htgm-def14a_20190814.htm

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

 

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Preliminary Proxy Statement

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Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to § 240.14a-12

HTG MOLECULAR DIAGNOSTICS, 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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HTG MOLECULAR DIAGNOSTICS, INC.

3430 E. Global Loop

Tucson, Arizona 85706

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On August 14, 2019

Dear Stockholder:

You are cordially invited to attend the 2019 Annual Meeting of Stockholders of HTG Molecular Diagnostics, Inc., a Delaware corporation (the “Company”). The meeting will be held on August 14, 2019 at 1:00 p.m. local time at the Company’s offices located at 3430 E. Global Loop, Tucson, Arizona 85706 for the following purposes:

1. To elect the Board of Directors’ two nominees for director named herein to hold office until the 2022 Annual Meeting of Stockholders.

2. To ratify the selection by the Audit Committee of the Board of Directors of BDO USA, LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2019.

3. To conduct any other business properly brought before the meeting.

These items of business are more fully described in the Proxy Statement accompanying this Notice.

The record date for the annual meeting is June 17, 2019. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof.

By Order of the Board of Directors

Shaun D. McMeans

Secretary

Tucson, Arizona

July 2, 2019

 

You are cordially invited to attend the meeting in person. Whether or not you expect to attend the meeting, please complete, date, sign and return the proxy card that may be mailed to you, or vote over the telephone or the internet as instructed in these materials, as promptly as possible in order to ensure your representation at the meeting. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

 

 

 


HTG MOLECULAR DIAGNOSTICS, INC.

3430 E. Global Loop

Tucson, Arizona 85706

PROXY STATEMENT

FOR THE 2019 ANNUAL MEETING OF STOCKHOLDERS

To Be Held On August 14, 2019

QUESTIONS AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING

Why did I receive a notice regarding the availability of proxy materials on the internet?

Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), we have elected to provide access to our proxy materials over the internet. Accordingly, we have sent you a Notice of Internet Availability of Proxy Materials (the “Notice”) because the Board of Directors (sometimes referred to as the “Board”) of HTG Molecular Diagnostics, Inc. (sometimes referred to as “we,” “us,” “our,” the “Company” or “HTG”) is soliciting your proxy to vote at the 2019 Annual Meeting of Stockholders, including at any adjournments or postponements of the meeting. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of the proxy materials. Instructions on how to access the proxy materials over the internet or to request a printed copy may be found in the Notice.

We intend to mail the Notice on July 2, 2019 to all stockholders of record entitled to vote at the annual meeting.

Will I receive any other proxy materials by mail?

We may send you a proxy card, along with a second Notice, on or after July 12, 2019.

How do I attend the annual meeting?

The meeting will be held on Wednesday, August 14, 2019 at 1:00 p.m. local time at the Company’s offices located at 3430 E. Global Loop, Tucson, Arizona 85706. Directions to the annual meeting are: From I-10 E or I-10 W in or around Tucson, Arizona, take exit 264 for Palo Verde Road; turn south on Palo Verde Road (for approximately 1.7 miles); turn right onto East Hemisphere Loop (for approximately 344 feet); turn right onto East Global Loop; and your destination will be on the left. Information on how to vote in person at the annual meeting is discussed below.

Who can vote at the annual meeting?

Only stockholders of record at the close of business on June 17, 2019 will be entitled to vote at the annual meeting. On this record date, there were 28,706,047 shares of common stock outstanding and entitled to vote.

Stockholder of Record: Shares Registered in Your Name

If on June 17, 2019, your shares were registered directly in your name with HTG’s transfer agent, American Stock Transfer & Trust Company, LLC, then you are a stockholder of record. As a stockholder of record, you may vote in person at the meeting or vote by proxy. Whether or not you plan to attend the meeting, we urge you to fill out and return the proxy card that may be mailed to you or vote by proxy over the telephone or on the internet as instructed below to ensure your vote is counted.

Beneficial Owner: Shares Registered in the Name of a Broker or Bank

If on June 17, 2019 your shares were held, not in your name, but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and the Notice is being forwarded to you by that organization. The organization holding your account is considered to be the stockholder of record for purposes of voting at the annual meeting. As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. You are also invited to attend the annual meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the meeting unless you request and obtain a valid proxy from your broker or other agent.

 


What am I voting on?

There are two matters scheduled for a vote:

 

Proposal 1: Election of the Board’s two nominees for director named herein to hold office until the 2022 Annual Meeting of Stockholders; and

 

Proposal 2: Ratification of the selection by the Audit Committee of the Board of Directors of BDO USA, LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2019.

What if another matter is properly brought before the meeting?

The Board of Directors knows of no other matters that will be presented for consideration at the annual meeting. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance with their best judgment.

How do I vote?

You may either vote “For” all the nominees to the Board of Directors or you may “Withhold” your vote for any nominee you specify. For each of the other matters to be voted on, you may vote “For” or “Against” or abstain from voting.

The procedures for voting are fairly simple:

Stockholder of Record: Shares Registered in Your Name

If you are a stockholder of record, you may vote in person at the annual meeting, vote by proxy over the telephone, vote by proxy through the internet or vote by proxy using a proxy card that you may request or that we may elect to deliver at a later time. Whether or not you plan to attend the meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the meeting and vote in person even if you have already voted by proxy.

 

To vote in person, come to the annual meeting and we will give you a ballot when you arrive.

 

To vote using the proxy card, simply complete, sign and date the proxy card that may be delivered to you and return it promptly in the envelope provided. If you return your signed proxy card to us before the annual meeting, we will vote your shares as you direct.

 

To vote over the telephone, dial toll-free 1-800-PROXIES (1-800-776-9437), or 718-921-8500 for international callers, and follow the recorded instructions. You will be asked to provide the company number and control number from the Notice. Your telephone vote must be received by 11:59 p.m., Eastern Time, on August 13, 2019 to be counted.

 

To vote through the internet, go to www.voteproxy.com and follow the on-screen instructions to complete an electronic proxy card or scan the QR code on your proxy notice with your smartphone. You will be asked to provide the company number and control number from the Notice. Your internet vote must be received by 11:59 p.m., Eastern Time, on August 13, 2019 to be counted.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If you are a beneficial owner of shares registered in the name of your broker, bank, or other agent, you should have received a Notice containing voting instructions from that organization rather than from HTG. Simply follow the voting instructions in the Notice to ensure that your vote is counted. To vote in person at the annual meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.

 

Internet proxy voting may be provided to allow you to vote your shares online, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies.

 


How many votes do I have?

On each matter to be voted upon, you have one vote for each share of common stock you owned as of the close of business on June 17, 2019.

What happens if I do not vote?

Stockholder of Record: Shares Registered in Your Name

If you are a stockholder of record and do not vote by completing your proxy card, by telephone, through the internet or in person at the annual meeting, your shares will not be voted.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If you are a beneficial owner and do not instruct your broker, bank, or other agent how to vote your shares, the question of whether your broker or nominee will still be able to vote your shares depends on whether the New York Stock Exchange (“NYSE”) deems the particular proposal to be a “routine” matter. Brokers and nominees can use their discretion to vote “uninstructed” shares with respect to matters that are considered to be “routine,” but not with respect to “non-routine” matters. Under the rules and interpretations of the NYSE, “non-routine” matters are matters that may substantially affect the rights or privileges of stockholders, such as mergers, stockholder proposals, elections of directors (even if not contested), executive compensation (including any advisory stockholder votes on executive compensation and on the frequency of stockholder votes on executive compensation), and certain corporate governance proposals, even if management-supported. Accordingly, your broker or nominee may not vote your shares on Proposal 1 without your instructions, but may vote your shares on Proposal 2 even in the absence of your instruction.

What if I return a proxy card or otherwise vote but do not make specific choices?

If you return a signed and dated proxy card or otherwise vote without marking voting selections, your shares will be voted, as applicable, “For” the election of the two nominees for director and “For” the ratification of the selection by the Audit Committee of the Board of Directors of BDO USA, LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2019. If any other matter is properly presented at the meeting, your proxyholder (one of the individuals named on your proxy card) will vote your shares using his or her best judgment.

Who is paying for this proxy solicitation?

We will pay for the entire cost of soliciting proxies. In addition to these proxy materials, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

What does it mean if I receive more than one Notice?

If you receive more than one Notice, your shares may be registered in more than one name or in different accounts. Please follow the voting instructions on the Notices to ensure that all of your shares are voted.

Can I change my vote after submitting my proxy?

Stockholder of Record: Shares Registered in Your Name

Yes. You can revoke your proxy at any time before the final vote at the meeting. If you are the record holder of your shares, you may revoke your proxy in any one of the following ways:

 

You may submit another properly completed proxy card with a later date.

 

You may grant a subsequent proxy by telephone or through the internet.

 

You may send a timely written notice that you are revoking your proxy to the Company’s Secretary at 3430 E. Global Loop, Tucson, Arizona 85706.

 

You may attend the annual meeting and vote in person. Simply attending the meeting will not, by itself, revoke your proxy.

 


Your most current proxy card or telephone or internet proxy is the one that is counted.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If your shares are held by your broker or bank as a nominee or agent, you should follow the instructions provided by your broker or bank.

When are stockholder proposals and director nominations due for next year’s annual meeting?

To be considered for inclusion in next year’s proxy materials, your proposal must be submitted in writing by March 4, 2020, to Attn: Corporate Secretary, 3430 E. Global Loop, Tucson, Arizona 85706. If you wish to submit a proposal (including a director nomination) at the meeting that is not to be included in next year’s proxy materials, you must do so between April 16, 2020 and May 16, 2020. You are also advised to review the Company’s Bylaws, which contain additional requirements relating to advance notice of stockholder proposals and director nominations.

How are votes counted?

Votes will be counted by the inspector of election appointed for the meeting, who will separately count, for the proposal to elect directors, votes “For,” “Withhold” and broker non-votes, and for the proposal to ratify the Audit Committee’s selection of BDO USA, LLP as our independent registered public accounting firm, votes “For” and “Against,” abstentions and, if applicable, broker non-votes. Abstentions will be counted towards the vote total for Proposal 2 and will have the same effect as “Against” votes. Broker non-votes will be counted towards the presence of a quorum but will not be counted towards the vote total for any proposal.

What are “broker non-votes”?

As discussed above, when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed by the NYSE to be “non-routine,” the broker or nominee cannot vote the shares. These unvoted shares are counted as “broker non-votes.”

How many votes are needed to approve each proposal?

For the election of directors, the two nominees receiving the most “For” votes from the holders of shares present in person or represented by proxy and entitled to vote on the election of directors will be elected. Only votes “For” will affect the outcome.

To be approved, Proposal 2, ratification of the selection of BDO USA, LLP as the Company’s independent registered public accounting firm for its fiscal year ending December 31, 2019, must receive “For” votes from the holders of a majority of shares present in person or represented by proxy and entitled to vote on the matter. If you “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will have no effect.

What is the quorum requirement?

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if stockholders holding at least a majority of the outstanding shares entitled to vote are present at the meeting in person or represented by proxy. On the record date, there were 28,706,047 shares outstanding and entitled to vote. Thus, the holders of 14,353,024 shares must be present in person or represented by proxy at the meeting to have a quorum.

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of shares present at the meeting in person or represented by proxy may adjourn the meeting to another date.

How can I find out the results of the voting at the annual meeting?

Preliminary voting results will be announced at the annual meeting. In addition, final voting results will be published in a current report on Form 8-K that we expect to file within four business days after the annual meeting. If final voting results are not available to us in time to file a Form 8-K within four business days after the meeting, we intend to file a Form 8-K to publish preliminary results and, within four business days after the final results are known to us, file an additional Form 8-K to publish the final results.

 


Proposal 1

Election Of Directors

The Company’s Board of Directors is divided into three classes. Each class consists, as nearly as possible, of one-third of the total number of directors, and each class has a three-year term. Vacancies on the Board may be filled only by persons elected by a majority of the remaining directors. A director elected by the Board to fill a vacancy in a class, including vacancies created by an increase in the number of directors, shall serve for the remainder of the full term of that class and until the director’s successor is duly elected and qualified.

The Board of Directors presently has eight members. There are two Class I directors whose term of office expires in 2019. The nominees for election at the annual meeting, Lee R. McCracken and James T. LaFrance are current Class I directors elected by our stockholders. If elected at the annual meeting, each of the two nominees would serve until the 2022 annual meeting and until his successor has been duly elected and qualified, or, if sooner, until the director’s death, resignation or removal. It is the Company’s policy to invite directors and nominees for director to attend the annual meeting. Six directors attended the 2018 Annual Meeting of Stockholders, consisting of Ann F. Hanham, Ph.D., Donnie M. Hardison, Timothy B. Johnson, James T. LaFrance, Lee R. McCracken and Michelle R. Griffin.  

Directors are elected by a plurality of the votes of the holders of shares present in person or represented by proxy and entitled to vote on the election of directors. Accordingly, the two nominees receiving the highest number of affirmative votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the two nominees named herein. If any nominee becomes unavailable for election as a result of an unexpected occurrence, your shares that would have been voted for that nominee instead may be voted for the election of a substitute nominee proposed by the Board of Directors. Each person nominated for election has agreed to serve if elected. Our management has no reason to believe that any nominee will be unable to serve.

The Board of Directors Recommends

A Vote “For” Each Named Nominee.

 

Name

 

Age

 

 

Position(s)

John L. Lubniewski

 

 

54

 

 

President, Chief Executive Officer and Director

Shaun D. McMeans

 

 

57

 

 

Senior Vice President, Chief Financial Officer, Treasurer and Secretary

Timothy B. Johnson

 

 

57

 

 

Executive Chairman

Ann F. Hanham, Ph.D.

 

 

66

 

 

Lead Independent Director

Michelle R. Griffin

 

 

52

 

 

Director

Harry A. George

 

 

70

 

 

Director

Donnie M. Hardison

 

 

68

 

 

Director

James T. LaFrance

 

 

60

 

 

Director

Lee R. McCracken

 

 

61

 

 

Director

 

 


The following is a brief biography of each nominee, each director whose term will continue after the annual meeting and each of our executive officers.

Nominees for Election for a Three-year Term Expiring at the 2022 Annual Meeting

James (Jim) T. LaFrance. Mr. LaFrance has served on our Board of Directors since December 2015. Mr. LaFrance has over thirty years of diagnostic industry experience, and has worked since January 2015 as a sales, marketing, strategy development and commercial operational management consultant for LaFrance Consulting LLC, a firm he founded. He currently serves on three additional boards, Vermillion, Inc (Nasdaq: VRML) as Chairman; BioArray Genetics, Inc., a private company, as Chairman, and as an independent director of privately held Personal Genome Diagnostics. He served as Chief Executive Officer of Vermillion, Inc. (Nasdaq: VRML) in 2014 and as a CEO for Omnyx, LLC, a UPMC/GE Healthcare joint venture from 2012 to 2013.  Mr. LaFrance held a series of senior management roles at Ventana Medical Systems (now Roche Tissue Diagnostics), including general management of the North American and international commercial operations. Prior to working for Ventana, Mr. LaFrance served in leadership roles in strategic marketing and business development at Bayer Diagnostics. He earned a Bachelor of Arts degree in Economics from the University of Connecticut and holds a Master’s in Business Administration from the University of Notre Dame. Our Board of Directors believes that Mr. LaFrance’s extensive industry and executive experience, and his experience serving on the board of directors of another public company qualify him to serve on our Board of Directors.

Lee R. McCracken. Mr. McCracken has served on our Board of Directors since October 2015. Mr. McCracken currently is the Chief Executive Officer and a member of the board of directors of Drawbridge Health, Inc., a company focused on enabling personal diagnostic testing, positions he has held since June 2017. From May 2016 to May 2017 and from April 2013 to March 2014, he served as a strategic and restructuring consultant in the regenerative medicine and diagnostic sectors for McCracken Consulting, a consulting firm he founded. Between April 2014 and May 2016, Mr. McCracken was Chief Executive Officer of Gensignia Life Sciences, Inc., a molecular diagnostics company. Earlier in his career, Mr. McCracken held a number of executive positions or roles with significant responsibility at several biotechnology and therapeutics companies, including Pathwork Diagnostics, Inc., Prometheus Laboratories Inc., GenStar Therapeutics Corporation, CombiChem Inc., and Allergan Inc., as well as at the investment companies, 3i Capital and Union Venture. Mr. McCracken received his M.B.A. from the Anderson School of Management at the University of California, Los Angeles, his Master of Computer Science (MCS) from the University of Dayton, and his B.S. in Commerce from Santa Clara University. Our Board of Directors believes Mr. McCracken’s extensive executive and industry experience and his broad knowledge of molecular diagnostics qualify him to serve on our Board of Directors.

Directors Continuing in Office Until the 2020 Annual Meeting

Harry A. George. Mr. George has served on our Board of Directors since 2002 and served as the chair of our Board of Directors from December 2007 until September 2013. Mr. George co-founded Solstice Capital, a venture capital firm, in 1995 and serves as its Managing General Partner. Mr. George serves as President and CFO of Radiance Therapeutics where he also serves on the board of directors. Mr. George has served as a member of the board of directors of a number of private and public companies and is currently serving on the boards of directors of Medipacs, Inc., Post.Bid.Ship, Inc., AdiCyte, Inc. and RxActuator, Inc. and Splash Pharmaceuticals, Inc. Mr. George is also a member of the boards of directors of several non-profit organizations, including Southern Arizona Leadership Council, Desert Angels and Start-up Tucson, a member of the Board of Visitors of the McGuire Center for Entrepreneurship, and an advisor to Tech Launch Arizona. Prior to 1995, Mr. George was co-founder, Director, and Vice-President of Finance for Interleaf Inc., a software products company. Prior to his time at Interleaf, Mr. George was co-founder, Director and Vice President of Finance of Kurzweil Computer Products, Inc., a computer products company, which subsequently was purchased by Xerox Imaging Systems. Mr. George received an A.B. from Bowdoin College and, in 2012, received an Honorary Doctorate of Science from the University of Arizona. Also in 2012, the Arizona BioIndustry Association conferred upon Mr. George the John McGarrity Bioscience Leader of the Year Award. Our Board of Directors believes Mr. George’s detailed knowledge of our company and long tenure with us, together with his more than 40 years of experience serving as founder, operating officer, or investor with successful rapid growth technology-related companies qualify him to serve on our Board of Directors.

 


Donnie M. Hardison. Mr. Hardison has served on our Board of Directors since May 2016. He currently is the President and Chief Executive Officer, and serves on the board of directors, of Biotheranostics, Inc., a molecular diagnostic company focused on oncology, positions he has held since February 2017. From April 2017 to January 2017, Mr. Hardison served as the sole proprietor of DMH Consulting, a management consulting firm, which he founded. Between April 2010 and March 2016, Mr. Hardison was the President and Chief Executive Officer of Good Start Genetics, a genetic testing company. For more than 20 years prior to that, Mr. Hardison held a number of executive and senior management positions at companies including Laboratory Corporation of America (“LabCorp”) a clinical laboratory company, Exact Sciences Corporation, a molecular diagnostics company, OnTarget, Inc., a sales and marketing consulting company, Quest Diagnostics Inc., a clinical laboratory company, SmithKline Beecham Corporation, a pharmaceutical company, and others. He currently serves as an independent director on the boards of directors of several private companies, including Seventh Sense Biosystems, Boston Microfluidics and IQuity, Inc. He also served on the board of directors of Exact Sciences Corporation (Nasdaq: EXAS) from May 2000, through its initial public offering in February 2001, until August 2007. Mr. Hardison received his Bachelor of Arts degree, in political science, from the University of North Carolina, Chapel Hill. Our Board of Directors believes that Mr. Hardison’s broad private and public company background, his extensive executive and industry experience, his experience with newly emerging and well-established companies, and his extensive commercial and operational experience qualify him to serve on our Board of Directors.

John L. Lubniewski. Mr. Lubniewski has served as our Chief Executive Officer and as a member of our Board of Directors since April 2019 and previously served as our President and Chief Operating Officer since April 2018. Prior to this he served as our Senior Vice President and Chief Business Officer since April 2011. Mr. Lubniewski joined us from Ventana, a medical diagnostics company and member of the Roche Group and global headquarters of Roche Tissue Diagnostics (“RTD”) where he served in leadership roles for nine years both before and after the acquisition of Ventana by Roche in March 2008. From August 2010 to April 2011, Mr. Lubniewski was Senior Vice President and Lifecycle Leader, Advanced Staining Platforms at Ventana. From January 2008 to August 2010, Mr. Lubniewski served as Senior Vice President and Lifecycle Leader, Clinical Assays at RTD, with responsibility for three lifecycle teams, technical marketing and medical marketing and global accountability for all RTD clinical assay products. Prior to the Roche acquisition of Ventana, Mr. Lubniewski served at Ventana as Senior Vice President, Advanced Staining Business Unit, Vice President Worldwide Marketing and Translational Diagnostic Business Unit, and General Manager, Research Products. In these roles, Mr. Lubniewski was responsible for a variety of assay and platform development and commercialization efforts. Prior to Ventana, Mr. Lubniewski worked for over ten years at Corning, Inc., a manufacturing company, in a variety of divisional, sector and corporate sales and marketing roles. Mr. Lubniewski earned a B.S. in Chemical Engineering from Clarkson University.

Directors Continuing in Office Until the 2021 Annual Meeting

Ann F. Hanham Ph.D. Dr. Hanham has served on our Board of Directors since August 2016 and has served as our Lead Independent Director since April 2019. Prior to her appointment as Lead Independent Director, Dr. Hanham served as the chair of our Board of Directors from March 2017 to March 2019. Since March 2017, Dr. Hanham has provided independent management consulting as a sole proprietor. Previously, she was the founding and managing partner of BAR Capital LLC, an investment company, a position she has held from December 2013 to March 2017. From February 2000 to November 2013, Dr. Hanham was the Managing Director and General Partner of Burrill and Company, a life science investment company. Prior to that, Dr. Hanham held positions of increasing responsibility in product development, medical affairs, and clinical and regulatory affairs at various companies, including InterMune Inc., Otsuka America Pharmaceuticals, Inc. (“Otsuka”), Celtrix Pharmaceuticals, Inc. (“Celtrix”), and Becton Dickinson and Company (“BD”). InterMune, Inc., Otsuka and Celtrix are, or prior to respective acquisitions, were clinical-stage biopharmaceutical companies, and BD is a life sciences discovery and diagnostics company. Dr. Hanham also currently serves on the board of directors of SCYNEXIS (Nasdaq: SCYX). Dr. Hanham received her B.Sc. degree from the University of Toronto, Canada; her M.Sc. degree, in biology, from Simon Fraser University, Canada; and her Ph.D. degree, in biology, from the University of British Columbia, Canada. Our Board of Directors believes that Dr. Hanham’s extensive industry and executive experience, and her experience serving on the board of directors of other public companies qualifies her to serve on our Board of Directors.

 


Michelle R. Griffin. Ms. Griffin has served on our Board of Directors since August 2018. Ms. Griffin currently serves as a member of the board of directors and chair of the audit committee for Acer Therapeutics, Inc. (Nasdaq: ACER) and Adaptive Biotechnologies Corp (Nasdaq: ADPT). She has also served on the board of directors and as audit committee chair for PhaseRx, Inc. (Nasdaq:PZRX) from 2016 to 2018, OncoGenex Pharmaceuticals Inc. (Nasdaq: OGXI) from 2008 to 2011, and Sonus Pharmaceuticals, Inc. (Nasdaq: SNUS) from 2004 to 2008; as chair of the board of directors for Universal Cells, Inc. from 2017 until its acquisition by Astellas Pharma Inc. in 2018; as a member of the board of directors of Virginia Mason Health System and Virginia Mason Medical Center from 2014 to 2018; and as a member of the board of directors for Polynoma LLC from 2012 to 2014. Ms. Griffin served as executive vice president, operations, and chief financial officer at OncoGenex from 2011 to 2013; served as acting chief executive, senior vice president and chief operating officer at Trubion Pharmaceuticals, Inc. from 2009 until its acquisition in 2010 and as its chief financial officer from 2006 to 2009; and served as senior vice president and chief financial officer of Dendreon Corp. from 2005 to 2006. Ms. Griffin began her career in the biopharmaceuticals industry in 1994 at Corixa Corp. (Nasdaq: CRXA) and served as its chief financial officer from its IPO in 1997 until 2005 when Corixa was acquired by GlaxoSmithKline plc. She received a post‐graduate certificate in accounting and an MBA from Seattle University, a B.S. in statistics and marketing from George Mason University and has passed the certified public accountant exam. Our Board of Directors believes that Ms. Griffin’s financial and accounting expertise and extensive executive experience qualifies her to serve on our Board of Directors.

Timothy (TJ) B. Johnson. Mr. Johnson has served as the Executive Chairman of our Board of Directors since March 2019 and as a member of our Board of Directors since January 2008. Mr. Johnson previously served as our Chief Executive Officer from January 2008 until March 2019. He also served as our President from January 2008 until April 2018. Mr. Johnson joined us from LVC Consulting, a consulting company, where he was a partner from April 2007 to January 2008. Prior to April 2007, Mr. Johnson spent five years in leadership roles at Ventana Medical Systems, Inc. (“Ventana”), a medical diagnostics company, prior to its acquisition by Roche Holdings, Inc. (“Roche”). At Ventana, Mr. Johnson held the positions of Senior Vice President, Global Business Services, Senior Vice President, Corporate Development and Operations, and Vice President/General Manager, Operations and Lean Systems. In these roles, Mr. Johnson’s responsibilities included product technical support, worldwide marketing, corporate development, strategic planning and manufacturing. Prior to working at Ventana, Mr. Johnson had a 12-year career at Hillenbrand Industries, Inc., a global diversified industrial company, where he held several leadership roles in the corporate offices and in the Hill-Rom Division, including Vice President, Global Marketing, Vice President/General Manager, Hill-Rom AirShields, Vice President, Operations, and Vice President, Continuous Improvement and Strategic Planning. Mr. Johnson spent part of his early career at PricewaterhouseCoopers LLP, a public accounting firm. Mr. Johnson previously served on the board of directors of Kalypto Medical, Inc. and was the Industry co-chair for the Biosciences Leadership Council of Southern Arizona. He earned a B.S. in Business from Indiana University. Our Board of Directors believes that Mr. Johnson’s extensive executive background in general management, strategic planning and managing operations of a diagnostic company and service as our Chief Executive Officer qualify him to serve on our Board of Directors.

Executive Officers

Set forth below is biographical information for our executive officers other than Mr. Lubniewski, whose biographical information is set forth above

Shaun D. McMeans. Mr. McMeans has served as our Senior Vice President and Chief Financial Officer since February 2018 and as our Vice President and Chief Financial Officer since February 2012. Prior to joining us, Mr. McMeans was Vice President – Finance of Securaplane Technologies, Inc., a product supply company and division of Meggitt PLC, an aerospace, defense and energy conglomerate, from May 2011 to February 2012. Mr. McMeans was a financial consultant from February 2008 to April 2011, working both in an individual capacity and as a partner for Tatum LLC, a consulting company. Prior to February 2008, Mr. McMeans was Chief Financial Officer for The Long Companies, a full service residential and commercial real estate division of Berkshire Hathaway, Inc. Mr. McMeans also worked for over five years at LXU Healthcare, Inc., a manufacturer and distributor of specialty surgical equipment, as Controller and then Chief Financial and Operating Officer. In his early career, Mr. McMeans worked in roles of increasing responsibility, including Director of Finance, for Burnham Holdings, Inc., formerly Burnham Corporation, a manufacturer and distributor of residential and commercial hydronic heating equipment. Mr. McMeans received his B.S. in Accounting from The Pennsylvania State University.

INFORMATION REGARDING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Independence of The Board of Directors

As required under the Nasdaq Stock Market (“Nasdaq”) listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by its board of directors. The Board consults with the Company’s counsel to ensure that the Board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent listing standards of Nasdaq, as in effect from time to time.

 


Consistent with these considerations, after review of all relevant identified transactions or relationships between each director, or any of his or her family members, and the Company, its senior management and its independent auditors, the Board has affirmatively determined that all of our current directors other than Mr. Johnson and Mr. Lubniewski are, and all of our former directors who served during any portion of the last fiscal year were, independent directors within the meaning of the applicable Nasdaq listing standards. In making this determination, the Board found that none of these directors, other than Mr. Johnson and Mr. Lubniewski, had a material or other disqualifying relationship with the Company.

Board Leadership Structure

As a general policy, our Board of Directors believes that separation of the positions of chair and Chief Executive Officer reinforces the independence of the Board from management, creates an environment that encourages objective oversight of management’s performance and enhances the effectiveness of the Board as a whole.

Effective March 31, 2019, Mr. Johnson was appointed by our Board of Directors to serve as our Executive Chairman, and Mr. Lubniewski was appointed by our Board of Directors to serve as our Chief Executive Officer, replacing Mr. Johnson in such capacity. As our Executive Chairman, Mr. Johnson advises our management, including our Chief Executive Officer, on various strategic matters. We believe that separation of the positions of Executive Chairman and Chief Executive Officer reinforces the independence of the Board of Directors in its oversight of our business and affairs. In addition, we have a separate chair for each committee of our Board of Directors. The chair of each committee is expected to report at least annually to our Board of Directors on the activities of their respective committee in fulfilling their responsibilities as detailed in their respective charters or specify any shortcomings should that be the case.

In addition, effective March 31, 2019, our Board of Directors designated Dr. Hanham to serve as our Lead Independent Director. As Lead Independent Director, Dr. Hanham presides over Board of Directors meetings, sets meeting agendas, ensures the duties, responsibilities and roles of members of our Board of Directors are clearly understood, ensures that our Board of Directors receives appropriate and timely information, material and reports from management regarding our business, provides input to the Board regarding candidates for nomination or appointment to the Board and Board committees, and performs such additional duties as set forth in our bylaws and as our Board of Directors may otherwise determine and delegate.

Role of the Board in Risk Oversight

One of the key functions of our Board of Directors is informed oversight of our risk management process. The Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board of Directors as a whole, as well as through various standing Board committees that address risks inherent in their respective areas of oversight. The risk oversight process includes receiving regular reports from Board committees and members of senior management to enable our Board to understand our risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, strategic and reputational risk. In particular, our Board of Directors is responsible for monitoring and assessing strategic risk exposure and our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors compliance with legal and regulatory requirements. Oversight by the Audit Committee includes direct communication with our external auditors. Our Nominating and Governance Committee monitors the effectiveness of our corporate governance practices, including whether they are successful in preventing illegal or improper liability-creating conduct. Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.

Meetings of The Board of Directors

The Board of Directors met 16 times during the last fiscal year. Each Board member attended 75% or more of the aggregate number of meetings of the Board and of the committees on which he or she served, held during the portion of the last fiscal year for which he or she was a director or committee member.

 


Information Regarding Committees of the Board of Directors

The Board maintains an Audit Committee, a Compensation Committee and a Nominating and Governance Committee. The following table provides membership and meeting information for 2018 for each of the foregoing Board committees:

 

Name

 

Audit

 

 

Compensation

 

 

Nominating and

Governance

 

John L. Lubniewski

 

 

 

 

 

 

 

 

 

 

 

 

Timothy B. Johnson

 

 

 

 

 

 

 

 

 

 

 

 

Harry A. George

 

X

 

 

 

 

 

 

 

 

 

Michelle R. Griffin (1)

 

X*

 

 

X

 

 

 

 

 

Ann F. Hanham, Ph.D.

 

 

 

 

 

 

 

 

 

X*

 

Donnie M. Hardison

 

 

 

 

 

X*

 

 

 

 

 

James T. LaFrance (1)

 

X

 

 

X

 

 

X

 

Lee R. McCracken

 

 

 

 

 

X

 

 

X

 

Lewis J. Shuster (2)

 

X

 

 

 

 

 

 

 

 

 

Total meetings in 2018

 

 

6

 

 

 

12

 

 

 

3

 

 

 

*

Committee Chairperson

(1)

Mr. LaFrance served on our Compensation Committee until May 22, 2019, at which time Ms. Griffin was appointed by the Board to replace him as a Compensation Committee member.

(2)

Mr. Shuster’s service on our Audit Committee ended concurrently with the expiration of his term of office at our 2018 Annual Shareholder’s Meeting.

The Board of Directors has determined that each member of each committee meets the applicable Nasdaq rules and regulations regarding “independence” and each member is free of any relationship that would impair his or her individual exercise of independent judgment with regard to the Company.

Board Committees

Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Governance Committee.

Audit Committee

The Audit Committee of the Board of Directors was established by the Board in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), to oversee the Company’s corporate accounting and financial reporting processes and audits of its financial statements. For this purpose, the Audit Committee performs several functions, including, among other things:

 

evaluating the performance, independence and qualifications of our independent auditors and determining whether to retain our existing independent auditors or engage new independent auditors;

 

reviewing and approving the engagement of our independent auditors to perform audit services and any permissible non-audit services;

 

monitoring the rotation of partners of our independent auditors on our engagement team as required by law;

 

prior to engagement of any independent auditor, and at least annually thereafter, reviewing relationships that may reasonably be thought to bear on their independence, and assessing and otherwise taking the appropriate action to oversee the independence of our independent auditor;

 

reviewing our annual and quarterly financial statements and reports, including the disclosures contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and discussing the statements and reports with our independent auditors and management;

 

reviewing with our independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy and effectiveness of our financial controls;

 


 

reviewing with management and our auditors any earnings announcements and other public announcements regarding material developments;

 

establishing procedures for the receipt, retention and treatment of complaints received by us regarding financial controls, accounting or auditing matters and other matters;

 

preparing the report that the SEC requires in our annual proxy statement;

 

reviewing and providing oversight of any related-person transactions in accordance with our related-person transaction policy and reviewing and monitoring compliance with legal and regulatory responsibilities, including our code of business conduct and ethics;

 

reviewing our major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management is implemented;

 

reviewing on a periodic basis our investment policy; and

 

reviewing and evaluating on an annual basis the performance of the Audit Committee, including compliance of the Audit Committee with its charter.

The Audit Committee is composed of three directors: Ms. Griffin, Mr. George and Mr. LaFrance. Ms. Griffin serves as the chair of the Audit Committee. The Board has adopted a written Audit Committee charter that is available to stockholders on the Company’s website at www.htgmolecular.com.

The Board of Directors reviews the Nasdaq listing standards definition of independence for Audit Committee members on an annual basis and has determined that all members of the Company’s Audit Committee are independent (as independence is currently defined in Rule 5605(c)(2)(A)(i) and (ii) of the Nasdaq listing standards).

The Board of Directors has also determined that Ms. Griffin qualifies as an “audit committee financial expert,” as defined in applicable SEC rules. The Board made a qualitative assessment of Ms. Griffin’s level of knowledge and experience based on a number of factors, including her formal education and experience in financial and executive roles.

Report of the Audit Committee of the Board of Directors*

The Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2018 with management of the Company. The Audit Committee has discussed with the independent registered public accounting firm the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (“PCAOB”) as outlined in Auditing Standard 1301, Communications with Audit Committees, and the SEC. The Audit Committee has also received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the Audit Committee concerning independence, and has discussed with the independent registered public accounting firm the accounting firm’s independence. Based on the foregoing, the Audit Committee recommended to the 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, 2018.

Ms. Michelle R. Griffin (Chair)

Mr. Harry A. George

Mr. James T. LaFrance

*

The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the Exchange Act or the Securities Act of 1933, as amended (the “Securities Act”), whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Compensation Committee

The Compensation Committee is composed of three directors: Mr. Hardison, Mr. McCracken and Ms. Griffin. Mr. Hardison serves as the chair of the Compensation Committee. All members of the Compensation Committee are independent (as independence is currently defined in Rule 5605(d)(2) of the Nasdaq listing standards). The Board has adopted a written Compensation Committee charter that is available to stockholders on the Company’s website at www.htgmolecular.com.

 


The functions of the Compensation Committee include, among other things:

 

reviewing, modifying and approving (or if it deems appropriate, making recommendations to the full Board of Directors regarding) our overall compensation strategy and policies;

 

reviewing and recommending to our Board of Directors the compensation and other terms of employment of our executive officers;

 

reviewing and recommending to our Board of Directors the performance goals and objectives relevant to the compensation of our executive officers and assessing their performance against these goals and objectives;

 

reviewing and approving (or if it deems it appropriate, making recommendations to the full Board of Directors regarding) the equity incentive plans, compensation plans and similar programs advisable for us, as well as modifying, amending or terminating existing plans and programs;

 

evaluating risks associated with our compensation policies and practices and assessing whether risks arising from our compensation policies and practices for our employees are reasonably likely to have a material adverse effect on us;

 

reviewing and approving (or if it deems it appropriate, making recommendations to the full Board of Directors regarding) the type and amount of compensation to be paid or awarded to our non-employee board members;

 

establishing policies for allocating between long-term and currently paid out compensation, between cash and non-cash compensation and the factors used in deciding between the various forms of compensation;

 

establishing policies with respect to votes by our stockholders to approve executive compensation as required by Section 14A of the Exchange Act and determining our recommendations regarding the frequency of advisory votes on executive compensation;

 

reviewing and assessing the independence of compensation consultants, legal counsel and other advisors as required by Section 10C of the Exchange Act;

 

establishing elements of corporate performance for purposes of increasing or decreasing compensation;

 

administering our equity incentive plans;

 

establishing policies with respect to equity compensation arrangements;

 

reviewing regional and industry-wide compensation practices and trends to assess the competitiveness of our executive compensation programs and evaluating the effectiveness of our compensation policy and strategy in achieving expected benefits to us;

 

reviewing the adequacy of its charter on a periodic basis;

 

reviewing with management and approving our disclosures under the caption “Compensation Discussion and Analysis” in our periodic reports or proxy statements to be filed with the SEC, if applicable;

 

preparing the report that the SEC requires in our annual proxy statement, if applicable; and

 

reviewing and assessing on an annual basis the performance of the Compensation Committee.

 


Compensation Committee Processes and Procedures

Typically, the Compensation Committee meets at least twice annually and with greater frequency if necessary. The agenda for each meeting is usually developed by the Chair of the Compensation Committee, in consultation with the Chief Executive Officer. The Compensation Committee meets regularly in executive session. However, from time to time, various members of management and other employees as well as outside advisors or consultants may be invited by the Compensation Committee to make presentations, to provide financial or other background information or advice or to otherwise participate in Compensation Committee meetings. The Chief Executive Officer may not participate in, or be present during, any deliberations or determinations of the Compensation Committee regarding his compensation or individual performance objectives. The charter of the Compensation Committee grants the Compensation Committee full access to all books, records, facilities and personnel of the Company. In addition, under the charter, the Compensation Committee has the authority to obtain, at the expense of the Company, advice and assistance from compensation consultants and internal and external legal, accounting or other advisors and other external resources that the Compensation Committee considers necessary or appropriate in the performance of its duties. The Compensation Committee has direct responsibility for the oversight of the work of any consultants or advisers engaged for the purpose of advising the Committee. In particular, the Compensation Committee has the sole authority to retain, in its sole discretion, compensation consultants to assist in its evaluation of executive and director compensation, including the authority to approve the consultant’s reasonable fees and other retention terms. Under the charter, the Compensation Committee may select, or receive advice from, a compensation consultant, legal counsel or other adviser to the Compensation Committee, other than in-house legal counsel and certain other types of advisers, only after taking into consideration six factors, prescribed by the SEC and Nasdaq, that bear upon the adviser’s independence; however, there is no requirement that any adviser be independent.

During the past fiscal year, after taking into consideration the six factors prescribed by the SEC and Nasdaq described above, our compensation committee retained Radford, an Aon Hewitt company and a provider of compensation market intelligence to the technology and life sciences industries, to provide a report summarizing relevant benchmark data relating to industry-appropriate peers and make recommendations regarding base salary, target total cash (base salary plus target cash incentives) and the amounts and terms of long-term equity incentive awards for our executives as well as to benchmark and make recommendations regarding the initial and annual cash retainer amounts for directors and chairpersons of our Board of Directors and the various committees and the amounts and terms of initial and annual long-term equity incentive awards for directors. No work performed by Radford during fiscal year 2018 raised a conflict of interest.

Nominating and Governance Committee

The Nominating and Governance Committee of the Board of Directors is responsible for identifying, reviewing and evaluating candidates to serve as directors of the Company (consistent with criteria approved by the Board), reviewing and evaluating incumbent directors, recommending candidates for election to the Board of Directors, making recommendations to the Board regarding the membership of the committees of the Board, assessing the performance of the Board and developing a set of corporate governance principles for the Company.

The Nominating and Governance Committee is composed of three directors: Dr. Hanham, Mr. LaFrance and Mr. McCracken. All members of the Nominating and Governance Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the Nasdaq listing standards). The Board has adopted a written Nominating and Governance Committee charter that is available to stockholders on the Company’s website and www.htgmolecular.com.

Candidates for director nominees are reviewed in the context of the current composition of our Board of Directors, our operating requirements and the long-term interests of our stockholders. The Nominating and Governance Committee considers such factors as possessing relevant expertise upon which to be able to offer advice and guidance to management, having sufficient time to devote to the affairs of the Company, demonstrated excellence in his or her field, having the ability to exercise sound business judgment and having the commitment to rigorously represent the long-term interests of the Company’s stockholders. The Nominating and Governance Committee typically also considers diversity, age, skills and such other factors as it deems appropriate, given the current needs of the Board and the Company, to maintain a balance of knowledge, experience and capability. However, the Nominating and Governance Committee retains the right to modify the standards by which it reviews director nominees from time to time.

 


In the case of incumbent directors whose terms of office are set to expire, the Nominating and Governance Committee reviews these directors’ overall service to the Company during their terms, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair the directors’ independence. In the case of new director candidates, the Nominating and Governance Committee also determines whether the nominee is independent for Nasdaq purposes, which determination is based upon applicable Nasdaq listing standards, applicable SEC rules and regulations and the advice of counsel, if necessary. The Nominating and Governance Committee uses its and the other Board members’ network of contacts to compile a list of potential candidates, but may also engage, if it deems appropriate, a professional search firm. The Nominating and Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board. The Nominating and Governance Committee meets to discuss and consider the candidates’ qualifications and selects candidates for recommendation to the Board by majority vote.

The Nominating and Governance Committee will consider director candidates recommended by stockholders. The Nominating and Governance Committee does not intend to alter the manner in which it evaluates candidates, based on whether or not the candidate was recommended by a stockholder. Stockholders who wish to recommend individuals for consideration by the Nominating and Governance Committee to become nominees for election to the Board may do so by delivering a written recommendation to the Nominating and Governance Committee at the following address: Attn: Corporate Secretary, 3430 E. Global Loop, Tucson, AZ 85706 at least 120 days prior to the anniversary date of the mailing of the Company’s proxy statement for the last annual meeting of stockholders. Submissions must include the full name of the proposed nominee, a description of the proposed nominee’s business experience for at least the previous five years, complete biographical information, a description of the proposed nominee’s qualifications as a director and the number of shares beneficially owned by the nominating stockholder as of the date of submission. Any such submission must be accompanied by the written consent of the proposed nominee to be named as a nominee and to serve as a director if elected.

Stockholder Communications With The Board Of Directors

The Company’s Board has adopted a formal process by which stockholders may communicate with the Board or any of its directors. Stockholders who wish to communicate with the Board may do so by sending written communications addressed to: Attn: Corporate Secretary, 3430 E. Global Loop, Tucson, Arizona, 85706. These communications will be reviewed by the Secretary, who will determine whether the communication is appropriate for presentation to the Board or the relevant director. The purpose of this screening is to allow the Board to avoid having to consider irrelevant or inappropriate communications (such as advertisements, solicitations and hostile communications).

Code of Ethics

The Company has adopted the Code of Business Conduct and Ethics that applies to all officers, directors and employees. The Code of Business Conduct and Ethics is available on the Company’s website at www.htgmolecular.com. If the Company makes any substantive amendments to the Code of Business Conduct and Ethics or grants any waiver from a provision of the Code to any executive officer or director, the Company will promptly disclose the nature of the amendment or waiver on its website.

 


Proposal 2

Ratification of Selection of Independent Registered Public Accounting Firm

The Audit Committee of the Board of Directors has selected BDO USA, LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019 and has further directed that management submit the selection of its independent registered public accounting firm for ratification by the stockholders at the annual meeting. BDO USA, LLP has audited the Company’s financial statements since June 25, 2014. Representatives of BDO USA, LLP are expected to be present at the annual meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Neither the Company’s Bylaws nor other governing documents or law require stockholder ratification of the selection of BDO USA, LLP as the Company’s independent registered public accounting firm. However, the Audit Committee of the Board is submitting the selection of BDO USA, LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee of the Board will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee of the Board in its discretion may direct the appointment of different independent auditors at any time during the year if they determine that such a change would be in the best interests of the Company and its stockholders.

The affirmative vote of the holders of a majority of the shares present in person or represented by proxy and entitled to vote on the matter at the annual meeting will be required to ratify the selection of accounting firm.

Principal Accountant Fees and Services

The following table represents aggregate fees billed to the Company for the fiscal years ended December 31, 2018 and 2017 by BDO USA, LLP, the Company’s principal accountant.

 

 

 

December 31,

 

 

 

2018

 

 

2017

 

Fee Category

 

 

 

 

 

 

 

 

Audit fees (1)

 

$

419,213

 

 

$

551,265

 

Audit-related fees

 

 

 

 

 

 

Tax fees

 

 

 

 

 

 

All other fees

 

 

 

 

 

 

Total fees

 

$

419,213

 

 

$

551,265

 

 

(1)

Audit fees consist of fees for professional services provided primarily in connection with the annual audit of our financial statements, quarterly reviews and services associated with SEC registration statements and other documents issued in connection with securities offerings including comfort letters and consents.

All fees described above were pre-approved by the Audit Committee.

Pre-Approval Policies and Procedures.

Pursuant to its charter, the Audit Committee must review and approve, in advance, the scope and plans for the audits and the audit fees and approve in advance (or, where permitted under the rules and regulations of the SEC, subsequently) all non-audit services to be performed by the independent auditor that are not otherwise prohibited by law and any associated fees. The Audit Committee may delegate to one or more members of the committee the authority to pre-approve audit and permissible non-audit services, as long as this pre-approval is presented to the full committee at scheduled meetings. All fees described above were pre-approved by the Audit Committee.  

 

The Board Of Directors Recommends

A Vote “For” Proposal 2.

 


Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding the ownership of the Company’s common stock as of June 15, 2019 by: (i) each director; (ii) each of the Company’s named executive officers; (iii) all executive officers and directors of the Company as a group; and (iv) all those known by the Company to be beneficial owners of more than five percent of its common stock.

The table is based upon information supplied by officers, directors and principal stockholders, Schedules 13G filed with the SEC and other sources believed to be reliable by the Company. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 28,706,047 shares outstanding on June 15, 2019, adjusted as required by rules promulgated by the SEC. The number of shares of common stock used to calculate the percentage ownership of each listed beneficial owner includes the shares of common stock underlying options or convertible securities held by such beneficial owner that are exercisable or convertible within 60 days following June 15, 2019. Unless otherwise indicated, the address for each person or entity listed in the table is c/o HTG Molecular Diagnostics, Inc., 3430 E. Global Loop, Tucson, Arizona 85706.

 

 

 

Common Stock Beneficially Owned

 

Name and address of beneficial owner

 

Shares

 

 

Percentage

 

Greater than 5% stockholders

 

 

 

 

 

 

 

 

FMR LLC (1)

 

 

3,607,849

 

 

 

12.6

%

245 Summer Street

 

 

 

 

 

 

 

 

Boston, MA  02210

 

 

 

 

 

 

 

 

Stonepine Capital Management (2)

 

 

2,675,889

 

 

 

9.3

%

919 NW Bond Street, Suite 204

 

 

 

 

 

 

 

 

Bend, OR 97703

 

 

 

 

 

 

 

 

Select Medical Technology and Devices Portfolio

 

 

2,392,976

 

 

 

8.3

%

245 Summer Street

 

 

 

 

 

 

 

 

Boston, MA  02210

 

 

 

 

 

 

 

 

T. Rowe Price Associates, Inc.

 

 

1,999,100

 

 

 

7.0

%

      100 E. Pratt Street

 

 

 

 

 

 

 

 

      Baltimore, MD  21202

 

 

 

 

 

 

 

 

T. Rowe Price Health Sciences Fund, Inc.

 

 

1,629,330

 

 

 

5.7

%

      100 E. Pratt Street

 

 

 

 

 

 

 

 

      Baltimore, MD  21202

 

 

 

 

 

 

 

 

QIAGEN NV (3)

 

 

1,620,447

 

 

 

5.5

%

Hulsterweg 82, 5912 PL

 

 

 

 

 

 

 

 

Venlo, The Netherlands

 

 

 

 

 

 

 

 

Directors and named executive officers

 

 

 

 

 

 

 

 

Timothy B. Johnson (4)

 

 

482,221

 

 

 

1.7

%

John L. Lubniewski (5)

 

 

292,749

 

 

*

 

Shaun D. McMeans (6)

 

 

216,621

 

 

*

 

Ann Hanham (7)

 

 

30,531

 

 

*

 

Harry A. George (8)

 

 

208,896

 

 

*

 

Donnie M. Hardison (9)

 

 

42,000

 

 

*

 

James T. LaFrance (10)

 

 

42,000

 

 

*

 

Lee McCracken (11)

 

 

34,500

 

 

*

 

Michelle R. Griffin (12)

 

 

6,666

 

 

*

 

All current executive officers and directors as a

   group (9 persons) (13)

 

 

1,356,184

 

 

 

4.6

%

 

 

*

Represents beneficial ownership of less than one percent.

 


(1)

Abigail P. Johnson is a director, the Vice Chairman, the Chief Executive Officer and President of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of the FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of the Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FRM LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act advised by Fidelity Management & Research Company, a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established by Fidelity Funds’ Board of Trustees. This information is based on the Schedule 13G filed on February 13, 2019 with the SEC.

(2)

Stonepine Capital Management, LLC, a California limited liability company is the general partner and investment advisor of    investment funds, including Stonepine Capital, L.P., a Delaware limited partnership. Jon M. Plexico and Timothy P. Lynch are the control persons of the general partner. These filers have filed a Schedule 13G jointly, but not as members of a group, and each disclaims membership in a group. Each filer also disclaims beneficial ownership of the stock except to the extent of that person’s pecuniary interest therein. In addition, the filing of the Schedule 13G on behalf of Stonepine Capital, L.P. should not be construed as an admission that it is, and it disclaims that it is, a beneficial owner, as defined in Rule 13d-3 under the Securities Act of 1934, of any of the stock covered by the 13G. This information is based on the Schedule 13G filed on February 13, 2019 with the SEC

(3)

The 833,333 shares of common stock are held of record by QIAGEN North American Holdings, Inc., a wholly owned subsidiary of QIAGEN N.V.

(4)

Includes 273,868 shares and 4,688 restricted stock units that Mr. Johnson has the right to acquire from us within 60 days of June 15, 2019 pursuant to the exercise of stock options and the vesting of restricted stock units.

(5)

Includes 168,725 shares and 3,125 restricted stock units that Mr. Lubniewski has the right to acquire from us within 60 days of June 15, 2019 pursuant to the exercise of stock options and the vesting of restricted stock units.

(6)

Includes 118,155 shares and 1,563 restricted stock units that Mr. McMeans has the right to acquire from us within 60 days of June 15, 2019 pursuant to the exercise of stock options and the vesting of restricted stock units.

(7)

Includes 25,727 shares and 2,500 restricted stock units that Dr. Hanham has the right to acquire from us within 60 days of June 15, 2019 pursuant to the exercise of stock options and the vesting of restricted stock units.

(8)

Consists of (i) 144,366 shares beneficially owned by Solstice Capital II LP and (ii) 28,000 shares and 2,500 restricted stock units that Mr. George has the right to acquire from us within 60 days of June 15, 2019 pursuant to the exercise of stock options and the vesting of restricted stock units. Mr. George is the managing member of Solstice Capital II LP and has joint voting and investment power over the shares held by Solstice Capital II LP.

(9)

Includes 32,000 shares and 2,500 restricted stock units that Mr. Hardison has the right to acquire from us within 60 days of June 15, 2019 pursuant to the exercise of stock options and the vesting of restricted stock units.

(10)

Includes 32,000 shares and 2,500 restricted stock units that Mr. LaFrance has the right to acquire from us within 60 days of June 15, 2019 pursuant to the exercise of stock options and the vesting of restricted stock units.

(11)

Includes 23,000 shares and 2,500 restricted stock units that Mr. McCracken has the right to acquire from us within 60 days of June 15, 2019 pursuant to the exercise of stock options and the vesting of restricted stock units.

(12)

Includes 6,666 shares that Ms. Griffin has the right to acquire from us within 60 days of June 15, 2019 pursuant to the exercise of stock options.

(13)

The number of shares beneficially owned consists of (a) the shares described in Notes (4) through (12).

 


Section 16(A) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s directors and executive officers, and persons who own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.

To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the fiscal year ended December 31, 2018, all Section 16(a) filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with.

Executive Compensation

Summary Compensation Table

The following table shows for the fiscal years ended December 31, 2018 and 2017, compensation awarded to or paid to, or earned by, the Company’s named executive officers, which consist of the Company’s principal executive officer and the Company’s two other most highly compensated executive officers as of December 31, 2018, as follows:

 

Timothy B. Johnson, Executive Chairman and former Chief Executive Officer;

 

John L. Lubniewski, our President and Chief Executive Officer; and

 

Shaun D. McMeans., our Senior Vice President and Chief Financial Officer.

Summary Compensation Table

Name and principal position

 

Year

 

Salary

($)

 

 

Bonus ($) (1)

 

 

Stock

awards

($) (2)

 

 

Option

awards

($) (3)

 

 

Non-equity

incentive

plan

compensation

($) (4)

 

 

All other

compensation

($) (5)

 

 

Total

($)

 

Timothy B. Johnson

 

2018

 

 

426,250

 

 

 

200,000

 

 

 

708,343

 

 

 

510,000

 

 

 

166,183

 

 

 

741

 

 

 

2,011,517

 

Executive Chairman and former Chief Executive Officer

 

2017

 

 

409,500

 

 

 

167,500

 

 

 

117,600

 

 

 

36,480

 

 

 

267,800

 

 

 

38,408

 

 

 

1,037,288

 

John L. Lubniewski

 

2018

 

 

327,230

 

 

 

100,000

 

 

 

413,775

 

 

 

340,000

 

 

 

116,007

 

 

 

741

 

 

 

1,297,753

 

President and Chief Executive Officer

 

2017

 

 

306,792

 

 

 

105,739

 

 

 

58,800

 

 

 

38,400

 

 

 

160,346

 

 

 

20,492

 

 

 

690,569

 

Shaun D. McMeans

 

2018

 

 

288,608

 

 

 

50,000

 

 

 

270,437

 

 

 

340,000

 

 

 

91,438

 

 

 

741

 

 

 

1,041,224

 

Senior Vice President and Chief Financial Officer

 

2017

 

 

255,738

 

 

 

80,110

 

 

 

50,600

 

 

 

35,520

 

 

 

134,316

 

 

 

18,786

 

 

 

575,070

 

 

 

(1)

The dollar amounts in this column represent the following bonus payments: For Mr. Johnson, $200,000 paid in 2018 in recognition of certain financing transactions in 2018, $142,500 paid in 2017 in recognition of 2016 corporate performance and our achievement of the financing goal described in note (4) below and $25,000 paid in 2017 in recognition of certain commercial and other financing transactions in 2016; for Mr. Lubniewski, $100,000 paid in 2018 in recognition of certain financing transactions in 2018, $85,739 paid in 2017 in recognition of 2016 corporate performance and our achievement of the financing goal described in note (4) below and $20,000 paid in 2017 in recognition of certain commercial and other financing transactions in 2016; and for Mr. McMeans, $50,000 paid in 2018 in recognition of certain financing transactions in 2018, $70,110 paid in 2017 in recognition of 2016 corporate performance and our achievement of the financing goal described in note (4) below, and $10,000 paid in 2017 in recognition of certain commercial and other financing transactions in 2016.

(2)

The dollar amounts in this column represent the aggregate grant date fair value of restricted stock unit (“RSU”) awards granted in 2018 and 2017, as applicable. For further discussion of valuation assumptions, see Note 13 “Stock-based Compensation” to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 7, 2019.

 


(3)

The dollar amounts in this column represent the aggregate grant date fair value of stock option awards granted in 2018 and 2017, as applicable. These amounts have been computed in accordance with FASB ASC Topic 718, using the Black-Scholes option pricing model. For a discussion of valuation assumptions, see Note 13 “Stock-based Compensation” to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on March 7, 2019.

(4)

Amounts shown represent annual performance-based bonuses earned for 2018 and 2017. In April 2017, our Board of Directors made the receipt of the annual performance-based bonuses for 2016 expressly conditioned upon the completion by us of a financing transaction or series of related financing transactions in which we raised aggregate gross proceeds in excess of $12.0 million and, with respect to each named executive officer, his continued employment through completion of such financing transaction(s). Because payment of the performance-based bonuses for 2016 was made expressly conditioned on the achievement of the foregoing financing goal (which was achieved in May 2017), the non-equity incentive plan compensation reportable for 2016 for each named executive officer was $0, and the performance-based bonuses paid with respect to 2016 are reflected as a bonus for 2017 as described in note (1) above.

(5)

Amount shown represents premiums for life, disability and accidental death and dismemberment insurance paid by us on behalf of the named executive officer and reimbursement to the named executive officers of the employee portion of taxes paid at the vesting of the RSU awards granted on August 26, 2016 which vested in February and August of 2017.

 

Annual Base Salary

The base salary of our named executive officers is generally set forth in each officer’s employment letter agreement with us and periodically reviewed and adjusted by our Board of Directors, based on the recommendation of the compensation committee of our Board of Directors and following analyses conducted by independent third-party consultants. At the beginning of 2018, the base salaries for our named executive officers were $412,000, $308,358 and $258,300, for Mr. Johnson, Mr. Lubniewski and Mr. McMeans, respectively. In February 2018, the base salary for Mr. McMeans was increased to $275,000. In connection with Mr. Lubniewski’s promotion to President and Chief Operating Officer in April 2018, Mr. Lubniewski’s base salary was increased to $335,000. In August 2018, the base salaries for Mr. Johnson and Mr. McMeans were increased to $450,000 and $315,000, respectively.

Annual Performance-Based Bonus Opportunity

In addition to base salaries, our named executive officers are eligible to receive annual performance-based bonuses, which are designed to provide appropriate incentives to our executives to achieve defined annual corporate goals and to reward our executives for individual achievement towards these goals. As with annual base salary, the target annual performance-based bonus percentage for each of our named executive officers is determined by our Board of Directors based upon input from independent third-party consultants. The annual performance-based bonus each named executive officer is awarded is generally based on the extent to which we achieve the corporate goals that our Board of Directors establishes each year. At the end of the year, our Board of Directors reviews our performance against each corporate goal and approves the extent to which we achieved each of our corporate goals.

Our Board of Directors will generally consider each named executive officer’s individual contributions towards reaching our annual corporate goals but does not typically establish specific individual goals for our named executive officers. There is no minimum bonus percentage or amount established for the named executive officers and, thus, the bonus amounts vary from year to year based on corporate and individual performance. For 2018, Mr. Johnson was eligible to receive a target bonus of up to 50% of his base salary pursuant to the terms of his employment letter agreement described below through August 15, 2018 and 55% of his base salary thereafter. For 2018, Mr. Lubniewski was eligible to receive a target bonus of up to 40% of his base salary pursuant to the terms of his employment letter agreement described below through April 15, 2018 and 50% of his base salary thereafter. For 2018, Mr. McMeans was eligible to receive a target bonus of up to 40% of his base salary pursuant to the terms of his employment letter agreement described below through August 15, 2018 and 45% of his base salary thereafter.

The corporate goals established by our Board of Directors for 2018 were based upon commercial and financial goals. Specific goals included financial performance, progress with biopharmaceutical company collaborative development programs and market and commercialization metrics in Europe. The financial goals were weighted at 70% towards overall corporate goal achievement and the commercial goals were weighted at 30% towards overall corporate goal achievement. There was no minimum percentage of corporate goals that was required to be achieved to earn a bonus. No specific individual goals were established for any of our named executive officers for 2018.

 


In January 2019, our Board of Directors determined that the 2018 corporate goals had been achieved at an aggregate level of 75%. As a result, on January 24, 2019, our Board of Directors awarded the following performance-based bonuses to our named executive officers:

 

Executive Officer

 

Title

 

2018 Bonus

Amount

 

Timothy B. Johnson

 

Executive Chairman and former Chief Executive Officer

 

$

166,183

 

John L. Lubniewski

 

President and Chief Executive Officer

 

$

116,007

 

Shaun D. McMeans

 

Senior Vice President and Chief Financial Officer

 

$

91,438

 

Equity-Based Incentive Awards

Our equity-based incentive awards are designed to align our interests with those of our employees and consultants, including our named executive officers. Our Board of Directors or any authorized committee thereof is responsible for approving equity grants, which include to date, stock options and RSUs. Vesting of the stock option and RSU awards is tied to continuous service with us and serves as an additional retention measure. Our executives generally are awarded an initial stock option grant upon commencement of employment. Additional equity awards may occur periodically to specifically incentivize executives to achieve certain corporate goals or to reward executives for exceptional performance. As of December 31, 2018, our named executive officers have been granted both stock option awards and RSUs.

Prior to the initial public offering, we granted all equity awards pursuant to the 2011 Plan and the 2001 Plan. All equity awards granted since our initial public offering have been granted pursuant to the 2014 Plan, the terms of which are described below under “—Equity Benefit Plans.” All stock options are granted with a per share exercise price equal to no less than the fair market value of a share of our common stock on the date of the grant of such award.

Generally, our stock option awards vest over a one to four-year period subject to the holder’s continuous service to us and may be granted with an early exercise feature. Such early exercise feature allows the holder to exercise and receive unvested shares of our stock, so that the holder may have a greater opportunity for gains on the shares to be taxed at long-term capital gains rates rather than ordinary income rates. From time to time as our Board of Directors considers appropriate, we may grant stock options or RSUs that vest upon achievement of performance goals.

Agreements with Named Executive Officers

We have entered into letter agreements with each of our named executive officers. The letter agreements generally provide for at-will employment and set forth the named executive officer’s initial base salary, eligibility for employee benefits, in some cases, and severance benefits upon a qualifying termination of employment. In addition, each of our named executive officers has executed a form of our standard confidential information and invention assignment agreement. The key terms of the letter agreements with our named executive officers are described below. Any potential payments and benefits due upon a qualifying termination of employment or a change in control are further described below under “– Potential Payments and Benefits upon Termination or Change in Control.”

Employment Letter Agreement with Mr. Johnson. We entered into an amended and restated letter agreement with Mr. Johnson in December 2014 that replaced his previous letter agreement and became effective in May 2015. The agreement sets forth certain agreed upon terms and conditions of employment. Mr. Johnson was initially entitled to receive an annual base salary of $400,000 (most recently increased in August 2018 to $450,000), an annual target performance bonus of up to 50% of his base salary (increased in August 2018 to 55% of base salary) as determined by our Board of Directors, and certain severance benefits, the terms of which are described below under “—Potential Payments and Benefits upon Termination or Change of Control.” Mr. Johnson’s base salary and target bonus percentage were subject to modification from time to time in the discretion of our Board of Directors or any authorized committee thereof.

Effective March 31, 2019, Mr. Johnson transitioned from the role of Chief Executive Officer to Executive Chairman. In connection with this transition, we entered into an amended and restated employment agreement with Mr. Johnson. Pursuant to the agreement, Mr. Johnson’s annual base salary was reduced to $100,000 and he will no longer be eligible to receive an annual target bonus.

 


Employment Letter Agreement Mr. Lubniewski. We entered into an amended and restated letter agreement with Mr. Lubniewski in December 2014 that replaced his previous letter agreement and became effective in May 2015. The agreement sets forth certain agreed upon terms and conditions of employment. Mr. Lubniewski was initially entitled to receive an annual base salary of $293,500 (most recently increased in April 2018 to $335,000), an annual target performance bonus of up to 40% of his base salary (increased in April 2018 to 50% of base salary) as determined by our Board of Directors, and certain severance benefits, the terms of which are described below under “—Potential Payments and Benefits upon Termination or Change of Control.” Mr. Lubniewski’s base salary and target bonus percentage are subject to modification from time to time in the discretion of our Board of Directors or any authorized committee thereof.

Effective March 31, 2019, Mr. Lubniewski was appointed by our Board of Directors as our President and Chief Executive Officer. In connection with his appointment, we entered into an amended and restated employment agreement with Mr. Lubniewski. Pursuant to the agreement, Mr. Lubniewski’s salary was increased to $385,000, and he became eligible to receive an annual target performance bonus of up to 55% of his base salary as determined by our Board of Directors following analysis conducted by independent third-party consultants.

Employment Letter Agreement with Mr. McMeans. We entered into an amended and restated letter agreement with Mr. McMeans in December 2014 that replaced his previous letter agreement and became effective in May 2015. The agreement sets forth certain agreed upon terms and conditions of employment. Mr. McMeans was initially entitled to an annual base salary of $246,000 (most recently increased in August 2018 to $315,000), an annual target performance bonus of up to 40% of his base salary (increased in August 2018 to 45% of base salary) as determined by our Board of Directors, and certain severance benefits, the terms of which are described below under “—Potential Payments and Benefits upon Termination or Change of Control.” Mr. McMeans’ base salary and target bonus percentage are subject to modification from time to time in the discretion of our Board of Directors or any authorized committee thereof.

Potential Payments and Benefits upon Termination or Change of Control

Under the terms of the amended and restated letter agreements of our named executive officers who are currently executive officers, upon the executive’s termination without “cause,” or resignation for “good reason,” each as defined below, such executive is eligible to receive continued base salary payments and COBRA premium payments for a specified period, which is 12 months for Mr. Lubniewski and nine months for Mr. McMeans. Additionally, upon the executive’s termination without “cause” or resignation for “good reason” in connection with a change of control, the executive is eligible to receive continued base salary payments and COBRA premium payments for 18 months, in the case of Mr. Lubniewski, and 12 months in the case of Mr. McMeans. Prior to the effective date of Mr. Johnson’s transition to Executive Chairman and the amendment and restatement of his employment agreement, he was eligible to receive continued base salary payments and COBRA premium payments for 18 months. Effective as of March 31, 2019, Mr. Johnson is not entitled to severance payments or benefits upon termination or change of control.

For purposes of the amended and restated letter agreements, “cause” generally means the occurrence of any of the following events, conditions or actions with respect to the executive: (1) conviction of any felony or crime involving fraud or dishonesty; (2) participation in any material fraud, material act of dishonesty or other material act of misconduct against us; (3) willful and habitual neglect of the executive’s duties after written notice and opportunity to cure; (4) material violation of any fiduciary duty or duty of loyalty owed to us; (5) breach of any material term of any material contract with us which has a material adverse effect on us; (6) knowing violation of any material company policy which has a material adverse effect on us; or (7) knowing violation of state or federal law in connection with the performance of the executive’s job which has a material adverse effect on us.

For purposes of each of the named executive officer’s amended and restated letter agreements, “good reason” generally means the following events, conditions or actions taken by us with respect to the executive without cause and without the executive’s express written consent: (1) a material reduction in base salary; (2) a material reduction in the executive’s authority, duties or responsibilities; (3) a material reduction in the authority, duties or responsibilities of the supervisor to whom the executive is required to report; or (4) a relocation of the executive’s principal place of employment to a place that increases the executive’s one-way commute by more than 50 miles.

Each of our named executive officers holds stock options and RSUs under our equity incentive plans that were granted subject to our form of stock option and RSU agreements. A description of the termination and change of control provisions in such equity incentive plans and stock options and RSUs granted thereunder is provided below under “– Equity Benefit Plans” and the specific vesting terms of each named executive officer’s stock options and RSUs are described below under “– Outstanding Equity Awards at Fiscal Year-End.”

 


Outstanding Equity Awards at Fiscal year-end

The following table presents information concerning equity awards held by our named executive officers as of December 31, 2018.

  

 

 

 

 

 

Option Awards

 

Stock Awards

 

Name

 

 

Grant Date/Vesting Commencement Date

 

Number of Securities Underlying Unexercised Options (#) Exercisable

 

 

Number of Securities Underlying Unexercised Options (#) Unexercisable

 

 

Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)

 

 

Option Exercise Price ($)

 

 

Option Expiration Date

 

Number of Shares or Units of Stock That Have Not Vested (#)

 

 

Market Value of Shares or Units of Stock That Have Not Vested ($)

 

 

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)

 

 

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

 

Timothy B. Johnson

 

(1)

3/01/2009

 

 

4,655

 

 

 

 

 

 

 

 

 

4.30

 

 

3/01/2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

3/01/2010

 

 

6,983

 

 

 

 

 

 

 

 

 

4.30

 

 

3/01/2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

4/13/2010

 

 

675

 

 

 

 

 

 

 

 

 

4.30

 

 

4/13/2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

10/21/2010

 

 

581

 

 

 

 

 

 

 

 

 

4.30

 

 

10/21/2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

1/20/2011

 

 

675

 

 

 

 

 

 

 

 

 

4.30

 

 

1/20/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

4/26/2011

 

 

29,797

 

 

 

 

 

 

 

 

 

2.15

 

 

4/26/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

2/01/2013

 

 

18,328

 

 

 

 

 

 

 

 

 

2.15

 

 

2/01/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

8/06/2013

 

 

9,311

 

 

 

 

 

 

 

 

 

2.15

 

 

8/06/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

3/20/2014

 

 

43,267

 

 

 

 

 

 

 

 

 

2.15

 

 

3/20/2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

12/29/2014

 

 

9,311

 

 

 

 

 

 

 

 

 

12.89

 

 

12/29/2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

2/16/2016

 

 

85,314

 

 

 

19,686

 

 

 

 

 

 

2.36

 

 

2/15/2026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

2/13/2017

 

 

19,000

 

 

 

 

 

 

 

 

 

1.92

 

 

2/13/2027

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

8/16/18

 

 

18,750

 

 

 

131,250

 

 

 

 

 

 

3.40

 

 

8/16/28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3)

8/16/18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

65,624

 

 

 

223,122

 

 

 

 

 

 

 

John L. Lubniewski

 

(1)

4/26/2011

 

 

13,036

 

 

 

 

 

 

 

 

 

2.15

 

 

4/26/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

3/08/2012

 

 

2,793

 

 

 

 

 

 

 

 

 

2.15

 

 

3/08/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

2/01/2013

 

 

3,503

 

 

 

 

 

 

 

 

 

2.15

 

 

2/01/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

8/06/2013

 

 

13,036

 

 

 

 

 

 

 

 

 

2.15

 

 

8/06/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

3/20/2014

 

 

29,818

 

 

 

 

 

 

 

 

 

2.15

 

 

3/20/2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

12/29/2014

 

 

3,724

 

 

 

 

 

 

 

 

 

12.89

 

 

12/29/2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

2/16/2016

 

 

28,439

 

 

 

6,561

 

 

 

 

 

 

2.36

 

 

2/15/2026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

2/13/17

 

 

20,000

 

 

 

 

 

 

 

 

 

 

1.92

 

 

2/13/2027

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

8/16/18

 

 

12,500

 

 

 

87,500

 

 

 

 

 

 

3.40

 

 

8/16/28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3)

8/16/18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43,750

 

 

 

148,750

 

 

 

 

 

 

 

Shaun D. McMeans

 

(1)

3/08/2012

 

 

8,380

 

 

 

 

 

 

 

 

 

2.15

 

 

3/08/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

2/01/2013

 

 

1,854

 

 

 

 

 

 

 

 

 

2.15

 

 

2/01/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

8/06/2013

 

 

13,036

 

 

 

 

 

 

 

 

 

2.15

 

 

8/06/2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

3/20/2014

 

 

30,308

 

 

 

 

 

 

 

 

 

2.15

 

 

3/20/2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

12/29/2014

 

 

2,327

 

 

 

 

 

 

 

 

 

12.89

 

 

12/29/2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

2/16/2016

 

 

16,250

 

 

 

3,750

 

 

 

 

 

 

2.36

 

 

2/15/2026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

2/13/2017

 

 

18,500

 

 

 

 

 

 

 

 

 

1.92

 

 

2/13/2027

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2)

8/16/18

 

 

12,500

 

 

 

87,500

 

 

 

 

 

 

3.40

 

 

8/16/28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3)

8/16/18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,874

 

 

 

74,372

 

 

 

 

 

 

 

(1)

Fully vested.

(2)

Stock options vest over four years as follows: 1/16 of the outstanding shares vest at the end of each calendar quarter over a period of approximately four years, subject to the individual’s continued service with us through each vesting date.

 


(3)

RSUs vest over four years as follows: 1/16 of the award vests at the end of each calendar quarter over a period of approximately four years, subject to the individual’s continued service with us through each vesting date.

Equity Benefit Plans

2014 Equity Incentive Plan

Our Board of Directors adopted the 2014 Plan in December 2014 and our stockholders approved the 2014 Plan in April 2015. The 2014 Plan became effective on May 5, 2015 in connection with our initial public offering.

Stock Awards. The 2014 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, and other forms of equity compensation (collectively “stock awards”), all of which may be granted to employees, including officers, non-employee directors and consultants of us and our affiliates. Additionally, the 2014 Plan provides for the grant of performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to non-employee directors and consultants.

Share Reserve. Initially, the aggregate number of shares of our common stock that may be issued pursuant to stock awards under the 2014 Plan was the sum of (1) 925,616 shares, plus (2) the number of shares (not to exceed 608,819 shares) (i) reserved for issuance under our 2011 Plan at the time the 2014 Plan became effective, and (ii) any shares subject to outstanding stock options or other stock awards that were granted under our 2011 Plan or 2001 Plan that, on or after the effective date of the 2014 Plan, are forfeited, terminate, expire or are otherwise not issued. In March 2019, our Board of Directors approved an amendment to the 2014 Plan pursuant to Nasdaq Rule 5635(c)(4) to reserve an additional 200,000 shares of common stock to be issued exclusively for grants of awards to individuals who were not previously employees or non-employee directors of the Company (or following a bona fide period of non-employment with the Company), as an inducement material to the individual’s entry into employment with the Company within the meaning of Nasdaq Rule 5635(c)(4). Additionally, the number of shares of our common stock reserved for issuance under the 2014 Plan automatically increases on January 1 of each year, beginning on January 1, 2016 and continuing through and including January 1, 2024, by 4% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our Board of Directors. The maximum number of shares of our common stock that may be issued upon the exercise of ISOs under the 2014 Plan is 1,800,000 shares.

No person may be granted stock awards covering more than 200,000 shares of our common stock under the 2014 Plan during any calendar year pursuant to stock options, stock appreciation rights and other stock awards whose value is determined by reference to an increase over an exercise or strike price of at least 100% of the fair market value on the date the stock award is granted. Additionally, no person may be granted in a calendar year a performance stock award covering more than 200,000 shares of our common stock or a performance cash award having a maximum value in excess of $2,000,000. Such limitations were designed to help assure that any deductions to which we would otherwise be entitled with respect to such awards would not be subject to the $1,000,000 limitation on the income tax deductibility of compensation paid to any covered executive officer imposed by Section 162(m) of the Code. The exemption from the deduction limit under Section 162(m) of the Code for “performance-based compensation” has been repealed, effective for taxable years beginning after December 31, 2017.

If a stock award granted under the 2014 Plan expires or otherwise terminates without being exercised in full, or is settled in cash, the shares of our common stock not acquired pursuant to the stock award again will become available for subsequent issuance under the 2014 Plan. In addition, the following types of shares of our common stock under the 2014 Plan may become available for the grant of new stock awards under the 2014 Plan: (1) shares that are forfeited to or repurchased by us prior to becoming fully vested; (2) shares withheld to satisfy income or employment withholding taxes; or (3) shares used to pay the exercise or purchase price of a stock award. Shares issued under the 2014 Plan may be previously unissued shares or reacquired shares bought by us on the open market. As of December 31, 2018, option awards covering an aggregate of 1,676,802 shares of our common stock and an additional 227,707 RSU awards had been granted under the 2014 Plan and were outstanding.

Administration. Our Board of Directors, or a duly authorized committee thereof, has the authority to administer the 2014 Plan. Our Board of Directors may also delegate to one or more of our officers the authority to (1) designate employees (other than other officers) to be recipients of certain stock awards, and (2) determine the number of shares of common stock to b