UNITED STATES
SCHEDULE 14A
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SEELOS THERAPEUTICS, INC.
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SEELOS THERAPEUTICS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of Apricus Biosciences,Seelos Therapeutics, Inc., a Nevada corporation (the “
(1) | To elect |
(2) | To ratify the selection of 2019; |
(3) | To conduct an advisory (non-binding) vote on executive compensation; |
(4) | To |
(5) |
To transact such other business as may properly come before the Annual Meeting or any adjournment(s) thereof. |
The record date for the Annual Meeting is April 12, 2017.5, 2019. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment(s) or postponement(s) thereof. The accompanying Proxy Statement more fully describes the details of the business to be conducted at the Annual Meeting. Our proxy materials (which include the Proxy Statement attached to this notice, our most recent Annual Report on Form 10-K and form of proxy card) are also available to you via the Internet at www.proxyvote.com.
By Order of the Board of Directors,
Raj Mehra, Ph.D.
Chief Executive Officer
April 12, 2019
New York, New York
THE BOARD OF DIRECTORS APPRECIATES AND ENCOURAGES YOUR PARTICIPATION IN THE ANNUAL MEETING. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED. ACCORDINGLY, PLEASE VOTE YOUR PROXY VIA THE INTERNET AT WWW.PROXYVOTE.COM OR OVER THE TELEPHONE AT 1-800-690-6903 OR SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD BY MAIL IN THE PRE-PAID ENVELOPE PROVIDED. EVEN IF YOU HAVE VOTED BY PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice, Proxy Statement, Proxy Card and Form 10-K are available at www.proxyvote.com.
SEELOS THERAPEUTICS, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors (the “
Board”) ofSolicitation and Voting Procedures
The solicitation of proxies will be conducted by mail and the Company will bear all costs. These costs will include the expense of preparing and mailing proxy materials for the Annual Meeting and reimbursements paid to brokerage firms and others for their expenses incurred in forwarding solicitation material regarding the Annual Meeting to “
Beneficial Holders” (defined below). The Company has engaged a proxy solicitation firm, Morrow Sodali LLC, 470 West Ave, Stamford, CT 06902, and may conduct further solicitation personally, by telephone or by facsimile with the assistances of our officers, directors and regular employees, none of whom will receive additional compensation for assisting with the solicitation. The Company expects that the out-of-pocket costs associated with solicitation of proxies will be approximately $5,000.As of the Record Date, there were 7,741,78220,213,762 shares of the Company’s Common Stock par value $0.001 per share (the “
Holders of record who hold shares of Common Stock directly on the Record Date must return a proxy by one of the methods described on the proxy card or attend the Annual Meeting in person in order to vote on the proposals. Investors who hold shares of Common Stock indirectly on the Record Date (“
Beneficial Holders”) through a brokerage firm, bank or other financial institution (a “Financial Institution”) must return a voting instruction form to have their shares voted in accordance with their instructions. Financial Institutions have discretion to vote absent instructions with respect to certain routine matters, such as Proposal No. 2, the ratification of the independent registered public accounting firm,The presence, in person or by proxy, of a majority of the outstanding shares of Common Stock on the Record Date, will constitute a quorum for the transaction of business at the Annual Meeting and any adjournments thereof. Abstentions from voting on a proposal and Broker Non-Votes will count for purposes of determining a quorum but will not be counted as votes cast on any proposal. A description of the required vote for each proposal is included within each proposal below.
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We urge any stockholder not planning to attend the Annual Meeting to vote their proxy in advance, whether via the Internet (www.proxyvote.com) or by telephone (1-800-690-6903) or by mailing an executed proxy card to us. The deadline to vote by Internet or by telephone is 11:59 P.M. Eastern Time on Tuesday,Friday, May 16, 2017.
Any holder of record may revoke a proxy submitted in advance of the Annual Meeting by: (i) delivering a written revocation to the Company’s Secretary before the Annual Meeting, (ii) delivering an executed, later-dated proxy or (iii) voting in person at the Annual Meeting.
Beneficial Holders who wish to change or revoke their voting instructions should contact their Financial Institution for information on how to do so. Beneficial Holders who wish to attend the Annual Meeting and vote in person should contact their Financial Institution in order to obtain a “legal proxy,” which will allow them to both attend the meeting and vote in person. Without a legal proxy, Beneficial Holders cannot vote at the Annual Meeting because their Financial Institution may have already voted or returned a Broker Non-Vote on their behalf.
Holders of proxies solicited by this Proxy Statement will vote the proxies received by them as directed on the proxy card or, if no direction is made, then FOR each of the nomineesnominee listed in Proposal No. 1, and FOR each of the other proposals described below.Proposal No. 2 and No. 3 and EVERY YEAR on Proposal No. 4.
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ELECTION OF CLASS III DIRECTORS
Overview
The Company’s Amended and Restated Articles of Incorporation, as amended, provide that the Board is to be divided into three classes as nearly equal in number as possible, with directors in each class serving staggered three-year terms. The total Board size is currently fixed at sixfive directors. The Class I director (whose term expires at the Annual Meeting) is Daniel J. O’Connor, J.D. The Class III directors (whose terms expire at the Annual Meeting)2020 annual meeting of stockholders) are Rusty RayDr. Robin L. Smith and Wendell Wierenga, Ph.D.Richard W. Pascoe. The Class II directors (whose terms expire at the 20182021 annual meeting of stockholders) are Richard W. PascoeRaj Mehra, Ph.D. and Sandford D. Smith.Brian Lian, Ph.D. The Class I directors (whose terms expire at the 2019 annual meeting of stockholders) are Kleanthis G. Xanthopoulos, Ph.D. and Paul V. Maier. Class III directorsdirector elected at the Annual Meeting will hold office until the 20202022 annual meeting of stockholders, and until their successors arehis successor is elected and qualified, unless they resignhe resigns or their seats becomehis seat becomes vacant due to death, removal or other cause in accordance with the Company’s Amended and Restated Bylaws.
As described below, the Board has nominated Rusty Ray and Wendell Wierenga, Ph.D.Daniel J. O’Connor, J.D. for re-election as a Class III directors. EachI director. The nominee for election as a director at the Annual Meeting has indicated theirhis willingness to serve if elected. Should anythe nominee become unavailable for election at the Annual Meeting, the personsperson named on the enclosed proxy as proxy holdersholder may vote all proxies given in response to this solicitation for the election of a substitute nominee chosen by our Board.
Nomination of Directors
The Corporate Governance/Nominating Committee, which acts as the nominating committee of the Board, reviews and recommends potential candidates for election to the Board. In reviewing potential candidates, the Corporate Governance/Nominating Committee considers the qualifications described below under the caption “Board of Directors and Committees and Corporate Governance - Director Nominations and Stockholder Communications.” After reviewing the qualifications of potential Board candidates, the Corporate Governance/Nominating Committee presents its recommendations to the Board, which selects the final director nominees. The Corporate Governance/Nominating Committee recommended each of the nomineesnominee for director identified in this Proxy Statement. We did not pay any fees to any third parties to identify or assist in identifying or evaluating nominees for consideration for election at the Annual Meeting.
Information Regarding Nominees and Incumbent Directors
The Corporate Governance/Nominating Committee has recommended, and the Board has nominated, Rusty Ray and Wendell Wierenga, Ph.D.Daniel J. O’Connor, J.D. to be re-elected as a Class III directorsI director at the Annual Meeting. The following table contains information about the nomineesnominee and about each of the Company’s continuing directors: the year each was first elected a director, their respective ages as of the date of this proxy, the positions currently held with the Company, the year their current term will expire and their current class:
Name | Year Initially Elected | Age | Position(s) | Expiration of Term | Class |
Daniel J. O’Connor, J.D.(1)(2) | 2019 | 54 | Director | 2019 | I |
Dr. Robin L. Smith(1)(3) | 2019 | 54 | Director | 2020 | III |
Richard W. Pascoe | 2013 | 55 | Director | 2020 | III |
Raj Mehra, Ph.D. | 2019 | 59 | Chairman, Chief Executive Officer, President and Interim Chief Financial Officer | 2021 | II |
Brian Lian, Ph.D.(1)(2)(3) | 2019 | 53 | Director | 2021 | II |
Name | Year Initially Elected | Age | Position(s) | Expiration of Term | Class | |||||
Rusty Ray | 2009 | 46 | Director | 2017 | III | |||||
Wendell Wierenga, Ph.D. | 2014 | 69 | Director | 2017 | III | |||||
Richard W. Pascoe | 2013 | 53 | Chief Executive Officer, Secretary & Director | 2018 | II | |||||
Sandford D. Smith | 2014 | 70 | Director | 2018 | II | |||||
Kleanthis G. Xanthopoulos, Ph.D. | 2011 | 58 | Chairman | 2019 | I | |||||
Paul V. Maier | 2012 | 69 | Director | 2019 | I |
(1) | Member of the Audit Committee. |
(2) | Member of the Corporate Governance/Nominating Committee. |
(3) | Member of the Compensation Committee. |
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Class III DirectorsI Director Nominated for Election
The following persons haveperson has been nominated by our Board to be elected as a Class III directorsI director at the Annual Meeting:
Daniel J. O'Connor, J.D. has been a director since December 2009.January 2019. He is the Chair of our Corporate Governance/NominatingAudit Committee and a member of our AuditCorporate Governance/Nominating Committee. He is currently Chief Executive Officer and a partner with 11T Partners, a healthcare-only investment bank. He has worked with a wide varietydirector of clients across the healthcare industry ranging from large pharmaceutical companiesOncoSec Medical Incorporated. Prior to early-stage drug development companies to medical device and service-based companies.that, Mr. Ray was a partner with Brocair Partners, a healthcare investment banking boutique, beginning in 2004 until he formed 11T Partners in 2012. Mr. RayO'Connor served as DeputyPresident, Chief Executive Officer, Director and in other senior roles at Advaxis, Inc., a cancer immunotherapy company, from January 2013 until his resignation in July 2017. Prior to that, Mr. O'Connor was Senior Vice President and General Counsel for eight years with ResourcesBRACCO Diagnostics Inc., a diagnostic imaging company, from 2008 until 2012; Senior Vice President, General Counsel and Secretary for ImClone Systems Incorporated, a biopharmaceutical company, from 2002 until 2008; and General Counsel at PharmaNet (now inVentiv Health Clinical), a clinical research company, from 1998 until 2001. Mr. O'Connor is a 1995 graduate of the Future (“
Class III Directors Continuing in Office until 2020
The following directors will continue in office until the healthcare industry, including his significant business knowledge based on his experience2020 annual meeting of stockholders, or until their earlier resignation or removal in accordance with healthcare-based investment banking.
Dr. Robin L. Smith has been a director since March 2014. HeJanuary 2019. She is a member of our Audit Committee and our Compensation Committee. Dr. Wierenga bringsSmith is a global thought leader in the regenerative medicine industry, one of the fastest growing segments of modern-day medicine. She received her M.D. from Yale University and an M.B.A. from the Wharton School of Business. She served as CEO of Caladrius Biosciences, Inc. (formerly NeoStem Inc.) (Nasdaq: CLBS), from 2006 to our2015. In 2007, Dr. Smith founded The Stem for Life Foundation (SFLF), a nonpartisan, 501(c)(3) educational organization devoted to fostering global awareness of the potential for regenerative medicine to treat and cure a range of deadly diseases and debilitating medical conditions, as opposed to merely treating their symptoms, and has served as Chairman of the Board over four decadesand President of the Stem for Life Foundation since its inception and now the expanded Cura Foundation. Dr. Smith was appointed as Clinical Associate Professor, Department of Medicine at the Rutgers, New Jersey Medical School in 2017. In addition, Dr. Smith has extensive experience in research, drug discovery and drug development, including clinical research, regulatory affairs, manufacturing, safety, and medical affairs. He has an extensive background serving as a public companyin executive and board member inlevel capacities for various medical enterprises and healthcare- based entities. She has served on the pharmaceuticalBoard of Directors of Rockwell Medical (Nasdaq: RMTI) since June 2016 and biotechnology industries. He most recently served as ExecutiveProLung Inc. since February 2017, and has been Chairman of the Board of Mynd Analytics (Nasdaq: MYND) since August 2015. She has been co-chairman of the Life Sci advisory board on gender diversity since April 2016. She has been Vice President Research and Development, at Santarus, Inc., a specialty biopharmaceutical company, from June 2011 until its acquisition by Salix Pharmaceuticals, Inc. in 2014. Prior to Santarus, he was Executive Vice President in Research and Development at Ambit Biosciences Corporation from 2007 until 2011 and Neurocrine Biosciences, Inc. from 2003 until joining Ambit. Additionally, Dr. Wierenga served as Chief Executive Officer of Syrrx, Inc. (now part of Takeda Pharmaceutical Company), Senior Vice President of Worldwide Pharmaceutical Sciences, Technologies and Development at Parke-Davis/Warner Lambert (now Pfizer, Inc.), and he spent 16 years at Upjohn Pharmaceuticals in research and drug discovery roles. Dr. Wierenga serves as a member of the boardBoard of directorsDirectors of the following private companies, Patara Pharma LLC, Dermata Therapeutics, LLCScience and Crinetics Pharmaceuticals Inc. He also servesFaith STOQ Foundation in Rome since 2015 and has served on Sanford Health's International Board since 2016 and the Board of Overseers at the NYU Langone Medical Center in New York since 2014. She served on the boardBoard of Concert Pharmaceuticals, Inc., a public company, and serves on the board and as a memberTrustees of the compensation committee atNYU Langone Medical Center from 2006 to 2014, was Chairman of the following other public companies, Ocera Therapeutics Inc.Board of Directors for the New York University Hospital for Joint Diseases from 2004 to 2010 and Cytokinetics Inc. He was previously on the board of directors of Onyx Pharmaceuticals,Signal Genetics, Inc. (acquired by Amgen), Anacor Pharmaceuticals Inc. (acquired by Pfizer)(Nasdaq: SGNL) from July 2014 to February 2016 and Xenoport, Inc. (acquired by Arbor Pharmaceuticals). Additionally, Dr. Wierenga serves on multiple scientific advisory boards, including Concert Pharmaceuticals, Ferring Pharmaceuticals, and aTyr Pharma, Inc. He holds a Ph.D. in ChemistryBioXcel Corporation from Stanford University and a B.A. in Chemistry from Hope College.August 2015 to June 2017. The Board believes Dr. WierengaSmith is qualified to serve as a director based on hisher scientific background and ability to contribute to the Board’s understanding of technical matters relating to the Company’s business, as well as Dr. Wierenga’sSmith’s broader business development and corporate experience.
Richard W. Pascoe
has been a director since March 2013. He has served as the Chairman and Chief Executive Officer of Histogen Inc., a private regenerative medicine company, since January 2019. He previously served as our Chief Executive Officer4
Somaxon, Mr. Pascoe was with ARIAD Pharmaceuticals, Inc., a specialty pharmaceutical company where he was most recently Senior Vice President and Chief Operating Officer. Prior to joining ARIAD in 2005, Mr. Pascoe held a series of senior management roles at King Pharmaceuticals, Inc. (acquired by Pfizer Inc.), including Senior Vice President positions in both marketing and sales, as well as Vice President positions in both international sales and marketing and hospital sales. Prior to King, Mr. Pascoe was in the commercial groups at Medco Research, Inc. (acquired by King), COR Therapeutics, Inc. (acquired by Millennium Pharmaceuticals Inc., the Takeda Oncology Company), B. Braun Interventional and The BOC Group. Mr. Pascoe is a member of the board of directors of KemPharm, Inc., as well as a member of the company’scompany's audit and compensation committees and its lead independent director. He serves as a member of the board of directors of the Johnny Mac Soldiers Fund, a charity for military veterans. Mr. Pascoe is also a member of the board of directors of BIOCOM, as well as its Vice-President of Industry. Mr. Pascoe served as a Commissioned Officer with the U.S. Army 24th Infantry Division.Division and continues to serve as a Civilian Aid to the Secretary of the Army. He is a graduate of the United States Military Academy at West Point where he received a B.S. degree in Leadership. Mr. Pascoe was appointed to the Board in connection with his appointment as our Chief Executive Officer. The Board believes Mr. Pascoe is qualified to serve as a director based on the depth and diversity of his experience in senior management of public pharmaceutical companies and his personal and professional integrity, ethics and values.
Class III Directors Continuing in Office until 2019
The following directors will continue in office until the 20192021 annual meeting of stockholders, or until their earlier resignation or removal in accordance with our Bylaws:
Dr. Raj Mehra has been our President, Chief Executive Officer, Interim Chief Financial Officer and Chairman of the Board of Directors since January 2019. Prior to founding Seelos, Dr. Mehra spent nine years at Auriga USA, LLC as a Managing Director focused on private and public equity investments in global healthcare companies. Prior to Auriga, Dr. Mehra was the sector head for healthcare equity investments at Bennett Lawrence Management, LLC in New York. He also founded and managed a long-short equity hedge fund at Weiss, Peck & Greer LLC. Dr. Mehra started his career as an investment professional at Cowen Asset Management, LLC. Dr. Mehra holds M.S., M.Phil., Ph.D.
, JD and MBA degrees from Columbia University in New York. He is also a graduate of Indian Institute of Technology, Kanpur, where he was ranked first in his class. The Board believes Dr. Mehra is qualified to serve as our chairman based on his experience in the healthcare industry, including his significant business knowledge based on his experience with healthcare-based investment banking.Dr. Brian Lian has been a director since November 2011January 2019. He is the Chair of our Compensation Committee, the Chair of our Corporate Governance/Nominating Committee and became Chairmana member of the Board in December 2013. Dr. Xanthopoulosour Audit Committee. He is an experienced and visionary leader in the biotechnology and pharmaceutical research industries, with a strong foundation in both operations and corporate development. He has been a Managing General Partner at Cerus Advisors, a life sciences investment company, since August 2015. From 2007 to June 2015, he was thecurrently President and Chief Executive Officer and a memberDirector of the board of directors of RegulusViking Therapeutics, Inc. (RGLS).(Nasdaq: VKTX), a biopharmaceutical company. Dr. Lian has over 15 years of experience in the biotechnology and financial services industries. Prior to joining Regulus in 2007, Dr. XanthopoulosViking, he was thea Managing Director and Senior Research Analyst at SunTrust Robinson Humphrey, an investment bank, from 2012 to 2013. At SunTrust Robinson Humphrey, he was responsible for coverage of Enterprise Partners Venture Capital. He co-founded Anadys Pharmaceuticals, Inc., served as their Presidentsmall and Chief Executive Officermid-cap biotechnology companies with an emphasis on companies in the diabetes, oncology, infectious disease and neurology spaces. Prior to SunTrust Robinson Humphrey, he was Managing Director and Senior Research Analyst at Global Hunter Securities, an investment bank, from 20002011 to 2006, and remained2012. Prior to Global Hunter Securities, he was Senior Healthcare Analyst at The Agave Group, LLC, a director until its acquisition by Roche inregistered investment advisor, from 2008 to 2011. Before that, Dr. Xanthopoulos was Vice President at Aurora Biosciences (acquired by Vertex Pharmaceuticals) from 1997Prior to 2000, and Section Head of the National Human Genome Research Institute from 1995 to 1997. Previously,The Agave Group, he was an Associate ProfessorExecutive Director and Senior Biotechnology Analyst at the Karolinska Institute, Stockholm, Sweden.CIBC World Markets, an investment bank, from 2006 to 2008. Prior to CIBC, he was a research scientist in small molecule drug discovery at Amgen, a biotechnology company. Prior to Amgen, he was a research scientist at Microcide Pharmaceuticals, a biotechnology company. Dr. Xanthopoulos is a memberLian holds an MBA in accounting and finance from Indiana University, an MS and Ph.D. in organic chemistry from The University of the board of directors of the Biotechnology Industry Organization (BIO) and Zosano Pharma Inc. (ZSAN) and he is a co-founderMichigan, and a member of the board of directors of Sente, Inc. Additionally, Dr. Xanthopoulos received the Ernst & Young Entrepreneur of the Year AwardBA in Health Sciences in 2006 and was named Most Admired CEO by the San Diego Business Journal in 2013. An Onassis Foundation Scholar, Dr. Xanthopoulos received his B.Sc. in Biology with honorschemistry from Aristotle University of Thessaloniki, Greece, and his M.Sc. degree in Microbiology and Ph.D. degree in Molecular Biology from the University of Stockholm, Sweden, and a Postdoctoral Research Fellowship at The Rockefeller University, New York.Whitman College. The Board believes Dr. XanthopoulosLian is qualified to serve as a director based on his scientific background and ability to contribute toexperience in the Board’s understanding of technical matters relating to the Company’shealthcare industry, including his significant business as well as Dr. Xanthopoulos’ broader business development and corporate experience.
Vote Required and Majority Vote Standard
Members of the Board are elected by a plurality vote. However, pursuant to the Company’s corporate governance guidelines, if the number of nominees for election to the Board is equal to, or less than, the number of seats open for election and a nominee receives a greater number of votes “withheld” than votes “for” such nominee’s election then such nominee must submit an offer of resignation to the Board. The Corporate
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Governance/Nominating Committee will then consider the offer of resignation and other relevant circumstances and recommend a course of action to the Board. The disinterested members of the Board will then determine whether to accept the offer of resignation.
Any shares that are not voted, for any reason, including abstentions and Broker Non-Votes, will not be counted as votes cast and will not affect the outcome of the election of directors.
Holders of proxies solicited by this Proxy Statement will vote the proxies received by them as directed on the proxy card or, if no direction is made, then FOR the election of the nomineesnominee named above.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR6
RATIFICATION OF APPOINTMENT OF INDEPENDENT
The Audit Committee of the Board has selected BDO USA,KPMG LLP (“
On April 3, 2019, the Company, at the discretion of the Audit Committee of the Board, dismissed BDO as the Company’s independent registered public accounting firm. The Company then engaged KPMG to serve as the Company’s independent registered public accounting firm. The Company filed a Current Report on Form 8-K on April 8, 2019 reporting this change. BDO was not engaged to audit the Company’s financial statements for Independent Registered Public Accounting Firm
The reports of BDO on the Company’s consolidated financial statements for the fiscal years ended December 31, 2018 and 2017 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that the report of BDO on the Company’s consolidated financial statements for each of the fiscal years ended December 31, 2018 and 2017 contained an explanatory paragraph describing conditions that raise substantial doubt about the Company’s ability to continue as a going concern.
During the fiscal years ended December 31, 20162018 and 2017 and the subsequent interim period through April 3, 2019, there have been no “disagreements” (as defined in Item 304(a)(1)(iv) of Regulation S-K and related instructions) with BDO on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of BDO, would have caused BDO to make reference thereto in their reports on the consolidated financial statements for such fiscal years.
During the fiscal years ended December 31, 2015,2018 and 2017 and any subsequent interim period through April 3, 2019, there have been no “reportable events” (as defined in Item 304(a)(1)(v) of Regulation S-K).During the fiscal years ended December 31, 2018 and 2017 and the subsequent interim period through April 3, 2019, neither the Company, nor anyone on its behalf, has consulted with BDOKPMG regarding either (i) the application of accounting principles to a specificspecified transaction, either completed or proposed, or (ii) the type of audit opinion that might be rendered on the Company's consolidated financial statements of the Company, and in the case of either (i) or (ii), ano written report or oral advice was provided to the Company by KPMG that BDOKPMG concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issues,issue; or (iii)(ii) any matter that was either the subject of a disagreement within the meaning of“disagreement” (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or (iv) anya “reportable event” within the meaning of(as that term is defined in Item 304(a)(1)(v) of Regulation S-K.
Fees for Independent Registered Public Accounting Firm
The following is a summary of the fees billed to the Company by BDO for professional services rendered for the fiscal years ended December 31, 20162018 and 2015,2017, respectively:
2018 | 2017 | |||||
Audit Fees(1) | $ | 394,789 | $ | 349,284 | ||
Tax Fees(2) | 21,500 | 101,300 | ||||
Total All Fees | $ | 416,289 | $ | 450,584 |
(1) | Audit fees consist of estimated fees for professional services performed by BDO for the audit of our annual financial statements that will be included in our Form 10-K filing and review of financial statements included in our quarterly Form 10-Q filings, reviews of registration statements and issuances of consents, comfort letters and services that are normally provided in connection with statutory and regulatory filings or engagements. |
2016 | 2015 | |||||||
Audit Fees (1): | $ | 358,000 | $ | 340,000 | ||||
Other Fees: | ||||||||
Audit-Related Fees (2) | — | — | ||||||
Tax (3) | 24,000 | 20,000 | ||||||
All Other Fees (4) | — | — | ||||||
Total Other Fees | 24,000 | 20,000 | ||||||
Total All Fees | $ | 382,000 | $ | 360,000 |
(2) | Consists of fees billed for tax compliance and consulting. |
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Pre-Approval Policies and Procedures
All audit and non-audit services provided by BDOKPMG must be pre-approved by the Audit Committee. BDOKPMG will provide the Audit Committee with an engagement letter during the first half of the fiscal year, outlining the scope of the proposed services and estimated fees for the fiscal year. Pre-approval may be given for a category of services, provided that (i) the category is reasonably narrow and detailed and (ii) the Audit Committee establishes a fee limit for such category. The Audit Committee may delegate to any other member of the Audit Committee the authority to grant pre-approval of permitted non-audit services to be provided by BDOKPMG between Audit Committee meetings; provided, however, that any such pre-approval shall be presented to the full Audit Committee at its next scheduled meeting. The Audit Committee pre-approved all audit and permitted non-audit services provided by BDO in fiscal 20162018 and 2015.
Required Vote
Assuming that a quorum is present at the Annual Meeting, approval of this proposal requires the affirmative vote of the majority of the votes cast (meaning the number of shares voted “for” the proposal must exceed the number of shares voted “against” the proposal). Abstentions from voting on the proposal and Broker Non-Votes will not be counted as votes cast and accordingly
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FORRATIFICATION OF THE APPOINTMENT OF8
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Our executive compensation program embodies a pay-for-performance philosophy that supports the Company’sour business strategy and aligns the interests of our executives with our stockholders. In particular, our compensation program rewards financial, strategic and operational performance and the goals set for each performance category support our short and long-term plans.
We are requesting that our stockholders vote to approve the compensation of our Named Executive Officers (defined below) as described below under “Executive Compensation” pursuant to the SEC’s compensation disclosure rules, which disclosures include the compensation tables and the narrative discussion following the compensation tables.
This advisory vote is generally referred to as a “say-on-pay vote” and is being provided pursuant to Section 14A of the Securities Exchange Act of 1934, as amended (the “
Exchange Act”). In accordance with the results of the advisory vote held at our 2013 annual meeting of stockholders on the frequency of future say-on-pay votes, we are conducting say-on-pay votes every year.The Board is asking stockholders to cast an advisory (non-binding) vote
FOR the following resolution:“RESOLVED, that the compensation paid to the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the compensation tables and narrative discussion within the section of the Company’s proxy statement entitled “Executive Compensation,” is hereby APPROVED.”
Although the vote we are asking you to cast is non-binding, the Compensation Committee and the Board value the views of our stockholders and will consider the outcome of the vote when determining future compensation arrangements for our Named Executive Officers.
Required Vote
Assuming that a quorum is present at the Annual Meeting, approval of this proposal requires the affirmative vote of the majority of the votes cast (meaning the number of shares voted “for” the proposal must exceed the number of share voted “against” the proposal). Abstentions from voting on the proposal and Broker Non-Votes will not be counted as votes cast and accordingly will have no effect upon the outcome of the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FORAPPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION PAID TO THE COMPANY’S NAMED EXECUTIVE OFFICERS, AS DISCLOSED PURSUANT TO ITEM 402 OF REGULATION S-K, INCLUDING THE COMPENSATION TABLES AND NARRATIVE DISCUSSION WITHIN THE SECTION OF THIS PROXY STATEMENT ENTITLED “EXECUTIVE COMPENSATION”.9
ADVISORY VOTE ON FREQUENCY OF AN AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK TO A TOTAL NUMBER OF 30,000,000 SHARES
In this Proposal No. 4, the Board recommendsof Directors is asking stockholders to cast an advisory (non-binding) vote on how frequently we should have say-on-pay votes in the future. Stockholders will be able to mark the enclosed proxy card or voting instruction form on whether to hold say-on-pay votes every one, two or three years. Alternatively, you may indicate that you are abstaining from voting.
Recommendation of Board
After careful consideration of the reasons described below, the Board believes that conducting an advisory vote on executive compensation EVERY YEAR, or an annual vote, is appropriate for the Company and our stockholders at this time.
As described in the Compensation Discussion and Analysis section, one of the core principles of our executive compensation program is to ensure management’s interests are aligned with our stockholders’ interests to support value creation and an annual vote
An annual vote will provide us with an opportunity to respond to stockholders’ sentiments and to implement changes before the next annual meeting. We carefully consider changes to our program to maintain the effectiveness and consistency of the program, which is important in motivating and retaining our employees.
Stockholders will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years or abstain. This advisory vote on the frequency of future advisory “say-on-pay” votes is non-binding on the Board. The option of one year, two years or three years that receives the highest number of votes cast by stockholders will be the frequency for the advisory vote on “say-on-pay” that has been selected by our stockholders. However, because this vote is advisory and not binding, the Board may in the future decide to conduct advisory votes on a more or less frequent basis.
Required Vote
The voting frequency option that receives the highest number of votes cast by stockholders will be the frequency of future advisory resolutions to approve named executive officer compensation that has been selected by our stockholders. However, because this vote is advisory and not binding on the Board or on the Company, the Board may decide that it is in the best interests of our stockholders and the Company to hold future advisory resolutions to approve named executive officer compensation more or less frequently than the amendment to our Amended and Restated Articles of Incorporation to increase the number of authorized shares of Common Stock. On March 15, 2017, the Board approved a proposal to amend the Company’s Amended and Restated Articles of Incorporation to increase the number of authorized shares of our Common Stock from 15,000,000 shares to 30,000,000 (the “
Number of Shares # | As of a % of Shares Outstanding (1) | Dollar Value $ (2) | |||||||||
2006 Plan | |||||||||||
Options outstanding | 127,320 | 1.6 | % | $ | 165,516 | ||||||
Weighted average exercise price of outstanding options | $ | 25.51 | |||||||||
Weighted average remaining term of outstanding options | 6.2 years | ||||||||||
2012 Plan | |||||||||||
Restricted stock units outstanding | 115,115 | 1.5 | % | $ | 149,650 | ||||||
Options outstanding | 287,545 | 3.7 | % | $ | 373,809 | ||||||
Weighted average exercise price of outstanding options | $ | 13.56 | |||||||||
Weighted average remaining term of outstanding options | 8.2 years | ||||||||||
Shares remaining available for grant under 2012 Plan (3) | 80,386 | 1 | % | $ | 104,502 | ||||||
Restated Plan | |||||||||||
Proposed increase in shares available for issuance under Restated Plan (over existing share reserve under 2013 Plan)(4) | 500,000 | 6.5 | % | $ | 650,000 |
Name and Principal Position(s) | Stock Options (#) | Restricted Stock Units (#) | ||||
Richard W. Pascoe, Chief Executive Officer, Secretary & Director | 89,000 | 42,977 | ||||
Brian T. Dorsey, Senior Vice President, Chief Development Officer | 53,000 | 29,189 | ||||
Neil Morton, Senior Vice President, Chief Business Officer | 52,796 | 12,449 | ||||
Barbara Troupin, M.D., Former Senior Vice President and Chief Medical Officer | — | — | ||||
All current executive officers as a group (3 persons) | 194,796 | 84,615 | ||||
All current non-executive directors as a group (5 persons) (1) | 53,700 | — | ||||
All employees, including all current officers who are not executive officers, as a group (12 persons) | 39,049 | 30,500 |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVALONE YEAR AS THE FREQUENCY OF THE AMENDMENT AND RESTATEMENTHOLDING FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION.
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Meetings of the Board
During fiscal 2016,2018, the Board met twentytwenty-three times. Each director attended at least 80%75% of the meetings of the Board and of the meetings of the committees of the Board on which they served during the periods that they served. Although we expect directors to attend each annual meeting of stockholders, we have no formal policy requiring attendance by directors at annual stockholder meetings. All of the members of the Board serving at the time of our 20162018 annual meeting of stockholders attended the 2018 annual meeting of stockholders, except for Kleanthis G. Xanthopoulos, Ph.D. and Wendell Wierenga, Ph.D., attended the 2016 annual meeting of stockholders, in person or by telephone.
Committees of the Board
There are currently three active committees of the Board: the Audit Committee, the Corporate Governance/Nominating Committee and the Compensation Committee. Below are descriptions of our three active Board committees.
The Audit Committee regularly meets with our financial and accounting management and independent auditors and is responsible for the selection and engagement of the Company’s independent auditors. Additionally, the Audit Committee reviews with the independent auditors the scope and results of the audit engagement, approves professional services provided by the independent auditors, reviews the independence of the independent auditors and reviews the adequacy of the internal accounting controls. The Audit Committee acts under a written charter, a copy of which is available on the Company’sour website at
The Corporate Governance/Nominating Committee makes recommendations to the Board regarding the election of directors, as well as providing guidance and oversight on matters relating to corporate governance. The Corporate Governance/Nominating Committee met two timesdid not meet in fiscal 2016,2018, and as of the Record Date, consisted of Rusty RayBrian Lian, Ph.D. (Chair) and Daniel J. O’Connor, J.D., Paul V. Maier and Wendell Wierenga, Ph.D., noneneither of whom waswere an employee of the Company and each of whom met the independence requirements of the NASDAQNasdaq Marketplace. The Corporate Governance/Nominating Committee acts under a written charter, which is available on our website at
The Compensation Committee determines compensation levels for our executive officers, implements incentive programs for officers, directors and consultants, and administers our equity compensation plans. The Compensation Committee met five timesdid not meet in fiscal 2016.2018. As of the Record Date, the Compensation Committee consisted of Sandford D.Brian Lian, Ph.D. (Chair) and Dr. Robin L. Smith, (Chair), Wendell Wierenga, Ph.D. and Kleanthis G. Xanthopoulos, Ph.D., noneneither of whom waswere an employee of the Company and each of whom met the independence requirements of the NASDAQNasdaq Marketplace. The Compensation Committee acts under a written charter, a copy of which is posted on the Company’s website at
The Compensation Committee may delegate authority for day-to-day administration and interpretation of the Company’s various compensation plans, including the selection of participants, the determination of award levels
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and the approval of award documents to our non-officer employees. However, the Compensation Committee may not delegate any authority under those plans for matters affecting the compensation and benefits of the Company’s Named Executive Officers. Compensation recommendations and performance assessments of Named Executive Officers from the Company’s Chief Executive Officer are considered by the Compensation Committee in determining the total compensation packages for Named Executive Officers (excluding the Chief Executive Officer). The Chief Executive Officer is not present for any discussions relating to his compensation.
Director Nominations and Stockholder Communications
Our Corporate Governance/Nominating Committee considers candidates for the Board submitted in writing to the Chair of the committee. Candidates may be submitted by our executive officers, current directors, search firms engaged by the Committee, and subject to the conditions described below, by a stockholder. Information with respect to any proposed candidate shall be provided in writing to the Chair of the Corporate Governance/Nominating Committee at Apricus Biosciences,Seelos Therapeutics, Inc., 11975 El Camino Real, Suite 300 San Diego, California 92130.Park Avenue, 12th Floor, New York, New York 10022. A nominating stockholder shall provide evidence that he, she or it is a stockholder (including information relating to all shares deemed beneficially held by the nominating stockholder) and shall provide the name of the Board candidate(s), and such other information with respect to the nominee required under the rules and regulations of the SEC to be included in our proxy statement if such proposed candidate were to be included therein. In addition, the stockholder shall include a statement that the proposed candidate has no direct or indirect business conflict of interest with the Company, and otherwise meets our standards set forth below.
There are currently no specific, minimum or absolute criteria for Board membership. Candidates are evaluated based upon a number of factors, including but not limited to independence, knowledge, judgment, integrity, character, leadership, skills, education, experience, financial literacy, standing in the community and ability to foster a diversity of backgrounds and views and to complement the Board’s existing strengths. The Committee does not alter its evaluation practices with regards to potential Board candidates recommended by a stockholder.
Any other stockholder communications intended for our management or the Board shall be submitted in writing to the Chair of the Corporate Governance/Nominating Committee (at the Company’s address provided in this proxy statement) who shall determine whether to forward the communication, in his or her discretion and considering the identity of the submitting stockholder and the materiality and appropriateness of the communication.
Director Independence
Our Board has determined that each of Mr. O’Connor and Drs. Xanthopoulos and Wierenga, and Messrs. Ray, MaierLian and Smith met the definitions of independence under the NASDAQNasdaq Marketplace Rules and Section 10A-3 of the Securities Exchange Act of 1934, as amended (the “
Code of Ethics
We have adopted a Code of Ethics that applies to our Chief Executive Officer and to all of our other officers, directors and employees. The Code of Ethics, as amended and restated, is available onin the Corporate Governance section of the Investors page on our website at
Board’s Role in Risk Oversight
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including, but not limited to, risks relating to product candidate development, technological uncertainty, dependence on clients and collaborative partners, uncertainty regarding patents and proprietary rights, comprehensive government regulations, marketing or sales capability or experience, business integration and dependence on key personnel. Management is responsible for the day-to-day management of the risks we face, while our Board as a whole and through its committees, is responsible for the oversight of risk management. Our Board believes its administration of its risk oversight function has not affected its leadership structure.
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Board oversight is conducted primarily through committees of the Board, including the Audit Committee, Compensation Committee and the Corporate Governance/Nominating Committee. However, the full Board has retained responsibility for general risk oversight. Our Board satisfies this responsibility, in part, through reports by each committee chair regarding the committee’s considerations and actions. The Board also has the responsibility of ensuring compliance with the risk management processes designed and implemented by management, which it satisfies through reports directly from the officersofficer responsible for oversight of particular risks within our Company. The Board believes that full and open communication between management and the Board is essential for effective risk management and oversight.
Compensation Committee Interlocks and Insider Participation
During the last completed fiscal year, no member of the Compensation Committee was a current or former officer or employee of the Company. None of our executive officers served as a member of the Compensation Committee (or board of directors serving the compensation function) of another entity where such entity’s executive officers served on our Compensation Committee. None of our officers served as a director of another entity whose executive officers served on our Compensation Committee. Moreover, none of our executive officers served as a member of the compensation committee (or board of directors serving the compensation function) of another entity where such entity’s executive officers served on our Board.
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As of the date of this proxy, our current executive officersofficer and their respective ageshis age and positions are set forth in the following table.
Name | Age | Position | ||
Raj Mehra, Ph.D. | 59 | |||
Chairman, Chief Executive Officer, | ||||
Raj Mehra, Ph.D. is our Chairman, Chief Executive Officer, SecretaryPresident and a member of the Board.Interim Chief Financial Officer. See “Election of Class II Directors - Class“Class II Directors Continuing in OfficerOffice until 2018”2021” above for a discussion of Mr. Pascoe’sDr. Mehra’s business experience.
The following table sets forth the compensation paid by us during the years ended December 31, 20162018 and 20152017 to (1) our principal executive officer during fiscal year 2016,2018 and (2) the other two most highly paid executive officers who were serving as executive officers as of December 31, 2016, and (3) an additional executive who served for part of fiscal 20162018 (collectively our “
Name and Position | Year | Salary | Bonus(4) | Stock Awards(5) | Option Awards(6) | Non-Equity Incentive Plan Compensation(7) | All Other Compensation | Total | ||||||||||||||
Richard W. Pascoe, Former Chief Executive Officer, Secretary and Director(1) | 2018 | $ | 487,396 | $ | — | $ | — | $ | 516,950 | $ | — | $ | 13,728 | $ | 1,018,074 | |||||||
2017 | $ | 487,396 | $ | 97,479 | $ | 64,000 | $ | — | $ | 176,681 | $ | 13,036 | $ | 838,592 | ||||||||
Brian T. Dorsey, Former Senior Former Senior Vice President, Chief Development Officer(2) | 2018 | $ | 319,300 | $ | — | $ | — | $ | 126,600 | $ | — | $ | 13,115 | $ | 459,015 | |||||||
2017 | $ | 319,300 | $ | 63,860 | $ | 48,000 | $ | — | $ | 92,597 | $ | 12,788 | $ | 536,545 | ||||||||
Neil Morton, Former Senior Vice President, Chief Business Officer(3) | 2018 | $ | 275,000 | $ | — | $ | — | $ | 126,600 | $ | — | $ | 12,636 | $ | 414,236 | |||||||
2017 | $ | 275,000 | $ | 55,000 | $ | 48,000 | $ | — | $ | 79,750 | $ | 12,006 | $ | 469,756 |
Name and Position | Year | Salary | Stock Awards (5) | Option Awards (6) | Non-Equity Incentive Plan Compensation (7) | All Other Compensation | Total | |||||||||||||||||||
Richard W. Pascoe, Chief Executive Officer, Secretary and Director (1) | 2016 | $ | 487,396 | $ | 179,555 | $ | 383,891 | $ | — | $ | 12,836 | $ | 1,063,678 | |||||||||||||
2015 | $ | 473,200 | $ | — | $ | 342,413 | $ | 88,555 | $ | 13,124 | $ | 917,292 | ||||||||||||||
Brian T. Dorsey, Senior Vice President, Chief Development Officer (2) | 2016 | $ | 319,300 | $ | 95,250 | $ | 153,559 | $ | — | $ | 12,588 | $ | 580,697 | |||||||||||||
2015 | $ | 310,000 | $ | — | $ | — | $ | 46,500 | $ | 12,938 | $ | 369,438 | ||||||||||||||
Neil Morton, Senior Vice President, Chief Business Officer (3) | 2016 | $ | 275,000 | $ | 46,691 | $ | 130,180 | $ | — | $ | 11,806 | $ | 463,677 | |||||||||||||
2015 | $ | 242,050 | $ | — | $ | 68,483 | $ | 27,191 | $ | 108,369 | $ | 446,093 | ||||||||||||||
Barbara Troupin, former Senior Vice President, Chief Medical Officer (4) | 2016 | $ | 194,382 | $ | 48,750 | $ | — | $ | — | $ | 444,651 | $ | 687,783 | |||||||||||||
2015 | $ | 325,000 | $ | — | $ | — | $ | 48,750 | $ | 62,938 | $ | 436,688 |
(1) | Mr. Pascoe’s employment was terminated on January 24, 2019. Mr. Pascoe’s all other compensation in |
(2) | Mr. Dorsey’s employment was terminated on August 30, 2018. Mr. Dorsey’s all other compensation in |
(3) | Mr. Morton’s employment was terminated on January 24, 2019. Mr. Morton’s all other compensation in |
(4) |
Represents the dollar amount of the |
(5) | Represents the grant date fair value of the stock awards granted in the applicable fiscal year, computed in accordance with FASB ASC Topic 718. For |
(6) | Represents the grant date fair value of the stock option awards granted in 2018, calculated in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. |
(7) | Represents the bonuses paid to the Named Executive Officers in cash in 2018 for 2017 performance pursuant to the Company’s annual incentive program. There were no bonuses paid to |
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Narrative Disclosure to Summary Compensation Table
Base Salary
In general, base salaries for our Named Executive Officers are approved by the Compensation Committee and are initially established through arm’s length negotiation at the time the executive is hired, taking into account such executive’s qualifications, experience, prior salary and market pay levels. Base salaries of our Named Executive Officers are approved and reviewed annually by our Compensation Committee and adjustments to base salaries are based on the scope of an executive’s responsibilities, individual contribution, prior experience and sustained performance. Decisions regarding salary increases may take into account an executive officer’s current salary, equity ownership, and the amounts paid to an executive officer’s peers inside our company by conducting an internal analysis, which compares the pay of an executive officer to other members of the management team. Base salaries are also reviewed in the case of promotions or other significant changes in responsibility. Base salaries are not automatically increased if the Compensation Committee believes that other elements of the Named Executive Officer’s compensation are more appropriate in light of our stated objectives. This strategy is consistent with our intent of offering compensation that is both cost-effective, competitive and contingent on the achievement of performance objectives.
Our executive officersNamed Executive Officers did not receive base salary increases in 2019, 2018 or 2017.
Annual Cash Incentive
The Company also generally provides executive officers with annual performance-based cash bonuses, which are specifically designed to reward executives for overall Company performance in a given year. Corporate goals are established by the Compensation Committee with input from senior management and approved by the full Board. The targetFor 2018, the Compensation Committee considered compensation criteria but declined to formally establish corporate goals and no annual cash bonus amounts relativewere paid to base salary vary depending on each executive’s accountability, scope of responsibilities and potential impact on the Company’s performance andour Named Executive Officers for 2016 were as follows: Mr. Pascoe, 50% of base salary; Mr. Dorsey, 40% of base salary; and Mr. Morton, 40% of base salary.
Equity Compensation
The Compensation Committee considers equity incentives to be important in aligning the interests of our executive officers with those of our stockholders. As part of our pay-for-performance philosophy, the Company’s compensation program tends to emphasize the long-term equity award component of total compensation packages paid to our executive officers.
Because vesting is based on continued employment, our equity-based incentives also encourage the retention of our Named Executive Officers through the vesting period of the awards. In determining the size of the long-term equity incentives to be awarded to our Named Executive Officers, we take into account a number of internal factors, such as the relative job scope, the value of existing long-term incentive awards, individual performance history, prior contributions to us and the size of prior grants. For 2016,2018, while our Compensation Committee reviewed competitive market data prepared by Radford in connection with its grant of long-term equity incentive awards to the Named Executive Officers, such awards were not determined by reference to any specific target level of compensation or benchmarking. Based upon these factors, the Compensation Committee determines the size of the long-term equity incentives at levels it considers appropriate to create a meaningful opportunity for reward predicated on the creation of long-term stockholder value.
To reward and retain our Named Executive Officers in a manner that best aligns employees’ interests with stockholders’ interests, we use stock options and restricted stock unit awards as the primary incentive vehicles for long-term compensation. We believe that stock options and restricted stock unit awards are an effective tooltools for meeting our compensation goal of increasing long-term stockholder value by tying the value of the stock options to our future performance. Because employees are able to profit from stock options only if our stock price increases relative to the stock option’s exercise price, we believe stock options provide meaningful incentives to employees to achieve increases in the value of our stock over time.
We use stock options and restricted stock unit awards to compensate our Named Executive Officers both in the form of initial grants in connection with the commencement of employment and annual refresher grants. Annual grants of optionsequity awards are typically approved by the Compensation committeeCommittee during the first quarter of each year. While we intend that the majority of stock optionequity awards to our employees be made pursuant to initial
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grants or our annual grant program, the Compensation Committee retains discretion to make stock optiongrant equity awards to employees at other times, including in connection with the promotion of an employee, to reward an employee, for retention purposes or for other circumstances recommended by management or the Compensation Committee.
The exercise price of each stock option grant is the fair market value of our Common Stock on the grant date. Time-based stock option awards granted to our Named Executive Officers generally vest over a four-year period as follows: 25% of the shares underlying the option vest on the first anniversary of the date of the vesting commencement date and the remainder of the shares underlying the option vest in equal monthly installments over the remaining 36 months thereafter. From time to time, our Compensation Committee may, however, determine that a different vesting schedule is appropriate. We do not have any stock ownership requirements for our Named Executive Officers.
2018 Awards Granted-Granted – Time-Based Stock Options and Restricted Stock Units
In March 2016,January 2018, the Board, based upon a recommendation by the Compensation Committee, awarded annual stock option awardsoptions to our Named Executive Officers based on its review of the foregoing factors and comparable company information. These awards are described in detail in the “Outstanding Equity Awards as of December 31, 2016 Table”2018” table below. In addition, in April 2016, in connection with his promotion to Senior Vice President and Chief Business Officer, we granted Mr. Morton an additional award of 16,500 stock options. The stock options are subject to time-based vesting are subject to our standard time-based four-year vesting schedule described above.
The Board’s determination regarding each Named Executive Officer’s annual award amount was not based on any quantifiable factors, but instead was based on the Compensation Committee’s subjective analysis of the award levels the Compensation Committee granted time-based restricted stock units to our Named Executive Officersdeemed appropriate for each executive in satisfactionlight of one-half ofvarious factors, including the executives’ 2015 bonus awards as described infact that each executive’s base salary remained below the footnotes to50th percentile for the “SummaryCompany’s peer group for 2015. The final award levels, however, were entirely based on the Compensation Table” above, as follows: Mr. Pascoe, 79,778 restricted stock units; Mr. Dorsey, 41,891 restricted stock units; Mr. Morton, 24,496 restricted stock units; and Dr. Troupin, 43,918 restricted stock units. These time-based restricted stock units vested on February 15, 2017, subject to the executive’s continued employment or service through the vesting date.
Employee Benefit Program
Executive officers, including the Named Executive Officers, are eligible to participate in all of our employee benefit plans, including medical, dental, vision, group life, disability and accidental death and dismemberment insurance, in each case on the same basis as other employees, subject to applicable law. We also provide vacation and other paid holidays to all employees, including executive officers. These benefit programs are designed to enable us to attract and retain our workforce in a competitive marketplace. Health, welfare and vacation benefits ensure that we have a productive and focused workforce through reliable and competitive health and other benefits.
Our retirement savings plan (401(k) Plan) is a tax-qualified retirement savings plan, pursuant to which eligible employees can begin to participate immediately upon employment. The 401(k) Plan elective deferrals and employer contributions are subject to compensation limitations and annual maximum contribution limits as governed by Internal Revenue Service. Employees are eligible to defer up to 100% of compensation and the Company makes safe harbor matching contributions of 100% match of first 3% of compensation contributed, then 50% match of next 2% of compensation contributed.
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The following table shows information regarding our outstanding equity awards as of December 31, 20162018 for the Named Executive Officers:
Option Awards (1) | Stock Awards | ||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Non-Exercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) (5) | Market Value of Shares or Units of Stock That Have Not Vested ($) (6) | Equity Incentive Plan Awards: Number of Unearned shares, Units or Other Rights That Have Not Vested (#) (7) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) (6) | ||||||||||||||||||||
Richard W. Pascoe | 84,375 | 5,625 | — | $ | 25.10 | 3/18/2023 | 25,477 | $ | 33,120 | 17,500 | $ | 22,750 | |||||||||||||||||
14,375 | 15,625 | — | $ | 14.30 | 1/29/2025 | ||||||||||||||||||||||||
— | — | 4,500 | (3) | $ | 14.30 | 1/29/2025 | |||||||||||||||||||||||
— | — | 4,500 | (4) | $ | 14.30 | 1/29/2025 | |||||||||||||||||||||||
— | 50,000 | — | $ | 11.10 | 3/15/2026 | ||||||||||||||||||||||||
Brian T. Dorsey | 15,000 | 15,000 | — | $ | 11.30 | 12/1/2024 | 16,689 | $ | 21,696 | 12,500 | $ | 16,250 | |||||||||||||||||
— | — | 1,500 | (3) | $ | 14.30 | 1/29/2025 | |||||||||||||||||||||||
— | — | 1,500 | (4) | $ | 14.30 | 1/29/2025 | |||||||||||||||||||||||
20,000 | — | $ | 11.10 | 3/15/2026 | |||||||||||||||||||||||||
Neil Morton | 8,249 | 3,750 | — | $ | 23.20 | 3/20/2024 | 7,450 | $ | 9,685 | 5,000 | $ | 6,500 | |||||||||||||||||
7,500 | 500 | — | (2) | $ | 23.20 | 3/20/2024 | |||||||||||||||||||||||
2,874 | 3,126 | $ | 14.30 | 1/29/2015 | |||||||||||||||||||||||||
— | — | 899 | (3) | $ | 14.30 | 1/29/2025 | |||||||||||||||||||||||
— | — | 899 | (4) | $ | 14.30 | 1/29/2025 | |||||||||||||||||||||||
— | 8,499 | $ | 11.10 | 3/15/2026 | |||||||||||||||||||||||||
16,500 | $ | 5.70 | 4/1/2026 |
Option Awards(1) | Stock Awards | ||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options Exercisable (#) | Number of Securities Underlying Unexercised Options Non- Exercisable (#) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) | ||||||||||||||||||
Richard W. Pascoe | — | 8,166 | — | $ | 63.30 | 1/3/2028 | — | — | 3,916 | $ | 752 | ||||||||||||||||
3,000 | — | — | $ | 753.00 | 3/18/2023 | ||||||||||||||||||||||
979 | 20 | — | $ | 429.00 | 1/29/2025 | ||||||||||||||||||||||
1,146 | 520 | — | $ | 333.00 | 3/15/2026 | ||||||||||||||||||||||
Brian T. Dorsey | 2,000 | — | — | $ | 63.30 | 1/3/2028 | — | — | — | — | |||||||||||||||||
1,000 | — | — | $ | 339.00 | 12/1/2024 | ||||||||||||||||||||||
666 | — | — | $ | 333.00 | 3/15/2026 | ||||||||||||||||||||||
Neil Morton | — | 2,000 | — | $ | 63.30 | 1/3/2028 | — | — | 2,666 | $ | 512 | ||||||||||||||||
400 | — | — | $ | 696.00 | 3/20/2024 | ||||||||||||||||||||||
266 | — | — | $ | 696.00 | 3/20/2024 | ||||||||||||||||||||||
195 | 4 | — | $ | 429.00 | 1/29/2025 | ||||||||||||||||||||||
194 | 88 | — | $ | 333.00 | 3/15/2026 | ||||||||||||||||||||||
366 | 183 | — | $ | 171.00 | 4/1/2026 |
(1) | Except as otherwise noted, all stock options have a |
(2) | The vesting of all of Mr. Dorsey’s restricted stock units accelerated upon his termination of employment on August 30, 2018, pursuant to the his release agreement. Includes 416 performance-based |
(3) | Represents performance-based stock options that vested based on the Company’s initiation of one or more Phase II or later clinical trials of assets approved by the Board (each, a “Qualifying Trial”) on or before December 31, 2015, as follows: (1) 25% of the underlying shares vested upon the First Vesting Date (e.g., the enrollment of the first patient in the first Qualifying Trial), which occurred as a result of the randomization and first dosing of the first RayVa Phase 2a patient in December 2014; 1/96th of the total number of shares subject to the option vested monthly thereafter over a 24-month period so that the option was vested and exercisable with respect to 50% of the total number of shares of stock underlying the option on the second anniversary of the First Vesting Date, and (2) 25% of the underlying shares vested upon the Second Vesting Date (e.g., the enrollment of the first patient in the second Qualifying Trial), which occurred as a result of the randomization and first dosing of the first fispemifene patient in May 2015; 1/96th of the total number of shares subject to the option vested monthly thereafter over a 24-month period so that the option was vested and exercisable with respect to 100% of the total number of shares of stock underlying the option on the second anniversary of the Second Vesting Date. |
(4) | Includes performance-based restricted stock units granted in April 2016 (with respect to Mr. Pascoe) and May 2016 (with respect to Mr. Morton) that will vest upon our receipt of marketing approval of Vitaros in the United States by the FDA on or before December 31, 2018, subject to the executive’s continuous employment or service with us through the vesting date, as follows: Mr. Pascoe, 583 restricted stock units; and Mr. Morton, 166 restricted stock units. Also includes performance-based restricted stock |
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units granted in January 2017 and June 2017 that will also vest upon our receipt of marketing approval of Vitaros in the United States by the FDA, subject to the executive’s continuous employment or service with us through the vesting date, as follows: Mr. Pascoe, 3,333 restricted stock units; and Mr. Morton, 2,500 restricted stock units. In addition, all of these restricted stock units will vest in the event of a “covered transaction” (as defined in the 2012 Plan).
(5) | Computed by multiplying the number of shares underlying each RSU by $0.19202, the closing market price of the Company’s Common |
Payments Upon Termination or Change In Control
We entered into employment agreements with each of the Named Executive Officers. These agreements set forth the individual’s base salary, annual incentive opportunities, equity compensation and other employee benefits, which are described in this Executive Compensation section. All employment agreements provide for “at-will” employment, meaning that either party can terminate the employment relationship at any time, although our agreements with our Named Executive Officers provide that they would be eligible for severance benefits in certain circumstances following a termination of employment without cause. Our Compensation Committee approved the severance benefits to mitigate certain risks associated with working in a biopharmaceutical company at our current stage of development and to help attract and retain qualified executives.
Richard W. Pascoe
On March 18, 2013, we entered into an employment agreement with Richard W. Pascoe when he became the Chief Executive Officer of the Company (the “Initial Employment Agreement”). Subsequently, on December 20, 2016, we entered into an amended and restated employment agreement with Mr. Pascoe (the “2016 Employment Agreement”), which superseded and replaced the initial employment agreement.
The 2016 Employment Agreement provided that if Mr. Pascoe’s employment ends due to an involuntary termination, as such term is defined in the 2016 Employment Agreement, he would receive, in a lump sum payment, 12 months of his annual base salary in effect on the date of termination, any accrued but unpaid bonus for the calendar year preceding his termination, to the extent that the criteria for the bonus had been met, plus his target bonus for the year in which the date of his involuntary termination occurred, full acceleration and vesting of his unvested equity awards, and reimbursement for the cost of continuation of health insurance benefits provided to him immediately prior to the termination (as provided under Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) or other applicable law) until the earliest of 12 months following the termination, the date Mr. Pascoe becomes eligible for coverage under health and/or dental plans of another employer or the date upon which he is no longer eligible for such COBRA or other benefits under applicable law.
The 2016 Employment Agreement also provided that if Mr. Pascoe’s employment was terminated in connection with his death or a permanent disability, Mr. Pascoe or his estate would have been entitled to a pro rata bonus for the calendar year in which such termination occurred, equal to the bonus he would have received, to the extent all criteria for such a bonus have been met (with the exception of the requirement that he be employed on the date the bonus is to be paid), for the calendar year of termination multiplied by a fraction, the numerator of which is the number of days in such year preceding and including the date of termination, and the denominator of which is 365. Such pro-rata bonus would have been paid at the same time as the bonus would have been paid had Mr. Pascoe remained employed by the Company through the date of payment, but in any event, not later than March 15 of the calendar year following the calendar year for which the bonus was payable. Mr. Pascoe was also entitled to receive any unpaid bonus for the calendar year preceding his termination, to the extent that all criteria for such bonus had been met (with the exception of the requirement that he be employed on the date the bonus was to be paid). Such bonus would have been paid at the same time as the bonus would have been paid had he remained employed by the Company through the date of payment. Additionally, all of his outstanding but unvested equity awards would have vested immediately and the expiration date for all such equity awards would have been extended so that they expire one year after termination due to death or permanent disability.
Under the 2016 Employment Agreement, in the event that Mr. Pascoe suffered an involuntary termination within the 12-month period following the effective date of a change of control, then in addition to all salary and bonuses accrued as of the date of his termination he would also have been entitled to severance benefits. These include (i) the Company would have paid to Mr. Pascoe in one lump sum an amount equal to the greater of (A) 18 months of the salary that he was receiving immediately prior to the termination or (B) 18 months of the
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salary that he was receiving immediately prior to the change of control; (ii) the Company shall pay to Mr. Pascoe in one lump sum (A) any unpaid bonus for the calendar year preceding his termination, to the extent that all criteria for such bonus had been met (with the exception of the requirement that he be employed on the date the bonus was to be paid), plus (B) 100% of his target bonus for the year in which the date of his involuntary termination occurred; (iii) full acceleration of the vesting of all equity awards held by Mr. Pascoe at the time of the termination, including any options, restricted stock, RSUs or other awards, and (iv) reimbursement for the cost of continuation of health insurance benefits provided to him immediately prior to the termination pursuant to the terms of COBRA or other applicable law for a period continuing until the earlier of 18 months following the termination or the date upon which he is no longer eligible for such COBRA or other benefits under applicable law. In addition, Mr. Pascoe’s outstanding performance-based stock options as well as the unvested portion of restricted stock units granted in March 2016, April 2016, January 2017, and June 2017 would have vested in the event of a “covered transaction” (as defined in the 2012 Plan).
If he was terminated for cause at any time or resigned under circumstances that did not constitute an involuntary termination, then Mr. Pascoe would not have been entitled to receive payment of any severance benefit or any continuation or acceleration of stock option vesting. He would have received payment for all salary accrued as of the date of termination of employment.
In connection with the Merger, our board of directors approved, and we entered into, an amended and restated employment agreement with Mr. Pascoe dated August 30, 2018 (the “2018 Employment Agreement”). Under the 2018 Employment Agreement, we and Mr. Pascoe agreed as follows:
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addition, we may elect to settle the Pascoe Closing RSU in cash, in its discretion. If the settlement of the Pascoe Closing RSU would not be possible as of the grant date as a result of there being insufficient shares available for issuance under the Company’s equity incentive plan, or the issuance of such shares causing the award to exceed any individual award limits contained in the 2012 Plan, the Pascoe Closing RSU will still be granted but any share settlement shall be subject to the approval by the our board of directors and/or the our stockholders of an amendment to the Company’s equity incentive plan permitting such share settlement under the terms of such plan (and increasing or deleting the individual award limits).
For the avoidance of doubt, the Pascoe Closing RSU would be granted in consideration of Mr. Pascoe’s services to us as an employee and not for his services as a non-employee director.
All other terms of the 2016 Employment Agreement remained substantially unchanged. Mr. Pascoe’s employment was terminated on January 24, 2019 in connection with the closing of the Merger.
Brian T. Dorsey
Employment Agreement with Mr. Dorsey
On December 1, 2014, we entered into an employment agreement with Brian T. Dorsey. Subsequently, on December 20, 2016, we entered into an amended and restated employment agreement with Mr. Dorsey, which superseded and replaced the initial employment agreement. Mr. Dorsey’s employment was terminated on August 30, 2018, and he executed a release agreement in connection with such termination, which superseded the employment agreement at that time.
The amended and restated agreement provided that if Mr. Dorsey’s employment ended due to an involuntary termination, as such term is defined in his agreement, he would receive, in a lump sum payment, 12 months of his annual base salary in effect on the date of termination, any accrued but unpaid bonus for the calendar year preceding his termination, to the extent that the criteria for the bonus had been met, plus his target bonus for the year in which the date of his involuntary termination occurred, full acceleration and vesting of his unvested equity awards, and reimbursement for the cost of continuation of health insurance benefits provided to him immediately prior to the termination (as provided under COBRA or other applicable law) until the earliest of 12 months following the termination, the date Mr. Dorsey becomes eligible for coverage under health and/or dental plans of another employer or the date upon which he is no longer eligible for such COBRA or other benefits under applicable law.
If Mr. Dorsey’s employment was terminated in connection with his death or a permanent disability, Mr. Dorsey or his estate was entitled to a pro rata target bonus for the calendar year in which such termination occurred. Mr. Dorsey was also entitled to receive any accrued but unpaid bonus for the calendar year preceding his termination, to the extent that all criteria for such bonus have been met (with the exception of the requirement that he be employed on the date the bonus is to be paid). Such bonus amounts would be paid in cash in a lump sum following the effectiveness of a general release of claims (or, in the event of his death, within five days following the date of death). Additionally, all of his outstanding but unvested equity awards would vest immediately and the expiration date for all such equity awards would be extended so that they expire one year after termination due to death or permanent disability.
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In the event that Mr. Dorsey suffered an involuntary termination within the 12-month period following the effective date of a change of control, then in addition to all salary accrued as of the date of his termination he will also be entitled to severance benefits. These include (i) the Company would pay to Mr. Dorsey in one lump sum an amount equal to the greater of (A) 18 months of the salary that he was receiving immediately prior to the termination or (B) 18 months of the salary that he was receiving immediately prior to the change of control; (ii) the Company shall pay to Mr. Dorsey in one lump sum (A) any accrued but unpaid bonus for the calendar year preceding his termination, to the extent that all criteria for such bonus have been met (with the exception of the requirement that he be employed on the date the bonus is to be paid), plus (B) 100% of his target bonus for the year in which the date of his involuntary termination occurred; (iii) full acceleration of the vesting of all equity awards held by Mr. Dorsey at the time of the termination, including any options, restricted stock, RSUs or other awards, and (iv) reimbursement for the cost of continuation of health insurance benefits provided to him immediately prior to the termination pursuant to the terms of COBRA or other applicable law for a period continuing until the earlier of 18 months following the termination or the date upon which he is no longer eligible for such COBRA or other benefits under applicable law. In addition, Mr. Dorsey’s outstanding performance-based stock options as well as the unvested portion of restricted stock units granted in March 2016, May 2016, January 2017, and June 2017 will vest in the event of a “covered transaction” (as defined in the 2012 Plan).
If he was terminated for cause at any time or if he voluntarily resigned under circumstances that did not constitute an involuntary termination, then Mr. Dorsey would not be entitled to receive payment of any severance benefit or any continuation or acceleration of stock option vesting and all of his restricted stock awards shall remain subject to all applicable forfeiture provisions and transfer restrictions. He would receive payment for all salary accrued as of the date of termination of employment.
Consulting Agreement and Release Agreement with Mr. Dorsey
On August 30, 2018, Mr. Dorsey’s employment with us terminated and we entered into a consulting agreement with Mr. Dorsey pursuant to which he will consult with us on an as-needed basis through March 31, 2019, and assist with any transition of the Vitaros assets to an interested third party in conjunction with its sale or license. In connection with his termination of employment, our board of directors approved, and we entered into, a release agreement with Mr. Dorsey dated August 30, 2018. Under the release agreement, we and Mr. Dorsey agreed as follows:
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any shares cannot be issued under the terms of the Company’s equity incentive plan for any reason, including as a result of there being insufficient shares available for issuance thereunder or the issuance of shares causing any individual award limit under the plan to be exceeded, in cash with respect to such shares. In addition, we may elect to settle the Dorsey Closing RSU in cash, in its discretion. If the settlement of the Dorsey Closing RSU would not be possible as of the grant date as a result of there being insufficient shares available for issuance under the Company’s equity incentive plan, or the issuance of such shares causing the award to exceed any individual award limits contained in the 2012 Plan, the Dorsey Closing RSU will still be granted but any share settlement shall be subject to the approval by our board and/or the our stockholders of an amendment to the Company’s equity incentive plan permitting such share settlement under the terms of such plan (and increasing or deleting the individual award limits).
The value of the Dorsey Closing RSU was paid to Mr. Dorsey on January 24, 2019 in connection with the closing of the Merger.
Neil Morton
On March 20, 2014, we entered into an employment agreement with Neil Morton, which was later amended and restated on April 25, 2016. Subsequently, on December 20, 2016, we entered into a second amended and restated employment agreement with Mr. Morton, which superseded and replaced the first amended and restated employment agreement. Mr. Morton’s employment was terminated on January 24, 2019 in connection with the closing of the Merger.
The second amended and restated agreement provided that if Mr. Morton’s employment ended due to an involuntary termination, as such term is defined in his agreement, he would receive, in a lump sum payment, 12 months of his annual base salary in effect on the date of termination, any accrued but unpaid bonus for the calendar year preceding his termination, to the extent that the criteria for the bonus had been met, plus his target bonus for the year in which the date of his involuntary termination occurred, full acceleration and vesting of his unvested equity awards, and reimbursement for the cost of continuation of health insurance benefits provided to him immediately prior to the termination (as provided under COBRA or other applicable law) until the earliest of 12 months following the termination, the date Mr. Morton becomes eligible for coverage under health and/or dental plans of another employer or the date upon which he is no longer eligible for such COBRA or other benefits under applicable law.
If Mr. Morton’s employment was terminated in connection with his death or a permanent disability, Mr. Morton or his estate was entitled to a pro rata target bonus for the calendar year in which such termination occurred. Mr. Morton was also entitled to receive any accrued but unpaid bonus for the calendar year preceding his termination, to the extent that all criteria for such bonus have been met (with the exception of the requirement that he be employed on the date the bonus is to be paid). Such bonus amounts would be paid in cash in a lump sum following the effectiveness of a general release of claims (or, in the event of his death, within five days following the date of death). Additionally, all of his outstanding but unvested equity awards would vest immediately and the expiration date for all such equity awards would be extended so that they expire one year after termination due to death or permanent disability.
In the event that Mr. Morton suffered an involuntary termination within the 12-month period following the effective date of a change of control, then in addition to all salary accrued as of the date of his termination he would also be entitled to severance benefits. These include (i) the Company would pay to Mr. Morton in one lump sum an amount equal to the greater of (A) 18 months of the salary that he was receiving immediately prior to the termination or (B) 18 months of the salary that he was receiving immediately prior to the change of control; (ii) the Company would pay to Mr. Morton in one lump sum (A) any accrued but unpaid bonus for the calendar year preceding his termination, to the extent that all criteria for such bonus have been met (with the exception of the requirement that he be employed on the date the bonus is to be paid), plus (B) 100% of his target bonus for the year in which the date of his involuntary termination occurred; (iii) full acceleration of the
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vesting of all equity awards held by Mr. Morton at the time of the termination, including any options, restricted stock, RSUs or other awards, and (iv) reimbursement for the cost of continuation of health insurance benefits provided to him immediately prior to the termination pursuant to the terms of COBRA or other applicable law for a period continuing until the earlier of 18 months following the termination or the date upon which he is no longer eligible for such COBRA or other benefits under applicable law. In addition, Mr. Morton’s outstanding performance-based stock options as well as the unvested portion of restricted stock units granted in March 2016, May 2016, January 2017, and June 2017 will vest in the event of a “covered transaction” (as defined in the 2012 Plan).
If he was terminated for cause at any time or if he voluntarily resigned under circumstances that did not constitute an involuntary termination, then Mr. Morton would not be entitled to receive payment of any severance benefit or any continuation or acceleration of stock option vesting and all of his restricted stock awards shall remain subject to all applicable forfeiture provisions and transfer restrictions. He would receive payment for all salary accrued as of the date of termination of employment.
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We have adopted a non-employee director compensation policy pursuant to which our non-employee directors are eligible to receive cash and equity compensation.
During 2018, each non-employee director was entitled to receive an annual cash retainer of $40,000, with additional annual cash retainers for the chairs of our various Board committees in the following amounts: $15,000 for the chair of the Audit Committee, $12,000 for the chair of the Compensation Committee and $8,000 for the chair of the Corporate Governance/Nominating Committee. Additionally, non-chair members of these committees will receive additional annual cash retainers in the following amounts: $7,000 for members of the Audit Committee, $5,000 for members of the Compensation Committee and $3,000 for members of the Corporate Governance/Nominating Committee. The Chairman of the Board is also entitled to receive an additional annual cash retainer of $40,000 per year.
Prior to January 3, 2018, on the third trading day of each calendar year, each non-employee director was eligible to receive an annual grant of 11,250 restricted stock units (or, in the case of our Chairman of the Board, 15,000 restricted stock units), subject to the terms and provisions of the 2012 Plan. Such restricted stock units vested upon the first anniversary of the date of grant, subject to the director's continuing service on our Board on such date.
On January 3, 2018, our Board approved an amendment to the equity component of our non-employee director compensation policy such that the annual grant of equity would be in the form of options rather than restricted stock units. As such, pursuant to the amendment, on the third trading day of each calendar year, each non-employee director is eligible to receive a non-qualified stock option to purchase 35,000 shares of Common Stock (or, in the case of our Chairman of the Board, an option to purchase 50,000 shares of Common Stock), subject to the terms and provisions of the 2012 Plan. Annual awards vest over one year in 12 equal monthly installments, subject to the director's continuing service on our Board through such dates. All initial and annual awards to our non-employee directors will vest in full in the event of a change in control.
On January 3, 2019, our Board determined to suspend our non-employee director compensation policy in light of the pending closing of the Merger.
On March 20, 2019, the Compensation Committee approved a non-employee director compensation policy governing the compensation for the non-employee directors of the Company (the “Non-Employee Director Compensation Policy”), authorizing the payment of an annual retainer of $40,000 for service on the Board, an annual retainer of an additional $40,000 for service as the chairperson of the Board, an annual retainer of $15,000 for service as the chairperson of the Audit Committee of the Board, an annual retainer of $7,000 for service as a member of the Audit Committee of the Board (excluding the chairperson of the committee), an annual retainer of $12,000 for service as the chairperson of the Compensation Committee of the Board, an annual retainer of $5,000 for service as a member of the Compensation Committee of the Board (excluding the chairperson of the committee), an annual retainer of $8,000 for service as the chairperson of the Corporate Governance/Nominating Committee of the Board and an annual retainer of $3,000 for service as a member of the Corporate Governance/Nominating Committee of the Board (excluding the chairperson of the committee), and equity compensation in the form of an option to purchase 24,000 shares of the Company's common stock upon election or appointment to the Board (the “Initial Grants”) and an annual option to purchase 16,000 shares of the Company's common stock (the “Annual Grants”). All equity awards will be granted pursuant to the Company's Amended and Restated 2012 Stock Long Term Incentive Plan, as may be amended, restated or superseded. The Initial Grants will vest at rate of one-third of the shares subject to the option on the one-year anniversary of the date of grant and 1/36th of the shares subject to the option on a monthly basis over the following 24 months. The Annual Grants will vest at a rate of 1/12th per month from the date of grant. In connection with the approval of the Non-Employee Director Compensation Policy, the Compensation Committee granted the following stock options to the Company's non-employee directors: (i) Initial Grants to purchase 24,000 shares of the Company's common stock to each of Brian Lian, Ph.D., Daniel J. O'Connor J.D. and Dr. Robin L. Smith, and (ii) Annual Grants to purchase 16,000 shares of the Company's common stock to each of Dr. Lian, Mr. O'Connor J.D., Dr. Smith and Richard W. Pascoe.
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Non-Employee Director Compensation for 2018
Below is a summary of the non-employee director compensation paid in fiscal 2018:
Name | Cash Compensation(1) | Option Grants(2) | Stock Awards(3) | Total | ||||||||
Kleanthis G. Xanthopoulos, Ph.D. | $ | 92,000 | $ | 96,710 | $ | — | $ | 188,710 | ||||
Russell Ray | $ | 55,000 | $ | 67,697 | $ | — | $ | 122,697 | ||||
Paul V. Maier | $ | 58,000 | $ | 67,697 | $ | — | $ | 125,697 | ||||
Wendell Wierenga, Ph.D. | $ | 48,000 | $ | 67,697 | $ | — | $ | 115,697 | ||||
Sandford D. Smith | $ | 52,000 | $ | 67,697 | $ | — | $ | 119,697 |
(1) | Includes the value of the annual retainers |
(2) | Represents the grant date
FASB ASC Topic 718. As of December 31, |
Equity Compensation Plan Information
The following table gives information as of December 31, 2018 about shares of our Common Stock that may be issued upon the exercise of options and restricted stock units under both of our existing equity compensation plans:
Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)(1) | Weighted-average exercise price of outstanding options, warrants and rights (b)(2) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)(3) | ||||||
Equity compensation plans approved by security holders | 38,416 | $ | 185.98 | 10,872 |
(1) | Consists of options and restricted stock units
|
(3) | Consists entirely of shares of common stock that remain available for future issuance under the |
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The Audit Committee evaluates auditor performance, manages relations with the Company’s independent registered public accounting firm and evaluates policies and procedures relating to internal control systems. The Audit Committee operates under a written Audit Committee Charter that has been adopted by the Board, a copy of which is available on the Company’s website at www.seelostherapeutics.com. All members of the Audit Committee currently meet the independence and qualification standards for Audit Committee membership set forth in the listing standards provided by Nasdaq and applicable SEC rules.
The Audit Committee members are not professional accountants or auditors. The members’ functions are not intended to duplicate or to certify the activities of management and the independent registered public accounting firm. The Audit Committee serves a board-level oversight role in which it provides advice, counsel and direction to management and the auditors on the basis of the information it receives, discussions with management and the auditors, and the experience of the Audit Committee’s members in business, financial and accounting matters.
The Audit Committee oversees the Company’s financial reporting process on behalf of the Board. The Company’s management has the primary responsibility for the financial statements and reporting process, including the Company’s system of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed with management the audited financial statements included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2018. This review included a discussion of the quality and the acceptability of the Company’s financial reporting, including the nature and extent of disclosures in the financial statements and the accompanying notes. The Audit Committee also reviewed the progress and results of the testing of the design and effectiveness of its internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.
Throughout the year, the Audit Committee monitors matters related to the independence of the Company’s independent registered public accounting firm. As part of its monitoring activities, the Audit Committee reviews the relationships between the independent registered public accounting firm and the Company. After reviewing the relationships and discussing them with both management and the Company’s independent registered public accounting firm, the Audit Committee discussed the independent registered public accounting firm’s overall relationship with the Company, as well as its objectivity and independence. Based on its review, the Audit Committee is satisfied with the auditors’ independence.
The Company’s independent registered public accounting firm also has confirmed to the Audit Committee in writing, as required by applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) regarding its communications with the Audit Committee concerning independence, that, in its professional judgment, it is independent of the Company under all relevant professional and regulatory standards.
The Audit Committee also reviewed with the Company’s independent registered public accounting firm, which is responsible for expressing an opinion on the conformity of the audited financial statements with accounting principles generally accepted in the United States of America, their judgments as to the quality and the acceptability of the Company’s financial reporting and such other matters required to be discussed with the Audit Committee under PCAOB Auditing Standard No. 1301, Communications with Audit Committees.
In addition to the matters specified above, the Audit Committee discussed with the Company’s independent registered public accounting firm the overall scope, plans and estimated costs of their audit. The Audit Committee met with the independent registered public accounting firm periodically, with and without management present, to discuss the results of the independent registered public accounting firm’s examinations, the overall quality of the Company’s financial reporting and the independent registered public accounting firm’s reviews of the quarterly financial statements, and drafts of the quarterly and annual reports.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that the Company’s audited financial statements should be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018.
Submitted | |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Review and Approval of Transactions with Related Persons
Our Board has adopted a written policy and procedures for review, approval and monitoring of transactions involving our Company and “related persons” (directors, director nominees, executive officers and stockholders owning 5% or greater of our outstanding Common Stock and immediate family members of any of the foregoing). The policy covers any related person transaction that meets the minimum threshold for disclosure in our proxy statement under our policy addressing the relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). Related person transactions must be approved by the Board or by the Audit Committee of the Board consisting solely of independent directors, which will approve the transaction if they determine that it is in our best interests. The Board or Audit Committee will periodically monitor the transaction to ensure that there are no changes that would render it advisable for us to amend or terminate the transaction.
Transactions with Related Persons
IRRAS AB (“IRRAS”) is a commercial stage medical technology company of which a former director of the Company, Kleanthis G. Xanthopoulos, Ph.D., is currently the President, Chief Executive Officer and director. In January 2018, the Company and IRRAS entered into a Sublease, pursuant to which we subleased to IRRAS excess capacity in its corporate headquarters. The sublease has a term of two years and aggregate payments due to the Company of approximately $0.3 million. On October 30, 2018, the Company and IRRAS entered into an amended and restated sublease, commencing January 1, 2019, pursuant to which we agreed to sublease to IRRAS the remainder of its current corporate headquarters (the “IRRAS Restated Sublease”), which satisfied a closing condition related to the Merger. The IRRAS Sublease has a term of one year and provides for aggregate payments due to the Company of approximately $0.4 million, which approximate fair value.
The employment and release agreements we entered into with each of its former executive officers provide for severance benefits in specified circumstances, as well as benefits in connection with a change in control. See “Executive Compensation – Payments Upon Termination or Change In Control” for additional information about these arrangements.
Dr. Raj Mehra is an executive officer of each of the Company and STI, a member of each of the Company’s and STI’s respective boards of directors and, in his individual capacity, a holder of more than 5% of the Company’s outstanding capital stock. Prior to the Merger, Dr. Mehra was also a holder of more than 5% of STI’s outstanding capital stock. Dr. Mehra received 3,081,546 shares of our common stock in the Merger.
In connection with the Merger and in accordance with the terms of the Merger Agreement, STI also entered into a Support Agreement, with Dr. Mehra, pursuant to which, among other things Dr. Mehra agreed, solely in his capacity as a stockholder of STI, to vote all of his shares of STI’s common stock in favor of the adoption of the Merger Agreement and the approval of the Merger and against any action or agreement that would reasonably be expected to result in a material breach of any covenant, representation, warranty or other obligation of STI under the Merger Agreement. He also agreed to vote against any acquisition proposal or other matter that would reasonably be expected to impede, interfere with, delay, postpone, discourage or materially adversely affect the consummation of the Merger and the transactions contemplated by the Merger Agreement. Dr. Mehra also granted STI an irrevocable proxy to vote his STI common stock in accordance with the support agreement.
Our Bylaws provide that we will indemnify each of our directors and officers to the fullest extent permitted by the laws of the State of Nevada. Further, we have entered into indemnification agreements with each of our directors and officers, and we have purchased a policy of directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment under certain circumstances.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information with respect to the beneficial ownership, as of the Record Date, of Common Stock by (a) each of our Named Executive Officers and current directors individually, (b) our current directors and executive officers as a group and (c) each holder of more than 5% of the Company’s outstanding Common Stock.
Beneficial ownership and percentage ownership are determined in accordance with the Rule 13d-3 of the Exchange Act. Under these rules, shares of Common Stock issuable under stock options or warrants that are exercisable within 60 days of the Record Date are deemed outstanding for the purpose of computing the percentage ownership of the person holding the options or warrant(s), but are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
Unless otherwise indicated and subject to applicable community property laws, to our knowledge, each stockholder named in the following table possesses sole voting and investment power over their shares of Common Stock, except for those jointly owned with that person’s spouse.
Name and Address of Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Class (%)(1) | ||||
Ligand Pharmaceuticals Incorporated(2) | 2,030,206 | 9.99 | % | |||
Directors and Named Executive Officers(3) | ||||||
Raj Mehra, Ph.D.(4) | 3,081,546 | 15.24 | % | |||
Robin L. Smith, M.D., Director(5) | 11,558 | * | ||||
Daniel J. O’Connor, J.D., Director(6) | 11,558 | * | ||||
Brian Lian, Ph.D., Director(7) | 11,558 | * | ||||
Richard W. Pascoe, Director(8) | 21,740 | * | ||||
Brian T. Dorsey, Former Senior Vice President, Chief Development Officer(9) | 7,530 | * | ||||
Neil Morton, Former Senior Vice President, Chief Business Officer(10) | 7,039 | * | ||||
All current executive officers and directors as a group (five persons)(11) | 3,137,960 | 15.48 | % |
Name and Address of Beneficial Owner (1) | Number of Shares Beneficially Owned | Percentage of Class (%) (2) | ||||
Sarissa Capital Management LP, 660 Steamboat Road, Greenwich, CT 06830 (3) | 2,120,358 | 25.20 | % | |||
Aspire Capital Fund, LLC, 155 North Wacker Drive, Suite 1600, Chicago, IL 60606 (4) | 610,223 | 7.75 | % | |||
Directors and Executive Officers | ||||||
Richard W. Pascoe (5) | 132,799 | 1.69 | % | |||
Neil Morton (6) | 30,412 | * | ||||
Brian T. Dorsey (7) | 28,278 | * | ||||
Kleanthis G. Xanthopoulos (8) | 27,775 | * | ||||
Wendell Wierenga, Ph.D. (9) | 17,251 | * | ||||
Rusty Ray (10) | 16,655 | * | ||||
Sandford D. Smith (11) | 15,932 | * | ||||
Paul V. Maier (12) | 14,204 | * | ||||
All current executive officers and directors as a group (eight persons) (13) | 283,305 | 3.55 | % |
* | Less than one percent. |
28 SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act requires our executive officers, directors and persons who beneficially own greater than 10% of a registered class of its equity securities to file certain reports with the SEC with respect to ownership and changes in ownership of the Common Stock and our other equity securities. To the Company’s knowledge, based solely on our review of the copies of such reports filed with the SEC, our officers, directors and greater than 10% stockholders timely complied with these Section 16(a) filing requirements during the fiscal year ended December 31, 2018. Stockholder proposals will be considered for inclusion in the Proxy Statement for the 2020 annual meeting in accordance with Rule 14a-8 under the Exchange Act, if they are received by the Company’s Secretary, on or before December 14, 2019. Stockholders who intend to present a proposal or director nominee at the 2020 annual meeting of stockholders without inclusion of such proposal in our proxy materials for the 2020 annual meeting are required to provide notice of such proposal within the time periods and in the manner set forth in our bylaws and the Charter of the Corporate Governance/Nominating Committee, a copy of which is available on our corporate website at www.seelostherapeutics.com. Proposals of business to be conducted at the 2020 annual meeting, other than nominations for election of directors, must be submitted between February 13, 2020 and March 14, 2020, which are 90 and 60 days prior to the first anniversary of the 2019 annual meeting, provided, however, that in the event that the date of the pending annual meeting is advanced by more than 30 days or delayed by more than 60 days from such anniversary date, such submission must be delivered not earlier than the 90th day prior to such pending annual meeting and not later than the close of business on the later of the 60th day prior to such pending annual meeting or the 10th day following the day on which a public announcement of the date of such annual meeting is first made. Director nominees must be submitted between December 17, 2019 and January 16, 2020, which are 120 and 90 days prior to the anniversary of the mailing date of the proxy materials for the 2019 Annual Meeting, provided that if the date of the 2020 annual meeting is advanced by more than 30 days or delayed by more than 60 days, notice must be delivered within 10 days after announcement of the 2020 annual meeting date is first made. We reserve the right to reject, rule out of order, or take other appropriate action with respect to any proposal that does not comply with these and other applicable requirements. Proposals and notices of intention to present proposals at the 2020 annual meeting should be addressed to the Secretary of Seelos Therapeutics, Inc., 300 Park Avenue, 12th Floor, New York, NY 10022. In some cases, only one copy of this Proxy Statement or our 2018 Annual Report is being delivered to multiple stockholders sharing an address unless we have received contrary instructions from one or more of the stockholders. We will deliver promptly, upon written or oral request, a separate copy of this Proxy Statement or such Annual Report to a stockholder at a shared address to which a single copy of the document was delivered. Stockholders sharing an address who are receiving multiple copies of proxy statements or annual reports may also request delivery of a single copy. To request separate or multiple delivery of these materials now or in the future, a stockholder may submit a written request to Secretary of Seelos Therapeutics, Inc., 300 Park Avenue, 12th Floor, New York, New York 10022. Please make your request no later than May 1, 2019 to facilitate timely delivery. 29 WHERE YOU CAN FIND ADDITIONAL INFORMATION We have filed reports, proxy statements and other information with the SEC. The SEC maintains a website that contains the reports, proxy statements and other information we file electronically with the SEC. The address of the SEC website is http://www.sec.gov. You may request, and we will provide at no cost, a copy of these filings, including any exhibits to such filings, by writing or telephoning us at the following address: Secretary of Seelos Therapeutics, Inc., 300 Park Avenue, 12th Floor, New York, New York 10022. You may also access these filings at our web site under the investor relations link at www.seelostherapeutics.com. OTHER MATTERS The Board knows of no other business that will be presented at the Annual Meeting. If any other business is properly brought before the Annual Meeting, it is intended that proxies in the enclosed form will be voted in respect thereof in accordance with the judgment of the persons voting the proxies. It is important that proxies be returned promptly and that your shares are represented. Stockholders are urged to vote via the Internet (www.proxyvote.com), by telephone (1-800-690-6903) or by executing and promptly returning the accompanying proxy card in the enclosed envelope. The deadline to vote by Internet or telephone is 11:59 P.M. Eastern Time on Friday, May 10, 2019.
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