UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
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☐☒ | | Preliminary Proxy Statement |
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| ☐ | | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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☒☐ | | Definitive Proxy Statement |
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| ☐ | | Definitive Additional Materials |
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| ☐ | | Soliciting Material Pursuant to §240.14a-12 |
Histogenics Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Histogenics Corporation
830 Winter Street, 3rd Floor
Waltham, MA 02451
NOTICE OF ANNUALSPECIAL MEETING OF STOCKHOLDERS
To Be Held On June 13, 2017, 2018
Dear Stockholder:
You are cordially invited to attend the AnnualSpecial Meeting of Stockholders (the “Annual“Special Meeting”) of Histogenics Corporation, a Delaware corporation (the “Company”). The AnnualSpecial Meeting will be held on June 13, 2017,, 2018, at 9:00 a.m. local time at the offices of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP located at One Marina Park Drive, Suite 900, Boston, MA 02210 for the following purposes:
| | • | | 1.Proposal 1:
| To elect David Gill, John H. Johnsonapprove an amendment to our Sixth Amended and Garheng Kong, M.D., Ph.D.Restated Certificate of Incorporation (the “Certificate of Incorporation”) to serve as Class III directors untilincrease the 2020 annual meetingCompany’s authorized shares of stockholders;common stock (the “Common Stock”) from 100,000,000 to 250,000,000. |
| | • | | 2.Proposal 2:
| To ratifyapprove an amendment to the selection by the Audit CommitteeCertificate of Incorporation, to effect a reverse stock split of the Common Stock at a ratio between1-for-2 and1-for-20, to be determined at the discretion of the Company’s Board of Directors (the “Board”) at any time before the earlier of Grant Thornton LLP as our independent registered public accounting firmJune 30, 2019 and the next annual meeting of stockholders of the Company, for the year ending December 31, 2017; andpurpose of complying with Nasdaq Listing Rule 5550(a)(2), subject to the Board’s discretion to abandon such amendment. |
| 3. | To conduct any other business properly brought before the Annual Meeting or any adjournments or postponements thereof. |
To conduct any other business properly brought before the Special Meeting or any adjournments or postponements thereof.
The record date for the AnnualSpecial Meeting is April 24, 2017., 2018. Only stockholders of record at the close of business on that date are entitled to notice of and tomay vote at the AnnualSpecial Meeting or any adjournment thereof. A complete list of such stockholders entitled to vote at the Special Meeting will be available for inspectionexamination at ourthe Company’s offices in Waltham, Massachusetts during normal business hours for a period of ten days prior to the AnnualSpecial Meeting.
YOUR VOTE IS IMPORTANT!
Your vote is important. Whether or not you plan to attend the Annual Meeting in person, pleasePlease vote by telephone or overusing the internet or by completing,telephone or by signing dating and returning yourthe enclosed proxy card or voting instruction form so that your shares will be represented at the Annual Meeting.card. Instructions for your voting options are described inon the Company’sproxy card.
The proxy statement for the Annual Meeting, Notice of Internet Availability of Proxy Materials or proxy card.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 13, 2017:
The Company’s Notice of Annual Meeting, Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2016 areis available at www.proxyvote.com.www.proxyvote.com.
Your Board of Directors unanimously recommends you vote the proxy card “FOR” Proposal 1 and “FOR” Proposal 2.
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By Order of the Board of Directors, |
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Adam Gridley President and Chief Executive Officer Waltham, Massachusetts April 27, 2017 , 2018
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This notice of Special Meeting and accompanying proxy statement are being distributed or made available to stockholders on or about , 2018.
Histogenics Corporation
830 Winter Street, 3rd Floor
Waltham, MA 02451
PROXY STATEMENT
FOR THE 2017 ANNUAL2018 SPECIAL MEETING OF STOCKHOLDERS
June 13, 2017 , 2018
This Proxy Statement isproxy statement and proxy card are furnished in connection with the solicitation of proxies to be voted at the 2017 Annual2018 Special Meeting of Stockholders (the “Annual“Special Meeting”) of Histogenics Corporation (sometimes referred to as “we,” the “Company” or “Histogenics”), which will be held on June 13, 2017,, 2018, at 9:00 a.m. local time at the offices of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP located at One Marina Park Drive, Suite 900, Boston, MA 02210.
We are making this Proxy Statement and our annual report on Form 10-K for the fiscal year ended December 31, 2016 (the “Annual Report”) available to stockholders at www.proxyvote.com. On or about April 27, 2017,, 2018, we will begin mailing this proxy statement to certain of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access and review this Proxy Statement and the Annual Report. The Notice also instructs you how you may submit your proxy over the internet or via telephone. If you would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting those materials included in the Notice.stockholders.
QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why am I receiving this proxy statement and proxy card?
You have received these proxy materials because you owned shares of Histogenics common stockCommon Stock as of April 24, 2017 (the “Record Date”), 2018, the record date for the AnnualSpecial Meeting, and the Company’sour Board of Directors (the “Board”) is soliciting your proxy to vote at the AnnualSpecial Meeting. This proxy statement describes issues on which we would like you to vote at the AnnualSpecial Meeting. It also gives you information on these issues so that you can make an informed decision.
Why did I receive a Notice of Internet Availability of Proxy Materials in the mail instead of a printed set of proxy materials?
Pursuant to rules adopted by the Securities and Exchange Commission (the “SEC”), we are permitted to furnish our proxy materials over the internet to our stockholders by delivering the Notice in the mail. As a result, only stockholders who specifically request a printed copy of the proxy statement will receive one. Instead, the Notice instructs stockholders on how to access and review the Proxy Statement and Annual Report over the internet at www.proxyvote.com. The Notice also instructs stockholders on how they may submit their proxy via telephone or the internet. If a stockholder who received a Notice would like to receive a printed copy of our proxy materials, such stockholder should follow the instructions for requesting these materials contained in the Notice.
How may I vote at the AnnualSpecial Meeting?
You are invited to attend the AnnualSpecial Meeting to vote on the proposalsproposal described in this Proxy Statement.proxy statement. However, you do not need to attend the Annual Meetingmeeting to vote your shares. Instead, you may simply follow the instructions below to submit your proxy via telephone or on the internet. If you received a printed set of materials, youInternet. You may also vote by mail by completing, signing, dating and returning the proxy card.card you received in the mail.
When you vote, regardless of the method used, you appoint Adam Gridley, our President and Chief Executive Officer, and Jonathan Lieber, our Chief Financial Officer, as your representatives (or proxyholders) at the AnnualSpecial Meeting. They will vote your shares at the AnnualSpecial Meeting as you have instructed them or, if an issue that is not on the proxy card comes up for vote, in accordance with their best judgment. This way, your shares will be voted whether or not you attend the AnnualSpecial Meeting.
Who is entitled to vote at the AnnualSpecial Meeting?
Only stockholders of record at the close of business on , 2018, the Record Date,record date for the Special Meeting, will be entitled to vote at the AnnualSpecial Meeting. On the record date, there were shares of our Common Stock outstanding. At the Special Meeting, the stockholders will be entitled to one vote for each share of our Common Stock held by them on the record date. On the Record Date, there were 22,168,090400.4910 shares of the Company’s common stock outstanding. Allour Series A Convertible Preferred Stock were outstanding, none of these outstanding shareswhich are entitled to vote at the Annual Meeting (one vote per share of common stock) in connection with the matters set forth in this Proxy Statement.Special Meeting.
In accordance with Delaware law, a list of stockholders entitled to vote at the meetingSpecial Meeting will be available at the place of the AnnualSpecial Meeting on the date of the Annual Meeting, 2018 and will be accessible for ten days prior to the Annual Meetingmeeting at our principal place of business, 830 Winter Street, 3rd Floor, Waltham, MA 02451, during normal business hours.between the hours of 9:00 a.m. and 5:00 p.m. local time.
How do I vote?
If on the Record Date,, 2018, your shares were registered directly in your name with our transfer agent, Broadridge Corporate Issuer Solutions, Inc., then you are a stockholder of record. Stockholders of record may vote viaby using the internet,Internet, by telephone or (if you received a proxy card by mail) mail as described below. Stockholders also may attend the meeting and vote in person. If you hold shares in “street name” (i.e., you are the beneficial owner of shares held through a bank, broker or other nominee),nominee, please refer to your proxy card the Notice or other information forwarded by your bank, broker or other nominee to see which voting options are available to you.
| | • | | You may vote by using the internetInternet.. The address of the website for internetInternet voting is www.proxyvote.com. Internet voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time the day before the Annual Meeting. on , 2018.Easy-to-follow instructions allow you to vote your shares and confirm that your instructions have been properly recorded. |
| | • | | You may vote by telephone. The toll-free telephone number is noted on the Notice and your proxy card. Telephone voting is available 24 hours a day and will be accessible until 11:59 p.m. Eastern Time the day before the Annual Meeting. on , 2018.Easy-to-follow voice prompts allow you to vote your shares and confirm that your instructions have been properly recorded. |
| | • | | You may vote by mail. If you received a proxy card by mail and choose to vote by mail, simply mark your proxy card, date and sign it, and return it in the postage-paid envelope. |
The method you use to vote will not limit your right to vote at the AnnualSpecial Meeting if you decide to attend in person. Written ballots will be passed out to anyone who wants to vote at the AnnualSpecial Meeting. If you hold your shares in street“street name,” you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the AnnualSpecial Meeting.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote at the AnnualSpecial Meeting. If you are the record holder of your shares, you may revoke your proxy in any one of three ways:
You may submit a subsequent proxy viaby using the internet,Internet, by telephone or by mail with a later date;
| | • | | You may deliver a written notice that you are revoking your proxy to the Corporate Secretary of the Company at 830 Winter Street, 3rd Floor, Waltham, MA 02451; or |
You may attend the AnnualSpecial Meeting and vote your shares in person. Simply attending the AnnualSpecial Meeting without affirmatively voting will not, by itself, revoke your proxy.
If you holdare a beneficial owner of your shares, in street name, you must contact the bank, broker or other nominee holding your shares and follow their instructions for changing your vote.
How many votes do you need to receive in order to hold the AnnualSpecial Meeting?
A quorum of stockholders is necessary to conduct business at the AnnualSpecial Meeting. Pursuant to our amended and restated bylaws, (the “Bylaws”), a quorum will be present if a majority of the voting power of outstanding shares of the Company entitled to vote generally in the election of directors is represented in person or by proxy at the AnnualSpecial Meeting. On the Record Date,record date, there were 22,168,090 shares of common stockCommon Stock outstanding and entitled to vote. Thus, 11,084,046 shares of Common Stock must be represented by stockholders present at the AnnualSpecial Meeting or represented by proxy to have a quorum. Our Series A Convertible Preferred Stock isnon-voting and is not included for the purposes of the calculations above.
Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you attend the AnnualSpecial Meeting and vote in person. Abstentions and broker Brokernon-votes will be counted for the purpose of determining whether a quorum is present for the transaction of business. If a quorum is not present, the chairman of the meeting or the holders of a majority of the votes present at the AnnualSpecial Meeting may adjourn the AnnualSpecial Meeting to another date.
What proposals will be voted on at the AnnualSpecial Meeting?
The following table provides a description of the proposals that will be voted on at the Annual Meeting:
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Proposal | | Board
Recommendation
| | Vote
Required
| | Broker
Discretionary
Voting
Allowed
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Proposal 1:1: Elect David Gill, John H. JohnsonTo approve an amendment to our Sixth Amended and Garheng Kong, M.D., Ph.D.Restated Certificate of Incorporation (the “Certificate of Incorporation”) to serve as Class III directors untilincrease the 2020 annual meetingCompany’s authorized shares of stockholders.Common Stock from 100,000,000 to 250,000,000 (the “Authorized Share Increase”) | | FOR | | PluralityMajority of the Voting Power | | NoYes |
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Proposal 2:2: RatifyTo approve an amendment to the selectionCertificate of Grant Thornton LLP asIncorporation, to effect a reverse stock split of our independent registered public accountantsoutstanding Common Stock at a ratio between1-for-2 and1-for-20, to be determined at the discretion of the Company’s Board of Directors (the “Board”) at any time before the earlier of June 30, 2019 and the next annual meeting of stockholders of the Company, for the year ending December 31, 2017.purpose of complying with Nasdaq Listing Rule 5550(a)(2), subject to the Board’s discretion to abandon such amendment (the “Reverse Split”) | | FOR | | Majority Votes Castof the Voting Power | | Yes |
Plurality means thatMajority of the nominees for director receiving the greatest number of votes will be elected. Withheld votes and “broker non-votes” (i.e., where a broker has not received voting instructions from the beneficial owner and for which the broker does not have discretionary power to vote on a particular matter) will have no effect on the election of a nominee.
Majority Votes CastVoting Power means that a proposal that receives an affirmative vote of a majority of the votes cast will be approved.voting power of all of the outstanding shares of the capital stock of the Company entitled to vote generally in the election of directors as of the record date. Abstentions and brokernon-votes will not be counted “FOR” orhave the effect of a vote “AGAINST” the proposal and will have no effect on the proposal.
Broker Discretionary Voting occurs when a broker does not receive voting instructions from the beneficial owner and votes those shares in its discretion on anythe proposal on which it is permitted to vote.
HowWhat are votes counted?the effects of abstentions and brokernon-votes?
VotesAn abstention represents a stockholder’s affirmative choice to decline to vote on a proposal. Under Delaware law, abstentions are considered present and entitled to vote at the Special Meeting. As a result, abstentions will be counted byfor purposes of determining the inspectorpresence or absence of elections appointed fora quorum and will also count as votes “AGAINST” a proposal in cases where approval of the meeting, who will separately count “For” and (with respectproposal requires the affirmative vote of a majority of the voting power of all of the outstanding shares of the capital stock of the Company entitled to proposals other thanvote generally in the election of directors) “Against” votes, abstentions and broker non-votes. Broker non-votes,directors as described inof the next paragraph, have no effect and will not be counted towards the vote total for Proposalrecord date (Proposals 1 and Proposal 2.2).
If youryou are a beneficial owner of shares are held in street name, you will need to obtain a proxy form from“street name” and do not provide the institutionorganization that holds your shares with specific voting instructions, under the rules of various national and followregional securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote onnon-routine matters. If the organization that holds your shares does not receive instructions includedfrom you on that form regarding how to instruct your broker to vote your
shares. If you do not give instructions to your broker, your broker can vote your shares on anon-routine matter, the organization that holds your shares does not have the authority to vote on the matter with respect to “discretionary” items, but not with respectthose shares. This is generally referred to “non-discretionary” items. Discretionary items are proposalsas a “brokernon-vote.” Proposals 1 and 2 involve matters that we believe will be considered routine under the rules onrelevant securities exchange rules. The “routine” treatment of these proposals does not affect the seriousness with which your broker may vote shares held in street name without your voting instructions. On non-discretionary items for which you do not give your broker instructions, the shareswe treat it. All other proposals involve matters that we believe will be treated as broker non-votes. Under current broker voting rules, any election of a member of the Board, whether contested or uncontested, is considered “non-discretionary” and therefore brokers are not permitted to vote your shares held in street name for the election of directors in the absence of instructions from you. Proposal 1 is “non-discretionary” and therefore ifnon-routine. We encourage you hold your shares through a broker, bank or other agent, your shares will not be voted on Proposals 1 unless youto provide voting instructions to the record holder.organization that holds your shares by carefully following the instructions provided by such organization.
Could other matters be decided at the AnnualSpecial Meeting?
Histogenics does not know of any other matters that may be presented for action at the AnnualSpecial Meeting. Should any other business come before the AnnualSpecial Meeting, the individualspersons named as proxies on the proxy card will have
discretionary authority to vote the shares represented by proxies in accordance with their best judgment. If you hold shares through a broker, bank or other nominee as described above, they will not be able to vote your shares on any other business that comes before the AnnualSpecial Meeting unless they receive instructions from you with respect to such other business.
What happens if a director nominee is unable to stand for election?
If a nominee is unable to stand for election, the Board may either:
reduce the number of directors that serve on the Board, or
designate a substitute nominee.
If the Board designates a substitute nominee, shares represented by proxies voted for the nominee who is unable to stand for election will be voted for the substitute nominee.
What happens if I submitsign and return my proxy card but do not provide voting instructions?
If you submit a proxy via telephone, the internet or return a signed and dated proxy card without indicating instructions with respect to specific proposals,marking any voting selections, your shares will be voted:
| | • | | Proposal 1:“FOR” the election of each of David Gill, John H. Johnson and Garheng Kong, M.D., Ph.D.as Class III directors to serve a term of three years until our 2020 annual meeting of stockholders; andProposal 1; |
| | • | | Proposal 2:“FOR” the ratification of Grant Thornton LLP as our independent registered public accounting firm for the year ending December 31, 2017.Proposal 2;and |
If any other matter is properly presented at the AnnualSpecial Meeting, the proxyholders for shares voted on the proxy card (i.e.(i.e., one of the individuals named as proxies on your proxy card) will vote your shares using their best judgment.
What do I need to show to attend the AnnualSpecial Meeting in person?
You will need proof of your share ownership (such as a recent brokerage statement or letter from your broker showing that you owned shares of our Common Stock as of the Record Date, 2018) and a form of photo identification such as a valid driver’s license.
If you are not a stockholder of record but hold shares in street name, you must provide proof of beneficial ownership as of the Record Date, such as an account statement or similar evidence of ownership.
identification. If you do not have proof of ownership and valid photo identification, you may not be admitted to the AnnualSpecial Meeting. All bags, briefcases and packages will be held at registration and will not be allowed in the meeting.
We will not permit the use of cameras (including cell phones and other devices with photographic capabilities) and other recording devices in the meeting room.
Who is paying for this proxy solicitation?
The accompanying proxy is being solicited by the Board. In addition to this solicitation, directors and employees of the Company may solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. In addition, the Company may also retain one or more third parties to aid in the solicitation of brokers, banks and institutional and other stockholders. We will pay for the entire cost of soliciting proxies. We may reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.
What happens if the AnnualSpecial Meeting is postponed or adjourned?
Unless the polls have closed or you have revoked your proxy, your proxy will still be in effect and may be voted once the AnnualSpecial Meeting is reconvened. However, you will still be able to change or revoke your proxy with respect to any proposalthe proposals until the polls have closed for voting on such proposal.the proposals.
How can I find out the results of the voting at the AnnualSpecial Meeting?
Preliminary voting results are expected to be announced at the AnnualSpecial Meeting. Final voting results will be reported on a Current Report on Form8-K filed with the SEC no later than the fourth business day after the Annual Meeting.Special Meeting, or , 2018.
How can I find Histogenics’ proxy materials on the internet?Internet?
This Proxy Statement and the Annual Report areproxy statement is available on the “Investors” section of our corporate website located at http://ir.histogenics.com. You also can obtain copies without charge at the SEC’s website at www.sec.gov. Additionally, in accordance with SEC rules, you may access these materialsthis proxy statement at www.proxyvote.com, which does not have “cookies” that identify visitors to the site.
How do I obtain a separate set of Histogenics’ proxy materials if I share an address with other stockholders?
In some cases, stockholders holding their shares in a brokerage or bank account who share the same surname and address receive only one copy of the Notice.proxy statement. This practice, called “householding,” is designed to reduce duplicate mailings and save printing and postage costs as well as natural resources. If you would like to have a separate copy of the Notice, our Annual Report and/or this Proxy Statementproxy statement mailed to you or to receive separate copies of future mailings, please submit your request to the address or phone number that appears on your Notice or proxy card. We will deliver such additional copies promptly upon receipt of such request.
In other cases, stockholders receiving multiple copies of proxy materials at the same address may wish to receive only one copy.one. If you would like to receive only one copy if you now receive more than one, please submit your request to the address or phone number that appears on your Noticeproxy card.
Why is Histogenics seeking to increase the number of authorized shares of Common Stock?
We have 100,000,000 authorized shares of Common Stock. As of October 15, 2018, over 99,400,000 of these shares were issued and outstanding or proxy card.reserved for issuance under outstanding securities, including stock options, preferred stock and warrants. The Board believes that it is prudent to increase the authorized number of shares of Common Stock in order to maintain a reserve of shares available for immediate issuance to meet business needs, such as equity offerings, equity awards and strategic partnership opportunities promptly as they arise.
If the stockholders approve this proposal, when would Histogenics implement the increase in the number of authorized shares?
We currently expect that the Authorized Share Increase will be implemented as soon as practicable after the receipt of the requisite stockholder approval.
Why is Histogenics seeking to implement the Reverse Split?
On October 17, 2018, the Company received a deficiency letter from the Nasdaq Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (“Nasdaq”) notifying it that, for the last 30 consecutive business days, the closing bid price for the Company’s Common Stock has closed below a minimum $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (“Rule 5550(a)(2)”). The Nasdaq deficiency letter had no immediate effect on the listing of our Common Stock, and our Common Stock continued to trade on The Nasdaq Capital Market under the symbol “HSGX” at this time. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been given 180 calendar days, or until April 15, 2019 to regain compliance with Rule 5550(a)(2).
While the Company continues to seek alternative options, the Reverse Split is being proposed in order to possibly increase the market price of our Common Stock to satisfy the $1.00 minimum closing bid price required to avoid the delisting of our Common Stock from The Nasdaq Capital Market, if necessary. In addition, a higher stock price, if the price does increase, may, among other things, increase the attractiveness of our Common Stock to the investment community.
What are the consequences of being delisted from Nasdaq?
If we are not able to satisfy the minimum closing bid price requirement prior to April 15, 2019 (and any applicable extensions or panel hearings are exhausted) and we do not effect the Reverse Split in order to meet the $1.00 minimum closing bid price continued listing requirement of Nasdaq, our Common Stock would be delisted from the Nasdaq Capital Market. If we are delisted from the Nasdaq Capital Market, we may be forced to seek to be traded on an inter-dealer electronic quotation and trading system operated by OTC Markets Group, which
would require our market makers to request that our Common Stock be so listed. There are a number of negative consequences that could result from our delisting from The Nasdaq Capital Market, including, but not limited to, the following:
the liquidity and market price of our Common Stock may be negatively impacted and the spread between the “bid” and “asked” prices quoted by market makers may be increased;
our access to capital may be reduced, causing us to have less flexibility in responding to our capital requirements;
our institutional investors may be less interested in or prohibited from investing in our Common Stock, which may cause the market price of our Common Stock to decline;
we will no longer be deemed a “covered security” under Section 18 of the Securities Act of 1933, as amended, and, as a result, we will lose our exemption from state securities regulations, making the granting of stock options and other equity incentives to our employees more difficult; and
if our Common Stock is traded as a “penny stock,” transactions in our Common Stock would be more difficult and cumbersome.
What would be the principal effects of the Reverse Split?
If implemented, the Reverse Split will have the following effects:
the market price of our Common Stock immediately upon effectiveness of the Reverse Split may increase over the market price of our Common Stock immediately prior to the Reverse Split, although there is no assurance that the market price of our Common Stock will increase at all and if it does, whether it will remain at the initial post-split level or higher for any period of time; and
the number of outstanding shares of Common Stock will be reduced to 31,012,699 if the Reverse Split is implemented at a ratio of1-for-2 and 3,101,270 if the Reverse Split is implemented at a ratio of1-for-20 (based on the number of shares of Common Stock outstanding on October 15, 2018 and prior to taking into account the effect of eliminating fractional shares or any issuances of Common Stock after October 15, 2018).
Would I need to take any action to receive post-Reverse Split shares?
All of the Company’s shares of Common Stock are held in book-entry form (that is, you do not have stock certificates evidencing your ownership of our Common Stock but instead receive statements reflecting the number of shares registered in your account), you would not need to take any action to receive your post-split shares, if the Reverse Split is implemented. If you are entitled to post-split shares, a transaction statement will be sent automatically to your address of record indicating the number of shares you hold.
What happens to any fractional shares resulting from the Reverse Split?
If you would be entitled to receive fractional shares as a result of the Reverse Split because you hold a number of shares of Common Stock before the reverse stock split that is not evenly divisible (in other words, it would result in a fractional interest following the Reverse Split), the Company shall not issue to any holder a fractional share of Common Stock on account of the Reverse Split. Rather, any fractional share of Common Stock resulting from such change shall be rounded upward to the nearest whole share of Common Stock. Share interests issued due to rounding are given solely to save the expense and inconvenience of issuing fractional shares of Common Stock and do not represent separately bargained for consideration.
What happens to equity awards under Histogenics’ equity incentive plans as a result of the Reverse Split?
If the Reverse Split is implemented, all shares of Common Stock subject to the outstanding equity awards (including stock options, performance shares and restricted stock) under Histogenics’ equity incentive plans will
be converted upon the effective date and time of the Reverse Split into between 5-50% of such number of such shares immediately preceding the Reverse Split (subject to adjustment for fractional interests), depending on the ratio of the Reverse Split approved by the Board. In addition, the exercise price of outstanding equity awards (including stock options and stock appreciation rights) will be adjusted to2-20 times the exercise price specified before the Reverse Split. As a result, the approximate aggregate exercise price will remain the same following the Reverse Split. No fractional shares will be issued pursuant to the plans following the Reverse Split. Therefore, if the number of shares subject to the outstanding equity awards immediately before the Reverse Split is not evenly divisible (in other words, it would result in a fractional interest following the Reverse Split), the number of shares of Common Stock issuable pursuant to such equity awards (including upon exercise of stock options and stock appreciation rights) will be rounded up to the nearest whole number.
Additional shares of Common Stock, if issued in connection with an equity award, would have a dilutive effect upon the percentage of equity of the Company owned by our present stockholders.
Can I receive future proxy materials and annual reports electronically?
Yes. This Proxy Statement and the Annual Report areproxy statement is available on the “Investors” section of our corporate website located at http://ir.histogenics.com. Instead of receiving paper copies in the mail, stockholders can elect to receive an e-mailemail that provides a link to our future annual reports and proxy materials on the internet. Opting to receive your proxy materials electronically will save us the cost of producing and mailing documents to your home or business will reduce the environmental impact of our annualstockholder meetings of stockholders and will give you an automatic link to the proxy voting site.
May I propose actions for consideration at next year’s annual meeting of stockholders or nominate individuals to serve as directors?
Yes. The following requirements apply to stockholder proposals, including director nominations, for our 20182019 annual meeting of stockholders:
Requirements for Stockholder Proposals to be Considered for Inclusion in Histogenics’ Proxy Materials:
Stockholders interested in submitting a proposal (other than the nomination of directors) for inclusion in the proxy materials to be distributed by us for our 20182019 annual meeting of stockholders may do so by following the procedures prescribed in Rule14a-8 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). To be eligible for inclusion in Histogenics’ proxy materials, stockholder proposals must be received at our principal executive offices no later than the close of business on December 27, 20172018 which is the 120th day prior to the first anniversary of the date that we released this Proxy Statementour proxy statement to our stockholders for the Annual Meeting.our 2018 annual meeting of stockholders. To be included in our proxy materials, your proposal also must comply with the Bylaws andRule 14a-8 promulgated under the Exchange Act regarding the inclusion of stockholder proposals in company-sponsored proxy materials. If we change the date of the 20182019 annual meeting of stockholders by more than 30 days from the anniversary of the Annual Meeting, stockholder proposals must be received a reasonable time before we begin to print and mail our proxy materials for our 20182019 annual meeting of stockholders. Such proposals should be sent to Histogenics Corporation, 830 Winter Street, 3rd Floor, Waltham, MA 02451, Attention: Corporate Secretary.
Requirements for Stockholder Nomination of Director Candidates and Stockholder Proposals Not Intended for Inclusion in Histogenics’ Proxy Materials:
Stockholders who wish to nominate persons for election to the Board at our 20182019 annual meeting of stockholders or who wish to present a proposal at our 20182019 annual meeting of stockholders, but who do not intend for such proposal to be included in the Company’s proxy materials for such meeting, must deliver written notice of the nomination or proposal to our Corporate Secretary at our principal executive offices no earlier than February 11, 2018,10, 2019, which is the 75th day prior to the first anniversary of the date we released this Proxy
Statement to our stockholders for the Annual Meeting,annual meeting, and no later than March 13, 2018,12, 2019, which is the 45th day prior to the first anniversary of the date we released this Proxy Statementour proxy statement to our stockholders for the Annual Meeting.2018 annual meeting of stockholders. However, if we change the date of our 20182019 annual meeting of stockholders by more than 30 days from the anniversary of this year’s Annual Meeting,annual meeting of stockholders, which was held on June 15, 2018, such nominations and proposals must be received no later than the close of business on the later of (a) the 90th day prior to our 20182019 annual meeting of stockholders and (b) the 10th day following the day we first publicly announce the date of our 20182019 annual meeting of stockholders. The stockholder’s written notice must include certain information concerning the stockholder and each nominee and proposal, as specified in our Bylaws. If the stockholder does not also satisfy the requirements ofRule 14a-4 promulgated under the Exchange Act, the persons named as proxies will be allowed to use their discretionary voting authority when and if the matter is raised at the 20182019 annual meeting of stockholders. Such nominations or proposals should be sent to Histogenics Corporation, 830 Winter Street, 3rd Floor, Waltham, MA 02451, Attention: Corporate Secretary.
Copy of Amended and Restated Bylaws:
You may request a copy of the Bylaws at no charge by writing to our Corporate Secretary at 830 Winter Street, 3rd Floor, Waltham, MA 02451. A current copy of the Bylaws also is available on the “Investors” section of our corporate website located at http://ir.histogenics.com.
Whom should I call if I have any questions?
If you have any questions, would like additional Histogenics proxy materials or proxy cards, or need assistance in voting your shares, please contact Investor Relations, Histogenics Corporation, 830 Winter Street, 3rd Floor, Waltham, MA 02451 or by telephone at (781)547-7900.
Important Notice Regarding the Availability of Proxy Materials
for the Special Meeting to be Held on Tuesday, June 13, 2017:, , 2018
The Notice, this Proxy Statement and the Annual Report areThis proxy statement is availableon-line atwww.proxyvote.com.
PROPOSAL 1
ELECTION OF DIRECTORS
Under our Bylaws, the Board is divided into three classes of roughly equal size. The members of each class are elected to serve a three-year term with the term of office of each of the three classes ending in successive years. Pursuant to our amended and restated Bylaws, the Board has fixed the current number of directors at seven. David Gill, John H. Johnson and Garheng Kong, M.D. Ph.D. are the three Class III directors whose terms expire at the Annual Meeting. Messrs. Gill and Johnson and Dr. Kong have been nominated for election by the Board to serve until the 2020 annual meeting of stockholders or until their successors are elected (or until their earlier death, resignation or removal). It is our policy to encourage nominees for director to attend the Annual Meeting.
Directors are elected by a plurality of the votes cast at the Annual Meeting. The three nominees receiving the highest number of “FOR” votes will be elected. Abstentions and broker non-votes will have no effect on the outcome of the election of directors at the Annual Meeting.
Shares represented by signed proxy cards will be voted on Proposal 1 “FOR” the election of Messrs. Gill and Johnson and Dr. Kong to the Board at the Annual Meeting, unless otherwise marked on the card. If any Histogenics director nominee becomes unavailable for election as a result of an unexpected occurrence, shares represented by proxy will be voted for the election of a substitute nominee designated by our current Board, unless otherwise marked on the card. Messrs. Gill and Johnson and Dr. Kong, Histogenics’ three director nominees, have each agreed to serve as a director if elected. We have no reason to believe that any of the Histogenics nominees will be unable to serve if elected.
Nominees for Election as Class III Directors at the Annual Meeting
This year’s nominees for election to the Board as our Class III directors to serve for a term of three years expiring at the 2020 annual meeting of stockholders, or until their successors have been duly elected and qualified or until their earlier death, resignation or removal, are provided below. The age of each director as of the Record Date is set forth below.
| | | | | | |
Name | | Age | | Positions and Offices Held with Company | | Director Since |
David Gill | | 62 | | Director | | 2015 |
John H. Johnson | | 59 | | Director | | 2013 |
Garheng Kong, M.D., Ph.D. | | 41 | | Director, Chairman of the Board | | 2012 |
The following is additional information about each of the nominees as of the date of this Proxy Statement, including their business experience, public company director positions held currently or at any time during the last five years, involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused the Nominating/Corporate Governance Committee and the Board to determine that the nominees should serve as one of our directors.
David Gill has served as a member of the Board since February 2015. Mr. Gill served as the President and Chief Financial Officer of EndoChoice, Inc., a medical device company focused on gastrointestinal disease from April 2016 through the sale of the company to Boston Scientific in November 2016 and as Chief Financial Officer from August 2014 to April 2016. Mr. Gill currently serves on the board and as audit committee chairman of Cempra, Inc. Previously, he served as the Chief Financial Officer of INC Research, a clinical research organization, from February 2011 to August 2013 after having served as a board member and its audit committee chairman from 2007 to 2010. Mr. Gill was the Chief Financial Officer of TransEnterix, Inc., a medical device company, from March 2009 to February 2011 and the Chief Financial Officer and Treasurer of NxStage Medical, Inc, a publicly-traded dialysis equipment company, from July 2005 to November 2006. Mr. Gill also served as a
director and audit committee chairman on two public life science company boards, LeMaitre Vascular, Inc. and IsoTis OrthoBiologics, Inc. and several private life science companies from 2006 to 2009. Earlier in his career Mr. Gill served in a variety of senior executive leadership roles for several publically-traded companies including CTI Molecular Imaging, Inc., Interland Inc., Novoste Corporation, and Dornier Medical Systems. Mr. Gill holds a B.S. degree, cum laude, in Accounting from Wake Forest University and an M.B.A. degree, with honors, from Emory University, and was formerly a certified public accountant. We believe that Mr. Gill’s qualifications to serve as a director of the Company include his extensive experience as an executive in the biotechnology industry and his prior service as a senior-level executive in mature biotechnology companies.
John H. Johnson has served as a member of the Board since November 2013. Mr. Johnson served as President and Chief Executive Officer of Dendreon Corporation from January 2012 to August 2014. Mr. Johnson previously served as the Chief Executive Officer and a director of Savient Pharmaceuticals, Inc., a pharmaceutical company, from January 2011 until January 2012, and prior to that time, served as Senior Vice President and President of Eli Lilly and Company’s oncology unit from November 2009 until January 2011. He was also Chief Executive Officer of ImClone Systems Incorporated from 2007 until November 2009, and served on ImClone’s board of directors until it was acquired by Eli Lilly in 2008. Prior to joining ImClone, Mr. Johnson served as Company Group Chairman of Johnson & Johnson’s Worldwide Biopharmaceuticals unit from 2005 until 2007, President of its Ortho Biotech Products LP and Ortho Biotech Canada units from 2003 until 2005, and Worldwide Vice President of its CNS, Pharmaceuticals Group Strategic unit from 2001 until 2003. Mr. Johnson currently serves as chairman of the board of directors of Strongbridge Biopharma plc, and as a director of Cempra Inc., Portola Pharmaceuticals, Inc. and Sucampo Pharmaceuticals, Inc. He also served as a member of the board of directors for the Pharmaceutical Research and Manufacturers of America and as a member of the Health Section Governing Board of Biotechnology Industry Organization. He earned his B.S. from the East Stroudsburg University of Pennsylvania. We believe that Mr. Johnson’s qualifications to serve as a director of the Company include his extensive experience as an executive in the biotechnology industry and his prior service as a senior-level executive in mature biotechnology companies.
Garheng Kong, M.D., Ph.D. has served as a member of the Board since July 2012. Dr. Kong has been the Managing Partner of HealthQuest Capital, a healthcare investment firm, since July 2013. He was a general partner at Sofinnova Ventures, a venture capital firm focused on life sciences, from September 2010 to December 2013. From 2000 to September 2010, he was at Intersouth Partners, a venture capital firm, most recently as a general partner. Dr. Kong has served on the board of directors of Cempra, Inc. since 2006 and as chairman of its board since 2008. Dr. Kong has also served on the board of directors of Strongbridge Biopharma plc since September 2015, the board of directors of Alimera Sciences, Inc. since October 2012 and on the board of directors of Laboratory Corporation of America Holdings since December 2013. Dr. Kong holds a B.S. from Stanford University. He holds an M.D., Ph.D. and an M.B.A. from Duke University. We believe that Dr. Kong’s qualifications to serve as a director of the Company include his knowledge and experience in the venture capital industry, his medical training and his significant prior board experience with both public and privately held companies.
THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF DAVID GILL, JOHN H. JOHNSON AND GARHENG KONG, M.D. PH.D. AS CLASS III DIRECTORS
Continuing Directors Not Standing for Election
Certain information about those directors whose terms do not expire at the Annual Meeting is furnished below, including their business experience, public company director positions held currently or at any time during the last five years, involvement in certain legal or administrative proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused the Nominating/Corporate Governance Committee and
the Board to determine that the directors should serve as one of our directors. The age of each director as of the Record Date is set forth below.
| | | | | | |
Name | | Age | | Positions and Offices Held with Company | | Director Since |
Joshua Baltzell | | 47 | | Director | | 2012 |
Adam Gridley | | 44 | | President, Chief Executive Officer and Director | | 2014 |
Michael Lewis | | 58 | | Director | | 2011 |
Kevin Rakin | | 56 | | Director | | 2012 |
Class I Directors (Terms Expire in 2018)
Joshua Baltzell has served as a member of the Board since July 2012. Mr. Baltzell is a Venture Partner at Split Rock Partners, and also serves as a Venture Partner at SightLine Partners. He has been with Split Rock since 2004 and with SightLine since 2014. Mr. Baltzell has over 20 years of experience in the healthcare industry. Prior to his tenure in the venture capital industry, Mr. Baltzell held roles as an investment banker at Piper Jaffray Companies from 2000 to 2002, where he focused primarily on mergers and acquisitions in the medical device sector, as well as various marketing and business development positions with SCIMED and Boston Scientific. Mr. Baltzell currently serves on the boards of Magnolia Medical, Nanocyte Medical, Colorescience and Entellus. Mr. Baltzell holds a B.A. in Economics from St. Olaf College and an M.B.A. from the University of Minnesota’s Carlson School of Management. We believe that Mr. Baltzell’s qualifications to serve as a director of the Company include his extensive experience in the venture capital industry, his investment banking experience in the healthcare and medical device industries with both public and privately held companies and his significant prior board experience.
Kevin Rakin has served as a member of the Board since October 2012. Mr. Rakin is a co-founder and Partner at HighCape Partners, a growth equity life sciences fund where he has served since November 2013. From June 2011 to November 2012, Mr. Rakin was the President of Regenerative Medicine at Shire plc, a leading specialty biopharmaceutical company. Mr. Rakin currently serves on a number of boards, including Oramed Pharmaceuticals, Inc., Cheetah Medical Inc. and Tela Bio, Inc. Mr. Rakin holds an M.B.A. from Columbia University and received his graduate and undergraduate degrees in Commerce from the University of Cape Town, South Africa. We believe that Mr. Rakin’s qualifications to serve as a director of the Company include his extensive experience as an executive in the biotechnology industry, as well as his service in positions in various companies as a chief executive officer, chief financial officer and president and his involvement in public and private financings and mergers and acquisitions in the biotechnology industry.
Class II Directors (Terms Expire in 2019)
Adam Gridley has served as our Chief Executive Officer and President since May 2014. Mr. Gridley previously served from October 2012 until May 2014 as Senior Vice President of Technical Operations at Merz North America, Inc., the North American business unit of Merz, Inc., a privately-held pharmaceuticals company. From September 2011 to October 2012, he was Senior Vice President, Operations & Product Development responsible for global research and development and manufacturing for Merz Aesthetics, Inc., a global business unit of Merz, Inc., and from July 2010 to September 2011, Mr. Gridley held the position of Senior Vice President, Product Development at Merz. From September 2008 to July 2010, Mr. Gridley was Senior Vice President, Corporate Development for BioForm Medical, Inc., a publicly-traded company acquired by Merz, Inc. Mr. Gridley holds a B.S. and an M.B.A. from the University of Denver. We believe that Mr. Gridley’s qualifications to serve as a director of the Company include his extensive experience as an executive in the biotechnology industry and his prior service as a senior-level executive in both early stage and mature biotechnology companies.
Michael Lewis has served as a member of Board of Directors since May 2011. Mr. Lewis has more than 25 years of experience in the investment management and retail industries. Mr. Lewis is currently Chairman of Oceana Investment Corporation Limited, a private U.K. investment company, and is also a Partner of Oceana Investment
Partners LLP, a U.K. investment advisor. Mr. Lewis currently serves as Chairman of Strandbags Holdings Pty Limited, an Australian retail company comprising some 450 stores and a Non-Executive Director of The Foschini Group Limited, a South African retail company with some 2,000 stores. Mr. Lewis serves on the board of United Trust Bank Limited, a U.K.-based bank, and served on the Supervisory Board of Axel Springer AG in Germany from 2007 to September 2012. Mr. Lewis previously worked for Ivory and Sime, a money manager based in Scotland, and Lombard Odier, a money manager based in England. He has an undergraduate degree and a postgraduate degree from the University of Cape Town. We believe Mr. Lewis’ qualifications to serve as a director of the Company include his extensive experience in money management, and as an investor and director of biomedical and other companies.
CORPORATE GOVERNANCE
Independence of the Board of Directors
As required under NASDAQ listing standards, a majority of the members of a listed company’s board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Consistent with these regulations, after review of all relevant transactions or relationships between each director, or any of his family members, and the Company, its senior management and its independent registered public accounting firm, the Board has determined that all of our directors are independent directors within the meaning of applicable NASDAQ listing standards, except for Mr. Gridley, our Chief Executive Officer.
Information Regarding the Board of Directors and its Committees
As required under NASDAQ listing standards, our independent directors meet in regularly scheduled executive sessions at which only independent directors are present. Dr. Kong, Chairman of the Board, presides over these executive sessions.
The Board has an Audit Committee (the “Audit Committee”), a Compensation Committee (the “Compensation Committee”) and a Nominating/Corporate Governance Committee (the “Nominating/Corporate Governance Committee”). The following table provides membership and meeting information for each of the Board committees during 2016:
| | | | | | |
Committee
| | Chairman
| | Members
| | Number of Committee
Meetings in 2016 |
Audit Committee
| | David Gill | | John H. Johnson and Kevin Rakin | | 6 |
Compensation Committee
| | John H. Johnson | | Joshua Baltzell and Kevin Rakin | | 6 |
Nominating/Corporate Governance Committee
| | Garheng Kong, M.D., Ph.D. | | Joshua Baltzell and Michael Lewis | | 1 |
Below is a description of each committee of the Board. The Board has determined that each member of the Audit Committee, Compensation Committee and Nominating/Corporate Governance Committee meets applicable rules and regulations regarding “independence” and that each such member is free of any relationship that would interfere with his individual exercise of independent judgment with regard to the Company.
Audit Committee
The Audit Committee of the Board oversees the quality and integrity of the Company’s financial statements and other financial information provided to the Company’s stockholders, the retention and performance of the Company’s independent accountants, the effectiveness of the Company’s internal controls and disclosure controls, and the Company’s compliance with ethics policies and SEC and related regulatory requirements Pursuant to the Audit Committee charter, the functions of the Audit Committee include, among other things: (1) appointing, approving the compensation of, and assessing the independence of our registered public accounting firm; (2) overseeing the work of our registered public accounting firm, including through the receipt and consideration of reports from such firm; (3) reviewing and discussing with management and the registered public accounting firm our annual and quarterly financial statements and related disclosures; (4) monitoring our internal control over financial reporting and our disclosure controls and procedures; (5) meeting independently with our registered public accounting firm and management; (6) furnishing the audit committee report required by SEC rules; (7) reviewing and approving or ratifying any related person transactions; and (8) overseeing our risk assessment and risk management policies. Our Audit Committee charter is available on the “Investors” section of our corporate website located at http://ir.histogenics.com. Three directors comprised the Audit Committee as of December 31, 2016: Mr. Gill (the Chairman of the Audit Committee), Mr. Johnson and
Mr. Rakin. The Audit Committee met six times during 2016. In addition, the members of the Audit Committee met informally in conjunction with each regularly scheduled quarterly Board meeting and at other times throughout the year to discuss a variety of matters.
All members of our Audit Committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and NASDAQ. The Board of Directors has determined that Messrs. Gill and Rakin are “audit committee financial experts” as defined by applicable SEC rules and have the requisite financial sophistication as defined under the applicable NASDAQ rules and regulations.
The Board annually reviews the NASDAQ listing standards definition of independence for Audit Committee members and has determined that all members of our Audit Committee are independent (as independence is currently defined in applicable NASDAQ listing standards and Rule 10A-3 promulgated under the Exchange Act).
Compensation Committee
The Compensation Committee of the Board reviews and approves the design of, assesses the effectiveness of, and administers compensation programs for officers and employees, including our equity incentive plans. Pursuant to the Compensation Committee charter, the functions of the Compensation Committee include: (1) evaluating the performance of our chief executive officer and determining the chief executive officer’s salary and contingent compensation based on his or her performance and other relevant criteria; (2) identifying the corporate and individual objectives governing the chief executive officer’s compensation; (3) approving the compensation of our other executive officers; (4) making recommendations to the Board with respect to director compensation; (5) reviewing and approving the terms of material agreements between us and our executive officers; (6) overseeing and administering our equity incentive plans and employee benefit plans; (7) reviewing and approving policies and procedures relating to the perquisites and expense accounts of our executive officers; (8) preparing the annual Compensation Committee report required by SEC rules; and (9) conducting a review of executive officer succession planning, as necessary, reporting its findings and recommendations to the Board, and working with the Board in evaluating potential successors to executive officer positions. In accordance with NASDAQ listing standards and our amended and restated Compensation Committee charter, the Board has granted our Compensation Committee the authority and responsibility to retain or obtain the advice of compensation consultants, legal counsel and other compensation advisers, the authority to fund such advisers, and the responsibility to consider the independence factors specified under applicable law and any additional factors the Compensation Committee deems relevant. Our Compensation Committee charter is available on the “Investors” section of our corporate website located at http://ir.histogenics.com.
In addition, the Compensation Committee has adopted additional internal policies and procedures relating to administration of the Company’s equity incentive plans, including the following:
Members of the Compensation Committee receive initial and periodic training from an independent consultant with expertise in compensation management matters concerning the Company’s operative equity incentive plans and compensation procedures as well as general best practices for compensation committees.
With the assistance of legal counsel, the Compensation Committee conducts reviews of the Compensation Committee’s charter, the Company’s equity incentive plans, the Compensation Committee’s current practices, procedures and controls, and has developed equity compensation compliance procedures and a checklist of key plan provisions to be reviewed prior to the issuance and delivery of equity awards. Among other things, the checklist addresses: (1) the expiration date of the applicable equity incentive plan or any portion thereof; (2) the overall shares available under the applicable plan; (3) any annual limitations on awards as set forth in the applicable equity incentive plan; (4) prior grants made to proposed recipients during any relevant period; and (5) the proper
| recording of the equity grants in accordance with the terms of the applicable equity incentive plan. The Compensation Committee has designated the Company’s Chief Financial Officer and Vice President of Finance to monitor compliance with the foregoing compliance procedures and checklists (the “Compliance Monitor”).
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In advance of the Compensation Committee’s first meeting each year, the Compliance Monitor provides the Compensation Committee information on the following: (1) the aggregate number of shares available for issuance under each equity incentive plan still in effect; (2) the expiration date for each such equity incentive plan; (3) the annual limit on equity grants to any one individual under each equity incentive plan; and (4) the number of shares covered by awards already granted to each of the Company’s executive officers under the Company’s equity incentive plans. The Compensation Committee reviews this information prior to making any equity compensation award to any executive officer.
Prior to the dissemination of the Company’s annual proxy statement released in conjunction with the annual meeting of stockholders, the Board (or an appropriate committee thereof), with the assistance of legal counsel, verifies that all awards made under, amendments or proposed amendments of, and summaries or descriptions of, the Company’s equity compensation plans have been disclosed accurately and properly in such proxy statement.
With the assistance of legal counsel, the Compensation Committee formally reviews and approves all disclosures in the Company’s SEC filings concerning executive officer and director compensation matters before the documents are publicly filed.
In the event of a proposed or contemplated stock split, reverse stock split or any other change to the Company’s capitalization, the Board will receive guidance from outside legal counsel on the effect of such capitalization change on the Company’s equity incentive plans, if any, including but not limited to the aggregate and annual limitations of those equity incentive plans.
The Board will seek stockholder approval of any amendment made to the Company’s equity incentive plans in the Company’s next annual meeting of stockholders following the amendment if such approval is required by the terms of such equity incentive plan, applicable Delaware law, SEC regulations or NASDAQ governance rules and listing standards.
The Board receives periodic reports on the Company’s compliance with its procedures, policies and guidelines for issuing equity awards. These reports are prepared and made with the input of the Compliance Monitor, the Compensation Committee and outside legal counsel.
Three directors comprised the Compensation Committee of the Board as of December 31, 2016: Mr. Johnson (the Chairman of the Compensation Committee), Mr. Baltzell and Mr. Rakin. The Compensation Committee met six times during 2016. In addition, the members of the Compensation Committee met informally in conjunction with each regularly scheduled quarterly Board meeting and at other times throughout the year to discuss a variety of matters.
The Board has determined that all members of the Compensation Committee are independent (as independence is currently defined in the NASDAQ listing standards). In addition, each of our directors serving on our Compensation Committee satisfies the heightened independence standards for members of a compensation committee under NASDAQ listing standards. Each member of this committee is also a non-employee director, as defined pursuant to Rule 16b-3 promulgated under the Exchange Act, and an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).
Our Chief Executive Officer and our Chief Financial Officer often participate in the Compensation Committee’s meetings. Neither of them participates in the determination of their own respective compensation or the compensation of directors. However, Mr. Gridley does make recommendations to the Compensation Committee regarding the amount and form of the compensation of the other executive officers and key
employees, and he often participates in the Compensation Committee’s deliberations about their compensation. No other executive officers participate in the determination of the amount or form of the compensation of executive officers or directors.
The Compensation Committee has retained Radford, a well-known consulting firm, since January 2015. In February 2017, Radford presented a summary executive compensation report to the Compensation Committee. Radford previously provided the Compensation Committee with data about the compensation paid by our peer group of companies and other employers who compete with the Company for executives, updated the Compensation Committee on new developments in areas that fall within the Compensation Committee’s jurisdiction and was available to advise the Compensation Committee regarding all of its responsibilities. The consultant serves at the pleasure of the Compensation Committee rather than the Company, and the consultant’s fees are approved by the Compensation Committee. In February 2017, our Compensation Committee assessed the independence of Radford pursuant to applicable SEC rules and NASDAQ listing standards and concluded that the work of Radford has not raised any conflict of interest.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee is or has ever been an officer or employee of the Company. No executive officer of the Company serves as a member of the Board of Directors or compensation committee of any other entity that has one or more executive officers serving as a member of the Board or our Compensation Committee.
Nominating/Corporate Governance Committee
Our Nominating/Corporate Governance Committee identifies, evaluates and recommends nominees to the Board and committees of the Board, conducts searches for appropriate directors, and evaluates the performance of the Board and of individual directors. Pursuant to the Nominating/Corporate Governance Committee charter, the functions of the Nominating/Corporate Governance Committee include, among other things: (1) identifying, evaluating, and making recommendations to the Board and our stockholders concerning nominees for election to the Board, to each of the Board’s committees and as committee chairs; (2) annually reviewing the performance and effectiveness of the Board and developing and overseeing a performance evaluation process; (3) annually evaluating the performance of management, the Board and each board committee against their duties and responsibilities relating to corporate governance; (4) annually evaluating adequacy of our corporate governance structure, policies, and procedures; and (5) providing reports to the Board regarding the committee’s nominations for election to the Board and its committees. Our Nominating/Corporate Governance Committee charter is available on the “Investors” section of our corporate website located at http://ir.histogenics.com. Three directors comprised the Nominating/Corporate Governance Committee as of December 31, 2016: Dr. Kong (the Chairman of the Nominating/Corporate Governance Committee), Mr. Baltzell and Mr. Lewis. The Nominating/Corporate Governance Committee met once during 2016. In addition, the members of the Nominating/Corporate Governance Committee met informally in conjunction with each regularly scheduled quarterly Board meeting and at other times throughout the year to discuss a variety of matters.
The Nominating/Corporate Governance Committee believes that candidates for director should have certain minimum qualifications, including being able to read and understand basic financial statements and having a general understanding of the Company’s industry. The Nominating/Corporate Governance Committee also considers other factors it deems appropriate, including, but not limited to:
the candidate’s relevant expertise and experience upon which to offer advice and guidance to management;
the candidate having sufficient time to devote to the affairs of the Company;
the candidate having a proven track record in his or her field;
the candidate’s ability to exercise sound business judgment;
the candidate’s commitment to vigorously represent the long-term interests of our stockholders;
whether or not a conflict of interest exists between the candidate and our business;
whether the candidate would be considered independent under applicable NASDAQ and SEC standards;
the current composition of the Board; and
the operating requirements of the Company.
In conducting this assessment, the committee considers diversity, age, skills, and such other factors as it deems appropriate given the then-current needs of the Board and the Company, to maintain a balance of knowledge, experience and capability. While diversity and variety of experiences and viewpoints represented on the Board should always be considered, the Nominating/Corporate Governance Committee believes that a director nominee should not be chosen nor excluded solely or largely because of race, color, gender, national origin or sexual orientation or identity.
In the case of incumbent directors whose terms of office are set to expire, the Nominating/Corporate Governance Committee reviews such directors’ overall service to the Company during their term, including the number of meetings attended, level of participation, quality of performance, and any other relationships and transactions that might impair such directors’ independence.
When there is a vacancy on the Board, the Nominating/Corporate Governance Committee uses its network of contacts to compile a list of potential candidates, but may also engage, if it deems it appropriate, a professional search firm. The Nominating/Corporate Governance Committee conducts any appropriate and necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board. The Nominating/Corporate Governance Committee meets to discuss and consider such candidates’ qualifications and then selects a nominee for recommendation to the Board by majority vote.
The Nominating/Corporate Governance Committee will consider director candidates recommended by stockholders and evaluate them using the same criteria as candidates identified by the Board or the Nominating/Corporate Governance Committee for consideration. If a stockholder of the Company wishes to recommend a director candidate for consideration by the Nominating/Corporate Governance Committee, the stockholder recommendation should be delivered to the Corporate Secretary of the Company at the principal executive offices of the Company pursuant to the terms and conditions of the Bylaws. The stockholder recommendation must, among other things, set forth:
for each person whom the stockholder proposes to nominate for election or reelection as a director all information relating to such person as would be required to be disclosed in solicitations of proxies for the election of such nominees as directors pursuant to Regulation 14A promulgated under the Exchange Act, and such person’s written consent to serve as a director if elected;
as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made: (1) the name and address of such stockholder, as they appear on the Company’s books, and of such beneficial owner; (2) the class and number of shares of the Company that are owned beneficially and of record by such stockholder and such beneficial owner and a representation that the stockholder will notify the Company in writing of the class and number of such shares owned beneficially and of record as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed; (3) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of a proposal, at least the percentage of the Company’s voting shares required under applicable law to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Company’s voting shares to elect such nominee or nominees; and (4) whether and the extent to
| which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such stockholder with respect to stock of the Company and whether any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock) has been made by or on behalf of such stockholder, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk of stock price changes for, such stockholder or to increase or decrease the voting power or pecuniary or economic interest of such stockholder with respect to stock of the Company;
|
any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Company or with a value derived in whole or in part from the value of any class or series of shares of the Company, whether or not such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Company or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by such stockholder and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Company and a representation that the stockholder will notify the Company in writing of any such Derivative Instrument in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed;
a description of any agreement, arrangement or understanding with respect to the proposal of business between or among such stockholder and the beneficial owner, if any, on whose behalf the proposal is made, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing and a representation that the stockholder will notify the Company in writing of any such agreements, arrangements or understandings in effect as of the record date for the meeting promptly following the later of the record date or the date notice of the record date is first publicly disclosed;
a representation that the stockholder is a holder of record of stock of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business; and
any other information that is required to be provided by the stockholder pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder in such stockholder’s capacity as a proponent of a stockholder proposal.
In addition, the Bylaws require that the stockholder recommendation shall set forth as to each person whom the stockholder proposes to nominate for election or reelection as a director: (1) the name, age, business address and residence address of the person; (2) the principal occupation or employment of the person; (3) the class, series and number of shares of capital stock of the Company that are owned beneficially and of record by the person; (4) a statement as to the person’s citizenship; (5) the completed and signed representation and agreement described above; (6) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to Section 14 of the Exchange Act; (7) such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; and (8) whether and the extent to which any derivative instrument, swap, option, warrant, short interest, hedge or profit interest or other transaction has been entered into by or on behalf of such person with respect to stock of the Company and whether any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock) has been made by or on behalf of such person, the effect or intent of any of the foregoing being to mitigate loss to, or to manage risk of stock price changes for, such person or to increase or decrease the voting power or pecuniary or economic interest of such person with respect to stock of the Company.
We believe that each of our directors and nominees brings a strong background and set of skills to the Board, giving the Board, as a whole, an appropriate balance of the knowledge, experience, attributes, skills and expertise. In addition, six of our seven directors are independent under NASDAQ standards (Mr. Gridley, our Chief Executive Officer, being the only exception as he is a Company employee) and our Nominating/Corporate Governance Committee believes that all seven directors are independent of the influence of any particular
stockholder or group of stockholders whose interests may diverge from the interests of our stockholders as a whole. We believe that our directors have a broad range of personal characteristics including leadership, management, pharmaceutical, business, marketing and financial experience and abilities to act with integrity, with sound judgment and collegially, to consider strategic proposals, to assist with the development of our strategic plan and oversee its implementation, to oversee our risk management efforts and executive compensation and to provide leadership, to commit the requisite time for preparation and attendance at board and committee meetings and to provide required expertise on the Board committees. As described above, the Nominating/Corporate Governance Committee has recommended the members of the Board for their directorships. In evaluating such directors, our Nominating/Corporate Governance Committee has reviewed the experience, qualifications, attributes and skills of our directors and nominees, including those identified in the biographical information set forth above in the section entitled “Election of Directors.” The Nominating/Corporate Governance Committee believes that the members of the Board offer insightful and creative views and solutions with respect to issues facing the Company. In addition, the Nominating/Corporate Governance Committee also believes that the members of the Board function well together as a group. The Nominating/Corporate Governance Committee believes that the above-mentioned attributes and qualifications, along with the leadership skills and other experiences of the members of the Board of Directors described in further detail above under the section entitled “Election of Directors,” provide the Company with the perspectives and judgment necessary to guide the Company’s strategies and monitor their execution.
Special Financing Committee
In 2016, the Board created a special financing committee to evaluate and approve matters relating to the Private Placement (as defined below, see “Certain Relationships and Related Party Transactions—2016 Private Placement”). The special financing committee was comprised of Messrs. Gill and Johnson. The special financing committee met five times in 2016, completing its work in September 2016, at which point it was disbanded.
Separation of CEO and Chairman of the Board Roles
The Board separates the positions of Chairman of the Board and Chief Executive Officer. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman of the Board to lead the Board in its fundamental role of providing advice to and independent oversight of management. The Board of Directors recognizes the time, effort, and energy that the Chief Executive Officer is required to devote to his position in the current business environment, as well as the commitment required to serve as our Chairman of the Board, particularly as the Board’s oversight responsibilities continue to grow. We believe that having separate positions and having an independent outside director serve as Chairman of the Board is the appropriate leadership structure for the Company at this time.
Meetings of the Board of Directors
The Board met ten times during 2016. Each director attended 75% or more of the aggregate of the meetings of the Board and of the committees on which he served, held during the period for which he was a director or committee member.
Director Attendance at Annual Meetings of Stockholders
Directors are encouraged, but not required, to attend our annual stockholder meetings. All of our directors attended our 2016 Annual Meeting of Stockholders.
Stockholder Communications with the Board of Directors
Stockholders may communicate with the Board, including the independent members of the Board, by sending a letter to Histogenics Corporation, 830 Winter Street, 3rd Floor, Waltham, MA 02451, Attention:
Corporate Secretary. Each such communication should set forth (1) the name and address of such stockholder, as they appear on the Company’s books and, if the shares of the Company’s stock are held by a nominee, the name and address of the beneficial owner of such shares, and (2) the number of shares of the Company’s stock that are owned of record by such record holder and beneficially by such beneficial owner. The Corporate Secretary will review all communications from stockholders, but may, in his sole discretion, disregard any communication that he believes is not related to the duties and responsibilities of the Board. If deemed an appropriate communication, the Corporate Secretary will submit a stockholder communication to a chairman of a committee of the Board, or a particular director, as appropriate.
The Board has also adopted internal policies and procedures, with the assistance of outside legal counsel, for responding to communications from the Company’s stockholders, including litigation demand letters (a “Litigation Demand”), which provide that:
any Litigation Demand is promptly forwarded to the independent Chairman of the Board and outside legal counsel;
| • | | investigations of any Litigation Demand will be directed and supervised by one or more disinterested and independent (i.e., non-management) members of the Board and such supervision will not be delegated to any member of the Company’s management team (though in appropriate cases members of management may otherwise assist an investigation); |
the Board has standing authority to retain and be advised by disinterested and independent outside legal counsel and other advisers, as needed;
the Board may authorize a special demand review committee to investigate a Litigation Demand, which committee would ensure the preparation of a written record of the resolution creating the demand review committee, its purpose, composition, structure, duties, responsibilities and scope of authority; and
upon completion of its investigation, the Board will receive a recommendation from the independent and disinterested members of the Board who investigated the Litigation Demand and vote on whether to adopt that recommendation and inform the demanding stockholder accordingly.
The Board’s Litigation Demand policy notes that every Litigation Demand situation is unique and that flexibility is required in responding thereto. Failure to adhere to any of the particular processes above is not deemed a breach of any Board member’s fiduciary duties.
Code of Business Conduct
We have adopted a Code of Business Conduct that applies to each of our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar functions. The Code of Business Conduct addresses various topics, including: (1) compliance with applicable laws, rules and regulations; (2) conflicts of interest; (3) public disclosure of information; (4) insider trading; (5) corporate opportunities; (6) competition and fair dealing; (7) gifts; (8) discrimination, harassment and retaliation; (9) health and safety; (10) record-keeping; (11) confidentiality; (12) protection and proper use of company assets; (13) payments to government personnel; and (14) the reporting of illegal and unethical behavior.
The Code of Business Conduct is available on the “Investors” section of our corporate website located at http://ir.histogenics.com. Any waiver of the Code of Business Conduct for an executive officer or director may be granted only by the Board or a committee thereof and must be timely disclosed as required by applicable law. We intend to disclose future amendments to certain provisions of our Code of Business Conduct, or waivers of those provisions, applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions on our website, www.histogenics.com.
We have implemented whistleblower procedures that establish formal protocols for receiving and handling complaints from employees. Any concerns regarding accounting or audit matters reported under these procedures will be communicated promptly to the Audit Committee.
Risk Oversight
The Board has responsibility for the oversight of the company’s risk management processes and, either as a whole or through its committees, regularly discusses with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight process includes the Board receiving regular reports from Board committees and members of senior management to enable the Board to understand the Company’s risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, strategic and reputational risk.
The Audit Committee reviews information regarding liquidity and operations, and oversees our management of financial risks. Periodically, the Audit Committee reviews our policies with respect to risk assessment, risk management, loss prevention and regulatory compliance. Oversight by the Audit Committee includes direct communication with our external independent auditors, and discussions with management regarding significant risk exposures and the actions management has taken to limit, monitor or control such exposures. The Compensation Committee is responsible for assessing whether any of our compensation policies or programs has the potential to encourage excessive risk-taking. The Nominating/Corporate Governance Committee manages risks associated with the independence of the Board, corporate disclosure practices, and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire Board is regularly informed through committee reports about such risks. Matters of significant strategic risk are considered by the Board as a whole.
The oversight of risk within the Company is an evolving process requiring the Company to continually look for opportunities to further embed systematic enterprise risk management into ongoing business processes within the Company. The Board encourages management to continue to drive this evolution.
Employee Compensation Risks
As part of its oversight of the Company’s executive compensation program, the Compensation Committee considers the impact of the Company’s executive compensation program, and the incentives created by the compensation awards that it administers, on the Company’s risk profile. In addition, the Compensation Committee reviews the compensation policies and procedures for all employees, including the incentives that they create and factors that may reduce the likelihood of excessive risk taking, to determine whether they present a significant risk to the Company. The Compensation Committee has determined that, for all employees, our Company’s compensation programs are not reasonably likely to have a material adverse effect on the Company.
Director Compensation
The Board adopted a non-employee director policy effective as of the date of our initial public offering and subsequently amended and restated such policy in June 2015. The table below sets forth the provisions of the Amended and Restated Compensation Program for Non-Employee Directors.
| | |
Term
| | Compensation
|
Annual Cash Retainer(1)
| | $40,000 |
Chairman of Board(1)
| | Additional annual retainer of $20,000 |
Chair of Audit Committee(1)
| | Additional annual retainer of $10,000 |
Chair of Compensation Committee(1)
| | Additional annual retainer of $7,500 |
Chair of Nominating/Corporate Governance Committee(1)
| | Additional annual retainer of $7,500 |
Non-Chair Member of Audit Committee(1)
| | Additional annual retainer of $5,000 |
Non-Chair Member of Compensation Committee(1)
| | Additional annual retainer of $3,750 |
Non-Chair Member of Nominating/Corporate Governance Committee(1)
| | Additional annual retainer of $3,750 |
Initial Option Grant
| | Option to purchase up to 20,000 shares of our common stock(2) |
Annual Option Grant
| | Option to purchase 10,000 shares of our common stock following each annual meeting of stockholders(3) |
(1) | All annual cash retainer fees are paid in four quarterly payments. |
(2) | Option vests and becomes exercisable with respect to 8.33% of the option shares for each three-month period after the date of grant. |
(3) | Option vests and becomes exercisable with respect to 8.33% of the option shares for each one-month period following the date of grant. |
All stock option grants to non-employee directors will have an exercise price per share equal to the fair market value of one share of our common stock on the date of grant and will be subject to the terms of our 2013 Equity Incentive Plan. Each option granted under our Amended and Restated Compensation Program for Non-Employee Directors that is not fully vested will become fully vested upon a change in control of our Company and if the non-employee director’s service terminates due to death.
We currently have a policy to reimburse our non-employee directors for travel, lodging and other reasonable expenses incurred in connection with their attendance at board and committee meetings.
Director Compensation Table for Year Ended December 31, 2016
The following table sets forth information regarding compensation earned by each of our non-employee directors during the fiscal year ended December 31, 2016.
| | | | | | | | | | | | |
Name(1) | | Fees Earned or
Paid in Cash ($) | | | Option
Awards ($) | | | Total ($) | |
Garheng Kong, M.D., Ph.D. | | | 67,500 | | | | 9,539 | | | | 77,039 | |
Kevin Rakin | | | 48,750 | | | | 9,539 | | | | 58,289 | |
John Johnson | | | 52,500 | | | | 9,539 | | | | 62,039 | |
Michael Lewis | | | 43,750 | | | | 9,539 | | | | 53,289 | |
Josh Baltzell | | | 47,500 | | | | 9,539 | | | | 57,039 | |
David Gill | | | 50,000 | | | | 9,539 | | | | 59,539 | |
(1) | Mr. Gridley was not eligible in 2016 to receive any compensation from us for his service as a director pursuant to our Amended and Restated Compensation Program for Non-Employee Directors because Mr. Gridley is a Company employee. |
The following table sets forth information regarding outstanding option awards held by each of our non-employee directors as of December 31, 2016:
| | | | | | | | | | | | | | |
| | | Option Awards |
Name | | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | | | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | | | Option
Exercise
Price ($) | | | Option Expiration
Date |
Garheng Kong, M.D., Ph.D. | | | 20,000 | | | | — | | | | 6.86 | | | June 23, 2025(1) |
| | | 5,000 | | | | 5,000 | | | | 1.58 | | | December 15, 2026(1) |
Josh Baltzell | | | 20,000 | | | | — | | | | 6.86 | | | June 23, 2025(1) |
| | | 5,000 | | | | 5,000 | | | | 1.58 | | | December 15, 2026(1) |
David Gill | | | 7,700 | | | | 5,500 | | | | 8.30 | | | February 1, 2025(2) |
| | | 6,800 | | | | — | | | | 6.86 | | | June 23, 2025(1) |
| | | 5,000 | | | | 5,000 | | | | 1.58 | | | December 15, 2026(1) |
John Johnson | | | 6,941 | | | | 2,314 | | | | 7.13 | | | December 10, 2023(3) |
| | | 20,475 | | | | — | | | | 6.86 | | | June 23, 2025(1) |
| | | 5,000 | | | | 5,000 | | | | 1.58 | | | December 15, 2026(1) |
Michael Lewis | | | 20,000 | | | | — | | | | 6.86 | | | June 23, 2025(1) |
| | | 5,000 | | | | 5,000 | | | | 1.58 | | | December 15, 2026(1) |
Kevin Rakin | | | 20,000 | | | | — | | | | 6.86 | | | June 23, 2025(1) |
| | | 5,000 | | | | 5,000 | | | | 1.58 | | | December 15, 2026(1) |
(1) | This option vests in twelve (12) equal monthly installments commencing on the date of grant. |
(2) | As of December 31, 2016, this option was exercisable with respect to 50% of the shares when the optionee completes each 12-month period of continuous service after February 2, 2015, and the balance of the shares become exercisable in equal quarterly instalments over the 36 months thereafter. This was the vesting schedule applicable to all initial grants to directors under the Company’s initial Compensation Program for Non-Employee Directors. In June 2015, the Board of Directors amended and restated the initial Compensation Program for Non-Employee Directors. Under the Amended and Restated Compensation Program for Non-Employee Directors, initial grants for new directors become exercisable with respect to 8.33% of the shares after each three-month period of continuous service as a director after the date of grant. On February 26, 2016, the Compensation Committee amended the vesting schedule of the option to reflect the Amended and Restated Compensation Program for Non-Employee Directors such that the shares subject to this option are now exercisable with respect to 8.33% of the shares after each three-month period of continuous service as a director after the date of grant. The table above reflects the modified vesting schedule. |
(3) | Exercisable with respect to 25% of the shares when the optionee completes each 12-month period of continuous service after November 13, 2013. If we are subject to a change in control before the optionee’s service terminates, then the option shall vest in full. |
PROPOSAL 2
RATIFICATION OF SELECTION OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2017
The Audit Committee of the Board has selected Grant Thornton LLP (“Grant Thornton”), an independent registered public accounting firm, as our independent auditors for the year ending December 31, 2017, and has further directed that management submit the selection of independent auditors for ratification by our stockholders at the Annual Meeting. Grant Thornton has audited our financial statements and has attested to the effectiveness of our internal control over financial reporting since March 2012. Representatives of Grant Thornton are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Neither our amended and restated bylaws nor other governing documents or laws require stockholder ratification of the selection of Grant Thornton as our independent registered public accounting firm. However, the Audit Committee of the Board of Directors is submitting the selection of Grant Thornton to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the selection, the Audit Committee of the Board of Directors will reconsider whether or not to retain Grant Thornton. Even if the selection is ratified, the Audit Committee of the Board in its discretion may direct the appointment of different independent auditors at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.
In order for Proposal 2 to pass, holders of a majority of all those outstanding shares present in person, or represented by proxy, and cast either affirmatively or negatively at the Annual Meeting must vote “FOR” Proposal 2. Abstentions and broker non-votes will be counted towards a quorum; however, they will not be counted either “FOR” or “AGAINST” the proposal and will have no effect on the proposal. Because the ratification of the appointment of the independent registered public accounting firm is a matter on which a bank, broker or other nominee is generally empowered to vote, no broker non-votes are expected to exist in connection with this matter.
Independent Registered Public Accounting Firm’s Fees
The following table represents aggregate fees billed to Histogenics for the years ended December 31, 2016 and December 31, 2015, by Grant Thornton, our principal accountant.
| | | | | | | | |
| | | Year ended December 31, | |
| | | 2016 | | | 2015 | |
Audit fees(1) | | $ | 277,766 | | | $ | 291,682 | |
Audit-related fees | | | — | | | | — | |
Tax fees | | | — | | | | — | |
All other fees | | | 44,962 | | | | — | |
Total fees | | $ | 322,728 | | | $ | 291,682 | |
(1) | The fees billed or incurred by Grant Thornton for professional services rendered in connection with the annual audit and quarterly review of our consolidated financial statements for the years ended December 31, 2016 and 2015, the consents issued for our registration statements, and the statements included in our filings with the SEC regarding private placement of common stock, Series A Preferred Stock and Warrants in September 2016 and the use of Grant Thornton’s online research tool. |
All fees described above were pre-approved by the Audit Committee in accordance with applicable SEC requirements.
Pre-Approval Policies and Procedures
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services rendered by Grant Thornton, our independent registered public accounting firm. The Audit Committee can pre-approve specified services in defined categories of audit services, audit-related services and tax services up to specified amounts, as part of the Audit Committee’s approval of the scope of the engagement of Grant Thornton or on an individual case-by-case basis before Grant Thornton is engaged to provide a service. The Audit Committee has determined that the rendering of tax-related services by Grant Thornton is compatible with maintaining the principal accountant’s independence for audit purposes. Grant Thornton has not been engaged to perform any non-audit services.
THE BOARD UNANIMOUSLY RECOMMENDS YOU VOTE “FOR” PROPOSAL 2.
AUDIT COMMITTEE REPORT
The Audit Committee has also reviewed and discussed with Grant Thornton the audited consolidated financial statements in the Annual Report. In addition, the Audit Committee discussed with Grant Thornton those matters required to be discussed by Statement of Accounting Standards 114, as modified, as adopted by the Public Company Accounting Oversight Board (“PCAOB”) in Rule 3200T and by PCAOB Auditing Standard No. 1301,Communications with Audit Committees, as may be further modified or supplemented. Additionally, Grant Thornton provided to the Audit Committee the written disclosures and the letter required by PCAOB Rule 3526, Communication with Audit Committees Concerning Independence, as adopted by the PCAOB. The Audit Committee also discussed with Grant Thornton its independence from the Company.
Based upon the review and discussions described above, the Audit Committee recommended to the Board that the audited consolidated financial statements be included in the Annual Report for filing with the SEC. We have selected Grant Thornton as the Company’s independent registered public accounting firm for the year ending December 31, 2017, and have approved submitting the selection of the independent registered public accounting firm for ratification by the stockholders.
Submitted by the following members of the Audit Committee:
|
David Gill, Chairman
|
John H. Johnson
|
Kevin Rakin
|
The material in this Audit Committee Report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of Histogenics under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to us regarding beneficial ownership of our common stockCommon Stock as of the Record DateOctober 15, 2018 (the “Applicable Date”) by:
each person, or group of affiliated persons, who is known by us to beneficially own more than five percent of our outstanding common stock;Common Stock;
each of our named executive officers;
each of our directors; and
all of our current directors and executive officers as a group.
Applicable percentage ownership is based on 22,168,09062,025,398 shares of common stockCommon Stock outstanding atas of the RecordApplicable Date.
The table below is based upon information supplied by executive officers, directors and principal stockholders and Schedule 13Gs and 13Ds filed with the SEC through the RecordApplicable Date.
Under the terms of the Common Stock Warrants (asand the 2018 Warrants (each as defined below), certain of the holders of the Common Stock Warrants and 2018 Warrants may not exercise the warrants to the extent such exercise would cause such holder, together with its affiliates and attribution parties, to beneficially own a number of shares of common stockCommon Stock which would exceed 4.99% of our then outstanding common stockCommon Stock following such exercise (subject to adjustment up to 9.99% upon the fulfillment of certain conditions), excluding for purposes of such determination shares of common stockCommon Stock issuable upon exercise of the Common Stock Warrants and 2018 Warrants which have not been exercised. In addition, the Preferred Shares (as defined below) may not be converted by certain holders thereof, at their election, if such conversion would cause such holder, together with its affiliates and attribution parties, to beneficially own a number of shares of common stockCommon Stock that would exceed 4.99% of our then outstanding common stockCommon Stock following such conversion (subject to adjustment up to 9.99% upon the fulfillment of certain conditions). TheUnless otherwise noted, the disclosures and the footnotes below concerning the stockholders’ beneficial ownership percentage reflect these limitations.
Wilmslow Estates Limited (“Wilmslow”), Split Rock Partners II, LP, and affiliates of Kevin Rakin and Perceptive Advisors LLC (“Perceptive”) purchased Preferred Shares and Common Stock Warrants in the Private Placement (as defined below). Wilmslow, Kevin Rakin, Perceptive and Sio Capital Management, LLC (“Sio Capital”) purchased 2018 Common Shares and 2018 Warrants in the 2018 Offering (as defined below). Each of these holders that purchased Preferred Shares has converted all such Preferred Shares held by such holders and their current holdings with respect to the Common Stock Warrants and 2018 Warrants, as applicable, is set forth in the footnotes to the table below.
In computing the number of shares of common stockCommon Stock beneficially owned by a person and the percentage ownership of that person, we deemed to be outstanding all shares of common stockCommon Stock subject to options, or warrants, preferred stock and restricted stock held by that person or entity that are currently exercisable or releasable or that will become exercisable or releasable within 60 days of the Record Date.October 15, 2018. We did not deem these shares outstanding, however, for the purpose of computing the percentage
ownership of any other person. Unless otherwise indicated, the principal address of each of the stockholders below is c/o Histogenics Corporation, 830 Winter Street, 3rd3rd Floor, Waltham, Massachusetts 02451.
| | | | | | | | |
Name and Address of Beneficial Owner | | Number of Shares
Beneficially Owned | | | Percentage of Shares
Beneficially Owned | |
5% Stockholders | | | | | | | | |
Wilmslow Estates Limited(1) c/o Stonehage Group 2 The Forum, Grenville Street St Helier, Jersey, Channel Islands JE1 4HH | | | 4,316,554 | | | | 18.4 | % |
| | |
Split Rock Partners II, LP(3) 10400 Viking Drive, Suite 250 Eden Prairie, MN 55344 | | | 4,166,382 | | | | 17.7 | % |
Intrexon Corporation(4) 20374 Seneca Meadows Parkway Germantown, MD 20876 | | | 2,690,570 | | | | 12.1 | % |
| | |
Sofinnova Venture Partners VIII, L.P.(2) 3000 Sand Hill Road, Bldg 4, Suite 250 Menlo Park, CA 94025 | | | 2,077,040 | | | | 9.4 | % |
| | |
FMR, LLC(5) 245 Summer Street Boston, MA 02210 | | | 1,729,620 | | | | 7.8 | % |
| | |
Directors and Named Executive Officers | | | | | | | | |
Joshua Baltzell(6) | | | 30,000 | | | | * | |
David Gill(7) | | | 34,700 | | | | * | |
John H. Johnson(8) | | | 37,416 | | | | * | |
Garheng Kong, M.D., Ph.D.(9) | | | 30,000 | | | | * | |
Michael Lewis(10) | | | 4,346,554 | | | | 18.5 | % |
Kevin Rakin(11) | | | 435,973 | | | | 1.9 | % |
Adam Gridley(12) | | | 299,837 | | | | 1.3 | % |
Stephen Kennedy(13) | | | 84,956 | | | | * | |
Gloria Matthews, DVM, Ph.D., DACVS(14) | | | 69,687 | | | | * | |
All current executive officers and directors as a group (10 persons)(15) | | | 5,435,581 | | | | 23.8 | % |
| | | | | | | | |
Name and Address of Beneficial Owner | | Number of Shares
Beneficially Owned | | | Percentage of Shares
Beneficially Owned | |
5% Stockholders | | | | | | | | |
Perceptive Advisors LLC(1) 51 Astor Place, 10th Floor New York, NY 10003 | | | 8,365,786 | | | | 9.99 | % |
| | |
Funds advised by Sio Capital Management, LLC(2) 515 Fifth Avenue, Suite 910 New York, NY 10017 | | | 8,076,922 | | | | 9.99 | % |
| | |
Wilmslow Estates Limited(3) c/o Stonehage Group 2 The Forum, Grenville Street St Helier, Jersey, Channel Islands JE1 4HH | | | 5,258,859 | | | | 8.3 | % |
| | |
Split Rock Partners II, LP(4) 10400 Viking Drive, Suite 250 Eden Prairie, MN 55344 | | | 4,166,382 | | | | 6.6 | % |
| | |
Directors and Named Executive Officers | | | | | | | | |
Joshua Baltzell(5) | | | 65,416 | | | | * | |
David Gill(6) | | | 79,416 | | | | * | |
Adam Gridley(7) | | | 537,029 | | | | * | |
John H. Johnson(8) | | | 75,146 | | | | * | |
Garheng Kong, M.D., Ph.D.(9) | | | 65,416 | | | | * | |
Michael Lewis(10) | | | 5,324,275 | | | | 8.4 | % |
Kevin Rakin(11) | | | 875,233 | | | | * | |
Susan Washer | | | — | | | | * | |
Stephen Kennedy(12) | | | 180,046 | | | | * | |
Jonathan Lieber(13) | | | 140,083 | | | | * | |
All current executive officers and directors as a group (12 persons)(14) | | | 7,645,954 | | | | 12.1 | % |
| * | Less than one percent of the outstanding shares of common stock.Common Stock. |
| (1) | Perceptive Life Sciences Master Fund, Ltd. (the “Fund”), Perceptive Advisors LLC (the “Advisor”) and Joseph Edelman. These shares are held of record by the Fund. The Advisor serves as the investment manager of the Fund and Mr. Edelman is the managing member of the Advisor. As such, the Fund, the Advisor and Mr. Edelman may each be deemed to share voting and investment power over these shares. Shareholdings include 1,244,4444,085,467 shares of Common Stock issuable upon the exercise of warrants to purchase shares of the Common Stock but such exercise would be subject to the limitations described above. The address for each of the Fund, the Advisor and Mr. Edelman is 51 Astor Place, 10th Floor, New York, NY 10003. |
| (2) | Sio Capital has shared power to vote or to direct the voting of these shares. Sio Capital and Sio GP, LLC (the “GP”) act as investment advisor and may act as general partner to various clients that are the record owners of the shares of common stock reflected in the table above (collectively, the “Sio Managed Entities”). Because Sio Capital’s investment discretion with respect to such clients is subject to oversight by the GP in certain circumstances, the GP may be deemed to be the beneficial owner of the Company’s common stock owned by such clients. In addition, both Sio Capital and the GP are controlled by Michael Castor. As such, he may be deemed to control the voting and dispositive decisions with respect to, and therefore be the beneficial owner of, the shares of the common stock reflected in the table above. Each of the GP and Michael Castor expressly disclaim beneficial ownership of these shares. Shareholdings include 3,461,538 shares of Common Stock issuable upon the exercise of a warrant2018 Warrants held by the Sio Entities but such exercise would be subject to the limitations described above. |
| (3) | Shareholdings include 1,648,289 shares of Common Stock issuable upon the exercise of warrants to purchase shares of the Company’s common stock.Common Stock. Wilmslow’s economic interest is ultimately owned by a family discretionary trust associated with Michael Lewis, who is referenced in footnote 710 below. Wilmslow has sole voting and investment power over the shares of capital stock owned. |
(2)(4) | Sofinnova Management VIII, L.L.C. (“SM VIII”) is the general partner of Sofinnova Venture Partners VIII, L.P. (“SVP VIII”) and Anand Mehra, M.D., Michael Powell, Ph.D. and James I. Healy, M.D., are the managing members of SM VIII (“Managing Members”). SVP VIII, SM VIII and the Managing Members may be deemed to have shared voting and dispositive power over the shares owned by SVP VIII. Such persons and entities disclaim beneficial ownership over the shares owned by SVP VIII except to the extent of any pecuniary interest therein. |
(3) | Shareholdings include 1,390,844 shares of common stockCommon Stock issuable upon the exercise of a warrant to purchase shares of common stock.Common Stock. Voting and investment power over the shares is delegated to Split Rock |
| Partners II Management, LLC, the general partner of Split Rock Partners II, LP. Split Rock Partners II Management, LLC has delegated voting and investment decisions to three individuals who require atwo-thirds vote to act. Split Rock Partners II Management, LLC disclaims beneficial ownership of the shares except to the extent of any pecuniary interest. |
(4) | Randal J. Kirk, directly and through certain affiliates, has voting and dispositive power over a majority of the outstanding capital stock of Intrexon. Mr. Kirk may therefore be deemed to have voting and dispositive power over the shares of Histogenics owned by Intrexon. Shares held by Intrexon may be deemed to be indirectly beneficially owned (as defined under Rule 13d-3 promulgated under the Exchange Act) by Mr. Kirk. Mr. Kirk disclaims beneficial ownership of such shares, except to the extent of any pecuniary interest therein. |
| (5) | Based on Schedule 13G/A filed with the SEC on February 14, 2017 by FMR LLC on behalf of itself and Abigail P. Johnson, the Director, the Vice Chairman, the Chief Executive Officer and the President of FMR LLC, members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act (“Fidelity Funds”) advised by Fidelity Management & Research Company, a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees. |
(6) | Shareholdings include 30,000 shares of common stock issuable upon exercise of options exercisable within 60 days of the Record Date. Mr. Baltzell is affiliated with Split Rock Partners II, LP but has no voting or dispositive control over shares held by Split Rock Partners II, LP. Mr. Baltzell disclaims beneficial ownership of the shares held by the entities affiliated with Split Rock Partners II, LPLP. referenced in footnote 34 above, except to the extent of his pecuniary interest therein. |
(7) | Shareholdings include 26,700 Includes 65,416 shares of common stockCommon Stock issuable upon exercise of options exercisable within 60 days of the RecordApplicable Date. |
(8)(6) | Shareholdings include 37,416Includes 65,416 shares of common stockCommon Stock issuable upon exercise of options exercisable within 60 days of the RecordApplicable Date. |
(9)(7) | Shareholdings include 30,000Includes 530,029 shares of common stockCommon Stock issuable upon exercise of options exercisable within 60 days of the RecordApplicable Date. |
(10)(8) | Shareholdings include 30,000Includes 75,146 shares of common stockCommon Stock issuable upon exercise of options exercisable within 60 days of the RecordApplicable Date. |
| (9) | Includes 65,416 shares of Common Stock issuable upon exercise of options exercisable within 60 days of the Applicable Date. |
| (10) | Mr. Lewis is the settlor of the trust which ultimately owns the economic interest in Wilmslow referenced in footnote 13 above. Mr. Lewis has no beneficial interest in the trust which ultimately owns the economic interest in Wilmslow, but other members of his family are discretionary beneficiaries in such trust. To the extent Mr. Lewis may be deemed to hold an indirect beneficial interest under applicable United States securities laws, Mr. Lewis disclaims such beneficial ownership. |
(11) | Shareholdings include (i) 30,000 Includes 65,416 shares of common stockCommon Stock issuable upon exercise of options exercisable within 60 days of the Record Date, (ii)Applicable Date. |
| (11) | Includes (i) 146,735 shares of common stockCommon Stock owned by the Kevin L. Rakin Irrevocable Trust, (iii)(ii) 33,333 shares of common stockCommon Stock owned by The Alison N Hoffman and Kevin L Rakin Irrevocable Trust For Sarah Hoffman Rakin (iv)and (iii) 33,333 shares of common stockCommon Stock owned by The Alison N Hoffman and Kevin L Rakin Irrevocable Trust For Julia Hoffman Rakin, (v) 111,111 shares of common stock issuable upon the exercise of a warrant to purchase shares of common stock held by the Kevin L. Rakin Irrevocable Trust, (vi) 33,333 shares of common stock issuable upon the exercise of a warrant to purchase shares of common stock held by The Alison N Hoffman and Kevin L Rakin Irrevocable Trust For Sarah Hoffman Rakin and (vii) 33,333 shares of common stock issuable upon the exercise of a warrant to purchase shares of common stock held by The Alison N Hoffman and Kevin L Rakin Irrevocable Trust For Julia Hoffman Rakin. Mr. Rakin is an affiliate of the Kevin L. Rakin Irrevocable Trust, The Alison N Hoffman and Kevin L Rakin Irrevocable Trust For Sarah Hoffman Rakin and The Alison N Hoffman and Kevin L Rakin Irrevocable Trust For Julia Hoffman Rakin. Mr. Rakin disclaims beneficial ownership in the shares owned by the foregoing affiliated trusts. |
(12) | Shareholdings include 294,837 shares of common stockCommon Stock. Also includes (i) 65,416 shares of Common Stock issuable upon exercise of options exercisable within 60 days of the Record Date.Applicable Date and (ii) 581,622 shares of Common Stock issuable upon the exercise of warrants to purchase shares of Common Stock. |
(13)(12) | Shareholdings include 84,956Includes 180,046 shares of common stockCommon Stock issuable upon exercise of options exercisable within 60 days of the RecordApplicable Date. |
(14)(13) | Shareholdings include 69,687Includes 135,083 shares of common stockCommon Stock issuable upon exercise of options exercisable within 60 days of the RecordApplicable Date. |
(15)(14) | Includes 695,0541,320,509 shares of common stockCommon Stock issuable upon exercise of options exercisable within 60 days of the RecordApplicable Date and the shareholdings attributable to Messrs. Lewis and Rakin in footnotes 10 and 11 above, respectively. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive officers, and certain holders of more than 10% of our common stock to file reports regarding their ownership and changes in ownership of our securities with the SEC, and to furnish us with copies of all Section 16(a) reports that they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us and written representations provided to us by all of our directors and executive officers and certain of our greater than 10% stockholders, we believe that during the year ended December 31, 2016, our directors, executive officers and greater than 10% stockholders complied with all applicable Section 16(a) filing requirements.
EXECUTIVE OFFICERS
The names of the current executive officers of Histogenics and certain information about each of them as of the Record Date, are set forth below:
Executive Officers
Adam Gridley. For biographical information, see “Proposal 1—Continuing Directors Not Standing for Election—Class II Directors (Terms Expire in 2019).”
Jonathan Lieber, age 47, has served as our Chief Financial Officer since July 2015. Prior to joining us, Mr. Lieber was Senior Vice President and Chief Financial Officer of Metamark Genetics, Inc., a privately held, urology-focused, molecular diagnostics company, from January 2014 to June 2015. From September 2012 to September 2013, Mr. Lieber served as the Chief Financial Officer and Treasurer of Repligen Corporation, a manufacturer and supplier of high-value consumables to the life sciences industry. From June 2009 to May 2012, Mr. Lieber served as Chief Financial Officer and Treasurer of Xcellerex, Inc., a privately-held company engaged in the manufacture and sale of capital equipment and related consumables to the biopharmaceutical industry. Mr. Lieber received an M.B.A. in finance from the Stern School of Business of New York University and a B.S. in business administration from Boston University.
Stephen Kennedy, age 60, has served as our Chief Technology Officer since July 2015, and previously served as our Senior Vice President of Technical Operations, beginning in August 2013. From May 2011 to August 2013, Mr. Kennedy served as the Executive Vice President, Research and Development, at Mascoma Corporation, a biofuel company. Mr. Kennedy served as Executive Director of the Novartis/MIT Center for Continuous Manufacturing at the Massachusetts Institute of Technology from October 2010 to May 2011. Mr. Kennedy also served as Senior Vice President of Biologics Operations at Genzyme Corporation from 2008 to October 2010, after having held a variety of technical operations positions with the company beginning in 1992. Prior to this, Mr. Kennedy managed process development at Genencor International in Helsinki, Finland from 1989 to 1992. Mr. Kennedy has a B.S. from the University of Michigan, an M.S. from the University of Rochester and an M.B.A. from Boston University.
Gloria Matthews, DVM, Ph.D., DACVS, age 47, has served as our Chief Medical Officer since July 2015. Prior to joining us, Dr. Matthews served as Senior Scientific Director and Global Head of Bone & Joint Research and Development at Genzyme, a Sanofi company, from July 2013 to June 2015. From April 2009 to June 2013, she served as Senior Director/Head of Orthopaedic and Regenerative Medicine Research at Genzyme, also taking on responsibility for Biomedical Imaging during that time. She previously held various research and development and medical affairs roles at Genzyme from February 2003 through April 2009. Prior to February 2003, Dr. Matthews engaged in both academic and private surgical practice. Dr. Matthews received her DVM, Ph.D. and B.S. degrees from Cornell University, and became board certified in equine orthopaedic surgery following residency training at Tufts University and fellowship training at Cornell University.
COMPENSATION OF EXECUTIVE OFFICERS
2016 Summary Compensation Table
The following table provides information concerning the compensation paid to Adam Gridley, our President and Chief Executive Officer and our next two most highly compensated executive officers during the year ended December 31, 2016, who are Stephen Kennedy, our Chief Technology Officer and Gloria Matthews, DVM, Ph.D., DACVS, our Chief Medical Officer. We refer to these individuals as our named executive officers.
| | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | | Salary ($) | | | Bonus ($) | | | Option
Awards ($)(5) | | | All Other
Compensation ($) | | | Total ($) | |
Adam Gridley | | | 2016 | | | | 400,400 | | | | 218,218 | | | | 166,937 | | | | — | | | | 785,555 | |
Director, President and Chief Executive Officer | | | 2015 | | | | 383,781 | | | | 77,000 | | | | 832,807 | | | | 15,396 | | | | 1,308,984 | |
Stephen Kennedy(1) | | | 2016 | | | | 330,240 | | | | 130,321 | | | | 35,611 | | | | — | | | | 496,172 | |
Chief Technology Officer | | | 2015 | | | | 310,037 | (2) | | | 67,200 | | | | 571,416 | | | | — | | | | 948,653 | |
Gloria Matthews, DVM, Ph.D., DACVS(3) | | | 2016 | | | | 346,807 | | | | 136,252 | | | | 55,582 | | | | — | | | | 538,641 | |
Chief Medical Officer | | | 2015 | | | | 152,624 | (4) | | | 47,435 | | | | 466,551 | | | | — | | | | 666,610 | |
(1) | Mr. Kennedy was promoted to Chief Technology Officer on July 29, 2015. |
(2) | In connection with his promotion to Chief Technology Officer on July 29, 2015, Mr. Kennedy’s gross annual salary was increased to $320,000. |
(3) | Employment commenced on July 14, 2015. |
(4) | Represents prorated salary due to the commencement or termination of the officer’s employment during the year ended December 31, 2015. |
(5) | Represents the aggregate grant date fair value of option awards, computed in accordance with FASB ASC Topic 718. See Note 11 to our consolidated financial statements included in the Annual Report for a discussion of the assumptions made by us in determining the fair value of our equity awards. |
Narrative Explanation of Certain Aspects of the Summary Compensation Table
The compensation paid to our named executive officers consists of the following components:
base salary;
performance-based cash bonuses; and
long-term incentive compensation in the form of stock options.
Base Salaries
For the year ended December 31, 2016, the annual base salaries for our named executive officers were as follows: Adam Gridley—$400,400 (increased to $435,000 in February 2017 for year ending December 31, 2017); Stephen Kennedy—$330,240 (increased to $345,101 in February 2017 for year ending December 31, 2017); and Gloria Matthews, DVM, Ph.D., DACVS—$346,807 (increased to $361,546 in February 2017 for year ending December 31, 2017). In addition to actions taken with respect to hiring new, or promoting existing, executive officers, the Compensation Committee of the Board approved the annual base salaries for certain of our named executive officers for the twelve-month period ended December 31, 2016, and approved option grants under the Company’s 2013 Equity Incentive Plan to certain of our named officers, as listed below in the section entitled “Outstanding Equity Awards at 2016 Fiscal Year-End.”
Performance-Based Bonuses
Pursuant to employment agreements with Messrs. Gridley and Kennedy and Dr. Matthews, each named executive officer is to earn an annual bonus equal to a specified percentage of his or her base salary (50% with
respect to Mr. Gridley and 35% with respect to each of Mr. Kennedy and Dr. Matthews). The actual amount of bonus earned is determined by the Board based on our performance and the officer’s achievement of objectives and goals determined by our chief executive officer (or, with respect to Mr. Gridley, the Board).
Long-Term Incentive Compensation
We offer stock options to our employees, including our named executive officers, as the long-term incentive component of our compensation program. Our stock options allow our employees to purchase shares of our common stock at a price equal to the fair market value of our common stock on the date of grant. Our stock options granted to newly hired employees generally vest as to 25% of the total number of option shares on the first anniversary of the award and in equal monthly installments over the following 36 months.
For information regarding the vesting acceleration provisions applicable to the options held by our named executive officers, please see “Severance Benefits” and “Change in Control Benefits” below.
Outstanding Equity Awards at 2016 Fiscal Year-End
The following table sets forth information regarding each unexercised option held by each of our named executive officers as of December 31, 2016.
| | | | | | | | | | | | | | | | |
| | | Option Awards | |
Name | | Number of Securities
Underlying
Unexercised Options
Exercisable(#) | | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable(#) | | | Option
Exercise
Price ($) | | | Option
Expiration
Date | |
Adam Gridley | | | 127,510 | | | | 69,925 | (1) | | | 7.99 | | | | April 29, 2024 | |
| | | 24,684 | | | | 13,536 | (1) | | | 8.97 | | | | July 16, 2024 | |
| | | 47,667 | | | | 56,333 | (2) | | | 9.96 | | | | February 26, 2025 | |
| | | — | | | | 60,000 | (3) | | | 9.96 | | | | February 26, 2025 | |
| | | — | | | | 175,000 | (4) | | | 1.58 | | | | December 15, 2026 | |
Stephen Kennedy | | | 23,139 | | | | 4,628 | (5) | | | 7.13 | | | | December 10, 2023 | |
| | | 22,504 | | | | 26,596 | (2) | | | 9.96 | | | | February 26, 2025 | |
| | | — | | | | 30,000 | (3) | | | 9.96 | | | | February 26, 2025 | |
| | | 17,708 | | | | 32,292 | (6) | | | 6.11 | | | | July 29, 2025 | |
| | | — | | | | 25,000 | (4) | | | 2.56 | | | | February 25, 2026 | |
Gloria Matthews, DVM, Ph.D., DACVS | | | 42,500 | | | | 77,500 | (7) | | | 6.11 | | | | July 29, 2025 | |
| | | — | | | | 30,000 | (3) | | | 6.11 | | | | July 29, 2025 | |
| | | — | | | | 39,000 | (4) | | | 2.56 | | | | February 25, 2026 | |
(1) | Option vests over four years of service following May 12, 2014, with 25% vesting upon completion of 12 months of service and in 36 equal monthly installments thereafter. |
(2) | Option vests over four years of service following February 26, 2015, with 25% vesting upon completion of 12 months of service and in 36 equal monthly installments thereafter. |
(3) | Option shall vest in full if the Company’s stock price is at or above $19.92 for any consecutive 60-day period within 4 years of February 24, 2015. If the option is exercised within one year of earning the award, the executive must hold shares net of taxes until the one-year anniversary of earning the award is reached. Additionally, the shares subject to such option shall become fully vested and exercisable upon a change of control of the Company if the per share transaction price for such change of control is at or above $19.92; the post-vesting holding period described above shall be waived if the option is accelerated upon a change of control. |
(4) | Option vests over four years of service following February 26, 2016, with 25% vesting upon completion of 12 months of service and in 36 equal monthly installments thereafter. |
(5) | Option vests over four years of service following August 19, 2013, with 25% vesting upon completion of 12 months of service and in 36 equal monthly installments thereafter. |
(6) | Option vests over four years of service following July 29, 2015, with 25% vesting upon completion of 12 months of service and in 36 equal monthly installments thereafter. |
(7) | Option vests over four years of service following July 14, 2015, with 25% vesting upon completion of 12 months of service and in 36 equal monthly installments thereafter. |
For information regarding the vesting acceleration provisions applicable to the options held by our named executive officers, please see “Change in Control Benefits” below.
On February 14, 2017, we granted options to purchase shares of our common stock to Mr. Gridley in the amount of 175,000, Mr. Kennedy in the amount of 75,000 and Dr. Matthews in the amount of 70,000. Each of these option grants vests over four years of service following February 14, 2017, with 25% vesting upon completion of 12 months of service and in 36 equal monthly installments thereafter. Although these grants are not listed in the table above as of December 31, 2016, they relate to compensation for the year ended December 31, 2017.
Employment Agreements
Adam Gridley
In April 2014, we entered into a letter agreement with Adam Gridley, under which Mr. Gridley agreed to become our president and chief executive officer, effective May 12, 2014. Under this agreement, Mr. Gridley’s base salary for 2016 was $400,400 per year (increased to $435,000 in February 2017 for the year ending December 31, 2017). Mr. Gridley is eligible to receive an annual cash bonus with a target equal to 50% of his base salary for 2017, subject to satisfaction of objective or subjective criteria established by the Board (and pro-rated for his first year of employment). For a period of 12 months after the termination of his employment, Mr. Gridley will be subject to certain restrictions on competition with us and on the solicitation of our employees and customers. Mr. Gridley has an at-will employment relationship with us.
Pursuant to his letter agreement, Mr. Gridley received an option to purchase up to 197,435 shares of our common stock. In addition, upon the final closing for the sale of shares of our Series A-1 Preferred Stock in May 2014, Mr. Gridley was granted an additional option to purchase up to 38,220 shares such that, together with the original option, Mr. Gridley’s options represented 4% of our common stock, including shares issuable upon conversion of option and warrants, outstanding on the date of such final closing. The shares subject to such options vest 25% after the first 12 months of Mr. Gridley’s continuous service with the remainder vesting in equal monthly installments over the next three years of his continuous service. In addition, for information regarding the vesting acceleration provisions applicable to Mr. Gridley’s options, please see “Change in Control Benefits” below.
In connection with the commencement of his employment, we paid Mr. Gridley $48,446 to assist with estimated temporary housing and related expenses.
Stephen Kennedy
In July 2015, Stephen Kennedy was promoted to Chief Technology Officer. In connection with this promotion, we entered into an amended and restated employment agreement with Mr. Kennedy. Under this amended agreement, Mr. Kennedy’s base salary for 2016 was $330,240 per year (increased to $345,101 in February 2017 for the year ending December 31, 2017). Mr. Kennedy is eligible to receive an annual cash bonus equal to 35% of his base salary, subject to satisfaction of objective or subjective criteria established by the Board. For a period of 12 months after the termination of his employment, Mr. Kennedy will be subject to certain restrictions on competition with us and on the solicitation of our employees and customers. Mr. Kennedy has an at-will employment relationship with us.
Pursuant to his amended and restated employment agreement, Mr. Kennedy received an option to purchase up to 50,000 shares of our common stock, as described in more detail above under “Outstanding Equity Awards at 2016 Fiscal Year-End.” The shares subject to the option will vest 25% after the first 12 months of Mr. Kennedy’s continuous service after July 29, 2015 with the remainder vesting in equal monthly installments over the next three years of his continuous service. In addition, for information regarding the vesting acceleration provisions applicable to Mr. Kennedy’s option, please see “Change in Control Benefits” below.
Gloria Matthews, DVM, Ph.D., DACVS
In July 2015, we entered into an employment agreement with Gloria Matthews, DVM, Ph.D., DACVS in connection with her appointment as our Chief Medical Officer. Under this agreement, Dr. Matthews’ base salary for 2016 was $346,807 per year (increased to $361,546 in February 2017 for year ending December 31, 2017). Dr. Matthews is eligible to receive an annual cash bonus with a target amount equal to 35% of her base salary, subject to satisfaction of objective or subjective criteria established by the Board. Dr. Matthews has an at-will employment relationship with us.
Pursuant to her employment agreement, Dr. Matthews received an option to purchase up to 120,000 shares of our common stock, as described in more detail above under “Outstanding Equity Awards at 2016 Fiscal Year-End.” The options will vest 25% after the first 12 months of Dr. Matthews’ continuous service with the remainder vesting in equal monthly installments over the next three years of her continuous service. For further information regarding the vesting acceleration provisions applicable to Dr. Matthews’ option, please see “Change in Control Benefits” below.
In addition, pursuant to the employment agreement, Dr. Matthews was granted an additional performance option to purchase 30,000 shares of our common stock as described in more detail above under “Outstanding Equity Awards at 2016 Fiscal Year-End.” The performance option shall vest in full if the Company’s stock price is at or above $19.92 for any consecutive 60 day period within 4 years of the date of grant as long as Dr. Matthews provides continuous service during such consecutive 60 day period. If the performance option is exercised within one year of earning the award, Dr. Matthews must hold the shares received upon exercise net of taxes until the one-year anniversary of earning the performance option is reached. The performance option shall also become fully vested and exercisable upon a change in control if the per share transaction price is at or above $19.92; the post post-holding period discussed previously shall be waived if the performance option is accelerated upon a change in control.
Severance Benefits
Adam Gridley
As described above, in April 2014, we entered into a letter agreement with Adam Gridley, under which Mr. Gridley agreed to become our president and chief executive officer, effective May 12, 2014. Under this agreement, if we terminate Mr. Gridley’s employment without cause or Mr. Gridley resigns for good reason, we will continue to pay Mr. Gridley his base salary, and he will be entitled to health benefits, for a period of twelve months following the termination of his employment. In addition, if the termination occurs during the first year of Mr. Gridley’s employment and prior to our change in control, then Mr. Gridley’s options will be deemed to be vested with respect to 1/48th of the shares for each month of employment completed by Mr. Gridley prior to his termination. Such benefits are subject to Mr. Gridley’s execution of a general release of all claims he may have against us and certain related parties.
For purposes of Mr. Gridley’s letter agreement, cause means Mr. Gridley’s unauthorized use or disclosure of our confidential information or trade secrets which causes material harm to us; material breach of any agreement with us; material failure to comply with our written policies or rules after receiving written notification of such failure; sale, possession or use of illegal drugs or habitual intoxication on our premises or the
premises of a customer or business partner while conducting our business; conviction of, or plea of guilty or no contest to, a felony; gross negligence or willful misconduct in the course of service to us that results in material harm to us; continuing and willful failure to perform reasonably assigned duties after receiving written notification of such failure; or failure to cooperate in good faith with a governmental or internal investigation of us, if so requested.
For purposes of his letter agreement, good reason means, without Mr. Gridley’s consent, a material reduction in his base salary, a change in his title or position that materially reduces his level of authority or responsibility, relocation of his principal workplace by more than 40 miles or a material breach by us of the letter agreement.
Stephen Kennedy
If we terminate Mr. Kennedy’s employment without cause or Mr. Kennedy resigns for good reason, we will continue to pay Mr. Kennedy his base salary, and he will be entitled to health benefits, for a period of nine months following the termination of his employment.
For purposes of his employment agreement, cause means Mr. Kennedy’s unauthorized use or disclosure of confidential information or trade secrets which causes material harm to the Company, a material breach of any agreement between Mr. Kennedy and the Company which is not remedied within 15 days after notice from the Company, a material failure to comply with the legal directives of the Board which is not remedied within 15 days after notice from the Board, the sale, possession or use of illegal drugs or habitual intoxication, conviction of, plea of “guilty” or “no contest” to any felony, gross negligence or willful misconduct in the course of performing service to the Company, failure to perform reasonably assigned duties after receiving written notification of such failure from the Board, or failure to cooperate in good faith with a governmental or internal investigation of the Company, if the Company has requested Mr. Kennedy’s cooperation. For purposes of the employment agreement, resignation for good reason means a material reduction in Mr. Kennedy’s base salary, a change in Mr. Kennedy’s title or position with the Company that materially reduces his level of authority or responsibility, a relocation of principal workplace by more than 40 miles or a material breach by the Company of its obligations under the employment agreement.
Gloria Matthews, DVM, Ph.D., DACVS
If we terminate Dr. Matthews’ employment without cause or Dr. Matthews resigns for good reason, we will continue to pay Dr. Matthews her base salary, and she will be entitled to health benefits, for a period of six months following the termination of her employment.
For purposes of her employment agreement, cause means Dr. Matthews’ unauthorized use or disclosure of confidential information or trade secrets which causes material harm to the Company, a material breach of any agreement between Dr. Matthews and the Company which is not remedied within 45 days after notice from the Company, a material failure to comply with the legal directives of the Board which is not remedied within 45 days after notice from the Board, the sale, possession or use of illegal drugs or habitual intoxication, conviction of, plea of “guilty” or “no contest” to any felony, gross negligence or willful misconduct in the course of performing service to the Company, failure to perform reasonably assigned duties after receiving written notification of such failure from the Board, or failure to cooperate in good faith with a governmental or internal investigation of the Company, if the Company has requested Dr. Matthews’ cooperation. For purposes of the employment agreement, resignation for good reason means a material reduction in Dr. Matthews’ base salary, a change in Dr. Matthews’ title or position with the Company that materially reduces her level of authority or responsibility or a relocation of principal workplace by more than 40 miles.
Change in Control Benefits
In the event that we experience a change in control and, within 12 months after such change in control, a named executive officer is terminated by us without cause or such individual resigns for good reason, such individual’s options will become fully vested and exercisable.
For purposes of the stock option agreements, change in control means an acquisition by any individual, entity or group of 50% or more of our voting stock, certain changes in the composition of the Board, our merger, consolidation, liquidation, dissolution or sale of all or substantially all of our assets.
For purposes of the stock option agreements, cause and good reason have substantially the same meanings as under Mr. Gridley’s employment agreement, described above.
Retirement Benefits
We have established a 401(k) tax-deferred savings plan, which permits participants, including our named executive officers, to make contributions by salary deduction pursuant to Section 401(k) of the Code. We are responsible for administrative costs of the 401(k) plan. We may, at our discretion, make matching contributions to the 401(k) plan. No employer contributions have been made to date.
Employee Benefits and Perquisites
Our named executive officers are eligible to participate in our health and welfare plans to the same extent as all full-time employees. Although we generally do not provide our named executive officers with perquisites or other personal benefits, we offered temporary housing and related assistance to Mr. Gridley in connection with the commencement of his employment with us, as described in the Summary Compensation Table above.
Tax and Accounting Considerations
Our Compensation Committee considers tax and accounting implications in determining all elements of our compensation plans, programs and arrangements. Section 162(m) of the Code generally denies a deduction to any publicly-held corporation for compensation paid in a taxable year to its named executive officers (other than the Chief Financial Officer) exceeding $1.0 million, unless such compensation qualifies as performance-based compensation. Base salaries, time-vested restricted stock, time-vested retention and transition payments, and discretionary or subjectively determined bonus awards generally do not qualify as performance-based compensation. In September 2014, our stockholders approved our 2013 Equity Incentive Plan that permits us to satisfy the performance-based requirements under Section 162(m) with respect to the grant of stock options.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the compensation arrangements with directors and executive officers described elsewhere in this proxy statement, the following is a description of transactions since January 1, 20142015 to which we have been a party, in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of our total assets atyear-end for the last two years, and in which any of our directors, executive officers or beneficial owners of more than five percent of our convertible preferred stock or common stock,Common Stock, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest, other than compensation, termination andchange-in-control arrangements.
All of the transactions set forth below were approved by a majority of the Board, including a majority of the independent and disinterested members of the Board. We believe that we have executed all of the transactions set forth below on terms no less favorable to us than we could have obtained from unaffiliated third parties. It is our intention to ensure that all future transactions between us and our officers, directors and principal stockholders and their affiliates are approved by the Audit Committee and a majority of the members of the Board, including a majority of the independent and disinterested members of the Board, and are on terms no less favorable to us than those that we could obtain from unaffiliated third parties.
2016 Private Placement
In September 2016, we entered into a securities purchase agreement with certain institutional and accredited investors (the “Securities Purchase Agreement”) for the sale and issuance of 2,596,059 shares of our Common Stock (the “Common Shares”) of the Company’s Common Stock and 24,158.8693 shares of our Series A Convertible Preferred Stock (the “Preferred Shares”), which Preferred Shares are convertible into an aggregate of 10,737,275 shares of our Common Stock, for total consideration of approximately $30,000,000 (the “Private“2016 Private Placement”). H.C. Wainwright & Co., LLC (“HCW”) served as the sole placement agent for the 2016 Private Placement. As part of the 2016 Private Placement, we provided each purchaser 100% warrant coverage based on anas-converted number of shares of our Common Stock issued and issuable upon conversion of the Preferred Shares plus the Common Shares and accordingly issued the investors warrants (the “Purchaser Warrants”) to purchase 13,333,334 shares of our Common Stock at an exercise price of $2.25 per share and exercisable for a period of five years following receipt of the stockholder approval required under the Securities Purchase Agreement. We also issued HCW a warrant (the “HCW Warrant” and, together with the Purchaser Warrants, the “Common Stock Warrants”) for the purchase of 133,333 shares of Common Stock at an exercise price of $2.25 per share and exercisable for a period of five years following receipt of the stockholder approval required under the Securities Purchase Agreement pursuant to the terms of our letter agreement with HCW.
The certificate of designation filed with the Secretary of State of the State of Delaware describing the rights, preference and privileges of the Series A Convertible Preferred Stock provides that, until stockholder approval was obtained, holders could not convert the Preferred Shares if such conversion would result in the purchasers under the Securities Purchase Agreement owning in the aggregate an amount of Common Stock issued in connection with the 2016 Private Placement in excess of 19.99% the number of shares of Common Stock outstanding immediately prior to the closing of the 2016 Private Placement. The Common Stock Warrants provide that, until stockholder approval was obtained, holders could not exercise the Common Stock Warrants. We obtained stockholder approval of the 2016 Private Placement on November 22, 2016.
Wilmslow, Estates Limited, which is a greater than 10% holder of our Common Stock and an affiliate of Michael Lewis, a member of the Board, purchased Common Shares, the Preferred Shares and the Common Stock Warrants in the 2016 Private Placement. The Alison N Hoffman and Kevin L Rakin Irrevocable Trust For Sarah Hoffman Rakin, The Alison N Hoffman and Kevin L Rakin Irrevocable Trust For Julia Hoffman Rakin and the Kevin L Rakin Irrevocable Trust,Trusts, which are each affiliates of Kevin Rakin, a member of the Board, purchased Common Shares, the Preferred Shares and the Common Stock Warrants in the 2016 Private Placement. Split Rock Partners II, LP, which is a greater than 10%5% holder of our Common Stock, purchased Common Shares, the Preferred Shares and the Common Stock Warrants in the 2016 Private Placement. Perceptive, which is a greater than 5% holder of our Common Stock, purchased Common Shares, Preferred Shares and Common Stock Warrants in the 2016 Private Placement.
Intrexon Collaboration Agreement and Obligations2018 Public Offering
In September 2014,On October 5, 2018, we entered into our ECCan underwriting agreement (the “Underwriting Agreement”) with Intrexon governing a “channel collaboration” arrangement. PursuantCanaccord Genuity LLC, as representative (“Representative”) of the several underwriters (collectively, the “Underwriters”), related to the ECC,public offering (the “2018 Offering”) of 26,155,000 shares (the “2018 Common Shares”) of Common Stock, and warrants to purchase up to 19,616,250 shares of Common Stock with an exercise price of $0.70 per share (the “2018 Warrants”) at a combined purchase price of $0.65 per share of Common Stock and accompanying warrant to purchase 0.75 shares of Common Stock. The 2018 Warrants are exercisable immediately through and including October 10, 2023.
Wilmslow, which is a greater than 5% holder of our Common Stock and an affiliate of Michael Lewis, a member of the Board, purchased 2018 Common Shares and 2018 Warrants in the 2018 Offering. Kevin Rakin, a member of the Board, purchased 2018 Common Shares and 2018 Warrants in the 2018 Offering. Perceptive and Sio Capital, which are each greater than 5% holders of our Common Stock, purchased 2018 Common Shares and 2018 Warrants in the 2018 Offering.
PROPOSAL 1
APPROVAL OF THE AUTHORIZED SHARE INCREASE
Background
Our Board has determined that it is advisable and in our and our stockholders’ best interests to increase the number of authorized shares of Common Stock from 100,000,000 to 250,000,000 shares, par value $0.01 per share. Accordingly, stockholders are asked to approve an amendment to our Certificate of Incorporation to effectuate such increase.
The Board strongly believes that the increase in the number of authorized shares of Common Stock is necessary to provide us with resources and flexibility with respect to our capital sufficient to execute our business plans and strategy.
Accordingly, the Board has unanimously approved a resolution proposing such amendment to our Certificate of Incorporation and directed that it be submitted for approval at the Special Meeting.
The text of the form of the proposed Certificate of Amendment (the “Amendment”) to our Certificate of Incorporation, which assumes the approval of this Proposal 1, is attached hereto asAnnex A.
As of October 15, 2018, we are responsiblehad outstanding 62,025,398 shares of Common Stock. Additionally, we have reserved (i) 3,548,786 shares of Common Stock issuable upon the exercise of outstanding options under our 2012 Equity Incentive Plan and 2013 Equity Incentive Plan (the “2013 Plan”), (ii) 148,613 shares of Common Stock reserved for issuance under the 2013 Plan, (iii) 33,145,228 shares of Common Stock issuable upon the exercise of outstanding warrants, (iv) 177,996 shares of Common Stock issuable upon conversion of shares of our Series A Convertible Preferred Stock, (v) 310,993 shares of Common Stock reserved for issuance under our 2013 Employee Stock Purchase Plan (the “ESPP”) and (vi) 200,000 shares of Common Stock reserved for issuance under an inducement option granted outside of the 2013 Plan pursuant to Nasdaq Listing Rule 5635(c)(4). As a result, we have allocated 99,408,401 shares of our 100,000,000 shares of authorized Common Stock under the Certificate of Incorporation, leaving only 591,599 shares of Common Stock unallocated for potential issuance.
The number of shares outstanding or reserved for issuance under outstanding options, warrants, preferred stock and other derivative securities set forth above does not reflect the Reverse Split set forth in Proposal 2 below. If the Reverse Split is approved, such number of shares, but not the number of authorized shares, would be adjusted proportionally.
Reasons for the Proposed Increase in Number of Authorized Shares of Common Stock
To provide us with resources and flexibility with respect to our capital sufficient to execute our business plans and strategy. The increase in authorized shares of Common Stock will provide us greater flexibility with respect to our capital structure for various purposes as the need may arise from time to time. These purposes may include: raising capital, establishing strategic relationships with other companies, expanding our business through the acquisition of other businesses or products and providing equity incentives to employees, officers or directors.
Principal Effects of Increase in Number of Authorized Shares of Common Stock
If stockholders approve this Proposal 1, the additional authorized shares of Common Stock will have rights identical to the currently outstanding shares of our Common Stock. The proposed amendment will not affect the par value of the Common Stock, which will remain at $0.01 per share. Approval of this Proposal 1 and issuance of the additional authorized shares of Common Stock would not affect the rights of the holders of currently outstanding shares of our Common Stock, except for effects incidental to increasing the number of shares of our Common Stock outstanding, such as dilution of any earnings per share and voting rights of current holders of Common Stock.
The additional authorized shares of Common Stock by the approval of this Proposal 1 could be issued by our Board without further vote of our stockholders except as may be required in particular cases by our Certificate of Incorporation, the DGCL or other applicable law, regulatory agencies or Nasdaq rules. Stockholders do not have preemptive rights to subscribe to additional securities that we may issue, which means that current stockholders do not have a prior right thereunder to purchase any new issue of Common Stock, or securities that are convertible into Common Stock, in order to maintain their proportionate ownership interests in the Company.
Our stockholders are not entitled to dissenters’ or appraisal rights under the DGCL with respect to the proposed amendment to our Certificate of Incorporation to increase the number of authorized shares of Common Stock and we will not independently provide the stockholders with any such right if the increase is implemented.
The proposed amendment to our Certificate of Incorporation to increase the number of authorized shares of our Common Stock could, under certain circumstances, have an anti-takeover effect. The additional shares of Common Stock that would become available for issuance if this Proposal 1 is approved could also be used by us to oppose a hostile takeover attempt or to delay or prevent changes in control or our management. For example, without further stockholder approval, the Board could adopt a “poison pill” which would, under certain circumstances related to an acquisition of our securities not approved by the Board, give certain holders the right to acquire additional shares of Common Stock at a low price, or the Board could strategically sell shares of Common Stock in a private transaction to purchasers who would oppose a takeover or favor the current Board.
Although this Proposal 1 to increase the authorized Common Stock has been prompted by business and financial considerations and not by the threat of any hostile takeover attempt (nor is the Board currently aware of any such attempts directed at us), nevertheless, stockholders should be aware that approval of this Proposal 1 could facilitate future efforts by us to deter or prevent changes in control, including transactions in which the stockholders might otherwise receive a premium for their shares over then current market prices.
This Proposal 1 will be effective upon its approval by our stockholders at the Annual Meeting and is not conditioned upon the approval by our stockholders of any other proposal. As each proposal will be presented to our stockholders at the Annual Meeting in the order presented herein, if this proposal is approved by our stockholders, it will become effective.
No Appraisal Rights
Under the DGCL, stockholders are not entitled to rights of appraisal with respect to Proposal 1, and we will not independently provide our stockholders with any such right.
Vote Required
The affirmative vote of a majority of the voting power of all of the outstanding shares of the capital stock of the Company entitled to vote generally in the election of directors as of the record date will be required for approval of this Proposal 1.
Bifurcation of Proposal 1 and Proposal 2
While the Amendment reflects the proposed amendments to our Certificate of Incorporation described in both Proposal 1 and Proposal 2, the approval of one proposal is not conditioned on the approval of the other proposal. To the extent that only one of these two proposals is approved by stockholders, we will only include the language relating to the proposal that was approved in the version of the Amendment that we file with the Secretary of State of the State of Delaware.
THE BOARD RECOMMENDS A VOTE “FOR” THE AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO INCREASE THE AMOUNT OF AUTHORIZED SHARES OF COMMON STOCK TO 250,000,000
PROPOSAL 2
APPROVAL OF THE REVERSE SPLIT
Background
Our Board has unanimously adopted resolutions approving a proposal to amend our Certificate of Incorporation to effect the Reverse Split of all our outstanding shares of Common Stock, at a ratio between1-for-2 and1-for-20, to be determined at the discretion of the Board at any time before the earlier of June 30, 2019 and the next annual meeting of stockholders of the Company (the “Authorized Period”), for the purpose of complying with Nasdaq Listing Rule 5550(a)(2), subject to the Board’s discretion to abandon such amendment. If this Proposal 2 is approved, the Board may decide not to effect the Reverse Split if it determines that it is not in the best interests of the Company to do so. If the Board determines to implement the Reverse Split, it will become effective upon filing a Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware or at such later date specified therein.
The text of the proposed Certificate of Amendment to our Certificate of Incorporation to effect the Reverse Split is included asAnnex A to this Proxy Statement.
Purpose of the Reverse Split
The primary purpose of the Reverse Split, if implemented, would be to potentially increase the market price of our Common Stock so that we can meet the minimum bid price rule requirements of Nasdaq. On October 17, 2018, we received a deficiency letter from Nasdaq indicating that, based on the closing bid price per share of our Common Stock for the last 30 consecutive business days, we did not comply with the minimum bid price requirement of $1.00 per share, as set forth in Nasdaq Listing Rule 5550(a)(2). The notification had no immediate effect on the listing of our Common Stock on Nasdaq. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a grace period of 180 calendar days, or until April 15, 2019, to regain compliance with the minimum closing bid price requirement for continued listing. In order to regain compliance, the minimum closing bid price per share of our Common Stock must be at least $1.00 for a minimum of ten consecutive business days. In the event we do not regain compliance by April 15, 2019, we may be afforded an additional 180-day compliance period, provided we demonstrate that we meet all other applicable standards for continued listing on The Nasdaq Capital Market (except the bid price requirement), and provide written notice of our intention to cure the minimum bid price deficiency during the second grace period, by effecting a reverse stock split, if necessary. If we fail to regain compliance after the second grace period, our Common Stock will be subject to delisting by Nasdaq. At that time, we may appeal delisting determination to a Nasdaq Listing Qualifications Panel (“Panel”). The Company would remain listed pending the Panel’s decision.
As of October 15, 2018, the last reported closing price of our Common Stock on The Nasdaq Capital Market was $0.627. A delisting of our Common Stock may materially and adversely affect a holder’s ability to dispose of, or to obtain accurate quotations as to the market value, of, the Common Stock. In addition, any delisting may cause the Common Stock to be subject to “penny stock” regulations promulgated by the SEC. Under such regulations, broker-dealers are required to, among other things, comply with disclosure and special suitability determinations prior to the sale of shares of Common Stock. If our Common Stock becomes subject to these regulations, the market price of the Common Stock and the liquidity thereof could be materially and adversely affected. Reducing the number of outstanding shares of our Common Stock should, absent other factors, increase the per share market price of our Common Stock, although we cannot provide any assurance that our minimum bid price would remain above the minimum bid price requirement of Nasdaq, or that this theoretical increase would indeed occur. Accordingly, we believe that approval of the amendment to our Certificate of Incorporation to effect the Reverse Split in the Board’s discretion is in the Company’s and our stockholders’ best interests.
In addition to increasing the market price of our Common Stock so that we can meet the minimum bid price rule requirements of Nasdaq, we believe that the Reverse Split could enhance the appeal of our Common Stock to
the financial community, including institutional investors, and the general investing public. We believe that a number of institutional investors and investment funds are reluctant to invest in lower-priced securities and that brokerage firms may be reluctant to recommend lower-priced stock to their clients, which may be due in part to a perception that lower-priced securities are less promising as investments, are less liquid in the event that an investor wishes to sell its shares, or are less likely to be followed by institutional securities research firms and development costs incurredtherefore to have less third-party analysis of the Company available to investors. In addition, certain institutional investors or investment funds may be prohibited from buying stocks whose price is below a certain threshold. We believe that the reduction in the number of issued and outstanding shares of Common Stock caused by Intrexonthe Reverse Split, together with the anticipated increased stock price immediately following and resulting from the Reverse Split, may encourage interest and trading in our Common Stock and thus possibly promote greater liquidity for our stockholders, thereby resulting in a broader market for the Common Stock than that which currently exists.
Reducing the number of outstanding shares of our Common Stock through the Reverse Split is intended, absent other factors, to theoretically increase the per share market price of our Common Stock. However, other factors, such as our financial results, market conditions and the market perception of our business, may adversely affect the market price of our Common Stock. As a result, there can be no assurance that the Reverse Split, if completed, will result in the intended benefits described above, that the market price of our Common Stock will increase following the Reverse Split or that the market price of our Common Stock will not decrease in the future. Additionally, we cannot assure you that the market price per share of our Common Stock after the Reverse Split will increase in proportion to the reduction in the number of shares of our Common Stock outstanding before such Reverse Split. Accordingly, the total market capitalization of our Common Stock after the Reverse Split may be lower than the total market capitalization before the Reverse Split.
We cannot be sure that our share price will comply with the requirements for continued listing of our shares of Common Stock on Nasdaq in the future or that we will comply with the other continued listing requirements. If our shares of Common Stock lose their status on Nasdaq, we believe that our shares of Common Stock would likely be eligible to be quoted on an inter-dealer electronic quotation and trading system operated by OTC Markets Group. These markets are generally considered to be less efficient than, and not as broad as, Nasdaq. Selling our shares of Common Stock on these markets could be more difficult because smaller quantities of shares would likely be bought and sold, and transactions could be delayed. In addition, in the event that our shares of Common Stock are delisted, broker-dealers have certain regulatory burdens imposed upon them, which may discourage them from effecting transactions in our Common Stock, further limiting the liquidity of our Common Stock. These factors could result in lower prices and larger spreads in the bid and ask prices for our Common Stock.
A delisting from Nasdaq and continued or further declines in our share price could also greatly impair our ability to raise additional necessary capital through equity or debt financing, and could significantly increase the ownership dilution to stockholders caused by our issuing equity in financing or other transactions. There are risks associated with the developmentReverse Split, including that the Reverse Split may not result in a sustained increase in the per share price of product candidates developedour Common Stock.
We cannot predict whether the Reverse Split will increase the market price for our Common Stock on a sustained basis, if at all. The history of similar stock split combinations for companies in like circumstances is varied. There is no assurance that:
the market price per share of our Common Stock after the Reverse Split will rise in proportion to the reduction in the number of shares of our Common Stock outstanding before the Reverse Split, if it increases at all;
the Reverse Split will result in a per share price that will attract brokers and investors who do not trade in lower priced stocks; and
the market price per share will either exceed or remain in excess of the $1.00 minimum bid price as required by Nasdaq, or that we will otherwise meet the requirements of Nasdaq for continued inclusion for trading on Nasdaq.
The market price of our Common Stock will also be based on our performance and other factors, some of which are unrelated to the number of shares outstanding. If the Reverse Split is effected and the market price of our Common Stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of the Reverse Split. Furthermore, the liquidity of our Common Stock could be adversely affected by the reduced number of shares that would be outstanding after the Reverse Split.
Board Discretion to Implement the Reverse Split
If this Proposal 2 is approved by the Company’s stockholders, the Board will have the authority, in its sole determination without any further action necessary by the stockholders, to effect the Reverse Split during the Authorized Period at a ratio set forth in the above range, as determined by the Board. The Board may, in its sole determination, choose to not effect the Reverse Split. The Board believes that granting this discretionary authority provides the Board with maximum flexibility to react to prevailing market conditions and future changes to the market price of our Common Stock, and therefore better enables it to act in the best interests of the Company. In addition to the Reverse Split, the Board may also pursuing other alternatives that may enable the Company to meet with the requirements for continued listing of our shares of Common Stock on Nasdaq. In exercising its discretion, the Board may consider the following factors:
the historical trading price and trading volume of our Common Stock;
the then-prevailing trading price and trading volume of our Common Stock and the anticipated impact of the Reverse Split on the trading market for our Common Stock; and
the prevailing general market and economic conditions.
At the close of business on October 15, 2018, the Company had 62,025,398 shares of Common Stock issued and outstanding. Following the effectiveness of the Reverse Split, if implemented, at a1-for-2 ratio, the Company would have approximately 31,012,699 shares of Common Stock issued and outstanding (without giving effect to the treatment of fractional shares or any issuances of Common Stock after October 15, 2018) following the Reverse Split and at a1-for-20 ratio, the Company would have approximately 3,101,270 shares of Common Stock issued and outstanding (without giving effect to the treatment of fractional shares or any issuances of Common Stock after October 15, 2018) following the Reverse Split. The actual number of shares of Common Stock outstanding after giving effect to the Reverse Split will depend on the ratio that is ultimately selected by the Board, and the number of shares of Common Stock outstanding at the time the Reverse Split is effected. The Company does not expect the Reverse Split to have any economic effect on stockholders, warrant holders, debt holders or holders of options, except to the extent the Reverse Split results in fractional shares as discussed below.
Procedure for Effecting the Reverse Split
Subject to the stockholder approval, if the Board decides to implement the Reverse Split, the Board will effect the split at a ratio between1-for-2 and1-for-20, to be determined at the discretion of the Board. We will file a Certificate of Amendment to our Certificate of Incorporation, substantially in the form attached to this Proxy Statement asAnnex A, with the Secretary of State of the State of Delaware to effect the Reverse Split. The Reverse Split would become effective at such time as the Certificate of Amendment is filed with the Secretary of State of the State of Delaware or at such later time as is specified therein. No further action on the part of the Company’s stockholders would be required and all shares of our Common Stock that were issued and outstanding immediately prior thereto would automatically be converted into new shares of our Common Stock based on the Reverse Split exchange ratio. As soon as practicable after the effective date of the Reverse Split,
stockholders of record on the record date for the implemented Reverse Split would receive a letter from our transfer agent asking them to return the outstanding certificates representing ourpre-split shares, which would be cancelled upon receipt by our transfer agent, and new certificates representing the post-split shares of our Common Stock would be sent to each of our stockholders. We will bear the costs of the issuance of the new stock certificates, if any.
Effects of the Reverse Split
If the Reverse Split is approved by the stockholders and implemented by the Board, the principal effect will be to proportionately decrease the number of outstanding shares of Common Stock based on the split ratio. The shares of Common Stock are currently registered under Section 12(b) of the Exchange Act and the Company is thus subject to the periodic reporting and other requirements of the Exchange Act. The Reverse Split will not affect the registration of our collaboration,Common Stock with the SEC or Nasdaq, where the Common Stock is traded. Following the Reverse Split, our Common Stock would continue to be listed on Nasdaq, assuming the Company’s compliance with the other continued listing standards of Nasdaq, although the shares will receive a new CUSIP number.
Proportionate voting rights and other rights of the holders of shares of our Common Stock will not be affected by the Reverse Split, other than as a result of the treatment of fractional shares as described below. For example, a holder of 2% of the voting power of the outstanding shares immediately prior to the effectiveness of the Reverse Split will generally continue to hold 2% of the voting power of the outstanding Common Stock after the Reverse Split. The number of stockholders of record will not be affected by the Reverse Split, other than as a result of the treatment of fractional shares as described below. If approved and implemented, the Reverse Split may result in some stockholders owning “odd lots” of less than 100 shares. Odd lot shares may be more difficult to sell, and brokerage commissions and other costs of transactions in odd lots are generally somewhat higher than the costs of transactions in “round lots” of even multiples of 100 shares. The Board believes, however, that these potential effects are outweighed by the benefits to the Company of the Reverse Split.
The table, which does not take into account an increase in the authorized shares to 250,000,000, below illustrates the number of shares of Common Stock authorized for issuance following the Reverse Split, the approximate number of shares of Common Stock that would remain outstanding following the Reverse Split, and the number of unreserved shares of Common Stock available for future issuance following the Reverse Split. The information in the following table is based on 62,025,398 shares of Common Stock issued and outstanding as of October 15, 2018 and 37,383,003 shares reserved for future issuance as of October 15, 2018.
| | | | | | | | | | | | | | | | |
Proposed Ratio | | Number of
Shares of
Common
Stock
Authorized | | | Approximate
Number of Shares of
Common Stock
Issued and
Outstanding | | | Approximate
Number of
Shares of
Common
Stock
Reserved for
Issuance | | | Approximate
Number of
Unreserved
Shares of
Common Stock
Available for
Future
Issuance | |
1-for-2 | | | 100,000,000 | | | | 31,012,699 | | | | 18,691,502 | | | | 295,799 | |
1-for-20 | | | 100,000,000 | | | | 3,101,270 | | | | 1,869,150 | | | | 29,580 | |
As reflected in the table above, the number of authorized shares of our Common Stock will not be reduced by the Reverse Split. Accordingly, the Reverse Split will have the effect of which may increase the levelcreating additional unissued and unreserved shares of our overall researchCommon Stock. We have no current arrangements or understandings providing for the issuance of any of the additional authorized and development expenses. Subjectunreserved shares of our Common Stock that would be available as a result of the proposed Reverse Split. However, these additional shares may be used by us for various purposes in the future without further stockholder approval (subject to certain exceptions, weapplicable Nasdaq listing rules), including, among other things: (i) raising capital necessary to fund our future operations, (ii) providing equity incentives to our employees, officers, directors and consultants, (iii) entering into collaborations and other strategic relationships and (iv) expanding our business through the acquisition of other businesses or products.
Effect of the Reverse Stock Split on the Company’s Equity Incentive Plans, Warrants and Convertible or Exchangeable Securities
Based upon the split ratio, proportionate adjustments are generally required to be made to the per share exercise price and the number of shares issuable upon the exercise or conversion of all outstanding options, warrants, convertible or exchangeable securities entitling the holders to purchase, exchange for, or convert into, shares of Common Stock. This would result in approximately the same aggregate price being required to be paid under such options, warrants, convertible or exchangeable securities upon exercise, and approximately the same value of shares of Common Stock being delivered upon such exercise, exchange or conversion, immediately following a Reverse Split as was the case immediately preceding such split. The number of shares deliverable upon settlement or vesting of restricted stock awards will be responsiblesimilarly adjusted, subject to our treatment of fractional shares. The number of shares reserved for among other things, fundingissuance pursuant to these securities will be proportionately based upon the further anticipated developmentratio determined by the Board, subject to our treatment of cell lines towardfractional shares.
Additional shares of Common Stock, if issued in connection with an equity award, would have a dilutive effect upon the goalpercentage of commercialization, conducting preclinical and clinical developmentequity of candidate product(s), as well as for other aspectsthe Company owned by our present stockholders.
Accounting Matters
The amendment to the Company’s Certificate of manufacturingIncorporation will not affect the par value of our Common Stock per share, which will remain $0.01 par value per share. As a result, the stated capital attributable to Common Stock and the commercializationadditionalpaid-in capital account on our balance sheet will not change due to the Reverse Split. Reported per share net income or loss will be higher because there will be fewer shares of Common Stock outstanding.
Effective Date
The Reverse Split would become effective upon the filing of a Certificate of Amendment to our Certificate of Incorporation with the office of the product(s). AsSecretary of December 31, 2016, we have paid Intrexon $2.7 millionState of the State of Delaware or at such later date as is specified in researchsuch filing. On the effective date, shares of Common Stock issued and development expensesoutstanding, in each case, immediately prior thereto, will be combined and haveconverted, automatically and without any action on the part of the stockholders, into new shares of Common Stock in accordance with the ratio determined by the Board within the limits set forth in this Proposal 2.
No Going Private Transaction
Notwithstanding the decrease in the number of outstanding shares of Common Stock following the implementation of the Reverse Split, the Board does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule13e-3 of the Exchange Act and the implementation of the proposed Reverse Split will not cause the Company to go private.
Treatment of Fractional Shares
No fractional shares would be issued if, as a result the Reverse Split, a registered stockholder would otherwise become entitled to a fractional share. Instead, stockholders who otherwise would be entitled to receive fractional shares because they hold a number of shares not evenly divisible by the ratio of the Reverse Split will automatically be entitled to receive an additional $3.4 million payable. For more information regarding our ECC with Intrexon, please seeshare of Common Stock. In other words, any fractional share will be rounded up to the sectionnearest whole number.
Book-Entry Shares
All of the Annual Report entitled “Material Technology License Agreements—Intrexon Corporation.”Company’s stockholders hold uncertificated shares of the Company’s Common Stock (i.e., all shares are held in book-entry form and not represented by a physical share certificate). If the Reverse Split is
Investors’ Rights Agreement
effected, all stockholders, either as direct or beneficial owners, will have their holdings electronically adjusted by the Company’s transfer agent (and, for beneficial owners, by their brokers or banks that hold in “street name” for their benefit, as the case may be) to give effect to the Reverse Split.
On December 18, 2013, we entered intoStockholders who hold uncertificated shares as direct owners will be sent a second amendedstatement of holding from the Company’s transfer agent that indicates the number of shares owned in book-entry form.
Possible Effects of Additional Issuances of Common Stock and restated investors’ rights agreement (“Investors’ Rights Agreement”) withHistory of Prior Reverse Splits
Following the purchaserseffective time of the Reverse Split, there will be an increase in the number of authorized but unissued shares of our then-outstanding PreferredCommon Stock. Under the DGCL, the Board can issue additional shares of Common Stock (whichwithout stockholder approval, which would have the effect of diluting existing holders of our Common Stock.
Additional shares of Common Stock, if issued, would have a dilutive effect upon the percentage of equity of the Company owned by our present stockholders. The issuance of such additional shares of Common Stock might be disadvantageous to current stockholders in that any additional issuances would potentially reduce per share dividends, if any. Stockholders should consider, however, that the possible impact upon dividends is likely to be minimal in view of the fact that the Company does not intend to pay any cash dividends on its Common Stock in the foreseeable future. In addition, the issuance of such additional shares of Common Stock, by reducing the percentage of equity of the Company owned by present stockholders, would reduce such present stockholders’ ability to influence the election of directors or any other action taken by the holders of Common Stock.
The Board voted to approve a1-for-10.804 reverse stock split on October 27, 2014, which was converted to common stockeffected on November 14, 2014 in connection with our initial public offering), including certainoffering. Additionally, effective May 13, 2011, the Board voted to approve a1-for-15,000 reverse stock split.
In the future the Board could, subject to its fiduciary duties and applicable law, use the increased number of authorized but unissued shares of Common Stock to frustrate persons seeking to take over or otherwise gain control of our existing stockholdersCompany by, for example, privately placing shares with purchasers who were represented atmight side with the time by membersBoard in opposing a hostile takeover bid. Shares of Common Stock could also be issued to a holder that would thereafter have sufficient voting power to assure that any proposal to amend or repeal the Company’s bylaws or Certificate of Incorporation would not receive the requisite vote. Such uses of the Board,Common Stock could render more difficult, or discourage, an attempt to acquire control of the Company if such transactions were opposed by the Board. A result of the anti-takeover effect of the increase in the number of authorized shares of Common Stock could be that stockholders would be denied the opportunity to obtain any advantages of a hostile takeover, including, Wilmslow, Sofinnova Venture Partners VIII, L.P. and Split Rock Partners II, LP. Underbut not limited to, receiving a premium to the Investors’ Rights Agreement, we granted information and inspection rights which terminated upon the closingthen current market price of our initial public offering. In addition,Common Stock, if the holders of 4,479,418 sharessame was so offered by a party attempting a hostile takeover of our common stockCompany. The Company is not aware of any party’s interest in or efforts to engage in a hostile takeover attempt as of the Record Date, who are partiesdate of this Proxy Statement.
Certain Material U.S. Federal Income Tax Consequences of a Reverse Stock Split
The following discussion summarizes certain material U.S. federal income tax consequences relating to the Investors’ Rights Agreement, are provided rights to demand registration of shares of common stock and to participateparticipation in a registrationreverse stock split by a U.S. stockholder that holds the shares as a capital asset. This discussion is based on the provisions of our common stock that we may decide to do, from time to time. These registration rights survived our initial public offeringthe Code, final, temporary and proposed U.S. Treasury regulations promulgated thereunder and current administrative rulings and judicial decisions, all as in effect as of the date hereof. All of these authorities may be exercised until their termination on December 3, 2019, unless earlier exercised. Certainsubject to differing interpretations or repealed, revoked or modified, possibly with retroactive effect, which could materially alter the tax consequences set forth herein.
For purposes of this summary, a “U.S. stockholder” refers to a beneficial owner of Common Stock who is any of the sharesfollowing for U.S. federal income tax purposes: (i) a citizen or resident of the United States, (ii) a corporation created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source,
or (iv) a trust if (1) its administration is subject to the Investors’ Rights Agreement are held by affiliatesprimary supervision of certaina court within the United States and one or more U.S. persons have the authority to control all of our directorsits substantial decisions, or (2) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. Anon-U.S. holder of Common Stock is a stockholder who is not a U.S. stockholder.
This summary does not represent a detailed description of the U.S. federal income tax consequences to a stockholder in light of his, her or its particular circumstances. In addition, it does not purport to be complete and by holdersdoes not address all aspects of five percentfederal income taxation that may be relevant to stockholders in light of our capital stock.
Indemnification Agreements
We have entered,their particular circumstances or will enter, into indemnification agreements with our directors, executive officers and certain key employees. Under these agreements, we agree to indemnify our directors, executive officers and certain key employees against any and all expenses incurred by themstockholder that may be subject to special tax rules, including, without limitation: (1) stockholders subject to the alternative minimum tax; (2) banks, insurance companies, or other financial institutions;(3) tax-exempt organizations; (4) dealers in securities or commodities; (5) regulated investment companies or real estate investment trusts; (6) traders in securities that elect to use amark-to-market method of accounting for their securities holdings; (7) U.S. stockholders whose “functional currency” is not the U.S. dollar; (8) persons holding Common Stock as a position in a hedging transaction, “straddle,” “conversion transaction” or other risk reduction transaction; (9) persons who acquire shares of Common Stock in connection with proceedings becauseemployment or other performance of services; (10) dealers and other stockholders that do not own their statusshares of Common Stock as capital assets; (11) U.S. expatriates, (12) foreign persons; (13) resident alien individuals; or (14) stockholders who directly or indirectly hold their stock in an entity that is treated as a partnership for U.S. federal tax purposes. Moreover, this description does not address the U.S. federal estate and gift tax, alternative minimum tax, or other tax consequences of a Reverse Split.
There can be no assurance that the Internal Revenue Service (the “IRS”) will not take a contrary position to the tax consequences described herein or that such position will be sustained by a court. In addition, U.S. tax laws are subject to change, possibly with retroactive effect, which may result in U.S. federal income tax considerations different from those summarized below. No opinion of counsel or ruling from the IRS has been obtained with respect to the U.S. federal income tax consequences of a Reverse Split.
This discussion is for general information only and is not tax advice. All stockholders should consult their own tax advisors with respect to the U.S. federal, state, local andnon-U.S. tax consequences of a Reverse Split.
Based on the assumption that a Reverse Split will constitute atax-free reorganization within the meaning of Section 368(a)(1)(E) of the Code, and subject to the limitations and qualifications set forth in this discussion, the following U.S. federal income tax consequences should result from a Reverse Split:
A stockholder should not recognize gain or loss in a Reverse Split;
the aggregate tax basis of the post-Reverse Split shares should be equal to the aggregate tax basis of thepre-Reverse Split shares; and
the holding period of the post-Reverse Split shares should include the holding period of thepre-Reverse Split shares.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF A REVERSE SPLIT AND DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT THERETO. YOU SHOULD CONSULT YOUR OWN TAX ADVISORS AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF A REVERSE SPLIT IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES.
No Appraisal Rights
Under the DGCL, stockholders are not entitled to rights of appraisal with respect to the proposed amendment to our Certificate of Incorporation to effect the Reverse Split, and we will not independently provide our stockholders with any such right.
Vote Required
The affirmative vote of a majority of the voting power of all of the outstanding shares of the capital stock of the Company entitled to vote generally in the election of directors as of the record date will be required for approval of this Proposal 2.
Bifurcation of Proposal 1 and Proposal 2
While the Amendment reflects the proposed amendments to our Certificate of Incorporation described in both Proposal 1 and Proposal 2, the approval of one proposal is not conditioned on the approval of the other proposal. To the extent that only one of our directors, executive officers or key employeesthese two proposals is approved by stockholders, we will only include the language relating to the fullest extent permitted by Delaware law, subject to certain limitations. In addition, these indemnification agreements provideproposal that towas approved in the fullest extent permitted by Delaware law, we will pay for all expenses incurred by our directors, executive officers and certain key employees in connection with a legal proceeding arising out of their service to us.
In addition, as permitted by Section 145version of the Delaware General Corporation Law, our amended and restated bylaws provideAmendment that we are authorized to enter into indemnification agreementsfile with our directors and executive officers and we are authorized to purchase directors’ and officers’ liability insurance, which we currently maintain to cover our directors and executive officers.
Policies and Procedures for Related Party Transactions
In November 2013, we adopted a related party transaction policy under which our directors, executive officers and any person who is known to be the beneficial ownerSecretary of more than 5% of any class of our voting securities, including their immediate family members and affiliates, are not permitted to enter into a related party transaction with us without the prior consent of our Audit Committee or another independent committeeState of the Board where it is inappropriate for our Audit Committee to review such transaction due to a conflictState of interest. Any request for us to enter into a transaction with an executive officer, director, or any of such persons’ immediate family members or affiliates, in which the amount involved exceeds $120,000 must first be presented
Delaware.to our Audit Committee for review, consideration and approval. All of our directors and executive officers are required to report to our Audit Committee any such related party transaction. In approving or rejecting the proposed agreement, our Audit Committee shall consider the relevant facts and circumstances available and deemed relevant to the Audit Committee, including costs, and benefits to us, the terms of the transaction, the availability of other sources for comparable services or products and, if applicable, the impact on a director’s independence. Our Audit Committee shall approve only those agreements that, in light of known circumstances, are not inconsistent with our best interests, as our Audit Committee determines in the good faith exercise of its discretion.THE BOARD RECOMMENDS A VOTE “FOR” THE APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO EFFECT THE REVERSE SPLIT
Stock Options
For information regarding stock options granted to our named executive officers and directors, see “Corporate Governance—2016 Director Compensation” and “Compensation of Executive Officers.”
NO INCORPORATION OF DOCUMENTS BY REFERENCE
In Histogenics’ filingsThe SEC allows us to “incorporate by reference” information into this proxy statement, which means that we can disclose important information to you by referring you to other documents that we have filed separately with the SEC and are delivering to you with the copy of this proxy statement. The information incorporated by reference is sometimes “incorporateddeemed to be part of this proxy statement. This proxy statement incorporates by reference.” This means that we are referring you to information that has previously beenreference the following documents:
our Annual Report on Form10-K for the year ended December 31, 2017;
our Quarterly Reports on Form10-Q for the quarters ended March 31, 2018 and June 30, 2018; and
our Current Reports on Form8-K filed with the SEC on August 9, 2018, September 26, 2018, October 2, 2018, October 5, 2018 and October 18, 2018.
We will provide each person to whom a proxy statement is delivered a copy of all of the information should be considered as part of the particular filing. As provided under SEC regulations, the “Audit Committee Report” containedthat has been incorporated by reference in this Proxy Statementproxy statement but not delivered with the proxy statement. You may obtain copies of these filings, at no cost, through the “Investor Relations” section of our website (http://ir.histogenics.com) and you may request a copy of these filings (other than an exhibit to any filing unless we have specifically incorporated that exhibit by reference into the filing), at no cost, by writing or telephoning us at the following address:
Corporate Secretary
Histogenics Corporation
830 Winter Street, 3rd Floor
Waltham, Massachusetts 02451
(781)547-7900
Information on, or that can be accessed through, our website is not incorporated by reference into anythis proxy statement or other securities filings with the SEC and shall not be deemed to be “soliciting material.” In addition, this Proxy Statement includes several website addresses. These website addresses are intended to provide inactive, textual references only. The information on these websites is not a part of this Proxy Statement.these filings.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for consideration at the AnnualSpecial Meeting. If any other matters are properly brought before the AnnualSpecial Meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.
It is important that your proxies be returned promptly and that your shares are represented at the AnnualSpecial Meeting. Whether or not you plan to attend the AnnualSpecial Meeting, please complete, date, sign and promptly return the enclosed proxy card in the enclosed postagepre-paid envelope or vote your shares before the AnnualSpecial Meeting viaby telephone or over the internet or by telephone so your shares will be represented at the AnnualSpecial Meeting.
The form of proxy card and this Proxy Statementproxy statement have been approved by the Board and are being mailed and delivered to stockholders by its authority.
CONTACT FOR QUESTIONS AND ASSISTANCE WITH VOTING
If you have any questions or require any assistance with voting your shares, please contact:
Investor Relations
Histogenics Corporation
830 Winter Street, 3rd3rd Floor
Waltham, MA 02451
or
Call (781)547-7900
If you need additional copies of this Proxy Statementproxy statement or voting materials, you should contact Investor Relations as described above.
|
The Board of Directors of Histogenics Corporation |
Waltham, Massachusetts |
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| , 2018 |
Annex A
CERTIFICATE OF AMENDMENT
OF THE SIXTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
HISTOGENICS CORPORATION
Histogenics Corporation (the “Corporation”), a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”):
DOES HEREBY CERTIFY:
FIRST: That the name of this Corporation is Histogenics Corporation. The original certificate of incorporation of this Corporation was originally filed with the office of the Secretary of State of the State of Delaware on July 14, 2006 under the name Histogenics Corporation.
SECOND: That the Board of Directors duly adopted resolutions proposing to amend the Sixth Amended and Restated Certificate of Incorporation (the “Restated Certificate”) of this Corporation, declaring said amendment to be advisable and in the best interests of this Corporation and its stockholders, and authorizing the appropriate officers of this corporation to solicit the consent of the stockholders therefor, which resolutions setting forth the proposed amendments are as follows:
[RESOLVED, that Article IV of the Restated Certificate be amended by amending and restating Paragraph A in its entirety as follows:
“A. The total number of shares of all classes of stock which the Corporation shall have authority to issue is Two Hundred Sixty Million (260,000,000), consisting of Two Hundred Fifty Million (250,000,000) shares of Common Stock, par value $0.01 per share (the “Common Stock”), and Ten Million (10,000,000) shares of Preferred Stock, par value $0.01 per share (the “Preferred Stock”).”]1
[RESOLVED,that Article IV of the Restated Certificate be amended by adding a new paragraph immediately prior to Paragraph A which reads as follows:
1. “Effective as of immediately upon the filing of this Certificate of Amendment to the Sixth Amended and Restated Certificate of Incorporation in the Office of the Secretary of State of the State of Delaware (the “Effective Time”), each * issued shares of each series of Preferred Stock and Common Stock shall be combined and changed into 1 share of such series of Preferred Stock or Common Stock, as applicable (the “Reverse Stock Split”), which shares shall be fully paid and nonassessable. The Corporation shall not issue to any holder a fractional share of Common Stock on account of the Reverse Stock Split. Rather, any fractional share of Common Stock resulting from such change shall be rounded upward to the nearest whole share of Common Stock. Share interests issued due to rounding are given solely to save the expense and inconvenience of issuing fractional shares of Common Stock and do not represent separately bargained for consideration. Such Reverse Stock Split shall occur whether or not certificates representing any stockholder’s shares held prior to the Reverse Stock Split are surrendered for cancellation.”]
*Number between two (2) and twenty (20) as determined by the Board of Directors in its sole discretion.]2
THIRD: The foregoing amendment was approved by the holders of the requisite number of shares of this Corporation in accordance with Section 211 of the General Corporation Law.
| 1 | April 27, 2017To be included if the stockholders approve Proposal 1.
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| 2 | To be included if the stockholders approve Proposal 2 and the Board elects, in its sole discretion, to proceed with the reverse stock split. |
FOURTH: That thereafter said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law by written consent of the stockholders holding the requisite number of shares required by statute given in accordance with and pursuant to Section 228 of the General Corporation Law.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed this day of , .
HISTOGENICS CORPORATION
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| By: | | |
| | Adam Gridley, President and CEO |
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| | HISTOGENICS CORPORATION 830 WINTER STREET 3RD FLOOR WALTHAM, MA 02451 | | | | | | VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up untilinformation. Vote by 11:59 p.m. Eastern Time the day before the cut-off date or meeting date.P.M. ET on , 2018. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up untilinstructions. Vote by 11:59 p.m. Eastern Time the day before the cut-off date or meeting date.P.M. ET on , 2018. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
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| | | Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 John Sample 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 | | 
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| | | | NAME | | CONTROL #  | | |
| | | | THE COMPANY NAME INC. - COMMON THE COMPANY NAME INC. - CLASS A THE COMPANY NAME INC. - CLASS B THE COMPANY NAME INC. - CLASS C THE COMPANY NAME INC. - CLASS D THE COMPANY NAME INC. - CLASS E THE COMPANY NAME INC. - CLASS F THE COMPANY NAME INC. - 401 K | | SHARES | | 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 | | |
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: ☒ | | PAGE 1 OF 2 | | E23544-P91614 |
| | KEEP THIS PORTION FOR YOUR RECORDS |
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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| | HISTOGENICS CORPORATION | | For
All
| | Withhold
All
| | For All Except | | | | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below. | | | | | | | | | | |
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| | | | The Board of Directors recommends you vote FOR the following:Proposals 1 and 2
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| | | | 1. | | Election of three Class III Directors | | ☐ | | ☐ | | ☐ | | | | | | | | | | | | | | |
| | | | | | Nominees: | | | | | | | | | | | | | | | | | | |
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| | | | | | 01) David Gill | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 02) John H. Johnson | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 03) Garheng Kong, M,D., Ph.D. | | | | | | | | | | | | | | | | | | | | | | |
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| | | | The Board of Directors recommends you vote FOR the following proposal: | | | | | | | | | | For | | Against | | Abstain | | |
| | | | 2.
| | To ratify the selection by the Audit Committee of our Board of Directors of Grant Thornton LLP as the independent registered public accounting firm of the Company for the year ending December 31, 2017.
| | ☐ | | ☐ | | ☐ | | |
| | | | 1. To approve an amendment to the Sixth Amended and Restated Certificate of Incorporation (the Certificate of Incorporation) of Histogenics Corporation (the Company) to increase the Company’s authorized shares of common stock (the Common Stock) from 100,000,000 to 250,000,000 | | | | ☐ | | ☐ | | ☐ |
| | | | 2. To approve an amendment to the Certificate of Incorporation, to effect a reverse stock split of the Common Stock at a ratio between 1-for-2 and 1-for-20, to be determined at the discretion of the Company’s Board of Directors (the Board) at any time before the earlier of June 30, 2019 and the next annual meeting of stockholders of the Company, for the purpose of complying with Nasdaq Listing Rule 5550(a)(2), subject to the Boards discretion to abandon such amendment | | | | ☐ | | ☐ | | ☐ | | |
 | | | | NOTE:Such other business as may properly come before the meeting or any adjournment thereof. | | | | | | | | |
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| | | | Please indicate if you plan to attend this meeting.meeting | | Yes ☐ | | No ☐ | | | | | | | | | | | | | | | | | | |
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| | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. | | | | | | | | | | | | | | | | |
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| | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | | | | | | | Signature (Joint Owners) | | Date | | | | | | | | | | |
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting:The Notice & Proxy Statement and Form 10-K are available atwww.proxyvote.com
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| | | | | | HISTOGENICS CORPORATION Special Meeting of Stockholders , 2018 9:00 AM Local Time This proxy is solicited by the Board of Directors | | |
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| | | | Signature [PLEASE SIGN WITHIN BOX] | | Date | | | | | | | | | | Signature (Joint Owners) | | Date | | | | | | | | |
V.1.1
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Form 10-K are available at www.proxyvote.com.
E23545-P91614
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| | HISTOGENICS CORPORATION
Annual Meeting of Stockholders
June 13, 2017 9:00 a.m. local time
This proxy is solicited by the Board of Directors
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| | This Proxy is solicited on behalf of the Board of Directors for the AnnualSpecial Meeting of Stockholders to be held on June 13, 2017., 2018. The undersigned appoints Mr. Adam Gridley and Mr. Jonathan Lieber, or either of them as shall be in attendance at the 2017 Annual2018 Special Meeting of Stockholders, as proxy or proxies, with full power of substitution, to represent the undersigned at the AnnualSpecial Meeting of Stockholders of Histogenics Corporation (the “Company”), to be held on June 13, 2017,, 2018, at 9:00 a.m. local time, at the offices of Gunderson Dettmer et al., LLP, One Marina Park Drive, Suite 900, Boston, Massachusetts 02210, and at any adjournments or postponements of the AnnualSpecial Meeting, and to vote on behalf of the undersigned as specified in this Proxy all the Common Stock of the Company that the undersigned would be entitled to vote if personally present, upon the matters referred to on the reverse side hereof, and, in their sole discretion, upon any other business as may properly come before theAnnualthe Special Meeting. The undersigned acknowledges receipt of the Notice of the AnnualSpecial Meeting of Stockholders and of the accompanying proxy statement and revokes any proxy heretofore given with respect to such AnnualSpecial Meeting. The votes entitled to be cast by the undersigned will be cast as instructed. If this Proxy is executed, but no instruction is given, the votes entitled to be cast by the undersigned will be cast “FOR” each of the Board of Director’s nominees for director in Proposal 1 and “FOR” Proposal 2, each of which is set forth on the reverse side hereof. The votes entitled to be cast by the undersigned will be cast in the discretion of the Proxy holders on any other matter that may properly come before the AnnualSpecial Meeting and any adjournment or postponement thereof. |
| | | | TextContinued and to be signed on reverse side
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V.1.1