SiNtx Technologies Inc (SINT)

[boston745]

The Treatment of Stock Options in the Context of a Merger or Acquisition Transaction

Acceleration of Vesting upon a Change of Control

A separate issue that must be assessed, at either the time of the option grant or at the time of the Corporate Transaction, is whether the vesting of any options should be accelerated if the Corporate Transaction also constitutes or results in a change of control of the company. Acceleration provisions may be set forth in the equity incentive plan or other agreements outside of the plan, such as the agreement evidencing the award, employment agreements, or severance and retention agreements. Generally, change of control acceleration is in the form of either a “single trigger” or a “double trigger.” Some plans and arrangements contain a hybrid of the single and double trigger approach, such as providing for the partial vesting of awards upon a change of control event, with additional vesting if a second triggering event occurs; or vesting that depends upon the treatment of the options in the Corporate Transaction, such as providing for accelerated vesting only in the event that awards are not assumed by the acquirer, since the optionee will no longer have the opportunity post-transaction to continue to earn the option through vesting, even if he or she remains employed.

Single Trigger

Under a single trigger provision, the vesting of options is accelerated and awards become exercisable immediately prior to a change of control.
Advantages

· Aligns the interests of option holders and stockholders by allowing the option holders to share in the value they have created

· Provides for equitable treatment of all employees, regardless of their length of employment (assuming all options are fully accelerated)

· Provides for a built-in retention award, allowing the target company to deliver an intact management team to the acquirer, which can eliminate the need for a cash retention arrangement through the date of a Corporate Transaction

· No affect on earnings as vested equity awards are treated as an expense of the target company

· Beneficial when acquirer is going to terminate the existing equity plan or will not be assuming or substituting the unvested options
Disadvantages

· Can be viewed as a windfall for option holders who will be terminated by the acquirer or who were recently employed by the target company

· No retention or motivational value after the change of control

· Will require the acquirer to issue its own equity post-transaction to newly incentivize employees of the target company

· The payment in respect of the acceleration will be taken from the consideration that would otherwise go to the stockholders of the target company

· The acquirer must deal with the fact that its acquired workforce has fully vested equity awards, while its pre-existing employees do not, which may present integration issues

· Viewed negatively by stockholders and investors, and specifically by governance groups, as a problematic pay practice

The Treatment of Stock Options in the Context of a Merger or Acquisition Transaction

Take note that Executives acquired over 717,000 new shares some of which are exercisable within the next 60 days.

Directors and Named Executive Officers:
B. Sonny Bal, M.D. (2) 63,700 *
David W. Truetzel (3) 463,882 *
Jeffrey S. White (4) 55,433 *
Eric A. Stookey (5) 45,833 *
Bryan McEntire (6) 100,831 *
All executive officers and directors as a group (5 persons) 792,650 1.0 %


(1) As calculated in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended, (i) Sabby Healthcare Master Fund, Ltd. and Sabby Volatility Master Fund, Ltd. beneficially own 1,050,000 and 1,050,000 shares of the common stock (common shares), respectively, representing approximately 2.90% and 2.90% of the Common Stock, respectively, and (ii) Sabby Management, LLC and Hal Mintz each beneficially own 2,100,000 shares of the common shares, representing approximately 5.79% of the common shares. Sabby Management, LLC and Hal Mintz do not directly own any common shares, but each indirectly owns 2,100,000 common shares. Sabby Management, LLC, a Delaware limited liability company, indirectly owns 2,100,000 common shares because it serves as the investment manager of Sabby Healthcare Master Fund, Ltd. and Sabby Volatility Warrant Master Fund, Ltd., Cayman Islands companies. Mr. Mintz indirectly owns 2,100,000 common shares in his capacity as manager of Sabby Management, LLC.

(2) Represents 59,627 shares of Common Stock and options and warrants to purchase 4,073 shares of Common Stock that are currently exercisable within 60 days of July __, 2017.

(3) Represents 398,811 shares of Common Stock and options and warrants to purchase 65,071 shares of Common Stock that are currently exercisable within 60 days of July __, 2017.

(4) Represents 9,600 shares of Common Stock and options to purchase 45,833 shares of Common Stock that are currently exercisable within 60 days of July __, 2017.

(5) Represents options to purchase 45,833shares of Common Stock that are currently exercisable within 60 days of July __, 2017.

(6) Represents 67,491 shares of Common Stock and options to purchase 33,340 shares of Common Stock that are currently exercisable within 60 days of July __, 2017.

2017 Proxy

Total shares held at 2016 Proxy Vote 67,145. Notice the lack of deadline to exercise options.

Directors and Named Executive Officers:
B. Sonny Bal, M.D. (1) 6,557 *
David W. Truetzel (2) 33,137 *
Jeffrey S.White (3) 4,724 *
Eric A. Stookey (4) 4,084 *
Ty Lombardi (5) 7,675 *
Bryan McEntire (6) 10,968 *
All executive officers and directors as a group (6 persons) 67,145 0.6 %




* Represents beneficial ownership of less than 1% of the shares of our common stock

(1) Consists of 1,716 shares of common stock held by Dr. Bal, 2,260 shares of common stock held by Dr. Bal and his spouse, 2,484 common stock options and 97 common stock warrants.

(2) Consists of 1,575 shares of common stock held by Mr. Truetzel, 23,640 shares of common stock held by Truetzel Revocable Trust of which Mr. Truetzel and his spouse are the sole beneficiaries, and 81 common stock warrants.

(3) Consists of 640 shares of common stock and 4,084 common stock options.

(4) Consists of 4,084 common stock options.

(5) Consists of 3,467 shares of common stock and 4,208 common stock options.

(6) Consists of 4,500 shares of common stock and 6,468 common stock options.

2016 Proxy