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 (Amendment No. )
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to (s)240.14a-12
ATOSSA THERAPEUTICS, 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 all boxes that apply):
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
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Atossa Therapeutics, Inc.
107 Spring Street
Seattle, Washington 98104
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on June 27, 2024 at 6:00 A.M. Pacific Time
Virtual Meeting to be Held Live via the Internet at: http://www.viewproxy.com/At
ossaTherapeutics/2024/htype.asp
Technical Support Contact: VirtualMeeting@viewproxy.com or call 1-866-612-8937
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
Annual Meeting
) of Atossa Therapeutics, Inc., a Delaware corporation (the
Company
), which will be held virtually on June 27, 2024, at 6:00 A.M. Pacific Time.
The Annual Meeting will be held in a virtual only meeting format via live
audio webcast. For more information, see General InformationAbout the Meeting
What do I need to do to virtually attend the Annual Meeting via live audio
webcast? Only stockholders of record who held Atossa Common Stock at the close
of business on the record date, May 9, 2024 (the
Record Date
), may attend virtually, view the list of stockholders of record and vote
online at the Annual Meeting, including at any adjournment or postponement
thereof.
At the Annual Meeting, you will be asked to consider and vote upon: (1) the
election of the two Class III director nominees named in the Proxy Statement;
(2) the ratification of the selection of Ernst & Young LLP (
EY
) as the Companys independent registered public accounting firm for the fiscal
year ending December 31, 2024; (3) the approval of an amendment and
restatement of the Companys 2020 Stock Incentive Plan, as amended, to increase
the shares available for issuance by 12,000,000 shares and to extend the term
thereof; (4) the approval of an amendment of the Companys Amended and Restated
Certificate of Incorporation to increase the number of authorized shares of
the Companys common stock from 175,000,000 to 350,000,000;
(5) the approval, on a non-binding, advisory basis, of the compensation of the
Companys named executive officers; and (6) the transaction of any other
business that may properly come before the meeting or any adjournment or
postponement thereof.
No other items of business are expected to be considered at the meeting and,
pursuant to the Companys Bylaws, no other director nominees will be
entertained. The enclosed Proxy Statement more fully describes the details of
the business to be conducted at the Annual Meeting. After careful
consideration, our Board of Directors has unanimously approved the proposals
and recommends that you vote FOR each director nominee and FOR each of the
other proposals. After reading the Proxy Statement and our other proxy
materials, please vote online, by telephone or by returning your proxy card or
your voting instruction form. YOUR SHARES WILL NOT BE VOTED UNLESS YOU VOTE IN
ONE OF THE WAYS DESCRIBED OR IF YOU ATTEND AND VOTE AT THE VIRTUAL ANNUAL
MEETING.
A copy of the Companys 2023 Annual Report has been mailed with this Proxy
Statement to all stockholders entitled to notice of and to vote at the virtual
Annual Meeting.
We look forward to seeing you at the Annual Meeting.
Sincerely,
Steven C. Quay, M.D., Ph.D.
Chairman of the Board, President and Chief Executive Officer
May 23, 2024
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WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE MARK, DATE AND
SIGN THE ENCLOSED PROXY OR YOUR VOTING INSTRUCTION FORM AND RETURN IT AT YOUR
EARLIEST CONVENIENCE, OR PLEASE VOTE IN ONE OF THE OTHER WAYS DESCRIBED IN THE
PROXY STATEMENT. EVEN IF YOU HAVE VOTED BY PROXY, YOU MAY REVOKE YOUR PROXY AT
ANY TIME BEFORE THE FINAL VOTE AT THE ANNUAL MEETING. YOUR LAST SUBMITTED VOTE
IS THE ONE THAT WILL BE COUNTED. PLEASE NOTE THAT IF YOUR SHARES ARE HELD OF
RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE VIRTUAL
MEETING, YOU MUST OBTAIN A LEGAL PROXY
ISSUED IN YOUR NAME FROM YOUR
BROKER (PREFERABLY AT LEAST FIVE DAYS BEFORE THE ANNUAL MEETING).
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD VIRTUALLY ON JUNE 27, 2024:
THIS PROXY STATEMENT, THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND THE
ANNUAL REPORT ARE AVAILABLE AT HTTP://WWW.VIEWPROXY.COM/ATOSSATHERAPEUTICS/2024.
WE ENCOURAGE YOU TO REVIEW ALL OF THE IMPORTANT INFORMATION CONTAINED IN THE
PROXY MATERIALS BEFORE VOTING.
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107 Spring Street
Seattle, Washington 98104
PROXY STATEMENT FOR
2024
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE
27, 2024 AT 6:00 A.M. PACIFIC TIME
VIRTUAL MEETING
TO BE HELD LIVE VIA THE INTERNET AT: http://www.viewproxy.com/AtossaTherapeutics
/2024/htype.asp
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the
Board
) of Atossa Therapeutics, Inc. (
Atossa
or the
Company
) for use at the Companys 2024 Annual Meeting of Stockholders (the
Annual Meeting
). This years Annual Meeting will be held in a virtual only meeting format via
live audio webcast. For more information, see General Information About the
Meeting - What do I need to do to virtually attend the Annual Meeting via live
audio webcast? This Proxy Statement and the accompanying form of proxy will be
mailed to our stockholders on or about May 23, 2024.
For a proxy to be effective, it must be properly executed and received prior
to the Annual Meeting. Each proxy properly executed and tendered will, unless
otherwise directed by the stockholder (in which case, such proxies will be
voted as directed), be voted FOR each of the director nominees, FOR each of
the other proposals described in this Proxy Statement and at the discretion of
the proxy holder(s) with respect to all other matters that may properly come
before the Annual Meeting or any adjournments or postponements thereof.
The Company will pay all costs of soliciting proxies. We will provide copies
of this Proxy Statement, notice of Annual Meeting and accompanying materials
to brokerage firms, fiduciaries, and custodians for forwarding to beneficial
owners and may reimburse these parties for their costs of forwarding these
materials. Our directors, officers and employees may also solicit proxies by
telephone, facsimile, or personal solicitation; however, we will not pay them
additional compensation for any of these services. We have retained Alliance
Advisors, a proxy solicitation firm, at an estimated cost of approximately
$8,000.
Only holders of record of our common stock, par value $0.18 per share (the
Common Stock
), at the close of business on May 9, 2024 (the
Record Date
) are entitled to notice of and to vote at the Annual Meeting. On the Record
Date, there were a total of 125,757,416 shares of Common Stock issued and
outstanding. Each share of Common Stock is entitled to one vote on all matters
to be voted upon at the Annual Meeting. Holders of Common Stock do not have
the right to cumulative voting in the election of directors. The presence,
virtually or by proxy, of the holders of one-third of the outstanding shares
of Common Stock on the Record Date will constitute a quorum for the
transaction of business at the Annual Meeting. If there is no quorum, the
meeting chair or the holders of a majority of shares of Common Stock present
at the Annual Meeting, either in person or by proxy, may adjourn the meeting
to another time or date.
Persons who hold shares of Common Stock directly on the Record Date and not
through a broker, bank or other financial institution (e.g., your shares of
Common Stock are registered directly in your name with our transfer agent) (
record holders
) may vote by the following methods:
"
Vote by proxy - You may complete, sign and return a proxy card;
"
Proxy Vote by Internet - Go to http://www.FCRvote.com/ATOS to complete an
electronic proxy card. Have your proxy card available when you access the
website. Your vote must be received by 11:59 P.M. Eastern Time on June 26,
2024 to be counted;
"
Proxy Vote by Phone - You may use any touch-tone telephone to transmit your
voting instructions up until 11:59 P.M. Eastern Time on June 26, 2024 by
calling the toll-free number 1-866-402-3905. Have your proxy card in hand when
you call and then follow the instructions; or
"
Vote at the Annual Meeting - You may virtually attend the Annual Meeting and
vote online during the meeting.
1
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Persons who hold shares of Common Stock indirectly on the Record Date through
a brokerage firm, bank, or other financial institution (
beneficial holders
) must return a voting instruction form to have their shares voted on their
behalf (or obtain a legal proxy to vote during the Annual Meeting as described
below). Brokerage firms, banks or other financial institutions that do not
receive voting instructions from beneficial holders will only be able to vote
shares on behalf of the beneficial holders with respect to proposals
considered to be routine and are not entitled to vote shares on behalf of the
beneficial holders with respect to non-routine proposals (referred to as a
broker non-vote
). Whether a proposal is considered routine or non-routine is subject to stock
exchange rules and final determination by the stock exchange. Even with
respect to routine matters, some brokerage firms, banks or other financial
institutions are choosing not to exercise discretionary voting authority. As a
result, beneficial holders are urged to direct their brokerage firm, bank or
other financial institution how to vote their shares on all proposals to
ensure that their vote is counted.
Abstentions and broker non-votes will be counted for the purpose of
determining the presence or absence of a quorum but will not be counted for
the purpose of determining the number of votes cast on a given proposal. The
required vote for each of the proposals expected to be acted upon at the
Annual Meeting is described below:
Proposal No. 1
Election of directors.
Directors are elected by a plurality of the votes cast, with the nominees
obtaining the most votes cast being elected. Votes that are withheld and
broker non-votes, if any, are not counted as votes cast and will have no
effect on the outcome.
Proposal No. 2
Ratification of the selection of the independent registered public accounting
firm.
This proposal must be approved by a majority of the votes cast on the matter.
As a result, abstentions and broker non-votes, if any, will have no effect on
the outcome.
Proposal No. 3 Approval of an amendment and restatement of the Companys 2020
Stock Incentive Plan, as amended, to increase the shares available for
issuance by 12,000,000 shares and to extend the term thereof.
This proposal must be approved by a majority of the votes cast on the matter.
As a result, abstentions and broker non-votes, if any, will have no effect on
the outcome.
Proposal No. 4
Approval of an amendment to the Companys Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of the Companys
common stock from 175,000,000 to 350,000,000.
This proposal must be approved by a majority of the votes cast on the matter.
As a result, abstentions and broker non-votes, if any, will have no effect on
the outcome.
Proposal No. 5
Approval, on a non-binding, advisory basis, of the compensation of the
Companys named
executive officers
. This non-binding, advisory proposal must be approved by a majority of the
votes cast on the matter. As a result, abstentions and broker non-votes, if
any, will have no effect on the outcome.
We encourage you to vote by returning your proxy or voting instruction form or
if you are a record holder by voting on-line or via phone prior to the
meeting. Voting in advance of the meeting helps ensure that your shares will
be voted and reduces the likelihood that the Company will be forced to incur
additional expenses soliciting proxies for the Annual Meeting. Any record
holder of our Common Stock may revoke their form of proxy at any time prior to
the closing of the polls at the Annual Meeting by:
"
executing and submitting a later-dated proxy;
"
submitting new proxy instructions via phone or the Internet;
"
delivering a written revocation to the Corporate Secretary at the address set
forth above; or
"
voting online at
http://www.FCRvote.com/ATOS
during the virtual Annual Meeting. However, your virtual attendance at the
Annual Meeting will not, by itself, revoke your proxy.
2
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Your last submitted vote is the one that will be counted.
Beneficial holders of our Common Stock who wish to change or revoke their
voting instructions should contact their brokerage firm, bank or other
financial institution for information on how to do so. Beneficial holders who
wish to attend the Annual Meeting virtually and vote during the virtual
meeting should contact their brokerage firm, bank or other financial
institution holding shares of Common Stock on their behalf in order to obtain
a legal proxy (preferably at least five days before the Annual Meeting), which
will allow them to vote during the virtual meeting. Without a legal proxy,
beneficial holders cannot vote at the virtual Annual Meeting because their
brokerage firm, bank or other financial institution may have already voted or
returned a broker non-vote on their behalf.
FOR TECHNICAL SUPPORT PRIOR TO OR DURING THE ANNUAL MEETING, PLEASE CONTACT:
VirtualMeeting@viewproxy.com or call 1-866-612-8937
3
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Amended and Restated Certificate of Incorporation of the Company provides
that the Board is to be divided into three classes nearly equal in number as
reasonably possible, with directors in each class serving three-year terms.
The total Board size is currently fixed at seven directors. Currently, the
Class III directors (whose terms expire at this Annual Meeting) are Shu-Chih
Chen, Ph.D. and H. Lawrence Remmel, Esq. The Class I directors (whose terms
expire at the 2025 Annual Meeting of Stockholders) are Steven C. Quay, M.D.,
Ph.D. and Jonathan F. Finn, C.F.A. The Class II directors (whose terms expire
at the 2026 Annual Meeting of Stockholders) are Stephen J. Galli, M.D.,
Richard I. Steinhart and Tessa Cigler, M.D., M.P.H. The Class III directors
elected at the Annual Meeting will hold office until the 2027 Annual Meeting
of Stockholders and until their successors are duly elected and qualified, or
until their earlier resignation, death or removal.
As described below, the Board has nominated Dr. Chen and Mr. Remmel for
reelection as Class III directors at the Annual Meeting. Both nominees were
most recently elected by stockholders at the 2021 Annual Meeting of
Stockholders. Both nominees have indicated their willingness and ability to
serve if elected. Should either of the nominees become unavailable for
election at the Annual Meeting, unable to serve or, for good cause, unwilling
to serve, the persons named on the enclosed proxy as proxy holders may vote
all proxies given in response to this solicitation for the election of a
substitute nominee chosen by the Board, or the Board may decrease the size of
the Board.
Nomination of Directors
The Nominating and Governance Committee reviews and recommends to the Board
potential nominees for election to the Board. In reviewing potential nominees,
the Nominating and Governance Committee considers the qualifications of each
potential nominee in light of the Boards existing and desired mix of
experience and expertise. Specifically, the Nominating and Governance
Committee considers each potential nominees personal and professional ethics,
integrity and values, business acumen, interest in the Company and commitment
to representing the long-term interests of the stockholders. The Nominating
and Governance Committee also seeks to have a Board that encompasses a range
of talents, ages, skills, diversity, and expertise sufficient to provide sound
and prudent oversight with respect to the operations and interests of the
business. These criteria are set forth in our Corporate Governance Guidelines,
a copy of which is available on our website at
https://investors.atossatherapeutics.com/
.
After reviewing the qualifications of potential Board candidates, the
Nominating and Governance Committee presents its recommendations to the Board,
which selects the final director nominees. Upon the recommendation of the
Nominating and Governance Committee, the Board nominated for reelection Dr.
Chen and Mr. Remmel as the Companys Class III directors. The Company did not
pay any fees to any third parties to identify or assist in identifying or
evaluating nominees for the Annual Meeting.
It is the Nominating and Governance Committees policy to consider written
recommendations from stockholders for director candidates. The Nominating and
Governance Committee considers stockholder nominees in the same manner and
using the same criteria as nominees recommended by other sources. Any such
recommendations should be submitted to the committee as described under
Stockholder Communications and should include the same information required
under our Bylaws for nominating a director, as described under Stockholder
Proposals.
Board Diversity
Although the Nominating and Governance Committee may consider whether nominees
contribute to a mix of Board members that represents a diversity of background
and experience, which is not only limited to race, gender, or national origin,
we have no formal policy regarding board diversity. The Nominating and
Governance Committee assesses its effectiveness in balancing these
considerations in connection with its annual evaluation of the composition of
the Board.
Our current Board of seven directors includes two directors who self-identify
as female (29%) and 2 directors who self-identify as racially/ethnically
diverse (29%).
In accordance with Nasdaqs board diversity listing standards, we are
disclosing aggregated statistical information about our Boards self-identified
gender and racial characteristics as voluntarily confirmed to us by each of
our directors.
4
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Board Diversity Matrix
(as of the date of this Proxy Statement)
Total number of directors - 7
Gender identity: Female Male Non-Binary Did Not Disclose Gender
Directors 2 5 0 0
Number of directors who identify in any of the
categories below:
African American or Black 0 0 0 0
Alaskan Native or Native American 0 1 0 0
Asian 1 0 0 0
Hispanic or Latinx 0 0 0 0
Native Hawaiian or Pacific Islander 1 0 0 0
White 1 5 0 0
Two or More Races or Ethnicities 1 1 0 0
LGBTQ+ 1
Did Not Disclose Demographic Background 0
Nominees and Incumbent Directors
The Nominating and Governance Committee has recommended, and the Board has
nominated, Dr. Chen and Mr. Remmel to be reelected as Class III directors at
the Annual Meeting. The following table sets forth the following information
for these nominees and the Companys continuing directors: the year each was
first elected a director of the Company; their respective ages as of the date
of this Proxy Statement; the positions currently held with the Company; the
year their current term will expire; and their current class.
There are no family relationships among any of our directors or executive
officers, except for Dr. Chen, who is married to Dr. Quay.
Nominee/Director Age Position(s) with Year Current Current
Name the Company Term Expires Director Class
and Year First
Became a Director
Nominees for Class
III Directors:
Shu-Chih Chen, 62 Director 2024 III
Ph.D. (2009)
H. Lawrence Remmel, 72 Director 2024 III
Esq. (2012)
Continuing
Directors
Steven C. Quay, 73 Chairman of the Board of Directors, 2025 I
M.D., Ph.D. (2009) President, and Chief Executive Officer
Jonathan F. Finn, 51 Director 2025 I
C.F.A. (2023)
Stephen J. Galli, 77 Director 2026 II
M.D. (2011)
Richard I. 67 Director 2026 II
Steinhart (2014)
Tessa Cigler, M.D., 50 Director 2026 II
M.P.H. (2024)
Class III Director Nominees
Shu-Chih Chen, Ph.D.
Dr. Chen has served as a director since April 2009. She was a founder of the
Company and has served as Chief Scientific Officer of the Company since it was
incorporated in April 2009 through August 2014. Prior to joining the Company,
she was an Associate Professor at National Yang Ming University, Taipei,
Taiwan, and served as the principal investigator of an NIH RO1 grant, studying
tumor suppression by gap junction protein connexin 43, at the Department of
Molecular Medicine at Northwest Hospital, Seattle, WA. She has two issued U.S.
patents and 20 pending U.S. patent applications related to cancer
therapeutics. Dr. Chen received her Ph.D. degree in microbiology and public
health from Michigan State University in 1992 and has published extensively on
molecular oncology. She received her B.S. degree in medical technology from
National Yang Ming University, Taipei, Taiwan in 1984. Dr. Chen has been
selected to serve on the Companys Board of Directors because of her role as a
founder of the Company and her qualifications in medical technology and as a
professor and researcher in the field of cancer therapeutics.
H. Lawrence Remmel, Esq.
Mr. Remmel has served as a director of the Company since February 2012. He is
currently a partner of the law firm Pryor Cashman LLP, located in New York
City, where he chairs the Banking and Finance practice group. Mr. Remmel
joined Pryor Cashman in 1988. His practice includes corporate and banking
financings, issues relating to the Investment Company Act of 1940, and
intellectual property and licensing issues, in particular in the biotechnology
5
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and biocosmeceutical areas. Mr. Remmel previously served on the Board of
Advisors of CytoDel, LLC, an early-stage bio-pharmaceutical company developing
products for bio-defense, neuronal drug delivery, and musculoskeletal and
aesthetic medicine. In February 2018, he became a director of CytoDel, Inc.,
the successor to CytoDel LLC. In March 2019, he became a director of Aufbau
Holdings Limited, an Irish limited company, developing therapeutics in
ophthalmology and other areas. He was an associate of the law firm Reboul,
MacMurray, Hewitt, Maynard & Kristol from 1984 to 1988, and began his legal
career at Carter, Ledyard & Milburn, where he was an associate from 1979 to
1984. He was admitted to the New York bar in 1980 and is a member of the New
York State Bar Association. He received his J.D. from the Washington & Lee
University School of Law in 1979 and his B.A. from Princeton University in
1975. He currently is a doctoral candidate in the Graduate School of Life
Sciences of the University of Utrecht, in the Department of Clinical and
Translational Oncology, with a thesis project in hyperplasia and early-stage
breast cancer. Mr. Remmel has been selected to serve on the Companys Board of
Directors because of his substantial experience as a corporate attorney
advising biotechnology companies and his familiarity with the fiduciary duties
and the regulatory requirements affecting publicly traded companies.
Class I Directors Continuing in Office Until 2025
Steven C. Quay, MD., Ph.D.
Steven C. Quay, M.D., Ph.D. has served as Chief Executive Officer, President
and Chairman of the Board of Directors of the Company since the Company was
incorporated in April 2009. Dr. Quay is certified in Anatomic Pathology with
the American Board of Pathology, has completed both an internship and
residency in anatomic pathology at Massachusetts General Hospital, a Harvard
Medical School teaching hospital, and is a former faculty member of the
Department of Pathology, Stanford University School of Medicine. Dr. Quay is a
named inventor on 90 U.S. patents, 862 published US and international patent
applications, and is a named inventor on patents covering seven pharmaceutical
products that have been approved by the U.S. Food and Drug Administration. Dr.
Quay received an M.D. in 1977 and a Ph.D. in 1975 from the University of
Michigan. He received his B.A. degree in biology, chemistry and mathematics
from Western Michigan University in 1971. He is a director and the Chair of
the Governance Committee, of the Taipei-American School in Taipei, Taiwan. He
was selected to serve on the Companys Board of Directors because of his role
as a founder of the Company, as well as his qualifications as a physician and
the principal researcher overseeing the research, preclinical, clinical and
regulatory development of the Companys pharmaceutical programs.
Jonathan F. Finn, C.F.A.
Jonathan F. Finn has served as a director of the Company since November 2023.
Mr. Finn has worked at Vantage Consulting Group, an investment advisory firm,
since 1995 and served as Executive Vice President and Chief Investment Officer
at Vantage since 2005. In this role, he directs investment strategy, asset
allocation, manager selection and portfolio construction. Mr. Finn is also a
Founding Partner of Scientia Ventures, a manager of venture capital funds that
invest in companies targeting computational biology and chemistry, the
digitization of medicine, digital therapies, and traditional drug development
businesses at the cutting edge of the life sciences industry, and has served
in this role since 2006. Earlier in his career, Mr. Finn was a portfolio
manager for the Lindner family of mutual funds, serving as co-manager for the
Small Cap and Asset Allocation funds from 2000 to 2001. He currently serves as
director of Verigraft AB, a regenerative medicine venture, Rose Pharma LLC, a
development stage specialty pain company, and Solor Bioenergy Holdings AB, a
bioenergy business. Mr. Finn has a B.A. in Economics from the University of
Virginia and holds the Chartered Financial Analyst designation. Mr. Finn has
been selected to serve on the Companys Board of Directors because of his
qualifications as a business executive and his familiarity with investment
strategy in the biotechnology sector.
Class II Directors Continuing in Office Until 2026
Stephen J. Galli, M.D.
Dr. Galli has served as a director of the Company since July 2011. Dr. Galli
has been a Professor of Pathology and of Microbiology & Immunology and the
Mary Hewitt Loveless, M.D., Professor, at Stanford University School of
Medicine, Stanford, California since February 1999. He served as Chair of the
Department of Pathology at Stanford University School of Medicine from 1999 to
2016. Before joining Stanford, he was on the faculty of Harvard Medical
School. He holds 16 U.S. patents and has over 490 publications. He is the past
president of the American Society for Investigative Pathology, the past
president of the Collegium Internationale Allergologicum, and the past
president of the Pluto Club (Association of University Pathologists). In
addition to receiving several awards for his research, and being elected to
the National Academy of Medicine (USA), the Accademia Nazionale de Lincei
(Rome, Italy), and the American Clinical and Climatological Association, he
was recognized with the 2010 Stanford University Presidents Award for
Excellence through Diversity for his recruitment and support of women and
underrepresented minorities at Stanford University. He received his B.A.
degree in biology,
magna cum laude
, from Harvard College in 1968 and his M.D. degree from Harvard Medical School
in 1973 and completed a residency in anatomic pathology at the Massachusetts
General Hospital in 1977. Dr. Galli has been selected to serve on the Companys
Board of Directors because of his qualifications as a professor and physician,
and his specialized expertise as a pathologist.
6
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Richard I. Steinhart.
Mr. Steinhart has served as a director of the Company since March 2014. Mr.
Steinhart is currently the Senior Vice President and Chief Financial Officer
of BioXcel Therapeutics, Inc., a clinical-stage biopharmaceutical company,
which he joined in October 2017. From October 2015 to June 2017, he was Vice
President and Chief Financial Officer of Remedy Pharmaceuticals, Inc., a
privately held pharmaceuticals company. From January 2014 until he joined
Remedy Pharmaceuticals, Mr. Steinhart acted as an independent financial
consultant to various companies in the biotechnology and medical device
industries. From April 2006 to December 2013, Mr. Steinhart was an executive
at MELA Sciences, Inc., serving as its Senior Vice President, Chief Financial
Officer, Treasurer and Secretary. From 1992 to 2006, Mr. Steinhart was
Managing Director at Forest St. Capital/SAE Ventures. Earlier, he served as
Vice President and Chief Financial Officer at Emisphere Technologies from 1991
to 1992 and as General Partner and Chief Financial Officer of CW Group Inc.
Mr. Steinhart is a Member of the Board of Directors of Actinium Pharmaceuticals
where he is Chairman of the Audit Committee. From 2004 to 2012, Mr. Steinhart
was a Member of the Board of Directors of Manhattan Pharmaceuticals and was
Chairman of the Audit Committee. Mr. Steinhart received his B.B.A. and M.B.A.
degrees from Pace University. Mr. Steinhart has been selected to serve on the
Companys Board of Directors because of his qualifications as a business
executive and audit committee financial expert, and his prior experience as a
Chief Financial Officer, director and committee member of public companies.
Tessa Cigler, M.D., M.P.H.
Dr. Cigler joined the Company as a director in March 2024. Dr. Cigler is a
medical oncologist whose work is dedicated to the treatment and prevention of
breast cancer. Dr. Cigler joined the Cornell faculty in August 2007 as a
medical oncologist and clinical investigator at the Weill Cornell Breast
Center. As a member of the Weill Cornell Breast Center research team, she
heads several clinical trials. Dr. Cigler received her undergraduate degree
from Harvard College, and her M.D. from Duke University School of Medicine.
She also holds a Masters in Public Health from the Harvard School of Public
Health. She completed her residency in Internal Medicine at New York
Presbyterian Hospital Weill Cornell Medical Center, followed by a fellowship
in Medical Oncology and Hematology at the Dana-Farber Harvard Cancer Center.
Vote Required
The two director nominees who receive the highest number of affirmative votes
cast will be elected as Class III directors. Votes that are withheld and
broker non-votes, if any, are not counted as votes cast and will have no
effect on the outcome of the matter.
Holders of proxies solicited by this Proxy Statement will vote the proxies
received by them as directed on the proxy card or, if no direction is made but
the card is signed, FOR the election of each of the director nominees named in
this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR
EACH OF
THE DIRECTOR NOMINEES IDENTIFIED ABOVE.
7
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PROPOSAL NO. 2
RATIFICATION OF THE SELECTION OF THE INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Our Audit Committee has selected Ernst & Young LLP (
EY
) as our independent registered public accounting firm for the fiscal year
ending December 31, 2024.
The Company is not required to submit the selection of our independent
registered public accounting firm for stockholder approval but is doing so as
a matter of a good corporate practice. However, if the stockholders do not
ratify this selection, the Audit Committee will reconsider its selection of
EY. Even if the selection is ratified, our Audit Committee may direct the
appointment of a different independent registered public accounting firm at
any time during the year if the Audit Committee determines that the change
would be in the best interests of the Company and our stockholders.
Pre-Approval Policies and Procedures
The Audit Committee reviews and pre-approves all audit and non-audit services
performed by the Companys independent registered public accounting firm, as
well as the fees charged for such services, in order to confirm that these
services do not impair the auditors independence. This generally involves the
pre-approval of the performance of specific services subject to a cost limit
for all such services. This general pre-approval is reviewed, and if necessary
modified, at least annually. Management must obtain the specific prior
approval of the committee for each engagement of our auditor to perform other
audit-related or other non-audit services. The committee does not delegate its
responsibility to approve services performed by our auditor to any member of
management. The committee has delegated authority to the committee chair to
pre-approve certain audit or non-audit services to be provided to us by our
auditor. Any approval of services by the committee chair pursuant to this
delegated authority is reported to the committee at its next regularly
scheduled meeting.
EY has served as our independent auditor for the year ended December 31, 2023
(on or after May 17, 2023 (the
Effective Date
)). BDO USA, LLP (BDO) served as our independent auditor prior to the
Effective Date. Representatives of EY are expected to be present virtually or
by telephone at the Annual Meeting, will have the opportunity to make a
statement if they desire to do so and are expected to be available to respond
to appropriate stockholder questions.
Fees for Independent Registered Public Accounting Firm
The following is a summary of the audit fees billed and expected to be billed
to the Company by EY and BDO for the fiscal year ended December 31, 2023 and
2022, respectively, and the fees billed to the Company by EY and BDO for all
other services rendered during the fiscal year ended December 31, 2023 and
2022, respectively. All services associated with such fees were pre-approved
by our Audit Committee in accordance with the Pre-Approval Policies and
Procedures described above. In its review of non-audit service fees, the Audit
Committee considers, among other things, the possible impact of the
performance of such services on the auditors independence. The Audit Committee
has determined that the services described below were compatible with
maintaining the auditors independence. Additional information concerning the
Audit Committee and its activities can be found in the following sections of
this Proxy Statement: Board Committees and Report of the Audit Committee.
2023 2022
Audit Fees:
Consists of fees billed for the audit of our annual financial statements and the review $ 610,000 $ 219,750
of the financial statements included in our quarterly reports on Form 10-Q, and services
that are normally provided by the independent auditors in connection with statutory and
regulatory filings or engagements for that fiscal year, including consents and expenses.
Audit-Related
Fees:
Consists of fees billed for assurance 20,000
services reasonably related to
the performance of the audit or
review of our financial statements.
Tax Fees
All Other Fees
Total Fees $ 610,000 $ 239,750
8
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Recent Changes in Independent Registered Public Accounting Firm
Dismissal of BDO
As previously reported in a Current Report on Form 8-K filed with the
Securities and Exchange Commission (
SEC
) on May 22, 2023 (the
Current Report
), on the Effective Date, the Audit Committee dismissed BDO as the Companys
independent registered public accounting firm, effective as of that date.
BDOs audit reports on the Companys consolidated financial statements for the
years ended December 31, 2022 and 2021 did not contain any adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. BDO expressed no opinion on the
effectiveness of the Companys internal control over financial reporting for
the fiscal year ended December 31, 2022, as the Company was not required to
have, nor did the Company engage BDO to perform, an audit of the Companys
internal control over financial reporting in such year.
During the Companys fiscal years ended December 31, 2022 and 2021 and the
subsequent interim period through (and including) the Effective Date, there
were (i) no disagreements with BDO on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure,
which if not resolved to BDOs satisfaction, would have caused BDO to make
reference to the subject matter of the disagreements in its report on the
Companys consolidated financial statements for such year, and (ii) no
reportable events as defined in Item 304(a)(1)(v) of Regulation S-K, except as
set forth in the following sentence. As previously disclosed under Item 9A of
the Companys Annual Report on Form 10-K for the year ended December 31, 2020,
during the audit of the consolidated financial statements for the year ended
December 31, 2020, the Company reported a material weakness in its internal
controls over financial reporting due to ineffective controls over the
evaluation and accounting for complex financing transactions. The material
weakness was remediated as of December 31, 2021.
The Company provided BDO with a copy of the disclosures in the Current Report
and requested that BDO furnish a letter addressed to the SEC stating whether
or not BDO agrees with the statements above. A copy of BDOs letter dated May
22, 2023 is filed as Exhibit 16.1 to the Current Report.
Appointment of EY
The Audit Committee, on and effective as of the Effective Date, appointed EY
as the Companys independent registered public accounting firm for the fiscal
year ending December 31, 2023.
During the fiscal years ended December 31, 2022 and 2021 and the subsequent
interim period through the Effective Date, neither the Company nor anyone
acting on its behalf consulted with EY, regarding either: (i) the application
of accounting principles to a specific transaction, completed or proposed, or
the type of audit opinion that might be rendered on the Companys consolidated
financial statements, and neither a written report nor oral advice was
provided to the Company that EY concluded was an important factor considered
by the Company in reaching a decision as to any accounting, auditing or
financial reporting issue or (ii) any matter that was either the subject of a
disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a
reportable event (as described in Item 304(a)(1)(v) of Regulation S-K).
Vote Required
Ratification of the selection of the independent registered public accounting
firm requires the affirmative vote of a majority of the votes cast on the
matter. Abstentions and broker non-votes, if any, are not counted as votes
cast, and they will have no effect on the outcome.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR
PROPOSAL NO. 2.
9
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PROPOSAL NO. 3
APPROVAL OF AN AMENDMENT AND RESTATEMENT OF THE COMPANYS 2020 STOCK INCENTIVE
PLAN, AS AMENDED, TO INCREASE THE SHARES AVAILABLE FOR ISSUANCE BY 12,000,000
SHARES AND TO EXTEND THE TERM THEREOF
At the Annual Meeting, you are being asked to approve an amendment and
restatement of the Companys 2020 Stock Incentive Plan, as amended (the
2020 Plan
), to increase the shares available for issuance by 12,000,000 shares and to
extend the term of the 2020 Plan to the tenth (10
th
) anniversary of the date of stockholder approval. There will be a
corresponding increase in the number of shares with respect to which incentive
stock options may be granted. The implementation of this Proposal 3 is
contingent upon stockholder approval of Proposal 4 (the authorized share
increase).
The total number of shares of common stock currently available for issuance
under the 2020 Plan is 18,000,000 shares.
On May 2, 2024, the Board approved an amendment of the 2020 Plan, subject to
shareholder approval, to increase the number of shares of common stock
available for issuance under the 2020 Plan by 12,000,000 shares, to a total of
30,000,000 shares, with a corresponding increase in the number of shares with
respect to which incentive stock options may be granted, and to extend the
term of the 2020 Plan to June 27, 2034. The Board adopted these amendments
because it believes that:
additional shares are necessary to attract new employees and executives;
additional shares are needed to further the goal of retaining and motivating existing personnel; and
the issuance of options to employees is an integral component of the Companys compensation policy.
As of May 6, 2024, options covering 12,534,577 shares of common stock with a
weighted average exercise price of $1.62 and a weighted average remaining term
of 7.6 years were outstanding under the 2020 Plan and options covering
4,151,220 shares of common stock with a weighted average exercise price of
$2.23 and weighted average remaining term of 4.9 years were outstanding under
the Companys 2010 Stock Option and Incentive Plan (the 2010 Plan). There were
no other outstanding equity awards under the 2020 Plan or 2010 Plan. There
remain available for future grant 5,465,423 shares of common stock under the
2020 Plan as of May 6, 2024. Assuming approval of this Proposal No. 3, there
will be a total of approximately 17,465,423 shares available for issuance
under the 2020 Plan, which equals approximately 10.7% of the fully diluted
common stock outstanding on May 6, 2024, including convertible preferred stock
and common stock issuable upon exercise of outstanding options and warrants as
of May 6, 2024. We expect that the additional shares requested for the 2020
Plan under this proposal would provide us with flexibility to continue to
grant equity-based awards for approximately 3 years.
Shares subject to outstanding awards may be returned to the 2020 Plan as a
result of cancellations or expiration of awards.
A summary of the amendment and restatement of the 2020 Plan that the
stockholders are being asked to approve under this Proposal 3 is as follows:
Increase in shares available for issuance as described above, with a corresponding increase
in the number of shares with respect to which incentive stock options may be granted; and
Extension of the term of the
2020 Plan to June 27, 2034.
Summary Description of the 2020 Plan
The principal terms of the 2020 Plan, assuming the proposed amendment is
approved, are summarized below. The following summary is qualified in its
entirety by the full text of the 2020 Plan, as amended, which appears as
Appendix A
to this Proxy Statement.
General.
The purpose of the 2020 Plan is to enhance the long-term stockholders value of
the Company by offering opportunities to eligible individuals to participate
in the growth in value of the equity of the Company. The 2020 Plan provides
for the grant of equity-based awards to full and part-time officers and
employees, non-employee directors and other key persons (including consultants
and prospective employees) providing services to the Company. Awards of
10
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incentive stock options may be granted under the 2020 Plan until May 2, 2034.
No other awards may be granted under the 2020 Plan on or after the date that
is 10 years from the date of stockholder approval.
Plan Administration
.The 2020 Plan may be administered by the full Board or the Compensation
Committee. It is the current intention of the Company that the 2020 Plan be
administered by the Compensation Committee. The Compensation Committee has
full power to select, from among the individuals eligible for awards, the
individuals to whom awards will be granted, to make any combination of awards
to participants, and to determine the specific terms and conditions of each
award, subject to the provisions of the 2020 Plan. The Compensation Committee
may delegate to our Chief Executive Officer the authority to grant stock
options to employees who are not subject to the reporting and other provisions
of Section 16 of the Securities Exchange Act of 1934, as amended (the
Exchange Act
) and not subject to Section 162(m) of the Code, subject to certain
limitations and guidelines.
Eligibility
.Persons eligible to participate in the 2020 Plan will be those full or
part-time officers, employees, non-employee directors and other key persons
(including consultants and prospective officers) of the Company and its
subsidiaries as selected from time to time by the Compensation Committee in
its discretion. As of May 9, 2024, approximately 12 employees, 6 non-employee
directors and 4 consultants were eligible to participate in the 2020 Plan.
Plan Limits
.The total number of shares of common stock available for issuance under the
2020 Plan is 30,000,000 shares plus any shares of common stock that remained
available for grant under the 2010 Plan as of May 15, 2020 and any shares of
common stock underlying awards under the Prior Plan that, on or after May 15,
2020, are forfeited, canceled, held back upon exercise of an option or
settlement of such an award to cover the exercise price or tax withholding,
reacquired by the Company prior to vesting, or satisfied without the issuance
of common stock or otherwise terminated (other than by exercise). Shares of
common stock issued pursuant to awards granted under the 2020 Plan may be
either authorized and unissued common stock or common stock held in or
acquired for the treasury of the Company or both. The maximum number of shares
of common stock with respect to which incentive stock options may be granted
under the 2020 Plan is 30,000,000 shares. Shares of common stock underlying
any awards under the 2020 Plan that are forfeited, canceled, held back upon
exercise of an option or settlement of an award to cover the exercise price or
tax withholding, reacquired by the Company prior to vesting, satisfied without
the issuance of common stock or otherwise terminated (other than by exercise)
will be added back to the shares of common stock available for issuance under
the 2020 Plan. In the event the Company repurchases shares of common stock on
the open market, such shares will not be added to the shares of common stock
available for issuance under the 2020 Plan. Subject to such overall
limitations, shares of common stock may be issued up to such maximum number
pursuant to any type or types of award; provided, however, that, other than in
the case of non-employee directors, stock options or stock appreciation rights
with respect to no more than 2,500,000 may be granted to any one individual
grantee during any one calendar year period.
Stock Options
.The 2020 Plan permits the granting of (i) options to purchase common stock
intended to qualify as incentive stock options under Section 422 of the Code,
and (ii) options that do not so qualify. Options granted under the 2020 Plan
will be non-qualified options if they fail to qualify as incentive options or
exceed the annual limit on incentive stock options. Incentive stock options
may only be granted to employees of the Company and its subsidiaries.
Non-qualified options may be granted to any persons eligible to receive
incentive options and to non-employee directors and key persons. The option
exercise price of each option will be determined by the Compensation Committee
but may not be less than 100% of the fair market value of the common stock on
the date of grant. Fair market value for this purpose will be the last
reported sale price of the shares of common stock on the Nasdaq Capital Market
on the date of grant. The exercise price of an option may not be reduced after
the date of the option grant, other than to appropriately reflect changes in
our capital structure.
The term of each option will be fixed by the Compensation Committee and may
not exceed 10 years from the date of grant. The Compensation Committee will
determine at what time or times each option may be exercised. Options may be
made exercisable in installments and the exercisability of options may be
accelerated by the Compensation Committee. In general, unless otherwise
permitted by the Compensation Committee, no option granted under the 2020 Plan
is transferable by the optionee other than by will or by the laws of descent
and distribution, and options may be exercised during the optionees lifetime
only by the optionee, or by the optionees legal representative or guardian in
the case of the optionees incapacity.
Upon exercise of options, the option exercise price must be paid in full
either in cash, by certified or bank check or other instrument acceptable to
the Compensation Committee or by delivery (or attestation to the ownership) of
shares of common stock that are beneficially owned by the optionee for at
least six months or were purchased in the open market. Subject to applicable
law, the exercise price may also be delivered to the Company by a broker
pursuant to irrevocable instructions to the broker from the optionee. In
addition, the Compensation Committee may permit non-qualified options to be
exercised
11
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using a net exercise feature which reduces the number of shares issued to the
optionee by the number of shares with a fair market value equal to the
exercise price.
To qualify as incentive options, options must meet additional federal tax
requirements, including a $100,000 limit on the value of shares subject to
incentive options that first become exercisable by a participant in any one
calendar year.
Stock Appreciation Rights
.The Compensation Committee may award stock appreciation rights subject to
such conditions and restrictions as the Compensation Committee may determine.
Stock appreciation rights entitle the recipient to shares of common stock
equal to the value of the appreciation in the stock price over the exercise
price. The exercise price is the fair market value of the common stock on the
date of grant. The term of a stock appreciation right will be fixed by the
Compensation Committee and may not exceed 10 years.
Restricted Stock
.The Compensation Committee may award shares of common stock to participants
subject to such conditions and restrictions as the Compensation Committee may
determine. These conditions and restrictions may include the achievement of
certain performance goals and/or continued employment with us through a
specified restricted period.
Restricted Stock Units
.The Compensation Committee may award restricted stock units to any
participants. Restricted stock units are generally payable in the form of
shares of common stock, although restricted stock units may be settled in
cash. These units may be subject to such conditions and restrictions as the
Compensation Committee may determine. These conditions and restrictions may
include the achievement of certain performance goals and/or continued
employment with the Company through a specified vesting period.
Adjustments for Stock Dividends, Stock Splits, Etc.
The 2020 Plan requires the Compensation Committee to make appropriate
adjustments to the number of shares of common stock that are subject to the
2020 Plan, to certain limits in the 2020 Plan, and to any outstanding awards
to reflect stock dividends, stock splits, extraordinary cash dividends and
similar events.
Change in Control
. Upon a change in control, as defined in the 2020 Plan, unless provided
otherwise in an award agreement, the 2020 Plan and all outstanding awards will
terminate, unless provision is made in connection with the change in control
in the sole discretion of the parties thereto for the assumption, continuation
or substitution of awards. In the event of termination, (i) the Company will
have the option (in its sole discretion) to make or provide for a cash payment
to the grantees holding options and stock appreciation rights, in exchange for
the cancellation thereof, in an amount equal to the difference between (A) the
price per share received in connection with the change in control (the sale
price) multiplied by the number of shares of common stock subject to
outstanding options and stock appreciation rights (to the extent then
exercisable (after taking into account any acceleration) at prices not in
excess of the sale price) and (B) the aggregate exercise price of all such
outstanding options and stock appreciation rights; or (ii) each grantee will
be permitted, within a specified period of time prior to the consummation of
the change in control as determined by the administrator, to exercise all
outstanding options and stock appreciation rights held by such grantee. The
administrator will also have the discretion to accelerate the vesting of all
other awards.
Tax Withholding
.Participants in the 2020 Plan are responsible for the payment of any federal,
state or local taxes that the Company is required by law to withhold upon the
exercise of options or stock appreciation rights or vesting of other awards.
Subject to approval by the Compensation Committee, participants may elect to
have the minimum tax withholding obligations satisfied by authorizing the
Company to withhold shares of common stock to be issued pursuant to the
exercise or vesting.
Amendments and Termination
.The Board of Directors of the Company may at any time amend or discontinue
the 2020 Plan and the Compensation Committee may at any time amend or cancel
any outstanding award for the purpose of satisfying changes in the law or for
any other lawful purpose. However, no such action may adversely affect any
rights under any outstanding award without the holders consent. To the extent
required under Nasdaq rules, any amendments that materially change the terms
of the 2020 Plan will be subject to approval by our stockholders. Amendments
will also be subject to approval by our stockholders if and to the extent
determined by the Compensation Committee to be required by the Code to
preserve the qualified status of incentive options.
Federal Income Tax Consequences of Options and Stock Awards under the 2020 Plan
THE FOLLOWING IS A GENERAL SUMMARY OF THE TYPICAL FEDERAL INCOME TAX
CONSEQUENCES UNDER CURRENT LAW OF THE ISSUANCE AND EXERCISE OF OPTIONS OR
AWARDS OF RESTRICTED STOCK OR RESTRICTED STOCK UNITS UNDER THE 2020 PLAN. IT
DOES NOT DESCRIBE STATE OR OTHER
12
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TAX CONSEQUENCES OF THE ISSUANCE AND EXERCISE OF OPTIONS, GRANT OF RESTRICTED
STOCK OR GRANT OF RESTRICTED STOCK UNITS.
Options.
The grant of an incentive stock option has no federal income tax effect on the
optionee. Upon exercise, the optionee does not recognize income for regular
tax purposes. However, the excess of the fair market value of the stock
subject to an option over the exercise price of such option (the option
spread) is includible in the optionees alternative minimum taxable income for
purposes of the alternative minimum tax. If the optionee does not dispose of
the stock acquired upon exercise of an incentive stock option until more than
two years after the option grant date and more than one year after exercise of
the option, any gain upon sale of the shares will be a long-term capital gain.
If shares are sold or otherwise disposed of before both of these periods have
expired (a disqualifying disposition), the option spread at the time of
exercise of the option (but not more than the amount of the gain on the sale
or other disposition) is ordinary income in the year of such sale or other
disposition. If gain on a disqualifying disposition exceeds the amount treated
as ordinary income, the excess is taxable as capital gain (which will be
long-term capital gain if the shares have been held more than one year after
the date of exercise of the option). The Company is not entitled to a federal
income tax deduction in connection with incentive stock options, except to the
extent that the optionee has taxable ordinary income on a disqualifying
disposition (unless limited by Section 162(m) of the Internal Revenue Code).
The grant of a nonstatutory option has no federal income tax effect on the
optionee. Upon the exercise of a nonstatutory option, the optionee has taxable
ordinary income (and the Company is entitled to a corresponding deduction
unless limited by Section 162(m) of the Internal Revenue Code) equal to the
option spread on the date of exercise. Upon the disposition of stock acquired
upon exercise of a nonstatutory option, the optionee recognizes either
long-term or short-term capital gain or loss, depending on how long such stock
was held, on any difference between the sale price and the exercise price, to
the extent not recognized as taxable income on the date of exercise. The
Company may allow nonstatutory options to be transferred subject to conditions
and restrictions imposed by the Administrator; special tax rules may apply on
such a transfer.
In the case of both incentive stock options and nonstatutory options, special
federal income tax rules apply if the Companys common stock is used to pay all
or part of the option price.
Stock Awards.
Upon receipt of a stock award, a recipient generally has taxable income in the
amount of the excess of the then fair market value of the common stock over
any consideration paid for the common stock (the spread). However, if the
common stock is subject to a substantial risk of forfeiture (such as a
requirement that the recipient continue in the employ of the Company) and the
recipient does not make an election under section 83(b) of the Internal
Revenue Code, the recipient will have taxable income upon the lapse of the
risk of forfeiture, rather than at receipt, in an amount equal to the spread
on the date of lapse. If the recipient is an employee of the Company, the
taxable income constitutes supplemental wages subject to income and employment
tax withholding, and the Company receives a corresponding income tax
deduction, unless limited by Section 162(m) of the Internal Revenue Code. If
the recipient makes an election under section 83(b) of the Internal Revenue
Code, the stock received by the recipient is valued as of the date of receipt
(without taking the restrictions into account) and the recipient has taxable
income equal to any excess of that value over the amount he or she paid for
the stock. The Company would again have a deduction equal to the income to the
recipient, unless limited by Section 162(m) of the Internal Revenue Code. If
the recipient makes an election under section 83(b) of the Internal Revenue
Code, the consequences upon sale or disposition (other than through
forfeiture) of the shares awarded or sold generally are the same as for common
stock acquired under a nonstatutory option as described above.
Restricted Stock Units.
Upon receipt of a restricted stock unit, a recipient will not recognize any
taxable income. However, upon vesting of a restricted stock unit and the
delivery to the recipient of the restricted stock units, the recipient
generally has taxable income in the amount of the excess of the then fair
market value of the common stock issued over any consideration paid for the
common stock (the spread).
If the recipient is subject to U.S. tax law and if allowed by the
Administrator, an eligible recipient may be allowed to elect to defer the
distribution of some or all of the restricted stock units, thereby deferring
the recipients recognition of taxable income until the restricted stock units
are delivered to the recipient.
If the recipient is an employee of the Company, the taxable income constitutes
supplemental wages subject to income and employment tax withholding, and the
Company receives a corresponding income tax deduction, unless limited by
Section 162(m) of the Internal Revenue Code. The Administrator, in its sole
discretion and pursuant to such procedures as it may specify from time to
time, may permit Awardee to satisfy such tax withholding obligation, in whole
or in part (without limitation) by (a) paying cash, (b) electing to have the
Company withhold otherwise deliverable shares of common stock having a fair
market value equal to the minimum amount required to be withheld, (c)
delivering to the Company already vested and owned shares of common stock
having a fair market value equal to the amount required to be withheld,
13
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or (d) selling a sufficient number of such shares of common stock otherwise
deliverable to recipient through such means as the Company may determine in
its sole discretion (whether through a broker or otherwise) equal to the
amount required to be withheld. To the extent determined appropriate by the
Company in its discretion, it will have the right (but not the obligation) to
satisfy any tax withholding obligations by reducing the number of shares
otherwise deliverable to recipient.
The American Jobs Creation Act of 2004 added Section 409A to the Internal
Revenue Code, generally effective January 1, 2005. Section 409A covers most
programs that defer the receipt of compensation to a succeeding year. There
are significant penalties placed on the individual awardee for failure to
comply with Section 409A. However, it does not impact the Companys ability to
deduct deferred compensation.
Section 409A does not apply to incentive stock options, nonstatutory stock
options that have an exercise price that is at least equal to the grant date
fair market value and restricted stock provided there is no deferral of income
beyond the vesting date.
Limitation on Deduction of Certain Compensation.
Section 162(m) of the Internal Revenue Code, as amended, limits a publicly
traded companys federal income tax deduction for compensation in excess of $1
million paid to certain covered employees. Covered employees generally include
any executive officer whose compensation was required to be disclosed in the
Companys annual proxy statement. Therefore, we expect that we will be unable
to deduct all compensation in excess of $1 million paid to our covered
employees.
Accounting Treatment
The Company recognizes compensation expense based on the grant-date fair value
of awards granted under the 2020 Plan. The Company uses the Black-Scholes
option valuation model to determine the fair value of the award, which is
affected by the Companys stock price and the number of shares granted, as well
as assumptions which include the Companys expected term of the award, the
expected stock price volatility, risk-free interest rate and expected
dividends over the expected term of the award. The expense associated with
each award will generally be recognized over the awards vesting period.
Aggregate Past Grants Under the 2020 Plan
The benefits that will be awarded or paid in the future under the 2020 Plan
are not currently determinable; provided, however, that pursuant to our
non-employee director compensation policy, non-employee directors are eligible
to receive an annual stock option grant to purchase 125,000 shares of our
common stock. As a result, we anticipate our non-employee directors will
receive such a grant subject to continued service through the grant date.
Other than the foregoing, awards under the 2020 Plan are within the discretion
of the Compensation Committee, and the Compensation Committee has not
determined future awards or who might receive them. The following table shows,
as of May 6, 2024, information regarding the grant of stock options since the
inception of the 2020 Plan among the persons and groups identified below. The
closing market price of our common stock on The Nasdaq Capital Market on May
6, 2024 was $1.72.
Name of Individual or Group
Number of shares
Underlying Stock Options
Steven C. Quay, M.D. Ph.D. 6,978,100
President and Chief
Executive Officer
Heather Rees, CPA (inactive) 605,700
Senior Vice President,
Finance & Accounting
Kyle Guse 2,549,567
Former Chief Financial Officer,
General Counsel and Secretary
Greg Weaver 2,895,000
Former Chief Financial Officer
All Current Executive 7,583,800
Officers as a Group:
All Current Non-Executive 1,163,334
Directors as a Group:
Each Nominee for
Election as a Director:
Shu-Chih Chen, Ph.D. 270,000
H. Lawrence Remmel, Esq 0
(1)
Each associate of any Such Directors, 0
Executive Officers or Nominees
Each Other Person Who has received or is to Receive 5% or 0
More of the Options, Warrants or Rights Under the 2020 Plan
14
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All other Current Employees, Including Any Current Officers Who are Not Executive Officers, as a Group 1,706,821
(1)
The compensation Mr. Remmel receives for his services as a director in the
form of an option grant is assigned to the Pryor Cashman law firm of which Mr.
Remmel is a partner.
Registration with the SEC
The Company intends to file with the SEC a registration statement on Form S-8
covering the new shares reserved for issuance under the 2020 Plan in the
second half of 2024.
Vote Required
Approval of the amendment and restatement of the 2020 Plan requires the
affirmative vote of a majority of the votes cast on the matter. Abstentions
and broker non-votes, if any, are not counted as votes cast, and they will
have no effect on the outcome.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NO. 3.
15
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PROPOSAL NO. 4
APPROVAL OF AN AMENDMENT TO THE COMPANYS AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANYS
COMMON STOCK
At the Annual Meeting, you are being asked to approve an amendment to the
Companys Amended and Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 175,000,000 to 350,000,000,
which would also have the effect of increasing the total number of authorized
shares from 185,000,000 to 360,000,000 (the
Proposed Certificate Amendment
). Specifically, the Proposed Certificate Amendment, which our Board has
approved and declared advisable, would amend and restate the first paragraph
of the Capital Stock Section of Article IV of our Amended and Restated
Certificate of Incorporation as follows:
The total number of shares of capital stock which the Corporation shall have
authority to issue is
Three Hundred Sixty Million (360,000,000)
, consisting of
Three Hundred Fifty Million (350,000,000)
shares of common stock, par value $0.18 per share (the Common Stock), and Ten
Million (10,000,000) shares of preferred stock, par value $0.001 per share
(the Undesignated Preferred Stock).
Under the Proposed Certificate Amendment, the authorized number of shares of
preferred stock would remain unchanged. As of May 6, 2024, there were 582
shares of Series B Convertible Preferred Stock issued and outstanding.
Total Share Usage
As of May 6, 2024, there was a total of approximately 169,284,727 shares of
Common Stock issued and outstanding or reserved for future issuance,
consisting of the following: (i) 125,757,416 shares of Common Stock issued and
outstanding, (ii) 16,685,797 shares of Common Stock reserved for potential
issuance upon the exercise of options that have previously been granted, (iii)
165,341 shares of Common Stock reserved for potential issuance upon the
conversion of 582 shares of Series B Convertible Preferred Stock, (iv)
5,465,423 shares of Common Stock reserved for issuance for future grants under
the 2020 Plan (not including the additional 12,000,000 shares subject to
Proposal 3), and (v) 21,210,750 shares of Common Stock reserved for issuance
upon the exercise of outstanding warrants. This represents a share utilization
of 97% of our currently authorized Common Stock and leaves only approximately
5,715,273 shares of Common Stock available for future issuance.
Reasons for the Proposed Certificate Amendment
A summary of the reasons to increase our authorized shares of Common Stock is
as follows:
1. As of May 6, 2024, we had only 5,715,273 shares of Common Stock available
for future issuance that have not been reserved for other purposes.
2. Because we have not yet generated revenue to support our ongoing operations
and research and development activities, we expect to rely primarily on our
existing cash and potential sales of our Common Stock and other securities
exercisable for or convertible into our Common Stock. Without additional
shares of Common Stock available for issuance, our ability to raise working
capital by selling our securities is limited.
3. A typical method for biotechnology companies to grow is to acquire or
in-license new technologies. Rather than deplete cash reserves, a common way
to pay for those technologies and to incentivize employees who may be hired to
develop those technologies is by issuing common stock. Without additional
shares of Common Stock available for issuance, our options to engage in these
transactions are limited and we may be at a competitive disadvantage relative
to other companies that have shares available for issuance. For example, as
discussed in Proposal 3, our Board has approved an amendment and restatement
of the 2020 Plan to, among other things, increase the shares available for
issuance under the 2020 Plan by 12,000,000 shares. Implementation of Proposal
3 is contingent on stockholder approval of this Proposal 4 (in addition to
stockholder approval of Proposal 3).
4. We plan to collaborate with other companies to develop our therapies
through later-stage clinical trials and commercialization. We may desire to
issue stock to potential collaborators in order to conserve cash and provide
appropriate incentives to potential collaborators. We will need additional
shares of Common Stock authorized so that we can potentially enter into these
important collaborations.
16
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Having additional authorized Common Stock available for future issuance would
allow our Board to issue shares of our Common Stock without undue delay and
enable us to engage in transactions and take advantage of opportunities on a
timelier basis, as determined by our Board.
General Effect of the Proposed Certificate Amendment
The Proposed Certificate Amendment is binding. Upon stockholder approval of
this Proposal 4, we intend to file a Certificate of Amendment to our
Certificate of Incorporation with the Secretary of State of the State of
Delaware as soon as reasonably practicable after the Annual Meeting. The
Proposed Certificate Amendment will be effective upon such filing and the
number of authorized shares of our Common Stock will be increased from
175,000,000 shares to 350,000,000 shares.
The additional authorized shares of our Common Stock would have rights
identical to our currently outstanding shares of Common Stock. Adoption of the
Proposed Certificate Amendment and subsequent future potential issuance of the
shares of Common Stock would not affect the rights of the holders of our
currently outstanding shares of Common Stock, except for effects incidental to
increasing the number of shares of our Common Stock. Incidental effects of a
subsequent issuance of shares of our Common Stock (but not of the adoption of
the Proposed Certificate Amendment in and of itself) could include potentially
diluting earnings per share, book value per share, the voting power and
percentage ownership of existing stockholders. Current holders of shares of
our Common Stock do not have preemptive or similar rights, which means that
current stockholders do not have a right to purchase any new issuances of our
capital stock, including shares of our Common Stock, in order to maintain
their proportionate ownership of our Company.
If the Proposed Certificate Amendment is approved, our Board may cause the
issuance of additional shares of our Common Stock without a further vote of
our stockholders, except as required under Delaware or other applicable law,
our Amended and Restated Certificate of Incorporation, our Bylaws or under the
rules of the Nasdaq Stock Market (
Nasdaq
).
The Proposed Certificate Amendment has been prompted by business and financial
considerations. The Proposed Certificate Amendment is not being proposed as a
means of preventing or dissuading a change in control or takeover of our
Company; however, use of these shares for such a purpose is possible. Shares
of authorized but unissued or unreserved common stock, for example, could be
issued in an effort to dilute the stock ownership and voting power of persons
seeking to obtain control of us or could be issued to purchasers who would
support our Board in opposing a takeover proposal. In addition, the increase
in number of authorized shares of our Common Stock, if approved, may have the
effect of discouraging a challenge for control of us or make it less likely
that such a challenge, if attempted, would be successful. Our Board and
executive officers have no knowledge of any current effort to obtain control
of our Company or to accumulate large amounts of our Common Stock.
Complete copies of the existing Amended and Restated Certificate of
Incorporation as well as related Certificates of Amendment are available as
exhibits to the Companys Annual Report on Form 10-K for the year ended
December 31, 2023.
Vote Required
Approval of the Proposed Certificate Amendment requires the affirmative vote
of a majority of the votes cast on the matter. Abstentions and broker
non-votes, if any, are not counted as votes cast, and they will have no effect
on the outcome.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR
PROPOSAL NO. 4.
17
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PROPOSAL NO. 5
APPROVAL, ON A NON-BINDING ADVISORY BASIS, OF
EXECUTIVE COMPENSATION
Background
In accordance with the requirements of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (the
Dodd-Frank Act
) and Section 14A of the Exchange Act, we are providing our stockholders with
the opportunity to cast a non-binding, advisory vote to approve the
compensation of our named executive officers (the say-on-pay vote).
The say-on-pay vote is a non-binding, advisory vote on the compensation of the
Companys named executive officers, as described in the tabular disclosure
regarding such compensation under the caption Executive Compensation and in
the accompanying narrative disclosure set forth in this Proxy Statement. The
say-on-pay vote is not a vote on the Companys general compensation policies or
compensation of the Companys Board.
Our philosophy in setting compensation policies for executive officers has two
fundamental objectives: (1) to attract and retain a highly skilled team of
executives and (2) to align our executives interests with those of our
stockholders by rewarding short-term and long-term performance and tying
compensation to increases in stockholder value. The Compensation Committee
believes in a pay for performance culture, meaning that executive compensation
should be directly linked both to improvements in corporate performance and
accomplishments that are expected to increase stockholder value.
The vote under this Proposal No. 5 is advisory, and therefore not binding on
the Company, the Board or our Compensation Committee. However, our Board,
including our Compensation Committee, values the opinions of our stockholders
and, to the extent there is any significant vote against the executive officer
compensation as disclosed in this Proxy Statement, we will consider the
outcome of the vote when making future compensation decisions for our named
executive officers.
Our Boards current policy is to hold a say-on-pay vote on an annual basis, and
accordingly, after the Annual Meeting, the next say-on-pay vote is expected to
occur at our 2025 Annual Meeting of Stockholders.
Stockholders will be asked at the Annual Meeting to approve the following
resolution pursuant to this Proposal No. 5:
RESOLVED, that the stockholders of Atossa Therapeutics, Inc. approve, on a
non-binding, advisory basis, the compensation of the Companys named executive
officers (as defined in the Proxy Statement), as such compensation is
described in the tabular disclosure regarding such compensation under the
caption Executive Compensation and the accompanying narrative disclosure, set
forth in the Companys Proxy Statement for the 2024 Annual Meeting of
Stockholders.
Vote Required
Advisory approval of this resolution requires the affirmative vote of a
majority of the votes cast on the matter. Abstentions and broker non-votes, if
any, are not counted as votes cast, and they will have no effect on the
outcome.
THE BOARD OF DIRECTORS RECOMMENDS AN ADVISORY VOTE
FOR
PROPOSAL NO. 5.
18
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CORPORATE GOVERNANCE
Director Independence
We believe that the Company benefits from having a strong and independent
Board. For a director to be considered independent, the Board must determine,
in accordance with the Nasdaq listing rules, that the director does not have
any direct or indirect material relationship with the Company that would
affect his or her exercise of independent judgment. On an annual basis, the
Board reviews the independence of all directors under guidelines established
by Nasdaq and in light of each directors background, employment and
affiliations with the Company and members of management, as well as
significant holdings of Company securities. This review considers all known
relevant facts and circumstances in making an independence determination.
Based on this review, the Board has made an affirmative determination that all
current directors, other than Drs. Quay and Chen, are independent directors as
defined by the Nasdaq listing rules. The Board determined that Dr. Quay is not
independent because of his status as the Companys President and Chief
Executive Officer and that Dr. Chen is not independent because of her marriage
to Dr. Quay. Former director, Greg Weaver, was independent under the Nasdaq
listing rules until he was appointed as our Executive Vice President and Chief
Financial Officer. The independent board members meet regularly in executive
sessions without the non-independent members and without management.
Our Board also determined that each of the directors currently serving on the
Audit Committee and the Compensation Committee satisfy the heightened
independence standards for audit committees and compensation committees, as
applicable, as established by the SEC and Nasdaq listing rules.
Corporate Code of Business Conduct and Ethics
We believe that our Board and committees, led by a group of strong and
independent directors, provide the necessary leadership, wisdom and experience
that the Company needs in making sound business decisions. We have adopted a
Code of Business Conduct and Ethics (the Code of Conduct) that applies to all
of our officers, directors and employees, including our principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. Our Code of Conduct helps
clarify the operating standards and ethics that we expect of all of our
officers, directors and employees. Our Code of Conduct is posted on our
website located at
https://atossatherapeutics.com/investors/
under Governance. We intend to disclose future amendments to certain
provisions of the Code of Conduct, and waivers of the Code of Conduct granted
to executive officers and directors, on the website within four business days
following the date of the amendment or waiver.
Stockholder Communications
Generally, stockholders and other interested parties who have questions or
concerns regarding the Company should contact our Investor Relations
representative at 610-529-6219. However, any party who wishes to address
questions regarding the business or affairs of the Company directly with the
Board, or any individual director, should direct his or her questions in
writing to the Corporate Secretary, Atossa Therapeutics, Inc., 107 Spring
Street, Seattle, WA 98104. Upon receipt of any such communications, the
correspondence will be reviewed by our Corporate Secretary, who will determine
whether the communication is appropriate for presentation to the Board or the
individual director, and if so determined by our Corporate Secretary, will be
directed to the appropriate person, including individual directors. The
purpose of this screening is to allow the Board to avoid having to consider
irrelevant or inappropriate communications (such as advertisements,
solicitations and hostile communications).
19
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BOARD OF DIRECTORS AND COMMITTEES
Director Attendance
During fiscal 2023, our Board met eight times and each director attended at
least 88% of the aggregate number of meetings of the Board and of the
committees on which he or she was a member (during the period in which he or
she was on the Board or committee).
Although the Company does not have a formal policy on annual meeting
attendance, the Company generally expects all directors to attend Annual
Meetings of Stockholders, absent unusual circumstances. All members of the
Board were present virtually or by telephone at the 2023 Annual Meeting of
Stockholders.
Board Leadership Structure
The Board currently combines the role of Chairman of the Board with the role
of Chief Executive Officer. The Board believes this leadership model, together
with five of the other six Board members being independent, all key committees
of the Board being comprised solely of, and chaired by, independent directors,
and the Companys established Corporate Governance Guidelines, provides an
effective leadership structure for the Company. Combining the Chairman and
Chief Executive Officer roles fosters clear accountability, effective
decision-making, and aligns corporate strategy with the Companys day-to-day
operations. In addition, to foster effective independent oversight of the
Company, the Board holds executive sessions of the independent directors of
the Board at every meeting.
Dr. Quay has served as Chairman, Chief Executive Officer and President since
the Company was incorporated in April 2009. The independent directors believe
that because Dr. Quay manages the Company on a day-to-day basis as Chief
Executive Officer and President, his direct involvement in the Companys
operations makes him uniquely qualified to lead the Board in effective
decision-making and to efficiently align the Companys day-to-day operations
with the Boards objectives. The Board believes that its programs for
overseeing risks, as described below, would be effective under a variety of
leadership frameworks. Accordingly, the Boards risk oversight function did not
significantly impact its selection of the current leadership structure.
Board Risk Oversight
The Board has overall responsibility for the oversight of the Companys risk
management process, which is designed to support the achievement of
organizational objectives, including strategic objectives, to improve
long-term organizational performance and enhance shareholder value. Risk
management includes not only understanding company-specific risks and the
steps management implements to manage those risks, but also what level of risk
is acceptable and appropriate for the Company. Management is responsible for
establishing our business strategy, identifying, and assessing the related
risks and implementing appropriate risk management practices. The Board
periodically reviews our business strategy and managements assessment of the
related risk, including risks related to cybersecurity and information
technology matters, and discusses with management the appropriate level of
risk for the Company. The Board also delegates oversight to Board committees
to oversee selected elements of risk as set forth below.
Board Committees
Our Board has a separately designated Audit Committee, Compensation Committee
and Nominating and Governance Committee. Members serve on these committees
until their resignation or until otherwise determined by our Board. Each of
these committees is comprised solely of independent directors, is empowered to
retain outside advisors as it deems appropriate and regularly reports its
activities to the full Board.
Audit Committee.
The Audit Committee is comprised of Mr. Steinhart (Chairman), Mr. Finn, Mr.
Remmel and Dr. Galli. The Audit Committee selects the Companys independent
registered public accounting firm, approves its compensation, oversees and
evaluates the performance of the independent registered public accounting
firm, oversees the accounting and financial reporting policies and internal
control systems of the Company, reviews the Companys interim and annual
financial statements, independent registered public accounting firm reports
and management letters and performs other duties, as specified in the Audit
Committee Charter, a copy of which is available on the Companys website at
www.atossatherapeutics.com.
Additionally, the Audit Committee is involved in the oversight of the Companys
risk management through its review of policies relating to risk assessment and
management. The Audit Committee met five times in fiscal 2023. All members of
the Audit Committee satisfy the heightened independence standards under the
Nasdaq listing rules and the rules and regulations established by the SEC
applicable to directors serving on audit committees. The Board has determined
that Mr. Steinhart qualifies as an audit committee financial expert, as that
term is
20
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defined in the rules and regulations established by the SEC, and all members
of the Audit Committee are financially literate under Nasdaq listing rules.
Compensation Committee.
The Compensation Committee is comprised of Mr. Remmel (Chairman), Mr.
Steinhart and Dr. Galli. The Compensation Committee reviews and recommends the
compensation arrangements for management or approves such arrangements if so
directed by the Board, establishes and reviews general compensation policies,
administers the Companys equity compensation plans and reviews and recommends
to the Board the compensation paid to non-employee directors for their service
on the Board. Our Chief Executive Officer makes recommendations to the
Compensation Committee regarding corporate and individual performance goals
and objectives relevant to executive compensation and executives performance
in light of such goals and objectives and recommends other executives
compensation levels to the Compensation Committee based on such evaluations.
The Compensation Committee may delegate authority to grant awards under our
equity compensation plan to the Chief Executive Officer, but it has not
historically done so. The Compensation Committee considers these recommendations
and then makes an independent decision regarding officer compensation levels
and awards. The Chief Executive Officer is not present when his compensation
is evaluated. The Compensation Committee has the authority to engage outside
advisors, such as compensation consultants, to assist it in carrying out its
responsibilities. The Compensation Committee engaged Aon Consulting Inc. (Aon)
(the
Compensation Consultant
) in 2023 to provide advice regarding the amount and form of executive and
director compensation. The Compensation Committee met two times in fiscal
2023. A copy of the Compensation Committee Charter is available on the
Companys website at
www.atossatherapeutics.com
. All members of the Compensation Committee satisfy the heightened
independence standards under the Nasdaq listing rules and the rules and
regulations established by the SEC applicable to directors serving on
compensation committees.
Compensation Committee Interlocks
None of the members of our Compensation Committee has at any time during the
prior three years been one of our officers or employees. None of our executive
officers currently serves, or in the past fiscal year has served, as a member
of the board or compensation committee of any entity that has one or more
executive officers serving on our Board or Compensation Committee.
Nominating and Governance Committee.
The Nominating and Governance Committee is comprised of Dr. Galli (Chairman),
Dr. Cigler and Mr. Remmel. The Nominating and Governance Committee identifies
and nominates candidates for election to the Board, establishes policies under
which stockholders may recommend a candidate for consideration for nomination
as a director, annually reviews and evaluates the performance, operations,
size and composition of the Board and periodically assesses and reviews the
Companys Corporate Governance Guidelines and recommends any appropriate
changes thereto. The Nominating and Governance Committee met three times in
fiscal 2023. A copy of the Nominating and Governance Committee Charter is
available on our website at
www.atossatherapeutics.com
. All members of the Nominating and Governance Committee satisfy the
independence standards under the Nasdaq listing rules.
21
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EXECUTIVE OFFICERS
Our current executive officers and their respective ages and positions as of
the date of this Proxy Statement are set forth in the following table.
Biographical information for Dr. Quay is set forth above under Proposal No. 1
(Election of Directors).
Name Age Position
Executive Officers:
Steven C. Quay, M.D., Ph.D 73 Chairman of the Board, President and Chief Executive Officer
(1)
.
Heather Rees, CPA (inactive) 51 SVP, Finance and Accounting
(1) For Dr. Quays biographical information, see Nominees and Incumbent
Directors above
Heather Rees., CPA (inactive).
Heather Rees has served as the Companys Senior Vice President, Finance and
Principal Accounting Officer since 2023. Prior to that time, Ms. Rees served
as the Companys Vice President of Finance & Accounting since 2021 and
controller since 2017. Ms. Rees previously spent ten years working as an
independent financial consultant serving public and private companies. She
began her career with Deloitte & Touche and worked for nine years in the audit
practice. Ms. Rees earned a Bachelor of Business Administration in Accounting
from Gonzaga University.
22
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SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
Based on information available to us and filings with the SEC, the following
table sets forth certain information regarding the beneficial ownership (as
defined by Rule 13d-3 under the Exchange Act) of our outstanding Common Stock
for (i) each of our directors and nominees, (ii) each of our named executive
officers, as defined in Executive Compensation below, (iii) all of our current
directors and executive officers as a group, and (iv) persons known to us to
beneficially hold more than 5% of our outstanding Common Stock. The following
information is presented as of March 15, 2024 or such other date as may be
reflected below.
Beneficial ownership and percentage ownership are determined in accordance
with the rules of the SEC and include voting or investment power with respect
to shares of stock. This information does not necessarily indicate beneficial
ownership for any other purpose. Under these rules, shares of Common Stock
issuable pursuant to stock options or warrants that are exercisable within 60
days of March 15, 2024, as well as convertible preferred stock, are deemed
outstanding for the purpose of computing the percentage ownership of the
person holding the options, warrants or convertible preferred stock, but are
not deemed outstanding for the purpose of computing the percentage ownership
of any other person. To our knowledge and subject to applicable community
property rules, and except as otherwise indicated below, the persons and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned. Unless otherwise noted, the address
of each person listed on the table is c/o Atossa Therapeutics, Inc., 107
Spring Street, Seattle, Washington 98104.
Shares Beneficially Owned
Name of Beneficial Owner Number Percent of Class
(1)
Steven C. Quay, M.D. Ph.D. 8,616,421 6.4 %
(2)
Shu-Chih Chen, Ph.D. 390,387 *
(3)
Jonathan F. Finn, C.F.A 31,250 *
(4)
Stephen J. Galli, M.D. 366,673 *
(5)
Heather Rees, CPA (inactive) 520,450 *
(6)
H. Lawrence Remmel, Esq. 257 *
(7)
Richard I. Steinhart 364,750 *
(8)
Tessa Cigler, M.D., M.P.H.
Kyle Guse, Esq., CPA 3,177,120 2.5 %
(9)
Gregory L. Weaver 56 *
(10)
All current executive officers and directors as a group (8 persons) 10,267,934 7.6 %
(11)
Other 5% Beneficial Owners:
CVI Investments, Inc. and Heights Capital Management, Inc. 7,762,500 6.2 %
(12)
* Less than one percent.
(1)
Based on 125,469,405 shares of Common Stock and Preferred Stock, on an as
converted basis, issued and outstanding as of March 15, 2024.
(2)
Consists of (i) 2,659 shares of Common Stock directly owned by Dr. Quay, (ii)
22,254 shares of Common Stock owned by Ensisheim Partners LLC (Ensisheim),
(iii) 8,589,235 shares of Common Stock issuable upon the exercise of stock
options held by Dr. Quay and exercisable within 60 days of March 15, 2024 and
(iv) 8 shares of Preferred B Stock convertible into 2,273 shares of Common
Stock. Drs. Quay and Chen share voting and investment power over the
securities held by Ensisheim. Ensisheim is solely owned and controlled by Drs.
Quay and Chen, and, as a result, Drs. Quay and Chen are deemed to be
beneficial owners of the shares held by this entity.
(3)
Consists of (i) 22,254 shares of Common Stock owned by Ensisheim, (ii) 365,860
shares of Common Stock issuable upon the exercise of stock options held by Dr.
Chen and exercisable within 60 days of March 15, 2024 and (iii) 8 shares of
Preferred B Stock, convertible into 2,273 shares of Common Stock. Drs. Quay
and Chen share voting and investment power over the securities held by
Ensisheim. Ensisheim is solely owned and controlled by Drs. Quay and Chen,
and, as a result, Drs. Quay and Chen are deemed to be beneficial owners of the
shares held by this entity.
(4)
Consists of 31,250 shares of Common Stock issuable upon the exercise of stock
options held by Mr. Finn and exercisable within 60 days of March 15, 2024.
(5)
Consists of (i) 99 shares of Common Stock held by Dr. Galli, and (ii) 366,574
shares of Common Stock issuable upon the exercise of stock options held by Dr.
Galli and exercisable within 60 days of March 15, 2024.
(6)
Consists of 520,450 shares of Common Stock issuable upon the exercise of stock
options held by Ms. Rees and exercisable within 60 days of March 15, 2024.
(7)
Consists of 257 shares of Common Stock held by Mr. Remmel. Mr. Remmel
disclaims beneficial ownership of the 11 shares of Common Stock held by his
spouse.
23
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(8)
Consists of 364,750 shares of Common Stock issuable upon the exercise of stock
options held by Mr. Steinhart and exercisable within 60 days of March 15, 2024.
(9)
Consists of (i) 3,174,014 shares of Common Stock issuable upon the exercise of
stock options held by Mr. Guse and exercisable within 60 days of March 15,
2024, (ii) 833 shares of Common Stock held by Mr. Guse and (iii) 8 shares of
Preferred B Stock convertible into 2,273 shares of Common Stock.
(10)
Consists of 56 shares of Common Stock held by Mr. Weaver.
(11)
Consists of (i) 25,269 shares of Common Stock, (ii) 10,238,119 shares of
Common Stock issuable upon the exercise of stock options exercisable within 60
days of March 15, 2024 and (iii) 16 shares of Preferred B Stock convertible
into 4,546 shares of Common Stock
(12)
Based on information set forth in a Schedule 13G/A filed with the SEC on
February 14, 2022, by CVI Investments, Inc. (CVI) and Heights Capital
Management, Inc. (Heights Capital). Consists of (i) no shares for which CVI
and Heights Capital have sole dispositive power, (ii) 7,762,500 shares for
which CVI and Heights Capital have shared dispositive power, (iii) no shares
for which CVI and Heights Capital have sole voting power, and (iv) 7,762,500
shares for which CVI and Heights Capital have shared voting power. CVIs
business address is P.O. Box 309GT, Ugland House, South Church Street, George
Town, Grand Cayman, KY1-1104, Cayman Islands. Heights Capitals business
address is 101 California Street, Suite 3250, San Francisco, California 94111.
and the address of Heights Capital is 101 California Street, Suite 3250, San
Francisco, California 94111.
24
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CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS
Transactions with Related Parties
Other than compensation arrangements described below under the captions
Director Compensation and Executive Compensation, since January 1, 2022, we
have not been a party to any related party transactions within the meaning of
SEC rules.
Related-Party Transaction Review and Approval
Related party transactions that the Company is required to disclose publicly
under the federal securities laws require prior approval by the Companys
independent directors without the participation of any director who may have a
direct or indirect interest in the transaction in question. Related parties
include directors, nominees for director, principal stockholders (that is, any
person who beneficially owns five percent or more of any class of the Companys
voting securities), executive officers and members of their immediate
families. For these purposes, a transaction includes all financial
transactions, arrangements or relationships, ranging from extending credit to
the provision of goods and services for value. The Companys policies and
procedures regarding related party transactions are not part of a formal
written policy, but rather, represent a course of practice determined to be
appropriate by the Board of Directors of the Company.
25
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DIRECTOR COMPENSATION
Non-employee director compensation is generally reviewed and set annually at
the Board meeting held in connection with the Annual Meeting of Stockholders.
The non-employee directors of the Company received the following for service
on the Board from May 2023 through May 2024:
"
upon joining the Board, an initial fee of $50,000 in cash;
"
an annual cash payment of $50,000 for each board member; and
"
an annual grant of options exercisable for 125,000 shares.
The Compensation Committee has engaged Aon to provide advice regarding the
amount and form of director compensation. Based on their compensation
analysis, and to more closely align with our peers, the annual grant of
options was increased in May 2023 from 50,000 shares to 125,000 shares. All
other Board compensation was unchanged.
In addition to the above, annual compensation for service on the Audit
Committee is $20,000 for the Chair and $15,000 for each committee member, paid
in cash quarterly. Annual compensation for service on the Compensation
Committee and Nominating and Governance Committee is $15,000 for the Chair and
$10,000 for each committee member, paid in cash quarterly. The independent
board members are also reimbursed on a case-by-case basis up to a pre-set
amount for actual out of pocket expenses for graduate level course work in
fields related to the business of the Company, though no such reimbursements
were made with respect to 2023.
The employee directors receive no compensation for their board service.
Pursuant to the policies of Pryor Cashman, the law firm of which Mr. Remmel is
a partner, the compensation Mr. Remmel receives for his services as a director
(other than expense reimbursement) is paid to the firm directly. All directors
receive reimbursement for reasonable travel expenses. The following table sets
forth information regarding compensation earned by our non-employee directors
during the fiscal year ended December 31, 2023:
Name Fees Earned or Option Awards Options Awards All Other Total Outstanding
Paid in Cash Dollar Amount Number of Shares Compensation Option
(1) Awards
(2)
Shu-Chih $ 50,000 $ 66,169 125,000 $ $ 116,169 366,555
Chen, Ph.D.
Stephen $ 78,750 $ 66,169 125,000 $ $ 144,919 366,658
Galli, M.D.
H. Lawrence $ 78,750 $ 66,169 125,000 $ $ 144,919
Remmel, Esq.
(3)
Richard $ 80,000 $ 66,169 125,000 $ $ 146,169 364,926
Steinhart
Jonathan F. $ 60,834 $ 33,146 62,500 $ $ 93,980 62,500
Finn, C.F.A.
(4)
(1)
The value of the awards has been computed in accordance with Accounting
Standards Codification Topic 718, Compensation - Stock Compensation (ASC 718).
Assumptions used in the calculations for these amounts are included in the
notes to our financial statements included in our Annual Report for the fiscal
year ended December 31, 2023. Except for Mr. Finn, option awards consist of
2023 annual option grants, to purchase shares of Common Stock with an exercise
price of $0.66, which was the fair value of our Common Stock at the time of
grant. Options vest quarterly over a year. Mr. Finns Option awards were
granted when he commenced service on the Board with an exercise price of
$0.65, which was the fair value of our Common Stock at the time of grant.
(2)
The shares reported in this column represent the aggregate number of option
awards outstanding as of December 31, 2023.
(3)
The compensation Mr. Remmel receives for his services as a director in the
form of an option grant is assigned to the Pryor Cashman law firm of which Mr.
Remmel is a partner.
(4)
Mr. Finn was added to the Board on November 8, 2023.
26
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EXECUTIVE COMPENSATION
Remuneration of Officers
Our Compensation Committee is responsible for reviewing and evaluating key
executive employee base salaries, setting goals and objectives for executive
bonuses and administering benefit plans. The Compensation Committee provides
advice and recommendations to our Board of Directors on such matters.
Summary Compensation Table
The following table sets forth the compensation earned by our President and
Chief Executive Officer and Senior Vice President of Finance and Accounting,
and our two former Chief Financial Officers (together, the
2023
Named Executive Officers
) for fiscal year 2023 and, in the case of Dr. Quay and Mr. Guse, fiscal year
2022:
Name and Year Salary Bonus Option Non-equity All Total
Position Awards Incentive Other
(1) Plan Compensation
Compensation (3)
(2)
Steven C. Quay, President 2023 $ 705,910 $ $ 1,143,927 $ 469,783 $ 36,600 $ 2,356,220
M.D. Ph. D. and Chief
Executive 2022 $ 705,910 $ $ 2,019,697 $ 402,369 $ 32,900 $ 3,160,876
Officer
Heather Rees, Senior Vice 2023 $ 331,585 $ $ 166,818 $ 152,460 $ 36,600 $ 687,463
CPA (inactive) President
Finance and
Accounting
Kyle Former Chief 2023 $ 248,358 $ $ 342,790 $ $ 580,483 $ 1,171,631
Guse Financial Officer,
General Counsel 2022 $ 466,658 $ $ 788,918 $ 239,395 $ 32,900 $ 1,527,871
and Secretary
Greg Former Chief 2023 $ 197,756 (4) $ 43,493 (5) $ 2,116,394 $ $ 21,783 $ 2,379,426
Weaver Financial Officer
(1)
The value of the option awards has been computed in accordance with ASC 718.
Assumptions used in the calculations for these amounts are included in the
notes to our financial statements included in our Annual Report. The options
vest quarterly over two years from the date of grant, except for 125,000
options with a grant date fair value of $66,169 that were granted to Mr.
Weaver in connection with his service as a non-employee director prior to
commencing service as Chief Financial Officer, which options were scheduled to
vest quarterly over one year from the date of grant, and 2,600,000 options
with a grant date fair value of $2,050,225 that were granted to Mr. Weaver in
connection with his appointment as Chief Financial Officer, which options were
scheduled to vest 25% on the one-year anniversary of the date of grant with
the remainder scheduled to vest in equal quarterly installments over the
following three years. In connection with his termination of service as Chief
Financial Officer and a member of the Board, however, all of Mr. Weavers
unvested options were terminated.
(2)
Amounts represent the annual performance bonus.
(3)
Amounts represent the 401(k) match made by the Company on behalf of the Named
Executive Officer and reimbursements under our wellness program. For Mr. Guse
the amount also includes a $553,533 severance payment.
(4)
Includes $33,333 paid to Mr. Weaver in connection with his service as a
non-employee director prior to becoming Chief Financial Officer.
(5)
Mr. Weaver received a sign on bonus of $125,000, but upon his resignation from
the Company, he was required to return $81,507 to the Company per his
employment agreement.
27
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Outstanding Equity Awards at Fiscal Year-End
The following table shows information regarding our outstanding equity awards
at December 31, 2023 for the 2023 Named Executive Officers under the Companys
Incentive Plans:
Name Grant Date Number of Number of Option Option
Securities Securities Exercise Expiration
Underlying Underlying Price Date
Unexercised Unexercised
Options Options
Exercisable Unexercisable
Steven Quay, President and Chief 5/6/2014 1,389 $ 219.60 5/6/2024
M.D. Ph.D Executive Officer 3/16/2015 1,528 $ 338.40 3/16/2025
5/18/2016 3,163 $ 47.34 5/18/2026
5/24/2017 47,992 $ 5.64 5/24/2027
5/17/2019 2,300,000 $ 1.36 5/17/2029
4/9/2020 195,000 $ 1.48 4/9/2030
5/15/2020 1,305,000 $ 1.48 5/15/2030
5/14/2021 1,900,000 $ 2.90 5/14/2031
2/24/2022 1,662,500 (1) 237,500 $ 1.25 2/24/2032
3/2/2023 702,415 (1) 1,170,685 $ 0.72 3/2/2033
Heather Rees, Senior Vice President 4/9/2020 32,500 $ 1.48 4/9/2030
CPA (inactive) Finance and Accounting 7/3/2020 23,500 $ 3.18 7/3/2030
5/14/2021 129,700 $ 2.90 5/21/2031
8/11/2021 100,000 $ 3.18 8/11/2031
5/13/2022 112,500 (1) 37,500 $ 0.93 5/13/2032
6/12/2023 56,500 (1) 169,500 $ 0.92 6/12/2033
Kyle Guse Former Chief Financial Officer, 1/8/2014 778 $ 396.00 1/8/2024
General Counsel and Secretary 5/6/2014 1,112 $ 219.60 5/6/2024
3/16/2015 1,056 $ 338.40 3/16/2025
5/18/2016 6,056 $ 47.34 5/18/2026
5/24/2017 41,280 $ 5.64 5/24/2027
5/17/2019 800,000 $ 1.36 5/17/2029
4/9/2020 195,000 $ 1.48 4/9/2030
5/15/2020 395,000 $ 1.48 5/15/2030
5/14/2021 850,000 $ 2.90 5/14/2031
2/24/2022 606,669 (2) $ 1.25 2/24/2032
3/2/2023 278,953 (2) $ 0.72 3/2/2033
Greg Weaver Former Chief Financial Officer 5/6/2014 84 $ 219.60 4/05/2024
(3)
5/12/2015 223 $ 246.60 4/05/2024
5/18/2016 624 $ 47.34 4/05/2024
5/14/2021 50,000 $ 2.90 4/05/2024
5/13/2022 50,000 $ 0.93 4/05/2024
5/4/2023 31,250 $ 0.66 4/05/2024
(1)
Option vests quarterly over two years from the date of grant.
(2)
Option accelerated upon termination per Mr. Guse's employment agreement.
(3)
Mr. Weavers vested options expired six months following his October 5, 2023
termination date.
28
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PAY VERSUS PERFORMANCE
As required by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection
Act and Item 402(v) of SEC Regulation S-K, we are providing the following
specified disclosures regarding the relationship between the compensation
actually paid to our executive officers and certain measures of financial
performance. The following table reports the compensation of Steven Quay, our
Chairman and CEO (our Principal Executive Officer, or
PEO
) and the average compensation of the other Named Executive Officers (our
Non-PEO NEOs
) as reported in the Summary Compensation Table for the past two fiscal years,
as well as their compensation actually paid as calculated pursuant to the SEC
rules (referred to as
CAP
).
Year Summary Compensation Summary Compensation Value of Net Loss
Compensation Actually Compensation Actually Initial Fixed
Table Total Paid to Table Total Paid to $100
for PEO PEO for Non-PEO Non-PEO Investment
(1) (1)(2) NEOs NEOs Based On
(1) (1)(3) Total
Shareholder
Return
(4)
2023 $ 2,356,220 $ 2,653,763 $ 1,412,840 $ 715,616 $ (7 ) $ (30,094,000 )
2022 $ 3,160,876 $ 2,971,123 $ 1,527,871 $ 1,445,374 $ (44 ) $ (26,960,000 )
2021 $ 5,892,563 $ 5,705,285 $ 2,801,628 $ 2,726,119 $ 68 $ (20,606,000 )
(1)
Dr. Steven Quay is our PEO for each of the years shown. For 2023, our Non-PEO
NEOs were Ms. Rees and Messrs. Guse and Weaver. Mr. Guse was our only Non-PEO
NEO for years 2022 and 2021.
(2)
The table below shows the amount of CAP to our PEO, as computed in accordance
with Item 402(v) of SEC regulation S-K. The dollar amounts reported do not
reflect actual amount of compensation earned by or paid to our PEO during the
applicable year, and the Compensation Committee did not consider CAP in making
any executive compensation decisions with respect to our PEO. In accordance
with SEC rules, these amounts reflect the Total compensation as set forth in
the Summary Compensation Table for the applicable year, adjusted as shown
below. Equity values are calculated in accordance with FASB ASC Topic 718, and
the valuation assumptions used to calculate fair values did not materially
differ from those disclosed at the time of grant.
Year Summary Equity Awards Equity Award Compensation
Compensation in SCT (A) Adjustments (B) Actually Paid
Table Total to PEO
for PEO
2023 $ 2,356,220 $ (1,143,927 ) $ 1,441,470 $ 2,653,763
2022 $ 3,160,876 $ (2,019,697 ) $ 1,829,944 $ 2,971,123
2021 $ 5,892,563 $ (4,707,913 ) $ 4,520,635 $ 5,705,285
(A)
Represents the amounts reported in the Option Awards column in the Summary
Compensation Table (
SCT
) for the applicable year.
(B)
Represents the equity award adjustments (deductions and additions) for PEO
equity awards for each applicable year calculated as follows:
Year Year-End Year-over-Year Fair Change Total
Fair Change Value in the Equity
Value in Fair as of Fair Value from Prior Fiscal Award
of Value of Vesting Year End to Vesting Date of Adjustments
Outstanding Outstanding Date of Equity
and and Equity Awards
Unvested Unvested Awards Granted
Equity Equity Granted in
Awards Awards and Prior
Granted Granted Vested Years
During in in the that
the Year Prior Year Vested
Years in the
Year
2023 $ 1,093,739 $ (15,321 ) $ 428,413 $ (65,361 ) $ 1,441,470
2022 $ 1,226,109 $ (50,510 ) $ 755,829 $ (101,484 ) $ 1,829,944
2021 $ 3,454,245 $ (36,544 ) $ 1,176,146 $ (73,212 ) $ 4,520,635
29
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(3)
The table below shows CAP for the Non-PEO NEOs, as computed in accordance with
Item 402(v) of SEC Regulation S-K. The dollar amounts reported do not reflect
the actual amount of compensation earned by or paid to our Non-PEO NEOs during
the applicable year, and the Compensation Committee did not consider CAP in
making any executive compensation decisions with respect to our Non-PEO NEOs.
In accordance with SEC rules, these amounts reflect the Total compensation as
set forth in the Summary Compensation Table for the applicable year, on
average, adjusted as shown below. Equity values are calculated in accordance
with FASB ASC Topic 718, and the valuation assumptions used to calculate fair
values did not materially differ from those disclosed at the time of grant.
Year Summary Equity Awards Equity Award Compensation
Compensation in SCT (A) Adjustments (B) Actually Paid
Table Total to Non-PEO NEOs
for Non-PEO
NEOs
2023 $ 1,412,840 $ (875,334 ) $ 178,110 $ 715,616
2022 $ 1,527,871 $ (788,918 ) $ 706,421 $ 1,445,374
2021 $ 2,801,628 $ (2,108,013 ) $ 2,032,504 $ 2,726,119
(A)
Represents the average of the amounts reported in the Option Awards column in
the Summary Compensation Table for the applicable year.
(B)
Represents the equity average award adjustments (deductions and additions) for
our Non-PEO NEOs equity awards for the applicable year calculated as follows:
Year Year-End Year-over-Year Fair Change Prior Year End Fair Value Total
Fair Change Value in the for Equity Awards Granted Equity
Value in as Fair Value from in Prior Years that were Award
of Fair of Prior Fiscal Forfeited During the Year Adjustments
Outstanding Value Vesting Year End to
and of Date Vesting Date
Unvested Outstanding of of
Equity and Equity Equity
Awards Unvested Awards Awards
Granted Equity Granted Granted
During Awards and in
the Granted Vested Prior
Year in in Years
Prior the that
Years Year Vested
in the
Year
2023 $ 113,935 $ (536 ) $ 76,474 $ (8,675 ) $ (3,088 ) $ 178,110
2022 $ 480,268 $ (22,448 ) $ 293,960 $ (45,359 ) - $ 706,421
2021 $ 1,547,312 $ (13,620 ) $ 526,170 $ (27,358 ) - $ 2,032,504
(4)
Total Shareholder Return (
TSR
) is calculated by dividing (a) the sum of (i) the cumulative amount of
dividends for the measurement period, assuming dividend reinvestment, and (ii)
the difference between the Companys share price at the end of each fiscal year
shown and the beginning of the measurement period, by (b) the Companys share
price at the beginning of the measurement period. The beginning of the
measurement period for each year in the table is December 31, 2020.
Description of Certain Relationships between Information Presented in the Pay
versus Performance Table
While the Company utilizes several performance measures to align executive
compensation with Company performance, all of those Company measures are not
presented in the Pay versus Performance table. Moreover, the Company generally
seeks to incentivize long-term performance, and therefore does not
specifically align the Companys performance measures with compensation that is
actually paid (as computed in accordance with SEC rules) for a particular
year. In accordance with SEC rules, the Company is providing the following
descriptions of the relationships between information presented in the Pay
versus Performance table.
30
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Compensation Actually Paid and Cumulative TSR
Compensation Actually Paid and Net Loss
Employment Agreements
Employment Agreement with Steven Quay, M.D., Ph.D.
The Company entered into an employment agreement with Dr. Quay on September
27, 2010, to act as the Companys Chief Executive Officer. The agreement
provided for an initial base salary of $250,000, which was amended over the
years and has been subsequently increased to $705,910 for 2023, with an annual
target bonus of up to 55% of Dr. Quays then-current base salary, payable upon
the achievement of performance goals to be established annually by the
Compensation Committee.
The goals for fiscal 2023 included (1) completion of enrollment in the
Endoxifen Phase 2 clinical study in women with mammographic breast density,
(2) completion of the PK run-in cohort for the Evangeline Phase 2 neoadjuvant
trial, (3) acquisition or development of additional programs, (4) commencement
of one or more additional studies and (5) accomplishment of one or more
specified stretch goals. On January 16, 2024, the Compensation Committee
reviewed the performance of Dr. Quay for 2023 against these goals and
determined that his bonus for 2023 was 121% of potential, or $469,783.
31
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During the employment term, the Company will make available to Dr. Quay
employee benefits provided to other key employees and officers of the Company.
To the extent these benefits are based on length of service with the Company,
Dr. Quay will receive full credit for prior service with the Company. Dr Quay
is entitled to participation in health, hospitalization, disability, dental
and other insurance plans that the Company may have in effect for other
executives, all of which shall be paid for by the Company with contribution by
Dr. Quay as set for the other executives, as and if appropriate.
Dr. Quay has also agreed that, for the period commencing on the date of his
employment agreement with the Company and during the term of his employment
and for a period of 12 months following termination of his employment with the
Company that he will not compete with the Company in the United States. The
employment agreement also contains provisions relating to confidential
information and assignment of inventions, which require Dr. Quay to refrain
from disclosing any proprietary information and to assign to the Company any
inventions, or future products, research, or development, or which result from
work they perform for the Company or using its facilities.
Employment Letter with Heather Rees, CPA (inactive)
The Company is party to an employment letter with Heather Rees dated as of
October 6, 2023, pursuant to which she was promoted to act as the Companys
Senior Vice President, Finance and Principal Accounting Officer. The agreement
provided for an initial base salary of $360,000, with an annual target bonus
of up to 35% of Ms. Rees then-current base salary, payable upon the
achievement of performance goals to be established annually by the
Compensation Committee.
The goals for fiscal 2023 included (1) completion of enrollment in the
Endoxifen Phase 2 clinical study in women with mammographic breast density,
(2) completion of the PK run-in cohort for the Evangeline Phase 2 neoadjuvant
trial, (3) acquisition or development of additional programs, (4) commencement
of one or more additional studies and (5) accomplishment of one or more
specified stretch goals. On January 16, 2024, the Compensation Committee
reviewed the performance of Ms. Rees for 2023 against these goals and
determined that her bonus for 2023 was 121% of potential, or $152,460.
Employment Agreement with Kyle Guse
The Company entered into an employment agreement with Mr. Guse to act as the
Companys Chief Financial Officer, General Counsel and Secretary. The agreement
was amended on May 18, 2016 and provided for a base salary of $364,000, which
was amended over the years and was increased to $466,658 for 2023, with an
annual target bonus of up to 45% of Mr. Guses then-current base salary,
payable upon the achievement of performance goals to be established annually
by the Compensation Committee.
The goals for fiscal 2023 included (1) completion of enrollment in the
Endoxifen Phase 2 clinical study in women with mammographic breast density,
(2) completion of the PK run-in cohort for the Evangeline Phase 2 neoadjuvant
trial, (3) acquisition or development of additional programs, (4) commencement
of one or more additional studies and (5) accomplishment of one or more
specified stretch goals. In accordance with his severance agreement, Mr. Guse
was paid his pro-rata share of his bonus for 2023. Refer below for severance
benefits paid to Mr. Guse.
During the employment term, the Company was required to make available to Mr.
Guse employee benefits provided to other key employees and officers of the
Company. To the extent these benefits were based on length of service with the
Company, Mr. Guse was entitled to full credit for prior service with the
Company. Mr. Guse was entitled to participation in health, hospitalization,
disability, dental and other insurance plans that the Company may have had in
effect for other executives, all of which were to be paid for by the Company
with contribution by Mr. Guse as set for the other executives, as and if
appropriate.
Mr. Guse has also agreed that, for the period commencing on the date of his
employment agreement with the Company and during the term of his employment
and for a period of six months following termination of his employment with
the Company that he will not compete with the Company in the United States.
The employment agreement also contains provisions relating to confidential
information and assignment of inventions, which require Mr. Guse to refrain
from disclosing any proprietary information and to assign to the Company any
inventions, or future products, research, or development, or which result from
work they perform for the Company or using its facilities.
Employment Agreement with Greg Weaver
The Company entered into an employment agreement with Mr. Weaver on June 1,
2023, to act as the Companys Executive Vice President and Chief Financial
Officer. The agreement provided for an initial base salary of $450,000, with
an annual target bonus of up to 45% of Mr. Weavers then-current base salary,
payable upon the achievement of performance goals to be established annually
by the Compensation Committee.
32
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The goals for fiscal 2023 included (1) completion of enrollment in the
Endoxifen Phase 2 clinical study in women with mammographic breast density,
(2) completion of the PK run-in cohort for the Evangeline Phase 2 neoadjuvant
trial, (3) acquisition or development of additional programs, (4) commencement
of one or more additional studies and (5) accomplishment of one or more
specified stretch goals. Mr. Weaver did not become eligible for payment of a
bonus for 2023 in connection with his termination of employment.
The agreement also provided for payment of a one-time signing bonus of
$125,000, which was subject to pro-rata repayment in connection with his
termination of employment.
During the employment term, Mr. Weaver was eligible to participate in the
Companys employee benefit plans as in effect from time to time on the same
basis as other senior executives.
Mr. Weaver also entered into an agreement with the Company relating to
confidential information and assignment of inventions, which requires Mr.
Weaver to refrain from disclosing any proprietary information and to assign to
the Company any inventions, or future products, research, or development, or
which result from work they perform for the Company or using its facilities.
Severance Benefits and Change in Control Arrangements
The Company has agreed to provide the severance benefits and change in control
arrangements described below to its named executive officers.
Dr. Steven Quay, M.D. Ph.D.
Pursuant to his employment agreement, if (i) the Company terminates the
employment of Dr. Quay without cause, or (ii) Dr. Quay terminates his
employment for good reason, then Dr. Quay will be entitled to receive all
accrued but unpaid compensation including pro-rated bonus, plus a severance
payment equal to 12 months of base salary. In addition, upon such event, the
vesting of all shares of Common Stock underlying unvested options then held by
Dr. Quay will accelerate, and the options will remain exercisable for the
remainder of their terms. The cash severance payment is required to be paid in
substantially equal installments over a period of six months beginning on the
Companys first payroll date that occurs following the 30th day after the
effective date of termination of Dr. Quays employment, subject to certain
conditions. The Company will not be required, however, to pay any severance
pay for any period following the termination date if Dr. Quay materially
violates certain provisions of his employment agreement and the violation is
not cured within 30 days following receipt of written notice from the Company
containing a description of the violation and a demand for immediate cure.
In addition, under the terms of his employment agreement, in the event of a
change in control of the Company (as defined in the employment agreement)
during Dr. Quays employment term, Dr. Quay will be entitled to receive a
one-time payment equal to 2.9 times his base salary, and the vesting of all
outstanding equity awards then held by Dr. Quay will accelerate such that they
are fully vested as of the date of the change in control.
Heather Rees, CPA (inactive)
Pursuant to her employment agreement, if (i) the Company terminates the
employment of Ms. Rees without cause, or (ii) Ms. Rees terminates her
employment for good reason, in either event not within 30 days before or 12
months after a change in control, she will be entitled to receive (a) a pro
rata portion of the actual bonus that would have been earned for the year of
termination, based on the days employed during such year, payable on the date
when bonuses are otherwise paid to company employees and (b) full acceleration
of the vesting of all outstanding equity awards.
Kyle Guse
Mr. Guse, ceased to serve as the Companys General Counsel and Chief Financial
Officer as of May 26, 2023. Pursuant to his employment agreement, Mr. Guse
became entitled to receive all accrued but unpaid compensation including a
pro-rated bonus, plus a severance payment equal to 12 months of base salary.
In addition, the vesting of 50% of shares of common stock underlying his
unvested options accelerated, and the options will remain exercisable for the
remainder of their terms. The cash severance payment was required to be paid
in substantially equal installments over a period of six months beginning on
the Companys first payroll date that occurred following the 30th day after the
effective date of termination of Mr. Guses employment, subject to certain
conditions. The Company was not required, however, to pay any severance pay
for any period following the termination date if Mr. Guse materially violated
certain provisions of his employment agreement and the violation was not cured
within 30 days following receipt of written notice from the Company containing
a description of the violation and a demand for immediate cure. Subject to,
and in accordance with, the terms of his
33
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employment agreement, upon Mr. Guses termination without cause, he became
entitled to receive the severance benefits payable of $554,000.
Greg Weaver
In connection with Mr. Weavers voluntary resignation, he was not entitled to
any severance benefits.
Other Benefits
The Company offers health, dental, disability and life insurance to its
full-time employees. A 401(k) Plan with matching up to 4% of salary is also
offered to its full and part-time employees.
Prohibition on Hedging and Pledging
Under our Insider Trading Policy and procedures pursuant to which, among other
things, our directors, officers, and employees, and their respective family
members and controlled entities, are prohibited from (i) engaging in short
sales, (ii) unless approved by the Audit Committee, buying or selling puts,
calls, other derivative securities of the Company or any derivative securities
that provide the economic equivalent of ownership of any of the Companys
securities or an opportunity, direct or indirect, to profit from any change in
the value of the Companys securities, (iii) using the Companys securities as
collateral in a margin account, and (iv) unless approved by the Audit
Committee, pledging Company securities as collateral for a loan (or modifying
an existing pledge).
Incentive Compensation Clawback Policy
We have adopted an Incentive Compensation Clawback Policy, which is intended
to comply with the requirements of Nasdaq Listing Standard 5608 implementing
Rule 10D-1 under the Exchange Act. In the event the Company is required to
prepare an accounting restatement of the Companys financial statements due to
material non-compliance with any financial reporting requirement under the
federal securities laws, the Company will recover, on a reasonably prompt
basis, the excess incentive-based compensation received by any covered
executive during the prior three fiscal years that exceeds the amount that the
executive otherwise would have received had the incentive-based compensation
been determined based on the restated financial statements.
Equity Compensation Plan Information
The following table sets forth certain information, as of December 31, 2023,
regarding the Companys Incentive Plans, as well as other stock options and
warrants previously issued by the Company as compensation for services.
Plan category Number of Weighted- Number of
Securities to Average Securities
be Issued Exercise Remaining
Upon Exercise Price of Available
of Outstanding Outstanding for Future
Options, Options, Issuance
Warrants Warrants Under Equity
and Rights and Rights Compensation
Plans
(Excluding
Securities
Reflected in
First Column)
Equity compensation plans approved by security holders 17,506,345 $ 1.79 4,646,686
Equity compensation plans not approved by security holders
Total 17,506,345 $ 1.79 4,646,686
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REPORT OF THE AUDIT COMMITTEE
No member of the Audit Committee is a professional accountant or auditor. The
members functions are not intended to duplicate or to certify the activities
of management and the independent registered public accounting firm. The Audit
Committee serves a board-level oversight role in which it provides advice,
counsel and direction to management and the auditors on the basis of the
information it receives, discussions with management and the auditors, and the
experience of the Audit Committees members in business, financial and
accounting matters.
The Audit Committee oversees the Companys financial reporting process on
behalf of the Board. The Companys management has the primary responsibility
for the financial statements and reporting process, including the Companys
system of internal controls. In fulfilling its oversight responsibilities, the
Audit Committee reviewed and discussed with management and the independent
auditor the audited financial statements included in the Annual Report on Form
10-K for the fiscal year ended December 31, 2023. This review included a
discussion of the quality and the acceptability of the Companys financial
reporting, including the nature and extent of disclosures in the financial
statements and the accompanying notes. The Audit Committee also reviewed the
progress and results of managements evaluation of the design and effectiveness
of its internal controls over financial reporting pursuant to Section 404 of
the Sarbanes-Oxley Act of 2002. The Audit Committee also reviewed with the
Companys independent registered public accounting firm, which is responsible
for expressing an opinion on the conformity of the audited financial
statements with accounting principles generally accepted in the United States,
its judgment as to the quality and the acceptability of the Companys financial
reporting and discussed with the auditor the matters required to be discussed
by the applicable requirements of the Public Company Accounting Oversight
Board (
PCAOB
) and the SEC. The Audit Committee has received from the independent auditor
the written disclosures and the letter required by the applicable requirements
of the PCAOB regarding the auditors communications with the audit committee
concerning independence, and has discussed with the independent auditor the
independent auditors independence.
In addition to the matters specified above, the Audit Committee discussed with
the Companys independent registered public accounting firm the overall scope,
plans and estimated costs of its audit. The Audit Committee met with the
independent registered public accounting firm periodically, with and without
management present, to discuss the results of the independent registered
public accounting firms examinations, the overall quality of the Companys
financial reporting and the independent registered public accounting firms
reviews of the quarterly financial statements, and drafts of the Company's
quarterly and annual reports.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the Companys audited
financial statements be included in the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 2023 for filing with the SEC.
Submitted by the Audit Committee of the Board of Directors
Richard I. Steinhart, Chairman
Jonathan F. Finn, C.F.A.
Stephen J. Galli, M.D.
H. Lawrence Remmel, Esq.
35
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GENERAL
About the Meeting - What do I need to do to virtually attend the Annual
Meeting via live audio webcast?
In order to attend and participate in the Annual Meeting live via the
Internet, you must register at
http://www.viewproxy.com/AtossaTherapeutics/2024/htype.asp
by 11:59 P.M. Eastern Time on June 24, 2024. If you are a registered holder,
you must register using the Virtual Control Number included in your proxy card
which will be mailed on or about May 23, 2024 to stockholders of record at the
close of business on the Record Date, May 9, 2024. If you hold your shares
beneficially through a bank or broker, you must provide a legal proxy from
your bank or broker during registration and you will be assigned a Virtual
Control Number in order to vote your shares during the Annual Meeting. If you
are unable to obtain a legal proxy to vote your shares, you will still be able
to virtually attend the Annual Meeting (but will not be able to vote your
shares) so long as you demonstrate proof of stock ownership. Instructions on
how to connect and participate via the Internet, including how to demonstrate
proof of stock ownership, are posted at
http://www.viewproxy.com/AtossaTherapeutics/2024/htype.asp
.
We will endeavor to answer as many stockholder-submitted questions as time
permits that comply with the Annual Meeting rules of conduct. We reserve the
right to edit profanity or other inappropriate language and to exclude
questions regarding topics that are not pertinent to meeting matters or
Company business. If we receive substantially similar questions, we may group
such questions together and provide a single response to avoid repetition.
The meeting webcast will begin promptly at 6:00 A.M. Pacific Time. Online
check-in will begin approximately 15 minutes before then, and we encourage you
to allow ample time for check-in procedures. If you experience technical
difficulties during the check-in process or during the meeting, please refer
to the contact information below. Additional information regarding the rules
and procedures for participating in the Annual Meeting will be set forth in
our meeting rules of conduct, which stockholders can view during the meeting
at the meeting website.
About the Meeting
Who do I contact if I am having technical problems voting or attending the
meeting?
If you have any questions about attending the virtual meeting, or otherwise
require technical assistance prior to or during the meeting, please contact:
VirtualMeeting@viewproxy.com or call 1-866-612-8937.
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OTHER BUSINESS
We know of no other matters to be submitted to a vote of stockholders at the
Annual Meeting. If any other matter is properly brought before the Annual
Meeting or any adjournments or postponements thereof, it is the intention of
the proxies named in the enclosed proxy card to vote the shares they represent
in their discretion. In order for any stockholder to nominate a candidate for
director election or to submit a proposal for other business to be acted upon
at any given annual meeting of stockholders, he or she must provide timely
written notice to our Corporate Secretary in the form prescribed by our
Bylaws, as described below.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 of the Exchange Act, stockholder proposals intended to
be included in the proxy statement for the 2025 Annual Meeting of Stockholders
must be received by our Corporate Secretary at the address set forth below no
later than the close of business (6:00 p.m. Pacific Time) on January 23, 2025.
The form and substance of such proposals must satisfy the requirements
established by the SEC, including Rule 14a-8 of the Exchange Act. The
submission of a stockholder proposal does not guarantee that it will be
included in the proxy statement.
Additionally, stockholders who intend to present a stockholder proposal, other
than pursuant to Rule 14a-8 under the Exchange Act, or nominate director
nominees for election at the 2025 Annual Meeting of Stockholders must provide
the Corporate Secretary with written notice of the proposal or nomination in
accordance with our Bylaws. Such notice must be received by the Corporate
Secretary at the address set forth below not later the close of business on
the 90th day nor earlier than the close of business on the 120th day prior to
the one-year anniversary date of the Annual Meeting;
provided, however
, that if the date of the 2025 Annual Meeting of Stockholders is advanced by
more than 30 days before or delayed by more than 60 days after the one-year
anniversary date of the Annual Meeting, then stockholders must provide notice
not later than the close of business on the later of the 90th day prior to the
scheduled date of such meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made. Therefore,
unless the date of the 2025 Annual Meeting of Stockholders is advanced by more
than 30 days before or delayed by more than 60 days after the one-year
anniversary of the Annual Meeting, notice of proposed nominations or proposals
(other than pursuant to Rule 14a-8 of the Exchange Act) must be received by
our Corporate Secretary not earlier than February 27, 2025 and not later than
the close of business (6:00 p.m. Pacific Time) on March 29, 2025. If a
stockholder fails to meet these deadlines or fails to satisfy the requirements
of Rule 14a-4 of the Exchange Act, we may exercise discretionary voting
authority under proxies we solicit to vote on any such proposal as we
determine appropriate. In addition to satisfying the deadlines in the advance
notice provisions of our Bylaws, a stockholder who intends to solicit proxies
pursuant to Rule 14a-19 of the Exchange Act in support of nominees submitted
under these advance notice provisions for the 2025 Annual Meeting of
Stockholders must provide the notice required under Rule 14a-19 of the
Exchange Act to our Corporate Secretary in writing not later than the close of
business (6:00 p.m. Pacific Time) on April 28, 2025.
Notice must be tendered in the proper form prescribed by our Bylaws. Proposals
or nominations not meeting the requirements set forth in our Bylaws will not
be entertained at the meeting. We reserve the right to reject, rule out of
order or take other appropriate action with respect to any nomination or
proposal that does not comply with these and other applicable requirements.
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DELIVERY OF PROXY MATERIALS
Our Annual Report on Form 10-K for the fiscal year ended December 31, 2023,
including our audited financial statements, accompanies this Proxy Statement.
We will provide a copy of our Annual Report on Form 10-K, free of charge, upon
the written or oral request of a stockholder.
Please send a written request to our Corporate Secretary at the address set
forth below or call the number below. Copies of these materials are also
available online through the SEC at
www.sec.gov
.
The Company may satisfy SEC rules regarding delivery of proxy statements and
annual reports by delivering a single copy of the proxy statement and annual
report to an address shared by two or more Company stockholders. This delivery
method can result in meaningful cost savings for the Company. In order to take
advantage of this opportunity, the Company may deliver only one copy of the
proxy statement and annual report to multiple stockholders who share an
address, unless contrary instructions are received prior to the mailing date.
Similarly, if you share an address with another stockholder and have received
multiple copies of our proxy materials, you may write or call us at the
address and phone number below to request delivery of a single copy of these
materials in the future. We will deliver promptly upon written or oral
request, a separate copy of the proxy statement and/or annual report to a
stockholder at a shared address to which a single copy of these documents was
delivered. If you hold stock as a record stockholder and prefer to receive
separate copies of a proxy statement or annual report either now or in the
future, please contact the Companys Corporate Secretary at 107 Spring Street,
Seattle, Washington 98104 or by telephone at (866) 893-4927. If your stock is
held through a brokerage firm or bank and you prefer to receive separate
copies of the proxy statement and/or annual report, or if you received
multiple copies of these materials and would prefer to receive a single copy,
either now or in the future, please contact your brokerage firm or bank.
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Appendix A
ATOSSA THERAPEUTICS, INC.
2020 STOCK INCENTIVE PLAN
(Most Recently Amended effective as of June 27, 2024)
SECTION 1.
GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Atossa Therapeutics, Inc. 2020 Stock Incentive
Plan (the
Plan
). The purpose of the Plan is to encourage and enable the officers, employees,
Non-Employee Directors and other key persons (including Consultants and
prospective employees) of Atossa Therapeutics, Inc. (the
Company
) and its Subsidiaries upon whose judgment, initiative and efforts the Company
largely depends for the successful conduct of its business to acquire a
proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Companys welfare will assure a closer
identification of their interests with those of the Company and its
stockholders, thereby stimulating their efforts on the Companys behalf and
strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
Act
means the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
Administrator
means either the Board or the compensation committee of the Board or a similar
committee performing the functions of the compensation committee and which is
comprised of not less than two Non-Employee Directors, each of whom is
intended to qualify as both a non-employee director as defined by Rule 16b-3
of the Exchange Act or any successor rule and an independent director under
the rules of any national securities exchange or automated quotation system on
which the Stock is listed, quoted or traded; provided that any action taken by
such committee shall be valid and effective, whether or not the members of
such committee at the time of such action are later determined not to have
satisfied the requirements for membership set forth in this definition or
otherwise provided in any charter of such committee.
Award
or
Awards
,
except where referring to a particular category of grant under the Plan, shall
include Incentive Stock Options, Non-Qualified Stock Options, Stock
Appreciation Rights, Restricted Stock Units, Restricted Stock Awards,
Unrestricted Stock Awards, Cash-Based Awards, Performance Share Awards and
Dividend Equivalent Rights.
Award Certificate
means a written or electronic document setting forth the terms and provisions
applicable to an Award granted under the Plan. Each Award Certificate is
subject to the terms and conditions of the Plan.
Board
means the Board of Directors of the Company.
Cash-Based Award
means an Award entitling the recipient to receive a cash-denominated payment.
Change in Control
means the occurrence, in a single transaction or in a series of related
transactions, of any one or more of the following events:
(a)
A transaction or series of transactions (other than an offering of Stock to
the general public through a registration statement filed with the Securities
and Exchange Commission) whereby any person or related group of persons (as
such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other
than the Company, any of its subsidiaries, an employee benefit plan maintained
by the Company or any of its subsidiaries or a person that, prior to such
transaction, directly or indirectly controls, is controlled by, or is under
common control with, the Company) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company possessing more than 50% of the total combined
voting power of the Companys securities outstanding immediately after such
acquisition; or
(b)
During any period of two consecutive years, individuals who, at the beginning
of such period, constitute the Board together with any new member(s) of the
Board (other than a member of the Board designated by a person who shall have
entered into an agreement with the Company to effect a transaction described
in subsection (a) or subsection (c) of this definition) whose election by the
Board or nomination for election by the Companys stockholders was approved by
a vote of at least two-thirds of the members of the Board then still in office
who either were members of
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the Board at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof; or
(c)
The consummation by the Company (whether directly involving the Company or
indirectly involving the Company through one or more intermediaries) of (x) a
merger, consolidation, reorganization, or business combination or (y) a sale
or other disposition of all or substantially all of the Companys assets in any
single transaction or series of related transactions or (z) the acquisition of
assets or stock of another entity, in each case other than a transaction:
(i)
which results in the Companys voting securities outstanding immediately before
the transaction continuing to represent (either by remaining outstanding or by
being converted into voting securities of the Company or the person that, as a
result of the transaction, controls, directly or indirectly, the Company or
owns, directly or indirectly, all or substantially all of the Companys assets
or otherwise succeeds to the business of the Company (the Company or such
person, the
Successor Entity
)) directly or indirectly, at least a majority of the combined voting power of
the Successor Entitys outstanding voting securities immediately after the
transaction, and
(ii)
after which no person or group beneficially owns voting securities
representing 50% or more of the combined voting power of the Successor Entity;
provided, however, that no person or group shall be treated for purposes of
this subsection (ii) as beneficially owning 50% or more of the combined voting
power of the Successor Entity solely as a result of the voting power held in
the Company prior to the consummation of the transaction; or
(d)
The Companys stockholders approve a liquidation or dissolution of the Company.
Notwithstanding the foregoing, if a Change in Control constitutes a payment
event with respect to any portion of an Award that provides for the deferral
of compensation and is subject to Section 409A of the Code, the transaction or
event described in subsection (a), (b), (c) or (d) with respect to such Award
(or portion thereof) must also constitute a change in control event, as
defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent required
by Section 409A. The Committee shall have full and final authority, which
shall be exercised in its discretion, to determine conclusively whether a
Change in Control of the Company has occurred pursuant to the above
definition, and the date of the occurrence of such Change in Control and any
incidental matters relating thereto; provided that any exercise of authority
is in conjunction with a determination of whether a Change in Control is a
change in control event as defined in Treasury Regulation Section
1.409A-3(i)(5) shall be consistent with such regulation.
Code
means the Internal Revenue Code of 1986, as amended, and any successor Code,
and related rules, regulations and interpretations.
Consultant
means any natural person that provides bona fide services to the Company, and
such services are not in connection with the offer or sale of securities in a
capital-raising transaction and do not directly or indirectly promote or
maintain a market for the Companys securities.
Dividend Equivalent Right
means an Award entitling the grantee to receive credits based on cash
dividends that would have been paid on the shares of Stock specified in the
Dividend Equivalent Right (or other award to which it relates) if such shares
had been issued to and held by the grantee.
Effective Date
means the date on which the Plan is approved by stockholders as set forth in
Section 21.
Exchange Act
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder.
Fair Market Value
of the Stock on any given date means the fair market value of the Stock
determined in good faith by the Administrator; provided, however, that if the
Stock is admitted to quotation on the National Association of Securities
Dealers Automated Quotation System (NASDAQ), NASDAQ Global Market or another
national securities exchange, the determination shall be made by reference to
market quotations. If there are no market quotations for such date, the
determination shall be made by reference to the last date preceding such date
for which there are market quotations.
Incentive Stock Option
means any Stock Option designated and qualified as an incentive stock option
as defined in Section 422 of the Code.
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Non-Employee Director
means a member of the Board who is not also an employee of the Company or any
Subsidiary.
Non-Qualified Stock Option
means any Stock Option that is not an Incentive Stock Option.
Option
or
Stock Option
means any option to purchase shares of Stock granted pursuant to Section 5.
Performance Criteria
means the criteria that the Administrator selects for purposes of establishing
the Performance Goal or Performance Goals for an individual for a Performance
Cycle. The Performance Criteria (which shall be applicable to the
organizational level specified by the Administrator, including, but not
limited to, the Company or a unit, division, group, or Subsidiary of the
Company) that will be used to establish Performance Goals may include one or
more of the following: earnings before interest, taxes, depreciation and
amortization, net income (loss) (either before or after interest, taxes,
depreciation and/or amortization), changes in the market price of the Stock,
economic value-added, funds from operations or similar measure, sales or
revenue, acquisitions or strategic transactions, operating income (loss), cash
flow (including, but not limited to, operating cash flow and free cash flow),
return on capital, assets, equity, or investment, stockholder returns, return
on sales, gross or net profit levels, productivity, expense, margins,
operating efficiency, customer satisfaction, working capital, earnings (loss)
per share of Stock, sales or market shares and number of customers, any other
criteria deemed appropriate by the Committee, any of which may be measured
either in absolute terms or as compared to any incremental increase or as
compared to results of a peer group.
Performance Cycle
means one or more periods of time, which may be of varying and overlapping
durations, as the Administrator may select, over which the attainment of one
or more Performance Criteria will be measured for the purpose of determining a
grantees right to and the payment of a Restricted Stock Award, Restricted
Stock Units, Performance Share Award or Cash-Based Award.
Performance Goals
means, for a Performance Cycle, the specific goals established in writing by
the Administrator for a Performance Cycle based upon the Performance Criteria.
Performance Share Award
means an Award entitling the recipient to acquire shares of Stock upon the
attainment of specified Performance Goals.
Prior Plan
means the Atossa Genetics, Inc. 2010 Stock Option and Incentive Plan, as
amended from time to time.
Restricted Stock Award
means an Award entitling the recipient to acquire, at such purchase price
(which may be zero) as determined by the Administrator, shares of Stock
subject to such restrictions and conditions as the Administrator may determine
at the time of grant.
Restricted Stock Unit
means a contractual right to receive in the future a share of Stock or the
Fair Market Value of a Share of Stock in cash.
Sale Price
means the value of the consideration payable, or otherwise to be received by
stockholders, per share of Stock in connection with a Change in Control.
Section 409A
means Section 409A of the Code and the regulations and other guidance
promulgated thereunder.
Stock
means the Common Stock, par value $0.18 per share, of the Company, subject to
adjustments pursuant to Section 3.
Stock Appreciation Right
means an Award entitling the recipient to receive shares of Stock having a
value equal to the excess of the Fair Market Value of the Stock on the date of
exercise over the exercise price of the Stock Appreciation Right multiplied by
the number of shares of Stock with respect to which the Stock Appreciation
Right shall have been exercised.
Subsidiary
means any corporation or other entity (other than the Company) in which the
Company has at least a 50 percent interest, either directly or indirectly.
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Ten Percent Owner
means an employee who owns or is deemed to own (by reason of the attribution
rules of Section 424(d) of the Code) more than 10 percent of the combined
voting power of all classes of stock of the Company or any parent or
subsidiary corporation.
Unrestricted Stock Award
means an Award of shares of Stock free of any restrictions.
SECTION 2.
ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND
DETERMINE AWARDS
(a)
Administration of Plan
.
(i)
The Plan shall be administered by the Administrator. Notwithstanding the
foregoing, (A) the full Board, acting by a majority of its members in office,
shall conduct the general administration of the Plan with respect to Awards
granted to Non-Employee Directors and, with respect to such Awards, the term
Administrator as used in the Plan shall be deemed to refer to the Board and
(B) the Administrator may delegate its authority hereunder to the extent
permitted by Section 2(a)(ii).
(ii)
To the extent permitted by applicable laws, the Administrator may from time to
time delegate to a committee of one or more members of the Board or one or
more officers of the Company the authority to grant or amend Awards or to take
other administrative actions pursuant to this Section 2; provided, however,
that in no event shall an officer of the Company be delegated the authority to
grant awards to, or amend awards held by, the following individuals: (A)
individuals who are subject to Section 16 of the Exchange Act or (B) officers
of the Company (or members of the Board) to whom authority to grant or amend
Awards has been delegated hereunder; provided, further, that any delegation of
administrative authority shall only be permitted to the extent it is
permissible under applicable laws. Any delegation hereunder shall be subject
to the restrictions and limits that the Administrator specifies at the time of
such delegation, and the Administrator may at any time rescind the authority
so delegated or appoint a new delegatee. At all times, the delegatee appointed
under this Section 2(a)(ii) shall serve in such capacity at the pleasure of
the Administrator.
(b)
Powers of Administrator
. The Administrator shall have the power and authority to grant Awards
consistent with the terms of the Plan, including the power and authority:
(i)
to select the individuals to whom Awards may from time to time be granted;
(ii)
to determine the time or times of grant, and the extent, if any, of Incentive
Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock Awards, Restricted Stock Units, Unrestricted Stock Awards,
Cash-Based Awards, Performance Share Awards and Dividend Equivalent Rights, or
any combination of the foregoing, granted to any one or more grantees;
(iii)
to determine the number of shares of Stock to be covered by any Award subject
to the limitations set forth in Section 2(f), Section 3(a) and Section 5(e);
(iv)
to determine and modify from time to time the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any Award, which
terms and conditions may differ among individual Awards and grantees, and to
approve the forms of Award Certificates;
(v)
to accelerate at any time the exercisability or vesting of all or any portion
of any Award; subject to the provisions of Section 5(b), to extend at any time
the period in which Stock Options may be exercised; and
(vi)
at any time to adopt, alter and repeal such rules, guidelines and practices
for administration of the Plan and for its own acts and proceedings as it
shall deem advisable; to interpret the terms and provisions of the Plan and
any Award (including related written instruments); to make all determinations
it deems advisable for the administration of the Plan; to decide all disputes
arising in connection with the Plan; and to otherwise supervise the
administration of the Plan.
Notwithstanding the foregoing, the Administrator shall not, without the
approval of the stockholders of the Company, have the authority to (i) amend
any outstanding Incentive Stock Option, Non-Qualified Stock Option or Stock
Appreciation Right to reduce its exercise price, or (ii) cancel any Incentive
Stock Option, Non-Qualified Stock Option or
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Stock Appreciation Right in exchange for cash or another Award when the
Incentive Stock Option, Non-Qualified Stock Option or Stock Appreciation Right
exercise price exceeds the Fair Market Value of the underlying shares of
Stock. All decisions and interpretations of the Administrator shall be binding
on all persons, including the Company and Plan grantees.
(c)
Award Certificate
. Awards under the Plan shall be evidenced by Award Certificates that set
forth the terms, conditions and limitations for each Award which may include,
without limitation, the term of an Award and the provisions applicable in the
event employment or service terminates.
(d)
Indemnification
. Neither the Board nor the Administrator, nor any member of either or any
delegate thereof, shall be liable for any act, omission, interpretation,
construction or determination made in good faith in connection with the Plan,
and the members of the Board and the Administrator (and any delegate thereof)
shall be entitled in all cases to indemnification and reimbursement by the
Company in respect of any claim, loss, damage or expense (including, without
limitation, reasonable attorneys fees) arising or resulting therefrom to the
fullest extent permitted by law and/or under the Companys articles or bylaws
or any directors and officers liability insurance coverage which may be in
effect from time to time and/or any indemnification agreement between such
individual and the Company.
(e)
Foreign Award Recipients
. Notwithstanding any provision of the Plan to the contrary, in order to
comply with the laws in other countries in which the Company and its
Subsidiaries operate or have employees or other individuals eligible for
Awards, the Administrator, in its sole discretion, shall have the power and
authority to: (i) determine which Subsidiaries shall be covered by the Plan;
(ii) determine which individuals outside the United States are eligible to
participate in the Plan; (iii) modify the terms and conditions of any Award
granted to individuals outside the United States to comply with applicable
foreign laws; (iv) establish subplans and modify exercise procedures and other
terms and procedures, to the extent the Administrator determines such actions
to be necessary or advisable (and such subplans and/or modifications shall be
attached to this Plan as appendices); provided, however, that no such subplans
and/or modifications shall increase the share limitations contained in Section
3(a) hereof; and (v) take any action, before or after an Award is made, that
the Administrator determines to be necessary or advisable to obtain approval
or comply with any local governmental regulatory exemptions or approvals.
Notwithstanding the foregoing, the Administrator may not take any actions
hereunder, and no Awards shall be granted, that would violate the Exchange Act
or any other applicable United States securities law, the Code, or any other
applicable United States governing statute or law.
SECTION 3.
STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a)
Stock Issuable
. The aggregate number of shares of Stock that may be issued pursuant to
Awards granted under the Plan shall be 30,000,000 shares (subject to any
increase or decrease pursuant to Section 3(b) and Section 3(c)) plus (i) any
shares of Stock that remain available for grant under the Prior Plan as of the
Effective Date and (ii) any shares of Stock underlying any awards under the
Prior Plan that, on or after the Effective Date, are forfeited, canceled, held
back upon exercise of an Option or settlement of such an award to cover the
exercise price or tax withholding, reacquired by the Company prior to vesting,
or satisfied without the issuance of Stock or otherwise terminated (other than
by exercise). Shares of Stock issued pursuant to Awards granted under the Plan
may be either authorized and unissued Stock or Stock held in or acquired for
the treasury of the Company or both. The maximum number of shares of Stock
with respect to which Incentive Stock Options may be granted under the Plan
shall be 30,000,000 shares. For purposes of the maximum number of shares
limit, the shares of Stock underlying any Awards that are forfeited, canceled,
held back upon exercise of an Option or settlement of an Award to cover the
exercise price or tax withholding, reacquired by the Company prior to vesting,
satisfied without the issuance of Stock or otherwise terminated (other than by
exercise) shall be added back to the shares of Stock available for issuance
under the Plan. In the event the Company repurchases shares of Stock on the
open market, such shares shall not be added to the shares of Stock available
for issuance under the Plan. Subject to such overall limitations, shares of
Stock may be issued up to such maximum number pursuant to any type or types of
Award; provided, however, that, other than in the case of Non-Employee
Directors, Stock Options or Stock Appreciation Rights with respect to no more
than 2,500,000 may be granted to any one individual grantee during any one
calendar year period.
(b)
Changes in Stock
. Subject to Section 3(c) hereof, if, as a result of any reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar change in the Companys capital stock, the outstanding
shares of Stock are increased or decreased or are exchanged for a different
number or kind of shares or other securities of the Company, or additional
shares or new or different shares or other securities of the Company or other
non-cash assets are distributed with respect to such shares of Stock or other
securities, or, if, as a result of any merger or consolidation, sale of all or
substantially all of the assets of the Company, the outstanding shares of
Stock are converted into or exchanged for securities of the Company or any
successor entity (or a parent or subsidiary thereof), the Administrator shall
make an appropriate or proportionate adjustment in (i) the maximum number of
shares reserved for
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issuance under the Plan, including the maximum number of shares that may be
issued in the form of Incentive Stock Options, (ii) the number of Stock
Options or Stock Appreciation Rights that can be granted to any one individual
grantee, (iii) the number and kind of shares or other securities subject to
any then outstanding Awards under the Plan, (iv) the repurchase price, if any,
per share subject to each outstanding Restricted Stock Award, and (v) the
exercise price for each share subject to any then outstanding Stock Options
and Stock Appreciation Rights under the Plan, without changing the aggregate
exercise price (i.e., the exercise price multiplied by the number of Stock
Options and Stock Appreciation Rights) as to which such Stock Options and
Stock Appreciation Rights remain exercisable. The Administrator shall also
make equitable or proportionate adjustments in the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards
to take into consideration cash dividends paid other than in the ordinary
course or any other extraordinary corporate event. The adjustment by the
Administrator shall be final, binding and conclusive. No fractional shares of
Stock shall be issued under the Plan resulting from any such adjustment, but
the Administrator in its discretion may make a cash payment in lieu of
fractional shares.
(c)
Change in Control and Other Transactions
. Except as the Administrator may otherwise specify with respect to particular
Awards in the relevant Award Certificate, in the case of and subject to the
consummation of a Change in Control, the Plan and all outstanding Awards
granted hereunder shall terminate, unless provision is made in connection with
the Change in Control in the sole discretion of the parties thereto for the
assumption or continuation of Awards theretofore granted by the successor
entity, or the substitution of such Awards with new awards of the successor
entity or parent thereof, with appropriate adjustment as to the number and
kind of shares and, if appropriate, the per share exercise prices, as such
parties shall agree (after taking into account any acceleration hereunder). In
the event of such termination, (i) the Company shall have the option (in its
sole discretion) to make or provide for a cash payment to the grantees holding
Options and Stock Appreciation Rights, in exchange for the cancellation
thereof, in an amount equal to the difference between (A) the Sale Price
multiplied by the number of shares of Stock subject to outstanding Options and
Stock Appreciation Rights (to the extent then exercisable (after taking into
account any acceleration hereunder) at prices not in excess of the Sale Price)
and (B) the aggregate exercise price of all such outstanding Options and Stock
Appreciation Rights; or (ii) each grantee shall be permitted, within a
specified period of time prior to the consummation of the Sale Event as
determined by the Administrator, to exercise all outstanding Options and Stock
Appreciation Rights held by such grantee. The Administrator shall also have
the discretion to accelerate the vesting of all other Awards.
(d)
Substitute Awards
. The Administrator may grant Awards under the Plan in substitution for stock
and stock based awards held by employees, directors or other service providers
of another corporation in connection with the merger or consolidation of the
employing corporation with the Company or a Subsidiary or the acquisition by
the Company or a Subsidiary of property or stock of the employing corporation.
The Administrator may direct that the substitute awards be granted on such
terms and conditions as the Administrator considers appropriate in the
circumstances. Any substitute Awards granted under the Plan shall not count
against the share limitation set forth in Section 3(a).
SECTION 4.
ELIGIBILITY
Grantees under the Plan will be such full or part-time officers and other
employees, Non-Employee Directors and key persons (including Consultants and
prospective employees) of the Company and its Subsidiaries as are selected
from time to time by the Administrator in its sole discretion.
SECTION 5.
STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the
Administrator may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options or
Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a subsidiary corporation
within the meaning of Section 424(f) of the Code. To the extent that any
Option does not qualify as an Incentive Stock Option, it shall be deemed a
Non-Qualified Stock Option.
Stock Options granted pursuant to this Section 5 shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Administrator
shall deem desirable. If the Administrator so determines, Stock Options may be
granted in lieu of cash compensation at the optionees election, subject to
such terms and conditions as the Administrator may establish.
(a)
Exercise Price
. The exercise price per share for the Stock covered by a Stock Option granted
pursuant to this Section 5 shall be determined by the Administrator at the
time of grant but shall not be less than 100
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percent of the Fair Market Value on the date of grant. In the case of an
Incentive Stock Option that is granted to a Ten Percent Owner, the option
price of such Incentive Stock Option shall be not less than 110 percent of the
Fair Market Value on the grant date.
(b)
Option Term
. The term of each Stock Option shall be fixed by the Administrator, but no
Stock Option shall be exercisable more than ten years after the date the Stock
Option is granted. In the case of an Incentive Stock Option that is granted to
a Ten Percent Owner, the term of such Stock Option shall be no more than five
years from the date of grant.
(c)
Exercisability; Rights of a Stockholder
. Stock Options shall become exercisable at such time or times, whether or not
in installments, as shall be determined by the Administrator at or after the
grant date. The Administrator may at any time accelerate the exercisability of
all or any portion of any Stock Option. An optionee shall have the rights of a
stockholder only as to shares acquired upon the exercise of a Stock Option and
not as to unexercised Stock Options.
(d)
Method of Exercise
. Stock Options may be exercised in whole or in part, by giving written or
electronic notice of exercise to the Company, specifying the number of shares
to be purchased. Payment of the purchase price may be made by one or more of
the following methods to the extent provided in the Option Award Certificate:
(i)
In cash, by certified or bank check or other instrument acceptable to the
Administrator;
(ii)
Through the delivery (or attestation to the ownership) of shares of Stock that
have been purchased by the optionee on the open market or that have been
beneficially owned by the optionee for at least six months and that are not
then subject to restrictions under any Company plan. Such surrendered shares
shall be valued at Fair Market Value on the exercise date;
(iii)
By the optionee delivering to the Company a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company cash or a check payable and acceptable to the Company for the purchase
price; provided that in the event the optionee chooses to pay the purchase
price as so provided, the optionee and the broker shall comply with such
procedures and enter into such agreements of indemnity and other agreements as
the Administrator shall prescribe as a condition of such payment procedure; or
(iv)
With respect to Stock Options that are not Incentive Stock Options, by a net
exercise arrangement pursuant to which the Company will reduce the number of
shares of Stock issuable upon exercise by the largest whole number of shares
with a Fair Market Value that does not exceed the aggregate exercise price.
Payment instruments will be received subject to collection. The transfer to
the optionee on the records of the Company or of the transfer agent of the
shares of Stock to be purchased pursuant to the exercise of a Stock Option
will be contingent upon receipt from the optionee (or a purchaser acting in
his stead in accordance with the provisions of the Stock Option) by the
Company of the full purchase price for such shares and the fulfillment of any
other requirements contained in the Option Award Certificate or applicable
provisions of laws (including the satisfaction of any withholding taxes that
the Company is obligated to withhold with respect to the optionee). In the
event an optionee chooses to pay the purchase price by previously-owned shares
of Stock through the attestation method, the number of shares of Stock
transferred to the optionee upon the exercise of the Stock Option shall be net
of the number of attested shares. In the event that the Company establishes,
for itself or using the services of a third party, an automated system for the
exercise of Stock Options, such as a system using an internet website or
interactive voice response, then the paperless exercise of Stock Options may
be permitted through the use of such an automated system.
(e)
Annual Limit on Incentive Stock Options
. To the extent required for incentive stock option treatment under Section
422 of the Code, the aggregate Fair Market Value (determined as of the time of
grant) of the shares of Stock with respect to which Incentive Stock Options
granted under this Plan and any other plan of the Company or its parent and
subsidiary corporations become exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000. To the extent that any
Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.
SECTION 6.
STOCK APPRECIATION RIGHTS
(a)
Exercise Price of Stock Appreciation Rights
. The exercise price of a Stock Appreciation Right shall not be less than 100
percent of the Fair Market Value of the Stock on the date of grant.
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(b)
Grant and Exercise of Stock Appreciation Rights
. Stock Appreciation Rights may be granted by the Administrator independently
of any Stock Option granted pursuant to Section 5 of the Plan.
(c)
Terms and Conditions of Stock Appreciation Rights
. Stock Appreciation Rights shall be subject to such terms and conditions as
shall be determined from time to time by the Administrator. The term of a
Stock Appreciation Right may not exceed ten years.
(d)
Exercisability; Rights of a Stockholder
. Stock Appreciation Rights shall become exercisable at such time or times,
whether or not in installments, as shall be determined by the Administrator at
or after the grant date. The Administrator may at any time accelerate the
exercisability of all or any portion of any Stock Appreciation Rights. A
grantee shall have the rights of a stockholder only as to shares acquired upon
the exercise of a Stock Appreciation Right and not as to unexercised Stock
Appreciation Rights.
(e)
Method of Exercise
. Stock Appreciation Rights may be exercised in whole or in part, by giving
written or electronic notice of exercise to the Company, specifying the number
of shares to be purchased. Payment of the purchase price may be made by one or
more of the following methods to the extent provided in the Stock Appreciation
Rights Award Certificate:
(i)
In cash, by certified or bank check or other instrument acceptable to the
Administrator;
(ii)
Through the delivery (or attestation to the ownership) of shares of Stock that
have been purchased by the grantee on the open market or that have been
beneficially owned by the grantee for at least six months and that are not
then subject to restrictions under any Company plan. Such surrendered shares
shall be valued at Fair Market Value on the exercise date;
(iii)
By the grantee delivering to the Company a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to the
Company cash or a check payable and acceptable to the Company for the purchase
price; provided that in the event the grantee chooses to pay the purchase
price as so provided, the grantee and the broker shall comply with such
procedures and enter into such agreements of indemnity and other agreements as
the Administrator shall prescribe as a condition of such payment procedure; or
(iv)
By a net exercise arrangement pursuant to which the Company will reduce the
number of shares of Stock issuable upon exercise by the largest whole number
of shares with a Fair Market Value that does not exceed the aggregate exercise
price.
Payment instruments will be received subject to collection. The transfer to
the grantee on the records of the Company or of the transfer agent of the
shares of Stock to be purchased pursuant to the exercise of a Stock
Appreciation Right will be contingent upon receipt from the grantee (or a
purchaser acting in his stead in accordance with the provisions of the Stock
Appreciation Right) by the Company of the full purchase price for such shares
and the fulfillment of any other requirements contained in the Stock
Appreciation Rights Award Certificate or applicable provisions of laws
(including the satisfaction of any withholding taxes that the Company is
obligated to withhold with respect to the grantee). In the event an grantee
chooses to pay the purchase price by previously-owned shares of Stock through
the attestation method, the number of shares of Stock transferred to the
grantee upon the exercise of the Stock Appreciation Right shall be net of the
number of attested shares. In the event that the Company establishes, for
itself or using the services of a third party, an automated system for the
exercise of Stock Appreciation Rights, such as a system using an internet
website or interactive voice response, then the paperless exercise of Stock
Appreciation Rights may be permitted through the use of such an automated
system.
SECTION 7.
RESTRICTED STOCK AWARDS
(a)
Nature of Restricted Stock Awards
. The Administrator shall determine the restrictions and conditions applicable
to each Restricted Stock Award at the time of grant. Conditions may be based
on continuing employment (or other service relationship) and/or achievement of
pre-established performance goals and objectives. The terms and conditions of
each such Award Certificate shall be determined by the Administrator, and such
terms and conditions may differ among individual Awards and grantees.
(b)
Rights as a Stockholder; Certificates for Restricted Stock
. Upon the grant of the Restricted Stock Award and payment of any applicable
purchase price, a grantee shall have the rights of a stockholder with respect
to
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the voting of the Restricted Stock, subject to such conditions contained in
the Restricted Stock Award Certificate. Restricted Stock granted pursuant to
the Plan may be evidenced in such manner as the Administrator shall determine.
Certificates or book entries evidencing shares of Restricted Stock must
include an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock. The Company may, in its sole
discretion, (a) retain physical possession of any stock certificate evidencing
shares of Restricted Stock until the restrictions thereon shall have lapsed
and/or (b) require that the stock certificates evidencing shares of Restricted
Stock be held in custody by a designated escrow agent (which may but need not
be the Company) until the restrictions thereon shall have lapsed, and that the
grantee deliver a stock power, endorsed in blank, relating to such Restricted
Stock.
(c)
Restrictions
. Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of except as specifically provided herein or
in the Restricted Stock Award Certificate. Except as may otherwise be provided
by the Administrator either in the Award Certificate or, subject to Section 18
below, in writing after the Award is issued, if a grantees employment (or
other service relationship) with the Company and its Subsidiaries terminates
for any reason, any Restricted Stock that has not vested at the time of
termination shall automatically and without any requirement of notice to such
grantee from or other action by or on behalf of, the Company be deemed to have
been reacquired by the Company at its original purchase price (if any) from
such grantee or such grantees legal representative simultaneously with such
termination of employment (or other service relationship), and thereafter
shall cease to represent any ownership of the Company by the grantee or rights
of the grantee as a stockholder. Following such deemed reacquisition of
unvested Restricted Stock that are represented by physical certificates, a
grantee shall surrender such certificates to the Company upon request without
consideration.
(d)
Vesting of Restricted Stock
. The Administrator at the time of grant shall specify the date or dates
and/or the attainment of pre-established performance goals, objectives and
other conditions on which the non-transferability of the Restricted Stock and
the Companys right of repurchase or forfeiture shall lapse. Subsequent to such
date or dates and/or the attainment of such pre-established performance goals,
objectives and other conditions, the shares on which all restrictions have
lapsed shall no longer be Restricted Stock and shall be deemed vested. Except
as may otherwise be provided by the Administrator either in the Award
Certificate or, subject to Section 18 below, in writing after the Award is
issued, a grantees rights in any shares of Restricted Stock that have not
vested shall automatically terminate upon the grantees termination of
employment (or other service relationship) with the Company and its
Subsidiaries and such shares shall be subject to the provisions of Section
7(c) above.
SECTION 8.
RESTRICTED STOCK UNITS
(a)
Nature of Restricted Stock Units
. The Administrator shall determine the restrictions and conditions applicable
to each Restricted Stock Unit at the time of grant. Conditions may be based on
continuing employment (or other service relationship) and/or achievement of
pre-established performance goals and objectives. The terms and conditions of
each such Award Certificate shall be determined by the Administrator, and such
terms and conditions may differ among individual Awards and grantees. Upon
vesting, the Restricted Stock Units shall be settled in the form of shares of
Stock. To the extent that an award of Restricted Stock Units is subject to
Section 409A, it may contain such additional terms and conditions as the
Administrator shall determine in its sole discretion in order for such Award
to comply with the requirements of Section 409A.
(b)
Election to Receive Restricted Stock Units in Lieu of Compensation
. The Administrator may, in its sole discretion, permit a grantee to elect to
receive a portion of future cash compensation otherwise due to such grantee in
the form of an award of Restricted Stock Units. Any such election shall be
made in writing and shall be delivered to the Company no later than the date
specified by the Administrator and in accordance with Section 409A and such
other rules and procedures established by the Administrator. Any such future
cash compensation that the grantee elects to receive in the form of Restricted
Stock Units shall be converted to a fixed number of Restricted Stock Units
based on the Fair Market Value of Stock on the date the compensation would
otherwise have been paid to the grantee if grantee had not elected to receive
such payment in the form of Restricted Stock Units. The Administrator shall
have the sole right to determine whether and under what circumstances to
permit such elections and to impose such limitations and other terms and
conditions thereon as the Administrator deems appropriate. The Administrator
shall determine the terms and conditions applicable to any Restricted Stock
Units that are elected to be received in lieu of cash compensation.
(c)
Rights as a Stockholder
. A grantee shall have the rights as a stockholder only as to shares of Stock
acquired by the grantee upon settlement of Restricted Stock Units; provided,
however, that the grantee may be credited with Dividend Equivalent Rights with
respect to the Restricted Stock Units, subject to such terms and conditions as
the Administrator may determine.
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(d)
Termination
. Except as may otherwise be provided by the Administrator either in the Award
Certificate or, subject to Section 18 below, in writing after the Award is
issued, a grantees right in all Restricted Stock Units that have not vested
shall automatically terminate upon the grantees termination of employment (or
cessation of service relationship) with the Company and its Subsidiaries for
any reason.
SECTION 9.
UNRESTRICTED STOCK AWARDS
(a)
Grant or Sale of Unrestricted Stock
. The Administrator may, in its sole discretion, grant (or sell at par value
or such higher purchase price determined by the Administrator) an Unrestricted
Stock Award under the Plan. Unrestricted Stock Awards may be granted in
respect of past services or other valid consideration, or in lieu of cash
compensation due to such grantee.
SECTION 10.
CASH-BASED AWARDS
(a)
Grant of Cash-Based Awards
. The Administrator may, in its sole discretion, grant Cash-Based Awards to
any grantee in such number or amount and upon such terms, and subject to such
conditions, as the Administrator shall determine at the time of grant. The
Administrator shall determine the maximum duration of the Cash-Based Award,
the amount of cash to which the Cash-Based Award pertains, the conditions upon
which the Cash-Based Award shall become vested or payable, and such other
provisions as the Administrator shall determine. Each Cash-Based Award shall
specify a cash-denominated payment amount, formula or payment ranges as
determined by the Administrator. Payment, if any, with respect to a Cash-Based
Award shall be made in accordance with the terms of the Award and may be made
in cash or in shares of Stock, as the Administrator determines.
SECTION 11.
PERFORMANCE SHARE AWARDS
(a)
Nature of Performance Share Awards
. The Administrator may, in its sole discretion, grant Performance Share
Awards independent of, or in connection with, the granting of any other Award
under the Plan. The Administrator shall determine whether and to whom
Performance Share Awards shall be granted, the Performance Goals, the periods
during which performance is to be measured, and such other limitations and
conditions as the Administrator shall determine.
(b)
Rights as a Stockholder
. A grantee receiving a Performance Share Award shall have the rights of a
stockholder only as to shares actually received by the grantee under the Plan
and not with respect to shares subject to the Award but not actually received
by the grantee. A grantee shall be entitled to receive shares of Stock under a
Performance Share Award only upon satisfaction of all conditions specified in
the Performance Share Award Certificate (or in a performance plan adopted by
the Administrator).
(c)
Termination
. Except as may otherwise be provided by the Administrator either in the Award
Certificate or, subject to Section 18 below, in writing after the Award is
issued, a grantees rights in all Performance Share Awards shall automatically
terminate upon the grantees termination of employment (or cessation of service
relationship) with the Company and its Subsidiaries for any reason.
SECTION 12.
[RESERVED]
SECTION 13.
DIVIDEND EQUIVALENT RIGHTS
(a)
Dividend Equivalent Rights
. A Dividend Equivalent Right may be granted hereunder to any grantee as a
component of an award of Restricted Stock Units, Restricted Stock Award or
Performance Share Award or as a freestanding award. The terms and conditions
of Dividend Equivalent Rights shall be specified in the Award Certificate.
Dividend equivalents credited to the holder of a Dividend Equivalent Right may
be paid currently or may be deemed to be reinvested in additional shares of
Stock, which may thereafter accrue additional equivalents. Any such
reinvestment shall be at Fair Market Value on the date of reinvestment or such
other price as may then apply under a dividend reinvestment plan sponsored by
the Company, if any. Dividend Equivalent Rights may be settled in cash or
shares of Stock or a combination thereof, in a single installment or
installments. A Dividend Equivalent Right granted as a component of an award
of Restricted Stock Units, Restricted Stock Award or Performance Share Award
may provide that such Dividend Equivalent Right shall be settled upon
settlement or payment of, or lapse of restrictions on, such other Award, and
that such Dividend Equivalent Right shall expire or be forfeited or annulled
under the same conditions as such other Award. A Dividend Equivalent Right
granted as a component of a Restricted Stock Units, Restricted Stock Award or
Performance Share Award may also contain terms and conditions different from
such other Award.
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(b)
Interest Equivalents
. Any Award under this Plan that is settled in whole or in part in cash on a
deferred basis may provide in the grant for interest equivalents to be
credited with respect to such cash payment. Interest equivalents may be
compounded and shall be paid upon such terms and conditions as may be
specified by the grant.
(c)
Termination
. Except as may otherwise be provided by the Administrator either in the Award
Certificate or, subject to Section 18 below, in writing after the Award is
issued, a grantees rights in all Dividend Equivalent Rights or interest
equivalents granted as a component of an award of Restricted Stock Units,
Restricted Stock Award or Performance Share Award that has not vested shall
automatically terminate upon the grantees termination of employment (or
cessation of service relationship) with the Company and its Subsidiaries for
any reason.
SECTION 14.
TRANSFERABILITY OF AWARDS
(a)
Transferability
. Except as provided in Section 14(b) below, during a grantees lifetime, his
or her Awards shall be exercisable only by the grantee, or by the grantees
legal representative or guardian in the event of the grantees incapacity. No
Awards shall be sold, assigned, transferred or otherwise encumbered or
disposed of by a grantee other than by will or by the laws of descent and
distribution or pursuant to a domestic relations order. No Awards shall be
subject, in whole or in part, to attachment, execution, or levy of any kind,
and any purported transfer in violation hereof shall be null and void.
(b)
Administrator Action
. Notwithstanding Section 14(a), the Administrator, in its discretion, may
provide either in the Award Certificate regarding a given Award or by
subsequent written approval that the grantee (who is an employee or member of
the Board) may transfer his or her Awards (other than any Incentive Stock
Options or Restricted Stock Units) to his or her immediate family members, to
trusts for the benefit of such family members, or to partnerships in which
such family members are the only partners, provided that the transferee agrees
in writing with the Company to be bound by all of the terms and conditions of
this Plan and the applicable Award. In no event may an Award be transferred by
a grantee for value.
(c)
Family Member
. For purposes of Section 14(b), family member shall mean a grantees child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships, any person sharing the grantees household (other than a tenant
of the grantee), a trust in which these persons (or the grantee) have more
than 50 percent of the beneficial interest, a foundation in which these
persons (or the grantee) control the management of assets, and any other
entity in which these persons (or the grantee) own more than 50 percent of the
voting interests.
(d)
Designation of Beneficiary
. Each grantee to whom an Award has been made under the Plan may designate a
beneficiary or beneficiaries to exercise any Award or receive any payment
under any Award payable on or after the grantees death. Any such designation
shall be on a form provided for that purpose by the Administrator and shall
not be effective until received by the Administrator. If no beneficiary has
been designated by a deceased grantee, or if the designated beneficiaries have
predeceased the grantee, the beneficiary shall be the grantees estate.
SECTION 15.
TAX WITHHOLDING
To the extent required by applicable federal, state, local or foreign law, the
Administrator may and/or a Participant shall make arrangements satisfactory to
the Company for the satisfaction of any withholding tax obligations that arise
with respect to any Award, or the issuance or sale of any shares of Stock. The
Company shall not be required to recognize any Participants rights under an
Award, to issue shares of Stock or to recognize the disposition of such shares
of Stock until such obligations are satisfied. To the extent permitted or
required by the Administrator, these obligations may or shall be satisfied by
the Company withholding cash from any compensation otherwise payable to or for
the benefit of a Participant, the Company withholding a portion of the shares
of Stock that otherwise would be issued to a Participant under such Award or
any other award held by the Participant or by the Participant tendering to the
Company cash or, if allowed by the Administrator, shares of Stock.
SECTION 16.
SECTION 409A AWARDS
To the extent that any Award is determined to constitute nonqualified deferred
compensation within the meaning of Section 409A (a
409A Award
), the Award shall be subject to such additional rules and requirements as
specified by the Administrator from time to time in order to comply with
Section 409A. In this regard, if any amount under a 409A Award is payable upon
a separation from service (within the meaning of Section 409A) to a grantee
who is then considered a specified employee (within the meaning of Section
409A), then no such payment shall be made prior to the
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date that is the earlier of (i) six months and one day after the grantees
separation from service, or (ii) the grantees death, but only to the extent
such delay is necessary to prevent such payment from being subject to
interest, penalties and/or additional tax imposed pursuant to Section 409A.
Further, the settlement of any such Award may not be accelerated except to the
extent permitted by Section 409A.
SECTION 17.
TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a)
a transfer to the employment of the Company from a Subsidiary or from the
Company to a Subsidiary, or from one Subsidiary to another Subsidiary; or
(b)
an approved leave of absence for military service or sickness, or for any
other purpose approved by the Company, if the employees right to re-employment
is guaranteed either by a statute or by contract or under the policy pursuant
to which the leave of absence was granted or if the Administrator otherwise so
provides in writing.
SECTION 18.
AMENDMENTS AND TERMINATION
The Board may, at any time, amend or discontinue the Plan and the
Administrator may, at any time, amend or cancel any outstanding Award for the
purpose of satisfying changes in law or for any other lawful purpose, but no
such action shall adversely affect rights under any outstanding Award without
the holders consent. To the extent required under the rules of any securities
exchange or market system on which the Stock is listed, to the extent
determined by the Administrator to be required by the Code to ensure that
Incentive Stock Options granted under the Plan are qualified under Section 422
of the Code, Plan amendments shall be subject to approval by the Company
stockholders entitled to vote at a meeting of stockholders. Nothing in this
Section 18 shall limit the Administrators authority to take any action
permitted pursuant to Section 3(b) or 3(c).
SECTION 19.
STATUS OF PLAN
The Plan is intended to constitute an unfunded plan. With respect to any
payment as to which a Participant has a fixed and vested interest but which
are not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any right that is greater than those of a
general unsecured creditor of the Company.
SECTION 20.
GENERAL PROVISIONS
(a)
Legend
. The Administrator may require each person receiving shares of Stock pursuant
to an Award under the Plan to represent to and agree with the Company in
writing that the Participant is acquiring the shares without a view to
distribution thereof. In addition to any legend required by the Plan, the
certificates for such shares may include any legend that the Administrator
deems appropriate to reflect any restrictions on transfer. All certificates
for shares of Stock delivered under the Plan shall be subject to such stop
transfer orders and other restrictions as the Administrator may deem advisable
under the rules, regulations and other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Stock is then listed or
any national securities exchange system upon whose system the Stock is then
quoted, any applicable federal or state securities law, and any applicable
corporate law, and the Administrator may cause a legend or legends to be put
on any such certificates to make appropriate reference to such restrictions.
(b)
Other Compensation Arrangements; No Employment Rights
. Nothing contained in this Plan shall prevent the Board from adopting other
or additional compensation arrangements, including trusts, and such
arrangements may be either generally applicable or applicable only in specific
cases. The adoption of this Plan and the grant of Awards do not confer upon
any employee any right to continued employment with the Company or any
Subsidiary.
(c)
No Right to Same Benefits
. The provisions of Awards need not be the same with respect to each
Participant, and such Awards to individual Participants need not be the same
in subsequent years.
(d)
Other Benefit
. No Award granted or paid out under the Plan shall be deemed compensation for
purposes of computing benefits under any retirement plan of the Company or its
Subsidiaries nor affect any benefit under any other benefit plan now or
subsequently in effect under which the availability or amount of benefits is
related to the level of compensation, except to the extent legally required
pursuant to the terms of such plan.
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(e)
Trading Policy Restrictions
. Option exercises and other Awards under the Plan shall be subject to the
Companys insider trading policies and procedures, as in effect from time to
time.
(f)
Forfeiture of Awards under Sarbanes-Oxley Act
. If the Company is required to prepare an accounting restatement due to the
material noncompliance of the Company, as a result of misconduct, with any
financial reporting requirement under the securities laws, then any grantee
who is one of the individuals subject to automatic forfeiture under Section
304 of the Sarbanes-Oxley Act of 2002 shall reimburse the Company for the
amount of any Award received by such individual under the Plan during the
12-month period following the first public issuance or filing with the United
States Securities and Exchange Commission, as the case may be, of the
financial document embodying such financial reporting requirement.
SECTION 21.
EFFECTIVE DATE OF PLAN
The Plan, as most recently amended, was approved by the Board on May 2, 2024
and shall become effective on the date it is approved by the stockholders of
the Company (the
Effective Date
). Subject to earlier termination as provided in Section 18, no new Awards may
be granted under the Plan on or after the 10
th
year anniversary of approval by the stockholders; provided, however, that
Awards outstanding on such date shall remain subject to the terms of the Plan
and any applicable Award Certificate; and, provided, further, that Incentive
Stock Options may not be granted under the Plan after the 10
th
year anniversary of the date of the Boards approval of the Plan.
SECTION 22.
GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be governed by,
and construed in accordance with, the laws of the State of Delaware, applied
without regard to conflict of law principles.
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ATOSSA THERAPEUTICS, INC. PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
VIRTUALLY JUNE 27, 2024 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED The
stockholder(s) hereby appoint(s) Steven C. Quay, M.D., Ph.D. and Heather Rees,
each as proxies and attorneys-in-fact, with the power to act without the other
and with the power to appoint his or her substitute, and hereby authorize(s)
each to represent and to vote, as designated on the reverse side of this form,
all of the shares of common stock of Atossa Therapeutics, Inc. that the
stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders
to be held live via the internet at 6:00 A.M. Pacific Time on June 27, 2024
and at any adjournment or postponement thereof. In order to virtually attend
the meeting, you must register at http://viewproxy.com/AtossaTherapeutics/2024/h
type.asp by 11:59 P.M. Eastern Time on June 24, 2024. On the day of the Annual
Meeting of Stockholders, if you have properly registered, you may enter the
meeting by clicking on the link provided and entering the password you
received via email in your registration confirmation. Further instructions on
how to attend and vote at the Annual Meeting of Stockholders are contained in
the Proxy Statement. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN. IF NO SUCH DIRECTION IS MADE BUT THE CARD IS SIGNED,
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF DIRECTORS
RECOMMENDATIONS. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF (INCLUDING, IF APPLICABLE, ON A MATTER
WHICH THE BOARD OF DIRECTORS DID NOT KNOW WOULD BE PRESENTED AT THE ANNUAL
MEETING BY A REASONABLE TIME BEFORE THE PROXY SOLICITATION WAS MADE OR FOR THE
ELECTION OF A SUBSTITUTE NOMINEE SELECTED BY THE BOARD OF DIRECTORS IF ANY
NOMINEE NAMED IN PROPOSAL 1 BECOMES UNAVAILABLE FOR ELECTION, UNABLE TO SERVE
OR FOR GOOD CAUSE WILL NOT SERVE). (Continued, and to be marked, dated and
signed, on the reverse side) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN
THE ENVELOPE PROVIDED. Important Notice Regarding the Availability of Proxy
Materials for the Annual Meeting of Stockholders to be held on June 27, 2024
The Notice, 2024 Proxy Statement, and Annual Report are available at:
http://www.viewproxy.com/AtossaTherapeutics/2024
The Board of Directors recommends you vote FOR all director nominees listed in
Proposal 1 and FOR Proposals 2, 3, 4, and 5. Proposal 1. Elect Class III
Directors: To be elected for terms expiring in 2027. PLEASE MARK YOUR VOTE IN
BLUE INK AS SHOWN HERE x Class III Nominees: 01 Shu-Chih Chen, Ph.D. 02 H.
Lawrence Remmel, Esq. o FOR ALL NOMINEES o WITHHOLD AUTHORITY FOR ALL NOMINEES
o FOR ALL EXCEPT (SEE INSTRUCTIONS BELOW) Instructions: To withhold authority
to vote for any individual nominee(s), mark For All Except and write the
name(s) for which you wish to withhold authority below. Proposal 2. Ratify
Ernst & Young LLP as the Companys independent registered public accounting
firm for the fiscal year ending December 31, 2024. o VOTE FOR o VOTE AGAINST o
ABSTAIN Address Change/Comments: (If you noted any Address Changes and/or
Comments above, please mark box) o VIRTUAL CONTROL NUMBER Proposal 3. Approval
of an amendment and restatement of the Companys 2020 Stock Incentive Plan, as
amended, to increase the shares available for issuance by 12,000,000 shares
and to extend the term thereof. o VOTE FOR o VOTE AGAINST o ABSTAIN Proposal
4. Approval of an amendment of the Companys Amended and Restated Certificate
of Incorporation to increase the number of authorized shares of the Companys
common stock from 175,000,000 to 350,000,000. o VOTE FOR o VOTE AGAINST o
ABSTAIN Proposal 5. Approval, on a non-binding, advisory basis, of the
compensation of the Companys named executive officers. o VOTE FOR o VOTE
AGAINST o ABSTAIN NOTE: To transact such other business as may properly come
before the meeting or any postponements or adjournments thereof. PLEASE SIGN,
DATE AND RETURN PROMPTLY IN THE ENCLOSED PRE- PAID ENVELOPE. Dated:
Signature(s) of Stockholder(s) Title Note: Please sign exactly as your name or
names appear on this card. Joint owners should each sign personally. If
signing as a fiduciary or attorney, please give your exact title. PLEASE
DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. VIRTUAL
CONTROL NUMBER PROXY VOTING INSTRUCTIONS Please have your 11 digit control
number ready when voting by Internet or Telephone INTERNET Vote Your Proxy on
the Internet: Go to www.FCRvote.com/ATOS Have your proxy card available when
you access the above website. Follow the prompts to vote your shares. (
TELEPHONE Vote Your Proxy by Phone: Call 1 (866) 402- 3905 Use any touch-tone
telephone to vote your proxy. Have your proxy card available when you call.
Follow the voting instructions to vote your shares. MAIL Vote Your Proxy by
Mail: Mark, sign, and date your proxy card, then detach it, and return it in
the postage-paid envelope provided. PLEASE DO NOT RETURN THE PROXY CARD IF YOU
ARE VOTING ELECTRONICALLY
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