Cyclacel Pharmaceuticals Inc
For the period ended Feb 6, 2025. Filed Jan 21, 2025.
View on SEC.govAbout this filing
What shareholders are asked to vote on at a company's meeting. It is where to find what directors and top executives are paid, and who owns the most shares.
Feb 6, 2025 · Filed Jan 21, 2025
Use the contents to explore the available documents and sections.
Contents
PROPOSAL NO. 5 – 2018 PLAN AMENDMENT PROPOSAL
PROPOSAL NO. 5 — 2018 PLAN AMENDMENT PROPOSAL
General
We are requesting that you vote to approve an amendment to the Cyclacel Pharmaceuticals, Inc. 2018 Equity Incentive Plan. On January 5, 2025, the Board adopted a resolution approving, subject to approval by our stockholders, an amendment of the 2018 Equity Incentive Plan to increase the number of shares of Common Stock available for grant under the 2018 Plan by adding 500,000 shares. The 2018 Plan was previously approved by our stockholders at the 2018 annual meeting.
As of January 6, 2025, the equity overhang, represented by all awards outstanding plus those available for future grant under the 2018 Plan, was 2.7%. The equity overhang from all awards outstanding and shares available for issuance would be 6.8%, assuming approval of this 2018 Plan Amendment Proposal, but excluding the impact from the approvals of Proposals 1 and 2. Equity overhang was calculated in each instance above as all shares issuable upon exercise of outstanding options plus shares available for future grant divided by (a) common shares outstanding plus (b) shares in the numerator.
Key Considerations for Requesting Additional Shares
In determining the number of shares to be authorized under the 2018 Plan, as proposed to be amended, the Board considered the following principal factors:
Number of Shares Available for Grant under Existing Plan: As of January 6, 2025, 195,972 shares remained available for issuance under the 2018 Plan. Except for 13,333 shares that remained available under our 2020 Inducement Equity Incentive Plan, there were no shares available to grant under prior incentive plans.
Number of Outstanding Awards Under All Plans: As of January 6, 2025, there were 118,878 outstanding stock options, which had a weighted average exercise price of $44.33 and a weighted average remaining contractual life of 7.21 years, and there were 39,414 RSU awards outstanding.
Our Board, the Compensation Development Committee and management all believe that the proposed amendment of the 2018 Plan is in the best interests of, and will provide long-term advantages to, us and our stockholders and recommends approval by our stockholders. The Board believes that the number of shares of Common Stock currently available for issuance under the 2018 Plan is insufficient in view of our compensation structure and strategy. The Board has concluded that our ability to attract, retain and motivate top quality employees and directors is material to our success and would be enhanced by our continued ability to make grants under the 2018 Plan. The Board has directed that the proposal to approve the amendment of the 2018 Plan be submitted to the stockholders for approval at the Special Meeting.
The following is a brief summary of the 2018 Plan, as amended by this Proposal, and is qualified in all respects by the specific language of the full text of the amended and restated 2018 Plan, a copy of which is attached as Appendix F to the Proxy Statement.
Material Features of the 2018 Plan
Eligibility. The 2018 Plan allows us, under the direction of our Compensation and Organization Development Committee, to make grants of stock options, restricted and unrestricted stock awards and other stock-based awards to employees, consultants and directors who, in the opinion of the Compensation and Organization Development Committee, are in a position to make a significant contribution to our long-term success. The purpose of these awards is to attract and retain key individuals, further align employee and stockholder interests, and to closely link compensation with Company performance. The 2018 Plan provides an essential component of the total compensation package, reflecting the importance that we place on aligning the interests of key individuals with those of our stockholders. All employees, directors and consultants of the Company and its affiliates are eligible to participate in the 2018 Plan. As of January 3, 2025, there were approximately ten (10) individuals eligible to participate.
Shares Available for Issuance. As of January 3, 2025, 195,972 shares of our Common Stock were available for future awards under the 2018 Plan. In addition, if any awards granted under the 2018 Plan lapse or are canceled, the shares subject to those awards will again become available for awards under the 2018 Plan. As of January 3, 2025, 118,225 shares were subject to outstanding awards under the 2018 Plan. Generally, shares of Common Stock reserved for awards under the 2018 Plan that lapse or are canceled will be added back to the share reserve available for future awards. However, shares of Common Stock tendered in payment for an award or shares of Common Stock withheld for taxes will not be available again for grant. The 2018 Plan provides that no non-employee director participant may receive awards for more than an aggregate grant date fair value of $100,000 in any calendar year. If our stockholders approve this proposal, an additional 500,000 shares of our Common Stock would be available for future awards under the 2018 Plan.
Stock Options. Stock options granted under the 2018 Plan may either be incentive stock options, which are intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, or the Code, or non-qualified stock options, which are not intended to meet those requirements. Incentive Stock Options may be granted to employees of the Company and its affiliates who are deemed to be residents of the United States for tax purposes. Non-qualified options may be granted to any employees, directors and consultants of the Company and its affiliates. The exercise price of a stock option may not be less than 100% of the fair market value of our Common Stock on the date of grant. If an incentive stock option is granted to an individual who owns more than 10% of the total combined voting power of all classes of our capital stock (or the capital stock of an affiliate of the Company), the exercise price may not be less than 110% of the fair market value of our Common Stock on the date of grant and the term of the incentive stock option may not be longer than five (5) years. Non-qualified options may not have a term longer than ten (10) years.
Award agreements for stock options include rules for exercise of the stock options after termination of service. Options may not be exercised unless they are vested, and no option may be exercised after the end of the term set forth in the award agreement. Generally, incentive stock options will be exercisable for three (3) months after termination of service for any reason other than death or total and permanent disability, and for 12 months after termination of service on account of death or total and permanent disability which occurs within three (3) months of termination of service. However, options will not be exercisable if the termination of service was due to cause.
Restricted Stock. Restricted stock is common stock that is subject to restrictions, including a prohibition against transfer and a substantial risk of forfeiture, until the end of a “restricted period” during which the grantee must satisfy certain vesting conditions. If the grantee does not satisfy the vesting conditions by the end of the restricted period, the restricted stock is forfeited. During the restricted period, the holder of restricted stock has the rights and privileges of a regular stockholder, except that the restrictions set forth in the applicable award agreement apply. For example, the holder of restricted stock may vote and receive dividends on the restricted shares; but he or she may not sell the shares until the restrictions are lifted.
Restricted Stock Units. Restricted stock units are phantom shares that vest in accordance with terms and conditions established by the Board or the Compensation and Organization Development Committee and when the applicable restrictions lapse, the grantee shall be entitled to receive a payout in cash, shares or a combination thereof based on the number of restricted stock units as specified in the award agreement.
Other Stock-Based Awards. The 2018 Plan also authorizes the grant of other types of stock-based compensation including, but not limited to phantom stock awards, stock appreciation rights and stock unit awards. Our Compensation and Organization Development Committee may award such stock-based awards subject to such conditions and restrictions as it may determine however each stock appreciation right shall have an exercise price which shall not be less than the fair market value of our common stock on the date of grant and shall terminate no more than ten (10) years from the date of grant. These conditions and restrictions may include continued employment with us through a specified restricted period.
Plan Administration. In accordance with the terms of the 2018 Plan, our Board has authorized our Compensation and Organization Development Committee to administer the 2018 Plan. The Compensation and Organization Development Committee may delegate part of its authority and powers under the 2018 Plan to one or more of our directors and/or officers, but only the Compensation and Organization Development Committee can make awards to participants who are directors or executive officers of the Company. In accordance with the provisions of the 2018 Plan, our Compensation and Organization Development Committee determines the terms of awards, including:
which employees, directors and consultants will be granted awards;
the number of shares subject to each award;
the vesting provisions of each award;
the termination or cancellation provisions applicable to awards; and
all other terms and conditions upon which each award may be granted in accordance with the 2018 Plan.
In addition, our Compensation and Organization Development Committee may, in its discretion, amend any term or condition of an outstanding award provided (i) such term or condition as amended is permitted by the 2018 Plan, and (ii) any such amendment shall be made only with the consent of the participant to whom such award was made, if the amendment is adverse to the participant; and provided, further, that, without the prior approval of our stockholders, options will not be repriced, replaced or regranted through cancellation or by lowering the exercise price of a previously granted award and will not be exchanged for another type of award or cash.
Stock Dividends and Stock Splits. If our Common Stock shall be subdivided or combined into a greater or smaller number of shares or if we issue any shares of Common Stock as a stock dividend, the number of shares of our common stock deliverable upon exercise of an option or upon vesting of an award shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the exercise, base or purchase price per share to reflect such subdivision, combination or stock dividend.
Corporate Transactions. Upon a merger or other reorganization event, our Board, may, in its sole discretion, take any one or more of the following actions pursuant to the 2018 Plan, as to some or all outstanding awards:
provide that all outstanding options shall be assumed or substituted by the successor corporation;
upon written notice to a participant provide that the participant’s unexercised options will terminate immediately prior to the consummation of such transaction unless exercised by the participant;
in the event of a merger pursuant to which holders of our common stock will receive a cash payment for each share surrendered in the merger, make or provide for a cash payment to the participants equal to the difference between the merger price times the number of shares of our common stock subject to such outstanding options, and the aggregate exercise price of all such outstanding options, in exchange for the termination of such options;
provide that outstanding awards shall be assumed or substituted by the successor corporation, become realizable or deliverable, or restrictions applicable to an award will lapse, in whole or in part, prior to or upon the merger or reorganization event; and
with respect to stock grants and in lieu of any of the foregoing, the Board or an authorized committee may provide that, upon consummation of the transaction, each outstanding stock grant shall be terminated in exchange for payment of an amount equal to the consideration payable upon consummation of such transaction to a holder of the number of shares of common stock comprising such award (to the extent such stock grant is no longer subject to any forfeiture or repurchase rights then in effect or, at the discretion of the Board or an authorized committee, all forfeiture and repurchase rights being waived upon such transaction).
However, in the event that the successor corporation refuses to assume or substitute an award:
awards consisting of options, stock appreciation rights and rights to purchase restricted stock will become fully vested and immediately exercisable, including awards that would not otherwise have become vested or exercisable; and
all other awards will become fully earned and eligible to receive a payout.
Amendment and Termination. The 2018 Plan may be amended by our stockholders. It may also be amended by our Board, provided that any amendment approved by our Board which is of a scope that requires stockholder approval as required by the rules of The Nasdaq Stock Market, in order to ensure favorable federal income tax treatment for any incentive stock options under Code Section 422, or for any other reason is subject to obtaining such stockholder approval. However, no such action may adversely affect any rights under any outstanding award without the holder’s consent.
Duration of Plan. The 2018 Plan will expire by its terms on March 29, 2028.
Federal Income Tax Considerations
The material federal income tax consequences of the issuance and exercise of stock options and other awards under the 2018 Plan, based on the current provisions of the Code and regulations, are as follows. Changes to these laws could alter the tax consequences described below. This summary assumes that all awards granted under the 2018 Plan are exempt from or comply with, the rules under Section 409A of the Code related to nonqualified deferred compensation.
| | Incentive Stock Option: | | | Incentive stock options are intended to qualify for treatment under Section 422 of the Code. An incentive stock option does not result in taxable income to the optionee or deduction to us at the time it is granted or exercised, provided that no disposition is made by the optionee of the shares acquired pursuant to the option within two (2) years after the date of grant of the option nor within one (1) year after the date of issuance of shares to the optionee (referred to as the “ISO holding period”). However, the difference between the fair market value of the shares on the date of exercise and the option price will be an item of tax preference includible in “alternative minimum taxable income” of the optionee. Upon disposition of the shares after the expiration of the ISO holding period, the optionee will generally recognize long term capital gain or loss based on the difference between the disposition proceeds and the option price paid for the shares. If the shares are disposed of prior to the expiration of the ISO holding period, the optionee generally will recognize taxable compensation, and we will have a corresponding deduction, in the year of the disposition, equal to the excess of the fair market value of the shares on the date of exercise of the option over the option price. Any additional gain realized on the disposition will normally constitute capital gain. If the amount realized upon such a disqualifying disposition is less than fair market value of the shares on the date of exercise, the amount of compensation income will be limited to the excess of the amount realized over the optionee’s adjusted basis in the shares. | |
|---|---|---|---|---|---|
| | Non-Qualified Options: | | | Options otherwise qualifying as incentive stock options, to the extent the aggregate fair market value of shares with respect to which such options are first exercisable by an individual in any calendar year exceeds $100,000, and options designated as non-qualified options will be treated as options that are not incentive stock options. A non-qualified option ordinarily will not result in income to the optionee or deduction to us at the time of grant. The optionee will recognize compensation income at the time of exercise of such non-qualified option in an amount equal to the excess of the then value of the shares over the option price per share. Such compensation income of optionees may be subject to withholding taxes, and a deduction may then be allowable to us in an amount equal to the optionee’s compensation income. An optionee’s initial basis in shares so acquired will be the amount paid on exercise of the non-qualified option plus the amount of any corresponding compensation income. Any gain or loss as a result of a subsequent disposition of the shares so acquired will be capital gain or loss. | |
| | Stock Grants: | | | With respect to stock grants under the 2018 Plan that result in the issuance of shares that are either not restricted as to transferability or not subject to a substantial risk of forfeiture, the grantee must generally recognize ordinary | |
| | | | | income equal to the fair market value of shares received. We generally will be entitled to a deduction in an amount equal to the ordinary income recognized by the grantee. With respect to stock grants involving the issuance of shares that are restricted as to transferability and subject to a substantial risk of forfeiture, the grantee must generally recognize ordinary income equal to the fair market value of the shares received at the first time the shares become transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier. A grantee may elect to be taxed at the time of receipt of shares rather than upon lapse of restrictions on transferability or substantial risk of forfeiture, but if the grantee subsequently forfeits such shares, the grantee would not be entitled to any tax deduction, including as a capital loss, for the value of the shares on which he previously paid tax. If such election is desired, the grantee must file such election with the Internal Revenue Service within 30 days of the receipt of the shares. We generally will be entitled to a deduction in an amount equal to the ordinary income recognized by the grantee. | |
|---|---|---|---|---|---|
| | Stock Units: | | | The grantee recognizes no income until the issuance of the shares. At that time, the grantee must generally recognize ordinary income equal to the fair market value of the shares received. We generally will be entitled to a deduction in an amount equal to the ordinary income recognized by the grantee. | |
Plan Benefits
Since the adoption of the 2018 Plan through January 3, 2025, we have granted the following stock options and restricted stock units under the 2018 Plan to the individuals and groups listed below. In all cases, the securities underlying such equity awards were shares of our common stock.
| Name and Position · · · Number of Shares · | |||||||
|---|---|---|---|---|---|---|---|
| Named Executive Officers: | | | | | | | |
| Spiro Rombotis | | | | | 37,198 | | |
| Paul McBarron | | | | | 22,326 | | |
| All current executive officers as a group | | | | | 59,524 | | |
| All current directors who are not executive officers as a group | | | | | 8,316 | | |
| Each associate of any executive officers, current directors or director nominees | | | | | 0 | | |
| Each other person who received or is to receive 5% of awards | | | | | 0 | | |
| All employees, including all current officers who are not executive officers, as a group | | | | | 89,845 | | |
New Plan Benefits
Other than the annual grant of stock options or restricted stock units, or any initial grant of restricted stock units to our non-employee directors, the amounts of future grants under the 2018 Plan are not determinable as awards under the 2018 Plan and will be granted at the sole discretion of the Compensation and Organization Development Committee, or other delegated persons and we cannot determine at this time either the persons who will receive awards under the 2018 Plan or the amount or types of any such awards.
On January 6, 2025, the closing market price per share of our Common Stock was $0.45, as reported by the Nasdaq Stock Market.
In order to approve this proposal, assuming that a quorum is present at the Special Meeting, the affirmative vote of a majority of the votes cast by the stockholders entitled to vote on the 2018 Plan
Amendment Proposal is required for the proposal to pass. Abstentions and broker non-votes, if any, will have no effect on the 2018 Plan Amendment Proposal.
As of the Record Date, there were 11,256,133 shares of Common Stock and 1,000,000 shares of our Series C Preferred Stock outstanding and entitled to vote. Holders of our Common Stock are entitled to one (1) vote for each share of Common Stock outstanding as of the Record Date. Holders of our Series C Preferred Stock will vote together with the holders of our Common Stock on the 2018 Plan Amendment Proposal on an as-converted to Common Stock basis, such that the number of votes per share of Series C Preferred Stock is equal to 2.65, assuming a conversion price of $1.00 per share, which was the Nasdaq Minimum Price (as defined in Nasdaq Listing Rule 5635(d)) applicable immediately before the execution and delivery of the Purchase Agreement. As of the Record Date, holders of our Series C Preferred Stock are entitled to 2.65 votes for each share of Series C Preferred Stock outstanding.
The Board unanimously recommends that you vote “FOR” Proposal No. 5 to approve the 2018 Plan Amendment Proposal.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.