Celsion Corporation
Celsion CORP (Form: DEF 14A, Received: 04/30/2015 17:10:43)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of

the Securities Exchange Act of 1934 (Amendment No.          )

   

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Definitive Proxy Statement

  

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Soliciting Material under §240.14a-12

 

  

Celsion Corporation

  

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CELSION CORPORATION

 

997 LENOX DRIVE, SUITE 100

LAWRENCEVILLE, NJ 08648

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD FRIDAY, JUNE 19, 2015

 

To Our Stockholders:

 

Notice is hereby given that the annual meeting (the "Annual Meeting") of the stockholders of Celsion Corporation, a Delaware corporation (the "Company"), will be held at 10:00 a.m., local time, on Friday, June 19, 2015 at the Harvard Club of New York, 35 West 44 th Street, New York, NY 10036 , for the following purposes, all as more fully described in the accompanying Proxy Statement:

 

  

1)

To elect two Class II Directors, each to serve until the Annual Meeting of Stockholders in 2018 and until their respective successors are duly elected and qualified;

 

  

2)

To ratify the selection of Stegman & Company as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2015;

 

  

3)

To consider and act upon an Amendment to the Celsion Corporation 2007 Stock Incentive Plan, as amended;

 

  

4)

To approve the issuance of shares of common stock of the Company in relation to the earnout payments for up to $30.4 million that may become payable in the future in connection with the acquisition of assets of EGWU, Inc. (formerly known as Egen, Inc.); and

 

  

5)

To consider and act upon any other matters that may properly come before the Annual Meeting and any adjournment or postponement thereof.

 

The close of business on April 24, 2015 has been fixed as the record date for the determination of stockholders of the Company entitled to notice of, and to vote at, the Annual Meeting.  Only stockholders of record at the close of business on April 24, 2015 are entitled to notice of, and to vote at, the Annual Meeting and any adjournment or postponement thereof.

 

All stockholders are cordially invited to attend the Annual Meeting. However, whether or not you expect to attend in person, please complete, sign, date and return the enclosed Proxy Card as promptly as possible in the envelope provided for that purpose. Returning your Proxy Card will ensure your representation and help to ensure the presence of a quorum at the Annual Meeting. Your proxy is revocable, as set forth in the accompanying Proxy Statement. Therefore, you may attend the Annual Meeting and vote your shares in person even if you send in your Proxy Card.

   

  

  

By Order of the Board of Directors

  

  

  

   

/s/ Jeffrey W. Church               

  

  

Jeffrey W. Church

Corporate Secretary

 

April 30, 2015

Lawrenceville, NJ 

     

 

 
 

 

      

YOUR VOTE IS IMPORTANT

 

THIS PROXY STATEMENT IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY THE COMPANY, ON BEHALF OF THE BOARD OF DIRECTORS, FOR THE 2015 ANNUAL MEETING OF STOCKHOLDERS. THE PROXY STATEMENT AND THE RELATED PROXY FORM ARE BEING DISTRIBUTED ON OR ABOUT MAY 6, 2015. YOU CAN VOTE YOUR SHARES USING ONE OF THE FOLLOWING METHODS:

 

 

 

  

COMPLETE AND RETURN A WRITTEN PROXY CARD

       

  

  

ATTEND THE COMPANY’S 201 5 ANNUAL MEETING OF STOCKHOLDERS AND VOTE IN PERSON

  

  

  

  

  

  

VOTE VIA THE INTERNET AT WWW.PROXYVOTE.COM

  

  

  

  

  

  

VOTE BY PHONE BY CALLING THE NUMBER PRINTED ON THE ACCOMPANYING VOTING DOCUMENT

 

ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD AS PROMPTLY AS POSSIBLE IN THE POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE, OR SUBMIT YOUR VOTE VIA THE INTERNET AT WWW.PROXYVOTE.COM OR VOTE BY PHONE BY CALLING THE NUMBER PRINTED ON THE ACCOMPANYING VOTING DOCUMENT. ANY STOCKHOLDER ATTENDING THE MEETING MAY VOTE IN PERSON EVEN IF HE OR SHE HAS RETURNED A PROXY CARD.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 19, 2015. THE PROXY STATEMENT AND OUR 2014 ANNUAL REPORT TO SECURITY HOLDERS ON SECURITIES AND EXCHANGE COMMISSION FORM 10-K ARE AVAILABLE AT WWW.PROXYVOTE.COM.

 

WHETHER OR NOT YOU INTEND TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED PRE-ADDRESSED AND POSTAGE-PAID ENVELOPE OR SUBMIT YOUR VOTE VIA THE INTERNET AT WWW.PROXYVOTE.COM OR BY CALLING THE NUMBER PRINTED ON THE ACCOMPANYING VOTING DOCUMENT.  

     

 

 
 

 

       

CELSION CORPORATION

PROXY STATEMENT

TABLE OF CONTENTS

 

 

  

Page

Information Concerning Solicitation and Voting

  

1

Information About the Annual Meeting

  

1

  

Date, Time and Place of the Annual Meeting

  

1

  

Who May Attend the Annual Meeting

  

1

  

Who May Vote

  

1

  

How to Vote

  

2

  

Voting by Proxy

  

2

  

Quorum Requirement

  

3

  

Vote Requirements

  

3

  

Other Matters

  

3

  

Information about the Proxy Statement and the Solicitation of Proxies

  

3

  

Annual Report

  

4

  

Householding of Annual Meeting Materials

  

4

Beneficial Ownership of Common Stock

  

5

Section 16(a) Beneficial Ownership Reporting Compliance

  

7

Code of Ethics

  

7

Certain Relationships and Related Party Transactions

  

7

Proposal No. 1: Election of Directors

  

8

  

General

  

8

  

Directors, Executive Officers and Corporate Governance

  

9

  

Legal Proceedings

  

10

  

Board Leadership Structure and Role in Risk Oversight

  

11

  

Committees of the Board of Directors

  

11

  

Meetings of the Board and Its Committees

  

12

  

Director Nominations

  

13

  

Stockholder Communications

  

15

  

Board Attendance

  

15

Director Compensation

  

16

  

2014 Director Compensation Table

  

16

  

Compensation Committee Interlocks and Insider Participation

  

17

  

Stock Ownership Guidelines for Non-Employee and Executive Directors

  

17

  

Report of the Audit Committee

  

18

Executive Compensation

  

19

  

Compensation Discussion and Analysis

  

19

  

Compensation Committee Report on Executive Compensation

  

24

  

2014 Executive Summary Compensation Table

  

25

  

Narrative Disclosure to Summary Compensation Table

  

26

  

2014 Grants of Plan-Based Awards

  

28

  

2014 Outstanding Equity Awards at Year-End

  

29

  

Option Exercises and Stock Vested

  

29

  

Potential Payments Upon Termination or Change in Control

  

30

Proposal No. 2: Ratification of Selection of Independent Registered Public Accounting Firm

  

31

Proposal No. 3: Amendment of the Celsion Corporation 2007 Stock Option Plan

  

33

Proposal No. 4: Approval of the Issuance of Shares of Common Stock in Relation to Earnout Payments of up to $30.4 Million that May Become Payable in Connection with the Acquisition of Assets of EGEN

  43

Stockholder Nominations and Proposals for the 2016 Annual Meeting of Stockholders

  

48

Where You Can Find Additional Information

  48

  

 

 
 i

 

   

CELSION CORPORATION

PROXY STATEMENT

 

INFORMATION CONCERNING SOLICITATION AND VOTING

 

This Proxy Statement is being furnished in connection with the solicitation of proxies by the Board of Directors of Celsion Corporation, a Delaware corporation (sometimes referred to in this Proxy Statement as the "Company", "Celsion", "we" or "us"), for exercise in voting at the Company’s 2015 Annual Meeting of Stockholders to be held on Friday, June 19, 2015 (the "Annual Meeting") for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. We are first sending this Proxy Statement, accompanying Proxy Card, Notice of Annual Meeting of Stockholders and Annual Report on Securities and Exchange Commission ("SEC") Form 10-K for the fiscal year ended December 31, 2014 ("2014 Annual Report on Form 10-K") to our stockholders on or about May 6, 2015.

 

Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting To Be Held on Friday, June 19, 2015. The Proxy Statement and our 2014 Annual Report on Form 10-K are available at www.proxyvote.com or you may request a printed or electronic set of the proxy materials at no charge. Instructions on how to access the proxy materials over the Internet and how to request a printed copy may be found on the Notice.

 

In addition, any stockholder may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. Choosing to receive future proxy materials by email will save us the cost of printing and mailing documents to stockholders and will reduce the impact on our environment. A stockholder who chooses to receive future proxy materials by email will receive an email prior to next year’s Annual Meeting with instructions containing a link to those materials and a link to the proxy voting website. A stockholder’s election to receive proxy materials by email will remain in effect until the stockholder terminates it.

 

Celsion is a fully-integrated oncology drug development company focused on developing a portfolio of innovative cancer treatments, including directed chemotherapies, immunotherapies and RNA- or DNA-based therapies. The Company's lead program is ThermoDox®, a proprietary heat-activated liposomal encapsulation of doxorubicin, currently in Phase III development for the treatment of primary liver cancer and in Phase II development for the treatment of recurrent chest wall breast cancer. The Company’s pipeline also includes GEN-1, a DNA-based immunotherapy for the localized treatment of ovarian and brain cancers.  Celsion has three platform technologies for the development of novel nucleic acid-based immunotherapies and other anti-cancer DNA or RNA therapies, including TheraPlas™, TheraSilence™ and RAST™. 

 

Our principal executive offices are located at 997 Lenox Drive, Suite 100, Lawrenceville, NJ 08648, and our telephone number is (609) 896-9100.

 

INFORMATION ABOUT THE ANNUAL MEETING

 

Date, Time and Place of the Annual Meeting

 

Our 2015 Annual Meeting will be held at 10:00 a.m., local time, on Friday, June 19, 2015 at the Harvard Club of New York, 35 West 44 th Street, New York, NY 10036.

 

Who May Attend the Annual Meeting

 

Only stockholders who own our common stock, par value $0.01 per share (our "Common Stock"), as of the close of business on April 24, 2015, the record date for the Annual Meeting (the "Record Date"), will be entitled to attend the Annual Meeting. At the discretion of management, we may permit certain other individuals to attend the Annual Meeting, including members of the media and our employees.

 

Who May Vote

 

Each share of our Common Stock outstanding on the Record Date entitles the holder thereof to one vote on each matter submitted to the stockholders at the Annual Meeting; provided, however, that pursuant to NASDAQ Marketplace Rules, the 2,712,188 shares of Common Stock issued to EGWU, Inc. (formerly known as Egen, Inc.), an Alabama corporation (“EGEN”), at the closing of the acquisition will not be entitled to vote on Proposal No. 4 and will not be counted in determining votes cast for purposes of Proposal No. 4. Only stockholders who own Common Stock as of the close of business on the Record Date are entitled to notice of, and to vote at, the Annual Meeting.  As of the Record Date, there were 20,005,186 shares of our Common Stock issued and outstanding.

 

 

 
1

 

      

How to Vote

 

If you were a holder of our Common Stock as of the Record Date, you are entitled to vote at the Annual Meeting, and we encourage you to attend and vote in person .  HOWEVER, WHETHER OR NOT YOU INTEND TO ATTEND THE ANNUAL MEETING, THE BOARD OF DIRECTORS REQUESTS THAT YOU COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD IN ORDER TO ENSURE THE PRESENCE OF A QUORUM.

 

A pre-addressed and postage-paid return envelope is enclosed for your convenience. Alternatively, you may cast your vote via the internet at www.proxyvote.com or by phone by calling the number printed on the accompanying voting document.

 

If your shares are held in the name of a bank, broker, or other holder of record, you will receive instructions from the holder of record that you must follow in order for your shares to be voted. If your shares are not registered in your own name and you plan to vote your shares in person at the Annual Meeting, you should contact your broker or agent to obtain a proxy and bring it to the Annual Meeting in order to vote.

 

Voting by Proxy

 

If you vote by proxy, the individuals named on the proxy, or their substitutes, will vote your shares in the manner you indicate.

 

If a beneficial owner who holds shares in street name does not provide specific voting instructions to their brokerage firm, bank, broker dealer or other nominee, under the rules of certain securities exchanges, including NASDAQ Marketplace Rules, the brokerage firm, bank, broker dealer or other nominee holding those shares may generally vote as the nominee determines in its discretion on behalf of the beneficial owner on routine matters but cannot vote on non-routine matters, the latter of which results in “broker non-votes.” Proposal No. 2 involves matters we believe to be routine. Accordingly, no broker non-votes are expected to exist in connection with Proposal No. 2. Broker non-votes are expected in connection with Proposals No. 1, 3 and 4.

 

Thus, if you date, sign, and return the proxy card without indicating your instructions, your shares will be voted as follows:

 

  

Proposal No. 1. FOR ” (if authority to do so is not withheld) the election of the two nominees for the Class II Directors, each to serve until the earlier of the Company’s Annual Meeting of Stockholders in 2018 and his successor is duly elected and qualified;

 

  

Proposal No. 2. FOR ” the ratification of the appointment of Stegman & Company as our independent registered public accounting firm for the year ending December 31, 2015;

 

  

Proposal No. 3. FOR ” the approval of an Amendment to the Celsion Corporation 2007 Stock Incentive Plan;

 

  

Proposal No. 4 . FOR ” the approval of the issuance of shares of Common Stock in relation to the earnout payments of up to $30.4 million that may become payable in the future in connection with the acquisition of assets of EGEN; and

 

  

Other Business. In the discretion of your proxy holder (one of the individuals named on your proxy card), on any other matter properly presented at the Annual Meeting or any adjournment or postponement thereof.

 

You may revoke or change your proxy at any time before it is exercised by delivering to us a signed proxy with a date later than your previously delivered proxy, by voting in person at the Annual Meeting, or by sending a written revocation of your proxy addressed to our Corporate Secretary at our principal executive office. Your latest dated proxy card is the one that will be counted.

   

 

 
2

 

      

Quorum Requirement

 

A quorum is necessary to hold a valid meeting. The presence, in person or by proxy, of holders of our Common Stock entitled to cast a majority of all the votes entitled to be cast at the Annual Meeting constitutes a quorum for the transaction of business. Abstentions and broker non-votes are counted as present for purposes of establishing a quorum. A "broker non-vote" occurs when a broker, bank or other holder of record holding shares for a beneficial owner properly executes and returns a proxy without voting on a particular proposal because such holder of record does not have discretionary voting power for that particular item and has not received instructions from the beneficial owner.

 

Vote Requirements

 

Proposal No. 1. The election of the Class II Directors at the Annual Meeting will be by a plurality of the votes cast. This means that the two director nominees receiving the greatest number of votes cast, in person or by proxy, by the holders of our Common Stock in the election of the Class II Directors, will be elected. Stockholders may not cumulate their votes in electing directors. Stockholders entitled to vote at the Annual Meeting may either vote "FOR" the nominees for election as a director or may "WITHHOLD" authority for the nominees. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the nominees named below in Proposal No. 1. If a stockholder withholds authority to vote with respect to the nominees for director, the shares held by that stockholder will be counted for purposes of establishing a quorum, but will have no effect on the election of the nominees. Broker non-votes will have no effect on the election of the nominee.

 

Proposal No. 2. Stockholders may vote "FOR" or "AGAINST" or may "ABSTAIN" on Proposal No. 2 regarding the ratification of the selection of Stegman & Company as the Company's independent registered public accounting firm for the year ending December 31, 2015. The affirmative vote of the holders of a majority of the shares of our Common Stock present in person or represented by proxy and entitled to vote on the proposal will be required to ratify the selection of Stegman & Company.  Abstentions will have the same effect as a vote against Proposal No. 2.

 

Proposal No. 3. Stockholders may vote "FOR" or "AGAINST" or may "ABSTAIN" on Proposal No. 3, to approve an Amendment to the Celsion Corporation 2007 Stock Incentive Plan. 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 proposal will be required to approve the amendment. Abstentions will have the same effect as a vote against Proposal No. 3. Broker non-votes will have no effect on Proposal No. 3.

 

Proposal No. 4. Stockholders may vote "FOR" or "AGAINST" or may "ABSTAIN" on Proposal No. 4 to approve the issuance of shares of Common Stock in relation to the earnout payments of up to $30.4 million that may become payable in the future in connection with the acquisition of assets of EGEN. 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 proposal will be required to approve Proposal No. 4; provided, however, that pursuant to NASDAQ Marketplace Rules, the 2,712,188 shares of Common Stock issued to EGEN at the closing of the acquisition will not be entitled to vote on Proposal No. 4 and will not be counted in determining votes cast for purposes of Proposal No. 4. Abstentions will have the same effect as a vote against Proposal No. 4. Broker non-votes will have no effect on Proposal No. 4.

 

Other Matters

 

Our Board of Directors knows of no other matters that may be presented for stockholder action at the Annual Meeting. It is not anticipated that other matters will be brought before the Annual Meeting. If other matters do properly come before the Annual Meeting, or any adjournments or postponements thereof, however, persons named as proxies will vote upon them in their discretion.

 

Information about the Proxy Statement and the Solicitation of Proxies

 

The enclosed proxy is solicited by our Board of Directors and we will bear the costs of preparing, assembling, printing and mailing this Proxy Statement, accompanying Proxy Card, Notice of Annual Meeting of Stockholders and the Company's 2014 Annual Report on Form 10-K, as well as any additional materials that we may furnish to stockholders in connection with the Annual Meeting. Copies of our solicitation materials will be furnished to brokerage houses, fiduciaries and custodians to forward to beneficial owners of stock held in the names of such nominees. We will, upon request, reimburse those parties for their reasonable expenses in forwarding proxy materials to the beneficial owners.

 

 
3

 

   

The solicitation of proxies may be by mail and direct communication with certain stockholders or their representatives by our officers, directors and employees, who will receive no additional compensation therefor.

 

We have also engaged Morrow & Co., LLC, 470 West Ave. Stamford Connecticut 06902, to assist with the solicitation of proxies for a fee of $7,500 plus reasonable out-of-pocket expenses.

 

Annual Report

 

Our 2014 Annual Report on Form 10-K is being mailed to stockholders together with this Proxy Statement and contains financial and other information about Celsion, including audited financial statements for our fiscal year ended December 31, 2014. A copy of our 2014 Annual Report on Form 10-K, as filed with the SEC, but excluding exhibits, is available on our website and additional copies may be obtained without charge, upon written request directed to the Corporate Secretary, Celsion Corporation, 997 Lenox Drive, Suite 100, Lawrenceville, New Jersey 08648.

 

Householding of Annual Meeting Materials

 

Some banks, brokers and other nominee record holders may be participating in the practice of "householding" proxy statements and annual reports. This means that only one copy of our Proxy Statement or 2014 Annual Report on Form 10-K may have been sent to multiple stockholders in your household.  The Company will promptly deliver a separate copy of either document to you if you write or call the Company at the following address or telephone number:

 

Celsion Corporation

997 Lenox Drive, Suite 100

Lawrenceville, New Jersey 08648

Attention: Corporate Secretary

(609) 896-9100

 

If you would like to receive separate copies of the Company's 2014 Annual Report on Form 10-K and the Proxy Statement in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact the Company at the address and telephone number set forth above.

 

PLEASE COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING WHITE PROXY CARD IN THE ENCLOSED PRE-ADDRESSED AND POSTAGE-PAID ENVELOPE AS PROMPTLY AS POSSIBLE OR SUBMIT YOUR VOTE VIA THE INTERNET AT   WWW.PROXYVOTE.COM   OR BY CALLING THE NUMBER PRINTED ON THE ACCOMPANYING VOTING DOCUMENT.   

 

 

 
4

 

       

BENEFICIAL OWNERSHIP OF COMMON STOCK

 

The following table sets forth certain information known to the Company regarding the beneficial ownership of the Company's Common Stock as of April 24, 2015 by:

 

 

each person or group known by us to own beneficially more than five percent of the outstanding Common Stock;

 

 

each of our directors and the director nominees, as well as each executive officer named in the Summary Compensation Table appearing under the heading "Executive Compensation"; and

 

 

our directors and executive officers as a group.

 

We determine beneficial ownership in accordance with the rules of the SEC. Under SEC rules, beneficial ownership for purposes of this table takes into account shares as to which the individual has voting or investment power as well as shares that may be acquired within 60 days.  Shares of Common Stock subject to options that are currently exercisable or that become exercisable within 60 days of April 24, 2015 are treated as outstanding and beneficially owned by the holder of such options. However, these shares are not treated as outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated or as to the interests of spouses, the persons included in the table have sole voting and investment power with respect to all shares beneficially owned thereby.

 

NUMBER OF SHARES OF COMMON STOCK BENEFICIALLY OWNED

 

NAME OF BENEFICIAL OWNER*

  

NUMBER OF

SHARES OF

COMMON

STOCK

BENEFICIALLY

OWNED

(1)

  

PERCENT OF 

SHARES OF 

COMMON 

STOCK

OUTSTANDING

(2)

  

EGWU, Inc. f/k/a Egen, Inc. (3)

   

2,512,423

    12.6

%

Sabby Healthcare Master Fund, Ltd. (4)

  

  

1,995,657

  

  

 9.9

%

Augustine Chow (5)

  

  

95,903

  

  

**

  

Robert W. Hooper (6)

  

  

94,753

  

  

**

  

Alberto Martinez (7)

  

  

113,412

  

  

**

  

Frederick J. Fritz (8)

  

  

89,884

  

  

**

  

Michael H. Tardugno (9)

  

  

507,202

  

  

2.5

%

Nicholas Borys (10)

  

  

170,698

  

  

**

 

Jeffrey Church (11)

  

  

171,733

  

  

**

  

Khursheed Anwer (12)

   

22,500

   

**

  

Estate of Max E. Link (13)

  

  

151,761

  

  

**

  

Directors and Executive Officers as a group (ten persons)(14)

  

  

1,471,595

  

  

7.4


*      

 

The address of each of the individuals named is c/o Celsion Corporation, 997 Lenox Drive, Suite 100, Lawrenceville, NJ 08648.

 

 

 

**     

 

Less than one percent.

 

 

 

(1)

 

 

Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them.

  

 

 
5

 

     

(2)

 

Based on 20,005,186 shares of Common Stock outstanding as of April 24, 2015.

  

(3)

 

Based solely on the Schedule 13G filed with the SEC on June 30, 2014 and the Form 4 filed with the SEC on February 24, 2015 by EGWU, Inc. (formerly known as Egen, Inc.), an Alabama corporation (“EGEN”). EGEN has the sole voting power and sole dispositive power with respect to 2,512,423 shares of Common Stock. The address of EGEN is 601 Genome Way, Suite 3400, Huntsville, Alabama 35806.

     

(4)

 

Based on the Schedule 13G/A (Amendment No. 2) filed with the SEC on January 8, 2015 by Sabby Healthcare Master Fund, Ltd., Sabby Management, LLC and Hal Mintz and including warrants to purchase an aggregate of 1,538,609 shares of Common Stock, which contain certain blocker provisions that restrict the holders thereof and their affiliates from exercising such warrants to the extent such exercise would result in their holding greater than 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise. Sabby Healthcare Master Fund, Ltd. beneficially owns 1,995,657 shares of Common Stock, and (ii) Sabby Management, LLC and Hal Mintz each beneficially own 1,995,657 shares of the Common Stock. Sabby Management, LLC and Hal Mintz do not directly own any shares of Common Stock, but each indirectly owns 1,995,657 shares of Common Stock. Sabby Management, LLC, a Delaware limited liability company, indirectly owns 1,995,657 shares of Common Stock because it serves as the investment manager of Sabby Healthcare Master Fund, Ltd. Mr. Mintz indirectly owns 1,995,657 shares of Common Stock in his capacity as manager of Sabby Management, LLC. Each of Sabby Management, LLC and Hal Mintz disclaims beneficial ownership over the securities reported except to the extent of its or his pecuniary interest therein. The address of principal business office of Sabby Healthcare Master Fund, Ltd. is c/o Ogier Fiduciary Services (Cayman) Limited, 89 Nexus Way, Camana Bay, Grand Cayman KY1-9007, Cayman Islands. The address of principal business office of each of Sabby Management, LLC and Hal Mintz is 10 Mountainview Road, Suite 205, Upper Saddle River, New Jersey 07458.   

  

 

 

(5)

 

Includes 88,227 shares of Common Stock underlying options and warrants currently exercisable or exercisable within 60 days of April 24, 2015.

  

  

  

(6)

 

Includes 70,754 shares of Common Stock underlying options and warrants currently exercisable or exercisable within 60 days of April 24, 2015.

  

  

  

(7)

 

Includes 58,331 shares of Common Stock underlying options currently exercisable or exercisable within 60 days of April 24, 2015.

  

  

  

(8)

 

Includes 55,553 shares of Common Stock underlying options and warrants currently exercisable or exercisable within 60 days of April 24, 2015.

  

  

  

(9)

 

Includes 432,681 shares of Common Stock underlying options and warrants currently exercisable or exercisable within 60 days of April 24, 2015.

  

  

  

(10)

 

Includes 162,772 shares of Common Stock underlying options and warrants currently exercisable or exercisable within 60 days of April 24, 2015.

  

  

  

(11)

 

Includes 151,505 shares of Common Stock underlying options currently exercisable or exercisable within 60 days of April 24, 2015.

  

 

 
6

 

 

(12)

 

Includes 17,500 shares of Common Stock underlying options currently exercisable or exercisable within 60 days of April 24, 2015.

  

  

  

(13)

 

Includes 84,525 shares of Common Stock and 67,236 shares of Common Stock underlying options currently exercisable which are included in the estate of Max E. Link, Ph.D., former Chairman of the Board of Directors of the Company, after his passing in October 2014. These options for 67,236 shares of Common Stock, if not exercised, will expire on October 6, 2015.

     

(14)

 

Includes 1,155,156 shares of Common Stock underlying options and warrants currently exercisable or exercisable within 60 days of April 24, 2015.

  

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires the Company's executive officers and directors and persons who beneficially own more than 10% of a registered class of our equity securities to file reports with the SEC regarding ownership and changes in ownership of such equity securities.  Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish to us copies of all reports that they file pursuant to Section 16(a). Based solely on our review of the copies of such forms furnished to us with respect to our fiscal year ended December 31, 2014, and on our discussions with directors and executive officers, we believe that, during the fiscal year ended December 31, 2014, all applicable Section 16(a) filing requirements were timely met.

 

CODE OF ETHICS

 

The Company has adopted a Code of Ethics and Business Conduct (the “Code of Ethics”) applicable to its directors, officers, including the Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and other officers performing similar functions, and employees. This Code of Ethics constitutes a code of ethics applicable to senior financial officers within the meaning of the Sarbanes-Oxley Act of 2002 and SEC rules. A copy of the Code of Ethics is available on the Company's website at http://www.celsion.com and any stockholder may obtain a copy by making a written request to the Company's Corporate Secretary, 997 Lenox Drive, Suite 100, Lawrenceville, NJ 08648.  In the event of any amendments to or waivers of the terms of the Code of Ethics, such matters will be posted promptly to the Company's website in lieu of disclosure on Form 8-K in accordance with Item 5.05(c) of Form 8-K.

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

 

The Code of Ethics requires all of the Company’s directors, officers and employees to give their complete loyalty to the best interests of the Company and to avoid any action that may involve, or that even may appear to involve, a conflict of interest with the Company. The Code of Ethics also requires any of the Company’s directors, officers or employees who become aware of a conflict or potential conflict to bring it to the attention of a supervisor, manager or other appropriate personnel or consult the compliance procedures provided in the Code of Ethics. The Board of Directors reviews and approves or ratifies all relationships and transactions between us and (i) any of our directors or executive officers, (ii) any nominee for election as a director, (iii) any security holder who is known to us to own beneficially or of record more than five percent of our common stock or (iv) any member of the immediate family of any of the foregoing.

 

On January 21, 2014, the Company sold and issued, in registered direct offerings, to Sabby Healthcare Volatility Master Fund, Ltd. and Sabby Volatility Warrant Master Fund, Ltd. (collectively, the “Sabby Volatility Funds”), (i) a total of 1,681,682 shares of Common Stock and (ii) warrants to purchase a total of 840,842 shares of Common Stock at an exercise price of $4.10 per share, for total consideration of $7,000,001.33. Certain affiliates of the Sabby Volatility Funds beneficially own more than five percent of the outstanding shares of Common Stock.

 

 

 
7

 

     

PROPOSAL NO. 1:

 

ELECTION OF DIRECTORS

GENERAL

 

The Company's Certificate of Incorporation provides that the number of directors that constitutes the Board of Directors is to be fixed by, or in the manner provided in, our Bylaws, as amended (the "Bylaws"). The Certificate of Incorporation also provides that the Board of Directors is to be divided into three classes, designated as Class I, Class II and Class III, and it is the Company's practice to have such classes as even in size as possible. The Company's Bylaws provide that the Board of Directors is to consist of between three and nine directors, with the exact number to be fixed by action of the Board of Directors. The current number of directors has been fixed by the Board of Directors at seven. Currently, the Company’s Board of Directors consists of five directors as two Board seats remain vacant.

 

The Board of Directors have nominated Mr. Robert W. Hooper and Dr. Alberto R. Martinez to stand for re-election to the Board of Directors as Class II Directors, with terms expiring at the Annual Meeting of Stockholders to be held in 2018 and with the election and qualification of their respective successors. The proxies named in the Proxy Card provided with this Proxy Statement intend to vote "FOR" the election of Mr. Robert W. Hooper and Dr. Alberto R. Martinez unless otherwise instructed. If you do not wish your shares to be voted for Mr. Robert W. Hooper and Dr. Alberto R. Martinez, you must so indicate by marking the "WITHHOLD" authority box on the Proxy Card next to Mr. Robert W. Hooper and Dr. Alberto R. Martinez in which event your shares will not be voted for Mr. Robert W. Hooper and Dr. Alberto R. Martinez. In the event that Mr. Robert W. Hooper and Dr. Alberto R. Martinez become unavailable for election as a result of an unexpected occurrence, the designated proxies will vote in their discretion for a substitute nominee, or the Board may reduce the number of directors serving on the Board.

 

Class II Director Nominees (If elected, term would expire in 2018)

 

Mr. Robert W. Hooper.   Mr. Hooper has served as a member of the Board of Directors since July 2010.  He is currently President of Crows Nest Ventures, Inc. a privately held company, which provides advisory and consulting services to the healthcare industry.  From 1997 to 2001, Mr. Hooper served as President North America for IMS Health Incorporated, a healthcare information and market research company listed on The New York Stock Exchange.  From 1993 to 1997, he served as President of Abbott Laboratories Canada.  From 1989 to 1993, he served as Managing Director, Australia/Asia for Abbott Laboratories.  Prior to that, he held increasingly senior positions at E.R. Squibb and Sterling Winthrop Labs.  Mr. Hooper holds a B.A degree in Biology from Wilkes University.

 

Dr. Alberto R. Martinez.   Dr. Martinez has served as a member of the Board of Directors since December 2010.  He is currently a consultant to the healthcare industry.  From 2007 to 2008, Dr. Martinez served as the President and Chief Operating Officer of Talecris Biotherapeutics, Inc., a publicly traded life science company.   Prior to that, Dr. Martinez served as Talecris’ President and Chief Executive Officer from October 2005 until June 2007. Prior to that, he held increasingly senior positions as Executive Vice President of Worldwide Commercial Operations at ZLB Behring (subsequently renamed CSL Behring). Prior to ZLB Behring, Dr. Martinez served in various international positions at Sandoz Pharmaceuticals (currently the generic pharmaceuticals division of Novartis) in Brazil, Switzerland, Spain and the U.S. for eighteen years. Dr. Martinez completed his undergraduate and graduate studies at the University of Sao Paulo and received his medical degree from the University of Sao Paulo in 1973. After completing his residency in Pediatrics in 1975, he studied Business and Marketing Administration at the Fundacao Getulio Vargas in Sao Paulo, Brazil.

 

The Board of Directors concluded that each of Mr. Robert W. Hooper and Dr. Alberto R. Martinez has the requisite experience, qualifications, attributes and skill necessary to serve as a member of the Board of Directors based on, among other things, his:

 

  

Leadership attributes and management experience;

  

Management experience in the pharmaceutical industry; and

  

Professional and educational background.

   

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “ FOR” THE ELECTION OF ALL NOMINEES NAMED ABOVE.

  

 

 
8

 

     

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Set forth below is certain information regarding the Company's current directors and the nominees (who are currently serving as directors), as well as the Company's non-director executive officers.

 

NAME

  

AGE

  

POSITION(S)

CLASS

  

  

  

  

  

  

Michael H. Tardugno

  

64

  

Chairman, President and Chief Executive Officer

III

Robert W. Hooper

  

68

  

Director

II

Alberto R. Martinez, M.D.

  

65

  

Director

II

Augustine Chow, Ph.D.

  

62

  

Director

I

Frederick J. Fritz

  

64

  

Director

I

Khursheed Anwer, Ph.D. MBA

 

55

 

Executive Vice President and Chief Scientific Officer

 

Nicholas Borys, M.D.

  

55

  

Senior Vice President and Chief Medical Officer

  

Jeffrey W. Church

  

58

  

Senior Vice President and Chief Financial Officer

  

 

Continuing Class I Director Nominees (Term Expires in 2017)

 

Dr. Augustine Chow.   Dr. Chow has served as a director of the Company since March 2007. Dr. Chow has served as the Chief Executive Officer of Harmony Asset Limited since 1996, an investment company listed on the Hong Kong Stock Exchange and specializing in China and Hong Kong.  Dr. Chow has served as Executive Director of Kaisun Energy Group Ltd. since 2008 and currently serves as a director of Medifocus Inc.  From 1990 to 1998, Dr. Chow was the Chief Executive Officer of Allied Group of Companies based in Hong Kong.  Prior to this, Dr. Chow held a senior position with Brunswick Corporation and Outboard Marine Corporation and was responsible for all business activities in South East Asia and China.  Dr. Chow’s qualifications include a number of Bachelors, Masters and Doctoral degrees.  Among them include a MSc from London Business School, a Ph.D. from the University of South Australia, and an Engineering Doctorate and Ph.D. on Biology from City University of Hong Kong.

 

Mr. Frederick J. Fritz.   Mr. Fritz has served as a director of the Company since July 2011.  Mr. Fritz is currently the CEO and Founder of NeuroDx, a development stage diagnostic device company focused on the neurosurgery market. Mr. Fritz joined NeuroDx from Valeo Medical, a biotech company he founded in 2003 to develop the world's first non-invasive diagnostic test for endometriosis. Prior to that, Mr. Fritz was President and CEO of Songbird Hearing, a medical device company spun out of Sarnoff Corporation. Mr. Fritz began his career in marketing management and new product development. He joined Schering Plough's Wesley Jessen in 1985 as VP Marketing and Sales in 1986. He was promoted to general manager of Schering's Over the Counter pharmaceutical business in 1988 and of the podiatric products business in 1990. He was President of Coleman North America from 1995-1997.  Mr. Fritz holds a Bachelor’s degree in engineering (summa cum laude) from University of Illinois and an MBA degree from Harvard University.

 

Continuing Class III Directors (Term Expires in 2016)

 

Mr. Michael H. Tardugno.     Mr. Tardugno was appointed President and Chief Executive Officer of the Company on January 3, 2007 and was elected to the Board of Directors on January 22, 2007. In October of 2014, Mr. Tardugno was appointed by the Board of Directors as the Chairman as successor to Max E. Link, Ph.D., who passed away in October 2014. Prior to joining the Company and for the period from February 2005 to December 2006, Mr. Tardugno served as Senior Vice President and General Manager of Mylan Technologies, Inc., a subsidiary of Mylan Inc. From 1998 to 2005, Mr. Tardugno was Executive Vice President of Songbird Hearing, Inc., a medical device company spun out of Sarnoff Corporation.  From 1996 to 1998, he was Senior Vice President of Technical Operations worldwide for a division of Bristol-Myers Squibb, and from 1977 to 1995, he held increasingly senior executive positions including Senior Vice-President of World-wide Technology Development with Bausch & Lomb and Abbott Laboratories.  Mr. Tardugno holds a B.S. degree from St. Bonaventure University and completed the Harvard Business School Program for Management Development.

 

 

 
9

 

   

The Board of Directors concluded that all of the continuing directors have the requisite experience, qualifications, attributes and skill necessary to serve as a member of the Board of Directors based on, among other things, his:

 

  

Leadership attributes and experience

  

Management experience in the pharmaceutical industry and/or business experience in countries in which the Company is conducting its clinical trials; and

  

Professional and educational background.

 

Executive Officers

 

Following are the biographical summaries for each of the Company's executive officers. Each executive officer is elected by, and serves at the pleasure of the Board of Directors.

 

Mr. Michael H. Tardugno.   Mr. Tardugno’s biographical information appears above under the heading “Continuing Class III Directors”.

 

Khursheed Anwer, Ph.D., M.B.A. Dr. Anwer joined Celsion on June 20, 2014 as Executive Vice President and Chief Scientific Officer, in connection with the Company’s acquisition of all the assets of EGWU, Inc. (formerly known as Egen, Inc.), an Alabama corporation (“EGEN”). Before joining Celsion, Dr. Anwer served as EGEN’s President and Chief Scientific Officer, a position he held since 2009. He joined EGEN in July, 2002 as Vice President of Research and Development, and directed the company’s clinical and research and development functions. Before joining EGEN, Inc., Dr. Anwer was Director of Pre-Clinical Development at Valentis, Inc. from July 2000 to June 2002. From 1993 to 1999, he served in several positions at GeneMedicine, Inc., where he led several research projects in the area of non-viral gene therapy. He has authored more than 40 publications in the area of non-viral gene therapy, resulting from his active career in research and development. Dr. Anwer has a Ph.D. in Physiology/Pharmacology from Ohio University and received post-doctoral training from the University of Texas Health Science Center at Houston.

 

Dr. Nicholas Borys.   Dr. Borys joined Celsion on October 1, 2007 as Vice President and Chief Medical Officer of the Company and was promoted to Senior Vice President in June 2014. In this position, Dr. Borys manages the clinical development and regulatory programs for Celsion. Dr. Borys has over 20 years of experience in all phases of pharmaceutical development with a focus on oncology.  Immediately prior to joining Celsion, Dr. Borys served as Chief Medical Officer of Molecular Insight Pharmaceuticals, Inc., a molecular imaging and nuclear oncology pharmaceutical company, from 2004 until 2007. From 2002 until 2004 he served as the Vice President and Chief Medical Officer of Taiho Pharma USA, a Japanese start-up oncology therapeutics company. Prior to that he held increasingly senior positions at Cytogen Corporation, Anthra Pharmaceuticals, Inc., Amersham Healthcare, Inc. and Hoffmann La-Roche Inc. Dr. Borys obtained his premedical degree from Rutgers University and holds an M.D. degree from American University of the Caribbean.

 

Mr. Jeffrey W. Church.   Mr. Church joined Celsion in July 2010 as Vice President, Chief Financial Officer and Corporate Secretary.  Mr. Church was appointed as Senior Vice President, Corporate Strategy and Investor Relations effective July 8, 2011.   On July 1, 2014, Mr. Church was reappointed as Senior Vice President and Chief Financial Officer. Immediately prior to joining Celsion, Mr. Church served as Chief Financial Officer and Corporate Secretary of Alba Therapeutics Corporation, a privately held life science company from 2007 until 2010.  From 2006 until 2007, he served as Vice President, CFO and Corporate Secretary for Novavax, Inc., a vaccine development company listed on The NASDAQ Global Select Market.  From 1998 until 2006, he served as Vice President, CFO and Corporate Secretary for GenVec, Inc., a life science and biotechnology company listed on The NASDAQ Capital Market. Prior to that, he held senior financial positions at BioSpherics Corporation and Meridian Medical Technologies, both publicly traded companies. He started his career with Price Waterhouse from 1979 until 1986.  Mr. Church holds a B.S. degree in accounting from the University of Maryland and is a Certified Public Accountant.

 

LEGAL PROCEEDINGS

 

None of the Company's directors or officers has been a part of any legal proceeding within the last 10 years that is subject to disclosure under Item 401(f) of Regulation S-K.

 

 

 
10

 

   

BOARD LEADERSHIP STRUCTURE AND ROLE IN RISK OVERSIGHT

 

Board Leadership

 

Our Board of Directors believes that it is important to select its Chairman of the Board and the Company’s Chief Executive Officer in the manner it considers in the best interests of the Company at any given point in time. The members of the Board possess considerable business experience and in-depth knowledge of the issues the Company faces and are therefore in the best position to evaluate the needs of the Company and how best to organize and adopt the Company’s leadership structure to meet those needs. Accordingly, the Chairman and the Chief Executive Officer may be filled by one individual or by two different individuals, and the Chairman may be a Company insider or an independent director.

 

On October 6, 2014, the Company announced the passing of Max E. Link, Ph.D., who had served as the Chairman of the Board of Directors for the last 13 years. Following Dr. Link’s passing, the Board of Directors appointed Mr. Michael H. Tardugno to serve as Chairman of the Board. Mr. Tardugno will continue to serve as President and Chief Executive Officer of the Company. The Board believes that the Company and its stockholders have been well served by the current leadership structure due to Mr. Tardugno's experience and in-depth knowledge of the Company and the industry.

  

Board Oversight of Risk

 

The Board of Directors is responsible for oversight of the various risks facing the Company. In this regard, the Board seeks to understand and oversee the most critical risks relating to our business and operations, allocate responsibilities for the oversight of risks among the full Board and its committees, and see that management has in place effective systems and processes for managing risks facing the Company. Overseeing risk is an ongoing process, and risk is inherently tied to our strategy and to strategic decisions. Accordingly, the Board considers risk throughout the year and with respect to specific proposed actions. The Board recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, purposeful and appropriate risk-taking is essential for the Company to be competitive and to achieve its business objectives.

 

While the Board oversees risk, management is charged with identifying and managing risk. We have robust internal processes and a strong internal control environment to identify and manage risks and to communicate information about risk to the Board. Management communicates routinely with the Board, Board committees and individual directors on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management.

 

The Board implements its risk oversight function both as a whole and through delegation to various committees. These committees meet regularly and report back to the full Board. The Audit Committee oversees the management of financial, accounting, internal controls, disclosure controls and the engagement arrangement and regular oversight of the independent auditors. The Compensation Committee is responsible for the design and oversight of the Company’s compensation programs. Based on a review of our company-wide compensation programs, including the compensation programs for our executive officers, the Compensation Committee has concluded that these programs do not create risks that are likely to have a material adverse effect on the Company. The Nominating and Governance Committee periodically reviews the Company’s corporate governance practices, including the risks that those practices are intended to address. It also periodically reviews the composition of the Board of Directors to help ensure that a diversity of skills and experiences is represented by the members of the Board of Directors taking into account the stage of growth of the Company and its strategic direction.

 

COMMITTEES OF THE BOARD OF DIRECTORS

 

The Board of Directors presently maintains separately designated Audit, Compensation, and Nominating and Governance Committees.

  

Audit Committee

 

The Audit Committee consists of Mr. Frederick J. Fritz, Chairman, Dr. Augustine Chow and Dr. Alberto R. Martinez. The Audit Committee operates under a written charter as amended and restated effective May 4, 2007. A copy of the charter, as may be amended from time to time, is available on our web site, located at http://www.celsion.com , in lieu of triennial filing with our proxy statement in accordance with Instruction 2 to Item 407 of Regulation S-K. Additional copies of the charter are available upon written request to the Company. All members of the Audit Committee meet the independence standards established by the SEC and NASDAQ.

 

 

 
11

 

    

The Audit Committee assists the Board in fulfilling its responsibility to oversee management's implementation of the Company's financial reporting process. In discharging its oversight role, the Audit Committee reviewed and discussed the audited financial statements contained in the Company's 2014 Annual Report on Form 10-K with the Company's management and the Company's independent registered public accounting firm. Management is responsible for the financial statements and the reporting process, including the system of internal controls. The Company's independent registered public accounting firm is responsible for expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States.

 

The Board of Directors has determined that Mr. Fritz is qualified to serve as the "audit committee financial expert" as defined by Item 407(d)(5) of Regulation S-K and that Drs. Chow and Martinez meet the financial literacy requirements under applicable NASDAQ rules.

 

Compensation Committee

 

The Compensation Committee is responsible for establishing and administering the compensation policies applicable to the Company's directors, officers and key personnel, for recommending compensation arrangements to the Board of Directors and for evaluating the performance of senior management. The Compensation Committee operates under a written charter effective as of December 24, 2003. A copy of the charter, as may be amended from time to time, is available on our web site, located at http://www.celsion.com , in lieu of triennial filing with our proxy statement in accordance with Instruction 2 to Item 407 of Regulation S-K. Additional copies of the charter are available upon written request to the Company.  The Compensation Committee does not delegate the authority to approve compensation policies and actions affecting the Company's named executive officers or directors. The Compensation Committee applies discretion in determining compensation for the Company's executives. The Compensation Committee has not established any equity or other security ownership requirements or guidelines in respect of its executive officers. The Chairman, President and Chief Executive Officer assists the Compensation Committee in evaluating the performance of other executive officers and by providing information to directors as and when requested, such as salary surveys and compensation paid by the Company's competitors, to the extent such information is publicly available. Members of the Compensation Committee undertake to verify such information prior to referring to it in determining executive compensation. The compensation of the Chairman, President and Chief Executive Officer is determined by the Compensation Committee based on the Compensation Committee's evaluation of his performance and with reference to such external or competitive data as they consider necessary.  The compensation of the other named executive officers is determined by the Compensation Committee based on its evaluation of their individual performance and the recommendations of the Chairman, President and Chief Executive Officer.

 

Mr. Hooper (Chairman) and Drs. Chow and Martinez currently comprise the Compensation Committee. All members of the Compensation Committee are independent under the applicable NASDAQ rules.

 

Nominating and Governance Committee

 

The Nominating and Governance Committee is responsible for identifying and recruiting new members of the Board of Directors when vacancies arise, identifying and recruiting nominees for election as directors, reconsideration of incumbent directors in connection with nominations for elections of directors and ensuring that the Board of Directors is properly constituted to meet its corporate governance obligations. The Nominating and Governance Committee operates under a written charter effective as of December 24, 2003 and amended on February 27, 2006. A copy of the charter, as may be amended from time to time, is available on our web site, located at http://www.celsion.com , in lieu of triennial filing with our proxy statement in accordance with Instruction 2 to Item 407 of Regulation S-K.  The current members of the Nominating and Governance Committee are Mr. Fritz and Dr. Martinez, each of whom is deemed to be independent under applicable NASDAQ rules.

 

MEETINGS OF THE BOARD AND ITS COMMITTEES

 

During the year ended December 31, 2014, there were a total of five regular meetings of the Board of Directors.  All of our directors, including Max E. Link, Ph.D. before he passed away in October 2014, attended all of the meetings of the Board of Directors and the committees on which they served that were held during the period for which they were a director or committee member, respectively.  During the year ended December 31, 2014, the Audit Committee met four times, the Compensation Committee met twice and the Nominating and Governance Committee met once.

 

 

 
12

 

    

DIRECTOR NOMINATIONS

 

The Nominating and Governance Committee

 

The role of the Nominating and Governance Committee is to act on behalf of the Board of Directors to ensure that the Board of Directors and its standing committees are appropriately constituted to meet their fiduciary and corporate governance obligations. In this role, the Nominating and Governance Committee is responsible for identifying and recruiting new members of the Board of Directors when vacancies arise, identifying and recruiting nominees for election as directors and reconsidering incumbent directors in connection with nominations for elections of directors. The Nominating and Governance Committee is also charged with: (i) reviewing and recommending changes in the size and composition of the Board of Directors and its committees; (ii) developing and maintaining criteria and processes for selecting candidates for election as directors; (iii) identifying and recruiting candidates to stand for election as directors and determining whether incumbent directors should stand for reelection; (iv) ensuring that the Company and the Board of Directors operate in accordance with current best practices; (v) providing for ongoing director training and education; (vi) reporting to the Board of Directors on Nominating and Governance Committee activities; (vii) annually reviewing the Nominating and Governance Committee's performance of its responsibilities and duties; and (viii) annually reviewing the Nominating and Governance Committee Charter, the structure and the processes and membership requirements of the Nominating and Governance Committee and recommending to the Board any improvements or amendments that the Nominating and Governance Committee considers appropriate or necessary.

 

Director Qualifications

 

It is a policy of the Nominating and Governance Committee that candidates for director be determined to have unquestionable integrity and the highest ethical character. Candidates must demonstrate the ability to exercise sound, mature and independent business judgment in the best interests of the stockholders as a whole and may not have any interests that would, in the view of the Nominating and Governance Committee, impair their ability to exercise independent judgment or otherwise discharge the fiduciary duties owed as a director. Candidates must have experience and demonstrated achievement in one or more fields of business, professional, governmental, communal, scientific or educational endeavors which will complement the talents of the other members of the Board of Directors and further the interests of the Company, bearing in mind the composition of the Board of Directors and the current state of the Company and the biotechnical/biopharmaceutical industry generally. In particular, the Nominating and Governance Committee believes it is important for one or more members of the Board of Directors to have in-depth experience in the biotechnical/biopharmaceutical industry. The Nominating and Governance Committee has determined that one or more of its members, including the incumbents nominated to stand for reelection at the Annual Meeting, have such biotechnical/biopharmaceutical experience.

 

Candidates are expected to have an appreciation of the major issues facing public companies of a size and operational scope similar to the Company, including contemporary governance concerns, regulatory obligations of a public issuer, strategic business planning, competition in a global economy, and basic concepts of corporate finance. Candidates must also have the willingness and capability to devote the time necessary to participate actively in meetings of the Board of Directors and committee meetings and related activities, the ability to work professionally and effectively with other members of the Board of Directors and Company management, and the ability and intention to remain on the Board of Directors long enough to make an effective contribution.  Among candidates who meet the foregoing criteria, the Nominating and Governance Committee also considers the Company's current and anticipated needs, including expertise, diversity and balance of inside, outside and independent directors.

  

The Nominating and Governance Committee, encouraging diversity, endeavors to comprise the Board of Directors of members with a broad mix of professional and personal backgrounds. Thus, the Nominating and Governance Committee accords some weight to the individual professional background and experience of each director. Further, in considering nominations, the Nominating and Governance Committee takes into account how a candidate’s professional background would fit into the mix of experiences represented by the then-current Board of Directors. When evaluating a nominee’s overall qualifications, the Nominating and Governance Committee does not assign specific weights to particular criteria, and no particular criterion is necessarily required of all prospective nominees. In addition to the aforementioned criteria, when evaluating a director for re-nomination to the Board of Directors, the Nominating and Governance Committee will also consider the director’s history of attendance at board and committee meetings, the director’s preparation for and participation in such meetings, and the director’s tenure as a member of the Board of Directors.

 

 
13

 

    

Director Independence

 

In addition, in accordance with the rules of the SEC and NASDAQ, the Company requires that at least a majority of the directors serving at any time on the Board of Directors be independent, that at least three directors satisfy the financial literacy requirements for service on the Audit Committee and that at least one member of the Audit Committee qualify as an "audit committee financial expert" under those rules.

 

The Board of Directors has determined that Mr. Fritz is qualified to serve as the "audit committee financial expert" as defined by Item 407(d)(5) of Regulation S-K and that Mr. Fritz, Drs. Chow and Martinez meet the financial literacy requirements under applicable SEC and NASDAQ rules. The Board of Directors has also determined that of the five currently serving directors, Drs. Augustine Chow, Alberto Martinez and Messrs. Robert W. Hooper and Frederick J. Fritz, are independent under applicable SEC and NASDAQ rules. Mr. Fritz acts as the chairman of our Audit Committee.  In considering the independence of the non-employee Director nominated for election, each of Mr. Hooper and Dr. Martinez has no relationship with the Company other than as a Director.

 

Nominating and Governance Committee Process

 

In selecting candidates for the Board of Directors, the Nominating and Governance Committee begins by determining whether the incumbent directors whose terms expire at the annual meeting of stockholders desire and are qualified to continue their service on the Board of Directors. Under its charter, the Nominating and Governance Committee is charged with considering incumbent directors as if they were new candidates. However, the Nominating and Governance Committee recognizes the significant value of the continuing service of qualified incumbents in promoting stability and continuity, providing the benefit of the familiarity and insight into the Company's affairs and enhancing the Board of Directors' ability to work as a collective body. Therefore, it is the policy of the Nominating and Governance Committee, absent special circumstances, to nominate qualified incumbent directors who the Nominating and Governance Committee believes will continue to make important contributions to the Board of Directors and who consent to stand for re-election. If any member of the Board of Directors does not wish to continue in service or if the Nominating and Governance Committee or the Board of Directors decides not to re-nominate a member, there is an existing vacancy on the Board of Directors, or the Board of Directors, upon the recommendation of the Nominating and Governance Committee, elects to expand the size of the Board of Directors, the following process would be followed:

 

  

The Nominating and Governance Committee develops a profile for candidates' skills and experience, based on the criteria described above.

 

  

The Nominating and Governance Committee initiates a search, polling members of the Board of Directors and management, and retaining a search firm if the Nominating and Governance Committee deems this appropriate.

 

   

The Nominating and Governance Committee has a policy with respect to stockholders' suggestions for nominees for directorships. Under this policy, stockholder nominees are given identical consideration as nominees identified by the Nominating and Governance Committee.

 

  

The process by which stockholders may submit potential nominees is described below under "Stockholder Recommendation Process."

 

  

The Nominating and Governance Committee then determines the eligibility and suitability of any candidate based on the criteria described above and the Nominating and Governance Committee's search profile.

   

  

The Chairman of the Board of Directors and at least one member of the Nominating and Governance Committee interview prospective candidate(s) who satisfy the qualifications described above.

 

  

The Nominating and Governance Committee offers other members of the Board of Directors the opportunity to interview the candidate(s) and then meets to consider and approve the final candidate(s).

 

  

The Nominating and Governance Committee seeks endorsement of the final candidate(s) from the full Board of Directors.

 

  

The final candidate(s) are nominated by the Board of Directors for submission to a stockholder vote or elected to fill a vacancy.

 

 

 
14

 

 

Stockholder Recommendation Process

 

The Nominating and Governance Committee will consider for nomination any qualified director candidates recommended by our stockholders. Any stockholder who wishes to recommend a director candidate is directed to submit in writing the candidate’s name, biographical information and relevant qualifications to our Corporate Secretary at our principal executive offices. All written submissions received from our stockholders will be reviewed by the Nominating and Governance Committee at the next appropriate meeting. The Nominating and Governance Committee will evaluate any suggested director candidates received from our stockholders in the same manner as recommendations received from management, committee members or members of our board. The Company or the Nominating and Governance Committee may require a stockholder who proposes a nominee to furnish such other information as may reasonably be required by the Company to determine the eligibility or suitability of the proposed nominee to serve as director of the Company. See the section titled “Stockholder Nominations and Proposals for the 2016 Annual Meeting of Stockholders” later in this Proxy Statement.

 

Revisions to Nomination Process

 

The Nominating and Governance Committee and stockholder recommendation processes have been developed to provide a flexible framework to permit the director nomination process to move forward effectively. The Nominating and Governance Committee intends to review these processes from time to time in light of the Company's evolving needs and changing circumstances, as well as changes in legal requirements and stock exchange listing standards. The Nominating and Governance Committee may revise these processes or adopt new ones based on such periodic reviews.

 

STOCKHOLDER COMMUNICATIONS

 

The Board of Directors has adopted a process through which interested stockholders may communicate with the Board of Directors. Stockholders who wish to send communications to the Board of Directors, or any particular director, should address such communications to the Corporate Secretary, at the Company's headquarters in Lawrenceville, New Jersey.  The envelope containing any such communication should be prominently marked "To the Attention of the Board of Directors" or to a particular committee or director, and the communication should include a representation from the stockholder indicating the stockholder's address and the number of shares of the Company's Common Stock beneficially owned by the stockholder. Our Corporate Secretary is primarily responsible for monitoring communications from stockholders. Depending upon the content of a particular communication, as he deems appropriate, our Corporate Secretary will: (i) forward the communication to the director, directors or committee to whom it is addressed; (ii) attempt to handle the inquiry directly, for example where it is a request for information about the Company or it is a stock-related matter; or (iii) not forward communications such as solicitations, junk mail and obviously frivolous or inappropriate communications. At each meeting of the Board of Directors, the Corporate Secretary will present a summary of all communications, whether or not forwarded, received since the last meeting and will make those communications available to the directors on request.  

   

BOARD ATTENDANCE

 

The Board of Directors strongly encourages, but does not require, all directors, to the extent reasonable and practicable, to attend the Company's annual meetings of stockholders in person. All of the current Board members were present at the Company’s 2014 Annual Meeting of Stockholders.

 

 
15

 

   

DIRECTOR COMPENSATION

 

2014 DIRECTOR COMPENSATION TABLE

 

The following table sets forth the cash and noncash compensation paid to the Company’s directors who are not employed by the Company or any of its subsidiaries (“Non-Employee Directors”) for the year ended December 31, 2014. The compensation paid to any director who was also one of our employees during fiscal year 2014 is presented in the “Summary Compensation Table” and the information that follows that table. Such employee directors do not receive separate compensation for service on the Board or any of its committees.

 

Name

 

Fees

Earned

and Paid

($)

   

Option

Awards

($) (1)

   

Total ($)

 

Augustine Chow

  $ 40,400     $ 127,170     $ 167,570  

Robert W. Hooper

    42,000       127,170       169,170  

Alberto R. Martinez

    38,200       127,170       165,370  

Frederick J. Fritz

    41,000       127,170       168,170  

Max E. Link (2)

    60,925       171,764       232,689  

 

(1 )

The value reported for Option Awards is the aggregate grant date fair value of stock options granted to the Non-Employee Directors in 2014, determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation—Stock Compensation (“FASB ASC Topic 718”), disregarding any adjustments for forfeiture assumptions. The relevant assumptions used in calculating these amounts are set forth in the Note 11 in the financial statements included in the Company’s 2014 Annual Report on Form 10-K as filed with the SEC on March 12, 2015. See the “Non-Employee Director Stock Option Awards Table” below.

     
(2 )

Dr. Link passed away in October 2014.

 

The following table sets forth stock options granted to the Company’s directors who are not employed by the Company or any of its subsidiaries (“Non-Employee Directors”) for the year ended December 31, 2014. The stock option grants to any director who was also one of our employees during fiscal year 2014 is presented in the “2014 Grants of Plan-Based Awards Table” and the information that follows that table. Employee directors do not receive separate option awards for service on the Board or any of its committees.

 

Non-Employee Director Stock Option Awards Table

 

Name

 

Number of

Options Granted

   

Exercise

Price

 

Grant Date

Expiration Date

 

Grant Date

Fair Value

 

Augustine Chow (1)

    10,000     $ 3.66  

2/24/2014

2/24/2024

  $ 33,060  
      30,000     $ 3.50  

6/20/2014

6/20/2024

  $ 94,110  
                             

Robert W. Hooper (1)

    10,000     $ 3.66  

2/24/2014

2/24/2024

  $ 33,060  
      30,000     $ 3.50  

6/20/2014

6/20/2024

  $ 94,110  
                             

Alberto R. Martinez (1)

    10,000     $ 3.66  

2/24/2014

2/24/2024

  $ 33,060  
      30,000     $ 3.50  

6/20/2014

6/20/2024

  $ 94,110  
                             

Frederick J. Fritz (1)

    10,000     $ 3.66  

2/24/2014

2/24/2024

  $ 33,060  
      30,000     $ 3.50  

6/20/2014

6/20/2024

  $ 94,110  
                             

Max E. Link (2)

    14,000     $ 3.66  

2/24/2014

2/24/2024

  $ 46,284  
      40,000     $ 3.50  

6/20/2014

6/20/2024

  $ 125,480  

 

(1 )

Each of these stock options granted in 2014 vest in three equal installments, with one-third of the grant vesting on the date of grant and the remainder vesting in two annual installments thereafter.

     
(2 )

As a result of Dr. Link’s passing in October 2014, vested option awards totaling 4,666 and 13,333 shares for the grants issued on February 24, 2014 and June 20, 2014, respectively, are exercisable by Dr. Link’s heirs until October 6, 2015, and unvested 2014 options totaling 36,001 shares were cancelled.

 

 

 
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The following table presents the aggregate number of outstanding unexercised (vested and unvested) options held by each of our Non-Employee Directors as of December 31, 2014.  None of the Non-Employee Directors held any other outstanding stock awards on that date.

 

Director

  

Number of

Stock Options

Outstanding

  

  

  

  

  

  

Augustine Chow

  

  

110,551

  

Robert W. Hooper

  

  

93,886

  

Alberto R. Martinez

  

  

88,331

  

Frederick J. Fritz

  

  

84,998

  

Max E. Link (1)

   

67,236

 

  

 

(1)

As a result of Dr. Link’s passing in October 2014, vested stock options totaling 67,236 are exercisable by Dr. Link’s heirs until October 6, 2015, and unvested options totaling 41,926 for stock options previously granted were cancelled.

 

During the year ended December 31, 2014, each Non-Employee Director of the Company received annual cash compensation in the amount of $27,500 payable in quarterly installments, and an additional $1,100 or $1,700 for attendance, telephonically or in person, respectively, at regular meetings of the Board of Directors and each meeting of a committee of the Board of Directors that was not held in conjunction with a meeting of the Board of Directors. Each Non-Employee director is reimbursed for the out-of-pocket costs of attending meetings of the Board of Directors and of committees of the Board of Directors. The Chairman of the Board received an additional annual cash fee of $16,500, the Chairman of the Audit Committee received an additional annual cash fee of $8,800, the Chairman of the Nominating and Corporate Governance Committee received an additional annual cash fee of $5,500 and the Chairman of the Compensation Committee received an additional annual cash fee of $5,500.

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

Mr. Hooper and Dr.’s Link and Martinez each served on the Compensation Committee of the Board of Directors for 2014. Dr. Chow succeeded Dr. Link after his passing in October 2014.  No director who served on our Compensation Committee at any time during 2014 is or was a current or former executive officer or employee of the Company, or had any relationships requiring disclosure by the Company under the SEC’s rules requiring disclosure of certain relationships and related party transactions. None of the members of the Compensation Committee during fiscal year 2014 was, or has ever been, an officer or employee of the Company, and, during fiscal year 2014, no executive officer of the Company served on the board and/or compensation committee of any company that employed as an executive officer any member of the Company's Board and/or Compensation Committee.

 

STOCK OWNERSHIP GUIDELINES FOR NON-EMPLOYEE AND EXECUTIVE DIRECTORS

 

The Board of Directors believes that, as a matter of sound corporate governance, non-employee and executive directors should have a significant personal financial stake in our performance. Consequently, in February 2011, the Board of Directors adopted stock ownership guidelines for non-employee and executive directors. Our corporate governance guidelines require that each non-employee director acquire and hold shares of our common stock having an aggregate value equal to two times the director’s total compensation in the first year of service and that our executive director acquire and hold shares of our common stock having an aggregate value equal to the executive director’s total compensation in the first year of service. Each director is expected to satisfy the applicable ownership guideline by February 2014, or within three years after his or her appointment to the board, whichever is later. All directors are in compliance with this requirement.

 

Shares of our common stock that count toward satisfaction of these ownership guidelines include, unless beneficial ownership therein is disclaimed: (i) shares owned outright by the director or executive officer or their immediate family members residing in the same household, whether held individually or jointly; (ii) shares held in a trust, family limited partnership or similar entity solely for the benefit of the director or executive officer and/or their immediate family members; (iii) shares of restricted stock and restricted stock units awarded under our equity incentive plans, including vested and unvested awards; and (iv) shares acquired upon stock option exercise, but not shares underlying unexercised stock options.  

   

 
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REPORT OF THE AUDIT COMMITTEE

 

The Audit Committee assists the Board in fulfilling its responsibility to oversee management's implementation of the Company's financial reporting process. In discharging its oversight role, the Audit Committee reviewed and discussed the audited financial statements contained in the Company's 2014 Annual Report on Form 10-K with the Company's management and the Company's independent registered public accounting firm. Management is responsible for the financial statements and the reporting process, including the system of internal controls. The Company's independent registered public accounting firm is responsible for expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States.

 

The Audit Committee met privately with the Company's independent registered public accounting firm and discussed issues deemed significant by the independent registered public accounting firm, including those required to be discussed by Auditing Standard No. 16, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board. In addition, the Audit Committee discussed with the independent registered public accounting firm its independence from the Company and its management, including the matters in the written disclosures and the letter received from the independent registered public accounting firm as required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the audit committee concerning independence, and considered whether the provision of non-audit services by the independent registered public accounting firm was compatible with maintaining the independent registered public accounting firm's independence. The Audit Committee also met with the independent registered public accounting firm, with and without management present, to discuss the results of the independent registered public accounting firm's examination, their evaluation of the Company's internal controls, and the overall quality of the Company's financial reporting.

 

In reliance on the reviews and discussions outlined above, the Audit Committee recommended to the Board that the audited financial statements be included in the Company's 2014 Annual Report on Form 10-K for filing with the Securities and Exchange Commission.

   

Members of the Audit Committee

 

Mr. Frederick J. Fritz (Chairman)

Dr. Augustine Chow

Dr. Alberto R. Martinez 

 

 

 
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EXECUTIVE COMPENSATION

 

COMPENSATION DISCUSSION AND ANALYSIS

 

This section describes the material elements of compensation awarded to, earned by or paid to Michael H. Tardugno, our Chairman, President and Chief Executive Officer, Jeffrey W. Church, our Senior Vice President and Chief Financial Officer, Nicholas Borys, our Senior Vice President and Chief Medical Officer and Khursheed Anwer, our Executive Vice President and Chief Science Officer. These individuals are listed in the 2014 Summary Compensation Table below and are referred to in this discussion as the “Named Executive Officers.”

 

Introduction

 

Celsion is a fully-integrated oncology drug development company focused on developing a portfolio of innovative cancer treatments, including directed chemotherapies, immunotherapies and RNA- or DNA-based therapies. The Company's lead program is ThermoDox®, a proprietary heat-activated liposomal encapsulation of doxorubicin, currently in Phase III development for the treatment of primary liver cancer and in Phase II development for the treatment of recurrent chest wall breast cancer. The Company's pipeline also includes GEN-1, a DNA-based immunotherapy for the localized treatment of ovarian and brain cancers.  Celsion has three platform technologies for the development of novel nucleic acid-based immunotherapies and other anti-cancer DNA or RNA therapies, including TheraPlas™, TheraSilence™ and RAST ™. 

 

As a result of the Company’s drug development status, it is unlikely, in the short to medium term, to generate revenues and income sufficient to cover product development costs. As a result, the Company’s executive compensation philosophy is to align the interests of management and stockholders by emphasizing rewards for Company performance, while remaining competitive with compensation paid by other clinical stage biotechnology companies.

 

The Compensation Committee has adopted the following executive compensation approaches, which the Company believes help to achieve the objectives for the executive compensation program and are generally favored by stockholders:

 

 

A significant amount of the executives’ compensation is at-risk.  For fiscal year 2014, approximately 71% of Mr. Tardugno’s target total direct compensation was performance-based and/or linked to the value of the Company’s stock price. As used in this discussion, the term “total direct compensation” means the aggregate amount of the executive’s base salary, target annual incentive awards, and long-term equity incentive awards based on the grant-date fair value of such awards as determined under the accounting principles used in the Company’s audited financial statements.

  

 

Executives’ bonuses under the Company’s annual incentive program are principally based on the achievement of specific performance objectives established at the beginning of the fiscal year by the Compensation Committee.

 

 

Executives’ 2014 annual equity awards were granted in the form of vested stock and stock options awards. We believe the stock option awards further aligns the executives’ interests with those of stockholders as the awards will not have value unless the Company’s stock price appreciates after the award is granted. The stock option awards also provide a retention incentive as they vest over a multi-year period. The stock grants provide an additional incentive to the executive.

     
  Executives are also granted stock option and stock awards at the time they join the Company as these provide the same incentives as annual equity awards.

   

Executive Compensation Philosophy and Procedures

 

The Compensation Committee attempts to design executive compensation programs to achieve three principal objectives.

 

 

The program is intended to attract, motivate and retain talented executives with total compensation that is competitive within the drug development and broader pharmaceutical and biotechnology industry;

 

 

The program is intended to create an alignment of interests between the Company’s executives and stockholders such that a significant portion of each executive’s compensation varies with business performance and is dependent on a rising stock price performance; and

 

 

The program is designed to award behavior which results in optimizing the commercial potential of the Company’s development program.

 

 

 
19

 

 

The Compensation Committee’s philosophy is to pay competitive total compensation, comprised of annual salaries, annual cash incentives and long-term equity awards (primarily stock options), with a significant percentage of total compensation that is directly linked with the Company’s performance. The Compensation Committee considers the elements of the compensation package to be reflective of compensation packages given to executives of companies of similar size in our industry. Compensation packages generally are designed to pay competitive salaries between the 50th and the 75th percentile level of the industry as described below, reward superior annual performance through incentive compensation awards and allow executives to participate in increases in stockholder value through stock option and other stock-based grants.

 

In determining executives’ compensation levels, the Compensation Committee relies primarily on its experience and judgment to provide a package that appropriately balances the need to attract and retain key executive talent with the creation of incentives that will enhance the growth of the Company and provide value for stockholders. As part of its decision-making process, the Compensation Committee takes into account the role and experience of each executive and reviews industry surveys (specifically, the Radford Global Life Sciences Survey, which covers a broad cross-section of the biotechnology, pharmaceuticals and life science industries and in which the Company participates) for information on the compensation paid to executive officers by companies in our industry that are similar in size, breadth, stage of development or complexity to the Company. However, this data is used by the Compensation Committee as background information only, and in reviewing this survey data, the Compensation Committee does not focus on any particular company used in the survey.

 

In light of the straightforward nature of the Company’s executive compensation arrangements, the Compensation Committee believes it has not been necessary to retain independent compensation consultants, and no consultants were retained by the Compensation Committee or the Company for 2014. To assist the Compensation Committee with its responsibilities, the Compensation Committee reviews briefing materials prepared by management. Management also participates in the collection and dissemination of survey information and the Chief Executive Officer interacts with the Compensation Committee in reviewing some of the elements of yearly performance and compensation of the other members of the executive management team. The Compensation Committee believes that an appropriate level of input from our Chief Executive Officer provides a necessary and valuable perspective in helping the Compensation Committee formulate its own independent views on compensation. The Compensation Committee takes measures to ensure its independence with respect to the Chief Executive Officer's compensation, excusing him from portions of meetings to freely discuss his and the other Named Executive Officers compensation. The Compensation Committee made all final determinations on the compensation levels for all Named Executive Officers.

 

A discussion of each individual element of compensation and the compensation for each Named Executive Officer for 2014 follows.

 

Annual Salaries

 

The Company participates in an ongoing industry survey as described above. The Compensation Committee compares base salary for Company executives with the levels provided to similarly situated executives and generally targets base salaries at levels between the 50th and the 75th percentile of the survey data.

 

In early 2014, after reviewing each executive’s job responsibilities, individual performance, our corporate performance, competitive market data and our total compensation expense, the base salaries of Mr. Tardugno, Mr. Church and Dr. Borys were increased by approximately 6%, 5% and 4%, respectively.

 

Incentive Compensation

 

The Company has an incentive compensation plan in which all members of our senior management participate. The plan is performance-driven based on Company and personal operational objectives established at the beginning of the year by the Compensation Committee in consultation with the Chief Executive Officer. These operational objectives include the completion of certain development projects, capital raising, cost controls, business development and profit and loss goals, which we believe are ultimately linked to creating stockholder value. These objectives are designed to achieve timely and efficient product development including completion of clinical studies and regulatory approvals. Each member of senior management is individually evaluated based on the achievement of the Company’s overall operational objectives and each individual’s personal performance against these objectives. This component of compensation is provided, among other reasons, to create incentives for members of senior management to meet short and medium term performance goals of the Company, without regard to stock price. Objectives are weighted in terms of overall importance to meeting the Company’s operating plan.  

 

 
20

 

     

The total annual incentive compensation a member of senior management can earn is based on his level within management, with more senior members of management eligible to earn a higher percentage of their base salary as incentive compensation than less senior members. We believe it is appropriate for executives to have a greater percentage of their compensation “at-risk” based on performance as they generally have a greater role in the achievement of objectives that we believe promote the growth of the Company and the creation of value for stockholders.  The actual amount of incentive compensation paid to any member of senior management is determined on a sliding scale dependent on how successful such member of senior management was in achieving the objectives upon which his or her incentive compensation was targeted and the relative importance to the Company of the objectives achieved. The Compensation Committee retains complete discretion to adjust any incentive compensation down and retains discretion as to whether to grant any incentive compensation to any individual member of senior management at all.

 

Under the incentive compensation plan for 2014, the Compensation Committee established a number of annual corporate goals identified below that include research and development, regulatory, manufacturing, organizational and financial goals which we believe were essential to building shareholder value.  The relative weighting of these Corporate goals is based upon our assessment of the importance of each goal in creating value for the Company and our stockholders. If all of the stated goals were achieved, the overall corporate performance rating would have been 100%.  Each corporate goal was established so that significant levels of achievement were required to meet the goal. Following the conclusion of the annual performance period, the level of achievement for each corporate goal was assessed by the Compensation Committee. The Compensation Committee determined whether each corporate goal had been met, exceeded, or not satisfied. In addition, in assessing corporate performance, the Compensation Committee had the discretion to factor in other significant corporate events that occurred during the performance period which could have resulted in an upward or downward adjustment in the determination of corporate performance. After taking into account the level of attainment of each corporate goal and other appropriate corporate performance factors, the Compensation Committee assigned the overall corporate performance rating, which could have ranged from 0% to 100%. A maximum bonus pool is established by multiplying the overall corporate performance rating by the aggregate target bonuses for all individuals in the incentive plan. Certain individual downward adjustments may be made at the discretion of the Committee. The aggregate of all individual bonuses awarded under the policy cannot exceed the maximum bonus pool available such that the cost of bonuses ultimately reflects our overall performance and is not inflated by any individual performance rating.

 

After the corporate performance rating is determined by the Compensation Committee, the individual performance of each Named Executive Officer is reviewed by the Compensation Committee in consultation with Mr. Tardugno in order to determine the appropriate annual performance percentage rating to be assigned to the executive for the performance period.  Each Named Executive Officer’s actual annual performance-based incentive compensation payment is based on a combination of our corporate performance rating and his or her individual performance rating.  The actual annual performance bonus compensation award for each Named Executive Officer is determined in our sole discretion, and the maximum payout for each Named Executive Officer could be up to 100% of his or her target annual performance-based compensation target.

 

The Named Executive Officers were each assigned a target annual incentive for 2014 ranging from 40% to 100% of base salary. The table below shows the target annual incentive assigned to each Named Executive Officer for 2014 both as a dollar amount and as a percentage of base salary.

 

Name

 

Target Annual

Incentive for

Entire 201 4

Year($)

   

Target Annual

Incentive for

Entire 201 4 Year

(% of Base Salary)

 

Michael H. Tardugno

  $ 465,462       100

%

Jeffrey W. Church

    118,040       40

%

Nicholas Borys

    139,369       40

%

Khursheed Anwer

    119,200       40

%

 

The 2014 corporate objectives and relative weightings assigned to each objective were as follows:

 

  

1.

Research and Development objective to initiate the Phase III clinical trial for primary liver cancer (the OPTIMA Study) including all regulatory submissions and commence enrollment with first patient enrolled in the second quarter of 2014 (24%).

 

  

2.

Research and Development objective to establish and report on clinical trial quality metrics (10%).

 

 

 
21

 

 

  

3.

Research and Development objective to submit and abstract of the HEAT Study for presentation at the 2014 ASCO Annual Meeting.

 

  

4.

Regulatory objectives relating to compliance with relevant regulatory requirements (10%).

 

  

5.

Chemical Manufacturing and Control objective to supply ThermoDox® from at least two separate sources in quantities and locations to meet regulatory requirements for approval of the USFDA and EMA as well as assure availability and quantities to support the OPTIMA Study (10%).

 

  

6.

Corporate Development objective to identify an acquisition or merger target (15%).

     
  7. Develop and execute a plan to finance such an acquisition or merger, raise capital to support on-going development and to ensure the overall capital strength of the Company (15%).

 

  

8.

Financial objectives to manage cash and operating expenses, achieve and maintain a market cap/share price equivalent to comparison groups, continued compliance with listing requirements (10%).

 

These performance objectives served as the corporate performance objectives under the incentive compensation plan for 2014.  Research and development, manufacturing and regulatory goals comprised 60% of the corporate performance objectives for 2014, with an additional 40% relating to corporate development, financial and organizational objectives that we believe were critical to the development of our drug candidate pipeline. We believe this mix of corporate goals was not only an appropriate measure of achievement in 2014, but also represents objectives important to building the long-term foundation of our business.

     

A report of the achievement of our 2014 corporate objectives was prepared by our executive management team and was then reviewed and assessed by the Compensation Committee. Based on this review and assessment, the Compensation Committee determined that four of the corporate goals identified above (3, 4, 6 and 7) were met.  The other four goals (1, 2, 5 and 8) were not fully met and partial credit was given for these goals.  Partial credit was given based on the level of achievement that, while not meeting the full corporate objective, nevertheless represented significant achievement towards that objective that the Compensation Committee determined warranted a proportional award. The Compensation Committee also determined that significant accomplishments outside of established corporate objectives, including the Company’s progress in certain partnerships and collaborations, advances in clinical development, and attainment of certain financial objectives, should be factored into the determination of the corporate performance rating.  Accordingly, the Compensation Committee determined in its judgment that the corporate performance rating under the incentive compensation plan was 74% for 2014 and that the maximum bonus pool for 2014 would be funded at 65% of the target bonus level. The bonuses awarded to the Named Executive Officers for 2014 fell within the guidelines we established under the incentive compensation plan.

 

Each of the Named Executive Officers participated in the annual incentive plan for 2014. The target bonus amount for each executive was established pursuant to his employment agreement as described above.  In March 2015, after consideration of the corporate objectives and maximum bonus pool as previously discussed, the Compensation Committee determined to award each of Mr. Tardugno, Mr. Church, Dr. Borys and Dr. Anwer a 2014 bonus equal to 64%, 60%, 65% and 47% of each executive’s target bonus award, respectively, based on the performance of the Company and the executive’s individual performance during the year. These amounts are reported in the “Non-Equity Incentive Plan Compensation” column in the 2014 Summary Compensation Table below and were paid in the first quarter of 2015.  

 

In addition to the annual incentive bonus award for 2014, Mr. Church received a pre-specified performance bonus of $75,000 ($50,000 grossed up for taxes of $25,000) to provide and fund an executable strategy (including the acquisition of EGEN) and take actions designed to increase the financial strength of the Company and Dr. Borys received the payout of a retention bonus pursuant to a 2013 retention agreement (see “Employment Agreements).

 

Stock-Based Compensation

 

The Company grants long-term equity awards to its executives and other employees that are designed to align the interests of Company employees and its stockholders, encouraging participants to maintain and increase their ownership of Company Common Stock with the opportunity to benefit from the Company’s long-term performance. The Company’s equity program has generally consisted of grants of stock options and occasional grants of stock awards.  Because the exercise price of the options is based on the market price of the Company’s common stock on the date of grant, the Compensation Committee believes that options help to align the interests of the Company’s executives with those of its stockholders as the options will not have value unless there is appreciation in the Company’s stock price.  The options also serve as a retention tool since they generally vest over a two to four year period following the grant date.  This approach is designed to focus key employees on sustainable growth of the Company and the creation of stockholder value over the long term.

 

 
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Annual grants to the Named Executive Officers are generally made during the first quarter of the fiscal year. Annual Grants are determined by the Committee based on their review of each individual’s past performance as well as their potential impact on the Company’s future performance. Grants may also be made at other times during the fiscal year in certain circumstances (such as a grant in connection with the hiring or promotion of an executive or other special circumstance as deemed appropriate by the Compensation Committee).  In February 2014, the Compensation Committee approved annual grants of stock options to each of the Named Executive Officers.  In addition, the Compensation Committee determined that, if our stockholders approved a proposal at the 2014 Annual Meeting to increase the number of shares available for grant under our stock incentive plan, the Compensation Committee would consider approving additional option grants so that the aggregate options granted to each executive for 2014 would be at levels the Compensation Committee considered appropriate to provide adequate retention and performance incentives for the executives. The plan proposal was approved by stockholders at the 2014 Annual Meeting and, accordingly, the Compensation Committee considered and approved a second set of option grants in June 2014 for each of the Named Executive Officers employed by the Company at the time of the February 2014 grant.

 

On June 20, 2014, Mr. Tardugno, Mr. Church and Dr. Anwer were awarded 12,000, 10,500 and 5,000 shares of stock under the 2007 Plan, respectively. All these stock awards vested immediately. In connection with his employment agreement, Dr. Anwer was awarded 35,000 shares under the 2007 Plan on June 20, 2014. This award will vest on the third anniversary date of the award.

 

Other Compensation

 

Executive officers are eligible to participate in our medical and other welfare benefit plans and for other benefits, in each case on generally the same basis as other employees. We maintain a 401(k) plan for our employees. Other than the 401(k) plan, we do not offer any of our employees a pension plan, retirement plan or other forms of compensation paid out upon retirement. Mr. Tardugno was reimbursed $288,122 ($150,000 grossed up for taxes of $138,122) for a loss he experienced from the sale of his prior residence in connection with his relocation when he joined the Company.

 

Stockholder Say-on-Pay Votes

 

The Company provides its stockholders with the opportunity to cast an advisory vote every three years to approve its executive compensation program (referred to as a “say-on-pay proposal”). At the annual meeting of stockholders held in July 2013, approximately 78% of the votes actually cast on the say-on-pay proposal at that meeting were voted in favor of the Company's executive compensation program. The Compensation Committee believes these results affirmed stockholders’ support of the Company’s approach to its executive compensation program. In general, the Compensation Committee did not change its approach in 2014 and believes the program in place, as in prior years, includes a number of features that further the goals of the Company’s executive compensation program. The Compensation Committee will continue to consider the outcome of the Company’s say-on-pay proposals when making future compensation decisions for the Named Executive Officers.

 

Post-Employment Obligations

 

The Company believes that severance protections, particularly in the context of a change in control transaction, can play a valuable role in attracting and retaining key executive officers. Under their employment agreements, each of the Named Executive Officers would be entitled to severance benefits in the event of a termination of employment by the Company without cause. The Company has determined that it is appropriate to provide the executives with severance benefits under these circumstances in light of their positions with the Company and as part of his overall compensation package.

  

The Company believes that the occurrence, or potential occurrence, of a change in control transaction will create uncertainty regarding the continued employment of the Company’s executive officers as many change in control transactions result in significant organizational changes, particularly at the senior executive level.  In order to encourage the Company’s executive officers to remain employed with the Company during an important time when their prospects for continued employment following the transaction may be uncertain, the Company provides each of the Named Executive Officers with enhanced severance benefits if his employment is actually or constructively terminated by the Company without cause in connection with a change in control.

 

Tax Considerations

 

The Compensation Committee also considers the tax impact of the compensation provided to the Named Executive Officers. Under U.S. tax law, publicly-held companies may be precluded from deducting certain compensation paid to a company’s chief executive officer and three other most highly compensated executive officers (other than the chief financial officer) in excess of $1.0 million in a year. The regulations exclude from this limit certain performance-based compensation, including stock options, provided certain requirements are satisfied. The Company’s intent generally is to design and administer executive compensation programs in a manner that will preserve the deductibility of compensation paid to the Company’s executive officers. However, the Company reserves the right to make compensation decisions that do not meet the standards of Section 162(m) of the Code when deemed necessary to enable the Company to continue to attract, retain, and motivate highly-qualified executives officers.

   

 
23

 

     

COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

 

The Compensation Committee has certain duties and powers as described in its charter. The Compensation Committee is currently composed of the three non-employee directors named at the end of this report, each of whom the Board of Directors has determined is independent under the applicable NASDAQ rules.

 

The Compensation Committee has reviewed and discussed with management the disclosures contained in the Compensation Discussion and Analysis section of this Proxy Statement. Based upon this review and discussion, the Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis section be included in this Proxy Statement and the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

   

 

Compensation Committee of the Board of Directors

 

Mr. Robert W. Hooper (Chairman)

Dr. Alberto R. Martinez

Dr. Augustine Chow

  

 

 
24

 

 

2014 SUMMARY COMPENSATION TABLE

 

The following table sets forth the aggregate cash and other compensation paid for the year ended December 31, 2014 and, to the extent required under SEC executive compensation disclosure rules, for the years ended December 31, 2013 and 2012. 

 

Name and Principal Position Year   Salary    

Bonus

( 1 )

   

Stock

Awards

( 2 )

   

Option

Awards

( 2 )

   

Non-Equity

Incentive Plan

Compensation

( 3 )

   

All Other

Compensation

( 4 )

    Total ($)  
                                                           
Michael H Tardugno( 5 )

2014

  $ 462,422    

    $ 42,000     $ 583,197     $ 298,803     $ 308,365     $ 1,694,787  

Chairman, President and CEO

2013

    434,117    

   

      139,554       357,659       24,053       955,383  
 

2012

    422,773    

   

      178,350       228,512       27,741       857,376  
                                                           

Jeffrey W. Church( 6 )

2014

  $ 293,485     $ 75,000     $ 36,750     $ 310,620     $ 71,352     $ 18,336     $ 805,543  

Senior Vice President and CFO

2013

    275,155    

   

      55,820       91,566       17,712       440,253  
 

2012

    262,755    

   

      74,313       68,426       22,766       428,260  
                                                           

Nicholas Borys( 7 )

2014

  $ 346,876     $ 100,000    

    $ 279,250     $ 90,590     $ 8,250     $ 824,966  

Senior Vice President and CMO

2013

    328,457    

   

      55,820       95,481       7,650       487,408  
 

2012

    314,642    

   

      74,313       56,416       8,250       453,621  
                                                           

Kursheed Anwer ( 8 )

2014

  $ 154,731    

    $ 140,000     $ 125,480     $ 55,964     $ 3,173     $ 479,348  

Executive Vice President and CSO

2013

 

   

   

   

   

   

   

 
 

2012

 

   

   

   

   

   

   

 

 

(1)

During 2014, Mr. Church received a special bonus to provide and fund an executable strategy (including the acquisition of EGEN) and to take actions designed to increase the financial strength of the Company and Dr. Borys received the payout of a retention bonus pursuant to a 2013 retention agreement (see “Employment Agreements). 

 

(2)

The value reported for Stock and Option Awards is the aggregate grant date fair value of stock awards and stock options, respectively, granted to the Named Executive Officers in the years shown, determined in accordance with FASB ASC Topic 718, disregarding adjustments for forfeiture assumptions. The assumptions for making the valuation determinations are set forth in the Note 11 in the financial statements in the Company’s 2014 Annual Report on Form 10K filed with the SEC on March 12, 2015.

 

(3)

Bonuses for 2014 were paid in March 2015. See “Incentive Compensation” in the Compensation Discussion and Analysis above for information on the terms of these bonuses. 

 

(4)

This column includes other compensation as indicated below and matching contributions made by the Company for the Named Executive Officers under the Company’s 401(k) plan. The Company’s matching contribution is equal to 50% of the employee’s deferrals under the plan up to 6% of the employee’s compensation and are made in shares of the Company’s common stock. The value of the Company’s matching contributions for each executive are indicated below.

 

(5)

For Mr. Tardugno, “All Other Compensation” for 2014 consists of a reimbursement of $280,122 ($150,000 grossed up for taxes of $138,122) for a loss he experienced from the sale of his prior residence in connection with his relocation when he joined the Company, $16,743 for temporary living and relocation allowance and a 401(k) plan matching contribution of $11,500 in Celsion common stock.

 

(6)

For Mr. Church “All Other Compensation” for 2014 consists of $18,336 for temporary living and relocation allowance.

 

(7)

For Dr. Borys, “All Other Compensation” for 2014 consists of a 401(k) plan matching contribution of $8,250 in Celsion common stock.

 

(8)

For Dr. Anwer, “All Other Compensation” for 2014 consists of a 401(k) plan matching contribution of $3,173 in Celsion common stock.

   

 

 
25

 

   

NARRATIVE DISCLOSURE TO EXECUTIVE SUMMARY COMPENSATION TABLE

 

Employment Agreements

 

The Company and Mr. Tardugno entered into an employment agreement, effective December 5, 2014, which superseded the previous employment agreements with Mr. Tardugno and pursuant to which Mr. Tardugno will continue to serve as our Chairman (a position he was appointed to in October 2014 after Max E. Link, Ph.D. our former Chairman, passed away) President and Chief Executive Officer.  Subject to earlier termination pursuant to the terms of the agreement, the initial term of the agreement shall end on January 31, 2018, with automatic one year renewals thereafter, unless either party provides a notice of non-renewal. Mr. Tardugno's employment agreement provides for an initial annual base salary of $465,462, subject to annual adjustment by the Board of Directors of the Company or the Compensation Committee. Mr. Tardugno is also eligible for an annual performance bonus from the Company, pursuant to the Company's management incentive bonus program in effect from time to time. The amount of such bonus will be determined by the Board or the Compensation Committee in its sole and absolute discretion and will not exceed 100% of the then-current base salary except pursuant to a specific finding by the Board or the Compensation Committee that a higher percentage is appropriate. Under the agreement, the Company agreed to grant to Mr. Tardugno, at the time of its usual annual grant to employees, annual stock options to purchase shares of the Company's common stock as the Board or the Compensation Committee shall determine.

 

In the event, (A) that the Company terminates the agreement other than for "cause" (as defined in the agreement) or (B) Mr. Tardugno terminates the agreement upon the occurrence of:  (i) a material adverse change in his duties or authority; (ii) a situation in which he is no longer at least one of the President or the Chief Executive Officer of the Company; (iii) a bankruptcy filing or similar action by or against the Company; or (iv) another material breach of the Agreement by the Company (each, a "Triggering Event"), Mr. Tardugno will be entitled to receive a severance payment equal to his base annual salary at the time of termination (the "Severance Amount"), payable in accordance with the Company's normal payroll practices and may generally exercise any vested options through the remainder of their original terms.

 

In the event of termination of his employment upon a Triggering Event within two years following a "change in control" (as described below), or, if within such two-year period (i) there is a material adverse change in his compensation or benefits, or (ii) any successor to the Company does not assume the Company's obligation under the agreement, and he terminates his employment, Mr. Tardugno is entitled to a lump sum severance payment equal to the Severance Amount and any previously unvested options granted to Mr. Tardugno and covered by the employment agreement shall immediately vest and remain fully exercisable through the remainder of their original maximum terms and otherwise in accordance with their respective original terms. The agreement also provides that such severance is payable following a change in control if Mr. Tardugno elects to terminate his employment for any reason or no reason commencing with the sixth and ending with the twelfth month following the change in control. Under the agreement, a "change in control" is deemed to occur: (i) if any person becomes the direct or indirect beneficial owner of more than 50% of the combined voting power of the Company's then-outstanding securities; (ii) there is a change in a majority of the directors in office during any twenty-four (24) month period; (iii) the Company engages in a recapitalization, reorganization, merger, consolidation or similar transaction after which the holders of the Company's voting securities before the transaction do not continue to hold at least 50% of the voting securities of the Company or its successor after the transaction; or (iv) upon the complete liquidation or dissolution of the Company or the sale or other disposition of substantially all of its assets after which the holders of the Company's voting securities before such sale or disposition do not continue to hold at least 50% of the voting securities of the Company or its successor after such sale or disposition.

 

In the event that Mr. Tardugno is terminated for cause or is receiving severance payments contemplated under the employment agreement, Mr. Tardugno shall, among other things, not provide any services, directly or indirectly, to any other business or commercial entity in the Company's "Field of Interest" (as such term is defined in his employment agreement), solicit any customers or suppliers of the Company, directly or indirectly, or employ or seek to employ an employee of the Company for a period of two years following the date of termination. In addition, at no time during the term of the employment agreement or thereafter will Mr. Tardugno knowingly make any written or oral untrue statement that disparages the Company.  Mr. Tardugno is also subject to confidentiality provisions in his employment agreement.

   

The Company and Dr. Borys entered into an employment offer letter on August 23, 2007, pursuant to which Dr. Borys agreed to serve as the Vice President and Chief Medical Officer of the Company. Under the terms of the offer letter, the Company agreed to pay Dr. Borys an annual starting salary of $270,000, subject to annual review. Dr. Borys is also eligible for an annual bonus, with a target of 35% of his annual base salary, conditioned on his and the Company's performance against key performance objectives, and annual discretionary stock option awards. In connection with his promotion to Senior Vice President in June 2014, Dr. Borys' target bonus was increased to 40%. Dr. Borys' employment with the Company is "at-will"; however, subject to a retention agreement the Company provided to Dr. Borys on February 19, 2013, if the Company terminates Dr. Borys' employment for any reason other than just cause, the Company will pay Dr. Borys a salary continuation and COBRA premiums for up to six months. The salary and COBRA premiums will cease at the end of the six-month period or, if he finds new employment prior to the end of the six month period, the benefit will be reduced by the amount of compensation which he will receive from any new employer.  Also in connection with this retention agreement, Dr. Borys was paid a retention bonus during June 2014 in the amount of $100,000 based on his continued employment with the Company through February 19, 2014.

 

 
26

 

   

The Company and Mr. Church entered into an employment offer letter on June 15, 2010.  Pursuant to the offer letter, Mr. Church will receive a starting base salary of $250,000 and will be eligible for an annual bonus, with a target of 35% of his annual base salary, conditioned on his and the Company’s performance against key business objectives.  In connection with his promotion to Senior Vice President in July 2011, Mr. Church’s target bonus was increased to 40%. Mr. Church’s employment is “at-will”; however, if the Company terminates Mr. Church for any reason other than just cause, the Company will pay Mr. Church a salary continuation and COBRA premiums for up to six months. The salary and COBRA premiums will cease at the end of the six month period or if he finds new employment prior to the six month period, the benefit will be reduced by the amount of compensation which he will receive from any new employer.  

 

The Company and Dr. Anwer entered into an employment offer letter effective as of June 20, 2014. Pursuant to the offer letter, Dr. Anwer will receive a starting base salary of $298,000 and will be eligible for an annual incentive bonus, with a target of 40% of his annual base salary contingent upon meeting personal goals and the Company’s objectives established by the Company. The Compensation Committee of the Board of Directors will determine his actual bonus amount each year. In addition, Dr. Anwer will receive certain retention compensation pursuant to the retention and severance agreement with the Company effective as of June 20, 2014, including 35,000 restricted shares of Common Stock and a cash bonus of $150,000, both of which will vest in one installment on the third anniversary of his starting date, subject to his continued employment through that vesting date. Dr. Anwer’s employment with the Company is “at-will”; however, subject to the retention and severance agreement, if the Company terminates Dr. Anwer’s employment without cause (as such term is defined in the retention and severance agreement), he will be entitled to receive cash severance equal to 12 months of his base salary and reimbursement of his COBRA premiums for up to 12 months. Dr. Anwer’s right to receive these severance benefits is subject to his providing a release of claims in favor of the Company.

 

Change in Control Agreements

 

In November 2011, the Company entered into change in control severance agreements (CIC Agreements) with each of the Named Executive Officers (other than Dr. Anwer), to provide severance benefits to these executives should their employment terminate in certain circumstances in connection with a change in control of the Company. The following summary is qualified in its entirety by the provisions of the CIC Agreement.

 

Under the CIC Agreement, in the event that the Company terminates the executive’s employment without cause or in the event that the executive terminates his employment for good reason, in either case on or within two years after a change in control of the Company, the executive would be entitled to receive a cash lump sum payment equal to the sum of (1) the executive’s annual base salary and (2) the executive’s target annual bonus for the fiscal year in which the termination occurs.  (For these purposes, the terms “cause,” “good reason” and “change in control” are each defined in the CIC Agreement.) In addition, the Company will pay or reimburse the executive for the cost of the premiums charged to continue health coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act and life insurance coverage for the executive and his eligible dependents, in each case for a period of up to one year following the termination. The executive would also be entitled to full acceleration of his then-outstanding equity awards granted to him by the Company. However, as to any equity award agreement that is subject to performance-based vesting requirements, the vesting of such award will continue to be governed by its terms.  In the case of options or similar awards, the award would generally remain exercisable for the remainder of the original term of the award (or, in the case of awards that vested after the date of the change in control, for the lesser of 12 months following the last day such award would have been exercisable under the applicable award agreement and the remainder of the original term). The benefits provided under the CIC Agreement are in addition to, and not in lieu of, any severance benefits the executive may be entitled to receive in connection with the termination of his employment under any other agreement with the Company. The executive’s right to benefits under the CIC Agreement is subject to his executing a release of claims in favor of the Company upon the termination of his employment.

 

Material Terms of Option Grants During 2014

 

Each of the stock options awarded to the Named Executive Officers in 2014 and reported in the 2014 Grants of Plan-Based Awards Table below was granted under, and is subject to, the terms of our 2007 Stock Incentive Plan (the “2007 Plan”). The 2007 Plan is administered by the Compensation Committee, which has authority to interpret the plan provisions and make all required determinations under the plan. This authority includes making required proportionate adjustments to outstanding awards upon the occurrence of certain corporate events such as reorganizations, mergers and stock splits, and making provision to ensure that any tax withholding obligations incurred in respect of awards are satisfied. Awards granted under the plan are generally only transferable to a beneficiary of a Named Executive Officer upon his death. Under the terms of the 2007 Plan, if there is a change in control of the Company, each Named Executive Officer’s outstanding awards granted under the plan will generally terminate, unless the Compensation Committee provides for the substitution, assumption, exchange or other continuation or settlement (in cash, securities or property) of the outstanding awards. The Compensation Committee has discretion to provide for outstanding awards to become vested in connection with a change in control.

 

 
27

 

   

Each option granted to the Named Executive Officers in 2014 was granted with a per-share exercise price equal to the closing price of our common stock on the grant date. Each option is scheduled to vest in three installments, with one-third vesting on the date of grant and the balance vesting in annual installments over each of the next two years, subject in each case to the executive’s continued employment through the applicable vesting date, and has a maximum term of ten years. However, vested options may terminate earlier in connection with a change in control transaction or a termination of the Named Executive Officer’s employment. Subject to any accelerated vesting that may apply in the circumstances, the unvested portion of the option will immediately terminate upon a termination of the Named Executive Officer’s employment.

 

On June 20, 2014, Mr. Tardugno, Mr. Church and Dr. Anwer were awarded 12,000, 10,500 and 5,000 shares of stock under the 2007 Plan, respectively. All these stock awards vested immediately. In connection with his employment agreement, Dr. Anwer was awarded 35,000 shares under the 2007 Plan on June 20, 2014. This award will vest on the third anniversary date of the award.

 

Material Terms of Non-Equity Incentive Awards

 

For information on the cash incentive awards for each of the Named Executive Officers for 2014, please see the “Incentive Compensation” section of the Compensation Discussion and Analysis above.

 

2014 GRANTS OF PLAN-BASED AWARDS TABLE

 

The following table presents information regarding the incentive awards granted to the Named Executive Officers during 2014.  Each of the equity awards reported in the table below was granted under the 2007 Plan.

 

Name

Grant Date

 

Estimated

Future Payouts

Under Non-

Equity

Incentive Plan

Awards Target

($)(1)

   

All other

Stock

Awards:

Number

of Shares

or Units

of Stock

(#)(2)

   

All Other

Option

Awards:

Number of

Securities

Under-

lying

Options

(#)(3)

   

Exercise

or Base

Price of

Option

Awards

($/Share)

   

Grant

Date Fair

Value of

Stock

and

Option

Awards

($) (4)

 

Michael H. Tardugno

N/A

  $ 465,462                                          
 

2/11/2014

                            44,444     $ 3.66     $ 135,999  
 

6/20/2014

                            140,556       3.50       447,198  
 

6/20/2014

            12,000                               42,000  
                                                   

Jeffrey W. Church

N/A

  $ 119,200                                          
 

2/11/2014

                            40,000     $ 3.66     $ 122,400  
 

6/20/2014

                            60,000       3.50       188,220  
 

6/20/2014

            10,500                               36,750  
                                                   

Nicholas Borys

N/A

  $ 139,369                                          
 

2/11/2014

                            40,000     $ 3.66     $ 122,400  
 

6/20/2014

                            50,000       3.50       156,850  
                                                   

Khursheed Anwer (5)

N/A

  $ 119,200                                          
 

6/20/2014

                            40,000     $ 3.50     $ 125,480  
 

6/20/2014

            5,000                               17,500  
 

6/20/2014

            35,000 (6)                              122,500  

 

   

(1)

The amounts reported in this column represent the target bonus opportunity under the Company’s annual bonus program. See “Incentive Compensation” in the Compensation Discussion and Analysis above for information on the terms of these bonuses.

     
 

(2)

Except for the grant of 35,000 shares of restricted stock to Dr. Anwer, the amounts reported in this column represents grants of vested stock awards granted to the Named Executive Officers under the 2007 Plan.

     
 

(3)

The amounts reported in this column represented stock option awards granted under the 2007 Plan. Each option is scheduled to vest in three installments, with one-third vesting on the date of grant and the balance vesting in annual installments over each of the next two years, subject in each case to the executive’s continued employment through the applicable vesting date, and has a maximum term of ten years.

     
 

(4)

The amounts reported as the grant date fair value reflect the fair value of these awards on the grant date as determined under the principles used to calculate the value of equity awards for purposes of the Company’s financial statements.  For a discussion of the assumptions and methodologies used to value the awards reported in Column (l), please see Footnote 2 to the Summary Compensation Table.

     
 

(5)

Dr. Anwer joined the Company in June 2014.

     
 

(6)

This amount represents a restricted stock award granted to Dr. Anwer under the 2007 Plan. This award will vest on the third anniversary date of the award, subject to Dr. Anwer’s continued employment through such date.

 

 
28

 

   

2014 OUTSTANDING EQUITY AWARDS AT YEAR-END

 

The following table summarizes the unexercised stock options held by each of the Named Executive Officers as of December 31, 2014.  None of the Named Executive Officers held any other outstanding stock awards as of that date.

 

 

 

  

Option Awards

Name

Grant Date

  

No. of Securities

Underlying

Unexercised

Options (#)

Exercisable

  

  

No. of Securities

Underlying

Unexercised

Options (#)

Unexercisable

  

  

  

  

Option

Exercise

Price

($)

  

Option

Expiration

Date

  

  

Michael H. Tardugno

1/3/2007

 

 

95,555

  

  

  

 

 

 

$

10.89

  

1/3/2017

  

  

 

2/19/2008

 

 

16,666

  

  

  

 

 

 

$

24.75

  

2/19/2018

  

  

 

1/19/2009

 

 

16,666

  

  

  

 

 

 

$

12.24

  

1/19/2019

  

  

 

2/19/2010

 

 

18,888

  

 

 

  

  

  

 

$

13.23

  

2/19/2020

  

  

 

2/25/2011

 

 

40,000

  

 

 

  

   

 

$

11.21

  

2/25/2021

  

  

 

2/22/2012

  

 

4,889

  

 

 

2,444

  

(1

)

 

$

9.27

  

2/22/2022

  

  

 

6/15/2012

  

12,889

  

 

 

6,444

  

(1

)

 

$

9.68

  

6/15/2022

  

  

  

5/6/2013

  

  

29,629

  

  

  

14,815

  

(2

)

  

$

4.37

  

5/6/2023

  

  

 

2/11/2014

   

14,815

     

29,629

 

(2

)

 

$

3.66

 

2/11/2024

   
 

6/20/2014

   

46,852

     

93,704

 

(2

)

 

$

3.50

 

6/20/2024

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

  

Jeffrey W. Church

7/6/2010

 

 

22,222

  

 

 

  

   

$

15.26

 

7/1/2020

   

 

2/25/2011

 

 

15,555

  

 

 

  

   

$

11.21

 

2/25/2021

   

 

2/27/2012

  

 

2,037

 

 

1,018

  

(1

)

 

$

9.41

  

2/27/2022

   

 

6/15/2012

  

 

5,370

 

 

2,685

  

(1

)

 

$

9.68

  

6/15/2022

   

  

5/6/2013

  

 

11,851

  

  

5,926

  

(2

)

 

$

4.37

  

5/6/2023

   
 

2/11/2014

   

13,333

   

26,667

 

(2

)

 

$

3.66

 

2/11/2024

   
 

6/20/2014

   

20,000

   

40,000

 

(2

)

 

$

3.50

 

6/20/2024

   
                                   

Nicholas Borys

9/24/2007

 

 

16,666

  

  

  

 

 

 

$

27.45

  

9/24/2017

  

  

 

2/19/2008

 

 

7,777

  

  

  

 

 

 

$

24.75

  

2/19/2018

  

  

 

1/19/2009

 

 

7,777

  

  

  

 

 

 

$

12.24

  

1/19/2019

  

  

 

2/19/2010

 

 

8,888

  

 

 

  

(1

)

 

$

13.23

  

2/19/2020

  

  

 

2/25/2011

 

 

15,555

  

 

 

  

(1

)

 

$

11.21

  

2/25/2021

  

  

 

2/27/2012

  

2,037

  

 

 

1,018

  

(1

)

 

$

9.27

  

2/22/2022

  

  

 

6/15/2012

  

5,370

  

 

 

2,685

  

(1

)

 

$

9.68

  

6/15/2022

  

  

  

5/6/2013

  

  

11,851

  

  

  

5,926

  

(2

)

  

$

4.37

  

5/6/2023

  

  

 

2/11/2014

   

13,333

     

26,667

 

(2

)

 

$

3.66

 

2/11/2024

  

  

 

6/20/2014

   

16,667

     

33,333

 

(2

)

 

$

3.50

 

6/20/2024

  

  

                                 

  

  

Khursheed Anwer

6/20/2014

   

10,000

     

30,000

 

(3

)

 

$

3.50

 

6/20/2014

   
                                     

 

 Notes:

 

   

(1)

These stock options vest in three annual installments commencing on the first anniversary of the date of grant.

 

   

(2)

Each of these stock options vests in three equal installments, with the first installment vesting on the date of grant and an additional installment vesting on each of the first two anniversaries thereafter.

 

   

(3)

These stock options vests in five installments, with the first installment of 10,000 vesting on the date of grant and an additional 7,500 installment vesting on each of the first four anniversaries thereafter.

 

The following table summarizes the unvested stock grants held by each of the Named Executive Officers as of December 31, 2014.  None of the Named Executive Officers held any other outstanding stock grants as of that date.

 

      Stock Awards  

 

Name

Grant Date

 

Number of Shares or

Units of Stock That

Not Vested(#)

   

Market Value of

Shares or Units of

Stock That Have Not

Vested ($)

 

Khursheed Anwer

6/20/2014

    35,000  (1)   $ 81,550  

 

 (1)

This amount represents a restricted stock award granted to Dr. Anwer under the 2007 Plan on June 20, 2014. This award will vest on the third anniversary date of the award, subject to Dr. Anwer’s continued employment through such date.

 

 
29

 

 

OPTION EXERCISES AND STOCK VESTED

 

None of the Named Executive Officers exercised any of their stock options that vested during 2014. During 2014, Mr. Tardugno, Mr. Church and Mr. Anwer were each granted 12,000, 10,500 and 5,000 shares of stock, respectively, which vested immediately in connection with the closing of the Egen, Inc. acquisition in June 2014. The following table sets forth the number of shares acquired upon the vesting of such award.

 

   

Stock Awards

 

Name

 

Number of

Shares Acquired

Upon Vesting

   

Value Realized

on Vesting

 

Michael H. Tardugno

    12,000     $ 42,000  

Jeffrey W. Church

    10,500     $ 36,750  

Nicholas Borys

 

   

 

Khursheed Anwer

    5,000     $ 17,500  

 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

 

As described above under “Narrative Disclosure to Executive Compensation Tables,” the Company has entered into agreements with each of the Named Executive Officers currently employed by the Company that provides benefits that may become payable to the executives in connection with a termination of their employment.  The Company has also entered into agreements with each of these Named Executive Officers that provides benefits that may become payable to the executives in connection with a change in control of the Company.  If in the event the Named Executive Officer is entitled to receive severance benefits in connection with a termination of employment under both their severance agreement and their change in control agreement, the executive shall be entitled to receive the benefits from both agreements.  The first table below indicates the benefits that would be payable to each executive if a termination of employment in the circumstances described above had occurred on December 31, 2014 outside of a change in control.  The second table below indicates the benefits that would be payable to each executive if a change in control of the Company and such a termination of employment had occurred on that date.

  

Severance Benefits (Outside of a Change in Control)

 

 

Name

 

Cash Severance

   

Continuation of

Health/Life Benefits

 

Equity

Acceleration (1)

 

Total

 
                           

Michael H. Tardugno

  $ 465,462     $ 16,800  

  $ 482,262  

Jeffrey W. Church

  $ 149,000     $ 10,650  

  $ 159,650  

Nicholas Borys

  $ 174,211     $ 10,650  

  $ 184,861  

Khursheed Anwer

  $ 298,000     $ 21,300  

  $ 319,300  

 

 

Change of Control Severance Benefits

 

Name

 

Cash Severance

   

Continuation of

Health/Life Benefits

 

Equity

Acceleration (1)

  Total  
                           

Michael H. Tardugno

  $ 930,924     $ 16,800  

  $ 947,724  

Jeffrey W. Church

  $ 417,200     $ 10,650  

  $ 427,850  

Nicholas Borys

  $ 487,791     $ 10,650  

  $ 498,441  

 

  

1)

This column reports the intrinsic value of the unvested portions of the executive’s equity awards that would accelerate if the executive’s employment had terminated on December 31, 2014 in the circumstances described above. For options, this value is calculated by multiplying the amount (if any) by which $2.33 (the closing price of the Company’s common stock on the last trading day of fiscal year 2014) exceeds the exercise price of the option by the number of shares subject to the accelerated portion of the option.

 

 

 
30

 

     

PROPOSAL NO. 2  

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee has appointed Stegman & Company ("Stegman") as the independent registered public accounting firm of the Company to audit its financial statements for the fiscal year ending December 31, 2015, and the Board requests stockholder ratification of such selection. Stegman has served as the Company's independent accountants since 1993 and has advised the Company that neither Stegman nor any of its members has, or has had in the past three years, any financial interest in the Company or any relation to the Company other than as auditors and accountants.

 

Representatives of Stegman are expected to be present at the Annual Meeting, will be given the opportunity to make a statement if they so desire and are expected to be available to respond to appropriate questions.

 

FEES

 

The following table presents fees as invoiced for professional audit services rendered by Stegman and Company for the audit of the Company's annual financial statements included in the Company’s Form 10-K and review of quarterly financial statements included in the Company's Forms 10-Q for the fiscal years ended December 31, 2014 and December 31, 2013, and fees for other services rendered by Stegman during those periods:

 

    2014     2013  
FEE CATEGORY   AMOUNT    

% OF TOTAL

    AMOUNT    

% OF T OTAL 

 

Audit Fees

  $ 114,200       79

 %

  $ 112,500       90

 %

Audit Related Fees

    21,000       14       4,500       4  

Tax Fees

    10,250       7       8,250       6  

All Other Fees

 

   

   

   

 

Total Fees

  $ 145,450       100

 %

  $ 125,250       100

 %

 

Audit fees consist of fees for professional services rendered by Stegman for the audit of the Company's annual financial statements in the Company’s Form 10-K and for reviews of the quarterly financial statements included in the Company's Forms 10-Q. Audit related fees pertain to the work performed during the Company's equity offerings in 2014 and 2013. Tax fees consist of fees for preparation of the Company's federal and state tax returns. All other fees consist of fees for attendance at the Company's annual meetings, review of registration statements and similar matters.

 

SERVICES BY EMPLOYEES OF STEGMAN & COMPANY

 

No part of Stegman's engagement to audit the Company's financial statements for the year ended December 31, 2014 was attributable to work performed by persons other than Stegman's full-time, permanent employees.

 

AUDIT COMMITTEE POLICY ON APPROVAL OF AUDIT AND NON-AUDIT SERVICES

 

It is the policy of the Audit Committee to pre-approve all audit and permissible non-audit services provided by the Company's independent accountants, in accordance with rules prescribed by the SEC. These services may include audit services, audit-related services, tax services, and other services. Pre-approval is based on a written proposal, accompanied by a cost estimate and estimated budget. The Audit Committee has delegated to its Chairman the authority to pre-approve audit and non-audit services with an estimated cost of up to $25,000, provided the exercise of such authority is reported to the Audit Committee at its next regular meeting. The Audit Committee reserves the right, from time to time, to delegate pre-approval authority to other of its members, so long as such members are independent directors.  All of the services of Stegman during 2014 and 2013 were approved by the Audit Committee in accordance with its pre-approval policy and the approval requirements of the SEC. 

 

 

 
31

 

    

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO RATIFY THE SELECTION OF STEGMAN AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR THE YEAR ENDING DECEMBER 31, 2015.

 

Stockholder ratification of the selection of Stegman as the Company's independent registered public accounting firm is not required by the Company's Bylaws or other applicable legal or regulatory requirements. However, the Board, upon the recommendation of the Audit Committee, is submitting the selection of Stegman to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection of Stegman, the Audit Committee will reconsider whether or not to retain that firm, or whether to retain a different firm. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.   

 

 

 
32

 

    

PROPOSAL NO. 3

AMENDMENT OF THE CELSION CORPORATION 2007 STOCK INCENTIVE PLAN

 

BACKGROUND

 

At the Annual Meeting, stockholders will be asked to approve the following amendment to the Celsion Corporation 2007 Stock Incentive Plan (the “2007 Plan”), which was adopted, subject to stockholder approval, by the Board of Directors on March 17, 2015.

 

  

Increase in Individual Share Limit.   The 2007 Plan currently limits the number of shares of Common Stock that may be subject to awards granted under the 2007 Plan in any calendar year to any one individual subject to Section 162(m) of the Code (a “Covered Employee”) (including the aggregate number of stock options and stock appreciation rights that may be granted in any one year to any Covered Employee) to 200,000 shares. The proposed amendments would increase this limit by an additional 100,000   shares so that the new individual share limit for the 2007 Plan would be 300,000   shares.

 

As of April 24, 2015, a total of 2,302,921 shares of Common Stock were subject to outstanding awards granted under the 2007 Plan, the 2004 Plan and the 2001 Plan, collectively and have a weighted average strike price of $5.60 with a weighted average term of 7.0 years. An additional 1,275,294 shares of Common Stock were available for new award grants under the 2007 Plan as of such date. The Board of Directors believes awards under the 2007 Plan provide the Company the ability to provide eligible officers, directors, key employees and other individuals with additional incentives to contribute to the success of the Company. In the judgment of the Board of Directors, awards under the 2007 Plan are a valuable incentive and will serve to the ultimate benefit of the stockholders by aligning more closely the interests of the 2007 participants with those of our stockholders.

  

The Board of Directors believes that the proposed 2007 Plan amendment is essential for the ongoing success of the Company, the implementation of its product and/or technology acquisition strategy and its ability to recruit, retain and reward key employees. The Board of Directors also believes that if the proposed amendment is not approved, Celsion’s ability to align the interests of key employees with stockholders through equity-based compensation would be compromised, disrupting Celsion’s compensation program and impairing Celsion’s ability to recruit and retain key employees. The Board of Directors recommends approval of the proposed 2007 Plan amendment for the following reasons:

 

Historical Company Equity Usage. -  We believe that our historic equity usage has been reasonable in light of competitive considerations and the potential dilutive impact of equity award grants on our stockholders. Celsion’s average three year “run rate” was 3.2% as a percentage of weighted common shares outstanding.

 

The Need to Provide Competitive Compensation . - Similar to other companies in our industry, we believe equity compensation is integral in providing a competitive total compensation package necessary to recruit, retain and reward key employees. Equity awards are commonly used by companies our size, and the ability to provide competitive grants is essential to competing in our labor markets. Therefore, we believe it is imperative to provide long-term incentive awards as a component of our compensation program.

 

Cash Compensation Expense Increase . - If our ability to provide equity compensation is impaired, the Company’s cash compensation costs could increase substantially to offset equity compensation typically provided in the marketplace. We believe it is important that we use our cash resources to operate and expand our business, rather than unnecessarily divert cash to pay compensation.

 

If stockholders do not approve this 2007 Plan proposal, the current share limits under, and other terms and conditions of, the 2007 Plan will continue in effect.

 

SUMMARY DESCRIPTION OF THE 2007 PLAN

 

The following summary provides a description of the significant provisions of the 2007 Plan and is qualified in its entirety by reference to the full text of the 2007 Plan, which has been filed as an exhibit to this Proxy Statement.

  

 

 
33

 

   

NUMBER OF SHARES SUBJECT TO THE 2007 PLAN

 

The maximum number of shares of Common Stock that may be issued pursuant to awards granted under the 2007 Plan is 3,444,444 shares. In addition, any shares subject to awards granted under the 2004 Plan or the 2001 Plan which expire, or for any reason are cancelled or terminated, after June 13, 2007, without a distribution of shares to the award-holder will also be available for award grant purposes under the 2007 Plan. The closing price of the Company's common stock was $2.90 per share on April 24, 2015.

 

SHARE-COUNTING PROVISIONS  

 

If an award under the 2007 Plan expires, or for any reason is cancelled or terminated, without a distribution of shares to the award-holder, the shares of Common Stock subject to the expired, cancelled or terminated award will again be available for awards under the 2007 Plan. Notwithstanding the foregoing, if a stock option or stock appreciation right is settled by the delivery of a net number of shares of Common Stock, the full number of shares underlying such stock option or stock appreciation right will not be available for subsequent awards under the 2007 Plan. Shares repurchased on the open market with the proceeds of an exercise price will not again be made available for issuance under the 2007 Plan. In addition, (i) shares withheld by the Company to satisfy the tax obligations related to an award granted under the 2007 Plan will again be available for grants of awards under the 2007 Plan, (ii) to the extent an award is paid or settled in cash, the number of shares with respect to which such payment or settlement is made will again be available for grants of awards under the 2007 Plan and (iii) shares underlying awards that can only be settled in cash will not be counted against the aggregate number of shares of Common Stock available for awards under the 2007 Plan.

 

ELIGIBILITY

 

All directors, officers, employees and consultants of the Company or any parent, subsidiary or affiliate are eligible to participate in the 2007 Plan. The selection of those directors, officers, employees and consultants, from among those eligible, who will receive awards under the 2007 Plan, is within the discretion of the Compensation Committee, provided that awards of Incentive Stock Options may be made only to employees of the Company and any parent or subsidiary of the Company. Currently there are 4 non-executive directors, 4 officers and 27 employees eligible to participate in the 2007 Plan.

  

PLAN ADMINISTRATION

 

The 2007 Plan may be administered by the Board of Directors or, at the election of the Board of Directors, by a committee appointed by the Board of Directors comprised solely of two or more non-employee independent directors within the meaning of Rule 16b-3 under the Securities Exchange Act, who also qualify as "outside directors" (as described under Section 162(m) of the Internal Revenue Code). The Board of Directors has determined that the Compensation Committee should administer the 2007 Plan.

   

The Compensation Committee will have full power and authority to administer and interpret the 2007 Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the 2007 Plan it deems necessary, desirable or appropriate in accordance with the terms of the 2007 Plan and the Certificate of Incorporation and Bylaws of the Company.  The Compensation Committee also will have full power and authority to take all other actions necessary to carry out the purpose and intent of the 2007 Plan, including the authority to (i) determine the participants to whom, and the time or times at which, awards shall be granted; (ii) determine the types of awards to be granted; (iii) determine the number of shares of Common Stock and/or amount of cash to be covered by or used for reference purposes for each award; (iv) impose such terms, limitations, vesting schedules, restrictions and conditions upon any such award as the Compensation Committee shall deem appropriate; (v) subject to the other provisions of the 2007 Plan, modify, extend or renew outstanding awards, accept the surrender of outstanding awards and substitute new awards, provided that no such action shall be taken with respect to any outstanding award that would materially or adversely affect the grantee' without the grantee's consent; (vi) accelerate the time in which an award may be exercised or in which an award becomes payable and waive or accelerate the lapse, in whole or in part, of any restriction or condition with respect to an award; (vii) establish objectives and conditions for earning awards and determining whether awards will be paid after the end of a performance period; and (viii) permit the deferral of, or require a participant to defer such participant's receipt of, the delivery of Common Stock and/or cash under an award that would otherwise be due to a participant and establish rules and procedures for such payment deferrals.

 

NO REPRICING

 

In no case (except due to an adjustment to reflect a stock split or other event referred to under “Adjustments” below, or any repricing that may be approved by stockholders) will the Compensation Committee (1) amend an outstanding stock option or stock appreciation right to reduce the exercise price or base price of the award, (2) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for cash or other awards for the purpose of repricing the award, or (3) cancel, exchange, or surrender an outstanding stock option or stock appreciation right in exchange for a stock option or stock appreciation right with an exercise or base price that is less than the exercise or base price of the original award. 

 

 
34

 

   

PERMITTED AWARDS

 

Our Board of Directors believes that it is appropriate to provide a flexible and comprehensive stock compensation plan that permits the granting of a variety of long-term incentive awards to eligible individuals. In keeping with the aim of providing a comprehensive and flexible plan, the 2007 Plan authorizes the following types of discretionary awards:

 

  

• 

Incentive Stock Options, which are stock options that meet the requirements set out in Section 422 of the Internal Revenue Code;

 

  

• 

Nonqualified Stock Options, which are stock options that do not meet the requirements of Incentive Stock Options under the Internal Revenue Code;

 

  

• 

Stock Appreciation Rights ("SARs"), which represent the right to receive payments in cash, Common Stock or a combination of the two, of up to the amount by which the fair market value of a share of Common Stock on the date of exercise exceeds the designated base price of a share of Common Stock on the grant date. SARs may be freestanding or may be granted "in tandem" with stock options;

 

  

• 

Phantom Stock, which represents the right to receive payments in cash, Common Stock or other consideration, equal to the fair market value of a specified number of shares of Common Stock at such time, and subject to such conditions, as are set forth in the grant agreement; 

 

  

• 

Restricted Stock, which is a specified number of shares of Common Stock that are subject to restrictions on disposition and forfeiture to the Company under certain circumstances;   Restricted Stock Units, which represent the right to receive shares of Common Stock without any cash payment therefore upon the satisfaction of vesting and other conditions, and may also include the right to receive dividend equivalents, in the form of additional Restricted Stock Units, equal to the amount of dividends or other distributions payable in respect of shares of Common Stock during the period from grant to satisfaction of all vesting and other conditions; and

 

  

• 

Performance Awards, which are amounts payable in Incentive Stock Options, Nonqualified Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, and/or Phantom Stock that may be earned upon satisfaction of various performance measures.

  

TERM AND TERMINATION

 

If not sooner terminated, the 2007 Plan will terminate on the business day immediately preceding the tenth anniversary of its effective date and no further awards may be granted thereafter (subject to any extension of the plan term that may be approved by stockholders). The Board of Directors, in its discretion, may terminate the 2007 Plan at any time with respect to any shares of Common Stock for which awards have not previously been granted.  

 

AMENDMENT

 

The Board of Directors may amend or terminate the 2007 Plan at any time, except that stockholder approval will be required to increase the number of shares of Common Stock subject to the 2007 Plan or if such approval is necessary to comply with any tax or regulatory requirement or rule of any exchange or national automated quotation system upon which the Common Stock is listed or quoted.

 

The Compensation Committee may make minor or administrative amendments to the 2007 Plan as well as amendments that may be dictated by requirements of applicable U.S. federal or state laws or that may be authorized or made desirable by such laws.

 

 

 
35

 

   

TERMS APPLICABLE TO ALL TYPES OF AWARDS

 

Maximum Annual Awards: No more than 200,000 shares of Common Stock may be subject to awards granted under the 2007 Plan to any one Covered Employee in any calendar year (including the aggregate number of stock options and stock appreciation rights that may be granted in any one year to any one Covered Employee). If stockholders approve the proposed amendments to the 2007 Plan, this limit on individual awards would be increased to 300,000 shares.

 

Changes in Control: In the event of any proposed change in control, as that term is defined in the 2007 Plan, the Compensation Committee will take such action as it deems appropriate and equitable to effectuate the purposes of the 2007 Plan and to protect the grantees of awards. Such actions may include:

 

  

• 

acceleration or change of the exercise and/or expiration dates of any award to require that exercise be made, if at all, prior to the change in control;

 

  

• 

cancellation of any award upon payment to the holder in cash of the fair market value of the stock subject to such award as of the date of the change in control, less the aggregate exercise price, if any, of the award; and

 

  

• 

in any case where equity securities of another entity are proposed to be delivered in exchange for or with respect to Common Stock, arrangements to have such other entity replace the awards granted under the 2007 Plan with awards with respect to such other securities, with appropriate adjustments in the number of shares subject to, and the exercise prices under, the award.

  

For purposes of the 2007 Plan, a "change in control" includes:

 

  

• 

the merger or consolidation of the Company with or into another entity or other reorganization of the Company, if more than 50% of the combined voting power of the continuing or surviving entity's securities outstanding immediately thereafter is not owned directly or indirectly by persons who were holders of the Company's voting securities immediately prior thereto;

 

  

• 

the sale, transfer or other disposition of all or substantially all of the Company's assets to an entity that is not a parent, subsidiary or affiliate of the Company;

 

  

• 

any transaction as a result of which any person becomes the beneficial owner, directly or indirectly, of securities of the Company representing at least 50% of the total voting power represented by the Company's then-outstanding voting securities; or

   

  

• 

a change in the composition of the Board of Directors over a period of 24 consecutive months or less as a result of which individuals who, at the beginning of such period, constitute the Board of Directors (the "Incumbent Board") cease to constitute at least a majority of the Board; provided, however, that any individual subsequently becoming a director whose selection as a director or nominee was approved by a vote of at least a majority of the directors then comprising the Board of Directors will be considered to be a member of the Incumbent Board, except if such selection occurs as a result of either an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board.

 

Adjustments . As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2007 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reclassifications, recapitalizations, stock splits, reverse stock splits, stock dividends, or other similar events.

 

Amendment: The Compensation Committee may not amend an outstanding award in any manner that would materially and adversely affect the award, except with the approval of the participant to whom the award was granted. Otherwise, the Compensation Committee may amend an outstanding award to the extent that it would have had the authority initially to grant the award as so amended.

 

Transferability:   An Incentive Stock Option is not transferable other than by will or the laws of descent and distribution, and may be exercised during the employee's lifetime only by the employee or his or her guardian or legal representative. Other awards may, in the discretion of the Compensation Committee, also be transferable by gift or pursuant to a domestic relations order to certain specified family members, entities and trusts.

 

 

 
36

 

   

TERMS OF SPECIFIC TYPES OF AWARDS

 

Stock Options

 

Exercise Price:     The exercise price will be determined by the Compensation Committee, in its discretion. The exercise price will not be less than the fair market value of the shares on the date of grant, unless the stock option complies with Section 409A of the Code. In no event, however, will Incentive Stock Options be granted at an exercise price of less than the fair market value of the Common Stock on the grant date.

 

Special Rules for Certain Stockholders:     If an Incentive Stock Option is granted to an employee who then owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or a subsidiary, then the term of the option will not exceed five years, and the exercise price will be at least 110% of the fair market value of the shares on the date that the option is granted.

 

Status of Options:   The Compensation Committee will designate the status of each option granted to an employee as either an Incentive Stock Option or a Nonqualified Stock Option at the time of grant. If, however, the aggregate fair market value (determined as of the date of grant) of shares with respect to which Incentive Stock Options become exercisable for the first time by an employee exceeds $100,000 in any calendar year, the options with respect to the excess shares will be Nonqualified Stock Options. All options granted to consultants and non-executive directors will be Nonqualified Stock Options.

  

Payment:     The Compensation Committee may determine the method by which the option price may be paid, including in cash, check or other shares of Common Stock. The 2007 Plan also allows the Compensation Committee, in its discretion, to permit cashless exercises.

 

Other Terms and Conditions:     The Compensation Committee may establish such other terms and conditions on the grant of stock options, not inconsistent with the terms of the 2007 Plan, as it deems appropriate.

   

Restricted Stock and Restricted Stock Units

 

Payment:     Unless otherwise determined by the Compensation Committee or as may be required to comply with applicable tax withholding obligations, grantees of Restricted Stock and Restricted Stock Units will not be required to pay the Company cash consideration for such Restricted Stock or Restricted Stock Units.

  

Vesting Conditions and Other Conditions:     The Compensation Committee, in its discretion, shall determine the vesting conditions and other restrictions applicable to each award of Restricted Stock or Restricted Stock Units, including the duration and conditions to termination of such restrictions. The Compensation Committee may, in its discretion, reduce or shorten the duration of any vesting period or other restriction applicable to any award of Restricted Stock or Restricted Stock Units.

 

Stock Issuance and Stockholder Rights:     Celsion will issue shares of Restricted Stock to the grantee, subject to forfeiture if the Restricted Stock does not vest or other restrictions do not lapse. Except as the Compensation Committee otherwise might determine, during the restricted period the grantee will have all the rights of a stockholder to receive dividends and to vote the Restricted Stock. Celsion will generally issue shares subject to a Restricted Stock Unit at such time as the Restricted Stock Unit has vested and other restrictions have lapsed. The grantee of Restricted Stock Units will not be entitled to any of the rights of a stockholder until the time that shares are issued. The Compensation Committee, in its discretion, may provide a participant with the right to receive amounts equivalent to the dividends and other distributions that otherwise would be payable on shares subject to the Restricted Stock Unit, either currently or upon vesting and lapse of restrictions, with such amounts payable in cash or Common Stock, as determined by the Compensation Committee ; provided, however, that as to any dividend equivalent rights granted in connection with an award granted under the 2007 Plan that is subject to performance-based vesting requirements, no dividend equivalent payment will be made unless the related performance-based vesting conditions of the award are satisfied (or, in the case of a restricted stock or similar award where the dividend must be paid as a matter of law, the dividend payment will be subject to forfeiture or repayment, as the case may be, if the related performance-based vesting conditions are not satisfied).

 

Stock Appreciation Rights

 

Tandem SARs:     Tandem SARs, which are SARs granted in connection with an underlying stock option, will entitle the participant to surrender all or part of the option for a cash payment at such time and to the extent such option is exercisable. Any such SAR will be exercisable only to the same extent and on the same terms as the related options are exercisable.

 

 
37

 

   

Free-Standing SARs:     Free-standing SARs, which are SARs not granted in connection with stock options, will be exercisable as and when determined by the Compensation Committee. The base price of the SAR will be determined by the Compensation Committee, in its discretion. The base price will not be less than the fair market value of the shares on the date of grant, unless the SAR complies with Section 409A of the Code.

   

Form of Payment:     The Company may pay amounts due upon exercise of a SAR by delivery of Common Stock, cash, or a combination of the two, as determined in the discretion of the Compensation Committee.

 

Other Terms:     The Compensation Committee will determine at the date of grant the times at which and the circumstances under which a SAR may be exercised, the method of exercise, whether the SAR will be in combination with another award, and any other terms and conditions of any SAR.

 

Phantom Stock Awards

 

Phantom Stock Awards under the 2007 Plan will be granted on such terms and subject to such conditions, not inconsistent with the 2007 Plan, as the Compensation Committee may prescribe. Each share of Phantom Stock will represent the value of one share of common stock. Except as otherwise provided in the applicable grant agreement, the participant will have none of the rights of a stockholder with respect to any shares represented by Phantom Stock as a result of the grant of Phantom Stock.

 

Performance Awards

 

Form of Grants:     Performance Awards may be in the form of Incentive Stock Options, Nonqualified Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights and/or Phantom Stock as the Compensation Committee, in its discretion, may determine.

 

Performance Period:     Performance periods will be established by the Compensation Committee, in its discretion, provided that no performance period may be less than three months or more than 10 years.

 

Performance Measures:     The Compensation Committee will use one or more of the following criteria, which may be used in absolute or relative terms, to measure the performance of the Company, or any parent, subsidiary, affiliate or division of the Company for a performance period:

  

  

•  

basic or diluted earnings per share of Common Stock;

  

•  

earnings per share of Common Stock growth;

   

•  

revenue;

  

•  

operating income;

  

•  

net income (either before or after taxes);

  

•  

earnings and/or net income before interest and taxes;

  

•  

earnings and/or net income before interest, taxes, depreciation and amortization;

  

•  

return on capital;

  

•  

return on equity;

  

•  

return on assets;

  

•  

net cash provided by operations;

  

•  

free cash flow;

  

•  

Common Stock price;

  

•  

economic profit;

  

•  

economic value;

  

•  

total stockholder return; and

  

•  

gross margins and costs.

 

The performance measures will be determined in accordance with generally accepted accounting principles and, if so determined by the Compensation Committee and to the extent permitted by Section 162(m) of the Code with respect to grants to covered employees, may be adjusted to omit the effects of extraordinary items, gain or loss on the disposal of a business segment, unusual or infrequently occurring events and transactions and cumulative effects of changes in accounting principles.

 

 
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Performance Awards Under Section 162(m) of the Internal Revenue Code:  Under Section 162(m) of the Internal Revenue Code, a corporation cannot take a tax deduction in any tax year for compensation it pays to its Chief Executive Officer and certain other executive officers in excess of $1 million. Compensation that qualifies as “performance-based,” however, is excluded from the $1 million limit if, among other requirements, the compensation is payable only upon attainment of pre-established, objective performance goals under a plan approved by the corporation’s shareholders. Under the 2007 Plan, the Compensation Committee may grant Performance Awards that are designed to satisfy the “performance-based” exception under Section 162(m). These “performance-based” awards are in addition to stock options and stock appreciation rights, separately authorized under the 2007 Plan, that may also qualify as performance-based for Section 162(m) purposes. There can be no assurance, however, that any compensation intended to qualify for deductibility under Section 162(m) awarded or paid by the Company will be fully deductible.

 

FEDERAL INCOME TAX ASPECTS OF THE 2007 PLAN

 

The following is a brief summary of certain of the U.S. federal income tax consequences of certain transactions under the 2007 Plan. It does not address any state, local or foreign income or other tax consequences, which may vary significantly depending upon the jurisdiction and the status of the stockholder/taxpayer. This summary also does not attempt to describe all of the possible tax consequences that could result from the acquisition, holding, exercise or disposition of an Incentive or Nonqualified Stock Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Phantom Stock or Performance Award, or the shares of Common Stock underlying any of the foregoing. The discussion is based on the Internal Revenue Code, its legislative history, existing and proposed regulations under the Internal Revenue Code, published rulings and court decisions, all as currently in effect. These laws are subject to change, possibly on a retroactive basis.

 

Incentive Stock Options

 

Incentive Stock Options are subject to special federal income tax treatment. No federal income tax is imposed on the optionee upon the grant or the exercise of an Incentive Stock Option if the optionee does not dispose of the shares acquired pursuant to the exercise within the two-year period beginning on the date the option was granted or within the one-year period beginning on the date the option was exercised (collectively, the "Holding Period"). In such event, the Company would not be entitled to any deduction for federal income tax purposes in connection with the grant or exercise of the option or the disposition of the shares so acquired. With respect to an Incentive Stock Option, the difference between the fair market value of the stock on the date of exercise and the exercise price must generally be included in the optionee's alternative minimum taxable income for the year in which such exercise occurs. However, if the optionee exercises an Incentive Stock Option and disposes of the shares received in the same taxable year and the amount realized is less than the fair market value of the shares on the date of exercise, then the amount included in the income of the optionee will not exceed the amount realized over the adjusted basis of the shares.

  

Upon disposition of the shares received upon exercise of an Incentive Stock Option after the Holding Period has been satisfied, any appreciation of the shares above the exercise price should constitute capital gain. If an optionee disposes of shares acquired pursuant to his or her exercise of an Incentive Stock Option prior to the end of the Holding Period, the optionee will be treated as having received, at the time of disposition, compensation taxable as ordinary income. In such event, and subject to the application of Section 162(m) of the Internal Revenue Code as discussed below, the Company may claim a deduction for compensation paid at the same time and in the same amount as compensation is treated as received by the optionee. The amount treated as compensation is the excess of the fair market value of the shares at the time of exercise (or in the case of a sale in which a loss would be recognized, the amount realized on the sale if less) over the exercise price; any amount realized in excess of the fair market value of the shares at the time of exercise would be treated as short-term or long-term capital gain, depending on the holding period of the shares.

    

Nonqualified Stock Options and Stock Appreciation Rights

 

As a general rule, no federal income tax is imposed on the optionee upon the grant of a Nonqualified Stock Option (whether or not including a Stock Appreciation Right), and the Company is not entitled to a tax deduction by reason of such grant. Generally, upon the exercise of a Nonqualified Stock Option, the optionee will be treated as receiving compensation taxable as ordinary income in the year of exercise in an amount equal to the excess of the fair market value of the shares of stock at the time of exercise over the option price paid for such shares. In the case of the exercise of a Stock Appreciation Right, the optionee will be treated as receiving compensation taxable as ordinary income in the year of exercise in an amount equal to the cash received plus the fair market value of the shares distributed to the optionee. Upon the exercise of a Nonqualified Stock Option or a Stock Appreciation Right, and subject to the application of Section 162(m) of the Internal Revenue Code, the Company may claim a deduction for compensation paid at the same time and in the same amount as compensation income is recognized by the optionee, assuming any federal income tax reporting requirements are satisfied.

 

 
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Generally upon a subsequent disposition of the shares received upon exercise of a Nonqualified Stock Option or a Stock Appreciation Right, any difference between the fair market value of the shares at the time of exercise and the amount realized on the disposition would be treated as capital gain or loss. 

 

Restricted Stock

 

The recipient of a Restricted Stock award will not realize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time, assuming that the restrictions constitute a substantial risk of forfeiture for federal income tax purposes. When the risk of forfeiture with respect to the stock subject to the award lapses, the holder will realize ordinary income in an amount equal to the fair market value of the shares of Common Stock at such time (less any cash paid with respect for such shares), and, subject to Section 162(m) of the Internal Revenue Code, the Company will be entitled to a corresponding deduction. All dividends and distributions (or the cash equivalent thereof) with respect to a Restricted Stock award paid to the holder before the risk of forfeiture lapses will also be compensation income to the holder when paid and, subject to Section 162(m) of the Internal Revenue Code, deductible as such by the Company. Notwithstanding the foregoing, the holder of a Restricted Stock award may elect, under Section 83(b) of the Internal Revenue Code, to be taxed at the time of grant of the Restricted Stock award, based on the fair market value of the shares of Common Stock on the date of the award (less any cash paid with respect for such shares), in which case (i) subject to Section 162(m) of the Internal Revenue Code, the Company will be entitled to a deduction at the same time and in the same amount; (ii) dividends paid to the recipient during the period the forfeiture restrictions apply will be taxable as dividends and will not be deductible by the Company; and (iii) there will be no further federal income tax consequences when the risk of forfeiture lapses. Such election must be made not later than 30 days after the grant of the Restricted Stock award and is irrevocable.

  

Performance Awards, Phantom Stock and Restricted Stock Units

 

An individual who has been granted a Performance Award, Phantom Stock or Restricted Stock Units generally will not realize taxable income at the time of grant, and the Company will not be entitled to a deduction at that time. Whether a Performance Award, Phantom Stock award or award of Restricted Stock Units is paid in cash or shares of Common Stock, the individual will have taxable compensation and, subject to the application of Section 162(m) of the Internal Revenue Code, the Company will have a corresponding deduction. The measure of such income and deduction will be the amount of any cash paid and the fair market value of any shares of Common Stock either at the time the award is paid or at the time any restrictions on the shares subsequently lapse, depending on the nature, if any, of the restrictions imposed. Any dividend equivalents paid with respect to a Performance Award, Phantom Stock or Restricted Stock Units prior to the actual issuance of shares under the award will be compensation income to the employee and, subject to the application of Section 162(m) of the Internal Revenue Code, deductible as such by the Company.

  

Other Tax Considerations

 

If an award is accelerated under the 2007 Plan in connection with a “change in control” (as this term is used under the U.S. Internal Revenue Code), the Company may not be permitted to deduct the portion of the compensation attributable to the acceleration (“parachute payments”) if it exceeds certain threshold limits under the U.S. Internal Revenue Code (and certain related excise taxes may be triggered). In addition, as noted above, the aggregate compensation in excess of $1,000,000 attributable to awards that are not “performance-based” within the meaning of Section 162(m) of the U.S. Internal Revenue Code may not be permitted to be deducted by the Company in certain circumstances.

 

The 2007 Plan is not qualified under Section 401(a) of the Internal Revenue Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974, as amended.

  

Specific Benefits under the 2007 Plan

 

The Company has not approved any awards that are conditioned upon stockholder approval of the proposed amendment to the 2007 Plan and is not currently considering any specific award grants that are conditioned upon such approval. For information regarding stock-based awards granted to the Company’s Named Executive Officers during fiscal 2014, see the material in this proxy statement above under the heading “Executive Compensation.”

   

 

 
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