, including the aggregate number of shares of Common Stock to be issued and the proceeds to be received by the Company from the Schuler Trust in connection therewith, may change from those described above. There is no guarantee the Company will be successful in restructuring the Old Convertible Notes or completing the Restructuring Transactions contemplated in connection therewith.
In addition to the shares of Common Stock that would be issuable in connection with the restructuring of the Old Convertible Notes, having the General Purpose Shares available for issuance in the future will give the Company greater flexibility and will allow the shares to be issued from time to time as determined by the Board and, unless otherwise required by NASDAQ rules or other applicable rules and regulations, without the expense and delay of a special shareholders’ meeting to approve the additional authorized capital stock. The corporate purposes
for which the Company may issue Common Stocksuch General Purpose Shares could include, without limitation, issuances of Common Stock in connection with stock splits or stock dividends, issuances in connection with future acquisitions, issuances pursuant to equity awards granted under current or future equity compensation plans, issuances in connection with equity financings and issuances in connection with exchange transactions. There are currently no commitments or understandings with respect to the issuance of any of the additional shares of Common StockGeneral Purpose Shares that would be authorized by the proposed Charter Amendment.
Effect of Proposed Charter Amendment
The approval of this Proposal No. 2 is necessary in order for the Company to be able to restructure its obligations under the Old Convertible Notes. The restructuring of the Old Convertible Notes will give the Company significantly increased financial flexibility. If the Company’s obligations under the Old Convertible Notes are not restructured, the holders of such notes would likely seek to enforce their rights to payment thereunder. The Company does not currently have the financial resources to both satisfy claims in respect of the Old Convertible Notes and continue its ordinary course business activities. Any such action by the holders of the Old Convertible Notes could cause the Company to seek the protection of the United States Bankruptcy Court, which may harm our business, adversely affect our ability to retain key personnel, and result in a significant loss of value for our Shareholders.
The issuance of additional shares of Common Stock in the future, however, may have the effect of diluting earnings or loss per share, as well as the ownership and voting rights of the holders of our then-outstanding Common Stock. In addition, while the increase in the authorized number of shares of Common Stock is not designed to deter or prevent a change of control, under some circumstances we could use the additional authorized shares to create voting impediments or to frustrate persons seeking to effect a takeover or otherwise gain control of the Company by, for example, issuing those shares in private placements to purchasers who might side with our Board in opposing a hostile takeover bid. The Board is not aware of any attempt to take control of the Company and has not presented this proposal with the intention that the increase in our authorized shares of Common Stock be used as a type of anti-takeover device.
Rights of Additional Authorized Shares
Any authorized shares of Common Stock, if and when issued, would be part of our existing class of Common Stock and would have the same rights and privileges as the shares of Common Stock then-outstanding. The holders of Common Stock have no preemptive rights to subscribe for or purchase any additional shares of Common Stock that may be issued in the future.
Implementing the Proposed Charter Amendment
If approved by the Shareholders at the Annual Meeting, the proposed Charter Amendment will become effective upon the filing of a Certificate of Amendment with the Secretary of State of the State of Delaware, which filing is expected to occur promptly after the Annual Meeting.
Vote Required and Board Recommendation
Pursuant to applicable Delaware law, approval of the Charter Amendment requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock. Abstentions and broker non-votes will have the same effect as a vote cast against the proposal.
The Board recommends that the Shareholders vote FOR Proposal 2.
PROPOSAL NO. 3
APPROVALAMENDMENT OF THE ACCELERATE DIAGNOSTICS, INC. 2022 OMNIBUS EQUITY INCENTIVE PLAN
General
The Company currently sponsors, and grants equity-based compensation awards pursuant to, the Accelerate Diagnostics, Inc. 2012 Omnibus Incentive Compensation Plan (the “2012 Incentive Plan”). The 2012 Incentive Plan will automatically expire pursuant to its terms in October 2022. Accordingly, on March 16,On May 12, 2022, the BoardCompany’s shareholders approved subject to the approval of our stockholders, the Accelerate Diagnostics, Inc. 2022 Omnibus Equity Incentive Compensation Plan (the “2022 Incentive Plan”). The 20122022 Incentive Plan will be automatically replacedprovides for the grant of nonqualified stock options, incentive stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units, stock grants, stock units, performance units, performance shares and superseded byperformance cash awards.
On April 14, 2023 (the “Effective Date”), the Board adopted, subject to shareholder approval, the FirstAmendment to the 2022 Incentive Plan on the date on which the 2022 Incentive Plan is(the “First Amendment”). If approved by our stockholders (the “Effective Date”), provided that any outstanding awards granted under the 2012 Incentive PlanShareholders, the First Amendment will remain in effect pursuant to their terms. If stockholder approval is not received,increase the 2012 Incentive Plan will remain in place until it automatically expires by its terms in Octobernumber of 2022.
If the 2022 Incentive Plan is approved, asshares of its Effective DateCommon Stock reserved and subject to the share counting rules and other adjustments described in the 2022 Incentive Plan, a total of 5,500,000 shares will be available for grant under the 2022 Incentive Plan. No awards will be granted under the 2012 Incentive Plan or any other prior plan on or after the Effective Date of the 2022 Incentive Plan.by 16,000,000 shares. We anticipate that the adoption of the 2022 Incentive PlanFirst Amendment and the additional 5,500,00016,000,000 shares we are requesting to be reserved for grant under the 2022 Incentive Plan will allow the Compensation and Nominating Committee to grant awards for the next two (2)3 years, although this could change based on other factors, including but not limitedvarious factors.
The Board believes the First Amendment is necessary because the Company exceeded its planned usage of shares in 2022, primarily due to mergergranting equity awards at a lower average share price than anticipated. The Board believes that the Company’s success is due to its talented workforce and acquisition activity.that its future success partially depends on the Company’s continued ability to recruit, hire, and retain the talent required to successfully execute the Company’s business plans. The ability to grant equity awards under the 2022 Incentive Plan is a critical tool in the Company’s efforts to achieve this objective.
As of the dateEffective Date, the total number of shares of Common Stock remaining available for grant under the 2022 Incentive Plan was approved by our Board, all of the shares previously reserved and available for grant under the 2012 Incentive Plan had been depleted. The table below presents our potential fully diluted overhang levels as of March 16, 2022 before and after effectiveness of the 2022 Incentive Plan:
| | | | | |
(A) Equity awards outstanding as of March 16, 2022 | 9,569,156 |
(B) Shares available for grant under the 2012 Incentive Plan | 2,872,042 |
(C) Additional requested shares for 2022 Incentive Plan | 5,500,000 |
(D) Common shares outstanding | 69,661,265 |
Fully Diluted Overhang prior to effectiveness of 2022 Incentive Plan (A+B)/(A+B+D) | 15 | % |
Fully Diluted Overhang after effectiveness of 2022 Incentive Plan (A+B+C)/(A+B+C+D) | 20 | % |
approximately 5,540,362 shares.
Our burn rate for the last three years (the “Burn Rate”), which we define as the total number of shares subject to awards granted in a calendar year expressed as a percentage of our weighted average shares outstanding, was 5.02%5.2% for 2022, 5.0% for 2021, 4.41%and 4.4% for 2020, and 6.87% for 2019, and the average Burn Rate over the last three years was 5.41%4.9%. If the 2022 Incentive Plan is not approved, we will no longer be able to grant equity-based compensation awards, which would have a detrimental effect on our ability to attract, retain and motivate our employees, officers, directors and consultants. The Board believes the potential dilution from equity issuances to be made under the 2022 Incentive Plan, approval of the First Amendment, and our historical Burn Rate is reasonable and that approval of the 2022 Incentive PlanFirst Amendment is in the best interests of our stockholdersShareholders as it allows us to continue awarding equity incentives, which are an important component of our overall compensation program.
The closing price of our common stock,Common Stock, as reported on The Nasdaq Capital Market on March 16, 2022,April 26, 2023, was $1.90$0.90 per share. If the 2022 Incentive PlanFirst Amendment is approved by our stockholders,Shareholders, we anticipate filing a Form S-8 registration statement with the SEC shortly after the Annual Meeting to register the shares authorized for issuance under the 2022 Incentive Plan. First Amendment.
Set forth below is a summary of the principal provisions of the 2022 Incentive Plan.Plan, as amended by the proposed First Amendment. The summary is qualified by reference to the full text of the 2022 Incentive Plan, as amended by the proposed First Amendment, which is attached to this proxy statementProxy Statement as Appendix B.
Summary of 2022 Incentive Plan Features
Purpose
Purpose
.
The Board believes that the 2022 Incentive Plan promotes the success and enhances the value of the Company by aligning the interests of participants in the 2022 Incentive Plan with those of the Company’s shareholdersShareholders and by providing those individuals with an incentive for outstanding performance to generate significant returns for the Company’s shareholders.Shareholders. The Board also believes that the flexible terms and conditions of the 2022 Incentive Plan, which permit the grant of various forms of equity awards with a variety of terms and
conditions, allow the Company to attract, retain and motivate individuals upon whose judgment, interest and effort the successful conduct of the Company’s operation is largely dependent.
Administration
Administration
.
The 2022 Incentive Plan is administered by the Compensation and Nominating Committee (“Committee”Committee���) or, with respect to non-employee directors, the Board. The Committee shall at all times consist of at least two (2) individuals, each of whom qualifies as: (i)(a) a “non-employee director” as defined in Rule 16b‑16b 3(b)(3) of the General Rules and Regulations of the Exchange Act; and (ii)(b) “independent” for purposes of the NASDAQ Listing Rules, in each case, as each such rule or regulation is in effect from time to time.The Committee, by majority action, is authorized to interpret the 2022 Incentive Plan, to prescribe, amend, and rescind rules and regulations relating to the 2022 Incentive Plan, to provide for conditions and assurances deemed necessary or advisable to protect the interests of the Company, and to make all other determinations necessary for the administration of the 2022 Incentive Plan, to the extent they are not contrary to express provisions of the 2022 Incentive Plan.
The Committee has the authority, without limitation, to: (i)(a) designate participants to receive awards; (ii)(b) determine the type or types of awards and the times when awards are to be granted; (iii)granted to each participant; (c) determine the number of awards to be granted and the number of shares of Common Stock to which an award will relate; (iv)(d) determine the terms and conditions of any award, including, but not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the award, any schedule for lapse of restrictions or limitations, and accelerations or waivers thereof, based in each case on such considerations as the Committee determines; (v)(e) determine whether, to what extent, and in what circumstances an award may be settled in, or the exercise price of an award may be paid in, cash, Common Stock, other awards, or other property, or whether an award may be cancelled, forfeited, exchanged or surrendered; (vi)(f) prescribe the form of each award agreement, which need not be identical for each participant; (vii)(g) decide all other matters that must be determined in connection with an award; (viii)(h) establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the 2022 Incentive Plan; (ix)(i) amend or modify any outstanding award to the extent the terms of such award are within the power and authority of the Committee as provided under the 2022 Incentive Plan; (x)(j) interpret the terms of, and determine any matter arising pursuant to, the 2022 Incentive Plan or any award agreement and correct any defects and reconcile any inconsistencies in the 2022 Incentive Plan or any award agreement; and (xi)(k) make all other decisions or determinations that may be required pursuant to the 2022 Incentive Plan or an award agreement as the Committee deems necessary or advisable to administer the 2022 Incentive Plan.
PursuantThe Committee may, in its discretion, delegate to the Committee’s specific written delegation,CEO, in writing, the Company’s CEO has thepower and authority to grant awards to employees (other than to expedite the hiring process and retain talented employees. The CEO does not have the authority to grant awards to any individualemployees who isare or may become upon hiring become employees subject to Section 16 of the Exchange Act.Act) to expedite the hiring process or to retain talented employees. The Committee’s delegation to the CEO may be revoked or modified at any time. Any such delegation must be consistent with applicable law and shall be subject to such restrictions or limitations as may be imposed by the Committee.
Stock Subject to the 2022 Incentive Plan
Plan. The
If the First Amendment is approved by the Shareholders, the total number of shares of Common Stock reserved and available for grant pursuant to the 2022 Incentive Plan shall be 5,500,000,21,500,000 shares, plus the number of shares of Common Stock that remain available or, thatas described in Section 4.2 of the 2022 Incentive Plan otherwise become available, for grant under the terms of the Company’s 2012 Omnibus Equity Incentive Plan and all Prior Plans (as definedprior equity plans adopted by the Company at any time in the 2022 Incentive Plan) following its Effective Date. past.
The maximum number of shares of Common Stock that may be issued as incentive stock options under the 2022 Incentive Plan is the same numeric limitation set forth in the preceding sentence. Shares delivered pursuant to the 2022 Incentive Plan may consist of authorized but unissued Common Stock, treasury stock, or Common Stock purchased on the open market. The amount of Common Stock reserved for grants pursuant to the 2022 Incentive Plan is subject to adjustment in the event of certain changes in capital structure as described below under “Adjustment Provisions.”
If any award granted under a Prior Plan (as defined in the 2022 Incentive Plan) terminates, expires, lapses for any reason, any Common Stock subject to or surrendered for such award will again be available for grant under
the 2022 Incentive Plan. The exercise of a stock-settled stock appreciation right (“SAR”)SAR or broker-assisted “cashless” exercise of an option (or a portion thereof) will reduce the number of shares of Common Stock available for grant by the entire number of
shares of Common Stock subject to that SAR or option (or applicable portion thereof), even though a smaller number of shares of Common Stock will be issued upon such an exercise. Common Stock tendered to pay the exercise price of an option or tendered or withheld to satisfy a tax withholding obligation arising in connection with an award will not become available for grant or sale under the 2022 Incentive Plan. Awards that are settled in cash will not be charged against the number of shares available for grant.
The aggregate grant date fair value of awards (including share-based and cash-based awards) that may be granted under the 2022 Incentive Plan to a non-employee director, plus the aggregate amount of all cash payments made to such non-employee director, for service as director during any fiscal year may not exceed $750,000.$500,000. For the avoidance of doubt, any compensation that is deferred shall be counted toward this annual director compensation limit during the year in which it is first earned.
Eligibility
Eligibility.
All employees, officers, directors, of, and certain consultants and advisers to the Company or its subsidiaries are eligible to participate in the 2022 Incentive Plan. Awards may alsoWe currently have 166 employees and 9 non-employee directors, although we expect that awards will be grantedgenerally limited to prospectiveapproximately 157 employees and 9 non-employee directors, and under unique circumstances a consultant or members of the Board subject to certain requirements.advisor (of whom there are currently 3 consultants and/or advisors eligible for equity awards).
Awards Available Under the 2022 Incentive Plan.Plan
Each of the following types of awards may be granted pursuant to the 2022 Incentive Plan:
•Stock OptionsOptions.. An option entitles the participant to purchase shares of Common Stock in the future at a specified price. The Committee may grant both incentive stock options and nonqualified stock options under the 2022 Incentive Plan. Incentive stock options will be granted only to participants who are employees. The exercise price of all options granted under the 2022 Incentive Plan will be at least 100% of the fair market value of our Common Stock on the date of grant. Stock options may be exercised as determined by the Committee, but no option may be exercised more than ten (10)10 years from the date of grant. The Committee will determine the methods by which the exercise price of an option may be paid, the form of payment, including, without limitation, cash, shares of Common Stock held for longer than six (6) months (through actual tender or by attestation), any net-issuance arrangement or other property acceptable to the Committee (including broker-assisted “cashless exercise” arrangements), and the methods by which shares of Common Stock will be delivered or deemed delivered to participants. Special rules will apply to incentive stock options as provided in the 2022 Incentive Plan. A participant will have no rights as a shareholder with respect to options until the shares of Common Stock are actually issued in connection with the award.
•Stock Appreciation RightsSARs.. A SAR award gives the participant the right to share in the appreciation in value of one share of Common Stock. Appreciation is calculated as the excess, if any, of (i) the fair market value of a share of Common Stock on the date of exercise over (ii) the base value fixed by the Committee on the date of grant, which may not be less than the fair market value of a share of Common Stock on the date of grant. SARs are exercisable at such times and subject to such restrictions and conditions as the Committee approves, provided that no SAR may be exercised more than ten (10) years following the date of grant. The award agreement will specify whether the payment for the SARs shall be in cash, Common Stock of equivalent value, or in a combination thereof.
•Restricted StockStock.. A restricted stock award gives the participant the right to receive a specified number of shares of Common Stock at a purchase price determined by the Committee (including and typically zero). Restrictions limit the participant’s ability to transfer the Common Stock and subject the Common Stock to a substantial risk of forfeiture until specific conditions or goals are met. The restrictions will lapse in accordance with a schedule or other conditions as determined by the Committee. As a general rule, if the participant terminates employment (or service) during the period of restriction, any unvested restricted Common Stock will be forfeited.
•Restricted Stock UnitsUnits.. A restricted stock unit award gives the participant the right to receive Common Stock, a cash payment, or a combination thereof, equal to the fair market value of our Common Stock (determined as of a specified date) in the future, subject to certain restrictions and to the risk of forfeiture. Participants holding restricted stock units have no voting rights with respect to the shares of Common Stock subject to their restricted stock unit award prior to the issuance of such shares pursuant to the award. As a general rule, if the participant terminates employment (or service) during the period of restriction, any unvested restricted stock units will be forfeited.
•Stock Grant AwardsAwards.. A stock grant award gives the participant the right to receive (or purchase at a price determined by the Committee), a designed number of shares of Common Stock free of any vesting restrictions. A stock grant award may be granted or sold as consideration for past services, other consideration or in lieu of cash compensation due to any participant. The purchase price, if any, for a stock grant award shall be payable in cash or other form of consideration acceptable to the Committee.
•Stock Unit Awards. A stock unit award gives the participant the right to receive a designated number of shares of Common Stock, or a cash payment equal to the fair market value (determined as of a specified date) of a designated number of shares of Common Stock, in the future free of any vesting restrictions. A stock unit award may be granted or sold as consideration for past services, other consideration or in lieu of cash compensation due to any participant.
•Performance Shares. A performance share award gives the participant the right to receive a specified number of shares of Common Stock if the participant achieves the performance goals specified by the Committee during a performance period specified by the Committee.
•Performance Units. A performance unit award gives the participant the right to receive a specified number of shares of Common Stock, a cash payment or a combination of Common Stock and cash, if the participant achieves the performance goals specified by the Committee during a performance period specified by the Committee.
•Performance Cash Awards. A performance cash award gives the participant the right to receive a cash payment if the participant achieves the performance goals specified by the Committee during a performance period specified by the Committee.
Restrictions
Restrictions.
Except as described above, the Committee may impose such restrictions on any awards under the 2022 Incentive Plan as it may deem advisable, including restrictions under applicable federal securities law, under the requirements of any stock exchange upon which our Common Stock is then listed and under any blue sky or state securities law applicable to the awards.
Change of Control. Control
If a Change of Control occurs, the Board shall have the authority and discretion, but shall not have the obligation, to provide, in an award agreement or thereafter, that all or part of outstanding awards shall become fully exercisable and all or part of the restrictions on outstanding awards shall lapse. In addition, upon, or in anticipation of, a Change of Control, the Committee may: (i)(a) cause all outstanding awards to be cancelled and terminated as of a specified date and give each participant the right to exercise such awards during a period of time as the Committee, in its sole discretion, shall determine, or (ii)(b) cause all outstanding awards to be cancelled and terminated as of a specified date in exchange for a payment or right to payment pursuant to the terms and conditions set forth in the Change of Control transaction documents. With respect to an award which the Company concludes is subject to (and not excepted from) the requirements of Section 409A, any actions taken by the Board in connection with a Change of Control shall be done in compliance with Section 409A of the Code.
Clawback of Awards. Awards
Every award issued under the 2022 Incentive Plan is subject to potential forfeiture or “clawback” to the fullest extent called for by applicable federal or state law or Company policy. By accepting an award, a participant agrees to return to the Company the full amount required by applicable law or Company policy.
Nontransferability
Nontransferability.
The Committee may, in its sole discretion, determine the right of a participant to transfer any award granted under the 2022 Incentive Plan.
Unless otherwise determined by the Committee, no award granted under the 2022 Incentive Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution or, pursuant to a domestic relations order in favor of a spouse (that would otherwise qualify as a qualified domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, but for the fact that the order pertains to an award), or, if applicable, until the termination of any restricted or performance period as determined by the Committee. Notwithstanding the foregoing, theThe Committee shall have the authority to allowadopt a participantpolicy that is applicable to existing Awards, new Awards, or both, which permits a Participant to transfer awards, including SARs and options,Awards during his or her lifetime to family members.any Family Member.
A participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the participant and to receive any distribution with respect to any award upon the participant’s death. If no
beneficiary has been designated or survives the participant, payment will be made to the person entitled thereto under the participant’s will or the laws of descent and distribution. Subject to the foregoing, a participant may change or revoke a beneficiary designation at any time provided the change or revocation is filed with the Committee.
Adjustment Provisions.Provisions
If there is a change in
In the outstandingevent of any recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to the shares of Common Stock, because of a stock dividend or split, recapitalization, merger, consolidation, combination, exchange of shares, or otherany similar corporate change,transaction or event in respect of the Common Stock, the Committee shall, in its sole discretion and to the extent it deems equitable and appropriate to prevent dilution or enlargement of rights, make a proportionate adjustment in: (i)(a) the number and class of shares of Common Stock made available for grant; (ii)(b) the number of shares of Common Stock set forth in the various numeric limits expressed in the 2022 Incentive Plan; (iii)(c) the number and class of and/or price of shares of Common Stock, units, or other rights subject to the then-outstanding awards; (iv)(d) the performance targets or goals appropriate to any outstanding awards; or (v)(e) any other terms of an award that are affected by the event. Notwithstanding anything in the 2022 Incentive Plan to the contrary, in the event of any such transaction or occurrence, the Committee, in its sole discretion, may provide in substitution for any or all outstanding awards such alternative consideration (including cash) as it, in good faith, may determine to be equitable under the circumstances and may require in connection therewith the surrender of all awards so replaced. Any adjustments made pursuant to the 2022 Incentive Plan’s adjustment provisionsPlan shall be made in a manner consistent with the requirements of Section 409A of the Code and, in the case of incentive stock options, any such adjustments shall be made in a manner consistent with the requirements of Section 424(a) of the Code.
Replacement Awards. Awards
In the event of any corporate transaction in which the Company or a subsidiary acquires a corporate entity which, at the time of such transaction, maintains an equity compensation plan pursuant to which equity awards are then outstanding (the “Acquired Plan”), the Committee may make awards to assume, substitute or convert such outstanding awards in such manner as may be determined to be appropriate and equitable by the Committee. Any shares of stock authorized and available for issuance under the Acquired Plan shall, subject to adjustment as described above under “Adjustment Provisions,” be available for use in making awards under this 2022 Incentive Plan with respect to persons eligible under such Acquired Plan, by virtue of the Company’s assumption of such Acquired Plan, consistent with the NASDAQ Listing Rules (or rules of any other exchange upon which our Common Stock is then traded), including, but not limited to, NASDAQ Listing Rule 5635(c), including IM-5635-1, as such rulesRules may be amended or replaced from time to time.
Amendment, Modification and Termination of Plan.the 2022 Incentive Plan
With the approval of the Board, the Committee may, at any time and from time to time, terminate, amend or modify the 2022 Incentive Plan. Any such action of the Committee is subject to the approval of the shareholdersShareholders to the extent required by law, regulation or the rules of any exchange on which our Common Stock is then listed,
quoted or traded. Except as otherwise provided in the 2022 Incentive Plan, neither the Board nor the Committee may, without the approval of shareholders: (i)Shareholders: (a) increase the number of shares available for grant under the 2022 Incentive Plan; (ii)(b) permit the Committee to grant options or SARs with an exercise price or base value that is below fair market value on the date of grant; (iii)(c) permit the Committee to extend the exercise period for an option or SAR beyond ten (10) years from the date of grant; (iv)(d) amend the 2022 Incentive Plan to permit the Committee to reprice previously granted options; (v)(e) amend the 2022 Incentive Plan to permit the Committee to reprice previously granted SARs; (vi)SARs, (f) extend the duration of the 2022 Incentive Plan;Plan, or (vii)(g) expand the type of awards available for grant under the 2022 Incentive Plan or expand the class of participants eligible to participate in the 2022 Incentive Plan.
Except as provided in the next sentence, or in connection with a change of control, no amendment, modification, or termination of the 2022 Incentive Plan or any award agreement shall in any material manner adversely affect any award previously granted under the 2022 Incentive Plan without the consent of the participant. The participant’s consent is unnecessary if the change: (i)(a) is required by law or regulation; (ii)(b) does not adversely affect in any material way the rights of the participant; or (iii)(c) is required to cause the benefits under the 2022 Incentive Plan to comply with the provisions of Section 409A of the Code.
Tax Withholding. Withholding
The Company will have the power to withhold, or require a participant to remit to the Company, up to the maximum statutory amount necessary (or such lower amount that will not cause an adverse tax consequence or cost to the Company) to satisfy federal, state, and local withholding tax requirements on any award under the 2022 Incentive Plan. To the extent that alternative methods of withholding are available under applicable laws, the Company will have the power to choose among such methods.
Federal Income Tax Information.
The following is a brief summary of certain federal income tax consequences of certain transactions under the 2022 Incentive Plan based on federal income tax laws in effect on as of the date of this Proxy Statement.December 31, 2022. This summary is not intended to be exhaustive and does not describe state, local, or foreign income tax consequences which may also be applicable.
As a general rule, with the exception of a stock grant, a participant will not recognize taxable income with respect to any award at the time of grant. A participant will recognize income on a stock grant award at the time of grant and, subject to any deduction limitations set forth in the Internal Revenue Code, the Company will be entitled to a concurrent income tax deduction equal to the ordinary income recognize by the participant.
Upon exercise of a nonqualified stock option, the lapse of restrictions on restricted stock, or upon the payment of SARs, restricted stock units, performance shares, performance units, performance cash awards, or stock unit awards, the participant will recognize ordinary taxable income in an amount equal to the difference between the amount paid for the award, if any, and the fair market value of our Common Stock or amount received on the date of exercise, lapse of restriction or payment. Subject to any deduction limitations set forth in the Internal Revenue Code, the Company will be entitled to a concurrent income tax deduction equal to the ordinary income recognized by the participant.
A participant who is granted an incentive stock option will not recognize taxable income at the time of exercise. However, the excess of the Common Stock’s fair market value over the option price could be subject to the alternative minimum tax in the year of exercise (assuming the Common Stock received is not subject to a substantial risk of forfeiture or is transferable). If Common Stock acquired upon exercise of an incentive stock option is held for a minimum of two (2) years from the date of grant and one year from the date of exercise, the gain or loss (in an amount equal to the difference between the sales price and the exercise price) upon disposition of the Common Stock will be treated as a long-term capital gain or loss, and the Company will not be entitled to any income tax deduction. If the holding period requirements are not met, the incentive stock option will not meet the requirements for this tax favored treatment and the tax consequences described for nonqualified stock options will apply.
Section 409A of the Code, among other things, expanded the definition of deferred compensation arrangements to include, for example, below market option and SAR grants, restricted stock units, performance shares, performance units, performance cash awards, and stock units.If awards that are subject to Section 409A fail to comply with Section 409A, a participant must include in ordinary income all deferred compensation conferred by the award, pay interest from the date of the deferral and pay an additional 20% tax.The award agreement for any award that is subject to Section 409A may include provisions necessary for compliance as determined by the Committee. The Company intends (but cannot and does not guarantee) that awards granted under the 2022 Incentive Plan will comply with the requirements of Section 409A or an exception thereto and intends to administer and interpret the 2022 Incentive Plan in such a manner.
The Patient Protection and Affordable Care Act, which became effective in 2010, introduced a new net investment income tax. Effective January 1, 2013, dividends paid to and capital gains recognized by individuals with incomes over certain threshold amounts may be subject to an additional 3.8% tax on net investment income.
Special Rules Applicable to Officers.
In limited circumstances where the sale of Common Stock that is received as the result of a grant of an award could subject an officer to suit under Section 16(b) of the Exchange Act, the tax consequences to the officer may differ from the tax consequences described above. In these circumstances, unless a special election has been made, the principal difference usually will be to postpone valuation and taxation of the Common Stock received so long as the sale of the Common Stock received could subject the officer or director to suit under Section 16(b) of the Exchange Act, but not longer than six (6) months.
Tax Consequences to the Company or Its Subsidiaries.
To the extent that a grantee recognizes ordinary income in the circumstances described above, the Company or the subsidiary for which the employee performs services will be entitled to a corresponding deduction, provided that, among other things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an “excess parachute payment” within the meaning of Section 280G of the Code.
New Plan Benefits.The Company has not approvedissuance of any awards that are conditioned upon stockholder approvalunder the First Amendment will be at the discretion of the 2022 Incentive Plan. Awards underCommittee. Therefore, the 2022 Incentive Plan will be determined by the Committee in its discretion. It is, therefore, not possible to predict the awardsbenefits and amounts that will be made to particular officersreceived or allocated under the First Amendment in the future under the 2022 Incentive Plan.are generally not determinable at this time. If the 2022 Incentive Planproposed First Amendment had been in effect in fiscal year 2021,2022, we expect that our award grants for fiscal year 20212022 would not have been different from those actually made in that year under the 20122022 Incentive Plan. The following table sets forth the awards that were granted during 2021For information regarding grants made under the 20122022 Incentive Plan during 2022 to (i) each of our NEOs; (ii) all current executive officers as a group; (iii) all currentNEOs and directors, who are not executive officers as a group;see the sections entitled “Compensation Overview” and (iv) all employees, including all current officers who are not executive officers, as a group.“Executive Compensation” in this Proxy Statement.
| | | | | | | | | | | | | | |
| Name and Position | Aggregate Grant Date Fair Value of Stock Awards
($) | RSUs Awarded
(#) | Number of PSUs Awarded
(#) | Options Awarded
(#) |
| Jack Phillips President and CEO | 2,918,596 | | 286,490 | | 103,299 | | — | |
| Steve Reichling CFO | 1,265,602 | | 140,657 | | — | | — | |
| Ron Price Senior Vice President and Head of Commercial Operations, America | 1,112,594 | | 123,673 | | — | | — | |
| Executive Group | 4,390,076 | | 341,742 | | 8,507 | | 100,000 | |
| Non-Executive Director Group | 1,614,166 | | 4,396 | | — | | 388,804 | |
| Non-Executive Officer Employee Group | 21,076,757 | | 1,574,518 | | 121,666 | | 1,000 | |
Vote Required and Board Recommendation
The proposal will be approved if a majority of the votes cast are voted in favor of the proposal. Abstentions and broker non-votes will not be treated as votes cast for or against the proposal, and therefore will have no effect on the outcome of the proposal.
The Board recommends that the Shareholders vote FOR Proposal 3.
PROPOSAL NO. 4
ADVISORY VOTEAMENDMENT OF THE CERTIFICATE OF INCORPORATION TO APPROVE COMPENSATION OF NAMED EXECUTIVE OFFICERS (“SAY-ON-PAY”)EFFECT A REVERSE STOCK SPLIT
Proposed Advisory Resolution of ShareholdersGeneral
AtThe Board has adopted resolutions approving, and is recommending that our Shareholders approve, an amendment to the Annual Meeting,Company’s current Certificate of Incorporation to effect a reverse stock split of our Common Stock at a ratio ranging from any whole number between and including 1-for-5 and 1-for-30, with the exact ratio within such range to be determined at the discretion of the Board, subject to the Board’s authority to determine when to file the amendment and to abandon such amendment notwithstanding prior Shareholder approval of such amendment. Pursuant to the law of the State of Delaware, our state of incorporation, the Board must adopt any amendment to our Certificate of Incorporation and submit the amendment to Shareholders will be givenfor their approval. The form of the opportunityproposed amendment to vote on the following advisory resolution:our Certificate of Incorporation is attached to this Proxy Statement as Appendix C.
RESOLVED, thatBy approving this proposal, Shareholders will approve an amendment to our Certificate of Incorporation pursuant to which any whole number of outstanding shares of Common Stock between and including five (5) and thirty (30), inclusive, would be combined into one share of Common Stock, and authorize our Board to file only one such amendment with the shareholdersSecretary of Accelerate Diagnostics, Inc. hereby approve, on an advisory basis, the compensationState of the Company’s named executive officers,State of Delaware, as discloseddetermined by our Board in the manner described herein. Our Board believes that Shareholder approval of an amendment granting our Board this proxy statement, includingdiscretion, rather than approval of a specified reverse stock split ratio, provides our Board with maximum flexibility to react to then-current market conditions and, therefore, is in the accompanying compensation tablesbest interests of the Company and the related narrative discussion.its Shareholders.
BackgroundThe Board may effect only one reverse stock split as a result of this authorization. The Board may also elect not to effect any reverse stock split. The Board’s decision as to whether and when to effect the reverse stock split will be based on Proposala number of factors, including the then prevailing market conditions, the historical, existing and expected trading price of our Common Stock, the anticipated impact of the reverse stock split on the trading price and trading volume of our Common Stock and our market capitalization, and the continued listing requirements of The Nasdaq Capital Market. Although our Shareholders may approve the reverse stock split, we will not effect the reverse stock split if the Board does not deem it to be in the best interests of the Company and its Shareholders.
As required by Section 14AThe proposed amendment will not reduce the number of the Exchange Act and in accordance with SEC rules, Shareholders are being given the opportunity to vote at the Annual Meeting on this advisory resolution for the approval of the compensationauthorized shares of our NEOs (commonly referredCommon Stock or preferred stock. Because the reverse stock split will decrease the number of outstanding shares of our Common Stock by a ratio in the range of 1-for-5 to 1-for-30, as “say-on-pay”).determined by the Board of Directors, the amendment would result in a relative increase in the number of authorized and unissued shares of our Common Stock. For more information abouton the compensation that we paid to our NEOs during 2021, as well as a descriptionrelative increase in the number of authorized shares of our overall executive compensation philosophy and program, please referCommon Stock, see “Effect of the Amendment on the Number of Authorized Shares of our Common Stock”. This Proxy Statement also contains a proposal that would increase the number of shares of Common Stock that the Company is authorized to issue under its Certificate of Incorporation. See “Proposal No. 2 - Amendment of the “Compensation Overview” and “Executive Compensation” sectionsCertificate of Incorporation to Increase Authorized Shares” in this Proxy Statement.
Purpose and Background of the Reverse Stock Split
On April 14, 2023, the Board approved the proposed amendment to our Certificate of Incorporation to effect the reverse stock split for the following reasons:
•The Board believes that the reverse stock split is our best means of ensuring compliance with the $1.00 per share of Common Stock minimum bid price requirement for continued listing on The Nasdaq Capital Market and avoid delisting;
•The Board believes that a higher stock price, which may be achieved through a reverse stock split, could help generate investor interest in the Company and help attract, retain, and motivate employees; and
•The Board believes that some potential employees are less likely to work for the Company if we have a low stock price or are no longer listed on The Nasdaq Capital Market, regardless of size of our overall market capitalization.
Nasdaq Requirements for Continued Listing
Our Common Stock is publicly traded and listed on The Nasdaq Capital Market under the symbol “AXDX.” One of the requirements for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) is maintenance of a minimum closing bid price of $1.00.
As selectedpreviously disclosed, on January 5, 2023, the Company received a deficiency letter from Nasdaq’s Listing Qualifications Department (“Nasdaq”) notifying the Company that it was not in compliance with the requirement of Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market as a result of the closing bid price of our Common Stock being below $1.00 per share for 30 consecutive business days (the “Bid Price Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided 180 calendar days, or until July 5, 2023, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the closing bid price of the Company’s Common Stock is required to be at least $1.00 per share for a minimum of 10 consecutive business days.
The Board believes that effecting a reverse stock split may be the best means of increasing and maintaining the price of our Common Stock to above $1.00 per share in compliance with the Bid Price Rule for continued listing on The Nasdaq Capital Market. The Board believes that continued listing on The Nasdaq Capital Market provides overall credibility to an investment in our stock, given the stringent listing and disclosure requirements of The Nasdaq Capital Market. Notably, some trading firms discourage investors from investing in lower priced stocks that are traded in the over-the-counter market because they are not held to the same stringent standards. Increasing visibility of our stock among a larger pool of potential investors could result in higher trading volumes. Such increases in visibility and liquidity could also help facilitate future financings.
In light of the factors mentioned above, our Board unanimously approved the proposed amendment to our Certificate of Incorporation to effect the reverse stock split as a potential means of increasing and maintaining the price of our Common Stock to above $1.00 per share in order to maintain compliance with the Nasdaq listing requirements.
Potential Increased Investor Interest
In approving the proposed amendment to our Certificate of Incorporation, the Board considered that our Common Stock may not appeal to brokerage firms that are reluctant to recommend lower priced securities to their clients. Investors may also be dissuaded from purchasing lower priced stocks because the brokerage commissions, as a percentage of the total transaction, tend to be higher for such stocks. Moreover, the analysts at many brokerage firms do not monitor the trading activity or otherwise provide coverage of lower priced stocks.
Risks Associated with the Reverse Stock Split
There are risks associated with the reverse stock split, including that the reverse stock split may not result in a sustained increase in the per share price of our Common Stock. There is no assurance that:
•The market price per share of our Common Stock after the reverse stock split will rise in proportion to the reduction in the number of shares of our Common Stock outstanding immediately before the reverse stock split;
•The reverse stock split will result in a per share price that will increase the level of investment in our Common Stock by institutional investors or increase analyst and broker interest in our Company;
•The reverse stock split will result in a per share price that will increase our ability to attract and retain employees and other service providers; and
•The market price per share of our Common Stock will either exceed or remain in excess of the $1.00 minimum bid price as required by Nasdaq, or that we will otherwise meet the requirements of Nasdaq for continued inclusion for trading on The Nasdaq Capital Market.
Shareholders should note that the effect of the reverse stock split, if any, upon the market price of our Common Stock cannot be accurately predicted. In particular, we cannot assure you that the price of a share of our
Common Stock after the reverse stock split will be five (5) to thirty (30) times, as applicable, the price for a share of our Common Stock immediately prior to the reverse stock split. Furthermore, even if the market price of our Common Stock does rise following the reverse stock split, we cannot assure you that the market price of our Common Stock immediately after the proposed reverse stock split will be maintained for any period of time. Even if an increased per-share price can be maintained, the reverse stock split may not achieve the desired results that have been outlined above. Moreover, because some investors may view the reverse stock split negatively, we cannot assure you that the reverse stock split will not adversely impact the market price of our Common Stock.
The market price of our Common Stock will also be based on our performance and other factors, some of which are unrelated to the reverse stock split or the number of shares outstanding. If the reverse stock split is effected and the market price of our Common Stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of a reverse stock split. The total market capitalization of our Common Stock after implementation of the reverse stock split when and if implemented may also be lower than the total market capitalization before the reverse stock split. Furthermore, the liquidity of our Common Stock could be adversely affected by the reduced number of shares that would be outstanding after the reverse stock split.
We believe that the reverse stock split may result in greater liquidity for our Shareholders. However, it is also possible that such liquidity could be adversely affected by the reduced number of shares outstanding after the reverse stock split, particularly if the price of our Common Stock does not increase as a result of the reverse stock split.
As discussed above, the Board approved the reverse stock split proposal and is submitting it for approval by the Shareholders with the primary intent of increasing the market price and minimum bid prices of our Common Stock to regain and maintain compliance with the listing requirements of The Nasdaq Capital Market and to make our Common Stock more attractive to a broader range of institutional and other investors. However, continued listing on such exchange requires compliance with a variety of other qualitative and quantitative listing standards. Even if we effect the reverse stock split, we may not be able to satisfy or maintain listing requirements on The Nasdaq Capital Market or any other stock exchange. We cannot provide any assurances that we will be able to maintain a listing of the Common Stock on The Nasdaq Capital Market or any other stock exchange.
Principal Effects of the Reverse Stock Split
By approving this amendment, Shareholders will approve the combination of any whole number of shares of Common Stock between and including five (5) and thirty (30) into one (1) share of Common Stock. The certificate of amendment filed with the Secretary of State of the State of Delaware will include only that reverse stock split ratio determined by the Board to be in the best interests of the Company and its Shareholders. The Board will not implement any amendment providing for any additional reverse stock split ratio based on the approval of this proposal.
The reverse stock split will be effected simultaneously for all issued and outstanding shares of Common Stock and the reverse stock split ratio will be the same for all issued and outstanding shares of Common Stock. The reverse stock split will affect all of our Common Shareholders uniformly and will not affect any Shareholder’s percentage ownership interests in the Company, except to the extent that the reverse stock split results in any of our Shareholders owning a fractional share. After the reverse stock split, the shares of our Common Stock will have the same voting rights and rights to dividends and distributions and will be identical in all other respects to our Common Stock now authorized. Common Stock issued pursuant to the reverse stock split will remain fully paid and non-assessable. The reverse stock split will not affect the Company continuing to be subject to the periodic reporting requirements of the Exchange Act.
The reverse stock split may result in some Shareholders owning “odd-lots” of less than 100 shares of our Common Stock. Brokerage commissions and other costs of transactions in odd-lots are generally higher than the costs of transactions in “round-lots” of even multiples of 100 shares.
Following the effectiveness of any reverse stock split approved by the Shareholders and implementation by the Board, current Shareholders will hold fewer shares of Common Stock, with such number of shares dependent on the specific ratio of the reverse stock split. For example, if the Board approves a 1-for-5 reverse stock split, a Shareholder owning a “round-lot” of 100 shares of Common Stock prior to the reverse stock split will hold 20 shares
of Common Stock following the reverse stock split. THE HIGHER THE REVERSE SPLIT RATIO (1-FOR-30 BEING HIGHER THAN 1-FOR-5, FOR EXAMPLE), THE GREATER THE REDUCTION IN THE NUMBER OF SHARES EACH EXISTING STOCKHOLDER, AFTER THE REVERSE STOCK SPLIT, WILL EXPERIENCE.
In deciding whether to implement the reverse stock split and the specific reverse stock split ratio to be used, the Board will consider, among other things: (i) the market price of the Common Stock at the 2019 Annual Meetingtime of the reverse stock split; (ii) the number of shares that will be outstanding after the reverse stock split; (iii) the expected number of Shareholders following the reverse stock split; (iv) the Shareholders’ equity at such time; (v) the shares of Common Stock available for issuance in the future; and (vi) the liquidity of the Common Stock in the market and the improved liquidity that may result. The Board maintains the right to abandon the proposed amendment to our Certificate of Incorporation if it determines, in its sole discretion, that we will be able to satisfy the listing requirements of Nasdaq without implementing the reverse stock split or if the proposed amendment to our Certificate of Incorporation is otherwise no longer in the best interests of the Company.
Effect of the Amendment on the Number of Authorized Shares of our Common Stock
Whether or not the proposed amendment to our Certificate of Incorporation to effect the reverse stock split is approved by the Company’s Shareholders, and if the Board authorizes the Company to file any such amendment with the Secretary of State of the State of Delaware, on the filing of the certificate of amendment to our Certificate of Incorporation with the Office of the Secretary of State of the State of Delaware (the “Effective Time”), the number of authorized shares of our Common Stock will be 200,000,000, and if the amendment to our Certificate of Incorporation described under “Proposal No. 2 - Amendment of the Certificate of Incorporation to Increase Authorized Shares” is adopted, the number of authorized shares of our Common Stock will be 450,000,000. Because the reverse stock split will decrease the number of outstanding shares of our Common Stock by a ratio in the range of 1-for-5 to 1-for-30, as determined by the Board, the say-on-payproposed amendment would result in a relative increase in the number of authorized and unissued shares of our Common Stock. The purpose of the relative increase in the amount of authorized and unissued shares of our Common Stock is to provide our Company with the ability to issue additional shares of Common Stock in connection with stock splits or stock dividends, issuances in connection with future acquisitions, issuances pursuant to equity awards granted under current or future equity compensation plans, issuances in connection with equity financings and issuances in connection with exchange transactions, without requiring our Company’s Shareholders to approve an increase in the authorized number of shares of Common Stock each time such an action is contemplated. If the proposed amendment to the Certificate of Incorporation to effect the reverse stock split is approved, all or any of the authorized and unissued shares of Common Stock may be issued in the future for such corporate purposes and such consideration as the Board deems advisable from time to time, without further action by the Shareholders of our Company and without first offering such shares to our Shareholders. When and if additional shares of Common Stock are issued, these new shares would have the same voting and other rights and privileges as the currently issued and outstanding shares of Common Stock, including the right to cast one vote is held every three years.per share. Except pursuant to the restructuring of our outstanding Old Convertible Notes described under “Proposal No. 2 - Amendment of the Certificate of Incorporation to Increase Authorized Shares,” our Company presently has no plan, commitment, arrangement, understanding or agreement regarding the issuance of Common Stock. However, the Company regularly considers its capital requirements and may conduct equity offerings in the future.
The following table contains approximate information relating to the Common Stock under the low end, high end and midpoint of the proposed range of reverse stock split ratios, without giving effect to any adjustments for fractional shares of Common Stock, as of the Record Date (and without giving effect to the proposed authorized share increase under the Company’s Certificate of Incorporation described in Proposal 2):
| | | | | | | | | | | |
| Status | Number of
Shares of
Common
Stock
Authorized | Number of
Shares of
Common
Stock
Issued and
Outstanding | Number of
Shares of
Common
Stock
Authorized
but Unissued |
| Pre-Reverse Stock Split | 200,000,000 | 101,486,745 | 98,513,255 |
| Post-Reverse Stock Split 1:5 | 200,000,000 | 20,297,349 | 179,702,651 |
| Post-Reverse Stock Split 1:15 | 200,000,000 | 6,765,783 | 193,234,217 |
| Post-Reverse Stock Split 1:30 | 200,000,000 | 3,382,892 | 196,617,108 |
Because our Shareholders have no preemptive rights to purchase or subscribe for any of our unissued Common Stock, the future issuance of additional shares of Common Stock will reduce our current Shareholders’ percentage ownership interest in the total outstanding shares of Common Stock. In the absence of a proportionate increase in our future earnings and book value, an increase in the number of our outstanding shares of Common Stock would dilute our projected future earnings per share, if any, and book value per share of all our outstanding shares of the Common Stock. If these factors were reflected in the price per share of our Common Stock, the potential realizable value of a Shareholder’s investment could be adversely affected. An issuance of additional shares could therefore have an adverse effect on the potential realizable value of a Shareholder’s investment.
Effects of Advisory the Amendment on our Common Stock
After the Effective Time of the amendment to our Certificate of Incorporation to effect the reverse stock split, each Shareholder will own fewer shares of our Common Stock as a result of the reverse stock split ratio chosen by the Board. Because the reverse stock split will decrease the number of outstanding shares of our Common Stock, the proposed amendment will result in a relative increase in the number of authorized and unissued shares of our Common Stock.
All outstanding options and warrants to purchase shares of our Common Stock, including any held by our officers and directors, would be adjusted proportionally as a result of the reverse stock split. In particular, the number of shares issuable upon the exercise of each instrument would be proportionally reduced, and the exercise price per share, if applicable, would be proportionally increased, in accordance with the terms of each instrument and based on the ratio of the reverse stock split.
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Beginning at the Effective Time, each certificate representing pre-reverse stock split shares will be deemed for all corporate purposes to evidence ownership of post-reverse stock split shares.
Fractional Shares
No scrip or fractional shares would be issued if, as a result of the reverse stock split, a Shareholder would otherwise become entitled to a fractional interest in a share. Instead, each Shareholder will be entitled to receive a cash payment equal to the fraction of which such Shareholder would otherwise be entitled in the manner described in this paragraph. As soon as practicable after the amendment to our Certificate of Incorporation is filed, Broadridge Corporate Issuer Solutions, Inc. would aggregate all fractional shares and arrange for them to be sold at the then prevailing prices on the open market on behalf of those Shareholders who would otherwise be entitled to receive a fractional share. We expect that Broadridge Corporate Issuer Solutions, Inc. would cause the sale to be conducted in an orderly fashion at a reasonable pace and that it may take several days to sell all of the aggregated fractional shares of our common stock. After completing the sale, Shareholders would receive a cash payment from Broadridge Corporate Issuer Solutions, Inc. in an amount equal to their pro rata shares of the total net proceeds of
these sales. The proceeds would be subject to certain taxes as discussed below. In addition, Shareholders would not be entitled to receive interest for the period of time between the filing of the amendment to the Certificate of Incorporation and the date a Shareholder receives payment for the cashed-out shares. The payment amount would be paid to the Shareholder in the form of a check in accordance with the procedures outlined below.
After the reverse stock split, then-current Shareholders would have no further interest in our Company with respect to their fractional shares. A person entitled to a fractional interest in a share would not have any voting, dividend or other rights in respect of their fractional interest except to receive the cash payment as described above. Such cash payments would reduce the number of post-reverse stock split Shareholders to the extent that there are Shareholders holding fewer than that number of pre-reverse stock split shares within the reverse stock split ratio that is determined by us as described above. Reducing the number of post-reverse stock split Shareholders, however, is not the purpose of this proposal.
Shareholders should be aware that, under the escheat laws of the various jurisdictions where Shareholders reside, where we are domiciled and where the funds for fractional shares would be deposited, sums due to Shareholders in payment for fractional shares that are not timely claimed after the Effective Time may be required to be paid to the designated agent for each such jurisdiction. Thereafter, Shareholders otherwise entitled to receive such funds may have to seek to obtain them directly from the state to which they were paid.
Effect on Outstanding Stock Options, Restricted Stock Units and Warrants
The Company has equity incentive plans designed to provide stock-based incentives to employees pursuant to which we have issued stock options to purchase shares of our Common Stock. As of March 22, 2023, we had 5,338,820 outstanding stock options and 3,673,317 outstanding restricted stock units under our equity incentive plans. In addition, as of March 22, 2023, we had issued and outstanding the Schuler Warrant to purchase up to 2,471,710 shares of our Common Stock. In the event of a reverse stock split, our Board generally has the discretion to determine the appropriate adjustment to awards granted under the equity incentive plans. Further, the terms of the Schuler Warrant provides for appropriate adjustments in the event of a stock split. Accordingly, if the reverse stock split is approved by our Shareholders and our Board decides to implement the reverse stock split, as of the Effective Time, the number of all shares issuable upon exercise of the Schuler Warrant and outstanding stock options, and the applicable exercise price will be proportionately adjusted based on the reverse stock split ratio selected by our Board, subject to the terms of such options and the Schuler Warrant. Our Board has also authorized the Company to effect any other changes necessary, desirable or appropriate to give effect to the reverse stock split, including any applicable technical, conforming changes.
For example, if a 1-for-5 reverse stock split is effected, as of the record date, the aggregate number of shares issuable under the Schuler Warrant, stock options and restricted stock units would be approximately 494,342, 1,067,764, and 734,663 respectively, representing a 5-fold decrease in the number of shares issuable under those warrants, stock options and restricted stock units. The terms of the Schuler Warrant and our outstanding stock options and restricted stock units do not permit exercise for fractional shares. As such, the number of shares issuable under any individual outstanding stock option or restricted stock unit shall be rounded up or down as provided for under the specific terms of our equity incentive plans, or in the case of the Schuler Warrant, upon exercise of those warrants the Company shall pay cash amounts for fractional shares that otherwise would be issued. Commensurately, the exercise price under the Schuler Warrant and each outstanding stock option would, except as noted above, be increased by 5 times such that upon exercise, the aggregate exercise price payable by the warrant holder or optionee to the Company would remain the same. Furthermore, the aggregate number of shares currently available under our equity incentive plans for future stock options and other equity-based grants will be proportionally reduced based on the reverse stock split ratio (rounded down to the nearest share). For example, in the event of a 1-for-5 reverse stock split, as of the Record Date, 14,552,496 shares that currently remain authorized for issuance under our equity incentive plans would be adjusted to equal approximately 2,910,499 shares, subject to future potential increases pursuant to the terms of those plans (and without giving effect to the proposed authorized share increase under the 2022 Incentive Plan described in Proposal 3).
Effect on Legal Ability to Pay Dividends
We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and to repay indebtedness, and therefore we do not anticipate declaring or paying any cash dividends on our Common Stock in the foreseeable future. We are not in arrears on any dividends, and we do not
believe that the reverse stock split would have any effect with respect to future distributions, if any, to holders of our Common Stock.
Procedure for Effecting Reverse Stock Split and Exchange of Stock Certificates, if Applicable
If the proposed amendment to our Certificate of Incorporation to effect the reverse stock split is approved by the Company’s Shareholders, and if at such time the Board still believes that a reverse stock split is in the best interests of the Company and its Shareholders, the Board will determine the reverse split ratio, within the range approved by the Company’s Shareholders. The reverse stock split will become effective at the time of filing of the certificate of amendment with the Secretary of State of the State of Delaware. At the Effective Time, shares of Common Stock issued and outstanding immediately prior thereto will be combined, automatically and without any action on the part of the Shareholders, into new shares of Common Stock in accordance with the reverse stock split ratio contained in the certificate of amendment.
As soon as practicable after the Effective Time, Shareholders will be notified by our transfer agent that the reverse stock split has been effected. If you hold shares of Common Stock in book-entry form, you will not need to take any action to receive post-reverse stock split shares of our Common Stock. As soon as practicable after the Effective Time, the Company’s transfer agent will send to your registered address a transmittal letter along with a statement of ownership indicating the number of post-reverse stock split shares of our Common Stock you hold. If applicable, a check representing a cash payment in lieu of fractional shares will also be mailed to your registered address as soon as practicable after the Effective Time (see “Fractional Shares” above).
Some Shareholders hold their shares of Common Stock in certificate form. Our transfer agent will act as exchange agent for purposes of implementing the exchange of stock certificates, if applicable. If you are a Shareholder holding pre-reverse stock split shares in certificate form, you will receive a transmittal letter from the Company’s transfer agent as soon as practicable after the Effective Time. The transmittal letter will be accompanied by instructions specifying how you can exchange your certificate or certificates representing the pre-reverse stock split shares of our Common Stock for a post-split statement of ownership. No new post-reverse stock split share certificates, including those representing whole shares to be issued in lieu of fractional shares, will be issued to a Shareholder until such Shareholder has surrendered such Shareholder’s outstanding certificate(s) together with the properly completed and executed letter of transmittal to the exchange agent.
Accounting Matters
The reverse stock split will not affect the Common Stock capital account on our balance sheet. However, because the par value of our Common Stock will remain unchanged at the Effective Time of the split, the components that make up the Common Stock capital account will change by offsetting amounts. Depending on the size of the reverse stock split the Board decides to implement, the stated capital component will be reduced to an amount between one-fifth (1/5) and one-thirtieth (1/30) of its present amount, and the additional paid-in capital component will be increased with the amount by which the stated capital is reduced. The per share net income or loss and net book value of our Common Stock will be increased because there will be fewer shares of Common Stock outstanding. Prior periods’ per share amounts will be restated to reflect the reverse stock split.
No Appraisal Rights
Under the Delaware General Corporation Law, the Company’s Shareholders will not be entitled to appraisal rights with respect to the reverse stock split, and we do not intend to independently provide Shareholders with any such right.
No Going Private Transaction
Notwithstanding the decrease in the number of outstanding shares following the reverse stock split, the Board of Directors does not intend for this transaction to be the first step in a series of plans or proposals of a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.
Interests of Certain Persons in the Proposal
Certain of our officers and directors have an interest in this proposal as a result of their ownership of shares of our Common Stock, as set forth below in the section entitled “Security Ownership of Certain Beneficial Owners and Management” below. However, we do not believe that our officers or directors have interests in this proposal that are different from or greater than those of any of our other Shareholders.
Anti-takeover Effects of Proposed Amendment
Release No. 34-15230 of the staff of the SEC requires disclosure and discussion of the effects of any action, including each of the proposed amendments to our Certificate of Incorporation discussed herein, that may be used as an anti-takeover mechanism. Because the proposed reverse stock split will result in a relative increase in the number of authorized but unissued shares of our Common Stock, it could, under certain circumstances, have an anti-takeover effect, although this is not the purpose or intent of our Board. A relative increase in the number of our authorized shares could enable the Board to render more difficult or discourage an attempt by a party attempting to obtain control of the Company by tender offer or other means.
As stated above, the Company has no present intent to use the relative increase in the number of authorized shares of our Common Stock for anti-takeover purposes, and the proposed amendment is not part of a plan by the Board to adopt a series of anti-takeover provisions; however, if the proposed amendment is approved by the Shareholders, then a greater number of shares of our Common Stock would be available for such purpose than is currently available. The Company is not aware of any pending or threatened efforts to obtain control of the Company, and the Board has no present intent to authorize the issuance of additional shares of Common Stock to discourage such efforts if they were to arise.
Material United States Federal Income Tax Consequences of the Reverse Stock Split
The following discussion describes the anticipated material United States Federal income tax consequences to “U.S. holders” (as defined below) of Company capital stock relating to the reverse stock split. This discussion is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations, judicial authorities, published positions of the Internal Revenue Service (“IRS”), and other applicable authorities, all as currently in effect and all of which are subject to change or differing interpretations (possibly with retroactive effect). We have not obtained a ruling from the IRS or an opinion of legal or tax counsel with respect to the tax consequences of the reverse stock split. The following discussion is for information purposes only and is not intended as tax or legal advice. Each holder should seek advice based on the holder’s particular circumstances from an independent tax advisor.
YOU ARE URGED TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE UNITED STATES FEDERAL ESTATE OR GIFT TAX RULES, OR UNDER THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION OR UNDER ANY APPLICABLE TREATY.
For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Company capital stock who is for United States Federal income tax purposes:
i.an individual citizen or resident of the United States;
ii.a corporation (or other entity treated as a corporation for U.S. Federal income tax purposes) organized under the laws of the United States, any state, or the District of Columbia;
iii.an estate with income subject to United States Federal income tax regardless of its source; or
iv.a trust that (a) is subject to primary supervision by a United States court and for which United States persons control all substantial decisions or (b) has a valid election in effect under applicable Treasury Regulations to be treated as a United States person.
This discussion assumes that Company capital stock is held as a capital asset within the meaning of Code Section 1221. This discussion does not address all of the tax consequences that may be relevant to a particular Company Shareholder or to Company Shareholders that are subject to special treatment under United States Federal income tax laws including, but not limited to, banks, financial institutions, tax-exempt organizations, insurance companies, regulated investment companies, real estate investment trusts, entities such as partnerships or s-corporations that are treated as “flow-through” entities, or entities that are disregarded as separate from their owners for tax purposes, persons that are broker-dealers, traders in securities who elect the mark-to-market method of accounting for their securities, or Company Shareholders holding their shares of Company capital stock as part of a “straddle,” “hedge,” “conversion transaction,” or other integrated transaction, U.S. expatriates, persons subject to the alternative minimum tax, to persons whose shares constitute “qualified small business stock” for purposes of Code section 1202, or persons who hold their Company capital stock through individual retirement or other tax-deferred accounts. This discussion also does not address the tax consequences to the Company, or to Company Shareholders that own 5% or more of the Company’s capital stock, are affiliates of Company, or are not U.S. holders. In addition, this discussion does not address other United States Federal taxes (such as gift or estate taxes or alternative minimum taxes), the tax consequences of the reverse stock split under state, local, or foreign tax laws or certain tax reporting requirements that may be applicable with respect to the reverse stock split. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences set forth below.
If a partnership (or other entity treated as a partnership for United States Federal income tax purposes) is a Company Shareholder, the tax treatment of a partner in the partnership, or any equity owner of such other entity will generally depend upon the status of the person and the activities of the partnership or other entity treated as a partnership for United States Federal income tax purposes.
Tax Consequences of the Reverse Stock Split Generally
We believe that the reverse stock split will qualify as a “reorganization” under Section 368(a)(1)(E) of the Code. Accordingly, provided that the fair market value of the post-reverse stock split shares is equal to the fair market value of the pre-reverse stock split shares surrendered in the reverse stock split:
•A U.S. holder will not recognize any gain or loss as a result of the reverse stock split;
•A U.S. holder’s aggregate tax basis in his, her, or its post-reverse stock split shares will be equal to the aggregate tax basis in the pre-reverse stock split shares exchanged therefor;
•A U.S. holder’s holding period for the post-reverse stock split shares will include the period during which such Shareholder held the pre-reverse stock split shares surrendered in the reverse stock split; and
•For purposes of the above discussion of the basis and holding periods for shares of Company capital stock, and except as provided therein, holders who acquired different blocks of Company capital stock at different times for different prices must calculate their basis and holding periods separately for each identifiable block of such stock exchanged, converted, canceled or received in the reverse stock split.
The receipt of cash in lieu of fractional shares of capital stock pursuant to the reverse stock split will be a taxable transaction for U.S. federal income tax purposes. A holder who receives cash in exchange for shares will generally recognize capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received and the holder’s adjusted tax basis in the shares exchanged.
Information Reporting and Backup Withholding
Cash payments received by a U.S. holder of Company capital stock pursuant to the reverse stock split are subject to information reporting, and may be subject to backup withholding at the applicable rate specified by the U.S. Internal Revenue Service (currently 24%) if the holder fails to provide a valid taxpayer identification number and comply with certain certification procedures or otherwise establish an exemption from backup withholding. Backup withholding is not an additional United States Federal income tax. Rather, the U.S. Federal income tax liability of the person subject to backup withholding will be reduced by the amount of the tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained provided that the required information is timely furnished to the IRS.
Vote Required to Approve Amendment to our Certificate of Incorporation
Pursuant to applicable Delaware law, approval of the amendment to our Certificate of Incorporation requires the affirmative vote of the holders of a majority of the outstanding shares of Common Stock. Abstentions will have the same effect as a vote cast against the proposal. Brokers will have discretionary authority to vote on this proposal. Accordingly, no broker non-votes are expected for this proposal.
The Board recommends that the Shareholders vote FOR Proposal 4.
PROPOSAL NO. 5
APPROVAL OF THE ISSUANCE OF COMMON STOCK IN ONE OR MORE NON-PUBLIC OFFERINGS AT A PRICE BELOW THE MINIMUM PRICE AND IN A NUMBER THAT WILL EXCEED 20% OF OUR OUTSTANDING SHARES OF COMMON STOCK IN ACCORDANCE WITH NASDAQ LISTING RULE 5635(d)
General and Purpose
Our Common Stock is currently listed on The Nasdaq Capital Market and, as such, we are subject to the Nasdaq Listing Rules. Nasdaq Listing Rule 5635(d) (“Rule 5635(d)”) requires us to obtain Shareholder approval prior to the issuance of our Common Stock or securities convertible or exercisable into Common Stock in connection with certain non-public offerings, issued below the “minimum price” for the Company’s Common Stock as defined in Rule 5635(d), involving the sale, issuance or potential issuance by the Company of Common Stock (and/or securities convertible into or exercisable for Common Stock) equal to 20% or more of the Common Stock outstanding before the issuance. Nasdaq defines the “minimum price” as the lower of (1) the closing price of the Common Stock (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement or (2) the average closing price of the Common Stock (as reflected on Nasdaq.com) for the five (5) trading days immediately preceding the signing of the binding agreement. Shares of our Common Stock issuable upon the exercise or conversion of warrants, options, debt instruments, preferred stock or other equity securities issued or granted in such non-public offerings will be considered shares issued in such a transaction in determining whether the 20% limit has been reached, except in certain circumstances such as issuing warrants that are not exercisable for a minimum of six months and have an exercise price that exceeds market value.
As discussed under “Proposal No. 2 – Amendment of the Certificate of Incorporation to Increase Authorized Shares-Purpose and Background of the Proposed Charter Amendment” in this Proxy Statement, our outstanding Old Convertible Notes became due on March 15, 2023 and remain unpaid. We will need to enter into the Restructuring Transactions described in Proposal No. 2 in connection with the restructuring of the Old Convertible Notes in order to satisfy the amounts owed to holders of the Old Convertible Notes. While the terms of the Restructuring Transactions are broadly outlined in Proposal No. 2, the final terms of the Restructuring Transactions are subject to the negotiation of definitive documentation among the Company, the holders of the Old Convertible Notes and the Schuler Trust and other Schuler Related Parties, and may change. Because those transactions may trigger the requirements of Rule 5635(d) (depending on the market price of our Common Stock at the time we enter the Restructuring Transactions), we are seeking Shareholder approval now, so that we will be able to move quickly in order to restructure our Old Convertible Notes.
Because each, or the voteaggregate, of the transactions described in Proposal No. 2 in connection with the restructuring of our Old Convertible Notes will exceed 20% of the number shares of our outstanding Common Stock, we are submitting this Proposal No. 5 to our Shareholders for their approval of the potential issuance of shares of our Common Stock, or securities convertible into our Common Stock, in one or more non-public capital-raising transactions, or offerings pursuant to the Restructuring Transactions, subject to the following limitations:
•The maximum discount at which securities will be offered in reliance on this proposal is advisoryshareholder approval will be equivalent to a discount of not more than 90% below the “minimum price” as defined by Rule 5635(d) of our Common Stock at the time of issuance. While the conversion and purchase prices pursuant to the Restructuring Transactions are outlined in nature, itProposal No. 2, any discount to such minimum price will be a function of the market price of our Common Stock at the time that we enter into the Restructuring Transactions.
•The aggregate number of shares issued in the Restructuring Transactions will not affectexceed 170,000,000 shares of our Common Stock, subject to adjustment for any compensation already paid or awardedreverse stock split effected prior to our NEOsentry into the Restructuring Transactions (including pursuant to preferred stock, convertible debt or other securities exercisable for or convertible into common stock). See “Proposal No. 4 - Amendment of the Certificate of Incorporation to Effect a Reverse Stock Split” for additional information regarding a proposal that would provide the Company with the ability to effect a reverse stock split.
•In connection with the Restructuring Transactions, the Company will be relieved of approximately $92.2 million of outstanding indebtedness, will incur approximately $67.3 million of indebtedness in
the form of the New Convertible Notes which are expected to have a term of 3.5 years plus additional New Convertible Notes in respect of interest accrued on the Old Convertible Notes from March 15, 2023 and will notreceive up to approximately $14.0 million of additional funding (plus up to an additional $20.0 million of funding pursuant to the additional securities purchase agreement referred below).
•The Restructuring Transactions will be bindingcompleted on or prior to August 1, 2023. As discussed under Proposal No. 2, the Company will enter into an additional securities purchase agreement with the Schuler Trust at the time the Restructuring Transactions are executed. Pursuant to this additional securities purchase agreement, the Company will have the right to require the Schuler Trust to purchase shares of Common Stock at the Company’s option on or prior to December 15, 2023 pursuant to this additional securities purchase agreement.
•Such other terms as the Board of Directors shall deem to be in the best interests of the Company and its Shareholders, not inconsistent with the foregoing.
The issuance of shares of our Common Stock and other securities convertible into shares of our Common Stock, in accordance with the Restructuring Transactions would dilute, and thereby reduce, each existing Shareholder’s proportionate ownership in our Common Stock. Our Shareholders do not have preemptive rights to subscribe to additional shares that may be issued by the Company in order to maintain their proportionate ownership of the Common Stock.
The issuance of shares of Common Stock pursuant to the Restructuring Transactions could also have an anti-takeover effect. Such issuances would dilute the voting power of another person seeking control of the Company, thereby deterring or rendering more difficult a merger, tender offer, proxy contest or an extraordinary corporate transaction opposed by the Compensation Committee. However,Company.
The final terms of the BoardRestructuring Transactions are subject to the negotiation of definitive documentation and could change from those described in this Proxy Statement. As a result, the Compensation Committee will considerlevel of potential dilution cannot be finally determined at this time. If the full number of shares underlying the New Convertible Notes were to be issued upon conversion to the holders of such notes, such issuance would concentrate voting power in the hands of a few Shareholders who could exercise greater influence on our operations or the outcome of matters put to a vote of Shareholders in the vote when making future executive compensation decisions.future.
The issuance of additional shares of Common Stock and the New Convertible Notes by the Company pursuant to the Restructuring Transactions is subject to Shareholder approval of Proposal No. 2 regarding an amendment to our Certificate of Incorporation to increase the total number of authorized shares of Common Stock.
Vote Required and Board Recommendation
ThisThe proposal will be approved if a majority of the votes cast are voted in favor of the proposal. Abstentions and broker non-votes will not be treated as votes cast for or against the proposal, and therefore will have no effect on the outcome of the proposal.
The Board recommends that the Shareholders vote FOR Proposal 4.No. 5.
PROPOSAL NO. 56
RATIFICATION OF ERNST & YOUNG LLP AS OUR INDEPENDENT PUBLIC ACCOUNTANTS
Audit and Governance Committee Appointment – Ernst & Young LLP
Our Audit and Governance Committee, pursuant to authority granted to it by the Board, has selected Ernst & Young LLP as the Company’s independent registered public accounting firm to examine our annual consolidated financial statements for the year ending December 31, 2022.2023. The Board is submitting this proposal to the vote of the Shareholders in order to ratify the Audit and Governance Committee’s selection. If Shareholders do not ratify the selection of Ernst & Young LLP, the Audit and Governance Committee will reconsider its selection of our independent registered public accounting firm for fiscal 2022,2023, although the Audit and Governance Committee will be under no obligation to change its selection. Ernst & Young LLP has been our independent registered public accounting firm since July 1, 2013.
Fees Billed by Ernst & Young, LLP
Audit Fees
Fees and related expenses for the audit by Ernst & Young, LLP of our annual financial statements, its review of the financial statements included in our quarterly reports and other services that were provided in connection with statutory and regulatory filings totaled approximately $1.0 million for the year ended December 31, 2022 and $0.9 million for the year ended December 31, 2021 and $0.7 million for the year ended December 31, 2020.2021.
Audit-Related Fees
During the years ended December 31, 20212022 and 2020,2021, Ernst & Young, LLP did not bill us for any audit-related fees.
Tax Fees
During the years ended December 31, 20212022 and 2020,2021, Ernst & Young, LLP did not bill us for tax-related professional services.
All Other Fees
During the years ended December 31, 20212022 and 2020,2021, Ernst & Young, LLP billed us $1,755$0 and $1,500,$1,755, respectively, for other professional services, which includes a subscription to accounting-related reference information.
Policy on Audit and Governance Committee Pre-Approval of Fees
The Audit and Governance Committee must pre-approve all services to be performed for us by our independent registered public accounting firm. Pre-approval is granted usually at regularly scheduled meetings of the Audit and Governance Committee. If unanticipated items arise between regularly scheduled meetings of the Audit and Governance Committee, the Audit and Governance Committee has delegated authority to the chairman of the Audit and Governance Committee to pre-approve services, in which case the chairman communicates such pre-approval to the full Audit and Governance Committee at its next meeting. The Audit and Governance Committee also may approve the additional unanticipated services by either convening a special meeting or acting by unanimous written consent. During the years ended December 31, 20212022 and 2020,2021, all services billed by Ernst & Young, LLP were pre-approved by the Audit and Governance Committee in accordance with this policy.
Attendance at Annual Meeting
Representatives of Ernst & Young LLP are expected to attend the Annual Meeting virtually. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Vote Required and Board Recommendation
This proposal will be approved if a majority of the votes cast are voted in favor of the proposal. Abstentions and broker non-votes will not be treated as votes cast for or against the proposal, and therefore will have no effect on the outcome of the proposal. Brokers will have discretionary authority to vote on this proposal. Accordingly, no broker non-votes are expected for this proposal.
The Board recommends that the Shareholders vote FOR Proposal 56.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has established policies and other procedures regarding approval of transactions between the Company and any employee, officer, director, and certain of their family members and other related persons. These policies and procedures are generally not in writing but are evidenced by long standing principles adhered to by our Board. The disinterested members of the Board review, approve and ratify transactions that involve “related persons” and potential conflicts of interest. Related persons must disclose to the disinterested members of the Board any potential related person transactions and must disclose all material facts with respect to such transaction. All such transactions will be reviewed by the disinterested members of the Board and, in their discretion, approved or ratified. In determining whether to approve or ratify a related person transaction the disinterested members of the Board will consider the relevant facts and circumstances of the transaction, which may include factors such as the relationship of the related person with the Company, the materiality or significance of the transaction to the Company and the related person, the business purpose and reasonableness of the transaction, whether the transaction is comparable to a transaction that could be available to the Company on an arms-length basis, and the impact of the transaction on the Company’s business and operations.
Since the beginning of fiscal year 2020,2021, the Company did not have any transactions to which it has been a participant that involved amounts that exceeded or will exceed the lesser of (i) $120,000 or (ii) one percent of the average of the Company’s total assets at year-end for the last two completed fiscal years, and in which any of the Company’s directors, executive officers or any other “related person” as defined in Item 404(a) of Regulation S-K had or will have a direct or indirect material interest, other than:
•David Patience whois an employee of the Company and is the son of John Patience, a member of our Board and former Chairman of the Board, is an employee ofBoard. On March 9, 2023, the Company. From January 2020 through June 2020 Mr. D. Patience's annual salary was $145,000.Company appointed Mr. D. Patience participatedas the Company’s CFO, effective April 1, 2023 (the “Effective Date”). In connection with Mr. D. Patience’s appointment, on March 9, 2023, the Company and Mr. D. Patience entered into an employment agreement (the “D. Patience Employment Agreement”). Pursuant to the D. Patience Employment Agreement, Mr. D. Patience’s employment is at-will. Mr. D. Patience will receive an annual base salary of $310,000, subject to review and adjustment on an annual basis, and will be eligible to participate in the 2020 Sub-Plan electingCompany’s annual cash incentive program, with a target incentive bonus of 60% of his base salary. Additionally, on March 9, 2023, the Board approved, effective April 1, 2023, a grant to forfeit $60,000 in 2020 salary in exchange for 15,161 nonqualified stock options. From July 2020 through January 2021 Mr. D. Patience's annual salary was $170,000. On June 29, 2020, the Compensation Committee approved temporary salary reductions for Company management becausePatience of the ongoing COVID-19 crisis. To compensate impacted employees, the Compensation Committee approved awards of500,000 RSUs under the 20122022 Incentive Plan.Plan, with 40% of such RSUs vesting on or about the second anniversary of the Effective Date and the remaining 60% vesting on or about the third anniversary of the Effective Date. Mr. D. Patience incurred a salary reductionis also eligible to receive annual stock options, performance shares and other awards under the 2022 Incentive Plan, as determined by the Compensation and Nominating Committee, provided that the value of $12,500 in exchange for 1,355 RSUs. For the year ended December 31, 2020,such equity award targets will equal 150% of his then base salary. Any equity awards granted to Mr. D. Patience was granted an aggregatewill be subject to additional terms and conditions, including as set forth in the 2022 Incentive Plan and the respective award agreement.
In the event of 23,575 stocktermination of employment by the Company without Cause (as defined in the D. Patience Employment Agreement) or by Mr. D. Patience with Good Reason (as defined in the D. Patience Employment Agreement) prior to a Change of Control (as defined in the Plan), Mr. D. Patience will be entitled to a severance payment equal to the sum of: (i) 12 months of his then base salary and (ii) his average earned under the Company’s annual cash incentive program over the term of his employment, plus a pro-rated amount under the Company’s annual cash incentive program for the year in which termination occurs. In the event of termination of employment by the Company without Cause or by Mr. D. Patience with Good Reason during the 12 month period following a Change of Control, Mr. D. Patience will be entitled to a severance payment equal to the sum of: (i) 18 months of his then base salary and (ii) 18 times the monthly amount that is charged to COBRA qualified beneficiaries for the same medical coverage options elected by Mr. D. Patience immediately prior to his last day of employment, plus a pro-rated amount under the Company’s annual cash incentive program for the year in which termination occurs. Additionally, upon a Change of Control, Mr. D. Patience’s options and other equity awards shall fully vest and become exercisable.
Mr. D. Patience received salary of $205,385 and $216,058 for the yearyears ended December 31, 2021 and December 31, 2022, respectively. For the years ended December 31, 2021 and 2022, the Company granted Mr. D. Patience was granted an aggregate of 45,414 RSUs.40,000 stock options and 85,273 RSUs, respectively.
•On March 22, 2018, the Company entered into a purchase agreement with J.P. Morgan Securities LLC, as representative of the several initial purchasers named therein (collectively, the “Initial Purchasers”), to issue and sell $150 million aggregate principal amount of 2.50% Convertible Senior Notes due 2023 in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “securities Act”). In addition, the Company granted the Initial Purchasers a 13-day option to purchase up to an additional $22.5 million aggregate principal amount of the Convertible Notes on the same terms and conditions, which was partially exercised by the Initial Purchasers on April 4, 2018 and resulted in an aggregate of $171.5 million of Convertible Notes issued.
The•During 2018, the Schuler Family Foundation (the “Foundation”) purchased an aggregate of $30.0 million of the Old Convertible Notes in connection with the March 22, 2018Company’s private placement offering onof the same terms as those under which other investors purchased theOld Convertible Notes, although no discount or commission in respect of such notes purchased by the Foundation was paid by the Company to the Initial Purchasers.Notes. During 2019, the Foundation purchased an additional $12.0 million of Old Convertible Notes on the open market. Jack Schuler, a member of our Board, is the President of the Foundation. The Old Convertible Notes bore interest at a rate of 2.50% per year. The Old Convertible Notes purchased by the Foundation constituteconstituted part of the same series as the other Old Convertible Notes sold in the offering, including with respect to voting rights under the indenture governing the Old Convertible Notes. Jack Schuler, a member of our Board, is the President of the Foundation.
The Convertible Notes bear interest at a rate of 2.50% per year, payable semi-annually on March 15 and September 15 of each year, beginning on September 15, 2018. The Convertible Notes will mature on March 15, 2023, unless earlier repurchased by the Company or converted pursuant to their terms. The initial conversion rate of the Convertible Notes is 32.3428 shares of Common Stock per $1,000 principal amount of notes (which is equivalent to an initial conversion price of approximately $30.92 per share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest. Upon conversion, the Company will pay or deliver, as the case may be, cash, shares of Common Stock, or a combination thereof, at its election.
For the years ended December 31, 2020 and 2021, interest on the Convertible Notes in the aggregate amount of $1.1 million and $1.1 million, respectively, was paid to the Foundation. In September 2021, the Foundation transferred by gift the $42.0 million aggregate principal amount of Old Convertible Notes held by the Foundation to the Schuler Initiative Supporting Charitable Trust, a tax-exempt organization that is not an affiliate of Mr. Schuler
•On August 20, 2019, the Company entered into a securities purchase agreement (the August 2019 Purchase Agreement”) with the John J. Phillips Investment Irrevocable Trust, dated July 31, 2019 (the “Phillips Trust”) for the issuance and sale by the Company of an aggregate of 55,586 sharesSchuler. For each of the Company’s Common Stockyears ended December 31, 2020 and 2021, interest on the Old Convertible Notes in an offering exempt from registration pursuant to Section 4(a)(2)the aggregate amount of the Securities Act and Rule 506 promulgated thereunder. The shares were sold at a purchase price (determined in accordance with NASDAQ rules relating$1.1 million was paid to the “market value” of the shares) of $17.99 per share, which was equal to the consolidated closing bid price reported by NASDAQ immediately preceding the time the Company entered into the August 2019 Purchase Agreement, for an aggregate purchase price of approximately $1 million. The spouse of Jack Phillips, our President and Chief Executive Officer and a member of our Board, is the beneficiary of the Phillips Trust, and a third-party serves as the trustee for the Phillips Trust.Foundation.
•On December 24, 2020, the Company entered into a securities purchase agreement (the “December 2020 Securities Purchase Agreement”) with Jack W. Schuler, John Patience, Matthew Strobeck, Mark C. Miller, Thomas D. Brown and Jack Phillips, or entities affiliated with such persons (collectively, the “Original Purchasers”), for the issuance and sale by the Company of an aggregate of 4,166,663 shares of the Company’s common stockCommon Stock (the “Shares”), to the Original Purchasers in an offering exempt from registration pursuant to Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder. Each of Jack W. Schuler, John Patience, Matthew Strobeck, Mark C. Miller, Thomas D. Brown and Jack Phillips iswas a member of the Board.Board at the time of the transaction. Mr. Phillips also serves as the Company’s President and Chief Executive Officer.CEO. Additionally, on December 24, 2020, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Original Purchasers in connection with the December 2020 Securities Purchase Agreement pursuant to which the Company agreed to register the resale of the Shares pursuant to the terms set forth therein.
The Jack W. Schuler Living Trust, (the “Schuler Trust”), which was the entity affiliated with Jack W. Schuler that originally entered into the December 2020 Securities Purchase Agreement for the purchase of 3,964,843 Shares for an aggregate purchase price of approximately $30.5 million, subsequently entered into an assignment and assumption agreement whereby it assigned all of its rights and obligations as an Original Purchaser to three other entities under the December 2020 Securities Purchase Agreement (collectively, the “Schuler Purchasers”). These three entities are related to Jack W. Schuler but are not affiliates of his. Jack W. Schuler is the sole trustee of the Schuler Trust.
Pursuant to the December 2020 Securities Purchase Agreement, the Original Purchasers agreed to purchase the Shares at a purchase price (determined in accordance with NASDAQ rules relating to the “market value” of the Company’s common stock) of $7.68 per share, which was equal to the consolidated closing bid price reported by NASDAQ immediately preceding the time the Company entered into the December 2020 Securities Purchase Agreement, for an aggregate purchase price of approximately $32$32.0 million.
The December 2020 Securities Purchase Agreement contemplated that the closing of the purchase and sale of the Shares would occur in three approximately equal tranches on the dates specified in the agreement or such other dates as the parties may agree, with the first and second tranches having closed on February 19, 2021 and April 9, 2021, respectively, whereby the Company received total proceeds of approximately $21.3 million.
On September 17, 2021, the Company entered into a rescission agreement (the “Rescission Agreement”) with the Schuler Purchasers and the Schuler Trust pursuant to which, effective as of January 29, 2021, the Company and the Schuler Purchasers agreed to rescind and unwind the December 2020 Securities Purchase Agreement and the Registration Rights Agreement for all legal, tax and financial purposes ab initio as if the related transactions, including the issuance and sale of an aggregate of 2,643,228 Shares in
the first two tranche closings and the third tranche (as discussed below) under the December 2020 Purchase Agreement, had never occurred with respect to the Schuler Purchasers and the Company. The Rescission Agreement was entered into due to the unanticipated legal, tax and/or financial consequences that may have otherwise resulted from the December 2020 Purchase Agreement and the Registration Rights Agreement.
On September 30, 2021, the Company closed the final third tranche in connection with the December 2020 Securities Purchase Agreement and received total proceeds of approximately $0.5 million. In accordance with the Rescission Agreement, the Schuler Purchasers did not participate in the third tranche. During the year ended December 31, 2021, the Company issued 201,820 Shares and received total proceeds of approximately $1.5 million under the December 2020 Securities Purchase Agreement. On February 3, 2022, the Company filed a registration statement on Form S-3 to register the resale of such Shares, which became effective on February 11, 2022.
•On September 22, 2021, the Company entered into a new securities purchase agreement (the “September 2021 Securities Purchase Agreement”) with the Schuler Purchasers for the issuance and sale by the Company of an aggregate of 3,954,546 shares of the Company’s newly designated Series A Preferred Stock, par value $0.001 per share (the “Series A Preferred Shares”), to the Schuler Purchasers in an offering exempt from registration pursuant to Section 4(a)(2) of the Securities Act and Rule 506 promulgated thereunder. The Series A Preferred Shares were sold at a purchase price of $7.70 per share for an aggregate purchase price of approximately $30.5 million. For additional information regarding the Series A Preferred Stock, see the Company’s Current Report on Form 8-K filed with the SEC on September 23, 2021.
•On November 29, 2021, the Schuler Trust purchased 1,000,000 shares of Common Stock at a price of $5.00 per share in an “at-the-market” (“ATM”) offering conducted by the Company under its ATM equity offering program established in May 2021.
The above related-party transactions were approved or ratified•On March 24, 2022, the Company entered into a securities purchase agreement (the “March 2022 Securities Purchase Agreement”) with the Schuler Trust for the issuance and sale by the disinterested membersCompany of 2,439,024 shares of Common Stock to the Schuler Trust (the “Private Placement”). Pursuant to the March 2022 Securities Purchase Agreement, the Schuler Trust agreed to purchase the shares at a purchase price (determined in accordance with NASDAQ rules relating to the “market value” of the Board.Company’s common stock) of $1.64 per share, which was equal to the consolidated closing bid price reported by NASDAQ immediately preceding the time the Company entered into the March 2022 Securities Purchase Agreement, for an aggregate purchase price of $4.0 million. The Company and the Schuler Trust have subsequently agreed to extend the closing date of the Private Placement to April 2023. This agreement is expected to be further amended as part of the Restructuring Transactions as discussed further in “Proposal No. 2 - Amendment of the Certificate of Incorporation to Increase Authorized Shares”.
•During 2022, the Schuler Trust purchased an aggregate of $49.9 million of the Old Convertible Notes in privately negotiated transactions with certain holders of the Old Convertible Notes. On August 15, 2022, the Company entered into an exchange agreement (the “August 2022 Exchange Agreement”) with the Schuler Trust. Under the terms of the August 2022 Exchange Agreement, the Schuler Trust agreed to exchange with the Company $49.9 million in aggregate principal amount of Notes held by it (the “Exchanged Notes”) for (a) a secured promissory note in an aggregate principal amount of $34.9 million (the “Schuler Secured Note”) and (b) a warrant to acquire Common Stock (the “Schuler Warrant”) at an exercise price of $2.12 per share (the “Exercise Price”).
The Schuler Secured Note has a scheduled maturity date of August 15, 2027 and is repayable upon written demand at any time on or after such date. The Company may, at its option, repay the Schuler Secured Note in (i) cash or (ii) in the form of Common Stock, in a number of shares that is obtained by dividing the total amount of such payment by $2.12. However, the payment in Common Stock is subject to certain limitations, including that the aggregate amount of common shares issued to settle the debt not exceed 19.99% of the Company’s then outstanding shares of Common Stock. The Schuler Secured Note bears interest at a rate of 5.0% per annum, payable at the option of the Company in the same form, at the earlier of (i) any prepayment of principal and (ii) maturity. The Company may prepay the Schuler Secured Note at any time without premium or penalty. The Schuler Secured Note is secured by substantially all of the assets of the Company, subject to customary exceptions and limitations, pursuant to a security agreement, dated as of August 15, 2022. The Schuler Secured Note does not restrict the incurrence of future indebtedness by the Company but shall become subordinated in right of payment and lien priority upon the request of any future senior lender.
The Schuler Warrant may be exercised from February 15, 2023 through the earlier of (i) August 15, 2029 and (ii) the consummation of certain acquisition transactions involving the Company, as set forth in the Schuler Warrant. The Schuler Warrant is exercisable for up to 2,471,710 shares, or 15% of the principal amount of the Schuler Secured Note, divided by the Exercise Price. Such number of shares and the Exercise Price are subject to certain customary proportional adjustments for fundamental events, including stock splits and recapitalizations, as set forth in the Schuler Warrant.
No principal or accrued interest under the Schuler Secured Note was paid to the Schuler Trust, or satisfied through the issuance of Common Stock shares, during the year ended December 31, 2022. Additionally, no interest on the Exchanged Notes was paid to the Schuler Trust during the year ended December 31, 2022.
ANNUAL REPORT
A copy of our Annual Report is being furnished to Shareholders concurrently herewith. An additional copy of our Annual Report may be obtained from www.proxyvote.com, or will be furnished, without charge, to beneficial shareholders or shareholders of record as of the record date upon request in writing to Accelerate Diagnostics, Inc., 3950 South Country Club Road, Suite 470, Tucson, Arizona 85714 or by telephone to (520) 365-3100.
HOUSEHOLDING
The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more shareholders sharing the same address by delivering a single set of these proxy materials addressed to those shareholders. This process, which is commonly referred to as “householding,” reduces duplicate mailings and saves printing costs and postage fees, as well as natural resources.
Accordingly, Shareholders who share an address may receive only one copy of this Proxy Statement and the Annual Report unless contrary instructions are received. We will deliver promptly a separate copy of such proxy materials to any Shareholder who resides at a shared address and to which a single copy of the documents was delivered, if the Shareholder makes a request by contacting our Corporate Secretary at 3950 South Country Club Road, Suite 470, Tucson, Arizona 85714, or by telephone at (520) 365-3100. If you wish to receive separate copies of proxy statements and annual reports in the future, or if you are receiving multiple copies and would like to receive a single copy for your household, you should contact your broker, bank or other agent if your shares are held in street name. Alternatively, if you are a record holder of our Common Stock, you may contact Broadridge Financial Solutions Inc. either by calling toll-free at 1-800-542-1061, or by writing Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717.
SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 20232024 ANNUAL MEETING
If any Shareholder of the Company desires to have a proposal included in the Company’s 20232024 proxy statement and form of proxy distributed by the Board pursuant to and in compliance with Rule 14a-8 under the Exchange Act, such proposal must be received at the Company’s offices, 3950 South Country Club Road, Suite 470, Tucson, Arizona 85714, Attention: Corporate Secretary, not later than [], 2022.January 2, 2024. However, in the event that the Company holds its 20232024 Annual Meeting of Shareholders more than 30 days before or 30 days after the one-year anniversary date of the 20222023 Annual Meeting of Shareholders, the Company will disclose the new deadline by which shareholder proposals must be received under Item 5 of the Company’s earliest possible Quarterly Report on Form 10-Q or, if impracticable, by any means reasonably calculated to inform Shareholders.
Proposals to be presented at the 20232024 Annual Meeting of Shareholders that are not intended for inclusion in the proxy statement, including director nominations, must be submitted by notice in writing and received by the Company at the above address no earlier than January 13, 202320, 2024 nor later than by February 12, 2023.19, 2024. However, if the 20232024 Annual Meeting of Shareholders is held more than 30 days prior to or delayed by more than 60 days after the one-year anniversary of the 20222023 Annual Meeting of Shareholders, such notice must be so received no earlier than the close of business on the 120th day prior to the date of the 20232024 Annual Meeting of Shareholders and not later than the close of business on the later of: (1) the 90th day prior to such annual meeting and (2) the 10th day following the date the first public disclosure of the date of such annual meeting.
In addition to comply withsatisfying the universal proxy rules (once effective), shareholdersdeadline in the advance notice provisions of the Amended and Restated Bylaws, Shareholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide the Company notice that sets forth the information required by Rule 14a-19 under the Exchange Act postmarked to the Company at its corporate headquarters, or transmitted electronically at investors@axdx.com, no later than March 14, 2023.20, 2024 to comply with the SEC’s universal proxy rules.
Please refer to the advance notice provisions of our Amended and Restated Bylaws for additional information and requirements regarding shareholders proposals and director nominations. We will not consider any proposal or nomination that is not timely or otherwise does not meet our Amended and Restated Bylaws’ and the SEC’s requirements for submitting a proposal or nomination, as applicable. We reserve the right to reject, rule out of order or take other appropriate action with respect to any proposal or nomination that does not comply with these and any other applicable requirements.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON THURSDAY,FRIDAY, MAY 12, 2022:19, 2023:
The proxy statement for the Annual Meeting and the combined Annual Report to Shareholders and Annual Report on Form 10-K for the year ended December 31, 20212022 are available at www.proxyvote.com.
OTHER MATTERS
We know of no other matters to be submitted for consideration by the Shareholders at the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed proxy card to vote the shares they represent as the Board may recommend. It is important that your shares be represented at the meeting, regardless of the number of shares which you hold. You are therefore urged to execute and return, at your earliest convenience, the accompanying proxy card in the postage-prepaid envelope enclosed. You may also submit your proxy over the Internet or by telephone. For specific instructions, please refer to the information provided with your proxy card.
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| By order of the Board of Directors, |
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| /s/ Jack Phillips |
| Jack Phillips |
| President and Chief Executive Officer |
APPENDIX A
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
ACCELERATE DIAGNOSTICS, INC.
Accelerate Diagnostics, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), hereby certifies as follows:
FIRST: That the following resolutions were duly adopted by the Corporation’s Board of Directors, in accordance with the Corporation’s Bylaws and the General Corporation Law of the State of Delaware, setting forth a proposed amendment to the Certificate of Incorporation of the Corporation as follows:
RESOLVED, that the Certificate of Incorporation be amended by deleting the current text of the first paragraph of Article IV (Capital Stock) in its entirety and replacing it with the following text (the “Amendment”):
“The Corporation shall be authorized to issue two classes of shares of capital stock, to be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares of Common Stock and Preferred Stock that the Corporation shall have the authority to issue is two hundred and five million (205,000,000),455,000,000, of which two hundred million (200,000,000)450,000,000 shares shall be Common Stock, par value $0.001 per share, and five million (5,000,000)5,000,000 shares shall be Preferred Stock, par value $0.001 per share.”
FURTHER RESOLVED, any officer of the Corporation is authorized and directed to execute and file the Amendment with the Secretary of State of the State of Delaware and to take such further actions and execute such additional documents and make such additional filings as such officer shall determine to be necessary or appropriate to effectuate the foregoing resolutions.
FURTHER RESOLVED, that all actions heretofore taken by the officers, directors, or agents of the Corporation relating to the foregoing resolutions, be, and hereby are, approved, adopted, ratified, and confirmed in all respects.
SECOND: The foregoing Amendment to the Certificate of Incorporation was duly adopted by the Corporation’s Board of Directors in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
THIRD: The foregoing Amendment to the Certificate of Incorporation was duly approved by the Corporation’s stockholders in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to the Certificate of Incorporation to be signed by the undersigned duly authorized officer who declares under penalty of perjury that the matters set forth in the foregoing Certificate of Amendment are true and correct to his knowledge.
Dated: [•], 2022[ ], 2023
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| ACCELERATE DIAGNOSTICS, INC. |
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| Steve ReichlingDavid Patience |
| Chief Financial Officer |
APPENDIX B
FIRST AMENDMENT TO THE
ACCELERATE DIAGNOSTICS, INC.
2022 OMNIBUS EQUITY INCENTIVE PLAN
EFFECTIVE DATE: March 16, 2022
APPROVED BY SHAREHOLDERS:Effective as of May 12, 2022,
EXPIRATION DATE: March 16, 2032
ARTICLE 1
ESTABLISHMENT; PURPOSE; GLOSSARY
1.1ESTABLISHMENT. Accelerate Diagnostics, Inc., a Delaware corporation (the “Company”“Company”), hereby establishesestablished, and the shareholders approved, the Accelerate Diagnostics, Inc. 2022 Omnibus Equity Incentive Plan (the “Plan”“Plan”). TheBy adoption of this instrument, the Company now desires to amend the Plan will supersedeto increase the number of shares of stock reserved and replace the Company’s 2012 Omnibus Equity Incentive Plan (the “2012 Plan”) and all other Prior Plans. No awards will be madeavailable for grant pursuant to the 2012 Plan or any other Prior Plan on or after the Effective Date (as defined below); provided, that, the 2012 Plan and all Prior Plans shall remain in effect until all awards granted under the 2012 Plan and such Prior Plans have been exercised, forfeited, cancelled, or have otherwise expired or terminated in accordance with the terms of such grants.by 16,000,000.
1.21.PURPOSE. The purposeThis Amendment shall be effective as of the Plan is to promote the success and enhance the value of the Company by linking the personal interest of the Participants to those of the Company’s shareholders by providing the Participants with an incentive for outstanding performance. To further these objectives, the Plan allows for the award of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Stock Grants, Stock Units, Performance Shares, Performance Units, and Performance Cash.
1.3GLOSSARY. Defined terms used in this Plan are set forth in the attached Glossary, which is incorporated into and made part of this Plan.
ARTICLE 2
EFFECTIVE DATE; EXPIRATION DATE
2.1.EFFECTIVE DATE. The Plan will become effective on the date it is approved by the Company’s shareholders at the Company’s 20222023 Annual Meeting (the “Effective Date”).and shall be void in the absence of such approval.
2.2.2.EXPIRATION DATE. The Plan will expire on, and no Award may be granted under the Plan after, the 10th anniversary of the Effective Date. Any Awards that are outstanding on the 10th anniversary of the Effective Date shall remain in force according to the termsSection 4.1 of the Plan (Number of Shares Subject to Plan-Number of Shares) is hereby amended and the Award Agreement.restated in its entirety to read as follows:
ARTICLE 3
ADMINISTRATION
3.1COMMITTEE. The Plan shall be administered by the Committee or, with respect to non-employee directors, the Board. The Committee shall consist of 2 or more individuals, each of whom qualifies as: (a) a “non-employee director” as defined in Rule 16b‑3(b)(3) of the General Rules and Regulations of the Exchange Act; and (b) “independent” for purposes of the NASDAQ Listing Rules (or rules of any other exchange upon which the Stock is then traded), in each case, as each such rule or regulation is in effect from time to time. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board. All references in the Plan to the “Committee” shall be, as applicable, to the Board or the Committee.
3.2ACTION BY THE COMMITTEE. A majority of the Committee shall constitute a quorum. The acts of a majority of the members present at any meeting at which a quorum is present, and acts approved in writing by all of the members of the Committee in lieu of a meeting, shall be deemed the acts of the Committee.
3.3AUTHORITY OF COMMITTEE. The Committee has the power and authority to take the following actions: (a) designate Participants to receive Awards; (b) determine the type or types of Awards and the times when Awards are to be granted to each Participant; (c) determine the number of Awards to be granted and the number of shares of Stock to which an Award will relate; (d) determine the terms and conditions of any Award, including, but
not limited to, the exercise price, grant price, or purchase price, any restrictions or limitations on the Award, any schedule for lapse of restrictions or limitations, and accelerations or waivers thereof, based in each case on such considerations as the Committee determines; (e) determine whether, to what extent, and in what circumstances an Award may be settled in, or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or whether an Award may be cancelled, forfeited, exchanged or surrendered; (f) prescribe the form of each Award Agreement, which need not be identical for each Participant; (g) decide all other matters that must be determined in connection with an Award; (h) establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to administer the Plan; (i) amend or modify any outstanding Award to the extent the terms of such Award are within the power and authority of the Committee as provided under the Plan; (j) interpret the terms of, and determine any matter arising pursuant to, the Plan or any Award Agreement and correct any defects and reconcile any inconsistencies in the Plan or any Award Agreement; and (k) make all other decisions or determinations that may be required pursuant to the Plan or an Award Agreement as the Committee deems necessary or advisable to administer the Plan.
3.4DECISIONS BINDING. The Committee’s interpretation of the Plan or any Award Agreement and all decisions and determinations by the Committee with respect to the Plan and any Award are final, binding, and conclusive on all parties. All authority of the Board and the Committee with respect to Awards issued pursuant to this Plan, including the authority to amend outstanding Awards, shall continue after the term of this Plan so long as any Award remains outstanding. Any action authorized to be taken by the Committee pursuant to the Plan may be taken or not taken by the Committee in the exercise of its discretion as long as such action or decision not to act is not inconsistent with a provision of this Plan.
3.5DELEGATION to CEO. The Committee may, in its discretion, delegate to the CEO, in writing, the power and authority to grant Awards to employees (other than to employees who are or may become upon hiring employees subject to Section 16 of the Exchange Act) to expedite the hiring process or to retain talented employees. The Committee’s delegation to the CEO may be revoked or modified at any time. Any such delegation must be consistent with applicable law and shall be subject to such restrictions or limitations as may be imposed by the Committee.
ARTICLE 4
SHARES SUBJECT TO THE PLAN
4.1NUMBER OF SHARES.SHARES. Subject to adjustment as provided in Section 4.4,, the total number of shares of Stock reserved and available for grant pursuant to the Plan is 5,500,000,21,500,000, plus the number of shares of Stock that remain available or, as described in Section 4.2 otherwise become available, for grant under the terms of the 2012 Plan and all Prior Plans following the Effective Date. As provided in Section 1.1,, no Awards will be made pursuant to the 2012 Plan or any other Prior Plan on or after the Effective Date.
3.This First Amendment shall only amend the provisions of the Plan referred to above, and those provisions not amended hereby shall be considered in full force and effect, unless the context indicates otherwise.
4.2SHARE COUNTING. For purposesIN WITNESS WHEREOF, the Company has caused this First Amendment to be executed as of determining the numberthis ____ day of shares of Stock available for grant under the Plan from time-to-time:April, 2023.
(a)In the event any Award granted under this Plan, or any award outstanding under any Prior Plan on or after the Effective Date, is forfeited, terminated, cancelled, or expired, the number of shares of Stock subject to such Award or Prior Plan award, to the extent of any such forfeiture, termination, cancellation or expiration, shall thereafter be available for grant under the Plan (i.e., any prior charge against the numeric limit in Section 4.1 shall be reversed).Dated: [ ], 2023
(b)If shares of Stock are not delivered in connection with any Award because the Award is settled in cash rather than in Stock, no shares of Stock shall be counted against the limit set forth in Section 4.1. If an Award may be settled in cash or Stock, the rules set forth in Section 4.2(a) shall apply until the Award is settled, at which time the underlying shares of Stock will be added back to the shares available for grant pursuant to Section 4.1 but only if the Award is settled in cash.
(c)The exercise of a stock-settled SAR or broker-assisted “cashless” exercise of an Option (or a portion thereof) will reduce the number of shares of Stock available for grant by the entire number of shares of Stock subject to that SAR or Option (or applicable portion thereof), even though a smaller number of shares of Stock will be issued upon such an exercise.
(d)Shares of Stock tendered to pay the exercise price of an Option or tendered, withheld or | | | | | |
| ACCELERATE DIAGNOSTICS, INC. |
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| David Patience |
| Chief Financial Officer |
otherwise relinquished by the Participant to satisfy a tax withholding obligation arising in connection with any Award will not become available for grant under the Plan. Moreover, shares of Stock purchased on the open market with cash proceeds generated by the exercise of an Option or SAR will not increase or replenish the number of shares available for grant.APPENDIX C
(e)If the provisions of this Section 4.2 are inconsistent with the requirements of any regulations promulgated by the Internal Revenue Service pursuant to Section 422 of the Code, the provisions of such regulations shall control over the provisions of this Section 4.2, but only as this Section 4.2 applies to Incentive Stock Options.CERTIFICATE OF AMENDMENT
TO THE
(f)The Committee may adopt such other reasonable rules and procedures as it deems to be appropriate for purposes of determining the number of shares of Stock that are available for grant pursuant to Section 4.1.CERTIFICATE OF INCORPORATION
4.3STOCK DISTRIBUTED. Any shares of Stock delivered pursuant to an Award may consist, in whole or in part, of authorized but unissued Stock or treasury Stock or Stock purchased on the open market.
4.4ADJUSTMENTS. In the event of any recapitalization, reclassification, stock dividend, stock split, reverse stock split or other distribution with respect to the shares of Stock, or any similar corporate transaction or event in respect of the Stock, the Committee shall, in its sole discretion and to the extent it deems equitable and appropriate to prevent dilution or enlargement of rights, make a proportionate adjustment in: (a) the number and class of shares of Stock made available for grant pursuant to Section 4.1; (b) the number of shares of Stock set forth in Section 7.2(h) and any other similar numeric limit expressed in the Plan; (c) the number and class of and/or price of shares of Stock, units, or other rights subject to the then-outstanding Awards; (d) the performance targets or goals appropriate to any outstanding Awards; or (e) any other terms of an Award that are affected by the event. Notwithstanding anything in the Plan to the contrary, in the event of any such transaction or occurrence, the Committee, in its sole discretion, may provide in substitution for any or all outstanding Awards such alternative consideration (including cash) as it, in good faith, may determine to be equitable under the circumstances and may require in connection therewith the surrender of all Awards so replaced. Any adjustments made pursuant to this Section 4.4 shall be made in a manner consistent with the requirements of Section 409A of the Code and, in the case of Incentive Stock Options, any such adjustments shall be made in a manner consistent with the requirements of Section 424(a) of the Code.
4.5REPLACEMENT AWARDS. In the event of any corporate transaction in which the Company or a Subsidiary acquires a corporate entity which, at the time of such transaction, maintains an equity compensation plan pursuant to which awards of stock options, stock appreciation rights, restricted stock, performance shares, performance units, stock grants, stock units, restricted stock units or any other form of equity based compensation are then outstanding (the “Acquired Plan”), the Committee may make Awards to assume, substitute or convert such outstanding awards in such manner as may be determined to be appropriate and equitable by the Committee; provided, however, that the number of shares of Stock subject to any Award shall always be a whole number by rounding any fractional share to the nearest whole share. To the extent permitted by Section 409A of the Code, Options or SARs issued pursuant to this Section 4.5 shall not be subject to the requirement that the exercise price of such Award not be less than the fair market value of Stock on the date the Award is granted. Shares used in connection with an Award granted in substitution for an award outstanding under an Acquired Plan under this Section 4.5 shall not be counted against the number of shares of Stock reserved under this Plan under Section 4.1. Any shares of Stock authorized and available for issuance under the Acquired Plan may, subject to adjustment as described in Section 4.4, be available for use in making Awards under this Plan with respect to persons eligible under such Acquired Plan, by virtue of the Company’s assumption of such Acquired Plan, consistent with NASDAQ Listing Rules (or rules of any other exchange upon which the Stock is then traded), including, but not limited to, NASDAQ Rule 5635(c), including IM-5635-1, as such Rules may be amended or replaced from time to time.
4.6FRACTIONAL SHARES. No fractional shares shall be issued pursuant to the Plan. Unless the Committee specifies otherwise in the Award Agreement or pursuant to any policy adopted by the Committee, cash will be given in lieu of fractional shares. In the event of adjustment as provided in Section 4.4 or the issuance of replacement awards as provided in Section 4.5, the total number of shares subject to any affected Award shall always be a whole number by rounding any fractional shares to the nearest whole share.
4.7LIMIT ON NON-EMPLOYEE DIRECTOR AWARDS. Notwithstanding any other provision in the Plan to the contrary, the aggregate grant date fair value (computed as of the date of grant in accordance with applicable financial accounting rules) of all Awards granted to any non-employee director during any fiscal year, plus the aggregate amount of all cash payments made to such non-employee director for services rendered as a director for the same fiscal year, shall not exceed $500,000 (the “Annual Director Compensation Limit”). For the avoidance of doubt, any compensation that is deferred shall be counted toward the Annual Director Compensation Limit during the year in which it is first earned.
ARTICLE 5
ELIGIBILITY; PARTICIPATION
5.1ELIGIBILITY. Persons eligible to participate in this Plan include members of the Board and employees and officers of the Company and its Subsidiaries. The Committee may determine on a case-by-case basis to make Awards to Consultants to the Company or any Subsidiary. Awards may also be granted to prospective employees or members of the Board but no portion of any such Award will vest, become exercisable, be issued, or become effective prior to the date on which such individual begins to provide services to the Company or any Subsidiary.
5.2ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee may, from time to time, select from among all eligible Participants those to whom Awards shall be granted and shall determine the nature and amount of each Award. No individual shall have any right to be selected to receive an Award, or having been so selected, to be selected to receive a future Award, except as otherwise provided by separate agreement, the relevant provisions of which have been approved by the Committee.
ARTICLE 6
GENERAL RULES APPLICABLE TO ALL AWARDS
6.1AWARD AGREEMENTS. All Awards shall be evidenced by an Award Agreement. The Award Agreement shall include such terms and provisions as the Committee determines to be appropriate. The terms of the Award Agreement may vary depending on the type of Award, the employee or classification of the employee to whom the Award is made and such other factors as the Committee determines to be appropriate.
6.2STAND-ALONE AND TANDEM AWARDS. Awards may be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as or at a different time from the grant of such other Awards.
6.3TERM OF AWARD. The term of each Award shall be for the period determined by the Committee; provided, that, in no event shall the term of any Option or Stock Appreciation Right exceed a period of 10 years from the Date of Grant.
6.4TERMINATION OF EMPLOYMENT OR SERVICE. Subject to the provisions of this Plan, the Committee shall determine and set forth in the applicable Award Agreement the extent to which a Participant shall have the right to retain and/or exercise an Award following Termination of Employment (or Termination of Service). Such provisions need not be uniform among all types of Awards and may reflect distinctions based on the reasons for such terminations, including but not limited to, death, Disability, a Change of Control, a termination for cause or reasons relating to the breach or threatened breach of restrictive covenants.
6.5FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan, the Award Agreement and any applicable law, payments or transfers to be made by the Company or any Subsidiary on the grant, exercise or settlement of an Award may be made in such forms as determined by the Committee, including, without limitation, cash, Stock, other Awards, or other property, or any combination thereof, and may be made in a single payment or transfer, in installments, or any combination thereof, in each case determined in accordance with applicable law and rules adopted by the Committee.
6.6LIMITS ON TRANSFER.
(a)General. Except as provided in Section 7.1(f), Section 8.1(f), Section 6.6(b) or Section 6.7, no right or interest of a Participant in any Award may be pledged, encumbered, or hypothecated to, or in
favor of, any party other than the Company or any Subsidiary, or shall be subject to any lien, obligation, or liability of such Participant to any other party other than the Company or any Subsidiary and except as otherwise provided by the Committee, no Award shall be assigned, transferred, or otherwise disposed of by a Participant other than by will or the laws of descent and distribution or, if applicable, until the expiration of any period during which any restrictions are applicable or any Performance Period as determined by the Committee.
(b)Transfers to Family Members. The Committee shall have the authority to adopt a policy that is applicable to existing Awards, new Awards, or both, which permits a Participant to transfer Awards during his or her lifetime to any Family Member. In the event an Award is transferred as permitted by such policy, such transferred Award may not be subsequently transferred by the transferee (other than another transfer meeting the conditions set forth in the policy) except by will or the laws of descent and distribution. A transferred Award shall continue to be governed by and subject to the terms and limitations of the Plan and relevant Award Agreement, and the transferee shall be entitled to the same rights as the Participant, as if the transfer had not taken place.
6.7BENEFICIARIES. Notwithstanding Section 6.6, a Participant may, in the manner determined by the Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with respect to any Award upon the Participant’s death, and, in accordance with Section 7.2(d)(3), upon the Participant’s Disability. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married and resides in a community property state, a designation of a person other than the Participant’s spouse as his beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time provided the change or revocation is provided to the Company.
6.8STOCK CERTIFICATES. Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award, unless and until the Committee has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange or quotation system on which the shares of Stock are listed, quoted or traded. All Stock certificates delivered pursuant to the Plan are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded. The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Committee may require that a Participant make such reasonable covenants, agreements, and representations, as the Committee deems advisable in order to comply with any such laws, regulations, or requirements.
6.9CLAWBACK. Notwithstanding any provision of the Plan to the contrary, in an Award Agreement, the Committee shall include provisions calling for the recapture or clawback of all or any portion of an Award to the extent necessary to comply with applicable law in effect on the date of the Award Agreement, including, but not limited to, the final rules issued by the Securities and Exchange Commission and the NASDAQ Listing Rules (or any other exchange upon which the Stock is then listed) pursuant to Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Committee also may include other clawback provisions in the Award Agreement as it determines to be appropriate. By accepting an Award, each Participant agrees to be bound by, and comply with, the terms of any such recapture or clawback provisions and with any Company request or demand for recapture or clawback.
6.10DIVIDEND EQUIVALENTS. With respect to any Award that vests based on the achievement of Performance Goals, in no event will any dividend equivalent award vest or be paid prior to the attainment of the Performance Goals applicable to the corresponding Award and such dividend equivalent awards shall only be paid to the Participant if and to the extent that the Performance Goals related to the corresponding Award are satisfied. No dividend equivalents awards may be awarded in connection with an award of Stock Options or SARs.
ARTICLE 7
STOCK OPTIONS
7.1GENERAL. Subject to the terms and provisions of the Plan, Options may be granted to one or more Participants upon such terms and conditions, and at any time and from time to time, as shall be determined by the Committee. The Committee may grant either Nonqualified Stock Options or Incentive Stock Options and shall have complete discretion in determining the number of shares subject to Options granted to each Participant. Option Awards are subject to the following terms and conditions:
(a)Exercise Price. The exercise price per share of Stock pursuant to any Option shall be equal to the Fair Market Value of one share of Stock as of the Date of Grant unless the Committee sets a higher exercise price in the Award Agreement.
(b)Exercise of Option. Options shall be exercisable at such times and in such manner, and shall be subject to such restrictions and conditions, as the Committee shall, in each instance approve, which need not be the same for each grant or for each Participant. The Committee may prescribe performance or other conditions, if any, that must be satisfied before all or part of an Option may be exercised.
(c)Term of Option. Each Option shall expire at such time as the Committee shall determine as of the Date of Grant; provided, however, that no Option shall be exercisable later than the 10th anniversary of the Date of Grant.
(d)Payment. The exercise price for any Option shall be paid in cash or shares of Stock held for longer than 6 months (through actual tender or by attestation). In the Award Agreement, the Committee also may prescribe other methods by which the exercise price of an Option may be paid and the form of payment including, without limitation, any net-issuance arrangement or other property acceptable to the Committee (including broker-assisted “cashless exercise” arrangements), and the methods by which shares of Stock shall be delivered or deemed to be delivered to Participants. The Committee, in consideration of applicable accounting standards and applicable law, may waive the 6-month share holding period described in the first sentence of this paragraph (d) in the event payment of an Option is made through the tendering of shares.
(e)Repricing of Options. Notwithstanding any other provision in the Plan to the contrary, without approval of the Company’s shareholders, an Option may not be amended, modified or repriced to reduce the exercise price after the Date of Grant. Except as otherwise provided in Section 4.4 with respect to an adjustment in capitalization, an Option also may not be surrendered in consideration of or exchanged for cash, other Awards or a new Option having an exercise price below the exercise price of the Option being surrendered or exchanged.
(f)Nontransferability of Options. No Option may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all Options granted to a Participant shall be exercisable during his or her lifetime only by such Participant or his or her legal representative. Notwithstanding the foregoing, the Committee may, in its discretion, permit the transfer of an Option to a Family Member, trust or partnership, or to a charitable organization, provided that no value or consideration is received by the Participant with respect to such transfer.
7.2INCENTIVE STOCK OPTIONS. The following additional rules shall apply to Incentive Stock Options granted pursuant to this Article 7:
(a)Employees Only. Incentive Stock Options shall be granted only to Participants who are employees of the Company or any Subsidiary.
(b)Exercise Price. Except as provided in Section 7.2(f), the exercise price per share of Stock pursuant to any Incentive Stock Option shall be equal to the Fair Market Value of one share of Stock as of the Date of Grant unless the Committee sets a higher exercise price in the Award Agreement.
(c)Term of Incentive Stock Option. In no event may any Incentive Stock Option be exercisable for more than 10 years from the Date of Grant.
(d)Lapse of Option. An Incentive Stock Option shall lapse in the following circumstances:
(1)The Incentive Stock Option shall lapse 10 years from the Date of Grant, unless an earlier time is specified in the Award Agreement;
(2)The Incentive Stock Option shall lapse upon a Termination of Employment for any reason other than the Participant’s death or Disability, unless otherwise provided in the Award Agreement; and
(3)If the Participant incurs a Termination of Employment on account of death or Disability before the Option lapses pursuant to paragraph (1) or (2), the Incentive Stock Option shall lapse on the earlier of: (i) the scheduled expiration date of the Option; or (ii) 12 months after the date of the Participant’s Termination of Employment on account of death or Disability. Upon the Participant’s death or Disability, any Incentive Stock Options exercisable at the Participant’s death or Disability may be exercised by the Participant’s legal representative or representatives, by the person or persons entitled to do so pursuant to the Participant’s last will and testament in the case of death, or, if the Participant fails to make testamentary disposition of such Incentive Stock Option or dies intestate, by the person or persons entitled to receive the Incentive Stock Option pursuant to the applicable laws of descent and distribution.
(e)Individual Dollar Limitation. The aggregate fair market value (determined as of the time an Award is made and in accordance with Section 422 of the Code) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any one calendar year may not exceed $100,000 or such other limitation as may then be imposed by Section 422(d) of the Code or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in excess of such limitation, the excess shall be considered Nonqualified Stock Options.
(f)Ten Percent Owners. An Incentive Stock Option may be granted to any employee 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 only if such Option is granted at a price that is not less than 110% of Fair Market Value on the Date of Grant and the Option is exercisable for no more than 5 years from the Date of Grant.
(g)Right to Exercise. Except as provided in Section 7.2(d)(3), during a Participant’s lifetime, an Incentive Stock Option may be exercised only by the Participant.
(h)Limitations on Number of Shares Subject to Awards. Subject to adjustment as provided in Section 4.4, the maximum number of shares that may be issued under the Plan as Incentive Stock Options is the numeric limit set forth in Section 4.1.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1GENERAL. Subject to the terms and provisions of the Plan, SARs may be granted to one or more Participants upon such terms and conditions, and at any time and from time to time, as shall be determined by the Committee. The Committee shall have complete discretion in determine the number of SARs granted to each Participant. SARs are subject to the following terms and conditions:
(a)Base Value. The base value per share of Stock pursuant to any SAR shall be equal to the Fair Market Value of one share of Stock as of the Date of Grant unless the Committee sets a higher base value in the Award Agreement.
(b)Exercise of SAR. SARs shall be exercisable at such times and in such manner, and shall be subject to such restrictions and conditions, as the Committee shall, in each instance approve, which need not be the same for each grant or for each Participant. The Committee may prescribe performance or other conditions, if any, that must be satisfied before all or part of a SAR may be exercised.
(c)Term of SAR. Each SAR shall expire at such time as the Committee shall determine as of the Date of Grant; provided, however, that no SAR shall be exercisable later than the 10th anniversary of the Date of Grant.
(d)Payment of SAR Amount. Upon exercise of the SAR, the Participant shall be entitled to receive a payment equal to the amount determined by multiplying (i) the excess, if any, of the fair market value of a share of Stock on the date of exercise over the base value fixed by the Committee on the Date of Grant, by (ii) the number of shares with respect to which the SAR is exercised. Payment shall be made in the manner and at the time specified by the Committee in the Award Agreement. At the discretion of the Committee, the Award Agreement may provide for payment for the SARs in cash, shares of Stock of equivalent value, or in a combination thereof.
(e)Repricing of SARs. Notwithstanding any other provision in the Plan to the contrary, without approval of the Company’s shareholders, a SAR may not be amended, modified or repriced to reduce the exercise price after the Date of Grant. Except as otherwise provided in Section 4.4 with respect to an adjustment in capitalization, a SAR also may not be surrendered in consideration of or exchanged for cash, other Awards or a new SAR having an exercise price below the exercise price of the SAR being surrendered or exchanged.
(f)Nontransferability of SARs. No SAR may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all SARs granted to a Participant shall be exercisable during his or her lifetime only by such Participant or his or her legal representative. Notwithstanding the foregoing, the Committee may, in its discretion, permit the transfer of an SAR to a Family Member, trust or partnership, or to a charitable organization, provided that no value or consideration is received by the Participant with respect to such transfer.
ARTICLE 9
RESTRICTED STOCK AND RESTRICTED STOCK UNIT AWARDS
9.1GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the Plan, Restricted Stock may be granted to one or more Participants upon such terms and conditions, and at any time and from time to time, as shall be determined by the Committee. Restricted Stock Awards are subject to the following terms and conditions:
(a)Restrictions. Restricted Stock shall be subject to such conditions and/or restrictions as the Committee may impose (including, without limitation, limitations on transferability, the right to receive dividends, or the right to vote the Restricted Stock), which need not be the same for each grant or for each Participant. These restrictions may lapse separately or in combination at such times, in such circumstances, in such installments, or otherwise, as determined by the Committee. Except as otherwise provided in the Award Agreement, Participants holding shares of Restricted Stock may not exercise voting rights with respect to the shares of Restricted Stock during the period of restriction.
(b)Forfeiture. Except as otherwise provided in the Award Agreement, upon a Termination of Employment (or Termination of Service) during the applicable period of restriction, Restricted Stock that is at that time subject to restrictions shall be forfeited. The Committee may provide in the Award Agreement that the restrictions or forfeiture conditions relating to a Restricted Stock Award will be waived in whole or in part in the event of a Termination of Employment (or Termination of Service) resulting from specified causes. The Committee also may waive in whole or in part any other restrictions or forfeiture conditions relating to a Restricted Stock Award.
(c)Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in the name of the Participant, the certificates must bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, and the Company may retain physical possession of the certificate until such time as all applicable restrictions lapse.
9.2GRANT OF RESTRICTED STOCK UNITS. Subject to the terms and provisions of the Plan, Restricted Stock Units may be granted to one or more Participants upon such terms and conditions, and at any time and from time to time, as shall be determined by the Committee. Restricted Stock Unit Awards are subject to the following terms and conditions:
(a)Restrictions. Restricted Stock Unit Awards grant a Participant the right to receive a specified number of shares of Stock, or a cash payment equal to the fair market value (determined as of a specified date) of a specified number of shares of Stock, subject to such conditions and/or restrictions as the Committee may impose, which need not be the same for each grant or for each Participant. These restrictions may lapse separately or in combination at such times, in such circumstances, in such installments, or otherwise, as determined by the Committee.
(b)Forfeiture. Except as otherwise provided in the Award Agreement, upon a Termination of Employment (or Termination of Service) during the applicable period of restriction, Restricted Stock Units that are at that time subject to restrictions shall be forfeited. The Committee may provide in any Award Agreement that restrictions or forfeiture conditions relating to a Restricted Stock Unit Award will be waived in whole or in part in the event of a Termination of Employment (or Termination of Service) resulting from specified causes. The Committee also may waive in whole or in part any other restrictions or forfeiture conditions relating to a Restricted Stock Unit Award.
(c)Payment. Payment for vested Restricted Stock Units shall be made in the manner and at the time designated by the Committee in the Award Agreement. In the Award Agreement, the Committee may provide that payment will be made in cash or Stock, or in a combination thereof.
ARTICLE 10
STOCK GRANT AND STOCK UNIT AWARDS
10.1STOCK GRANT AWARDS. Subject to the terms and provisions of the Plan, Stock Grant Awards may be granted to one or more Participants upon such terms and conditions, and at any time and from time to time, as shall be determined by the Committee. A Stock Grant Award grants the Participant the right to receive (or purchase at such price as determined by the Committee) a designated number of shares of Stock free of any vesting restrictions. The purchase price, if any, for a Stock Grant Award shall be payable in cash or other form of consideration acceptable to the Committee. A Stock Grant Award may be granted or sold as described in the preceding sentence in respect of past services or other valid consideration, or in lieu of any cash compensation due to such Participant.
10.2STOCK UNIT AWARDS. Subject to the terms and provisions of the Plan, Stock Unit Awards may be granted to one or more Participants upon such terms and conditions, and at any time and from time to time, as shall be determined by the Committee. A Stock Unit Award grants the Participant the right to receive a designated number of shares of Stock, or a cash payment equal to the fair market value (determined as of a specified date) of a designated number of shares of Stock, in the future free of any vesting restrictions. A Stock Unit Award may be granted as described in the preceding sentence in respect of past services or other valid consideration, or in lieu of any cash compensation due to such Participant.
ARTICLE 11
PERFORMANCE SHARES; PERFORMANCE UNITS;
AND PERFORMANCE CASH AWARDS
11.1PERFORMANCE SHARE AWARDS. Subject to the terms and provisions of the Plan, Performance Share Awards may be granted to one or more Participants upon such terms and conditions, and at any time and from time to time, as shall be determined by the Committee. A Performance Share Award grants the Participant the right to receive a specified number of shares of Stock depending on the satisfaction of any one or more Performance Goals. Performance may be measured on a specified date or dates or over any period or periods determined by the Committee. Unless otherwise provided in the Award Agreement, payment for vested Performance Shares shall be made in Stock.
11.2PERFORMANCE UNIT AWARDS. Subject to the terms and provisions of the Plan, Performance Unit Awards may be granted to one or more Participants upon such terms and conditions, and at any time and from
time to time, as shall be determined by the Committee. A Performance Unit Award grants the Participant the right to receive a specified number of shares of Stock or a cash payment equal to the fair market value (determined as of a specified date) of a specified number of shares of Stock depending on the satisfaction of any one or more Performance Goals. Performance may be measured on a specified date or dates or over any period or periods determined by the Committee. At the discretion of the Committee, the Award Agreement may provide for payment for vested Performance Unit Awards in cash, shares of Stock of equivalent cash value, or in a combination thereof.
11.3PERFORMANCE CASH AWARDS. Subject to the terms and provisions of the Plan, Performance Cash Awards may be granted to one or more Participants upon such terms and conditions, and at any time and from time to time, as shall be determined by the Committee. A Performance Cash Award grants the Participant the right to receive an amount of cash depending on the satisfaction of any one or more Performance Goals. Performance may be measured on a specified date or dates or over any period or periods determined by the Committee.
11.4PERFORMANCE GOALS. The Performance Goal or Goals applicable to any Performance Share, Performance Unit or Performance Cash Award shall be specified by the Committee in the Award Agreement. The Committee shall retain the power to adjust the Performance Goals, the level of attainment of the Performance Goals or otherwise increase or decrease the amount payable with respect to any Award made pursuant to this Article 11.
ARTICLE 12
CHANGE OF CONTROL
12.1BOARD DISCRETION. If a Change of Control occurs, the Board shall have the authority and discretion, but shall not have the obligation, to provide, in the Award Agreement or thereafter, that all or part of outstanding Options, SARs, and other Awards shall become fully exercisable and all or part of the restrictions on outstanding Awards shall lapse. To the extent that this provision causes Incentive Stock Options to exceed the dollar limitation set forth in Section 7.2(e), the excess Options shall be deemed to be Nonqualified Stock Options. In addition, upon, or in anticipation of, a Change of Control, the Committee may: (a) cause all or a part of outstanding Awards to be cancelled and terminated as of a specified date and give each Participant the right to exercise such Awards during a period of time as the Committee, in its sole discretion, shall determine; or (b) cause all or a part of outstanding Awards to be cancelled and terminated as of a specified date in exchange for a payment or right to payment pursuant to the terms and conditions set forth in the Change of Control transaction documents. With respect to an Award which the Company concludes is subject to (and not excepted from) the requirements of Section 409A, any actions taken by the Board pursuant to this Article 12 shall be done in compliance with Section 409A of the Code.
12.2PARTICIPANT CONSENT NOT REQUIRED. Nothing in this Article 12 or any other provision of this Plan is intended to provide any Participant with any right to consent to or object to any transaction that might result in a Change of Control and each provision of this Plan shall be interpreted in a manner consistent with this intent. Similarly, nothing in this Article 12 or any other provision of this Plan is intended to provide any Participant with any right to consent to or object to any action taken by the Board pursuant to this Article 12.
ARTICLE 13
AMENDMENT, MODIFICATION, AND TERMINATION
13.1AMENDMENT, MODIFICATION, AND TERMINATION OF THE PLAN. With the approval of the Board, at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, however, that any such action of the Committee shall be subject to the approval of the shareholders to the extent necessary to comply with any applicable law, regulation, or rule of the stock exchange on which the shares of Stock are listed, quoted or traded. Except as provided in Section 4.4, neither the Board nor the Committee may, without the approval of shareholders: (a) increase the number of shares available for grant under the Plan; (b) permit the Committee to grant Options or SARs with an exercise price or base value that is below Fair Market Value on the Date of Grant; (c) permit the Committee to extend the exercise period for an Option or SAR beyond 10 years from the Date of Grant; (d) amend Section 7.1(e) to permit the Committee to reprice previously granted Options; (e) amend Section 8.1(e) to permit the Committee to reprice previously granted SARs; (f) extend the duration of the Plan; or (g) expand the type of awards available for grant under the Plan or expand the class of participants eligible to participate in the Plan.
13.2AWARDS PREVIOUSLY GRANTED. Except as provided in the next sentence and subject to Section 12.2, no termination, amendment, or modification of the Plan or any Award Agreement shall adversely affect in any material way the rights of the holder of any Award previously granted pursuant to the Plan without the prior written consent of the holder of the Award. The consent of the holder of a previously granted Award is not needed if the change: (a) is required by law or regulation; (b) does not adversely affect in any material way the rights of the holder; or (c) is required to cause the benefits under the Plan to comply with the provisions of Section 409A of the Code. Additional rules relating to amendments to the Plan or any Award Agreement to assure compliance with Section 409A of the Code are set forth in Section 14.15.
ARTICLE 14
GENERAL PROVISIONS
14.1NO RIGHTS TO AWARDS. No Participant, employee, or other person shall have any claim to be granted any Award, and neither the Company nor the Committee is obligated to treat Participants, employees, and other persons uniformly.
14.2NO SHAREHOLDERS RIGHTS. No Award gives the Participant any of the rights of a shareholder of the Company unless and until unrestricted shares of Stock are issued to the Participant or the restrictions on any shares previously issued lapse, except as specifically otherwise provided in the Plan or the Award Agreement.
14.3WITHHOLDING. The Company or any Subsidiary shall have the authority and the right to deduct or withhold, or require a Participant to remit to the Company, up to the maximum statutory amount necessary (or such lower amount that will not cause an adverse accounting consequence or cost to the Company), in the applicable jurisdiction, to satisfy any federal, state, and local taxes required by law to be withheld with respect to any taxable event concerning a Participant arising as a result of this Plan. With the Committee’s consent as expressed in an Award Agreement or in any policy adopted by the Committee, the Company may permit the Participant to satisfy a tax withholding requirement by: (a) directing the Company to withhold shares of Stock to which the Participant is entitled pursuant to the Award in an amount necessary to satisfy the Company’s applicable federal, state, local or foreign income and employment tax withholding obligations with respect to such Participant; (b) tendering previously-owned shares of Stock held by the Participant for 6 months or longer to satisfy the Company’s applicable federal, state, local, or foreign income and employment tax withholding obligations with respect to the Participant (which holding period may be waived in accordance with Section 7.1(d)); (c) a broker-assisted “cashless” transaction; or (d) personal check or other cash equivalent acceptable to the Company.
14.4NO RIGHT TO CONTINUED EMPLOYMENT OR SERVICE. Nothing in the Plan or any Award Agreement shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s employment or services at any time, nor confer upon any Participant any right to continue in the employ or service of the Company or any Subsidiary.
14.5UNFUNDED STATUS OF AWARDS. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary. Neither the Participant nor any other persons shall have any interest in any fund or in any specific asset or assets of the Company or any other entity by reason of any Award, except to the extent provided hereunder.
14.6RELATIONSHIP TO OTHER BENEFITS. No payment pursuant to the Plan shall be taken into account in determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary, except as otherwise provided in such plan.
14.7EXPENSES. The expenses of administering the Plan shall be borne by the Company.
14.8TITLES AND HEADINGS. The titles and headings of the sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
14.9SECURITIES LAW COMPLIANCE. With respect to any person who is, on the relevant date, obligated to file reports pursuant to Section 16 of the Exchange Act, transactions pursuant to this Plan are intended
to comply with all applicable conditions of Rule 16b‑3 or its successors pursuant to the Exchange Act. Notwithstanding any other provision of the Plan, the Committee may impose such conditions on the exercise of any Award as may be required to satisfy the requirements of Rule 16b‑3 or its successors pursuant to the Securities Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be void to the extent permitted by law and voidable as deemed advisable by the Committee.
14.10GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to make payment of awards in Stock or otherwise shall be subject to all applicable laws, rules and regulations, and to such approvals by government agencies as may be required. The Company shall be under no obligation to register pursuant to the Securities Act of 1933, any of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to the Plan may in certain circumstances be exempt from registration pursuant to the Securities Act of 1933, the Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability of any such exemption. The Committee shall impose such restrictions on any Award as it may deem advisable, including without limitation, restrictions under applicable federal securities law, under the requirements of the NASDAQ Listing Rules (or any other exchange upon which the Stock is then listed), quoted or traded and under any blue sky or state securities laws applicable to such Award.
14.11GOVERNING LAW. The Plan and all Award Agreements shall be construed in accordance with and governed by the laws of the jurisdiction of incorporation of the Company.
14.12SUCCESSORS. All obligations of the Company under the Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect merger, consolidation, purchase of all or substantially all of the business and/or assets of the Company or otherwise.
14.13SURVIVAL OF PROVISIONS. The rights, remedies, agreements, obligations and covenants contained in or made pursuant to this Plan, any Award Agreements and any notices or agreements made in connection with this Plan shall survive the execution and delivery of such notices and agreements and the delivery and receipt of such shares of Stock.
14.14INDEMNIFICATION. Each person who is or shall have been a member of the Committee or of the Board, or who has served as the CEO, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company’s approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless.
14.15COMPLIANCE WITH SECTION 409A.
(a)General Compliance. Some of the types of Awards that may be granted pursuant to the Plan (including, but not necessarily limited to, Restricted Stock Unit Awards, Performance Share Awards, Performance Unit Awards, Performance Cash Awards and Stock Unit Awards) may be considered to be “non-qualified deferred compensation” subject to the requirements of Section 409A of the Code. If an Award is subject to the requirements of Section 409A of the Code, the Company intends (but cannot and does not guarantee) that the Award Agreement and this Plan comply fully with and meet all of the requirements of Section 409A of the Code or an exception thereto and the Award Agreement shall include such provisions, in addition to the provisions of this Plan, as may be necessary to assure compliance with Section 409A of the Code or an exception thereto.
(b)Delay for Specified Employees. If, at the time of a Participant’s Separation from Service, the Company has any Stock which is publicly traded on an established securities market or otherwise, and if the Participant is considered to be a Specified Employee, to the extent any payment for any Award is
subject to the requirements of Section 409A of the Code and is payable upon the Participant’s Separation from Service, such payment shall not commence prior to the first business day following the date which is 6 months after the Participant’s Separation from Service (or the date of the Participant’s death if earlier than the end of the 6 month period). Any amounts that would have been distributed during such 6-month period will be distributed on the day following the expiration of the 6 month period.
(c)Prohibition on Acceleration or Deferral. Under no circumstances may the time or schedule of any payment for any Award that is subject to the requirements of Section 409A of the Code be accelerated or subject to further deferral except as otherwise permitted or required by Section 409A of the Code. If the Company fails to make any payment pursuant to the payment provisions applicable to an Award that is subject to Section 409A of the Code, either intentionally or unintentionally, within the time period specified in such provisions, but the payment is made within the same calendar year, such payment will be treated as made within the specified time period. In addition, in the event of a dispute with respect to any payment, such payment may be delayed in accordance with Section 409A of the Code.
ACCELERATE DIAGNOSTICS, INC.
Accelerate Diagnostics, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “Corporation”), hereby certifies as follows:
By:
FIRST: That the following resolutions were duly adopted by the Corporation’s Board of Directors, in accordance with the Corporation’s Bylaws and the General Corporation Law of the State of Delaware, setting forth a proposed amendment to the Certificate of Incorporation of the Corporation as follows:
RESOLVED, that the Certificate of Incorporation be amended by inserting the following text as a new third paragraph of Article IV (Capital Stock) (the “Amendment”):
“That, effective on the filing of this Certificate of Amendment of Certificate of Incorporation with the Office of the Secretary of State of the State of Delaware (the “Effective Time”), a one-for-[*] reverse stock split of the Corporation’s Common Stock shall become effective, pursuant to which each [*] shares of Common Stock outstanding and held of record by each stockholder of the Corporation (including treasury shares) immediately prior to the Effective Time shall be reclassified and combined into one validly issued, fully-paid and nonassessable share of Common Stock automatically and without any action by the holder thereof upon the Effective Time and shall represent one share of Common Stock from and after the Effective Time (such reclassification and combination of shares, the “Reverse Stock Split”). The par value of the Common Stock following the Reverse Stock Split shall remain at $0.001 per share. No fractional shares of Common Stock shall be issued as a result of the Reverse Stock Split. In lieu thereof, each holder shall be entitled to receive its pro rata share of the proceeds from the sale of shares of Common Stock by Broadridge Corporate Issuer Solutions, Inc. (the "Transfer Agent"). The Company shall instruct the Transfer Agent to aggregate all fractional shares and to arrange for them to be sold at the then prevailing prices on the open market on behalf of those stockholders otherwise entitled to receive a fractional share of Common Stock. The Company shall direct the Transfer Agent to conduct such sales in an orderly fashion and at a reasonable pace. After the completion of such sales, the Company shall direct the Transfer Agent to remit a cash payment to each stockholders entitled to a cash payment in an amount equal to its pro rata share of the total net proceeds of such sales.”
FURTHER RESOLVED, any officer of the Corporation is authorized and directed to execute and file the Amendment with the Secretary of State of the State of Delaware and to take such further actions and execute such additional documents and make such additional filings as such officer shall determine to be necessary or appropriate to effectuate the foregoing resolutions.
FURTHER RESOLVED, that all actions heretofore taken by the officers, directors, or agents of the Corporation relating to the foregoing resolutions, be, and hereby are, approved, adopted, ratified, and confirmed in all respects.
SECOND: The foregoing Amendment to the Certificate of Incorporation was duly adopted by the Corporation’s Board of Directors in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
THIRD: The foregoing Amendment to the Certificate of Incorporation was duly approved by the Corporation’s stockholders in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.
GLOSSARY
(a)IN WITNESS WHEREOF“2012 Plan” means, the Company’s 2012 Omnibus Equity Incentive Plan.Corporation has caused this Certificate of Amendment to the Certificate of Incorporation to be signed by the undersigned duly authorized officer who declares under penalty of perjury that the matters set forth in the foregoing Certificate of Amendment are true and correct to his knowledge.
(b)“Acquired Plan” has the meaning ascribed to it in Section 4.5.
(c)“Award” means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Performance Unit, Performance Share, Performance Cash, Stock Grant, or Stock Unit Award granted to a Participant under the Plan.Dated: [ ], 2023
(d)“Award Agreement” means any written agreement, contract, or other instrument or document, including an electronic agreement or document, evidencing an Award.
(e)“Board” means the Board of Directors of the Company.
(f)“Change of Control” means and shall be deemed to have occurred as of the date of the occurrence of any of the following events:
(1)Any person, or more than one person acting as a group (as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)), acquires (or has acquired during the 12-month period ending on the most recent acquisition by such person or persons) ownership of stock of Company possessing 40% or more of the total voting power of the stock of Company, unless such person is, or shall be, a trustee or other fiduciary holding securities under an employee benefit plan of Company or a corporation owned, directly or indirectly, by the shareholders of Company in substantially the same proportion as their ownership of stock of Company;
(2)The sale, transfer or other disposition of all or substantially all of the assets of the Company to a person other than the Company or a Subsidiary; or
(3)During any period of 12 consecutive months, excluding any period prior to the Effective Date, the majority of the members of the Board is replaced by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of such appointment or election.
Notwithstanding the foregoing, except as otherwise provided in an Award Agreement, a Change of Control shall not occur for purposes of this Plan in the case of Awards that are subject to the requirements of Section 409A of the Code unless such Change of Control constitutes a “change in control event” as defined in Section 409A of the Code.
(g)“Chief Executive Officer” or “CEO” means the President and Chief Executive Officer of the Company.
(h)“Code” means the Internal Revenue Code of 1986, as amended. All references to the Code shall be interpreted to include a reference to any applicable rules, regulations, rulings or other official guidance promulgated pursuant to such section of the Code.
(i)“Committee” means the Compensation Committee of the Board or a subcommittee thereof, or such other committee of the Board designated by the Board to administer the Plan pursuant to Section 3.1.
(j)“Company” means Accelerate Diagnostics, Inc., a Delaware corporation and any successor corporation.
(k)“Consultant” means any consultant or advisor or independent contractor who is a natural person and who provides services to the Company or any Subsidiary, so long as such person: (i) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital raising transaction; (ii) does not directly or indirectly promote or maintain a market for the Company’s securities; and (iii) otherwise qualifies as a consultant under the applicable rules of the SEC for registration of shares of stock on a Form S-8 registration statement. | | | | | |
| ACCELERATE DIAGNOSTICS, INC. |
| |
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| David Patience |
| Chief Financial Officer |
(l)“Date of Grant” means, as determined by the Committee (or CEO with respect to an Award granted pursuant to Section 3.5), the latest to occur of: (i) the date as of which the Committee (or CEO) approves an Award; (ii) the date on which an Award to a prospective employee, officer, or member of the Board first becomes effective; or (iii) such other date as may be specified in the Award Agreement.
(m)“Disability” means “disability” as that term is defined in Section 22(e)(3) of the Code unless a different definition is provided in the Award Agreement.
(n)“Effective Date” has the meaning ascribed to it in Section 2.1.
(o)“Exchange Act” means the Securities Exchange Act of 1934, as amended. All references to the Exchange Act shall be interpreted to include a reference to any applicable rules, regulations, rulings or other official guidance promulgated pursuant to such section of the Exchange Act.
(p)“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
(q)“Fair Market Value” means, as of any given date, the closing price for the Stock as reported on the NASDAQ (or any other exchange upon which the Stock is then listed) on that date or the closing price for the Stock on the immediately preceding date or, if no such prices are reported on either such date, the closing price on the last day on which such prices were reported.
(r)“Family Member” means a Participant’s spouse and any parent, stepparent, grandparent, child, stepchild, or grandchild, including adoptive relationships, a trust or any other entity in which these persons (or the Participant) have more than 50% of the beneficial interest or voting interest, or any other person or entity who is identified as a “family member” under the applicable rules of the SEC for registration of shares of stock on a Form S-8 registration statement.
(s)“Incentive Stock Option” means an Option granted pursuant to and in compliance with Section 7.2.
(t)“Nonqualified Stock Option” means an Option granted pursuant to Section 7.1 that is not intended to be an Incentive Stock Option.
(u)“Option” means a right granted to a Participant pursuant to Article 7. An Option may be either an Incentive Stock Option or a Nonqualified Stock Option.
(v)“Participant” means a person who has been granted an Award.
(w)“Performance Cash” means a right granted to a Participant pursuant to Section 11.3.
(x)“Performance Goals” means, for a Performance Period, the goals established in writing by the Committee for the Performance Period. The Performance Goals may be expressed in terms of overall Company performance or the performance of a division, business unit, plant, or an individual. The Performance Goals may be stated in terms of absolute levels or relative to another company or companies or to an index or indices.
(y)“Performance Period” means the one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, an Award.
(z)“Performance Share” means a right granted to a Participant pursuant to Section 11.1.
(aa)“Performance Unit” means a right granted to a Participant pursuant to Section 11.2.
(bb)“Plan” means this Accelerate Diagnostics, Inc. 2022 Omnibus Equity Incentive Plan, as it may be amended from time to time.
(cc)“Prior Plans” means the 2012 Plan, Company’s 2004 Omnibus Stock Option Plan, the Company’s 1996 Nonqualified Stock Option Plan, and any other similar plan adopted by the Company at any time in the past,
which has not yet lapsed or expired.
(dd)“Restricted Stock” means Stock granted to a Participant pursuant to Section 9.1.
(ee)“Restricted Stock Unit” means a right granted to a Participant pursuant to Section 9.2.
(ff)“Securities Act” means the Securities Act of 1933, as amended. All references to the Securities Act shall be interpreted to include a reference to any applicable rules, regulations, rulings or other official guidance promulgated pursuant to such section of the Securities Act.
(gg)“Separation from Service” is a term that applies only in the context of an Award that the Company concludes is subject to Section 409A of the Code. In that limited context, the term “Separation from Service” means either: (i) the termination of a Participant’s employment with the Company and all Subsidiaries due to death, retirement or other reasons; or (ii) a permanent reduction in the level of bona fide services the Participant provides to the Company and all Subsidiaries to an amount that is less than 20% of the average level of bona fide services the Participant provided to the Company and all Subsidiaries in the immediately preceding 36 months, with the level of bona fide service calculated in accordance with Treasury Regulation Section 1.409A‑1(h)(1)(ii).
Solely for purposes of determining whether a Participant has a “Separation from Service,” a Participant’s employment relationship is treated as continuing while the Participant is on military leave, medical or sick leave, or other bona fide leave of absence (if the period of such leave does not exceed 6 months, or if longer, so long as the Participant’s right to reemployment with the Company or a Subsidiary is provided either by statute or contract). If the Participant’s period of leave exceeds 6 months and the Participant’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed to terminate on the first day immediately following the expiration of such 6-month period. Whether a Termination of Employment has occurred will be determined based on all of the facts and circumstances and in accordance with Section 409A of the Code.
In the case of a non-employee member of the Board, Separation from Service means that such member has ceased to be a member of the Board. Whether an independent contractor consultant has incurred a Separation from Service will be determined in accordance with Treasury Regulation Section 1.409A‑1(h).
(hh)“Specified Employee” means certain officers and highly compensated employees of the Company as defined in Treasury Regulation Section 1.409A-1(i).
(ii)“Stock” means the common stock of the Company or any security that may be substituted for Stock or into which Stock may be changed pursuant to Article 4.
(jj)“Stock Appreciation Right” or “SAR” means a right granted to a Participant pursuant to Article 8.
(kk)“Stock Grant Award” means the grant of Stock to a Participant pursuant to Section 10.1.
(ll)“Stock Unit” means a right granted to a Participant pursuant to Section 10.2.
(mm)“Subsidiary” means any subsidiary or parent of the Company that is: (i) a member of a “controlled group of corporations” (within the meaning of Section 414(b) of the Code as modified by Section 415(h) of the Code) that includes the Company as a member of the group; or (ii) a member of a group of trades or businesses under common control (within the meaning of Section 414(c) of the Code as modified by Section 415(h) of the Code) that includes the Company as a member of the group. In applying Section 1563(a)(1), (2) and (3) of the Code for purposes of determining the members of a controlled group of corporations under Section 414(b) of the Code, the language “at least 50%” shall be used instead of “at least 80%” each place it appears in Section 1563(a)(1), (2) and (3) and in applying Treasury Regulation Section 1.414(c)-2 for purposes of determining the members of a group of trades or businesses (whether or not incorporated) that are under common control for purposes of Section 414(c) of the Code, the language “at least 50%” shall be used instead of “at least 80%” each place it appears in Treasury Regulation Section 1.414(c)-2.
(nn)“Termination of Employment” or “Termination of Service” means the cessation of performance of services for the Company. For this purpose, the transfer of a Participant among the Company and any Subsidiary, or transfer from a position as a member of the Board to Employee, shall not be considered a Termination of Service
or a Termination of Employment with the Company. In the context of an Award that is subject to the requirements of Section 409A of the Code, the terms “Termination of Service” and “Termination of Employment” mean a Separation from Service.
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