Document:

tcon-ex49_470.htm

Exhibit 4.9

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS SET FORTH IN SECTIONS 5.3 AND 5.4 BELOW, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN FORM AND SUBSTANCE SATISFACTORY TO THE COMPANY, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

WARRANT TO PURCHASE COMMON STOCK

Company:  TRACON PHARMACEUTICALS, INC.

Number of Shares of Common Stock: [$140,000/Warrant Price]

Warrant Price:  $2.61 per share [10-day average stock price at closing]

Issue Date: May 3, 2018

Expiration Date:  May 3, 2025See also Section 5.1(b).

	
Credit Facility:
	
This Warrant to Purchase Common Stock (“Warrant”) is issued in connection with that certain Amended and Restated Loan and Security Agreement dated as of May 13, 2015, between Silicon Valley Bank and the Company (as the same has been and may from time to time be amended, modified, supplemented or restated, the “Loan Agreement”).

THIS WARRANT CERTIFIES THAT, for good and valuable consideration, SILICON VALLEY BANK (together with any successor or permitted assignee or transferee of this Warrant or of any shares issued upon exercise hereof, “Holder”) is entitled to purchase the number of fully paid and non-assessable shares (the “Shares”) of the above-stated common stock (the “Common Stock”) of the above-named company (the “Company”) at the above-stated Warrant Price, all as set forth above and as adjusted pursuant to Section 2 of this Warrant, subject to the provisions and upon the terms and conditions set forth in this Warrant.  Reference is made to Section 5.4 of this Warrant whereby Silicon Valley Bank shall transfer this Warrant to its parent company, SVB Financial Group.

SECTION 1. EXERCISE.

	
1.1
	
Method of Exercise.  Holder may at any time and from time to time exercise this Warrant, in whole or in part, by delivering to the Company this Warrant together with a duly executed Notice of Exercise in substantially the form attached hereto as Appendix 1 and, unless Holder is exercising this Warrant pursuant to a cashless exercise set forth in Section 1.2, a check, wire transfer of same-day funds (to an account designated by the Company), or other form of payment acceptable to the Company for the aggregate Warrant Price for the Shares being purchased.  In no event shall an original ink-signed paper copy of this Warrant be required for any exercise of a Holder’s rights hereunder, nor shall this Warrant or any physical copy thereof be required to be physically surrendered at the time of any exercise hereof.

	
1.2
	
Cashless Exercise.  On any exercise of this Warrant, in lieu of payment of the aggregate Warrant Price in the manner as specified in Section 1.1 above, but otherwise in accordance with the requirements of Section 1.1, Holder may elect to receive Shares equal to the value of this Warrant, or portion hereof as to which this Warrant is being exercised.  Thereupon, the Company shall issue to the Holder such number of fully paid and non-assessable Shares as are computed using the following formula: 

X = Y(A-B)/A

 

1

 

where:

	
 
	
X =
	
the number of Shares to be issued to the Holder;

	
 
	
Y =
	
the number of Shares with respect to which this Warrant is being exercised (inclusive of the Shares surrendered to the Company in payment of the aggregate Warrant Price);

	
 
	
A =
	
the Fair Market Value (as determined pursuant to Section 1.3 below) of one Share; and

	
 
	
B =
	
the Warrant Price.

	
1.3
	
Fair Market Value.  If the Company’s Common Stock is then traded or quoted on a nationally recognized securities exchange, inter-dealer quotation system or over-the-counter market (a “Trading Market”), the fair market value of a Share shall be the closing price or last sale price of a share of Common Stock reported for the Business Day immediately before the date on which Holder delivers this Warrant together with its Notice of Exercise to the Company.  If the Company’s Common Stock is not traded in a Trading Market, the Board of Directors of the Company shall determine the fair market value of a Share in its reasonable good faith judgment.

	
1.4
	
Delivery of Certificate and New Warrant.  Within a reasonable time after Holder exercises this Warrant in the manner set forth in Section 1.1 or 1.2 above, the Company shall deliver to Holder a certificate representing the Shares issued to Holder upon such exercise and, if this Warrant has not been fully exercised and has not expired, a new warrant of like tenor representing the Shares not so acquired.

	
1.5
	
Replacement of Warrant.  

	
(a)
	
Paper Original Warrant.  On receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory in form, substance and amount to the Company or, in the case of mutilation, on surrender of this Warrant to the Company for cancellation, the Company shall, within a reasonable time, execute and deliver to Holder, in lieu of this Warrant, a new warrant of like tenor and amount.

	
(b)
	
Electronic Original Warrant.  If at any time this Warrant is rejected by any person (including but not limited to, paying or escrow agents) or any such person fails to comply with the terms of this Warrant based on this Warrant being presented to such person as an electronic record, a printout thereof, or any signature hereto being in electronic form, the Company, shall, promptly upon Holder’s request without indemnity, execute and deliver to Holder, in lieu of electronic original versions of this warrant, a new warrant of like tenor and amount in paper form with original signatures.

	
1.6
	
Treatment of Warrant Upon Acquisition of Company.

	
(a)
	
Acquisition.  For the purpose of this Warrant, “Acquisition” means any transaction or series of related transactions involving: (i) the sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company (ii) any merger or consolidation of the Company into or with another person or entity (other than a merger or consolidation effected exclusively to change the 

 

 

 

		
Company’s domicile), or any other corporate reorganization, in which the stockholders of the Company in their capacity as such immediately prior to such merger, consolidation or reorganization, own less than a majority of the Company’s (or the surviving or successor entity’s) outstanding voting power immediately after such merger, consolidation or reorganization; or (iii) any sale or other transfer by the stockholders of the Company of shares representing at least a majority of the Company’s then-total outstanding combined voting power.

	
(b)
	
Treatment of Warrant at Acquisition.    In the event of an Acquisition in which the consideration to be received by the Company’s stockholders consists solely of cash, solely of Marketable Securities or a combination of cash and Marketable Securities (a “Cash/Public Acquisition”), and the fair market value of one Share as determined in accordance with Section 1.3 above would be greater than the Warrant Price in effect on such date immediately prior to such Cash/Public Acquisition, and Holder has not exercised this Warrant pursuant to Section 1.1 above as to all Shares, then this Warrant shall automatically be deemed to be Cashless Exercised pursuant to Section 1.2 above as to all Shares effective immediately prior to and contingent upon the consummation of a Cash/Public Acquisition.  In connection with such Cashless Exercise, Holder shall be deemed to have restated each of the representations and warranties in Section 4 of the Warrant as of the date thereof and the Company shall promptly notify the Holder of the number of Shares (or such other securities) issued upon exercise.  In the event of a Cash/Public Acquisition where the fair market value of one Share as determined in accordance with Section 1.3 above would be less than the Warrant Price in effect immediately prior to such Cash/Public Acquisition, then this Warrant will expire immediately prior to the consummation of such Cash/Public Acquisition.

	
(c)
	
Upon the closing of any Acquisition other than a Cash/Public Acquisition defined above, the acquiring, surviving or successor entity shall assume the obligations of this Warrant, and this Warrant shall thereafter be exercisable for the same securities and/or other property as would have been paid for the Shares issuable upon exercise of the unexercised portion of this Warrant as if such Shares were outstanding on and as of the closing of such Acquisition, subject to further adjustment from time to time in accordance with the provisions of this Warrant.

	
(d)
	
As used in this Warrant, “Marketable Securities” means securities meeting all of the following requirements: (i) the issuer thereof is then subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and is then current in its filing of all required reports and other information under the Act and the Exchange Act; (ii) the class and series of shares or other security of the issuer that would be received by Holder in connection with the Acquisition were Holder to exercise this Warrant on or prior to the closing thereof is then traded in a Trading Market, and (iii) following the closing of such Acquisition, Holder would not be restricted from publicly re-selling all of the issuer’s shares and/or other securities that would be received by Holder in such Acquisition were Holder to exercise or convert this Warrant in full on or prior to the closing of such Acquisition, except to the extent that any such restriction (x) arises solely under federal or state securities laws, rules or regulations, and (y) does not extend beyond six (6) months from the closing of such Acquisition.

SECTION 2.  ADJUSTMENTS TO THE SHARES AND WARRANT PRICE.

	
2.1
	
Stock Dividends, Splits, Etc.  If the Company declares or pays a dividend or distribution on the outstanding shares of the Common Stock payable in securities or property (other than cash), then upon exercise of this Warrant, for each Share acquired, Holder shall receive, without additional 

 

 

 

		
cost to Holder, the total number and kind of securities and property which Holder would have received had Holder owned the Shares of record as of the date the dividend or distribution occurred.  If the Company subdivides the outstanding shares of the Common Stock by reclassification or otherwise into a greater number of shares, the number of Shares purchasable hereunder shall be proportionately increased and the Warrant Price shall be proportionately decreased.  If the outstanding shares of the Common Stock are combined or consolidated, by reclassification or otherwise, into a lesser number of shares, the Warrant Price shall be proportionately increased and the number of Shares shall be proportionately decreased.

	
2.2
	
Reclassification, Exchange, Combinations or Substitution.  Upon any event whereby all of the outstanding shares of the Common Stock are reclassified, exchanged, combined, substituted, or replaced for, into, with or by Company securities of a different class and/or series, then from and after the consummation of such event, this Warrant will be exercisable for the number, class and series of Company securities that Holder would have received had the Shares been outstanding on and as of the consummation of such event, and subject to further adjustment thereafter from time to time in accordance with the provisions of this Warrant.  The provisions of this Section 2.2 shall similarly apply to successive reclassifications, exchanges, combinations, substitutions, replacements or other similar events. 

	
2.3
	
Intentionally Omitted.

	
2.4
	
Intentionally Omitted.

	
2.5
	
No Fractional Share.  No fractional Share shall be issuable upon exercise of this Warrant and the number of Shares to be issued shall be rounded down to the nearest whole Share.  If a fractional Share interest arises upon any exercise of the Warrant, the Company shall eliminate such fractional Share interest by paying Holder in cash the amount computed by multiplying the fractional interest by (i) the fair market value (as determined in accordance with Section 1.3 above) of a full Share, less (ii) the then-effective Warrant Price.

	
2.6
	
Notice/Certificate as to Adjustments.  Upon each adjustment of the Warrant Price, Common Stock and/or number of Shares, the Company, at the Company’s expense, shall notify Holder in writing within a reasonable time setting forth the adjustments to the Warrant Price, class and/or number of Shares and facts upon which such adjustment is based.  The Company shall, upon written request from Holder, furnish Holder with a certificate of its Chief Financial Officer, including computations of such adjustment and the Warrant Price, class and number of Shares in effect upon the date of such adjustment.

SECTION 3.  REPRESENTATIONS AND COVENANTS OF THE COMPANY.

	
3.1
	
Representations and Warranties.  The Company represents and warrants to, and agrees with, the Holder as follows:

	
(a)
	
All Shares which may be issued upon the exercise of this Warrant, shall, upon issuance, be duly authorized, validly issued, fully paid and non-assessable, and free of any liens and encumbrances except for restrictions on transfer provided for herein or under applicable federal and state securities laws.  The Company covenants that it shall at all times cause to be reserved and kept available out of its authorized and unissued capital stock such number of securities as will be sufficient to permit the exercise in full of this Warrant. 

 

 

 

	
3.2
	
Notice of Certain Events.  If the Company proposes at any time to:

(a) declare any dividend or distribution upon the outstanding shares of the Company’s stock, whether in cash, property, stock, or other securities and whether or not a regular cash dividend;

(b) offer for subscription or sale pro rata to the holders of the outstanding shares any additional shares of any class or series of the Company’s stock (other than pursuant to contractual pre-emptive rights);

(c) effect any reclassification, exchange, combination, substitution, reorganization or recapitalization of the outstanding shares of the Common Stock; or

(d) effect an Acquisition or to liquidate, dissolve or wind up;

then, in connection with each such event, the Company shall give Holder:

(1) in the case of the matters referred to in (a) and (b) above, at least seven (7) Business Days prior written notice of the earlier to occur of the effective date thereof or the date on which a record will be taken for such dividend, distribution, or subscription rights (and specifying the date on which the holders of outstanding shares of the Common Stock will be entitled thereto) or for determining rights to vote, if any, and

(2) in the case of the matters referred to in (c) and (d) above at least seven (7) Business Days prior written notice of the date when the same will take place (and specifying the date on which the holders of outstanding shares of the Common Stock will be entitled to exchange their shares for the securities or other property deliverable upon the occurrence of such event and such reasonable information as Holder may reasonably require regarding the treatment of this Warrant in connection with such event giving rise to the notice). 

Company will also provide information requested by Holder that is reasonably necessary to enable Holder to comply with Holder’s accounting or reporting requirements. 

SECTION 4.  REPRESENTATIONS, WARRANTIES OF THE HOLDER.

The Holder represents and warrants to the Company as follows:

	
4.1
	
Purchase for Own Account.  This Warrant and the Shares to be acquired upon exercise of this Warrant by Holder are being acquired for investment for Holder’s account, not as a nominee or agent, and not with a view to the public resale or distribution within the meaning of the Act.  Holder also represents that it has not been formed for the specific purpose of acquiring this Warrant or the Shares.

	
4.2
	
Disclosure of Information.  Holder is aware of the Company’s business affairs and financial condition and has received or has had full access to all the information it considers necessary or appropriate to make an informed investment decision with respect to the acquisition of this Warrant and its underlying securities.  Holder further has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of this Warrant and its underlying 

 

 

 

		
securities and to obtain additional information (to the extent the Company possessed such information or could acquire it without unreasonable effort or expense) necessary to verify any information furnished to Holder or to which Holder has access.

	
4.3
	
Investment Experience.  Holder understands that the purchase of this Warrant and its underlying securities involves substantial risk.  Holder has experience as an investor in securities of companies in the development stage and acknowledges that Holder can bear the economic risk of such Holder’s investment in this Warrant and its underlying securities and has such knowledge and experience in financial or business matters that Holder is capable of evaluating the merits and risks of its investment in this Warrant and its underlying securities and/or has a preexisting personal or business relationship with the Company and certain of its officers, directors or controlling persons of a nature and duration that enables Holder to be aware of the character, business acumen and financial circumstances of such persons.

	
4.4
	
Accredited Investor Status.  Holder is an “accredited investor” within the meaning of Regulation D promulgated under the Act.

	
4.5
	
The Act.  Holder understands that this Warrant and the Shares issuable upon exercise hereof have not been registered under the Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of the Holder’s investment intent as expressed herein.  Holder understands that this Warrant and the Shares issued upon any exercise hereof must be held indefinitely unless subsequently registered under the Act and qualified under applicable state securities laws, or unless exemption from such registration and qualification are otherwise available.  Holder is aware of the provisions of Rule 144 promulgated under the Act.

4.6No Voting Rights.  Holder, as a Holder of this Warrant, will not have any voting rights until the exercise of this Warrant.

SECTION 5.  MISCELLANEOUS.

	
5.1
	
Term and Automatic Conversion Upon Expiration.

	
(a)
	
Term.  Subject to the provisions of Section 1.6 above, this Warrant is exercisable in whole or in part at any time and from time to time on or before 6:00 PM, Pacific time, on the Expiration Date and shall be void thereafter.

	
(b)
	
Automatic Cashless Exercise upon Expiration.  In the event that, upon the Expiration Date, the fair market value of one Share (or other security issuable upon the exercise hereof) as determined in accordance with Section 1.3 above is greater than the Warrant Price in effect on such date, then this Warrant shall automatically be deemed on and as of such date to be exercised pursuant to Section 1.2 above as to all Shares (or such other securities) for which it shall not previously have been exercised, and the Company shall, within a reasonable time, deliver a certificate representing the Shares (or such other securities) issued upon such exercise to Holder. 

	
5.2
	
Legends.  The Shares (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) shall be imprinted with a legend in substantially the following form:

THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AS 

 

 

 

SET FORTH IN THAT CERTAIN WARRANT TO PURCHASE COMMON STOCK ISSUED BY THE ISSUER TO SILICON VALLEY BANK DATED , 2018, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND LAWS OR IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER, SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS EXEMPT FROM SUCH REGISTRATION.

	
5.3
	
Compliance with Securities Laws on Transfer.  This Warrant and the Shares issuable upon exercise of this Warrant (and the securities issuable, directly or indirectly, upon conversion of the Shares, if any) may not be transferred or assigned in whole or in part except in compliance with applicable federal and state securities laws by the transferor and the transferee (including, without limitation, the delivery of investment representation letters and legal opinions reasonably satisfactory to the Company, as reasonably requested by the Company).  The Company shall not require Holder to provide an opinion of counsel if the transfer is to SVB Financial Group (Silicon Valley Bank’s parent company) or any other affiliate of Holder, provided that any such transferee is an “accredited investor” as defined in Regulation D promulgated under the Act.  Additionally, the Company shall also not require an opinion of counsel if there is no material question as to the availability of Rule 144 promulgated under the Act.

	
5.4
	
Transfer Procedure.  After receipt by Silicon Valley Bank of the executed Warrant, Silicon Valley Bank will transfer all of this Warrant to its parent company, SVB Financial Group.  By its acceptance of this Warrant, SVB Financial Group hereby makes to the Company each of the representations and warranties set forth in Section 4 hereof and agrees to be bound by all of the terms and conditions of this Warrant as if the original Holder hereof.  Subject to the provisions of Section 5.3 and upon providing the Company with written notice, SVB Financial Group and any subsequent Holder may transfer all or part of this Warrant or the Shares issuable upon exercise of this Warrant (or the securities issuable directly or indirectly, upon conversion of the Shares, if any) to any transferee, provided, however, in connection with any such transfer, SVB Financial Group or any subsequent Holder will give the Company notice of the portion of the Warrant being transferred with the name, address and taxpayer identification number of the transferee and Holder will surrender this Warrant to the Company for reissuance to the transferee(s) (and Holder if applicable); and provided further, that any subsequent transferee other than SVB Financial Group shall agree in writing with the Company to be bound by all of the terms and conditions of this Warrant.  

	
5.5
	
Notices.  All notices and other communications hereunder from the Company to the Holder, or vice versa, shall be deemed delivered and effective (i) when given personally, (ii) on the third (3rd) Business Day after being mailed by first-class registered or certified mail, postage prepaid, (iii) upon actual receipt if given by facsimile or electronic mail and such receipt is confirmed in writing by the recipient, or (iv) on the first Business Day following delivery to a reliable overnight courier service, courier fee prepaid, in any case at such address as may have been furnished to the Company or Holder, as the case may be, in writing by the Company or such Holder from time to time in accordance with the provisions of this Section 5.5.  All notices to Holder shall be addressed as follows until the Company receives notice of a change of address in connection with a transfer or otherwise:

SVB Financial Group

Attn:  Treasury Department

3003 Tasman Drive, HC 215

 

 

 

Santa Clara, CA 95054

Telephone: (408) 654-7400

Facsimile:  (408) 988-8317

Email address:  derivatives@svb.com

Notice to the Company shall be addressed as follows until Holder receives notice of a change in address:

Tracon Pharmaceuticals, Inc.

Attn:  Patricia Bitar, Chief Financial Officer

8910 University Center Lane, Suite 700

San Diego, CA 92122

Telephone: _______________

Facsimile: (858) 550-0786

Email: pbitar@traconpharma.com

	
5.6
	
Waiver.  This Warrant and any term hereof may be changed, waived, discharged or terminated (either generally or in a particular instance and either retroactively or prospectively) only by an instrument in writing signed by the party against which enforcement of such change, waiver, discharge or termination is sought.

	
5.7
	
Attorney’s Fees.  In the event of any dispute between the parties concerning the terms and provisions of this Warrant, the party prevailing in such dispute shall be entitled to collect from the other party all costs incurred in such dispute, including reasonable attorneys’ fees.

	
5.8
	
Counterparts; Facsimile/Electronic Signatures; Status as a Certificated Security.  This Warrant may be executed in counterparts, all of which together shall constitute one and the same agreement.  Company, Holder and any other party hereto may execute this Warrant by facsimile or electronic means and each party hereto recognizes and accepts the use of electronic signatures and records by any other party hereto in connection with the execution and storage hereof.  To the extent that this Warrant or any agreement subject to the terms hereof or any amendment hereto is executed, recorded or delivered electronically or by facsimile, it shall be binding to the same extent as though it had been executed on paper with an original ink signature.  The fact that this Warrant is executed, signed, stored or delivered electronically shall not prevent the transfer by any Holder of this Warrant pursuant to Section 5.4 or the enforcement of the terms hereof.  This Warrant, and any copies hereof, shall NOT be deemed to be a “certificated security” within the meaning of Section 8102(a)(4) of the California Commercial Code.  Physical possession of the original of this Warrant or any paper copy thereof shall confer no special status to the bearer thereof.

	
5.9
	
Governing Law.  This Warrant shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its principles regarding conflicts of law.

	
5.10
	
Headings.  The headings in this Warrant are for purposes of reference only and shall not limit or otherwise affect the meaning of any provision of this Warrant.

	
5.11
	
Business Days.  “Business Day” is any day that is not a Saturday, Sunday or a day on which Silicon Valley Bank is closed.

 

 

 

[Remainder of page left blank intentionally]

[Signature page follows]

 

 

 

IN WITNESS WHEREOF, the parties have caused this Warrant to Purchase Common Stock to be executed by their duly authorized representatives effective as of the Issue Date written above.

		
	
“COMPANY”

 

TRACON PHARMACEUTICALS, INC.

 

 

By: /s/ Patricia L Bitar

 

Name: Patricia Bitar

(Print)

Title: Chief Financial Officer                            

 
	
 

 

		
	
“HOLDER”

 

SILICON VALLEY BANK

 

 

By: /s/ Igor DaCruz

 

Name:  Igor DaCruz

(Print)

Title: Vice President

 

 
	
 

 

 

 

 

 

 

APPENDIX 1

NOTICE OF EXERCISE

	
1.
	
The undersigned Holder hereby exercises its right to purchase ___________ shares of the Common Stock of TRACON PHARMACEUTICALS, INC. (the “Company”) in accordance with the attached Warrant to Purchase Common Stock, and tenders payment of the aggregate Warrant Price for such shares as follows: 

	
 
	
[    ]
	
Check in the amount of $________ payable to the order of the Company enclosed herewith

	
 
	
[    ]
	
Wire transfer of immediately available funds to the Company’s account 

	
 
	
[    ]
	
Cashless Exercise pursuant to Section 1.2 of the Warrant

	
 
	
[    ]
	
Other [Describe] __________________________________________

	
2.
	
Please issue a certificate or certificates representing the Shares in the name specified below:

___________________________________________

Holder’s Name

 

 

___________________________________________

 

___________________________________________

(Address)

	
3.
	
By its execution below and for the benefit of the Company, Holder hereby restates each of the representations and warranties in Section 4 of the Warrant to Purchase Common Stock as of the date hereof.

HOLDER:

 

_________________________

 

 

By: 

 

Name: 

 

Title: 

 

(Date):tcon-ex101_270.htm

Exhibit 10.1

TRACON PHARMACEUTICALS, INC.

BONUS PLAN

 

 

The TRACON Pharmaceuticals, Inc. (“TRACON” or the “Company”) Bonus Plan (the “Plan”) is designed to reward eligible employees for the achievement of corporate objectives, as well as measured individual objectives that are consistent with and support the overall corporate objectives.

 

ELIGIBILITY

 

All regular employees are eligible to participate in the Plan.  In order to be eligible, a participant must have been in an eligible position for at least three (3) full months prior to the end of the Plan year, and the participant must remain employed through the end of the Plan year and until awards are paid.  If the participant is not employed on the date awards are paid, the participant will not have earned any bonus.  If the participant has been subject to any performance improvement plan or other disciplinary procedure during the Plan year, any award to such individual will be at the discretion of the President/CEO or the Compensation Committee of the Board of Directors (the “Compensation Committee”), and may be reduced or withheld regardless of corporate performance as outlined below. 

 

Change in Status During the Plan Period:

 

	
a.
	
Participants hired during the Plan year:

	
•
	
Participants hired during the Plan year are eligible for a prorated award based on the number of calendar days employed in an eligible position.

	
•
	
Participants hired during the months of October through December are not eligible to participate for the Plan year. 

	
•
	
If an employee has worked in a temporary or consulting capacity for TRACON, this time will NOT impact the eligibility start date which is the date of hire.  Only as an exception and with approval by the Compensation Committee or the Board of Directors will time worked as a consultant be considered when determining the bonus award proration for an employee.

	
b.
	
Promotion/change in level: 

	
•
	
Participants promoted during the Plan year with a change to bonus target and/or bonus corporate and individual performance factor percentages are eligible for an award that will be prorated based on the number of calendar days employed in each eligible position.

	
c.
	
Termination of employment: 

	
•
	
If a participant’s employment is terminated voluntarily prior to the date awards are paid, the participant will not be eligible to receive an award. 

	
•
	
If a participant’s employment is terminated involuntarily prior to the date awards are paid, it will be at the absolute discretion of the Company whether or not an award payment is made.

	
d.
	
Leave of absence:  

	
•
	
Bonus award will be prorated to reflect the calendar days on a leave of absence that exceed 60 calendar days in the Plan year.

 

AWARD CALCULATION

 

Awards will be determined by applying a “bonus percentage” to the participant’s base salary that is in effect at the end of the Plan year, regardless if the salary has changed at any point during the calendar year. 

 

The President/CEO will present to the Compensation Committee/Board of Directors a list of the overall corporate objectives for the applicable Plan year, which are subject to approval by the Compensation Committee/Board of Directors.  All participants in the Plan whose performance is measured in part based on individual performance factors will then develop a list of key individual objectives, which must be approved by the responsible Vice President, Senior Vice President, Chief Officer, or President/CEO.

1

 

 

The relative weight between “corporate and individual performance factors” varies based on the individual’s assigned level within the organization.  The bonus percentage and/or the weighting may be reviewed periodically and may be adjusted for any Plan year by the Compensation Committee.  The bonus percentages and weighting for the performance factors will initially be as follows:

 

						
	
Level/Position
	
 
	
 

	
 
	
 
	
 
	
Individual Factors

	
 
	
Bonus Percentage 
	
Corporate Factor
	
Core Competency
	
Individual Goal Achievement

	
President and CEO
	
50%
	
100%
	
 
	
 

	
Chief Officer
	
40%
	
75%
	
10%
	
15%

	
Senior Vice President
	
35%
	
75%
	
10%
	
15%

	
Vice President
	
30%
	
60%
	
16%
	
24%

	
Senior Director
	
20%
	
40%
	
24%
	
36%

	
Director
	
20%
	
40%
	
24%
	
36%

	
Associate Director
	
20%
	
40%
	
24%
	
36%

	
Senior Manager II, I
	
20%
	
25%
	
30%
	
45%

	
Manager II, I
	
20%
	
25%
	
30%
	
45%

	
Individual Contributor II, I
	
20%
	
25%
	
30%
	
45%

	
Support
	
20%
	
25%
	
30%
	
45%

 

Performance Award Multiplier

 

Separate award multipliers will be established for both the corporate and the individual components of each award.  The award multiplier for the corporate component will be determined by the Compensation Committee/Board of Directors each Plan year, in its sole discretion, based on the achievement of the approved corporate objectives for the Plan year.  The same award multiplier for the corporate component of the award shall be used for all such Plan participants.  

 

The award multiplier for the individual component shall be approved by the responsible Chief Officer or President/CEO and consists of the Core Competency Assessment and the achievement of Individual goals, each weighted 40% and 60%, respectively.

 

2

 

The ratings used for the Annual Performance Core Competency Assessment is as follows: 

 

5 = Exceptional; Far exceeds all goals and objectives on a consistent basis

4 = Exceeds; Consistently exceeds goals and objectives

3 = Meets; Consistently meets goals and objectives

2 = Marginal; Met some goals and objectives but requires improvement

          1 = Unsatisfactory

 

		
	
Numerical Rating Scale
	
Multiplier for Core Competency Individual Performance

	
5
	
120.00%

	
4.9
	
118.37%

	
4.8
	
116.70%

	
4.7
	
115.03%

	
4.6
	
113.36%

	
4.5
	
111.69%

	
4.4
	
110.02%

	
4.3
	
108.35%

	
4.2
	
106.68%

	
4.1
	
105.01%

	
4
	
103.34%

	
3.9
	
101.67%

	
3.8
	
100.00%

	
3.7
	
97.50%

	
3.6
	
95.00%

	
3.5
	
92.50%

	
3.4
	
90.00%

	
3.3
	
87.50%

	
3.2
	
85.00%

	
3.1
	
82.50%

	
3
	
80.00%

	
2.9
	
72.00%

	
2.8
	
64.00%

	
2.7
	
56.00%

	
2.6
	
48.00%

	
2.5
	
40.00%

	
2.4
	
32.00%

	
2.3
	
24.00%

	
2.2
	
16.00%

	
2.1
	
8.00%

	
2
	
0.00%

3

 

 

 

For Executives (Vice President level and above):  The actual performance bonus awarded in any year, if any, may be more or less than the applicable target, depending primarily on the Compensation Committee’s determination of the award multiplier for the corporate component and the executive’s individual performance with respect to the corporate objectives. Whether or not performance bonus is paid for any year is within the discretion of the Compensation Committee/Board of Directors based on such achievement.  

 

Example:

 

Step # 1:    Potential bonus award calculation

Position:Manager

Base salary at end of calendar year:              $100,000

Target bonus percentage:       20%

Potential base bonus:             $ 20,000

 

Step # 2:    Split award target amount based on weighting of performance factors

Potential corporate performance bonus (25%):$ 5,000

Target individual performance bonus (75%):

       Core Competency (40% of 75%, or 30%)                $6,000

       Personal Goal Achievement (60% of 75%, or 45%)   $9,000

           $ 20,000

Step # 2:   Actual bonus award calculation

Payment multipliers are determined and approved based on assessment of corporate and individual

performance, for example:

 

Corporate multiplier                        25.0%   

Core Competency Assessment multiplier         116.7% - performance assessed at 4.8

Personal Goal Objective Performance                85.0%   

 

Corporate component                         $    3,750   ($5,000 x 25.0%)

Individual component:

        Core Competency Assessment                     $    7,002   ($6,000 x 116.7%)

                               Individual Goals Achieved                         $    7,650   ($9,000 x 85.0%)

Total Award                                       $  18,402

 

AWARD PAYMENTS

 

Bonus award payments may be made in cash, through the issuance of stock, stock options or another form of equity award, or by a combination of cash, stock, stock options and/or another form of equity award, at the discretion of the Compensation Committee.  All bonus award payments are subject to applicable tax withholdings.  In the event that the Compensation Committee and/or the Board of Directors elect to pay bonus awards in stock or stock options, the Compensation Committee, in its sole discretion, will make a determination as to the number of shares of stock or stock options to be issued to each Plan participant based, in part, upon the overall corporate performance and each participant’s individual performance, as described.  The issuance of stock and stock options may also be subject to the approval of the Company’s stockholders, and any stock options issued will be subject to the terms and conditions of the Company’s equity incentive award plan, as amended from time to time by the Company.

 

Payment of bonus awards will be made as soon as practicable after the Company’s year-end, but not later than December 31 of the year following the Plan year.   Payments will not be impacted by any benefits, with the exception of elected 401(k) contributions which will be applied. 

 

4

 

PLAN PROVISIONS

 

Governance

 

The Plan will be governed by the Compensation Committee.  The President and/or CEO of TRACON will be responsible for the administration of the Plan.  The Compensation Committee will be responsible for recommending to the Board of Directors a bonus amount for the President and/or CEO (unless such compensation is intended to be qualified, performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended).  Additionally, the Compensation Committee will be responsible for approving any compensation or incentive awards to other executive officers of the Company and all other officers who are subject to the reporting requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended.  All determinations of the Compensation Committee, under the Plan, shall be final and binding on all Plan participants.

 

Compensation Committee’s Absolute Right to Alter or Abolish the Plan

 

The Compensation Committee reserves the right in its absolute discretion to terminate the Plan, or any portion of the Plan, at any time or to alter the terms and conditions under which a bonus will be paid. In the event of the Plan’s termination prior to the payment of a bonus, such bonus will not be payable under this Plan. Such discretion may be exercised any time before, during, and after the Plan year is completed. No participant shall have any vested right to receive any compensation hereunder until actual delivery of such compensation.  Participation in the Plan at any given time does not guarantee ongoing participation.

 

Employment Duration/Employment Relationship

 

This Plan does not, and TRACON’s policies and practices in administering this Plan do not, constitute an express or implied contract or other agreement concerning the duration of any participant’s employment with the Company.  The employment relationship of each participant is “at will” and may be terminated at any time by TRACON or by the participant, with or without cause.

 

 

 

 

 

 

5

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