Clarification determined..
Effective December 26, 2018, the Company entered into an Executive Employment Agreement with Mr. Grasser the term of which shall continue through December 31, 2021. Pursuant to the Executive Employment Agreement, Mr. Grasser will receive an annual base salary of $250,000 (the “Base Salary”) and incentive stock options to purchase 250,000 shares of the Company’s common stock under the Company’s 2013 Amended and Restated Equity Incentive Plan, subject to the approval by the Company’s Compensation Committee (the “Stock Options”). The Stock Options will have a strike price based on the closing price of the Company’s common stock the day prior to grant and will vest over a period of three years, with 33% vesting on the one-year anniversary of grant and the remaining 67% vesting in a series of 24 equal monthly increments, subject to continued employment, with customary provisions for acceleration upon a change of control. Mr. Grasser is also eligible to receive an annual performance bonus in an amount not to exceed 20% of Mr. Grasser’s then effective Base Salary to be determined by the Compensation Committee of the Company’s Board of Directors.
There are no arrangements or understandings between Mr. Grasser and any other person pursuant to which Mr. Grasser was appointed as an officer of the Company. Mr. Grasser is not a participant in, nor is he to be a participant in, any related-person transaction or proposed related-person transaction required to be disclosed by Item 404(a) of Regulation S-K under the Securities Exchange Act of 1934, as amended. There are no familial relationships between Mr. Grasser and any of the Company’s directors, executive officers or persons nominated or chosen by the Company to become a director or executive officer.
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Section 2. Item 404(a) — Transactions with related persons
Question 2.01
Question: Item 404(a) requires, in pertinent part, disclosure of any transaction since the beginning of the registrant’s last fiscal year between the registrant and any 5 percent shareholder where the amount involved exceeds $120,000 and the 5 percent shareholder has a direct or indirect material interest in the transaction. Is disclosure required of such a transaction that occurred since the beginning of the registrant’s last fiscal year, but prior to the date the person became a 5 percent shareholder?
Answer: Disclosure is required if the transaction: (a) was continuing (such as through the ongoing receipt of payments) after the date the person became a 5 percent shareholder; or (b) resulted in the person becoming a 5 percent shareholder. If the transaction concluded before the person became a 5 percent shareholder, disclosure would not be required. [March 13, 2007]
Question 2.02
Question: How does a company value unexercised, in-the-money stock options for purposes of determining whether the $120,000 threshold of Item 404(a) has been met?
Answer: The value of unexercised, in-the-money options should be determined for Item 404(a) purposes by determining the difference between the fair market value of the securities underlying the options and the exercise or base price of the options. Use of the Black-Scholes or binomial option pricing method also would be appropriate, provided that such use and the underlying assumptions are clearly disclosed and the value thus calculated is greater than zero and is otherwise reasonably related to the unrealized gain. [March 13, 2007]
