UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒x
Filed by a Party other than the Registrant ☐¨
Check the appropriate box:
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| Preliminary Proxy Statement |
| Confidential, for Use of the Commission Only (as permitted by Rule |
| Definitive Proxy Statement |
| Definitive Additional Materials |
| Soliciting Material Pursuant to |
KALA PHARMACEUTICALS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box)all boxes that apply):
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PRELIMINARY COPY SUBJECT TO COMPLETION DATED AUGUST 30, 2022
In accordance with Rule 14a-6(d) under Regulation 14A, please be advised that Kala Pharmaceuticals, Inc. intends to release definitive copies of Contentsthis Proxy Statement to security holders on or about September 9, 2022.
KALA PHARMACEUTICALS, INC.
490 Arsenal Way, Suite 1201167 Massachusetts Avenue
Watertown, MA 02472Arlington, Massachusetts 02476
(781) 996‑5252996-5252
NOTICE OF 2021 ANNUALSPECIAL MEETING OF STOCKHOLDERS
To Be Held on June 17, 2021October 19, 2022
Dear Stockholders:
You are cordially invited to attendTo the 2021 annualStockholders of Kala Pharmaceuticals, Inc.:
Notice is hereby given that a special meeting of stockholders (the “Special Meeting”) of Kala Pharmaceuticals, Inc. To support the health and well-being of our stockholders, employees and directors in light of the novel coronavirus (COVID-19) pandemic, the 2021 annual meeting of stockholders, will be a virtual meeting held virtually via the Internet at www.virtualshareholdermeeting.com/KALA2021 KALA2022SM on June 17, 2021October 19, 2022 at 9:11:00 a.m., Eastern Time. At the annual meeting,Special Meeting, stockholders will consider and vote on the following matters:
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The Reverse Split Proposal was approved by the Board, at a ratio to be determined by the Board at a later date in its discretion, and requires the affirmative vote of holders of a majority of the outstanding shares of our Common Stock and Series D Preferred Stock, par value $0.001 per share (“Series D Preferred Stock”), entitled to vote at the Special Meeting on the Reverse Stock Split Proposal, voting together as a single class, to be approved.
Stockholders are referred to the proxy statement for more detailed information with respect to the matters to be considered at the Special Meeting. After careful consideration, the Board recommends a vote “FOR” the Reverse Stock Split Proposal and “FOR” the Adjournment Proposal.
As noted above, due to the COVID-19 pandemic, our annual meetingSpecial Meeting will be a “virtual meeting” of stockholders, which will be conducted exclusively via the Internet at a virtual web conference. There will not be a physical meeting location, and stockholders will not be able to attend the annual meetingSpecial Meeting in person. This means you can attend the annual meetingSpecial Meeting online, vote your shares electronically during the annual meetingSpecial Meeting and submit questions online during the annual meetingSpecial Meeting by accessing www.virtualshareholdermeeting.com/KALA2021KALA2022SM shortly prior to the scheduled start of the meeting and entering the 16-digit control number found on the proxy card, voting instruction form or notice of availability of proxy materials.In light of the public health and safety concerns related to COVID-19, we We believe that hosting a “virtual meeting” will enable greater stockholder attendance and participation from any location around the world. Pending the status of the COVID-19 pandemic, we intend to resume our practice of holding an in-person meeting next year.
Stockholders of record at
The Board has fixed the close of business on April 21, 2021 will beAugust 31, 2022 as the record date for determining the stockholders entitled to notice of, and to vote at, the annual meetingSpecial Meeting or any adjournmentadjournments thereof. Only the stockholders of record of our Common Stock and our Series D Preferred Stock are entitled to receive notice of, and to vote at, the Special Meeting or postponementany adjournments thereof. As a result of the dividend of the shares of Series D Preferred Stock distributed on August 30, 2022, each holder of shares of our Common Stock also holds a number of one one-thousandths of a share of our Series D Preferred Stock equal to the whole number of shares of Common Stock held by such holder. Because any one one-thousandths of a share of Series D Preferred Stock that are not present in person or by proxy at the Special Meeting as of immediately prior to the opening of the polls at the Special Meeting will be automatically redeemed, if you fail to submit a proxy to vote your shares or attend the Special Meeting in order to do so, your shares of Series D Preferred Stock will be redeemed immediately prior to the opening of the polls at the Special Meeting and will not be entitled to vote at the Special Meeting.
Accordingly, we urge you to review the accompanying material carefully and to promptly return the enclosed proxy card or voting instruction. On the following pages, we provide answers to frequently asked questions about the Special Meeting.
A complete list of registered stockholders entitled to vote at the Special Meeting will be available for inspection by stockholders at the principal executive offices of the Company during regular business hours for the 10 calendar days prior to and during the Special Meeting, and online during the Special Meeting.
Hard copies of the Company’s proxy statement to security holders in connection with the Special Meeting are being mailed to stockholders of record as of the close of business on the record date will be available online for examination by our stockholders of record during the annual meeting.
We have elected to provide access to our proxy materials over the Internet under the Securities and Exchange Commission’s “notice and access” rules. We are mailing the Notice of Internet Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on June 17, 2021August 31, 2022, beginning on or about April 28, 2021, and it contains instructions on howSeptember 9, 2022. The Company’s proxy statement to access those documents over the Internet. We believe that providing our proxy materials over the Internet expedites stockholders’ receipt of proxy materials, lowers costs and reduces the environmental impact of our annual meeting.security holders is also available at www.proxyvote.com.
YOUR VOTE AND PARTICIPATION IN THE COMPANY’S AFFAIRS ARE IMPORTANT.
We encourage all stockholders to attend the virtual annual meeting.Special Meeting. However, whether or not you plan to attend the virtual annual meeting,Special Meeting, we encourage you to read this proxy statement and submit your proxy or voting instructions as soon as possible.possible. Please review the instructions of each of your voting options described in the proxy statement.
If your shares are registered in your name, even if you plan to attend the Special Meeting or any postponement or adjournment of the Special Meeting online, we request that you vote by telephone, over the Internet, or complete, sign and mail your proxy card to ensure that your shares will be represented at the Special Meeting.
If your shares are held in the name of a broker, trust, bank or other nominee, and you receive notice of the Special Meeting through your broker or through another intermediary, please vote or complete and return the materials in accordance with the instructions provided to you by such broker or other intermediary or contact your broker directly in order to obtain a proxy issued to you by your nominee holder to attend the Special Meeting and vote online. Failure to do so may result in your shares not being eligible to be voted by proxy at the Special Meeting.
Thank you for your ongoing support and continued interest in Kala.
By Order of the Board of Directors,
Mark Iwicki
President and Chief Executive Officer
Watertown,Arlington, Massachusetts
April 28, 2021September , 2022
Important Notice Regarding Internetthe Availability of Proxy Materials for the AnnualSpecial Meeting of Stockholders to be Held on June 17, 2021:October 19, 2022. The Notice of Special Meeting and proxy statement and our 2020 annual report to stockholders, which includes our Annual Report on Form 10‑K for the fiscal year ended December 31, 2020, are available at www.proxyvote.com. These documents are also available to any stockholder who wishes to receive a paper copy by calling 1‑800‑579‑1639, by emailing sendmaterial@proxyvote.com or by submitting a request over the Internet at www.proxyvote.com.
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KALA PHARMACEUTICALS, INC.
490 Arsenal Way, Suite 1201167 Massachusetts Avenue
Watertown,Arlington, MA 0247202476
(781) 996‑5252996-5252
PROXY STATEMENT
2021 ANNUALSPECIAL MEETING OF STOCKHOLDERS
To Be Held on June 17, 2021October 19, 2022
INFORMATION CONCERNING SOLICITATION AND VOTING
This proxy statement and the enclosedaccompanying proxy card are being furnished in connection with the solicitation of proxies by the boardBoard of directorsDirectors of Kala Pharmaceuticals, Inc. (the “Board”) for use at the annualspecial meeting of stockholders (the “Special Meeting”) to be held on June 17, 2021October 19, 2022 at 9:11:00 a.m., Eastern Time, and at any adjournment thereof. To support the health and well-being of our stockholders, employees and directors in light of the novel coronavirus (COVID-19) pandemic, the annual meeting of stockholdersThe Special Meeting will be a virtual meeting held via the Internet at www.virtualshareholdermeeting.com/KALA2021.KALA2022SM. There will not be a physical meeting location, and stockholders will not be able to attend the annual meetingSpecial Meeting in person. As always, we encourage you to vote your shares prior to the annual meetingSpecial Meeting regardless of whether you intend to attend.
Except where the context otherwise requires, references to “Kala,” “the Company,” “we,” “us,” “our” and similar terms refer to Kala Pharmaceuticals, Inc. In addition, unless the context otherwise requires, references to “stockholders” are to the holders of our common stock, par value $0.001 per share (“Common Stock”) and our Series D Preferred Stock, par value $0.001 per share (“Series D Preferred Stock”).
This proxy statement summarizes information about the proposals to be considered at the meeting and other information you may find useful in determining how to vote. The proxy card is thea means by which you actually authorize another personthe proxies to vote your shares in accordance with your instructions. We are makingHard copies of this proxy statement, along with the relatednotice and either a proxy card andor a voting instruction card, are being mailed to our annual report to stockholders forof record as of the fiscal year ended Decemberclose of business on August 31, 2020 available to stockholders for the first time2022, beginning on or about April 28, 2021.September 9, 2022.
A copy
Important Notice Regarding the Availability of our Annual Report on Form 10‑KProxy Materials for the fiscal year ended December 31, 2020,Special Meeting of Stockholders to be Held on October 19, 2022. The Notice of Special Meeting and proxy statement are also available at www.proxyvote.com.
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
| Q. | What is a proxy? |
A proxy is a person you appoint to vote on your behalf. By using the methods discussed below, you will be appointing Mary Reumuth or, in her absence, Mark Iwicki, Todd Bazemore and Eric L. Trachtenberg as filed withyour proxy. The proxy agent will vote on your behalf, and will have the authority to appoint a substitute to act as proxy. If you are unable to attend the Special Meeting, please vote by proxy so that your shares may be voted.
| Q. | What is a proxy statement? |
A proxy statement is a document that regulations of the Securities and Exchange Commission or (the “SEC except for exhibits, will be furnished without charge”) require that we give to any stockholder upon written or oral requestyou when we ask you to Kala Pharmaceuticals, Inc., 490 Arsenal Way, Suite 120, Watertown, Massachusetts 02472 or by calling 1‑800‑579‑1639, by emailing sendmaterial@proxyvote.com or by submittingsign a request overproxy card to vote your stock at the Internet at www.proxyvote.com.This proxy statement and our Annual Report on Form 10‑K for the fiscal year ended December 31, 2020 are also available on the SEC’s website at www.sec.gov.Special Meeting.
IMPORTANT INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Q. | Why did I receive these proxy materials? |
A. | Our |
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| A. | At the Special Meeting, stockholders will be asked to consider and vote on the following matters: |
| 1. | to approve the proposal to authorize the Board, in its discretion but prior to the one-year anniversary of the date on which the reverse stock split is approved by the Company’s stockholders at the Special Meeting, to amend our restated certificate of incorporation to effect a |
| 2. | to approve a proposal to adjourn the Special Meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of |
Other than these proposals, no other proposals will be presented for a vote at the Special Meeting.
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| A. | Our Board has unanimously adopted a resolution declaring advisable, and |
Q.What is the purpose
The form of the annual meeting?
A.Atproposed Reverse Stock Split Amendment is attached to this proxy statement as Annex A. The Reverse Stock Split Amendment will effect the annual meeting,Reverse Stock Split by reducing the number of outstanding shares of Common Stock as compared to the number of outstanding shares immediately prior to the effectiveness of the Reverse Stock Split, but will not increase the par value of Common Stock, and will not change the number of authorized shares of our capital stock. Stockholders are urged to carefully read Annex A. If implemented, the number of shares of our Common Stock owned by each of our stockholders will consider and vote onbe reduced by the following matters:same proportion as the reduction in the total number of shares of our Common Stock outstanding, so that the percentage of our outstanding Common Stock owned by each of our stockholders will remain approximately the same, except to the extent that the Reverse Stock Split could result in some or all of our stockholders receiving one share of Common Stock in lieu of a fractional share.
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| The Special Meeting will be a virtual meeting of stockholders where stockholders will participate by accessing a website using the Internet. There will not be a physical meeting location. |
| Q. | How do I virtually attend the |
| A. | We will host the |
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Beginning fifteen (15) minutes prior to, and during, the annual meeting,Special Meeting, we will have technicians standing by and ready to assist you with any technical difficulties you may have accessing or hearing the virtual meeting. If you encounter any difficulties accessing the virtual meeting or during the virtual meeting, please call the technical support team at the phone number available on www.virtualshareholdermeeting.com/KALA2021.KALA2022SM.
Q.Who can vote at the annual meeting?
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| Who is entitled to vote |
| A. | Stockholders of record, including holders of our Common Stock and holders of our Series D Preferred Stock, at the close of business on |
Q.How many
Pursuant to the rights of our stockholders contained in our charter documents, each share of our Common Stock is entitled to one vote on all matters listed in this proxy statement. As previously announced on August 18, 2022, the Board declared a dividend of one one-thousandth (1/1,000th) of a share of Series D Preferred Stock for each outstanding share of Common Stock to stockholders of record of Common Stock as of 5:00 p.m. Eastern Time on August 29, 2022. The holders of Series D Preferred Stock have 1,000,000 votes do I have?per whole share of Series D Preferred Stock (i.e., 1,000 votes per one one-thousandth of a share of Series D Preferred Stock) and are entitled to vote with the Common Stock, together as a single class, on the Reverse Stock Split Proposal and Adjournment Proposal, but are not otherwise entitled to vote on the other proposals, if any, to be presented at the Special Meeting. Notwithstanding the foregoing, each share of Series D Preferred Stock redeemed pursuant to the Initial Redemption will have no voting power with respect to the Reverse Stock Split, the Adjournment Proposal or any other matter. Unless otherwise provided on any applicable proxy or ballot with respect to the voting on the Reverse Stock Split or the Adjournment Proposal, when a holder of Common Stock submits a vote on the Reverse Stock Split Proposal and the Adjournment Proposal, the corresponding number of shares of Series D Preferred Stock (or fraction thereof) held by such holder will be automatically cast in the same manner as the vote of the share of Common Stock (or fraction thereof) in respect of which such share of Series D Preferred Stock (or fraction thereof) was issued as a dividend is cast on the Reverse Stock Split, the Adjournment Proposal or such other matter, as applicable, and the proxy or ballot with respect to shares of Common Stock held by any holder on whose behalf such proxy or ballot is submitted will be deemed to include all shares of Series D Preferred Stock (or fraction thereof) held by such holder. Holders of Series D Preferred Stock will not receive a separate ballot or proxy to cast votes with respect to the Series D Preferred Stock on the Reverse Stock Split, the Adjournment Proposal or any other matter brought before the Special Meeting. For example, if a stockholder holds 10 shares of Common Stock (entitled to one vote per share) and votes in favor of the Reverse Stock Split Proposal, then 10,010 votes will be recorded in favor of the Reverse Stock Split Proposal, because the stockholder’s shares of Series D Preferred Stock will automatically be voted in favor of the Reverse Stock Split Proposal alongside such stockholder’s shares of Common Stock, unless otherwise provided on any applicable proxy for ballot with respect to voting on such proposals.
All shares of Series D Preferred Stock that are not present in person or by proxy at the Special Meeting as of immediately prior to the opening of the polls at the Special Meeting will be automatically redeemed (the “Initial Redemption”). Any outstanding shares of Series D Preferred Stock that have not been redeemed pursuant to the Initial Redemption will be redeemed in whole, but not in part, (i) if and when ordered by our Board or (ii) automatically upon the approval by the Company’s stockholders of the Reverse Stock Split at any meeting of the stockholders held for the purpose of voting on such proposal.
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| What is the difference between a stockholder of |
If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, you are considered the stockholder of record with respect to those shares. The notice of the Special Meeting has been sent directly to you by us.
If your shares are held in a stock brokerage account or by a bank or other nominee, the nominee is considered the record holder of those shares. You are considered the beneficial owner of these shares, and your shares are held in “street name.” A notice or proxy statement and voting instruction card have been forwarded to you by your nominee. As the beneficial owner, you have the right to direct your nominee concerning how to vote your shares by using the voting instructions they included in the mailing or by following their instructions for voting by telephone or the Internet.
| Q. | What is a broker non-vote? |
| A. | Broker non-votes occur when shares are held indirectly through a broker, bank or other intermediary on behalf of a beneficial owner (referred to as held in “street name”) and the broker submits a proxy but does not vote for a matter because the broker has not received voting instructions from the beneficial owner and (i) the broker does not have discretionary voting authority on the matter or (ii) the broker chooses not to vote on a matter for which it has discretionary voting authority. Under the rules of the |
| Q. | If I am a beneficial owner of shares, can my brokerage firm vote my shares? |
| A. | If you are a beneficial owner and do not vote via the Internet or telephone or by returning a signed voting instruction card to |
Q.How do I vote?
We encourage you to provide instructions to your brokerage firm via the Internet or telephone or by returning your signed voting instruction card. This ensures that your shares will be voted at the Special Meeting with respect to the proposal described in this proxy statement.
| Q. | How do I vote? |
| A. | If you are the “record holder” of your shares, meaning that your shares are registered in your name in the records of our transfer agent, American Stock Transfer & Trust Company, LLC, you may vote your shares during the |
1. | Over the Internet prior to the |
2. | By Telephone prior to the |
3. | By Mail prior to the |
4. | Over the Internet during the |
If your shares are held in “street name,” meaning they are held for your account by an intermediary, such as a bank, broker or other nominee, then you are deemed to be the beneficial owner of your shares and the broker that actually holds the shares for you is the record holder and is required to vote the shares it holds on your behalf according to your instructions. The proxy materials, as well as voting and revocation instructions, should
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have been forwarded to you by the bank, broker or other nominee that holds your shares. In order to vote your shares, you will need to follow the instructions that your bank, broker or other nominee provides you. The voting deadlines and availability of telephone and Internet voting for beneficial owners of shares held in “street name” will depend on the voting processes of the bank, broker or other nominee that holds your shares. Therefore, we urge you to carefully review and follow the voting instruction card and any other materials that you receive from that organization.
If you do not give instructions to your bank, broker or other nominee, your bank, broker or other nominee will still be able to vote your shares with respect to certain “discretionary” items. The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm (Proposal 2) is considered a discretionary item. Accordingly, your bank, broker or other nominee may vote your shares in its discretion with respect to that matter even if you do not give voting instructions on Proposal 2.
However, under applicable stock exchange rules that regulate voting by registered brokerage firms, the election of our nominees to serve as Class I directors (Proposal 1) is not considered to be a discretionary item. Accordingly, if you do not give your broker voting instructions on Proposal 1, your broker may not vote your shares with respect to this matter and your shares will be counted as “broker non-votes” with respect to this proposal. A “broker non-vote” occurs when shares held by a bank, broker or other nominee are not voted with respect to a particular proposal because the bank, broker or other nominee does not have or did not exercise discretionary authority to vote on the matter and has not received voting instructions from its client.
If your shares are held in “street name”, you will receive instructions from your bank, broker or other nominee explaining how you can attend the annual meeting online and vote your shares online during the Annual Meeting.
Even if you plan to attend the annual meetingSpecial Meeting online, we urge you to vote your shares by proxy in advance of the annual meetingSpecial Meeting so that if you should become unable to attend the annual meetingSpecial Meeting your shares will be voted as directed by you.
| Q. | How will my proxy vote my shares? |
| A. | If you are a stockholder of record, your proxy will vote according to your instructions. If you choose to vote by mail and complete and return the enclosed proxy card but do not indicate your vote, your proxy will vote: |
| · | “FOR” the approval of the amendment to our restated certificate of incorporation to effect, at the discretion of the Company’s Board but prior to the one-year anniversary of the date on which the reverse stock split is approved by the Company’s stockholders at the Special Meeting, a reverse stock split of all of the outstanding shares of our Common Stock, par value $0.001 per share, at a ratio in the range of 1-for-2 to 1-for-75, with such ratio to be determined by the Company’s Board and included in a public announcement. |
| · | “FOR” the approval of the proposal to adjourn the Special Meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of Proposal 1. |
We do not intend to bring any other matter for a vote at the Special Meeting, and we do not know of anyone else who intends to do so. Your proxies are authorized to vote on your behalf, however, using their best judgment, on any other business that properly comes before the Special Meeting.
If your shares are held in the name of a bank, broker or other nominee, you will receive separate voting instructions from your bank, broker or other nominee describing how to vote your shares. The availability of Internet voting will depend on the voting process of your bank, broker or other nominee. Please check with your bank, broker or other nominee and follow the voting instructions your bank, broker or other nominee provides.
As described above, under the rules of the NYSE, each of Proposal 1 and 2 is considered to be a “routine” matter. Accordingly, brokers will have such discretionary authority to vote on Proposals 1 and 2 and may vote “FOR” the Proposals 1 and 2.
| Q. | Can I change my vote? |
| A. | If your shares are registered directly in your name, you may revoke your proxy and change your vote at any time before the vote is taken at the |
1. | Vote over the Internet or by telephone as instructed above under |
2. | Sign, date and return a new proxy card. Only your latest dated and timely received proxy card will be counted. |
3. | Attend the |
4. | Give our corporate secretary written notice before the |
If your shares are held in “street name,” you may submit new voting instructions by contacting your bank, broker or other nominee. You may also vote online during the annual meeting,Special Meeting, which will have the effect of revoking any previously submitted voting instructions if you follow the procedures described under “How“How do I vote?vote?” above.
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| Q. | How are abstentions and broker non-votes treated for purposes of the Special Meeting? |
| A. | Abstentions are included in the determination of the number of shares present at the Special Meeting for determining a quorum at the meeting. An abstention is not an “affirmative vote” but an abstaining stockholder is considered “entitled to vote” at the Special Meeting. Accordingly, an abstention will have the effect of a vote against Proposal 1. An abstention will have no effect on Proposal 2 because an abstention does not count as a vote cast. |
Broker non-votes will be included in the determination of the number of shares present at the Special Meeting for determining a quorum at the meeting. Because your broker will have discretionary voting authority with respect to Proposals 1 and 2, a broker non-vote would only arise in the event that your broker does not receive your voting instructions and chooses not to exercise its discretionary voting authority with respect to such matter. Broker non-votes, to the extent applicable, will have the effect of a vote against Proposal 1 because brokers will have discretionary voting authority with respect to Proposal 1 and a broker non-vote is not an “affirmative vote”. Broker non-votes, to the extent applicable, will not have an effect on Proposal 2 because a broker non-vote does not count as a vote cast for this proposal.
If your shares are held in the name of a bank, broker or other nominee, you should check with your bank, broker or other nominee and follow the voting instructions provided. Attendance at the Special Meeting alone will not revoke your proxy.
| Q. | Who counts the votes? |
| A. | All votes will be tabulated by the inspector of election appointed for the Special Meeting. |
| Q. | How many shares must be represented to have a quorum and hold the |
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| Q. | What vote is required to approve each |
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A nominee
| A. | Proposal 1 — The Reverse Stock Split Proposal |
The affirmative vote of holders of a majority of the outstanding shares of our Common Stock and Series D Preferred Stock entitled to vote at the Special Meeting on the Reverse Stock Split Proposal, voting together as a single class, is required for approval of the Reverse Stock Split Proposal.
Please refer to the discussion above under “Who is entitled to vote at the Special Meeting, and how many votes do they have?” for a description of the Series D Preferred Stock, which is entitled to be voted together with the Common Stock as a single class on the Reverse Stock Split Proposal and the Adjournment Proposal. Shares of Series D Preferred Stock that are not present in person or by proxy as of immediately prior to the opening of the polls will be elected as a director atautomatically redeemed in the annual meeting if the nominee receives a plurality of the votes cast by stockholdersInitial Redemption and, therefore, will not be outstanding or entitled to vote on either the election “FOR”Reverse Stock Split Proposal or the applicable seatAdjournment Proposal and will be excluded from the calculation as to whether such proposals pass at the Special Meeting. Due to the voting power of the shares of Series D Preferred Stock that are not redeemed pursuant to the Initial Redemption on the boardReverse Stock Split Proposal and the Adjournment Proposal, the holders of directors.Common Stock that submit a proxy to vote their shares at the Special Meeting or attend the Special Meeting will effectively have enhanced voting power on the two proposals over holders of Common Stock that are not represented in person or by proxy at the Special Meeting. This means that the Reverse Stock Split Proposal and the Adjournment Proposal could each be approved by the affirmative vote of the holders of less than a majority of the outstanding shares of our Common Stock.
Shares withheld from voting
The principal terms of the Reverse Stock Split Amendment have been approved by the Board. Because the vote is based on the total number of shares outstanding rather than the votes cast at the Special Meeting, your failure to vote or marking “ABSTAIN” on your proxy or ballot with respect to the Reverse Stock Split Proposal has the same effect as a vote against this proposal. We expect that the directors and “broker non-votes”executive officers will not be counted as votesvote all their shares in favor of such matter and will also not be counted as shares voting on the Reverse Stock Split Proposal.
Proposal 1. Accordingly, shares withheld and “broker non-votes” will have no effect on the voting on2 — The Adjournment Proposal 1.
Proposal 2—Ratification of the Appointment of Independent Registered Public Accounting Firm
The affirmative vote of the holders of shares of common stockour Common Stock and Series D Preferred Stock, voting as a single class, representing a majority in voting power of the votes cast by holders of all of the shares of common stockCommon Stock and Series D Preferred Stock present or represented at the meetingSpecial Meeting and voting on the Adjournment Proposal 2 is required for the ratificationapproval of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2021.Adjournment Proposal.
Shares that abstain from voting will not be counted as votes in favor of Proposal 2 and will also not be counted as shares voting on Proposal 2. Accordingly, abstentions will have no effect on the voting on Proposal 2.
Q.How does the board of directors recommend that I vote on the proposals?
| Q. | What are the consequences if the Reverse Stock Split Proposal is not approved by stockholders? |
| A. | If stockholders fail to approve the Reverse Stock Split Proposal our Board would not have the authority to effect the Reverse Stock Split to, among other things, facilitate the continued listing of our Common Stock on Nasdaq by increasing the per share trading price of our Common Stock to help ensure a share price high enough to satisfy the $1.00 per share minimum bid price requirement. Any inability of our Board to effect the Reverse Stock Split could expose us to delisting from Nasdaq. |
| Q. | Will the Company change its name as a result of the Reverse Stock Split? |
| A. | No. The Company will retain the name “Kala Pharmaceuticals, Inc.” and will remain incorporated under the laws of the State of Delaware. |
| Q. | Will the Reverse Stock Split change the business of the Company? |
| A. | No. The Reverse Stock Split will not change the current business of the Company. Following the Reverse Stock Split, we will continue to operate in the biopharmaceutical sector. |
| Q. | Will the Company have the same directors and executive officers that the Company currently has following the Reverse Stock Split? |
| A. | Yes. The executive officers and members of the Board will not change as a result of the Reverse Stock Split. |
| Q. | Who is soliciting proxies, how are they being solicited, and who pays the cost? |
| A. | Proxies are being solicited by the Board on behalf of the Company. In addition, we have engaged Kingsdale Advisors (“Kingdsale”), the proxy solicitation firm hired by the Company, at an approximate cost of $11,500, plus reimbursement expenses, to solicit proxies on behalf of our Board. Kingsdale may solicit the return of proxies, either by mail, telephone, telecopy, e-mail or through personal contact. The fees of Kingsdale as well as the reimbursement of expenses of Kingsdale will be borne by us. Our |
| Q. | How does the Board recommend that I vote on the proposals? |
| A. | Our Board recommends that you vote: |
FOR the electionapproval of the two nominees to serve as Class I directors, each for a three-year term;Reverse Stock Split; and
FOR the ratificationapproval of the appointmentadjournment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021.
Q.AreSpecial Meeting, if necessary, to solicit additional proxies if there other matters to be voted onare insufficient votes at the annual meeting?time of the Special Meeting to approve the Reverse Stock Split Proposal.
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| Do I have any dissenters’ or appraisal rights or cumulative voting rights with respect to any of |
| A. | No. None of our |
| Q. | Where can I |
| A. | The Company expects to publish the voting results of the |
Q.Where can I find the voting results?
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Q.What are the costs of soliciting these proxies?
| Q. | What are the costs of soliciting these proxies? |
| A. | We will bear the cost of soliciting proxies. In addition to solicitation by mail, our directors, officers and employees may solicit proxies by telephone, e-mail, facsimile, and in person without additional compensation. We may reimburse brokers or persons holding stock in their names, or in the names of their nominees, for their expenses in sending proxies and proxy material to beneficial owners. |
Q.How do I submit a question at the annual meeting?
| Q. | How many shares of Common Stock and Preferred Stock are outstanding? |
| A. | As of August 31, 2022, there are [●] shares of Common Stock and [●] shares of Series D Preferred Stock outstanding. There are no shares of any other series of preferred stock currently outstanding. |
| Q. | How do I submit a question at the Special Meeting? |
| A. | If you wish to submit a question, on the day of the |
The information provided above in this “Question and Answer” format is for your convenience only and is merely a summary of the information contained in this proxy statement. We urge you to carefully read this entire proxy statement, including the documents we refer to in this proxy statement. If you have any questions, or need additional materials, please feel free to contact the firm assisting us in the solicitation of proxies, Kingsdale, if you have any questions or need assistance in voting your shares. Banks, brokers and shareholders may call Kingsdale toll-free at 1-866-581-1570 (or call collect outside North America at +1-416-867-2272) or may send an email to contactus@kingsdaleadvisors.com.
Implications of Being an “Emerging Growth Company”
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an “emerging growth company.” For so long as we remain an emerging growth company, we are permitted and plan to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include reduced disclosure obligations regarding executive compensation. In addition, as an emerging growth company, we are not required to conduct votes seeking approval, on an advisory basis, of the compensation of our named executive officers or the frequency with which such votes must be conducted. We may take advantage of some or all these exemptions until such time as we are no longer an emerging growth company. We may remain an emerging growth company until December 31, 2022, although we would cease to be an emerging growth company earlier if we have more than $1.07 billion in annual revenue, if we have more than $700 million in market value of our stock held by non-affiliates as of the last day of our preceding second fiscal quarter or if we issue more than $1 billion of non-convertible debt over a three-year period. We have taken advantage of certain reduced reporting obligations in this proxy statement. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.
Implications of Being a “Smaller Reporting Company”
We are a “smaller reporting company,” as defined in Rule 12b‑212b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. The SEC has adopted rules allowing smaller reporting companies to provide scaled disclosure, and we are permitted and plan to rely on these exemptions from certain disclosure requirements for as long as we remain a smaller reporting company. We are a smaller reporting company so long as we have a public float of less than $250 million, or have annual revenues of less than $100 million and a public float less than $700 million, determined on an annual basis. Under the scaled disclosure obligations available to smaller reporting companies, we are not required to provide, among other things, Compensation Discussion and Analysis and certain other tabular and narrative disclosures relating to executive compensation. We have taken advantage of certain reduced reporting obligations in this proxy statement. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.
MATTERS TO BE VOTED ON
BOARDPROPOSAL 1: APPROVAL OF DIRECTORS AND CORPORATE GOVERNANCETHE REVERSE STOCK SPLIT PROPOSAL
Background and Proposed Amendment
Our boardrestated certificate of directors is authorizedincorporation currently authorizes the Company to have,issue a total of 125,000,000 shares of capital stock, consisting of 120,000,000 shares of Common Stock, par value $0.001 per share, and currently consists5,000,000 shares of seven members divided into three classes, with memberspreferred stock, par value $0.001 per share.
On August 18, 2022, subject to stockholder approval, the Board approved an amendment to our restated certificate of each class holding office for staggered three-year terms. There are currently two Class I directors (Andrew I. Koven and Gregory D. Perry), whose terms expireincorporation to, at the 2021 annual meetingdiscretion of stockholders; two Class II
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directors (Mark Iwicki and Gregory Grunberg), whose terms expirethe Common Stock at a ratio of 1-for-2 to 1-for-75, including shares held by the 2022 annual meetingCompany as treasury shares, with the exact ratio within such range to be determined by the Board of stockholders; and three Class III directors (Robert Paull, Howard B. Rosen, and Rajeev Shah) whose terms expirethe Company at its discretion. The primary goal of the 2023 annual meeting of stockholders (in all cases subjectReverse Stock Split is to increase the election and qualification of their successors or to their earlier death, resignation or removal).
Set forth below are the names of and certain information for each memberper share market price of our board, includingCommon Stock to meet the nomineesminimum per share bid price requirements for election as Class I directors, as of April 15, 2021. The information presented includes each director’s and nominee’s principal occupation and business experience for the past five years, and the names of other public companies of which he has served as a director during the past five years. The information presented below regarding the specific experience, qualifications, attributes and skills of each director and nominee led our nominating and corporate governance committee and our board of directors to conclude that he or she should serve as a director. In addition, we believe that all of our directors and nominees possess the attributes or characteristics described in “Corporate Governance Matters—Director Nomination Process” that the nominating and corporate governance committee expects of each director. There are no family relationships among any of our directors, nominees for director, or executive officers.
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Andrew I. Koven has served as a member of our board of directors since September 2017 and as our Lead Independent Director since December 2018. Mr. Koven was, until his retirement in January 2019, the President and Chief Business Officer of Aralez Pharmaceuticals Inc., or Aralez, a public specialty pharmaceutical company, and served in that role with the company’s predecessor, Pozen Inc., commencing in June 2015. Prior to joining Pozen, Mr. Koven served as Executive Vice President, Chief Administrative Officer and General Counsel of Auxilium Pharmaceuticals Inc., a public specialty biopharmaceutical company, from February 2012 until January 2015, when it was acquired by Endo International plc. Mr. Koven served as President and Chief Administrative Officer and a member of the board of directors of Neurologix, Inc., a company focusedcontinued listing on the development of multiple innovative gene therapy development programs, from September 2011 to November 2011. Before Neurologix, Mr. Koven served as Executive Vice President and Chief Administrative and Legal Officer of Inspire Pharmaceuticals, Inc., a public specialty pharmaceutical company, from July 2010 until May 2011 when it was acquired by Merck & Co., Inc. Previously, Mr. Koven served as Executive Vice President, General Counsel and Corporate Secretary of Sepracor Inc. (now Sunovion), a public specialty pharmaceutical company, from March 2007 until February 2010 when it was acquired by Dainippon Sumitomo Pharma Co., Ltd. Prior to joining Sepracor, Mr. Koven served as Executive Vice President, General Counsel and Corporate Secretary of Kos Pharmaceuticals, Inc., a public specialty pharmaceutical company, from August 2003 until its acquisition by Abbott Laboratories (now AbbVie) in December 2006. Mr. Koven began his career in the pharmaceutical industry first as an Assistant General Counsel and then as Associate General Counsel at Warner-Lambert Company from 1993 to 2000, followed by his role as Senior Vice President and General Counsel at Lavipharm Corporation from 2000 to 2003. From 1986 to 1992 he was a corporate associate at Cahill, Gordon & Reindel in New York. From 1992 to 1993 he served as Counsel, Corporate and Investment Division, at The Equitable Life Assurance Society of the U.S. Mr. Koven holds a Master of Laws (LL.M.) Degree from Columbia University School of Law and a Bachelor of Laws (LL.B.) Degree and Bachelor of Arts Degree in Political Science from Dalhousie University.Nasdaq. We believe that Mr. Koven’s extensive experiencea range of Reverse Stock Split ratios provides us with the most flexibility to achieve the desired results of the Reverse Stock Split. The Reverse Stock Split is not intended as, and will not have the effect of, a “going private transaction” covered by Rule 13e-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Reverse Stock Split is not intended to modify the rights of existing stockholders in any material respect.
If the pharmaceutical industry qualifies himReverse Stock Split Proposal is approved by our stockholders and the Reverse Stock Split is effected, up to serve as a memberevery 75 shares of our boardoutstanding Common Stock would be combined and reclassified into one share of directors.
Gregory D. Perry has served as a member of our board of directors since February 2018. Mr. Perry has served as Chief Financial OfficerCommon Stock. The actual timing for Finch Therapeutics Group, Inc., a public therapeutics company focused on the microbiome, since June 2018. Previously, he served as Chief Financial and Administrative Officer of Novelion Therapeutics Inc., or Novelion, a public biopharmaceutical company, from November 2016 to December 2017. Prior to this, Mr. Perry was Chief Financial Officer of Aegerion Pharmaceuticals, Inc., a public biopharmaceutical company, from July 2015 until its merger with Novelion in November 2016. Prior to that, he served as Chief Financial and Business Officer of Eleven Biotherapeutics, Inc., a public company, from January 2014 to June 2015. Before joining Eleven Biotherapeutics, Mr. Perry served as the Interim Chief Financial Officer of InVivo Therapeutics, a public biotechnology company, from September 2013 to December 2013, and prior to that he served as the Senior Vice President and Chief Financial Officer of ImmunoGen, Inc., a public biotechnology company, from 2009 until he was promoted in 2011 to Executive Vice President and Chief Financial Officer, a role he held until 2013. Before that, he was the Chief Financial Officer of Elixir Pharmaceuticals. Mr. Perry previously was Senior Vice President and Chief Financial Officer of Transkaryotic Therapies. He has also held various financial leadership roles within PerkinElmer Inc., Domantis Ltd., Honeywell and General Electric. Since May 2016, Mr. Perry has served on the board of directors of Merus N.V., a public clinical-stage immuno-oncology company, including as Chair of its Audit Committee. From December 2011 to February 2016, Mr. Perry served on the board of directors of Ocata Therapeutics, a public biotechnology company, including as Chair of its Audit Committee and a member of its Compensation Committee, until it was acquired by Astellas Pharma Inc. Mr. Perry received a B.A. in Economics and Political Science from Amherst College. We believe that Mr. Perry’s experience in the biopharmaceutical industry, including his specific experience in financial leadership roles in biopharmaceutical companies, qualifies him to serve as a member of our board of directors.
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Mark Iwicki has served as our Chief Executive Officer and Chairman of our board of directors since September 2015 and our President since August 2017. Previously he served as Executive Chairman of our board of directors from April 2015 to September 2015. Prior to joining us, Mr. Iwicki served as President and Chief Executive Officer of Civitas Therapeutics, Inc., or Civitas, a biopharmaceutical company, from January 2014 to November 2014. Prior to Civitas, Mr. Iwicki served as President and Chief Executive Officer at Blend Therapeutics, Inc., or Blend, a biopharmaceutical company, from December 2012 to January 2014. Prior to Blend, Mr. Iwicki was President and Chief Executive Officer of Sunovion Pharmaceuticals Inc. (formerly Sepracor Inc.), or Sunovion, a pharmaceutical company. Mr. Iwicki was at Sepracor/Sunovion from October 2007 to June 2012. Prior to joining Sepracor Inc., Mr. Iwicki was Vice President and Business Unit Head at Novartis Pharmaceuticals Corporation, a biopharmaceutical company. He was at Novartis from March 1998 to October 2007. Prior to that, Mr. Iwicki held management positions at Astra Merck Inc. and Merck & Co., Inc. In addition to serving on our board of directors, Mr. Iwicki also currently serves on the boards of Merus N.V., Pulmatrix Inc. and Akero Therapeutics, Inc., and formerly served on the board of Aimmune Therapeutics, Inc., all publicly-traded companies. Mr. Iwicki holds a B.S. in Business Administration from Ball State University and an M.B.A. from Loyola University. We believe that Mr. Iwicki’s extensive experience as a pharmaceutical industry leader managing all stages of drug development and commercialization in multiple therapeutic areas qualifies him to serve as a member of our board of directors.
Gregory Grunberg, M.D. has served as a member of our board of directors since April 2016. Dr. Grunberg has been a Managing Director at Longitude Capital Management Co., LLC, a venture capital firm and a current 5% stockholder, or Longitude, since 2012 and has focused on drug development and medical technology solutions. Prior to joining Longitude, Dr. Grunberg was a Principal at Rho Ventures, a venture capital firm from 2007 to 2012, and an Engagement Manager at McKinsey & Company, a management consulting firm from 2004 to 2007. Dr. Grunberg is a board-certified physician in Internal Medicine and completed his residency at Cornell’s New York Presbyterian Hospital. He has maintained a limited clinical practice in Internal Medicine and affiliations with University of California, San Francisco and Kaiser Permanente. Dr. Grunberg currently serves on the boards of 89bio, Inc., Somatus, Inc. and WelbeHealth LLC. He is also a board observer at Sydnexis, Inc. He previously served on the board of California Cryobank (acquired by GI Partners). While at Rho Ventures he served on the board of AqueSys (acquired by Allergan) and was a board observer at both SARCode Bioscience (acquired by Shire) and PHT (acquired by ERT). Dr. Grunberg holds an M.D. and an M.B.A from Duke University where he was a Fuqua Scholar and an A.B. in Economics and English from Amherst College. We believe that Dr. Grunberg’s experience with biotechnology companies qualifies him to serve as a member of our board of directors.
Robert Paull has served as a member of our board of directors since July 2009. Mr. Paull was a co-founder of, and since 2014 has been a Venture Partner at, Lux Capital Management, or Lux Capital, where he focuses on healthcare ventures. In addition, Mr. Paull served as our founding Chief Executive Officer, President and Treasurer from July 2009 to June 2012. Mr. Paull also served as founding Chief Executive Officer of Genocea Biosciences Inc., a vaccine discovery and development company, from August 2006 to February 2009, and was the co-founder of Lux Research, Inc., an emerging technology market research and consulting firm, which was founded in January 2004. From January 2018 to December 2020, Mr. Paull was the Chief Executive Officer of Mahana Therapeutics, Inc., a digital therapeutics company. Mr. Paull holds a B.S. in Architecture from the University of Virginia. We believe that Mr. Paull’s extensive experience guiding and investing in healthcare ventures qualifies him to serve as a member of our board of directors.
Howard B. Rosen has served as a member of our board of directors since January 2014. Since 2008, Mr. Rosen has served as a consultant to several companies in the biotechnology industry. He has also served as a lecturer at Stanford University in Chemical Engineering since 2009 and in Management since 2011. Mr. Rosen served as Chief Executive Officer of AcelRx Pharmaceuticals, Inc., or AcelRx, a public specialty pharmaceutical company developing products for pain relief, from April 2016 to March 2017, and Interim Chief Executive Officer from April 2015 to March 2016. Mr. Rosen also served as Interim President and Chief Executive Officer of Pearl Therapeutics, Inc. from June 2010 to
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March 2011. From 2004 to 2008, Mr. Rosen was Vice President of Commercial Strategy at Gilead Sciences, Inc., a biopharmaceutical company. From 2003 until 2004, Mr. Rosen was President of ALZA Corporation, a pharmaceutical and medical systems company that merged in 2001 with Johnson & Johnson, a global healthcare company. Prior to that, from 1994 until 2003, Mr. Rosen held various positions at ALZA Corporation. Mr. Rosen is a memberimplementation of the board of directors of AcelRx, a public pharmaceutical company,Reverse Stock Split would be determined by the Board based upon its evaluation as to when such action would be most advantageous to the Company and also served on the board of directors of Alcobra, Ltd., a public pharmaceutical company, until November 2017. Mr. Rosen is also currently a memberits stockholders. Notwithstanding approval of the boardReverse Stock Split Proposal by our stockholders, the Board will have the sole authority to elect whether or not and when to amend our restated certificate of directors of private companies, including Hammerton, Inc., twoXAR Pharmaceuticals, Inc. and Entrega, Inc., and wasincorporation to effect the Reverse Stock Split. If the Reverse Stock Split Proposal is approved by our stockholders, the Board will make a member ofdetermination as to whether effecting the board of directors of Metera Pharmaceuticals, Inc. from 2018 to 2020. Mr. Rosen holds a B.S.Reverse Stock Split is in Chemical Engineering from Stanford University, an M.S. in Chemical Engineering from the Massachusetts Institute of Technology and an M.B.A. from the Stanford Graduate School of Business where he was an Arjay Miller Scholar and Henry Ford II Scholar. We believe that Mr. Rosen’s experience in the biopharmaceutical industry, including his specific experience with the development and commercialization of pharmaceutical products, qualifies him to serve as a member of our board of directors.
Rajeev Shah has served as a member of our board of directors since July 2015. Since 2004, Mr. Shah has been a managing partner at RA Capital Management, L.P., a multi-stage investment manager dedicated to evidence-based investing in public and private healthcare and life science companies that are developing drugs, medical devices, and diagnostics and current 5% beneficial stockholder. Mr. Shah is currently a member of the board of directors of Solid Biosciences, Inc., Satsuma Pharmaceuticals, Inc., and Black Diamond Therapeutics, Inc., all publicly-traded biopharmaceuticals companies. Mr. Shah was previously a member of the board of directors of KalVista Pharmaceuticals, Inc., a publicly-traded biopharmaceutical company, from June 2015 through April 2018, Ra Pharmaceuticals, Inc., a publicly-traded biopharmaceutical company, from July 2015 through April 2020 and Eidos Therapeutics, Inc., a publicly-traded biopharmaceutical company, from March 2018 to August 2020. Mr. Shah holds a B.A. in Chemistry from Cornell University. We believe Mr. Shah is qualified to serve on our board of directors because of his leadership and financial experience at RA Capital Management, his experience in the biopharmaceutical industry, and his experience with venture capital investments.
Our board of directors believes that good corporate governance is important to ensure that our company is managed for the long-term benefit of stockholders. This section describes key corporate governance guidelines and practices that our board of directors has adopted. Complete copies of our corporate governance guidelines, committee charters and code of conduct are available on the “Investors—Corporate Governance” section of our website, which is located at www.kalarx.com. Alternatively, you can request a copy of any of these documents by writing us at Kala Pharmaceuticals, Inc., 490 Arsenal Way, Suite 120, Watertown, Massachusetts 02472, Attention: General Counsel.
Corporate Governance Guidelines
Our board of directors has adopted corporate governance guidelines to assist in the exercise of its duties and responsibilities and to serve the best interests of our companythe Company and our stockholders. These guidelines, which provide a framework forstockholders in light of, among other things, the conductCompany’s ability to increase the trading price of our boardCommon Stock to meet the minimum stock price standards of directors’ business, provideNasdaq without effecting the Reverse Stock Split, the per share price of the Common Stock immediately prior to the Reverse Stock Split and the expected stability of the per share price of the Common Stock following the Reverse Stock Split. If the Board determines that among other things:
10it is in the best interests of the Company and its stockholders to effect the Reverse Stock Split, it will hold a Board meeting to determine the ratio of the Reverse Stock Split. For additional information concerning the factors the Board will consider in deciding whether to effect the Reverse Stock Split, see “— Determination of the Reverse Stock Split Ratio” and “— Board Discretion to Effect the Reverse Stock Split.”
Mr. Iwicki servesthe proposed amendment to the Company’s restated certificate of incorporation to effect the Reverse Stock Split is included as ChairmanAnnex A to this proxy statement. If the Reverse Stock Split Proposal is approved by the Company’s stockholders, the Company will have the authority to file the Reverse Stock Split Amendment with the Secretary of our boardState of the State of Delaware, which will become effective upon its filing; provided, however, that the Reverse Stock Split Amendment is subject to revision to include such changes as may be required by the office of the Secretary of State of the State of Delaware and as our President and Chief Executive Officer. Our board believes that combining the Chairman and Chief Executive Officer positions fosters clear accountability, effective decision-making and alignment of corporate strategy and is the appropriate leadership structure for us at this time. Our board believes that Mr. Iwicki’s combined role of Chairman and President and Chief Executive Officer promotes effective execution of strategic goals and facilitates information flow between management and our board. Mr. Koven has served as our Lead Independent Director since December 2018. As our Lead Independent Director, Mr. Koven’s responsibilities include the following, among others:
We believe this structure represents an appropriate allocation of roles and responsibilities for our company at this time. Our nominating and corporate governance committee evaluates our board leadership structure from time to time and may recommend further alterations of this structure in the future.
Board Determination of Independence
Applicable Nasdaq rules require a majority of a listed company’s board of directors to be comprised of independent directors within one year of listing. In addition, the Nasdaq rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and corporate governance committees be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A‑3 under the Exchange Act and compensation committee members must also satisfy the independence criteria set forth in Rule 10C‑1 under the Exchange Act. Under applicable Nasdaq rules, a director will only qualify as an “independent director” if, in the opinion of the listed company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A‑3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee, accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its subsidiaries. In order to be considered independent for purposes of Rule 10C‑1, the board must consider, for each member of a compensation committee of a listed company, all factors specifically relevant to determining whether a director has a relationship to such company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: (1) the source of compensation of the director, including any consulting advisory or other compensatory fee paid by such company to the director; and (2) whether the director is affiliated with the company or any of its subsidiaries or affiliates.
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In March 2021, our board of directors undertook a review of the composition of our board of directors and its committees and the independence of each then-sitting director. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our board of directors has determined that each of our directors, with the exception of Mark Iwicki, is an “independent director” as defined under applicable Nasdaq rules. In making such determinations, our board of directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances that our board of directors deemed relevant in determining his or her independence, including the beneficial ownership of our capital stock by each non-employee director. Mr. Iwicki is not an independent director under these rules because he is our Chief Executive Officer.
Board of Director Meetings and Attendance
Our board of directors held eight meetings during the year ended December 31, 2020, or fiscal 2020. During fiscal 2020, each of the directors then in office attended at least 75% of the aggregate of the number of board of director meetings and the number of meetings held by all committees of the board of directors on which such director then served.
Our corporate governance guidelines provide that directors are expected to attend the annual meeting of stockholders. All of our directors attended our 2020 annual meeting of stockholders virtually.
Communicating with the Independent Directors
The board will give appropriate attention to written communications that are submitted by stockholders, and will respond if and as appropriate. The lead independent director, subject to advice and assistance from the company’s general counsel or an individual performing a similar function, if any, or the company’s chief financial officer, or an individual performing a similar function, is primarily responsible for monitoring communications from stockholders and for providing copies or summaries to the other directors as he considers appropriate.
Communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that the lead independent director, or chairman of the nominating and corporate governance committee, as applicable, considers to be important for the directors to know. In general, communications relating to corporate governance and corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we receive repetitive or duplicative communications.
Stockholders who wish to send communications on any topic to our board of directors should address such communications to Andrew I. Koven, Lead Independent Director, c/o Kala Pharmaceuticals, Inc., 490 Arsenal Way, Suite 120, Watertown, Massachusetts 02472.
Committees of the Board of Directors
We have established an audit committee, a compensation committeedeems necessary and a nominating and corporate governance committee. Each of these committees operates under a charter that has been approved by our board of directors. A copy of each committee’s charter can be found under the “Investors—Corporate Governance” section of our website, which is located at www.kalarx.com.
advisable. The members of our audit committee are Mr. Rosen, Mr. Paull and Mr. Perry. Mr. Perry is the chair of the audit committee. Our audit committee’s responsibilities include:
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All audit and non-audit services, other than de minimis non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our audit committee. In 2020, the audit committee delegated to its chair authority to pre-approve any audit or non-audit services to be provided to us by our independent registered public accounting firm. By the terms of the delegated authority, the chair must report on any such approval of services pursuant to such authority at the first regularly scheduled meeting of the audit committee following such approval.
Our board of directors has determined that Mr. Perry is an “audit committee financial expert” as defined in applicable SEC rules. We believe that the composition of our audit committee meets the requirements for independence under current Nasdaq and SEC rules and regulations. The audit committee held five meetings during fiscal 2020.
The members of our compensation committee are Mr. Shah, Mr. Koven and Dr. Grunberg. Mr. Shah is the chair of the compensation committee. Our compensation committee’s responsibilities include:
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We believe that the composition of our compensation committee meets the requirements for independence under current Nasdaq and SEC rules and regulations. The compensation committee held four meetings during fiscal 2020.
Nominating and Corporate Governance Committee
The members of our nominating and corporate governance committee are Mr. Paull, Mr. Koven and Mr. Shah. Mr. Paull is the chair of the nominating and corporate governance committee. Our nominating and corporate governance committee’s responsibilities include:
We believe that the composition of our nominating and corporate governance committee meets the requirements for independence under current Nasdaq and SEC rules and regulations. The nominating and corporate governance committee held three meetings during fiscal 2020.
The process followed by our nominating and corporate governance committee to identify and evaluate director candidates includes requests to board members and others for recommendations, meetings from time to time to evaluate biographical information and background material relating to potential candidates and interviews of selected candidates by members of the nominating and corporate governance committee and our board of directors.
In considering whether to recommend to our board of directors any particular candidate for inclusion in our board of directors’ slate of recommended director nominees, including candidates recommended by stockholders, the nominating and corporate governance committee of our board of directors applies the criteria set forth in our corporate governance guidelines. These criteria include the candidate’s integrity, business acumen, knowledge of our business and industry, the ability to act in the interests of all stockholders and lack of conflicts of interest.
The director biographies on pages 8 to 10 of this proxy statement indicate each nominee’s experience, qualifications, attributes and skills that led our nominating and corporate governance committee and our board of directors to conclude he should continue to serve as a director. Our nominating and corporate governance committee and our board of directors believe that each of the nominees has the individual attributes and characteristics required of each of our directors, and the nominees as a group possess the skill sets and specific experience desired of our board of directors as a whole.
Our nominating and corporate governance committee does not have a policy (formal or informal) with respect to diversity, but believes that our board, taken as a whole, should embody a diverse set of skills, experiences and backgrounds. In this regard, the nominating and corporate governance committee also takes into consideration the diversity (for example, with respect to gender, race and national origin) of our board members. While the nominating and corporate governance committee does not make any particular weighting of diversity or any other characteristic in
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evaluating nominees and directors, the committee will deem diversity an important criteria to consider in evaluating future nominees and directors.
Stockholders may recommend individuals to our nominating and corporate governance committee for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background materials, to Kala Pharmaceuticals, Inc., Attention: Nominating and Corporate Governance Committee, 490 Arsenal Way, Suite 120, Watertown, Massachusetts 02472. Assuming that appropriate biographical and background material has been provided on or before the dates set forth in this proxy statement under the heading “Other Matters – Stockholder Proposals for our 2022 Annual Meeting”, the committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others. If the board determines to nominate a stockholder-recommended candidate and recommends his or her election, then his or her name will be included in our proxy card for the next annual meeting.
Stockholders also have the right under our by-laws to directly nominate director candidates, without any action or recommendation on the part of the nominating and corporate governance committee or our board of directors, by following the procedures set forth under “Other Matters—Stockholder Proposals for our 2022 Annual Meeting.”
From February 2016 to March 2018, Mr. Trachtenberg served as General Counsel, Chief Compliance Officer and Corporate Secretary of Aralez. Prior to that, he served in similar capacities for Pozen Inc., Aralez’s predecessor, from June 2015 to February 2016. In addition, Mr. Koven was, until his retirement on January 30, 2019, the President and Chief Business Officer of Aralez and served in that role with the company’s predecessor, Pozen Inc., commencing on June 1, 2015. On August 10, 2018, Aralez and its affiliates each filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code.
In September 2011, Mr. Koven was appointed President and Chief Administrative Officer and a member of the board of directors of Neurologix, Inc. Mr. Koven resigned from Neurologix, Inc. in November 2011, primarily due to the company’s inability to raise sufficient capital to continue its operations (including its inability to compensate Mr. Koven for his services). Neurologix, Inc. filed for protection under Chapter 7 of the U.S. Bankruptcy Code on March 16, 2012.
Our board of directors oversees our risk management processes directly and through its committees. Our management is responsible for risk management on a day-to-day basis. The role of our board of directors and its committees is to oversee the risk management activities of management. Our board of directors fulfills this duty by discussing with management the policies and practices utilized by management in assessing and managing risks and providing input on those policies and practices. In general, our board of directors oversees risk management activities relating to business strategy, acquisitions, capital allocation, organizational structure and certain operational risks; our audit committee oversees risk management activities related to financial controls and legal and compliance risks; our compensation committee oversees risk management activities relating to our compensation policies and practices; and our nominating and corporate governance committee oversees risk management activities relating to the composition of our board of directors and management succession planning. Each committee reports to the full board of directors on a regular basis, including reports with respect to the committee’s risk oversight activities as appropriate. In addition, since risk issues often overlap, committees from time to time request that the full board of directors discuss particular risks.
Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer and principal financial officer. A copy of the code is available on the “Investors—Corporate Governance” section of our website, which is located at www.kalarx.com. Our board of directors
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is responsible for overseeing the code of business conduct and ethics and must approve any waivers of the code for directors, officers and employees. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8‑K.
Policies and Procedures for Related Person Transactions
Our board of directors has adopted written policies and procedures for the review of any transaction, arrangement or relationship in which our company is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% stockholders, or their immediate family members, each of whom we refer to as a “related person,” has a direct or indirect material interest.
If a related person proposes to enter into such a transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our general counsel or, if none, to our chief financial officer, or individual performing a similar function. The policy calls for the proposed related person transaction to be reviewed and, if deemed appropriate, approved by our audit committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not practicable, the committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chairman of the audit committee to review and, if deemed appropriate, approve proposed related person transactions that arise between committee meetings, subject to ratification by the committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.
A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the audit committee after full disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the audit committee will review and consider:
Our audit committee may approve or ratify the transaction only if it determines that, under all of the circumstances, the transaction is in our best interests. Our audit committee may impose any conditions on the related person transaction that it deems appropriate.
In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, our board of directorsBoard has determined that the following transactions do not create a material direct or
16
indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
The policy provides that transactions involving compensation of executive officers shall be reviewed and approved by our compensation committee in the manner specified in the compensation committee’s charter.
With respect to related person transactions, itamendment is the practice of our board of directors to consider the nature of and business reasons for such transactions, how the terms of such transactions compared to those which might be obtained from unaffiliated third parties and whether such transactions were otherwise fair toadvisable and in the best interests of or not contrary to,the Company and its stockholders and has submitted the amendment for consideration by our best interests.stockholders at the Special Meeting.
Related Person Transactions
Reasons for the Reverse Stock Split Amendment
In addition to
Maintain Nasdaq Listing
On the compensation arrangements with directors and executive officers described elsewhere indate of the mailing of this proxy statement, since January 1, 2019, weour Common Stock was listed on the Nasdaq Global Select Market under the symbol “KALA.” The continued listing requirements of Nasdaq, among other things, require that our Common Stock must maintain a closing bid price in excess of $1.00 per share. We have engaged in the following transactionspast, and may in the future, be unable to comply with our directors, executive officers and holderscertain of more than 5%the listing standards that we are required to meet to maintain the listing of our voting securities, and affiliatesCommon Stock on Nasdaq.
On March 2, 2022, we received a deficiency letter from Nasdaq notifying us that, for 30 consecutive business days, the bid price of our directors, executive officers and holdersCommon Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on Nasdaq pursuant to Nasdaq Listing Rule 5450(a)(1) (the “Bid Price Requirement”). We were provided a period of more than 5%180 calendar days, or until August 29, 2022, to regain compliance with the Bid Price Requirement. On March 22, 2022, we received a letter from Nasdaq notifying us that we had regained compliance with the Bid Price Requirement as we had a closing bid price of at least $1.00 per share for a minimum of ten consecutive business days from March 8, 2022 through March 21, 2022.
On May 24, 2022, we received another deficiency letter from Nasdaq notifying us that, for 30 consecutive business days, the bid price of our voting securities. These transactionsCommon Stock had closed below the $1.00 per share minimum bid price requirement for continued inclusion on Nasdaq pursuant to the Bid Price Requirement. We were approvedprovided a period of 180 calendar days, or until November 21, 2022, to regain compliance with the Bid Price Requirement.
If our Common Stock is delisted from Nasdaq, the Board believes that the trading market for our Common Stock could become significantly less liquid, which could reduce the trading price of our Common Stock and increase the transaction costs of trading in accordance with our Related Person Transaction Policy, and we believe that all of these transactions were on terms as favorable as could have been obtained from unrelated third parties.
On March 13, 2020, we issued and sold 16,000,000 shares of our common stock in an underwritten public offering atCommon Stock.
If the Reverse Stock Split Amendment is effected, it would cause a public offering price of $7.89 per share, before expenses and underwriting discounts and commissions. On April 3, 2020, we issued and sold an additional 979,371 shares of our common stockdecrease in the offering on the same terms following the exercise by the underwriters of their option to purchase additional shares. In the offering, certain of our 5% stockholders and their affiliated entities purchased an aggregate of 10,826,879 shares of our common stock at a price per share of $7.89. The following table sets forth the aggregatetotal number of shares of our commonCommon Stock outstanding and increase the market price of our Common Stock. The Board intends to effect the Reverse Stock Split only if it believes that a decrease in the number of shares outstanding is in the best interests of the Company and our stockholders and is likely to improve the trading price of our Common Stock and improve the likelihood that we will be allowed to maintain our listing on Nasdaq. Accordingly, our Board approved the Reverse Stock Split as being in the best interests of the Company.
Risks Associated with the Reverse Stock Split
The Reverse Stock Split May Not Increase the Price of our Common Stock over the Long-Term. As noted above, the principal purpose of the Reverse Stock Split is to increase the trading price of our Common Stock to meet the minimum stock price standards of Nasdaq. However, the effect of the Reverse Stock Split on the market price of our Common Stock cannot be predicted with any certainty, and we cannot assure you that the Reverse Stock Split will accomplish this objective for any meaningful period of time, or at all. While we expect that the reduction in the number of outstanding shares of Common Stock will proportionally increase the market price of our 5% stockholders purchasedCommon Stock, we cannot assure you that the Reverse Stock Split will increase the market price of our Common Stock by a multiple of the Reverse Stock Split ratio, or result in any permanent or sustained increase in the market price of our Common Stock. The market price of our Common Stock may be affected by other factors which may be unrelated to the number of shares outstanding, including the Company’s business and financial performance, general market conditions, and prospects for future success.
The Reverse Stock Split May Decrease the Liquidity of our Common Stock. The Board believes that the Reverse Stock Split may result in an increase in the market price of our Common Stock, which could lead to increased interest in our underwritten public offeringCommon Stock and possibly promote greater liquidity for our stockholders. However, the Reverse Stock Split will also reduce the total number of outstanding shares of Common Stock, which may lead to reduced trading and a smaller number of market makers for our Common Stock, particularly if the price per share of our Common Stock does not increase as a result of the Reverse Stock Split.
The Reverse Stock Split May Result in 2020.
17Some Stockholders Owning “Odd Lots” That May Be More Difficult to Sell or Require Greater Transaction Costs per Share to Sell. If the Reverse Stock Split is implemented, it will increase the number of stockholders who own “odd lots” of less than 100 shares of Common Stock. A purchase or sale of less than 100 shares of Common Stock (an “odd lot” transaction) may result in incrementally higher trading costs through certain brokers, particularly “full service” brokers. Therefore, those stockholders who own fewer than 100 shares of Common Stock following the Reverse Stock Split may be required to pay higher transaction costs if they sell their Common Stock.
The Reverse Stock Split May Lead to a Decrease in our Overall Market Capitalization. The Reverse Stock Split may be viewed negatively by the market and, consequently, could lead to a decrease in our overall market capitalization. If the per share market price of our Common Stock does not increase in proportion to the Reverse Stock Split ratio, or following such increase does not maintain or exceed such price, then the value of our Company, as measured by our market capitalization, will be reduced. Additionally, any reduction in our market capitalization may be magnified as a result of the smaller number of total shares of Common Stock outstanding following the Reverse Stock Split.
On July 6, 2022, we received a deficiency letter from Nasdaq notifying us that the listing of our Common Stock was not in compliance with Nasdaq Listing Rule 5450(b)(2)(A) (the “Minimum MVLS Requirement”) for continued listing on Nasdaq, as the market value of our listed securities was less than $50,000,000 for the previous 30 consecutive business days. We were provided a period of 180 calendar days, or until January 2, 2023, to regain compliance with the Minimum MVLS Requirement. As noted above, the Reverse Stock Split may have a negative impact on our ability to regain compliance with the Minimum MVLS Requirement if the per share market price of our Common Stock does not increase in proportion to the Reverse Stock Split ratio, or following such increase does not maintain or exceed such price.
TablePotential Consequences if the Reverse Stock Split Proposal is Not Approved
If the Reverse Stock Split Proposal is not approved by our stockholders, our Board will not have the authority to effect the Reverse Stock Split Amendment to, among other things, facilitate the continued listing of Contentsour Common Stock on Nasdaq by increasing the per share trading price of our Common Stock to help ensure a share price high enough to satisfy the $1.00 per share minimum bid price requirement. Any inability of our Board to effect the Reverse Stock Split could expose us to delisting from Nasdaq.
| | | | | |
| | Shares of | | | |
| | Common | | Aggregate | |
| | Stock | | Purchased | |
Purchaser |
| Purchase |
| Price | |
Entities affiliated with RA Capital(1) |
| 6,337,135 | | $ | 49,999,995 |
Entities affiliated Longitude Venture Partners(2) |
| 2,534,854 | |
| 19,999,998 |
Entities affiliated with OrbiMed Advisors LLC |
| 1,954,890 | |
| 15,424,082 |
Determination of the Reverse Stock Split Ratio
The Board believes that stockholder approval of a range of potential Reverse Stock Split ratios is in the best interests of our Company and stockholders because it is not possible to predict market conditions at the time the Reverse Stock Split would be implemented. We believe that a range of Reverse Stock Split ratios provides us with the most flexibility to achieve the desired results of the Reverse Stock Split. The Reverse Stock Split ratio to be selected by our Board will be not more than 1-for-75.
The selection of the specific Reverse Stock Split ratio will be based on several factors, including, among other things:
| our ability to maintain the listing of our |
| the per share price of our |
| · | the expected stability of |
| · | the likelihood that the Reverse Stock Split will result in increased marketability and liquidity of our Common Stock; |
| · | prevailing market conditions; |
| · | general economic conditions in our industry; and |
| · | our market capitalization before, and anticipated market capitalization after, the Reverse Stock Split. |
Registration Rights
We arebelieve that granting our Board the authority to set the ratio for the Reverse Stock Split is essential because it allows us to take these factors into consideration and to react to changing market conditions. If the Board chooses to implement the Reverse Stock Split, the Company will make a partypublic announcement regarding the determination of the Reverse Stock Split ratio.
Board Discretion to a registration rights agreement, as amended, with certain holdersEffect the Reverse Stock Split
If the Reverse Stock Split proposal is approved by our stockholders, the Board will have the discretion to implement the Reverse Stock Split or to not effect the Reverse Stock Split at all. The Board currently intends to effect the Reverse Stock Split. If the trading price of our common stock, including Mr. Iwicki, certainCommon Stock increases without effecting the Reverse Stock Split, the Reverse Stock Split may not be necessary. Following the Reverse Stock Split, if implemented, there can be no assurance that the market price of our 5%Common Stock will rise in proportion to the reduction in the number of outstanding shares resulting from the Reverse Stock Split or that the market price of the post-split Common Stock can be maintained above $1.00. There also can be no assurance that our Common Stock will not be delisted from Nasdaq for other reasons.
If our stockholders approve the Reverse Stock Split proposal at the Special Meeting, the Reverse Stock Split will be effected, if at all, only upon a determination by the Board that the Reverse Stock Split is in the best interests of the Company and their affiliatesits stockholders at that time. No further action on the part of the stockholders will be required to either effect or abandon the Reverse Stock Split. If our Board does not implement the Reverse Stock Split prior to the one-year anniversary of the date on which the Reverse Stock Split is approved by the Company’s stockholders at the Special Meeting, the authority granted in this proposal to implement the Reverse Stock Split will terminate and entities affiliated withthe Reverse Stock Split Amendment will be abandoned.
The market price of our Common Stock is dependent upon our performance and other factors, some of which are unrelated to the number of shares outstanding. If the Reverse Stock Split is effected and the market price of our directors. This registration rights agreement,Common Stock declines, the percentage decline as amended, provides these holdersan absolute number and as a percentage of our overall market capitalization may be greater than would occur in the right, subjectabsence of the Reverse Stock Split. Furthermore, the reduced number of shares that will be outstanding after the Reverse Stock Split could significantly reduce the trading volume and otherwise adversely affect the liquidity of our Common Stock.
We have not proposed the Reverse Stock Split in response to certain conditions, beginning after January 16, 2018, to demand that we file a registration statement or to request that their shares be covered by a registration statement thatany effort of which we are otherwise filing.aware to accumulate our shares of Common Stock or obtain control of the Company, nor is it a plan by management to recommend a series of similar actions to our Board or our stockholders. Notwithstanding the decrease in the number of outstanding shares of Common Stock following the Reverse Stock Split, our Board does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.
Indemnification Agreements
OurEffectiveness of the Reverse Stock Split
The Reverse Stock Split, if approved by our stockholders, will become effective upon the filing with the Secretary of State of the State of Delaware of a certificate of amendment to our restated certificate of incorporation provides that we will indemnify our directors and officers toin substantially the fullest extent permitted by Delaware law. In addition, we have entered into indemnification agreements with all of our directors and officers.
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EXECUTIVE AND DIRECTOR COMPENSATION
Certain information regarding our executive officers as of April 15, 2021 is set forth below.
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Mark Iwicki is our President and Chief Executive Officer and a member of our Board of Directors. Please see “Board of Directors and Corporate Governance – Election of Directors” above for biographical information regarding Mr. Iwicki.
Todd Bazemore has served as our Chief Operating Officer since November 2017. Previously, he served as Executive Vice President and Chief Operating Officer of Santhera Pharmaceuticals (USA) Inc., or Santhera, a pharmaceutical company and subsidiary of Santhera Pharmaceuticals Holdings AG, from September 2016 until November 2017. Prior to joining Santhera, Mr. Bazemore served as Executive Vice President and Chief Commercial Officer of Dyax Corp., or Dyax, a biopharmaceutical company focused on orphan diseases, between April 2014 and January 2016, when Dyax was acquired by Shire plc. At Dyax, Mr. Bazemore oversaw all aspects of Dyax’s commercial department including sales, marketing, commercial analytics, market access and patient services. Between April 2012 and September 2013, he served as Vice President, Managed Markets at Sunovion Pharmaceuticals, Inc., or Sunovion (a subsidiary of Dainippon Sumitomo Pharma Co. Ltd.), a global biopharmaceutical company focused on serious medical conditions. Prior to that, Mr. Bazemore held several roles of increasing responsibility at Sunovion, including Vice President of Sales and Vice President of Respiratory Business Unit. Since October 2020, Mr. Bazemore has served on the board of directors of Pulmatrix Inc., a clinical stage publicly traded biopharmaceutical company. He received his Bachelor of Science from the University of Massachusetts, Lowell.
Kim Brazzell, Ph.D. has served as our Chief Medical Officer since February 2013. Dr. Brazzell served as Chief Medical Officer of Mimetogen Pharmaceuticals, Inc., a clinical stage biotechnology company, from January 2012 until December 2015. Dr. Brazzell also held several executive positions at Inspire Pharmaceuticals, Inc., or Inspire, a specialty pharmaceutical company focusing on ophthalmic and respiratory products, including Executive Vice President of Medical and Scientific Affairs from 2010 to 2011, Executive Vice President and Head of Ophthalmology Business from 2009 to 2010, and Senior Vice President of Ophthalmic Research and Development from 2004 to 2008. Prior to joining Inspire, Dr. Brazzell served as Global Head of Clinical R&D and Senior Vice President, U.S. R&D, of Novartis Ophthalmics AG from 2000 to 2004. Dr. Brazzell also served as Vice President, R&D at Ciba Vision Ophthalmics, Inc. and as Associate Director, R&D, at Alcon Laboratories, Inc. Dr. Brazzell received a B.S. in Pharmacy and a Ph.D. in Pharmaceutical Sciences from the University of Kentucky.
Hongming Chen, Sc.D. has served as our Chief Scientific Officer since October 2014. Prior to that, Dr. Chen served as our Executive Vice President of Research from October 2013 to October 2014 and our Vice President of Research from January 2010 to October 2013. Prior to joining us, Dr. Chen served as Director of Formulation Development at TransForm Pharmaceuticals Inc., or TransForm, from 2000 to January 2010. Before joining TransForm, Dr. Chen conducted vaccine delivery research and development at AstraZeneca plc from 1997 to 2000, and at Merck & Co., Inc. from 1996 to 1997. Dr. Chen is a memberform of the National Academy of Engineering, the College of Fellows of the American Institute for Medical and Biological Engineering and the College of Fellows of the Controlled Release Society. Dr. Chen received a B.S. in Chemical Engineering from The University of Texas at Austin in 1992 and both an M.S. and a Sc.D. in Chemical Engineering from the Massachusetts Institute of Technology.
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Mary Reumuth, C.P.A. has served as our Chief Financial Officer since July 2017, Senior Vice President, Finance from February 2017Reverse Stock Split Amendment attached to July 2017, our Vice President, Finance from December 2014 to February 2017, our Senior Director, Finance from February 2014 to December 2014, as our Corporate Controller from February 2014 to July 2017 and Treasurer since February 2014. Prior to joining us, Ms. Reumuth acted as an independent financial consultant from November 2012 to January 2014 and, prior to that, served as Corporate Controller for Enobia Pharma Corp., or Enobia, a global biopharmaceutical company acquired by Alexion Pharmaceuticals, Inc., from May 2011 to June 2012. Prior to Enobia, Ms. Reumuth served as Director of Finance at Verenium Corporation, or Verenium, a biotechnology company, from December 2007 to March 2011. From 2001 to 2007, Ms. Reumuth held a variety of finance and accounting positions at Genzyme Corporation, or Genzyme, (now a Sanofi Company), and ILEX Oncology, Inc., or ILEX (acquired by Genzyme). Prior to ILEX, Ms. Reumuth was an auditor at Ernst & Young LLP. Ms. Reumuth earned her Bachelor’s degree in Business Administration from Texas A&M University—Corpus Christi, and is a Certified Public Accountant.
Eric L. Trachtenberg has served as our General Counsel and Corporate Secretary since April 2018 and as our Chief Compliance Officer since June 2018. Previously, he served as General Counsel, Chief Compliance Officer and Corporate Secretary of Aralez Pharmaceuticals Inc., or Aralez, a pharmaceutical company, from February 2016 to March 2018. Prior to that, he served in similar capacities for Pozen Inc., Aralez’s predecessor, from June 2015 to February 2016. Mr. Trachtenberg also formerly served as Deputy General Counsel at Auxilium Pharmaceuticals, Inc., a specialty biopharmaceutical company, from May 2012 through its acquisition by Endo Pharmaceuticals in February 2015. Prior to Auxilium, he was Vice President, General Counsel and Corporate Secretary of Enobia Pharma, Inc. from April 2011 through its acquisition by Alexion Pharmaceuticals in April 2012. Prior to that, Mr. Trachtenberg served as Vice President and Associate General Counsel of Sepracor Inc. (now known as Sunovion Pharmaceuticals Inc.) commencing in May 2007 and remained in that position following the acquisition of Sepracor Inc. by Dainippon Sumitomo Pharma through April 2011. Mr. Trachtenberg also held a Senior Counsel position at Kos Pharmaceuticals, Inc. from July 2005 to April 2007 before its acquisition by Abbott. Mr. Trachtenberg began his career at Blank Rome LLP. He holds a Juris Doctorate and Master of Business Administration from Temple University and a Bachelor of Science in Management from Tulane University.
The following discussion relates to the compensation of our President and Chief Executive Officer, Mark Iwicki, our Chief Operating Officer, Todd Bazemore, and our Chief Medical Officer, Kim Brazzell, Ph.D. for the periods presented. These three individuals are collectively referred to in this proxy statement as Annex A. The exact timing of the filing of the Reverse Stock Split Amendment will be determined by the Board based upon its evaluation of when such action will be most advantageous to the Company and our named executive officers. Each year,stockholders. The Board reserves the right, notwithstanding stockholder approval and without further action by our compensation committeestockholders, to elect not to proceed with the Reverse Stock Split if, at any time prior to filing such Reverse Stock Split Amendment, the Board, in its sole discretion, determines that it is no longer in the best interests of the Company and boardour stockholders. The Board currently intends to effect the Reverse Stock Split. If our Board does not implement the Reverse Stock Split prior to the one-year anniversary of directors reviewthe date on which the Reverse Stock Split is approved by the Company’s stockholders at the Special Meeting, the authority granted in this proposal to implement the Reverse Stock Split will terminate and determine the compensationReverse Stock Split Amendment to effect the Reverse Stock Split will be abandoned.
Effects of the Reverse Stock Split on Common Stock and Preferred Stock
Pursuant to the Reverse Stock Split Amendment, each holder of our named executive officers.Common Stock outstanding immediately prior to the effectiveness of the Reverse Stock Split (“Old Common Stock”) will become the holder of fewer shares of our Common Stock (“New Common Stock”) after consummation of the Reverse Stock Split.
Executive
Based on [●] shares of our Common Stock outstanding as of the date hereof, the following table reflects the approximate number of shares of our Common Stock that would be outstanding as a result of the Reverse Stock Split under certain possible exchange ratios.
| Proposed Ratio (Old Common Stock: New Common Stock) | Percentage Reduction in Outstanding Common Stock | Approximate Number of Shares of Common Stock to be Outstanding after the Reverse Stock Split | ||||
| 2:1 | 50 | % | [●] | |||
| 3:1 | 66.67 | % | [●] | |||
| 4:1 | 75 | % | [●] | |||
| 5:1 | 80 | % | [●] | |||
| 6:1 | 83.33 | % | [●] | |||
| 7:1 | 85.71 | % | [●] | |||
| 8:1 | 87.5 | % | [●] | |||
| 9:1 | 88.89 | % | [●] | |||
| 10:1 | 90 | % | [●] | |||
| 11:1 | 90.91 | % | [●] | |||
| 12:1 | 91.67 | % | [●] | |||
| 13:1 | 92.31 | % | [●] | |||
| 14:1 | 92.86 | % | [●] | |||
| 15:1 | 93.33 | % | [●] | |||
| 16:1 | 93.75 | % | [●] | |||
| 17:1 | 94.12 | % | [●] | |||
| 18:1 | 94.44 | % | [●] | |||
| 19:1 | 94.74 | % | [●] | |||
| 20:1 | 95 | % | [●] | |||
| 21:1 | 95.24 | % | [●] | |||
| 22:1 | 95.45 | % | [●] | |||
| 23:1 | 95.65 | % | [●] | |||
| 24:1 | 95.83 | % | [●] | |||
| 25:1 | 96.00 | % | [●] | |||
| 26:1 | 96.15 | % | [●] | |||
| 27:1 | 96.30 | % | [●] | |||
| 28:1 | 96.43 | % | [●] | |||
| 29:1 | 96.55 | % | [●] | |||
| 30:1 | 96.67 | % | [●] | |||
| 31:1 | 96.77 | % | [●] | |||
| 32:1 | 96.88 | % | [●] | |||
| 33:1 | 96.97 | % | [●] | |||
| 34:1 | 97.06 | % | [●] | |||
| 35:1 | 97.14 | % | [●] | |||
| 36:1 | 97.22 | % | [●] | |||
| 37:1 | 97.30 | % | [●] | |||
| 38:1 | 97.37 | % | [●] | |||
| 39:1 | 97.44 | % | [●] | |||
| 40:1 | 97.50 | % | [●] | |||
| 41:1 | 97.56 | % | [●] | |||
| 42:1 | 97.62 | % | [●] | |||
| 43:1 | 97.67 | % | [●] | |||
| 44:1 | 97.73 | % | [●] | |||
| 45:1 | 97.78 | % | [●] | |||
| 46:1 | 97.83 | % | [●] | |||
| 47:1 | 97.87 | % | [●] | |||
| 48:1 | 97.92 | % | [●] | |||
| 49:1 | 97.96 | % | [●] | |||
| 50:1 | 98.00 | % | [●] | |||
| 51:1 | 98.04 | % | [●] | |||
| 52:1 | 98.08 | % | [●] | |||
| 53:1 | 98.11 | % | [●] | |||
| 54:1 | 98.15 | % | [●] | |||
| 55:1 | 98.18 | % | [●] | |||
| 56:1 | 98.21 | % | [●] | |||
| 57:1 | 98.25 | % | [●] | |||
| 58:1 | 98.28 | % | [●] | |||
| 59:1 | 98.31 | % | [●] | |||
| 60:1 | 98.33 | % | [●] | |||
| 61:1 | 98.36 | % | [●] | |||
| 62:1 | 98.39 | % | [●] | |||
| 63:1 | 98.41 | % | [●] | |||
| 64:1 | 98.44 | % | [●] | |||
| 65:1 | 98.46 | % | [●] | |||
| 66:1 | 98.48 | % | [●] | |||
| 67:1 | 98.51 | % | [●] | |||
| 68:1 | 98.53 | % | [●] | |||
| 69:1 | 98.55 | % | [●] | |||
| 70:1 | 98.57 | % | [●] | |||
| 71:1 | 98.59 | % | [●] | |||
| 72:1 | 98.61 | % | [●] | |||
| 73:1 | 98.63 | % | [●] | |||
| 74:1 | 98.65 | % | [●] | |||
| 75:1 | 98.67 | % | [●] |
The Reverse Stock Split will affect all stockholders equally and Director Compensation Processes
Our executive compensation program is administeredwill not affect any stockholder’s proportionate equity interest in the Company, except for those stockholders who receive an additional share of our Common Stock in lieu of a fractional share. None of the rights currently accruing to holders of our Common Stock will be affected by the compensation committeeReverse Stock Split. Following the Reverse Stock Split, each share of New Common Stock will entitle the holder thereof to one vote per share and will otherwise be identical to Old Common Stock. The Reverse Stock Split also will have no effect on the number of authorized shares of our boardCommon Stock. The shares of directors, subjectNew Common Stock will be fully paid and non-assessable.
The par value per share of the Common Stock will remain unchanged at $0.001 per share after the Reverse Stock Split. As a result, on the effective date of the Reverse Stock Split, if any, the stated capital on our balance sheet attributable to the oversightCommon Stock will be reduced proportionately based on the Reverse Stock Split ratio, from its present amount, and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. After the Reverse Stock Split, net income or loss per share and other per share amounts will be increased because there will be fewer shares of our Common Stock outstanding. In future financial statements, net income or loss per share and other per share amounts for periods ending before the Reverse Stock Split would be recast to give retroactive effect to the Reverse Stock Split. As described below under “Effects of the Reverse Stock Split on Outstanding Equity Awards and Warrants to Purchase Common Stock,” the per share exercise price of outstanding option awards and warrants would increase proportionately, and the number of shares of our Common Stock issuable upon the exercise of outstanding options and warrants, or that relate to other equity awards (e.g., restricted stock awards) would decrease proportionately, in each case based on the Reverse Stock Split ratio selected by the Board. The Company does not anticipate that any other accounting consequences would arise as a result of the Reverse Stock Split.
All shares of Series D Preferred Stock that are not present in person or by proxy at the Special Meeting as of immediately prior to the opening of the polls at the Special Meeting will be automatically redeemed in the Initial Redemption. Any outstanding shares of Series D Preferred Stock that were not redeemed pursuant to the Initial Redemption will be redeemed in whole, but not in part, (i) if and when ordered by our Board or (ii) automatically upon the approval of our boardthe Reverse Stock Split Amendment effecting the Reverse Stock Split. Please refer to the discussion in the Questions and Answers About the Special Meeting section under “Who is entitled to vote at the Special Meeting, and how many votes do they have?” and “What vote is required to approve each matter and how are votes counted?” for a description of directors. Our compensation committee reviews our executive compensation practices onthe voting power of the Series D Preferred Stock.
Pursuant to the Certificate of Designation of Series D Preferred Stock (the “Certificate of Designation”), each share of Series D Preferred Stock redeemed in any redemption shall be redeemed in consideration for the right to receive an annual basisamount equal to $0.10 in cash for each one hundred whole shares of Series D Preferred Stock that are “beneficially owned” by the “beneficial owner” (as such terms are defined in the Certificate of Designation) thereof as of the applicable redemption time and based on this review approves, or, as appropriate, makes recommendationsredeemed pursuant to such redemption, payable upon receipt by the Company of a written request submitted by the applicable holder to our board of directors for approval of our executive compensation program. In designing our executive compensation program, our compensation committee considers publicly available compensation data for national and regional companiescorporate secretary (each a “Redemption Payment Request”) following the applicable redemption time. Such Redemption Payment Request shall (i) be in the biotechnology/pharmaceutical industry to help guide its executive compensation decisions at the time of hiring and for subsequent adjustments in compensation. Since 2018, our compensation committee has retained Radford, which is part of the Rewards Solution practice at Aon plc, as its independent compensation consultant, to provide comparative data on executive compensation practices in our industry and to advise on our executive compensation program generally. Although our compensation committee considers the advice and guidelines of Radford as to our executive compensation program, our compensation committee ultimately makes its own decisions about these matters. During the fiscal year ended December 31, 2020, the compensation committee directly engaged Radford to develop a compensation peer group; assess our executive compensation program and develop recommendations covering salary, bonus, incentive and equity compensation; review the peer group’s long-term incentive compensation trends; assist with governance related matters and risk-assessment; review and assist in
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designing an equity compensation strategy for non-officer employees; and review our director compensation program. Radford ultimately developed recommendations that were presentedform reasonably acceptable to the Compensation Committee for its consideration. Following an active dialogue with Radford, the Compensation Committee approved the recommendations. In the future, we expect that our compensation committee will continue to engage independent compensation consultants to provide additional guidance on our executive compensation programs and to conduct further competitive benchmarking against a peer group of publicly traded companies.
The compensation committee reviewed information regarding the independence and potential conflicts of interest of Radford, taking into account, among other things, the factorsCompany (ii) set forth in reasonable detail the Nasdaq listing standards. Based onnumber of shares of Series D Preferred Stock beneficially owned by the holder at the applicable redemption time and include evidence reasonably satisfactory to the Company regarding the same, and (iii) set forth a calculation specifying the amount in cash owed to such review,holder by the compensation committee concludedCompany with respect to the shares of Series D Preferred Stock that were redeemed at the engagementapplicable redemption time.
We are currently authorized to issue a maximum of Radford did not raise any conflict120,000,000 shares of interest. Our director compensation program is administered by our board of directors with the assistanceCommon Stock. As of the compensation committee. The compensation committee conducts an annual reviewRecord Date, there were [●] shares of director compensationour Common Stock issued and makes recommendationsoutstanding. Although the number of authorized shares of our Common Stock will not change as a result of the Reverse Stock Split, the number of shares of our Common Stock issued and outstanding will be reduced in proportion to the boardratio selected by the Board. Thus, the Reverse Stock Split will effectively increase the number of directorsauthorized and unissued shares of our Common Stock available for future issuance by the amount of the reduction effected by the Reverse Stock Split. Conversely, with respect thereto.
Under its charter,to the compensation committee may form, and delegate authority to, subcommittees, consistingnumber of independent directors, as it deems appropriate. During fiscal year 2020, the compensation committee did not form or delegate authority to such subcommittees. In addition,shares reserved for issuance under, its charter, the compensation committee may delegate to one or more executive officers the power to grant options, restricted stock units or other stock awards pursuant to itsfor example, our 2017 Equity Incentive Plan as amended, to employees who are not directors or executive officers(the “2017 Plan”), our Board will proportionately reduce such reserve in accordance with the terms of the Company. During fiscal year 2020, the compensation committee delegated authority to our Chief Executive Officer to grant certain stock options and restricted stock units to non-executive employees.
Summary Compensation Table
The following table sets forth information regarding compensation awarded to, earned by or paid to each of our named executive officers for the periods presented.
| | | | | | | | | | | | | | |
| | | | | | | | Stock | | Option | | All other | | |
Name and Principal | | | | Salary | | Bonus | | Awards | | Awards | | compensation | | Total |
Position |
| Year |
| ($) |
| ($)(1) |
| ($)(2) | | ($)(3) |
| ($) |
| ($) |
Mark Iwicki |
| 2020 |
| 585,500 |
| 676,500 |
| 2,665,962 | | 969,079 |
| 4,719 | (4) | 4,901,760 |
President and Chief Executive Officer |
| 2019 |
| 563,500 |
| 304,290 |
| — | | 1,685,024 |
| 3,353 | (5) | 2,556,167 |
| | | | | | | | | | | | | | |
Todd Bazemore |
| 2020 |
| 455,700 |
| 273,420 | | 1,170,000 | | 318,777 |
| 10,419 | (6) | 2,228,316 |
Chief Operating Officer |
| 2019 |
| 440,300 |
| 158,508 |
| — | | 1,066,604 |
| 8,694 | (7) | 1,674,106 |
| | | | | | | | | | | | | | |
Kim Brazzell, Ph.D. |
| 2020 |
| 455,700 |
| 373,420 |
| 1,170,000 | | 318,329 |
| 19,155 | (8) | 2,336,604 |
Chief Medical Officer |
| 2019 |
| 440,300 |
| 158,508 |
| — | | 550,359 |
| 15,338 | (9) | 1,164,505 |
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Narrative Disclosure to Summary Compensation Table
Base Salary. In December 2019, our compensation committee increased Mr. Iwicki’s, Mr. Bazemore’s and Dr. Brazzell’s annual base salaries to $585,500, $455,700 and $455,700, respectively, effective January 1, 2020.
In December 2020, our compensation committee increased Mr. Iwicki’s, Mr. Bazemore’s and Dr. Brazzell’s annual base salaries to $643,500, $489,878 and $476,207, respectively, effective January 1, 2021.
We use base salaries to recognize the experience, skills, knowledge and responsibilities required of all our employees, including our named executive officers. None of our named executive officers is currently party to an employment agreement or other agreement or arrangement that provides for automatic or scheduled increases in base salary.
Annual Bonus. Performance-based bonuses, which are calculated as a percentage of base salary, are designed to motivate our employees to achieve annual goals based on our strategic, financial and operating performance objectives. Historically, our board of directors or our compensation committee has approved discretionary annual cash bonuses to our named executive officers with respect to their prior year performance.
With respect to 2020 performance, our compensation committee awarded bonuses of $526,500, $273,420 and $273,420 to Mr. Iwicki, Mr. Bazemore and Dr. Brazzell, respectively. Mr. Iwicki’s individual performance-based target bonus amount for 2021, expressed as a percentage of his 2021 base salary, is 60%. Mr. Bazemore’s individual performance-based target bonus amount for 2021, expressed as a percentage of his 2021 base salary, is 50%. Dr. Brazzell’s individual performance-based target bonus amount for 2021, expressed as a percentage of his 2021 base salary, is 45%. In addition, with respect to 2020 performance, our compensation committee awarded special one-time bonuses to Mr. Iwicki and Dr. Brazzell of $150,000 and $100,000, respectively. These special one-time bonuses were awarded as a result of Mr. Iwicki’s and Dr. Brazzell’s contributions to our significant accomplishments during 2020, including the achievement of positive data from our pivotal STRIDE 3 clinical trial of EYSUVIS®, resubmission2017 Plan. As of the EYSUVIS New Drug ApplicationRecord Date, there were [●] shares of Common Stock reserved for issuance under the 2017 Plan, of which [●] remained available for future awards, and following the Reverse Stock Split, if any, such reserve will be reduced to between [●] – [●] shares of Common Stock, of which between approximately [●] – [●] shares will be available for future awards.
Following the U.S. FoodReverse Stock Split, the Board will have the authority, subject to applicable securities laws, to issue all authorized and Drug Administration,unissued shares without further stockholder approval, upon such terms and conditions as the Board deems appropriate. We do not currently have any plans, proposals or FDA, significantly ahead of internal timelinesunderstandings to issue the additional shares that would be available if the Reverse Stock Split is approved and industry standard while in the midsteffected, but some of the global COVID-19 pandemic,additional shares underlie warrants, which could be exercised or converted after the Reverse Stock Split Amendment is effected.
Effects of the Reverse Stock Split on Outstanding Equity Awards and approval of EYSUVIS byWarrants to Purchase Common Stock
If the FDA.
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Equity Incentives. Although we do not have a formal policy with respectReverse Stock Split is effected, all outstanding options entitling their holders to the grant of equity incentive awards to our executive officers, or any formal equity ownership guidelines applicable to them, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and our stockholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention because this feature incentivizes our executive officers to remain in our employment during the vesting period. Accordingly, our compensation committee periodically reviews the equity incentive compensation of our named executive officers and from time to time may grant equity incentive awards to them in the form of stock options, time-based restricted stock units or performance-based restricted stock units.
In January 2020, based on overall performance, we granted to Mr. Iwicki options to purchase 365,000 shares of our common stock andCommon Stock, as well as any other equity awards granted pursuant to, each of Mr. Bazemore and Dr. Brazzell options to purchase 120,000 shares of our common stock. All ofor available under, the options granted in 2020 to Mr. Iwicki, Mr. Bazemore and Dr. Brazzell vest monthly as to 1/48th of the shares underlying the option.
In June 2020, based on overall performance, we granted2017 Plan (e.g., restricted stock units with respect to 49,560, 19,000awards), the Amended and 19,000 shares of our common stock to Mr. Iwicki, Mr. Bazemore and Dr. Brazzell, respectively. Such awards vest as to 50% ofRestated 2017 Employee Stock Purchase Plan (the “2017 ESPP”) or the shares on June 25, 2021 and the remaining 50% of the shares on June 25, 2022. In June 2020, we also granted performance-based restricted stock units tied to FDA approval of EYSUVIS with respect to 178,300, 81,000 and 81,000 shares of our common stock to Mr. Iwicki, Mr. Bazemore and Dr. Brazzell, respectively. In October 2020, we determined that the performance condition for the awards has been achieved, following which the awards will vest as to 50% of the shares on October 26, 2021, the first anniversary of the achievement of the performance condition, and as to the remaining 50% of the shares on October 26, 2022, the second anniversary of the achievement of the performance condition.
Prior to our IPO, our executives were eligible to participate in our 2009 Employee, Director and Consultant Equity Incentive Plan as amended, or the 2009 Plan. Following the closing of our IPO, our employees and executives became eligible to receive stock options and other stock-based awards pursuant to the 2017 Equity Incentive Plan and no further grants are made under the 2009 Plan. For a description of our (the “2009 Plan”, and our 2017 Equity Incentive Plan, as amended, see “—Stock Option and Other Compensation Plans”.
Historically, we have used stock options to compensate our executive officers in the form of initial grants in connectiontogether with the commencement of employment and also at various times, often but not necessarily annually, if we have performed as expected or better than expected. The award of stock options to our executive officers, including our Chief Executive Officer, generally have been and going forward are expected to be made by our compensation committee. We have granted stock options to our executive officers with both time-based and performance-based vesting. Since our IPO and going forward, annual and other option grants made to existing executive officers and employees typically vest monthly as to 1/48th of the shares underlying the option. Vesting and exercise rights cease shortly after termination of employment except in the case of death or disability and, in certain circumstances, including, upon a change in control. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option, including no voting rights and no right to receive dividends or dividend equivalents. In addition, we have historically granted stock options with exercise prices that are equal to the fair market value of our common stock on the date of grant as determined by our board of directors or compensation committee, based on a number of objective and subjective factors. The exercise price of all stock options granted after our IPO has been and will be equal to the fair market value of shares of our common stock on the date of grant, which will be determined by reference to the closing market price of our common stock on the date of grant.
In June 2020, we also began to use restricted stock units to compensate our executive officers if we have performed as expected or better than expected. The award of restricted stock units to our executive officers, including our Chief Executive Officer, generally have been and going forward are expected to be made by our board of directors. We have granted restricted stock units to our executive officers with both time-based and performance-based vesting. Time-based awards vest over two or three years, as applicable. Prior to settlement of the restricted stock units, the holder has no rights as a stockholder with respect to the shares subject to such restricted stock unit, including no voting rights and no right to receive dividends or dividend equivalents.
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None of our executive officers is currently party to an employment agreement that provides for automatic equity awards.
Outstanding Equity Awards at December 31, 2020
The following table sets forth information regarding all outstanding equity awards held by each of our named executive officers as of December 31, 2020.
| | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards | ||||||||||||||||
| | | | | | | | | | | | | | | | | | Equity | | Equity |
| | | | | | | | | | | | | | | | | | Incentive | | Incentive |
| | | | | | | | | | | | | | | | | | Plan Awards: | | Plan Awards: |
| | | | | | | | | | | | | | | | | | Number of | | Market or |
| | | | | | | | | | | | | Number | | Market | | Unearned | | Payout Value | |
| | Number of | | Number of | | Number of | | | | | | | of Shares | | Value | | Shares, Units | | of Unearned | |
| | Securities | | Securities | | Securities | | | | | | | or Units | | of Shares | | or Other | | Shares, Units | |
| | Underlying | | Underlying | | Underlying | | | | | | | of Stock | | or Units of | | Rights | | or Other | |
| | Unexercised | | Unexercised | | Unexercised | | Option | | Option | | That | | Stock That | | That Have | | Rights That | ||
| | Options (#) | | Options (#) | | Unearned | | Exercise | | Expiration | | Have Not | | Have Not | | Not | | Have Not | ||
Name |
| Exercisable |
| Unexercisable | | Options (#) |
| Price ($) |
| Date | | Vested (#) | | Vested ($)(1) |
| Vested (#) |
| Vested ($) | ||
Mark Iwicki | | 272,496 | | — | | — | | $ | 3.34 | | 6/3/2025 | | — | | | — | | — | | — |
| | 378,844 | | — | | — | | $ | 5.21 | | 9/11/2025 | | — | | | — | | — | | — |
| | 609,811 | | — | | — | | $ | 3.34 | | 6/17/2026 | | — | | | — | | — | | — |
| | 67,164 | | 11,468 | (2) | — | | $ | 15.00 | | 7/18/2027 | | — | | | — | | — | | — |
| | 162,917 | | 67,083 | (3) | — | | $ | 12.86 | | 2/6/2028 | | — | | | — | | — | | — |
| | 220,417 | | 239,583 | (4) | — | | $ | 5.19 | | 1/1/2029 | | — | | | — | | — | | — |
| | 83,646 | | 281,354 | (5) | — | | $ | 3.84 | | 1/1/2030 | | — | | | — | | — | | — |
| | — | | — | | — | | | — | | — | | 49,560 | (15) | $ | 336,017 | | — | | — |
| | — | | — | | — | | | — | | — | | 178,300 | (16) | $ | 1,208,874 | | — | | — |
Todd Bazemore | | 132,583 | | 39,417 | (6) | — | | $ | 19.60 | | 11/19/2027 | | — | | | — | | — | | — |
| | 17,708 | | 7,292 | (7) | — | | $ | 12.86 | | 2/6/2028 | | — | | | — | | — | | — |
| | 83,854 | | 91,146 | (8) | — | | $ | 5.19 | | 1/1/2029 | | — | | | — | | — | | — |
| | 51,042 | | 123,958 | (9) | — | | $ | 3.45 | | 10/10/2029 | | — | | | — | | — | | — |
| | 27,500 | | 92,500 | (10) | — | | $ | 3.84 | | 1/1/2030 | | — | | | — | | — | | — |
| | — | | — | | — | | | — | | — | | 19,000 | (15) | $ | 128,820 | | — | | — |
| | — | | — | | — | | | — | | — | | 81,000 | (16) | $ | 549,180 | | — | | — |
Kim Brazzell, M.D. | | 15,430 | | — | | — | | $ | 5.21 | | 10/2/2025 | | — | | | — | | — | | — |
| | 102,341 | | — | | — | | $ | 3.34 | | 6/17/2026 | | — | | | — | | — | | — |
| | 40,267 | | 6,875 | (11) | — | | $ | 15.00 | | 7/18/2027 | | — | | | — | | — | | — |
| | 49,583 | | 20,417 | (12) | — | | $ | 12.86 | | 2/6/2028 | | — | | | — | | — | | — |
| | 71,875 | | 78,125 | (13) | — | | $ | 5.19 | | 1/1/2029 | | — | | | — | | — | | — |
| | 27,500 | | 92,500 | (14) | — | | $ | 3.84 | | 1/1/2030 | | — | | | — | | — | | — |
| | — | | — | | — | | | — | | — | | 19,000 | (15) | $ | 128,820 | | — | | — |
| | — | | — | | — | | | — | | — | | 81,000 | (16) | $ | 549,180 | | — | | — |
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Employment Agreements with Named Executive Officers
Letter Agreement with Mr. Iwicki
Mr. Iwicki was appointed as our Chief Executive Officer and Chairman of our board of directors pursuant to a letter agreement with us dated September 10, 2015, which amended and restated a prior letter agreement. In August 2017, Mr. Iwicki was appointed as our President. Mr. Iwicki is an at-will employee, and his employment with us can be terminated by him or us at any time and for any reason.
Mr. Iwicki’s base salary is subject to annual review and adjustment by our compensation committee. In December 2020, Mr. Iwicki’s annual base salary was increased to $643,500, effective January 1, 2021. In addition, Mr. Iwicki is eligible to receive a discretionary bonus in a target amount of 60% of his annual base salary, as determined by our board of directors in its sole discretion.
On March 11, 2019, Mr. Iwicki’s employment letter agreement was amended to revise the severance benefits he is entitled to receive upon termination in connection with the following events. Subject to his execution and nonrevocation of a release of claims in our favor, in the event of the termination of Mr. Iwicki’s employment by us without cause or by him for good reason, each as defined in his employment letter agreement, and such termination is not within the twenty-four month period following a change of control, as defined in his employment letter agreement, Mr. Iwicki will be entitled to a lump sum payment in an amount equal to (i) twenty-four months of his then-current annual base salary, (ii) any bonus earned for the year prior to the year of termination that has not yet been paid, (iii) an amount equal to 200% of his target bonus attributable to the year of termination and (iv) a pro-rated portion of any bonus attributable to the year of termination based upon performance against company but not individual objectives. In addition, Mr. Iwicki will be entitled to twenty-four months of COBRA premiums for continued health benefit coverage on the same terms as were applicable to him prior to his termination and outplacement services for the twenty-four month period.
Further, in the event of the termination of Mr. Iwicki’s employment by us without cause or by him for good reason within the twenty-four month period following a change of control, Mr. Iwicki will be entitled to a lump sum payment in an amount equal to (i) thirty months of his then-current annual base salary, (ii) any bonus earned for the year prior to
25
the year of termination that has not yet been paid, (iii) a pro-rated portion of any bonus attributable to the year of termination based upon performance against company but not individual objectives and (iv) 250% of the greater of (A) the average bonus Mr. Iwicki received during the two years prior to termination or resignation, or (B) the target bonus for the year of termination or resignation. In addition, Mr. Iwicki will be entitled thirty months of COBRA premiums for continued health benefit coverage on the same terms as were applicable to him prior to his termination and outplacement services for thirty months.
In addition, in the event we terminate his employment or other service relationship with us without cause, he terminates his employment or other service relationship with us for good reason, or his employment or other service relationship with us terminates by reason of his death or disability, Mr. Iwicki is entitled to the automatic vesting and exercisability of any unvested options that would have vested if Mr. Iwicki’s employment or other service relationship with us had continued for twenty-four months following such termination. In addition, provided Mr. Iwicki is an employee, member of our board of directors or is otherwise providing services to us at the time of a change of control, as defined in the letter agreement, or in the event of the termination of Mr. Iwicki’s employment by us without cause or by him for good reason in contemplation of a change of control, as defined in the letter agreement, Mr. Iwicki’s time-based equity awards will vest in full upon consummation of such change in control. Options granted to Mr. Iwicki will be exercisable for up to eighteen months following the termination of his employment or other relationship with us other than a termination for cause. Mr. Iwicki also is entitled to piggyback registration rights with respect to options granted pursuant to his employment letter agreement.
In addition, in the event we terminate his employment without cause or he terminates his employment for good reason within the twenty-four month period following a change of control, Mr. Iwicki is entitled to the automatic vesting and exercisability of any options and other equity awards granted to him following a change of control that vest solely based on his continued employment and have not vested.
Letter Agreement with Mr. Bazemore
Mr. Bazemore was appointed as our Chief Operating Officer pursuant to a letter agreement with us dated November 6, 2017. Mr. Bazemore is an at-will employee, and his employment with us can be terminated by him or us at any time and for any reason.
Mr. Bazemore’s base salary is subject to annual review and adjustment by our compensation committee. In December 2020, Mr. Bazemore’s annual base salary was increased to $489,878, effective January 1, 2021. In addition, Mr. Bazemore is eligible to receive a discretionary bonus in a target amount of 50% of 2021 annual base salary, as determined by our board of directors in its sole discretion.
On March 11, 2019, Mr. Bazemore’s employment letter agreement was amended to revise the severance benefits he is entitled to receive upon termination in connection with the following events. Subject to his execution and nonrevocation of a release of claims in our favor, in the event of the termination of Mr. Bazemore’s employment by us without cause or by him for good reason, each as defined in his employment letter agreement, and such termination is not within the twenty-four month period following a change of control, as defined in his employment letter agreement, Mr. Bazemore will be entitled to a lump sum payment in an amount equal to (i) twelve months of his then-current annual base salary, (ii) any bonus earned for the year prior to the year of termination that has not yet been paid, (iii) a pro-rated portion of any bonus attributable to the year of termination based upon performance against company but not individual objectives and (iv) an amount equal to 100% of his target bonus for the year of termination. In addition, Mr. Bazemore is entitled to twelve months of COBRA premiums for continued health benefit coverage on the same terms as were applicable to him prior to his termination and outplacement services for the twelve-month period.
Further, in the event of the termination of Mr. Bazemore’s employment by us without cause or by him for good reason within the twenty-four month period following a change of control, Mr. Bazemore will be entitled to a lump sum payment in an amount equal to (i) eighteen months of his then-current annual base salary, (ii) any bonus earned for the year prior to the year of termination that has not yet been paid, (iii) a pro-rated portion of any bonus attributable to the year of termination based upon performance against company but not individual objectives and (iv) 150% of the
26
greater of (A) the average bonus Mr. Bazemore received during the two years prior to termination or resignation, or (B) the target bonus for the year of termination or resignation. In addition, Mr. Bazemore is entitled to eighteen months of COBRA premiums for continued health benefit coverage on the same terms as were applicable to him prior to his termination and outplacement services for the eighteen-month period.
In addition, in the event we terminate his employment without cause or he terminates his employment for good reason, Mr. Bazemore is entitled to the automatic vesting and exercisability of any options and other equity awards granted to him that vest solely based on his continued employment that would have vested if his employment had continued for twelve months following such termination, and any performance-based grants with the performance period ending within one year after the termination shall be treated as having satisfied any service requirement with respect thereto and shall vest subject to, and only to the extent of, the satisfaction of the applicable performance goals at the end of the applicable performance period.
In the event we terminate his employment without cause or he terminates his employment for good reason in contemplation of a change of control, as defined in the letter agreement, or within the twenty-four-month period following a change of control, Mr. Bazemore is entitled to the automatic vesting and exercisability of 100% of any options and other equity awards granted to him that vest solely based on his continued employment, and any performance based grants with a performance period ending within one year after the termination will be treated as having satisfied any service requirement with respect such grant, and will vest subject to, and only to the extent of, the satisfaction of the applicable performance goals at the end of the applicable performance period.
Letter Agreement with Dr. Brazzell
Dr. Brazzell was appointed to serve on a full-time basis as our Chief Medical Officer pursuant to a letter agreement with us dated May 10, 2016, which amended and restated a prior letter agreement. Dr. Brazzell is an at-will employee, and his employment with us can be terminated by him or us at any time and for any reason.
Brazzell’s base salary is subject to annual review and adjustment by our compensation committee. In December 2020, Dr. Brazzell’s annual base salary was increased to $476,207, effective January 1, 2021. In addition, Dr. Brazzell is eligible to receive a discretionary bonus in a target amount of 45% of 2021 annual base salary, as determined by our compensation committee in its sole discretion.
On March 11, 2019, Dr. Brazzell’s employment letter agreement was amended to revise the severance benefits he is entitled to receive upon termination in connection with the following events. Subject to his execution and nonrevocation of a release of claims in our favor, in the event of the termination of Dr. Brazzell’s employment by us without cause or by him for good reason, each as defined in his employment letter agreement, and such termination is not within the twenty-four month period following a change of control, as defined in his employment letter agreement, Dr. Brazzell will be entitled to a lump sum payment in an amount equal to (i) twelve months of his then-current annual base salary, (ii) any bonus earned for the year prior to the year of termination that has not yet been paid, (iii) a pro-rated portion of any bonus attributable to the year of termination based upon performance against company but not individual objectives and (iv) an amount equal to 100% of his target bonus for the year of termination. In addition, Dr. Brazzell is entitled to twelve months of COBRA premiums for continued health benefit coverage on the same terms as were applicable to him prior to his termination and outplacement services for the twelve-month period.
Further, in the event of the termination of Dr. Brazzell’s employment by us without cause or by him for good reason within the twenty-four month period following a change of control, Dr. Brazzell will be entitled to a lump sum payment in an amount equal to (i) eighteen months of his then-current annual base salary, (ii) any bonus earned for the year prior to the year of termination that has not yet been paid, (iii) a pro-rated portion of any bonus attributable to the year of termination based upon performance against company but not individual objectives and (iv) 150% of the greater of (A) the average bonus Dr. Brazzell received during the two years prior to termination or resignation, or (B) the target bonus for the year of termination or resignation. In addition, Dr. Brazzell is entitled to eighteen months of COBRA premiums for continued health benefit coverage on the same terms as were applicable to him prior to his termination and outplacement services for the eighteen-month period.
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In addition, in the event we terminate his employment without cause or he terminates his employment for good reason, Dr. Brazzell is entitled to the automatic vesting and exercisability of any options and shares granted to him that vest solely based on his continued employment that would have vested if his employment had continued for twelve months following such termination. In the event of a change of control, as defined in his employment letter agreement, during his employment, Dr. Brazzell is entitled to the automatic vesting and exercisability of 100% of any options and restricted shares granted to him that vest solely based on his continued employment. The option referenced in his employment agreement for 162,135 shares is exercisable for a period of up to six months following his termination date.
In addition, in the event we terminate his employment without cause or he terminates his employment for good reason within the twenty-four-month period following a change of control, Dr. Brazzell is entitled to the automatic vesting and exercisability of any options and shares granted to him following a change of control that vest solely based on his continued employment and have not vested.
Employee Non-Competition, Non-Solicitation, Confidentiality, and Assignment of Inventions Agreements
Each of our named executive officers has entered into a standard form agreement with respect to non-competition, non-solicitation, confidential information and assignment of inventions. Under this agreement, each executive officer has agreed not to compete with us during his or her employment and for a period of one year after the termination of his or her employment and to protect our confidential and proprietary information indefinitely. Under this agreement, each of Mr. Iwicki and Dr. Brazzell has agreed not to solicit our employees or consultants during his employment and for a period of twelve months after the termination of his employment, and Mr. Bazemore has agreed not to solicit our employees or consultants during his employment and for a period of eighteen months after the termination of his employment, and each executive officer has agreed to protect our confidential and proprietary information indefinitely. In addition, under this agreement, each executive officer has agreed that we own all inventions, as defined in the agreement, that are developed during such executive officer’s employment and for a period of one year after the termination of his or her employment, to the extent such invention is our field of interest, as defined in the agreement. Each executive officer also agreed to assign to us any inventions which were not prepared or originated in the performance of employment but that were provided to us or incorporated into any of our products or systems.
Stock Option and Other Compensation Plans
In this section we describe our 2009 Employee, Director and Consultant Equity Incentive Plan, as amended to date, or the 2009 Plan, our 2017 Equity Incentive Plan, or the 2017 Plan and our Amended and Restated 2017 Employee Stock Purchase Plan, or 2017 ESPP. Prior to our initial public offering of common stock, or IPO, which closed on July 25, 2017, we granted awards to eligible participants underESPP, the 2009 Plan. Following the closing of our IPO, we ceased granting awards under the 2009 Plan and started granting awards to eligible participants under the 2017 Plan.
2009 Plan
Our 2009 Plan was adopted by our board of directors and approved by our stockholders on December 11, 2009 and subsequently amended by our board in 2012, 2013, 2014 and 2015. The 2009 Plan provided for the grant of incentive stock options, non-qualified options, shares, restricted or otherwise, of our common stock, and other stock-based awards. We refer to awards granted under our 2009 Plan as stock rights. Our employees, directors and consultants were eligible to receive stock rights under our 2009 Plan; however incentive stock options could only be granted to our employees who are deemed to be residents of the United States.
The type of stock right granted under our 2009 Plan and the terms of such stock right are set forth in the applicable stock right award agreement.
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Pursuant to the 2009 Plan, our board of directors (or a committee to which our board delegates its authority) administers the 2009 Plan. Subject to the provisions of the 2009 Plan, our board of directors is authorized to:
Effect of certain changes in capitalization
If our shares of common stock are subdivided or combined into a greater or smaller number of shares, if we issue shares of common stock as a stock dividend, or if we make any distribution of additional, new or different shares or securities of ours or any distribution of non-cash assets with respect to our shares of common stock, then, subject to the terms of the 2009 Plan, our board of directors shall proportionately and appropriately adjust:
Effect of certain corporate transactions
In the event that we are consolidated with or acquired by another entity in a merger, consolidation, or sale of all or substantially all of our assets (other than a transaction to merely change the state of incorporation), which we refer to as corporate transactions, our board of directors, or the board of directors of any entity assuming our obligations under the 2009 Plan, must take one of the following actions pursuant to the 2009 Plan as to outstanding options, subject to the terms of the 2009 Plan:
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If there is a corporate transaction, our board of directors, or the board of directors of any entity assuming our obligations under the 2009 Plan, must take one of the following actions pursuant to the 2009 Plan as to outstanding stock grants, restricted or otherwise, subject to the terms of the 2009 plan:
In taking any of the above actions with respect to stock rights, our board of directors will not be obligated to treat all stock rights, all stock rights held by a participant, or all stock rights of the same type, identically.
As of March 31, 2021, options to purchase 2,195,070 shares of common stock were outstanding under the 2009 Plan at a weighted average exercise price of $3.62 per share, and 968,207 options to purchase shares of our common stock had been exercised.
We will no longer grant awards under our 2009 Plan; however, awards outstanding under our 2009 Plan continue to be governed by their existing terms.
2017 Equity “Incentive Plan
Our 2017 Plan, which became effective on July 19, 2017, was adopted by our board of directors and approved by our stockholders in July 2017. An amendment to our 2017 Plan was adopted by our board of directors on April 2020 and approved by our stockholders at the 2020 annual meeting of stockholders. The 2017 Plan provides for the grant of incentive stock options, non-qualified options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. The number of shares of our common stock reserved for issuance under the 2017 Plan is the sum of: (1) 3,786,883; plus (2) 241,548 shares available for issuance under the 2009 Plan at the time of our IPO and the number of shares of our common stock subject to outstanding awards under the 2009 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by us at their original issuance price pursuant to a contractual repurchase right; plus (3) an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2018 and continuing until, and including, the fiscal year ending December 31, 2027, equal to the lowest of 3,573,766 shares of our common stock, 4% of the number of shares of our common stock outstanding on the first day of such fiscal year and an amount determined by our board of directors. The number of shares authorized for issuance under the 2017 Plan further increased each year, pursuant to the terms of the 2017 Plan, on the first of January beginning in 2018 by an amount equal to 4% of our then-outstanding common stock
Our employees, officers, directors, consultants and advisors are eligible to receive awards under the 2017 Plan. Incentive stock options, however, may only be granted to our employees.
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Pursuant to the terms of the 2017 Plan, our board of directors (or a committee delegated by our board of directors or, subject to certain limitations, officers delegated by our board of directors) administers the plan and, subject to any limitations in the plan, selects the recipients of awards and determines:
If our board of directors delegates authority to an executive officer to grant awards under the 2017 Plan, the executive officer will have the power to make awards to all of our employees, except executive officers. Our board of directors will fix the terms of the awards to be granted by such executive officer, including the exercise price of such awards (which may include a formula by which the exercise pricePlans”), will be determined), and the maximum number of shares subject to awards that such executive officer may make.
Effect of certain changes in capitalization
Upon the occurrence of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of our common stock other than an ordinary cash dividend, our board of directors shall equitably adjust:
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Effect of certain corporate transactions
Upon a merger or other reorganization event (as defined in our 2017 Plan), our board of directors may, on such terms as our board determines (except to the extent specifically provided otherwise in an applicable award agreement or other agreement between the participant and us), take any one or more of, or a combination of, the following actions pursuant to the 2017 Plan as to some or all outstanding awards, other than restricted stock awards:
Our board of directors does not need to take the same action with respect to all awards, all awards held by a participant or all awards of the same type.
In the case of certain restricted stock units, no assumption or substitution is permitted, and the restricted stock units will instead be settledproportionately reduced, in accordance with the terms of the applicable restricted stock unit agreement.
UponIncentive Plan, in the occurrencesame ratio as the reduction in the number of a reorganization event other than a liquidation or dissolution,shares of outstanding Common Stock, except that any fractional shares resulting from such reduction will be rounded down to the repurchasenearest whole share to comply with the requirements of Code Sections 409A and other rights with respect424. Correspondingly, the per share exercise price of any such options will be increased in direct proportion to outstanding restricted stock awards will continuethe Reverse Stock Split ratio (rounded up to the nearest whole cent), so that the aggregate dollar amount payable for the benefitpurchase of the successor company and will, unless our board of directors may otherwise determine, applyshares subject to the cash, securities or other property into whichoptions will remain materially unchanged. For example, assuming that we effect the Reverse Stock Split at a ratio of 1-for-5, and that an optionee holds options to purchase 1,033 shares of our common stock are converted or exchanged pursuantCommon Stock at an exercise price of $1.00 per share, upon the effectiveness of the Reverse Stock Split at such ratio, the number of shares of the Common Stock subject to that option would be reduced to 206 (rounded down from 206.6 to account for fractional shares) and the reorganization event. Upon the occurrence of a reorganization event involving a liquidation or dissolution, all restrictions and conditions on each outstanding restricted stock award will automaticallyexercise price would be deemed terminated or satisfied, unless otherwise provided in the agreement evidencing the restricted stock award or any other agreement between the participant and us.proportionately increased to $5.00 per share.
At any time, our board of directors may, in its sole discretion, provide that any award under the 2017 Plan will become immediately exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in whole or in part as the case may be.
No award may be granted under the 2017 Plan on or after July 19, 2027. Our board of directors may amend, suspend or terminate the 2017 Plan at any time, except that stockholder approval may be required to comply with applicable law or stock market requirements.
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As of MarchAugust 31, 2021, options2022, there are three warrants to purchase 6,948,258Common Stock outstanding, representing 215,172 shares of common stock were outstanding under the 2017 PlanCommon Stock at a weighted average exercise price of $7.88$11.57 per share, and 70,043 options to purchase shares of our common stock had been exercised. As of March 31, restricted stock units with respect to 1,365,592 shares of common stock wereshare. If the Reverse Stock Split is effected, the outstanding underwarrants will automatically be reduced in the 2017 Plan.
As of March 31, 2021, 1,846,235 shares of common stock were available for future issuance under our 2017 Plan.
Amended and Restated 2017 Employee Stock Purchase Plan
Our 2017 ESPP, which became effective on July 19, 2017, was adopted by our board of directors and approved by our stockholderssame ratio as the reduction in July 2017 and amended and restated by our board of directors in December 2018. The 2017 ESPP is administered by our board of directors or by a committee appointed by our board of directors. The 2017 ESPP initially provides participating employees with the opportunity to purchase an aggregate of 223,341 shares of our common stock. The number of shares of our common stock reserved for issuance underoutstanding Common Stock. Correspondingly, the 2017 ESPPper share exercise price of such warrants will automatically increase on the first day of each fiscal year, beginning on January 1, 2019 and ending on December 31, 2029,be increased in an amount equaldirect proportion to the lowest of: (1) 893,441Reverse Stock Split ratio, so that the aggregate dollar amount payable for the purchase of the shares subject to the warrants will remain unchanged.
Effect on Registered and Beneficial Stockholders
Upon the Reverse Stock Split, the Company intends to treat stockholders holding shares of our common stock; (2) 1%Common Stock in “street name” (that is, held through a bank, broker or other nominee) in the same manner as stockholders of record whose shares of Common Stock are registered in their names. Banks, brokers or other nominees will be instructed to effect the totalReverse Stock Split for their beneficial holders holding shares of our Common Stock in “street name”; however, these banks, brokers or other nominees may apply their own specific procedures for processing the Reverse Stock Split. If you hold your shares of our Common Stock with a bank, broker or other nominee, and have any questions in this regard, the Company encourages you to contact your nominee.
Effect on “Book-Entry” Stockholders of Record
The Company’s stockholders of record may hold some or all of their shares electronically in book-entry form. These stockholders will not have stock certificates evidencing their ownership of our Common Stock. They are, however, provided with a statement reflecting the number of shares of our common stock outstanding onCommon Stock registered in their accounts.
If you hold registered shares of Old Common Stock in a book-entry form, you do not need to take any action to receive your shares of New Common Stock in registered book-entry form, if applicable. A transaction statement will automatically be sent to your address of record as soon as practicable after the first dayeffective time of the applicable fiscal year; and (3) an amount determined by our board of directors. TheReverse Stock Split indicating the number of shares authorized for issuance under the 2017 ESPP increased each year, pursuant to the terms of the 2017 ESPP,New Common Stock you hold.
Effect on the firstRegistered Certificated Shares
Some stockholders of January beginning in 2019 by an amount equal to 1% of our then-outstanding common stock.
All of our employees and employees of any of our designated subsidiaries, as defined in the 2017 ESPP, are eligible to participate in the 2017 ESPP, provided that:
We retain the discretion to determine which eligible employees may participate in an offering under applicable Treasury regulations.
We may make one or more offerings to our eligible employees to purchase stock under the 2017 ESPP beginning at such time and on such dates as our board of directors may determine, or the first business day thereafter. Each offering will consist of a six-month offering period during which payroll deductions will be made and held for the purchase of our common stock at the end of the offering period. Our board of directors or a committee appointed by our board, may, at its discretion, choose a different period of not more than 12 months for offerings. The first offering period under our 2017 ESPP commenced on January 1, 2019 and subsequent offering periods commenced on July 1, 2019 and January 1, 2020.
On each offering commencement date, each participant will be granted the right to purchase, on the last business day of the offering period, up to 25,000record hold their shares of our common stock. No employee may be granted an option under the 2017 ESPP that permits the employee’s rights to purchase shares under the 2017 ESPPCommon Stock in certificate form or a combination of certificate and any other employee stock purchase plan of ours or ofbook-entry form. If any of our subsidiaries to accrue at a rate that exceeds $25,000 of the fair market value of our common stock (determined as of the first day of each offering period) for each calendar year in which the option is outstanding. In addition, no employee may purchaseyour shares of our common stock underCommon Stock are held in certificate form, you will receive a transmittal letter from the 2017 ESPP that would result inCompany’s transfer agent as soon as practicable after the employee owning 5% or moreeffective time of the total combined voting power or value of our stock or the stock of any of our subsidiaries.
On the commencement date of each offering period, each eligible employee may authorize up to a maximum of 15% of his or her compensation to be deducted by us during the offering period. Each employee who continues to be a participant in the 2017 ESPP on the last business day of the offering periodReverse Stock Split, if any. The transmittal letter will be deemedaccompanied by instructions specifying how to have exercised an option to purchase from usexchange your certificate representing the Old Common Stock for a statement of holding or a certificate of New Common Stock.
STOCKHOLDERS SHOULD NOT DESTROY ANY SHARE CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
Shares of Common Stock Issued and Outstanding
With the exception of the number of wholeshares issued and outstanding, the rights and preferences of the shares of our common stock that his or her accumulated payroll deductions on
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such dateCommon Stock prior and subsequent to the Reverse Stock Split will buy, not in excessremain the same. After the effectiveness of the maximum numbers set forth above. Reverse Stock Split, we do not anticipate that our financial condition, the percentage ownership of management, the number of our stockholders, or any aspect of our business would materially change as a result of the Reverse Stock Split.
Our Common Stock is currently registered under Section 12(b) of the Exchange Act, and as a result, we are subject to the periodic reporting and other requirements of the Exchange Act. If effected, the proposed Reverse Stock Split will not affect the registration of our Common Stock under the Exchange Act or our periodic or other reporting requirements thereunder.
In addition, we have not proposed the Reverse Stock Split, with its corresponding increase in the authorized and unissued number of shares of Common Stock, with the intention of using the additional shares for anti-takeover purposes, although we could theoretically use the additional shares to make more difficult or to discourage an attempt to acquire control of the Company.
We do not believe that our officers or directors have interests in this proposal that are different from or greater than those of any other of our stockholders.
Fractional shares will not be issued in connection with the Reverse Stock Split. Each stockholder who would otherwise hold a fractional share of Common Stock as a result of the Reverse Stock Split will receive one share of Common Stock in lieu of such fractional share. If such shares are subject to an award granted under the Incentive Plans, each fractional share of Common Stock will be rounded down to the nearest whole share of Common Stock in order to comply with the requirements of Sections 409A and 424 of the Code.
Under the termsDelaware General Corporation Law, our stockholders are not entitled to appraisal or dissenter’s rights with respect to the Reverse Stock Split, and we will not independently provide our stockholders with any such rights.
The Reverse Stock Split will not be consummated, if at all, until after approval of the 2017 ESPP,Company’s stockholders is obtained. The Company is not obligated to obtain any governmental approvals or comply with any state or federal regulations prior to consummating the purchase price shall be determined by our board of directors for each offering period and will be at least 85%Reverse Stock Split other than the filing of the applicable closing priceReverse Stock Split Amendment with the Secretary of our common stock. If our boardState of directorsthe State of Delaware.
Certain U.S. Federal Income Tax Consequences of the Reverse Stock Split
The following is a discussion of certain material U.S. federal income tax consequences of the Reverse Stock Split to U.S. holders (as defined below). This discussion is included for general information purposes only, does not make a determinationpurport to address all aspects of the purchase price, the purchase price willU.S. federal income tax law that may be 85%relevant to U.S. holders in light of the lesser of the closing price of our common stocktheir particular circumstances, and does not describe any potential state, local, or foreign tax consequences. This discussion is based on the first business day of the offering period or on the last business day of the offering period.
An employee may at any time prior to the close of business on the fifteenth business day prior to the end of an offering period, and for any reason, permanently withdraw from participation in an offering prior to the end of an offering period and permanently withdraw the balance accumulated in the employee’s account. Any balance remaining in an employee’s payroll deduction account at the end of an offering period will be automatically refunded to the employee. If a participating employee’s employment ends before the last business day of an offering period, no additional payroll deductions will be taken and the balance in the employee’s account will be paid to the employee.
We are required to make equitable adjustments to the extent determined by our board of directors or a committee of our board of directors to the number and class of securities available under the 2017 ESPP, the share limitations under the 2017 ESPP and the purchase price for an offering period under the 2017 ESPP to reflect stock splits, reverse stock splits, stock dividends, recapitalizations, combinations of shares, reclassifications of shares, spin-offs and other similar changes in capitalization or events or any dividends or distributions to holders of our common stock other than ordinary cash dividends.
In connection with a merger or other reorganization event (as defined in the 2017 ESPP), our board of directors or a committee of our board of directors may take any one or more of the following actions as to outstanding options to purchase shares of our common stock under the 2017 ESPP on such terms as our board of directors or committee determines:
Our board of directors may at any time, and from time to time, amend or suspend the 2017 ESPP, or any portion of the 2017 ESPP. We will obtain stockholder approval for any amendment if such approval is required by Section 423 of
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the Internal Revenue Code of 1986, as amended (the “Code”), current Treasury Regulations and administrative and court decisions and interpretations, all as in effect as of the date hereof, and all of which are subject to change, possibly on a retroactive basis, or different interpretation. Any such changes could affect the Code. Further, our boardcontinuing validity of directors maythis discussion.
STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR FEDERAL, STATE, LOCAL, OR FOREIGN TAX CONSEQUENCES TO THEM OF THE REVERSE STOCK SPLIT.
This discussion does not make any amendmentaddress tax consequences to stockholders that would causeare subject to special tax rules, such as banks, insurance companies, regulated investment companies, personal holding companies, U.S. holders whose functional currency is not the 2017 ESPP to fail to complyU.S. dollar, partnerships (or other flow-through entities for U.S. federal income purposes and their partners or members), persons who acquired their shares or equity awards in connection with employment or other performance of services (who will not incur a taxable event in connection with the Reverse Stock Split), broker-dealers, foreign entities, nonresident alien individuals and tax-exempt entities. This summary also assumes that the Old Common Stock shares were, and the New Common stock shares will be, held as a “capital asset,” as defined in Section 4231221 of the Code. The 2017 ESPP may be terminated at any time by our board of directors. Upon termination, we will refund all amounts in
As used herein, the accounts of participating employees.term “U.S. holder” means a holder that is, for U.S. federal income tax purposes:
401(k) Plan
We maintain a defined contribution employee retirement plan for our employees. Our 401(k) plan is intended to qualify as a tax-qualified plan under Section 401 of the Code so that contributions to our 401(k) plan, and income earned on such contributions, are not taxable to participants until withdrawn or distributed from the 401(k) plan. Our 401(k) plan provides that each participant may contribute up to 90% of his or her pre-tax compensation, up to a statutory limit, which was $19,500 for 2020 and is $19,500 for 2021. Participants who are at least 50 years old can also make “catch-up” contributions, which in 2020 was up to an additional $6,500 above the statutory limit and is up to an additional $6,500 above the statutory limited in 2021. We also make discretionary matching contributions to our 401(k) plan equal to 50% of the employee contributions up to 4% of the employee’s salary, subject to the statutorily prescribed limit, equal to $19,500 in 2020 and 2021. The discretionary matching contributions are capped at $5,700 and $5,800 in 2020 and 2021, respectively. Under our 401(k) plan, each employee is fully vested in his or her deferred salary contributions and our discretionary match. Employee contributions are held and invested by the plan’s trustee, subject to participants’ ability to give investment directions by following certain procedures.
Rule 10b5‑1 Sales Plans
Our directors and executive officers may adopt written plans, known as Rule 10b5‑1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5‑1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from the director or officer. It also is possible that the director or officer could amend or terminate the plan when not in possession of material, nonpublic information. In addition, our directors and executive officers may buy or sell additional shares outside of a Rule 10b5‑1 plan when they are not in possession of material, nonpublic information.
Anti-Hedging Policies
Our insider trading policy expressly prohibits all of our employees, including our executive officers, and our directors from engaging in any purchases of financial instruments (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that are designed to hedge or offset any decrease in the market value of our securities.
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The table below shows all compensation to our non-employee directors during 2020.
| | | | | | | | |
| | Fees Earned or | | Option | | Stock | | |
| | Paid in Cash | | Awards | | Awards | | Total |
Name |
| ($) |
| ($)(1) |
| ($)(2)(3)(4) |
| ($) |
Gregory Grunberg |
| 47,500 |
| — |
| 234,000 |
| 281,500 |
Andrew I. Koven |
| 71,250 |
| — |
| 327,600 |
| 398,850 |
Robert Paull |
| 60,000 |
| — |
| 234,000 |
| 294,000 |
Gregory D. Perry |
| 60,000 |
| — |
| 234,000 |
| 294,000 |
Howard B. Rosen |
| 50,000 |
| — |
| 234,000 |
| 284,000 |
Rajeev Shah |
| 60,000 |
| — |
| 234,000 |
| 294,000 |
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Mr. Iwicki, one of our directors who also serves as our President and Chief Executive Officer, does not receive any additional compensation for his service as a director. The compensation that we pay to our Chief Executive Officer is discussed under “—Summary Compensation Table” and “—Narrative Disclosure to Summary Compensation Table.”
During the year ended December 31, 2020, our non-employee directors were compensated for their services on our board of directors as follows:
| an estate the |
Each member
Other than with respect to any stockholder that receives a full share for a fractional share (which will not apply to outstanding equity awards granted under the Incentive Plans), a stockholder generally will not recognize a gain or loss by reason of such stockholder’s receipt of shares of New Common Stock pursuant to the Reverse Stock Split solely in exchange for shares of Old Common Stock held by such stockholder immediately prior to the Reverse Stock Split. A stockholder’s aggregate tax basis in the shares of New Common Stock received pursuant to the Reverse Stock Split (including any fractional shares) will equal the stockholder’s aggregate basis in the Old Common Stock exchanged therefore and will be allocated among the shares of New Common Stock received in the Reverse Stock Split on a pro-rata basis. Stockholders who have used the specific identification method to identify their basis in the shares of Old Common Stock held immediately prior to the Reverse Stock Split should consult their own tax advisers to determine their basis in the shares of New Common Stock received in exchange therefor in the Reverse Stock Split. A stockholder’s holding period in the shares of New Common Stock received pursuant to the Reverse Stock Split will include the stockholder’s holding period in the shares of Old Common Stock surrendered in exchange therefore, provided the shares of Old Common Stock surrendered are held as capital assets at the time of the Reverse Stock Split.
No gain or loss will be recognized by us as a result of the Reverse Stock Split.
The affirmative vote of holders of a majority of the outstanding shares of our board of directors also isCommon Stock and Series D Preferred Stock entitled to be reimbursedvote at the Special Meeting on the Reverse Stock Split Proposal, voting together as a single class, is required for reasonable travel and other expenses incurred in connection with attending meetings of our board of directors and any committee of our board of directors on which he or she serves.
Beginning in 2021, each non-employee director will receive, in lieuapproval of the Annual Fee described above, an annual fee of $50,000. Beginning in 2021, each non-employee director who has then served on our board of directors for at least six months will receive, on the date of the first board meeting held after each annual meeting of stockholders, in lieu of the Annual Equity Grant described above, 20,000 restricted stock units, and if then serving as the lead independent director, 25,000 restricted stock units, which restricted stock units will vest (A) on the earlier of (i) the first anniversary date of the previous year’s annual meeting or (ii) the date of the first annual meeting following the grant date, and (B) automatically as to 100% of the unvested portion of such restricted stock units upon specified change in control events. Each non-employee director shall be permitted to defer the receipt of such restricted stock units until the earlier of the director’s cessation of service to us or the date of a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(i) (in each event, to the extent vested on such date).Reverse Stock Split Proposal.
The Board unanimously recommends that you vote “FOR” the approval of the Reverse Stock Split Proposal. |
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Compensation Committee Interlocks and Insider ParticipationPROPOSAL 2: APPROVAL OF THE ADJOURNMENT PROPOSAL
For 2020,
Background of and Rationale for the members of our compensation committee were Rajeev Shah, Gregory Grunberg and Andrew I. Koven. None of our executive officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our board of directors or our compensation committee. None of the members of our compensation committee is, or has ever been, an officer or employee of our company.Adjournment Proposal
Securities Authorized for Issuance under Equity Compensation Plans
The following table contains information about our equity compensation plans as of December 31, 2020. As of December 31, 2020, we had three equity compensation plans, our 2009 Plan, our 2017 Plan and our 2017 ESPP, each of which was approved by our stockholders. We have also made inducement awards to certain new hires, which awards were not approved by our stockholders.
Equity Compensation Plan Information
| | | | | | | | |
| | | | | | | Number of |
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| | Number of | | | | | securities | |
| | securities to be | | Weighted‑ | | remaining available |
| |
| | issued upon | | average | | for future issuance |
| |
| | exercise of | | exercise price | | under equity |
| |
| | outstanding | | of outstanding | | compensation plans |
| |
| | options | | options | | (excluding |
| |
| | warrants and | | | warrants and | | securities reflected |
|
| | rights | | | rights (#) | | in column (a)) |
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| | (b) |
| (c) |
|
Equity compensation plans approved by security holders |
| 7,799,285 | (1) | $ | 6.83 | (2) | 1,808,619 | (3)(4)(5) |
Equity compensation plans not approved by security holders |
| 945,842 | (6) | $ | 8.65 |
| — | |
Total |
| 8,745,127 | | $ | 7.03 |
| 1,808,619 | |
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Report of the Audit Committee of the Board of Directors
The audit committee oversees the Company’s financial reporting process on behalf of the board of directors. The audit committee has reviewed the Company’s audited consolidated financial statements for the fiscal year ended December 31, 2020 and discussed them with Company management and Deloitte & Touche LLP, the Company’s independent registered public accounting firm.
The audit committee has received from, and discussed with, Deloitte & Touche LLP, which is responsible for expressing an opinion on the conformity of the Company’s audited consolidated financial statements with accounting principles generally acceptedCommon Stock and Series D Preferred Stock outstanding and entitled to vote at the Special Meeting is insufficient to approve the Reverse Stock Split, it is in the United States, its judgments as to the quality, not just the acceptability,best interests of the Company’s accounting principles and such other matters as are requiredstockholders to be discussed withenable the audit committee under generally accepted auditing standards, including the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board (the “PCAOB”) and the Securities and Exchange Commission. In addition, the audit committee has received from Deloitte & Touche LLP the written disclosures and the letter required by applicable requirements of the PCAOB regarding its communications with us concerning independence, have considered the compatibility of non-audit services with the auditors’ independence and have discussed with Deloitte & Touche LLP its independence from management and the Company.
Based on the review and discussions referred to above, the audit committee recommended to the board of directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2020.
This report of the audit committee is not “soliciting material,” shall not be deemed “filed” with the SEC and shall not be incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts.
The foregoing report has been furnished by the audit committee.
Respectfully submitted,
The Audit Committee of the Board of DirectorsGregory D. Perry, Chair
Robert PaullHoward B. Rosen
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Proposal 1: Election of Directors
Our Restated Certificate of Incorporation provides for a classified board of directors. This means our board of directors is divided into three classes, with each class having as nearly as possible an equal number of directors. The term of service of each class of directors is staggered so that the term of one class expires at each annual meeting of the stockholders.
Our board of directors consists of seven members, divided into three classes as follows:
Class I is comprised of Andrew I. Koven and Gregory D. Perry, each with a term ending at the 2021 annual meeting of stockholders;
Class II is comprised of Mark Iwicki and Gregory Grunberg, each with a term ending at the 2022 annual meeting of stockholders; and
Class III is comprised of Robert Paull, Howard B. Rosen and Rajeev Shah, each with a term ending at the 2023 annual meeting of stockholders.
At each annual meeting of stockholders, directors are elected for a full term of three years to succeed those directors whose terms are expiring.
Our board of directors, on the recommendation of our nominating and corporate governance committee, has nominated Andrew I. Koven and Gregory D. Perry for election as Class I directors, each with a term ending at the 2024 annual meeting of stockholders.
Unless otherwise instructed in the proxy, all proxies will be voted “FOR” the election of each of the Class I nominees identified above to a three-year term ending at the 2024 annual meeting of stockholders, each such nominee to hold office until his successor has been duly elected and qualified. Each of the nominees has indicated a willingness to continue to serve as director, if elected. seek to obtain a sufficient number of additional votes to approve the Reverse Stock Split Proposal.
In the event thatAdjournment Proposal, we are asking stockholders to authorize the holder of any nominee should be unable to serve, discretionary authority is reserved forproxy solicited by the named proxy holdersBoard to vote for a substitute,in favor of adjourning or to reducepostponing the number of directors to be elected,Special Meeting or both. We do not expect that any adjournment or postponement thereof. If our stockholders approve this proposal, we could adjourn or postpone the Special Meeting, and any adjourned session of the nominees will be unableSpecial Meeting, to serve if elected.
A pluralityuse the additional time to solicit additional proxies in favor of the combinedReverse Stock Split Proposal.
Additionally, approval of the Adjournment Proposal could mean that, in the event we receive proxies indicating that a majority in voting power of the votes to be cast by holders of our Common Stock and Series D Preferred Stock, as counted to mirror the Common Stock votes cast, will vote against the Reverse Stock Split Proposal, we could adjourn or postpone the Special Meeting without a vote on the Reverse Stock Split Proposal and use the additional time to solicit the holders of those shares to change their vote in favor of the Reverse Stock Split Proposal.
The affirmative vote of the holders of shares of common stockour Common Stock and Series D Preferred Stock, voting as a single class, representing a majority in voting power of the votes cast by holders of all of the shares of Common Stock and Series D Preferred Stock present virtually or represented by proxy at the annual meetingSpecial Meeting and entitled to votevoting on the Adjournment Proposal is required to elect each nominee as a director.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF ANDREW I. KOVEN AND GREGORY D. PERRY TO SERVE AS CLASS I DIRECTORS.
Proposal 2: Ratificationfor approval of the Appointment of Independent Registered Public Accounting FirmAdjournment Proposal.
Our audit committee has appointed the firm of Deloitte & Touche LLP, or Deloitte, an independent registered public accounting firm, as independent auditors for the fiscal year ending December 31, 2021. Although stockholder approval of our audit committee’s appointment of Deloitte is not required by law, our board of directors believes that it is advisable to give stockholders an opportunity to ratify this appointment. If this proposal is not approved at the annual meeting, our audit committee will reconsider its appointment of Deloitte. Deloitte has no direct or indirect material financial interest in our company or our subsidiaries. Representatives of Deloitte are expected to be present at the annual meeting and will have the opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions from our stockholders.
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Audit Fees and Services
Deloitte was our independent registered public accounting firm for the years ended December 31, 2020 and December 31, 2019. The following table summarizes the fees Deloitte billed to us for the last two fiscal years. All such services and fees were pre-approved by our audit committee in accordance with the “Pre-Approval Policies and Procedures” described below.
| | | | | | |
| | Years Ended December 31, | ||||
Fee Category |
| 2020 |
| 2019 | ||
Audit Fees(1) | | $ | 917,051 | | $ | 771,730 |
Audit-Related Fees | |
| — | |
| — |
Tax Fees(2) | |
| 85,793 | |
| 98,845 |
All Other Fees(3) | |
| 1,895 | |
| 1,895 |
Total Fees | | $ | 1,004,739 | | $ | 872,470 |
|
|
|
|
|
|
Pre-approval policiesSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The audit committee of our board of directors has adopted policies and procedures for the pre-approval of audit and non-audit services for the purpose of maintaining the independence of our independent auditor. We may not engage our independent auditor to render any audit or non-audit service unless either the service is approved in advance by the audit committee, or the engagement to render the service is entered into pursuant to the audit committee’s pre-approval policies and procedures. In 2020, the audit committee delegated to its chair the authority to pre-approve any audit or non-audit services to be provided to us by our independent registered public accounting firm. By the terms of this delegated authority, the chair must be report on any such approval of services pursuant to the such authority at the first regularly scheduled meeting of the audit committee following such approval. The audit committee does not delegate its responsibility to approve services performed by the independent auditor to any member of management.
The standard applied by the audit committee, or the chair of the audit committee, in determining whether to grant approval of any type of non-audit service, or of any specific engagement to perform a non-audit service, is whether the services to be performed, the compensation to be paid therefore and other related factors are consistent with the independent registered public accounting firm’s independence under guidelines of the SEC and applicable professional standards. Relevant considerations include whether the work product is likely to be subject to, or implicated in, audit procedures during the audit of our financial statements, whether the independent registered public accounting firm would be functioning in the role of management or in an advocacy role, whether the independent registered public accounting firm’s performance of the service would enhance our ability to manage or control risk or improve audit quality, whether such performance would increase efficiency because of the independent registered public accounting firm’s familiarity with our business, personnel, culture, systems, risk profile and other factors, and whether the amount of fees involved, or the non-audit services portion of the total fees payable to the independent registered public accounting firm in the period would tend to reduce the independent registered public accounting firm’s ability to exercise independent judgment in performing the audit.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2021.
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Security Ownership of Certain Beneficial Owners and Management
Unless otherwise provided below, the following table sets forth information regarding beneficial ownership of our common stockCommon Stock as of MarchAugust 31, 20212022 by:
| each person, or group of affiliated persons, known to us to be the beneficial owner of 5% or more of the outstanding shares of our |
| each of our current directors; |
| our principal executive officer and |
| all of our executive officers and directors as a group. |
Beneficial ownership is determined in accordance with the rules and regulations of the SEC and includes voting or investment power with respect to our common stock.Common Stock. Percentage of beneficial ownership is based on 63,805,108[●] shares of our common stockCommon Stock outstanding as of MarchAugust 31, 2021.2022. In addition, shares of common stockCommon Stock subject to options or other rights currently exercisable, or exercisable within 60 days of MarchAugust 31, 2021,2022, are deemed outstanding and beneficially owned for the purpose of computing the percentage beneficially owned by (i) the individual holding such options, warrants or other rights (but not any other individual) and (ii) the directors and executive officers as a group. Except as otherwise noted, the persons and entities in this table have sole voting and investing power with respect to all of the shares of our common stockCommon Stock beneficially owned by them, subject to community property laws, where applicable. Except as otherwise set forth below, the address of the beneficial owner is c/o Kala Pharmaceuticals, Inc., 490 Arsenal Way, Suite 120, Watertown,1167 Massachusetts 02472.Avenue, Arlington, Massachusetts 02476.
| Shares of | |||||||||
| Common Stock | Shares of | Percentage of | |||||||
| Beneficially | Series D Preferred | Percentage of | Series D Preferred | ||||||
| Name and Address of Beneficial Owner | Owned | Stock | Common Stock | Stock(14) | |||||
| 5% Stockholders: | |||||||||
| Entities affiliated with Longitude Venture Partners(1) | 5,411,860 | [●] | 7.39 | % | [●] | ||||
| Entities affiliated with Lagunita(2) | 4,570,403 | [●] | 6.24 | % | [●] | ||||
| Directors and Named Executive Officers: | [●] | [●] | |||||||
| Mark Iwicki(3) | 2,650,729 | [●] | 3.50 | % | [●] | ||||
| Todd Bazemore(4) | 727,724 | [●] | * | [●] | |||||
| Kim Brazzell, Ph.D.(5) | 777,015 | [●] | 1.05 | % | [●] | ||||
| Mark S. Blumenkranz, M.D.(6) | 4,709,512 | [●] | 6.43 | % | [●] | ||||
| Gregory Grunberg, M.D.(7) | 5,498,780 | [●] | 7.51 | % | [●] | ||||
| Andrew I. Koven(8) | 59,880 | [●] | * | [●] | |||||
| C. Daniel Myers(9) | — | [●] | * | [●] | |||||
| Robert Paull(10) | 49,281 | [●] | * | [●] | |||||
| Gregory D. Perry(11) | 46,920 | [●] | * | [●] | |||||
| Howard B. Rosen(12) | 98,230 | [●] | * | [●] | |||||
| All current executive officers and directors as a group (13 persons)(13) | 15,989,529 | [●] | 20.44 | % | [●] |
| | | | | |
| | Number of | | Percentage |
|
| | shares | | of shares |
|
| | beneficially | | beneficially |
|
Name and Address of Beneficial Owner |
| owned |
| owned |
|
5% Stockholders: | | | | | |
Entities affiliated with RA Capital(1) |
| 10,874,613 |
| 17.04 | % |
Entities affiliated with OrbiMed(2) |
| 5,465,030 |
| 8.57 | % |
Entities affiliated with Longitude Venture Partners(3) |
| 5,411,860 |
| 8.48 | % |
Entities affiliated with Eventide Asset Management, LLC(4) |
| 3,450,000 |
| 5.41 | % |
Directors and Named Executive Officers: | | | | | |
Mark Iwicki(5) |
| 1,936,993 |
| 2.95 | % |
Todd Bazemore(6) |
| 401,376 |
| * | |
Kim Brazzell, Ph.D.(7) |
| 532,004 |
| * | |
Gregory Grunberg, M.D.(8) |
| 5,458,780 |
| 8.55 | % |
Andrew I. Koven(9) |
| 57,960 |
| * | |
Robert Paull(10) |
| 49,281 |
| * | |
Gregory D. Perry(11) |
| 42,120 |
| * | |
Howard B. Rosen(12) |
| 98,230 |
| * | |
Rajeev Shah(13) |
| 10,921,533 |
| 17.10 | % |
All current executive officers and directors as a group (12 persons)(14) |
| 20,713,855 |
| 30.55 | % |
*Less than one percent
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| Based solely on a Schedule 13D/A filed with the SEC on March 23, 2020. Consists of (a) 2,877,006 shares of |
| (2) | Based, |
| (3) | Consists of (i) 120,882 shares of |
| (4) | Consists of (i) |
| (5) | Consists of (i) |
| (6) | Consists of (i) the shares described in note |
| (7) | Consists of (i) the shares described in note 1 above, (ii) 40,000 shares of Common Stock beneficially owned by Dr. Grunberg and (iii) 46,920 shares of |
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| (8) | Consists of shares of |
| (9) | Consists of shares of Common Stock underlying options held by Mr. Myers that are exercisable as of August 31, 2022 or will become exercisable within 60 days after such date. |
| (10) | Consists of (i) 2,361 shares of |
| (11) | Consists of shares of |
| (12) | Consists of (i) 4,824 shares of |
| (13) |
| (14) |
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors, executive officers and beneficial owners of more than 10% of our common stock to file reports of holdings and transactions in our common stock and our other securities with the SEC. Directors, executive officers and holders of more than 10% of our common stock are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on a review of our records and representations made by the persons required to file these reports, we believe that, during the year ended December 31, 2020, our directors, executive officers and holders of more than 10% of our common stock complied with all Section 16(a) filing requirements applicable to them, except that (A) Robert Paull, a director, filed a late Form 4 with respect to shares of our common stock he acquired in May 2018, June 2018 and March 2020 through pro rata distributions from Lux Ventures II, L.P., of which he is a non-managing member, (B) Howard B. Rosen, a director, filed a late Form 4 with respect to shares of our common stock he acquired in August 2019 upon exercise of two separate stock options and (C) Todd Bazemore, an executive officer, filed a late Form 4 with respect to shares of our common stock acquired by his adult son in June 2020 and in October 2020 without Mr. Bazemore’s knowledge.
As of the date of this proxy statement, we know of no matter not specifically referred to above as to which any action is expected to be taken at the annual meeting.Special Meeting. The persons named as proxies will vote the proxies, insofar as they are not otherwise instructed, regarding such other matters and the transaction of such other business as may be properly brought before the meeting, as seems to them to be in the best interest of our company and our stockholders.
Stockholder Proposals for our 20222023 Annual Meeting of Stockholders
Stockholder Proposals Included in Proxy Statement
In
As previously stated in the Company’s proxy statement filed with the SEC on April 29, 2022, pursuant to Rule 14a-8 under the Exchange Act, in order to be considered for inclusion in our proxy statement and proxy card relating to our 20222023 annual meeting of stockholders, stockholder proposals must be received by us no later than December 29, 2021,30, 2022, which is 120 days prior to the first anniversary of the mailing date of thisthe proxy statement relating to the 2022 annual meeting of stockholders, unless the date of the 20222023 annual meeting of stockholders is changed by more than 30 days from the anniversary of our 20212022 annual meeting, in which case, the deadline for such proposals will be a reasonable time before we begin to print and send our proxy materials. Upon receipt of any such proposal, we will determine whether or not to include such proposal in the proxy statement and proxy card in accordance with regulations governing the solicitation of proxies.
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Stockholder Proposals Not Included in Proxy Statement
In addition, our by-laws establish an advance notice procedure for nominations for election to our board of directorsBoard and other matters that stockholders wish to present for action at an annual meeting other than those to be included in our proxy statement. In general, we must receive other proposals of stockholders (including director nominations) intended to be presented at the 20222023 annual meeting of stockholders but not included in the proxy statement by March 19, 2022,18, 2023, but not before February 17, 2022,16, 2023, which is not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting. However, if the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice must be received no earlier than the close of business on the 120th calendar day prior to such annual meeting and no later than the close of business on the later of the 90th day prior to such annual meeting and the 10th day following the day on which notice of the date of such annual meeting was mailed or public announcement of the date of such annual meeting was first made, whichever first. If the stockholder fails to give notice by these dates, then the persons named as proxies in the proxies solicited by the board of directorsBoard for the 20222023 annual meeting of stockholders may exercise discretionary voting power regarding any such proposal. Stockholders are advised to review our by-laws which also specify requirements as to the form and content of a stockholder’s notice.
Any proposals, notices or information about proposed director candidates should be sent to Kala Pharmaceuticals, Inc., Attention: Nominating and Corporate Governance Committee, 490 Arsenal Way, Suite 120, Watertown,1167 Massachusetts 02472.Avenue, Arlington, Massachusetts 02476.
Householding of Annual MeetingProxy Materials
Some brokers and other nominee record holders may be “householding” our proxy materials. This means a single notice and, if applicable, the proxy materials, will be delivered to multiple stockholders sharing an address unless contrary instructions have been received. We will promptly deliver a separate copy of the notice and, if applicable, the proxy materials and our 20202021 annual report to stockholders, which consists of our Annual Report on Form 10‑K10-K for the fiscal year ended December 31, 2020,2021, to you if you write or call us at Kala Pharmaceuticals, Inc., 490 Arsenal Way, Suite 120, Watertown,1167 Massachusetts 02472,Avenue, Arlington, Massachusetts 02476, Attention: Chief Financial Officer, telephone: (781) 996‑5252.996-5252. If you would like to receive separate notices and copies of our proxy materials and annual reports in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address and telephone number.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We are subject to the informational requirements of the Exchange Act and, therefore, we file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public on the SEC’s website at www.sec.gov. The SEC’s website contains reports, proxy and information statements and other information regarding issuers, such as us, that file electronically with the SEC. You may also read and copy any document we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of its Public Reference Room.
Form of Reverse Stock Split Charter Amendment
Certificate of Amendment
of
Restated Certificate of Incorporation
of
Kala Pharmaceuticals, Inc.
Kala Pharmaceuticals, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify that:
| 1. | The Restated Certificate of Incorporation of this Corporation was filed with the Secretary of State of Delaware on July 25, 2017 (the “Certificate of Incorporation”). |
| 2. | Resolutions were duly adopted by the Board of Directors of the Corporation setting forth this proposed Amendment to the Certificate of Incorporation and declaring said amendment to be advisable and calling for the consideration and approval thereof at a meeting of the stockholders of the Corporation. |
| 3. | Resolutions were duly adopted by the Board of Directors of the Corporation, in accordance with the provisions of the Certificate of Incorporation set forth below, providing that, effective as of [●], New York time, on [●], each [●] (#) issued and outstanding shares of the Corporation’s Common Stock, par value $0.001 per share, shall be converted into [●] (#) share of the Corporation’s Common Stock, par value $0.001 per share, as constituted following such date. |
| 4. | The Certificate of Incorporation is hereby amended by revising Article FOURTH to include a new paragraph A.5. as follows: |
“5. Reverse Split. Upon the effectiveness of the filing of this Certificate of Amendment (the “Effective Time”) each share of the Corporation’s common stock, $0.001 par value per share (the ���Old Common Stock”), either issued or outstanding or held by the Corporation as treasury stock, immediately prior to the Effective Time, will be automatically reclassified and combined (without any further act) into a smaller number of shares such that each two (2) to seventy-five (75) shares of Old Common Stock issued and outstanding or held by the Company as treasury stock immediately prior to the Effective Time is reclassified into one share of Common Stock, $0.001 par value per share, of the Corporation (the “New Common Stock”), the exact ratio within such range to be determined by the Board of Directors of the Corporation prior to the Effective Time and publicly announced by the Corporation (the “Reverse Stock Split”). The Board of Directors shall make provision for the issuance of that number of fractions of New Common Stock such that any fractional share of a holder otherwise resulting from the Reverse Stock Split shall be rounded up to the next whole number of shares of New Common Stock. Any stock certificate that, immediately prior to the Effective Time, represented shares of the Old Common Stock will, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent the number of shares of the New Common Stock into which such shares of Old Common Stock shall have been reclassified plus the fraction, if any, of a share of New Common Stock issued as aforesaid.”
| 5. | Pursuant to the resolution of the Board of Directors, a meeting of the stockholders of the Company was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the foregoing amendment. |
| 6. | The foregoing amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. |
45
[SIGNATURE PAGE TO CERTIFICATE OF AMENDMENT]
IN WITNESS WHEREOF, Kala Pharmaceuticals, Inc. has caused this Certificate to be duly executed by the undersigned duly authorized officer as of this [●] day of [●], [●].
| Kala Pharmaceuticals, Inc. | ||
| By: | ||
| Name: | ||
| Title: | ||
| Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. NOTE: To transact such other business as may properly come before the meeting or any adjournment thereof. 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. D90679-S52344 1. To approve an amendment to the Company's restated certificate of incorporation to effect, at the discretion of the Company's Board of Directors (the "Board") but prior to the one-year anniversary of the date on which the reverse stock split is approved by the Company's stockholders at the Special Meeting, a reverse stock split of all of the outstanding shares of the Company's common stock, par value $0.001 per share (“Common Stock”), at a ratio in the range of 1-for-2 to 1-for-75, with such ratio to be determined by the Board in its discretion and included in a public announcement (the “Reverse Stock Split Proposal”); The Board of Directors recommends you vote FOR Proposals 1 and 2: 2. To approve a proposal to adjourn the Special Meeting to a later date or dates, if necessary or appropriate, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Reverse Stock Split Proposal. 1a. To vote my Series D Preferred Stock differently on Proposal 1: Q. Your Series D Preferred Stock will be voted in the same manner as you've instructed your Common Stock on Proposals 1 and 2. If you wish to vote your Series D Preferred Stock in a DIFFERENT manner, indicate YES and provide instructions on proposals 1a. and 2a. 2a. To vote my Series D Preferred Stock differently on Proposal 2: For Against Abstain For Against Abstain Yes No ! ! ! ! ! ! ! ! KALA PHARMACEUTICALS, INC. 1167 MASSACHUSETTS AVE ARLINGTON, MA 02476 KALA PHARMACEUTICALS, INC. ! ! ! ! ! ! SCAN TO VIEW MATERIALS & VOTE w VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the meeting date. 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. |
| D90680-S52344 Important Notice Regarding the Availability of Proxy Materials for the |
