UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
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of
the Securities Exchange Act of 1934
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Definitive Additional Materials | ||||
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Soliciting Material Pursuant to §240.14a-12 | ||||
NEOSTEM,
INC.
(Name of Registrant
as Specified in its Charter)
(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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NEOSTEM,
INC.
420
LEXINGTON AVENUE, SUITE 450
NEW
YORK, NEW YORK 10170
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
April 15,
2009
To
the Stockholders of NeoStem, Inc.:
The
Annual Meeting of Stockholders (the “Annual Meeting”) of NeoStem, Inc.
(“NeoStem,” or the “Company”) will be held at the Company's offices at 420
Lexington Avenue, Suite 450, New York, New York 10170, on May 8, 2009, at 4:00
p.m. (Eastern Daylight time) for the purpose of considering and acting upon the
following matters:
1. Election
of four directors;
2. Consideration
of and vote to approve the Company’s 2009 Equity Compensation Plan (the “2009
Plan”);
3. Ratification
of the appointment of Holtz Rubenstein Reminick LLP as the Company's independent
registered public accounting firm for the fiscal year ending December 31, 2009;
and
4. Any
other matters properly brought before the stockholders at the Annual
Meeting.
The Board
of Directors has fixed the close of business on March 10, 2009 as the record
date for the determination of stockholders entitled to notice of, and to vote
at, the Annual Meeting or any adjournment or adjournments thereof.
Your
proxy vote is important. Whether or not you expect to attend the Annual Meeting
in person, you are urged to mark, sign, date and return the enclosed proxy in
the enclosed prepaid envelope.
Your
attention is directed to the Proxy Statement which is set forth on the following
pages.
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By
Order of the Board of Directors,
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| /s/ Catherine M. Vaczy | |
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Catherine
M. Vaczy
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April
15, 2009
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Secretary
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-2-
NEOSTEM,
INC.
420
Lexington Avenue, Suite 450
New York,
New York 10170
PROXY
STATEMENT
ANNUAL
MEETING OF STOCKHOLDERS
May 8,
2009
SOLICITATION
OF PROXY
This
proxy statement and the enclosed proxy are being mailed on or about the
fifteenth day of April 2009, by and on behalf of the Board of Directors of
NeoStem, Inc. (“NeoStem,” or the “Company”), in connection with the solicitation
of proxies for the Annual Meeting of Stockholders (the “Annual Meeting”) to be
held at 4:00 p.m. (Eastern Daylight time) on May 8, 2009 at the principal
executive offices of the Company located at 420 Lexington Avenue, Suite 450, New
York, New York 10170 and at any adjournments thereof. The matters to be
considered and acted upon at such Annual Meeting are referred to in the
preceding Notice and are more fully discussed below. All shares represented by
proxies which are returned properly signed will be voted as specified on the
proxy card. If choices are not specified on the proxy card, the shares will be
voted IN FAVOR OF the Board's nominees for director named herein, the adoption
of the 2009 Plan and the ratification of the appointment of the Company's
auditors to audit the Company's financial statements for the 2009 fiscal year.
The By-Laws of the Company require that the holders of a majority of the total
number of shares entitled to vote at the Annual Meeting be represented in person
or by proxy in order for the business of the Annual Meeting to be transacted
with respect to such matters.
This
solicitation is being made by the Company. The cost of this solicitation will be
paid by the Company. In addition to soliciting proxies by mail, the Company may
make requests for proxies by telephone or messenger, or by personal solicitation
by officers, directors or employees of the Company at nominal cost to the
Company or by any one or more of the foregoing means. Additionally, the Company
has retained The Altman Group, Inc. (“The Altman Group”), 60 East 42nd Street,
Suite 916, New York, NY 10165, a proxy solicitation firm, to assist us in
soliciting your proxy. The Company will pay to The Altman Group a fee
of $10,000, plus reasonable out-of-pocket expenses, for proxy solicitation
services in connection with this Annual Meeting and certain other proxy
services. The Company will reimburse brokers, dealers, banks and others
authorized by the Company for their reasonable expenses in forwarding proxy
solicitation material to the beneficial owner of shares.
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
NEOSTEM, INC. TO BE HELD ON MAY 8, 2009. THIS
PROXY STATEMENT, THE ACCOMPANYING FORM OF PROXY CARD AND OUR ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008, INCLUDING FINANCIAL
STATEMENTS, ARE AVAILABLE AT HTTP://WWW.VFNOTICE.COM/NEOSTEM. Under new rules issued by
the Securities and Exchange Commission, we are providing access to our proxy
materials both by sending you this full set of proxy materials and by notifying
you of the availability of our proxy materials on the Internet.
REVOCATION
OF PROXY
A proxy
may be revoked by a stockholder by giving written notice of revocation to the
Secretary of the Company, by filing a later dated proxy with the Secretary at
any time prior to its exercise, or by voting in person at the Annual Meeting.
The presence at the meeting of a stockholder who has given a proxy does not
revoke the proxy unless the stockholder files a notice of revocation or votes by
written ballot.
STOCK
OUTSTANDING
On March
10, 2009, there were outstanding and entitled to vote at the Annual Meeting
7,749,358 shares of common stock, par value $0.001 per share (the "Common
Stock") and 10,000 shares of Series B Convertible Redeemable Preferred Stock,
par value $0.01 per share (the “Series B Preferred Stock”). Holders of record of
Common Stock at the close of business on March 10, 2009, will be entitled to one
vote for each share held on all matters properly coming before the Annual
Meeting. Holders of record of Series B Preferred Stock are entitled
to ten votes per share. Shares of Common Stock and shares of Series B
Preferred Stock vote together as one class. Unless the context
otherwise requires, all references to “stockholders” in this proxy statement
refer to holders of Common Stock and Series B Preferred Stock.
-3-
There is
no right to cumulate votes in the election of directors. Holders of the Common
Stock and Series B Preferred Stock will not have any dissenters' rights of
appraisal in connection with any of the matters to be voted on at the Annual
Meeting.
The
presence in person or by proxy of the holders of shares of Common Stock and
Series B Preferred Stock entitled to cast a majority of the votes of all shares
entitled to vote will constitute a quorum for purposes of conducting business at
the Meeting. Assuming that a quorum is present, directors will be elected by a
plurality vote. The approval of Proposal 2 and Proposal 3 will
require the affirmative vote of a majority of the votes cast. Pursuant to
Delaware corporate law, abstentions and broker non-votes will be counted for the
purpose of determining whether a quorum is present and do not have an effect on
the election of directors. Abstentions, but not broker non-votes, are treated as
shares present and entitled to vote, and will be counted as a "no" vote. Broker
non-votes are treated as not entitled to vote, and so reduce the absolute
number, but not the percentage of votes needed for approval of Proposal 2 and
Proposal 3.
PROPOSAL
ONE
ELECTION
OF DIRECTORS
Currently,
the Board of Directors consists of five members. On April 9, 2009, the Board of
Directors reduced the size of the Board from five to four members, effective as
of the date of the Annual Meeting.
Four
individuals have been nominated by the Board for election as directors at the
forthcoming Annual Meeting, to hold office until the next annual meeting and
until their successors are duly elected and have qualified. Shares represented
by proxies which are returned properly signed will be voted for the nominees
unless the stockholder indicates on the proxy that authority to vote the shares
is withheld for one or more or for all of the nominees listed. Should a nominee
become unable to serve as a director (which is not anticipated), the proxy will
be voted for the election of a substitute nominee who shall be designated by the
Board.
The
following table and related narrative sets forth certain information regarding
the nominees for director, current directors and executive officers of the
Company as of March 31, 2009. Directors are elected to hold office until the
next annual meeting of stockholders and until their successors are elected and
have qualified. There are no family relationships among any of the Company's
directors and officers. For information with respect to beneficial ownership of
Common Stock, see "Security Ownership of Certain Beneficial Owners and
Management."
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Name
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Age
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Position
and Year Position Held Since
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Ro Robin
L. Smith, M.D.
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44
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Chief
Executive Officer & Chairman of the Board since
2006
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Ma Mark
Weinreb (1)
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56
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Director
and President since 2003
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Lar Joseph
Zuckerman, M.D.
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57
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Director
since 2004
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Cat Richard
Berman
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66
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Director
since 2006
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Re Larry
A. May
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59
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Chief
Financial Officer since 2006
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Jos Catherine
M. Vaczy
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47
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Vice
President and General Counsel since 2005
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Ric Steven
S. Myers
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62
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Director
since
2006
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(1)
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Mr.
Weinreb’s term as a director of the Company will expire as of the Annual
Meeting. However, Mr. Weinreb continues to serve as
President.
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NOMINEES
FOR ELECTION AS DIRECTORS
Robin
L. Smith, M.D.
Chief
Executive Officer and Chairman of the Board
Dr. Robin
L. Smith joined the Company as Chairman of its Advisory Board in
September 2005 and, effective June 2, 2006, became the Chief Executive
Officer and Chairman of the Board. Dr. Smith, who received a medical degree
from Yale University in 1992 and a master’s degree in business administration
from the Wharton School in 1997, brings to the Company extensive experience in
medical enterprises and business development. From 2000 to 2003, Dr. Smith
served as President & Chief Executive Officer of IP2M, a multi-platform
media company specializing in healthcare. During her term, the company was
selected as being one of the 10 fastest growing technology companies in Houston.
IP2M was sold to a publicly-traded company in February 2003. Previously,
from 1998 to 2000, she was Executive Vice President and Chief Medical Officer
for HealthHelp, Inc., a National Radiology Management company that managed
14 percent of the healthcare dollars spent by large insurance
companies.
-4-
Dr. Smith
has acted as a senior advisor and investor to both publicly traded and privately
held companies including but not limited to China Biopharmaceutical Holdings,
Phase III Medical (the Company’s predecessor), the Madelin Fund, HC Innovations
Inc., Navstar Media Holdings, Strike Force, Health Quest, Red Lion Partners and
All American Pet, where she has played a significant role in restructuring and
or growing the companies. Dr. Smith served on the Board of Directors of two
privately held companies, Talon Air and Biomega, and also served on the
Chemotherapy Foundation Board of Trustees and The New York Theatre Ballet. She
currently serves on the Board of Trustees of the NYU Medical Center Board, is
Chairman of the Board of Directors for the New York University Hospital for
Joint Diseases where she heads up new development efforts and board member
recruitment, and serves on the Board of Choose Living. Dr. Smith is the
President and serves on the Board of Directors of The Stem for Life
Foundation.
Dr. Smith
was originally appointed to the Board of Directors in June 2006 pursuant to the
terms of the Securities Purchase Agreement in the June 2006 private
placement.
Joseph
Zuckerman, M.D.
Director
Joseph D.
Zuckerman joined the Board of Directors of the Company in January 2004 and
serves on the Compensation Committee, Audit Committee and Nominating Committee.
Since 1997, Dr. Zuckerman has been Chairman of the NYU Hospital for Joint
Diseases Department of Orthopedic Surgery and the Walter A. L. Thompson
Professor of Orthopedic Surgery at the New York University School of Medicine.
He is responsible for one of the largest departments of orthopedic surgery in
the country, providing orthopedic care at five different hospitals including
Tisch Hospital, the Hospital for Joint Diseases, Bellevue Hospital Center, the
Manhattan Veteran’s Administration Medical Center and Jamaica Hospital. He was
also the Director of the Orthopedic Surgery Residency Program from 1990 to 2006,
which trains more than 60 residents in a five year program.
Dr. Zuckerman
was recently elected First Vice President of the Board of Directors of the
American Academy of Orthopedic Surgeons. He has also held other leadership
positions in national organizations and was President of the American Shoulder
and Elbow Surgeons and Chair of the Council on Education for the American
Academy of Orthopedic Surgeons. His clinical practice is focused on shoulder
surgery and hip and knee replacement and he is the author or editor of ten
textbooks, 60 chapters and more than 200 articles in the orthopedic and
scientific literature.
Richard
Berman
Director
Richard
Berman joined the Board of Directors of the Company in November 2006,
serves as Chairman of the Compensation Committee and Chairman of the Audit
Committee and until March 2009, served as Chairman of the Nominating Committee.
Mr. Berman’s career spans over 35 years of venture capital, management and
merger & acquisitions experience. In the last five years, he has served
as a professional director and/or officer of about a dozen public and private
companies. He is currently CEO of Nexmed, a small public biotech company,
Chairman of National Investment Managers, a public company in pension
administration and investment management, Chairman of Candidate Resources, a
private company delivering HR services over the Web, and Chairman of Fortress
Technology Systems (homeland security). In addition to serving as a director of
NeoStem Mr. Berman also serves as a director of six other public companies:
Broadcaster, Inc., NexMed, Inc., National Investment Managers, Inc.,
Advaxis, Inc., Superfly Advertising Inc. and Easylink Services International,
Inc.
Pursuant
to the terms of the Securities Purchase Agreement in the June 2006 private
placement, the Company agreed to permit the lead investor, DCI Master LDC, to
designate one additional independent member to the Company’s Board of Directors
reasonably acceptable to the Company. This right terminated in 2007.
Mr. Berman was originally appointed to the Board of Directors in
November 2006 to serve as such designee.
-5-
Steven
S. Myers
Director
Steven S.
Myers joined the Board of Directors of the Company in November 2006 and
serves on the Compensation Committee, Audit Committee and Nominating Committee.
In March 2009, Mr. Myers became Chairman of the Nominating Committee.
Mr. Myers is the founder, and until his retirement in March 2007 was
the Chairman and CEO, of SM&A (Nasdaq:WINS), the world’s leading provider of
Competition Management Services. SM&A helps businesses win structured
competitive procurements and design successful transitions from proposals to
programs. Since 1982, SM&A has managed over 1,000 proposals worth more than
$340 billion for its clients and has achieved an 85% win rate on awarded
contracts. The company has also supported more than 140 programs with a better
than 93% client-satisfaction rating. SM&A routinely supports clients such as
Boeing, Lockheed Martin, Accenture, Raytheon, Northrop Grumman, Motorola, and
other Fortune 500 companies.
Mr. Myers
graduated from Stanford University with a B.S. in Mathematics and had a
successful career in the aerospace and defense sector supporting DoD and NASA
programs before founding SM&A. He has a strong technical background in
systems engineering and program management. Mr. Myers is also founder,
President and CEO of Dolphin Capital Holdings, Inc, which owns, operates and
leases business jet aircraft and does private equity investing in innovative
enterprises. A serial entrepreneur, Mr. Myers has spearheaded a number of
business innovations in aerospace & defense and in business aviation.
He is a highly accomplished aviator.
EXECUTIVE
OFFICERS
Robin
L. Smith, M.D.
Chief
Executive Officer and Chairman of the Board
See Dr.
Smith’s biographical information in the “Nominees for Election as Directors”
section of this proxy statement, above.
Mark
Weinreb
President
and Director
Mr. Weinreb
joined the Company on February 6, 2003 as a Director, Chief Executive
Officer and President and since June 2, 2006, has served as a Director and
President. He continues to serve as President and will continue to
serve as a Director through the Annual Meeting. In 1976,
Mr. Weinreb joined Bio Health Laboratories, Inc., a state-of-the-art
medical diagnostic laboratory providing clinical testing services for
physicians, hospitals, and other medical laboratories. He progressed to become
the laboratory administrator in 1978 and then an owner and the laboratory’s
Chief Operating Officer in 1982. Here he oversaw all technical and business
facets, including finance, laboratory science technology and all the additional
support departments. He left Bio Health Labs in 1989 when he sold the business
to a biotechnology company listed on the New York Stock Exchange. In 1992,
Mr. Weinreb founded Big City Bagels, Inc., a national chain of
franchised upscale bagel bakeries and became Chairman and Chief Executive
Officer of such entity. The company went public in 1995 and in 1999 he
redirected the company and completed a merger with an Internet service provider.
In 2000, Mr. Weinreb became the Chief Executive Officer of
Jestertek, Inc., a 12-year old software development company pioneering
gesture recognition and control using advanced inter-active proprietary video
technology. In 2002, he left Jestertek after arranging additional financing.
Mr. Weinreb received a Bachelor of Arts degree in 1975 from Northwestern
University and a Master of Science degree in 1982 in Medical Biology, from C.W.
Post, Long Island University.
Larry
A. May
Chief
Financial Officer
Mr. May,
the former Treasurer of Amgen (one of the world’s largest biotechnology
companies), initially joined the Company to assist with licensing activities in
September 2003. He became an officer of the Company upon the Company’s
acquisition of the business of NS California in January 2006. For the last 25
years, Mr. May has worked in the areas of life science and
biotechnology. From 1983 to 1998, Mr. May worked for Amgen as
Corporate Controller (1983 to 1988), Vice President/Corporate Controller/Chief
Accounting Officer (1988 to 1997), and Vice President/Treasurer (1997 to 1998).
At Amgen, Mr. May helped build Amgen’s accounting, finance and IT
organizations. From 1998 to 2000, Mr. May served as the Senior Vice
President, Finance & Chief Financial Officer of Biosource
International, Inc., a provider of biologic research reagents and assays.
From 2000 to May 2003, Mr. May served as the Chief Financial
Officer of Saronyx, Inc., a company focused on developing productivity
tools and secure communication systems for research scientists. From
August 2003 to January 2005, Mr. May served as the Chief
Financial Officer of NS California. In March 2005, Mr. May was
appointed CEO of NS California and in May 2005 he was elected to the Board
of Directors of NS California. He received a Bachelor of Science degree in
Business Administration & Accounting in 1971 from the University of
Missouri.
-6-
Catherine
M. Vaczy
Vice
President and General Counsel
Ms. Vaczy
joined the Company in April 2005 as Vice President and General Counsel.
Ms. Vaczy is responsible for overseeing the Company’s legal affairs. From
1997 through 2003, Ms. Vaczy held various senior positions at ImClone
Systems Incorporated, a then publicly-traded company developing a portfolio of
targeted biologic treatments to address the medical needs of patients with a
variety of cancers, most recently as its Vice President, Legal and Associate
General Counsel. While at ImClone, Ms. Vaczy served as a key advisor in the
day-to-day operation of the company and helped forge a number of important
strategic alliances, including a $1 billion co-development agreement for
Erbitux®, the company’s targeted therapy approved for the treatment of
metastatic colorectal and head and neck cancers. From 1988 through 1996,
Ms. Vaczy served as a corporate attorney advising clients in the life
science industry at the New York City law firm of Ross & Hardies. Ms.
Vaczy is Secretary and serves on the Board of Directors of The Stem for Life
Foundation. Ms. Vaczy received a Bachelor of Arts degree in 1983 from
Boston College and a Juris Doctor from St. John’s University School of Law in
1988.
CHAIRMAN,
SCIENTIFIC ADVISORY BOARD
Wayne
Marasco, M.D., Ph.D.
Dr. Marasco,
55, is an Associate Professor in the Department of Cancer Immunology &
AIDS at the Dana-Farber Cancer Institute and Associate Professor of Medicine at
Harvard Medical School. A former founding Director and long time Senior
Scientific Advisor to the Company, in November 2006 he relinquished his
position as Director to focus his time with the Company on heading and expanding
the Company’s new Scientific Advisory Board effective as of January 29,
2007. In addition, Dr. Marasco will assist in the Company’s initiatives of
establishing partnerships with leading academic institutions focused on stem
cell therapies and translational research and will help source intellectual
property that will keep the Company in the forefront of the adult stem cell
field.
Dr. Marasco
will continue to advise the Company on identifying and engaging leading
physicians and scientists who are increasingly revolutionizing adult stem cell
treatments in the fields of cardiology, radiation exposure, diabetes, blood
cancer and other cancers, wound and burn healing, skeletal repair, and
autoimmune disorders such as lupus, multiple sclerosis and rheumatoid
arthritis.
Dr. Marasco
is a licensed physician-scientist with training in Internal Medicine and
specialty training in infectious diseases. His clinical practice sub-specialty
is in the treatment of immunocompromised (cancer, bone marrow and solid organ
transplant) patients.
Dr. Marasco’s
research laboratory is primarily focused on the areas of antibody engineering
and gene therapy. New immuno- and genetic- therapies for HIV-1 infection / AIDS,
HTLV-1, the etiologic agent in Adult T-cell Leukemia, and other emerging
infectious diseases such as SARS and Avian Influenza are being studied.
Dr. Marasco’s laboratory is recognized internationally for its pioneering
development of intracellular antibodies (sFv) or “intrabodies” as a new class of
molecules for research and gene therapy applications. He is the author of more
than 70 peer reviewed research publications, numerous chapters, books and
monographs and has been an invited speaker at many national and international
conferences in the areas of antibody engineering, gene therapy and AIDS.
Dr. Marasco is also the Scientific Director of the National Foundation for
Cancer Research Center for Therapeutic Antibody Engineering (the “Center”). The
Center is located at the Dana-Faber Cancer Institute and will work with
investigators globally to develop new human monoclonal antibody drugs for the
treatment of human cancers.
In 1995,
Dr. Marasco founded IntraImmune Therapies, Inc., a gene therapy and
antibody engineering company. He served as the Chairman of the Scientific
Advisory Board until the company was acquired by Abgenix in 2000. He has also
served as a scientific advisor to several biotechnology companies working in the
field of antibody engineering, gene discovery and gene therapy. He is an
inventor on numerous issued and pending patent applications.
-7-
CORPORATE
GOVERNANCE
Director
Independence
Our
current Board members consist of Dr. Smith, Dr. Zuckerman, Mr. Berman, Mr. Myers
and Mr. Weinreb. The Board has determined that Messrs. Myers and Berman and Dr.
Zuckerman are independent applying the definition of independence under the
listing standards of the NYSE Amex and SEC regulations. Dr. Smith and
Mr. Weinreb are not independent.
Term
of Directors
Directors
hold office until the next annual meeting and until their successors are elected
and have qualified.
Committees
In
November 2006, our Board established separate Audit and Compensation Committees
and in May 2007 a separate Nominating and Governance Committee (“Nominating
Committee”) was established. Mr. Berman was appointed as chairman of
each such committee with Mr. Myers and Dr. Zuckerman serving as additional
members. In March 2009, Mr. Myers was appointed as chairman of the
Nominating Committee with Mr. Berman and Dr. Zuckerman serving as additional
members.
Audit
Committee
Our Audit
Committee consists of three directors, Mr. Berman (chairman), Mr. Myers and Dr.
Zuckerman. Each such member of the committee is independent applying the
definition of independence under the listing standards of the NYSE Amex and SEC
regulation. The Audit Committee met four times during the year ended December
31, 2008. In addition, the Audit Committee took action by written consent. The
Board has determined that Mr. Berman qualifies as an "audit committee financial
expert" as defined by Item 407(d)(5)(ii) of Regulation S-B, and Mr. Berman is
independent applying the definition of independence under the listing standards
of the NYSE Amex and SEC regulations. For information on Mr. Berman's
experience, please see "Nominees for Election as Directors - Richard
Berman."
Pursuant
to the terms of the Audit Committee charter, our Audit Committee is required to
consist of at least three "independent" directors of the Company and shall serve
at the pleasure of the Board. An "independent" director is defined as an
individual who (a) is not an officer or salaried employee or an affiliate of the
Company, (b) does not have any relationship that, in the opinion of the Board,
would interfere with his or her exercise of independent judgment as an Audit
Committee member, (c) meets the independence requirements of the SEC and the
NYSE Amex or such other securities exchange or market on which the Company's
securities are traded and (d) except as permitted by the SEC and the NYSE Amex
or such other securities exchange or market on which the Company's securities
are traded, does not accept any consulting, advisory or other compensatory fee
from the Company.
Our Audit
Committee has a charter that requires the committee to oversee our accounting
and financial reporting process, the Company's system of internal controls
regarding finance, accounting, legal compliance and ethics, and the audits of
the Company's financial statements. The primary duties of the Audit Committee
consist of, among other things:
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Serve
as an independent and objective party to monitor the Company's financial
reporting process, internal control system and disclosure control
system.
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Review
and appraise the audit efforts of the Company's independent
accountants.
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Assume
direct responsibility for the appointment, compensation, retention and
oversight of the work of the outside auditors and for the resolution of
disputes between the outside auditors and the Company's management
regarding financial reporting
issues.
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Provide
an open avenue of communication among the independent accountants,
financial and senior management and the
Board.
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-8-
Statement
of Audit Committee
The Audit
Committee of the Board offers this statement regarding the Company's audited
financial statements contained in its annual report on Form 10-K for the year
ended December 31, 2008 and regarding certain matters with respect to Holtz
Rubenstein Reminick LLP, the Company's independent auditors. This statement
shall not be deemed to be incorporated by reference by any general statement
incorporating by reference this proxy statement into any filing with the
Securities and Exchange Commission by the Company, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed to be filed with the Securities and Exchange
Commission.
The Audit
Committee has reviewed and discussed the audited financial statements for the
fiscal year ended December 31, 2008 with management. We have discussed with the
Company's independent auditors the matters required to be discussed by the
statement on Auditing Standards 61, as amended (AICPA, Professional Standards, Vol. 1. AU
section 380), as adopted by the Public Company Accounting Oversight Board
in Rule 3200T. We have received the written disclosures and the letter from the
Company's independent auditors required by applicable requirements of the Public
Company Accounting Oversight Board regarding the independent accountant’s
communications with the Audit Committee concerning independence, and have
discussed with the independent accountant the independent accountant's
independence. Based on the review and discussions referred to above, the Audit
Committee recommended to the Company's Board of Directors that the audited
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2008 for filing with the Securities and
Exchange Commission.
The
Audit Committee of the Board of Directors
Richard
Berman, Chairman
Steven S.
Myers
Joseph
Zuckerman
-9-
Compensation
Committee
Our
Compensation Committee consists of three directors, Mr. Berman (chairman), Mr.
Myers and Dr. Zuckerman. Each such member of the Compensation Committee is
independent applying the definition of independence under the listing standards
of the NYSE Amex and SEC regulations. The Compensation Committee met two times
during the year ended December 31, 2008. In addition, the Compensation Committee
took action by written consent.
Each
member of our Compensation Committee must (i) be an independent director of the
Company satisfying the independence requirements of the NYSE Amex and other
applicable regulatory requirements; (ii) qualify as an "outside director" under
Section 162(m) of the Internal Revenue Code, as amended; and (iii) meet the
requirements of a "non-employee director" for purposes of Section 16 of the
Securities Exchange Act of 1934, as amended.
The
Compensation Committee oversees the determination of all matters relating to
employee compensation and benefits and specifically reviews and approves
salaries, bonuses and equity-based compensation for our executive
officers.
We have
adopted a Compensation Committee charter which outlines the Compensation
Committee's primary duties which are to:
|
|
·
|
evaluate
the performance of the Chief Executive Officer in light of the Company's
goals and objectives and determine the Chief Executive Officer's
compensation based on this evaluation and such other factors as the
Committee shall deem appropriate;
|
|
|
·
|
approve
all salary, bonus, and long-term incentive awards for executive
officers;
|
|
|
·
|
approve
the aggregate amounts and methodology for determination of all salary,
bonus, and long-term incentive awards for all employees other than
executive officers;
|
|
|
·
|
review
and recommend equity-based compensation plans to the full Board and
approve all grants and awards
thereunder;
|
|
|
·
|
review
and approve changes to the Company's equity-based compensation plans other
than those changes that require stockholder approval under the plans, the
requirements of The NYSE Amex or any exchange on which the Company's
securities may be listed and/or any applicable
law;
|
|
|
·
|
review
and recommend to the full Board changes to the Company's equity-based
compensation plans that require stockholder approval under the plans, the
requirements of The NYSE Amex or any exchange on which the Company's
securities may be listed and/or any applicable
law;
|
|
|
·
|
review
and approve changes in the Company's retirement, health, welfare and other
benefit programs that result in a material change in costs or the benefit
levels provided;
|
|
|
·
|
administer
the Company's equity-based compensation plans;
and
|
|
|
·
|
approve,
as required by applicable law, the annual Committee report on executive
compensation (if required) for inclusion in the Company's proxy
statement.
|
The
Compensation Committee may form and delegate its authority to subcommittees as
appropriate. Additionally, the Chief Executive Officer may make recommendations
to the Compensation Committee relating to executive and director
compensation.
-10-
Director
Nomination Process
|
|
Nominating
Committee
|
Our
Nominating Committee consists of three directors. From May 2007
through March 2009, Mr. Berman was the chairman of the Nominating Committee
with Mr. Myers and Dr. Zuckerman serving as additional
members. In March 2009, Mr. Myers was appointed as chairman of the
Nominating Committee with Mr. Berman and Dr. Zuckerman serving as additional
members. The Nominating Committee is empowered by the Board of Directors to
recommend to the Board of Directors qualified individuals to serve on the
Company’s Board of Directors and to identify the manner in which the Nominating
Committee evaluates nominees recommended for the Board. All members of the
Nominating Committee of the Board of Directors have been determined to be
“independent directors” pursuant to the definition contained in the rules of the
NYSE Amex and SEC regulations. The Board of Directors has adopted a
Nominating Committee charter to govern its Nominating
Committee.
Qualifications
for Board Membership
The
charter and guidelines developed by the Nominating Committee describe the
minimum qualifications for nominees and the qualities or skills that are
necessary for directors to possess. Each nominee, among other factors
listed in the Committee’s guidelines:
|
|
·
|
should
possess the highest personal and professional standards of integrity and
ethical values;
|
|
|
·
|
must
be committed to promoting and enhancing the long term value of the Company
for its stockholders;
|
|
|
·
|
should
not have any conflicts of interest;
|
|
|
·
|
must
have demonstrated achievement in one of more fields of business,
professional, governmental, community, scientific or educational endeavor,
and possess mature and objective business judgment and
expertise;
|
|
|
·
|
must
have a general appreciation regarding major issues facing public companies
of a size and operational scope similar to the
Company;
|
|
|
·
|
must
have adequate time to devote to the Board and its committees;
and
|
|
|
·
|
is
expected to have sound judgment, derived from management or policy-making
experience that demonstrates an ability to function effectively in an
oversight role.
|
Process
for Identifying and Evaluating Nominees
The Board
believes the Company is well-served by its current directors. In the ordinary
course, absent special circumstances or a material change in the criteria for
Board membership, the Board will renominate incumbent directors who continue to
be qualified for Board service and are willing to continue as directors. If an
incumbent director is not standing for re-election, if a vacancy on the Board
occurs between annual stockholder meetings or if our Board believes it is in the
Company's best interests to expand its size, the Board may seek out potential
candidates for Board appointment who meet the criteria for selection as a
nominee and have the specific qualities or skills being sought. Nominees for
director must be discussed by the full Board and approved for nomination by the
affirmative vote of a majority of our Board, including the affirmative vote of a
majority of the independent directors. Two of our directors, Dr. Smith and Mr.
Berman, were originally nominated in 2006 pursuant to certain contractual rights
(see “Election of Directors - Nominees for Election as Directors).
The
Nominating Committee assists the Board by identifying qualified candidates for
director and recommends to the Board the director nominees for the annual
meeting of stockholders. The Board will conduct a process of making a
preliminary assessment of each proposed nominee based upon the resume and
biographical information, an indication of the individual's willingness to serve
and other background information. This information is evaluated against the
criteria set forth above and the Company's specific needs at that time. Based
upon a preliminary assessment of the candidate(s), those who appear best suited
to meet the Company's needs may be invited to participate in a series of
interviews, which are used as a further means of evaluating potential
candidates. On the basis of information learned during this process, the Board
will determine which nominee(s) to include in the slate of candidates that the
Board recommends for election at each annual meeting of the Company's
stockholders.
-11-
Procedures
for Considering Nominations Made by Shareholders
The
Nominating Committee’s charter and guidelines developed by the Nominating
Committee describe procedures for nominations to be submitted by shareholders
and other third-parties, other than candidates who have previously served on the
Board of Directors or who are recommended by the Board of Directors. The
guidelines state that a nomination must be delivered to the Secretary of the
Company at the principal executive offices of the Company not later than the
120th day prior to the date of the proxy statement for the preceding year’s
annual meeting; provided,
however, that if the date of the annual meeting is more than 30 days
after the anniversary date of the annual meeting, notice to be timely must be so
delivered a reasonable time in advance of the mailing of the Company’s proxy
statement for the annual meeting for the current year. The guidelines
require a nomination notice to set forth as to each person whom the proponent
proposes to nominate for election as a director, among other things: (a) all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors pursuant to Regulation 14A
under the Securities Exchange Act of 1934, as amended (including such person’s
written consent to being named in the proxy statement as a nominee and to
serving as a director it elected) and (b) information that will enable the
Nominating Committee to determine whether the candidate or candidates satisfy
the criteria established pursuant to the charter and the guidelines for director
candidates.
There
will be no differences in the manner in which the Board evaluates nominees
recommended by stockholders and nominees recommended by the Board or management,
except that no specific process shall be mandated with respect to the nomination
of any individuals who have previously served on the Board. In connection with
the Annual Meeting, the Board did not receive any nominations from any
stockholder or group of stockholders which owned more than 5% of the Common
Stock for at least one year.
Board
and Committee Meeting Attendance
During
the year ended December 31, 2008, the Board of Directors held seven meetings,
the Audit Committee held four meetings and the Compensation Committee held two
meetings. In addition, the Board of Directors, the Audit Committee
and the Compensation Committee each took action by written consent. The
Nominating Committee, formed in May 2007, held no meetings during the year ended
December 31, 2008. Each director attended (or participated by telephone in) at
least 75% of the total number of meetings of the Board and committees on which
he or she served.
Director
Attendance at Annual Meetings
Board
members are encouraged, but not required by any specific Board policy, to attend
the Company's Annual Meeting. All five then current and all incumbent Board
members attended the Company's Annual Meeting held in 2007.
Shareholder
Communications
The Board
has established a procedure that enables stockholders to communicate in writing
with members of the Board. Any such communication should be addressed to the
Company's Secretary and should be sent to such individual c/o the Company. Any
such communication must state, in a conspicuous manner, that it is intended for
distribution to the entire Board. Under the procedures established by the Board,
upon the Secretary's receipt of such a communication, the Company's Secretary
will send a copy of such communication to each member of the Board, identifying
it as a communication received from a stockholder. Absent unusual circumstances,
at the next regularly scheduled meeting of the Board held more than two days
after such communication has been distributed, the Board will consider the
substance of any such communication.
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY
VOTE "FOR" ITS SLATE OF DIRECTORS.
-12-
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information as to the number of shares of Common
Stock beneficially owned, as of March 10, 2009 by (i) each person known to
the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock, (ii) each current executive officer and director
and (iii) all current executive officers and directors of the Company as a
group. All shares are owned both beneficially and of record unless otherwise
indicated. Unless otherwise indicated, the address of each beneficial owner is
c/o NeoStem, Inc., 420 Lexington Avenue, Suite 450, New York, New
York 10170.
Beneficial
ownership is determined in accordance with the rules of the SEC and
generally includes any shares over which a person possesses sole or shared
voting or investment power. Except as otherwise indicated by footnote, to our
knowledge, the persons named in the table have sole voting and investment power
with respect to all shares of Common Stock beneficially owned by them. In
calculating the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of Common Stock subject to options
or warrants held by that person that are exercisable as of March 10, 2009 or
will become exercisable within 60 days thereafter (collectively, “currently
exercisable” options or warrants), are deemed outstanding, while such shares are
not deemed outstanding for purposes of calculating percentage ownership of any
other person. As of March 10, 2009, there were 7,749,358 shares of Common Stock
outstanding.
Number
and Percentage of Shares of Common Stock Owned*
|
Name and Address of Beneficial Holder
|
Number of Shares
Beneficially Owned
|
Percentage
of
Common Stock
Beneficially Owned
|
||||||
|
Dr. Robin
L. Smith
Chief
Executive Officer and Chairman of the Board
|
612,572
|
(1)
|
7.50
|
%
|
||||
|
Mark
Weinreb
President
and Director
|
272,423
|
(2)
|
3.43
|
%
|
||||
|
Catherine
M. Vaczy
Vice
President and General Counsel
|
275,279
|
(3)
|
3.50
|
%
|
||||
|
Larry
A. May
Vice
President and Chief Financial Officer
|
98,169
|
(4)
|
1.26
|
%
|
||||
|
Dr. Joseph
Zuckerman
Director
|
100,844
|
(5)
|
1.29
|
%
|
||||
|
Richard
Berman
Director
|
185,092
|
(6)
|
2.37
|
%
|
||||
|
Steven
S. Myers
Director
|
155,083
|
(7)
|
1.99
|
%
|
||||
|
RimAsia
Capital Management, L.P.
RimAsia
Capital Management GP, L.P.
RimAsia
Capital Management GP, Ltd.
Eric
H.C. Wei
1808
Hutchison House
10
Harcourt Road
Admiralty
Hong
Kong
|
1,577,500
|
(8)
|
19.90
|
%
|
||||
-13-
|
Southpoint
Capital Advisors, LP
Southpoint
GP, LP
Southpoint
Capital Advisors, LLC
Southpoint
GP, LLC
Robert
W. Butts
John
S. Clark II
623
Fifth Avenue, Suite 2601
New
York, NY 10022
|
775,000
|
(9)
|
9.60
|
%
|
||||
|
Fullbright
Finance Limited
Suzhou
Erye Economy and Trading Co. Ltd.
Shi
Mingsheng
Zhang
Jian
Ding
Weihua
Suite
1307, Tongmei Center
43
East Queen’s Road
Wanchai Hong
Kong
|
400,000
|
(10)
|
5.16
|
%
|
||||
|
Margula
Company LLC
Alan
Hamel
23679
Calabasas Road
Suite
663
Calabasas,
CA 91302
|
437,503
|
(11)
|
5.39
|
%
|
||||
|
All
Directors and Officers as a group (seven persons)
|
1,699,462
|
(12)
|
21.34
|
%
|
|
*
|
All
numbers in this table and footnotes thereto have been adjusted (as
appropriate) to reflect the one-for-ten reverse stock split effective
August 9, 2007.
|
|
(1)
|
Includes
currently exercisable options to purchase 369,000 shares of Common Stock
and currently exercisable warrants to purchase an aggregate of 45,825
shares of Common Stock.
|
|
(2)
|
Includes
currently exercisable options to purchase 205,500 shares of Common
Stock.
|
|
(3)
|
Includes
currently exercisable options to purchase 104,000 shares of Common Stock
and currently exercisable warrants to purchase 11,584 shares of Common
Stock.
|
|
(4)
|
Includes
currently exercisable options to purchase 56,500 shares of Common Stock
and also includes 51 shares of Common Stock owned directly by Mr. May’s
wife.
|
|
(5)
|
Includes
currently exercisable options to purchase 57,500 shares of Common Stock
and currently exercisable warrants to purchase 2,084 shares of Common
Stock.
|
|
(6)
|
Includes
currently exercisable options to purchase 36,000 shares of Common Stock
and currently exercisable warrants to purchase 11,364 shares of Common
Stock.
|
|
(7)
|
Includes
currently exercisable options to purchase 36,000 shares of Common Stock
and currently exercisable warrants to purchase 22,728 shares of Common
Stock.
|
-14-
|
(8)
|
This
information was obtained from a Schedule 13G, a Schedule 13D, Amendment
No. 1 to Schedule 13D/A and Amendment No. 2 to Schedule 13D/A
(collectively, the "Statements") filed with the Securities and Exchange
Commission on September 12, 2008, December 5, 2008, March 6, 2009 and
March 27, 2009, respectively, by the reporting persons pursuant to joint
filing agreements attached as exhibits thereto, other information provided
by the reporting persons and the Company’s records. The
reporting persons include RimAsia Capital Partners, L.P., a Cayman Islands
exempted limited partnership (“RimAsia LP”), RimAsia Capital Partners GP,
L.P., a Cayman Islands exempted limited partnership (“RimAsia GP”),
RimAsia Capital Partners GP, Ltd., a Cayman Islands exempted company
(“RimAsia Ltd.”), and Eric H.C. Wei (“Wei”). RimAsia GP is the
general partner of RimAsia LP. RimAsia Ltd. is the general partner of
RimAsia GP. Wei is the sole director of RimAsia
Ltd. The Schedule 13G relates to 1,000,000 shares of Common
Stock purchased by RimAsia LP in September 2008, and the Schedule 13D and
Schedule 13D/As relate to 400,000 shares of the Company that were pledged
by Suzhou Erye Economy and Trading Co. Ltd. (“EET”) to RimAsia LP as
collateral for a loan and 1,000,000 shares of Common Stock issuable upon
exercise of outstanding warrants issued to RimAsia in September 2008 (the
"RimAsia Warrants"). Pursuant to the Statements and the
Company’s records, beneficial ownership of the relevant Common Stock is as
follows: RimAsia LP, RimAsia GP, RimAsia Ltd. and Wei may be
deemed the beneficial owners of 2,400,000 shares of Common Stock,
1,000,000 shares of which are issuable upon exercise of outstanding
warrants. RimAsia LP, RimAsia GP, RimAsia Ltd. and Wei have the sole power
to vote and dispose of 2,000,000 shares of Common Stock beneficially
owned. RimAsia LP, RimAsia GP, RimAsia Ltd. and Wei have no
power to vote and have shared power to dispose of the 400,000 shares of
Common Stock and the 400,000 shares of Common Stock issuable upon exercise
of warrants first exercisable commencing May 26, 2009 pledged to RimAsia
LP as collateral for a loan to EET (see footnote 10,
below). Notwithstanding the foregoing, on December 18, 2008,
the Company and RimAsia entered into a letter agreement (the “Amendment”)
pursuant to which, among other things, the warrants issued to RimAsia in
September 2008 were amended to restrict their exercisability in the event
that such exercise would increase RimAsia’s beneficial ownership of
NeoStem’s Common Stock to above 19.9%. The restriction on exercisability
also applies to warrants issued in the April 2009 private placement (see
below) and as further discussed below. The warrants are not
exercisable to the extent that the number of shares of Common Stock to be
issued pursuant to such exercise would exceed, when aggregated with all
other shares of Common Stock beneficially owned by RimAsia at such time,
the number of shares of Common Stock which would result in RimAsia
beneficially owning in excess of 19.9% of NeoStem’s Common
Stock. Such restrictions on exercisability shall not apply upon
a merger, consolidation or sale of all or substantially all of the assets
of NeoStem if the shareholders of NeoStem prior to such transaction do not
own more than 50% of the entity succeeding to the business of NeoStem
after such transaction, and such restriction does not apply following any
exercise of any mandatory conversion or redemption rights by NeoStem. Such
restriction on exercise shall remain in place until such time as approval
of NeoStem’s shareholders shall be obtained. See “Certain
Relationships and Related Transactions” for information on the Company’s
proposed Merger and the NeoStem Class B Warrants and NeoStem Class C
Convertible Preferred Stock to be issued to RimAsia in connection with the
Company’s proposed Merger, which are also the subject of the Amendment and
the restriction on exercisability and conversion,
respectively. See also footnote (10), below, for a description
of securities issued of which RimAsia may be deemed the beneficial owner,
which would also be included, as appropriate, in any calculation under the
Amendment. Thus, as of March 10, 2009, RimAsia LP (together
with its affiliates) may be deemed to beneficially own approximately
1,577,500 shares of Common Stock, which represents approximately 19.9% of
the outstanding shares of the issued and outstanding shares of Common
Stock as of such date. See "Certain Relationships and Related
Transactions" and Footnote No. 10 below. On
April 9, 2009, as part of the April 2009 private placement (discussed in
“Certain Relationships and Related Transactions”), RimAsia acquired
400,000 units consisting of 400,000 shares of Series D Convertible
Redeemable Preferred Stock and warrants to purchase 4,000,000 shares of
Common Stock. Subject to stockholder approval and the rules of
the NYSE Amex, the warrants will become exercisable for a period of five
years and each share of Series D Convertible Redeemable Preferred Stock
will automatically convert into ten shares of Common Stock. See
“Certain Relationships and Related Transactions” for a description of the
April 2009 private
placement.
|
|
(9)
|
This
information was obtained from a Schedule 13G filed with the Securities and
Exchange Commission on August 21, 2007 by the reporting persons pursuant
to a joint filing agreement attached as an exhibit thereto and Company
records. In the Schedule 13G, the reporting persons stated that
the Schedule 13G was being filed on behalf of: Southpoint
Capital Advisors LLC, a Delaware limited liability company (“Southpoint CA
LLC”), Southpoint GP, LLC, a Delaware limited liability company
(“Southpoint GP LLC”), Southpoint Capital Advisors LP, a Delaware limited
partnership (“Southpoint Advisors”), Southpoint GP, LP, a Delaware limited
partnership (“Southpoint GP”), Robert W. Butts and John S. Clark
II. Southpoint CA LLC is the general partner of Southpoint
Advisors. Southpoint GP LLC is the general partner of Southpoint GP.
Southpoint GP is the general partner of Southpoint Fund LP, a Delaware
limited partnership (the “Fund”), Southpoint Qualified Fund LP, a Delaware
limited partnership (the “Qualified Fund”), and Southpoint Master Fund,
LP, a Cayman Islands exempted limited partnership (the “Master Fund”).
Southpoint Offshore Fund, Ltd., a Cayman Island exempted company (the
“Offshore Fund”), is also a general partner of the Master Fund. The
reporting persons further stated that the Schedule 13G related to
shares of Common Stock purchased by the Fund, the Qualified Fund and the
Master Fund. The reporting persons further stated that their
beneficial ownership was as follows: Southpoint CA LLC,
Southpoint GP LLC, Southpoint GP, Southpoint Advisors, Robert W. Butts and
John S. Clark II may be deemed the beneficial owners of 775,000 shares of
Common Stock, 450,000 of which are shares of Common Stock and 325,000 are
shares of Common Stock issuable upon exercise of
warrants. Southpoint CA LLC, Southpoint GP LLC, Southpoint GP,
Southpoint Advisors, Robert W. Butts and John S. Clark II have the sole
power to vote and dispose of the 775,000 shares of Common Stock
beneficially owned.
|
|
(10)
|
Fullbright
Finance Limited ("Fullbright") is a corporation organized under the laws
of the British Virgin Islands, Suzhou Erye Economy and Trading Co. Ltd.
("EET") is a limited liability company organized under the laws of the
PRC, and Shi Mingsheng, Chief Operating Officer of China
Biopharmaceuticals Holdings, Inc. (“CBH”), Zhang Jian, Chairman and Chief
Executive Officer of CBH, and Ding Weihua, a director of CBH, are
principal shareholders of each of Fullbright and
EET. Fullbright, EET, Shi Mingsheng, Zhang Jian and Ding Weihua
may be deemed the beneficial owners of 400,000 shares of Common Stock and
have shared power to vote and dispose of the 400,000 shares of Common
Stock beneficially owned. Beneficial ownership includes 400,000
shares of Common Stock pledged to RimAsia LP as collateral for a loan to
EET, and does not yet include 400,000 shares of Common Stock issuable upon
exercise of warrants, exercisable commencing May 26, 2009, which were also
pledged as collateral for such loan. This information was
obtained from the reporting person and the Company's
records.
|
-15-
|
(11)
|
Includes
currently exercisable warrants to purchase 437,503 shares of Common
Stock.
|
|
(12)
|
Includes
currently exercisable options and warrants to purchase an aggregate of
958,088 shares of Common
Stock.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
On
January 20, 2006, Mr. Robert Aholt, Jr. tendered his resignation
as Chief Operating Officer of the Company. In connection therewith, on
March 31, 2006, the Company and Mr. Aholt entered into a Settlement
Agreement and General Release. Pursuant to the settlement agreement, the Company
agreed to pay to Mr. Aholt the aggregate sum of $250,000 (less applicable
Federal and California state and local withholdings and payroll deductions),
payable over a period of two years in biweekly installments of $4,808 commencing
on April 7, 2006, except that the first payment was in the amount of
$9,615. In July 2006, this agreement was amended to provide for
semi-monthly payments of $10,417 for the remaining 21 months. In the event the
Company breaches its payment obligations under the Settlement Agreement and such
breach remains uncured, the full balance owed shall become due. The Company and
Mr. Aholt each provided certain general releases. Mr. Aholt also
agrees to continue to be bound by his obligations not to compete with the
Company and to maintain the confidentiality of Company proprietary information.
The payments under this agreement were completed in March 2008.
In
May 2006, the Company entered into an advisory agreement with Duncan
Capital Group LLC (“Duncan”), who together with DCI Master LDC and their
affiliates, are the former beneficial owners of more than 5% of the NeoStem
Common Stock. Pursuant to the advisory agreement, Duncan provided to the Company
on a non-exclusive best efforts basis, services as a financial consultant in
connection with any equity or debt financing, merger, acquisition as well as
with other financial matters. In return for these services, the Company was
paying to Duncan a monthly retainer fee of $7,500 (50% of which could be paid by
the Company in shares of Common Stock valued at fair market value) and
reimbursing it for its reasonable out-of-pocket expenses up to $12,000. Pursuant
to the advisory agreement, Duncan also agreed that it or an affiliate would act
as lead investor in a proposed private placement of securities, for a fee of
$200,000 in cash and 24,000 shares of restricted Common Stock. On June 2,
2006 (the “June 2006 private placement”), the Company entered into a
securities purchase agreement with 17 accredited investors (the “June 2006
investors”). DCI Master LDC, an affiliate of Duncan, acted as lead investor.
Duncan received its fee as described above. The Company issued to each
June 2006 investor shares of Common Stock at a per-share price of $4.40
along with a five-year warrant to purchase a number of shares of Common Stock
equal to 50% of the number of shares of Common Stock purchased by the
June 2006 investor (together with the Common Stock issued, the
“June 2006 securities”). The gross proceeds from this sale were $2,079,000.
In February 2007, the term of this agreement was extended through
December 2007. Additionally, it was amended to provide that the monthly
retainer fee be entirely paid by issuing to Duncan an aggregate of 15,000 shares
of Common Stock vesting monthly over the remaining term of the agreement. The
vesting of these shares was accelerated in July 2007 such that they were fully
vested and the advisory agreement was canceled in August 2007.
Pursuant
to the securities purchase agreement for the June 2006 private placement,
the Company expanded the size of its Board to four directors, and appointed
Dr. Robin L. Smith as Chairman of the Board and Chief Executive Officer of
the Company. Dr. Smith, who was previously Chairman of the Advisory Board
of the Company, purchased 5,000 shares of Common Stock and warrants
to purchase 2,400 shares of Common Stock pursuant to the terms of the securities
purchase agreement. The Company also agreed to expand the size of the Board upon
the initial closing under the securities purchase agreement to permit DCI Master
LDC to designate one additional independent member to the Company’s Board of
Directors reasonably acceptable to the Company. Richard Berman was originally
appointed to the Company’s Board of Directors in November 2006 to serve as
such designee. The securities purchase agreement also prohibits the Company from
taking certain action without the approval of a majority of the Board of
Directors for so long as the purchasers in the June 2006 private placement
own at least 20% of the Common Stock, including making loans, guarantying
indebtedness, incurring indebtedness that is not already included in a Board
approved budget on the date of the securities purchase agreement that exceeds
$100,000, encumbering the Company’s technology and intellectual property or
entering into new or amending employment agreements with executive officers. DCI
Master LDC was also granted access to Company facilities and personnel and given
other information rights. Pursuant to the securities purchase agreement, all
then current and future officers and directors of the Company were to not,
without the prior written consent of DCI Master LDC, dispose of any shares of
capital stock of the Company, or any securities convertible into, or
exchangeable for or containing rights to purchase, shares of capital stock of
the Company until three months after the effective date of the registration
statement filed with the SEC to register the securities issued in the
June 2006 private placement. Such registration statement was declared
effective on November 6, 2006.
-16-
Effective
as of July 1, 2006, the Company entered into an agreement for the use of
space at 420 Lexington Avenue, New York, New York. This space
was subleased from an affiliate of Duncan Capital Group LLC (a former financial
advisor to and an investor in the Company) and DCI Master LDC (the lead investor
in the Company’s June 2006 private placement). Pursuant to the terms
of the Agreement, the Company was obligated to pay $7,500 monthly for the space,
including the use of various office services and utilities. The agreement is on
a month to month basis, subject to a thirty day prior written notice requirement
to terminate. The space serves as the Company’s principal executive offices. On
October 27, 2006, the Company amended this agreement to increase the
utilized space for an additional payment of $2,000 per month. In May
2007, the Board of Directors approved an amendment to this agreement whereby, in
exchange for a further increase in utilized space, the Company would pay on a
monthly basis (i) $10,000 in cash and (ii) shares of the Company’s restricted
Common Stock with a value of $5,000 based on the fair market value of the Common
Stock on the date of issuance. Commencing in August 2007, the parties
agreed this monthly fee of $15,000 would be paid in cash on a month to month
basis. In February 2008, the Company was advised that a portion of this sublet
space was no longer available. The Company agreed to utilize the
smaller space for a monthly fee of $9,000 beginning in March 2008, as it was
expected that many of our employees would be spending a majority of their time
in Long Island, New York, helping to launch the ProHealthcare collection
center. On September 24, 2008, the Company entered into a license
agreement with a provider of executive office space (the “Licensor”) to use
office space at 420 Lexington Avenue, Suite 300, New York, NY 10170
(the “New Office Lease”). Upon entering into the New Office Lease
for office space at Suite 300, the Company further reduced the amount of office
space it was utilizing at Suite 450 in the same building with a corresponding
reduction in the monthly fee to $3,500 which was paid through December 31,
2008.
NeoStem
believed the combined office space at Suite 300 and Suite 450 at 420 Lexington
Avenue, New York, NY, would be sufficient for its near term needs; however,
sufficient space was again becoming available at Suite 450 and therefore 60
days’ prior written notice was given to Licensor in December 2008 that the
Company would be terminating the lease at Suite 300 effective February 1,
2009. It is anticipated that the Company will enter into an agreement
for the lease of executive office space at Suite 450, 420 Lexington Avenue, New
York, NY 10170 with a lease term through June 2013. Rental
and utility payments are anticipated to be in the aggregate approximate monthly
amount of $20,100. To help defray the cost of the lease, the Company
will license to third parties the right to occupy certain of the offices in
Suite 450 and use certain business services. Such license payments
are expected to total approximately $13,860 per month. The chief
executive officer of one such licensee is in an exclusive relationship with the
Company’s Chief Executive Officer. The lease is expected to be
entered into pursuant to an assignment and assumption of the original lease from
the original lessor thereof, DCI Master LDC (the lead investor in the Company’s
June 2006 private placement) and affiliates of DCI Master LDC and Duncan Capital
Group LLC (a former financial advisor to and an investor in the Company), for
which original lease a principal of such entities acted as guarantor (the
“Guarantor”). The Company will be credited with an amount remaining
as a security deposit with the landlord from such original lessor (the “Security
Deposit Credit”), be required to deposit an additional amount with the landlord
to replenish the original amount of security for the lease, and pay an amount
equal to the Security Deposit Credit to the Guarantor of the original lease,
such security deposit and payment of the Security Deposit Credit to the
Guarantor to be in the approximate aggregate amount of $157,100. The
Company believes this space should be sufficient for its needs for the
foreseeable future, although there can be no assurance that the new lease will
be entered into and the Company may then need to secure new executive office
space.
In
February 2007, Duncan also received 30,000 shares of Common Stock for advisory
services.
Pursuant
to the securities purchase agreement in the June 2006 private placement, on
June 2, 2006, Dr. Robin L. Smith was appointed Chief Executive Officer
and Chairman of the Board of the Company. See “Executive Compensation” and
“Employment Agreements, Post-Employment Payments and Equity Grants-Employment
Agreements.” In September 2005, Dr. Smith had entered into an advisory
agreement with the Company pursuant to which Dr. Smith agreed to become
Chairman of the Company’s advisory board. Under the terms of the advisory
agreement, Dr. Smith was required to provide various business and
scientific advice to the Company for a period of one year in consideration for
which she received 5,000 shares of Common Stock and warrants to purchase 2,400
shares of Common Stock. The warrants are exercisable at $8.00 per share, the
closing price of the Common Stock on the date of grant, and were scheduled to
vest as to 200 shares per month during the term of the agreement. Dr. Smith
received registration rights for such shares of Common Stock and Common Stock
underlying warrants. In January 2006, the Company and Dr. Smith
entered into a supplement to the advisory agreement to set forth certain
supplemental understandings with respect to a potential financing transaction.
Under the supplement to the advisory agreement, Dr. Smith agreed that
through April 30, 2006 (as such date was later extended) Dr. Smith
would provide additional business and financial advisory services beyond those
set forth in the original agreement. In return, Dr. Smith would receive
upon the closing of a financing (i) 2,000 shares of Common Stock and a cash
payment in the amount of $25,000 if the gross proceeds of the financing are at
least $500,000; (ii) 4,000 shares of Common Stock and a cash payment in the
amount of $50,000 if the gross proceeds of the financing are at least
$1,000,000; (iii) 8,000 shares of Common Stock and a cash payment in the
amount of $100,000 if the gross proceeds of the financing are at least
$2,000,000; (iv) 10,000 shares of Common Stock and a cash payment in the
amount of $150,000 if the gross proceeds of the financing are at least
$3,000,000; (v) 12,000 shares of Common Stock and a cash payment of
$175,000 if the gross proceeds of the financing are at least $3,500,000; and
(vi) 16,000 shares of Common Stock and a cash payment in the amount of
$200,000 if the gross proceeds of the financing are at least $4,000,000.
Dr. Smith was also entitled to receive a cash payment of $3,000 for each of
January, February and March 2006. The advisory agreement was
terminated in connection with Dr. Smith’s employment as Chief Executive
Officer and Chairman of the Board in June 2006.
-17-
In the
June 2006 private placement, Dr. Smith also purchased for aggregate
consideration of $22,000, units consisting of 5,000 shares of Common Stock and
five-year warrants to purchase 2,500 shares of Common Stock at a per share
purchase price of $8.00. In December 2005, Dr. Smith purchased from
the Company in the Westpark private placement, units consisting of a 9%
convertible promissory note in the principal amount of $12,500 and three year
Warrants to purchase 2,083 shares of Common Stock at a per share purchase price
of $12.00. WestPark Capital, Inc. (“WestPark”), the placement agent for
this private placement, was issued as compensation for this private placement
(i) 5,000 shares of Common Stock (2,500 shares on December 30, 2005
and 2,500 shares in January 2006); and (ii) Warrants to purchase an
aggregate of 8,334 shares of Common Stock (4,167 on December 30, 2005 and
4,167 in January 2006). WestPark assigned its rights to 1,458 of these
warrants to Starobin Partners, Inc., an entity in which Dr. Smith has
a 7% interest. Dr. Smith waived her rights to any interest in these
warrants.
On
August 11, 2006, Dr. Smith accepted the offer from the Company which
the Company extended to all holders of promissory notes acquired in the Westpark
private placement, pursuant to which (i) the $12,500 promissory note was
converted into 2,841 shares of Common Stock, (ii) the Company issued to her
568 shares of Common Stock, (iii) the exercise price of the warrants was
reduced from $12.00 to $8.00 and (iv) a new warrant was issued to purchase
2,083 shares of Common Stock at $8.00.
On
August 29, 2006, Ms. Vaczy and Dr. Zuckerman each purchased from
the then holder a $12,500 promissory note after which Ms. Vaczy and
Dr. Zuckerman accepted the offer from the Company which the Company
extended to all holders of promissory notes acquired in the Westpark private
placement, pursuant to which (i) each of the $12,500 promissory notes was
converted into 2,841 shares of Common Stock, (ii) the Company issued to
each of Ms. Vaczy and Dr. Zuckerman 568 shares of Common Stock, and
(iii) a new warrant was issued to each to purchase 2,083 shares of Common
Stock at $8.00.
During
July and August 2006, the Company raised an aggregate of $1,750,000
through the private placement to 34 accredited investors of 397,727 shares of
Common Stock at $4.40 per share and warrants to purchase 198,864 shares of
Common Stock at $8.00 per share (the “Summer 2006 private placement”). The terms
of the Summer 2006 private placement were substantially similar to the terms of
the June 2006 private placement. Prior to his appointment as a director and
as part of the Summer 2006 private placement, on August 30, 2006
Mr. Berman entered into a Subscription Agreement with the Company for the
purchase of units consisting of 22,727 shares of Common Stock at a purchase
price of $4.40 per share and warrants to purchase up to 11,364 shares of Common
Stock at a price per share of $8.00. Such warrants are exercisable immediately
and will expire on August 29, 2011.
Prior to
his appointment as a director and as part of the June 2006 private
placement, Mr. Myers entered into a Subscription Agreement with the Company
on June 2, 2006 for the purchase of units consisting of 45,455 shares of
Common Stock at a purchase price of $4.40 per share and warrants to purchase up
to 22,727 shares of Common Stock at a price per share of $8.00. Such warrants
are exercisable immediately and will expire on June 1, 2011.
In
January 2007, the Company had entered into a strategic alliance with UTEK,
a specialty finance company focused on technology transfer, as part of its plan
to move forward to expand its proprietary position in the adult stem cell
collection and storage arena as well as the burgeoning field of regenerative
medicine. The purpose of the agreement was to identify potential
technology acquisition opportunities that fit the Company’s strategic
vision. Through its strategic alliance agreements with companies in
exchange for their equity securities, UTEK assists such companies in enhancing
their new product pipeline by facilitating the identification and acquisition of
innovative technologies from universities and research laboratories worldwide.
UTEK is a business development company with operations in the United States,
United Kingdom and Israel. In January 2007, the Company issued 12,000
shares of Common Stock to UTEK, vesting as to 1,000 shares per month commencing
January 2007. UTEK is a former beneficial owner of more than 5%
of NeoStem’s Common Stock.
-18-
On
November 13, 2007, the Company entered into an acquisition agreement with UTEK
Corporation ("UTEK") and Stem Cell Technologies, Inc., a wholly-owned subsidiary
of UTEK ("SCTI"), pursuant to which the Company acquired all the issued and
outstanding common stock of SCTI in a stock-for-stock exchange. Pursuant to a
license agreement (the "License Agreement") between SCTI and the University of
Louisville Research Foundation ("ULRF"), SCTI owns an exclusive, worldwide
license to a technology developed by researchers at the University of Louisville
to identify and isolate rare stem cells from adult human bone marrow, called
VSELs (very small embryonic like) stem cells. Concurrent with the SCTI
acquisition, the Company entered into a sponsored research agreement (the
"Sponsored Research Agreement" or "SRA") with ULRF under which the Company will
support further research in the laboratory of Mariusz Ratajczak, M.D., Ph.D., a
co-inventor of the VSEL technology and head of the Stem Cell Biology Program at
the James Graham Brown Cancer Center at the University of Louisville. Certain
early obligations of the Company under the License Agreement and the SRA were
paid for by funds supplied by UTEK to SCTI prior to the
acquisition. In consideration for the acquisition, the Company issued
to UTEK 400,000 unregistered shares of its Common Stock for all the issued and
outstanding common stock of SCTI.
Under the
License Agreement, SCTI agreed to engage in a diligent program to develop the
VSEL technology. Certain license fees, milestone payments and royalties, and
specified payments in the event of sublicensing, are to be paid to ULRF from
SCTI, and SCTI is responsible for all payments for patent filings and related
applications. The License Agreement has an initial term ending the
later of (i) 20 years and (ii) the last to expire patent claim. The
License Agreement also contains certain provisions relating to "stacking,"
permitting SCTI to pay royalties to ULRF at a reduced rate in the event it is
required to also pay royalties to third parties exceeding a specified threshold
for other technology in furtherance of the exercise of its patent rights or the
manufacture of products using the VSEL technology. Portions of the
license may be converted to a non-exclusive license if SCTI does not diligently
develop the VSEL Technology or terminated entirely if SCTI chooses to not pay
for the filing and maintenance of any patents thereunder. The License Agreement
calls for the following specific payments: (i) reimbursement of $29,000 for all
expenses related to patent filing and prosecution incurred before the effective
date (“Effective Date”) of the license agreement (all of which has been paid);
(ii) a non-refundable prepayment of $20,000 creditable against the first $20,000
of patent expenses incurred after the Effective Date, due upon commencement of
research under the SRA, which will occur upon IRB approval and receipt of
samples; (iii) a non-refundable license issue fee of $46,000, due upon
commencement of research under the SRA; (iv) a non-refundable annual license
maintenance fee of $10,000 upon issuance of the licensed patent in the United
States; (v) a specified royalty percentage on net sales; (vi) specified
milestone payments and (vii) specified payments in the event of
sublicensing. Pursuant to a February 2009 amendment to the License
Agreement the payments under (ii) and (iii) became due and were paid in March
2009. To date, the Company has paid: (i) $29,000 for
reimbursement of all expenses related to patent filing and prosecution incurred
prior to the Effective Date; (ii) a nonrefundable prepayment of $20,000
creditable against the first $20,000 of patent expenses incurred after the
Effective Date; and (iii) a nonrefundable license issue fee equal to
$46,000.
SCTI has
the right to sublicense the VSEL technology in accordance with the terms of the
License Agreement. The License Agreement also sets forth the parties rights and
obligations with regard to patent prosecution, including that SCTI will take the
lead in connection therewith. SCTI can terminate the License Agreement for any
reason upon 60 days' prior written notice, and either party can terminate upon
30 days' prior written notice upon certain uncured material breaches of the
agreement or immediately upon certain bankruptcy related events. Portions of the
license may be converted to a non-exclusive license if SCTI does not diligently
develop the VSEL Technology or terminated entirely if SCTI chooses to not pay
for the filing and maintenance of any patents thereunder. ULRF retained the
right under the License Agreement to license and practice the VSEL Technology
for noncommercial purposes only, such as education, academic research, teaching
and public service, and also retained the right of publication subject to
certain confidentiality limitations and prior review by SCTI.
In
January and February 2007, the Company raised an aggregate of
$2,500,000 through the private placement of 250,000 units at a price of $10.00
per unit to 35 accredited investors (the “January 2007 private placement”).
Each unit was comprised of two shares of Common Stock, one redeemable seven-year
warrant to purchase one share of Common Stock at a purchase price of $8.00 per
share and one non-redeemable seven-year warrant to purchase one share of Common
Stock at a purchase price of $8.00 per share. The Company issued an aggregate of
500,000 shares of Common Stock, and warrants to purchase up to an aggregate of
500,000 shares of Common Stock at an exercise price of $8.00 per share. In the
January 2007 private placement, Dr. Smith purchased 11,000 units for
an aggregate consideration of $110,000, each unit comprised of two shares of
Common Stock, one redeemable seven-year warrant to purchase one share of Common
Stock at a purchase price of $8.00 per share and one non-redeemable seven-year
warrant to purchase one share of Common Stock at a purchase price of $8.00 per
share.
-19-
In the
January 2007 private placement, Ms. Vaczy purchased 1,000 units for an
aggregate consideration of $10,000, each unit comprised of two shares of Common
Stock, one redeemable seven-year warrant to purchase one share of Common Stock
at a purchase price of $8.00 per share and one non-redeemable seven-year warrant
to purchase one share of Common Stock at a purchase price of $8.00 per
share.
In August
2007, the Company raised an aggregate of $6,350,000 through a best efforts
underwritten public offering of 1,270,000 units at a price of $5.00 per unit
(the “August 2007 public offering”). Each unit consisted of one share of Common
Stock and a five year Class A warrant to purchase one-half a share of Common
Stock at a price of $6.00 per share. Thus, 1,000 units consisted of 1,000 shares
of Common Stock and Class A warrants to purchase 500 shares of Common Stock. The
aggregate number of units sold was 1,270,000, the aggregate number of shares of
Common Stock included within the units was 1,270,000 and the aggregate number of
Class A Warrants included within the units was 535,000. In the August 2007
public offering, Dr. Smith purchased 3,300 units for an aggregate consideration
of $16,500, each unit comprised of one share of Common Stock and one-half of a
five-year Class A Warrant to purchase one-half a share of Common Stock at a
purchase price of $6.00 per share.
In July
and August 2007, the Company borrowed an aggregate of $200,000 through the
issuance of short term bridge notes to support operations pending the closing of
the Company’s August 2007 public offering. These bridge notes provided that they
matured in six months from the date of issuance, subject to the Company’s right
to prepay, and bore interest at a rate of 15% per annum. Of the $200,000 so
borrowed and notes issued by the Company, Dr. Smith was issued a bridge note for
$125,000 and Mr. Berman was issued a bridge note for $50,000. On August 10,
2007, the Board authorized the repayment in full of the bridge notes and all
outstanding bridge notes were repaid in full plus an aggregate of accrued
interest of $976 on the total $200,000 of bridge notes issued.
In
October 2007, the Company entered into a three month consulting agreement with
Matthew Henninger pursuant to which he agreed to provide services as a business
consultant in areas requested by the Company, including financial analysis
projects and acquisition target analysis. As compensation for these services,
pursuant to the agreement he was entitled to receive a cash fee of $8,333
payable each month during the term of the agreement as well as a fee in the
event a transaction was effected during the term as a result of the performance
of the consultant’s services. In January 2008, the Company and the consultant
entered into an agreement whereby the consultant agreed to accept in
satisfaction of his final payment under the agreement, 4,902 shares of Common
Stock issued under and pursuant to the terms of the Company’s 2003 Equity
Participation Plan based on the fair market value of the Common Stock on the
date of approval by the Company’s Compensation Committee. No other fee was paid.
The consultant is currently in an exclusive relationship with the Company’s
CEO. In April 2009, the Company entered into a letter of intent with
Ceres Living, Inc. (of which Mr. Henninger is the chief executive officer), a
product development and direct marketing company selling products in the health
and wellness market, whereby Ceres would utilize various NeoStem publications as
support for the marketing of a nutritional supplement. The Company
and the Stem for Life Foundation, which the Company helped to found, would
receive certain payments in connection with the sales of the
supplement. Additionally, Ceres will market NeoStem adult stem cell
collection services and will receive a referral fee for each paid
collection.
In May
21, 2008, the Company completed a private placement of securities pursuant to
which $900,000 in gross proceeds was raised (the “May 2008 private placement”).
On May 20 and May 21, 2008, the Company entered into Subscription Agreements
(the "Subscription Agreements") with 16 accredited investors listed therein (the
"Investors"). Pursuant to the Subscription Agreements, the Company issued to
each Investor units comprised of one share of Common Stock and one redeemable
five-year warrant to purchase one share of Common Stock at a purchase price of
$1.75 per share, at a per-unit price of $1.20. The warrants are not
exercisable for a period of six months and are redeemable by the Company if the
Common Stock trades at a price equal to or in excess of $2.40 for a specified
period of time. In the May 2008 private placement, the Company issued an
aggregate of 750,006 units to Investors consisting of 750,006 shares of Common
Stock and 750,006 redeemable warrants, for an aggregate purchase price of
$900,000. In the May 2008 private placement, Dr. Smith purchased
16,667 units for an aggregate consideration of $20,000, each unit comprised of
one share of Common Stock and one redeemable five-year warrant to purchase one
share of Common Stock at a purchase price of $1.75 per share, at a per-Unit
price of $1.20.
In the
May 2008 private placement, Ms. Vaczy purchased 7,500 units for an
aggregate consideration of $9,000, each unit comprised of one share of Common
Stock and one redeemable five-year warrant to purchase one share of Common Stock
at a purchase price of $1.75 per share, at a per-Unit price of
$1.20.
-20-
On
November 2, 2008, the Company entered into an Agreement and Plan of Merger (the
“Merger Agreement”), with China Biopharmaceuticals Holdings, Inc., a Delaware
corporation ("CBH"), China Biopharmaceuticals Corp., a British Virgin Islands
corporation and wholly-owned subsidiary of CBH ("CBC"), and CBH Acquisition LLC,
a Delaware limited liability company and wholly-owned subsidiary of NeoStem
("Merger Sub"). The Merger Agreement contemplates the merger of CBH with and
into Merger Sub, with Merger Sub as the surviving entity (the “Merger”);
provided, that prior to the consummation of the Merger, CBH will spin off all of
its shares of capital stock of CBC to CBH’s stockholders in a distribution so
that the only material assets of CBH following such spin-off (the "Spin-off")
will be CBH's 51% ownership interest in Suzhou Erye Pharmaceuticals Company Ltd.
(“Erye”), a Sino-foreign joint venture with limited liability organized under
the laws of the People’s Republic of China (the "PRC"), plus net cash which
shall not be less than $550,000. Erye specializes in research and development,
production and sales of pharmaceutical products, as well as chemicals used in
pharmaceutical products. Erye, which has been in business for more than 50
years, currently manufactures over 100 drugs on seven Good Manufacturing
Practices (GMP) lines, including small molecule drugs.
Pursuant
to the terms and subject to the conditions set forth in the Merger Agreement,
all of the shares of common stock, par value $.01 per share, of CBH ("CBH Common
Stock"), issued and outstanding immediately prior to the effective time of the
Merger (the "Effective Time") will be converted into the right to receive, in
the aggregate, 7,500,000 shares of NeoStem Common Stock (of which 150,000 shares
will be held in escrow pursuant to the terms of an escrow agreement to be
entered into between CBH and NeoStem). Subject to the cancellation of
outstanding warrants to purchase shares of CBH Common Stock held by RimAsia
Capital Partners, L.P. ("RimAsia"), a principal stockholder of NeoStem (see
“Security Ownership of Certain Beneficial Owners and Management”) and the sole
holder of shares of Series B Convertible Preferred Stock, par value $0.01 per
share, of CBH (the "CBH Series B Preferred Stock"), all of the shares of CBH
Series B Preferred Stock issued and outstanding immediately prior to the
Effective Time will be converted into (i) 5,383,009 shares of NeoStem Common
Stock, (ii) 6,977,512 shares of Series C Convertible Preferred Stock, without
par value, of NeoStem, each with a liquidation preference of $1.125 per share
and convertible into shares of NeoStem Common Stock at a conversion price of
$.90 per share, and (iii) warrants to purchase 2,400,000 shares of NeoStem
Common Stock at an exercise price of $0.80 per share.
At the
Effective Time, in exchange for cancellation of all of the outstanding shares of
Series A Convertible Preferred Stock, par value $.01 per share, of CBH (the "CBH
Series A Preferred Stock") held by Stephen Globus, a director of CBH, and/or
related persons, NeoStem will issue to Mr. Globus and/or related persons an
aggregate of 50,000 shares of NeoStem Common Stock. NeoStem also will issue
60,000 shares of NeoStem Common Stock to Mr. Globus and 40,000 shares of NeoStem
Common Stock to Chris Peng Mao, the Chief Executive Officer of CBH, in exchange
for the cancellation and the satisfaction in full of indebtedness in the
aggregate principal amount of $90,000, plus any and all accrued but unpaid
interest thereon, and other obligations of CBH to Globus and Mao. NeoStem will
bear 50% of up to $450,000 of CBH's expenses post-merger, and satisfaction of
the liabilities of Messrs. Globus and Mao will count toward that obligation.
NeoStem also will issue 200,000 shares to CBC to be held in escrow, payable if
NeoStem successfully consummates its previously announced acquisition of control
of Shandong New Medicine Research Institute of Integrated Traditional and
Western Medicine Limited Liability Company and there are no further liabilities
above $450,000.
Also at
the Effective Time, subject to acceptance by the holders of all of the
outstanding warrants to purchase shares of CBH Common Stock (other than warrants
held by RimAsia), such warrants shall be canceled and the holders thereof shall
receive warrants to purchase up to an aggregate of up to 2,012,097 shares of
NeoStem Common Stock at an exercise price of $2.50 per share.
Upon
consummation of the transactions contemplated by the Merger, NeoStem will own
51% of the ownership interests in Erye, and Suzhou Erye Economy and Trading Co.
Ltd., a limited liability company organized under the laws of the PRC ("EET"),
will own the remaining 49% ownership interest. In connection with the execution
of the Merger Agreement, NeoStem, Merger Sub and EET have negotiated a revised
joint venture agreement (the "Joint Venture Agreement"), which, subject to
finalization and approval by the requisite PRC governmental authorities, will
become effective and will govern the rights and obligations with respect to
their respective ownership interests in Erye. Pursuant to the terms and
conditions of the Joint Venture Agreement, dividend distributions to EET and
NeoStem will be made in proportion to their respective ownership interests in
Erye; provided, however, that for the three-year period commencing on the first
day of the first fiscal quarter after the Joint Venture Agreement becomes
effective, (i) 49% of undistributed profits (after tax) will be distributed to
EET and lent back to Erye by EET for use by Erye in connection with the
construction of a new plant for Erye; (ii) 45% of the net profit (after tax)
will be provided to Erye as part of the new plant construction fund, which will
be characterized as paid-in capital for NeoStem's 51% interest in Erye; and
(iii) 6% of the net profit will be distributed to NeoStem directly for NeoStem’s
operating expenses. In the event of the sale of all of the assets of Erye or
liquidation of Erye, NeoStem will be entitled to receive the return of such
additional paid-in capital before distribution of Eyre’s assets is made based
upon the ownership percentages of NeoStem and EET, and upon an initial public
offering of Erye which raises at least 50,000,000 RMB (or approximately U.S.
$7,100,000), NeoStem will be entitled to receive the return of such additional
paid-in capital.
-21-
Pursuant
to the Merger Agreement, NeoStem has agreed to use its reasonable best efforts
to cause the members of NeoStem's Board of Directors to consist of the following
five members promptly following the Effective Time: Robin L. Smith (Chairman),
current Chairman of the Board and Chief Executive Officer of NeoStem; Madam
Zhang Jian, the Chairman and Chief Financial Officer of CBH, the General Manager
of Erye and a 10% holder of EET, and Richard Berman, Steven S. Myers and Joseph
Zuckerman, each a director of NeoStem (the latter three to be independent
directors, as defined under the NYSE Amex listing
standards). NeoStem’s intention thereafter will be to cause the
number of members constituting the NeoStem Board of Directors to be increased
from five to seven, in accordance with NeoStem’s by-laws, as amended, and to
fill the two vacancies created thereby with one additional independent director
(as defined under the NYSE Amex listing standards) to be selected by a
nominating committee of the NeoStem Board of Directors and with Eric Wei, the
managing partner of RimAsia.
The
Merger Agreement acknowledges that in its discretion the Compensation Committee
of NeoStem’s Board of Directors may grant bonuses of up to 1,000,000 shares or
options under any equity compensation plan in connection with the closing of the
transactions under the Merger Agreement. The Merger Agreement also
provides that options outstanding immediately prior to the closing of the
transactions under the Merger Agreement to purchase shares of Common Stock, in
the sole discretion of the Compensation Committee, may be amended, cancelled and
reissued or otherwise modified so that the exercise price shall be adjusted
downward to not less than $0.80 per share.
In
connection with execution of the Merger Agreement, each of the officers and
directors of CBH, RimAsia, Erye and EET have entered into a lock-up and voting
agreement, pursuant to which they have agreed to vote their shares of CBH Common
Stock in favor of the Merger and to the other transactions contemplated by the
Merger Agreement and are prohibited from selling their CBH Common Stock and/or
NeoStem Common Stock from November 2, 2008 through the expiration of the
six-month period immediately following the consummation of the transactions
contemplated by the Merger Agreement (the "Lock-Up Period"). Similarly, the
officers and directors of NeoStem have entered into a lock-up and voting
agreement, pursuant to which they have agreed to vote their shares of NeoStem
Common Stock in favor of the Issuance and are prohibited from selling their
NeoStem Common Stock during the Lock-Up Period.
Robin L.
Smith, the Company’s Chairman and Chief Executive Officer, and Steven Myers, a
member of the Company’s Board of Directors and Audit, Compensation and
Nominating Committees (of which Nominating Committee Mr. Myers became Chairman
in March 2009), are holders of CBH Common Stock. Dr. Smith is the
beneficial owner of 387,466 shares of CBH Common Stock that were acquired in
2005. Mr. Myers is the beneficial owner of 285,714 shares of CBH
Common Stock that were acquired in 2005. Accordingly, a special
committee of the Company’s Board of Directors (comprised of Mark Weinreb,
Richard Berman and Joseph Zuckerman) approved on behalf of the Company the
execution of the Merger Agreement and the transactions contemplated
thereby.
Certain
options to purchase shares of the Company’s Common Stock held by Dr. Smith
(130,000), Mr. Weinreb (20,000) and Ms. Vaczy (20,000) are scheduled to vest
upon the achievement of specific business milestones. These
milestones would be achieved upon consummation of the Merger and such options
would vest provided they are outstanding immediately prior
thereto. See “Outstanding Equity Awards at Fiscal
Year-End.”
The
transactions contemplated by the Merger Agreement are subject to the
authorization for listing on the NYSE Amex (or any other stock exchange on which
shares of NeoStem Common Stock are listed) of the shares to be issued in
connection with the Merger, approval by the stockholders of NeoStem and CBH,
approval of NeoStem's acquisition of 51% ownership interest in Erye by relevant
PRC governmental authorities, receipt of a fairness opinion and other customary
closing conditions set forth in the Merger Agreement. The Merger currently is
expected to be consummated in the second quarter of 2009.
In a
private placement of units by the Company in November 2008, Fullbright, the
principal shareholders of which are Madam Zhang Jian, Chairman and Chief
Financial Officer of CBH, Shi Mingsheng, Chief Operating Officer of CBH, and
Ding Weihua, a director of CBH, purchased 400,000 units for an aggregate
consideration of $400,000, each unit comprised of one share of Common Stock and
one redeemable five-year warrant to purchase one share of Common Stock at a
purchase price of $1.75 per share, at a per-unit price of $1.25. In
connection with Fullbright's purchase of the units, EET, the principal
shareholders of which are also the principal shareholders of Fullbright,
borrowed $500,000 from RimAsia, and the units acquired by Fullbright were
pledged to RimAsia as collateral therefor.
In order
to move forward certain research and development activities, strategic
relationships in various clinical and therapeutic areas as well as to support
activities related to the Company’s proposed Merger and other transactions and
other ongoing obligations of the Company, on February 25, 2009 and March 6,
2009, respectively, the Company issued promissory notes (the “Notes”) to RimAsia
in the principal amounts of $400,000 and $750,000, respectively. The
Notes bear interest at the rate of 10% per annum and are due and payable on
October 31, 2009 (the “Maturity Date”), except that all principal and accrued
interest on the Notes shall be immediately due and payable in the event the
Company raises over $10 million in equity financing prior to the Maturity
Date. The Notes contain standard events of default and in the event
of a default that is not subsequently cured or waived, the interest rate will
increase to a rate of 15% per annum and, at the option of RimAsia and upon
notice, the entire unpaid principal balance together with all accrued interest
thereon will be immediately due and payable. The Notes or any portion
thereof may be prepaid at any time and from time to time at the discretion of
the Company without premium or penalty.
In April
2009, the Company raised an aggregate of $11,000,000 through the private
placement of units at a price of $12.50 per unit (the “April 2009 private
placement”), with each unit consisting of one share of the Company's Series D
Convertible Redeemable Preferred Stock and ten warrants each to purchase one
share of Common Stock (resulting in an equivalent price of $1.25 per share of
Common Stock plus an attached warrant). The warrants have a per share exercise
price equal to $2.50 and are callable by the Company if the Common Stock trades
at a price at least equal to $3.50. Subject to the affirmative vote of the
Company's stockholders and the rules of the NYSE Amex, the warrants will become
exercisable for a period of five years and each share of Series D Convertible
Redeemable Preferred Stock will automatically convert into ten shares of Common
Stock. In the April 2009 private placement, RimAsia purchased 400,000
units for an aggregate consideration of $5,000,000. See footnote 8,
“Security Ownership of Certain Beneficial Owners and Management,” for a
description of a December 18, 2008 letter agreement between the Company and
RimAsia pursuant to which the exercisability of the warrants issued to RimAsia
in the April 2009 private placement (as well as certain other warrants) may be
limited. A portion of the proceeds from the April 2009 private
placement are being used to repay the principal and interest on the Notes issued
to RimAsia in February and March 2009 and certain other costs advanced by
RimAsia in connection with the Company's expansion activities in
China.
-22-
EQUITY
COMPENSATION PLAN INFORMATION
The
following table gives information about Common Stock that may be issued upon the
exercise of options, warrants and rights under NeoStem's 2003 Equity
Participation Plan as of December 31, 2008. This plan was NeoStem's
equity compensation plan in existence as of December 31, 2008.
|
Plan
Category
|
(a)
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
|
(b)
Weighted-
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights
|
(c)
Number of Securities
Remaining Available For
Future Issuance Under Equity
Compensation Plan (Excluding
Securities Reflected In Column
(a))
|
|||||||
|
Equity
Compensation Plans Approved by Stockholders
|
1,725,300
|
$
|
3.96
|
36,298
|
||||||
|
Equity
Compensation Plans Not Approved by Stockholders
|
0
|
0
|
0
|
|||||||
|
TOTAL
|
1,725,300
|
$
|
3.96
|
36,298
|
||||||
-23-
NEOSTEM
EXECUTIVE COMPENSATION
The
following table* sets forth all compensation paid during the years ended
December 31, 2008 and December 31, 2007 to NeoStem’s Chief Executive
Officer and the two other most highly compensated executive officers of NeoStem
whose total compensation was in excess of $100,000 (the “Named Executive
Officers”).
|
Name and Principal
Function
|
Year
|
Salary
|
Bonus
|
Stock
Awards(1)
|
Option
Awards(1)
|
All Other
Compensation
|
Total
Compensation
|
|||||||||||||||||||
|
Robin
L. Smith, Chief Executive
O
Officer
|
2008
|
$ | 261,893 | (2) | $ | 250,000 | (3) | $ | 76,998 | (4) | $ | 160,609 | (5) | $ | 23,528 | (6) | $ | 773,028 | ||||||||
|
D
|
2007
|
$ | 250,420 | $ | 187,500 | (7) | $ | 186,502 | (4)(8) | $ | 1,249,495 | (9) | $ | 22,440 | (10) | $ | 1,896,857 | |||||||||
|
MMark
Weinreb, President
|
2008
|
$ | 210,000 | $ | 30,000 | $ | 0 | (11) | $ | 347,294 | (12) | $ | 32,167 | (13) | $ | 619,461 | ||||||||||
|
2007
|
$ | 201,455 | $ | 32,397 | $ | 132,004 | (11) | $ | 79,395 | (14) | $ | 30,326 | (15) | $ | 475,577 | |||||||||||
|
Catherine
M. Vaczy, Vice President and General Counsel
|
2008
|
$ | 167,722 | (16) | $ | 10,000 | (7) | $ | 74,247 | (17) | $ | 155,509 | (18) | $ | 11,500 | (19) | $ | 418,977 | ||||||||
|
2007
|
$ | 148,156 | $ | 55,000 | (7) | $ | 136,128 | (17) | $ | 183,375 | (20) | $ | 11,250 | (19) | $ | 553,909 | ||||||||||
|
*
|
All
numbers in this table and footnotes thereto have been adjusted (as
appropriate) to reflect the one-for-ten reverse stock split effective as
of August 31, 2006 and the one-for-ten reverse stock split effective as of
August 9, 2007.
|
|
|
(1)
|
Amounts
shown are the amounts recognized for financial statement reporting
purposes during 2007 and 2008 in accordance with FAS 123(R) (as discussed
below). Effective January 1, 2006, NeoStem’s 2003 Equity
Participation Plan is accounted for in accordance with the recognition and
measurement provisions of Statement of Financial Accounting Standards
(“FAS”) No. 123 (revised 2004), Share-Based Payment (“FAS 123(R)”),
which replaces FAS No. 123, Accounting for Stock-Based Compensation,
and supersedes Accounting Principles Board Opinion (“APB”) No. 25,
Accounting for Stock Issued to Employees, and related interpretations. FAS
123 (R) requires compensation costs related to share-based payment
transactions, including employee stock options, to be recognized in the
financial statements. In addition, NeoStem adheres to the guidance set
forth within Securities and Exchange Commission (“SEC”) Staff Accounting
Bulletin (“SAB”) No. 107, which provides the Staff’s views regarding
the interaction between SFAS No. 123(R) and certain SEC
rules and regulations and provides interpretations with respect to
the valuation of share-based payments for public companies. In adopting
FAS 123(R), NeoStem applied the modified prospective approach to
transition. Under the modified prospective approach, the provisions of FAS
123 (R) are to be applied to new awards and to awards modified,
repurchased, or cancelled after the required effective date. Additionally,
compensation cost for the portion of awards for which the requisite
service has not been rendered that are outstanding as of the required
effective date shall be recognized as the requisite service is rendered on
or after the required effective date. The compensation cost for that
portion of awards shall be based on the grant-date fair value of those
awards as calculated for either recognition or pro-forma disclosures under
FAS 123. The general assumptions made in calculating the fair value of
options are set forth in Note 9 of the Company's notes to its audited
consolidated financial statements for the fiscal years ended December 31,
2008 and 2007. For more information on the option awards reflected in this
table, please see “Outstanding Equity Awards at Fiscal
Year-End.” See also “Certain Relationships and Related
Transactions” for a description of the Merger Agreement which provides
that options outstanding immediately prior to the closing of the
transactions under the Merger Agreement to purchase shares of Common
Stock, in the sole discretion of the Compensation Committee, may be
amended, cancelled and reissued or otherwise modified so that the exercise
price shall be adjusted downward to not less than $.80 per
share.
|
-24-
|
(2)
|
In
response to NeoStem’s efforts to conserve cash, Dr. Smith agreed to accept
shares of Common Stock in lieu of salary. Of the amount shown for salary
in 2008, $50,000 was paid to Dr. Smith through the issuance of 16,574
shares of Common Stock with a per share price equal to $1.70 per share
(net of shares in payment of applicable withholding taxes), and $24,437.50
was paid through the issuance of 33,941 shares of Common Stock with a per
share price equal to $0.72 per share (for which the Company agreed to pay
total withholding taxes), in each case the per share price being equal to
the closing price of the Common Stock on the date of approval by the
Compensation Committee of the Company’s Board of
Directors.
|
|
(3)
|
On
October 1, 2008, Dr. Smith earned a bonus of $250,000. In an effort to
help conserve the Company’s current cash, she has elected to defer
receiving payment of the bonus until a future undetermined date. The
Company recognized this bonus as compensation in 2008 and it is reflected
on the balance sheet as an accrued liability. Dr. Smith has
undertaken to distribute $25,000 of this bonus to Ms.
Vaczy.
|
|
(4)
|
On
September 27, 2007, Dr. Smith was granted a stock award of 30,000 shares
of Common Stock pursuant to an action of the Compensation Committee of the
Board of Directors, in her capacity as a member of the Board of Directors.
One-half of these shares (15,000) vested immediately on the date of grant
and the remaining one-half were scheduled to vest on the first anniversary
of the date of grant (the vesting of which was accelerated to August 28,
2008 in connection with Dr. Smith’s agreement to accept shares of Common
Stock in lieu of accrued and unpaid salary). Of the $186,502 compensation
value for Dr. Smith’s 2007 Stock Awards, $99,002 is attributable to such
shares granted in her capacity as a member of the Board of Directors. Of the $76,998
compensation value for Dr. Smith’s 2008 Stock Awards, $49,498 is
attributable to such shares granted in her capacity as a member of the
Board of Directors.
|
|
(5)
|
On February 27, 2008, Dr. Smith
was granted options to purchase 120,000 shares of Common Stock at an
exercise price of $1.63 per share, 90,000 of which vested during 2008 and
30,000 of which are scheduled to vest upon the achievement of a business
milestone, and on October 31, 2008 was granted options to purchase 5,000
shares of Common Stock at an exercise price of $1.13 per share, all of
which vested during 2008. An option to purchase 12,000 shares
of Common Stock at $25.00 per share issued to Dr. Smith on May 26, 2006
vested in its entirety on June 2, 2008. See “Outstanding Equity Awards at
Fiscal Year-End” for information regarding these
options.
|
|
(6)
|
Consists
of (i) a car allowance of $11,000 and (ii) approximately $12,500
paid by NeoStem on behalf of Dr. Smith for life
insurance.
|
|
(7)
|
On
September 27, 2007, Dr. Smith earned a bonus of $187,500. Dr. Smith
elected to receive $118,750 of this amount, and elected to have $34,000
distributed to certain employees of NeoStem including its Vice President
and General Counsel, Catherine Vaczy, who received $5,000, its Chief
Financial Officer, Larry May, who received $4,000 and its Vice President
of Operations and Corporate Strategy, Renee Cohen, who received $4,000, in
recognition of their efforts on behalf of NeoStem. The payment to Dr.
Smith of the balance of $34,750 was deferred to 2008. In 2008, Dr. Smith
was paid $24,750 of this amount and elected to have $10,000 distributed to
Vice President and General Counsel, Catherine Vaczy, in recognition of her
continuing efforts on behalf of NeoStem.
|
|
(8)
|
On
December 5, 2006, Dr. Smith was granted a stock award of 30,000
shares of Common Stock, of which 10,000 shares vested immediately,
pursuant to an action by the Compensation Committee of the Board of
Directors. The remaining 20,000 shares vested in August 2007 upon the
closing of NeoStem’s August 2007 public offering.
|
|
(9)
|
On January 26, 2007, Dr. Smith
was granted options to purchase 55,000 shares of Common Stock at an
exercise price of $5.00 per share, all of which vested during 2007, and on
September 27, 2007 was granted options to purchase 250,000 shares of
Common Stock at an exercise price of $4.95 per share, 150,000 of which
vested during 2007 and 100,000 of which are scheduled to vest upon the
achievement of a business milestone. An option to purchase
5,000 shares of Common Stock at $6.00 per share issued to Dr. Smith on
December 5, 2006 vested in its entirety on August 6, 2007. See “Outstanding Equity Awards at
Fiscal Year-End” for information regarding these
options.
|
-25-
|
(10)
|
Consists
of (i) a car allowance of $12,000 and (ii) approximately $10,400 paid by
NeoStem on behalf of Dr. Smith for life insurance.
|
|
(11)
|
On
September 27, 2007, Mr. Weinreb was granted a stock award of 40,000 shares
of Common Stock pursuant to an action of the Compensation Committee of the
Board of Directors, 30,000 of which were granted in his capacity as a
member of the Board of Directors. One-half of the total shares granted
(20,000) vested on April 1, 2008 and the remaining one-half were scheduled
to vest on the first anniversary of the date of grant. Mr. Weinreb
declined the second half of this award in October 2008. As
originally granted, the first half of such shares were scheduled to vest
on the date of grant. Of the $132,004 compensation value for Mr. Weinreb’s
2007 Stock Awards, $99,002 is attributable to the shares granted in his
capacity as a member of the Board of Directors. As a result of Mr.
Weinreb’s decision to forego the second half of this award, $33,002 of
compensation recognized in 2007 (of which $24,752 is attributable to the
shares granted in his capacity as a member of the Board of Directors) was
reversed in 2008.
|
|
(12)
|
On
February 27, 2008, Mr. Weinreb was granted options to purchase 120,000
shares of Common Stock at an exercise price of $1.63 per share, 70,000 of
which vested during 2008 and 50,000 of which are scheduled to vest upon
the achievement of business milestones, and on October 31, 2008 was
granted options to purchase 5,000 shares of Common Stock at an exercise
price of $1.13 per share, all of which are scheduled to vest upon the
achievement of a business milestone. See “Outstanding Equity
Awards at Fiscal Year-End” for information regarding these options. On
June 2, 2006, in connection with the June 2006 private
placement, Mr. Weinreb was issued an option to purchase 15,000 shares
of Common Stock at $5.30 per share. This new option was scheduled to vest
as NeoStem achieved certain business milestones, which had not yet been
achieved (see the Outstanding Equity Awards Table). On October
31, 2008, the business milestone was modified pursuant to an action of the
Compensation Committee of the Board of Directors, which milestone was met
on November 20, 2008 and the option vested on that date (see the
Outstanding Equity Awards Table for the specific options effected—the
modification of the business milestone was not considered a material
change in the terms of such option and accordingly the fair value was not
adjusted).
|
|
(13)
|
Consists
of (i) a car allowance of $12,000 and (ii) approximately $20,100
paid by NeoStem on behalf of Mr. Weinreb for disability, life and
long-term care insurance.
|
|
(14)
|
On September 27, 2007, Mr.
Weinreb was granted options to purchase 50,000 shares of Common Stock at
an exercise price of $4.95 per share, 40,000 of which vested during 2007
and 10,000 of which are scheduled to vest upon the achievement of a
business milestone. An option to purchase 10,000 shares of
Common Stock at $6.00 per share issued to Mr. Weinreb on December 5, 2006
vested in its entirety on January 26, 2007, which option was originally
scheduled to vest upon achievement of a business milestone. In connection with the
January 2007 private placement, NeoStem was informed by the placement
agent that it was advisable for the executive officers of NeoStem to make
continued salary concessions and/or agree to an extension of their
employment term. On January 26, 2007, Mr. Weinreb therefore
entered into a letter agreement with NeoStem pursuant to which, among
other things, he agreed to a reduction in his salary by 20% from that to
which he would otherwise be entitled under his employment agreement. In
consideration for this salary concession, the Compensation Committee
agreed, among other things, to the acceleration of the vesting of this
option to purchase 10,000 shares of Common Stock (the acceleration of the
vesting date was not considered a material change in the terms of such
option and accordingly the fair value was not adjusted). See
“Outstanding Equity Awards at Fiscal Year-End” for information regarding
these options.
|
|
(15)
|
Consists
of (i) a car allowance of $13,000 and (ii) approximately $17,300
paid by NeoStem on behalf of Mr. Weinreb for disability, life and
long-term care insurance.
|
|
(16)
|
In
response to NeoStem’s efforts to conserve cash, Ms. Vaczy agreed to accept
shares of Common Stock in lieu of salary. Of the amount shown for salary
in 2008, $11,250 was paid to Ms. Vaczy through the issuance of 3,729
shares of Common Stock with a per share price equal to $1.70 per share
(net of shares in payment of applicable withholding taxes), and $10,578.50
was paid through the issuance of 14,692 shares of Common Stock with a per
share price equal to $0.72 per share (for which the Company agreed to pay
total withholding taxes), in each case the per share price being equal to
the closing price of the Common Stock on the date of approval by the
Compensation Committee. All such shares were issued under the
Company’s 2003 Equity Participation
Plan.
|
-26-
|
(17)
|
On
September 27, 2007, Ms. Vaczy was granted a stock award of 45,000 shares
of Common Stock pursuant to an action of the Compensation Committee of the
Board of Directors, 30,000 of which were granted in her capacity as
Secretary of the Board of Directors. One-half of the total shares granted
(22,500) vested immediately on the date of grant and the remaining
one-half were scheduled to vest on the first anniversary of the date of
grant (the vesting of which was accelerated to August 28, 2008 in
connection with Ms. Vaczy’s agreement to accept shares of Common Stock in
lieu of accrued and unpaid salary). On December 19, 2007, Ms. Vaczy was
granted a stock award of 10,000 shares of Common Stock pursuant to an
action of the Compensation Committee of the Board of
Directors.
|
|
(18)
|
On
February 27, 2008, Ms. Vaczy was granted options to purchase 36,000 shares
of Common Stock at an exercise price of $1.63 per share, 26,000 of which
vested during 2008 and 10,000 of which are scheduled to vest upon the
achievement of a business milestone, and on October 31, 2008 was granted
options to purchase 5,000 shares of Common Stock at an exercise price of
$1.13 per share, all of which vested during 2008. See
“Outstanding Equity Awards at Fiscal Year-End” for information regarding
these options. An option granted to Ms. Vaczy on December 19, 2007 to
purchase 12,000 shares of Common Stock at $1.70 per share, vested in
2008. On June 2, 2006, in connection with the
June 2006 private placement, Ms. Vaczy was issued a new option
to purchase 10,000 shares of Common Stock at $5.30 per share. This new
option was scheduled to vest as NeoStem achieved certain business
milestones, which had not yet been achieved (see the Outstanding Equity
Awards Table). On October 31, 2008, the business milestone was
modified pursuant to an action of the Compensation Committee of the Board
of Directors and the option vested immediately (see the Outstanding Equity
Awards Table for the specific options effected—the modification of the
business milestone was not considered a material change in the terms of
such options and accordingly the fair value was not
adjusted).
|
|
(19)
|
Consists
of a car allowance per Ms. Vaczy’s employment agreement with
NeoStem.
|
|
(20)
|
On September 27, 2007, Ms. Vaczy
was granted options to purchase 35,000 shares of Common Stock at an
exercise price of $4.95 per share, 25,000 of which vested during 2007 and
10,000 of which are scheduled to vest upon the achievement of a business
milestone, and on December 19, 2007, was granted an option to purchase
12,000 shares of Common Stock at $1.70 per share, which vested in
2008. Options granted to Ms. Vaczy on December 5, 2006 to
purchase an aggregate of 15,000 shares of Common Stock at $6.00 per share,
vested in 2007. See “Outstanding Equity Awards at Fiscal
Year-End” for information regarding these
options.
|
EMPLOYMENT
AGREEMENTS, POST-EMPLOYMENT PAYMENTS AND EQUITY GRANTS
OVERVIEW
Following
is a description of the employment agreements NeoStem has (or had during the
years ended December 31, 2007 and 2008) with the officers named in the Summary
Compensation Table. These descriptions provide further information about the
compensation which is shown in the Summary Compensation Table for these
officers. They also give you information about payments which could be received
by the Chief Executive Officer under certain circumstances at such time as her
employment ends with NeoStem, for example, certain severance arrangements.
Following these descriptions you will see a table called Outstanding Equity
Awards at Fiscal Year End. This table contains details about the terms of
options to these officers which are included in the Summary Compensation Table.
All numbers in the tables and descriptions have been adjusted (as appropriate)
to reflect both the one-for-ten reverse stock split which was effective as of
August 31, 2006 and the one-for-ten reverse stock split which was effective as
of August 9, 2007.
-27-
EMPLOYMENT
AGREEMENTS
The
officers of NeoStem, as a condition of the initial closing under the securities
purchase agreement in the June 2006 private placement, entered into letter
agreements with NeoStem pursuant to which they converted an aggregate of
$278,653 of accrued salary into shares of Common Stock at a per share price of
$4.40. After adjustments for applicable payroll and withholding taxes which were
paid by NeoStem, NeoStem issued to such officers an aggregate of 37,998 shares
of Common Stock. NeoStem also adopted an Executive Officer Compensation Plan,
effective as of the date of closing of the securities purchase agreement and
pursuant to the letter agreements each officer agreed to be bound by the
Executive Officer Compensation Plan. In addition to the conversion of accrued
salary, the letter agreements provided for a reduction by 25% in base salary for
each officer until NeoStem achieved certain milestones. In consideration of the
officers’ agreement to such reduction in base salary, NeoStem granted to the
officers options to purchase shares of Common Stock under NeoStem’s 2003 Equity
Participation Plan which become exercisable upon NeoStem achieving certain
revenue milestones, and accelerated the vesting of certain options and
restricted shares held by the officers.
In
January 2007, the milestones relating to the reduction in base salary had
been achieved and the executive officers were entitled to have their salaries
restored to their original levels. NeoStem was informed by the placement agent
for the January 2007 private placement that it was advisable for the
executive officers of NeoStem to make continued salary concessions and/or to
agree to extend the term of their employment agreements. Accordingly, on
January 26, 2007, letter agreements were entered into which provided
instead for each such officer’s salary to be set in an amount which is twenty
percent less than that to which they were originally entitled pursuant to their
original employment agreements (subject to increase in certain circumstances)
and/or an extension of the officer’s employment term, and certain additional or
amended terms. In consideration of the salary concessions and/or agreement to a
substantial extension of employment term, the officers were generally either
granted options, option vesting was accelerated, and/or performance bonus
formulas were put into place. As discussed below, the January 2007 letter
agreements were either supplements or amendments to the executive officers’
respective employment agreements. In August 2007, the supplemental agreements
expired by their terms. In September 2007, two of the executive officers entered
into further amendments to their employment agreements.
In
January 2008, in response to NeoStem’s efforts to conserve cash, two of the
executive officers entered into agreements with NeoStem pursuant to which they
agreed to be paid a portion of their 2008 salary in shares of Common
Stock. In August 2008, in further response to NeoStem’s efforts to
conserve cash, three of the executive officers entered into agreements with
NeoStem pursuant to which they agreed to accept unpaid accrued salary in shares
of Common Stock. In connection therewith, the vesting of shares of
Common Stock granted to two of such executive officers under the 2003 Equity
Participation Plan on September 27, 2007 was accelerated from September 27, 2008
to August 28, 2008.
The
employment agreements for members of the Company’s management (including Mr.
Weinreb and Ms. Vaczy but excluding the Chief Executive Officer) expired between
December 31, 2008 and January 19, 2009. However, the Company has
continued to compensate these individuals based on their base salary, stated
bonus and employee benefits that would otherwise be due to such individuals
under such agreements.
Robin
L. Smith—Chief Executive Officer and Chairman of the Board
On
May 26, 2006, NeoStem entered into an employment agreement with
Dr. Robin L. Smith, pursuant to which Dr. Smith serves as the Chief
Executive Officer of NeoStem. This agreement was for a period of two years,
which term could be renewed for successive one-year terms unless otherwise
terminated by Dr. Smith or NeoStem. The effective date of Dr. Smith’s
employment agreement was June 2, 2006, the date of the initial closing
under the securities purchase agreement for the June 2006 private
placement. Under this agreement, Dr. Smith was entitled to receive a base
salary of $180,000 per year, to be increased to $236,000 after the first year
anniversary of the effective date of her employment agreement. If NeoStem raised
an aggregate of $5,000,000 through equity or debt financing (with the exception
of the financing under the securities purchase agreement), Dr. Smith’s base
salary was to be raised to $275,000. Dr. Smith was also eligible for an
annual bonus determined by the Board, a car allowance of $1,000 per month and
variable life insurance with payments not to exceed $1,200 per month. Pursuant
to the employment agreement, Dr. Smith’s advisory agreement with NeoStem,
as supplemented (see “Certain Relationships and Related Transactions”), was
terminated, except that (i) the vesting of the warrant to purchase 2,400
shares of Common Stock granted thereunder was accelerated so that the warrant
became fully vested as of the effective date of the employment agreement,
(ii) Dr. Smith received $100,000 in cash and 10,000 shares upon the
initial closing under the June 2006 private placement, (iii) if an
aggregate of at least $3,000,000 was raised and/or other debt or equity
financings prior to August 15, 2006 (as amended, August 31, 2006),
Dr. Smith was to receive an additional payment of $50,000, (iv) a
final payment of $3,000 relating to services rendered in connection with
Dr. Smith’s advisory agreement, paid at the closing of the June 2006
private placement, and (v) all registration rights provided in the advisory
agreement were to continue in effect.
-28-
As of
August 30, 2006, in excess of $3,000,000 had been raised and accordingly,
Dr. Smith was entitled to a payment of $50,000. Dr. Smith elected to
have $30,000 of this amount distributed to certain employees of NeoStem,
including its Chief Financial Officer and General Counsel, in recognition of
their efforts on behalf of NeoStem and retained $20,000. Upon the effective date
of the Employment Agreement, Dr. Smith was awarded under NeoStem’s 2003
Equity Participation Plan 20,000 shares of Common Stock, and options to purchase
54,000 shares of Common Stock, which options expire ten years from the date of
grant.
On
January 26, 2007, in connection with the January 2007 private
placement, NeoStem entered into a letter agreement with Dr. Smith, pursuant
to which Dr. Smith’s employment agreement dated as of May 26, 2006 was
amended to provide that: (a) the term of her employment would be extended
to December 31, 2010; (b) upon the first closings in the
January 2007 private placement, Dr. Smith’s base salary would be
increased to $250,000; (c) her base salary would be increased by 10% on
each one year anniversary of the agreement; (d) no cash bonus would be paid
to Dr. Smith for 2007; and (e) cash bonuses and stock awards under
NeoStem’s 2003 Equity Participation Plan would be fixed at the end of 2007 for
2008, in an amount to be determined. Other than as set forth therein,
Dr. Smith’s original employment agreement and all amendments thereto remain
in full force and effect. As consideration for her agreement to substantially
extend her employment term, among other agreements contained in this amendment,
on January 18, 2007 Dr. Smith was also granted an option under
NeoStem’s 2003 Equity Participation Plan to purchase 55,000 shares of the Common
Stock at a per share exercise price equal to $5.00 vesting as to (i) 25,000
shares upon the first closings in the January 2007 private placement;
(ii) 15,000 shares on June 30, 2007; and (iii) 15,000 shares on
December 31, 2007.
Effective
as of September 27, 2007, NeoStem entered into a letter agreement with Dr.
Smith, pursuant to which Dr. Smith's employment agreement dated as of May 26,
2006 and amended as of January 26, 2007, was further amended to provide that:
(a) Dr. Smith's base salary would be increased to $275,000 (the amount to which
Dr. Smith would have been entitled under her original employment agreement prior
to her agreement on January 26, 2007 to accept a reduced salary of $250,000);
(b) her base salary would be increased by 10% on each one year anniversary of
the agreement; (c) a cash bonus of $187,500 (an amount equal to 75% of her base
salary) would be paid October 1, 2007; (d) Dr. Smith's bonus for 2008 is set in
the amount of $250,000 (an amount equal to 100% of her base salary) to be paid
October 1, 2008; and (e) NeoStem will pay membership and annual fees for a club
in New York of Dr. Smith's choice for business entertaining and meetings. Other
than as set forth therein, Dr. Smith's original employment agreement and all
amendments thereto remain in full force and effect.
On
January 9, 2008, NeoStem entered into a letter agreement with Dr. Smith,
pursuant to which Dr. Smith's employment agreement dated as of May 26, 2006 and
amended as of January 26, 2007 and September 27, 2007 was further amended to
provide that, in response to NeoStem’s efforts to conserve cash, Dr. Smith would
be paid $50,000 of her 2008 salary in shares of Common Stock, net of shares in
payment of applicable withholding taxes valued at the closing price of the
Common Stock on the date of issuance. Accordingly, Dr. Smith was issued 16,574
shares of Common Stock pursuant to NeoStem’s 2003 Equity Participation Plan
which was based on a price per share of $1.70, the closing price of the Common
Stock on the date of approval by the Compensation Committee of the Board of
Directors. The cash component of her salary for 2008 will be
$225,000.
On August
29, 2008, NeoStem entered into a letter agreement with Dr. Smith, pursuant to
which, in response to NeoStem’s efforts to conserve cash, Dr. Smith agreed to
accept shares of Common Stock in lieu of unpaid accrued salary. Dr. Smith agreed
to accept in lieu of $24,437.50 in unpaid salary accrued during the period July
15, 2008 through August 31, 2008, 33,941 shares of Common
Stock. The number of shares so issued was based on $0.72, the
closing price of the Common Stock on the date of approval by the Compensation
Committee of the Board of Directors, for which NeoStem agreed to pay total
withholding taxes. All such shares were issued under NeoStem's 2003 Equity
Participation Plan. In connection therewith, the vesting of 15,000
shares of Common Stock granted to Dr. Smith under the 2003 Equity Participation
Plan on September 27, 2007 was accelerated from September 27, 2008 to August 28,
2008.
NeoStem
maintains key-man life insurance on Dr. Smith in the amount of
$3,000,000.
-29-
Mark
Weinreb—President
On
February 6, 2003, Mr. Weinreb was appointed President and Chief
Executive Officer of NeoStem and NeoStem entered into an employment agreement
with Mr. Weinreb. On June 2, 2006, Mr. Weinreb resigned as Chief
Executive Officer and Chairman of the Board, but continued as President and a
director of NeoStem. Mr. Weinreb’s original employment agreement had an
initial term of three years, with automatic annual extensions unless earlier
terminated by NeoStem or Mr. Weinreb (notice of non-renewal was provided by
NeoStem to Mr. Weinreb and therefore the agreement expired in accordance with
its terms in December 2008). Under this agreement, in addition to base salary he
was entitled to an annual bonus in the amount of $20,000 for the initial year in
the event, and concurrently on the date, that NeoStem received debt and/or
equity financing in the aggregate amount of at least $1,000,000 since the
beginning of his service, and $20,000 for each subsequent year of the term,
without condition.
On
May 4, 2005, the Board voted to approve an amendment to Mr. Weinreb’s
employment agreement, subject to approval of the stockholders which was obtained
on July 20, 2005, pursuant to which among other things Mr. Weinreb’s
employment agreement was amended on August 12, 2005 to (a) extend the
expiration date thereof from February 2006 to December 2008;
(b) change Mr. Weinreb’s annual base salary of $217,800 (with an
increase of 10% per annum) to an annual base salary of $250,000 (with no
increase per annum); (c) grant Mr. Weinreb 30,000 shares of Common
Stock, 10,000 shares of which shall vest on each of the date of grant and the
first and second anniversaries of the date of grant; (d) commencing in
August 2006, increase Mr. Weinreb’s annual bonus from $20,000 to
$25,000; and (e) in 2006, provide for the reimbursement of all premiums in
an annual aggregate amount of up to $18,000 payable by Mr. Weinreb for life
and long term care insurance covering each year during the remainder of the term
of his employment. Pursuant to and as a condition of the closing of the
June 2006 private placement, Mr. Weinreb entered into a letter
agreement with NeoStem in which he agreed to convert $121,532 of accrued salary
(after giving effect to employment taxes which were paid by NeoStem) into 16,573
shares of Common Stock at a per share price equal to $4.40 (the price of the
shares being sold in the June 2006 private placement). Mr. Weinreb
further agreed to a reduction in his base salary by 25% until the achievement by
NeoStem of certain milestones. In consideration for such compensation
concessions: (i) the remaining vesting of the shares which was scheduled to
vest as to 10,000 shares each on July 20, 2006 and July 20, 2007, was
accelerated such that it became fully vested as of June 2, 2006, the date
of the closing of the June 2006 private placement; and (ii) options to
purchase 20,000 shares of Common Stock which were also scheduled to vest as to
10,000 shares on each of July 20, 2006 and July 20, 2007, were
similarly accelerated.
On
January 26, 2007, NeoStem entered into a letter agreement with
Mr. Weinreb pursuant to which Mr. Weinreb’s employment agreement
amended as of August 12, 2005 was supplemented with new terms which
provided that: (a) upon the first closings in the January 2007 private
placement, Mr. Weinreb’s base salary would be paid at the annual rate of
$200,000 (an annual rate which is 20% lower than the amount to which he was
otherwise entitled under his employment agreement); (b) he would be
entitled to quarterly bonuses of $5,000 commencing March 31, 2007;
(c) he would be entitled to bonuses ranging from $3,000 to $5,000 upon the
achievement of certain business milestones (as follows: (i) a $5,000 bonus
for every fifty collection fees paid to NeoStem; (ii) a $5,000 bonus for
every five collection agreements signed and for which the fee is collected by
NeoStem; and (iii) a $3,000 bonus for every twenty five fees paid to
NeoStem for collection through certain strategic alliances negotiated by
Mr. Weinreb; and (d) any other bonuses would only be paid upon
approval by the Compensation Committee of the Board of Directors. In
consideration of his agreement to a reduction in base salary, and in connection
with his entering into this agreement, an option to purchase 10,000 shares of
Common Stock at $6.00 per share, previously granted to Mr. Weinreb on
December 5, 2006 and tied to the opening of certain collection centers,
vested upon the execution of the agreement. Other than as set forth therein,
Mr. Weinreb’s original employment agreement and all amendments thereto
remain in full force and effect. This supplemental agreement was to terminate
upon NeoStem achieving certain revenue, financing or adult stem cell collection
milestones, or at the discretion of the Compensation Committee of the Board of
Directors. This supplemental agreement terminated in August 2007 by its
terms.
Effective
as of September 28, 2007, NeoStem entered into a letter agreement with Mr.
Weinreb, pursuant to which Mr. Weinreb's employment agreement dated as of
February 6, 2005 and amended as of August 12, 2005 and June 1, 2006 (together,
the "Agreement") (such Agreement being supplemented as of January 26, 2007, the
effectiveness of which supplement has expired by its terms), was further amended
to provide that: (a) Mr. Weinreb's base salary would be increased from $200,000
to $210,000; (b) the sole bonus to which he will be entitled shall be a
quarterly bonus of $7,500 payable at the end of each quarterly period during the
term commencing as of September 30, 2007; (c) in the event of termination of
employment, any severance to which Mr. Weinreb is entitled under the Agreement
shall equal the lesser of one year of his base salary or his base salary payable
for the remainder of the term, in each case paid out over a 12 month period in
accordance with the payroll policies and practices of NeoStem; and (d) any
unused vacation to which Mr. Weinreb is entitled under the Agreement in any
calendar year shall be forfeited without compensation. In addition, on February
27, 2008 the Compensation Committee authorized a cash bonus of $20,000 to be
paid to Mr. Weinreb for every 200 paid adult stem cell collections at collection
centers.
-30-
Catherine
M. Vaczy—Vice President and General Counsel
On
April 20, 2005, NeoStem entered into a letter agreement with Catherine M.
Vaczy pursuant to which Ms. Vaczy served as NeoStem’s Vice President and
General Counsel. The term of this original agreement was three years. In
consideration for Ms. Vaczy’s services under the letter agreement,
Ms. Vaczy was entitled to receive an annual salary of $155,000 during the
first year of the term, a minimum annual salary of $170,500 during the second
year of the term, and a minimum annual salary of $187,550 during the third year
of the term. On the date of the letter agreement, Ms. Vaczy was granted an
option to purchase 1,500 shares of Common Stock pursuant to NeoStem’s 2003
Equity Participation Plan, with an exercise price equal to $10.00 per share. The
option was to vest and become exercisable as to 500 shares on each of the first,
second and third year anniversaries of the date of the agreement and remain
exercisable as to any vested portion thereof in accordance with the terms of
NeoStem’s 2003 Equity Participation Plan and NeoStem’s Incentive Stock Option
Agreement. Pursuant to and as a condition of the closing of the June 2006
private placement, Ms. Vaczy entered into a letter agreement with NeoStem
in which she agreed to convert $44,711 in accrued salary (after giving effect to
employment taxes which were paid by NeoStem) into 6,097 shares of Common Stock
at a per share price equal to $4.40 (the price of the shares being sold in the
June 2006 private placement). Ms. Vaczy further agreed to a reduction
in her base salary by 25% until the achievement by NeoStem of certain
milestones. In consideration for such compensation concessions, the vesting of
the option to purchase 1,500 shares of Common Stock was accelerated such that it
became fully vested as of June 2, 2006, the date of the closing of the
June 2006 private placement.
On
January 26, 2007, NeoStem entered into another letter agreement with
Ms. Vaczy pursuant to which Ms. Vaczy continues to serve as NeoStem’s
Vice President and General Counsel. This agreement supersedes Ms. Vaczy’s
employment agreement dated as of April 20, 2005 and all amendments thereto.
Subject to the terms and conditions of the letter agreement, the term of
Ms. Vaczy’s employment in such capacity will continue through
December 31, 2008. In consideration for her services under the letter
agreement, Ms. Vaczy will be entitled to receive a minimum annual salary of
$150,000 during 2007 (such amount being 20% less than the annual salary to which
Ms. Vaczy would have been entitled commencing April 20, 2007 pursuant
to the terms of her original employment agreement) and a minimum annual salary
of $172,500 during 2008.
In
consideration for such salary concessions and agreement to extension of her
employment term, Ms. Vaczy is also entitled to receive a cash bonus upon
the occurrence of each of the following milestones: (a) $5,000 upon the
first closings in the January 2007 private placement; and (b) $7,500
upon the next registration statement (other than a Form S-8) being declared
effective by the Securities and Exchange Commission. Ms. Vaczy shall also
be eligible for additional cash bonuses as follows, in each case as may be
approved by the Compensation Committee of the Board of Directors: (a) for
other tasks and responsibilities as mutually agreed, such as foundation legal
counsel; (b) pursuant to milestones for 2008 as shall be set no later than
December 31, 2007 by Ms. Vaczy and NeoStem’s Chief Executive Officer,
which the Chief Executive Officer shall recommend to the Compensation Committee
of the Board of Directors for their vote thereon; and (c) as may be
approved from time to time.
Ms. Vaczy
is also entitled to payment or reimbursement of certain expenses (including a
car allowance equal to $1,000 per month) incurred by her in connection with the
performance of her duties and obligations under the letter agreement, and to
participate in any incentive and employee benefit plans or programs which may be
offered by NeoStem and in all other plans in which NeoStem executives
participate.
On
January 9, 2008, NeoStem entered into a letter agreement with Ms. Vaczy,
pursuant to which Ms. Vaczy’s employment agreement dated as of January 26, 2007
was amended to provide that, in response to NeoStem’s efforts to conserve cash,
Ms. Vaczy would be paid $11,250 of her 2008 salary in shares of Common Stock.
Accordingly, Ms. Vaczy was issued 3,729 shares of Common Stock pursuant to
NeoStem’s 2003 Equity Participation Plan which was based on a price per share of
$1.70, the closing price of the Common Stock on the date of approval by the
Compensation Committee of the Board of Directors. The cash component of her
salary for 2008 will be $161,250.
On August
29, 2008, NeoStem entered into a letter agreement with Ms. Vaczy, pursuant to
which, in response to NeoStem’s efforts to conserve cash, Ms. Vaczy agreed to
accept shares of Common Stock in lieu of unpaid accrued
salary. Ms. Vaczy agreed to accept in lieu of $10,578.50 in
unpaid salary accrued during the period July 15, 2008 through August 31, 2008,
14,692 shares of Common Stock. The number of shares so issued was based on
$0.72, the closing price of the Common Stock on the date of approval by the
Compensation Committee of the Board of Directors, for which NeoStem agreed to
pay total withholding taxes. All such shares were issued under NeoStem's 2003
Equity Participation Plan. In connection therewith, the vesting of
22,500 shares of Common Stock granted to Ms. Vaczy under the 2003 Equity
Participation Plan on September 27, 2007 was accelerated from September 27, 2008
to August 28, 2008.
-31-
Ms.
Vaczy’s current employment agreement expired by its terms on December 31,
2008.
POST
EMPLOYMENT PAYMENTS
Robin
L. Smith
Per
Dr. Smith’s January 26, 2007 letter agreement with NeoStem, upon
termination of Dr. Smith’s employment by NeoStem without cause or by
Dr. Smith with good reason, NeoStem was to pay to Dr. Smith her base
salary at the time of termination for the two year period following such
termination. Dr. Smith’s September 27, 2007 letter agreement provides that such
payment of severance can be made instead in 12 equal monthly installments
beginning the date of termination. In addition, per Dr. Smith’s
May 26, 2006 employment agreement, upon termination of Dr. Smith’s
employment by NeoStem without cause or by Dr. Smith for good reason,
Dr. Smith is entitled to: (i) a pro-rata bonus based on the annual
bonus received for the prior year; (ii) COBRA payments for a one year
period; and (iii) have all vested options, as well as all options which
would have vested during the 12 month period following the date of termination,
become fully vested and remain exercisable for a maximum of 48 months (but in no
event longer than the original term of exercise). Upon termination of
Dr. Smith’s employment by NeoStem for cause or by Dr. Smith without
good reason, Dr. Smith is entitled to: (i) the payment of all amounts
due for services rendered under the agreement up until the termination date; and
(ii) have all vested options remain exercisable for a period of ninety days
(all stock options which have not vested shall be forfeited). Upon termination
for death or disability, Dr. Smith (or her estate) is entitled to:
(i) the payment of all amounts due for services rendered under the
agreement until the termination date; (ii) family COBRA payments for the
applicable term; and (ii) have all vested options, as well as all options
which would have vested during the 12 month period following the date of
termination, become fully vested and remain exercisable for a maximum of 48
months (but in no event longer than the original term of exercise).
Upon a
change in control of NeoStem, per Dr. Smith’s May 26, 2006 employment
agreement, Dr. Smith is entitled to: (i) the payment of base salary
for one year; (ii) a pro-rata bonus based on the annual bonus received for
the prior year; (iii) COBRA payments for a one year period; and
(iv) have all vested options, as well as all options which would have
vested during the 12 month period following the date of termination, become
fully vested and remain exercisable for a maximum of 48 months (but in no event
longer than the original term of exercise).
-32-
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The
following table* sets forth information on option and stock awards outstanding
at December 31, 2008 for the Named Executive Officers.
|
Option Awards**
|
Stock Awards**
|
||||||||||||||||||||
|
Name
|
Number of
Securities
Underlying
Unexercised
Options
# Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
# Unexercisable
|
Option
Exercise
Price***
|
Option
Expiration
Date
|
Number of
Shares or
Units of
Stock that
have not
vested
|
Market Value
of Shares
or Units
of Stock that
have not
vested
|
|||||||||||||||
|
D
Robin L. Smith
|
10,000 | (1)(47) | $ | 5.30 |
June 1, 2016
|
0 | $ | 0 | |||||||||||||
| 10,000 | (1)(47) | $ | 8.00 |
June 1, 2016
|
— | — | |||||||||||||||
| 10,000 | (1)(47) | $ | 10.00 |
June 1, 2016
|
— | — | |||||||||||||||
| 12,000 | (2)(47) | $ | 16.00 |
June 1, 2016
|
— | — | |||||||||||||||
| 12,000 | (3)(47) | $ | 25.00 |
June 1, 2016
|
— | — | |||||||||||||||
| 10,000 | (4) | $ | 6.00 |
Dec. 4, 2016
|
— | — | |||||||||||||||
| 5,000 | (5) | $ | 6.00 |
Dec. 4, 2016
|
— | — | |||||||||||||||
| 55,000 | (6) | $ | 5.00 |
Jan. 17, 2017
|
|||||||||||||||||
| 150,000 | (7) | $ | 4.95 |
Sept. 26, 2017
|
|||||||||||||||||
| 100,000 | (8) | $ | 4.95 |
Sept. 26, 2017
|
|||||||||||||||||
| 40,000 | (9) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 30,000 | (10) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 30,000 | (11) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 20,000 | (12)(48) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 5,000 | (13) | $ | 1.13 |
Oct. 30, 2018
|
|||||||||||||||||
|
Mark
Weinreb
|
25,000 | (14)(47) | $ | 3.00 |
Feb. 5, 2013
|
0 | $ | 0 | |||||||||||||
| 500 | (15) | $ | 10.00 |
Sept. 13, 2014
|
— | — | |||||||||||||||
| 40,000 | (16)(47) | $ | 6.00 |
July 19, 2015
|
— | — | |||||||||||||||
| 15,000 | (17) | $ | 5.30 |
June 1, 2016
|
— | — | |||||||||||||||
| 5,000 | (18) | $ | 6.00 |
Dec. 4, 2016
|
— | — | |||||||||||||||
| 10,000 | (19) | $ | 6.00 |
Dec. 4, 2016
|
— | — | |||||||||||||||
| 5,000 | (20) | $ | 6.00 |
Dec. 4, 2016
|
— | — | |||||||||||||||
| 10,000 | (21) | $ | 4.95 |
Sept. 26, 2017
|
|||||||||||||||||
| 30,000 | (22) | $ | 4.95 |
Sept. 26, 2017
|
|||||||||||||||||
| 10,000 | (23) | $ | 4.95 |
Sept. 26, 2017
|
|||||||||||||||||
| 25,000 | (24) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 10,000 | (25) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 10,000 | (26) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 5,000 | (27) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 5,000 | (28) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 20,000 | (29)(48) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 5,000 | (30)(48) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 40,000 | (31) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 5,000 | (32) | $ | 1.13 |
Oct. 30, 2018
|
|||||||||||||||||
|
C Catherine
M. Vaczy
|
1,500 | (33) | $ | 10.00 |
Apr. 19, 2015
|
0 | $ | 0 | |||||||||||||
| 7,500 | (34)(47) | $ | 6.00 |
July 19, 2015
|
— | — | |||||||||||||||
| 2,000 | (35)(47) | $ | 6.00 |
Dec. 21, 2015
|
— | — | |||||||||||||||
| 10,000 | (36) | $ | 5.30 |
June 1, 2016
|
— | — | |||||||||||||||
| 5,000 | (37) | $ | 6.00 |
Dec. 4, 2016
|
— | — | |||||||||||||||
| 10,000 | (38) | $ | 6.00 |
Dec. 4, 2016
|
— | — | |||||||||||||||
| 15,000 | (39) | $ | 4.95 |
Sept. 26, 2017
|
|||||||||||||||||
| 10,000 | (40) | $ | 4.95 |
Sept. 26, 2017
|
|||||||||||||||||
| 10,000 | (41) | $ | 4.95 |
Sept. 26, 2017
|
|||||||||||||||||
| 12,000 | (42) | $ | 1.70 |
Dec. 18, 2017
|
|||||||||||||||||
| 10,000 | (43) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 10,000 | (44) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 16,000 | (45) | $ | 1.63 |
Feb. 26, 2018
|
|||||||||||||||||
| 5,000 | (46) | $ | 1.13 |
Oct. 30, 2018
|
|||||||||||||||||
-33-
|
*
|
All
numbers in this table and footnotes thereto have been adjusted (as
appropriate) to reflect the one-for-ten reverse stock split effective as
of August 31, 2006 and the one-for-ten reverse stock split effective as of
August 9, 2007.
|
|
**
|
All
option and stock awards were made under and are governed by the terms of
NeoStem’s 2003 Equity Participation
Plan.
|
|
***
|
See
“Certain Relationships and Related Transactions” for a description of the
Merger Agreement which provides that options outstanding immediately prior
to the closing of the transactions under the Merger Agreement to purchase
shares of Common Stock, in the sole discretion of the Compensation
Committee, may be amended, cancelled and reissued or otherwise modified so
that the exercise price shall be adjusted downward to not less
than $.80 per share.
|
|
(1)
|
This
option was granted to Dr. Smith pursuant to the terms of her
employment agreement dated as of May 26, 2006 and vested in its
entirety on June 2, 2006.
|
|
|
|
(2)
|
This
option was granted to Dr. Smith pursuant to the terms of her employment
agreement dated as of May 26, 2006 and vested on June 2,
2007.
|
|
|
(3)
|
This
option was granted to Dr. Smith pursuant to the terms of her employment
agreement dated as of May 26, 2006 and vested on June 2,
2008.
|
|
|
(4)
|
This
option was granted to Dr. Smith by the Compensation Committee of the
Board of Directors (the “Compensation Committee”) on December 5, 2006
and vested in its entirety upon grant.
|
|
|
(5)
|
This
option granted to Dr. Smith by the Compensation Committee on December 5,
2006 vested on August 9, 2007 upon NeoStem’s Common Stock being listed for
trading on the American Stock Exchange (now known as the NYSE
Amex).
|
|
|
(6)
|
This
option was granted to Dr. Smith in connection with her entering into an
amendment to her employment agreement on January 26, 2007, and vested as
to (i) 25,000 shares upon the first closings in NeoStem’s January 2007
private placement, (ii) 15,000 shares on June 30, 2007 and 15,000 shares
on December 31, 2007.
|
|
|
(7)
|
This
option was granted to Dr. Smith by the Compensation Committee on September
27, 2007 and was vested in its entirety on the date of
grant.
|
|
|
(8)
|
This
option was granted to Dr. Smith by the Compensation Committee on September
27, 2007 and is scheduled to vest upon the achievement of a business
milestone. This milestone would be achieved upon
consummation of the Company’s proposed Merger and the option would vest
provided it is outstanding immediately prior thereto. See
“Certain Relationships and Related Transactions.”
|
|
(9)
|
This
option was granted to Dr. Smith by the Compensation Committee on February
27, 2008 and was vested in its entirety on the date of
grant.
|
|
|
(10)
|
This
option was granted to Dr. Smith by the Compensation Committee on February
27, 2008 and is scheduled to vest upon the achievement of a business
milestone. This milestone would be achieved upon consummation
of the Company’s proposed Merger and the option would vest provided it is
outstanding immediately prior thereto. See “Certain
Relationships and Related Transactions.”
|
|
|
(11)
|
This
option was granted to Dr. Smith by the Compensation Committee on February
27, 2008 and vested on September 2, 2008 upon the achievement of a
business milestone.
|
|
|
(12)
|
This
option was granted to Dr. Smith by the Compensation Committee on February
27, 2008 and vested on October 31, 2008 upon the achievement of a business
milestone.
|
-34-
|
(13)
|
This
option was granted to Dr. Smith by the Compensation Committee on October
31, 2008 and vested on November 2, 2008 upon the achievement of a business
milestone.
|
|
|
|
(14)
|
This
option was granted to Mr. Weinreb pursuant to the terms of his
employment agreement dated as of February 6, 2003 and vested in its
entirety on the date of grant.
|
|
|
(15)
|
This
option was granted to Mr. Weinreb by the Board of Directors on
September 14, 2004 and vested in its entirety on the date of
grant.
|
|
|
(16)
|
This
option was granted to Mr. Weinreb by the Board of Directors and
approved by the stockholders on July 20, 2005. The option originally
was scheduled to vest as to 20,000 shares on July 20, 2005; as to an
additional 10,000 shares on July 20, 2006 and as to the remaining
10,000 shares on July 20, 2007. As a condition of the closing of the
June 2006 private placement, Mr. Weinreb entered into a letter
agreement with NeoStem pursuant to which he agreed to convert $121,532 in
accrued salary into shares of Common Stock at a per share price equal to
$4.40 (the price of the shares being sold in the June 2006 private
placement) and further agreed to a reduction in his base salary by 25%
until the achievement by NeoStem of certain milestones, in partial
consideration for which the vesting of this option was accelerated such
that it became fully vested as of June 2, 2006, the date of the
closing of the June 2006 private placement. This was not considered a
material change in the terms of such option and accordingly the fair value
was not adjusted.
|
|
|
(17)
|
This
option was granted to Mr. Weinreb pursuant to the letter agreement
described in footnote 16, above, and was scheduled to vest as to 33% of
the shares upon NeoStem reaching $1,000,000 in cumulative revenues; as to
an additional 33% of the shares upon NeoStem reaching $2,000,000 in
cumulative revenues; and as to the remaining 34% upon NeoStem reaching
$3,000,000 in cumulative revenues. On October 31, 2008, this
business milestone was modified pursuant to an action of the Compensation
Committee, which milestone was met on November 20, 2008 and the option
vested on that date. This was not considered a material change
in the terms of such option and accordingly the fair value was not
adjusted.
|
|
|
(18)
|
These
options were granted to Mr. Weinreb by the Compensation Committee on
December 5, 2006 and vested in their entirety on December 15,
2006, the date NeoStem entered into a collection agreement with Hemacare
Corporation.
|
|
|
(19)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
December 5, 2006 and was originally scheduled to vest based upon stem
cell collections commencing by a New York or California Company owned
facility. In connection with the January 2007 private placement,
NeoStem was informed by the placement agent that it was advisable for the
executive officers of NeoStem to make continued salary concessions and/or
agree to an extension of their employment term. On January 26, 2007,
Mr. Weinreb therefore entered into a letter agreement with NeoStem
pursuant to which, among other things, he agreed to a reduction in his
salary by 20% from that to which he would otherwise be entitled under his
employment agreement. In consideration for this salary concession, the
Compensation Committee agreed, among other things, to the acceleration of
the vesting of this option (the acceleration of the vesting date was not
considered a material change in the terms of such option and accordingly
the fair value was not adjusted).
|
|
|
(20)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
December 5, 2006 and vests upon NeoStem achieving a specified number
of adult stem cell collections through new selling
programs.
|
|
|
(21)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
September 27, 2007 and was vested in its entirety on the date of
grant.
|
|
|
(22)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
September 27, 2007 and vested as to 15,000 shares on October 2, 2007 and
15,000 shares on October 12, 2007, respectively, upon the achievement of
certain business milestones.
|
|
|
(23)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
September 27, 2007 and is scheduled to vest upon the achievement of a
business milestone. This milestone would be achieved upon
consummation of the Company’s proposed Merger and the option would vest
provided it is outstanding immediately prior thereto. See
“Certain Relationships and Related Transactions.”
|
|
(24)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
February 27, 2008 was vested in its entirety on the date of
grant.
|
|
|
(25)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
February 27, 2008 and is scheduled to vest upon the achievement of a
business milestone. This milestone would be achieved upon
consummation of the Company’s proposed Merger and the option would vest
provided it is outstanding immediately prior thereto. See
“Certain Relationships and Related Transactions.”
|
|
|
(26)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
February 27, 2008 and vested on September 2, 2008 upon the achievement of
a business milestone.
|
|
|
(27)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
February 27, 2008 and vested on October 13, 2008 upon the achievement of a
business milestone.
|
|
|
(28)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
February 27, 2008 and vested on September 17, 2008 upon the achievement of
a business milestone.
|
-35-
|
(29)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
February 27, 2008 and vested on October 31, 2008 upon the achievement of a
business milestone.
|
|
|
(30)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
February 27, 2008 and vested on November 20, 2008 upon the achievement of
a business milestone.
|
|
|
(31)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on
February 27, 2008 and is scheduled to vest upon the achievement of a
business milestone.
|
|
|
(32)
|
This
option was granted to Mr. Weinreb by the Compensation Committee on October
31, 2008 and is scheduled to vest upon the achievement of a business
milestone.
|
|
|
|
(33)
|
This
option was granted to Ms. Vaczy pursuant to the terms of her
employment agreement dated April 20, 2005 and was originally
scheduled to vest as to 500 shares on April 20, 2006; as to an
additional 500 shares on April 20, 2007 and as to the remaining 500
shares on April 20, 2008. As a condition of the closing of the
June 2006 private placement, Ms. Vaczy entered into a letter
agreement with NeoStem pursuant to which she agreed to convert $44,711 in
accrued salary into shares of Common Stock at a per share price equal to
$4.40 (the price of the shares being sold in the June 2006 private
placement) and further agreed to a reduction in her base salary by 25%
until the achievement by NeoStem of certain milestones, in partial
consideration for which the vesting of this option was accelerated such
that it became fully vested as of June 2, 2006, the date of the
closing of the June 2006 private placement. This was not considered a
material change in the terms of such option and accordingly the fair value
was not adjusted.
|
|
|
(34)
|
This
option was granted to Ms. Vaczy by the Board of Directors and
approved by the stockholders on July 20, 2005. The option originally
was scheduled to vest as to 3,750 shares on July 20, 2006 and as to
the remaining 3,750 shares on July 20, 2007. In partial consideration
for Ms. Vaczy entering into the letter agreement described in
footnote 33, above, the vesting of this option was accelerated such that
it became fully vested as of June 2, 2006, the date of the closing of
the June 2006 private placement. This was not considered a material
change in the terms of such option and accordingly the fair value was not
adjusted.
|
|
|
(35)
|
This
option was granted to Ms. Vaczy by the Board of Directors on
December 22, 2005 and was vested in its entirety on the date of
grant.
|
|
|
(36)
|
This
option was granted to Ms. Vaczy pursuant to the letter agreement
described in footnote 33, above, and was scheduled to vest as to 33% of
the shares upon NeoStem reaching $1,000,000 in cumulative revenues; as to
an additional 33% of the shares upon NeoStem reaching $2,000,000 in
cumulative revenues; and as to the remaining 34% upon NeoStem reaching
$3,000,000 in cumulative revenues. On October 31, 2008, this
business milestone was modified pursuant to an action of the Compensation
Committee of the Board of Directors and the option vested immediately.
This was not considered a material change in the terms of such option and
accordingly the fair value was not adjusted.
|
|
|
(37)
|
This
option was granted to Ms. Vaczy by the Compensation Committee on
December 5, 2006, and vested in its entirety upon the closing of
NeoStem’s August 2007 public offering.
|
|
|
(38)
|
This
option was granted to Ms. Vaczy by the Compensation Committee on
December 5, 2006 and vested in its entirety on April 25, 2007
upon a registration statement filed with the SEC by NeoStem being declared
effective.
|
|
|
(39)
|
This
option was granted to Ms. Vaczy by the Compensation Committee on September
27, 2007 and was vested in its entirety on the date of
grant.
|
|
|
(40)
|
This
option was granted to Ms. Vaczy by the Compensation Committee on September
27, 2007 and vested in its entirety on November 13, 2007 upon the
achievement of a specific business milestone.
|
|
|
(41)
|
This
option was granted to Ms. Vaczy by the Compensation Committee on September
27, 2007 and is scheduled to vest upon the achievement of a business
milestone. This milestone would be achieved upon consummation
of the Company’s proposed Merger and the option would vest provided it is
outstanding immediately prior thereto. See “Certain
Relationships and Related Transactions.”
|
|
|
(42)
|
This
option was granted to Ms. Vaczy by the Compensation Committee on December
19, 2007 and vested in its entirety on January 1, 2008.
|
|
(43)
|
This
option was granted to Ms. Vaczy by the Compensation Committee on February
27, 2008 and vested in its entirety on the date of
grant.
|
|
|
(44)
|
This
option was granted to Ms. Vaczy by the Compensation Committee on February
27, 2008 and is scheduled to vest upon the achievement of a business
milestone. This milestone would be achieved upon consummation
of the Company’s proposed Merger and the option would vest provided it is
outstanding immediately prior thereto. See “Certain
Relationships and Related Transactions.”
|
|
|
(45)
|
This
option was granted to Ms. Vaczy by the Compensation Committee on February
27, 2008 and vested on September 2, 2008 upon the achievement of a
business milestone.
|
|
|
(46)
|
This
option was granted to Ms. Vaczy by the Compensation Committee on October
31, 2008 and vested on November 2, 2008 upon the achievement of a business
milestone.
|
|
|
|
(47)
|
This
option provides for the grant of an additional option upon exercise of the
original option when the exercise price is paid with shares in the
individual’s possession or to which they are
entitled.
|
-36-
|
(48)
|
This
option was originally scheduled to vest upon the achievement of a
specified business milestone, which milestone was modified by an action of
the Compensation Committee on October 31, 2008. This was not
considered a material change in the terms of such option and accordingly
the fair value was not
adjusted.
|
NEOSTEM
DIRECTOR COMPENSATION
The
following table* sets forth information on all compensation to our non-employee
directors for the year ended December 31, 2008.
|
Name
|
Year
|
Fees Earned
or Paid in
Cash
|
Stock
Awards(1)
|
Option
Awards(1)
|
All Other
Compensation
|
Total
|
||||||||||||||||
|
Ri Richard
Berman
|
2008
|
— | $ | 201,524 | (2) | $ | 51,338 | (5) | — | $ | 252,862 | |||||||||||
|
Ste Steven
Myers
|
2008
|
— | $ | 88,385 | (3) | $ | 51,338 | (6) | — | $ | 139,723 | |||||||||||
|
JoseJoseph
Zuckerman, MD
|
2008
|
— | $ | 49,494 | (4) | $ | 51,338 | (7) | — | $ | 100,836 | |||||||||||
|
|
*
|
All numbers in these footnotes
have been adjusted (as appropriate) to reflect the one-for-ten reverse
stock split effective as of August 31, 2006 and the one-for-ten reverse
stock split effective as of August 9,
2007.
|
|
|
(1)
|
Amounts shown are the amounts
recognized for financial statement reporting purposes during 2008 in
accordance with FAS 123(R) (as discussed below). Effective
January 1, 2006, NeoStem’s 2003 Equity Participation Plan is
accounted for in accordance with the recognition and measurement
provisions of Statement of Financial Accounting Standards (“FAS”)
No. 123 (revised 2004), Share-Based Payment (“FAS 123(R)”), which
replaces FAS No. 123, Accounting for Stock-Based Compensation, and
supersedes Accounting Principles Board Opinion (“APB”) No. 25,
Accounting for Stock Issued to Employees, and related interpretations.
FAS 123(R) requires compensation costs related to share-based payment
transactions, including employee stock options, to be recognized in the
financial statements. In addition, NeoStem adheres to the guidance set
forth within Securities and Exchange Commission (“SEC”) Staff Accounting
Bulletin (“SAB”) No. 107, which provides the Staff’s views regarding
the interaction between SFAS No. 123(R) and certain SEC
rules and regulations and provides interpretations with respect to
the valuation of share-based payments for public companies. In adopting
FAS 123(R), NeoStem applied the modified prospective approach to
transition. Under the modified prospective approach, the provisions of FAS
123(R) are to be applied to new awards and to awards modified,
repurchased, or cancelled after the required effective date. Additionally,
compensation cost for the portion of awards for which the requisite
service has not been rendered that are outstanding as of the required
effective date shall be recognized as the requisite service is rendered on
or after the required effective date. The compensation cost for that
portion of awards shall be based on the grant-date fair value of those
awards as calculated for either recognition or pro-forma disclosures under
FAS 123. The general assumptions made in
calculating the fair value of options are set forth in Note 9 of the
Company's notes to its audited consolidated financial statements for the
fiscal years ended December 31, 2008 and 2007. See also
“Certain Relationships and Related Transactions” for a description of the
Merger Agreement which provides that options outstanding immediately prior
to the closing of the transactions under the Merger Agreement to purchase
shares of Common Stock, in the sole discretion of the Compensation
Committee, may be amended, cancelled and reissued or otherwise modified so
that the exercise price shall be adjusted downward to not less
than $.80 per share.
|
|
|
(2)
|
On September 27, 2007, Mr. Berman
was awarded a stock grant of 30,000 shares of Common Stock, in his
capacity as a member of the Board of Directors. He was also awarded a
stock grant of 45,000 shares of Common Stock, in his capacity as Chairman
of the Audit, Compensation and Nominating Committees of the Board of
Directors. One-half of the total of such shares granted (37,500) vested on
the date of grant and the remaining one-half (37,500) vested on September
27, 2008 on the first anniversary of the date of grant. On November 15,
2006, Mr. Berman was awarded a stock grant of 40,000 shares of Common
Stock, in connection with his appointment as a member of the Board of
Directors, Chairman of the Audit Committee and Chairman of the
Compensation Committee. This stock grant vested as follows: 13,333 shares
on November 15, 2006, 13,333 shares on November 15, 2007 and
13,334 on November 15, 2008. At December 31, 2008, Mr.
Berman had a total of 115,000 shares in stock awards outstanding, all of
which were vested.
|
-37-
|
|
(3)
|
On
February 27, 2008, Mr. Berman was granted an option to purchase 36,000
shares of Common Stock at a per share exercise price of $1.63, vesting as
to one-half (18,000) of such shares on the date of grant and the remaining
one-half (18,000) of such shares on February 27, 2009, the one year
anniversary of the date of grant. At December 31, 2008, Mr.
Berman had options to purchase 36,000 shares of Common Stock outstanding,
18,000 of which were vested.
|
|
|
(4)
|
On September 27, 2007, Mr. Myers
was awarded a stock grant of 30,000 shares of Common Stock, in his
capacity as a member of the Board of Directors. One-half of the total of
such shares granted (15,000) vested on the date of grant and the remaining
one-half (15,000) vested on September 27, 2008 on the first anniversary of
the date of grant. On November 16, 2006,
Mr. Myers was awarded a stock grant of 20,000 shares of Common Stock,
in connection with his appointment as a member of the Board of Directors.
This stock grant vested as follows: 6,667 shares on November 16,
2006, 6,667 shares on November 16, 2007 and 6,666 on
November 16, 2008. At December 31, 2008, Mr. Myers had a
total of 50,000 shares in stock awards outstanding, all of which were
vested.
|
|
|
(5)
|
On
February 27, 2008, Mr. Myers was granted an option to purchase 36,000
shares of Common Stock at a per share exercise price of $1.63, vesting as
to one-half (18,000) of such shares on the date of grant and the remaining
one-half (18,000) of such shares on February 27, 2009, the one year
anniversary of the date of grant. At December 31, 2008, Mr.
Myers had options to purchase 36,000 shares of Common Stock outstanding,
18,000 of which were vested.
|
|
|
(6)
|
On
September 27, 2007, Dr. Zuckerman was awarded a stock grant of 30,000
shares of Common Stock, in his capacity as a member of the Board of
Directors. One-half of the total of such shares granted (15,000) vested on
the date of grant and the remaining one-half (15,000) vested on September
27, 2008 on the first anniversary of the date of grant. As of December 31,
2007, Dr. Zuckerman had a total of 30,000 shares in stock awards
outstanding, all of which were
vested.
|
|
|
(7)
|
On February 27, 2008, Dr.
Zuckerman was granted an option to purchase 36,000 shares of Common Stock
at a per share exercise price of $1.63, vesting as to one-half (18,000) of
such shares on the date of grant and the remaining one-half (18,000) of
such shares on February 27, 2009, the one year anniversary of the date of
grant. At December 31, 2008, Dr. Zuckerman had options to
purchase 57,500 shares of Common Stock outstanding, 39,500 of which were
vested.
|
GENERAL
INFORMATION ON DIRECTOR COMPENSATION
Directors
who are employees of NeoStem do not receive additional cash compensation for
serving as directors. Independent (non-employee) directors of NeoStem are
reimbursed for out-of-pocket travel expenses incurred in their capacity as
directors of NeoStem. Pursuant to NeoStem’s 2003 Equity Participation Plan, all
directors (including independent directors) are eligible to receive equity
awards. Stock awards and option awards granted (or vesting) during
2008 to NeoStem’s independent directors are reflected in the table and
accompanying footnotes above.
-38-
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires the Company's directors
and officers, and persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission. These persons
are required by the Securities and Exchange Commission to furnish the Company
with copies of all Section 16(a) reports that they file.
Based
solely upon a review of Forms 3, 4 and 5 and amendments thereto and/or written
representations furnished to us, all parties subject to the reporting
requirements of Section 16(a) filed all such required reports during and with
respect to the fiscal year ended December 31, 2008, except that Southpoint
Capital Advisors LP, Southpoint GP, LP, Southpoint Capital Advisors, LLC,
Southpoint GP, LLC, Robert W. Butts and John S. Clark (collectively,
“Southpoint”), filed a Form 3 on February 17, 2009 to report status as a 10%
owner of the Company’s Common Stock, which was required to have been previously
filed.
Code
of Ethics
The
Company has adopted a Code of Ethics that applies to the Company's principal
executive officer, principal financial officer, principal accounting officer or
controller (or persons performing similar functions). The Code of Ethics is
available on our website, www.neostem.com, and also has been filed as Exhibit
14.1 to Annual Report on Form 10-K for the year ended December 31,
2003.
-39-
PROPOSAL
TWO
APPROVAL
OF THE 2009 EQUITY COMPENSATION PLAN
General
On April
9, 2009, our Board of Directors adopted the Neostem, Inc. 2009 Equity
Compensation Plan (the “2009 Plan”), subject to the approval of our
stockholders.
The
general purpose of the 2009 Plan is to provide an incentive to our employees,
directors, consultants and advisors by enabling them to share in the future
growth of our business. Our Board of Directors believes that the
granting of stock options, restricted stock awards, unrestricted stock awards
and similar kinds of equity-based compensation promotes continuity of management
and increases incentive and personal interest in the welfare of our Company by
those who are primarily responsible for shaping and carrying out our long range
plans and securing our growth and financial success.
The Board
believes that the 2009 Plan will advance our interests by enhancing our ability
to (a) attract and retain employees, consultants, directors and advisors who are
in a position to make significant contributions to our success; (b) reward our
employees, consultants, directors and advisors for these contributions; and (c)
encourage employees, consultants, directors and advisors to take into account
our long-term interests through ownership of our shares.
If the
2009 Plan is approved by stockholders, options to purchase shares of Common
Stock or awards may continue to be granted under our 2003 Equity Participation
Plan, as amended. As of April 1, 2009, 5,314 shares of our Common
Stock remain available for issuance under the 2003 Equity Participation
Plan.
Description
of the 2009 Equity Compensation Plan
The
following description of the principal terms of the 2009 Plan is a summary and
is qualified in its entirety by the full text of the 2009 Plan, which is
attached as Appendix
A hereto.
Administration. The 2009 Plan will be
administered by the Compensation Committee of our Board of
Directors. The Compensation Committee may grant options to purchase
shares of our Common Stock, stock appreciation rights and restricted stock units
payable in shares of our Common Stock, as well as restricted or unrestricted
shares of our Common Stock. The Compensation Committee also has broad
authority to determine the terms and conditions of each option or other kind of
equity award, adopt, amend and rescind rules and regulations for the
administration of the 2009 Plan and amend or modify outstanding options
(including the repricing thereof), grants and awards. The Board of
Directors may delegate authority to the chief executive officer and/or other
executive officers to grant options to employees (other than themselves),
subject to guidelines established by our Board of Directors and consistent with
the 2009 Plan. No options, stock purchase rights or awards may be
made under the Plan on or after April 9, 2019, but the 2009 Plan will continue
thereafter while previously granted options, stock appreciation rights or awards
remain subject to the 2009 Plan.
Eligibility. Persons eligible
to receive options, stock appreciation rights or other awards under the 2009
Plan are those employees, consultants, advisors and directors of our Company and
our subsidiaries who, in the opinion of the Compensation Committee, are in a
position to contribute to our success.
Shares Subject to
the 2009 Plan. The aggregate
number of shares of Common Stock available for issuance in connection with
options and awards granted under the 2009 Plan will be 3,800,000, subject to
customary adjustments for stock splits, stock dividends or similar
transactions. Incentive Stock Options may be granted under the 2009
Plan with respect to all of those shares. If any option or stock
appreciation right granted under the 2009 Plan terminates without having been
exercised in full or if any award is forfeited, the number of shares of Common
Stock as to which such option or award was forfeited will be available for
future grants under the 2009 Plan. No employee, consultant, advisor
or director may receive options or stock appreciation rights relating to more
than 1,900,000 shares of our Common Stock in the aggregate in any calendar
year.
Terms and
Conditions of Options. Options granted under the
2009 Plan may be either “incentive stock options” that are intended to meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the “Code”) or “nonstatutory stock options” that do not meet the requirements
of Section 422 of the Code. The Compensation Committee will determine
the exercise price of options granted under the 2009 Plan. The
exercise price of incentive stock options may not be less than the fair market
value, on the date of grant, per share of our Common Stock issuable upon
exercise of the option (or 110% of fair market value in the case of incentive
options granted to a ten-percent stockholder).
-40-
If on the
date of grant the Common Stock is listed on a stock exchange or is quoted on the
automated quotation system of Nasdaq, the fair market value shall generally be
the closing sale price on the date of grant (or, if no trades were made on the
date of grant, for the last trading day before the date of grant). If
no such prices are available, the fair market value shall be determined in good
faith by the Compensation Committee based on the reasonable application of a
reasonable valuation method. On April 6, 2009, the closing sale price
of a share of Common Stock on NYSE Amex was $1.07.
No option
may be exercisable for more than ten years (five years in the case of an
incentive option granted to a ten-percent stockholder) from the date of
grant. Options granted under the 2009 Plan will be exercisable at
such time or times as the Compensation Committee prescribes at the time of
grant. No employee may receive incentive stock options that first
become exercisable in any calendar year in an amount exceeding
$100,000.
Generally,
the option price may be paid (a) in cash or by certified check, bank draft or
money order, (b) through delivery of shares of our Common Stock having a fair
market value equal to the purchase price, or (c) a combination of these
methods. The Compensation Committee is also authorized to establish a
cashless exercise program and to permit the exercise price (or tax withholding
obligations) to be satisfied by reducing from the shares otherwise issuable upon
exercise a number of shares having a fair market value equal to the exercise
price.
Options
granted under the 2009 Plan may be granted with a "reload" feature under which
an optionee will be granted a new option for a number of shares that is equal to
the number of shares applied by the optionee to satisfy the exercise price or
tax withholdings of a previous option grant.
No option
may be transferred other than by will or by the laws of descent and
distribution, and during a recipient’s lifetime an option may be exercised only
by the recipient. However, the Compensation Committee may permit the
holder of an option or stock appreciation right to transfer the option or right
to immediate family members or a family trust for estate planning
purposes. Unless otherwise provided by the Compensation Committee,
options that are exercisable at the time of a recipient's termination of service
with us will continue to be exercisable for 90 days, unless the optionee
terminates employment or service with us due to death or disability, in which
case the option will continue to be exercisable for one year, or upon a
voluntary termination or for cause, in which case the option will cease to be
exercisable upon termination.
Stock
Appreciation Rights. A stock
appreciation right may be granted by the Compensation Committee either alone, or
in tandem with, other options or awards under the 2009 Plan. A stock
appreciation right will relate to a number of shares of our Common Stock as the
Compensation Committee determines at the time of grant. Each stock
appreciation right will have an exercise period determined by the Compensation
Committee not to exceed ten years from the date of grant. Upon
exercise of a stock appreciation right, the holder will receive a number of
shares of our Common Stock equal to (i) the number of shares for which the stock
appreciation right is exercised times the appreciation in the fair market value
of a share of our Common Stock between the date the stock appreciation right was
granted and its date of exercise; divided by (ii) the fair market value of a
share of Common Stock on the date that the stock appreciation right is
exercised. The Compensation Committee will determine the extent to
which a holder of a stock appreciation right may exercise the right following
termination of service with us.
Terms and
Conditions of Stock Awards. The Compensation
Committee may also grant a restricted or unrestricted stock award and/or a
restricted stock unit award to any eligible employee, consultant, director or
advisor. Under a restricted stock award, shares of common stock that
are the subject of the award are generally subject to forfeiture to the extent
that the recipient terminates service with us prior to the award having vested
or if the performance goals established by the Compensation Committee as a
condition of vesting are not achieved. Shares of common stock subject
to a restricted stock award cannot be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of by the recipient of the award unless and
until the applicable restrictions lapse. Unless otherwise determined
by the Compensation Committee, holders of restricted shares will have the right
to vote such shares and to receive any cash dividends with respect thereto
during the restriction period. Any stock dividends will be subject to
the same restrictions as the underlying shares of restricted stock.
Under a
restricted stock unit award, restricted stock units that are the subject of the
award are generally subject to forfeiture to the extent that the recipient
terminates service with us prior to the award having vested or if the
performance goals established by the Compensation Committee as a condition of
vesting are not achieved. To the extent that the award of restricted
stock units vests, the recipient shall become entitled to receive a number of
shares of Common Stock equal to the number of restricted stock units that became
vested. Restricted stock units cannot be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of by the recipient of the award and
during a recipient’s lifetime may be exercised only by the
recipient. Prior to the delivery of shares of Common Stock with
respect to an award of restricted stock units, the recipient shall have no
rights as a stockholder of our Company.
-41-
Unrestricted
stock awards are grants of shares of Common Stock that are not subject to
forfeiture.
To the
extent that the Compensation Committee grants stock awards that are subject to
the satisfaction of performance goals specified by the Compensation Committee
(“performance awards”), the Compensation Committee shall establish the specified
levels of performance goals. Performance goals may be weighted for
different factors and measures. The Compensation Committee will have
discretion to make adjustments to a performance award in certain circumstances,
such as when a person is promoted into a position of eligibility for a
performance award, is transferred between eligible positions with different
performance goals, terminates employment and is subsequently rehired, takes a
leave of absence, or other circumstances deemed appropriate by the Compensation
Committee. The Compensation Committee may also increase or decrease a
stock award to any individual, except that, an award intended to be “qualified
performance-based compensation” for purposes of Section 162(m) of the Code, may
not be increased. The Compensation Committee will certify the degree
of attainment of performance goals after the end of each year.
If stock
awards are intended to satisfy the conditions for deductibility under Section
162(m) of the Code as “performance-based compensation,” the performance criteria
will be selected from among the following, which may be applied to our Company
as a whole, or to an individual recipient, or to a department, unit, division or
function within the Company or an affiliate, and they may apply on a pre- or
post-tax basis, either alone or relative to the performance of other businesses
or individuals (including industry or general market indices): (a) earnings
(either in the aggregate or on a per-share basis, reflecting dilution of shares
as the committee deems appropriate and, if the committee so determines, net of
or including dividends) before or after interest and taxes (“EBIT”) or before or
after interest, taxes, depreciation, and amortization (“EBITDA”); (b) gross or
net revenue or changes in annual revenues; (c) cash flow(s) (including either
operating or net cash flows); (d) financial return ratios; (e) total stockholder
return, stockholder return based on growth measures or the attainment by the
shares of a specified value for a specified period of time, share price, or
share price appreciation; (f) earnings growth or growth in earnings per share;
(g) return measures, including return or net return on assets, net assets,
equity, capital, investment, or gross sales; (h) adjusted pre-tax margin; (i)
pre-tax profits; (j) operating margins; (k) operating profits; (l) operating
expenses; (m) dividends; (n) net income or net operating income; (o) growth in
operating earnings or growth in earnings per share; (p) value of assets; (q)
market share or market penetration with respect to specific designated products
or product groups and/or specific geographic areas; (r) aggregate product price
and other product measures; (s) expense or cost levels, in each case, where
applicable, determined either on a company-wide basis or in respect of any one
or more specified divisions; (t) reduction of losses, loss ratios or expense
ratios; (u) reduction in fixed costs; (v) operating cost management; (w) cost of
capital; (x) debt reduction; (y) productivity improvements; (z) average
inventory turnover; or (aa) satisfaction of specified business expansion goals
or goals relating to acquisitions or divestitures.
Effect of Certain
Corporate Transactions. In the event that
our Company merges or consolidates with another corporation, or if our Company
liquidates or sells substantially all of its assets, or if a person or entity or
a group of persons and/or entities acting in concert becomes the beneficial
owner of more than 50% of the combined voting power of our outstanding
securities, then each holder of an option or stock appreciation right will be
entitled, upon exercise of the option or stock appreciation right, to receive,
in lieu of shares of our Common Stock, the securities or other property to which
the holder would have been entitled if the option or stock appreciation right
had been exercised immediately prior to such event. The Board may
waive any restrictions applicable to options or stock appreciation rights so
that they may be exercised prior to such an event. In connection with
such an event, the successor corporation may assume other awards granted under
the 2009 Plan. However, if the successor corporation does not assume
the awards, then all vesting periods and other conditions applicable to the
awards will be deemed to have been satisfied as a result of such an
event. Our Board of Directors may also treat all vesting periods and
other conditions applicable to the awards as having been satisfied as a result
of such an event regardless of whether or not the awards would have been assumed
or continued by the successor corporation. The proposed transaction
between the Company and China Biopharmaceutical Holdings, Inc. shall not
constitute a corporate transaction for this purpose.
Amendment,
Termination. Our Board may at
any time amend the 2009 Plan for the purpose of satisfying the requirements of
the Code, or other applicable law or regulation or for any other legal purpose,
provided that, without the consent of our stockholders, the Board may not (a)
increase the number of shares of Common Stock available under the 2009 Plan, (b)
change the group of individuals eligible to receive options, stock appreciation
rights and/or other Awards, or (c) extend the term of the 2009
Plan.
-42-
Federal
Income Consequences
Following
is a summary of the federal income tax consequences of option and other grants
under the 2009 Plan. Optionees and recipients of other rights and
Awards granted under the 2009 Plan are advised to consult their personal tax
advisors before exercising an option, stock appreciation right or award or
disposing of any stock received pursuant to the exercise of an option, stock
appreciation right or award. In addition, the following summary is
based upon an analysis of the Code as currently in effect, existing laws,
judicial decisions, administrative rulings, regulations and proposed
regulations, all of which are subject to change and does not address state,
local or other tax laws.
Treatment
of Options
The Code
treats incentive stock options and nonstatutory stock options
differently. However, as to both types of options, no income will be
recognized to the optionee at the time of the grant of the options under the
2009 Plan, nor will our Company be entitled to a tax deduction at that
time.
Generally,
upon exercise of a nonstatutory stock option (including an option intended to be
an incentive stock option but which has not continued to so qualify at the time
of exercise), an optionee will recognize ordinary income tax on the excess of
the fair market value of the stock on the exercise date over the option
price. Our Company will be entitled to a tax deduction in an amount
equal to the ordinary income recognized by the optionee in the fiscal year which
includes the end of the optionee’s taxable year. We will be required
to satisfy applicable withholding requirements in order to be entitled to a tax
deduction. In general, if an optionee, in exercising a nonstatutory
stock option, tenders shares of our Common Stock in partial or full payment of
the option price, no gain or loss will be recognized on the
tender. However, if the tendered shares were previously acquired upon
the exercise of an incentive stock option and the tender is within two years
from the date of grant or one year after the date of exercise of the incentive
stock option, the tender will be a disqualifying disposition of the shares
acquired upon exercise of the incentive stock option.
For
incentive stock options, there is no taxable income to an optionee at the time
of exercise. However, the excess of the fair market value of the
stock on the date of exercise over the exercise price will be taken into account
in determining whether the “alternative minimum tax” will apply for the year of
exercise. If the shares acquired upon exercise are held until at
least two years from the date of grant and more than one year from the date of
exercise, any gain or loss upon the sale of such shares, if held as capital
assets, will be long-term capital gain or loss (measured by the difference
between the sales price of the stock and the exercise price). Under
current federal income tax law, a long-term capital gain will be taxed at a rate
which is less than the maximum rate of tax on ordinary income. If the
two-year and one year holding period requirements are not met (a “disqualifying
disposition”), an optionee will recognize ordinary income in the year of
disposition in an amount equal to the lesser of (i) the fair market value of the
stock on the date of exercise minus the exercise price or (ii) the amount
realized on disposition minus the exercise price. The remainder of
the gain will be treated as long-term capital gain, depending upon whether the
stock has been held for more than a year. If an optionee makes a disqualifying
disposition, our Company will be entitled to a tax deduction equal to the amount
of ordinary income recognized by the optionee.
In
general, if an optionee, in exercising an incentive stock option, tenders shares
of Common Stock in partial or full payment of the option price, no gain or loss
will be recognized on the tender. However, if the tendered shares
were previously acquired upon the exercise of another incentive stock option and
the tender is within two years from the date of grant or one year after the date
of exercise of the other option, the tender will be a disqualifying disposition
of the shares acquired upon exercise of the other option.
As noted
above, the exercise of an incentive stock option could subject an optionee to
the alternative minimum tax. The application of the alternative
minimum tax to any particular optionee depends upon the particular facts and
circumstances which exist with respect to the optionee in the year of
exercise. However, as a general rule, the amount by which the fair
market value of the Common Stock on the date of exercise of an option exceeds
the exercise price of the option will constitute an item of “adjustment” for
purposes of determining the alternative minimum taxable income on which the
alternative tax may be imposed. As such, this item will enter into
the tax base on which the alternative minimum tax is computed, and may therefore
cause the alternative minimum tax to become applicable in any given
year.
Treatment
of Stock Appreciation Rights
Generally,
the recipient of a stock appreciation right will not recognize any income upon
grant of the stock appreciation right, nor will our Company be entitled to a
deduction at that time. Upon exercise of a stock appreciation right,
the holder will recognize ordinary income, and our Company generally will be
entitled to a corresponding deduction, equal to the fair market value of our
Common Stock at that time.
-43-
Treatment
of Stock Awards
Generally,
absent an election to be taxed currently under Section 83(b) of the Code (a
"Section 83(b) Election"), there will be no federal income tax consequences to
either the recipient or our Company upon the grant of a restricted stock
award. At the expiration of the restriction period and the
satisfaction of any other restrictions applicable to the restricted shares, the
recipient will recognize ordinary income and our Company generally will be
entitled to a corresponding deduction equal to the fair market value of the
Common Stock at that time. If a Section 83(b) Election is made within
30 days after the date the restricted stock award is granted, the recipient will
recognize an amount of ordinary income at the time of the receipt of the
restricted shares, and our Company generally will be entitled to a corresponding
deduction, equal to the fair market value (determined without regard to
applicable restrictions) of the shares at such time. If a Section
83(b) Election is made, no additional income will be recognized by the recipient
upon the lapse of restrictions on the shares (and prior to the sale of such
shares), but, if the shares are subsequently forfeited, the recipient may not
deduct the income that was recognized pursuant to the Section 83(b) Election at
the time of the receipt of the shares.
The
recipient of an unrestricted stock award will recognize ordinary income, and our
Company generally will be entitled to a corresponding deduction, equal to the
fair market value of our Common Stock that is the subject of the award when the
Award is made.
The
recipient of a restricted stock unit will recognize ordinary income as and when
the units vest. The amount of the income will be equal to the fair
market value of the shares of our Common Stock issued at that time, and our
Company will be entitled to a corresponding deduction. The recipient
of a restricted stock unit will not be permitted to make a Section 83(b)
Election with respect to such award.
Potential
Limitation on Company Deductions
Code
Section 162(m) denies a deduction to any publicly held corporation for
compensation paid to certain “covered employees” in a taxable year to the extent
that compensation exceeds $1 million for a covered employee. It is
possible that compensation attributable to options granted in the future under
the 2009 Plan, when combined with all other types of compensation received by a
covered employee from us, may cause this limitation to be exceeded in any
particular year. Certain kinds of compensation, including qualified
“performance-based compensation,” are disregarded for purposes of the deduction
limitation. In accordance with Treasury regulations issued under Code
Section 162(m), compensation attributable to options will qualify as
performance-based compensation, provided that: (i) the stock award plan contains
a per-employee limitation on the number of shares for which options may be
granted during a specified period; (ii) the per-employee limitation is approved
by the stockholders; (iii) the award is granted by a Compensation Committee
comprised solely of “outside directors”; and (iv) the exercise price of the
award is no less than the fair market value of the stock on the date of
grant.
Tax
Withholding
As and
when appropriate, we shall have the right to require each optionee purchasing
shares of Common Stock and each grantee receiving an award of shares of Common
Stock under the 2009 Plan to pay any federal, state or local taxes required by
law to be withheld.
-44-
Option
Grants and Stock Awards
The grant
of options and other awards under the 2009 Plan is discretionary, and we cannot
determine now the specific number or type of options or awards to be granted in
the future to any particular person or group, except for the grants set forth in
the following New Plan Benefits table. The Company does anticipate, however,
that a significant portion of the shares of Common Stock made available
under the 2009 Plan may be utilized in the near term as a result of
the minimal number of shares available under its 2003 Equity Participation Plan
over the last year. Any such grants of options or other awards would
be made in the sole discretion of the Compensation Committee in such amounts and
to such persons as it deemed appropriate. In addition, in connection with
the Company’s proposed Merger with CBH, the Merger Agreement provides that
options outstanding immediately prior to the closing of the transactions under
the Merger Agreement to purchase shares of Common Stock, in the sole discretion
of the Compensation Committee, may be amended, canceled and reissued or
otherwise modified so that the exercise price shall be adjusted downward to not
less than $0.80 per share. Accordingly, options that may be issued under
the 2009 Plan before such closing, as well as currently outstanding
options, could have the exercise price so adjusted upon
the Merger.
NEW PLAN
BENEFITS
NEOSTEM,
INC.
2009
EQUITY COMPENSATION PLAN
|
Name and Position
|
Dollar Value ($)
|
Number of Units
|
|||
|
Non-Executive
Officer Employee Group
|
*
|
Options
to purchase 375,000 shares of Common
Stock*
|
|||
* These
options (the (“Options”) are to be granted upon approval of the 2009 Plan by the
Company’s stockholders (the “Grant Date”) or upon the approval of the Company’s
proposed Merger by the Company’s stockholders (the “Second Grant Date”) to two
new employees in consideration of entering into employment with the
Company. The first option is to purchase 75,000 shares of Common
Stock, exercisable for 10 years from the Grant Date, at an exercise price equal
to the closing price of the Common Stock on the Grant Date, and will vest as to
(i) 25,000 shares on the Grant Date, (ii) 25,000 shares on the six month
anniversary of the Grant Date and (iii) 25,000 shares on the one year
anniversary of the Grant Date. The second option is to purchase
100,000 shares of Common Stock, exercisable for 10 years from the Grant Date, at
an exercise price equal to the closing price of the Common Stock on the Grant
Date, and will vest over a three year period in equal amounts every six month
anniversary of the Grant Date. The third option (to be granted to the
recipient of the second option) is to purchase 200,000 shares of Common Stock,
exercisable for 10 years from the Second Grant Date, at an exercise price equal
to the closing price of the Common Stock on the Second Grant Date and will vest
over a three year period in equal amounts every six month anniversary of the
Second Grant Date. The market value of the Common Stock underlying the Options,
based on the closing price of the Common Stock of $1.07 on April 6, 2009 on the
NYSE Amex, is $401,250. These Options are intended to be “incentive
stock options.” Please see “ - Federal Income Tax Consequences” for a
discussion of the federal income tax consequences of the issuance and exercise
of these Options to the recipients and the Company.
Vote
Required
The
affirmative vote of a majority of the votes cast at the Annual Meeting is
required to approve Proposal 2.
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY
VOTE
“FOR” PROPOSAL 2.
-45-
PROPOSAL
THREE
RATIFICATION
OF THE APPOINTMENT OF HOLTZ RUBENSTEIN REMINICK LLP
AS
THE COMPANY'S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING
FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2009
The Audit
Committee has appointed Holtz Rubenstein Reminick LLP as the Company's
independent registered public accounting firm for the Company’s fiscal year
ending December 31, 2009. Our Board is submitting this appointment to our
stockholders for ratification. Holtz Rubenstein Reminick LLP has served as the
Company's independent registered public accounting firm since 2003. It is
intended that the persons named in the accompanying proxy will vote for the
ratification of Holtz Rubenstein Reminick LLP. Representatives of Holtz
Rubenstein Reminick LLP are expected to attend the meeting, to have an
opportunity to make a statement if they desire to do so and to be available to
respond to appropriate questions.
ACCOUNTING
FEES AND OTHER ACCOUNTING MATTERS
The
following is a summary of the fees billed or expected to be billed to us by
Holtz Rubenstein Reminick LLP, the Company's independent auditors, for
professional services rendered for the fiscal years ended December 31, 2008 and
December 31, 2007:
|
Fee Category
|
Fiscal 2008
Fees
|
Fiscal 2007
Fees
|
||||||
|
Audit
Fees(1)
|
$ | 104,000 | $ | 92,000 | ||||
|
Audit-Related
Fees(2)
|
$ | 100,335 | $ | 103,000 | ||||
|
Tax
Fees(3)
|
$ | 19,800 | $ | 9,000 | ||||
|
All
Other Fees(4)
|
$ | - | $ | - | ||||
|
Total
Fees
|
$ | 224,135 | $ | 204,000 | ||||
(1) Audit
Fees consist of aggregate fees billed or expected to be billed for professional
services rendered for the audit of the Company's annual consolidated financial
statements included in the Company's Annual Reports on Form 10-K and review of
the interim consolidated financial statements included in Quarterly Reports on
Forms 10-Q and 10-QSB or services that are normally provided by the independent
auditors in connection with statutory and regulatory filings or engagements for
the fiscal years ended December 31, 2008 and December 31, 2007,
respectively.
(2)
Audit-Related Fees consist of aggregate fees billed for assurance and related
services that are reasonably related to the performance of the audit or review
of the Company's consolidated financial statements and are not reported under
"Audit Fees." Such services include review of Form 8-K, S-1, SB-2 and S-3
filings (and related correspondence with the SEC), agreed upon procedures in
connection with the Company's proposed merger and acquisition transactions and
review of the related proposed S-4 filing, and research into various accounting
issues.
(3) Tax
Fees consist of aggregate fees billed or expected to be billed for professional
services rendered for tax compliance, tax advice and tax planning. These fees
related to preparation of the Company's federal and state income tax returns and
other tax compliance activities.
(4) All
Other Fees consist of aggregate fees billed for products and services provided
by Holtz Rubenstein Reminick LLP, other than those disclosed above.
The Audit
Committee is responsible for the appointment, compensation and oversight of the
work of the independent auditors and approves in advance any services to be
performed by the independent auditors, whether audit-related or not. The Audit
Committee reviews each proposed engagement to determine whether the provision of
services is compatible with maintaining the independence of the independent
auditors. All of the fees shown above were pre-approved by the Audit
Committee.
Vote
Required
The
affirmative vote of a majority of the votes cast at the Annual Meeting is
required to approve Proposal 3.
-46-
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY
VOTE
“FOR” PROPOSAL 3.
STOCKHOLDER
PROPOSALS
Any
proposal intended to be presented by a stockholder at the next annual meeting of
stockholders must be received by the Company at the Company's principal
executive offices, 420 Lexington Avenue, Suite 450, New York, New York 10170 no
later than the close of business on December 16, 2009 to be considered for
inclusion in the proxy statement for the annual meeting and by March 1, 2010 in
order for the proposal to be considered timely for consideration at next year's
annual meeting (but not included in the proxy statement for such
meeting).
ANNUAL
REPORTS
The
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008
(the "2008 Annual Report") containing consolidated financial statements
reflecting the financial position of the Company as of December 31, 2008 and
2007, and the results of operations and statements of cash flows for each of the
three years in the period ended December 31, 2008, has been mailed with this
proxy material to all stockholders. The 2008 Annual Report is
not to be regarded as proxy soliciting material or as a communication by means
of which any solicitation is to be made.
DELIVERY
OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS
The
Company delivers its proxy materials and annual reports to each stockholder of
record. If any stockholders sharing an address wish to receive only one copy of
each such document, they should send a letter with this request to the Company's
principal executive offices, c/o Corporate Secretary, 420 Lexington Avenue,
Suite 450, New York, New York 10170.
OTHER
BUSINESS
The
Annual Meeting is called for the purposes set forth in the Notice. The Board
does not know of any matter for action by stockholders at such Annual Meeting
other than the matters described in the Notice. However, the enclosed proxy will
confer discretionary authority with respect to matters which are not known at
the date of printing hereof which may properly come before the Annual Meeting.
It is the intention of the person named in the proxy to vote in accordance with
their judgment on any such matter.
You are
cordially invited to attend the Annual Meeting in person. Your participation in
and discussion of the Company's affairs will be welcome.
By
Order of the Board of Directors
/s/
Catherine
M. Vaczy
Catherine
M. Vaczy, Secretary
-47-
Appendix
A
NEOSTEM,
INC.
2009
EQUITY COMPENSATION PLAN
1. Purposes of the
Plan. The purposes of this Neostem, Inc. 2009 Equity
Compensation Plan (the “Plan”) are: to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentives to Employees, Directors and
Consultants, and to promote the success of the Company and any Parent or
Subsidiary. Options granted under the Plan may be Incentive Stock
Options or Nonstatutory Stock Options, as determined by the Administrator at the
time of grant. Stock Awards, Unrestricted Shares and Stock
Appreciation Rights may also be granted under
the Plan.
2. Definitions. As
used herein, the following definitions shall apply:
“Administrator” means
a Committee which has been delegated the responsibility of administering the
Plan in accordance with Section 4 of the Plan or, if there is no such Committee,
the Board.
“Applicable Laws”
means the requirements relating to the administration of equity compensation
plans under the applicable corporate and securities laws of any of the states in
the United States, U.S. federal securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Awards are, or will
be, granted under the Plan.
“Award” means an
Option, a Stock Award, a Stock Appreciation Right and/or the grant of
Unrestricted Shares.
“Board” means the
Board of Directors of the Company.
“Cause”, with respect
to any Service Provider, means (unless otherwise determined by the
Administrator) such Service Provider’s (i) conviction of, or plea of nolo
contendere to, a felony or crime involving moral turpitude; (ii) fraud on
or misappropriation of any funds or property of the Company; (iii) personal
dishonesty, willful misconduct, willful violation of any law, rule or regulation
(other than minor traffic violations or similar offenses) or breach of fiduciary
duty which involves personal profit; (iv) willful misconduct in connection
with the Service Provider’s duties; (v) chronic use of alcohol, drugs or
other similar substances which affects the Service Provider’s work performance;
or (vi) material breach of any provision of any employment, non-disclosure,
non-competition, non-solicitation or other similar agreement executed by the
Service Provider for the benefit of the Company, all as reasonably determined by
the Committee, which determination will be
conclusive. Notwithstanding the foregoing, if a Service Provider and
the Company (or any of its Affiliates) have entered into an employment
agreement, consulting agreement, advisory agreement or other similar agreement
that specifically defines “cause,” then with respect to such Service Provider,
“Cause” shall have the meaning defined in that employment agreement, consulting
agreement, advisory agreement or other agreement.
“Code” means the
Internal Revenue Code of 1986, as amended.
“Committee” means a
committee of Directors appointed by the Board in accordance with Section 4 of
the Plan.
“Common Stock” means
the common stock, par value $.001 per share, of the Company.
1
“Company” means
Neostem, Inc., a Delaware corporation.
“Consultant” means any
person, including an advisor, engaged by the Company or a Parent or Subsidiary
to render services to such entity, other than an Employee or a
Director.
“Director” means a
member of the Board.
“Disability” means
total and permanent disability as defined in Section 22(e)(3) of the
Code.
“Employee” means any
person, including officers and Directors, serving as an employee of the Company
or any Parent or Subsidiary. An individual shall not cease to be an
Employee in the case of (i) any leave of absence approved by the Company or (ii)
transfers between locations of the Company or between the Company, its Parent,
any Subsidiary or any successor. For purposes of an Option initially
granted as an Incentive Stock Option, if a leave of absence of more than three
months precludes such Option from being treated as an Incentive Stock Option
under the Code, such Option thereafter shall be treated as a Nonstatutory Stock
Option for purposes of this Plan. Neither service as a Director nor
payment of a director's fee by the Company shall be sufficient to constitute
“employment” by the Company.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended.
“Fair Market Value”
means, as of any date, the value of Common Stock determined as
follows:
(i) if
the Common Stock is listed on any established stock exchange or a national
market system, including without limitation the NYSE Amex, Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, or any
successor to any of them, the Fair Market Value of a Share of Common Stock shall
be the closing sales price of a Share of Common Stock as quoted on such exchange
or system for such date (or the most recent trading day preceding such date if
there were no trades on such date), as reported in The Wall Street
Journal or such other source as the Committee deems reliable, including
without limitation, Yahoo! Finance;
(ii) if
the Common Stock is regularly quoted by a recognized securities dealer but is
not listed in the manner contemplated by clause (i) above, the Fair Market Value
of a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock for such date (or the most recent trading day
preceding such date if there were no trades on such date), as reported in The Wall Street Journal
or such other source as the Committee deems reliable, including without
limitation Yahoo! Finance; or
(iii) if
neither clause (i) above nor clause (ii) above applies, the Fair Market Value
shall be determined in good faith by the Administrator based on the reasonable
application of a reasonable valuation method.
“Grant Agreement”
means an agreement between the Company and a Participant evidencing the terms
and conditions of an individual Option or Stock Appreciation Right
grant. Each Grant Agreement shall be subject to the terms and
conditions of the Plan.
2
“Incentive Stock
Option” means an Option intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code and the regulations promulgated
thereunder.
“Nonstatutory Stock
Option” means an Option not intended to qualify as an Incentive Stock
Option.
“Notice of Grant”
means a written or electronic notice evidencing certain terms and conditions of
an individual Option grant, Stock Award grant or grant of Unrestricted Shares or
Stock Appreciation Rights. The Notice of Grant applicable to Stock
Options or Stock Appreciation Rights shall be part of the Grant
Agreement.
“Option” means a stock
option granted pursuant to the Plan.
“Optioned Stock” means
the Common Stock subject to an Option.
“Optionee” means the
holder of an outstanding Option granted under the Plan.
“Parent” means a
“parent corporation” of the Company (or, for purposes of Section 16(b) of the
Plan, a successor to the Company), whether now or hereafter existing, as defined
in Section 424(e) of the Code.
“Participant” shall
mean any Service Provider who holds an Option, Restricted Stock, a Stock Award,
Unrestricted Shares or a Stock Appreciation Right granted or issued pursuant to
the Plan.
“Rule 16b-3” means
Rule 16b-3 of the Exchange Act or any successor to such Rule 16b-3, as such rule
is in effect when discretion is being exercised with respect to the
Plan.
“Section 16(b)” means
Section 16(b) of the Exchange Act.
“Service Provider”
means an Employee, Director or Consultant.
“Share” means a share
of the Common Stock, as adjusted in accordance with Section 16 of the
Plan.
“Stock Appreciation
Right” means a right awarded pursuant to Section 14 of the
Plan.
“Stock Award” means an
Award of Shares pursuant to Section 11 of the Plan or an award of Restricted
Stock Units pursuant to Section 12 of the Plan.
“Stock Award
Agreement” means an agreement, approved by the Administrator, providing
the terms and conditions of a Stock Award.
“Stock Award Shares”
means Shares subject to a Stock Award.
“Stock Awardee” means
the holder of an outstanding Stock Award granted under the Plan.
“Subsidiary” means a
"subsidiary corporation" of the Company (or, for purposes of Section 16(b) of
the Plan, a successor to the Company), whether now or hereafter existing, as
defined in Section 424(f) of the Code.
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“Unrestricted Shares”
means a grant of Shares made on an unrestricted basis pursuant to Section 13 of
the Plan.
3. Stock Subject to the
Plan. Subject to the provisions of Section 16(a) of the Plan,
the maximum aggregate number of Shares that may be issued under the Plan is
3,800,000 Shares, all of which may be issued in respect of Incentive Stock
Options. The Shares may be authorized but unissued, or reacquired,
shares of Common Stock. The maximum number of Shares subject to
Options and Stock Appreciation Rights which may be issued to any Participant
under the Plan during any calendar year is 1,900,000 Shares. If an Option or Stock Appreciation
Right expires or becomes unexercisable without having been exercised in full or
is canceled or terminated, or if any Shares of Restricted Stock or Shares
underlying a Stock Award are forfeited or reacquired by the Company, the Shares
that were subject thereto shall be added back to the Shares available for
issuance under the Plan. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
4. Administration of the
Plan.
(a) Appointment. The
Plan shall be administered by a Committee to be appointed by the Board, which
Committee shall consist of not less than two members of the Board and shall be
comprised solely of members of the Board who qualify as both non-employee
directors as defined in Rule 16b-3(b)(3) of the Exchange Act and outside
directors within the meaning of Department of Treasury Regulations issued under
Section 162(m) of the Code. The Board shall have the power to add or
remove members of the Committee, from time to time, and to fill vacancies
thereon arising; by resignation, death, removal, or
otherwise. Meetings shall be held at such times and places as shall
be determined by the Committee. A majority of the members of the
Committee shall constitute a quorum for the transaction of business, and the
vote of a majority of those members present at any meeting shall decide any
question brought before that meeting.
(b) Powers of the
Administrator. The Administrator shall have the authority, in
its discretion:
(i) to
determine the Fair Market Value of Shares;
(ii) to
select the Service Providers to whom Options, Stock Awards, Unrestricted Shares
and/or Stock Appreciation
Rights may be granted
hereunder;
(iii) to
determine the number of shares of Common Stock to be covered by each Award
granted hereunder;
(iv) to
approve forms of agreement for use under the Plan;
(v) to
determine the terms and conditions, not inconsistent with the terms of the Plan
or of any Award granted hereunder. Such terms and conditions include,
but are not limited to, the exercise price, the time or times when Options and
Stock Appreciation Rights may be exercised (which may be based on performance
criteria), any vesting, acceleration or waiver of forfeiture provisions, and any
restriction or limitation regarding any Option, Stock Appreciation Right or
Stock Award, or the Shares of Common Stock relating thereto, based in each case
on such factors as the Administrator, in its sole discretion, shall
determine;
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(vi) to
construe and interpret the terms of the Plan, Awards granted pursuant to the
Plan and agreements entered into pursuant to the Plan;
(vii) to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax
laws;
(viii) to
modify or amend each Award (subject to Section 19(c) of the Plan), including the
discretionary authority to extend, subject to the terms of the Plan, the
post-termination exercisability period of Options or Stock Appreciation Rights
longer than is otherwise provided for in a Grant Agreement and to accelerate the
time at which any outstanding Option or Stock Appreciation Right may be
exercised;
(ix) to
allow grantees to satisfy withholding tax obligations by having the Company
withhold from the Shares to be issued upon exercise of an Option or Stock
Appreciation Right, upon vesting of a Stock Award, or upon the grant of
Unrestricted Shares that number of Shares having a Fair Market Value equal to
the amount required to be withheld, provided that withholding is calculated at
the minimum statutory withholding level. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All determinations to have Shares
withheld for this purpose shall be made by the Administrator in its
discretion;
(x) to
reduce the exercise price of any Option or Stock Appreciation Right
(xi) to
authorize any person to execute on behalf of the Company any agreement entered
into pursuant to the Plan and any instrument required to effect the grant of an
Award previously granted by the Administrator; and
(xii) to
make all other determinations deemed necessary or advisable for administering
the Plan.
(c) Effect of Administrator's
Decision. The Administrator's decisions, determinations and
interpretations shall be final and binding on all holders of Awards and
Restricted Stock. None of the Board, the Committee or the
Administrator, nor any member or delegate thereof, shall be liable for any act,
omission, interpretation, construction or determination made in good faith in
connection with the Plan, and each of the foregoing 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 any directors’ and officers’ liability insurance coverage
which may be in effect from time to time.
(d) Delegation of Grant
Authority. Notwithstanding any other provision in the Plan,
the Board may authorize the Company’s Chief Executive Officer or another
executive officer of the Company or a committee of such officers (“Authorized Officers”)
to grant Options under the Plan; provided, however, that in no
event shall the Authorized Officers be permitted to grant Options to (i) any
Director, (ii) any person who is identified by the Company as an executive
officer of the Company or who is subject to the restrictions imposed under
Section 16 of the Exchange Act, (iii) any person who is not an employee of the
Company or any Subsidiary, or (iv) such other person or persons as may be
designated from time to time by the Board. If such authority is
provided by the Board, the Board shall establish and adopt written guidelines
setting forth the maximum number of shares for which the Authorized Officers may
grant Options to any individual during a specified period of time and such other
terms and conditions as the Board deems appropriate for such
grants. Such guidelines may be amended by the Board prospectively at
any time. Subject to the foregoing, the Authorized Officers shall
have the same authority as the Administrator under this Section 4 with respect
to the grant of Options under the Plan.
5
5. Eligibility. Nonstatutory
Stock Options, Stock Awards, Unrestricted Shares and Stock Appreciation Rights
may be granted to Service Providers. Incentive Stock Options may be
granted only to Employees. Notwithstanding anything contained herein
to the contrary, an Award may be granted to a person who is not then a Service
Provider; provided, however, that the grant of such Award shall be conditioned
upon such person becoming a Service Provider at or prior to the time of the
execution of the agreement evidencing such Award.
6. Limitations.
(a) Each
Option shall be designated in the Grant Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option. However, notwithstanding such
designation, if a single Employee becomes eligible in any given year to exercise
Incentive Stock Options for Shares having a Fair Market Value in excess of
$100,000, those Options representing the excess shall be treated as Nonstatutory
Stock Options. In the previous sentence, “Incentive Stock Options”
include Incentive Stock Options granted under any plan of the Company or any
Parent or any Subsidiary. For the purpose of deciding which Options
apply to Shares that “exceed” the $100,000 limit, Incentive Stock Options shall
be taken into account in the same order as granted. The Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(b)
Neither the Plan nor any Award nor any agreement entered into pursuant to the
Plan shall confer upon a Participant any right with respect to continuing the
Participant's relationship as a Service Provider with the Company, nor shall
they interfere in any way with the Participant's right or the Company's right to
terminate such relationship at any time, with or without cause.
7. Term of the
Plan. Subject to Section 22 of the Plan, the Plan shall become
effective upon its adoption by the Board. It shall continue in effect
for a term of ten (10) years unless terminated earlier under Section 19 of the
Plan.
8. Term of
Options. Unless otherwise provided in the applicable Grant
Agreement, the term of each Option granted to anyone other than a Consultant
shall be ten (10) years from the date of grant and the term of each Option
granted to any Consultant shall be five (5) years from the date of
grant. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the applicable Grant Agreement. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Incentive Stock Option
is granted, owns, directly or indirectly, stock representing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Incentive Stock Option
shall be five (5) years from the date of grant or such shorter term as may be
provided in the applicable Grant Agreement.
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9. Option Exercise Price;
Exercisability.
(a) Exercise
Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an
Incentive Stock Option
(A) granted
to an Employee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the Fair Market Value per Share on
the date of grant, or
(B) granted
to any Employee other than an Employee described in paragraph (A) immediately
above, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.
(ii)
In the case of a Nonstatutory Stock Option, the per Share exercise price
shall be determined by the Administrator; provided, however, that in the case of
a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price of a Nonstatutory Stock Option shall be no less than 100% of the
Fair Market Value per Share on the date of grant, as determined by the
Administrator in good faith.
(iii) Notwithstanding
the foregoing, Options may be granted with a per Share exercise price of less
than 100% (or 110%, if clause (i)(A) above applies) of the Fair Market Value per
Share on the date of grant pursuant to a merger or other comparable corporate
transaction.
(b) Exercise Period and
Conditions. At the time that an Option is granted, the
Administrator shall fix the period within which the Option may be exercised and
shall determine any conditions that must be satisfied before the Option may be
exercised.
(c) Reload
Options. The Administrator may grant Options with a reload
feature. A reload feature shall only apply when the option price is
paid by delivery of Common Stock (as set forth in Section 10(f)) or by
having the Company reduce the number of shares otherwise
issuable to an Optionee (as provided for in Section 10(f)) (a "Net
Exercise"). The Grant Agreement for the Options containing the
reload feature shall provide that the Option holder shall receive,
contemporaneously with the payment of the exercise price in shares of
Common Stock or in the event of a Net Exercise, a reload stock option
(the "Reload
Option") to purchase that number of shares of Common Stock equal to the
sum of (i) the number of shares of Common Stock used to exercise the
Option (or not issued in the case of a Net Exercise), and (ii) with respect to
Nonstatutory Stock Options, the number of shares of Common Stock used to satisfy
any tax withholding requirement incident to the exercise of such Nonstatutory
Stock Option. The terms of the Plan applicable to the
Option shall be equally applicable to the Reload Option with the
following exceptions: (i) the exercise price per share of Common
Stock deliverable upon the exercise of the Reload Option, (A) in the case of a
Reload Option which is an Incentive Stock Option being granted to a 10%
Stockholder, shall be one hundred ten percent (110%) of the Fair Market Value of
a share of Common Stock on the date of grant of the Reload Option, and (B) in
the case of a Reload Option which is an Incentive Stock Option being granted to
a person other than a 10% Stockholder or is a Nonstatutory Stock Option, shall
be the Fair Market Value of a share of Common Stock on the date of grant of the
Reload Option; and (ii) the term of the Reload Option shall be equal to the
remaining option term of the Option (including a Reload Option) which gave rise
to the Reload Option. The Reload Option shall be evidenced by an
appropriate amendment to the Grant Agreement for the Option which gave rise to
the Reload Option. In the event the exercise price of an
Option containing a reload feature is paid by check and not in shares of Common
Stock, the reload feature shall have no application with respect to such
exercise.
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10. Exercise of Options;
Consideration.
(a) Procedure for Exercise; Rights as a
Shareholder. Any Option granted hereunder shall be exercisable
according to the terms of the Plan and at such times and under such conditions
as determined by the Administrator and set forth in the Grant
Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a
Share. An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Grant
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is
exercised. Full payment may consist of any consideration and method
of payment authorized by the Administrator and permitted by the Grant Agreement
and Section 10(f) of the Plan. Shares issued upon exercise of an
Option shall be issued in the name of the Optionee. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are
issued, except as provided in Section 16 of the Plan. Exercising an
Option in any manner shall decrease the number of Shares thereafter available,
both for purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
(b) Termination of Relationship as a
Service Provider. Unless otherwise specified in the Grant
Agreement or provided by the Administrator, if an Optionee ceases to be a
Service Provider, other than as a result of (x) the Optionee's death or
Disability, or (y) termination of such Optionee’s employment or relationship
with the Company with Cause, or (z) the Optionee's voluntary termination of
employment other than as a result of retirement, the Optionee may exercise his
or her Option for up to ninety (90) days following the date on which the
Optionee ceases to be a Service Provider to the extent that the Option is vested
on the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Grant Agreement). If, on the
date that the Optionee ceases to be a Service Provider, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after the date
that the Optionee ceases to be a Service Provider the Optionee does not exercise
his or her Option in full within the time set forth herein or the Grant
Agreement, as applicable, the unexercised portion of the Option shall terminate,
and the Shares covered by such unexercised portion of the Option shall revert to
the Plan. An Optionee who changes his or her status as a Service
Provider (e.g., from being an Employee to being a Consultant) shall not be
deemed to have ceased being a Service Provider for purposes of this Section
10(b), nor shall a transfer of employment among the Company and any Subsidiary
be considered a termination of employment; however, if an Optionee holding
Incentive Stock Options ceases being an Employee but continues as a Service
Provider, such Incentive Stock Options shall be deemed to be Nonstatutory Stock
Options three months after the date of such cessation.
(c) Disability of an
Optionee. Unless otherwise specified in the Grant Agreement,
if an Optionee ceases to be a Service Provider as a result of the Optionee's
Disability, the Optionee may exercise his or her Option, to the extent the
Option is vested on the date that the Optionee ceases to be a Service Provider,
up until the one-year anniversary of the date on which the Optionee ceases to be
a Service Provider (but in no event later than the expiration of the term of
such Option as set forth in the Grant Agreement). If, on the date
that the Optionee ceases to be a Service Provider, the Optionee is not vested as
to his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after the Optionee ceases to be
a Service Provider, the Optionee does not exercise his or her Option in full
within the time set forth herein or the Grant Agreement, as applicable, the
unexercised portion of the Option shall terminate, and the Shares covered by
such unexercised portion of the Option shall revert to the Plan.
8
(d) Death of an
Optionee. Unless otherwise specified in the Grant Agreement,
if an Optionee dies while a Service Provider, the Option may be exercised, to
the extent that the Option is vested on the date of death, by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance up until the one-year anniversary of the Optionee’s death (but in
no event later than the expiration of the term of such Option as set forth in
the Notice of Grant). If, at the time of death, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If the Option is not
so exercised in full within the time set forth herein or the Grant Agreement, as
applicable, the unexercised portion of the Option shall terminate, and the
Shares covered by the unexercised portion of such Option shall revert to the
Plan.
(e) Termination for Cause or Voluntary
Termination. If a Service Provider’s relationship with the Company is
terminated for Cause, or if a Service Provider voluntarily terminates his or her
relationship with the Company other than as a result of retirement, then, unless
otherwise provided in such Service Provider’s Grant Agreement or by the
Administrator, such Service Provider shall have no right to exercise any of such
Service Provider’s Options at any time on or after the effective date of such
termination.
(f) Form of
Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the
Administrator shall determine the acceptable form of consideration at the time
of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) other
Shares which (A) in the case of Shares acquired upon exercise of an option at a
time when the Company is subject to Section 16(b) of the Exchange Act, have been
owned by the Optionee for more than six months on the date of surrender, and (B)
have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be
exercised;
(iv) consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan;
(v) a
reduction in the number of Shares otherwise issuable by a number of Shares
having a Fair Market Value equal to the exercise price of the Option being
exercised;
(vi) any
combination of the foregoing methods of payment; or
(vii) such
other consideration and method of payment for the issuance of Shares to the
extent permitted by Applicable Laws.
9
11. Stock Awards. The
Administrator may, in its sole discretion, grant (or sell at par value or such
higher purchase price as it determines) Shares to any Service Provider subject
to such terms and conditions as the Administrator sets forth in a Stock Award
Agreement evidencing such grant. Stock Awards may be granted or sold
in respect of past services or other valid consideration or in lieu of any cash
compensation otherwise payable to such individual. The grant of Stock
Awards under this Section 11 shall be subject to the following
provisions:
(a) At
the time a Stock Award under this Section 11 is made, the Administrator shall
establish a vesting period (the "Restricted Period")
applicable to the Stock Award Shares subject to such Stock Award. The
Administrator may, in its sole discretion, at the time a grant is made,
prescribe restrictions in addition to the expiration of the Restricted Period,
including the satisfaction of corporate or individual performance
objectives. None of the Stock Award Shares may be sold, transferred,
assigned, pledged or otherwise encumbered or disposed of during the Restricted
Period applicable to such Stock Award Shares or prior to the satisfaction of any
other restrictions prescribed by the Administrator with respect to such Stock
Award Shares.
(b) The
Company shall issue, in the name of each Service Provider to whom Stock Award
Shares have been granted, stock certificates representing the total number of
Stock Award Shares granted to such person, as soon as reasonably practicable
after the grant. The Company, at the direction of the Administrator,
shall hold such certificates, properly endorsed for transfer, for the Stock
Awardee's benefit until such time as the Stock Award Shares are forfeited to the
Company, or the restrictions lapse.
(c)
Unless otherwise provided by the Administrator, holders of Stock Award Shares
shall have the right to vote such Shares and have the right to receive any cash
dividends with respect to such Shares. All distributions, if any,
received by a Stock Awardee with respect to Stock Award Shares as a result of
any stock split, stock distribution, combination of shares, or other similar
transaction shall be subject to the restrictions of this Section
11.
(d) Any
Stock Award Shares granted to a Service Provider pursuant to the Plan shall be
forfeited if the Stock Awardee voluntarily terminates employment with the
Company or its subsidiaries or resigns or voluntarily terminates his consultancy
or advisory arrangement or directorship with the Company or its subsidiaries, or
if the Stock Awardee's employment or the consultant's or advisor's consultancy
or advisory arrangement or directorship is terminated for Cause, in each case
prior to the expiration or termination of the applicable Restricted Period and
the satisfaction of any other conditions applicable to such Stock Award
Shares. Upon such forfeiture, the Stock Award Shares that are
forfeited shall be retained in the treasury of the Company and be available for
subsequent awards under the Plan. If the Stock Awardee's employment,
consultancy or advisory arrangement or directorship terminates for any other
reason prior to the expiration or termination of the applicable Restricted
Period and the satisfaction of any other conditions applicable to such Stock
Award Shares, the Stock Award Shares held by such person shall be forfeited,
unless the Administrator, in its sole discretion, shall determine
otherwise.
(e) Upon
the expiration or termination of the Restricted Period and the satisfaction of
any other conditions prescribed by the Committee, the restrictions applicable to
the Stock Award Shares shall lapse and, at the Stock Awardee’s request, a stock
certificate for the number of Stock Award Shares with respect to which the
restrictions have lapsed shall be delivered, free of all such restrictions, to
the Stock Awardee or his beneficiary or estate, as the case may be.
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(f) Prior
to the delivery of any shares of Common Stock in connection with a Stock Award
under this Section 11, the Company shall be entitled to require as a condition
of delivery that the Stock Awardee shall pay or make adequate provision
acceptable to the Company for the satisfaction of the statutory minimum
prescribed amount of federal and state income tax and other withholding
obligations of the Company, including, if permitted by the Administrator, by
having the Company withhold from the number of shares of Common Stock otherwise
deliverable in connection with a Stock Award, a number of shares of Common Stock
having a Fair Market Value equal to an amount sufficient to satisfy such tax
withholding obligations.
12. Restricted Stock
Units. The Committee may, in its sole discretion, grant
Restricted Stock Units to a Service Provider subject to such terms and
conditions as the Committee sets forth in a Stock Award Agreement evidencing
such grant. “Restricted Stock Units” are Awards denominated in units
evidencing the right to receive Shares of Common Stock, which may vest over such
period of time and/or upon satisfaction of such performance criteria or
objectives as is determined by the Committee at the time of grant and set forth
in the applicable Stock Award Agreement, without payment of any amounts by the
Stock Awardee thereof (except to the extent required by law). Prior
to delivery of shares of Common Stock with respect to an award of Restricted
Stock Units, the Stock Awardee shall have no rights as a stockholder of the
Company.
Upon
satisfaction and/or achievement of the applicable vesting requirements relating
to an award of Restricted Stock Units, the Stock Awardee shall be entitled to
receive a number of shares of Common Stock that are equal to the number of
Restricted Stock Units that became vested. To the extent, if any, set
forth in the applicable Stock Award Agreement, cash dividend equivalents may be
paid during, or may be accumulated and paid at the end of, the applicable
vesting period, as determined by the Committee.
Unless
otherwise provided by the Stock Award Agreement, any Restricted Stock Units
granted to a Service Provider pursuant to the Plan shall be forfeited if the
Stock Awardee’s employment or service with the Company or its Subsidiaries
terminates for any reason prior to the expiration or termination of the
applicable vesting period and/or the achievement of such other vesting
conditions applicable to the award.
Prior to
the delivery of any shares of Common Stock in connection with an award of
Restricted Stock Units, the Company shall be entitled to require as a condition
of delivery that the Stock Awardee shall pay or make adequate provision
acceptable to the Company for the satisfaction of the statutory minimum
prescribed amount of federal and state income tax and other withholding
obligations of the Company, including, if permitted by the Administrator, by
having the Company withhold from the number of shares of Common Stock otherwise
deliverable in connection with an award of Restricted Stock Units, a number of
shares of Common Stock having a Fair Market Value equal to an amount sufficient
to satisfy such tax withholding obligations.
13. Unrestricted Shares. The
Administrator may grant Unrestricted Shares in accordance with the following
provisions:
(a) The
Administrator may cause the Company to grant Unrestricted Shares to Service
Providers at such time or times, in such amounts and for such reasons as the
Administrator, in its sole discretion, shall determine. No payment shall be
required for Unrestricted Shares.
(b) The
Company shall issue, in the name of each Service Provider to whom Unrestricted
Shares have been granted, stock certificates representing the total number of
Unrestricted Shares granted to such individual, and shall deliver such
certificates to such Service Provider as soon as reasonably practicable after
the date of grant or on such later date as the Administrator shall determine at
the time of grant.
11
(c) Prior
to the delivery of any Unrestricted Shares, the Company shall be entitled to
require as a condition of delivery that the Stock Awardee shall pay or make
adequate provision acceptable to the Company for the satisfaction of the
statutory minimum prescribed amount of federal and state income tax and other
withholding obligations of the Company, including, if permitted by the
Administrator, by having the Company withhold from the number of Unrestricted
Shares otherwise deliverable, a number of shares of Common Stock having a Fair
Market Value equal to an amount sufficient to satisfy such tax withholding
obligations.
14. Stock Appreciation
Rights. A Stock Appreciation Right may be granted by the
Committee either alone, in addition to, or in tandem with other Awards granted
under the Plan. Each Stock Appreciation Right granted under the Plan
shall be subject to the following terms and conditions:
(a) Each
Stock Appreciation Right shall relate to such number of Shares as shall be
determined by the Committee.
(b) The
Award Date (i.e., the
date of grant) of a Stock Appreciation Right shall be the date specified by the
Committee, provided that that date shall not be before the date on which the
Stock Appreciation Right is actually granted. The Award Date of a
Stock Appreciation Right shall not be prior to the date on which the recipient
commences providing services as a Service Provider. The term of each
Stock Appreciation Right shall be determined by the Committee, but shall not
exceed ten years from the date of grant. Each Stock Appreciation
Right shall become exercisable at such time or times and in such amount or
amounts during its term as shall be determined by the
Committee. Unless otherwise specified by the Committee, once a Stock
Appreciation Right becomes exercisable, whether in full or in part, it shall
remain so exercisable until its expiration, forfeiture, termination or
cancellation.
(c) A
Stock Appreciation Right may be exercised, in whole or in part, by giving
written notice to the Committee. As soon as practicable after receipt
of the written notice, the Company shall deliver to the person exercising the
Stock Appreciation Right stock certificates for the Shares to which that person
is entitled under Section 14(d) hereof.
(d) A
Stock Appreciation Right shall be exercisable for Shares only. The
number of Shares issuable upon the exercise of the Stock Appreciation Right
shall be determined by dividing:
(i) the
number of Shares for which the Stock Appreciation Right is exercised multiplied
by the amount of the appreciation per Share (for this purpose, the "appreciation
per Share" shall be the amount by which the Fair Market Value of a Share on the
exercise date exceeds (x) in the case of a Stock Appreciation Right granted in
tandem with an Option, the exercise price or (y) in the case of a Stock
Appreciation Right granted alone without reference to an Option, the Fair Market
Value of a Share on the Award Date of the Stock Appreciation Right);
by
(ii) the
Fair Market Value of a Share on the exercise date.
15. Non-Transferability. Unless
determined otherwise by the Administrator, an Option or Stock Appreciation Right
may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in
any manner other than by will or by the laws of descent or distribution and may
be exercised, during the lifetime of the Optionee, only by the
Optionee. If the Administrator makes an Option or Stock Appreciation
Right transferable, such Option or Stock Appreciation Right shall contain such
additional terms and conditions as the Administrator deems
appropriate. Notwithstanding the foregoing, the Administrator, in its
sole discretion, may provide in the Grant Agreement regarding a given Option
that the Optionee may transfer, without consideration for the transfer, his or
her Nonstatutory Stock Options to members of his or her immediate family, 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 Option. During the period when Shares of
Restricted Stock and Stock Award Shares are restricted (by virtue of vesting
schedules or otherwise), such Shares may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than by will or by
the laws of descent or distribution.
12
16. Adjustments Upon Changes in
Capitalization, Dissolution, Merger or Asset Sale.
(a) Changes in
Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares of Common Stock covered by
each outstanding Option, Stock Appreciation Right and Stock Award, the number of
Shares of Restricted Stock outstanding and the number of Shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options, Stock Appreciation Rights or Stock Awards have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, Stock Appreciation Right or Stock Award, as well as the price per share
of Common Stock covered by each such outstanding Option or Stock Appreciation
Right, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Administrator,
whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of Shares of Common Stock subject
to an Award hereunder. Except as expressly provided herein, the
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into sub-shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, the number or
price of Shares of Common Stock then subject to outstanding Options and Stock
Appreciation Rights.
(b) Corporate
Transactions. If the Company merges or consolidates with
another corporation, whether or not the Company is the surviving corporation, or
if the Company is liquidated or sells or otherwise disposes of substantially all
its assets, or if any “person” (as that term is used in Section 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing greater than 50% of the
combined voting power of the Company's then outstanding securities (each such
event a “Corporate
Transaction Event”) then (i) after the effective date of such Corporate
Transaction Event, each holder of an outstanding Option or Stock Appreciation
Right shall be entitled, upon exercise of such Option or Stock Appreciation
Right to receive, in lieu of Shares of Common Stock, the number and class or
classes of shares of such stock or other securities or property to which such
holder would have been entitled if, immediately prior to such Corporate
Transaction Event, such holder had been the holder of record of a number of
Shares of Common Stock equal to the number of shares as to which such Option and
Stock Appreciation Right may be exercised; and (ii) the Board may waive any
limitations set forth in or imposed pursuant hereto so that all Options and
Stock Appreciation Rights from and after a date prior to the effective date of
such Corporate Transaction Event, as specified by the Board, shall be
exercisable in full. Notwithstanding anything contained herein to the
contrary, the proposed transaction between the Company and China
Biopharmaceutical Holdings, Inc. shall not constitute a Corporate Transaction
Event.
13
In the
event of a Corporate Transaction Event, then each outstanding Stock Award shall
be assumed or an equivalent agreement or award substituted by the successor
corporation or a Parent or Subsidiary of the successor
corporation. In the event that the Committee determines that the
successor corporation or a Parent or a Subsidiary of the successor corporation
has refused to assume or substitute an equivalent agreement or award for each
outstanding Stock Award, all vesting periods and conditions under Stock Awards
shall be deemed to have been satisfied. The Board may also, in its
discretion, cause all vesting periods and conditions under Stock Awards to be
deemed to have been satisfied.
17. Substitute
Options. In the event that the Company, directly or
indirectly, acquires another entity, the Board may authorize the issuance of
stock options (“Substitute Options”)
to the individuals performing services for the acquired entity in substitution
of stock options previously granted to those individuals in connection with
their performance of services for such entity upon such terms and conditions as
the Board shall determine, taking into account the conditions of Code Section
424(a), as from time to time amended or superceded, in the case of a Substitute
Option that is intended to be an Incentive Stock Option. Shares of
capital stock underlying Substitute Stock Options shall not constitute Shares
issued pursuant to the Plan for any purpose.
18. Date of Grant. The
date of grant of an Option, Stock Appreciation Right, Stock Award or
Unrestricted Share shall be, for all purposes, the date on which the
Administrator makes the determination granting such Option, Stock Appreciation
Right, Stock Award or Unrestricted Share, or such other later date as is
determined by the Administrator. Notice of the determination shall be
provided to each grantee within a reasonable time after the date of such
grant.
19. Amendment and Termination of the
Plan.
(a) Amendment and
Termination. The Board may at any time amend, alter, suspend
or terminate the Plan.
(b) Shareholder
Approval. The Company shall obtain shareholder approval of any
Plan amendment to the extent necessary to comply with Applicable
Laws.
(c) Effect of Amendment or
Termination. No amendment, alteration, suspension or
termination of the Plan shall impair the rights of any grantee, unless mutually
agreed otherwise between the grantee and the Administrator, which agreement must
be in writing and signed by the grantee and the Company. Termination
of the Plan shall not affect the Administrator's ability to exercise the powers
granted to it hereunder with respect to Awards granted under the Plan prior to
the date of such termination.
20. Conditions Upon Issuance of
Shares.
(a) Legal
Compliance. Shares shall not be issued in connection with the
grant of any Stock Award or Unrestricted Share or the exercise of any Option or
Stock Appreciation Right unless such grant or the exercise of such Option or
Stock Appreciation Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment
Representations. As a condition to the grant of any Stock
Award or Unrestricted Share or the exercise of any Option or Stock Appreciation
Right, the Company may require the person receiving such Award or exercising
such Option or Stock Appreciation Right to represent and warrant at the time of
any such exercise or grant that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
14
(c) Additional
Conditions. The Administrator shall have the authority to
condition the grant of any Award in such other manner that the Administrator
determines to be appropriate, provided that such condition is not inconsistent
with the terms of the Plan.
(d) Trading Policy
Restrictions. Option and or Stock Appreciation Right exercises
and other Awards under the Plan shall be subject to the terms and conditions of
any insider trading policy established by the Company or the
Administrator.
21. Inability to Obtain
Authority. The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not have
been obtained.
22. Shareholder
Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner
and to the degree required under Applicable Laws. Notwithstanding any
provision in the Plan to the contrary, any exercise of an Option or Stock
Appreciation Right granted before the Company has obtained shareholder approval
of the Plan in accordance with this Section 22 shall be conditioned upon
obtaining such shareholder approval of the Plan in accordance with this Section
22.
23. Withholding; Notice of
Sale. The Company shall be entitled to withhold from any
amounts payable to an Employee or other Service Provider any amounts which the
Company determines, in its discretion, are required to be withheld under any
Applicable Law as a result of any action taken by a holder of an
Award.
24. Governing Law. This
Plan shall be governed by the laws of the State of Delaware, without regard to
conflict of law principles.
15
NEOSTEM,
INC.
PROXY
CARD FOR HOLDERS OF COMMON STOCK
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
May 8,
2009
The
undersigned hereby appoints Robin L. Smith and Catherine M. Vaczy, and each of
them, attorneys and proxies with power of substitution, to vote for and on
behalf of the undersigned at the NeoStem, Inc. Annual Meeting of Stockholders to
be held on May 8, 2009 and at any adjournments or postponements thereof (the
"Meeting"), upon the following matters and upon any other business that may
properly come before the Meeting, as set forth in the related Notice of Meeting
and Proxy Statement, both of which have been received by the
undersigned.
This
proxy, when properly executed, will be voted in the manner directed by the
undersigned stockholder. If this proxy is executed but no direction is made,
this proxy will be voted FOR the Board's nominees for director named herein,
approval of the Company's 2009 Equity Compensation Plan, and ratification of the
appointment of the Company's independent registered public accounting firm to
audit the Company's financial statements for the 2009 fiscal year.
PLEASE
INDICATE YOUR VOTE ON THE OTHER SIDE.
(CONTINUED,
AND TO BE DATED AND SIGNED, ON THE OTHER SIDE)
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE"FOR" PROPOSALS 1, 2 AND 3
|
For all
|
|||||||
|
nominees
|
|||||||
|
*(except as
|
Withhold authority
|
||||||
|
marked to the
|
to vote for all
|
||||||
|
contrary below)
|
nominees
|
Nominees:
|
|||||
|
1.
|
Election
of 4
|
Robin
L. Smith
|
|||||
|
Directors.
|
Joseph
D. Zuckerman
|
||||||
|
Richard
Berman
|
|||||||
|
Steven
S.
Myers
|
* To
withhold authority for any individual nominee(s), print nominee's name(s) on the
line below.
_____________________________________________________________________________
|
FOR
|
AGAINST
|
ABSTAIN
|
|||||
|
2.
|
Approval
of the 2009 Equity
|
||||||
|
Compensation
Plan.
|
|||||||
|
FOR
|
AGAINST
|
ABSTAIN
|
|||||
|
3.
|
Ratification
of the appointment of
|
||||||
|
Holtz
Rubenstein Reminick LLP
|
|||||||
|
to
audit the Company’s financial
|
|||||||
|
statements
for the fiscal year
|
|||||||
|
ending
December 31, 2009
|
In their
discretion, the above named proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof and
upon matters incident to the conduct of the meeting.
UNLESS
OTHERWISE SPECIFIED IN THE SQUARES OR SPACE PROVIDED IN THIS PROXY, THIS PROXY
WILL BE VOTED FOR THE BOARD'S NOMINEES FOR DIRECTOR NAMED HEREIN, APPROVAL OF
THE COMPANY'S 2009 EQUITY COMPENSATION PLAN, AND THE RATIFICATION OF THE
APPOINTMENT OF THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM TO
AUDIT THE COMPANY'S FINANCIAL STATEMENTS FOR THE 2009 FISCAL YEAR.
Please
sign this proxy and return it promptly whether or not you expect to attend the
meeting. You may nevertheless vote in person if you attend.
|
Signed:
|
Dated:
,
2009
|
NOTE:
Please sign exactly as your name appears hereon. Give full title if an Attorney,
Executor, Administrator, Trustee, Guardian, etc. For an account in the name of
two or more persons, each should sign, or if one signs, he should attach
evidence of his authority.
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
NEOSTEM, INC. TO BE HELD ON MAY 8, 2009. THIS PROXY STATEMENT, THE
ACCOMPANYING FORM OF PROXY CARD AND OUR ANNUAL REPORT ON FORM 10-K FOR THE
FISCAL YEAR ENDED DECEMBER 31, 2008, INCLUDING FINANCIAL STATEMENTS, ARE
AVAILABLE AT http://www.vfnotice.com/neostem/